HOMESTAKE MINING CO /DE/, DEFM14A, 1998-03-30

HOMESTAKE MINING CO /DE/
DEFM14A, 1998-03-30
GOLD AND SILVER ORES

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<PAGE> 1

SCHEDULE 14A
(RULE 14a-101)

INFORMATION REQUIRED IN PROXY STATEMENT

SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE SECURITIES
EXCHANGE ACT OF 1934 (AMENDMENT NO. )

Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:

<TABLE>
<S> <C>
[ ] Preliminary Proxy Statement [ ] Confidential. For Use of the Commission Only (as
permitted by Rule 14a-6(e)(2))
</TABLE>

[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12

HOMESTAKE MINING COMPANY
- --------------------------------------------------------------------------------
(Name of Registrant as Specified in Its Charter)

- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if Other Than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[ ] No fee required.
[X] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and
0-11.
(1) Title of each class of securities to which transaction applies:
COMMON STOCK, $1.00 PAR VALUE
- --------------------------------------------------------------------------------
(2) Aggregate number of securities to which transaction applies:

64,400,000

- --------------------------------------------------------------------------------
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which the filing fee
is calculated and state how it was determined):

On January 26, 1998, the date on which the Preliminary Proxy Statement
initially was filed, Homestake estimated, solely for purposes of calculating the
filing fee, that it would receive the equivalent of approximately 189,279,250
Plutonic Ordinary Shares, comprised of Ordinary Shares, Partly Paid Shares and
Options (the "Plutonic Securities"). On that date, the Plutonic Securities were
valued at US$2.79 per share, representing the average of the high and low price
(A$4.21) reported for Ordinary Shares on the Australian Stock Exchange as of
January 20, 1998, multiplied by the exchange rate (A$1.00 = US$0.6637) on that
date.

Since filing a revised Preliminary Proxy Statement on March 11, 1998,
Homestake was notified that certain holders of Plutonic Securities had
paid-in-full their Partly Paid Shares. As a consequence, Homestake has
recalculated its filing fee as if all Partly Paid Shares were paid-in-full.
Estimated solely for purposes of calculating such fee, pursuant to the
transaction described herein, Homestake may receive up to the equivalent of
approximately 189,411,764 Plutonic Ordinary Shares (or 132,514 Plutonic Ordinary
Shares more than previously accounted for). The additional 132,514 Plutonic
Securities are being valued at US$3.08 per share, representing the average of
the high and low price (A$4.65) reported for Ordinary Shares on the Australian
Stock Exchange as of March 23, 1998 multiplied by the exchange rate
($A1.00 = US$0.6632) on that date.

- --------------------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:

$529,288,384

- --------------------------------------------------------------------------------
(5) Total fee paid:

$105,858*

- --------------------------------------------------------------------------------
[ ] Fee paid previously with preliminary material:
$105,776
- --------------------------------------------------------------------------------
[ ] Check box if any part of the fee is offset as provided by Exchange
Act Rule 0-11(a)(2) and identify the filing for which the offsetting fee was
paid previously. Identify the previous filing by registration statement number,
or the form or schedule and the date of its filing.
(1) Amount previously paid:
- --------------------------------------------------------------------------------
(2) Form, Schedule or Registration Statement No.:
- --------------------------------------------------------------------------------
(3) Filing Party:
- --------------------------------------------------------------------------------
(4) Date Filed:
- --------------------------------------------------------------------------------

* Additional fee of $82 paid out of available non-restricted funds in
Homestake's name with the Commission.

<PAGE> 2

LOGO

March 30, 1998

Dear Stockholder:

The Board of Directors cordially invites you to attend a Special Meeting of
Stockholders of Homestake Mining Company to be held at 10:00 a.m. local time, on
Wednesday, April 29, 1998, at Cathedral Hill Room A, Cathedral Hill Hotel, 1101
Van Ness Avenue, San Francisco, California, relating to the proposed acquisition
by Homestake of Plutonic Resources Limited.

At this important special meeting, you will be asked to approve a proposal
to issue shares of Homestake Common Stock to effect the acquisition of Plutonic.
As a consequence of the transaction, holders of Plutonic fully paid ordinary
shares, partly paid shares and options outstanding will receive shares of
Homestake Common Stock based on the Exchange Ratios described in the
accompanying Proxy Statement. It is expected that Homestake will issue a total
of approximately 64,356,482 shares of Homestake Common Stock to the holders of
Plutonic shares and options, representing approximately 30% of the capital stock
of Homestake outstanding after the transaction.

On completion of the acquisition, Plutonic will operate as a wholly-owned
subsidiary of Homestake.

The reasons you should approve the Combination include the following:

- The Combined Company will have:

- an exciting growth profile and a large, geographically diverse,
prospective land package from which we expect to generate
future discoveries;

- an excellent asset base, strong balance sheet and cash flow,
and the ability to compete more effectively for acquisition,
exploration and development opportunities throughout the world;

- higher gold production and lower cash operating costs per
ounce; and

- the financial strength to weather the low gold price
environment.

- The Combination will be immediately accretive to Homestake's 1998 cash
flow and operating results (before one time transaction and restructuring
costs).

- The additional low cost production will give Homestake added flexibility
to reduce per ounce production costs in the future.

The Homestake Board of Directors has determined unanimously that the
transaction is fair to and in the best interests of the Homestake stockholders.
Accordingly, the Homestake Board of Directors recommends that the Homestake
stockholders vote "FOR" the proposal to issue shares of Homestake Common Stock
to effect the acquisition of Plutonic.

We are excited about the opportunities created by the combination of
Homestake and Plutonic. We believe that this transaction will result in a
larger, more diverse company that will be well-positioned to capitalize on
opportunities for future growth. We strongly recommend that you support this
proposal.

/s/ HARRY M. CONGER /s/ JACK E. THOMPSON

Harry M. Conger Jack E. Thompson
Chairman of the Board President and Chief Executive Officer

HOMESTAKE MINING COMPANY
650 CALIFORNIA STREET - SAN FRANCISCO - CA 94108-2788 (415) 981-8150
<PAGE> 3

HOMESTAKE MINING COMPANY
650 CALIFORNIA STREET

SAN FRANCISCO, CALIFORNIA 94108-2788
LOGO

------------------------

NOTICE OF SPECIAL MEETING OF STOCKHOLDERS

TO BE HELD ON APRIL 29, 1998

To The Stockholders of Homestake Mining Company:

Notice is hereby given that a Special Meeting of Stockholders of Homestake
Mining Company, a Delaware corporation ("Homestake"), will be held at 10:00 a.m.
local time, on Wednesday, April 29, 1998, at Cathedral Hill Room A, Cathedral
Hill Hotel, 1101 Van Ness Avenue, San Francisco, California, for the following
purposes:

1. To consider and vote upon a proposal to issue Homestake Common
Stock to acquire Plutonic Resources Limited ("Plutonic") pursuant to a
Combination Implementation Agreement dated
22 December 1997. As a consequence of the transaction:

(a) Holders of Plutonic fully paid ordinary shares, par value
A$0.50 ("Ordinary Shares"), other than Homestake, will receive 0.34
shares of Homestake Common Stock for each Ordinary Share owned by them.

(b) Holders of Plutonic partly paid shares, par value A$0.50, paid
up to A$0.05 each ("Partly Paid Shares"), will receive shares of
Homestake Common Stock for their Partly Paid Shares, with the number to
be received determined in accordance with a valuation formula described
in the accompanying Proxy Statement.

(c) Holders of options granted pursuant to the Plutonic Directors'
Option Plan or the Plutonic Employee Share Plan ("Options") will receive
shares of Homestake Common Stock for their Options, with the number to
be received determined in accordance with a valuation formula described
in the accompanying Proxy Statement.

2. To transact such other business as may properly come before the
Homestake Special Meeting or any adjournments thereof.

The Homestake Board of Directors has fixed the close of business on March
10, 1998 as the Homestake Record Date for determining the holders of Homestake
Common Stock entitled to receive notice of, and to vote at, the Homestake
Special Meeting and any adjournments thereof. Only the record holders of
Homestake Common Stock as of the Homestake Record Date are entitled to vote at
the Homestake Special Meeting or any adjournments thereof.

All stockholders are cordially invited to attend the Homestake Special
Meeting in person. It is important that your shares of Homestake Common Stock be
represented at the Homestake Special Meeting regardless of the number of shares
you hold. TO ENSURE THAT YOU ARE REPRESENTED AT THE HOMESTAKE SPECIAL MEETING,
PLEASE FILL IN, SIGN AND RETURN THE ENCLOSED PROXY AS PROMPTLY AS POSSIBLE,
using the return envelope which requires no postage if mailed in the United
States. Your early attention to the enclosed proxy will be greatly appreciated
because it will reduce the cost Homestake incurs in obtaining voting
instructions from its stockholders.

THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT STOCKHOLDERS VOTE "FOR"
THE PROPOSAL TO ISSUE SHARES OF HOMESTAKE COMMON STOCK TO ACQUIRE PLUTONIC.

By Order of the Board of Directors,

/s/ WAYNE KIRK

Wayne Kirk
Secretary

March 30, 1998

YOUR VOTE IS IMPORTANT. PLEASE SIGN, DATE AND RETURN YOUR PROXY.
<PAGE> 4

HOMESTAKE MINING COMPANY

650 CALIFORNIA STREET
SAN FRANCISCO, CA 94108-2788

March 30, 1998

PROXY STATEMENT

SPECIAL MEETING OF STOCKHOLDERS

TO BE HELD ON APRIL 29, 1998

This Proxy Statement is being furnished to the stockholders of Homestake
Mining Company in connection with the solicitation of proxies by the Board of
Directors of Homestake Mining Company for use at a special meeting of
stockholders to be held on Wednesday, April 29, 1998. This Proxy Statement and
the accompanying form of proxy are first being mailed to the stockholders of
Homestake Mining Company on or about March 30, 1998.

This Proxy Statement consists of certain preliminary information, a
summary, a supplement ("Supplement") and several appendices (collectively, the
"Proxy Statement"). Capitalized terms used herein are defined in "Certain
Defined Terms" on page S-7 of the Supplement.

MATTERS TO BE CONSIDERED

At the Homestake Special Meeting, the holders of Homestake Common Stock
will be asked to consider the following matters:

1. To consider and vote upon a proposal to issue Homestake Common
Stock to acquire Plutonic Resources Limited ("Plutonic") pursuant to a
Combination Implementation Agreement dated as of 22 December 1997. As a
consequence of the transaction:

(a) Holders of Plutonic Ordinary Shares, other than Homestake, will
receive 0.34 shares of Homestake Common Stock for each Ordinary Share
owned by them.

(b) Holders of Plutonic Partly Paid Shares will receive shares of
Homestake Common Stock for their Partly Paid Shares, with the number to
be received determined in accordance with a valuation formula described
in "The Agreement -- Schemes of Arrangement" in the Supplement.

(c) Holders of Plutonic Options will receive shares of Homestake
Common Stock for their Options, with the number to be received
determined in accordance with a valuation formula described in "The
Agreement -- Schemes of Arrangement" in the Supplement.

It is expected that Homestake will issue approximately 63,852,776
shares of Homestake Common Stock to the holders of Ordinary Shares,
approximately 311,531 shares of Homestake Common Stock to the holders of
Partly Paid Shares, and approximately 192,175 shares of Homestake Common
Stock to the holders of Options resulting in a total issuance of
approximately 64,356,482 shares of Homestake Common Stock (64,398,751
shares if the holders of the Partly Paid Shares outstanding pay the
remainder of the purchase price for such Partly Paid Shares) (the "Share
Issuance"). The Share Issuance will represent approximately 30% of the
capital stock of Homestake outstanding after the transaction (approximately
29% on a fully-diluted basis).

2. To transact such other business as may properly come before the
Homestake Special Meeting or any adjournments thereof.

VOTING RIGHTS; VOTE REQUIRED

A majority of the shares of Homestake Common Stock outstanding on the
Homestake Record Date must be represented in person or by proxy at the Homestake
Special Meeting for a quorum to be present at the Homestake Special Meeting. In
the event a quorum is not present at the Homestake Special Meeting, the meeting
will be adjourned to solicit additional proxies.

1
<PAGE> 5

Approval of the Share Issuance requires the approval of a majority of the
votes cast on the proposal, provided that the total votes cast on the proposal
represent over 50% of all shares of Homestake Common Stock that are entitled to
vote on the proposal.

Only the record holders of Homestake Common Stock on the Homestake Record
Date are entitled to receive notice of and to vote at the Homestake Special
Meeting. On the Homestake Record Date, there were 146,761,857 shares of
Homestake Common Stock outstanding held by 21,428 record holders.

Record holders of Homestake Common Stock on the Homestake Record Date are
entitled to one vote per share on each matter to be considered at the Homestake
Special Meeting. The Homestake Board is not aware of any matter to be presented
at the Homestake Special Meeting other than the Share Issuance.

At March 1, 1998, directors and executive officers of Homestake and their
affiliates beneficially owned and were entitled to vote 8,156,791 shares of
Homestake Common Stock, which represented approximately 5.5% of the 146,754,653
shares of Homestake Common Stock outstanding on such date. Each such director
and executive officer of Homestake has indicated his or her present intention to
vote, or cause to be voted, the Homestake Common Stock owned by him or her "FOR"
the Share Issuance.

THE HOMESTAKE BOARD UNANIMOUSLY RECOMMENDS THAT THE HOMESTAKE STOCKHOLDERS
VOTE "FOR" THE SHARE ISSUANCE.

ABSENCE OF DISSENTERS APPRAISAL RIGHTS

The Homestake Stockholders are not entitled to dissenters appraisal rights
in respect of the Combination or the Share Issuance. See "The
Combination -- Absence of Dissenters Appraisal Rights" in the Supplement.

VOTING OF PROXIES

Shares represented by all properly executed proxies received in time for
the Homestake Special Meeting will be voted in the manner specified by the
holders thereof. Properly executed proxies for shares of Homestake Common Stock
that do not contain voting instructions will be voted in favor of the Share
Issuance.

Shares of Homestake Common Stock represented at the Homestake Special
Meeting but not voting, including shares with respect to which the holders
thereof have abstained on any matter, will be treated as present for purposes of
determining the presence or absence of a quorum for the transaction of all
business.

Under the applicable rules of the NYSE, brokers who hold shares in street
name for customers are prohibited from giving a proxy to vote such customers'
shares with respect to any proposal in the absence of specific instructions from
such customers ("broker nonvotes"). Because approval of the Share Issuance
requires a majority of the votes cast on the proposal, broker nonvotes will not
affect approval of the Share Issuance.

The persons named as proxies by a Homestake Stockholder may propose and
vote for one or more adjournments of the Homestake Special Meeting, including,
without limitation, adjournments to permit further solicitations of proxies in
favor of the Share Issuance; provided, however, that no proxy that is voted
against the Share Issuance will be voted in favor of any adjournment to permit
such further solicitations.

REVOCABILITY OF PROXIES

The grant of a proxy on the enclosed form of proxy does not preclude a
Homestake Stockholder from voting in person. A Homestake Stockholder may revoke
a proxy at any time prior to its exercise by filing with the Secretary of
Homestake a duly executed revocation of proxy, by submitting a duly executed
proxy bearing a later date or by appearing at the Homestake Special Meeting and
voting in person. Attendance at the Homestake Special Meeting will not, in and
of itself, constitute revocation of a proxy.

SOLICITATION OF PROXIES

Homestake will bear the cost of the solicitation of proxies from its
stockholders. In addition to solicitation by mail, the directors, officers and
employees of Homestake may solicit proxies from the Homestake

2
<PAGE> 6

Stockholders by telephone or telegram or in person. Arrangements will also be
made with brokerage houses and other custodians, nominees and fiduciaries for
the forwarding of solicitation material to the beneficial owners of Homestake
Common Stock, and Homestake will reimburse such custodians, nominees and
fiduciaries for their reasonable out-of-pocket expenses in connection therewith.
D.F. King & Co., Inc. will assist in the solicitation of proxies by Homestake
and will receive $12,000 plus reimbursement of its expenses.

------------------------

NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATION NOT CONTAINED IN THIS PROXY STATEMENT IN CONNECTION WITH THE
SOLICITATION OF PROXIES AND, IF GIVEN OR MADE, SUCH INFORMATION OR
REPRESENTATION MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY HOMESTAKE.
THIS PROXY STATEMENT DOES NOT CONSTITUTE THE SOLICITATION OF A PROXY IN ANY
JURISDICTION IN WHICH IT IS NOT LAWFUL TO MAKE ANY SUCH OFFER OR SOLICITATION OR
TO ANY PERSON TO WHOM IT IS NOT LAWFUL TO MAKE ANY SUCH OFFER OR SOLICITATION.

CERTAIN INFORMATION

The information concerning Homestake contained in this Proxy Statement,
including financial information, has been provided by Homestake and its
affiliates and advisors ("Homestake Information"). The information concerning
Plutonic contained in this Proxy Statement, including financial information, has
been provided by Plutonic and its affiliates and advisors ("Plutonic
Information"). The information concerning the Combined Company contained in this
Proxy Statement, including pro forma financial information, has been prepared by
Homestake, based on the Homestake Information and the Plutonic Information.
Neither Plutonic nor its affiliates or advisors assume any responsibility for
the accuracy or completeness of the Homestake Information.

In this Proxy Statement, unless otherwise indicated, Homestake Information
presents financial information in US dollars and Plutonic Information presents
financial information in Australian dollars. The consolidated financial
statements of Homestake are prepared in accordance with U.S. GAAP. The
consolidated financial statements of Plutonic are prepared in accordance with
Australian GAAP. Significant differences between U.S. GAAP and Australian GAAP,
as they relate to Homestake, are summarized in Appendix F. Significant
differences between U.S. GAAP and Australian GAAP, as they relate to Plutonic,
are summarized in Appendix D.

3
<PAGE> 7

TABLE OF CONTENTS

PROXY STATEMENT

<TABLE>
<CAPTION>
PAGE
-----
<S> <C>
SPECIAL MEETING OF STOCKHOLDERS............................. 1
Matters to be Considered.................................. 1
Voting Rights; Vote Required.............................. 1
Absence of Dissenters Appraisal Rights.................... 2
Voting of Proxies......................................... 2
Revocability of Proxies................................... 2
Solicitation of Proxies................................... 2
CERTAIN INFORMATION......................................... 3
SUMMARY..................................................... 8
Description of the Combination............................ 8
Exchange Ratios; Entitlement to Homestake Common Stock.... 9
Comparative Stock Prices and Premium to Plutonic
Shareholders........................................... 10
Homestake Mining Company.................................. 10
Plutonic Resources Limited................................ 13
Homestake's Reasons for the Combination; Recommendation of
the Homestake Board.................................... 14
Opinion of Homestake's Financial Advisor.................. 15
Plutonic's Reasons for the Combination; Recommendation of
the Plutonic Board..................................... 15
The Combined Company...................................... 15
Risk Factors.............................................. 18
Material Australian Income Tax and United States Federal
Income Tax Consequences................................ 20
Anticipated Accounting Treatment.......................... 20
Interests of Certain Persons in the Combination........... 20
Conditions to the Combination............................. 20
Termination of the Agreement.............................. 20
Regulatory Matters........................................ 21
SELECTED FINANCIAL AND OTHER DATA........................... 22
Homestake Selected Consolidated Historical Financial
Data................................................... 22
Homestake Selected Operating Data......................... 23
Plutonic Selected Consolidated Historical Financial Data
(Australian GAAP)...................................... 24
Plutonic Selected Operating Data.......................... 24
Plutonic Selected Consolidated Historical Financial Data
(U.S. GAAP)............................................ 25
Unaudited Pro Forma Combined Selected Financial Data...... 26
COMPARATIVE PER SHARE DATA.................................. 27
SUPPLEMENT
AVAILABLE INFORMATION....................................... S-5
EXCHANGE RATES.............................................. S-5
CERTAIN DEFINED TERMS....................................... S-7
CERTAIN MEASUREMENTS........................................ S-10
RISK FACTORS................................................ S-11
Risks Inherent in Gold Exploration, Development and
Production............................................. S-11
Risks of Gold and Silver Price Fluctuations and Hedging
Activities............................................. S-11
Risk of Inability to Achieve Combined Company Cost
Savings................................................ S-12
Risks Associated with Reserve Realization................. S-13
Risks of Government Regulation of Mining Activities....... S-13
Risks of Currency Fluctuations............................ S-14
Risks of Native Title Claims.............................. S-14
</TABLE>

4
<PAGE> 8

<TABLE>
<CAPTION>
PAGE
-----
<S> <C>
CAUTIONARY STATEMENTS....................................... S-16
Reliance by Homestake and Plutonic on Information Provided
by the Other........................................... S-16
Reserves.................................................. S-16
Estimates of Production................................... S-17
Estimates of Operating Costs and Capital Costs; Capital
Projects............................................... S-17
Taxes..................................................... S-18
Western Australia Royalty................................. S-19
PRICE RANGE AND TRADING VOLUME OF HOMESTAKE COMMON STOCK AND
THE PLUTONIC ORDINARY SHARES; DIVIDENDS................... S-20
Price Ranges and Trading Volumes.......................... S-20
Comparison of Stock Price Performances.................... S-22
Dividends................................................. S-22
THE COMBINATION............................................. S-24
General................................................... S-24
Exchange Ratios........................................... S-24
Background of the Combination............................. S-25
Homestake's Reasons for the Combination; Recommendation of
the Homestake Board.................................... S-28
Opinion of Homestake's Financial Advisor.................. S-32
Plutonic's Reasons for the Combination; Recommendation of
the Plutonic Board..................................... S-37
Material Australian Income Tax and United States Federal
Income Tax Consequences................................ S-37
Anticipated Accounting Treatment.......................... S-43
Regulatory Matters........................................ S-43
Absence of Dissenters Appraisal Rights.................... S-43
Interests of Certain Persons in the Combination........... S-44
Resale of Homestake Common Stock.......................... S-46
HOMESTAKE MINING COMPANY.................................... S-47
Background................................................ S-47
Significant 1997 and 1998 Developments.................... S-48
Statistical Summary....................................... S-49
Business and Property Description......................... S-52
Mineral Exploration and Development....................... S-74
Information on Reserves................................... S-75
Environmental Matters..................................... S-76
Customers................................................. S-80
Employees................................................. S-81
Legal Proceedings......................................... S-82
PLUTONIC RESOURCES LIMITED.................................. S-83
Background................................................ S-83
Significant Recent Developments........................... S-84
Statistical Summary....................................... S-85
Business and Property Description......................... S-87
Mineral Exploration and Development....................... S-97
Information on Reserves................................... S-98
Estimation of Reserves.................................... S-98
Other Information......................................... S-98
Native Title Claims....................................... S-98
Environmental............................................. S-98
Customers................................................. S-100
Employees................................................. S-100
Legal Proceedings......................................... S-100
</TABLE>

5
<PAGE> 9

<TABLE>
<CAPTION>
PAGE
-----
<S> <C>
THE AGREEMENT............................................... S-101
General................................................... S-101
Schemes of Arrangement.................................... S-101
Representations and Warranties............................ S-101
Conduct of Business Pending the Combination............... S-102
Certain Actions With Respect to Takeover Proposals........ S-103
Conditions to the Consummation of the Combination......... S-104
Termination............................................... S-104
Superior Proposal......................................... S-105
Termination Fees.......................................... S-105
Effect of Termination..................................... S-106
Enforcement............................................... S-106
Release of Officers and Directors......................... S-106
Definitions............................................... S-106
HOMESTAKE HISTORICAL SELECTED FINANCIAL AND OTHER DATA...... S-109
Historical Selected Financial Data........................ S-109
Homestake Selected Operating Data......................... S-110
PLUTONIC HISTORICAL SELECTED FINANCIAL AND OTHER DATA
(AUSTRALIAN GAAP)......................................... S-111
Historical Selected Financial Data........................ S-111
Plutonic Selected Operating Data.......................... S-111
PLUTONIC HISTORICAL SELECTED FINANCIAL DATA (U.S. GAAP)..... S-112
UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL
STATEMENTS................................................ S-113
COMPARATIVE PER SHARE DATA.................................. S-124
DIRECTORS AND MANAGEMENT OF HOMESTAKE AFTER THE
COMBINATION............................................... S-125
Board of Directors of Homestake after the Combination..... S-125
Directors and Management of Homestake after the
Combination; Intentions about Plutonic................. S-128
BENEFICIAL OWNERSHIP OF SECURITIES.......................... S-130
Ownership of Common Stock By Homestake's Management....... S-130
Security Ownership of Certain Beneficial Owners of
Homestake.............................................. S-131
DESCRIPTION OF HOMESTAKE CAPITAL STOCK...................... S-132
General................................................... S-132
"Fair Price" Charter Provision............................ S-132
Homestake Rights Agreement................................ S-133
COMPARISON OF SHAREHOLDERS' RIGHTS.......................... S-135
Vote Required for Ordinary Transactions; Quorum........... S-135
Vote Required for Extraordinary Transactions.............. S-135
Distribution on Winding-Up................................ S-136
Transactions Involving Shareholders, Officers or
Directors.............................................. S-136
Takeover Regulation....................................... S-137
Dissenters Appraisal Rights............................... S-138
Oppression Remedy......................................... S-139
Limitation of Director Liability.......................... S-139
Distributions and Dividends............................... S-140
INDEPENDENT ACCOUNTANTS..................................... S-141
LEGAL MATTERS............................................... S-141
STOCKHOLDER PROPOSALS....................................... S-141
</TABLE>

6
<PAGE> 10

<TABLE>
<CAPTION>
PAGE
-----
<S> <C>
APPENDIX A: HOMESTAKE MINING COMPANY AND PLUTONIC RESOURCES
LIMITED COMBINATION IMPLEMENTATION AGREEMENT.............. A-1
APPENDIX B: OPINION OF HOMESTAKE'S INVESTMENT ADVISOR....... B-1
APPENDIX C: HOMESTAKE MINING COMPANY CONSOLIDATED FINANCIAL
STATEMENTS AND SUPPLEMENTARY DATA......................... C-1
APPENDIX D: PLUTONIC RESOURCES LIMITED AND CONTROLLED
ENTITITES CONSOLIDATED FINANCIAL STATEMENTS............... D-1
APPENDIX E: COMPARISON OF CERTAIN SEC AND JORC CODE
REPORTING REQUIREMENTS.................................... E-1
APPENDIX F: HOMESTAKE DIFFERENCES BETWEEN U.S. AND
AUSTRALIAN GENERALLY ACCEPTED ACCOUNTING PRINCIPLES....... F-1
APPENDIX G: OVERVIEW OF AUSTRALIAN, CANADIAN AND UNITED
STATES REGULATION OF MINING RIGHTS........................ G-1
APPENDIX H: MAPS SHOWING LOCATIONS OF HOMESTAKE AND PLUTONIC
MINES..................................................... H-1
</TABLE>

7
<PAGE> 11

SUMMARY

The following is a summary of certain information contained elsewhere in
this Proxy Statement, including the Supplement and the Appendices. Consequently,
reference is made to, and this Summary is qualified in its entirety by, the more
detailed information contained in this Proxy Statement. Stockholders are urged
to read this Proxy Statement, which includes the Supplement and the Appendices,
in its entirety.

DESCRIPTION OF THE COMBINATION

Subject to the terms and conditions of the Agreement, following the
implementation of the Combination, Plutonic will be a wholly-owned subsidiary of
Homestake.

At March 25, 1998, Plutonic had 188,152,285 Ordinary Shares outstanding,
1,040,587 Partly Paid Shares outstanding, and Options outstanding to acquire
3,218,000 Plutonic Shares. In February 1998, Homestake purchased 350,000
Ordinary Shares (approximately 0.19%) in open market purchases on the ASX for
aggregate consideration of A$1.55 million. Homestake does not have a beneficial
interest in any other Plutonic Securities.

Pursuant to the Agreement and in accordance with applicable law in
Australia, Plutonic has prepared an Information Memorandum containing the
disclosures required by Australian law and will seek to obtain the approval of
its securityholders by convening separate meetings of holders of the Ordinary
Shares, holders of the Partly Paid Shares, and holders of the Options to
consider and approve separate "Schemes of Arrangement" with respect to the
Ordinary Shares, the Partly Paid Shares and the Options (each, a class of
"Plutonic Securities"). Homestake, in its capacity as holder of 350,000 Ordinary
Shares, is required to vote on the Ordinary Scheme at a separate meeting. The
meetings are expected to be held on April 29, 1998 in Sydney, Australia. Each
Scheme provides for the cancellation of all Plutonic Securities of that class in
consideration of receipt by the holders thereof of Homestake Common Stock,
except that the 350,000 Ordinary Shares held by Homestake will continue to be
outstanding and will not be cancelled.

Each Scheme must be approved by (i) a majority in number of the holders of
the applicable class of Plutonic Securities present or represented by proxy at
the respective Scheme of Arrangement meeting, and (ii) 75% of the applicable
class of Plutonic Securities present or represented by proxy at such meeting.
These approvals are required under the Agreement, but Homestake has the right to
waive the approvals with respect to the Partly Paid Scheme and the Option
Scheme. Homestake currently does not intend to waive these conditions.

Following approval of the Share Issuance by Homestake Stockholders and
following approval of the separate Schemes by each class of Plutonic Securities,
the Supreme Court of New South Wales will make a final determination of the
fairness of the Combination to the holders of Plutonic Securities and may grant
its approval to the Schemes, such approval being subject to such alterations and
conditions as it deems appropriate, and issue its order approving the Schemes
(the "Second Court Order"). Thereafter, and subject to the terms and conditions
of the Agreement, Homestake Common Stock will be issued to the holders of the
Plutonic Securities (other than Homestake) on the basis of the applicable
Exchange Ratio and Homestake will own 100% of the Plutonic Securities then
outstanding.

Homestake Common Stock to be issued in the Combination will be issued
approximately two weeks after the Second Court Order approving the Schemes in
order to comply with ASX requirements for orderly termination of trading and
final settlement of trades outstanding. Fractional shares of Homestake Common
Stock will not be issued and cash will be paid (in Australian dollars) in lieu
of fractional shares.

It is a condition of the Agreement that the Share Issuance must be approved
by the Homestake Stockholders.

There are no dissenters appraisal rights available to Homestake
Stockholders who vote against the Share Issuance. Similarly, a holder of a
Plutonic Security whose class of securities approves the Combination will be
bound by the applicable Scheme and will have no rights equivalent to dissenters
appraisal rights.

8
<PAGE> 12

Pursuant to the Homestake Rights Agreement, each share of Homestake Common
Stock issued in the Combination will be accompanied by one Homestake Right. See
"Description of Homestake Capital Stock -- Homestake Rights Agreement" in the
Supplement.

As a consequence of the Combination, it is expected that Homestake will
issue a total of approximately 64,356,482 shares of Homestake Common Stock
(64,398,751 shares if the holders of the Partly Paid Shares outstanding pay the
remainder for the purchase price for such Partly Paid Shares), representing
approximately 30% of the capital stock of Homestake outstanding after the
transaction (approximately 29% on a fully-diluted basis).

EXCHANGE RATIOS; ENTITLEMENT TO HOMESTAKE COMMON STOCK

The Exchange Ratios established for the Plutonic Securities are as follows:

ORDINARY SHARES

Holders of Ordinary Shares will be entitled to receive 0.34 shares of
Homestake Common Stock in consideration of the cancellation of each Ordinary
Share owned by them.

PARTLY PAID SHARES

There are three groups of Partly Paid Shares outstanding that are held by
employees of Plutonic (each an "Employee Grantee") or, at the election of the
Employee Grantee, an affiliate of the Employee Grantee. The Partly Paid Shares
have been paid up as to A$0.05 per share, and the remainder of the purchase
price has not yet been paid. A holder of Partly Paid Shares is not required to
pay the remainder of the purchase price therefor until the earlier of six months
after termination of employment of the applicable Employee Grantee (or such
longer period as the Plutonic Board may determine) and the date the Partly Paid
Shares are to be sold.

In valuing each of the Partly Paid Shares, Homestake and Plutonic agreed to
use as the basis therefor the value of 0.34 shares of Homestake Common Stock
(based on the closing price of Homestake Common Stock on the NYSE on December
19, 1997) converted into Australian dollars, and reduced by the unpaid purchase
price applicable to each Partly Paid Share. It was also assumed each Partly Paid
Share would be paid up in full within five years.

Based on the foregoing, the relative value of each Partly Paid Share to one
Ordinary Share was determined and a relative exchange ratio was established, as
follows:

<TABLE>
<CAPTION>
EXCHANGE RATIO (SHARES OF HOMESTAKE
PLUTONIC PARTLY PAID SHARES COMMON STOCK TO EACH PARTLY PAID SHARE)
--------------------------- ---------------------------------------
<S> <C>
211,250 Partly Paid Shares, unpaid as to A$0.75 per share 0.303
679,962 Partly Paid Shares, unpaid as to A$0.85 per share 0.299
149,375 Partly Paid Shares, unpaid as to A$0.90 per share 0.296
</TABLE>

A total of 311,531 shares of Homestake Common Stock will be exchanged for
the 1,040,587 Partly Paid Shares outstanding.

OPTIONS

There are eleven separate groups of Options outstanding, exercisable on
dates ranging from October 12, 1999 through June 4, 2002, at prices ranging from
A$5.66 to A$8.75. In valuing the Options, Homestake and Plutonic agreed to apply
the Black-Scholes option valuation method, using as the basis therefor the value
of 0.34 shares of Homestake Common Stock (based on the closing price of
Homestake Common Stock on the NYSE on December 19, 1997) converted into
Australian dollars. Based on the foregoing, the relative value of each Option to
one Ordinary Share was determined and a relative exchange ratio was established
for each Option. Exchange Ratios for the Options vary from 0.048 to 0.104 shares
of Homestake Common Stock per Option, for a total of 192,175 shares of Homestake
Common Stock to be exchanged for the Options outstanding to subscribe for
3,218,000 Plutonic Shares.

9
<PAGE> 13

COMPARATIVE STOCK PRICES AND PREMIUM TO PLUTONIC SHAREHOLDERS

Homestake and Plutonic publicly announced the Combination on December 21,
1997 in the United States (December 22, 1997 in Australia). The following table
shows the closing prices for Homestake Common Stock on the NYSE and for Ordinary
Shares on the ASX on December 19, 1997 (the last trading day before the
Combination was announced) and comparable price data on March 25, 1998:

<TABLE>
<CAPTION>
HOMESTAKE COMMON PLUTONIC ORDINARY SHARES
STOCK (NYSE) (ASX)
------------------- ------------------------
<S> <C> <C> <C>
December 19, 1997............. US$9.9375 A$2.80 (US$1.82*)
March 25, 1998................ US$9.875 A$4.88 (US$3.26>*)
</TABLE>

- ---------------

* US dollar amounts are calculated by multiplying the actual Australian dollar
amounts by the Exchange Rate on the applicable date.

The following table shows the equivalent market price (in both US and
Australian dollars) on December 19, 1997 and March 25, 1998 for 0.34 shares of
Homestake Common Stock, being the Exchange Ratio of Homestake Common Stock for
each Ordinary Share, based on the closing prices of Homestake Common Stock on
the NYSE on those days:

<TABLE>
<S> <C> <C>
December 19, 1997........................................ US$3.38 A$5.20**

March 25, 1998........................................... US$3.36 A$5.01**
</TABLE>

Based on the closing price of the Ordinary Shares on December 19, 1997 and
the closing price of Homestake Common Stock on December 19, 1997 and March 25,
1998, the Combination offers a premium of 86% at December 19, 1997 and a premium
of 79% at March 25, 1998 to the holders of Ordinary Shares.

- ---------------

** Australian dollar amounts are calculated by multiplying the actual US dollar
amounts by the Exchange Rate on the applicable date.

HOMESTAKE MINING COMPANY

Homestake is engaged principally in gold mining and related activities,
including exploration, extraction, processing, refining and reclamation. Gold
bullion, Homestake's principal product, is produced in the United States,
Canada, Australia and Chile. Homestake is actively engaged in exploration in the
United States, Canada, Australia, Eastern Europe, Brazil, Chile and the Andean
region of South America, and participates in a development project in Bulgaria.
Homestake is incorporated under Delaware law. The Homestake Common Stock is
listed on the NYSE under the symbol "HM," on the ASX and on the Swiss Stock
Exchange (Basel, Geneva and Zurich). Homestake's principal executive offices are
located at 650 California Street, San Francisco, California 94108-2788
(telephone number: (415) 981-8150). See "Homestake Mining Company" in the
Supplement.

10
<PAGE> 14

The following table presents certain information regarding Homestake's
significant operating properties. Where the percentage interest shown below is
less than 100%, production, reserves and mineralized material data represent
Homestake's share of total production, reserves and mineralized material. All
tons are presented in short tons of 2,000 pounds, except tons of sulfur, which
are presented in long tons of 2,240 pounds.

<TABLE>
<CAPTION>
MINERALIZED
MATERIAL AT
RESERVES AT DECEMBER 31,
DECEMBER 31, 1997
1997 ---------------------
OWNERSHIP 1997 ------------ WEIGHTED
INTEREST PRODUCTION CONTAINED AVERAGE
---------- ---------- OUNCES TONS(1) GRADE
GOLD MINES PERCENTAGE OUNCES (THOUSANDS) (MILLIONS) (OZ/TON)
---------- ---------- ---------- ------------ ---------- --------
<S> <C> <C> <C> <C> <C>
UNITED STATES

The HOMESTAKE MINE, located in Lead, South Dakota, has 100 397,299 2,786 18.5 0.170
operated for over 122 years and produced more than 38.5
million ounces of gold. Operations consist of an 8,000
foot deep underground mine, an open-pit mine (scheduled to
close in 1998), a mill and a refinery. On January 26,
1998, Homestake announced a major restructuring that will
substantially reduce production and costs per ounce of
production at the mine.

The ROUND MOUNTAIN MINE is located in central Nevada, 25 119,959 1,759 35.6 0.016
about 60 miles north of Tonopah. The operation is one of
the largest heap leach gold mines in the world. An 8,000
TPD gravity mill to process higher-grade sulfide ores was
completed in October 1997.

The RUBY HILL MINE is located near Eureka in central 100 16,629 687 7.2 0.073
Nevada. Production commenced in the fourth quarter of
1997. Production for 1998 is estimated to be 110,000
ounces at a total cash cost of approximately US$123 per
ounce and at a total production cost of US$241 per ounce.
Ore from this open pit mine is heap leached.

The MCLAUGHLIN MINE is located in northern California. 100 118,491 845 -- --
Mining ceased in 1996 and processing of stockpiled ore
will continue until 2003.

The MARIGOLD MINE is located about 40 miles southeast of 33.3 24,547 168 -- --
Winnemucca, Nevada. Mining is conducted by conventional
open pit methods. The mine is primarily a heap leach
operation with intermittent milling operations.

The PINSON MINE, located about 30 miles northeast of 50 25,829 65 -- --
Winnemucca, Nevada. Mining is conducted by conventional
open pit methods in several different areas. The mine has
both heap leaching and conventional milling facilities. In
February 1998, milling was suspended and all ores
currently are processed by heap leaching.

CANADA

The ESKAY CREEK MINE is located approximately 50 air miles 100 417,303 Gold 0.2 Gold
north of Stewart, British Columbia. This underground mine (3)(4) 1,281 0.587
is one of Canada's highest-grade and Homestake's lowest
cost operations. Ore at Eskay Creek is crushed and blended Silver Silver
prior to the sale to third-party smelters for final 59,208 11.97
processing. Construction of a new gravity/flotation mill
was completed in November 1997. The mill will improve
profit margins on ore currently shipped to third-party
smelters and will allow for the treatment of some lower
grade ores that otherwise could not be processed
economically.(2)

The SNIP MINE is an underground mine located approximately 100 115,644 80 -- 0.555
56 air miles north of Stewart, British Columbia. It is a (3)
small high-grade mine. Absent additional exploration
success, the Snip Mine is expected to close in June
1999.(2)

The WILLIAMS MINE, Canada's largest underground gold mine, 50 201,098 2,465 4.1 0.119
is located in the Hemlo Gold Camp, immediately north of
Lake Superior near Marathon, Ontario.

The DAVID BELL MINE, which is adjacent to the Williams 50 101,313 804 -- --
Mine, is a smaller, higher-grade underground mine.
Included with the David Bell mine is a "Quarter Claim"
royalty interest in a neighboring mine. The Williams and
David Bell Mines are modern and low cost.
</TABLE>

11
<PAGE> 15

The consolidated surface and underground operations at 50 425,914 5,924 102.6 0.071
KALGOORLIE comprise Australia's largest gold mining
complex. During 1995, a US$90 million (100% basis) mill
expansion increased the milling capacity at Kalgoorlie to
35,000 TPD and will allow for further expansion of the
Super Pit. In 1997, a 1.6-mile long decline was completed
from the Super Pit to the Mt Charlotte underground mine.

CHILE

The AGUA DE LA FALDA MINE is located approximately 600 100 31,417 110 7.6 0.160
miles north of Santiago. Ore from this underground mine is
heap leached. Mining commenced in January 1997 and the
first gold was poured in April 1997. Annualized production
is currently at a rate of approximately 40,000 ounces per
year (100% basis), at a total cash cost of US$213 per
ounce and a total production cost of US$295 per ounce.(5)
</TABLE>

<TABLE>
<CAPTION>
OWNERSHIP RESERVES AT
INTEREST 1997 PRODUCTION DECEMBER 31, 1997
---------- --------------- -----------------
SULFUR MINE PERCENTAGE
----------- ----------
<S> <C> <C> <C>
The MAIN PASS 299 sulfur deposit is located in the Gulf 16.7 Sulfur Sulfur
of Mexico off the coast of Louisiana. Main Pass 299 is 315,964 10.7 million
the largest Frasch sulfur mine discovered in North tons(1) tons(1)(6)
America since 1920. In September 1997 Homestake wrote
off its entire remaining investment in the sulfur Oil Oil
property. In addition to sulfur, oil reserves overlie 458,078 1.5 million
the deposit. barrels barrels(6)
</TABLE>

- ---------------

(1) All tons are presented in short tons of 2,000 pounds, except tons of sulfur,
which are presented in long tons of 2,240 pounds.

(2) The Eskay Creek and Snip mines are owned 100% by Prime Resources Group Inc.,
of which Homestake owns 50.6% of the stock outstanding. The ownership
interest and 1996 production amounts shown are Homestake's interests without
reduction for the 49.4% minority interest in Prime. Reserves and mineralized
material amounts shown are Homestake's interests after reduction for the
49.4% minority interest in Prime.

(3) Includes contained ounces of gold and equivalent ounces of gold contained in
ore and concentrates sold to smelters.

(4) Includes silver converted into equivalent ounces of gold at a ratio of 68.2
ounces of silver equals one ounce of gold.

(5) Homestake owns 51% of Agua de la Falda, S.A. Reserves and mineralized
material amounts shown are Homestake's interest after reduction for the 49%
minority interest.

(6) Reserve amounts are before royalties.

RECENT DEVELOPMENTS

On January 26, 1998, Homestake announced the implementation of a major
restructuring of operations at the Homestake mine to reduce operating costs.
Annual production will be reduced to approximately 150,000 to 180,000 ounces per
year. Implementation of the plan will require a major reduction in the level of
employment and a complete reorganization of the methods of operation. To
implement the plan, Homestake suspended underground mining while it completed
the final details of the new operating plan and readied the underground mine to
begin operating on the restructured basis. During the shutdown period, the mill
operated at a reduced level sufficient to process ore from the Open Cut, which
continued to operate during the shutdown period. To achieve the new operating
plan, Homestake will invest US$20 million to US$30 million by the end of 1999.
Underground crews commenced returning to work on a limited basis on March 26,
1998,

12
<PAGE> 16

and the remaining underground work force, which is expected to be approximately
one-half of the pre-shutdown work force, will return on a phased basis through
April 1998. On completion of the restructuring, total cash cost for the
underground mine is expected to decline from the current cost of approximately
US$335 per ounce to approximately US$280 per ounce by the end of 1999. Before
taking into account the Combination, the restructuring is expected to reduce
Homestake's weighted average cash costs by approximately US$8 per ounce by the
end of 1999. The new operating plan involves closing parts of the mine and
concentrating on the best ore bodies on substantially fewer production levels in
order to reduce continuing infrastructure and other operating costs. Although
the new plan reduces proven and probable gold reserves by 1.5 million ounces
(before taking account of 1997 production), the improved per ounce operating
margin on the remaining reserves should increase the mine's future total cash
flow significantly.

PLUTONIC RESOURCES LIMITED

Plutonic is engaged principally in gold mining and related activities,
including exploration, extraction, processing and reclamation. Plutonic also has
interests in base metal activities through Lachlan Resources NL, its 62% owned
subsidiary. Plutonic has interests in five gold mines in Western Australia and
conducts exploration in the Australian states of Western Australia, Queensland,
New South Wales, Victoria and Tasmania. Plutonic is incorporated in New South
Wales. The Ordinary Shares are listed on the ASX under the symbol "PLU."
Plutonic's principal offices are located at Level 37, 100 Miller Street, North
Sydney, NSW 2060, Australia (telephone number: (02) 9900-5000). See "Plutonic
Resources Limited" in the Supplement.

The following table presents certain information regarding Plutonic's
significant properties. Where the percentage interest is less than 100%,
production, reserves and mineralized material represent Plutonic's share of
total production, reserves and mineralized material. All tons are presented in
short tons of 2,000 pounds.

<TABLE>
<CAPTION>
RESERVES
AT 31 MINERALIZED MATERIAL
DECEMBER AT 31 DECEMBER 1997
1997 ----------------------
----------- WEIGHTED
OWNERSHIP 1997 CONTAINED AVERAGE
INTEREST PRODUCTION OUNCES TONS GRADE
GOLD MINES PERCENTAGE OUNCES (THOUSANDS) (MILLIONS) (OZ/TON)
---------- ---------- ---------- ----------- ---------- --------
<S> <C> <C> <C> <C> <C>
The PLUTONIC MINE, 180 kilometres from 100 274,608 567 26.7 0.222
Meekatharra, is an open pit mine transitioning
to one of the largest underground mines in
Australia. Production began in 1990 and the
first millionth ounce was produced in 1996.

The DARLOT/CENTENARY MINE, 110 kilometres from 100 65,153 1,556 4.0 0.123
Leonora is an underground mine. A decline has
been driven from the Darlot mine to access the
new, major Centenary discovery, and development
at Centenary commenced in October 1997.

The LAWLERS MINE, 120 kilometres from Leonora, 100 87,481 252 3.8 0.117
is an open pit mine, with additional
underground development underway. Mining
operations will continue for two more years in
absence of additional discoveries.

The MT MORGANS MINE, 50 kilometres from 80 73,588 91
Laverton, was acquired in late 1995.
Development activity has been suspended and
production will continue from developed stoping
blocks through approximately September 1998 but
at a significantly reduced level.

The PEAK HILL MINE, 130 kilometres from 66.67 33,104 24
Meekatharra, was acquired in December 1992. Ore
processing is expected to continue to at least
mid-1998.
</TABLE>

13
<PAGE> 17

HOMESTAKE'S REASONS FOR THE COMBINATION; RECOMMENDATION OF THE HOMESTAKE BOARD

Homestake believes that the Combination will result in a number of benefits
to Homestake and its stockholders, including the following:

- The transaction will be immediately accretive to Homestake's 1998 cash
flow and operating results, before one-time transaction costs.

- The transaction will result in a significant growth of low-cost
production and will reduce Homestake's total cash cost per ounce of gold
produced. Homestake's gold production for 1997 was 1,996,000 equivalent
ounces of gold at a total cash cost of US$237 per ounce. After taking
into account the proposed restructuring of operations at the Homestake
mine, combined production of Homestake and Plutonic is expected to be
approximately 2,325,000 equivalent ounces of gold at a total cash cost of
US$228 per ounce for 1998 and approximately 2,406,000 equivalent ounces
of gold at a total cash cost of US$219 per ounce for 1999.

- The transaction will help Homestake to weather the current environment of
low gold prices and position Homestake to thrive when gold prices return
to more normal levels.

- The transaction will increase Homestake's reserves and mineralized
material at December 31, 1997 by approximately 15% and 57%, respectively,
creating one of the largest North American-based gold producers (based on
production and reserves and mineralized materials).

- The transaction will provide Homestake with an additional four operated
mines and the high quality reserves at the Plutonic and Darlot/Centenary
mines, with excellent potential for conversion of a substantial part of
mineralization into reserves. These mines also have excellent exploration
potential.

- Plutonic has a large number of attractive exploration prospects in
Australia's most prolific gold region, the Yilgarn greenstone belt.

- With principal operations in the United States, Canada and Australia, the
Combined Company will have the lowest political risk profile of any major
North American-based gold mining company.

- Homestake's extensive underground mining expertise will be a major
positive factor in developing the expanding underground operations at the
Plutonic and Darlot/Centenary mines.

- The Combined Company will be the operator of 11 of its 17 mines,
resulting in greater experience in mine operations and greater ability to
attract high quality personnel.

- The Combined Company will have an excellent asset base, and a strong
balance sheet and cash flow, which should enable the Combined Company to
compete more effectively for acquisition, exploration and development
opportunities throughout the world.

- The Combined Company expects to realize significant exploration and
administrative cost savings, aggregating approximately US$20 million on
an annualized basis by the end of 1998.

- The Combination will be accounted for as a pooling-of-interests, whereby
Homestake will record the acquisition of the Plutonic assets at their
U.S. GAAP historical carrying values.

No assurance can be given as to if, when or the extent to which the
foregoing benefits will be realized. See "Risk Factors" herein and "Risk
Factors" and "Cautionary Statements" in the Supplement.

The Homestake Board has determined unanimously that the Combination is fair
to and in the best interests of the Homestake Stockholders. Accordingly, the
Homestake Board unanimously recommends that the Homestake Stockholders vote
"FOR" the Share Issuance. See "The Combination -- Homestake's Reasons for the
Combination; Recommendation of the Homestake Board" in the Supplement.

14
<PAGE> 18

OPINION OF HOMESTAKE'S FINANCIAL ADVISOR

SBC Warburg Dillon Read Inc., Homestake's Financial Advisor ("Homestake's
Financial Advisor"), has delivered its written opinion to the Homestake Board to
the effect that, based upon and subject to certain matters stated therein, as of
December 22, 1997, the Exchange Ratio for Ordinary Shares was fair to the
Homestake Stockholders from a financial point of view. See "The
Combination -- Opinion of Homestake's Financial Advisor" in the Supplement for a
summary of the material quantitative analyses performed by Homestake's Financial
Advisor in arriving at its opinion, as well as a description of the assumptions
and qualifications made, matters considered and limitations relating thereto. A
copy of the full text of the written opinion of Homestake's Financial Advisor,
set forth in Appendix B hereto, is incorporated herein by reference and should
be read carefully in its entirety.

PLUTONIC'S REASONS FOR THE COMBINATION; RECOMMENDATION OF THE PLUTONIC BOARD

On December 22, 1997, the Plutonic Board unanimously recommended the
Combination to the Plutonic Shareholders.

The recommendation on that date took into account a number of benefits,
including the following:

- Homestake's offer valued Plutonic at A$970 million, which represented a
premium of 86% to Plutonic's market capitalization (based on the closing
share price on December 19, 1997, the last trading day prior to
announcement of the offer).

- Homestake's extensive underground mining expertise will contribute
significantly in developing the Centenary deposit and the underground
mine operations at the Plutonic mine and in capitalizing on the potential
within the Yilgarn greenstone belt in Western Australia.

- Homestake is a large, quality gold mining company, and Homestake Common
Stock is a highly liquid US dollar denominated stock.

In accordance with commercial practice in Australia, the Plutonic Board
intends to meet again to consider the final terms of its recommendation
immediately prior to finalizing the Information Memorandum relating to the
proposed Schemes.

THE COMBINED COMPANY

DIRECTORS AND MANAGEMENT OF HOMESTAKE AFTER THE COMBINATION

Following the Combination, the existing members of the Homestake Board will
continue as directors of Homestake. In addition, the existing officers of
Homestake are expected to continue to hold their respective positions. It is
also the expectation of Homestake that the Homestake Board will invite Mr. Paul
McClintock, the Chairman of the Board of Plutonic, to become a member of the
Homestake Board following consummation of the Combination.

15
<PAGE> 19

GOLD PRODUCTION AND RESERVES

The following table shows the relative position of Homestake and the
Combined Company in respect of gold production and reserves, as compared with
the other large North American-based gold mining companies for 1997. The data in
the table have been obtained from annual reports and other information
disseminated to the public by the respective companies. The table also shows the
relative position of Homestake, Plutonic and the Combined Company's Australian
sourced gold production and reserves, as compared with the other large
Australian-based gold mining companies whose production and reserves are
primarily from Australia. Except as noted, the Australian comparisons are for
the fiscal year ended June 30, 1997.

<TABLE>
<S> <C> <C>
NORTH AMERICAN-BASED GOLD MINING PRODUCTION RESERVES
--------
COMPANIES(1) (000
OUNCES)

Newmont Gold Company............................. 3,957 52,678
Barrick Gold Corporation......................... 3,048 50,318
Placer Dome Inc.................................. 2,563 31,068
HOMESTAKE/PLUTONIC(2)............................ 2,544(3) 19,466
Homestake Mining Company......................... 1,996(3) 16,974
Battle Mountain Gold Company..................... 876 10,140

AUSTRALIAN-BASED GOLD MINING COMPANIES(4)
Normandy Mining Limited(5)....................... 1,228 9,831
HOMESTAKE/PLUTONIC(6)............................ 927 8,416
Plutonic Resources Limited(7).................... 510 2,492
Sons of Gwalia Limited........................... 510 3,290
Great Central Mines Limited(8)................... 505 6,100
Newcrest Mining Limited.......................... 474 8,100
Acacia Resources Limited(9)...................... 425 3,100
Homestake Mining Company(10)..................... 417 5,924
</TABLE>

- ---------------

(1) Amounts for the year ending December 31, 1997.

(2) Includes Plutonic production and reserves for the year ended December 31,
1997.

(3) Without reduction of 278,700 ounces for minority interests.

(4) Includes only production and reserves for Australian properties.

(5) Production and reserves exclude those amounts attributable to minority
interest.

(6) Includes Homestake and Plutonic amounts described below.

(7) Plutonic production restated to conform with Australian fiscal year
reporting for the 12 months ended June 30, 1997. Plutonic reserves are as
at December 31, 1997.

(8) Production is for the 12 months ended December 31, 1997 and reserves are as
at December 31, 1997.

(9) Production is for the fiscal year ended December 31, 1997. Reserves are at
December 31, 1996 and updated for information contained in Acacia's March
1997, June 1997, September 1997 and December 1997 Quarterly Reports.

(10) Homestake's Australian production restated to conform with Australian
fiscal year reporting for the 12 months ended June 30, 1997. Reserves
include only Homestake's Australian reserves at December 31, 1997.

16
<PAGE> 20

HOMESTAKE'S BUSINESS PLAN AFTER THE COMBINATION

Following the Combination, Homestake expects to focus its exploration and
development activities, taking into account the best prospects of Homestake and
Plutonic. Homestake plans to continue a substantial exploration program. In
addition, Homestake expects to continue evaluating prospects for acquisitions
and mergers with a view to continued acquisition of attractive companies and
properties that will enhance value for the Homestake Stockholders.

The Homestake Bank Credit Agreement permits total borrowings of up to
US$275 million. At December 31, 1997, borrowings under the Homestake Bank Credit
Agreement were US$49 million. Homestake's Bank Credit Agreement also limits the
amount of indebtedness that may be incurred or maintained by certain
subsidiaries. At December 31, 1997, the borrowings by Plutonic under its bank
credit agreement were approximately A$170 million (approximately US$111 million
at A$1 = US$0.65), which is in excess of the borrowings which would be permitted
for Plutonic operating as a subsidiary of Homestake under the Homestake Bank
Credit Agreement. Plutonic's bank credit agreement provides that lenders under
that agreement have the right to request repayment of outstanding indebtedness
following a change of control of Plutonic. The Combination will constitute a
change of control of Plutonic for purposes of the Plutonic bank credit
agreement. Plutonic's bank credit agreement also permits Plutonic to prepay
outstanding indebtedness at any time. Homestake does not expect any difficulty
in securing the consent of its lenders and the Plutonic lenders to maintain the
Plutonic indebtedness outstanding or to refinance the outstanding Plutonic
indebtedness under the Homestake Bank Credit Agreement.

INTENTIONS ABOUT PLUTONIC

On completion of the Combination, Plutonic will cease to be a separate,
publicly-held company. As a result, certain administrative, treasury and other
activities of Plutonic will no longer need to be performed. It is the intention
of Homestake to integrate the management, administrative, exploration,
operational and other activities of Plutonic and Homestake Gold of Australia
Limited ("HGAL"), Homestake's principal Australian subsidiary. As a part of that
integration, Homestake expects to close the Plutonic offices in Sydney and to
relocate the continuing Plutonic activities to Perth. Plutonic exploration
functions performed in Sydney, as well as HGAL's exploration department in
Perth, will be relocated to Plutonic's existing Perth exploration offices.
Homestake expects to complete substantially all of the integration during 1998.

As a part of the integration process, Plutonic and Homestake management
will work together to determine an appropriate organizational structure and the
nature and number of management, administrative, exploration, operational and
other positions for the consolidated group. Plutonic and Homestake management
will also evaluate the personnel employed by HGAL and Plutonic to determine the
persons best qualified from both companies, taking into account the extent to
which Plutonic personnel may be prepared to relocate to Perth. Following that
evaluation process, Homestake management will select the appropriate senior
management and other personnel from both companies and take other appropriate
action to implement the administrative reorganization.

Because of the relocation of the headquarters, the elimination of certain
functions, and the restructuring of the organizations, there will be a reduction
in the combined workforce. As a result, Homestake anticipates that some number
of existing Plutonic and HGAL employees will cease to be employed in the newly
consolidated group, although it cannot now determine the extent thereof.
Homestake will provide severance packages to all employees whose positions are
eliminated on terms at least as favorable as those generally offered to
similarly situated persons in the location of employment and the Australian gold
mining sector.

Except as set out above, Homestake does not intend to materially alter the
business of Plutonic or to dispose of or redeploy any of Plutonic's material
assets as a result of the Combination.

17
<PAGE> 21

RISK FACTORS

The risk factors identified below should be considered by Homestake
Stockholders in deciding whether to vote for the Share Issuance. These factors
also should be considered in conjunction with the information contained in the
sections entitled "Risk Factors" and "Cautionary Statements" and the other
information contained in the Supplement.

RISKS INHERENT IN GOLD EXPLORATION, DEVELOPMENT AND PRODUCTION

The business of gold exploration, development and production by its nature
involves significant risks. Among other things, the business depends on
successful location of reserves and skillful management. Gold exploration is
highly speculative in nature, involves many risks and frequently is
non-productive. Production costs can be affected by unforeseen changes in ore
grades and recoveries, permitting requirements, environmental factors, work
interruptions, operating circumstances, unexpected changes in the quantity or
quality of reserves, unstable or unexpected ground conditions and technical
issues.

RISKS OF GOLD AND SILVER PRICE FLUCTUATIONS AND HEDGING ACTIVITIES

In general, hedging enables a gold producer to "lock in" a future price for
hedged gold that is higher than the then current spot price for gold. However,
to the extent that sales of future gold production are hedged, the ability to
realize future increases in gold prices may be reduced, subject to the gold
producer's ability to extend the expiry dates of the hedge contracts.

Homestake has adopted a gold hedging policy under which Homestake will, in
appropriate circumstances, enter into forward-sales contracts for approximately
30% of its gold production in each of the subsequent ten years at prices in
excess of certain targeted prices. In appropriate circumstances, Homestake also
will use combinations of put and call option contracts, which provide an
effective price floor for sales while permitting participation in future price
increases. In addition, Prime Resources Group Inc. ("Prime"), a 50.6% owned
subsidiary of Homestake, has adopted a hedging policy under which Prime will, in
appropriate circumstances, enter into forward-sales contracts for approximately
40% of its gold and silver production in each of the subsequent five years.

Plutonic's hedging strategy is designed to permit Plutonic to support the
long term viability of its mining and exploration activities and to provide
shareholders with the opportunity to benefit from future gold price increases.
Plutonic's current policy is to limit forward-sales transactions to the lesser
of 1.75 million ounces or 100% of reserves.

Homestake expects to continue the Homestake general gold hedging policy
following the Combination.

RISK OF INABILITY TO ACHIEVE COMBINED COMPANY COST SAVINGS

18
<PAGE> 22

RISKS ASSOCIATED WITH RESERVE REALIZATION

Gold and silver reserves reported by Homestake and Plutonic reflect
estimated quantities and grades of gold and silver in deposits and in stockpiles
of mined material that Homestake or Plutonic, as the case may be, believes can
be mined, processed and sold at prices sufficient to recover the estimated
future cash costs of production, remaining investment and anticipated additional
capital expenditures. Reserves are estimates based upon drilling results, past
experience with mining properties, experience of the persons making the reserve
estimates and many other factors. Reserve estimation is an interpretive process
based upon available data. The actual quality and characteristics of ore
deposits cannot be known until mining has taken place. Further, reserves are
valued based on estimates of future costs and future prices. Homestake gold
reserves at December 31, 1996 are based on an assumed price of US$375 per ounce
and gold reserves at December 31, 1997 are based on an assumed price of US$325
per ounce for short-lived operations and US$350 per ounce for other operations.

Plutonic's reserve estimates are made by persons considered "competent
persons" in accordance with the JORC Code. Plutonic's reserve estimates as of
December 31, 1996 are based on assumed gold prices of A$500 to A$525 per ounce
for its various operations. Plutonic's reserve estimates as of December 31, 1997
are based on an assumed gold price of A$450 per ounce.

Actual quality and characteristics of ore deposits and gold prices will
differ from the assumptions used to develop reserves. Such differences may be
significant.

RISKS OF GOVERNMENT REGULATION OF MINING ACTIVITIES

Homestake's and Plutonic's exploration activities and mining operations are
subject to extensive regulations governing development, production, labor
standards, occupation health, waste disposal, use of toxic substances,
environmental regulations, mine safety and other matters in all jurisdictions in
which they operate. Changes in regulations can have material impacts on
anticipated levels of production, costs and profitability. There can be no
assurance that all required permits and governmental approvals can be secured
and maintained on an economic basis.

RISKS OF CURRENCY FLUCTUATIONS

Gold is sold throughout the world principally based on the US dollar price,
but operating expenses of gold mining companies generally are incurred in local
currencies. Homestake's operations principally are based in the United States,
Canada and Australia. Homestake's Canadian and Australian subsidiaries engage in
currency hedging programs in Canadian and Australian dollars to protect against
significant currency fluctuations relative to the US dollar. Because Homestake's
production of gold in Australia will increase as a result of the Combination,
Homestake expects it will engage in currency hedging with respect to Plutonic's
operations.

The majority of Plutonic's gold production is initially sold forward based
on the US dollar price with the proceeds being simultaneously converted to
Australian dollars. There are occasions when the future US dollar proceeds will
be hedged and converted to Australian dollars. At December 31, 1997 Plutonic had
hedged a total of US$20 million to cover future US dollar gold proceeds.

RISKS OF NATIVE TITLE CLAIMS

In both Australia and Canada, rights of aboriginal populations impact on
the granting of rights by governments to conduct mining operations. Homestake
and Plutonic believe that mining at their existing mining operations will not be
adversely affected by native title claims, but native title claims may impact on
rights of exploration and mining of new discoveries in the future. See "Risk
Factors -- Risks of Native Title Claims," "Homestake Mining Company" and
"Plutonic Resources Limited -- Native Title Claims" in the Supplement.

19
<PAGE> 23

MATERIAL AUSTRALIAN INCOME TAX AND UNITED STATES FEDERAL INCOME TAX CONSEQUENCES

See "Material Australian Income Tax and United States Federal Income Tax
Consequences" in the Supplement for the opinion of Allen Allen & Hemsley with
respect to material Australian income tax consequences to the holders of
Plutonic Securities and the summary prepared by Skadden, Arps, Slate, Meagher &
Flom LLP with respect to material United States federal income tax consequences.
Because Homestake Stockholders will continue to hold their shares, there are no
income tax consequences to Homestake Stockholders as a result of the
Combination.

ANTICIPATED ACCOUNTING TREATMENT

The Combination is expected to be accounted for as a pooling-of-interests
in accordance with U.S. GAAP. It is a condition to the consummation of the
Combination that Homestake and Plutonic receive letters from their respective
independent accountants, Coopers & Lybrand L.L.P. and Ernst & Young, to the
effect that the Combination will qualify for pooling-of-interests accounting
treatment. See "The Combination -- Anticipated Accounting Treatment" and "The
Agreement -- Conditions to the Consummation of the Combination" in the
Supplement.

INTERESTS OF CERTAIN PERSONS IN THE COMBINATION

The directors and certain executive officers of Homestake have interests in
the Combination that are different from, or in addition to, the interests of
Homestake Stockholders. Such interests relate to or arise from, under certain
circumstances, the availability of severance benefits and the early vesting in
stock options and contingent stock rights granted to senior executives of
Homestake.

Certain executives and directors of Plutonic have interests in the
Combination that are different from, or in addition to, the interests of holders
of Plutonic Securities. Specifically, (i) one executive director has an
employment agreement, (ii) one director has a contract that guarantees the
payment of directors' fees for a specified period of time, (iii) one director is
affiliated with a financial advisor that will be paid fees for services in
connection with the implementation of the Combination, (iv) certain executives
and directors hold Options that currently are out of the money, for which the
executives and directors will receive Homestake Common Stock, and (v) the
Plutonic directors and officers will receive certain rights to indemnification
and liability insurance coverage.

See "The Combination -- Interests of Certain Persons in the Combination" in
the Supplement.

CONDITIONS TO THE COMBINATION

The obligations of Homestake and Plutonic to consummate the Combination are
subject to various conditions, including: (i) approval of the Schemes by the
holders of Plutonic Ordinary Shares, Partly Paid Shares and Options and by the
Supreme Court of New South Wales; (ii) receipt of Homestake Stockholder
Approval; (iii) approval for listing on the NYSE and the quotation on the ASX of
the shares of Homestake Common Stock to be issued pursuant to the Agreement;
(iv) the absence of legal restraints or prohibitions preventing the consummation
of the Combination; (v) the receipt of letters from Coopers & Lybrand L.L.P. and
Ernst & Young to the effect that the Combination qualifies as a
pooling-of-interests; (vi) the absence of certain material litigation; (vii) the
representations and warranties of the other party contained in the Agreement
being materially true; (viii) the performance of the other party in all material
respects of all obligations contained in the Agreement; and (ix) the absence of
material adverse changes with respect to the other party. See "The
Combination -- Regulatory Matters" and "The Agreement -- Conditions to the
Consummation of the Combination" in the Supplement.

TERMINATION OF THE AGREEMENT

Subject to certain limitations, the Agreement is subject to termination at
the option of either Homestake or Plutonic if the Combination is not consummated
on or before June 30, 1998 and prior to such time upon the occurrence of certain
events (such as a material adverse change in Homestake or Plutonic, regulatory
approvals not being obtained or other conditions). The Agreement also may be
terminated by either

20
<PAGE> 24

Homestake or Plutonic if such company receives a superior proposal by a third
party to acquire 15% or more of such company pursuant to a takeover bid, tender
offer, merger, sale of assets or the like and certain other conditions are met
(a "Superior Proposal"). If there is a material breach of the Agreement by a
party or a Superior Proposal for Homestake or Plutonic, the defaulting party or
Homestake or Plutonic, respectively, will be required to pay to the other party
a fee in the amount of US$4.5 million (the "Termination Fee") upon the
termination of the Agreement. In addition, Homestake will be required to
reimburse Plutonic up to US$1 million of expenses if Plutonic terminates the
Agreement because Homestake Stockholder Approval is not obtained. See "The
Agreement -- Termination Fees" in the Supplement.

REGULATORY MATTERS

The Combination is subject to approval by the Supreme Court of New South
Wales. The Combination also is subject to the Treasurer of the Commonwealth of
Australia not objecting to Homestake's acquisition of Plutonic. In February
1998, Homestake was advised that the Treasurer of the Commonwealth would not
object to the acquisition. See "The Combination -- Regulatory Matters" in the
Supplement.

21
<PAGE> 25

SELECTED FINANCIAL AND OTHER DATA

HOMESTAKE SELECTED CONSOLIDATED HISTORICAL FINANCIAL DATA

The following table sets forth certain financial data relating to
Homestake. The financial data should be read in conjunction with (i) the
historical financial statements of Homestake, including the notes thereto, which
are set forth in Appendix C, (ii) the explanation of significant differences
between U.S. GAAP and Australian GAAP, as applicable to Homestake, as set forth
in Appendix F, and (iii) the Unaudited Pro Forma Condensed Combined Financial
Statements, which are included in the Supplement.

(IN US DOLLARS)
(TABULAR DOLLAR AMOUNTS ARE IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
(PREPARED IN ACCORDANCE WITH U.S. GAAP)

<TABLE>
<CAPTION>
FOR THE YEAR ENDED DECEMBER 31,
------------------------------------------------------------------
1997 1996 1995 1994 1993
---------- ----------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C>
Revenues.................... $ 723,834 $ 766,936 $ 746,365 $ 705,487 $ 722,228
Net income (loss)........... (168,879)(1) 30,281(2) 30,327 78,016(3) 52,494(4)
Net income (loss) per
share(5).................. (1.15)(1) 0.21(2) 0.22 0.57(3) 0.38(4)
Cash dividends per share.... 0.15 0.20 0.20 0.175 0.10
</TABLE>

<TABLE>
<CAPTION>
DECEMBER 31,
------------------------------------------------------------------
1997 1996 1995 1994 1993
---------- ----------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C>
Total assets................ $1,304,729 $ 1,482,108 $1,321,633 $1,201,968 $1,121,250
Long-term obligations(6).... 406,237 299,168 305,418 295,719 282,865
Shareholders' equity........ 531,750 768,552 635,857 588,770 515,244
</TABLE>

- ---------------

(1) Includes a gain of $47.2 million ($62.9 million pretax), or $0.32 per share,
from the fee received from Santa Fe upon termination of Homestake's merger
agreement with Santa Fe, a gain of $8.1 million ($13.5 million pretax), or
$0.06 per share, from the sale of the George Lake and Back River joint
venture interests, and write-downs and unusual charges of $158.7 million
($198.8 million pretax), or $1.08 per share, including (i) a write-down of
$84.9 million ($107.8 million pretax) of Homestake's investment in the Main
Pass 299 sulfur mine, (ii) a reduction of $20.3 million ($26.9 million
pretax) in the carrying values of short-lived mining properties, (iii) an
increase in the estimated accrual for future reclamation of $21.5 million
($29.1 million pretax), (iv) write-downs of $22.9 million ($24.8 million
pretax) of certain investments, and (v) other charges of $9.1 million ($10.2
million pretax) primarily related to foreign exchange losses on intercompany
redeemable preferred stock.

(2) Includes income of $24 million, or $0.16 per share, from a reduction in
Homestake's accrual for prior year income taxes, a foreign currency exchange
loss on intercompany advances of $7.4 million ($8.9 million pretax), or
$0.05 per share, primarily related to Homestake's Canadian-dollar
denominated advances to Homestake Canada Inc., write-downs of $8.3 million
($9 million pretax), or $0.06 per share, in the carrying value of
investments in mining company securities, costs of $2.8 million ($3.4
million pretax), or $0.02 per share, related to the terminated proposed
merger with Santa Fe, and income of $4.9 million ($5.5 million pretax), or
$0.03 per share, from a litigation recovery.

(3) Includes a gain of $12.6 million ($15.7 million pretax), or $0.09 per share,
on the sale of Homestake's interest in the Dee mine and a gain of $11.2
million (no tax expense), or $0.08 per share, on dilution of the Company's
interest in Prime.

(4) Includes expense of $12.8 million ($16 million pretax), or $0.09 per share,
for the write-down of oil assets at Main Pass 299 and expense of $6.8
million ($8.2 million pretax), or $0.05 per share, for restructuring and
business combination costs.

(5) Basic and diluted earnings per share.

22
<PAGE> 26

(6) Long-term obligations include:

<TABLE>
<CAPTION>
DECEMBER 31,
----------------------------------------------------
1997 1996 1995 1994 1993
-------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
Long-term debt.......................... $263,855 $185,000 $185,000 $185,000 $189,191
Accrued reclamation costs............... 71,178 45,388 44,051 33,892 22,138
Accrued pension and other postretirement
benefit obligations................... 60,942 59,273 63,092 64,066 59,626
Other................................... 10,262 9,507 13,275 12,761 11,910
-------- -------- -------- -------- --------
$406,237 $299,168 $305,418 $295,719 $282,865
======== ======== ======== ======== ========
</TABLE>

HOMESTAKE SELECTED OPERATING DATA
(IN US DOLLARS)

<TABLE>
<CAPTION>
FOR THE YEAR ENDED DECEMBER 31,
----------------------------------------------------
1997 1996 1995 1994 1993
-------- -------- ------- ------- -------
<S> <C> <C> <C> <C> <C>
DEBT TO EQUITY RATIO (at December
31).................................. 50% 24% 29% 31% 37%
CAPITAL EXPENDITURES (thousands of
dollars)............................. $131,474 $105,923 $80,979 $88,654 $57,825
OPERATING STATISTICS
Gold production (thousands of
ounces).............................. 1,996 1,968 1,877 1,696 1,918
Average gold price realized per
ounce................................ $ 333 $ 389 $ 386 $ 384 $ 359
Total cash costs per ounce............. $ 237 $ 248 $ 257 $ 252 $ 229
RESERVES (at December 31)
Gold (millions of ounces).............. 17.0 20.4 21.5 17.9 18.4
Eskay Creek silver (millions of
ounces).............................. 59.2 56.1 47.4 51.5 55.1
Sulfur (millions of long tons)......... 10.7 11.0 11.4 11.7 11.0
</TABLE>

23
<PAGE> 27

PLUTONIC SELECTED CONSOLIDATED HISTORICAL FINANCIAL DATA (AUSTRALIAN GAAP)

The following table sets forth certain financial data relating to Plutonic.
The financial data should be read in conjunction with (i) the historical
financial statements of Plutonic, including the notes thereto, which are set
forth in Appendix D and (ii) the Unaudited Pro Forma Condensed Combined
Financial Statements, which are included in the Supplement.

(IN AUSTRALIAN DOLLARS)
(TABULAR DOLLAR AMOUNTS ARE IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
(PREPARED IN ACCORDANCE WITH AUSTRALIAN GAAP)

<TABLE>
<CAPTION>
FOR THE YEAR ENDED 31 DECEMBER
--------------------------------------------------------
1997 1996 1995 1994 1993
-------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
Operating revenue................. $361,579 $340,461 $222,691 $214,363 $239,098
Net income (loss)................. (62,299) 40,702 40,124 38,055 35,223
Net income (loss) per share(1).... (0.33) 0.22 0.22 0.21 0.22
Cash dividends per share.......... 0.03 0.11 0.095 0.08 0.06
</TABLE>

<TABLE>
<CAPTION>
31 DECEMBER
--------------------------------------------------------
1997 1996 1995 1994 1993
-------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
Total assets...................... $575,309 $678,011 $540,134 $396,730 $377,848
Long-term obligations(2).......... 175,061 90,184 122,415 4,415 13,517
Shareholders' equity.............. 339,211 416,569 354,967 331,708 300,122(3)
</TABLE>

- ---------------

(1) Basic and diluted earnings per share, except 1996 on a diluted basis was
$0.21.

(2) Long-term obligations consist of:

<TABLE>
<CAPTION>
31 DECEMBER
------------------------------------------------------
1997 1996 1995 1994 1993
-------- -------- -------- ------ -------
<S> <C> <C> <C> <C> <C>
Creditors and borrowings............. $170,000 $ 87,500 $120,000 $3,970 $13,517
Mine rehabilitation.................. 3,560 1,984 1,955
Employee entitlements................ 493 134 117
Other long-term obligations.......... 1,008 566 343 445
-------- -------- -------- ------ -------
$175,061 $ 90,184 $122,415 $4,415 $13,517
======== ======== ======== ====== =======
</TABLE>

During 1995, Plutonic borrowed $120 million under an unsecured finance
facility. During 1996, a total of $180 million was borrowed under the
finance facility, of which $92.5 million was included in the current portion
of creditors and borrowings.

(3) During 1993, Plutonic completed a rights issue of 19,935,000 Ordinary Shares
at a price of $6.30 per Ordinary Share on the basis of one Ordinary Share
for every eight Ordinary Shares held.

PLUTONIC SELECTED OPERATING DATA
(IN AUSTRALIAN DOLLARS)

<TABLE>
<CAPTION>
FOR THE YEAR ENDED 31 DECEMBER,
-------------------------------------------------
1997 1996 1995 1994 1993
-------- -------- ------- ------- -------
<S> <C> <C> <C> <C> <C>
DEBT TO EQUITY RATIO (at 31 December)...... 51% 44% 34% 4% 8%
CAPITAL EXPENDITURES (thousands of
dollars)................................. $123,085 $126,437 $64,666 $76,396 $30,914
OPERATING STATISTICS
Gold production (thousands of ounces)...... 550.4 449.8 348.7 332.8 391.8
Average gold price realized per ounce...... $ 553 $ 600 $ 612 $ 579 $ 532
Total cash costs per ounce................. $ 373 $ 403 $ 378 $ 304 $ 295
RESERVES (at 31 December)
Gold (millions of ounces).................. 2.5 2.2 2.1 1.6 1.2
</TABLE>

24
<PAGE> 28

PLUTONIC SELECTED CONSOLIDATED HISTORICAL FINANCIAL DATA (U.S. GAAP)

The following table sets forth certain financial data relating to Plutonic.
The financial data should be read in conjunction with (i) the historical
financial statements of Plutonic, including the notes thereto, which are set
forth in Appendix D, and (ii) the Unaudited Pro Forma Condensed Combined
Financial Statements, which are included in the Supplement.

(IN AUSTRALIAN DOLLARS)
(TABULAR DOLLAR AMOUNTS ARE IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
(PREPARED IN ACCORDANCE WITH U.S. GAAP)

<TABLE>
<CAPTION>
FOR THE YEAR ENDED 31 DECEMBER
--------------------------------------------------------
1997 1996 1995 1994 1993
-------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
Revenues............................ $335,755 $302,976 $218,291 $203,941 $233,086
Net income (loss)................... (45,684) 24,242 27,147 20,521 34,600
Net income (loss) per share(1)...... (0.24) 0.13 0.15 0.11 0.22
Cash dividends per share............ 0.07 0.095 0.09 0.09 0.05
</TABLE>

<TABLE>
<CAPTION>
31 DECEMBER
--------------------------------------------------------
1997 1996 1995 1994 1993
-------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
Total assets........................ $566,348 $651,918 $531,227 $380,375 $381,279
Long-term obligations(2)............ 175,061 90,184 122,415 4,415 13,517
Shareholders' equity................ 286,422 336,812 297,689 282,053 282,528
</TABLE>

- ---------------

(1) Basic and diluted earnings per share.

(2) Long-term obligations consist of:

<TABLE>
<CAPTION>
31 DECEMBER
------------------------------------------------
1997 1996 1995 1994 1993
-------- ------- -------- ------ -------
<S> <C> <C> <C> <C> <C>
Creditors and borrowings..................... $170,000 $87,500 $120,000 $3,970 $13,517
Mine rehabilitation.......................... 3,560 1,984 1,955
Employee entitlements........................ 493 134 117
Other long-term obligations.................. 1,008 566 343 445
-------- ------- -------- ------ -------
$175,061 $90,184 $122,415 $4,415 $13,517
======== ======= ======== ====== =======
</TABLE>

25
<PAGE> 29

UNAUDITED PRO FORMA COMBINED SELECTED FINANCIAL DATA

The following table presents unaudited pro forma combined selected
financial data for Homestake giving effect to the Combination and accounting for
the Combination as a pooling-of-interests. The pro forma financial data do not
purport to represent what the combined financial position or results of
operations actually would have been if the Combination had occurred at the
beginning of the periods or to project the combined financial position or
results of operations for any future date or period.

The information below should be read in conjunction with (i) the historical
financial statements of Homestake and Plutonic, including the notes thereto,
which are set forth in Appendices C and D, respectively, (ii) the Unaudited Pro
Forma Condensed Combined Financial Statements, which are included in the
Supplement and (iii) the historical selected financial information of Homestake
and Plutonic above.

(IN US DOLLARS)
(TABULAR AMOUNTS ARE IN THOUSANDS OF DOLLARS, EXCEPT PER SHARE AMOUNTS)
(PREPARED IN ACCORDANCE WITH U.S. GAAP)

<TABLE>
<CAPTION>
FOR THE YEAR ENDED DECEMBER 31,
--------------------------------------------------------------
1997 1996 1995 1994 1993
---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C>
Revenues............................. $ 972,765 $ 997,641 $ 948,022 $ 829,934 $ 855,834
Net income (loss).................... (202,635) 47,141 58,189 93,631 68,737
Net income (loss) per share(1)....... (0.96) 0.22 0.29 0.47 0.36
Cash dividends per share............. 0.15 0.21 0.20 0.18 0.10
</TABLE>

<TABLE>
<CAPTION>
DECEMBER 31,
--------------------------------------------------------------
1997 1996 1995 1994 1993
---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C>
Total assets......................... $1,675,943 $1,997,039 $1,716,217 $1,484,756 $1,365,644
Long-term obligations................ 520,272 370,973 396,507 299,150 291,951
Shareholders' equity................. 703,379 1,034,081 856,917 799,376 697,185
</TABLE>

- ---------------

(1) Basic and diluted earnings per share.

26
<PAGE> 30

COMPARATIVE PER SHARE DATA

The following table presents Homestake's and Plutonic's historical per
share data and pro forma combined per share data for the years ended December
31, 1997, 1996 and 1995, giving effect to the Combination and accounting for the
Combination as a pooling-of-interests, based upon the consolidated historical
financial statements of Homestake and Plutonic and the Unaudited Pro Forma
Condensed Combined Financial Statements. The pro forma combined information does
not purport to represent what the combined financial position or results of
operations would actually have been if the Combination had occurred at the
beginning of each of the periods or to project the combined financial position
or results of operations for any future data or period.

The information presented below should be read in conjunction with (i) the
historical financial statements of Homestake and Plutonic, including the notes
thereto, which are set forth in Appendices C and D, respectively, (ii) the
Unaudited Pro Forma Condensed Combined Financial Statements, which are included
in the Supplement and (iii) the historical selected financial information of
Homestake and Plutonic.

<TABLE>
<CAPTION>
FOR THE YEAR ENDED
DECEMBER 31,
--------------------------
1997 1996 1995
------ ------ ------
<S> <C> <C> <C>
HISTORICAL:

Per share of Homestake Common Stock:
(Prepared in accordance with U.S. GAAP; amounts in US
dollars)
Book value (1)......................................... $ 3.62 $ 5.24 $ 4.52
Cash dividends......................................... 0.15 0.20 0.20
Net income (loss)(2)................................... (1.15) 0.21 0.22
Per Plutonic Ordinary Share:
(Prepared in accordance with Australian GAAP; amounts in
Australian dollars)
Book value(1).......................................... $ 1.81 $ 2.22 $ 1.97
Cash dividends......................................... 0.03 0.11 0.095
Net income (loss)(2)................................... (0.33) 0.22 0.22
Per Plutonic Ordinary Share:
(Prepared in accordance with U.S. GAAP; amounts in Australian
dollars)
Book value(1).......................................... $ 1.53 $ 1.80 $ 1.65
Cash dividends......................................... 0.07 0.095 0.090
Net income (loss)(2)................................... (0.24) 0.13 0.15
PRO FORMA:
Combined per share of Homestake Common Stock:
(Prepared in accordance with U.S. GAAP; amounts in US
dollars)
Book value(1).......................................... $ 3.34 $ 4.91 $ 4.25
Cash dividends......................................... 0.15 0.21 0.20
Net income (loss)(2)................................... (0.96) 0.22 0.29
Combined per Plutonic Ordinary Share equivalent:(3)
(Prepared in accordance with U.S. GAAP; amounts in US
dollars)
Book value(1).......................................... $ 1.14 $ 1.67 $ 1.44
Cash dividends......................................... 0.05 0.07 0.07
Net income (loss)(2)................................... (0.33) 0.07 0.10
</TABLE>

- ---------------

(1) Book value per share is shareholders' equity divided by common shares (or in
the case of Plutonic, Ordinary Shares) outstanding at December 31, 1997,
1996 and 1995.

(2) Basic and diluted earnings per share, except Plutonic's 1996 earnings per
share on a diluted basis under Australian GAAP was $0.21.

(3) Pro forma combined per Ordinary Share equivalent information reflects the
pro forma combined per share of Homestake Common Stock amount multiplied by
the Exchange Ratio of 0.34 shares of Homestake Common Stock for each
Ordinary Share.

27
<PAGE> 31

SUPPLEMENT

TO
PROXY STATEMENT
AND
INFORMATION MEMORANDUM

This Supplement consists of information regarding Homestake and Plutonic
and the proposed Combination of the two companies. The Supplement is included as
part of the Proxy Statement that is being provided to Homestake Stockholders and
as part of the Information Memorandum that is being provided to the holders of
Plutonic Ordinary Shares, Partly Paid Shares and Options.

S-1
<PAGE> 32

TABLE OF CONTENTS

SUPPLEMENT

<TABLE>
<CAPTION>
PAGE
-----
<S> <C>
AVAILABLE INFORMATION....................................... S-5
EXCHANGE RATES.............................................. S-5
CERTAIN DEFINED TERMS....................................... S-7
CERTAIN MEASUREMENTS........................................ S-10
RISK FACTORS................................................ S-11
Risks Inherent in Gold Exploration, Development and
Production............................................. S-11
Risks of Gold and Silver Price Fluctuations and Hedging
Activities............................................. S-11
Risk of Inability to Achieve Combined Company Cost
Savings................................................ S-12
Risks Associated with Reserve Realization................. S-13
Risks of Government Regulation of Mining Activities....... S-13
Risks of Currency Fluctuations............................ S-14
Risks of Native Title Claims.............................. S-14
CAUTIONARY STATEMENTS....................................... S-16
Reliance by Homestake and Plutonic on Information Provided
by the Other........................................... S-16
Reserves.................................................. S-16
Estimates of Production................................... S-17
Estimates of Operating Costs and Capital Costs; Capital
Projects............................................... S-17
Taxes..................................................... S-18
Western Australia Royalty................................. S-19
PRICE RANGE AND TRADING VOLUME OF HOMESTAKE COMMON STOCK AND
THE PLUTONIC ORDINARY SHARES; DIVIDENDS................... S-20
Price Ranges and Trading Volumes.......................... S-20
Comparison of Stock Price Performances.................... S-22
Dividends................................................. S-22
THE COMBINATION............................................. S-24
General................................................... S-24
Exchange Ratios........................................... S-24
Background of the Combination............................. S-25
Homestake's Reasons for the Combination; Recommendation of
the Homestake Board.................................... S-28
Opinion of Homestake's Financial Advisor.................. S-32
Plutonic's Reasons for the Combination; Recommendation of
the Plutonic Board..................................... S-37
Material Australian Income Tax and United States Federal
Income Tax Consequences................................ S-37
Anticipated Accounting Treatment.......................... S-43
Regulatory Matters........................................ S-43
Absence of Dissenters Appraisal Rights.................... S-43
Interests of Certain Persons in the Combination........... S-44
Resale of Homestake Common Stock.......................... S-46
</TABLE>

S-2
<PAGE> 33

<TABLE>
<CAPTION>
PAGE
-----
<S> <C>
HOMESTAKE MINING COMPANY.................................... S-47
Background................................................ S-47
Significant 1997 and 1998 Developments.................... S-48
Statistical Summary....................................... S-49
Business and Property Description......................... S-52
Mineral Exploration and Development....................... S-74
Information on Reserves................................... S-75
Environmental Matters..................................... S-76
Customers................................................. S-80
Employees................................................. S-81
Legal Proceedings......................................... S-82
PLUTONIC RESOURCES LIMITED.................................. S-83
Background................................................ S-83
Significant Recent Developments........................... S-84
Statistical Summary....................................... S-85
Business and Property Description......................... S-87
Mineral Exploration and Development....................... S-97
Information on Reserves................................... S-98
Estimation of Reserves.................................... S-98
Other Information......................................... S-98
Native Title Claims....................................... S-98
Environmental............................................. S-98
Customers................................................. S-100
Employees................................................. S-100
Legal Proceedings......................................... S-100
THE AGREEMENT............................................... S-101
General................................................... S-101
Schemes of Arrangement.................................... S-101
Representations and Warranties............................ S-101
Conduct of Business Pending the Combination............... S-102
Certain Actions With Respect to Takeover Proposals........ S-103
Conditions to the Consummation of the Combination......... S-104
Termination............................................... S-104
Superior Proposal......................................... S-105
Termination Fees.......................................... S-105
Effect of Termination..................................... S-106
Enforcement............................................... S-106
Release of Officers and Directors......................... S-106
Definitions............................................... S-106
HOMESTAKE HISTORICAL SELECTED FINANCIAL AND OTHER DATA...... S-109
Historical Selected Financial Data........................ S-109
Homestake Selected Operating Data......................... S-110
PLUTONIC HISTORICAL SELECTED FINANCIAL AND OTHER DATA
(AUSTRALIAN GAAP)......................................... S-111
Historical Selected Financial Data........................ S-111
Plutonic Selected Operating Data.......................... S-111
PLUTONIC HISTORICAL SELECTED FINANCIAL DATA (U.S. GAAP)..... S-112
UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL
STATEMENTS................................................ S-113
</TABLE>

S-3
<PAGE> 34

<TABLE>
<CAPTION>
PAGE
-----
<S> <C>
COMPARATIVE PER SHARE DATA.................................. S-124
DIRECTORS AND MANAGEMENT OF HOMESTAKE AFTER THE
COMBINATION............................................... S-125
Board of Directors of Homestake after the Combination..... S-125
Directors and Management of Homestake after the
Combination; Intentions about Plutonic................. S-128
BENEFICIAL OWNERSHIP OF SECURITIES.......................... S-130
Ownership of Common Stock By Homestake's Management....... S-130
Security Ownership of Certain Beneficial Owners of
Homestake.............................................. S-131
DESCRIPTION OF HOMESTAKE CAPITAL STOCK...................... S-132
General................................................... S-132
"Fair Price" Charter Provision............................ S-132
Homestake Rights Agreement................................ S-133
COMPARISON OF SHAREHOLDERS' RIGHTS.......................... S-135
Vote Required for Ordinary Transactions; Quorum........... S-135
Vote Required for Extraordinary Transactions.............. S-135
Distribution on Winding-Up................................ S-136
Transactions Involving Shareholders, Officers or
Directors.............................................. S-136
Takeover Regulation....................................... S-137
Dissenters Appraisal Rights............................... S-138
Oppression Remedy......................................... S-139
Limitation of Director Liability.......................... S-139
Distributions and Dividends............................... S-140
INDEPENDENT ACCOUNTANTS..................................... S-141
LEGAL MATTERS............................................... S-141
STOCKHOLDER PROPOSALS....................................... S-141
APPENDIX A: HOMESTAKE MINING COMPANY AND PLUTONIC RESOURCES
LIMITED COMBINATION IMPLEMENTATION AGREEMENT.............. A-1
APPENDIX B: OPINION OF HOMESTAKE'S INVESTMENT ADVISOR....... B-1
APPENDIX C: HOMESTAKE MINING COMPANY CONSOLIDATED FINANCIAL
STATEMENTS AND SUPPLEMENTARY DATA......................... C-1
APPENDIX D: PLUTONIC RESOURCES LIMITED AND CONTROLLED
ENTITITES CONSOLIDATED FINANCIAL STATEMENTS............... D-1
APPENDIX E: COMPARISON OF CERTAIN SEC AND JORC CODE
REPORTING REQUIREMENTS.................................... E-1
APPENDIX F: HOMESTAKE DIFFERENCES BETWEEN U.S. AND
AUSTRALIAN GENERALLY ACCEPTED ACCOUNTING PRINCIPLES....... F-1
APPENDIX G: OVERVIEW OF AUSTRALIAN, CANADIAN AND UNITED
STATES REGULATION OF MINING RIGHTS........................ G-1
APPENDIX H: MAPS SHOWING LOCATIONS OF HOMESTAKE AND PLUTONIC
MINES..................................................... H-1
</TABLE>

S-4
<PAGE> 35

NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATION NOT CONTAINED IN THIS DOCUMENT IN CONNECTION WITH THE
SOLICITATION OF PROXIES AND, IF GIVEN OR MADE, SUCH INFORMATION OR
REPRESENTATION MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY HOMESTAKE OR
PLUTONIC. THIS DOCUMENT DOES NOT CONSTITUTE THE SOLICITATION OF A PROXY IN ANY
JURISDICTION IN WHICH IT IS NOT LAWFUL TO MAKE ANY SUCH OFFER OR SOLICITATION OR
TO ANY PERSON TO WHOM IT IS NOT LAWFUL TO MAKE ANY SUCH OFFER OR SOLICITATION.

AVAILABLE INFORMATION

Homestake is subject to the informational requirements of the United States
Securities Exchange Act of 1934, as amended (the "Exchange Act"), and in
accordance therewith files reports, proxy statements and other information with
the United States Securities and Exchange Commission (the "SEC"). Reports, proxy
statements and other information filed by Homestake with the SEC may be
inspected and copied at the public reference facilities maintained by the SEC at
Room 1024, Judiciary Plaza, 450 Fifth Street, N.W., Washington, D.C. 20549, and
at the SEC's regional offices at Suite 1300, Seven World Trade Center, New York,
New York 10048, and at The Citicorp Center, 500 West Madison Street, Suite 1400,
Chicago, Illinois 60661. Copies of such material also can be obtained from the
Public Reference Section of the SEC at 450 Fifth Street, N.W., Washington D.C.
20549 at prescribed rates. The SEC maintains a Web site that contains reports,
proxy and information statements and other information regarding registrants
that file electronically with the SEC. Such reports, proxy and information
statements and other information may be found on the SEC's Web site address,
http://www.sec.gov. In addition, Homestake Common Stock is listed on the New
York Stock Exchange, Inc. (the "NYSE"), and material filed by Homestake may be
inspected at the offices of the NYSE, 20 Broad Street, New York, New York 10005.

Plutonic Ordinary Shares and Homestake Common Stock are quoted on the
Australian Stock Exchange Limited (the "ASX"). As a publicly listed company in
Australia, Plutonic is subject to regulation by the Australian Securities
Commission (the "ASC") and the ASX. Homestake is an exempt foreign listed
company and, as such, is also subject to certain limited ASC and ASX
regulations. The public can obtain information held by the ASC about Plutonic
and Homestake by application to ASC business centers located in the capital
cities of Australia. Members of the public are entitled to obtain copies of most
documents lodged with the ASC. The ASC also maintains a comprehensive on-line
computer database and a more limited Web site. The public can also access
information held by the ASX about any public company on application to any of
the ASX business centers located in the capital cities of Australia.

EXCHANGE RATES

The exchange rates expressed in United States dollars for A$1.00 at the end
of each of the years in the five years ended December 31, 1997 and the period
from January 1, 1998 to March 25, 1998, and the average, the high and the low
exchange rates for each of such periods were as follows (being the noon buying
rates in New York City for cable transfers in Australian dollars as certified
for custom purposes by the Federal Reserve Bank of New York (the "Exchange
Rate")):

<TABLE>
<CAPTION>
1998 1997 1996 1995 1994 1993
----------- ----- ----- ----- ----- -----
<S> <C> <C> <C> <C> <C> <C>
At end of period....................... .6700 .6515 .7944 .7432 .7753 .6783
Average for period*.................... .6779 .7385 .7847 .7398 .7345 .6785
High for period........................ .6868 .7978 .8180 .7703 .7778 .7213
Low for period......................... .6347 .6490 .7318 .7100 .6840 .6450
</TABLE>

- ---------------

* Based on the average of the Exchange Rates on the last business day of each
month during the period.

S-5
<PAGE> 36

The Exchange Rates expressed in Australian dollars for US$1.00 at the end
of each of the years in the five year period ended December 31, 1997 and the
period from January 1, 1998 to March 25, 1998, and the average, the high and the
low Exchange Rates for each of such periods were as follows (being the inverse
of the Exchange Rates set forth in the table above):

<TABLE>
<CAPTION>
1998 1997 1996 1995 1994 1993
----------- ------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C> <C>
At end of period.................. 1.4925 1.5349 1.2588 1.3455 1.2898 1.4743
Average for period*............... 1.4752 1.3541 1.2744 1.3517 1.3615 1.4738
High for period................... 1.5755 1.5408 1.3665 1.4085 1.4620 1.5504
Low for period.................... 1.4560 1.2534 1.2225 1.2982 1.2857 1.3864
</TABLE>

- ---------------

* Based on the average of the Exchange Rates on the last business day of each
month during the period.

The Exchange Rates for Australian dollars on December 19, 1997 and on March
25, 1998 were, respectively, A$1.00 = US$0.6530 and A$1.00 = US$0.6689, and the
inverse of such rates were US$1.00 = A$1.5314 and US$1.00 = A$1.4950,
respectively.

S-6
<PAGE> 37

CERTAIN DEFINED TERMS

In this Document:

"A$" refers to Australian dollars.

"Agreement" refers to the Combination Implementation Agreement dated 22
December 1997 between Homestake and Plutonic.

"ASC" refers to the Australian Securities Commission.

"ASX" refers to the Australian Stock Exchange Limited.

"Australian GAAP" refers to generally accepted accounting principles in
Australia.

"Board" refers to the Board of Directors of the relevant corporation.

"Business Day" refers to a weekday on which trading banks are open for
business in both Sydney and San Francisco.

"Combination" refers to the combination of Plutonic and Homestake pursuant
to the terms of the Agreement and the issue of Homestake Common Stock to the
Plutonic Shareholders and Plutonic Option Holders in exchange for their Ordinary
Shares, Partly Paid Shares and Options, as the case may be.

"Combined Company" refers to Homestake following the Combination.

"Court Order Time" refers to the time the Supreme Court of New South Wales
makes an order confirming such of the Schemes (and the reductions of capital
incidental to those Schemes) as are approved by the relevant Scheme
Participants.

"DGCL" refers to the Delaware General Corporation Law, as amended.

"Document" refers to the Proxy Statement (in the case of Homestake
Stockholders) and the Information Memorandum (in the case of holders of Plutonic
Securities).

"Effective Date" means the date on which the Schemes become effective in
accordance with the Second Court Order.

"Exchange Act" refers to the United States Securities Exchange Act of 1934,
as amended, and the rules and regulations thereunder.

"Exchange Rate" refers to the noon buying rate in New York City for cable
transfers in Australian dollars expressed in US dollars as certified for customs
purposes by the Federal Reserve Bank of New York, or the inverse thereof, as the
case may be.

"Exchange Ratio" refers to (i) an exchange ratio of 0.34 shares of
Homestake Common Stock for one Ordinary Share when used in connection with the
Ordinary Scheme, (ii) exchange ratios ranging from 0.296 to 0.303 shares of
Homestake Common Stock for each Partly Paid Share, as described in "The
Agreement -- Schemes of Arrangement," when used in connection with the Partly
Paid Scheme and (iii) exchange ratios ranging from 0.048 to 0.104 shares of
Homestake Common Stock for each Option, as described in "The
Agreement -- Schemes of Arrangement," when used in connection with the Option
Scheme. When used generally for descriptive purposes, "Exchange Ratios" refer
collectively to each of the ratios described in the preceding sentence.

"FIRB" refers to the Australian Foreign Investment Review Board.

"First Court Date" refers to the date on which the Supreme Court of New
South Wales makes an order under Section 411(1) of the NSWL for Plutonic to
convene the meetings of Scheme Participants to consider the Schemes.

"HGAL" refers to Homestake Gold of Australia Limited, a South Australian
corporation.

S-7
<PAGE> 38

"Homestake" or the "Company" refers to Homestake Mining Company, a Delaware
corporation, and, where the context so requires, Homestake and its subsidiaries
and predecessor entities.

"Homestake California" refers to Homestake Mining Company of California, a
California corporation and a wholly-owned subsidiary of Homestake.

"Homestake Board" refers to the Board of Directors of Homestake.

"Homestake Charter" refers to the Restated Certificate of Incorporation of
Homestake, as amended.

"Homestake Common Stock" refers to the common stock, $1.00 par value, of
Homestake.

"Homestake Preferred Stock" refers to the preferred stock, $1.00 par value,
of Homestake.

"Homestake Record Date" refers to March 10, 1998, the record date for the
Homestake Special Meeting.

"Homestake Rights" refer to the rights to purchase or receive Homestake
Preferred Stock or Homestake Common Stock in certain circumstances pursuant to
the Homestake Rights Agreement.

"Homestake Rights Agreement" refers to the Rights Agreement dated October
16, 1987, and amended as of October 15, 1997, between Homestake and BankBoston
N.A., as Rights Agent.

"Homestake Special Meeting" refers to the special meeting of the Homestake
Stockholders to be held on April 29, 1998.

"Homestake Stockholders" refers to the holders of Homestake Common Stock.

"Homestake Stockholder Approval" refers to the approval by the Homestake
Stockholders of the Share Issuance.

"Information Memorandum" refers to the documents required to be sent to
holders of Plutonic Securities under section 412 of the NSWL.

"JORC Code" refers to the Australasian Code for Reporting of Identified
Mineral Resources and Ore Reserves.

"NSWL" refers to the Corporations Law, as amended, as it applies in New
South Wales, Australia.

"NYSE" refers to the New York Stock Exchange, Inc.

"Option" refers to an option to subscribe for Ordinary Shares granted
pursuant to the Plutonic Directors' Option Plan or an option to subscribe for
Partly Paid Shares granted pursuant to the Plutonic Employee Share Plan.

"Option Holders" refers to the holders of Plutonic Options.

"Option Scheme" refers to the Scheme between Plutonic and the Plutonic
Option Holders as described in "The Agreement -- Schemes of Arrangement."

"Ordinary Scheme" refers to the Scheme between Plutonic and the Ordinary
Scheme Members as described in "The Agreement -- Schemes of Arrangement."

"Ordinary Scheme Member" refers to each person who is registered in the
register of members of Plutonic as the holder of an Ordinary Share as at the
Plutonic Combination Record Date.

"Ordinary Share" refers to a fully paid ordinary share, par value A$0.50,
of Plutonic.

"Partly Paid Scheme" refers to the Scheme between Plutonic and the Partly
Paid Scheme Members as described in "The Agreement -- Schemes of Arrangement."

"Partly Paid Scheme Member" refers to each person who is registered in the
register of members of Plutonic as the holder of a Partly Paid Share as at the
Plutonic Combination Record Date.

S-8
<PAGE> 39

"Partly Paid Share" refers to a partly paid Ordinary Share, par value
A$0.50, paid to A$0.05 each, issued by Plutonic pursuant to the Plutonic
Employee Share Plan.

"Plutonic" refers to Plutonic Resources Limited, a New South Wales
corporation and where the context so requires, Plutonic and its subsidiaries and
predecessor entities.

"Plutonic Board" refers to the Board of Directors of Plutonic.

"Plutonic Combination Record Date" refers to the date which is one Business
Day before the Second Court Order comes into effect or any other date agreed
with the ASX, being the record date to determine entitlement to receive shares
of Homestake Common Stock as a result of the Combination.

"Plutonic Meeting Record Date" refers to the time and date specified for
determining entitlements to attend and vote at the meetings of the Ordinary
Scheme Members, the Partly Paid Scheme Members and the Option Holders.

"Plutonic Option Holder" refers to each person who is registered in the
register of option holders of Plutonic as an Option Holder as at the Plutonic
Combination Record Date.

"Plutonic Securities" refers to the Ordinary Shares, the Partly Paid Shares
and the Options.

"Plutonic Shareholder" refers to each person who is registered in the
register of Plutonic as a holder of Ordinary Shares or Partly Paid Shares on the
Plutonic Combination Record Date or on the Plutonic Meeting Record Date, as
appropriate.

"Plutonic Share Plan" refers to the Plutonic Employee Share Plan and the
Plutonic Directors Option Plan.

"Plutonic Shares" refers to the Ordinary Shares and the Partly Paid Shares,
as the case may be.

"Prime" refers to Prime Resources Group Inc., a British Columbia company
and a 50.6% owned subsidiary of Homestake.

"Scheme Participants" refers to the Ordinary Scheme Members, the Partly
Paid Scheme Members and the Option Holders.

"Scheme" refers to the Ordinary Scheme, the Partly Paid Scheme and the
Option Scheme.

"Scheme Securities" refers to the Ordinary Shares (other than Ordinary
Shares held by Homestake), the Partly Paid Shares and the Options.

"SEC" refers to the United States Securities and Exchange Commission.

"Second Court Date" refers to the day upon which the Second Court Order is
made.

"Second Court Order" refers to the order of the Supreme Court of New South
Wales approving the Schemes following the approval of the Schemes by the Scheme
Participants.

"Securities Act" refers to the United States Securities Act of 1933, as
amended, and the rules and regulations thereunder.

"Share Issuance" refers to the issuance of up to approximately 64,356,482
shares of Homestake Common Stock to the Plutonic Shareholders and Plutonic
Option Holders pursuant to the Agreement (64,398,751 shares if the holders of
the Partly Paid Shares outstanding pay the remainder of the purchase price for
such Partly Paid Shares).

"US$" or "$" refers to United States dollars.

"U.S. GAAP" refers to generally accepted accounting principles in the
United States.

S-9
<PAGE> 40

CERTAIN MEASUREMENTS

An "acre" equals 0.405 hectares.

A "foot" equals .3048 meters.

A "gram" or "gramme" equals 0.032 ounces (troy).

A "hectare" equals 2.47 acres.

A "kilogram" equals 2.2046 pounds.

A "kilometer" equals 0.62 miles.

A "long ton" refers to a long ton of 2,240 pounds or 1.016 tonnes.

A "meter" equals 39.37 inches.

A "mile" equals 1.609 kilometers.

An "ounce" is a troy ounce, which equals 31.1 grams.

A "pound" equals 0.454 kilograms.

A "short ton" refers to a short ton of 2,000 pounds or 0.907 tonnes.

A "square kilometer" equals 0.3861 square miles.

A "square mile" equals 2.590 square kilometers.

A "tonne" refers to a metric ton of 1,000 kilograms, 2,204.6 pounds or
1.102 short tons.

"TPD" refers to short tons per day with respect to Homestake Information,
and tonnes per day with respect to Plutonic Information.

S-10
<PAGE> 41

RISK FACTORS

The risk factors identified below should be considered by Homestake
Stockholders in deciding whether to vote for the Share Issuance and should be
considered by the holders of Plutonic Securities in deciding whether to vote for
their respective Scheme. These risk factors also should be considered in
conjunction with the information contained in the section entitled "Cautionary
Statements" and other information contained in this Document.

RISKS INHERENT IN GOLD EXPLORATION, DEVELOPMENT AND PRODUCTION

The business of gold exploration, development and production by its nature
involves significant risks. Among other things, the business depends on
successful location of reserves and skillful management. Gold exploration is
highly speculative in nature, involves many risks and frequently is
non-productive. Once mineralization is discovered and determined to be
economically recoverable, it usually takes a number of years from the initial
phase of exploration until production commences, during which time the economic
feasibility of production may change. Substantial expenditures are required to
establish reserves through drilling, to determine means of production and
metallurgical processes to extract the metal from ore and, in the case of new
properties, to construct mining and processing facilities.

Mining is subject to a variety of risks and hazards, including rock falls
and slides, cave-ins, flooding and other weather conditions, and other acts of
God. Homestake and Plutonic each maintain and, after the Combination, Homestake
intends to maintain, property and liability insurance consistent with industry
practice, but such insurance contains exclusions and limitations on coverage.
For example, coverage for environmental liability generally is limited and may
be totally unavailable. There can be no assurance that insurance will continue
to be available at economically acceptable premiums. Production costs also can
be affected by unforeseen changes in ore grades and recoveries, permitting
requirements, environmental factors, work interruptions, operating
circumstances, unexpected changes in the quantity or quality of reserves,
unstable or unexpected ground conditions, and technical issues.

Substantially all of Homestake's and Plutonic's gold production and
significant exploration activities take place in the United States, Australia
and Canada, all of which historically have experienced relatively low levels of
political and economic risk. Homestake also produces gold in Chile and conducts
exploration activities in Eastern Europe, Brazil, Chile and the Andean region of
South America. These regions generally have higher levels of political and
economic risk than the United States, Australia and Canada, including greater
potential for government instability, uncertainty of laws and legal enforcement
and compliance, defects in or uncertainty as to title to mining property,
expropriation of property, restrictions on production, export controls, currency
non-convertibility, fluctuations in currency exchange rates, inflation and other
general economic and political uncertainties.

RISKS OF GOLD AND SILVER PRICE FLUCTUATIONS AND HEDGING ACTIVITIES

The results of Homestake's and Plutonic's operations are affected
significantly by the market price of gold. The results of Homestake's operations
are also affected, to a lesser extent, by the market price of silver. The
markets for gold and silver are worldwide markets. Gold and silver prices are
subject to volatile price movements over short periods of time and are
influenced by numerous factors over which Homestake and Plutonic have no
control, including expectations with respect to the rate of inflation, the
relative strength of the United States, Canadian and Australian dollars,
interest rates, global or regional political or economic crises, demand for
jewelry and industrial products containing gold and silver, speculation, and
sales by central banks and other holders and producers of gold and silver in
response to these factors. Recently, the price of gold has been in decline and
at certain points during the past few months has been below US$300 per ounce.

S-11
<PAGE> 42

The following table shows the reported annual high, low, average and end of
the year afternoon fixing prices of gold per ounce in US dollars on the London
Bullion Market:

<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31
------------------------------------
1997 1996 1995 1994 1993
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
High.................................. $367 $416 $397 $398 $407
Low................................... $283 $367 $372 $370 $326
Average............................... $331 $388 $384 $384 $360
End................................... $290 $369 $387 $383 $392
</TABLE>

On March 25, 1998, the closing spot price of gold per ounce was US$299.

The supply of gold and silver includes a combination of new mine
production, recycling of industrial products containing gold and silver, and
sales from existing stocks of bullion and fabricated gold and silver held by
governments, public and private financial institutions, and individuals.

Homestake has adopted a gold hedging policy under which Homestake will, in
appropriate circumstances, enter into forward-sales transactions for
approximately 30% of its gold production in each of the subsequent ten years at
prices in excess of certain targeted prices. Homestake will also, in appropriate
circumstances, use combinations of put and call option contracts, which provide
an effective price floor for sales while permitting participation in future
price increases. To the extent Homestake has not hedged its production in
forward-sales transactions or established price floors, Homestake's
profitability is fully exposed to fluctuations in the current price of gold and
silver in world markets. In addition, Prime has adopted a hedging policy under
which Prime will, in appropriate circumstances, enter into forward-sales
contracts for approximately 40% of its gold and silver production in each of the
subsequent five years.

Homestake expects to continue the Homestake general gold hedging policy
following the Combination.

Homestake's results are also affected to a lesser degree by the market
prices for sulfur and for crude oil. Sulfur prices are affected principally by
the demand for fertilizer and the availability of by-product sulfur recovered
during the refining and processing of oil and natural gas. Crude oil prices are
affected principally by supply and demand for gasoline and fuel oil as well as
global or regional political or economic crises.

RISK OF INABILITY TO ACHIEVE COMBINED COMPANY COST SAVINGS

Estimates of cost savings for the Combined Company are based in part on the
expectation that the Combined Company will integrate various functions to
eliminate certain overlapping operating, exploration, administrative and general
expenses that currently are incurred separately by Homestake and Plutonic.
Homestake expects to close the Plutonic offices in Sydney and consolidate
administrative and general activities in Homestake's Perth office, which will
result in certain employee positions within HGAL and Plutonic being eliminated.
Certain Plutonic functions, such as those associated with Plutonic being a
publicly listed company, will be eliminated. In addition, Homestake will combine
its Australian exploration program with Plutonic's exploration program. This
will involve consolidating Plutonic's and Homestake's Australian exploration
activities in Plutonic's Perth exploration office, evaluating and prioritizing
the exploration prospects for both companies, and pursuing an exploration
program for the best properties of both companies. Cost savings are expected to
be achieved by eliminating certain overlapping exploration administrative
expenses and by a reduction of the total exploration budget as a result of
concentrating on fewer total

S-12
<PAGE> 43

exploration projects than the two companies presently are pursuing separately.
Although Homestake expects to complete substantially all of the integration of
these administrative and operating functions during 1998, there can be no
assurance that the Combined Company will be able to eliminate overlapping
functions of Homestake and Plutonic within that time frame.

Factors which could delay the combination of the exploration programs, or
which could affect the level of costs, include the ability to terminate or
modify commitments with respect to existing exploration projects, and the
emergence of unanticipated difficulties or changes at existing exploration
projects, which could lead Homestake to decide to postpone certain aspects of
the combined exploration program.

Actual cost savings resulting from the Combination may be lower than
anticipated, and realization of cost savings may be delayed. Accordingly, no
assurance can be given as to if, when or the extent to which such cost savings
may be realized. See "The Combination -- Homestake's Reasons for the
Combination; Recommendation of the Homestake Board."

RISKS ASSOCIATED WITH RESERVE REALIZATION

Gold and silver reserves reported by Homestake and Plutonic reflect
estimated quantities and grades of gold and silver in deposits and in stockpiles
of mined material that Homestake or Plutonic, as the case may be, believes can
be mined, processed and sold at prices sufficient to recover the estimated
future cash costs of production, remaining investment and anticipated additional
capital expenditures. Reserves are estimates based upon drilling results, past
experience with mining properties, experience of the person making the reserve
estimates and many other factors. Reserve estimation is an interpretive process
based upon available data. The actual quality and characteristics of ore
deposits cannot be known until mining has taken place. Further, reserves are
valued based on estimates of future costs and future prices. Homestake's gold
reserves at December 31, 1997 are based on an assumed price of US$325 per ounce
for short-lived operations, and US$350 per ounce for other operations.
Homestake's silver reserves at December 31, 1997 and 1996 are based on an
assumed price of US$5 per ounce. Homestake gold reserves at December 31, 1996
are based on an assumed price of US$375 per ounce.

Actual quality and characteristic of ore deposits and gold and silver
prices will differ from the assumptions used to develop reserves. Such
differences may be significant.

Sulfur and oil reserve realization is subject to similar risks. In the
third quarter of 1997, Homestake wrote off its entire sulfur mine investment in
light of the continued depressed world market for sulfur.

RISKS OF GOVERNMENT REGULATION OF MINING ACTIVITIES

Homestake's and Plutonic's mining operations and exploration activities are
subject to extensive regulation governing development, production, labor
standards, occupational health, waste disposal, use of toxic substances,
environmental regulations, mine safety and other matters in all jurisdictions in
which they operate. Changes in regulations can have material impacts on
anticipated levels of production, costs and profitability. There can be no
assurance that all required permits and government approvals can be secured and
maintained on an economic basis.

The United States Mining Law of 1872 (the "Mining Law") has been the
subject of substantial debate and proposals for change for several years. While
changes in the Mining Law may occur, Homestake cannot predict when or if changes
will occur, or the extent to which any new legislation will exempt or otherwise
"grandfather" existing mining operations, unpatented mining claims on which
commercial discoveries have been made or unpatented mining claims for which the
patenting process is partially complete. Under current law, persons staking
unpatented mining claims on United States federal government property open to
exploration (unpatented mining claims), upon the making and documenting of a
discovery of most minerals

S-13
<PAGE> 44

(including gold and silver) in commercial quantities, are entitled to mine the
property without payment of royalties and to secure title to the property
(patented mining claims) at nominal cost. Under proposals made in recent years
to amend the Mining Law, the United States government would be entitled to
receive royalties based on either the gross or net value of production from
government-owned property. This would have only minimal impact on Homestake's
current operations, as substantially all of Homestake's current operations in
the United States, other than its operations at Ruby Hill, are conducted on
privately held land. It is possible that Homestake may be required to pay
royalties on production from the Ruby Hill operation, which would increase the
production cost over current estimates, but the amount of the increase, if any,
is not predictable. Expansion at Homestake's Round Mountain mine also may occur
on government-owned property, as to which royalties similarly might be payable.
Should the Mining Law be so amended, it could reduce the amount of future
exploration and development activity conducted by the Combined Company on
federal government-owned property in the United States.

Mining activities in Australia and Canada also are subject to governmental
regulation. See Appendix G, Overview of Australian, Canadian and United States
Regulation of Mining Rights.

RISKS OF CURRENCY FLUCTUATIONS

Gold is sold throughout the world principally based on the US dollar price,
but operating expenses of gold mining companies generally are incurred in local
currencies. Homestake's operations principally are based in the United States,
Canada and Australia. Homestake's Canadian and Australian subsidiaries engage in
currency hedging programs in Canadian and Australian dollars to protect against
significant currency fluctuations relative to the US dollar. Because Homestake
production of gold in Australia will increase as a result of the Combination,
Homestake expects it will engage in currency hedging with respect to the
Plutonic operations.

RISKS OF NATIVE TITLE CLAIMS

AUSTRALIA

The decision of the High Court of Australia in 1992 in Mabo and Others v
Queensland (No. 2) recognized traditional native title rights to land. That
decision and the Racial Discrimination Act raised the possibility that mining
and exploration tenements granted by the Crown after October 31, 1975 over areas
in which there were existing native title rights might be invalid to the extent
of any inconsistency with those native title rights. The High Court recently
held in The Wik Peoples v Queensland that the grant of pastoral leases will not
necessarily extinguish native title rights. (Many mining leases have been
granted over areas of pastoral leasehold.)

The Commonwealth and States have passed legislation in relation to native
title which provides for native title claims to be made. This legislation is
subject to amendments currently before Parliament. The legislation provides for
a right to negotiate, after January 1, 1994, before the grant or renewal of
certain tenements (other than renewals of tenements as of right, in accordance
with the terms of their original grant or renewals of validated tenements).
Negotiations must take place between the native title holders or claimants, the
grantee party and the government party.

The native title legislation also validates mining tenements granted before
January 1, 1994 and suspends native title over the mining tenements area. Any
compensation for the suspension is payable by the government that granted the
tenement.

There are a number of native title claims relating to the area of
Homestake's 50% owned Kalgoorlie operations, but the validity of those claims
has not been determined. In any event, all of the mining leases with respect to
active mining operations at Kalgoorlie are pre-1994 leases and therefore native
title claims will not adversely affect the operations. See "Business and
Property Description -- Kalgoorlie Operations." Similarly, there are native
title claims relating to the areas in which Plutonic's mining operations are
conducted. However,

S-14
<PAGE> 45

with one exception, all of the mining leases with respect to the current and
proposed mining areas at Plutonic's active mines are pre-1994 leases. Native
title claims are not expected to adversely affect those operations.

One Plutonic mining lease was granted between January 1, 1994 and March 16,
1995, when Western Australia did not comply with the requirement of negotiation
in granting these titles. Although there has been no decision on the point to
date, titles granted during that period may be open to challenge on native title
grounds. It is possible that proposed Commonwealth legislation may validate such
titles to put them beyond doubt. If such titles are found to be invalid due to
native title, the state of Western Australia has indicated that it will
facilitate regrants and pay any compensation due to aggrieved native title
parties.

Some of Homestake's and Plutonic's exploration tenements in Australia are
subject to multiple native title claims. Should the Combined Company be
successful in its exploration activities in these areas and seek to convert its
interests to mining leases, it will be necessary to comply with the right to
negotiate provisions of the Native Title Act and any agreement reached as a
result of negotiations may include provisions with respect to payment of
compensation by the Combined Company to the native title claimants. If agreement
cannot be reached and the matter has to be determined by the National Native
Title Tribunal, the National Native Title Tribunal is entitled to include in its
determination as to whether or not the titles may be granted, conditions with
respect to compensation of native title claimants. The requirements for
negotiation and the possibility of a requirement to pay compensation may result
in delay and increased costs for mining in the affected mining areas.

CANADA

In the Delgamuukw decision in December 1997, the Supreme Court of Canada
affirmed that aboriginal tribal groups continue to have aboriginal rights in
lands in British Columbia used or occupied by their ancestors in 1846. Those
rights may vary from rights of limited use up to aboriginal title. The decision
has created uncertainty regarding property rights in Canada (including mineral
and other resource rights), particularly in British Columbia and other areas
where treaties were not concluded with aboriginal groups. The Court stated these
principles in broad terms, and did not apply them to any particular lands. The
decision also did not address how aboriginal rights or title are to be
reconciled with property and tenure rights previously sold or granted by the
government. The Court did confirm that the extent of the aboriginal rights
(including whether the rights rise to the level of aboriginal title) will depend
on, among other things, the extent of prior aboriginal use and occupation. The
Court also stated that, depending on the nature of the aboriginal rights,
consultation with and compensation to (and possibly consent of) aboriginal
groups may be required in connection with sales of government-owned land or
granting of mining, forestry and other rights to use government-owned land. The
Court indicated that rights of compensation derive from the government's
fiduciary obligations to the aboriginal groups. The application of the
principles enunciated in the decision will not be possible until subsequent
decisions provide clarification, and the application of these principles to any
particular land will not be possible until the exact nature of historical
aboriginal use and occupancy and the resulting rights in the particular property
has been determined.

There are aboriginal claims that extend to the areas of British Columbia in
which the Eskay Creek and Snip mines are located. These mining operations are
conducted under government mining leases which grant the exclusive right to
mine. There has not been any determination of the existence of any valid claim
of aboriginal rights or title in these areas. Homestake does not expect any
interruption of its existing mining operations, and Homestake does not believe
that its existing Canadian operations will be materially adversely affected by
aboriginal claims. However, Homestake expects that future Canadian activities,
including exploration and development of new mines, could be slowed and could be
adversely affected, depending on future legal developments in this area and the
extent of aboriginal rights in any particular property. See "Homestake Mining
Company."

UNITED STATES

There are no native title issues for Homestake's properties in the United
States.

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<PAGE> 46

CAUTIONARY STATEMENTS

This Document contains certain forward-looking statements (as such term is
defined in the United States Private Securities Litigation Reform Act of 1995)
and information relating to Homestake and Plutonic that are based on the beliefs
of the managements of Homestake and Plutonic, as applicable, as well as
assumptions made by and information currently available to the managements of
Homestake and Plutonic, as applicable. Any statements made in this Document that
are not historical in nature, including statements preceded by the words
"anticipate," "believe," "estimate," "expect," "intend," "will" and similar
expressions, as they relate to Homestake or Plutonic or the managements of
either of them, are forward-looking statements. Estimates of reserves, future
production and future cash costs per ounce of gold-equivalent production are
also forward-looking statements.

The purpose of these cautionary statements is to identify certain important
factors and assumptions on which forward-looking statements may be based or
which could cause actual results to differ materially from those expressed in
forward looking statements. The important factors and assumptions set forth
below should be read in conjunction with "Risk Factors" herein.

RELIANCE BY HOMESTAKE AND PLUTONIC ON INFORMATION PROVIDED BY THE OTHER

The information concerning Plutonic contained in this Proxy Statement,
including financial information, has been provided by Plutonic ("Plutonic
Information"). The information concerning Homestake contained in this Proxy
Statement, including financial information, has been provided by Homestake
("Homestake Information"). The information concerning the Combined Company
contained in this Proxy Statement, including pro forma financial information,
has been prepared by Homestake, based on the Homestake Information and the
Plutonic Information. Plutonic and its affiliates and advisors do not assume any
responsibility for the accuracy or completeness of the Homestake Information.

RESERVES

Information with respect to ore reserves of Homestake has been prepared in
accordance with SEC definitions and practices. Information with respect to ore
reserves of Plutonic has been prepared in accordance with the JORC Code. See
Appendix E to this Document for a comparison of the SEC and JORC Code reporting
requirements.

Reserves are reported as general indicators of the life of mineral
deposits. Reserves should not be interpreted as assurances of mine lives or of
the profitability of current or future operations. Reserves are estimated for
each property based upon factors relevant to each deposit. Reserves are
estimates based upon drilling results, past experience with the property,
experience of the persons making the reserve estimates and many other factors.
Reserve estimation is an interpretive process based upon available data, and the
actual quality and characteristics of ore deposits cannot be known until mining
has taken place.

Changes in reserves over time generally reflect (i) efforts to develop
additional reserves, (ii) depletion of existing reserves through production,
(iii) actual mining experience, (iv) continued testing and development of
additional information and (v) price and cost forecasts. Grades of ore actually
processed may be different from the stated reserve grades because of geologic
variations in different areas mined, mining dilution, losses in processing and
other factors. Recovery rates vary with the metallurgical and other
characteristics and grade of ore processed.

Gold and silver reserve calculations for properties operated by Homestake
are prepared by Homestake. Gold and silver reserve calculations for properties
not operated by Homestake are based on information

S-16
<PAGE> 47

provided to Homestake by the operator. Homestake periodically reviews such
information but does not independently confirm the information provided by these
operators. Homestake gold reserves at December 31, 1997 are based on an assumed
price of US$325 per ounce for short-lived operations, and US$350 per ounce for
other operations. Homestake's silver reserves at December 31, 1997 and 1996 are
based on an assumed price of US$5 per ounce. Homestake's gold reserves at
December 31, 1996 are based on an assumed price of US$375 per ounce.

Plutonic's reserve estimates are made by persons considered "competent
persons" in accordance with the JORC Code. Plutonic's reserve estimates as of
December 31, 1996 were based on assumed gold prices of A$500 to A$525 per ounce
for its various operations. Plutonic's reserve estimates as of December 31, 1997
were based on an assumed gold price of A$450 per ounce.

Actual quality and characteristics of ore deposits and gold and silver
prices will differ from the assumptions used to develop reserves. Such
differences may be significant.

Homestake's sulfur reserves represent the quantity of sulfur in the Main
Pass 299 deposit for which geological, engineering and marketing data give
reasonable assurance of recovery and sale under projected economic and operating
conditions at prices sufficient to cover the estimated future cash costs of
production, and estimated future capital expenditures. Homestake's proven oil
reserves at Main Pass 299 are the estimated quantity of crude oil and condensate
which geological and engineering data give reasonable assurance of recovery and
sale under projected operating conditions at prices sufficient to cover the
estimated future cash costs of production, the remaining investment, and
estimated future capital expenditures. The estimates are based on limited
reservoir and engineering data. The reserve estimates are based on information
provided by the operator. The operator principally relies on oil reserve
estimations performed by third-party petroleum engineers. In the third quarter
of 1997, Homestake wrote off its entire investment in the sulfur mine in light
of the continued depressed market for sulfur.

ESTIMATES OF PRODUCTION

Estimates of future production and mine life for particular properties are
derived from annual mining plans that have been developed based on, among other
things, mining experience, reserve estimates, assumptions regarding ground
conditions and physical characteristics of ores (such as hardness and presence
or absence of certain metallurgical characteristics), and estimated rates and
costs of production. Actual production may vary from estimates for a variety of
reasons, including risks and hazards of the types discussed above, actual ore
mined varying from estimates of grade and metallurgical and other
characteristics, mining dilution, strikes and other actions by labor at
unionized locations, restrictions imposed by government agencies and other
factors. Estimates of production from properties not yet in production or from
operations that are to be expanded are based on similar factors (including, in
some instances, feasibility reports prepared by company personnel and/or outside
consultants) but, as such estimates do not have the benefit of actual
experience, there is a greater likelihood that actual results will vary from the
estimates.

ESTIMATES OF OPERATING COSTS AND CAPITAL COSTS; CAPITAL PROJECTS

Estimates of cash costs for mining operations are developed based on past
experience, reserve and production estimates, anticipated mining and ground
conditions, metallurgical recoveries, estimated costs of materials, supplies and
utilities, exchange rates and other items. Estimates of amortization of noncash
costs are based on total capital costs and reserve estimates and may change at
least annually based on actual amounts of unamortized capital and changes in
reserve estimates. If the net book value of mining operations exceeds the fair
value, usually determined based on the estimated future undiscounted cash flows
from that mine, then an impairment loss based on the discounted cash flows would
be recognized as an expense in the period such evaluation is made.

Estimates for reclamation and environmental remediation costs are developed
based on existing and expected legal requirements, past reclamation experience,
cost estimates provided by company employees and third parties and other
factors. Estimates also reflect assumptions with respect to actions of
government agencies, including exercise of discretion and the amount of time
government agencies may take in completing

S-17
<PAGE> 48

processes required under applicable laws and regulations. As a result, final
costs may vary significantly from estimates. Each of Homestake and Plutonic
periodically reevaluates its reclamation cost estimates and reclamation reserves
to take account of such factors.

Estimates of future capital costs are based on a variety of factors and may
include past operating experience, estimated levels of future production,
estimates by and contract terms with third-party suppliers, expectations as to
government and legal requirements, feasibility reports (which may be prepared by
company personnel and/or outside consultants) and other factors. Capital cost
estimates for new projects under development generally are subject to greater
uncertainties than additional capital costs for existing operations.

Estimated periods for completion of capital projects are based on many
factors, including Homestake's and Plutonic's respective experience in
completing capital projects, and estimates provided by and contract terms with
contractors, engineers, suppliers and others involved in design and construction
of projects. Estimates also reflect assumptions with respect to factors beyond
the control of Homestake and Plutonic, including, but not limited to, the time
government agencies may take in processing applications, issuing permits and
otherwise completing processes required under applicable laws and regulations.
Actual time to completion may vary significantly from estimates.

Estimates of exploration costs are based upon many factors such as past
exploration costs, estimates of the level and cost of future activities, and
assumptions regarding anticipated results on each property. Actual costs may
vary during the year as a result of such factors as actual exploration results
(which could result in increasing or decreasing expenditures for particular
properties), changed conditions, and acquisitions and dispositions of property.

TAXES

Homestake's operations are conducted in a number of jurisdictions, with
differing rates of taxation. Homestake's income and mining taxes were higher in
1996, in part because a substantial portion of Homestake's income is earned in
Canada, which has a combined income tax and mining tax rate which is
significantly higher than income tax rates in the United States and Australia.
Homestake's total income and mining taxes were lower in 1997, due to lower gold
prices.

The Canadian statutory tax rate, including federal and provincial income
tax and mining tax is approximately 49%. The applicable United States tax rate
is 21% (20% alternative minimum tax plus 1% state tax). The Australian statutory
rate is 36%.

Homestake's effective tax rate varies from the statutory rate because of
certain differences between the tax laws and the accounting treatment of income
and expenditures. For example, some of Homestake's foreign exploration costs are
expensed for accounting purposes but are not yet deductible for tax purposes.
Therefore, the tax benefit related to those expenditures cannot be recognized
until there is sufficient taxable income generated in the jurisdictions where
such expenditures are incurred. In addition, certain Canadian accounting
expenses cannot be deducted in calculating the mining tax. Homestake also has
limited ability to utilize foreign tax credits in calculating its United States
income tax.

Homestake's overall effective tax rate is dramatically impacted by the
geographic mix of its pretax income and losses. A greater proportion of income
in a high tax jurisdiction, like Canada, will cause the consolidated effective
tax rate to rise. The additional Australian production following the Combination
will change the geographic mix of pretax income, reducing the proportion of
income subject to the higher Canadian rate.

Homestake's overall effective rate can also fluctuate significantly during
a period of low gold prices, because the tax rate is the ratio of tax expense to
pretax income. Low pretax income or pretax losses can produce unusually high or
unusually low effective tax rates (including the possibility of negative rates).
This can occur if mining and income tax expense continues to accrue on
profitable mines in high tax jurisdictions while losses are incurred in low tax
jurisdictions. The tax expense in the high tax jurisdiction is not fully offset
by the tax benefit from losses generated in the low tax jurisdictions. As a
result, as the income and tax

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<PAGE> 49

expenses from all jurisdictions are blended into a consolidated total, the
overall effective rate is disproportionately impacted.

WESTERN AUSTRALIA ROYALTY

Each of Homestake and Plutonic has operations in the State of Western
Australia. Until recently, no royalties have been payable on gold production in
Western Australia. However, in late 1997, a gold royalty was formally adopted.
The principal features of the royalty are as follows:

- A 1.25% royalty will be payable between July 1, 1998 and June 30, 2000 on
the realized value of all gold produced, increasing to 2.5% on or after
July 1, 2000. No royalty is payable in respect of production prior to
July 1, 1998.

- Realized value is to be calculated by multiplying the total gold produced
during each month by the average of the gold spot prices for that month.

- If, in any quarter between July 1, 2000 and June 30, 2005 the average
spot gold price for any quarter is less than A$450 per ounce, the rate of
royalty for that quarter will fall to 1.25%.

- An exemption from payment of the royalty will apply in respect of the
first 2,500 ounces of gold produced during each financial year from gold
produced or obtained from the same gold royalty project. A "gold royalty
project" is defined as one or more mining tenements from which anyone
(not just the royalty paying producer in question) produces or obtains
gold that is treated or processed at a common treatment facility or
combination of treatment facilities (other than a refinery).

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<PAGE> 50

PRICE RANGE AND TRADING VOLUME OF HOMESTAKE COMMON STOCK
AND THE PLUTONIC ORDINARY SHARES; DIVIDENDS

PRICE RANGES AND TRADING VOLUMES

Homestake Common Stock is listed on the NYSE and the ASX and in Switzerland
on the Basel, Geneva and Zurich stock exchanges. The price ranges of Homestake
Common Stock on the NYSE, the principal exchange on which shares of Homestake
Common Stock are traded, and the volume of trading (in millions of shares) as
shown on the NYSE Composite Transaction Tape are set forth in the following
table for the periods indicated:

HOMESTAKE COMMON STOCK

<TABLE>
<CAPTION>
HIGH LOW VOLUME
------ ------ ------------------
(US$) MILLIONS OF SHARES
<S> <C> <C> <C>
1996
First Quarter............................................ $20.63 $15.75 82.8
Second Quarter........................................... 20.88 16.88 53.0
Third Quarter............................................ 18.00 14.25 42.3
Fourth Quarter........................................... 16.63 13.63 77.1
1997
First Quarter............................................ 16.63 13.13 73.0
Second Quarter........................................... 15.25 12.75 48.0
Third Quarter............................................ 15.38 12.31 45.9
Fourth Quarter
October 1-December 19................................. 15.56 9.38 47.1
December 20-December 31............................... 9.44 8.31 9.7
1998
January 1-March 25....................................... 10.25 7.69 65.4
</TABLE>

The Plutonic Ordinary Shares are listed on the ASX. The volume of trading
and price ranges of the Plutonic Ordinary Shares on the ASX in Australian
dollars are set forth in the following table for the periods indicated, and as
converted into US dollars:

PLUTONIC ORDINARY SHARES

<TABLE>
<CAPTION>
HIGH LOW VOLUME HIGH LOW
----- ----- ------------------ ----- -----
(A$) MILLIONS OF SHARES (US$)*
<S> <C> <C> <C> <C> <C>
1996
First Quarter.................. $7.92 $6.45 33.0 $6.00 $4.80
Second Quarter................. 7.84 6.30 25.4 6.19 4.98
Third Quarter.................. 6.60 5.10 27.3 5.22 4.04
Fourth Quarter................. 6.24 4.89 23.4 4.94 3.87
1997
First Quarter.................. 5.95 4.89 20.8 4.73 3.85
Second Quarter................. 5.15 4.13 22.5 4.01 3.08
Third Quarter.................. 4.40 3.24 26.4 3.32 2.40
Fourth Quarter
October 1-December 19....... 4.11 1.95 29.5 3.00 1.32
December 20-December 31..... 4.56 4.00 17.4 2.99 2.61
1998
January 1-March 25............. 5.02 3.71 45.9 3.34 2.38
</TABLE>

- ---------------

* US dollar amounts were calculated by multiplying the actual Australian dollars
amounts by the Exchange Rate on the relevant date.

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<PAGE> 51

Homestake and Plutonic publicly announced the Combination on December 21,
1997 in the United States (December 22, 1997 in Australia). The following table
shows the closing prices for Homestake Common Stock on the NYSE and for Ordinary
Shares (in Australian dollars) on the ASX (and converted into US dollars) on
December 19, 1997 (the last trading day before the Combination was announced)
and comparable price data on March 25, 1998:

<TABLE>
<CAPTION>
HOMESTAKE COMMON PLUTONIC ORDINARY SHARES
STOCK (NYSE) (ASX)
------------------- ------------------------
<S> <C> <C> <C>
December 19, 1997............. US$9.9375 A$2.80 (US$1.82)*
March 25, 1998................ US$9.875 A$4.88 (US$3.26)*
</TABLE>

- ---------------

* US dollars amounts were calculated by multiplying the actual Australian dollar
amounts by the Exchange Rate on that date.

<TABLE>
<S> <C> <C>
December 19, 1997..................................... US$3.38 A$5.20**

March 25, 1998........................................ US$3.36 A$5.01**
</TABLE>

- ---------------

** Australian dollar amounts were calculated by multiplying the actual US dollar
amounts by the Exchange Rate on that date.

Based on the closing price of the Ordinary Shares on December 19, 1997 and
the closing prices of Homestake Common Stock at December 19, 1997 and March 25,
1998, the Combination offers a premium of 86% at December 19, 1997 and a premium
of 79% at March 25, 1998 to the holders of Ordinary Shares.

The market value of the shares of Homestake Common Stock that Plutonic
Shareholders will receive in the Combination may vary significantly from the
prices shown above. Plutonic Shareholders are urged to obtain current quotations
for the market prices of Homestake Common Stock.

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<PAGE> 52

COMPARISON OF STOCK PRICE PERFORMANCES

The following graph compares the relative stock price performances of
Homestake Common Stock and Plutonic Ordinary Shares from January 1, 1997 to
December 19, 1997. The graph also compares such stock price performances to the
S&P Gold and Precious Metals Index and the Australian Stock Exchange Gold Index
for the same period. The stock prices for the Ordinary Shares and the Australian
Stock Exchange Gold Index figures have been converted from Australian dollars to
US dollars using the daily Exchange Rates.

<TABLE>
<CAPTION>
Measurement Period S&P Gold ASE Gold
(Fiscal Year Covered) Homestake Plutonic (US$) Index Index (US$)
<S> <C> <C> <C> <C>
1/1/97 100.00 100.00 100.00 100.00
1/2/97 98.25 101.15 97.71 99.07
1/3/97 95.61 95.74 95.79 97.64
1/6/97 92.11 92.63 92.35 95.69
1/7/97 96.05 86.96 94.19 92.68
1/8/97 93.86 86.66 92.27 92.45
1/9/97 97.37 86.29 95.55 91.54
1/10/97 97.37 87.01 96.84 92.38
1/13/97 98.25 86.45 96.17 92.62
1/14/97 95.61 87.09 93.32 92.54
1/15/97 94.74 86.90 92.90 91.48
1/16/97 97.37 85.80 95.30 91.92
1/17/97 100.88 86.27 97.12 93.06
1/20/97 99.12 86.34 95.45 93.93
1/21/97 98.25 84.68 95.86 92.63
1/22/97 97.37 84.51 93.49 92.47
1/23/97 97.37 83.32 92.97 91.05
1/24/97 99.12 83.30 95.14 91.20
1/27/97 100.88 83.15 97.29 91.04
1/28/97 100.00 85.22 96.05 91.70
1/29/97 101.75 85.40 96.82 91.79
1/30/97 98.25 85.79 94.30 91.45
1/31/97 99.12 86.12 94.13 90.29
2/3/97 100.00 82.65 95.70 89.90
2/4/97 99.12 83.26 95.14 90.09
2/5/97 97.37 82.75 93.39 90.05
2/6/97 96.49 82.25 92.05 90.39
2/7/97 99.12 82.02 93.87 89.74
2/10/97 98.25 82.27 92.67 89.48
2/11/97 97.37 83.56 91.69 90.34
2/12/97 103.51 82.03 95.49 89.74
2/13/97 103.51 84.26 95.80 92.82
2/14/97 107.89 82.42 97.39 92.83
2/17/97 107.89 82.42 97.39 92.83
2/18/97 109.65 85.65 98.10 94.27
2/19/97 109.65 88.20 97.70 94.64
2/20/97 112.28 86.76 100.76 94.15
2/21/97 113.16 87.93 100.83 96.54
2/24/97 114.04 88.04 102.59 97.19
2/25/97 112.28 87.79 102.28 96.68
2/26/97 112.28 87.42 99.99 95.89
2/27/97 114.91 85.48 103.22 95.15
2/28/97 115.79 85.36 104.07 95.65
3/3/97 114.04 85.19 102.44 95.85
3/4/97 109.65 86.20 100.26 96.42
3/5/97 109.65 85.38 99.56 94.92
3/6/97 107.89 84.62 98.46 94.65
3/7/97 105.26 84.48 97.04 94.99
3/10/97 112.28 85.47 97.90 95.16
3/11/97 114.04 85.63 99.48 95.41
3/12/97 114.04 85.53 98.31 95.30
3/13/97 115.79 86.14 98.73 94.43
3/14/97 114.04 87.54 98.11 94.43
3/17/97 112.28 88.83 96.44 94.16
'3/18/97 111.40 86.32 96.60 91.51
3/19/97"' 110.53 84.54 96.19 90.13
3/20/97 110.53 83.08 94.24 90.64
3/21/97 109.65 82.89 93.80 90.16
3/24/97 107.89 84.05 92.97 89.77
3/25/97 107.02 82.52 92.24 89.00
3/26/97 109.65 82.94 93.87 88.66
3/27/97 104.39 83.31 89.40 89.65
3/28/97 104.39 83.31 89.40 89.65
3/31/97 105.26 83.51 88.50 89.86
4/1/97 105.26 81.34 88.12 87.74
4/2/97 104.39 80.20 89.20 87.64
4/3/97 103.51 76.05 88.31 86.22
4/4/97 103.51 79.70 88.06 85.28
4/7/97 101.75 79.70 87.20 85.05
4/8/97 100.88 80.54 86.94 85.40
4/9/97 99.12 82.81 85.96 86.09
4/10/97 101.75 81.55 88.38 85.46
4/11/97 100.00 78.68 85.66 85.03
4/14/97 98.25 77.15 84.25 83.17
4/15/97 96.49 81.00 82.91 83.21
4/16/97 95.61 80.64 83.79 82.55
4/17/97 97.37 81.73 85.15 82.80
4/18/97 97.37 83.84 83.27 84.32
4/21/97 95.61 84.86 83.13 85.31
4/22/97 95.61 84.08 81.65 85.64
4/23/97 93.86 82.94 80.33 84.79
4/24/97 92.11 83.47 78.72 84.62
4/25/97 92.11 83.55 79.18 84.71
4/28/97 91.23 83.30 79.07 84.25
4/29/97 92.98 82.72 80.19 83.72
4/30/97 92.98 82.43 80.31 83.92
5/1/97 94.74 82.81 81.84 83.84
5/2/97 97.37 82.73 82.54 84.05
5/5/97 97.37 81.63 84.21 83.16
5/6/97 98.25 83.31 84.82 83.12
5/7/97 100.00 83.78 88.66 82.30
5/8/97 101.75 82.53 88.98 83.07
5/9/97 103.51 82.93 91.45 83.58
5/12/97 101.75 85.48 89.96 84.89
5/13/97 100.88 85.98 88.18 84.79
5/14/97 98.25 85.73 86.70 84.81
5/15/97 100.00 82.98 89.07 83.96
5/16/97 96.49 84.01 87.07 83.85
5/19/97 96.49 83.31 87.04 83.04
5/20/97 97.37 83.23 87.70 82.15
5/21/97 95.18 81.92 87.14 83.13
5/22/97 94.74 82.50 87.06 82.95
5/23/97 94.74 81.58 87.70 80.91
5/26/97 94.74 81.58 87.70 80.91
5/27/97 96.49 83.84 89.59 81.13
5/28/97 98.25 82.91 88.60 81.47
5/29/97 100.00 80.43 90.93 81.52
5/30/97 97.37 78.81 89.49 81.87
6/2/97 95.61 79.21 87.40 82.02
6/3/97 93.86 79.41 85.87 82.14
6/4/97 92.98 78.33 84.06 81.68
6/5/97 95.61 77.28 86.66 81.08
6/6/97 95.61 77.65 86.85 81.48
6/9/97 96.49 77.82 88.19 81.66
6/10/97 94.74 78.36 87.87 81.96
6/11/97 95.61 79.21 88.93 81.07
6/12/97 95.61 78.57 89.74 79.99
6/13/97 95.61 77.15 89.70 79.96
6/16/97 95.61 75.41 88.28 79.24
6/17/97 93.86 74.28 87.64 78.92
6/18/97 92.11 73.05 85.40 78.96
6/19/97 93.86 69.86 86.55 77.78
6/20/97 91.23 69.98 83.85 77.63
6/23/97 92.11 68.84 82.01 76.89
6/24/97 91.67 70.34 81.27 76.50
6/25/97 92.98 69.21 83.10 75.55
6/26/97 93.42 68.58 83.37 75.14
6/27/97 91.23 67.09 82.12 75.54
6/30/97 91.67 66.75 82.16 75.51
7/1/97 92.11 69.69 83.81 75.91
7/2/97 92.11 69.58 82.20 75.80
7/3/97 91.23 67.85 81.40 74.09
7/4'97 91.23 67.85 81.40 74.09
7/7/97 87.28 62.07 74.82 65.21
7/8/97 88.60 54.75 77.45 61.41
7/9/97 87.72 55.46 76.74 63.01
7/10/97 92.54 56.79 79.66 63.37
7/11/97 93.42 60.92 81.20 66.40
7/14/97 92.98 61.06 78.67 65.38
7/15/97 91.23 60.06 77.73 64.67
7/16/97 90.35 61.39 78.64 65.18
7/17/97 92.54 59.83 81.53 65.58
7/18/97 96.05 60.52 84.06 66.84
7/21/97 93.86 59.05 81.64 66.91
7/22/97 94.30 58.23 82.15 65.81
7/23/97 92.54 58.96 81.25 65.48
7/24/97 93.42 56.77 81.49 63.82
7/25/97 94.30 56.98 82.46 64.41
7/28/97 96.05 58.29 83.58 65.63
7/29/97 95.18 59.56 83.31 68.10
7/30/97 96.49 60.92 85.00 68.53
7/31/97 96.93 63.82 85.22 67.96
8/1/97 96.49 63.71 85.25 68.11
8/4/97 95.18 62.64 84.91 67.28
8/5/97 93.86 60.98 82.95 66.56
8/6/97 95.18 59.78 84.50 65.55
8/7/97 96.05 59.40 85.46 64.79
8/8/97 99.56 59.49 89.06 64.57
8/11/97 100.44 60.16 89.35 65.39
8/12/97 99.12 61.81 88.45 66.12
8/13/97 99.56 60.64 89.04 65.76
8/14/97 97.81 61.90 86.72 66.87
8/15/97 99.12 62.78 87.52 68.48
8/18/97 96.93 60.42 87.22 67.20
8/19/97 96.93 61.57 85.96 67.19
8/20/97 96.49 63.10 86.19 67.78
8/21/97 96.93 63.04 87.07 68.77
8/22/97 100.44 61.96 87.96 69.09
8/25/97 99.12 62.04 87.48 69.71
8/26/97 99.12 62.38 87.39 69.67
8/27/97 98.25 61.42 85.93 68.68
8/28/97 98.25 61.03 86.24 67.60
8/29/97 98.25 61.33 85.65 65.94
9/1/97 98.25 61.33 85.65 65.94
9/2/97 98.25 61.68 85.67 65.22
9/3/97 96.05 62.15 85.05 65.65
9/4/97 96.93 63.85 85.33 66.10
9/5/97 97.81 63.68 84.76 65.97
9/8/97 96.93 61.61 82.09 66.26
9/9/97 97.37 62.10 82.69 65.92
'9/10/97 95.61 60.34 82.53 65.33
9/11/97"' 93.86 59.18 81.36 63.95
9/12/97 93.86 59.78 81.36 63.93
9/15/97 92.11 58.93 80.14 63.31
9/16/97 90.79 56.67 79.58 61.83
9/17/97 90.79 56.85 80.36 61.84
9/18/97 92.11 57.06 82.33 60.96
9/19/97 90.79 57.37 82.22 61.88
9/22/97 89.91 57.32 80.42 61.92
9/23/97 92.11 56.73 82.21 61.54
9/24/97 95.61 54.92 84.94 61.28
9/25/97 101.75 57.54 89.51 62.67
9/26/97 100.88 57.03 88.50 63.81
9/29/97 102.63 55.70 91.12 62.79
9/30/97 107.89 59.07 94.37 64.67
10/1/97 104.82 63.60 93.35 67.95
10/2/97 103.95 63.99 92.35 68.03
10/3/97 105.70 61.60 94.02 66.50
10/6/97 103.95 60.77 91.97 67.30
10/7/97 103.51 61.01 91.66 66.63
10/8/97 106.58 62.61 94.06 66.78
10/9/97 100.88 63.35 91.25 67.53
10/10/97 104.39 62.00 92.71 67.16
10/13/97 101.75 61.34 92.73 67.62
10/14/97 102.63 59.63 91.26 67.19
10/15/97 103.95 56.92 90.37 66.68
10/16/97 100.88 55.85 88.45 66.54
10/17/97 101.75 52.08 87.41 65.54
10/20/97 100.00 51.57 85.76 64.55
10/21/97 99.12 50.83 88.28 64.53
10/22/97 101.32 48.61 90.97 62.59
10/23/97 102.63 48.25 91.69 61.70
10/24/97 92.54 47.85 83.79 60.28
10/27/97 85.09 40.18 74.33 52.72
10/28/97 85.96 35.90 77.46 47.70
10/29/97 84.65 37.96 74.91 51.84
10/30/97 89.47 36.14 78.87 50.35
10/31/97 86.84 38.53 76.38 52.12
11/3/97 87.28 39.91 76.60 52.58
11/4/97 88.16 41.54 76.01 52.52
11/5/97 85.96 41.49 74.76 51.88
11/6/97 85.53 42.40 73.53 51.61
11/7/97 81.58 38.32 70.69 50.35
11/10/97 82.02 37.79 70.07 49.91
11/11/97 82.89 37.53 70.10 49.84
11/12/97 79.82 36.87 66.15 49.00
11/13/97 80.26 36.02 68.35 48.39
11/14/97 78.07 35.86 66.94 47.75
11/17/97 78.95 33.98 66.78 46.18
11/18/97 78.07 34.55 65.99 45.65
11/19/97 78.07 35.60 65.31 44.12
11/20/97 79.82 36.92 67.32 43.39
11/21/97 79.39 38.42 66.86 45.15
11/24/97 78.07 37.33 65.29 45.17
11/25/97 77.19 33.91 64.08 43.47
11/26/97 75.44 32.34 62.68 42.31
11/27/97 75.44 32.34 62.68 42.31
11/28/97 73.68 31.37 62.10 40.56
12/1/97 74.12 33.85 61.91 40.58
12/2/97 72.81 33.75 62.11 40.46
12/3/97 70.18 34.05 60.72 41.44
12/4/97 68.42 33.57 57.42 40.78
12/5/97 69.30 31.77 59.08 39.99
12/8/97 68.42 31.63 57.86 40.35
12/9/97 67.11 30.14 56.51 40.27
12/10/97 69.74 29.25 59.12 39.19
12/11/97 67.98 30.12 57.91 39.16
12/12/97 68.42 33.22 59.42 39.11
12/15/97 69.74 31.51 60.42 38.64
12/16/97' 69.74 31.91 60.31 38.11
12/17/97 74.56 34.43 65.78 39.93
12/18/97 71.49 37.41 64.08 41.82
12/19/97 69.74 39.40 62.59 41.49
</TABLE>

DIVIDENDS

In March 1997, the Homestake Board elected to change from quarterly
dividends to semi-annual dividends. On a semi-annual basis, the Homestake Board
evaluates the financial circumstances and requirements of Homestake to determine
whether a dividend should be paid and the amount thereof. Homestake can give no
assurance that dividends will continue to be paid on a regular basis or in
amounts previously paid. Any decision whether to pay dividends will be made
based on the financial requirements of Homestake as determined by the Homestake
Board from time to time.

S-22
<PAGE> 53

The following table sets forth, for the calendar quarters indicated,
dividends per share paid on the Homestake Common Stock:

<TABLE>
<CAPTION>
DIVIDENDS
CALENDAR PERIOD ---------
(US$)
<S> <C>
1996
First Quarter............................................. $.05
Second Quarter............................................ .05
Third Quarter............................................. .05
Fourth Quarter............................................ .05
1997
First Quarter............................................. .05
Second Quarter............................................ .05
Third Quarter............................................. --
Fourth Quarter............................................ .05
</TABLE>

On March 27, 1998 the Homestake Board declared a five cent per share
dividend to be paid on May 21, 1998 to stockholders of record at April 28, 1998.

For the convenience of Australian residents, Homestake will pay dividends
in Australian dollars to stockholders who have an Australian address in its
register of stockholders. Those dividends will not be franked and will be
subject to U.S. withholding tax for non-U.S. residents (currently 15% for
Australian residents).

The following table sets forth, for the periods indicated, the dividends
per share declared on the Ordinary Shares:

<TABLE>
<CAPTION>
DIVIDENDS
CALENDAR PERIOD ---------
(A$)
<S> <C>
1996
First Half................................................ $0.04
Final..................................................... 0.07
1997
First Half................................................ NIL
Final..................................................... 0.03
</TABLE>

Plutonic historically has declared and paid dividends on a semi-annual
basis. A final unfranked dividend for 1997 of three cents per share is to be
paid on April 1, 1998 to registered shareholders at March 18, 1998.

S-23
<PAGE> 54

THE COMBINATION

GENERAL

The Homestake Board and the Plutonic Board have approved the Agreement,
which provides that subject to the terms and conditions of the Agreement, and in
accordance with the DGCL and the NSWL, at the Effective Date Homestake and
Plutonic will consummate the Combination. As a consequence of the Combination
Plutonic will become a wholly-owned subsidiary of Homestake, and holders of
Plutonic Securities will receive the following consideration:

(a) All holders of Ordinary Shares, other than Homestake, will receive
0.34 shares of Homestake Common Stock for each Ordinary Share owned by
them, and their Ordinary Shares will be cancelled.

(b) Holders of each class of Partly Paid Shares will receive shares of
Homestake Common Stock for their Partly Paid Shares, with the number to be
received having been determined in accordance with a valuation formula
described in "The Agreement -- Schemes of Arrangement," and their Partly
Paid Shares will be cancelled.

(c) Holders of each class of Options will receive shares of Homestake
Common Stock for their Options, with the number to be received having been
determined in accordance with a valuation formula described in "The
Agreement -- Schemes of Arrangement," and their Options will be cancelled.

It is expected that Homestake will issue approximately 63,852,776 shares of
Homestake Common Stock to the holders of Ordinary Shares, approximately 311,531
shares of Homestake Common Stock to holders of Partly Paid Shares, and
approximately 192,175 shares of Homestake Common Stock to the holders of
Options. A total of approximately 64,356,482 shares of Homestake Common Stock
will be issued in the Combination if all of the Schemes are approved (64,398,751
shares if the holders of the Partly Paid Shares outstanding pay the remainder of
the purchase price for such Partly Paid Shares).

EXCHANGE RATIOS

The Exchange Ratios established for the Plutonic Securities are as follows:

ORDINARY SHARES

Holders of Ordinary Shares will be entitled to receive 0.34 shares of
Homestake Common Stock in consideration of the cancellation of each Ordinary
Share owned by them.

PARTLY PAID SHARES

There are three groups of Partly Paid Shares outstanding that are held by
employees of Plutonic (each, an "Employee Grantee") or, at the election of the
Employee Grantee, an affiliate of the Employee Grantee. The Partly Paid Shares
have been paid up as to A$0.05 per share, and the remainder of the purchase
price has not yet been paid. A holder of Partly Paid Shares is not required to
pay the remainder of the purchase price therefor until the earlier of six months
after termination of employment of the applicable Employee Grantee (or such
longer period as the Plutonic Board may determine) and the date the shares are
to be sold.

In valuing each of the Partly Paid Shares, Homestake and Plutonic agreed to
use, as the basis therefor, the value of 0.34 shares of Homestake Common Stock
(based on the closing price of Homestake Common Stock on the NYSE on December
19, 1997) converted into Australian dollars, and reduced by the unpaid purchase
price applicable to each Partly Paid Share. It was also assumed each Partly Paid
Share would be paid up in full within five years.

S-24
<PAGE> 55

Based on the foregoing, the relative value of each Partly Paid Share to one
Ordinary Share was determined and a relative exchange ratio was established, as
follows:

<TABLE>
<CAPTION>
EXCHANGE RATIO
(SHARES OF HOMESTAKE
COMMON STOCK TO EACH
PARTLY PAID SHARES PARTLY PAID SHARE)
------------------ ---------------------
<S> <C>
211,250 Partly Paid Shares, unpaid as to A$0.75 per share 0.303
679,962 Partly Paid Shares, unpaid as to A$0.85 per share 0.299
149,375 Partly Paid Shares, unpaid as to A$0.90 per share 0.296
</TABLE>

A total of 311,531 shares of Homestake Common Stock will be exchanged for
the 1,040,587 Partly Paid Shares outstanding.

OPTIONS

There are eleven separate groups of Options outstanding, exercisable on
dates ranging from October 12, 1999 through June 4, 2002, at prices ranging from
A$5.66 to A$8.75. In valuing the Options, Homestake and Plutonic agreed to apply
the Black-Scholes option valuation model, using as the basis therefor, the value
of 0.34 shares of Homestake Common Stock (based on the closing price of
Homestake Common Stock on the NYSE on December 19, 1997) converted into
Australian dollars. Based on the foregoing, the relative value of each Option to
one Ordinary Share was determined and a relative exchange ratio was established
for each Option. Exchange Ratios for the Options vary from 0.048 to 0.104 shares
of Homestake Common Stock per Option, for a total of 192,175 shares of Homestake
Common Stock to be exchanged for the Options outstanding to subscribe for
3,218,000 Plutonic Shares.

BACKGROUND OF THE COMBINATION

For at least the past three years, Homestake has engaged in a continuing
evaluation of strategic alternatives, including evaluation of possible
acquisition and merger candidates, both as a means of acquiring attractive
operating properties and as a means of acquiring exploration property with
potential. In 1996, Homestake and Santa Fe Pacific Gold Corporation pursued
negotiations, which led to the announcement of a merger agreement on December 8,
1996. In March 1997, that agreement was terminated by Santa Fe. Santa Fe paid
Homestake a US$65 million termination fee and subsequently consummated a merger
with Newmont Gold Company.

Following the termination of the Santa Fe merger agreement, Homestake
reactivated its evaluation of other gold mining acquisition candidates, with an
emphasis on Australian producers and other companies having strong international
production, potential for reserve growth, and exploration property with
potential. Homestake identified three preferred acquisition candidates,
including Plutonic.

On March 28, 1997, Homestake initiated contact with Malaysia Mining
Corporation Berhad, a company whose subsidiaries and affiliates own
approximately 35% of Plutonic (collectively, "MMC"). On April 23, 1997, Messrs.
Lee A. Graber, Homestake's Vice President of Corporate Development, and Richard
A. Tastula, Managing Director of HGAL, met with Mr. Lim Che Wan, Chief Executive
Officer of one of the MMC affiliates. During that initial meeting, Messrs.
Graber and Tastula provided Mr. Lim with a presentation that included the
possible benefits and rationale for an arrangement involving a combination of
Homestake and Plutonic. No agreements were reached but the parties decided that
they should maintain contact, become better acquainted and further explore
prospects of a mutually satisfactory collaboration in the gold mining business.

On July 11, 1997, Mr. Graber sent a letter to Mr. Lim, outlining the
potential benefits of a collaboration between Homestake and MMC regarding
Plutonic.

At the July 24, 1997 meeting of the Homestake Board, the Homestake Board
was provided with an analysis of Plutonic and two other international gold
mining companies ("Company A" and "Company B") that had been identified as
preferred candidates for acquisition or other arrangement. The Homestake Board

S-25
<PAGE> 56

instructed management to explore these opportunities further. In addition to
continuing its discussions with Plutonic, Homestake management contacted
representatives of Company A , and Homestake and Company A signed a
confidentiality agreement and initiated an exchange of information and
preliminary due diligence. Due diligence with Company A continued through
mid-September. In early September, Homestake initiated discussions with Company
B.

On August 1, 1997, Mr. Lim responded to Mr. Graber's letter and agreed that
the parties should meet again for further discussion. The parties met in Kuala
Lumpur during the week of September 29, 1997.

At the September 25, 1997 meeting of the Homestake Board, the Homestake
Board was advised of the status of analyses and discussions between Homestake
and some of the companies under consideration.

On September 29 and 30, 1997, representatives of Homestake and SBC Warburg
Dillon Read Inc. ("SBC Warburg Dillon Read" or "Homestake's Financial Advisor")
met with representatives of MMC in Kuala Lumpur to further discuss possible
transactions involving Homestake and Plutonic. Homestake advanced two proposals,
including a proposal to combine Homestake and Plutonic using Homestake Common
Stock as consideration, which would result in MMC becoming Homestake's largest
stockholder. Although MMC indicated during these discussions that MMC's interest
in Plutonic was not for sale, the parties discussed the implications of MMC
becoming a significant stockholder of Homestake. On October 17, 1997, MMC
advised Homestake that Homestake's proposals did not satisfy MMC's business
requirements. As a result, Homestake focused on other alternatives then under
consideration.

In mid-October, Homestake entered into a confidentiality agreement with
another international gold mining company that had independently approached
Homestake ("Company C"). In late October, Company B advised Homestake that it
was not interested in pursuing further discussion.

On November 2, 1997, MMC contacted Homestake regarding possible further
discussions of matters discussed in the September meetings. Homestake suggested
meeting again to revisit outstanding issues. On November 11 and 12, 1997,
representatives of Homestake met with representatives of MMC in Honolulu to
discuss their common interest in proposals for a combination of Homestake and
Plutonic. Homestake proposed issuing Homestake Common Stock for Plutonic
Securities. The parties discussed alternative structures available under
Australian law to implement a combination of Homestake and Plutonic and decided
that if a transaction were to proceed, it should be a transaction negotiated
directly between Homestake and Plutonic. The parties discussed various trading
ratios and price expectations but failed to reach any agreement.

At the November 21, 1997 meeting of the Homestake Board, the Homestake
Board was advised of the status of discussions between Homestake and MMC and the
expectation that Homestake would commence direct discussions with Plutonic. The
Homestake Board was provided with the most recent analysis prepared by Homestake
management, including the reasons Homestake's management recommended pursuing a
combination with Plutonic. The Homestake management analysis reviewed, among
other things, general industry factors, the business conditions and prospects of
the two companies (on a stand-alone and combined basis), synergies and cost
saving and possible long-term effects on Homestake's stock price. These matters
are discussed in more detail under "-- Homestake's Reasons for the Combination;
Recommendation of the Homestake Board" below. The Homestake Board also reviewed
analyses and presentations by Homestake's Financial Advisor as to the benefits
of the proposed transaction. These and other analyses, updated to reflect
additional information made available to Homestake's Financial Adviser, are
summarized under "-- Opinion of Homestake's Financial Advisor" below. The
Homestake Board then authorized management to proceed with the negotiation of
possible terms of a transaction which would result in a combination of Homestake
and Plutonic, with Homestake Common Stock to be issued to the holders of
Plutonic Securities.

Homestake considered the feasibility of doing transactions simultaneously
with Plutonic and Company A but determined not to proceed on this basis and so
advised Company A in late November.

Preliminary discussions were held with Company C following Homestake's
November 21, 1997, Board meeting. Due diligence was conducted thereafter.
Following a consideration of its preliminary due diligence evaluation, Homestake
notified Company C in early December that it did not wish to proceed with
negotiations.

S-26
<PAGE> 57

The parties subsequently met on December 3, 1997 in Kuala Lumpur. Jack E.
Thompson, President and Chief Executive Officer of Homestake, and other
representatives of Homestake and Homestake's Financial Advisor met with Tan Sri
Ibrahim Menudin, Group Chief Executive of MMC, Paul McClintock, Chairman of
Plutonic, and other representatives of MMC and Plutonic. At these discussions,
Homestake proposed an exchange ratio for the Ordinary Shares of 0.34, which
Homestake believed (based on prior discussions with certain representatives of
MMC) would be in the range of exchange ratios acceptable to the Plutonic Board
and MMC. Based on this proposal, the Plutonic representatives indicated that
further evaluation by both sides of a possible transaction was appropriate. The
parties then discussed the possible structures of a transaction, the accounting
treatment, the scope of due diligence, transaction documentation and the timing
of the next steps.

As a result of these discussions, Homestake and Plutonic agreed that they
should enter into a confidentiality agreement and continue negotiations
regarding the terms of a possible combination transaction for presentation to
the Boards of each company. The parties also agreed that any transaction would
be structured as a scheme of arrangement under Australian law and that it would
be accounted for as a pooling of interest under U.S. GAAP. During the period of
December 4-8, 1997, representatives of the parties discussed during telephone
meetings their respective due diligence requirements and agreed on the next
steps to conduct due diligence and negotiate the terms of a definitive
agreement. Also during that period, the parties negotiated the terms of a
confidentiality agreement, which was executed on December 8, 1997.

Negotiation of the terms of a definitive agreement also began during the
week of December 8-12, 1997. Also, during the week of December 8-12, 1997,
representatives of Plutonic met with Homestake representatives in Homestake's
offices in San Francisco. During these meetings, the Plutonic representatives
attended presentations by and interviewed Homestake's key officers regarding
Homestake's operations, prospects, finances and liabilities. The parties also
discussed the benefits of the combination of the companies, personnel matters
and the plan of integrating Homestake's and Plutonic's Australian activities.
Also during that period, Homestake representatives and Homestake's Financial
Advisor met with Plutonic representatives in Sydney to conduct due diligence,
and other Homestake representatives reviewed geological, operating and other
data that had been provided by Plutonic to Homestake.

Due diligence and negotiation of the terms of a definitive agreement
continued during the period of December 12-18, 1997 in Sydney and in San
Francisco. During this period, the parties also agreed on the principles that
would be used to derive the exchange ratios for the Partly Paid Shares and the
Options (see "-- Exchange Ratios" above for a discussion of those principles).
Mr. Thompson and other representatives of Homestake and Homestake's Financial
Advisor attended a Plutonic Board meeting on December 17, 1997 in Sydney and
Homestake gave a presentation to the Plutonic Board regarding Homestake, the
benefits of a combination between Homestake and Plutonic, and Homestake's plans
to integrate the Australian operations of the companies.

On December 18, 1997, the Homestake Board met in San Francisco to consider
the transaction. Homestake's management reviewed the results of due diligence
and the negotiations between the two companies, including the principal terms
that had been agreed upon and those issues that were yet to be resolved.
Following that review, the Homestake Board authorized management to proceed with
the combination, contingent upon the parties reaching a definitive agreement and
resolution of the remaining unresolved issues.

Negotiations of the remaining unresolved issues continued until December
21, 1997, San Francisco time, when final agreement was reached. The terms of the
definitive agreement, including the exchange ratios, were determined through
arm's-length negotiations between the parties and their respective advisors. The
Plutonic Board approved the agreement on December 22, 1997 (Australian time).
The definitive agreement was executed and announced on December 21, 1997 in the
United States (December 22, 1997 in Australia).

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HOMESTAKE'S REASONS FOR THE COMBINATION; RECOMMENDATION OF THE HOMESTAKE BOARD

In connection with its consideration of the Combination, the Homestake
Board received and considered presentations by Homestake management and
presentations by and advice from its legal and financial advisors regarding the
proposed Combination. After careful consideration, on December 18, 1997, the
Homestake Board unanimously approved the Combination and the Share Issuance as
being fair and in the best interests of the Homestake Stockholders. In reaching
that decision, the Homestake Board considered a number of factors, including
those listed below. In view of the wide variety of factors considered by the
Homestake Board in connection with its evaluation of the Combination and the
complexity of those matters, the Homestake Board did not consider it practicable
to, nor did it attempt to, quantify or otherwise assign relative weights to the
specific factors it considered in reaching its decision. In addition, individual
members of the Homestake Board may have given different weight to different
factors.

General Industry Factors. The Homestake Board reviewed the generally
prevailing conditions in the gold industry in the United States and worldwide.
The Homestake Board believes that in the current low gold price environment,
there will be a significant consolidation in the gold mining industry in North
America and worldwide, and that companies that continue to reduce their costs,
become more efficient and add quality reserves will weather the low gold price
environment and thrive when gold prices return to more normal levels. In
addition, companies that consolidate and increase their reserves and exploration
prospects will be much better positioned to compete in the future than those
companies that do not take the opportunity to grow during this period of
depressed valuations. Finally, recent experiences of a number of gold companies
in many parts of the world have demonstrated the value of continuing to grow and
to build strong production and explorations bases in countries with low
political risk profiles.

The combination of Homestake and Plutonic will create the second largest
gold mining company in Australia (measured by Australian production and
reserves) and one of the largest North American-based gold mining companies. As
of December 31, 1997, the Combined Company would have had approximately 20.3
million ounces of gold equivalent reserves and approximately 217 million tons of
mineralized material averaging a grade of 0.096 ounces of gold equivalents per
ton (in each case after reduction for minority interests), increases of 15% and
57%, respectively, over Homestake's reserves and mineralized material at
December 31, 1997. The Combined Company also will benefit significantly in terms
of production growth and lower cash costs. Homestake's 1996 and 1997 production
was 1.968 and 1.996 million ounces of gold equivalents, respectively.
Homestake's 1996 and 1997 total cash production costs were US$248 and US$237 per
gold equivalent ounce, respectively. After taking into account the restructuring
of operations at the Homestake mine, 1998 production for the Combined Company is
expected to total 2.325 million ounces at a total cash production cost of US$223
per ounce, and 1999 production for the Combined Company is expected to total
2.406 million ounces at a total cash production cost of US$215 per ounce.
Homestake believes that the Combined Company will have the lowest political risk
profile of any major North American-based gold mining company, with a strong
balance sheet and significant cash flow.

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<PAGE> 59

<TABLE>
<S> <C> <C>
NORTH AMERICAN-BASED GOLD MINING PRODUCTION RESERVES
--------
COMPANIES(1) (000
OUNCES)

- ---------------

(1) Amounts for the year ending December 31, 1997.

(2) Includes Plutonic production and reserves for the year ended December 31,
1997.

(3) Without reduction of 278,700 ounces for minority interests.

(4) Includes only production and reserves for Australian properties.

(5) Production and reserves exclude those amounts attributable to minority
interest.

(6) Includes Homestake and Plutonic amounts described below.

(7) Plutonic production restated to conform with Australian fiscal year
reporting for the 12 months ended June 30, 1997. Plutonic reserves are as
at December 31, 1997.

(8) Production is for the 12 months ended December 31, 1997 and reserves are as
at December 31, 1997.

The Combined Company will benefit from the combination of the Homestake
exploration program in Nevada, Australia, Canada and other parts of the world
with the Plutonic exploration program in Australia, particularly the exploration
potential in the area around the Plutonic and Darlot/Centenary mines and
Plutonic's other large tenement holdings in Western Australia, the location of
some of the most significant gold discoveries in Australia over the past 20
years.

These factors should permit the Combined Company to pursue aggressive
acquisition, exploration and development opportunities in the United States,
Australia, Canada and elsewhere throughout the world, and

S-29
<PAGE> 60

will give the Combined Company the financial ability to compete more effectively
for attractive opportunities available only to the largest competitors.

Business, Conditions, and Prospects of Homestake and Plutonic; Relative
Prices of Stock. In evaluating the Combination, the Homestake Board considered
information with respect to the business, conditions and prospects of both
Homestake and Plutonic, including results of investigations by Homestake's
management with respect to the current operations, assets, financial condition,
management, prospects and liabilities of Plutonic. In particular, the Homestake
Board noted that the Plutonic and Darlot/Centenary mines are young and
developing long-lived mines that are expected to show increases in annual gold
production over the next several years at low cash costs per ounce. In
developing the Combined Company projected cash costs per ounce, Homestake's
engineers and geologists reviewed mine plans prepared by Plutonic for the
Plutonic and Darlot/Centenary mines. Plutonic's projected cash costs per ounce
are US$200 for 1998 and US$184 for 1999. Homestake's projected cash costs per
ounce are US$229 for 1998 and US$226 for 1999, after giving effect to the
Homestake mine restructuring. Due in part to the significant contribution to
projected lower cash costs per ounce made by the Plutonic and Darlot/Centenary
mines, the projected cash costs for the Combined Company are US$223 for 1998 and
US$215 for 1999. In addition, Homestake engineers and geologists reviewed
Plutonic's geologic database, cross sections and reserve and mineralized
material data. Based on this review, and in light of drill intersections and
geology beyond the areas reflected in the estimates of other mineralized
material at the Plutonic and Darlot/Centenary mines, Homestake believes that
these mines have excellent potential for conversion of mineralized material to
reserves over the next several years and excellent exploration potential for the
discovery of additional reserves and mineralization. Finally, Homestake's strong
balance sheet and both companies' cash flows should permit the Combined Company
to manage debt service and provide increased opportunities for timely asset
acquisitions.

The Homestake Board also considered the relative prices of the two
companies' shares in its evaluation. As a result of the general deterioration of
prices of gold stocks in the Australian market relative to the U.S. market, as
well as the decline in the relative value of the Australian dollar against the
value of the US dollar, the current circumstances created an opportunity for
Homestake to acquire Plutonic at an acceptable price to Homestake which would,
at the same time, provide an attractive premium to the holders of Plutonic
Securities. The Homestake Board noted the view of SBC Warburg Dillon Read that
the range of potential premiums being offered by Homestake was driven to a
substantial extent by the factors listed above and was not inconsistent with the
proposed transaction being favorable to Homestake.

Pro Forma Impact of the Combination on the Homestake Stockholders. The
Homestake Board considered the likely pro forma impact of the Combination on the
current Homestake Stockholders. The following summary shows accretion in terms
of earnings per share and cash flow per share for 1998 and 1999, after giving
effect to the Homestake mine restructuring, excluding and including assumed
synergies of the Combination.

<TABLE>
<CAPTION>
ACCRETION ANALYSIS
------------------------------
EARNINGS PER CASH FLOW PER
SHARE SHARE
------------ --------------
1998 1999 1998 1999
---- ---- ----- -----
<S> <C> <C> <C> <C>
Accretion after giving effect to the restructuring at the
Homestake mine:
Excluding synergies....................................... $.01 $.04 $.03 $.10
Including synergies....................................... .03 .10 .07 .20
</TABLE>

The foregoing analysis assumes gold prices of US$325 per ounce for 1998 and
US$350 per ounce for 1999. The Combination remains accretive at lower gold
prices (US$300 per ounce) due primarily to Plutonic's lower projected operating
costs, which reduce the Combined Company's costs.

At the Exchange Ratio of 0.34 to 1, the current Homestake Stockholders will
own approximately 70% of the Combined Company. Although the Combination
initially will be dilutive to the Homestake Stockholders on the basis of both
reserves per share of Homestake Common Stock and production per share of
Homestake Common Stock, the extent of the dilution is expected to be eliminated
over time as a result of conversion of

S-30
<PAGE> 61

Plutonic's mineralized material into reserves. See "Risk Factors" and
"Cautionary Statements" for a discussion of risks and uncertainties associated
with projections of earnings and production.

Stock Market Considerations. During the past few years, Homestake Common
Stock has traded at multiples that were significantly lower than those of other
major North American gold producers, principally Barrick Gold Corporation,
Newmont Gold Company and Placer Dome Inc., due in large part to the higher cost
per ounce and the lower growth profile for Homestake. Although Homestake's stock
price has somewhat improved relative to the stock prices of the other three
North American major producers in the past year, the Homestake Board believes
that the Combined Company has a much greater opportunity to trade at stock
market multiples comparable to those of these other major producers due to the
restored growth profile and reduced average cash costs that will result from the
Combination.

Synergies and Cost Savings. In evaluating the Combination, the Homestake
Board considered the opportunities for synergies and cost savings that exist
between Homestake and Plutonic. Homestake has underground mining expertise
involving virtually every underground mining method, which will be a major
positive factor in the continued development of the Darlot/Centenary and
Plutonic mines. Plutonic operates four of its five mines. As a result of the
Combination, the Combined Company will directly operate and manage 11 mines
throughout the world, which will give the Combined Company increased experience
in mine operation and greater ability to attract high quality operating
personnel in Australia and throughout the world. There are considerable
opportunities for cost savings for the Combined Company. The Combined Company
will be able to eliminate certain overlapping operating expenses and
administrative and general expenses that currently are incurred separately by
Homestake and Plutonic. Homestake will close the Sydney office of Plutonic and
consolidate administrative activities in Homestake's Perth office. In addition,
certain Plutonic functions, such as those associated with Plutonic being a
publicly listed company, will be eliminated. Homestake estimates that the
savings in this area will approximate US$5 million per year by year end 1998.

Homestake will also combine its exploration program with that of Plutonic.
This will involve consolidating Plutonic's and Homestake's Australian principal
exploration offices in Plutonic's Perth office. It will also involve evaluating
and prioritizing the exploration prospects for both companies and pursuing an
exploration program for the best properties of both companies, with the Combined
Company's Australian exploration program focused in the area around the Plutonic
and Darlot/Centenary mines. Cost savings are expected to be achieved by
eliminating overlapping exploration and administrative expenses and a reduction
of the total exploration budget as a result of concentrating on the best
prospects of both companies. Homestake projects that the Combined Company will
spend approximately US$20 to US$25 per ounce of production on exploration. Based
on the foregoing, Homestake expects the total exploration savings to be
approximately US$15 million on an annualized basis by year end 1998.

Accounting Treatment. The Combination will be accounted for as a pooling of
interests, whereby Homestake will record the acquisition of Plutonic assets at
Plutonic's historical carrying values, after adjusting for U.S. GAAP and
Homestake accounting policy differences.

Analyses and Advice of SBC Warburg Dillon Read. As part of its
deliberations, the Homestake Board considered the oral and written analyses and
advice of SBC Warburg Dillon Read, its financial advisor, regarding the
Combination. Among other things, SBC Warburg Dillon Read reviewed the benefits
to Homestake of the Combination, the historical trading prices for both
Homestake and Plutonic capital stock, trading levels for companies which in SBC
Warburg Dillon Read's judgment were generally comparable, the opportunity
created by the current Australian market for gold stocks and currency exchange
rates, recent acquisitions in the gold industry, and the respective
contributions of both Homestake and Plutonic to the Combined Company. The
Homestake Board requested that SBC Warburg Dillon Read undertake the analysis
necessary to form an opinion as to the fairness of the Exchange Ratio for the
Ordinary Shares to the Homestake Stockholders from a financial point of view.
See "-- Opinion of Homestake's Financial Advisor," and see the full text of the
written opinion set out in Appendix B.

On December 18, 1997, the Homestake Board concluded that the Combination
was in the best interests of the Homestake Stockholders. At its Board meetings
on January 22-23, 1998 the Homestake Board reviewed the impact of the Homestake
mine restructuring on the Combination. The Homestake Board
S-31
<PAGE> 62

determined that all of the conclusions previously reached continued to be
applicable and that the Combined Company would be further strengthened as a
result of the restructuring of the Homestake mine operations.

After considering the matter, including all of the factors described above,
the Homestake Board believes that the Combination is in the best interests of
the Homestake Stockholders. Accordingly, THE HOMESTAKE BOARD UNANIMOUSLY
RECOMMENDS THAT THE HOMESTAKE STOCKHOLDERS VOTE "FOR" THE SHARE ISSUANCE.

OPINION OF HOMESTAKE'S FINANCIAL ADVISOR

Homestake retained SBC Warburg Dillon Read to act as its financial advisor
in connection with the Combination.

SBC Warburg Dillon Read has delivered its written opinion, dated January
23, 1998, to the Homestake Board to the effect that, and based upon and subject
to the assumptions, limitations and qualifications set forth therein, as of
December 22, 1997 (the date of the execution of the Agreement), the exchange
ratio of 0.34 shares of Homestake Common Stock for each Plutonic fully paid
Ordinary Share (the "Conversion Number") was fair to Homestake Stockholders from
a financial point of view. On approximately January 19, 1998, Homestake advised
SBC Warburg Dillon Read of the restructuring at the Homestake mine and provided
revised operating and financial estimates for the company that reflected the
restructuring. As this development occurred subsequent to December 22, 1997, it
was not considered to be pertinent to SBC Warburg Dillon Read's opinion.
However, using the revised operating and financial estimates provided by
Homestake management, SBC Warburg Dillion Read re-calculated those analyses that
were impacted by the revised estimates to confirm that the proposed
restructuring would not materially change the results obtained by these
analyses.

THE FULL TEXT OF SBC WARBURG DILLON READ'S OPINION DATED JANUARY 23, 1998,
WHICH SETS FORTH A DESCRIPTION OF THE ASSUMPTIONS MADE, GENERAL PROCEDURES
FOLLOWED, MATTERS CONSIDERED AND LIMITATIONS ON THE REVIEW UNDERTAKEN, IS SET
OUT IN APPENDIX B. SBC Warburg Dillon Read's opinion does not constitute a
recommendation to any Homestake Stockholder as to how such Stockholder should
vote at the Homestake Special Meeting. Homestake Stockholders are urged to read
the opinion carefully in its entirety, especially with regard to the assumptions
made and matters considered by SBC Warburg Dillon Read. The summary of the
opinion set forth in this Document is qualified in its entirety by reference to
the full text of such opinion. Unless otherwise indicated, all references to
dollars or "$" are to United States dollars.

In arriving at its opinion, SBC Warburg Dillon Read among other things: (i)
reviewed certain publicly available business and historical financial
information relating to Homestake and Plutonic, (ii) reviewed certain internal
financial information and other data relating to the business and prospects of
Homestake, including financial estimates prepared by the management of
Homestake, that were provided to SBC Warburg Dillon Read by Homestake and are
not publicly available, (iii) reviewed certain internal financial information
and other data relating to the business and prospects of Plutonic, including
financial estimates prepared by Homestake, that were provided to SBC Warburg
Dillon Read by Homestake and are not publicly available, (iv) conducted
discussions with members of the senior management of Homestake, (v) reviewed the
historical market prices and trading activity of the common stocks of Homestake
and Plutonic, (vi) considered certain pro forma effects of the Combination on
the financial results of Homestake (including the effects of assumed Combination
savings that were provided to SBC Warburg Dillon Read by Homestake), (vii)
reviewed publicly available financial and stock market data with respect to
certain other publicly traded companies that SBC Warburg Dillon Read believed to
be generally comparable to Homestake and Plutonic, (viii) compared the financial
terms of the Combination with the financial terms of certain other mergers and
acquisitions that SBC Warburg Dillon Read believed to be relevant, (ix) reviewed
the Agreement, and (x) conducted such other financial studies, analyses and
investigations, and considered such other information as SBC Warburg Dillon Read
deemed necessary or appropriate, but none of which was individually, material.
SBC Warburg Dillon Read's opinion was necessarily based on economic, monetary,
market and other conditions as in effect on, and the information made available
to SBC Warburg Dillon Read as of, the date thereof.

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<PAGE> 63

In connection with its review, SBC Warburg Dillon Read did not, with
Homestake's consent, assume any responsibility for independent verification of
any of the information reviewed by it for the purpose of its opinion and, with
Homestake's consent, relied on its being complete and accurate in all material
respects. In addition, with Homestake's consent, SBC Warburg Dillon Read did not
make any independent evaluation or appraisal of any of the assets or liabilities
(contingent or otherwise) of Homestake or Plutonic, nor was SBC Warburg Dillon
Read furnished with any such evaluation or appraisal. With respect to the
financial estimates (including the effects of assumed Combination savings)
provided to or otherwise reviewed by or discussed with it, SBC Warburg Dillon
Read assumed, with Homestake's consent, that they were reasonably prepared on
bases reflecting the best currently available estimates and judgments of
Homestake's management as to the future financial performance of each company.
With respect to the business and financial information pertaining to Plutonic,
SBC Warburg Dillon Read did not, with Homestake's consent, hold any independent
discussions with Plutonic's management as to any aspect of the information
provided to SBC Warburg Dillon Read. With the consent of Homestake, SBC Warburg
Dillon Read also assumed that the Combination would not result in taxable income
for Homestake or the Homestake Stockholders and would be accounted for as a
pooling-of-interests. Homestake did not place any limitations upon SBC Warburg
Dillon Read regarding the procedures to be followed and the factors to be
considered in rendering its opinion.

In arriving at its opinion, SBC Warburg Dillon Read did not assign any
particular weight to any analysis or factor considered by it, but rather made
qualitative judgments based on its experience in providing such opinions and on
then existing economic, monetary, market and other conditions as to the
significance and relevance of each analysis and factor. Accordingly, SBC Warburg
Dillon Read believes that its analyses must be considered as a whole and that
selecting portions of its analyses and the factors considered, without
considering all analyses and factors, could create a misleading or incomplete
view of the processes underlying its opinion. In its analyses, SBC Warburg
Dillon Read made numerous assumptions with respect to industry performance,
general business and economic conditions and other matters, many of which are
beyond the control of Homestake, Plutonic, or SBC Warburg Dillon Read. In
particular, SBC Warburg Dillon Read used Homestake's forecast gold price of $325
per ounce in 1998, $350 per ounce in 1999 and $375 per ounce thereafter. In
using Homestake's forecast gold prices, SBC Warburg Dillon Read recognizes that
there are substantial uncertainties surrounding forecasts of higher gold prices.
See "Risk Factors -- Risks of Gold and Silver Price Fluctuations and Hedging
Activities." On December 22, 1997 (the date of the SBC Warburg Dillon Read
opinion), the price of gold was approximately $290 per ounce. Any assumed
estimates contained in SBC Warburg Dillon Read's analyses are not necessarily
indicative of actual values or predictive of future results or values, which may
be significantly more or less favorable than as set forth therein. Such
estimates relating to the value of a business or securities do not purport to be
appraisals or necessarily reflect the prices at which companies or securities
may actually be sold.

SBC Warburg Dillon Read is an internationally recognized investment banking
firm which, as a part of its investment banking business, regularly engages in
the evaluation of businesses and their securities in connection with mergers and
acquisitions, negotiated underwritings, competitive bids, secondary
distributions of listed and unlisted securities, private placements and
valuations for estate, corporate and other purposes. The Homestake Board
selected SBC Warburg Dillon Read on the basis of its experience and
independence. In the past, SBC Warburg Dillon Read and its predecessors have
provided investment banking services to Homestake and have received customary
compensation for such services. In the ordinary course of business, SBC Warburg
Dillon Read and its affiliates may actively trade or hold the equity securities
of Homestake and Plutonic for their own account or the accounts of their
customers and, accordingly, may at any time hold a long or short position in
such securities.

Pursuant to the engagement letter dated as of July 16, 1997, between
Homestake and SBC Warburg Dillon Read, Homestake has agreed to pay SBC Warburg
Dillon Read a fee of $6,000,000 in connection with a combination in which the
business, company or assets acquired (collectively an "Acquisition") are valued
at $1.0 billion, $4,000,000 in an Acquisition valued at $500 million, or an
interpolated amount in an Acquisition valued at between $500 million and $1.0
billion, for services provided in connection with the Acquisition. The payment
of this fee is contingent upon the consummation of the Combination, and it will
be credited by $1,237,000, representing $325,000 paid as retainer fees between
July and December, 1997 and $912,000 paid

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<PAGE> 64

upon announcement by Homestake of the execution of the Agreement. Homestake has
also agreed to reimburse SBC Warburg Dillon Read for the expenses reasonably
incurred by it in connection with its engagement (including reasonable counsel
fees) and to indemnify SBC Warburg Dillon Read and its officers, directors,
employees, agents and controlling persons against certain expenses, losses,
claims, damages or liabilities in connection with its services, including those
arising under the federal securities laws.

In connection with rendering its opinion, SBC Warburg Dillon Read employed
a variety of valuation methods. The material valuation methods used are
summarized below.

Pro Forma Impact. SBC Warburg Dillon Read examined the impact of the
Combination on Homestake's net income per share, Cash Flow from Operations
(defined as net income plus depreciation, depletion and amortization and
deferred taxes) per share, gold reserves per share, gold reserves plus
mineralized material per share and gold production per share based on operating
and financial estimates for the two companies. The estimates of such net income,
Cash Flow from Operations, gold reserves, gold reserves plus mineralized
material and gold production were based upon operating estimates provided by
Homestake management for Homestake, assuming the Combination did not take place,
operating estimates for Plutonic provided by Homestake management, assuming the
Combination did not take place, and the cost savings expected to result from the
Combination, as estimated by Homestake management. This analysis indicated that
the Combination would be accretive to Homestake net income per share in the
years 1998 through 2002, accretive to Homestake Cash Flow from Operations per
share in the years 1998 through 2002, dilutive to Homestake gold reserves per
share, dilutive to Homestake gold reserves plus mineralized material per share,
and dilutive to Homestake gold production per share in the years 1998 through
2002. The pro forma results above assumed pre-tax cost savings of $20 million
per year, beginning in 1998, and one-time transaction costs of $11 million in
1998. The operating estimates described above for both Homestake and Plutonic
consisted of financial projections for each company based upon production plans
for each company's mines. The production plans considered the amount and grade
of ore mined and processed, the gold recoveries that were achieved and the costs
associated with these activities. These plans were combined with estimates for
the price of gold, overhead costs, financial costs, depreciation, depletion and
amortization expense, taxation and any other relevant revenues or expenses to
produce the financial projections used. The figures for gold reserves and
mineralized material were based upon the latest estimates for these amounts
prepared by each company, adjusted by subsequent announcements.

Contribution Analysis. SBC Warburg Dillon Read analyzed the percentage of
(i) EBITDA (defined as earnings before interest, taxes, depreciation, depletion
and amortization), (ii) EBITDA less capital expenditures, (iii) earnings before
interest and taxes, (iv) net income, (v) Cash Flow from Operations, (vi) book
value of equity, (vii) gold reserves, (viii) gold reserves plus mineralized
material, and (ix) gold production on an equity basis that each of Homestake and
Plutonic would contribute to the total of the Combined Company. Based upon data
for the latest 12 months and operating and financial estimates for both
Homestake and Plutonic provided by the management of Homestake for the years
1997 to 2002 (inclusive), Plutonic's contribution to the Combined Company ranged
from 13.7% (for reserves) to 73.6% (for 1999 estimated net income). Based upon
the Conversion Number, the current Plutonic Shareholders would own approximately
30.5% of the equity of the Combined Company, within the range of contribution
based upon the statistics considered.

Discounted Cashflow Analysis. SBC Warburg Dillon Read performed a
discounted cashflow analysis of Homestake and Plutonic, each on a stand alone
basis, based upon estimates provided by the management of Homestake. The
analysis attributed no value to the exploration potential of either company and,
accordingly, all exploration costs were excluded from the cash flows subject to
the analysis. In addition, the financial estimates for Plutonic terminated on a
date that was prior to the end of the expected operating life of some of
Plutonic's projects. As a result, certain incremental production was not
included in the analysis. No value was attributed to any such incremental
production. The purpose of the analysis was to determine the relative
theoretical contribution of the existing projects of each company and was not
expected to calculate the full net present value of either company as an ongoing
entity. The analysis assumed no inflation and an unlevered after-tax discount
rate range of 2.0% to 8.0%, representing rates that are commonly used within the
gold industry for such analysis. The results were adjusted for corporate
expenses, net debt and other balance sheet
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items to arrive at a range of theoretical net present values attributable to the
equity of each company. Using this methodology, Plutonic's contribution to the
equity value of the Combined Company ranged from 28.6% to 31.9%. Based upon the
Conversion Number, the current Plutonic Shareholders would own approximately
30.5% of the equity of the Combined Company, within the range of contribution
calculated above.

Summary of Recent Acquisition Transactions. Using publicly available
information, SBC Warburg Dillon Read reviewed the purchase prices and multiples
paid in selected mergers and acquisitions involving gold mining companies in the
North American and Australian markets which in SBC Warburg Dillon Read's
judgment were generally comparable to the Combination for the purposes of this
analysis.

The North American transactions considered involved the following gold
companies (target and acquiror, respectively): (i) Santa Fe Pacific Gold
Corporation and Newmont Mining Corporation, (ii) Dayton Mining Corporation and
Pegasus Gold Inc., (iii) Arequipa Resources Ltd. and Barrick Gold Corporation,
(iv) Hemlo Gold Mines Inc. and Battle Mountain Gold Company, (v) Lac Minerals
Ltd. and American Barrick Resources Corporation, (vi) International Corona
Corporation and Homestake, and (vii) Freeport-McMoRan Gold Company and Minorco
S.A. The Australian transactions considered involved the following gold
companies (target and acquiror, respectively): (i) Gasgoyne Gold Mines NL and
Sons of Gwalia Limited, (ii) Burmine Limited and Sons of Gwalia Limited, (iii)
Orion Resources NL and Sons of Gwalia Limited, (iv) Mt. Edon Gold Mines (Aust.)
Limited and Camelot Resources Limited/Teck Corporation, (v) Eagle Mining
Corporation NL and Great Central Mines Limited and (vi) Wiluna Mines Limited and
Great Central Mines Limited.

SBC Warburg Dillon Read reviewed certain multiples implied by these
transactions, including ratios of (i) Enterprise Value (defined as consideration
offered for the equity plus the book value of debt less the cash and cash
equivalents) per ounce of gold reserves, (ii) Enterprise Value per ounce of gold
reserves plus mineralized material, (iii) Enterprise Value per ounce of gold
production over the latest reported twelve months ("LTM"), and (iv) Enterprise
Value to LTM EBITDA. The high, low and median multiples for such ratios for the
selected North American transactions were (i) $318/oz., $148/oz. and $213/oz.,
(ii) $175/oz., $91/oz. and $154/oz., (iii) $4,004/oz., $1,219/oz. and
$3,095/oz., and (iv) 25.6x, 8.3x and 21.9x. Based upon the closing price of
Homestake Common Stock of $9.9375 on December 19, 1997 (the last trading day
before the announcement of the Combination), the implied multiples for the
Combination based upon the Conversion Number are (i) $226/oz., within the range
for the transactions considered, (ii) $65/oz., below the range for the
transactions considered, (iii) $1,376/oz., within the range for the transactions
considered, and (iv) 13.6x (based upon U.S. GAAP), within the range for the
transactions considered.

The high, low and median multiples for such ratios for the selected
Australian transactions were (i) A$399/oz., A$201/oz. and A$268/oz., (ii)
A$177/oz., A$46/oz. and A$83/oz., (iii) A$2,544/oz., A$1,146/oz. and
A$1,887/oz., and (iv) 14.5x, 6.7x and 10.9x. Based upon the closing price of
Homestake Common Stock and an exchange rate of A$1=$0.65 on December 19, 1997,
the implied multiples for the Combination based upon the Conversion Number are
(i) A$348/oz., within the range for the transactions considered, (ii) A$100/oz.,
within the range for the transactions considered, (iii) A$2,117/oz., within the
range for the transactions considered, and (iv) 11.9x (based upon Australian
GAAP), within the range for the transactions considered.

SBC Warburg Dillon Read also considered the premiums of the offer prices
(defined as the share price of the offering company multiplied by the exchange
ratio in the case of stock-for-stock transactions) compared to the target
company's share price, (i) one day, (ii) one week, (iii) one month, (iv) three
months, and (v) six months prior to the announcement date of the relevant
transaction. The high, low and median premiums for the North American
transactions for the respective periods were (i) 72.0%, 19.5% and 30.7%, (ii)
79.6%, 16.2% and 29.3%, (iii) 73.8%, 16.7% and 25.2%, (iv) 104.2%, 10.5% and
43.6%, and (v) 423.9%, (8.7)% and 57.0%. The high, low and median premiums for
the Australian transactions for the respective periods were (i) 55.2%, 11.1% and
25.8%, (ii) 54.1%, 13.6% and 25.6%, (iii) 52.7%, 1.1% and 26.8%, (iv) 70.2%,
(4.3)% and 30.3%, and (v) 83.3%, 4.7% and 42.7%. Based upon the closing price of
Homestake Common Stock and the exchange rate on December 19, 1997, and the
Australian dollar price of the Ordinary Shares on the respective dates, the
implied premiums for the Combination based on the Conversion Number are (i)
85.6%,

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above the range for the transactions considered, (ii) 123.1%, above the range
for the transactions considered, (iii) 116.6%, above the range for the
transactions considered, (iv) 40.5%, within the range for the transactions
considered, and (v) 19.8%, within the range for the transactions considered,
respectively. SBC Warburg Dillon Read noted in this context that the
deterioration in the market for the shares of gold companies in Australia
relative to that for the shares of gold companies in the United States, together
with the volatility in the Australian dollar exchange rate, that occurred prior
to December 22, 1997, resulted in the "one day," "one week" and "one month"
premium calculations for the Combination being significantly higher than the
"three month" and "six month" calculations.

Analysis of Selected Publicly Traded Comparable Companies. Using publicly
available information, SBC Warburg Dillon Read reviewed the stock prices and
market multiples of the common stocks of companies which in SBC Warburg Dillon
Read's judgment were generally comparable to Plutonic for the purposes of this
analysis. These companies consisted of (i) the following North American gold
mining companies: Amax Gold Inc., Battle Mountain Gold Company, Cambior Inc.,
Getchell Gold Corporation, Kinross Gold Corporation, and TVX Gold Inc., and (ii)
the following Australian gold mining companies: Acacia Resources Limited, Delta
Gold NL, Goldfields Limited, Great Central Mines Limited, Newcrest Mining
Limited, Normandy Mining Limited, Resolute Limited, and Sons of Gwalia Limited.

The analysis considered, among other things, the ratio of (i) Enterprise
Value per ounce of gold reserves, (ii) Enterprise Value per ounce of gold
reserves plus mineralized material, (iii) Enterprise Value per ounce of LTM gold
production, and (iv) Enterprise Value to LTM EBITDA. The analysis indicated that
the high, low and median multiples for such ratios for the selected North
American companies were (i) $119/oz., $52/oz. and $95/oz., (ii) $81/oz., $18/oz.
and $35/oz., (iii) $2,917/oz., $499/oz. and $1,296/oz., and (iv) 17.4x, 5.9x and
7.6x. For the selected Australian companies, the high, low and median multiples
for such ratios were (i) $146/oz., $36/oz. and $79/oz., (ii) $59/oz., $12/oz.
and $33/oz., (iii) $1,379/oz., $254/oz. and $649/oz., and (iv) 7.5x, 2.5x and
5.8x. Based upon the closing price of Homestake Common Stock on December 19,
1997, the implied multiples for the Combination based upon the Conversion Number
are (i) $226/oz., above the range for both the North American and the Australian
companies, (ii) $65/oz., within the range for the North American companies and
above the range for the Australian companies, (iii) $1,376/oz., within the range
for both the North American and the Australian companies, and (iv) 13.6x
(according to U.S. GAAP), within the range for the North American companies, and
11.9x (according to Australian GAAP), above the range for the Australian
companies.

No company, transaction or business used in the analysis described under
"-- Summary of Recent Acquisition Transactions" and "-- Analysis of Selected
Publicly Traded Comparable Companies" above is identical to Homestake, Plutonic
or the Combination. Accordingly, an analysis of the results thereof necessarily
involves complex considerations and judgments concerning differences in
financial and operating characteristics and other factors that could affect the
transaction or the public trading or other values of the company or companies to
which they are being compared. Mathematical analysis (such as determining the
average or median) is not in itself a meaningful method of using comparable
acquisition or company data.

Historical Trading Analysis. To provide contextual and comparative market
data, SBC Warburg Dillon Read reviewed the recent historical stock market
performance of Homestake Common Stock and the Ordinary Shares and their relative
relationship, together with the respective exchange rates, during certain
periods ended December 19, 1997, including, among other periods, the preceding
(i) one month, (ii) three months, (iii) six months, (iv) one year and (v) two
years. The average exchange ratios between the share prices of Homestake Common
Stock and the Ordinary Shares over these periods were (i) 0.151, (ii) 0.164,
(iii) 0.189, (iv) 0.231 and (v) 0.262. The Conversion Number of 0.34 represents
a premium to the average exchange ratios for these periods of (i) 125%, (ii)
107%, (iii) 80%, (iv) 47% and (v) 30%. The exchange ratios between the share
prices of Homestake Common Stock and the Ordinary Shares at the start of these
periods were (i) 0.149, (ii) 0.206, (iii) 0.243, (iv) 0.321 and (v) 0.301. The
Conversion Number of 0.34 represents a premium to the exchange ratios for these
dates of (i) 128%, (ii) 65%, (iii) 40%, (iv) 6% and (v) 13%. SBC Warburg Dillon
Read noted in this context that the deterioration in the market for the shares
of gold companies in Australia relative to that for the shares of gold companies
in the United States, together with the volatility in the Australian dollar
exchange rate, that occurred prior to December 22, 1997, resulted in
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the "one month," "three months" and "six months" premium calculations for the
Combination being significantly higher than the "one year" and "two year"
calculations. At the closing market price of Homestake Common Stock of $9.9375
and an exchange rate of A$1 = US$0.65, both on December 19, 1997, the Conversion
Number of 0.34 represents a premium of 86% to the closing price of the Ordinary
Shares of A$2.80 on December 19, 1997, a premium of 156% to the low Ordinary
Shares price over the preceding twelve months and a discount of 13% to the high
Ordinary Shares price over the preceding twelve months.

PLUTONIC'S REASONS FOR THE COMBINATION; RECOMMENDATION OF THE PLUTONIC BOARD

On December 22, 1997 the Plutonic Board unanimously recommended the
Combination to the Plutonic Shareholders.

The recommendation on that date took into account a number of benefits,
including the following:

- Homestake's extensive underground mining expertise would contribute
significantly in developing the Centenary deposit and the underground
mine operations at the Plutonic mine and in capitalizing on the potential
within the Yilgarn greenstone belts in Western Australia.

- Homestake is a large, quality gold mining company and Homestake Common
Stock is a highly liquid US dollar denominated stock.

In accordance with commercial practice in Australia, the Plutonic Board
intends to meet to consider the final terms of its recommendation immediately
prior to finalizing the Information Memorandum relating to the proposed Schemes.

MATERIAL AUSTRALIAN INCOME TAX AND UNITED STATES FEDERAL INCOME TAX CONSEQUENCES

EACH PLUTONIC SHAREHOLDER AND OPTION HOLDER IS ADVISED TO CONSULT WITH HIS
OR HER OWN TAX ADVISOR REGARDING THE CONSEQUENCES OF ACQUIRING, HOLDING OR
DISPOSING OF PLUTONIC SHARES OR OPTIONS, HOMESTAKE COMMON STOCK OR AUSTRALIAN
DOLLARS IN LIGHT OF ANY CHANGES TO TAX LAWS AFTER THE DATE OF THIS OPINION, THE
SHAREHOLDER'S OR OPTION HOLDER'S PARTICULAR INVESTMENT CIRCUMSTANCES AND THE
APPLICATION OF FEDERAL, STATE, LOCAL AND FOREIGN TAX LAWS.

AUSTRALIAN INCOME TAX CONSIDERATIONS

The following is the opinion of Allen Allen & Hemsley, Sydney, Australia,
Australian tax counsel to Plutonic as to the principal Australian income tax
consequences generally applicable to a Plutonic Shareholder who disposes of
Plutonic Shares or a Plutonic Option Holder who disposes of Options under one of
the Schemes. The opinion reflects counsel's interpretation of the Convention
between the Government of Australia and the Government of the United States for
the Avoidance of Double Taxation and the Prevention of Fiscal Evasion with
respect to Taxes on Income (the "Australian/United States Tax Treaty"), the
current provisions of the Australian Income Tax Assessment Act 1936 and the
Income Tax Assessment Act 1997 and the regulations thereunder, taking into
account currently proposed amendments and counsel's understanding of the current
administrative practices of the Australian Taxation Office. The opinion does not
otherwise take into account or anticipate changes in the law, whether by way of
judicial decision or legislative action, nor does it take into account tax
legislation of other countries. Nor does this opinion express any view in
relation to the income tax consequences which may arise for Plutonic
Shareholders or Plutonic Option Holders dealing in, exercising or refraining
from exercising Homestake Rights.

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Shareholders who are Australian Residents

The Australian tax consequences of the Combination for holders of Plutonic
Shares and Options, who are residents of Australia for tax purposes, are
generally as follows:

(i) DISPOSAL OF PLUTONIC SHARES AND OPTIONS

WHERE HELD AS CAPITAL ASSETS

The cancellation of Plutonic Shares as a result of a Scheme will generally
result in a disposal of Plutonic Shares for capital gains tax purposes. However,
any cancellation of the Plutonic Shares acquired prior to September 20, 1985
generally should not be subject to the capital gains tax regime.

A capital gain will arise if Plutonic Shares are disposed of for a
consideration receivable in excess of their cost base. In this regard, the
consideration receivable for the Plutonic Shares cancelled under a Scheme is the
market value of the Homestake Common Stock received at the time of the disposal
of the Plutonic Shares together with any cash adjustment for fractional shares.
The time of disposal will be the date on which, after the Scheme has been
approved by the Court, the office copy of the approval is lodged with the ASC.
The cost base of the Plutonic Shares should generally equal the consideration
provided by the holder to acquire those Plutonic Shares. The unpaid portion of
the amount outstanding on any Partly Paid Share will not comprise relevant
consideration for these purposes. Where the holder has held the Plutonic Shares
for more than 12 months, the cost base will be indexed for inflation over the
period for which those Plutonic Shares have been held. Generally, if the
Plutonic Shareholder has capital losses available the capital gain will be
reduced by the amount of those capital losses. A taxable capital gain will be
included in the taxable income of the Plutonic Shareholder and taxed
accordingly.

A capital loss should arise if Plutonic Shares are disposed of for a
consideration receivable which is less than their cost base. In this regard, the
consideration receivable is as set out above. No indexation of the cost base
will occur for these purposes. A capital loss may be offset against capital
gains arising in the current or future years of income but not carried back to
offset capital gains of earlier years. A capital loss cannot be offset against
ordinary income.

WHERE HELD AS REVENUE ASSETS

Plutonic Shareholders who hold the shares as revenue assets, such as banks,
insurance companies and some classes of profit-taking investors, will have any
profits realised on disposal taxed as ordinary income without any adjustment for
inflation and any losses realised on disposal allowed as deductions.

The capital gain tax regime will also apply, in the manner described above,
to the disposal of Plutonic Shares held on capital account but the amount of any
capital gain will be reduced by any amount that is treated as ordinary income.
This should have the effect of reducing the capital gain otherwise arising on
the disposal to nil.

WHERE HELD AS TRADING STOCK

Plutonic Shareholders who dispose of shares held as trading stock, will
derive assessable income equal to the value of the Homestake Common Stock
received under a Scheme together with any cash adjustment for fractional shares.
Those values/amounts will not be adjusted for inflation. Additionally, those
shareholders will be allowed the cost of the Plutonic Shares disposed of by them
under the Scheme as a deduction at the time of disposal. The capital gains tax
regime will not apply to the disposal of trading stock.

THE POSITION OF PLUTONIC OPTION HOLDERS

The position of Plutonic Option Holders should be generally the same as
that set out above for Plutonic Shareholders.

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WHERE HELD BY EMPLOYEES

The income tax consequences arising for a Plutonic Shareholder or a
Plutonic Option Holder who disposes of Plutonic Shares or Plutonic Options, as
the case may be, acquired under an employee share scheme may be affected by
specific tax provisions concerning such schemes.

(ii) HOMESTAKE SHARES HELD BY AUSTRALIAN HOLDERS

Dividends paid on shares of Homestake Common Stock would generally be
subject to U.S. withholding tax at the rate of 15%. This tax would be deducted
by Homestake before the dividend is paid.

Generally, such dividends will also be subject to Australian income tax.
The entire amount of the dividend will be taxable including the amount of U.S.
tax withheld by Homestake. The Australian tax payable on such dividends will
generally be reduced by the amount of any U.S. tax withheld. Dividends paid by
Homestake cannot be franked and a shareholder will not be entitled to franking
rebates. Dividends paid by Homestake will not qualify for the inter-corporate
dividend rebate.

Dividends will be exempt from Australian tax if paid to an Australian
resident company which has a voting interest in Homestake of greater than 10%.

Because of the nature of the business activities of Homestake the
Australian rules relating to the taxation of foreign investment funds do not
currently apply to investors who hold Homestake Common Stock.

(iii) SUBSEQUENT SALE OF HOMESTAKE COMMON STOCK BY AUSTRALIAN STOCKHOLDERS

A gain or loss from the sale or other disposal of Homestake Common Stock
will generally be subject to the same tax rules as those referred to at item (i)
above.

The cost base of the Homestake Common Stock should be the market value of
the Plutonic Shares disposed of at the time of the acquisition of the Homestake
Common Stock less any cash adjustments received for fractional shares.

The sale of Homestake Common Stock on the ASX will generally be subject to
share transfer duty at the rate of 0.3%, half of which will be payable by the
shareholder disposing of those shares. The transfer of Homestake Common Stock on
a branch register of Homestake in Australia (other than those pursuant to a sale
on the ASX) generally will be subject to share transfer duty at the rate of
0.6%, payable in full by the purchaser.

Plutonic Shareholders who are not Australian Residents

The Australian tax consequences of the Combination for holders of Plutonic
Shares who are not residents of Australia for tax purposes are generally as
follows:

(I) DISPOSAL OF PLUTONIC SHARES

WHERE HELD AS CAPITAL ASSETS

Generally, if the Plutonic Shares held by a shareholder (plus any Plutonic
Shares held by an associate) during the five years preceding the disposal of
such shares pursuant to a Scheme represent less than 10% of the issued shares in
Plutonic, their sale or other disposal pursuant to the Scheme will not give rise
to any Australian tax liability arising from the capital gains tax provisions.

In any other case, the shares will comprise taxable Australian assets for
capital gains tax purposes and the consequences of disposal of Plutonic Shares
by residents of Australia described above will apply, subject to any double tax
treaty protection (see below).

WHERE HELD AS REVENUE ASSETS

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without any adjustment for inflation and any losses realised on disposal allowed
as deductions. However, this will only apply when the profits or losses have an
Australian source.

If the shares are taxable Australian assets (see above), the capital gains
tax regime will also apply to the disposal of the shares (regardless of the
question of source of the gain), again subject to the operation of any relevant
double tax treaty. If the profits realised on disposal have an Australian source
and are taxed as ordinary income, then the amount of any capital gain will be
reduced by any amount that is treated as ordinary income above. This should have
the effect of reducing the capital gain otherwise arising on the disposal (if
any) to nil.

WHERE HELD AS TRADING STOCK

Plutonic Shareholders who hold the shares as trading stock, will have the
value of the Homestake Common Stock received under a Scheme together with any
cash payments made under the Scheme taxed as ordinary income without any
adjustment for inflation and will be effectively allowed the cost of the
Plutonic Shares disposed of by them under the Scheme as a deduction, where the
proceeds of disposal have an Australian source.

SOURCE OF INCOME

Determining the source of income is a factual matter which depends on all
the surrounding circumstances. However, if the shareholder is resident in a
country with which Australia has a double tax treaty, it is possible that the
terms of the particular treaty could deem any profit arising on the approval of
a Scheme and the consequential disposal of the Plutonic Shares to have an
Australian source.

POSSIBLE DOUBLE TAX TREATY PROTECTION

In some cases a holder of Plutonic Shares may be entitled to relief in
respect of the disposal of those Plutonic Shares under the terms of a relevant
double tax treaty (although the Australian Taxation Office currently takes the
view that such relief is not normally available).

(ii) DIVIDENDS

Any dividend paid by Homestake to a non-Australian resident shareholder
will generally not be taxable in Australia.

(iii) SUBSEQUENT SALE OF HOMESTAKE COMMON STOCK

A gain or loss arising from the sale or other disposal of Homestake Common
Stock by a shareholder who is not a resident of Australia will generally not be
subject to Australian tax.

The sale of Homestake Common Stock on the ASX in Australia will generally
be subject to share transfer duty at the rate of 0.3%, half of which will be
payable by the vendor disposing of those shares. The transfer of Homestake
Common Stock on a branch register of Homestake in Australia (other than those
pursuant to a sale of the ASX) generally will be subject to share transfer duty
at the rate of 0.6%, payable in full by the purchaser.

(iv) PLUTONIC OPTIONS

Allen Allen & Hemsley assumed that Options are only held by residents of
Australia. If this is not the case, the position of Plutonic Option Holders
should be generally the same as that set out above for non-resident Plutonic
Shareholders, subject to any application of the employee share scheme
provisions, to them.

(v) WHERE HELD BY EMPLOYEES

The income tax consequences arising for a Plutonic Shareholder or a
Plutonic Option Holder who is not a resident and who disposes of Plutonic Shares
or Plutonic Options, as the case may be, which were acquired under an employee
share scheme, may be affected by specific tax provisions concerning such
schemes.

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UNITED STATES INCOME TAX CONSIDERATIONS

General

The following is a summary of the principal U.S. federal income tax
consequences generally applicable to a Plutonic Shareholder who receives
Homestake Common Stock in exchange for Ordinary Shares pursuant to the
Combination. This summary does not address the U.S. federal income tax
consequences of the Combination to holders of Partly Paid Shares or of Options
or holders who acquired their shares as compensation. The following summary is
for general information purposes only and is based on the U.S. federal income
tax law now in effect, which is subject to change, possibly retroactively. In
addition, this summary does not address all aspects of U.S. federal income
taxation which may be important to particular holders in light of their
individual investment circumstances or to certain types of holders subject to
special tax rules (e.g., financial institutions, insurance companies,
broker-dealers, tax-exempt organizations, or, except to the extent described
below, foreign taxpayers), nor does it address any aspects of state, local, or
foreign tax laws. Each investor is urged to consult its tax advisor as to the
particular consequences of the Combination, including the application and effect
of U.S. federal, state, local, and foreign tax laws.

As used herein, "Non-U.S. Holder" means a beneficial owner of Ordinary
Shares that is not a citizen or resident of the U.S., a corporation, partnership
or other entity created or organized in or under the laws of the U.S. or any
political subdivision thereof, or an estate the income of which is subject to
U.S. federal income taxation without regard to the source of its income or a
trust whose administration is subject to the primary supervision of a U.S. court
and which has one or more fiduciaries who have authority to control substantial
decisions of the trust.

United States Holders

EXCHANGE OF ORDINARY SHARES

The receipt of Homestake Common Stock in exchange for Ordinary Shares
pursuant to the Combination is expected to be a taxable transaction for U.S.
federal income tax purposes and may also be a taxable transaction under state,
local or foreign laws. In general, a U.S. holder who receives Homestake Common
Stock in exchange for Ordinary Shares in the Combination will recognize gain or
loss for U.S. federal income tax purposes equal to the difference, if any,
between the holder's tax basis in the Ordinary Shares surrendered and the sum of
(1) the fair market value of Homestake Common Stock and (2) the fair market
value, expressed in U.S. dollars, of the Australian dollar payment, if any, in
lieu of fractional shares of Homestake Common Stock received in the Combination
for the Ordinary Shares. Gain or loss will be determined separately for each
block of Ordinary Shares (i.e., Ordinary Shares acquired at the same time and
price) exchanged pursuant to the Combination. Such gain or loss will generally
be capital gain or loss if the Ordinary Shares disposed of were held as capital
assets (generally, property held for investment) by the U.S. holder. A U.S.
holder's tax basis in any Homestake Common Stock received in exchange for
Ordinary Shares will be the fair market value of the Homestake Common Stock on
the date of the exchange.

Under the Taxpayer Relief Act of 1997, net capital gain (generally, capital
gain in excess of capital loss) recognized by an individual from the sale of a
capital asset that has been held for more than 18 months will be subject to tax
at a rate not to exceed 20%, capital gain from the sale of an asset held for
more than 12 months, but not more than 18 months, will be subject to tax at a
rate not to exceed 28%, and capital gain recognized from the sale of a capital
asset that has been held for 12 months or less will be subject to tax at
ordinary income tax rates. In addition, capital gain recognized by a corporate
taxpayer will be subject to tax at the ordinary income tax rates applicable to
corporations.

A U.S. holder whose exchange of Ordinary Shares pursuant to the Combination
is subject to tax in both Australia and the U.S. should consult its tax advisor
concerning the availability of foreign tax credits or the benefits under the
Australia-United States Tax Treaty.

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Non-U.S. Holders

(i) EXCHANGE OF ORDINARY SHARES

A Non-U.S. Holder will not be subject to U.S. federal income tax on any
gain recognized on the receipt of Homestake Common Stock or cash in lieu of
fractional shares in the Combination unless (i) such gain is effectively
connected with the conduct of a U.S. trade or business by the Non-U.S. Holder or
(ii) in the case of a Non-U.S. Holder who is a nonresident alien individual,
such holder is present in the U.S. for 183 or more days in the taxable year and
certain other requirements are met.

(ii) DIVIDENDS

Dividends on Homestake Common Stock paid to a Non-U.S. Holder will
generally be subject to withholding of U.S. federal income tax at the rate of
30%, unless the withholding rate is reduced under an applicable income tax
treaty between the U.S. and the country of tax residence of the Non-U.S. Holder.
Under the Income Tax Treaty between the United States and Australia, this
withholding rate is 15%. The 30% withholding tax will not apply if the dividend
is effectively connected with a trade or business conducted within the U.S. by
the Non-U.S. Holder (or, alternatively, where an income tax treaty applies, if
the dividend is effectively connected with a permanent establishment maintained
within the U.S. by the Non-U.S. Holder), but, instead, the dividend will be
subject to the U.S. federal income tax on net income that applies to U.S.
persons (and, with respect to corporate holders, also may be subject to the
branch profits tax). Until December 31, 1998, dividends paid to a foreign
address may be presumed to be paid to a resident of that country. Thereafter, a
Non-U.S. Holder will be required to satisfy certain certification requirements
in order to claim treaty benefits or to otherwise claim a reduction of or
exemption from withholding under the foregoing rules. These requirements will
require identification of the holder and must be made under penalties of
perjury. A Non-U.S. Holder that is eligible for a reduced rate of U.S.
withholding tax pursuant to a tax treaty may obtain a refund of any excess
amounts withheld by filing an appropriate claim for refund with the U.S.
Internal Revenue Service.

(iii) GAIN ON SALE OF COMMON STOCK

A Non-U.S. Holder will generally not be subject to tax on any capital gains
recognized upon the sale, exchange, redemption or other disposition of Homestake
Common Stock unless (i) such gain is effectively connected with the conduct of a
U.S. trade or business by the Non-U.S. Holder or (ii) in the case of a Non-U.S.
Holder who is a nonresident alien individual, such holder is present in the U.S.
for 183 or more days in the taxable year and certain other requirements are met.

If Homestake were to be a United States Real Property Holding Corporation,
(i.e., more than 50% in value of its worldwide assets consisted of real property
in the United States), gain on the disposition of Homestake Common Stock would
be subject to U.S. federal income taxes. Nevertheless, a Non-U.S. Holder of less
than 5% of Homestake Common Stock would not be subject to tax on the disposition
of such stock provided that Homestake Common Stock were traded on an established
securities market. Homestake does not believe that it has been or is currently a
United States Real Property Holding Corporation.

(iv) FEDERAL ESTATE TAX

Homestake Common Stock owned or treated as owned by an individual who is
not a citizen or resident (as specially defined for U.S. federal estate tax
purposes) of the U.S. at the date of death will be included in such individual's
estate for U.S. federal estate tax purposes and may be subject to U.S. federal
estate tax, unless an applicable estate tax treaty provides otherwise.

(v) BACKUP WITHHOLDING AND INFORMATION REPORTING

Homestake must report to the holders of Homestake Common Stock and to the
Internal Revenue Service the amount of any dividends paid on Homestake Common
Stock in each calendar year and the

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amounts of tax withheld, if any, with respect to such payments. This information
may also be made available to the tax authorities of the country in which a
Non-U.S. Holder resides.

Payments to a Non-U.S. Holder will not be subject to a 31% U.S. federal
backup withholding tax if the holder furnishes the certificate noted above,
except that during 1998, there will be no backup withholding for dividends paid
to a Non-U.S. Holder with a foreign address, even if no certification is made.
Payments by a U.S. office of a broker of the proceeds of a sale of Homestake
Common Stock is subject to both backup withholding at a rate of 31% and
information reporting unless the holder certifies its Non-U.S. Holder status
under penalties of perjury or otherwise establishes an exemption. Information
reporting requirements (but not backup withholding) will also apply to payments
of the proceeds of sales of Homestake Common Stock where the transaction is
effected outside the U.S. through foreign offices of U.S. brokers, or foreign
brokers with certain types of relationships to the U.S., unless the broker has
documentary evidence in its records that the holder is a Non-U.S. Holder and
certain other conditions are met, or the holder otherwise establishes an
exemption.

Any amounts withheld under the foregoing rules will be available as a
credit against the U.S. federal income tax liability, if any, of the Non-U.S.
Holder and such holder may be eligible for a refund if he provides appropriate
certification to the U.S. Internal Revenue Service.

ANTICIPATED ACCOUNTING TREATMENT

The Combination is expected to be accounted for as a pooling-of-interests
in accordance with U.S. GAAP. Under this method of accounting, after addressing
any conformity issues, the recorded assets and liabilities of Plutonic will be
carried forward to Homestake's balance sheet and results for prior periods will
be combined and restated as income of Homestake. Pursuant to the Agreement, on
March 27, 1998 Coopers & Lybrand L.L.P. provided to Homestake and Ernst & Young
provided to Plutonic letters confirming that the Combination qualifies for
pooling-of-interests accounting treatment under U.S. GAAP. See "The
Agreement -- Conditions to the Consummation of the Combination."

In connection with the Combination, one-time transaction costs are
estimated to be US$13 million and one-time post-combination restructuring costs,
primarily for severance, lease termination and relocation charges are estimated
to be US$4 million. The majority of these costs will be incurred and expensed
during 1998. In addition, in connection with the preparation of the pro forma
information included elsewhere in this Document, management of Homestake and
Plutonic have conformed certain differences in accounting practice. See
"Unaudited Pro Forma Condensed Combined Financial Statements" and Appendix F,
Homestake Differences between U.S. and Australian Generally Accepted Accounting
Principles.

REGULATORY MATTERS

Homestake has applied to FIRB for approval for the acquisition by Homestake
of the interest in Plutonic to be acquired under the Schemes. FIRB is the
Australian regulatory body that reviews foreign investment applications and
advises the Treasurer of the Commonwealth of Australia in relation to them. In
February 1998, Homestake was advised that the Treasurer of the Commonwealth
would not object to Homestake's proposed acquisition of Plutonic.

ABSENCE OF DISSENTERS APPRAISAL RIGHTS

Homestake Stockholders who fail to vote in favor of the transaction will
have no dissenters appraisal rights if the Share Issuance is approved.
Similarly, a holder of a Plutonic Security whose class of securities approves
the Combination will be bound by the applicable Scheme and will have no rights
equivalent to dissenters appraisal rights if the relevant Scheme is implemented.

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INTERESTS OF CERTAIN PERSONS IN THE COMBINATION

HOMESTAKE

Certain members of Homestake management may be deemed to have certain
interests in the Combination that are in addition to their interests as
Homestake Stockholders generally. The Homestake Board was aware of these
interests and considered them, among other matters, in approving the
Combination.

A total of 11 senior Homestake management personnel have severance
agreements with Homestake under which they are entitled to receive benefits in
the event of a "Change of Control" if there is a "Qualifying Termination." The
Combination is a Change of Control for purposes of these severance agreements
and for purposes of the other benefits described below. Under the severance
agreements, entitlement to benefits arises if, within three years following the
consummation of a Change of Control, such person's employment is terminated
other than for cause or such person elects to terminate his employment following
(i) a reduction in salary or certain benefits, (ii) a change in location of
employment, (iii) a change in position, duties, responsibilities or status
inconsistent with such person's prior position, or (iv) a reduction in
responsibilities, title or office as in effect just before the consummation of
the Change of Control (a "Qualifying Termination"). Benefits consist of (i) a
lump sum payment equal to two times such person's highest annual salary and
bonus (including deferred compensation) during the three years prior to
termination, (ii) continuation of participation in insurance and certain other
fringe benefits for two years, (iii) continued vesting of stock options, and
(iv) relocation assistance. Such benefits are in lieu of severance benefits
otherwise payable under Homestake's general severance policy. If there were a
Qualifying Termination with respect to each of the 11 severance agreements,
Homestake's estimated costs (based on information available at March 1, 1998)
would total approximately US$7.3 million.

The same 11 management personnel are also participants in Homestake's
Executive Supplemental Retirement Plan (the "Homestake ESRP"). The Homestake
ESRP provides that participating employees accrue retirement benefits at the
rate of 4 1/3% times years of service up to a maximum of 15 years. Service
credit is then multiplied by average monthly compensation during the 36
consecutive months of highest compensation (salary and bonus) to determine a
monthly retirement benefit. Benefits are payable on retirement at age 62 after
10 continuous years of service, with provision for early retirement between ages
55 and 62. The Combination is a Change of Control for purposes of the Homestake
ESRP. If there is a Qualifying Termination within two years following a Change
in Control, the terminated participant will fully vest in the maximum benefits
payable under the Homestake ESRP to the extent such participant is not already
fully vested, and will be entitled to commence receiving such benefits at age
55. Benefits payable under the Homestake ESRP are reduced to the extent of
retirement benefits otherwise payable under any other Homestake retirement plan
(except the Homestake Mining Company Savings Plan). If there were a Qualifying
Termination with respect to each of the 11 ESRP participants, Homestake's
estimated costs, calculated at present value and assuming full benefits commence
at the earliest possible age regardless of service and accrued retirement
benefits, would total approximately US$13 million.

There are employee stock options for a total of 4,350,052 shares of
Homestake Common Stock outstanding to key employees and managers of Homestake,
including the 11 senior management personnel described above. Those options
provide that if there is a Qualifying Termination within one year of a Change of
Control, all unvested options held by the terminated employee vest and become
immediately exercisable and remain exercisable until the expiration date of the
option. The exercise prices for stock options held by employees of the Company
at March 25, 1998 ranged from US$9.37 to US$39.024.

In April 1997, 12 key employees and managers of Homestake, including the 11
senior management personnel described above, were granted Performance Based
Stock Rights ("Stock Rights") to receive a total of 125,400 shares of Homestake
Common Stock. Under the terms of the Stocks Rights, if on each of December 31,
1997, 1998, 1999 and 2000 (the "Measurement Date"), the Company achieves the
"Annual Performance Goal" set out for the Measurement Date, the grantee will
vest as to 25% of the shares subject to the grantee's Stock Rights, plus any
shares as to which the Stock Rights could have but did not vest on any prior
Measurement Date because the Annual Performance Goal for the prior Measurement
Date was not achieved. The Stock Rights also provide that if there is a
Qualifying Termination, within one year of a Change of Control, the terminated
employee will vest in the Stock Rights (to the extent not already vested) in the

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same proportion as the number of months from date of grant to the date of
termination bears to the total number of months from date of grant until the
final vesting date for the Stock Rights (in this case, 45 months). On March 2,
1998, the 12 key employees and managers referred to above were granted Stock
Rights to receive a total of 219,200 shares of Homestake Common Stock. Under the
terms of these new Stock Rights, the Measurement Dates are December 31, 1998,
1999 and 2000, and the grantees will vest as to 33 1/3% of the shares subject to
the Stock Rights if the Annual Performance Goals are met. If there is a
Qualifying Termination within one year of a Change of Control, the terminated
employee will vest in the new Stock Rights (to the extent not already vested) in
the same proportion as the number of months from the date of grant to the date
of termination bears to 34 months.

The Company also has a program providing for "Matching Stock Awards." Under
the Matching Stock Award agreements, participating employees are entitled to
"enroll" Homestake Common Stock owned by them. If they hold the enrolled shares
continuously for a period of 60 months from the enrollment date, they are
entitled to receive, for no additional consideration, one share of Homestake
Common Stock for each three shares so enrolled. Eight of the senior management
personnel described above entered into Matching Stock Award agreements in May
1997 and/or January 1998, enrolling a total of 92,795 shares of Homestake Common
Stock which, if held continuously for the five years, would entitle them to
receive 30,392 shares of Homestake Common Stock. The Matching Stock Awards also
provide that if there is a Qualifying Termination within one year of a Change of
Control, the terminated employee will vest in the shares subject to his or her
one for three Matching Stock Award with respect to the continuously enrolled
shares in the same proportion as the number of months from date of grant to the
date of termination bears to the total number of months from date of grant until
the final vesting date for the Matching Stock Award (60 months).

In July 1997, seven of the senior management personnel described above
entered into Contingent Stock Award agreements with the Company. Under the
Contingent Stock Award agreements, the employees agreed to exchange the right to
receive a designated amount of year-end cash bonus, if awarded, for the
contingent right to receive Homestake Common Stock equal in value on the date of
the cash bonus award to 150% of the foregone cash bonus. On November 21, 1997,
the seven senior management personnel described above gave up cash bonuses in
the total amount of US$228,700 for the contingent right to receive a total of
30,324 shares of Homestake Common Stock. The right to receive the Homestake
Common Stock vests as to 50% of the shares on the first anniversary of grant, as
to 25% of the shares on the second anniversary of grant, and as to 25% of the
shares on the third anniversary of the grant, but only on condition that the
employee continues to be employed by the Company on such anniversary. If this
condition is not met, the unvested shares are forfeited and no part of the cash
bonus is payable. The Contingent Stock Award agreements also provide that if
there is a Qualifying Termination within one year of a Change of Control, the
terminated employee will vest in all of the shares subject to his or her
Contingent Stock Award.

PLUTONIC

Certain members of Plutonic management may be deemed to have certain
interests in the Combination that are in addition to their interests as
stockholders of Plutonic generally. The Plutonic Board was aware of these
interests and considered them, among other matters, in approving the
Combination.

The employment contract of the managing director of Plutonic, Mr. Ronald
Hawkes, was due to expire on January 31, 1998. Mr. Hawkes and Plutonic have
agreed to extend the term of that contract until April 30, 1998, on the same
terms and conditions which are currently applicable.

Mr. J.M. Clark, a director appointed to the Plutonic Board in August 1997,
is entitled to receive directors' fees through August 1998, regardless of
whether he is removed as a director or is requested by Homestake to resign as a
director prior to that date.

Eleven executives and five Plutonic directors hold options to acquire a
total of 2,360,000 Plutonic Shares. Based on the closing price of Homestake
Common Stock on the NYSE on December 22, 1997, the exercise price of those
Options is above the value attributed to Ordinary Shares by the Exchange Ratio.
The executives and directors will receive Homestake Common Stock in the
Combination in exchange for their Options. Eight executives and 2 directors hold
a total of 1,054,212 Partly Paid Shares. The amount to be paid up on these
shares ranges from A$0.75 to A$0.90 per share.

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Mr. Paul McClintock, Chairman of the Plutonic Board, is a director of
McClintock Associates Pty Limited ("MAL") and a 33.3% shareholder in that
company. MAL has for many years acted as the financial and business adviser to
MMC and its Australian subsidiary, Malaysia Mining Australia Corporation Pty
Limited, in connection with certain Australian investments, including its
investments in Plutonic. MAL has also provided financial and business advice to
Plutonic in connection with the Combination for fees of A$48,000. MAL will not
be providing any further advice to Plutonic in connection with the Combination.
In relation to 1997, MAL was paid fees of A$212,000 and US$200,000 by MMC in
connection with the services and advice given. While MAL and MMC have not
negotiated a retainer for MAL to provide financial and business advice in 1998,
MAL expects one will be negotiated and that the fee will reflect the significant
work undertaken by MAL in 1997 and 1998 in order to implement and complete the
Combination. Following the Combination, it is expected that Homestake's Board
will invite Mr. McClintock to become a member of the Homestake Board.

Homestake has agreed for six years following consummation of the Schemes
not to amend Article 156 of Plutonic's Articles of Association (which provides
for indemnification of Plutonic's directors and officers) in any manner adverse
to those directors or officers without their prior consent or without providing,
by agreement, a comparable indemnity. In addition, Homestake has agreed to cause
Plutonic to continue to provide for those directors and officers liability
insurance comparable to that currently carried by Plutonic.

RESALE OF HOMESTAKE COMMON STOCK

The Homestake Common Stock issued pursuant to the Agreement will not be
subject to any restrictions on transfer arising under the Securities Act, except
for shares issued to any holder of Plutonic Securities who may be deemed to be
an "affiliate" of Plutonic for purposes of Rule 145 under the Securities Act or
for purposes of qualifying the Combination for pooling-of-interests accounting
treatment. It is a condition under the Agreement that each such affiliate will
enter into an agreement (a "Plutonic Affiliate Letter") with Homestake providing
that such affiliate will not transfer any Homestake Common Stock received in the
Combination except in compliance with the Securities Act. In addition, it is
expected that each such affiliate will represent that he or she has not
transferred Plutonic Securities for a specified period before the Combination is
completed or Homestake Common Stock thereafter until after such time as
financial results have been published covering at least 30 days of combined
operations of Homestake and Plutonic after the Combination. Pursuant to the
Plutonic Affiliate Letters and the Agreement, Homestake has agreed to publish
such financial results as promptly as practicable, and in any event within 30
days following the end of the first full calendar month following the
Combination.

The Plutonic Affiliate Letters also provide certain registration rights to
Plutonic Shareholders who are "affiliates" of Plutonic and who will receive,
pursuant to the Schemes, more than one percent (1%) of the Homestake Common
Stock outstanding after the consummation of the Schemes. It is expected that MMC
will be the only Plutonic Shareholder in this category. For one year following
acquisition of such Homestake Common Stock, such Plutonic Shareholder will have
the right to demand that Homestake register in accordance with the Securities
Act, some or all of the Homestake Common Stock acquired by such Plutonic
Shareholder in the Schemes. Homestake shall have the obligation to effect a
maximum of two registrations pursuant to the Plutonic Affiliate Letters and
shall do all things reasonable and customary in connection with each such
registration, including preparation and filing of the applicable registration
statement, entry into customary underwriting arrangements and the payment of
reasonable and customary registration expenses incident to each such
registration. The registrations described in the Plutonic Affiliate Letters may
be delayed for up to 90 days if filing or effectiveness of the applicable
registration statement would require disclosure that would, in the reasonable
judgment of Homestake, require disclosure that would be detrimental to
Homestake.

Other than as described above, Homestake Common Stock may be freely
transferred following allotment. Once allotted, Homestake Common Stock will be
automatically listed on and available for sale through the NYSE and the Swiss
Stock Exchange. Homestake will apply for official quotation of the Homestake
Common Stock allotted under the Schemes on the ASX but quotation is not
guaranteed or automatic. Once quoted, Homestake Common Stock may also be sold on
the ASX.

Options on shares of Homestake Common Stock are also traded on the NYSE and
the Chicago Board of Options Exchange.
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HOMESTAKE MINING COMPANY

BACKGROUND

Homestake Mining Company is a Delaware corporation incorporated in 1983 as
the parent holding company of Homestake Mining Company of California ("Homestake
California"), which has been engaged in the gold mining business since 1877.
Homestake is one of the largest North American-based gold mining companies.
Operations of Homestake include mineral exploration, extraction, processing and
refining. Gold bullion is Homestake's principal product. Ore and concentrates
containing gold and silver from the Eskay Creek and Snip Mines in Canada are
sold directly to smelters. Homestake has significant operations in the United
States, Canada and Australia. Homestake also has operations in Chile. Homestake
is engaged in active exploration projects in the United States, Canada,
Australia, Eastern Europe, Brazil, Chile and the Andean region of South America,
and participates in a development project in Bulgaria. Maps showing the
locations of Homestake's operating properties are contained in Appendix H.

Homestake California was founded to develop the Homestake Mine discovered
in the Black Hills of the Dakota Territory in 1876. Homestake was predominately
a gold mining company until its diversification into uranium mining and
production in the early 1950s and into lead and zinc in the 1960s. In 1984,
Homestake further diversified into the oil and gas business, principally as a
result of the acquisition of Felmont Oil Company. In 1989 and 1990, Homestake
disposed of its oil and gas business. In 1990, Homestake closed its last
remaining uranium mine and sold its interest in its base metals business.

In 1975, Homestake made its initial investment in the Kalgoorlie gold
district of Western Australia (known as the Golden Mile) when Homestake Gold of
Australia Limited ("HGAL") acquired a 48% interest in the Kalgoorlie Mining
Associates partnership. In 1987, Homestake sold 20% of its shares of HGAL to the
public. Subsequently, HGAL increased its interest in Kalgoorlie Mining
Associates to 50% and acquired a 50% interest in adjacent joint ventures and
properties. In late 1995 and early 1996, Homestake acquired the HGAL shares that
it did not then own.

In 1989, Homestake joined with two partners in the development of a major
sulfur discovery, Main Pass 299, in the Gulf of Mexico.

In 1992, Homestake acquired International Corona Corporation (now known as
Homestake Canada, Inc.), a large Canadian gold producer. As a result of the
acquisition, Homestake added approximately 600,000 ounces to its annual gold
production and increased its gold reserves by more than 5.4 million ounces.
Homestake also acquired an interest in the high-grade Eskay Creek deposit in
British Columbia. Commercial production at Eskay Creek commenced in January
1995. Homestake now holds a 50.6% interest in the Eskay Creek mine through its
holdings in Prime. The common shares of Prime are listed on the Toronto Stock
Exchange, the Vancouver Stock Exchange, and the American Stock Exchange.

Homestake has adopted a gold hedging policy under which Homestake, in the
appropriate circumstances, will enter into forward sales transactions for
approximately 30% of its gold production in each of the subsequent 10 years at
prices in excess of certain targeted prices. In appropriate circumstances,
Homestake also will use combinations of put and call option contracts to
establish an effective price floor for sales while permitting participation in
future price increases. At December 31, 1997 Homestake's gold forward sales
commitments totaled 580,052 ounces, deliverable over the period 1998-2003, at an
average contract settlement price of US$433.72 per ounce. The estimated
liquidation value of the contracts at December 31, 1997 was US$53.1 million.
During 1997, Homestake entered into a series of put and call option contracts
which provide a floor price of US$325 per ounce for 900,000 ounces of
Homestake's 1998 gold production. Homestake purchased put options for 900,000
ounces of gold exercisable during 1998 at a price of US$325 per ounce. Homestake
also sold call options for 900,000 ounces of gold exercisable during 1998 at a
price of US$325 per ounce and purchased call options for 900,000 ounces of gold
exercisable during 1998 at US$336 per ounce. Homestake also purchased put
options for 30,000 ounces of gold exercisable during the year 2000 at a price of
US$350 per ounce and sold call options for 15,000 ounces of gold exercisable
during 2000 at an average price of US$395 per ounce. The estimated liquidation
value of Homestake's option position at

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December 31, 1997 was US$26.4 million, bringing the liquidation value of the
total hedge position to US$79.5 million.

Prime has adopted a hedging policy under which Prime, in the appropriate
circumstances, will enter into forward sales transactions for approximately 40%
of its gold and silver production in each of the subsequent five years at prices
in excess of certain targeted prices.

See "Risk Factors" and "Cautionary Statements" for a discussion of factors
and assumptions on which forward looking statements in this Document may be
based or which could cause actual results to differ materially from those
expressed in the forward looking statements.

SIGNIFICANT 1997 AND 1998 DEVELOPMENTS

Homestake and Santa Fe Pacific Gold Corporation ("Santa Fe") announced in
December 1996 that they had entered into a definitive agreement whereby
Homestake would acquire Santa Fe. In March 1997, Santa Fe terminated the
agreement and, in accordance with the terms of the agreement, paid Homestake a
US$65 million termination fee. As a result, in the first quarter of 1997
Homestake recorded a pretax gain of US$62.9 million (US$47.2 million after tax),
net of transaction-related expenses of approximately US$2 million incurred in
1997.

In February 1997, Homestake completed the sale of its interest in the
George Lake and Back River ventures in Canada to Kit Resources Corporation
("Kit") for US$9.3 million in cash and 3.6 million shares of Kit. As a result of
this transaction, Homestake recorded a pretax gain of US$13.5 million (US$8.1
million after tax).

During 1997, Homestake recorded write-downs and other unusual charges of
US$198.8 million (US$158.7 million after tax). Due to a prolonged period of low
sulfur prices and Homestake's current assessment of estimated future cash flows,
the Company wrote off its entire US$107.8 million investment in the Main Pass
299 sulfur mine in the Gulf of Mexico. The Company also wrote down the carrying
value of several of its short-lived assets or operations, certain redundant
assets and investments in certain mining securities. It also increased its
reclamation accruals at several properties to reflect revised cost estimates,
changed conditions and more stringent reclamation requirements.

In October 1997, the gravity mill for processing higher-grade sulfide ores
at Round Mountain was completed at a cost of US$62.2 million (Homestake's
share -- US$15.5 million). Higher gold recoveries will be achieved by milling
than otherwise would be obtained by crushing and leaching the higher-grade
sulfide ore. The mill has a capacity to process 8,000 tons per day of sulfide
ore.

During the fourth quarter of 1997, Prime completed construction of a small
gravity and flotation mill facility at the Eskay Creek mine site in British
Columbia, Canada, at a total capital cost of US$12 million. The mill will
improve the profitability of certain Eskay Creek ore that otherwise would be
shipped directly to third-party smelters and will permit processing of lower
grade material that otherwise would not be economic for direct shipment.

In December 1997, Homestake completed construction at the Ruby Hill mine
near Eureka, Nevada, at a total capital cost of approximately US$64.7 million.
Initial gold production occurred on November 6, 1997. The operation is expected
to produce 110,000 ounces of gold in 1998 at a total cash cost of US$123 per
ounce and a total production cost of US$241 per ounce.

In December 1997, Kalgoorlie Consolidated Gold Mines Pty Ltd ("KCGM")
completed a 1.6 mile decline from surface at the northern end of the Kalgoorlie
Super Pit to access from underground the upper level remnants of the Mt.
Charlotte orebody and the recently delineated northern orebody. HGAL's share of
the decline's cost is approximately US$2.6 million.

In September and November of 1997, the State of South Dakota, the United
States government and the Cheyenne River Sioux Tribe filed actions against
Homestake claiming unspecified and unquantified damages to natural resources
alleged to result from disposal of mine tailings in Whitewood Creek beginning in
the nineteenth century. Disposal of the tailings in Whitewood Creek was in
compliance with all applicable laws.
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Further, the site was a licensed waste disposal facility. Homestake answered the
complaints denying the claims and filed crossclaims seeking cost recoupment,
contribution and indemnity from the plaintiffs in the actions. Homestake intends
to vigorously defend and, as appropriate, join other government and non-
government entities that also disposed of material in the affected area. See
"Environmental Matters."

In January 1998, Homestake announced the implementation of a major
restructuring of operations at the Homestake mine to reduce operating costs.
Annual production will be reduced to approximately 150,000 to 180,000 ounces per
year. Implementation of the plan will require a major reduction in the level of
employment and a complete reorganization of the methods of operation. To
implement the plan, Homestake suspended underground mining while it completed
the final details of the new operating plan and readied the underground mine to
begin operating on the restructured basis. The new operating plan will involve
closing parts of the mine and concentrating on the best ore bodies on
substantially fewer production levels in order to reduce continuing
infrastructure and other operating costs. Although the new plan reduces proven
and probable gold reserves by 1.5 million ounces (before taking account of 1997
production), the improved per ounce operating margin on the remaining reserves
should increase the mine's future total cash flow significantly.

STATISTICAL SUMMARY

The information in the following table is a summary of certain 1997 and
1996 statistical information regarding ownership of gold mines, production
costs, reserves and mineralized material of Homestake's significant properties.
Where the percentage interest shown below is less than 100%, production,
reserves and mineralized material data represent Homestake's share of total
production, reserves and mineralized material. Mineralized material is reported
in short tons of 2,000 pounds (equivalent to 0.9071 metric tons). The
statistical information included in the table is derived from studies, analyses
and other information prepared by or for, or available to, Homestake.

Information in this Document with respect to reserves and mineralized
material for Homestake has been prepared and defined in accordance with SEC
definitions and requirements. These definitions and requirements are different
than those used in the JORC Code applicable in Australia. SEC requirements do
not permit Homestake to report in SEC-filed documents (including this Document)
reserves and resources, as they would be reported under the JORC Code. In
Australia, what would be reported as resources includes reserves; in the United
States, the same information must be reported separately as reserves (reported
in ounces) and mineralized material (reported in tons and grade). Under SEC
definitions, mineralized material is generally comparable to that material
reported in Australia as resources, after subtracting that portion of the
resource that contains the proven and probable ore reserves. A more complete
description of the differences between the SEC requirements and the JORC Code is
contained in Appendix E to this Document.

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STATISTICAL SUMMARY
<TABLE>
<CAPTION>
GOLD PRODUCTION
...............................................
INTEREST TONS PROCESSED GRADE RECOVERY OUNCES
% (MILLIONS) (OZ/TON) % PRODUCED
<S> <C> <C> <C> <C> <C>
- -------------------------------------------------------------------------------------------------------
1997
UNITED STATES
.......................................................................................................
Homestake 100 2.6 0.163 94 397,299
Round Mountain(2) 25 12.1 0.015 75 119,959
Ruby Hill 100 0.3 -- -- 16,629
McLaughlin 100 2.7 0.075 58 118,491
Pinson(3) 50 0.6 0.046 86 25,829
Marigold(3) 33 0.9 0.028 95 24,547

CANADA
.......................................................................................................
Eskay Creek(4,5) 100 0.1 3.661 95 417,303
Williams 50 1.3 0.160 95 201,098
David Bell(6) 50 0.3 0.397 96 101,313
Snip(4) 100 0.2 0.780 92 115,644

AUSTRALIA
.......................................................................................................
Kalgoorlie 50 6.6 0.072 89 425,914

CHILE
.......................................................................................................
El Hueso 100 -- -- -- 507
Agua de la Falda(7) 100 0.3 0.172 65 31,417
.......................................................................................................
Total production 1,995,950
Minority interests(8) (278,670)
.......................................................................................................
Homestake's share of gold 1,717,280
- -------------------------------------------------------------------------------------------------------
1996
UNITED STATES
.......................................................................................................
Homestake 100 2.6 0.166 95 407,322
Round Mountain(2) 25 10.2 0.017 71 102,744
Ruby Hill 100 -- -- -- --
McLaughlin 100 2.5 0.096 77 185,458
Pinson(3,9) 50 0.3 0.051 79 12,098
Marigold(3) 33 1.0 0.029 93 24,485

CANADA
.......................................................................................................
Eskay Creek(4,5) 100 0.1 3.382 95 372,279
Williams 50 1.3 0.167 95 205,519
David Bell(6) 50 0.3 0.476 96 109,098
Nickel Plate 100 1.1 0.078 81 70,199
Snip(4,10) 100 0.1 0.799 92 101,827
George Lake/Back
River(11) 74 -- -- -- --

AUSTRALIA
.......................................................................................................
Kalgoorlie 50 6.4 0.067 88 368,816

CHILE
.......................................................................................................
El Hueso 100 -- -- -- 8,274
Agua de la Falda(7) 100 -- -- -- --
.......................................................................................................
Total production 1,968,119
Minority interests(8) (234,208)
.......................................................................................................
Homestake's share of gold 1,733,911
- -------------------------------------------------------------------------------------------------------
ESKAY CREEK -- SILVER
1997
1996
- -------------------------------------------------------------------------------------------------------

<CAPTION>
PRODUCTION COSTS PER OUNCE(1)
...............................
OPERATING OTHER
CASH(C) CASH(D) NONCASH(E)
<S> <C> <C> <C> <C>
- ------------------------------------------------------------------------------------------------------
1997
UNITED STATES
.........................
Homestake $306 $ 4 $ 47
Round Mountain(2) 210 16 49
Ruby Hill -- -- --
McLaughlin 247 7 120
Pinson(3) 334 10 54
Marigold(3) 239 28 34
CANADA
.........................
Eskay Creek(4,5) 155 2 35
Williams 222 7 40
David Bell(6) 184 10 45
Snip(4) 213 -- 115
AUSTRALIA
.........................
Kalgoorlie 259 -- 55
CHILE
.........................
El Hueso 310 -- --
Agua de la Falda(7) 213 -- 82
.........................
Total production $232 $ 5 $ 54
Minority interests(8)
.........................
Homestake's share of gold
- -------------------------------------------------------------------------------------------------------
1996
UNITED STATES
.........................
Homestake $293 $11 $ 35
Round Mountain(2) 230 26 61
Ruby Hill -- -- --
McLaughlin 242 8 123
Pinson(3,9) 355 14 63
Marigold(3) 231 36 46
CANADA
.........................
Eskay Creek(4,5) 167 3 43
Williams 214 8 39
David Bell(6) 161 11 45
Nickel Plate 347 -- 46
Snip(4,10) 190 -- 151
George Lake/Back
River(11) -- -- --
AUSTRALIA
.........................
Kalgoorlie 291 -- 60
CHILE
.........................
El Hueso 275 -- --
Agua de la Falda(7) -- -- --
.........................
Total production $241 $ 7 $ 58
Minority interests(8)
.........................
Homestake's share of gold
- -------------------------------------------------------------------------------------------------------
ESKAY CREEK -- SILVER
1997
1996
- -------------------------------------------------------------------------------------------------------
</TABLE>

S-50
<PAGE> 81

<TABLE>
<CAPTION>
RESERVES(A) MINERALIZED MATERIAL(B)
........................................ ......................
TONS GRADE CONTAINED OUNCES TONS GRADE
(MILLIONS) (OZ/TON) (THOUSANDS) (MILLIONS) (OZ/TON)
<S> <C> <C> <C> <C> <C>
- -------------------------------------------------------------------------------------------
...........................................................................................
13.6 0.205 2,786 18.5 0.170
100.3 0.018 1,759 35.6 0.016
7.0 0.098 687 7.2 0.073
13.9 0.061 845 -- --
0.9 0.073 65 -- --
5.1 0.033 168 -- --
...........................................................................................
0.8 1.693 1,281 0.2 0.587
16.4 0.150 2,465 4.1 0.119
2.6 0.312 804 -- --
0.1 0.678 80 -- 0.555
...........................................................................................
89.7 0.066 5,924 102.6 0.071
...........................................................................................
-- -- -- -- --
0.7 0.167 110 7.6 0.160
...........................................................................................
...........................................................................................
251.1 16,974 175.8
- -------------------------------------------------------------------------------------------
...........................................................................................
23.8 0.196 4,662 24.0 0.173
119.2 0.019 2,263 26.5 0.015
7.6 0.099 755 9.2 0.067
16.6 0.063 1,048 -- --
1.3 0.072 92 -- --
6.0 0.034 203 -- --
...........................................................................................
0.7 1.732 1,224 0.1 0.541
17.7 0.146 2,585 4.3 0.121
3.0 0.288 871 -- --
-- -- -- -- --
0.2 0.722 135 -- 0.555
-- -- -- 2.6 0.322
...........................................................................................
98.3 0.066 6,446 82.9 0.073
...........................................................................................
-- -- -- -- --
0.5 0.181 95 3.0 0.158
...........................................................................................
...........................................................................................
294.9 20,379 152.6
- -------------------------------------------------------------------------------------------
0.8 78.3 59,208 0.2 11.97
0.7 79.3 56,070 0.1 31.62
- -------------------------------------------------------------------------------------------
</TABLE>

DEFINITIONS:
(a) A proven and probable RESERVE is that part of a mineral deposit which could
be extracted or produced economically and legally at the time of the
reserve determination.
(b) MINERALIZED MATERIAL is gold-bearing material that has been physically
delineated by one or more of a number of methods including drilling,
underground work, surface trenching and other types of sampling. This
material has been found to contain a sufficient amount of mineralization of
an average grade of metal or metals to have economic potential that
warrants further exploration evaluation. While this material is not
currently or may never be classified as reserves, it is reported as
mineralized material only if the potential exists for reclassification into
the reserves category. This material has established geologic continuity,
but cannot be classified in the reserves category until final technical,
economic and legal factors have been determined and the project containing
the material has been approved for development.
(c) OPERATING CASH COSTS are costs directly related to the physical activities
of producing gold; includes mining, milling, third-party smelting, and
in-mine drilling expenditures that are related to production.
(d) OTHER CASH COSTS are costs that are not directly related to, but may result
from, gold production; includes production taxes and royalties.
(e) NONCASH COSTS are costs that typically are accounted for ratably over the
life of an operation; includes depreciation, depletion, and accruals for
final reclamation. Noncash costs do not include amortization of additions
to property resulting from SFAS 109 deferred tax purchase accounting
adjustments, as these additions did not involve any economic resources of
the Company.
NOTES:
(1) All per ounce production costs in this Statistical Summary are presented in
accordance with the "Gold Institute Production Cost Standard".

(2) Recovery relates to reusable pad at the Round Mountain mine.
(3) Recovery relates to ore milled at the Pinson and Marigold mines.

(4) The Eskay Creek and (effective April 1996) Snip mines are owned 100% by
Prime. Homestake owns 50.6% of Prime. The ownership interests and
production amounts shown are Homestake's consolidated interests without
reduction for minority interests. Production amounts include gold
equivalent ounces contained in ore or concentrates sold to smelters.
Reserves and mineralized material amounts are Homestake's interests after
reduction for the 49.4% minority interests.

(5) Gold and silver are accounted for as co-products at Eskay Creek. Silver
production is converted into gold equivalent, using the ratio of the gold
market price to the silver market price. For the years ended December 31,
1997 and 1996, the ratio was 68.2 and 74.9 ounces of silver equals one
ounce of gold production, respectively. Reserves and mineralized material
on this line relate to gold only. Silver is shown at the bottom of this
chart.
(6) Ounces produced includes 11,331 and 11,362 ounces of gold production from
the Quarter Claim in 1997 and 1996, respectively. Reserves include a 25%
net profits interest in the Quarter Claim.

(7) Homestake owns 51% of Agua de la Falda, S.A. Reserves and mineralized
material are Homestake's interests after reduction for the 49% minority
interests.
(8) Minority interests in production include minority inter

S-51
ests' 49.4% share of Prime's production in 1997 and 1996 and 49% share of
Agua's production in 1997.

(9) Homestake increased its interest in the Pinson Mine to 50% in December
1996.

(10) Prime purchased the remaining 60% interest in the Snip Mine in April 1996.

(11) Homestake completed the sale of its interest in the George Lake and Back
River joint ventures in February 1997.
<PAGE> 82

BUSINESS AND PROPERTY DESCRIPTION

UNITED STATES GOLD OPERATIONS

Homestake conducts operations at the Homestake mine in the Black Hills of
South Dakota, at the Ruby Hill mine in Nevada, at the McLaughlin mine in
northern California and at the 50% owned Pinson mine in north central Nevada. In
addition, Homestake owns a 25% interest in the Round Mountain mine in central
Nevada and a 33.3% interest in the Marigold mine in north central Nevada. The
Company's principal exploration office is in Reno, Nevada.

Homestake Mine

The Homestake gold mine is located in Lawrence County in and near Lead,
South Dakota. The mine has been in operation since 1876. Homestake owns 100% of
the operation. Paved public roads provide access to the operation.

The Homestake mine properties cover approximately 11,700 acres, of which
approximately 8,200 acres are owned in fee and the remainder are held as
unpatented mining claims. All mining is conducted on owned property.

The Homestake mine is comprised of underground and open-pit (the "Open
Cut") mining operations, an ore processing plant, final product refinery, a
waste-water treatment plant, and tailings disposal facilities. The underground
mine is serviced by two 5,000-foot vertical shafts from the surface connecting
with internal shafts which provide hoisting and services to the 8,000-foot
level. Ore from underground is hoisted to the surface, crushed and transported
to the nearby processing plant. Open Cut ore is crushed and transported more
than a mile to the processing plant by an enclosed conveyor. The 7,400
tons-per-day ("TPD") capacity processing plant recovers gold through a
combination of gravity, carbon-in-pulp ("CIP") and vat leaching processes.
Recycled process water is pumped through a carbon-in-leach ("CIL") circuit to
recover residual gold in solution. The refinery produces 0.997 fine gold
bullion. Process tails are used for underground fill or are deposited in a
tailings impoundment facility three miles from the plant.

The first phase of a major tailings dam lift expansion commenced in 1996.
Construction of an interim raise of ten feet was completed in 1997 at a cost of
approximately US$11.8 million, and construction of the full lift will be
completed in 1999 at a cost of approximately US$18.2 million. The expansion will
provide tailings storage capacity sufficient to hold projected mining activity
through the year 2014, and additional flood storage capacity. Facilities and
equipment at this operation continue to be upgraded, and during 1997 capital
expenditures totaled approximately US$16 million, principally for tailings dam
lift and electrical facilities upgrades. The facilities and equipment are
generally in good operating condition, but the basic mine and major facilities
have been in service for many years and are less efficient than more recently
designed and developed mines and facilities.

Untreated water for use in the mine's facilities is obtained from local
watersheds under Homestake mine water rights and potable water is purchased from
the Lead/Deadwood Sanitation District. Approximately 80% of the electric power
consumption is purchased under contract from Black Hills Corporation and the
remainder is provided by Homestake-owned hydroelectric facilities.

During 1997, certain Open Cut assets were deemed to be impaired and were
written down, resulting in a pre-tax charge of US$12.8 million. Open Cut mining
currently is scheduled to be completed in April 1998. Open Cut ore stockpiles
will continue to be processed through the end of 1998.

As underground mining has progressed into the lower levels of the Homestake
mine, the remaining higher-grade ore deposits have become narrower, less
continuous and more difficult to mine, with resulting higher costs. On January
26, 1998, in response to increasing costs for the underground mine and the low
gold price, Homestake announced the implementation of a major restructuring of
operations at the Homestake mine. The new operating plan is expected to reduce
costs significantly, so as to position the mine to continue operating for many
additional years. The plan will require a substantial reduction in annual
production, a major reduction in the level of employment and a complete
reorganization of the methods of operation. The new operating plan will also
involve closing parts of the mine and concentrating on substantially fewer
production levels in order to reduce continuing infrastructure and other
operating costs. This new plan, which

S-52
<PAGE> 83

also incorporates new capital spending projects, is expected to result in
increased productivity in tons mined per manshift worked and should also result
in higher mined ore grade due to changing the mix of mining methods to be
employed in different parts of the mine. The combined impact of these
improvements is expected to be a significant reduction in production costs per
ounce of gold produced.

To most effectively implement the new operating plan, Homestake suspended
underground mining while it completed the final details of the plan and readied
the underground mine to begin operating on the restructured basis. During the
shutdown period, the mill operated at a level sufficient to process ore from the
Open Cut, which has continued to operate during the planned shutdown period.

The new operating plan provides that upon completion of the restructuring
and restart of the mine, production will be reduced to a rate of approximately
150,000 to 180,000 ounces per year by the beginning of 1999, and that the total
cash cost for the underground mine will be reduced from in excess of the current
amount of US$335 per ounce to approximately US$280 per ounce by the end of 1999.
To achieve the new operating plan, Homestake expects to invest US$20 to $30
million by the end of 1999. Before taking into account the proposed Combination
with Plutonic, the restructuring is expected to reduce the Company's weighted
average cash costs by approximately US$8 per ounce by the end of 1999.
Underground crews commenced returning to work on a limited basis on March 26,
1998, and the remaining underground work force, expected to be about one-half of
the size of the pre-shutdown work force, will return on a phased basis through
April 1998.

Although the new operating plan reduces proven and probable gold reserves
by 1.5 million ounces (before taking account of 1997 production), the improved
per ounce operating margin on the remaining reserves should increase the mine's
future total cash flow significantly.

Hourly employees at the Homestake mine are represented by the United
Steelworkers of America. The current three year labor contract expires in May
1998. Negotiations with respect to a new contract commenced during the first
quarter of 1998. The negotiations involve a number of matters that arise as a
result of the restructuring of the operation and the reduction of the work force
described above.

During 1997, the mine operated in compliance with its environmental
permits, except that in November 1997, the mine had one reportable spill of
tailings into Whitewood Creek. The Homestake mine is under no regulatory orders
of any kind mandating specific environmental expenditures.

No royalties are payable on production from the Homestake mine. The State
of South Dakota imposes a severance tax of 10% of net profits from the sale of
gold produced in the state, plus US$4 per ounce of gold sold when the price of
gold is US$499 per ounce or less, increasing by US$1 per ounce for each US$100
increment or part thereof in excess of US$499 per ounce.

S-53
<PAGE> 84

GEOLOGY

The Homestake mine is the largest known iron formation hosted gold deposit.
In its 122-year life, the mine has produced in excess of 38.9 million ounces of
gold. The Homestake gold deposit is Proterozoic in age (approximately 1.9
billion years). Mineralization is generally stratabound within the Homestake
Formation, which is a quartz-veined, sulfide-rich sedimentary sequence that has
been complexly deformed by tight folding, faulting and shearing. Ten
southeast-plunging fold structures, locally called ledges, have produced gold
ore over a vertical extent of more than 8,000 feet.

YEAR-END PROVEN AND PROBABLE ORE RESERVES

<TABLE>
<CAPTION>
1997 1996
------ ------
<S> <C> <C>
UNDERGROUND:
Tons of ore (000)........................................ 11,900 19,764
Ounces of gold per ton................................... 0.220 0.220
Contained ounces of gold (000)........................... 2,620 4,345

OPEN CUT:
Tons of ore (000)........................................ 1,674 3,990
Ounces of gold per ton................................... 0.099 0.079
Contained ounces of gold (000)........................... 166 317

TOTAL:
Tons of ore (000)........................................ 13,574 23,754
Ounces of gold per ton................................... 0.205 0.196
Contained ounces of gold (000)........................... 2,786 4,662
</TABLE>

OPERATING DATA

<TABLE>
<CAPTION>
1997 1996
------ ------
<S> <C> <C>
PRODUCTION STATISTICS:
Tons of ore mined (000):
Underground........................................ 1,359 1,376
Open Cut........................................... 1,894 1,683
Ore grade mined (oz. gold/ton):
Underground........................................ 0.195 0.211
Open Cut........................................... 0.123 0.115
Open Cut stripping ratio (waste:ore).................. 2.3:1 4.9:1
Tons of ore milled (000).............................. 2,578 2,566
Mill feed ore grade (oz. gold/ton).................... 0.163 0.166
Mill recovery (%)..................................... 94 95
Gold recovered (000 ozs.)............................. 397 407

COST PER OUNCE OF GOLD PRODUCED:
Cash operating costs.................................. US$306 US$293
Other cash costs...................................... 4 11
Noncash costs......................................... 47 35
------ ------
Total production costs................................ US$357 US$339
</TABLE>

Round Mountain Mine

The Round Mountain gold mine is an open-pit mine located in Nye County,
Nevada, about 60 miles north of Tonopah. Homestake owns a 25% interest in the
mine. Echo Bay Mines Ltd. owns a 50% interest and is the operator. The remaining
25% interest is owned by Case, Pomeroy & Company, Inc. The mine has been in
operation since 1977. Paved public roads provide access to the operations.

S-54
<PAGE> 85

The Round Mountain properties cover approximately 24,968 acres of land, of
which 645 acres are privately owned, 405 acres are under patent application, and
the remainder are held under unpatented mining claims. Approximately 73% of the
total reserves are located on the privately-owned land.

Most of the ore is heap leached, and the remainder, consisting of
higher-grade sulfide ore, is milled in the recently completed mill. Ore is heap
leached using two methods. The higher-grade oxide ore is crushed and processed
on reusable heap-leach pads for 100 to 150 days and then hauled to dedicated
pads and releached. Lower grade, uncrushed run-of-mine oxide ore is heap leached
on dedicated pads along with previously leached ore from the reusable pad.

The reusable pad processing facilities consist of a gyratory crusher, an
intermediate ore storage and a reclamation system, secondary and tertiary cone
crushers and screens, a conveyor system used to transport ore to two asphalt
leach pads, and a solution pumping system. The reusable pads have a total
capacity of approximately three million tons. The separate, dedicated heap-leach
pads and solution pumping system, covering an area of 24.2 million square feet,
have the capacity to process 195 million tons of ore. Construction of an
additional 7.8 million square foot dedicated pad facility and solution pumping
system was completed in February 1998 at a cost of approximately US$13.5 million
(Homestake's share -- US$3.4 million). This expansion will be sufficient for
mining and processing activity through mid-1999. It is anticipated that the
dedicated pad facilities will be expanded to approximately 51.2 million square
feet and 485 million tons over the life of the project. During 1997, total ore
processed averaged 134,300 TPD, the reusable heap-leach pads processed 26,600
TPD and the balance was processed on the dedicated pads. The average ore and
waste mining rate was 197,200 TPD, and the total mining rate, including
stockpiles, was 265,000 TPD.

The gravity mill for processing higher-grade sulfide ores was completed
ahead of schedule in October 1997 and under budget at a cost of US$62.2 million
(Homestake's share -- US$15.5 million). The mill provides higher gold recoveries
than otherwise would be obtained by crushing and leaching the higher-grade
sulfide ores on the reusable pad. The mill has a capacity to process 8,000 tons
per day of sulfide ore. Mill tailings are impounded at a newly constructed
tailings facility.

Water is supplied from company-owned wells on the property and from water
reclaimed from tailings dams. Power is purchased under contract from Sierra
Pacific Power Company.

Homestake's share of total 1997 gold production from the Round Mountain
mine was 119,959 ounces compared to 102,744 ounces in 1996. The higher 1997
production is a result of improved mining efficiency, higher grades and
recoveries from the reusable pads, and an increase in the volume of ore placed
on the dedicated pad. Gold production from gravity treatment of high-grade ores
declined to 1,799 ounces (Homestake's share) in 1997 compared to 3,137 ounces in
1996.

During the third quarter of 1997, a new Round Mountain mining plan was
approved. This new plan was the result of an intensive re-engineering effort and
resulted in moderately lower ore tons but significantly lower waste tons to be
mined. Specifically, the new plan provides for a decrease in the ore reserves of
approximately 1,261,000 ounces (100% basis) at December 31, 1997 (before taking
account of 1997 production) and a decrease in total mining requirements of 260
million tons. The combined effect of these changes is expected to increase the
mine's cash flow and profitability and to reduce total cash costs. The new
schedule and pit design will require the movement of a number of shops and other
facilities during 1998. Cost for construction of the new facilities and
demolition of the old facilities is estimated at approximately US$15.5 million
(Homestake's share -- US$3.9 million) and should be completed by the third
quarter of 1998.

Pit water discharges began to exceed the permitted levels for arsenic
during 1997. A new pit dewatering system has since been designed that utilizes
pit water within the operation, and eliminates pit water discharges outside of
the property. During 1997, one minor air quality citation was issued by the
Nevada Bureau of Air Quality for fugitive dust emissions. Otherwise, during 1997
the mine operated in compliance with its permits.

All Round Mountain mine production is subject to a royalty determined by a
complex formula based on the price of gold. The royalties range from
approximately 3.5% of gold revenues at prices of US$320 per ounce of gold to
approximately 6.4% of gold revenues at prices of US$440 per ounce of gold or
more. During 1997, the royalties averaged 3.78% of revenues.

S-55
<PAGE> 86

GEOLOGY

The Round Mountain ore body straddles the margin of a volcanic caldera
complex. Gold-bearing hydrothermal fluids were transported along major
structural conduits created by the volcano's collapse and associated faulting.
These ascending fluids deposited gold in permeable zones along a broad northwest
trend. Primary gold mineralization at Round Mountain occurs as electrum, a
natural gold/silver alloy, in association with quartz, adularia and pyrite.
Narrow fractures in shear zones host higher-grade mineralization while porous
sites within the volcanic rocks host the disseminated mineralization. Economic
gold mineralization is found in both the volcanic and surrounding sedimentary
rocks as well as overlying alluvial placers. The oblong open-pit mine is over a
mile at its longest dimension and currently more than 1,200 feet from the
highest working level to the bottom of the pit.

Homestake has a 25% share of the following amounts:

YEAR-END PROVEN AND PROBABLE ORE RESERVES
(100% BASIS)

<TABLE>
<CAPTION>
1997 1996
-------- --------
<S> <C> <C>
Tons of ore (000)........................................... 401,325 476,509
Ounces of gold per ton...................................... 0.018 0.019
Contained ounces of gold (000).............................. 7,037 9,050
</TABLE>

OPERATING DATA (100% BASIS)

<TABLE>
<CAPTION>
1997 1996
-------- --------
<S> <C> <C>
PRODUCTION STATISTICS:
Tons of ore mined (000)................................... 32,726 31,947
Stripping ratio (waste:ore)............................... 1.2:1 0.8:1
Tons of ore crushed (000)................................. 9,757 9,894
Tons of ore processed (000)............................... 48,496 40,867
Weighted average ore grade placed on the pads (oz.
gold/ton).............................................. 0.015 0.017
Leach recovery -- reusable pads (%)....................... 75 66
Gold recovered (000 ozs.)................................. 480 411

HOMESTAKE'S COST PER OUNCE OF GOLD PRODUCED:
Cash operating costs...................................... US$210 US$230
Other cash costs.......................................... 16 26
Noncash costs............................................. 49 61
-------- --------
Total production costs.................................... US$275 US$317
</TABLE>

Ruby Hill Mine

The Ruby Hill mine is located one mile northwest of Eureka, Nevada.
Homestake acquired a 100% interest in the property in 1992. Access to the
property is by a 1.5 mile gravel road from U.S. Highway 50.

The Ruby Hill properties consist of approximately 24,831 acres, of which
23,386 acres are unpatented mining claims and 1,445 acres are privately owned.

Exploration activities have resulted in the discovery of several
mineralized zones. A positive feasibility study on the West Archimedes deposit
was completed during the fourth quarter of 1995, and construction of a mine,
heap-leach pads and a mill facility commenced in early 1997 and was completed in
December 1997. Total capital cost, including the pre-stripping of the overlying
alluvium, was approximately US$64.7 million.

The operation utilizes conventional open-pit mining methods and heap
leaching. High-grade ore is ground in a ball mill, leached and filtered, and
then combined with the crushed low-grade ore in a rotating agglomeration drum
prior to being placed on the leach pad. The feasibility study estimated that the
mine would produce an average of 105,000 ounces of gold per year over its
six-year life at a total cash cost of approximately US$140 per ounce. The mine,
which poured its first gold on November 6, 1997, produced

S-56
<PAGE> 87

16,629 ounces of gold during 1997. The mine commenced commercial production
effective January 1, 1998 and is budgeted to produce 110,000 ounces in 1998 at a
total cash cost of US$123 per ounce and a total cost of US$241 per ounce.

Water is available from on-site wells and power is available from Mount
Wheeler Power Company.

A production royalty of 3% of net smelter returns is payable on production
over 500,000 ounces of gold.

GEOLOGY

The West Archimedes gold mineralization is hosted primarily within
brecciated jasperoid and decalcified limestones of the uppermost Goodwin and
Antelope Valley units of the Ordivician Pogonip Group. The micron-size gold is
finely disseminated and the ore body is entirely oxidized. Exploration and
delineation drilling are continuing in the nearby East Archimedes zone and in
the Ruby Deeps zone located below the West Archimedes deposit.

YEAR-END PROVEN AND PROBABLE ORE RESERVES
(100% BASIS)

<TABLE>
<CAPTION>
1997 1996
------ ------
<S> <C> <C>
Tons of ore (000)....................................... 7,028 7,616
Ounces of gold per ton.................................. 0.098 0.099
Contained ounces of gold (000).......................... 687 755
</TABLE>

McLaughlin Mine

The McLaughlin gold mine is located at the junction of Lake, Napa and Yolo
Counties in northern California. The McLaughlin mine commenced operation in 1985
and is 100% owned by Homestake. Access to the property is by paved road.

The McLaughlin mine properties cover approximately 16,200 acres.
Approximately 15,100 acres are owned and approximately 950 acres are leased. The
Company holds seven unpatented mining claims and six millsite claims covering
the remaining property.

Mining was completed in June 1996 and ore is now sourced exclusively from
lower-grade stockpiles which were built up over the life of the mine. The
autoclave and flotation circuits were decommissioned following the completion of
mining of high-grade ores. The plant now operates as a direct-cyanidation
circuit utilizing cyanide leaching followed by CIP circuits, pressure stripping
and electrowinning. Total mill capacity is approximately 7,600 TPD. In 1996, the
embankment at the tailings impoundment was raised, increasing the impoundment's
capacity to allow for the treatment of all but the lowest-grade ore remaining in
the stockpiles. A final tailings dam lift, currently scheduled to be added in
1999 at an estimated cost of US$2.4 million, will allow for the processing of
the then remaining ore. Facilities are modern and in good operating condition.

The majority of process water is recycled from the tailings pond.
Additional water is obtained from the Company's reservoir in Yolo County, which
has approximately four years of storage capacity. Electric power is purchased
under interruptible tariff from Pacific Gas and Electric Company.

Gold production, which is expected to continue through approximately 2003,
has declined significantly due to the completion of mining and exhaustion of
high-grade ores. Processing costs also have declined significantly due to the
shutdown of the higher cost autoclave and flotation circuits, allowing economic
treatment of the lower-grade stockpiled ore. During 1996, the Company entered
into long term hedging contracts for the sale of future production from the mine
to ensure recovery of the remaining investment and to cover remaining
reclamation costs.

During 1997, the mine operated in compliance with its environmental
permits.

S-57
<PAGE> 88

McLaughlin mine royalties are equivalent to approximately 2% of revenues.

YEAR-END PROVEN AND PROBABLE ORE RESERVES

<TABLE>
<CAPTION>
1997 1996
-------- --------
<S> <C> <C>
STOCKPILED:
Tons of ore (000)......................................... 13,908 16,627
Ounces of gold per ton.................................... 0.061 0.063
Contained ounces of gold (000)............................ 845 1,048
</TABLE>

OPERATING DATA

<TABLE>
<CAPTION>
1997 1996
-------- --------
<S> <C> <C>
PRODUCTION STATISTICS:
Tons of ore mined (000)................................... -- 826
Stripping ratio (waste:ore)............................... -- 4.0:1
Tons of ore milled (000).................................. 2,719 2,485
Mill feed ore grade (oz. gold/ton)........................ 0.075 0.096
Mill recovery (%)......................................... 58 77
Gold recovered (000 ozs.)................................. 118 185

COST PER OUNCE OF GOLD PRODUCED:
Cash operating costs...................................... US$247 US$242
Other cash costs.......................................... 7 8
Noncash costs............................................. 120 123
-------- --------
Total production costs.................................... US$374 US$373
</TABLE>

Pinson Mine

The Pinson gold mine is located in Humboldt County approximately 30 miles
northeast of Winnemucca, Nevada. In December 1996, Homestake increased its
interest in the Pinson Partnership to 50% and became the operator of the Pinson
mine. Barrick Gold Corporation ("Barrick") owns the remaining interest. The mine
has operated since 1981. Access to the property is by paved and gravel roads.

The Pinson properties consist of approximately 36,615 acres of which 11,511
acres are held under leases, the terms of which are sufficient to allow for the
mining of all known reserves. The remaining land is comprised of 21,800 acres of
unpatented mining claims and 3,303 acres of primarily fee lands. New leases have
been negotiated for portions of the property where the leases were scheduled to
expire by the year 2000. Homestake and Barrick are conducting an extensive deep
drilling exploration program on the Pinson properties.

Mining is conducted by conventional open-pit methods in several different
areas. The mine has both heap-leaching and conventional milling facilities. In
February 1998, milling was suspended and all ores currently are processed by
heap leaching. Total material mined averaged approximately 32,510 TPD in 1997.
The mill has a capacity of 1,550 TPD using both CIP and CIL methods. In 1997,
73% of total gold production was from milled ore. The facilities are in good
condition.

Water is supplied from on-site wells and power is purchased from Sierra
Pacific Power Company.

During 1997, the mine operated in compliance with all of its environmental
permits.

Production royalties averaging 3.5% of net smelter returns are currently
payable on the principal producing areas of the property. Overall, the
underlying property ownership is complex, requiring special arrangements with
respect to the commingling of ore from various locations.

Homestake's share of production from the Pinson mine was 25,829 ounces of
gold in 1997 compared to 12,098 ounces in 1996.

S-58
<PAGE> 89

As a result of lower gold prices, in the third quarter of 1997 the Company
reviewed its carrying value of the Pinson mine. Based on its evaluation of the
property at a $325 gold price, the Company wrote down the carrying value of its
investment in the Pinson mine to zero. However, the Company believes the Pinson
property has good exploration potential, and plans to continue with its
exploration program for portions of the property.

During 1998, Homestake and Barrick plan to spend US$3 million collectively
to explore for high-grade mineralized zones at depth. Current reserves at Pinson
are sufficient for approximately one and one-half years of mining at current
operating rates.

GEOLOGY

The Pinson deposit includes more than six zones of mineralization largely
hosted in carbonate rocks and calcareous siltstones of the Ordovician Comus
Formation. Ore bodies consist of disseminations of micron-size gold peripheral
to faults in favorable stratigraphy. High-grade stringer zones have been
identified and are the subject of continuing investigations.

Homestake has a 50% share of the following reserves:

YEAR-END PROVEN AND PROBABLE ORE RESERVES
(100% BASIS)

<TABLE>
<CAPTION>
1997 1996
------ ------
<S> <C> <C>
Tons of ore (000)........................................... 1,783 2,563
Ounces of gold per ton...................................... 0.073 0.072
Contained ounces of gold (000).............................. 131 184
</TABLE>

Operating data is presented below on a 100% basis. In December 1996,
Homestake increased its interest to 50%. Prior to December 1996, Homestake had a
26.25% share of the following amounts:

OPERATING DATA (100% BASIS)

<TABLE>
<CAPTION>
1997 1996
------ ------
<S> <C> <C>
PRODUCTION STATISTICS:
Tons of ore mined (000)................................... 1,263 1,257
Stripping ratio (waste:ore)............................... 8.2:1 6.1:1
Tons of ore milled (000).................................. 550 549
Ore grade milled (oz. gold/ton)........................... 0.076 0.077
Mill recovery (%)......................................... 86 79
Tons of ore leached (000)................................. 712 669
Ore grade leached (oz. gold/ton).......................... 0.023 0.030
Gold recovered (000 ozs.)................................. 52 42
HOMESTAKE'S COST PER OUNCE OF GOLD PRODUCED:
Cash operating costs...................................... US$334 US$355
Other cash costs.......................................... 10 14
Noncash costs............................................. 54 63
------ ------
Total production costs.................................... US$398 US$432
</TABLE>

Marigold Mine

The Marigold gold mine is located in Humboldt County approximately 40 miles
southeast of Winnemucca, Nevada. Homestake owns a 33.3% interest in the Marigold
partnership. Rayrock Mines, Inc. ("Rayrock") owns the remaining interest and is
the operator. The mine has operated since 1989. Access to the property is via a
five-mile long gravel road.

The property consists of approximately 3,920 acres of unpatented mining
claims and 14,920 acres held under leases which remain in effect as long as the
mine continues production.

S-59
<PAGE> 90

Mining is conducted by conventional open-pit methods. Ore is processed by
heap leaching and milling methods. Mill-grade ore is stockpiled and periodically
processed through the mill to maximize gold recovery. Milling operations were
intermittent during 1997. Mine facilities are in good condition.

Water is supplied from on-site wells and power is purchased from Sierra
Pacific Power Company.

During 1997, the mine operated in compliance with all its environmental
permits.

Production royalties are paid to two lease holders in amounts of 5% of net
smelter returns and 3.5% of net profits.

Homestake's share of production from the Marigold mine was 24,547 ounces of
gold in 1997 compared to 24,485 ounces in 1996.

GEOLOGY

Gold mineralization at the Marigold mine is hosted largely in the Permian
Antler Formation and the Ordovician Valmy Formation and are associated with
broad bands of silicification and local decalcification. Both stratigraphy and
structure control the geometry of the mineralized zones. The ore bodies are
sediment-hosted, disseminated deposits of micron-size gold, and are entirely
oxidized.

Homestake has a 33.3% share of the following amounts:

YEAR-END PROVEN AND PROBABLE ORE RESERVES
(100% BASIS)

<TABLE>
<CAPTION>
1997 1996
------ ------
<S> <C> <C>
Tons of ore (000)......................................... 15,288 18,068
Ounces of gold per ton.................................... 0.033 0.034
Contained ounces of gold (000)............................ 504 610
</TABLE>

OPERATING DATA (100% BASIS)

<TABLE>
<CAPTION>
1997 1996
------ ------
<S> <C> <C>
PRODUCTION STATISTICS:
Tons of ore mined (000)................................. 2,583 2,882
Stripping ratio (waste:ore)............................. 3.3:1 2.9:1
Tons of ore milled (000)................................ 387 428
Ore grade milled (oz. gold/ton)......................... 0.082 0.086
Mill recovery (%)....................................... 95 93
Tons of ore leached (000)............................... 2,290 2,491
Ore grade leached (oz. gold/ton)........................ 0.019 0.019
Gold recovered (000 ozs.)............................... 74 73
HOMESTAKE'S COST PER OUNCE OF GOLD PRODUCED:
Cash operating costs.................................... US$239 US$231
Other cash costs........................................ 28 36
Noncash costs........................................... 34 46
------ ------
Total production costs.................................. US$301 US$313
</TABLE>

CANADA

Homestake has a 50% interest in the Williams and David Bell mines in the
Hemlo mining district in Ontario and a 25% net profits interest in the Quarter
Claim (adjacent to the David Bell mine). Homestake also has a 50.6% interest in
Prime, which owns the Eskay Creek and Snip mines in northwestern British
Columbia. Prime has no employees and has contracted with Homestake to provide
all necessary professional, managerial, operational and administrative services
in connection with exploration, development and operation of the Eskay Creek and
Snip mines. During 1996, mining was completed at Homestake's Nickel Plate mine
in south central British Columbia.

S-60
<PAGE> 91

The Company conducts exploration and investigates mineral acquisition and
development opportunities throughout Canada. Canadian activities are managed
from an office in Vancouver, British Columbia.

Eskay Creek Mine

Prime owns 100% of the Eskay Creek gold/silver mine, located in
northwestern British Columbia approximately 50 air miles north of Stewart,
British Columbia. Through its interest in Prime, Homestake has a 50.6% interest
in the mine. Access is by 38 miles of privately owned single-lane gravel road.
Road maintenance and snow removal are provided under contract by a local
company.

The Eskay Creek property consists of five mining leases and various other
mineral and surface rights comprising approximately 3,390 acres. The leases have
remaining terms of approximately 23 to 27 years, subject to renewal rights.

The Eskay Creek mine commenced commercial production in January 1995. The
mine is an underground operation accessible through three surface portals.
Mining is conducted by a mining contractor using equipment owned by Prime. The
mine utilizes a drift-and-fill mining method with cemented rock backfill. The
mine and facilities and equipment are new and in good condition. During 1997,
direct-shipped ore was crushed and blended in a facility located at the minesite
prior to shipment and sale to third-party smelters for final processing. Mine
waste-rock and tailings from the newly completed mill are disposed of underwater
in a nearby barren lake. Eskay Creek workers work two weeks on followed by two
weeks off.

In July 1997 Eskay Creek began construction of a gravitation and flotation
mill. Mill construction was completed ahead of schedule in November 1997 and on
budget at a cost of US$12 million. Mill commissioning began immediately and
commercial production commenced January 1, 1998. This mill is expected to treat
165 tons of ore per day producing a gravity concentrate, which is sold to a
Canadian refinery, and flotation concentrates which are sold to smelters in
Japan and Canada. The mill will improve the profitability of certain Eskay Creek
ore that would otherwise be shipped directly to third-party smelters and will
permit processing of other lower grade ore that previously was not economic for
direct shipment. Recovery from the milled ores is expected to be approximately
90% for gold and silver, net of third-party smelter payables. It is estimated
that the mill will produce approximately 70,000 payable ounces of gold
equivalent each year, a net increase of approximately 30,000 ounces over the
levels of production that would be achieved in the absence of the mill.

Two long-term ore sale contracts with smelters in Japan and Quebec provide
for combined target ore sales of 99,200 tons annually, with options to increase
sales to 132,300 tons, subject to mutual agreement with the smelters. During
1997, spot ore sales totaling approximately 12,000 tons were made to one other
smelter. Ore is trucked by a contractor 164 miles to Stewart for shipment to
Japan and 224 miles to Kitwanga, British Columbia for shipment to Quebec. A
contract loading facility for ships at Stewart handles ore and concentrate
shipments destined for Japan and a company-owned loading facility is utilized at
the railhead in Kitwanga for shipments to Quebec.

Water is supplied from the Eskay and Argillite creeks and power is produced
on-site by diesel generators.

The mine produced approximately 333 TPD in 1997 and 303 TPD in 1996. Based
on existing reserves and current production rates, the mine has a projected
remaining life of approximately nine years.

Following a successful 1997 exploration program, Eskay Creek's proven and
probable ore reserves increased by approximately 376,000 ounces of gold and 18.1
million ounces of silver at December 31, 1997, (before considering 1997
production).

The planned extension of the No. 5 ramp and the associated hanging wall
exploration drift at the north end of the mine were completed in 1997.
Exploration drilling from the hanging wall drift into the NEX and HW zones
started in the fourth quarter of 1997 and was focused on upgrading and expanding
ore reserves in these zones.

During 1997 there were four occasions where water effluent permit levels
were exceeded. The incidents were properly reported and in each instance
corrective action was taken immediately. No citations have been issued and none
are expected. With these exceptions the mine operated in compliance with all
environmental permits in 1997. During 1997, the mine's environmental health and
safety programs were recognized for a number of achievements. The mine received
an environmental award from the British Columbia Mining

S-61
<PAGE> 92

Association and the Ministry of Employment and Investment for British Columbia
for reclamation work conducted on the original exploration camp site. In
addition, during 1997 the mine received the British Columbia Small Mine Safety
Award and the prestigious John T. Ryan Award in recognition of its exemplary
safety performance during 1996.

The mine is subject to a 1% net smelter royalty, with the exception of a
small portion of the ore body, which is subject to a 2% net smelter royalty.

There are aboriginal claims relating to areas of British Columbia and other
parts of Canada, including a claim by the Tahltan Nation to the area which
includes the Eskay Creek mine. The nature and extent and validity of such claims
has not been determined. The mine has entered into several services contracts
with the Tahltan Nation Development Corporation, and approximately 39% of the
employees at the mine are members of the Tahltan Nation. Homestake believes that
its relations with aboriginal groups, including the Tahltan Nation, are
excellent. Homestake does not believe that aboriginal claims at Eskay Creek will
have any material adverse effect. However, future exploration for and
development of new mines in Canada could be slowed and could be adversely
affected, depending on future legal developments in this area. The extent of any
such effect, if any, is not known.

GEOLOGY

The Eskay Creek ore body is a precious metal-enriched volcanogenic massive
sulfide deposit that occurs in association with volcanics of the Jurassic-aged
(141 to 195 million years) Hazelton Group. Eskay Creek mineralization is
generally stratabound and occurs in a contact mudstone and breccia bounded below
by a rhyolite flow-dome complex and overlain by volcanic rocks in the west limb
of a north-plunging fold. Sphalerite, pyrite, galena and tetrahedrite are the
most abundant ore minerals. Native gold occurs as mostly microscopic particles
located between sulfide grains, in fractures within sulfide grains, or locked in
pyrite. Gold also occurs in volcanic rocks beneath the contact mudstone, along
with coarse grained sphalerite, pyrite and galena in quartz veins or stockworks.

YEAR-END PROVEN AND PROBABLE ORE RESERVES
(100% BASIS)

<TABLE>
<CAPTION>
1997 1996
------- -------
<S> <C> <C>
Tons of ore (000)........................................... 1,495 1,397
Ore grade (ozs. gold/ton)................................... 1.693 1.732
Contained ounces of gold (000).............................. 2,532 2,418
Ore grade (ozs. silver/ton)................................. 78.3 79.3
Contained ounces of silver (000)............................ 117,011 110,810
Contained gold equivalent ounces(1)(000).................... 4,051 3,857
</TABLE>

OPERATING DATA (100% BASIS)

<TABLE>
<CAPTION>
1997 1996
------ ------
<S> <C> <C>
PRODUCTION STATISTICS:
Tons of ore shipped (000)................................. 121 116
Ore grade (ozs. gold/ton)................................. 2.158 1.922
Ore grade (ozs. silver/ton)............................... 97.7 106.6
Ounces of payable gold (000).............................. 245 211
Ounces of payable silver (000)............................ 11,766 12,054
Total gold equivalent ounces(1) (000 ozs.)................ 417 372
</TABLE>

- ---------------

(1) Gold and silver are accounted for as co-products at Eskay Creek. Silver
production is converted into gold equivalent, using the ratio of the average
gold market price to the average silver market price. The ratio was 68.2
ounces and 74.9 ounces of silver equals one ounce of gold equivalent for
production calculations for the years ended December 31, 1997 and 1996,
respectively, and 77 ounces of silver equals one ounce of gold equivalent
for reserve calculations at both December 31, 1997 and 1996.

S-62
<PAGE> 93

<TABLE>
<S> <C> <C>
HOMESTAKE'S PRODUCTION COST PER OUNCE OF GOLD EQUIVALENT:
Cash operating costs(1)................................... US$155 US$167
Other cash costs.......................................... 2 3
Noncash costs............................................. 35 43
------ ------
Total production costs.................................... US$192 US$213
</TABLE>

- ---------------

(1) 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.

Snip Mine

The Snip gold mine is located at the junction of Bronson Creek and the
Iskut River, 56 air miles north of Stewart in northwestern British Columbia. In
April 1996, Prime purchased Cominco's 60% interest in the Snip mine, and now
owns 100% of the Snip mine. Through its interest in Prime, the Company has a
50.6% interest in the mine. The mine commenced operations in 1991.

The property consists of a mining lease with a remaining term of 22 years,
together with four mineral claims covering approximately 4,944 acres.

The mine is serviced by aircraft which utilize a 4,500-foot long landing
strip at the minesite to transport personnel, mine concentrates, fuel and other
supplies.

The Snip mine is an underground operation serviced by adits and a
haulageway at the mill elevation level. Mining is carried out through a
combination of shrinkage, conventional and mechanized cut and fill. Backfill
consists of mill tailings, ground waste rock, which is pumped to the mine, and
underground waste rock. The mill has a capacity of 500 TPD. Mill tailings not
used for backfill are deposited in a tailings facility located adjacent to the
mine and reclaimed water is pumped back to the mill. The facilities and
equipment are modern and in good condition. Employees work three weeks on
followed by three weeks off.

Approximately 92% of the gold contained in the ore is recovered. A gravity
circuit recovers about 36% of the gold and the remaining gold is recovered in
flotation concentrates containing approximately ten ounces of gold per ton. The
concentrates are sold under a life-of-mine contract to a smelter located in
Japan

Water is supplied from Bronson Creek and power is produced on site by
diesel generators.

The 1997 surface exploration program was not successful in making any
significant additions to the ore reserves. The underground exploration program
added modest reserves and based on current milling rates and existing reserves,
the mine is expected to operate through approximately June 1999. Diamond
drilling conducted during the first quarter of 1998 tested the remaining
exploration targets, but was unsuccessful in identifying additional ore grade
material. As a result, all exploration activity at the Snip mine has been
suspended.

During 1997, the Snip mine had two minor diesel spills. The incidents were
properly reported and corrective action was taken immediately. No citations have
been issued and none are expected. With these exceptions, the mine operated in
compliance with all environmental permits during 1997.

Homestake's share of gold production in 1997 was 115,644 ounces compared to
101,827 ounces in 1996.

GEOLOGY

The main Twin Zone ore body at the Snip mine is a 1.5 foot to 50-foot thick
quartz-carbonate-sulfide-filled shear structure within a Triassic sedimentary
unit. Gold primarily occurs as finely disseminated grains along pyrite grain
boundaries. Other sulfides within the Twin Zone include pyrrhotite, chalcopyrite
and sphalerite, with minor arsenopyrite. The vein structure has been traced over
a strike length of 3,300 feet and has a known vertical extent to 1,650 feet. In
addition to the Twin Zone, mining is conducted on footwall and hanging wall
veins. The 150 vein is the largest of these secondary, narrow veins.The 150 vein
adjoins the Twin

S-63
<PAGE> 94

Zone ore body in the east and runs roughly parallel to it for most of its strike
length. In 1997 mining commenced on a small reserve in the T West Zone, which is
located to the west of the tailings impoundment.

YEAR-END PROVEN AND PROBABLE ORE RESERVES
(100% BASIS)

<TABLE>
<CAPTION>
1997 1996
------ ------
<S> <C> <C>
Tons of ore (000)......................................... 232 369
Ounces of gold per ton.................................... 0.678 0.722
Contained ounces of gold (000)............................ 157 267
</TABLE>

OPERATING DATA
(100% BASIS)

<TABLE>
<CAPTION>
1997 1996
------ ------
<S> <C> <C>
PRODUCTION STATISTICS:
Tons of ore milled (000)................................ 165 171
Mill feed ore grade (oz. gold/ton)...................... 0.780 0.787
Mill recovery (%)....................................... 92 92
Gold recovered(1) (000 ozs.)............................ 116 124

HOMESTAKE'S COST PER OUNCE OF GOLD PRODUCED:
Cash operating costs.................................... US$213 US$190
Noncash costs........................................... 115 151
------ ------
Total production costs.................................. US$328 US$341
</TABLE>

- ---------------

(1) Includes recoverable gold contained in dore and in concentrates.

Williams Mine

The Williams gold mine is located in the Hemlo Gold Camp 217 miles east of
Thunder Bay, Ontario, adjacent to the TransCanada Highway. The mine is operated
by Williams Operating Corporation ("WOC") with its own personnel. Homestake and
Teck Corporation ("Teck") each owns a 50% interest in WOC. The mine commenced
operations in 1985.

The property consists of 11 mining claims covering approximately 380 acres
and one Crown mining lease. Homestake and Teck are required to provide funds
equally to WOC for all costs incurred to operate the mine. Homestake and Teck
have mutual rights of first refusal over each other's interest in the Williams
mine and shares of WOC.

The Williams mine is an underground operation which is accessible by a
4,300-foot shaft. The mine utilizes the longhole, open-stope mining method with
cemented and uncemented rock backfill. In addition, 650-750 TPD of lower-grade
ore is recovered from a nearby open pit. Waste rock from the open pit is used
for backfill in the underground operations. The mine has a 7,000 TPD capacity
mill which operated at 7,277 TPD during 1997 with gold recovery at 94.9%. The
Williams and David Bell mines share one tailings basin facility located
approximately two miles from the mill. Cyanidation and the CIP process are used
to recover gold. Water from the tailings basin is treated during the summer
months in an effluent treatment plant prior to discharge. Both mines recycle
mill make-up water from the tailings pond. The facilities and equipment are
modern and in good condition.

Fresh water for the property is supplied from Cedar Creek and power is
purchased from Ontario Hydro via a long-term contract. Propane for heating mine
air and surface facilities is purchased under contract.

During 1997, ore was mined primarily from the Block 3 and Block 4 zones.
Ground control problems were experienced during the year limiting access to
high-grade stopes. However, by increasing output from the open pit and other
areas of the mine, ounces produced were as predicted. Ground conditions will
continue to be a concern, but increased use of ground support technology and
careful stope scheduling should help mitigate future problems.
S-64
<PAGE> 95

The mine will continue to operate at the average ore reserve grade for the
remaining life of the operation. Approximately 43% of the ounces mined in 1997
have been replaced with reserve additions in the Block 3 zone and lower "C"
zone.

During 1997, under an agreement with Franco Nevada Ltd. ("Franco"), a drift
was driven, at Franco's expense, from the Williams property onto Franco's
adjacent property to carry out an underground exploration program. The agreement
gives WOC a right of first proposal for any mineralization which Franco may
discover during its exploration activity. During 1997 Franco conducted
approximately 33,000 feet of exploration drilling from the Franco drift.

During 1997, the mine had five minor spills. All incidents were properly
reported and corrective action was taken immediately. No citations have been
issued and none are expected. With these exceptions, the mine operated in
compliance with all environmental permits during 1997.

The owned property is subject to three net smelter royalties totaling a net
effective rate of 2.08% and the Crown mining lease is subject to a net smelter
royalty of 0.75%.

Homestake's share of production was 201,098 ounces in 1997 compared to
205,519 ounces in 1996.

GEOLOGY

The Hemlo Gold Camp occurs within the east-west striking Heron Bay belt of
metamorphosed Archean aged rocks (3.5 billion years). The steeply dipping ore
bodies lie along the contact between overlying metasedimentary rocks and
underlying volcanic rocks. Gold mineralization is hosted primarily by a fine-
grained feldspar porphyry unit and is associated with pyrite, barite and
molybdenite.

Homestake has a 50% share of the following amounts:

YEAR-END PROVEN AND PROBABLE ORE RESERVES
(100% BASIS)

<TABLE>
<CAPTION>
1997 1996
------ ------
<S> <C> <C>
Tons of ore (000)....................................... 32,926 35,449
Ounces of gold per ton.................................. 0.150 0.146
Contained ounces of gold (000).......................... 4,929 5,169
</TABLE>

OPERATING DATA (100% BASIS)

<TABLE>
<CAPTION>
1997 1996
------ ------
<S> <C> <C>
PRODUCTION STATISTICS:
Tons of ore milled (000).............................. 2,656 2,583
Mill feed ore grade (oz. gold/ton).................... 0.160 0.167
Mill recovery (%)..................................... 95 95
Gold recovered (000 ozs.)............................. 402 411
HOMESTAKE'S COST PER OUNCE OF GOLD PRODUCED:
Cash operating costs.................................. US$222 US$214
Other cash costs...................................... 7 8
Noncash costs......................................... 40 39
------ ------
Total production costs................................ US$269 US$261
</TABLE>

David Bell Mine

The David Bell gold mine is located in the Hemlo Gold Camp. The mine is
operated by the Teck-Corona Operating Corporation ("TCOC") with TCOC personnel.
Homestake and Teck each own a 50% interest in TCOC. The mine commenced
operations in 1985.

The mine is located on the same ore trend as the Williams mine. The
property consists of approximately 640 acres held under two freehold patents.
Homestake and Teck are required to provide funds equally to TCOC for all costs
incurred to operate the mine. Homestake and Teck have mutual rights of first
refusal over

S-65
<PAGE> 96

each other's interest in the David Bell mine and shares of TCOC. Homestake and
Teck each have a 50% interest in efforts to explore and develop mineral
properties within approximately two miles of the David Bell property.

The David Bell mine is an underground operation which is accessible by a
3,819-foot shaft. Production is from stopes using longhole mining methods, with
cement, tailings, sand and waste rock utilized as backfill. Mill throughput was
1,297 TPD in 1997. Cyanidation and CIP processes are used to recover gold. The
facilities and equipment are modern and in good condition.

Water and power supplies are the same as those at the Williams mine.
Treated reclaimed process water is used to service the underground operations.

The average width of ore at the David Bell mine is decreasing as mining
progresses away from the central core of the ore body. In an effort to optimize
ore extraction and to minimize development costs, stoping of narrow-width ore by
longitudinal longhole retreat continued during the year. Production in 1997
decreased by 6% compared to 1996 primarily as a result of processing lower grade
ore. The 1997 ore grade declined, approaching average life-of-mine reserve
grade. This trend will continue in 1998 and beyond.

Approximately 42% of the ounces mined in 1997 have been replaced with ore
reserve additions despite a 28% increase in the cut-off ore grade.

The hourly work force at David Bell is unionized and the collective
bargaining agreement with the United Steel Workers of America is in effect
through October 1998.

In December 1997, the mine had a minor propane emission. The incident was
properly reported and corrective action was taken immediately. No citation was
issued and none is expected. Except as noted, the mine operated in compliance
with all of its environmental permits during 1997.

The property is subject to a 3% net smelter return royalty.

Homestake's share of production at the David Bell mine was 89,982 ounces in
1997 compared with 97,736 ounces in 1996.

GEOLOGY

See "Williams Mine -- Geology."

Homestake has a 50% share of the following amounts:

YEAR-END PROVEN AND PROBABLE ORE RESERVES
(100% BASIS)

<TABLE>
<CAPTION>
1997 1996
------ ------
<S> <C> <C>
Tons of ore (000)......................................... 4,785 5,574
Ounces of gold per ton.................................... 0.316 0.291
Contained ounces of gold (000)............................ 1,512 1,621
</TABLE>

OPERATING DATA (100% BASIS)

<TABLE>
<CAPTION>
1997 1996
------ ------
<S> <C> <C>
PRODUCTION STATISTICS:
Tons of ore milled (000)................................ 473 427
Mill feed ore grade (oz. gold/ton)...................... 0.397 0.476
Mill recovery (%)....................................... 96 96
Gold recovered (000 ozs.)............................... 180 195
HOMESTAKE'S COST PER OUNCE OF GOLD PRODUCED:
Cash operating costs.................................... US$184 US$161
Other cash costs........................................ 10 11
Noncash costs........................................... 45 45
------ ------
Total production costs.................................. US$239 US$217
</TABLE>

S-66
<PAGE> 97

Quarter Claim

The Quarter Claim constitutes approximately one-fourth of a mining claim,
which was originally part of the David Bell property, and was optioned to and
subsequently acquired by Battle Mountain Gold Company ("Battle Mountain") in
1982. Battle Mountain developed a shaft on the Quarter Claim and reserved
hoisting and milling capacity of 500 TPD at its mill to process any ore found on
the Quarter Claim. Homestake has a 25% net profits interest in all ore recovered
from the Quarter Claim. The net profits interest is based on a deemed production
rate, deemed production costs and the market price of gold. The deemed
production rate is based upon committed throughput of 500 TPD multiplied by (a)
the average ore grade of the remaining Quarter Claim reserves, (b) a recovery
factor, and (c) 95%.

Homestake's share of production at the Quarter Claim was 11,331 ounces in
1997 compared with 11,362 ounces in 1996.

GEOLOGY

See "Williams Mine -- Geology."

Homestake has a 25% share of the following amounts:

YEAR-END PROVEN AND PROBABLE ORE RESERVES
(100% BASIS)

<TABLE>
<CAPTION>
1997 1996
------ ------
<S> <C> <C>
Tons of ore (000)......................................... 747 930
Ounces of gold per ton.................................... 0.258 0.258
Contained ounces of gold (000)............................ 193 240
</TABLE>

OPERATING DATA (100% BASIS)

<TABLE>
<CAPTION>
1997 1996
------ ------
<S> <C> <C>
PRODUCTION STATISTICS:
Tons of ore milled (000)................................ 183 183
Mill feed ore grade (oz. gold/ton)...................... 0.257 0.257
Mill recovery (%)....................................... 96 96
Gold recovered (000 ozs.)............................... 45 45
HOMESTAKE'S COST PER OUNCE OF GOLD PRODUCED:
Cash operating costs.................................... US$162 US$156
Other cash costs........................................ 10 12
Noncash costs........................................... 1 1
------ ------
Total production costs.................................. US$173 US$169
</TABLE>

Nickel Plate Mine

Mining and ore processing at the Nickel Plate mine, located near Hedley,
British Columbia, was completed in 1996. Reclamation of the property, in
accordance with a plan filed with British Columbia's regulatory agencies, is in
progress. At the end of 1997, approximately 79% of the total land affected by
mining activities had been reclaimed. Reclamation work includes sloping,
covering with soil, and seeding all rock dumps. It will also include treating
all water in the tailings impoundment prior to release into the environment.
When the water treatment is complete, the plant will be removed and the 80 acre
plant site area will be reclaimed. During 1997, the property operated in
compliance with all of its environmental permits.

AUSTRALIA

HGAL is a 50% owner in Australia's largest gold mining operation, the
consolidated surface and underground gold operations at Kalgoorlie, Western
Australia. HGAL also explores for gold throughout Australia. Australian
activities are managed from an office in Perth, Western Australia.

S-67
<PAGE> 98

Kalgoorlie Operations

The Kalgoorlie operations are located 340 miles northeast of Perth, Western
Australia on 164 state leases and licenses covering approximately 30,000 acres
adjacent to the town of Kalgoorlie. The mineral leases are granted on
application for a term of 21 years on conditions covering rental, royalties,
expenditure conditions and reporting. They are renewable in the final year.
Homestake acquired its interest in the original Kalgoorlie Mining Associates
joint venture in 1976. Mining operations in the Kalgoorlie region date back to
1893. Access to the operations is by paved road.

HGAL owns a 50% interest in the Kalgoorlie operations. Subsidiaries of
Normandy Mining Limited ("Normandy") own the other 50% interest. HGAL and
Normandy jointly own and control KCGM, which manages the operations under the
direction of a joint management committee. Prior to June 1996, HGAL and Normandy
each paid 50% of the costs but under certain circumstances Normandy was entitled
to more than 50% of the production from one area of the Super Pit (the
"Disproportionate Share"). In June 1996, HGAL purchased Normandy's rights under
the Disproportionate Share and HGAL now shares equally with Normandy in all gold
produced at the Kalgoorlie operations.

The Kalgoorlie operation is comprised of two mines, the Super Pit open-pit
mine and the Mt Charlotte underground gold mine. Ore from both of these
operations is treated at the Fimiston mill. Two smaller facilities, the Mt Percy
and Croesus mills were closed in 1997. The Croesus mill has been demolished and
the Mt Percy mill has been mothballed. Sulfide concentrates produced at the
Fimiston mill are roasted at the Gidji roaster, located 12 miles north of the
main Kalgoorlie operations, prior to final processing at the Fimiston mill. The
facilities and equipment at the Kalgoorlie operations generally are in good
condition.

Contractors are employed to conduct the open-pit mining operations, ore and
concentrate haulage and some specialized services. Ore from the Mt Charlotte
mine is conveyed to the Fimiston mill by an open conveyor. Fresh water is
supplied under allocation from the state water system and is piped 340 miles
from Perth. Remaining process water requirements are satisfied using salt water
taken from bores and the underground mine. Until September 1996, power was
purchased under a number of agreements with the state power authority. Power now
is provided under a power supply agreement with Normandy Power Pty Ltd, a
company associated with Normandy.

During 1996, the Kalgoorlie operations had a solutions spill at one of its
tailings ponds. The spill was reported timely and remediated. During 1997, the
operations were cited for the 1996 spill and paid a fine of A$2,000. During
1997, there was also one instance where sulfur dioxide levels in the Kalgoorlie
area exceeded air quality limits. The Department of Environmental Protection and
KCGM are investigating to determine whether the Gidgi roaster was a principal
contributor to the event. With this possible exception, during 1997 the mine
operations were in compliance with all environmental permits.

HGAL's share of gold production from the consolidated Kalgoorlie operations
was 425,914 ounces in 1997 compared to 368,816 ounces in 1996. No royalties
currently are payable on production. See "Cautionary Statements -- Western
Australia Royalty."

Total cash costs per ounce in 1997 were US$259 compared to US$291 in 1996.
Cash costs were lower in 1997 compared to 1996 primarily due to higher grades,
higher tonnage processed and lower milling costs, partially offset by higher
mining costs. In addition, there was a 5% decline in the average value of the
Australian dollar compared to the US dollar.

There are a number of native title claims relating to the area of the
Kalgoorlie operations, but the validity of those claims has not been determined.
In any event, all of the mining leases with respect to active mining operations
at Kalgoorlie are pre-1994 leases, and therefore native title claims will not
adversely affect the operations. Thirteen mining titles were granted between
January 1, 1994 and March 16, 1995, when Western Australia did not comply with
the requirements of negotiation in granting these and associated titles.
Although there has been no decision on the issue to date, titles granted during
that period may be open to challenge on native title grounds. It is possible
that proposed Commonwealth legislation may validate such titles to put them
beyond doubt. If such titles are found to be invalid due to native title, the
State of Western Australia has indicated that it will facilitate regrants and
pay any compensation due to aggrieved native title parties. KCGM is in the
process of converting two prospecting licenses to mining leases for use of the
property for waste rock

S-68
<PAGE> 99

disposal, and it will be necessary to comply with the right to negotiate process
of the Native Title Act in order to ensure the validity of the grant of the
mining leases. Native title issues are expected to arise in the process. KCGM is
engaged in general discussions with several of the claimants, and KCGM has
implemented aboriginal training and employment programs. Homestake does not
expect native title issues to have any material adverse effect on the Kalgoorlie
operations. See "Risk Factors."

Super Pit

This large open-pit mine is located along the "Golden Mile" ore bodies
previously mined from underground.

In 1997, 75.9 million tons of material were mined containing 10.8 million
tons of ore, compared to 78.5 million tons of material mined containing 11.8
million tons of ore in 1996. HGAL's share of Super Pit gold production was
343,644 ounces in 1997 and 305,837 ounces in 1996. The increase in production in
1997 primarily was due to increases in throughput, grade and recoveries.

Mt Charlotte

This underground mine uses bulk mining methods and large conventional
diesel powered loaders and trucks. The main production level is 3,200 feet below
surface. Longhole mass-blast mining techniques are employed. Ore is crushed
underground with primary crushers before being hoisted to the surface and
conveyed to the Fimiston mill. In February 1997, development work began on a 1.6
mile decline from surface at the northern end of the Super Pit to access from
underground the upper level remnants of the Mt Charlotte orebody and the
recently delineated northern orebody. The decline was completed ahead of
schedule and below budget in December 1997. HGAL's share of the decline's cost
was approximately US$2.6 million.

Ore production and mill throughput increased by 13% at Mt Charlotte during
1997 due to successful mass blasts that allowed greater flexibility for
production.

In 1997, 1.9 million tons of ore were mined from Mt Charlotte compared to
1.7 million tons of ore mined in 1996. HGAL's share of gold production was
81,160 ounces in 1997 and 61,024 ounces in 1996.

Mt Percy

The Mt Percy open cuts were mined to their planned economic depth in July
1992, at which time mining ceased. Previously stockpiled low-grade Mt Percy ore
was blended with non-refractory ore from the Super Pit and treated in the Mt
Percy mill until it was shut down in June 1997. HGAL's share of Mt Percy gold
production was 1,110 ounces in 1997 and 1,955 ounces in 1996.

Mills

The Fimiston mill is a 35,000-TPD mill with CIP leaching and refractory
sulfide flotation circuits. Approximately US$90 million (100% basis) was spent
during 1995 and 1994 on an expansion program at the Fimiston mill, including a
5,000-TPD free-milling sulfide circuit to treat Mt Charlotte ore. Additional
capital expenditures (100% basis) of US$4.2 million in 1997 and US$4.4 million
in 1996 were incurred for efficiency improvements at the mill. The increased
capacity improved the mill's efficiency and replaced the capacity of the Oroya
mill, which was dismantled in 1995 to allow for further planned expansion of the
Super Pit. The Fimiston mill processed 12.2 million tons of ore in 1997 and 10.6
million tons in 1996.

The Gidji roaster complex, which comprises two roasters and a CIP circuit,
processes all sulfide concentrates produced at the Fimiston mill. The Gidji
roaster processed 0.3 million tons of concentrate in 1997 and 0.2 million tons
in 1996.

The Mt Percy mill, a 2,500-TPD mill with a CIP circuit, was mothballed in
June 1997.

GEOLOGY

The ore deposits mined in the Kalgoorlie Goldfields occur within an
intensely mineralized shear zone system in dolerite host rocks, within the
Norseman-Wiluna greenstone belt which is part of the Yilgarn Block of Western
Australia. The rocks are of Archaen age. The favorable structural metamorphic
and lithologic setting in conjunction with hydrothermal activity controlled gold
mineralization. During its history of

S-69
<PAGE> 100

operations since 1893, in excess of 45 million ounces of gold have been produced
from the Kalgoorlie properties at depths of up to 4,000 feet from high-grade
lodes and adjacent disseminated mineralization in the Golden Mile Dolerite, and
from the large stockwork zones which characterize the Mt Charlotte and Reward
(underground) ore bodies.

HGAL has a 50% share (subject to the Disproportionate Share prior to June
1996) of the following amounts:

YEAR-END PROVEN AND PROBABLE ORE RESERVES
(100% BASIS)

<TABLE>
<CAPTION>
1997 1996
------- -------
<S> <C> <C>
Tons of ore (000)........................................ 179,346 196,589
Ounces of gold per ton................................... 0.066 0.066
Contained ounces of gold (000)........................... 11,847 12,892
</TABLE>

OPERATING DATA (100% BASIS)

<TABLE>
<CAPTION>
1997 1996
------- -------
<S> <C> <C>
PRODUCTION STATISTICS:
SUPER PIT:
Tons of ore mined (000)............................. 10,844 11,836
Stripping ratio (waste:ore)......................... 6.0:1 5.6:1
Tons of ore milled (000)............................ 11,183 10,926
Mill feed ore grade (oz. gold/ton).................. 0.069 0.065
Mill recovery (%)................................... 88 87
Gold recovered (000 ozs.)........................... 687 612
MT PERCY:
Tons of stockpiled ore milled (000)................. 105 200
Mill feed ore grade (oz. gold/ton).................. 0.025 0.025
Mill recovery (%)................................... 83 83
Gold recovered (000 ozs.)........................... 2 4
MT CHARLOTTE:
Tons of ore mined (000)............................. 1,919 1,694
Tons of ore milled (000)............................ 1,931 1,707
Mill feed ore grade (oz. gold/ton).................. 0.091 0.079
Mill recovery (%)................................... 92 91
Gold recovered (000 ozs.)........................... 163 122
COMBINED PRODUCTION STATISTICS:
Tons of ore mined (000)............................. 12,763 13,530
Tons of ore milled (000)............................ 13,219 12,833
Mill feed ore grade (oz. gold/ton).................. 0.072 0.067
Mill recovery (%)................................... 89 88
Gold recovered (000 ozs.)........................... 852 738
HOMESTAKE'S CONSOLIDATED COST PER OUNCE OF GOLD
PRODUCED:
Cash operating costs................................ US$259 US$291
Noncash costs....................................... 55 60
------- -------
Total production costs.............................. US$314 US$351
</TABLE>

CHILE

Homestake conducts exploration programs throughout Chile. Homestake's
office is in Santiago, Chile.

In July 1996, Homestake and Corporacion Nacional del Cobre Chile, a
state-owned mining company in Chile ("Codelco"), formed a new company, Agua de
la Falda S.A. ("La Falda"), to explore near Homestake's former El Hueso mine in
northern Chile. Homestake and Codelco contributed property interests

S-70
<PAGE> 101

in the area to the new company. In addition, Codelco contributed the existing El
Hueso plant which had been under lease to Homestake. Homestake owns 51% of the
corporation and Codelco owns the remaining 49% interest.

La Falda holds mining properties covering approximately 8,336 acres.
Included within those properties is the new Agua de la Falda mine that was
developed, and is operated by La Falda, to mine the 187,000 ounces of oxide
reserves discovered on the property by Homestake. The Agua de la Falda mine is
located approximately three miles northeast of the former El Hueso mine, in the
Maricunga District of Chile about 600 miles north of Santiago at an elevation of
approximately 12,500 feet. Access to the property is by 14 miles of dirt road.

Construction of facilities and underground mine development for the Agua de
la Falda mine commenced in late 1996. Construction was completed ahead of
schedule and below budget at a total cost of approximately US$6.5 million.
Mining commenced in January 1997 and gold production began in April 1997. The
operation utilizes both room-and-pillar and post-pillar underground mining
methods. The existing El Hueso facility is used to heap leach the Agua de la
Falda ore using the Merrill Crowe process to recover the gold from solution.
Production in 1997 was 31,417 ounces. Production is expected to average 40,000
to 45,000 ounces annually during 1998 through 2000.

Water and power is purchased from Codelco.

Exploration drilling conducted in 1997 encountered an additional oxide ore
zone, adding 300,000 tons at a grade of 0.18 ounces of gold per ton to proven
and probable reserves. This additional ore will be mined through the La Falda
mine.

No royalties are payable on the production from the current Agua de la
Falda reserves. However, any ores which may be extracted from the northern area
of the property are subject to royalty payment of 1.5% of net smelter returns on
production of over one million ounces.

Drilling and metallurgical testing continues on the much larger Jeronimo
deposit, where to date approximately 15.0 million tons of unoxidized mineralized
material (100% basis), at an average grade of 0.160 ounces per ton, have been
outlined. Metallugical testwork is underway to develop an economic treatment
method.

In February 1995, the El Hueso mine closed as reserves were depleted.
Reclamation of the El Hueso mine site continued during 1997. There is little
flora or fauna present in the Maricunga District, and no water sources are
located nearby. Nonetheless, continued environmental monitoring will be carried
out for a period of time.

GEOLOGY

The La Falda property is located within the Potrerillos porphyry copper
district and comprises Mesozoic marine sediments that have been overlain by
Tertiary volcanics and intruded by Tertiary porphyries. Gold mineralization has
been mined historically in sediments and volcanics but the Agua de la Falda and
Jeronimo deposits are hosted largely by a single, permeable, gently dipping
carbonate unit.

Homestake has a 51% share of the following amounts:

YEAR-END PROVEN AND PROBABLE ORE RESERVES
(100% BASIS)

<TABLE>
<CAPTION>
1997 1996
--------- ---------
<S> <C> <C>
Tons of ore (000).................................. 1,290 1,032
Ounces of gold per ton............................. 0.167 0.181
Contained ounces of gold (000)..................... 215 187
</TABLE>

S-71
<PAGE> 102

OPERATING DATA (100% BASIS)

<TABLE>
<CAPTION>
1997
---------
<S> <C> <C>
PRODUCTION STATISTICS:
Tons of ore leached (000)........................ 281
Ore grade (oz. gold/ton)......................... 0.172
Recovery (%)..................................... 65
Gold recovered (000 ozs.)........................ 31
COST PER OUNCE OF GOLD PRODUCED:
Cash operating costs............................. US$213
Noncash costs.................................... 82
---------
Total production costs........................... US$295
</TABLE>

BULGARIA

During 1997, Homestake entered into agreements with Navan Resources Plc, an
Irish public company ("Navan"), with regard to the Chelopech mine and
exploration activities in Bulgaria. In November 1997, Homestake purchased a 20%
interest in Navan Bulgarian Mining BV, a Netherlands company ("Navan BV"), that
was formerly a wholly-owned subsidiary of Navan. Homestake's initial debt and
equity investment in Navan BV was US$12 million. Navan BV owns a 68% interest in
Bimak AD, a Bulgarian company that owns and operates the surface facilities at
the Chelopech copper-gold mine near Sofia, Bulgaria. The other 32% of Bimak is
owned by Chelopech EAD, a government-owned corporation that owns and operates
the Chelopech mine. Bimak AD provides consulting services to Chelopech and
purchases the ore from the Chelopech mine at cost plus a 1% gross royalty.

Homestake has agreed, under certain circumstances, to invest an additional
US$18 million in debt and equity of Navan BV, which would result in Homestake
owning 51% of Navan BV, and give Homestake the right to become operator of the
project. The investment of the additional US$18 million is dependent on
satisfactory outcome of the Chelopech EAD privatization and concession grant
discussions described below, approval by Homestake and Navan of an expansion
plan for the mine and mill, and receipt of financial commitments from lenders
for additional funding for the expansion plan. Under certain circumstances, (i)
each of Homestake and Navan will severally guarantee up to US$10 million of
financing for an expansion and (ii) Homestake will provide up to an additional
US$10 million if financing of up to US$20 million from third-party lenders is
not available.

Production at the Chelopech mine in 1996 was 629,600 tons of ore at an
average grade of 0.106 ounces of gold per ton and 1.10% copper, and production
for 1997 is estimated at 658,400 tons of ore at an average grade of 0.10 ounces
per ton of gold and 1.20% copper. Production from the Bimak mill, including
recoverable gold and copper contained in concentrates and black sands sold to
others for processing, was 56,604 ounces of gold and 11.0 million pounds of
copper in 1996 and an estimated 56,318 ounces of gold and 12.9 million pounds of
copper in 1997. Mineralized material at the Chelopech mine is estimated at
approximately 28.7 million tons of ore at an average grade of 0.11 ounces of
gold per ton and 1.40% copper.

Homestake and Navan are now engaged in discussions with the Bulgarian
government regarding the privatization of Chelopech EAD and the confirmation of
secure concession rights in mineralization in and around the mine for the
privatized company. Those discussions contemplate that Navan BV or Bimak (or
other company owned by Homestake and Navan) would acquire a minimum of 80% of
Chelopech EAD, with up to 20% to be made available principally to employees of
Chelopech. Homestake is also engaged in the development of an expansion plan for
the Chelopech mine and the related Bimak mill and facilities, the implementation
of which would be dependent upon the outcome of the privatization discussions
with the Bulgarian government.

During November 1997, Homestake bought a 32% interest in Navan's Bulgarian
exploration projects and program for US$4 million. Homestake is obligated to
invest an additional US$4 million in the exploration program during the next
three years, which will result in Homestake's owning a 50% interest in and
having the right to become the operator of the exploration program.

S-72
<PAGE> 103

Sulfur

Homestake owns an undivided 16.7% interest in the Main Pass 299 sulfur
deposit, which at December 31, 1997 contained proven recoverable reserves of
approximately 64.3 million long tons of sulfur. Freeport-McMoRan Sulphur Inc.
("FMS") owns the remaining 83.3% of the deposit and is the operator under a
joint operating agreement.

The sulfur deposit is located in the Gulf of Mexico approximately 36 miles
east of Venice, Louisiana in water approximately 210 feet deep. The deposit is
approximately 1,500 feet below the sea floor. A royalty of 12.5% of the wellhead
value is payable under the terms of the federal sulfur leases.

The operating agreement provides that each participant pay its share of
capital and operating costs, and has the right to take its share of production
in kind in proportion to its undivided interest.

The sulfur deposit is being mined using the Frasch process, a method of
extraction which injects high-temperature (330 degrees) sea water to liquefy the
sulfur, which is then pumped to surface. Initial sulfur production commenced in
1992 and full sulfur production levels of 5,500 TPD were reached in December
1993. Sulfur production averaged 5,200 TPD during 1997, down from 5,500 TPD in
1996. The reduction was a planned response to a weakening sulfur market. Based
on current reserve estimates, projected costs and prices, annual production
(100% basis) is expected to average two million long tons over a remaining
reserve life currently in excess of 30 years.

FMS filters, blends, markets and delivers Homestake's share of sulfur
production under an agreement having an initial term of ten years from
commencement of production in 1992. Homestake can terminate the agreement by
giving FMS two years notice.

Homestake's realized sales price for sulfur is a blend of various market
prices, including the Tampa market, and is net of a 2.625% marketing fee.

In the third quarter of 1997, due to a prolonged period of low sulfur
prices and Homestake's current assessment of estimated future cash flows, the
Company wrote off its entire remaining US$107.8 million investment in the Main
Pass 299 sulfur mine. As a result, the Company's carrying value of the Main Pass
299 sulfur mine was reduced to zero at September 30, 1997.

During sulfur exploration, oil and gas were discovered overlying the sulfur
deposit. In 1990, the participants acquired the oil and gas rights from Chevron
USA Inc.

The federal oil and gas lease requires a 16.7% royalty payment based on
wellhead value. In addition, Chevron retained the right to share in the proceeds
of future production should the price or volume realized exceed those which were
used by the parties as the basis for determining the purchase price.

Oil and gas production, which peaked during 1992, is expected to continue
to decline over the next few years. Oil production (100% basis) totaled 3.3
million barrels in 1997 compared to 3.9 million barrels in 1996. Homestake's
share of remaining recoverable oil reserves at December 31, 1997 is estimated to
be 1.1 million barrels after adjusting for the federal royalty and future
production due to Chevron. The remaining carrying value of Homestake's
investment in the Main Pass 299 oil and gas property was US$3.8 million at
December 31, 1997.

Homestake has a 16.7% share of the following amounts:

YEAR-END PROVEN AND RECOVERABLE RESERVES
(100% BASIS)

<TABLE>
<CAPTION>
1997 1996
----- -----
<S> <C> <C>
Tons of sulfur (000)........................................ 64,287 66,182
Barrels of oil (000)........................................ 8,738 12,751
</TABLE>

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<PAGE> 104

PRODUCTION STATISTICS (100% BASIS)

<TABLE>
<CAPTION>
1997 1996
----- -----
<S> <C> <C>
Tons of sulfur (000)........................................ 1,894 1,950
Barrels of oil (000)........................................ 3,298 3,900
</TABLE>

HOMESTAKE'S PER UNIT DATA

<TABLE>
<CAPTION>
1997 1996
----- -----
<S> <C> <C>
AVERAGE SALES REALIZATION:
Per ton of sulfur......................................... US$59 US$60
Per barrel of oil......................................... 18 19

PRODUCTION COSTS:
Sulfur cash operating costs per ton....................... US$66 US$57
Sulfur noncash costs per ton.............................. 8 11
----- -----
Total production costs.................................... US$74 US$68
Oil cash operating costs per barrel....................... US$10 US$ 5
Oil noncash costs per barrel.............................. 7 7
----- -----
Total production costs.................................... US$17 US$12
</TABLE>

MINERAL EXPLORATION AND DEVELOPMENT

Total exploration expenses, including in-mine grass roots exploration at
Homestake's operating mines, were US$48.4 million in 1997 and US$45.4 million in
1996. The Company currently plans to spend US$35 million on existing Homestake
exploration projects during 1998. Expenses related to the in-mine definition
drilling at Homestake's operating mines totaled an additional US$4 million in
1997 and US$5 million in 1996. In-mine definition drilling expenses are included
in the individual mine property operating expenses and cost per ounce
calculations.

UNITED STATES

United States exploration expenses totaled approximately US$13.9 million in
1997 and US$11.9 million in 1996. Domestic exploration expenses in 1998 are
budgeted to be US$10.3 million.

Exploration of a deep sulfide gold system beneath the Ruby Hill open pit
established that the mineralization occurs in two zones of altered carbonate
rocks. Delineation drilling of the East Archimedes deposit completed in 1997
indicates mineralization of 7.2 million tons at an average grade of 0.073 ounces
of gold per ton. Evaluation and testing of this deposit will continue in 1998.
Exploration plans for 1998 include several wide-spaced deep holes to search for
larger concentrations of higher-grade mineralization and the testing of
additional shallow targets to search for more oxide reserves. Exploration
expenditures totaled US$2.4 million during 1997 and US$1.7 million of work is
planned for 1998.

At the Pinson property, 50% owned by each of Homestake and Barrick and
managed by Homestake, 1997 expenditures totaled US$4.8 million (100% basis),
including US$0.7 million of in-mine target drilling. Drilling of deep target
zones in 1997 yielded several holes of possible interest that will be followed
up in 1998. Homestake has budgeted US$1.5 million for its share of 1998
exploration expenditures.

Homestake has secured a major land position in the old Pioche mining
district in eastern Nevada and has delineated several targets. Drill testing
began in the fourth quarter of 1997 and will continue into 1998. Expenditures
for 1997 totaled US$1.5 million and US$0.8 million is budgeted for 1998.

In-mine target exploration at the Round Mountain mine (25% owned by
Homestake) expanded in 1997, and Homestake's share of expenditures was US$0.5
million. A similar level of expenditures is planned for 1998.

At the Homestake mine, exploration for new targets within the mine has
resumed, and two areas of prospective iron formation have been selected for test
drilling. Total expenditures for new target testing and in-mine resource
drilling in 1997 were US$1.9 million. Planned expenditures for 1998 are US$1.1
million.

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<PAGE> 105

INTERNATIONAL

Homestake conducts gold exploration in a number of countries outside of the
United States. International exploration expenses totaled approximately US$34.5
million in 1997 and US$33.5 million in 1996, and US$24.9 million of expenditures
are planned for 1998.

In Canada, Homestake's exploration is conducted jointly with Prime
(Homestake 51%, Prime 49%) under an agreement that extends through 1998. This
agreement covers all of Canada except for areas of interest surrounding current
operating mines and some pre-agreement exploration properties.

At Eskay Creek, surface and in-mine target drilling in 1997 discovered
additional mineralization lateral to both the 21B and 21C zones. At the northern
end of the 21B orebody, two down-plunge exploration holes encountered
significant gold intercepts. These intercepts will be followed up with future
underground drilling. In mid-1997 an exploration agreement was signed on the
Corey property, located 8 miles south of the Eskay Creek mine and covering
similar geology. The 1997 exploration program for the Eskay Creek district
totaled US$3.6 million, and 1998 expenditures are budgeted at US$3.5 million.

Homestake explores for gold in several geologic belts in the Andes, with
emphasis on northern Chile, northern Argentina and central Peru. In Chile, gold
production commenced in 1997 from the oxide portion of the Jeronimo deposit on
the Agua de la Falda property. Drilling and metallurgical testing continues on
the much larger, refractory portion of the Jeronimo deposit where, to date,
approximately 15 million tons of unoxidized mineralized material, at an average
grade of 0.16 ounces of gold per ton, has been outlined. Metallurgical testwork
is underway to develop an economic treatment method. Drill testing of several
other targets is ongoing. Exploration expenditures on the property were US$2.0
million in 1997 and are budgeted to be similar in 1998.

In the northern part of South America, exploration in Venezuela and French
Guiana has been disappointing. In northern Brazil, a large land package has been
acquired in a poorly explored gold belt and this will be Homestake's exploration
focus for 1998. Total exploration expenditures for the northern part of South
America were US$8.4 million in 1997 and are budgeted to decrease to US$2.2
million in 1998.

Homestake explores for gold in several areas of Australia, with an emphasis
on the Yilgarn area of Western Australia. During 1997, a discovery of
poly-metallic mineralization was made at the Kundip Project in the southern part
of Western Australia. The project is at an early stage and several additional
targets are being prepared for ongoing drill testing. Exploration expenditures
in Australia, including Homestake's 50% share of exploration expenditures at
Kalgoorlie, were US$8.7 million in 1997 and are budgeted at US$6.7 million for
1998.

During 1997, Homestake significantly increased its involvement and
commitment in Eastern Europe. Homestake acquired a 32% interest in Navan's
Bulgarian exploration concessions for US$4 million. Over the next three years,
Homestake will fund US$4 million of exploration expenditures and will then hold
a 50% position and will be operator of the Bulgarian exploration program.
Homestake is also exploring several concessions in western Poland with FX Energy
Inc. and investigating other properties in Hungary and Romania. Expenditures
were US$1.4 million in 1997 and are budgeted to increase to US$4.2 million in
1998.

INFORMATION ON RESERVES

GOLD

The proven and probable gold ore reserves stated in this report reflect
estimated quantities and grades of gold in in-situ deposits and in stockpiles of
mined material that Homestake believes can be recovered and sold at prices
sufficient to recover the estimated future cash costs of production and
remaining investment. The estimates of cash costs of production are based on
current and projected costs. Estimated mining dilution has been factored into
the reserve calculation. The Company used a price of US$325 per ounce of gold in
its mine-by-mine evaluation of short-lived properties and a price of US$350 per
ounce of gold for its other gold mining properties at December 31, 1997. The
Company used a price of US$375 per ounce of gold in calculating reserves at
December 31, 1996.

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SILVER

The proven and probable silver ore reserves have been calculated on the
same basis as gold ore reserves and were based on a spot price of US$5 per ounce
of silver in 1996 and 1997.

SULFUR

Homestake's proven sulfur reserves represent the quantity of sulfur in the
Main Pass 299 deposit for which geological, engineering and marketing data give
reasonable assurance of recovery and sale under projected economic and operating
conditions. As noted above, in the third quarter of 1997, the Company wrote down
its investment in the Main Pass 299 sulfur assets to zero.

OIL

Homestake's proved oil reserves at Main Pass 299 are the estimated quantity
of crude oil and condensate which geological and engineering data give
reasonable assurance of recovery and sale under projected operating conditions
at prices sufficient to cover the estimated future cash costs of production and
the remaining investment. The estimate is based on limited reservoir and
engineering data.

ESTIMATION OF RESERVES

Gold and silver reserves are estimated for each of the properties operated
by Homestake based upon factors relevant to each deposit. Gold ore reserves for
those properties not operated by Homestake are based on reserve information
provided to Homestake by the operator. Homestake has reviewed but has not
independently confirmed the information provided by these operators.

The sulfur and oil reserves at Main Pass 299 are based on information
provided by the operator. Homestake reviewed the initial reserve data with
independent consultants. Homestake has reviewed subsequent adjustments to these
reserves but has not independently confirmed the reserve adjustments provided by
the operator.

OTHER INFORMATION

Ore reserves are reported as general indicators of the life of mineral
deposits. Changes in reserves generally reflect (i) efforts to develop
additional reserves; (ii) depletion of existing reserves through production;
(iii) actual mining experience; and (iv) price forecasts. Grades of ore actually
processed from time to time may be different from stated reserve grades because
of geologic variation in different areas mined, mining dilution, losses in
processing and other factors. Recovery rates vary with the metallurgical and
other characteristics and grade of ore processed.

Neither reserves nor projections of future operations should be interpreted
as assurances of the economic life of mineral deposits or of the profitability
of future operations.

ENVIRONMENTAL MATTERS

GENERAL

Homestake has a policy of conducting extensive environmental audits of its
operations in order to minimize the impact of its operations on the environment
and to monitor compliance with applicable environmental laws and regulations. A
committee of the Homestake Board oversees the establishment and implementation
of environmental policy. Environmental audits have been conducted on all of
Homestake's operations within the last three years.

Homestake has made significant capital expenditures to minimize the effects
of its operations on the environment. Capital expenditures primarily are for the
purchase or development of environmental monitoring equipment and containment of
tailings and waste rock. In 1997, these expenditures totaled approximately US$18
million compared to US$7 million in 1996. Homestake estimates that during 1998
capital expenditures for such purposes will be approximately US$7 million and
that during the five years ending December 31, 2002 such capital expenditures
will be approximately US$20 million.

Homestake also incurs significant operating costs in order to protect the
environment. Operating costs include current reclamation costs, costs for
environmental monitoring and studies to identify and quantify

S-76
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environmental impacts, if any, and accruals for future reclamation expenditures.
Such additional costs totaled approximately US$28 million in 1997, compared with
approximately US$17 million in 1996, not including related depreciation expense
of US$2 million and US$3 million, respectively. Homestake estimates that
environmental and related operating and depreciation costs in 1998 will be
approximately US$16 million and US$3 million, respectively. The above amounts
exclude expenditures related to the Company's discontinued uranium operations.

Under applicable law and the terms of permits under which Homestake
operates, Homestake is required to reclaim land disturbed by its operations. In
the mining industry, most reclamation work takes place after mining and related
operations terminate. With respect to nonoperating properties, Homestake
believes that it has fully provided for all remediation liabilities and for
estimated reclamation and site restoration costs. Homestake's provisions are
evaluated regularly and adjusted when necessary. At September 30, 1997, the
Company determined that it was necessary to increase the reclamation accruals at
certain of its nonoperating properties including the Sante Fe mine in Nevada,
the Nickel Plate mine in Canada and the Grants uranium complex in New Mexico to
reflect revised estimates, changed conditions and more stringent future
reclamation requirements. Accordingly, a charge of US$29.1 million was recorded
at that time. Homestake charges reclamation costs incurred in connection with
its exploration activities as expenses in the year in which incurred. For mining
operations, Homestake provides for final reclamation on a units-of-production
basis over the individual operating mine lives. In addition, Homestake has
adopted a policy of conducting reclamation concurrently with mining operations
where practical. As a result, an increasing amount of reclamation is being
conducted simultaneously with mining. At December 31, 1997 and 1996, Homestake
had accrued a total of US$83 million and US$55.4 million, respectively, for
future reclamation and related costs.

Homestake's operations are conducted under permits issued by regulatory
agencies. Many permits require periodic renewal or review of their conditions.
Homestake cannot predict whether it will be able to renew such permits or
whether material changes in permit conditions will be imposed.

RCRA

The United States Environmental Protection Agency ("EPA") has not yet
issued final regulations for management of mining wastes under the United States
Resource Conservation and Recovery Act ("RCRA"). The ultimate effects and costs
of compliance with RCRA cannot be estimated at this time.

CERCLA

The United States Comprehensive Environmental Response, Compensation and
Liability Act of 1980 ("CERCLA") imposes heavy liabilities on any person who is
responsible for an actual or threatened release of any hazardous substance,
including liability for oversight costs incurred by the EPA. Legislative
proposals and congressional hearings for CERCLA reauthorization have occurred in
1994 through 1997. CERCLA reauthorization is expected to be enacted in 1998.

WHITEWOOD CREEK

Mining companies operating in the Black Hills of South Dakota, including
Homestake, placed mine tailings in Whitewood Creek in Western South Dakota
beginning in the nineteenth century. Some tailings placed in Whitewood Creek
eventually flowed into the Belle Fourche River, the Cheyenne River and
downstream therefrom. Placement of mine tailings into Whitewood Creek was
authorized by the laws of the United States, the Dakota territory and the State
of South Dakota, and Whitewood Creek was later specifically designated by the
State of South Dakota as a disposal stream for mine tailings and for the
disposal of raw sewage and other municipal waste. Consequently, all mine
tailings placed by Homestake in Whitewood Creek were placed there with the
consent and encouragement of the State of South Dakota and the United States
government and in compliance with applicable laws. In response to changes in
legal requirements, Homestake ceased the placement of mine tailings into
Whitewood Creek in 1977 and for more than 20 years the Homestake mine has
impounded all mine tailings that are not redeposited in the mine.

In 1983, the United States EPA designated an 18-mile stretch of Whitewood
Creek and adjacent land as a superfund site and placed it on the National
Priorities List ("NPL") under CERCLA. The EPA asserted that the discharges of
tailings by mining companies, including Homestake, contaminated the soil and
stream
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<PAGE> 108

bed. During the period from 1982 through 1990, extensive studies of the
superfund site were conducted at Homestake's expense to identify any public
health and environmental issues related to the site and appropriate remedial
action. In August 1990, Homestake signed a consent decree with the United States
Environmental Protection Agency ("EPA") in United States of America v. Homestake
Mining Company of California, U.S. Dist. Ct., W.D.S.D., Civ. Action No. 90-5101.
Under the consent decree, Homestake conducted remedial work at its expense and
also reimbursed the EPA for its oversight costs. Remedial field work was
completed in 1993. The decree also provided for the three counties in which the
property is located to enact institutional controls which would limit the future
use of the property included within the area of the superfund site.
Institutional controls were adopted in all three counties. In addition,
Homestake offered to purchase all properties along Whitewood Creek that were
affected by the institutional controls. Approximately US$3 million has been
spent to date to acquire property along Whitewood Creek and the Company
estimates that the total cost for purchasing all of the remaining affected
property would be an additional US$3 million. These costs are expensed as and
when incurred.

The consent decree was terminated by the court on January 10, 1996. The
Whitewood Creek site was deleted from the NPL on August 13, 1996. In the
deletion notice, the EPA stated that "EPA, in consultation with the State of
South Dakota, have determined that the Site poses no significant threat to
public health or the environment." Whitewood Creek now supports a thriving trout
fishery and the adjacent area provides significant wildlife habitat for a number
of species, as well as water and grazing for cattle and other farm animals.

In July 1997, Homestake received a letter from the United States Fish and
Wildlife Service and the Cheyenne River Sioux Tribe stating that the Department
of the Interior intended to file suit against Homestake to recover alleged
natural resource damages and assessment costs under CERCLA and the Clean Water
Act with respect to alleged releases of hazardous substances at Whitewood Creek
in South Dakota. HMCC agreed to a limited waiver of statutes of limitations
until November 25, 1997 to facilitate settlement discussion.

On September 25, 1997 the State of South Dakota filed an action against
Homestake, State of South Dakota v. Homestake Mining Company of California, U.S.
Dist. Ct., W.D.S.D., Civ. Action No. 97-5078. The action relates to the same
general matter which is the subject of the above referenced letter -- placement
of mine tailings in Whitewood Creek. In the complaint, the State of South Dakota
alleged that HMCC disposed of mine tailings in Whitewood Creek and that such
disposal resulted in injuries to natural resources in Whitewood Creek and
downstream in the Belle Fourche River, the Cheyenne River and Lake Oahe on the
Missouri River (the "NRD Site"). The complaint also alleged that the State of
South Dakota incurred assessment costs. The State of South Dakota claims that it
is a trustee authorized under CERCLA to bring such action. The complaint also
contained a pendent state law claim, alleging that the tailings placed in
Whitewood Creek constitute a continuing public nuisance in and around the NRD
Site downstream from Whitewood Creek. The complaint asks for abatement of the
nuisance, damages in an unascertained amount, costs and interest.

In its answer to the state complaint, Homestake denied that there has been
any continuing damage to natural resources or nuisance caused by Homestake as a
result of the placement of tailings in Whitewood Creek. Among other defenses, it
is also the position of Homestake that as a result of the State of South
Dakota's ownership of Whitewood Creek and designation of Whitewood Creek as an
authorized disposal site under state authority, the State of South Dakota was
and is the owner and operator of the waste disposal facility and is responsible
for all past and future damages and any continuing nuisance resulting therefrom.
Homestake has also counterclaimed against the State of South Dakota seeking cost
recoupment, contribution and indemnity from the State of South Dakota, in its
capacity as an owner and operator of a disposal facility, for expenses
previously incurred and to be incurred in the future with respect to Whitewood
Creek and downstream areas.

On November 25, 1997, the United States government and the Cheyenne River
Sioux Tribe (the "Federal Trustees") filed an action against HMCC, United States
of America et al. v. Homestake Mining Company of California, U.S. Dist. Ct,
W.D.S.D., Civ. Action No. 97-5100. This action relates to the matters referenced
in the letter described above and which are the subject of the federal cause of
action brought by the

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State of South Dakota, described above, with respect to the NRD Site. The
complaint seeks response costs and damages in unspecified amounts, costs and
attorneys fees.

In its answer to the complaint by the Federal Trustees, Homestake denied
that there has been any continuing damage to natural resources. Among other
defenses, it is also the position of Homestake that the United States government
approved and authorized deposit of tailings in Whitewood Creek, including
designation of Whitewood Creek as a disposal site under federal authority, and
is therefore responsible for any past and future damages, and that the matters
at issue have been previously litigated and are the subject of a prior final
judgment between Homestake and the United States government. Homestake has also
counterclaimed against the Federal Trustees seeking cost recoupment,
contribution and indemnity.

HMCC intends to vigorously defend these actions and to seek cost
recoupment, contribution and indemnity from the State of South Dakota, federal,
state and other government entities and agencies, and other persons who
participated in ownership and/or operation or otherwise encouraged use of
Whitewood Creek as a waste disposal site, who disposed of waste in Whitewood
Creek or its receiving waters, or who have owned property or otherwise conducted
activities which may have contributed to any alleged damage in the NRD Site.

In the opinion of the Company, there is no basis for the claims by the
State of South Dakota or by the federal government and the Cheyenne River Sioux
Tribe. The Company is also of the opinion that Homestake has valid defenses and
counterclaims against the State of South Dakota, the United States government
and the Cheyenne River Sioux Tribe, as well as potential counterclaims and
crossclaims against other governmental entities and agencies, and other persons
who participated in ownership and/or operation or otherwise encouraged use of
Whitewood Creek as a waste disposal site, who disposed of waste in the NRD Site,
or who have owned property or otherwise conducted activity within the NRD Site
which may have contributed to any alleged damage. The Company does not believe
that resolution of these matters will have a material adverse effect on the
business or financial condition or results of operations of the Company.

GRANTS TAILINGS

Homestake's closed uranium mill site near Grants, New Mexico is listed on
the NPL. The EPA asserted that leachate from the tailings contaminated a shallow
aquifer used by some of the residents in adjacent residential subdivisions.
Homestake paid the cost of extending the municipal water supply to the
subdivisions. Homestake also has operated a water injection and collection
system since 1976 that has significantly improved the quality of the aquifer.
The estimated costs of continued remediation are included in the accrued
reclamation liability. Homestake has settled with the EPA concerning its
oversight costs for this site and no additional oversight costs are accruing.
Homestake signed a Consent Decree with the EPA related to the ground water
issues and an Administrative Order on Consent ("AOC") for radon studies of the
adjacent subdivisions. The radon studies in the subdivisions determined that
there was no contamination or impact. The work required by the Consent Decree
and AOC has been completed and both have been terminated.

Under Nuclear Regulatory Commission ("NRC") regulations, the
decommissioning of the uranium mill tailings facilities is in accordance with
the provisions of the facility's license. The facility license sets the closure
of the two tailings impoundments as 2004 and 2013, subject to extension under
certain circumstances. The NRC and EPA signed a Memorandum of Understanding in
1993 which has established the NRC as the oversight and enforcement agency for
decommissioning and reclamation of the site. Mill decommissioning was completed
in 1994 and final closure of the Grants large tailings site is scheduled for
completion in 2003. During 1997, the Company incurred approximately US$3 million
of reclamation expenditures at the Grant's facility and an additional US$3.7
million is planned to be expended during 1998.

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<PAGE> 110

received US$21.1 million from the DOE and the accompanying balance sheet at
December 31, 1997 includes an additional receivable of US$10.9 million for the
DOE's share of reclamation expenditures made by the Company through 1997. The
Company believes that its share of the estimated remaining cost of reclaiming
the Grants facility is fully provided in the financial statements at December
31, 1997.

In 1983, the State of New Mexico filed claims against Homestake for natural
resource damages resulting from the Grants site. The State has taken no action
to pursue the claims.

LEAD

Prior to May 1986, Homestake Lead Company of Missouri ("HLCM"), a
wholly-owned subsidiary of the Company, was a joint venturer and partner with
subsidiaries of AMAX, Inc. ("AMAX") in the production of lead metal and lead
concentrates in Missouri. In May 1986, HLCM acquired AMAX's interest in the
Missouri facilities and operations and agreed to assume certain limited
liabilities of AMAX in connection with the Missouri facilities. In June 1991,
HLCM and AMAX were notified of a potential claim by the Jackson County,
Mississippi Port Authority for contamination of soil and water alleged to have
resulted from storage and shipment of lead dross at the Port of Pascagoula prior
to May 1986. Since that time, a number of other lead producers and former lead
producers have also been so notified. The Port of Pascagoula is taking primary
responsibility for conducting an investigation of the site, but the Port of
Pascagoula also has made claims for reimbursement against customers whose
material was stored at and shipped through the site. As a result of subsequent
investigations conducted by the Company and others, the Company believes that
most of the material at the Pascagoula site, as well as the material primarily
responsible for any contamination, is lead concentrate. Based on a review of
shipping records to date, less than half of the lead concentrate shipped through
the Port of Pascagoula was produced and sold for the account of the Company. The
State of Mississippi Department of Environmental Quality is, through regulatory
oversight, reviewing the investigation efforts and remediation plans that are
being developed by the Port Authority. Based on information currently available,
the Company believes the remediation costs should not exceed US$1 million. The
Company's position is that the Port is primarily responsible for the cost of
remediation as owner of the property and as lessor with the ability to control
the activities of the stevedoring company, and also because the Port contributed
to the contamination by moving stored material from a storage building and
depositing it on the ground. The Company believes that any future costs it may
incur in connection with this matter will not be material.

FOREIGN OPERATIONS

Homestake believes that its foreign operations comply with applicable laws,
regulations and permit conditions and has no knowledge of any significant
environmental liability or contingent liability resulting from its foreign
operations. Homestake expects that environmental constraints in foreign
countries will become increasingly strict.

CUSTOMERS

Sales to individual customers exceeding 10% of Homestake's consolidated
revenues are stated below. Homestake believes that the loss of any of these
customers would not have a material adverse impact on Homestake because of the
active worldwide market for gold.

<TABLE>
<CAPTION>
1997 1996
-------- --------
(US$ IN THOUSANDS)
<S> <C> <C> <C>
Customer A......................................... $143,000 $117,000
B......................................... 100,000 129,000
C......................................... 80,000 --
D......................................... 77,000
E......................................... 77,000
</TABLE>

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EMPLOYEES

The number of full-time employees at December 31, 1997 of Homestake and its
subsidiaries was:

<TABLE>
<S> <C>
Homestake mine(1)........................................... 871
McLaughlin mine............................................. 109
Ruby Hill mine.............................................. 87
Nickel Plate mine........................................... 12
Eskay Creek mine............................................ 89
Snip mine................................................... 183
Agua de la Falda mine(1).................................... 47
United States corporate staff and other..................... 82
Canada exploration and corporate staff...................... 34
HGAL exploration and corporate staff........................ 22
United States exploration................................... 25
Uranium..................................................... 8
Chile exploration and corporate staff....................... 16
-----
Total............................................. 1,585
</TABLE>

The number of full-time employees (excluding contractors' employees) at
December 31, 1997 in jointly-owned operations in which Homestake participates
was:

<TABLE>
<S> <C>
Kalgoorlie Consolidated Gold Mines Pty Ltd(1)............... 512
Williams Operating Corporation.............................. 604
Round Mountain mine......................................... 673
Teck-Corona Operating Corporation(1)........................ 246
Pinson Mining Company....................................... 109
Marigold Mining Company..................................... 89
Main Pass 299............................................... 144
-----
Total............................................. 2,377
</TABLE>

- ---------------

(1) Operations where a portion of the employees are represented by a labor
union.

As a result of the reorganization of the Homestake mine operation described
above, employment at the Homestake mine is expected to be reduced by more than
50%.

Labor relations at all locations are believed to be good. The union
contracts at Lead and David Bell will expire in May 1998 and October 1998,
respectively. Negotiations for a new contract at Lead commenced during the first
quarter of 1998. The negotiations at Lead involve a number of matters that arise
as a result of the restructuring of the operation and the reduction of work
force.

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<PAGE> 112

LEGAL PROCEEDINGS

Certain environmental proceedings in which the Company is or may become a
party are discussed under the caption "Environmental Matters."

In October 1997, Homestake and Prime entered into an agreement with Inmet
Mining Corporation ("Inmet") to purchase (Homestake as to 51% and Prime as to
49%) the Troilus mine in Quebec for US$110 million plus working capital. In
December 1997, Homestake and Prime terminated the agreement after determining
that, on the basis of due diligence studies, conditions to closing the
transaction would not be satisfied. On February 23, 1998, Inmet commenced
litigation against Prime and Homestake in the Supreme Court of British Columbia,
disputing the termination of the agreement, and alleging that Prime and
Homestake had breached the agreement. Inmet seeks specific performance or, in
the alternative, equitable damages. Homestake believes that the agreement with
Inmet was terminated properly by Prime and Homestake and that the action by
Inmet is without merit. Homestake intends to defend this action vigorously.

The Company and its subsidiaries are defendants in various legal actions in
the ordinary course of business. In the opinion of management, such matters will
be resolved without material adverse effect on the Company's financial
condition, results of operations or cash flow.

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PLUTONIC RESOURCES LIMITED

BACKGROUND

Plutonic Resources Limited was incorporated as Noranda Limited in Victoria
in 1984 and listed on the Australian Associated Stock Exchange in August 1985.
It transferred its incorporation to New South Wales in 1990. In this document,
the term "Plutonic" refers to Plutonic Resources Limited and its subsidiaries.

In 1989 Plutonic acquired the Plutonic property in Western Australia
following discovery of the gold deposit in 1988. It subsequently explored,
developed and constructed its first mine, the Plutonic Gold Mine, which
commenced production in August 1990. The mine produced its millionth ounce in
1996 and is one of the larger gold mines in Australia based on annual
production.

Plutonic has interests in five gold mines in Western Australia, namely
Plutonic (100%), Darlot/Centenary (100%), Lawlers (100%), Mt Morgans (80%) and
Peak Hill (66.67%), and has exploration interests in Western Australia,
Queensland, New South Wales, Victoria and Tasmania. Total production
attributable to Plutonic from those mines in 1997 was approximately 550,000
ounces. Plutonic has an interest in base metals exploration through its 62%
interest in Lachlan Resources NL ("Lachlan"). Lachlan's exploration, evaluation
and development efforts are concentrated on polymetallic base metal deposits
principally at Balcooma in Queensland and at the Mt Goode nickel prospect near
Plutonic's Bellevue Gold Mine in Western Australia. Maps showing the locations
of the Plutonic operating properties are contained in Exhibit H.

Plutonic has adopted a gold hedging strategy with the dual objectives of
supporting the long term viability of its mining and exploration activities and
providing shareholders with the opportunity to benefit from future gold price
increases. Plutonic's current policy is to limit forward sales transactions to
the lesser of 1.75 million ounces or 100% of reserves. Plutonic has considerable
mineralised material which it expects to provide future gold production.
Plutonic's average realised selling prices were A$597 per ounce for 1996 and
A$568 per ounce for 1997. At December 1997 Plutonic had 1.227 million ounces of
gold sold forward with the following delivery dates and prices, at an average
future price of A$507.

<TABLE>
<CAPTION>
HEDGING COMMITMENTS -- 31 DECEMBER 1997
- ----------------------------------------------
YEARS CONTRACTS OZ FUTURE PRICE
- --------- ------------- ------ ------------
('000) ($A/OZ)
<S> <C> <C> <C>
1998 Spot Deferred 745 459
Fixed Forward 200 575
----- ---
945 484
1999 Fixed Forward 82 649
2000 Fixed Forward 25 526
2001/2005 Fixed Forward 175 562
----- ---
Total 1,227 507
----- ---
</TABLE>

The mark-to-market value of the contracts at 31 December 1997 was A$47.2
million.

As the December 1997 hedging commitment of 1.227 million ounces represents
a modest percentage of the Plutonic's reserves and mineralised material there is
scope to take advantage of any future improvement in the gold price.

At 31 December 1997 Plutonic's reserves totalled 2.49 million ounces of
gold. Total attributable mineralised material at Plutonic's mines was 34.7
million tons at 0.2 ounces of gold per ton.

The Plutonic Board has given approval for management to undertake a limited
hedging/option strategy in respect of US currency/gold deliveries and domestic
interest rates. Apart from a total of US$20 million hedged, no other hedging in
respect of this strategy was outstanding at 31 December 1997.

S-83
<PAGE> 114

SIGNIFICANT RECENT DEVELOPMENTS

On 30 April 1997, Plutonic closed the Bellevue Gold Mine. In the third
quarter 1997, Plutonic suspended all underground mine development activity at
the Mt Morgans Gold Mine and stated that future production would be derived from
developed stoping blocks and existing ore stockpiles.

On 23 June 1997, a formal agreement for an A$400 million syndicated debt
facility was executed by Plutonic and a syndicate of banks including ABN AMRO
Australia Limited, The Chase Manhattan Bank and Credit Suisse First Boston. The
facility comprises of an A$115 million one year standby facility and an A$285
million 5 year term facility. At 31 December 1997 an amount of A$170 million was
outstanding under the A$285 million term facility.

At 30 June 1997, Plutonic wrote down the carrying value of mining assets
and investments by A$93.3 million (after tax, A$71.2 million). This action was
taken in light of the continued weak gold price and its impact on the operations
including the high cost Mt Morgans mine and the declining Peak Hill mine. In
making the determination, Plutonic used a price of A$450 per ounce in the
evaluation.

In September 1997, the decline access to the Centenary orebody intersected
ore at a depth of 350 metres. The first development ore was processed through
the existing Darlot treatment plant. Development expenditure on Centenary in
1997 amounted to approximately A$12 million.

At the Plutonic Gold Mine, during the third quarter 1997, after almost two
years of development, two declines entered Zone 124 at approximately 400 to 450
metres depth. Development on ore of Zone 124, the principal underground ore
zone, commenced immediately. Mine development capital expenditure during 1997,
including the West Decline and Zone 550 Decline, totalled approximately A$30.7
million.

In September 1997, a new 19MW gas-fired power station was put into
operation at the Plutonic Gold Mine at a projected cost of A$21.7 million. Gas
is drawn from the Goldfields Gas Transmission pipeline via a 20 kilometre
lateral line.

In July 1996, Plutonic sold a right to cancel its option to acquire shares
of Great Central Mines Limited to Edensor Nominees Pty Ltd ("Edensor"). In
August 1997, Edensor exercised its right to cancel the option by paying Plutonic
a cancellation payment of A$8.5 million and repaying a A$50 million loan.
Between July 1996 and August 1997 Plutonic received additional payments of
A$11.5 million in respect of the right to cancel the option. On 6 November 1997,
Plutonic, in response to a takeover bid for Wiluna Mines Limited, sold its 19.9%
holding in that company for approximately A$24 million.

On 17 December 1997, a new reserve estimate for the Centenary Deposit of
1.4 million contained ounces of gold was announced. The reserve estimate at 31
December 1996 was 284,000 contained ounces.

Plutonic has a 45% interest in the Coronation Hill Joint Venture which owns
mineral leases and exploration tenements in the Northern Territory. On 24 June
1991 the Australian Federal Government (the "Federal Government") issued a
Proclamation incorporating the Conservation Zone in Kakadu National Park and
thereby prohibited mining of Plutonic's Coronation Hill gold, platinum and
palladium deposit and exploration -- and potentially mining -- of Plutonic's
other mineral tenements in the highly prospective Conservation Zone. The Joint
Venturers received no compensation and sought a ruling from the High Court of
Australia that the Federal Government's proclamation in June 1991 of Stage III
of Kakadu National Park was invalid.

On 14 August 1997 the High Court of Australia handed down its decision
regarding the purported acquisition of mining leases at Coronation Hill by the
Federal Government. The Court found that, with two exceptions, the leases had
not been validly acquired by the Federal Government and that they continue to
exist. If they are to be validly acquired by the Federal Government then just
compensation will be payable. The Coronation Hill Joint Venturers (Plutonic 45%,
Newcrest Mining Limited 45% and North Limited 10%) are now considering what
options are available to them in relation to all leases. Any claims, including
claims for compensation, will be a matter for further action by the Joint
Venturers. Plutonic has, in previous years' accounts, written off all its
expenditure on Coronation Hill.

In September 1997, Plutonic announced its intention to reduce its
shareholding in Lachlan to no more than 15% by the distribution of its Lachlan
shares to Plutonic Shareholders. At the same time it was

S-84
<PAGE> 115

announced that Lachlan would repay a A$50.9 million loan (including capitalized
interest) owed by it to Plutonic through either an underwritten rights issue or
a placement to a Plutonic group company at A$0.30 per share. The loan had
earlier been made to Lachlan to fund its cash takeover bid for Archaean Gold NL.
Immediately preceding the bid Lachlan and Plutonic entered into a
subunderwriting agreement pursuant to which Plutonic agreed to subunderwrite a
rights issue of Lachlan shares. Following the announcement of the proposed
Combination, Plutonic announced on 29 December 1997 that it did not intend to
proceed with the proposed distribution of shares in Lachlan to Plutonic
Shareholders. On 27 March 1998, Plutonic and Lachlan agreed that Lachlan must
determine a course of action for repaying the loan by 31 May 1998.

STATISTICAL SUMMARY

The information in the following tables is a summary of material 1997 and
1996 statistical information regarding ownership of mines, production costs,
reserves and mineralised material for Plutonic's significant properties. The
statistical information included in the tables is derived from studies, analyses
and other information prepared by or for, or available to, Plutonic.

In Australia, Plutonic reports in accordance with the JORC Code. A
description of the differences between the SEC requirements and the JORC Code is
contained in Appendix E to this Document. Information in this statistical
summary with respect to reserves and mineralized material for Plutonic has been
prepared in accordance with the JORC Code but is presented in this statistical
summary in accordance with SEC presentation requirements. Plutonic believes that
its reserve estimates (reported in ounces in this Document) are approximately
the same as those that would result from the application of the SEC definitions
and requirements with respect to reserves. Plutonic's estimates of mineralized
material for purposes of this Document are Plutonic's resources less the portion
of resources from which reserves have been derived, and reported in tons and
grade. Plutonic believes that the estimates are approximately the same as would
result from the application of the SEC definitions and requirements with respect
to mineralized material. While the tons and grades of mineralized material shown
include some mineralized material that is classified as an "Inferred Mineral
Resource" under the JORC Code, such tonnages and grades pertain only to those
areas where drill holes have been appropriately drilled at closer spacing on
grids that conform with the mineralized material definition as prescribed by the
SEC, and where historical experience with the ore bodies provides an increased
confidence level with respect to the mineralized material.

Production Summary 1997

<TABLE>
<CAPTION>
ATTRIBUTABLE GOLD PRODUCTION(1) PRODUCTION COSTS PER
....................................... OUNCE
TONS ..................
INTEREST PROCESSED GRADE RECOVERY OUNCES OPERATING NON
% (MILLIONS) (OZ/TON) % PRODUCED CASH(2) CASH(3)
-------- ---------- -------- -------- -------- --------- --------
($A/OZ) ($A/OZ)
<S> <C> <C> <C> <C> <C> <C> <C>
Plutonic........................... 100 3.4 0.094 88 274,608 337 80
Darlot/Centenary................... 100 0.6 0.114 95 65,153 427 88
Lawlers............................ 100 0.5 0.178 96 87,481 353 53
Mt Morgans......................... 80 1.0 0.093 88 73,588 479 85
Peak Hill.......................... 66.67 0.7 0.069 97 33,104 390 134
Bellevue........................... 100 0.1 0.210 90 14,441
Total Production 548,375 373(4)
</TABLE>

S-85
<PAGE> 116

Production Summary 1996

<TABLE>
<CAPTION>
ATTRIBUTABLE GOLD PRODUCTION(1) PRODUCTION COSTS PER
....................................... OUNCE
TONS ..................
INTEREST PROCESSED GRADE RECOVERY OUNCES OPERATING NON
% (MILLIONS) (OZ/TON) % PRODUCED CASH(2) CASH(3)
-------- ---------- -------- -------- -------- --------- --------
($A/OZ) ($A/OZ)
<S> <C> <C> <C> <C> <C> <C> <C>
Plutonic........................... 100 2.2 0.105 80 183,691 373 56
Darlot/Centenary................... 100 0.6 0.120 95 62,757 448 71
Lawlers............................ 100 0.7 0.082 90 50,603 553 48
Mt Morgans......................... 80 1.0 0.088 92 75,067 491 120
Peak Hill.......................... 66.67 0.8 0.117 98 60,380 209 194
Bellevue........................... 100 0.2 0.082 89 17,313
Total Production................... 449,811 403(4)
</TABLE>

- ---------------

(1) Production is Plutonic's share

(2) Cash operating costs are costs directly related to the physical activities
of producing gold and include all expenditures incurred for mining
operations adjusted for costs attributable to stockpile movements and
current pre-stripping, but exclude exploration, finance and corporate
expenses. No government royalties are currently applicable to Plutonic's
production. A minor private royalty payable on portion of the Plutonic Gold
Mine production is not included in cash operating costs.

(3) Non cash costs are depreciation and amortisation of acquisition cost of the
property and exclude any abnormal charges related to writedowns of mining
assets.

(4) Cash operating costs exclude Bellevue.

Reserves and Mineralised Material Attributable to Plutonic at 31 December
1997

<TABLE>
<CAPTION>
RESERVES
------------------------------------- MINERALISED MATERIAL
CONTAINED ----------------------
INTEREST TONS GRADE OUNCES TONS GRADE
% (MILLIONS) (OZ/TON) (THOUSANDS) (MILLIONS) (OZ/TON)
-------- ---------- -------- ----------- ---------- --------
<S> <C> <C> <C> <C> <C> <C>
Plutonic...................... 100 5.2 0.108 567 26.7 0.222
Darlot/Centenary.............. 100 9.4 0.163 1,556 4.0 0.123
Lawlers....................... 100 1.9 0.134 252 3.8 0.117
Mt Morgans.................... 80 3.8 0.023 91
Peak Hill..................... 66.67 0.5 0.044 24
Bellevue...................... 100 0.01 0.14 2 0.2 0.35
Total......................... 20.81 0.118 2,492 34.7 0.200
</TABLE>

Reserves and Mineralised Material Attributable to Plutonic at 31 December
1996

<TABLE>
<CAPTION>
RESERVES
------------------------------------- MINERALISED MATERIAL
CONTAINED ----------------------
INTEREST TONS GRADE OUNCES TONS GRADE
% (MILLIONS) (OZ/TON) (THOUSANDS) (MILLIONS) (OZ/TON)
-------- ---------- -------- ----------- ---------- --------
<S> <C> <C> <C> <C> <C> <C>
Plutonic...................... 100 10.2 0.111 1,127 28.2 0.219
Darlot/Centenary.............. 100 3.3 0.143 468 8.5 0.169
Lawlers....................... 100 1.5 0.137 212 2.8 0.105
Mt Morgans.................... 80 5.1 0.047 245 1.0 0.114
Peak Hill..................... 66.67 1.2 0.053 65 1.6 0.073
Bellevue...................... 100 0.3 0.277 70 0.5 0.230
Total......................... 21.6 0.101 2,187 42.6 0.184
</TABLE>

S-86
<PAGE> 117

BUSINESS AND PROPERTY DESCRIPTION

Plutonic has interests in five operating gold mines, all located 650 to 900
kilometres north and north-east of Perth in Western Australia.

Plutonic Gold Mine

The Plutonic Gold Mine, 100% owned by Plutonic, is located 180 kilometres
north-east of Meekatharra, Western Australia, approximately 12 kilometres from
the Great Northern Highway. Tenement holdings (25 Mining Leases and two
Prospecting Licences) total 18,660 hectares. Plutonic also holds the Three
Rivers Pastoral Lease on which the mine is located.

The Main Pit and the underground workings are located on three mining
leases of a group of nine mining leases which are not subject to any
non-government royalty. However, 16 mining leases to the east of the Main Pit
which contain a relatively small proportion of the project's overall reserves
and mineralised material are subject to a royalty based on tonnage and grade.

The mine commenced production in August 1990 and is operated on a fly-in
fly-out basis by approximately 146 staff employees and 275 contractor personnel
working on a two weeks on and one week off roster. Underground mining is
performed by contractors with technical supervision and control provided by
Plutonic employees. All mining is by mechanised trackless systems.

The mine is being transformed from a large open pit to a large underground
operation. Initial underground development commenced early in 1995 and by the
end of 1997 some 30 kilometres of development had been completed as the mine
continued to expand rapidly. Capital expenditure of approximately A$32.5 million
during 1997 on mine development at Plutonic included three development declines,
one ventilation decline and underground pre-production. Underground production
for 1997 was approximately 0.5 million tonnes (0.55 million tons)of ore.

The Main Pit was the predominant ore source from the commencement of
operations until its depletion in December 1997. Primary ore is now sourced from
the underground operation and from extensive primary ore and laterite stockpiles
built-up as the Main Pit was mined. Oxide ore is derived from the Perch and
Salmon Pits located on the Freshwater tenements. A new laterite and oxide ore
pit at Area 4 is expected to commence in early 1998. Open pit mining with
selective mining techniques is undertaken by a mining contractor utilising one
100 tonne excavator and a fleet of 85 tonne trucks.

The underground mine consists of three main working areas, namely:

- North West Extension, including Zone 19

- North Decline/Ventilation Decline including Zone 124, Area 54 and Zone
61

- Zone 550

The North West Extension area is accessed via the West Decline. It
currently accesses 12 levels, 15 metres apart, from which ore is produced from
both development and uphole retreat open stoping. The decline portal is located
within the Main Pit approximately 80 metres below the natural surface. The lodes
typically dip at 45 degrees to 70 degrees, are 3 to 5 metres thick and have a
strike length of 30 to 100 metres. Stopes do not require filling. Typically five
to eight sub-parallel lodes are mined on each level. The current production rate
from the North West Extension area is approximately 0.5 million tonnes (0.55
million tons) per annum. Ore is hauled to the portal in 40 tonne rigid body
trucks and is transported from there to the crusher by the open pit contractor.

The North Decline and the Ventilation Decline provide access to Zone 61,
Area 54 and Zone 124. The North Decline commences from the West Decline
approximately 400 metres from the portal, while the Ventilation Decline has its
own portal within the Main Pit, some 110 metres below the natural surface.
Significant production commenced from the North Decline in late 1997 when it
reached the Area 54 orebodies. In-fill underground drilling and mine development
from both the North Decline and the Ventilation Decline confirm the presence of
continuous, high grade lodes amenable to flat dip room and pillar mining.
S-87
<PAGE> 118

The Zone 550 Decline commenced in mid-1996 from a 35 metre deep box-cut.
The decline had progressed to about 150 metres below surface by the end of 1997.
Initial ore development of the relatively small Zone 550 deposit has commenced
on two levels. Development has revealed geological complexities which suggest
the Zone 550 reserve (estimated at 134,000 ounces as at 31 December 1996) should
be downgraded. Although the extent of the downgrade cannot be determined
accurately until lower levels are developed, Zone 550 has been assigned no
reserve and mineralised material in the 31 December 1997 estimates of reserves
and mineralised material.

Geotechnical conditions in Zone 124 and Area 54 are such that mine fill
will not be required. At Zone 550, additional ground support has been necessary.

The Plutonic Gold Mine mineralisation consists of multiple discrete lodes
which makes definition of underground reserves by deep, close-spaced drilling
from surface prohibitively expensive. Extensive mineralised material has,
however, been defined by wide spaced surface drilling but detailed drilling from
underground development openings is required for conversion of the mineralised
material to reserves. Underground access to the 300-400m deep Zone 124, the
largest zone of mineralisation, was achieved by decline only in late 1997. A
portion of the underground mineralised material in Zone 124 is now the subject
of on-going drilling programmes which are planned to continue through 1998 and
beyond. Similar drilling programmes are planned for Zones 61 and 19.

The original treatment plant flowsheet was based on conventional primary
crushing, semi-autogenous (SAG) mill and ball mill grinding, leach and
adsorption tanks and a gold recovery section at a design throughput of 1.4
million tonnes (1.54 million tons) per annum. This approach was appropriate for
relatively soft oxide and laterite ore available at that time which was treated
at an actual rate of 1.8 million tonnes per annum. In 1994, the plant was
upgraded to treat 1.8 million tonnes (2.0 million tons) per annum of hard
primary ore with the addition of a new three stage crushing circuit, conversion
of the SAG mill to a ball mill and the installation of a third ball mill. A 14MW
diesel fired power station was installed as part of this upgrade. The plant has
consistently treated 1.85 million tonnes (2.0 million tons) per annum since this
upgrade was completed in October 1994.

Primary ore metallurgical performance is variable with recoveries in the
range of 75% to 90% depending on ore source and mineralogy.

Potable quality process water is sourced from two borefields with most
coming from a borefield, located some 12 kilometres from the mine.

In November 1996, the existing treatment facility was augmented with a
parallel facility with an annual capacity of 1.2 million tonnes (1.3 million
tons) of oxide ore. Total annual capacity is now approximately 3 million tonnes
(3.3 million tons). The augmentation plant consists of a SAG and ball mill
grinding circuit, leach and adsorption tanks and associated infrastructure.
Oxide ore metallurgical recovery is typically 95%.

In 1997, a gas-fired power station was put into operation on site at a
projected cost of A$21.7 million. Gas is provided via a 20 kilometre lateral
line from the Goldfields Gas Transmission pipeline. The gas station incorporates
four Wartsila 18V 34SG engines with a rated station capacity of 19MW. The move
to gas will provide power cost savings.

All plant and equipment is modern, well constructed and well maintained.

Production for 1997 of 274,608 ounces is an increase of 90,920 ounces over
the 1996 production of 183,688 ounces. The increased production is due primarily
to the first full year's operation of the augmentation plant for an increase of
64,339 ounces, with the balance due to the higher grades derived from the Main
Pit and the increasing production levels of high grade underground ore.

S-88
<PAGE> 119

YEAR-END PROVED AND PROBABLE ORE RESERVES

<TABLE>
<CAPTION>
1997 1996 1995
------- ------- -------
<S> <C> <C> <C> <C>
Tonnes of ore (000)................ 4,736 9,266 9,650
Grammes of gold per tonne.......... 3.7 3.8 4.5
Contained ounces of gold (000)..... 567 1,127.6 1,396.2
</TABLE>

OPERATING DATA

<TABLE>
<CAPTION>
1997 1996 1995
------- ------- -------
<S> <C> <C> <C> <C>
Total Volume Mined Open Pit........ (000bcm) 7,937 12,584 11,876
Underground Development............ (m) 16,709 9,961 4,477
Ore Mined.......................... (000t) 2,982 3,190 2,447
Ore Treated........................ (000t) 3,080 2,015 1,871
Ore Head Grade..................... (Au g/t) 3.2 3.6 3.2
Metallurgical Recovery............. (%) 87.7 80.1 85.3
Fine Gold Produced................. (000oz) 274.6 183.7 165.9
Cash Operating Cost
-- per tonne treated............. (A$/t) 30.02 34.01 28.20
(US$/t) 22.34 26.63 20.83
-- per fine ounce Produced....... (A$/oz) 337 373 318
(US$/oz) 251 292 235
</TABLE>

t = metric tonnes (one metric tonne = 1.1023 short tons), bcm = bank cubic
metres, g/t = grammes per tonne

Total Plutonic Gold Mine mineralised material as at 31 December 1997 was
estimated at 26.7 million tons at 0.222 ounces of gold per ton. Reserves at that
date were 567,000 contained ounces of gold.

GEOLOGY

Gold lodes occur predominantly within mafic volcanics in an Archaean
sequence of ultramafic volcanics, mafic volcanics and sediments. The sequence in
the immediate mine area consists of upper and lower ultramafic volcanic units
separated by a dominantly mafic volcanic unit. Gold mineralisation occurs within
multiple, sub-parallel, north-west striking lodes, which generally dip in a
north-east direction. The lodes are hosted mainly by the mafic volcanic unit.
Lodes range from one to ten metres thick and display good continuity often for
several hundred metres. Gold is associated with sulphides, particularly
arsenopyrite and pyrrhotite.

Exploration potential of the extensive property is high.

Waste dump slopes and tailings storage facility walls are rehabilitated on
an ongoing basis and as early as possible within an orderly mining operation.

Recently the mine was notified of non-compliance under four of its
Department of Environmental Protection ("DEP") licence conditions by the DEP.
The non-compliance areas have been rectified or are being addressed. Plutonic
does not consider the non-compliance to be material or the remediation to
involve material cost.

Darlot/Centenary Gold Project

The Darlot/Centenary Gold Project is located 110 kilometres north of
Leonora, Western Australia. Plutonic's property covers an extensive goldfield
discovered more than 100 years ago.

Modern mining, including development of the Darlot Pit, commenced in 1988.
The Pit was completed in 1995 and the mine is now an entirely underground
operation based on both the original Darlot orebody and the new Centenary
orebody.

S-89
<PAGE> 120

The mine is a fly-in fly-out operation with about 61 staff employees and
120 contractor personnel working a two weeks on and one week off roster.

The Darlot/Centenary Gold Mine Project encompasses an area of approximately
13,845 hectares, comprising of 16 mining leases, 32 prospecting licences and one
exploration licence. The tenements are held either 100% by Plutonic or in two
joint ventures. Darlot and Centenary orebodies are within a 100% owned Mining
Lease located on the Melrose Pastoral Lease which is held by Plutonic. With the
exception of a production royalty on M37/252 (which has no known reserves or
mineralised material), no non-government royalties are payable on production
from any Darlot tenement.

The Darlot and Centenary deposits are located within Mining Lease M37/155,
100% owned by Plutonic, which was granted in 1988 for a 21 year term and is
renewable.

Open pit operations were completed in 1995, with the Darlot lode adjacent
to the pit being subsequently accessed with a decline from the base of the pit.
The underground production rate is currently around 0.5 million tonnes (0.55
million tons) per annum.

Mining at Darlot utilises mechanised trackless equipment. Access is via a
decline from a portal in the Darlot Pit located approximately 115 metres below
the natural surface. During the second quarter 1996, the mine successfully
completed the transition to a full-scale underground operation. The workings now
extend to about 220 metres below the surface with mining taking place in about
four different sub-lode systems within the main Darlot structure.

Stoping of the Darlot lode is by a mixture of room and pillar mining in the
thinner sections of the deposit, generally using longhole blastholes, while
sub-level open stoping techniques are utilised in the thicker sections.
Geotechnical conditions are such that mine fill is not required.

The nature of the Darlot project has been significantly altered by the
discovery in late 1996 of the Centenary deposit about 1.2 kilometres from the
existing mine workings.

In August 1996, a vertical exploration drillhole intersected the Centenary
deposit, an undiscovered gold mineralised zone of substantial thickness. The
drillhole showed mineralisation is associated with multiple, thin, shallowly
dipping quartz veinlets with associated pyritic alteration in dolerite.
Follow-up holes have confirmed this discovery and showed the Centenary deposit
to be of appreciable lateral extent. The grade, thickness and continuity of the
Centenary mineralisation indicate its capacity to support a substantial, low
cost, underground mining operation. Mine planning and evaluation have indicated
that the Centenary deposit is amenable to low cost bulk stoping, that the
geotechnical conditions are very good and that there is minimal groundwater.
Additionally, the Centenary mineralisation is free milling, as is the Darlot
lode.

Access to Centenary is via an extension of the Darlot decline which
intersected the Centenary deposit in September 1997 approximately 350 metres
below the surface. First development ore was subsequently fed to the upgraded
Darlot processing plant. A raise bored ventilation shaft is currently being
constructed, which will complete the Centenary ventilation circuit and also
provide the second egress for the mine. Initial orebody development and in-fill
diamond drilling has commenced. It is planned that initial sub-level stoping of
the thick central section of the Centenary deposit will commence prior to
mid-1998. The thinner extremities of the deposit are suitable for sub-level open
stoping or room and pillar stoping as successfully utilised at Darlot.
Production options remain subject to an ongoing feasibility study.

The treatment plant comprises of a three stage crushing circuit (which is
not owned by Plutonic), primary and secondary ball mills, leaching, adsorption
and gold recovery circuits. Coarse gold, which is about 50% of the total
production, is recovered within a gravity circuit. Ore throughput is about 0.68
million tonnes per annum, based on the current blend of 100% primary material.

The treatment plant is in good condition reflecting regular maintenance and
recent upgrades to the gravity, leach and grinding circuits have remedied any
significant maintenance issues.

Two new generators, commissioned in early 1998, provide all power to the
site.

Water is available from a borefield eight kilometres from the treatment
plant.

S-90
<PAGE> 121

Production in 1997 of 65,153 ounces is similar to the 1996 level of 62,757
ounces as the key physical operating parameters have remained largely unchanged.

YEAR-END PROVED AND PROBABLE ORE RESERVES

<TABLE>
<CAPTION>
1997 1996 1995
----- ----- -----
<S> <C> <C> <C>
Tonnes of ore (000)............................... 8,536 2,976 777
Grammes of gold per tonne......................... 5.6 4.9 4.4
Contained ounces of gold (000).................... 1,556 468.1 110.6
</TABLE>

OPERATING DATA

<TABLE>
<CAPTION>
1997 1996 1995
----- ----- -----
<S> <C> <C> <C> <C>
Total Volume Mined Open Pit............ (000bcm) N.A. N.A. 776
Underground Development................ (m) 6,175 7,657 5,002
Ore Mined.............................. (000t) 516 462 286
Ore Treated............................ (000t) 551 504 334
Ore Head Grade......................... (Au g/t) 3.9 4.1 4.0
Metallurgical Recovery................. (%) 95.0 95.0 95.7
Fine Gold Produced..................... (000oz) 65.2 62.8 41.1
Cash Operating Cost
- -- per tonne treated................... (A$/t) 50.50 55.82 65.59
(US$/t) 37.58 43.70 48.44
- -- per fine ounce Produced............. (A$/oz) 427 448 533
(US$/oz) 318 351 394
</TABLE>

Total Darlot Gold Mine mineralised material (including Centenary) as at 31
December 1997 was 4.0 million tons at 0.1 ounces of gold per ton. Reserves at
that date were 1.556 million contained ounces of gold.

On 17 December 1997 a reserve estimate for Centenary of 1.4 million
contained ounces of gold was announced.

GEOLOGY

Darlot is situated within an Archaean sequence of mostly intrusive and
extrusive mafic rocks. The Darlot orebody occurs within a corridor of
north-northwest trending structures.

The Darlot orebody is a shear-hosted, gold-mineralised, quartz vein system
about 1.5 kilometres long. The structure is continuous along strike with
mineralisation open down dip indicating potential for depth extensions.

The Centenary orebody is a large, structurally controlled, quartz vein
hosted gold deposit. The lode, which extends for more than 1.2 kilometres,
varies from 5 metres to more than 50 metres in thickness. The full extent of the
lode is not yet known.

Within the extensive Darlot property several areas with geological features
analogous to the Darlot and Centenary deposits are currently being explored.
Zones of mineralisation have been located at several prospects but, as yet, no
deposits with sizes comparable to either Darlot or Centenary have been
discovered. Exploration is continuing as the recent discovery of Centenary has
affirmed the high prospectivity of the property.

Darlot complies with all environmental conditions and no material breaches
were reported in 1997. Options for suppression of excess dust from the open fine
ore stockpile are currently being evaluated. Minor tailings storage facility
seepage is being collected in cut-off drains for return to the storage facility.

S-91
<PAGE> 122

Lawlers Gold Mine

Lawlers Gold Mine is located 120 kilometres north-west of Leonora, Western
Australia. Plutonic has a 100% interest in the mine which has operated since
1986. The mine is a fly-in fly-out operation with about 67 staff employees and
104 contractor personnel working on a two weeks on and one week off or six weeks
on, one week off roster basis.

The Lawlers Gold Mine property consists of two proximal groups of
contiguous tenements totalling approximately 27,850 hectares and consisting of
three exploration licences, 89 prospecting licences and 13 mining leases. All
tenements are owned 100% by Plutonic. No non-government royalties are payable on
production.

Mining leases which encompass current mining operations or known reserves
vary in date of grant and expiry. One mining lease from which production is
currently derived was granted by the Western Australian Government post 1
January 1994.

Since 1986, almost 600,000 ounces of gold have been produced from several
open pits and one underground source in the Lawlers goldfields. During 1997
production was principally derived from the New Holland Pit where mining is
undertaken by conventional selective mining techniques utilising a contractor
operating a 100 tonne excavator and a fleet of 85 tonne trucks, under the
supervision of Plutonic personnel.

Recently, mining at New Holland ceased temporarily to allow commencement of
the New Holland South underground project which will extract the southern down
plunge extension of the orebody, initially by decline on-ore development, and
later by room and pillar stoping. During this interruption to mining at New
Holland in the fourth quarter of 1997, open pit mining of the Fairyland deposit
commenced. Ore haulage from the New Holland and Fairyland Pits, which are remote
from the treatment plant, is by 100 tonne trucks, also provided and operated by
contractors.

The treatment plant is capable of treating approximately 0.5 to 0.7 million
tonnes (0.55 to 0.77 million tons) per annum of oxide, transition and primary
ore depending on the blend. Three stage crushing is followed by single stage
milling through two parallel ball mills. The grinding circuit incorporates a
gravity circuit for the recovery of coarse gold. The slurry is then transferred
to a conventional carbon-in-pulp circuit. The gravity component is typically
40%, with total gold recovery in the range of 90 to 95% depending on ore source.
Power is supplied by contract diesel generators. Good quality process water is
available from a borefield 15 kilometres north-east of the plant. The plant is
well maintained and in good condition.

Production in 1997 was 87,481 ounces, plus a further 14,441 ounces derived
by processing ore from Plutonic's Bellevue mine. This compares with 50,603
ounces of Lawlers production and 17,313 ounces of Bellevue production in 1996.
The increased production in 1997 was due almost entirely to the high grade ore
sourced from the New Holland Pit during the year.

GEOLOGY

Gold ore is derived from two distinct geological domains - a western
sedimentary domain (New Holland) and an eastern mafic/ultramafic volcanic domain
(Fairyland).

The western area deposits are high grade ladder quartz veins within
sandstones enclosed in finer sediments. Exploration involves deep, close-spaced
drilling to locate high grade, shallow plunging ore shoots within the favourable
rock unit. Recent discovery of extensions to the New Holland Pit mineralisation
indicates the high prospectivity of the western domain.

Discovery of the Fairyland deposit in 1996 in mafic volcanics of the
eastern domain attests to its high prospectivity. The eastern domain is also
highly prospective for nickel and ore grade intersections have already been
obtained in laterite from limited drilling. The underlying ultramafic rocks are
part of the nickeliferous Agnew-Mt Keith-Yakabindie-Honeymoon Well sequence
which hosts major nickel deposits north of Lawlers.

S-92
<PAGE> 123

YEAR-END PROVED AND PROBABLE ORE RESERVES

<TABLE>
<CAPTION>
1997 1996 1995
----- ----- -----
<S> <C> <C> <C>
Tonnes of ore (000)............................... 1,721 1,400 1,279
Grammes of gold per tonne......................... 4.6 4.7 3.2
Contained ounces of gold (000).................... 252.3 212.4 133.5
</TABLE>

OPERATING DATA

<TABLE>
<CAPTION>
1997 1996 1995
----- ----- -----
<S> <C> <C> <C> <C>
Total Volume Mined Open Pit............ (000bcm) 2,369 5,569 4,154
Underground Development................ (m) 417 N.A. N.A.
Ore Mined.............................. (000t) 815 606 721
Ore Treated............................ (000t) 468 627 727
Ore Head Grade......................... (Au g/t) 6.1 2.8 1.9
Metallurgical Recovery................. (%) 95.7 90.4 91.6
Fine Gold Produced..................... (000oz) 87.5 50.6 42.5
Cash Operating Cost
- -- per tonne treated................... (A$/t) 65.92 44.63 36.24
(US$/t) 49.06 34.94 26.76
- -- per fine ounce Produced............. (A$/oz) 353 553 620
(US$/oz) 263 433 458
</TABLE>

Total Lawlers Gold Mine project mineralised material as at 31 December 1997
was 3.8 million tons at 0.117 ounces of gold per ton. Reserves at that date were
1.9 million tons at 0.134 ounces of gold per ton (252,300 contained ounces).

On 30 April 1997 a mineralised material estimate of 1.3 million tons at
0.105 ounces of gold per ton was announced for the Fairyland deposit (cf. 0.64
million tons at the same grade as of 31 December 1996). The Fairyland
mineralised material is included in the mineralised material estimate for the
Lawlers Gold Mine project.

Drilling under and south of the New Holland Pit and north towards the
Genesis Pit has encountered multiple high grade gold lodes. Underground
development of the high grade southern extensions of the New Holland lode began
in the fourth quarter 1997. This development is based on an initial reserve of
65,000 contained ounces of gold. Deeper zones of mineralisation will be drilled
from the underground workings.

Open pit mining commenced at the Fairyland prospect, located 12.5
kilometres east of the treatment plant in October 1997. Exploration and
development drilling is on-going. The excellent grade of deeper drill
intersections suggests a modest scale underground operation might also
ultimately be developed, although the geotechnical conditions may adversely
impact on the project economics.

Feasibility studies are underway to assess underground projects at Genesis
and Genesis North as well as the deeper mineralisation at New Holland South.

Lawlers complies with the environmental conditions of the licences under
which it operates. Over the last few years the backlog of open pit waste dumps
and tailings storage facility wall rehabilitation has been brought up to date. A
contaminated groundwater plume exists south-west of the tailings dams. This
plume is being monitored and controlled. No material environmental breaches
occurred in 1997.

Mt Morgans Gold Mine

The Mt Morgans Gold Mine is located 50 kilometres west of Laverton, Western
Australia. The Mt Morgans goldfield has been operated intermittently since 1896
and has produced in excess of 1.2 million

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<PAGE> 124

ounces. The mine is operated on a fly-in fly-out basis with about 48 staff
employees and 74 contractor personnel working a two weeks on and one week off
roster.

The Mt Morgans Gold Mine, which is jointly owned by Plutonic (80%) and
Abednego Nickel Limited (20%), is operated on a joint venture basis by the Mt
Morgans Joint Venture (MMJV). Plutonic manages all mining and exploration
activities on behalf of the MMJV. All known economic mineralisation is on
tenements owned by the MMJV which has interests of various types in four joint
venture properties within an area of influence surrounding the MMJV-owned
properties.

The MMJV holds six exploration licences, 117 prospecting licences and 27
mining leases totalling approximately 46,000 hectares. Mining Leases associated
with current mining activity at Transvaal and Jupiter and the treatment plant
were all granted prior to 1 January 1994.

Mt Morgans is currently producing gold at an annual rate of 94,000 ounces
(100%) with the mill processing 1.0 million tonnes (1.1 million tons) per annum.
Treatment is expected to cease in August or September of 1998 and, as a result,
1998 production will be approximately 42,000 ounces. Mill feed is sourced from
the Transvaal underground mine, the remaining ore stockpiles from the now
completed Jupiter Pit and the retreatment of the Westralia tailings. A dump
leach operation based on low grade Jupiter ore provides minor production.

The Transvaal operation is accessed via a decline from the Transvaal Pit.
The main portal is located about 75 metres below the natural surface and the
decline extends to a depth of 125 metres vertically below the portal.

Underground ore is mined by uphole retreat open stoping. Typical orebody
dimensions are 100 metres long by 3 metres thick and 40 metres to 50 metres up
and down dip. Orebody dip averages 75 degrees. Up to three sub-parallel lodes
are present on each level. Stopes are not filled.

Underground development and stoping activities utilise contractors under
Plutonic supervision. Ore haulage is by 40 tonne low profile trucks to the
treatment plant, located approximately 3 kilometres from the portal.

The Westralia underground operation has recently ceased following the
extraction of all reserves.

The treatment plant, capable of treating 1 million tonnes (1.1 million
tons) per annum of hard rock, consists of a primary crusher, open stockpile, SAG
mill, pebble crusher and secondary ball mill grinding circuit, followed by a
conventional carbon-in-pulp leach/adsorption section. Westralia tailings are
reclaimed from old dams, slurried up and introduced into the circuit with the
cyclone feed. Metallurgical recovery at Mt Morgans is 85% to 90%. The plant,
which was in poor condition when Plutonic acquired the operation in late 1995,
has undergone major refurbishment over the last two years and is now in good
condition.

Power is supplied by diesel generators owned by the MMJV, whilst process
water is sourced from a borefield located eight kilometres from the plant. The
power station underwent a major upgrade in late 1996.

Production in 1997 was 91,985 ounces (100% basis) which is similar to the
1996 production.

GEOLOGY

Most production to date has come from lodes in Archaean banded iron
formation, but currently underground production from Transvaal comes from a
shear zone in basalts. The now depleted Jupiter pit contained low grade gold
mineralisation in a syenite intrusive.

YEAR-END PROVED AND PROBABLE ORE RESERVES (100% basis)

<TABLE>
<CAPTION>
1997 1996 1995
----- ----- -----
<S> <C> <C> <C> <C>
Tonnes of ore (000).................... 4,313 5,777 4,743
Grammes of gold per tonne.............. 0.8 1.6 2.2
Contained ounces of gold (000)......... 114.2 306.1 332.9
</TABLE>

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<PAGE> 125

OPERATING DATA (100% BASIS)

<TABLE>
<CAPTION>
1997 1996 1995**
----- ----- ------
<S> <C> <C> <C> <C>
Total Volume Mined Open Pit............ (000bcm) N.A. 1,516 648
Underground Development................ (m) 4,439 6,144 998
Ore Mined.............................. (000t) 528 1,299 306
Ore Treated............................ (000t) 943 887 290
Ore Head Grade......................... (Au g/t) 3.2 3.0 3.0
Metallurgical Recovery................. (%) 88.1 91.9 92.5
Fine Gold Produced*.................... (000oz) 73.6 75.0 24.9
Cash Operating Cost
- -- per tonne treated................... (A$/t) 46.67 51.97 41.88
(US$/t) 34.73 40.68 30.93
- -- per fine ounce Produced............. (A$/oz) 479 491 390
(US$/oz) 356 384 288
</TABLE>

- ---------------

* Plutonic's 80% equity share of production

** Owned for one quarter from 1 October 1995

Plutonic's share of Mt Morgans Gold Mine ore reserves at 31 December 1997
was estimated at 3.8 million tons at 0.023 ounces of gold per ton (91,000
ounces).

The mining operation has been a high cost producer in recent years. In July
1997, steps were taken to ensure the operation's costs would be substantially
reduced. Underground development largely ceased. Mining has concentrated on
extraction of ore from the three levels of the Transvaal Mine which were already
fully developed. Costs have subsequently reduced substantially, however, in the
absence of significant exploration success, mining and treatment of stockpiled
ore is expected to be completed in 1998.

In 1997, the operation complied in all material aspects with the
environmental conditions imposed upon it. No material breaches existed.
Environmental rehabilitation from open pit mining activities is up to date with
dumps contoured, topsoil spread and seeds planted. In August 1997, the site was
awarded a Golden Gecko Certificate of Merit for Environmental Excellence by the
Department of Minerals and Energy of Western Australia in connection with its
standard of environmental performance.

A contaminated groundwater cyanide plume from the active tailings storage
facilities exists. The plume is being monitored and addressed in conjunction
with the relevant governmental authorities. Minor tailings storage wall leaks
are also being addressed. The commissioning of a new tailings storage facility
which occurred in January 1998 is expected to reduce the impact on the
environment from the currently active storages as they will be decommissioned.

Peak Hill Gold Mine

The Peak Hill Gold Mine is situated 130 kilometres north of Meekatharra,
Western Australia.

The Peak Hill Gold Field is more than 100 years old, but modern operations
commenced only in 1988. In recent times the Peak Hill Gold Mine has produced
about 600,000 ounces from four open pits.

The Peak Hill Gold Mine is owned by a joint venture (Plutonic 66.67%, North
Limited 33.33%). North currently manages the mining operation although Plutonic
has the right to assume management. Exploration of the joint venture's tenements
is managed by Plutonic which also has extensive non-joint venture exploration
interests in the region surrounding the Peak Hill Gold Mine.

The mine is a fly-in fly-out operation with approximately 25 staff
employees and 11 contractor personnel working a two weeks on and one week off
roster.

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<PAGE> 126

The Peak Hill Gold Mine tenements which are owned by the Plutonic-North
joint venture are two exploration licences, 41 prospecting licences and 18
mining leases totalling 17,900 hectares. Plutonic, either by itself or in joint
ventures, has interests in surrounding tenements. In all Plutonic has thirteen
projects in the Peak Hill District (8 joint ventures) totalling 55,771 hectares
in 101 tenements.

Open pit mining at the Harmony Pit, located 9 kilometres west of the plant,
was completed in November 1997. Ore processing is expected to continue until at
least mid-1998.

The plant has a capacity of 0.6 million tonnes per annum (0.66 million
tons) of soft oxide ore. Hard primary ore is blended or fine crushed to maintain
this rate. There is a SAG/ball mill grinding circuit with a conventional
carbon-in-pulp and pressure Zadra elution circuit. The gold recovery has varied
from 93% to 98% over the past ten years.

Power is generated by diesel generators. Good quality water is available
from a borefield 11 kilometres north-east of the plant.

GEOLOGY

Gold mineralisation occurs as multiple lodes within altered Proterozoic
mafic volcanics. Weathering extends to 100 metres beneath a well developed
laterite profile.

YEAR-END PROVED AND PROBABLE ORE RESERVES (100% BASIS)

<TABLE>
<CAPTION>
1997 1996 1995
----- ----- -----
<S> <C> <C> <C> <C>
Tonnes of ore (000).................... 726 1,637 2,491
Grammes of gold per tonne.............. 1.5 1.8 3.0
Contained ounces of gold(000).......... 35.8 97.8 240.3
</TABLE>

OPERATING DATA (100% BASIS)

<TABLE>
<CAPTION>
1997 1996 1995
----- ----- -----
<S> <C> <C> <C> <C>
Total Volume Mined Open Pit............ (000bcm) 799 4,779 3,278
Underground Development................ (m) N.A. N.A. N.A.
Ore Mined.............................. (000t) 355 1,275 715
Ore Treated............................ (000t) 664 719 583
Ore Head Grade......................... (Au g/t) 2.4 4.0 4.7
Metallurgical Recovery................. (%) 97.5 97.7 97.5
Fine Gold Produced *................... (000oz) 33.1 60.4 56.7
Cash Operating Cost
- -- per tonne treated................... (A$/t) 29.16 26.31 26.97
(US$/t) 21.70 20.60 19.92
- -- per fine ounce Produced............. (A$/oz) 390 209 183
(US$/oz) 290 164 135
</TABLE>

- ---------------

* Plutonic's equity share of production; 50% until 31 January 1995 and 66.67%
thereafter

Plutonic's share of total Peak Hill Gold Project ore reserves at 31
December 1997 was estimated at 0.5 million tons at 0.044 ounces of gold per ton.

In general, reasonable potential exists for finding additional deposits
similar to those mined at Peak Hill in recent years.

Continuous rehabilitation has ensured that only active areas are still to
be rehabilitated. During 1997, the operation was in compliance with relevant
environmental legislation.

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<PAGE> 127

Bellevue Gold Mine

The Bellevue Gold Mine is located 175 kilometres north of Leonora and 120
kilometres south of Wiluna, Western Australia. The project was placed on care
and maintenance in April 1997 following some 10 years of modern underground and
open pit production. The area has been mined since 1896, producing approximately
750,000 ounces of gold, mostly in recent years. The project is 100% owned by
Plutonic.

The Bellevue Gold Project tenements comprise nine mining leases, eight
prospecting licences and two exploration licences. Four mining leases were
granted prior to 1 January 1994.

Treatment at Bellevue ceased in August 1996, with mining completed in April
1997 at which time the operation was placed on care and maintenance. Ore
produced after August 1996 was trucked to the nearby Lawlers plant for
treatment. Ore production in 1997 was sourced from Bellevue 13 level
underground, other underground remnants and the Henderson North and Vanguard
Pits. These sources are now effectively exhausted.

The Bellevue property is prospective for both gold and nickel
mineralisation. Any gold reserves discovered in the future are likely to be
transported to the nearby Lawlers treatment plant. Drilling has, in recent
months, intersected wide intervals of low to moderate grade nickel sulphide
mineralisation. Another party recently discovered a significant high grade
nickel sulphide deposit about 200 metres north of Plutonic's Bellevue property.
Plutonic has entered into an agreement with its 62% owned subsidiary, Lachlan,
under which Lachlan has acquired the rights to non-gold mineralisation on 23 of
the Bellevue tenements subject to a 25% Net Profits Interest to Plutonic.

At the time of closure in mid-1997 all rehabilitation was up to date with
open pit dumps contoured and the filled No. 1 tailings storage facility capped.
The plant site remains largely intact, while the partially filled No. 2 tailings
storage facility has not been capped pending further exploration and a decision
on permanent mine closure.

MINERAL EXPLORATION AND DEVELOPMENT

Plutonic began as a mineral exploration company and continues to maintain a
strong commitment to mineral exploration. Plutonic's large team of professional
explorers has identified targets which have warranted drilling of between
200,000 metres and 480,000 metres per year in recent years. Plutonic has
discovered more than ten million ounces of gold since 1989.

The Plutonic group (including Lachlan) holds in its own right or in joint
ventures, tenements or tenement applications covering more than 8,000 square
kilometres. The tenements and tenement applications exceed 800 in number. Mining
leases total 240 and cover approximately 1,100 square kilometres.

Exploration is concentrated on the extensive tenement holding surrounding
the Company's gold mines. In late 1996 substantial success was achieved at
Darlot with the discovery of the Centenary deposit.

Substantial exploration programmes are also conducted on properties distant
from the mines. Exploration offices are established at Perth, Western Australia
and Townsville, Queensland.

Significant advanced exploration projects include:

<TABLE>
<CAPTION>
PROJECT MINERALISED MATERIAL (100% BASIS)
------- ---------------------------------
<S> <C>
Twin Hills Joint Venture*..... 2.6 million tons at 0.149 ounces of gold per ton
Keith Kilkenny Joint
Venture**................... 7.8 million tons at 0.082 ounces of gold per ton
Kundana (100%)................ 1.6 million tons at 0.088 ounces of gold per ton
</TABLE>

- ---------------

* Plutonic 51% interest, increasing to 65%

** Plutonic 45.45% interest

Properties with copper-lead-zinc and zinc-silver mineralisation are owned
by Plutonic's 62.5% subsidiary Lachlan Resources NL which is managed by Plutonic
and contains most of the base metal assets of the

S-97
<PAGE> 128

Plutonic group. As of 25 March 1998 Lachlan, which has debt of approximately $51
million to Plutonic, had a market capitalisation of approximately A$16.8
million.

In 1996 Plutonic's exploration expenditure was A$30.1 million and in 1997
expenditure was approximately A$32.7 million.

INFORMATION ON RESERVES

The proven and probable gold ore reserves stated in this report reflect
estimated quantities and grades of gold in in-situ deposits and in stockpiles of
mined material that Plutonic believes can be recovered and sold at prices
sufficient to recover the estimated future cash costs of production and
remaining investment. The estimates of cash costs of production are based on
current and projected costs. Estimated mining dilution has been factored into
the reserve calculation. Plutonic used a gold price of A$500 to A$525 per ounce
of gold in its mine-by-mine evaluation of mining properties at 31 December 1996
and A$450 for the evaluation at 31 December 1997.

ESTIMATION OF RESERVES

Gold reserves are estimated for each of the properties operated by Plutonic
based upon factors relevant to each deposit. Gold ore reserves for Peak Hill,
which is not operated by Plutonic, are based on reserve information provided to
Plutonic by the operator. Plutonic has reviewed, but has not independently
confirmed, the information provided by the operator.

OTHER INFORMATION

Changes in reserves generally reflect (i) results of efforts to develop
additional reserves; (ii) depletion of existing reserves through production;
(iii) actual mining experience; and (iv) price forecasts. Grades of ore actually
processed from time to time may be different from stated reserve grades because
of geologic variation in different areas mined, mining dilution, sampling errors
and assaying and other factors. Recovery rates vary with the metallurgical and
other characteristics and grade of ore processed.

Neither reserves nor projections of future operations should be interpreted
as assurances of the economic life of mineral deposits or of the profitability
of future operations.

NATIVE TITLE CLAIMS

In respect of tenements granted before 1 January 1994, Plutonic believes
that any native title rights over the relevant land have probably been suspended
at least to the extent that those rights are inconsistent with the rights
conferred by the tenement. Various claims have been entered on the Register of
Native Title Claims under the Commonwealth Native Title Act which affect
Plutonic's mining tenements, but Plutonic is not aware of any determination of
native title with respect to those claims.

In respect of tenements granted to Plutonic after 1 January 1994, native
title claims have been made in respect of some of the land covered by those
tenements but Plutonic does not believe that it will be prevented from carrying
out exploration or mining operations under these tenements in any material way
as a result of those claims.

Most of Plutonic's key exploration targets in Western Australia are covered
by mining leases surrounding existing mines. If Plutonic is successful in its
exploration activities in these areas it will be able to develop the deposits
under those mining leases and any native title claims relating to the land
covered by those mining leases will not prevent that development.

ENVIRONMENTAL

Plutonic has a strong commitment to excellence in environmental
performance. Particular emphasis is placed on the elimination of unnecessary
disturbance to the natural environment and appropriate rehabilitation of areas
affected by mining activity. Plutonic fosters an environmentally responsible
culture within its

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<PAGE> 129

workforce by integrating environmental management into all areas of operations
from the exploration phase through to mining and, ultimately, decommissioning.

Plutonic has made significant expenditures to minimise the effects of its
operations on the environment. Expenditures primarily are for the earthmoving,
fertilising and reseeding costs associated with the final contouring and
rehabilitation of waste dumps and tailings storage facilities. In 1996, these
expenditures totalled approximately A$1.8 million over and above the contractor
earthmoving costs. Basic dump contouring is included within the contractor load
and haul rates. Plutonic estimates that during 1997, expenditures for such
purposes will be approximately A$0.7 million.

Under applicable law and the terms of permits under which Plutonic
operates, Plutonic is required to rehabilitate land disturbed by its operations.
In the mining industry, much of the reclamation work takes place during mining
and related operations, while the balance of the work is completed once mining
and treatment is finished. Plutonic charges reclamation costs incurred in
connection with its exploration activities as expenses in the year in which
incurred. For mining operations, Plutonic provides for final reclamation on an
estimate of anticipated costs to rehabilitate the site at the date of the
estimate, for each individual operating mine site. In addition, Plutonic has
adopted a policy of conducting reclamation concurrently with mining operations
where practical. As a result, an increasing amount of reclamation is being
conducted simultaneously with mining. At December 31, 1997, Plutonic had accrued
a total of A$3.6 million for future rehabilitation and related costs.

Plutonic's operations are conducted under licences issued by regulatory
authorities. Many licences require periodic renewal or review of their
conditions. Plutonic cannot predict whether it will be able to renew such
permits or whether material changes in permit conditions will be imposed.

The first formal internal annual environmental audit of each managed site
was completed in early 1996. These audits and regular environmental reviews have
discovered no material environmental issues. Issues which receive the highest
priority are the rehabilitation of waste dumps and tailings storage facilities,
the minimisation of groundwater contamination from tailings facilities and the
suppression of dust.

Areas rehabilitated and new surface disturbance statistics for 1997 for
managed mines are summarised below:

<TABLE>
<S> <C>
Area Rehabilitated................................... 228 hectares
New Area Disturbed................................... 77 hectares
Rehabilitation Expenditure........................... A$0.7 million
</TABLE>

The bulk of the expenditure outlined above was incurred on major waste dump
rehabilitation programs which were completed at the Lawlers and Mt Morgans Gold
Mines. Significant portions of the waste dumps which were rehabilitated resulted
from mining activities prior to Plutonic's ownership of these sites.

During 1996 and 1997, no material environmental breaches occurred, no fines
were imposed and there were no non-compliance issues apart from those listed
under Plutonic Gold Mine, all of which are being addressed and have been largely
rectified.

In August 1997, the Mt Morgans Gold Mine was awarded a Golden Gecko
Certificate of Merit for Environmental Excellence by the Department of Minerals
and Energy of Western Australia.

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<PAGE> 130

CUSTOMERS

Sales to individual customers exceeding 10% of Plutonics consolidated
revenues are stated below. Plutonic believes that the loss of any of these
customers would not have a material adverse impact on Plutonic because of the
active worldwide market for gold.

<TABLE>
<CAPTION>
1997 1996
------- -------
(A$000) (A$000)
<S> <C> <C>
Customer A....................................... 38,504 47,409
B....................................... 129,323 179,262
C....................................... 135,880 30,499
------- -------
Total.............................................. 303,707 257,170
</TABLE>

EMPLOYEES

The number of full-time employees of Plutonic and its subsidiaries and
employees of major contractors to Plutonic at 31 December 1997 was:

<TABLE>
<CAPTION>
FULL TIME
PERMANENT CONTRACT
--------- --------
<S> <C> <C>
Plutonic Gold Mine.............................. 143 231
Darlot Gold Mine................................ 65 139
Lawlers Gold Mine............................... 69 82
Bellevue Gold Mine.............................. 3 0
Exploration Staff............................... 73 43
Corporate Staff................................. 33 4
--- ---
Total........................................... 383 546
</TABLE>

The number of full-time employees at 31 December 1997 in jointly-owned
operations in which Plutonic participates was:

<TABLE>
<CAPTION>
FULL TIME
PERMANENT CONTRACT
--------- --------
<S> <C> <C>
Mt Morgans Gold Mine............................ 48 74
Peak Hill Gold Mine............................. 25 11
--- ---
Total........................................... 85 103
</TABLE>

LEGAL PROCEEDINGS

Plutonic and its subsidiaries are defendants in various legal actions in
the ordinary course of business. In the opinion of management, such matters will
be resolved without material affect on Plutonic's financial condition, results
of operation or cash flow.

S-100
<PAGE> 131

THE AGREEMENT

GENERAL

This section of the Document describes the material terms of the Agreement.
The description is qualified in its entirety by reference to the Agreement, a
copy of which is attached hereto as Appendix A and which is incorporated herein
by reference. All Homestake Stockholders, Plutonic Shareholders and Plutonic
Option Holders are urged to carefully read the Agreement in its entirety.

SCHEMES OF ARRANGEMENT

The Agreement provides that Plutonic will propose at least three schemes of
arrangement under the NSWL. If the Schemes are implemented, the following will
occur. Pursuant to the Ordinary Scheme, all of the Ordinary Shares other than
those held by or on behalf of Homestake will be cancelled and the Ordinary
Scheme Members will receive 0.34 shares of Homestake Common Stock as
consideration for the cancellation of each Ordinary Share held on the Plutonic
Combination Record Date.

Pursuant to the Partly Paid Scheme, all of the Partly Paid Shares will be
cancelled and the Partly Paid Scheme Members will receive a number of shares of
Homestake Common Stock set forth in the chart below for each Partly Paid Share
held on the Plutonic Combination Record Date.

<TABLE>
<CAPTION>
EXCHANGE RATIO
CLASS OF UNPAID FOR A PLUTONIC
CAPITAL PARTLY PAID SHARE
- ----------------- -------------------
<S> <C>
A$0.75 0.303
A$0.85 0.299
A$0.90 0.296
</TABLE>

Pursuant to the Option Scheme, all of the Plutonic Options will be
cancelled and the Plutonic Option Holders will receive a number of shares of
Homestake Common Stock set forth in the chart below for each Option held on the
Plutonic Combination Record Date.

<TABLE>
<CAPTION>
EXERCISE EXCHANGE
OPTION EXPIRY DATE PRICE(A$) RATIO
------------------ --------- --------
<S> <C> <C>
October 12, 1999...................................... 6.04 0.070
November 28, 2000..................................... 5.87 0.088
December 5, 2000...................................... 6.04 0.084
May 21, 2001.......................................... 7.75 0.060
May 21, 2001.......................................... 8.75 0.048
June 24, 2001......................................... 7.75 0.060
June 24, 2001......................................... 8.75 0.049
June 26, 2001......................................... 7.75 0.061
June 26, 2001......................................... 8.75 0.049
June 4, 2002.......................................... 5.66 0.104
June 4, 2002.......................................... 6.40 0.089
</TABLE>

The Agreement provides that (i) the Ordinary Scheme is subject to and
conditional upon the Partly Paid Scheme and the Option Scheme becoming
effective, (ii) the Partly Paid Scheme is subject to and conditional upon the
Ordinary Scheme and the Option Scheme becoming effective and (iii) the Option
Scheme is subject to and conditional upon the Ordinary Scheme and the Partly
Paid Scheme becoming effective. The conditions described in clauses (ii) and
(iii) can be waived only by Homestake. Homestake currently does not intend to
waive these conditions.

REPRESENTATIONS AND WARRANTIES

The Agreement contains customary mutual representations and warranties
relating to, among other things, (i) the accuracy of information supplied by
each of Homestake and Plutonic in connection with the
S-101
<PAGE> 132

Document, (ii) the capital structure of each of Homestake and Plutonic, (iii)
the execution, delivery and performance of the Agreement and related matters,
(iv) the absence of certain litigation and native title claims, (v) the
compliance of financial statements with U.S. GAAP, in the case of Homestake, and
Australian GAAP, in the case of Plutonic, (vi) documents filed by Homestake with
the SEC and by Plutonic with the ASC, the accuracy of information contained
therein and the absence of undisclosed liabilities or obligations of each of
Homestake and Plutonic, (vii) the conduct of business of the parties since
December 31, 1996, including that each business was operated only in the
ordinary course, (viii) the absence of material changes relating to either
party, (ix) environmental matters, and (x) the possession by each party of all
necessary certificates, franchises, licenses, leases, mining tenements, permits,
authorizations and approvals of governmental authorities necessary to conduct
its business.

CONDUCT OF BUSINESS PENDING THE COMBINATION

Pursuant to the Agreement, Homestake and Plutonic each has agreed to carry
on its respective businesses in the usual, regular and ordinary course in
substantially the same manner as conducted prior to the execution of the
Agreement. In addition, Plutonic has agreed that, among other things and subject
to certain exceptions, neither it nor any of its subsidiaries may, without the
written consent of Homestake: (a) incur any expenditure that: (i) would
individually or in aggregate cause actual expenditures to exceed by 10% or more,
the amount provided for that type of expenditure in the operating budget (the
"Budget") of Plutonic and its subsidiaries to be completed pursuant to the
Agreement; or (ii) is in excess of A$200,000 for any single item or A$1 million
in the aggregate which is not provided for in the Budget; (b) acquire or agree
to acquire: (i) by merging or consolidating with, or by purchasing a substantial
portion of the assets of, or by any other manner, any business or any
corporation, partnership, limited liability company, joint venture association
or other business organization or division thereof; or (ii) any assets that are
material, individually or in the aggregate, to Plutonic and its subsidiaries
taken as a whole; (c) sell, lease, license, mortgage or otherwise encumber or
subject to any lien or otherwise dispose of (which for the purposes of this
clause includes disposing of any economic or beneficial interest) any company
property (or agree to do any of these things) other than: (i) sales and
dispositions of interests or rights with respect to raw materials, obsolete
equipment, mine output and other inventories, in each case only if in the
ordinary course of business consistent with past practice; and (ii) encumbrances
that are incurred in the ordinary course of business consistent with past
practice; (d) except pursuant to existing employment agreements and as
previously disclosed or as required by applicable laws, (i) increase the
compensation payable or to become payable to its executive officers or
employees; (ii) grant any severance or termination pay to, or enter into any
employment or severance agreement with, any director or executive officer or
employee of Plutonic or any of its subsidiaries; or (iii) establish, adopt,
enter into or amend or take any action to accelerate any rights or benefits
under any collective bargaining agreement or any bonus, pension, profit sharing,
deferred compensation, incentive compensation, stock ownership, stock purchase,
stock option, phantom stock, retirement, vacation, severance, disability, death
benefit, hospitalization, medical or other plan, arrangement or understanding
(whether or not legally binding) providing benefits to any current or former
employee, officer or director of Plutonic or any of its subsidiaries; or (e)
authorize any of, or commit or agree to take any of, the foregoing actions.

Each of Homestake and Plutonic has also covenanted in the Agreement not to
take any action and not to fail to take any action which action or failure to
act would prevent, or would be likely to prevent the Combination from qualifying
for pooling-of-interests accounting treatment. Without limiting the generality
of the foregoing, the Agreement provides that except as previously disclosed,
from November 11, 1997, neither Homestake nor Plutonic nor any of their
respective subsidiaries will: (a) issue ordinary shares, options or other types
of equity securities or securities convertible into equity securities, except
pursuant to previously outstanding agreements or except in the ordinary course
consistent with past practice in the case of employee stock options and
directors share rights; (b) enter into or amend employment or termination
agreements with officers or directors that would be triggered by completion of
the Combination; (c) enter into agreements to dispose of significant assets; or
(d) distribute assets to its shareholders, other than regular dividends in the
ordinary course and time at rates consistent with past practices (which for
Plutonic would be a final dividend for the year ended December 31, 1997 not
exceeding A$0.03 per Ordinary Share), or purchase, redeem or otherwise acquire
any shares of capital stock of Plutonic or any of its subsidiaries or any other
securities
S-102
<PAGE> 133

thereof or any rights, warrants or options to acquire any such shares or other
securities except for the purchase by Homestake or one of its subsidiaries of
Ordinary Shares prior to the Court Order Time.

CERTAIN ACTIONS WITH RESPECT TO TAKEOVER PROPOSALS

The Agreement provides that neither party shall, nor shall either party
permit any of its subsidiaries to, nor shall it authorize or permit any
affiliate, officer, director or employee of, or any investment banker, attorney
or other advisor or representative of, such party, any of its subsidiaries or
affiliates to: (i) directly or indirectly solicit, initiate or encourage the
submission of any Takeover Proposal (as defined below) for such party; or (ii)
enter into any agreement with respect to any Takeover Proposal for such party or
directly or indirectly participate in any discussions or negotiations regarding,
or furnish to any person any information with respect to, or take any other
action to facilitate any inquiries or the making of any proposal that
constitutes, or may reasonably be expected to lead to, any Takeover Proposal for
such party. Notwithstanding the foregoing, after the First Court Date but only
to the extent required by the fiduciary obligations of the Board of such party,
as determined in good faith by it based on the written opinion of outside
counsel, such party may, in response to a Takeover Proposal for such party that
was not solicited by such party and that did not otherwise result from a breach
or a deemed breach of the covenant described in the preceding sentence: (A)
furnish information with respect to such party to any person pursuant to a
customary confidentiality agreement not less restrictive of such person than the
Confidentiality Agreement dated as of December 8, 1997 between Homestake and
Plutonic, as amended by such parties as of December 21, 1997; and (B)
participate in discussions or negotiations with such person regarding any
Takeover Proposal for such party.

The Agreement also provides that neither the Board of any party nor any
committee thereof shall (i) withdraw or modify, or propose to withdraw or
modify, in a manner adverse to the other party, the approval or recommendation
by such Board or committee of the Agreement or the Combination or (ii) approve
any letter of intent, agreement in principle, acquisition agreement or similar
agreement relating to any Takeover Proposal for such party, unless (in either
case) the Board of such party determines in good faith (based on the written
opinion of outside counsel) that it is required to do so by its fiduciary
obligations.

Immediately following the provision (in writing or orally) of any
information in relation to Homestake or Plutonic as a result of a Takeover
Proposal for such party or any discussions or negotiations by such party to or
with any person in relation to a Takeover Proposal for such party, such party
shall advise the other party in writing of the general terms of the Takeover
Proposal (including details on timing, nationality of offeror, gold
company/diversified resource company, stock/cash, nature of offer and the
material conditions relating thereto and whether the market capitalization of
the acquiring person exceeds $1 billion). Such party shall also (i) keep the
other party informed of any change in the general terms of the Takeover
Proposal, (ii) provide to the other party as soon as practicable after delivery
thereof, full details of the written material relating to such party provided to
other persons in connection with the Takeover Proposal or inquiry and where the
relevant information has not already been given to the other party, provide
copies of the information to the other party, (iii) provide to the other party
as soon as practicable after receipt thereof any information or analysis
regarding the other party or the other party's stock provided to such party by
any person in connection or association with the Takeover Proposal, and (iv)
within 14 days of first entering into discussions with the person who has made a
Takeover Proposal, notify the other party in writing (A) of the determinations
described in clause (b) of "-- Superior Proposal" below and all material terms
(including the parties) of the Superior Proposal, or (B) that the targeted party
has ceased discussions in relation to that Takeover Proposal.

The Agreement provides that without limiting the foregoing, it is
understood that any violation of the restrictions set forth above by any
executive officer of a party or any of its subsidiaries or affiliates,
investment bankers, attorneys or other advisors or representatives of such party
or any of its subsidiaries, whether or not such person is purporting to act on
behalf of such party or any of its subsidiaries or otherwise, shall be deemed to
be a breach by such party.

S-103
<PAGE> 134

CONDITIONS TO THE CONSUMMATION OF THE COMBINATION

Homestake's and Plutonic's respective obligations to effect the Combination
are subject to the satisfaction or waiver on or prior to the Second Court Date
of various conditions, including: (a) (i) a notice in writing shall have been
issued by or on behalf of the Treasurer of the Commonwealth of Australia stating
that the Commonwealth Government does not object to Homestake entering into and
completing the Agreement or (ii) the Treasurer of the Commonwealth of Australia
shall be or shall become precluded from making an order in respect of the entry
into or completion by Homestake of the Agreement under the Australian Foreign
Acquisitions and Takeovers Act 1975; (b) the waiting periods with respect to the
Combination under the U.S. Hart-Scott-Rodino Antitrust Improvements Act of 1976,
if applicable, shall have been terminated or shall have expired; (c) no
temporary restraining order, preliminary or permanent injunction or other order
issued by any court of competent jurisdiction or other legal restraint or
prohibition preventing the consummation of the Combination shall be in effect;
(d) Homestake and Plutonic shall each have received a letter dated as of the day
before the date of dispatch of the Document and reaffirmed as at the Second
Court Date from Coopers & Lybrand L.L.P. and Ernst & Young, respectively, to the
effect that the Combination will qualify for pooling-of-interests accounting
treatment; and (e) the Homestake Common Stock to be issued to the Ordinary
Scheme Members, the Partly Paid Scheme Members and the Option Holders pursuant
to the Schemes shall have been approved for listing on the NYSE, subject to
official notice of issuance, and approved for official quotation by the ASX, in
each case, prior to the Second Court Date.

In addition, Homestake's and Plutonic's respective obligations to effect
the Combination are subject to the following additional conditions (any of which
may be waived by such party): (i) the representations and warranties of the
other party set forth in the Agreement that are qualified as to materiality
shall be true and correct, and the representations and warranties of such other
party set forth in the Agreement that are not so qualified shall be true and
correct in all material respects, in each case as of the date of the Agreement
and as of the Second Court Date as though made on and as of the Second Court
Date, except to the extent any such representation or warranty expressly relates
to an earlier date (in which case as of such date); (ii) the other party to the
Agreement shall have performed in all material respects all obligations required
to be performed by it under the Agreement at or prior to the Second Court Date;
(iii) there shall not have occurred since the date of the Agreement any Material
Adverse Change (as defined below) relating to the other party; (iv) there shall
not have occurred since the date of the Agreement any Prescribed Occurrence (as
defined below) relating to the other party; (v) a certified copy of the court
orders approving the Schemes shall have been lodged with the ASC within fifteen
trading days of the Second Court Date; and (vi) each of Homestake and Plutonic
shall have received affiliate letters from the affiliates of the other party
relating to resale restrictions imposed on such affiliates in relation to
Homestake Common Stock.

TERMINATION

The Agreement provides that it can be terminated at any time prior to the
Second Court Date:

(a) By either Homestake or Plutonic if at a duly held meeting of
Homestake Stockholders the Share Issuance is not approved.

(b) By either Homestake or Plutonic if any court or government agency
has issued an order, decree or ruling or taken any other action permanently
enjoining, restraining or otherwise prohibiting the Combination and such
order, decree, ruling or other action has become final and nonappealable.

(d) By Plutonic if the Homestake Board has:

(i) failed to recommend to the Homestake stockholders that they
approve the Share Issuance;

(ii) taken any action described in either clause (i) or (ii) of the
second paragraph under "-- Certain Actions With Respect to Takeover
Proposals" above; or

(iii) failed to publicly reaffirm in terms no less favorable than
and subject to no further qualifications than those contained in their
original announcement that they approve the Share
S-104
<PAGE> 135

Issuance within 14 days after Plutonic has made a written request to
Homestake to do so (which written request may be made by Plutonic at any
time after the public disclosure of a Takeover Proposal for Homestake).

(e) By Homestake if the Plutonic Board has:

(i) failed to recommend to the Scheme Participants that they
approve the Ordinary Scheme, the Partly Paid Scheme and the Option
Scheme;

(ii) taken any action described in either clause (i) or (ii) of the
second paragraph under "-- Certain Actions With Respect to Takeover
Proposals" above; or

(iii) failed to publicly reaffirm in terms no less favourable than
and subject to no further qualifications than those contained in their
original announcement that they approve the Schemes within 14 days after
Homestake has made a written request to Plutonic to do so (which written
request may be made by Homestake at any time after the public disclosure
of a Takeover Proposal for Plutonic).

(f) By either Homestake or Plutonic if the other is in material breach
of any clause of the Agreement (other than a warranty which is qualified by
a materiality test, in which case any breach shall suffice) before the
Second Court Date, provided that either Homestake or Plutonic, as the case
may be, has given notice to the other setting out the relevant
circumstances and stating an intention to terminate and the relevant
circumstances continue to exist seven business days (or any shorter period
ending at 12 noon on the day before the Second Court Date) from the time
such notice is given.

(g) By either Homestake or Plutonic if the Combination is not
consummated by June 30, 1998.

(h) By:

(i) either Homestake or Plutonic if at a duly held meeting the
Ordinary Scheme Members; or

(ii) by Homestake if at a duly held meeting the Partly Paid Scheme
Members or the Option Holders

do not approve the applicable Scheme by the majorities required under
the NSWL.

(i) By Homestake if Plutonic takes any action in breach of the first
paragraph under "-- Certain Actions With Respect to Takeover Proposals"
above or any action permitted by the second sentence of that paragraph.

(j) By Plutonic if Homestake takes any action in breach of the first
paragraph under "-- Certain Actions With Respect to Takeover Proposals"
above or any action permitted by the second sentence of that paragraph.

SUPERIOR PROPOSAL

Plutonic or Homestake may terminate the Agreement pursuant to clause (c)
under "-- Termination" above only if: (a) the Board of the terminating party has
received a Superior Proposal; (b) in light of such Superior Proposal such Board
has determined in good faith, based upon the written advice of outside counsel,
that it is necessary for such Board to withdraw or modify its approval or
recommendation of the Combination or the Agreement in order to comply with its
fiduciary duty under applicable law; (c) the terminating party is in compliance
with its obligations under "-- Certain Actions With Respect to Takeover
Proposals" above; and (d) such Board concurrently approves or recommends the
implementation of the Superior Proposal.

TERMINATION FEES

Plutonic shall pay to Homestake a fee of US$4.5 million if Homestake
terminates the Agreement pursuant to clause (f) under "-- Termination" above or
Plutonic or Homestake terminates the Agreement where Plutonic has approved or
recommended the implementation of a Superior Proposal for Plutonic in accordance
with the terms of the Agreement.
S-105
<PAGE> 136

Homestake shall pay to Plutonic a fee of US$4.5 million if Plutonic
terminates the Agreement pursuant to clause (f) under "-- Termination" above or
Homestake or Plutonic terminates the Agreement where Homestake has approved or
recommended the implementation of a Superior Proposal for Homestake in
accordance with the terms of the Agreement. Homestake shall reimburse certain of
Plutonic's costs in relation to the Combination up to a maximum of US$1 million
if Plutonic terminates the Agreement pursuant to clause (a) under
"-- Termination" above.

EFFECT OF TERMINATION

In the event of termination of the Agreement, except to the extent that
such termination results from a wilful breach by any party of its obligations
under the Agreement (other than under "-- Representations and Warranties"), the
Agreement shall become void and have no effect, without any liability or
obligation on the part of Homestake or Plutonic, other than obligations of
confidentiality and the obligations described under "-- Termination Fees" above.

ENFORCEMENT

The Agreement provides that if any clause of the Agreement is held to be
invalid as a consequence of a breach of the duties of the directors of Plutonic
caused by Plutonic entering into the Agreement, the Agreement is void.

Each party acknowledges in the Agreement that (i) the Schemes would only be
available for consideration by Scheme Participants if the directors of Plutonic
agreed to each provision in the Agreement and (ii) the restrictions and
obligations in the Agreement are reciprocal in all material respects and
supported by valuable consideration.

RELEASE OF OFFICERS AND DIRECTORS

The Agreement provides that neither Homestake nor any officer or director
of Homestake, and, subject to section 241 of the NSWL, neither Plutonic nor any
officer or director of Plutonic, will be liable for anything done or purported
to be done in connection with the Combination or any transaction contemplated by
the Agreement in good faith, but nothing in this clause excludes any liability
that may arise from a grossly negligence act or omission on the part of such a
person. The Agreement provides that Homestake or, as applicable, Plutonic
receives and holds the benefit of the aforesaid release, to the extent it
relates to its officers and directors as agent for them.

DEFINITIONS

For the purposes of the above summary of the contents of the Agreement, the
following terms have the meaning indicated below:

Material Adverse Change means one or more occurrences or matters
individually or in aggregate (other than as previously disclosed) that:

(a) have a material adverse effect on the business, properties,
financial condition or results of operations of a party and its
subsidiaries, taken as a whole (other than effects relating to the gold
mining industry in general) in relation to which creates or could
reasonably be expected to create liabilities, or results or could
reasonably be expected to result in a diminution of the value of such
party's assets, which in aggregate exceed US$150 million for Homestake or
A$50 million for Plutonic; or

(b) prevent such party and its subsidiaries from performing their
respective obligations under the Agreement.

Homestake Prescribed Occurrence means, other than as previously disclosed
or as required by the Agreement or the Schemes, between the date of the
Agreement and the Effective Date:

(a) Homestake reclassifying, reducing or splitting its outstanding
stock by way of capital stock split, payment of any dividend payable in
stock, or otherwise;
S-106
<PAGE> 137

(b) the Homestake Board, enacting a resolution providing for the
reduction, by repurchase or otherwise, of the number of outstanding shares
of capital stock of such entity;

(c) Homestake entering into an agreement to purchase any of its
outstanding shares of capital stock, or the Homestake Board enacting a
resolution approving the terms of such an agreement;

(d) Homestake, or a subsidiary thereof, issuing or selling, or
granting an option to purchase, any of its shares of capital stock or
agreeing to issue or sell, or to grant an option to purchase, any such
shares except in the ordinary operation of stock option plans, savings plan
and directors' rights plans;

(e) Homestake, or a subsidiary thereof, issuing, or agreeing to issue,
convertible notes;

(f) Homestake, or any subsidiary thereof, disposing, agreeing to
dispose, of the whole, or a substantial part, of the business or property
of the Homestake group as a whole;

(g) Homestake, or any subsidiary thereof, mortgaging, pledging or
otherwise encumbering, or agreeing to mortgage, pledge or otherwise
encumber, the whole, or a substantial part, of the business or property of
the Homestake group as a whole;

(h) the Homestake Board, or any board of any subsidiary of Homestake,
enacting a resolution providing for the winding up, bankruptcy, liquidation
or dissolution of Homestake or a subsidiary thereof, except for a
subsidiary having assets of less than US$250,000;

(i) the appointment of a receiver, bankruptcy trustee, liquidator,
administrator, custodian or other similar official of Homestake or any
subsidiary thereof, except for a subsidiary having assets of less than
US$250,000;

(j) the entry by a court of competent jurisdiction of an order or
decree providing for the winding up of Homestake or a subsidiary thereof,
except for a subsidiary having assets of less than US$250,000; or

(k) Homestake, or a subsidiary thereof, entering into a Chapter 11
bankruptcy.

Plutonic Prescribed Occurrence means, other than as previously disclosed or
as required by the Agreement or the Schemes, between the date of the Agreement
and the Effective Date:

(a) any one or more of the provisions of the constitution of Plutonic
or any material subsidiary of Plutonic being altered in any of the ways
mentioned in section 193(1) of the NSWL;

(b) Plutonic or any material subsidiary of Plutonic resolving to
reduce its share capital in any way;

(c) Plutonic making an allotment of, or granting an option to
subscribe for, any of its Ordinary Shares, Partly Paid Shares or Options or
agreeing to make such an allotment or to grant such an option other than
allotments of Ordinary Shares or Partly Paid Shares following an election
to convert by the holder of an Option or any subsidiary of Plutonic doing
any of the foregoing with respect to its own securities;

(d) Plutonic or a subsidiary of Plutonic issuing, or agreeing to
issue, convertible notes or other debt securities (other than the issue of
non-convertible debt securities in the ordinary course of business);

(e) Plutonic or any material subsidiary of Plutonic disposing, or
agreeing to dispose, of the whole, or a substantial part, of its business
or property;

(f) Plutonic or any material subsidiary of Plutonic creating, or
agreeing to create, any mortgage, charge, lien or other encumbrance over
the whole, or a substantial part, of its business or property otherwise
than in the ordinary course of business;

(g) Plutonic or any subsidiary entering into any onerous or long term
contract or commitment otherwise than in the ordinary course of business;

(h) Plutonic or any material subsidiary of Plutonic resolving that it
be wound up;

S-107
<PAGE> 138

(i) the appointment of a provisional liquidator or administrator of
Plutonic or of any material subsidiary of Plutonic;

(j) the making of an order by a court for the winding up of Plutonic
or of any material subsidiary of Plutonic;

(k) an administrator of Plutonic, or of any material subsidiary of
Plutonic being appointed under sections 436A, 436B or 436C of the NSWL;

(l) Plutonic or any material subsidiary of Plutonic executing a deed
of company arrangement;

(m) the appointment of a receiver or a receiver and manager, in
relation to the whole, or a substantial part, of the property of Plutonic
or of any material subsidiary of Plutonic; or

(n) Plutonic or any material subsidiary of Plutonic:

(i) entering into a buy-back agreement; or

(ii) resolving to approve the terms of a buy-back agreement under
the NSWL.

For the purposes of this definition a material subsidiary includes any
subsidiary that has assets of more than A$100,000.

Takeover Proposal means any proposal for a takeover bid, share purchase,
scheme, capital reconstruction purchase of assets, merger, amalgamation,
consolidation or other business combination involving Homestake or Plutonic, as
applicable, or any of its subsidiaries, any proposal for the issuance by such
party of a material amount of its equity securities as consideration for the
assets or securities of another person or any proposal or offer to acquire in
any manner, directly or indirectly, a material equity interest in, any voting
securities of, or a substantial portion of the assets of Homestake or Plutonic
or any of its subsidiaries, other than the transactions contemplated by the
Agreement.

Superior Proposal means any proposal made by a third party to acquire a
significant proportion (15% or more) of either Homestake or Plutonic pursuant to
a takeover bid, share purchase, scheme, capital reconstruction, tender or
exchange offer, a merger, a sale of all or substantially all of its assets or
otherwise on terms that the Board of such party determines in its good faith
judgment to be more favorable to the holders of the shares of such party than
the transactions contemplated by the Agreement (based on the written opinion,
with only customary qualifications, of such party's independent financial
advisor), taking into account all the terms and conditions of such proposal and
the Agreement.

S-108
<PAGE> 139

HOMESTAKE HISTORICAL SELECTED FINANCIAL AND OTHER DATA

HISTORICAL SELECTED FINANCIAL DATA

The following table sets forth certain financial data relating to
Homestake. The financial data should be read in conjunction with (i) the
historical financial statements of Homestake, including the notes thereto, which
are set forth in Appendix C, (ii) the explanation of significant differences
between U.S. GAAP and Australian GAAP as applicable to Homestake, as set forth
in Appendix F, and (iii) the Unaudited Pro Forma Condensed Combined Financial
Statements, which are included in this Supplement.

(IN US DOLLARS)
(TABULAR DOLLAR AMOUNTS ARE IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
(PREPARED IN ACCORDANCE WITH U.S. GAAP)

- ---------------

(5) Basic and diluted earnings per share.

S-109
<PAGE> 140

(6) Long-term obligations include:

HOMESTAKE SELECTED OPERATING DATA
(IN US DOLLARS)

S-110
<PAGE> 141

PLUTONIC HISTORICAL SELECTED FINANCIAL AND OTHER DATA
(AUSTRALIAN GAAP)

HISTORICAL SELECTED FINANCIAL DATA

The following table sets forth certain financial data relating to Plutonic.
The financial data should be read in conjunction with (i) the historical
financial statements of Plutonic, including the notes thereto, which are set
forth in Appendix D, and (ii) the Unaudited Pro Forma Condensed Combined
Financial Statements, which are included in this Supplement.

(IN AUSTRALIAN DOLLARS)
(TABULAR DOLLAR AMOUNTS ARE IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
(PREPARED IN ACCORDANCE WITH AUSTRALIAN GAAP)

<TABLE>
<CAPTION>
FOR THE YEAR ENDED 31 DECEMBER
--------------------------------------------------------
1997 1996 1995 1994 1993
-------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
Operating revenue................... $361,579 $340,461 $222,691 $214,363 $239,098
Net income (loss)................... (62,299) 40,702 40,124 38,055 35,223
Net income (loss) per share(1)...... (0.33) 0.22 0.22 0.21 0.22
Cash dividends per share............ 0.03 0.11 0.095 0.08 0.06
</TABLE>

<TABLE>
<CAPTION>
31 DECEMBER
--------------------------------------------------------
1997 1996 1995 1994 1993
-------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
Total assets........................ $575,309 $678,011 $540,134 $396,730 $377,848
Long-term obligations(2)............ 175,061 90,184 122,415 4,415 13,517
Shareholders' equity................ 339,211 416,569 354,967 331,708 300,122(3)
</TABLE>

- ---------------

(1) Basic and diluted earnings per share, except 1996 on a diluted basis was
$0.21.

(2) Long-term obligations consist of:

<TABLE>
<CAPTION>
31 DECEMBER
----------------------------------------------------
1997 1996 1995 1994 1993
-------- -------- -------- ------ -------
<S> <C> <C> <C> <C> <C>
Creditors and borrowings............. $170,000 $ 87,500 $120,000 $3,970 $13,517
Mine rehabilitation.................. 3,560 1,984 1,955
Employee entitlements................ 493 134 117
Other long-term obligations.......... 1,008 566 343 445
-------- -------- -------- ------ -------
$175,061 $ 90,184 $122,415 $4,415 $13,517
======== ======== ======== ====== =======
</TABLE>

(3) During 1993, Plutonic completed a rights issue of 19,935,000 Ordinary Shares
at a price of $6.30 per Ordinary Share on the basis of one Ordinary Share
for every eight Ordinary Shares held.

PLUTONIC SELECTED OPERATING DATA
(IN AUSTRALIAN DOLLARS)

S-111
<PAGE> 142

PLUTONIC HISTORICAL SELECTED FINANCIAL DATA
(U.S. GAAP)

The following table sets forth certain financial data information relating
to Plutonic. The financial data should be read in conjunction with (i) the
historical financial statements of Plutonic, including the notes thereto, which
are set forth in Appendix D, and (ii) the Unaudited Pro Forma Condensed Combined
Financial Statements, which are included in this Supplement.

(IN AUSTRALIAN DOLLARS)
(TABULAR DOLLAR AMOUNTS ARE IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
(PREPARED IN ACCORDANCE WITH U.S. GAAP)

<TABLE>
<CAPTION>
FOR THE YEAR ENDED 31 DECEMBER
--------------------------------------------------------
1997 1996 1995 1994 1993
-------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
Revenues............................ $335,755 $302,976 $218,291 $203,941 $233,086
Net income (loss)................... (45,684) 24,242 27,147 20,521 34,600
Net income (loss) per share(1)...... (0.24) 0.13 0.15 0.11 0.22
Cash dividends per share............ 0.07 0.095 0.09 0.09 0.05
</TABLE>

<TABLE>
<CAPTION>
31 DECEMBER
--------------------------------------------------------
1997 1996 1995 1994 1993
-------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
Total assets........................ $566,348 $651,918 $531,227 $380,375 $381,279
Long-term obligations(2)............ 175,061 90,184 122,415 4,415 13,517
Shareholders' equity................ 286,422 336,812 297,689 282,053 282,528
</TABLE>

- ---------------

(1) Basic and diluted earnings per share.

(2) Long-term obligations consist of:

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<PAGE> 143

UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL STATEMENTS
(TABULAR DOLLAR AMOUNTS ARE IN THOUSANDS OF US DOLLARS, EXCEPT PER SHARE
AMOUNTS)
(PREPARED IN ACCORDANCE WITH U.S. GAAP)

The following Unaudited Pro Forma Condensed Combined Balance Sheet and
Unaudited Pro Forma Condensed Combined Statements of Operations (collectively
the "Pro Forma Financial Statements") were prepared by Homestake to illustrate
the estimated effects of the Combination accounted for as a pooling-of-
interests under U.S. GAAP. See "The Combination -- Anticipated Accounting
Treatment." Accordingly, the financial information of Homestake and Plutonic has
been combined for all prior periods. All amounts in the Pro Forma Financial
Statements are stated in US dollars unless otherwise stated. The Pro Forma
Financial Statements give effect to material differences between Homestake's and
Plutonic's accounting policies which are expected to have a material impact on
the combined financial statements, and reflect adjustments made to conform to
Homestake's presentation and U.S. GAAP. The Pro Forma Financial Statements do
not purport to represent what the combined financial position or results of
operations actually would have been if the Combination had occurred at the
beginning of the periods or to project the combined financial position or
results of operations for any future date or period. The Unaudited Pro Forma
Condensed Combined Balance Sheet gives effect to the Combination as if it had
occurred on December 31, 1997. The Unaudited Pro Forma Condensed Combined
Statements of Operations are presented for the years ended December 31, 1997,
1996, and 1995, giving effect to the Combination as if it had occurred at the
beginning of the earliest period presented.

The Pro Forma Financial Statements should be read in conjunction with the
historical consolidated financial statements, including notes thereto, of
Homestake, prepared in accordance with U.S. GAAP and Plutonic, prepared in
accordance with Australian GAAP, which are included elsewhere in this Document.
Plutonic's historical financial statements have been adjusted to conform with
U.S. GAAP and translated into US dollars.

The Pro Forma Financial Statements are presented utilizing the
pooling-of-interests method of accounting whereby the recorded assets,
liabilities, shareholders' equity and results of operations of Homestake and
Plutonic become the combined assets, liabilities, shareholders' equity and
results of operations. The Pro Forma Financial Statements also include pro forma
adjustments which are based upon available information and certain assumptions
that management of Homestake believes are reasonable in the circumstances. Such
pro forma adjustments reflect the effects of (1) the exchange of each Ordinary
Share for 0.34 shares of Homestake Common Stock, (2) the exchange of
approximately 311,531 shares of Homestake Common Stock for the Partly Paid
Shares, (3) the exchange of approximately 192,175 shares of Homestake Common
Stock for the Options, and (4) conforming Plutonic's U.S. GAAP adjusted
financial information to Homestake's basis of accounting.

S-113
<PAGE> 144

UNAUDITED PRO FORMA CONDENSED COMBINED BALANCE SHEET
DECEMBER 31, 1997
(IN THOUSANDS OF US DOLLARS)

ASSETS

<TABLE>
<CAPTION>
PLUTONIC
HOMESTAKE HISTORICAL PRO FORMA PRO FORMA
HISTORICAL AS ADJUSTED(A) ADJUSTMENTS COMBINED
---------- ---------------- ----------- ----------
<S> <C> <C> <C> <C>
Current Assets
Cash and equivalents............... $ 94,725 $ 29,358 $ -- $ 124,083
Short-term investments............. 141,221 141,221
Receivables........................ 40,366 3,163 43,529
Gold bullion....................... 20,516 (20,516)(B) --
Inventories........................ 69,258 17,194 17,473(B) 103,925
Deferred income and mining taxes... 20,894 4,119 25,013
Other.............................. 9,506 3,648 13,154
---------- -------- -------- ----------
Total current assets............ 375,970 77,998 (3,043) 450,925
---------- -------- -------- ----------
Property, Plant and Equipment -- net 812,046 225,693 1,037,739
---------- -------- -------- ----------
Investments and Other Assets
Noncurrent investments............. 32,321 8,773 41,094
Other assets....................... 84,392 17,617 102,009
Deferred income taxes.............. 44,176 44,176
---------- -------- -------- ----------
Total investments and other
assets........................ 116,713 70,566 187,279
---------- -------- -------- ----------
Total Assets............... $1,304,729 $374,257 $ (3,043) $1,675,943
========== ======== ======== ==========

LIABILITIES AND SHAREHOLDERS' EQUITY

Current Liabilities.................. $ 108,906 $ 23,334 $ (1,095)(C)
13,000(D) $ 144,145
---------- -------- -------- ----------
Long-term Liabilities
Long-term debt..................... 263,855 110,738 374,593
Other long-term obligations........ 142,382 3,297 145,679
Deferred income taxes.............. 155,449 44,582 200,031
---------- -------- -------- ----------
Total long-term liabilities..... 561,686 158,617 720,303
---------- -------- -------- ----------
Minority Interests................... 102,387 5,729 108,116
---------- -------- -------- ----------
Shareholders' Equity................. 531,750 186,577 (3,043)(B)
1,095(C)
(13,000)(D) 703,379
---------- -------- -------- ----------
Total Liabilities and
Shareholders' Equity..... $1,304,729 $374,257 $ (3,043) $1,675,943
========== ======== ======== ==========
</TABLE>

See notes to Unaudited Pro Forma Condensed Combined Balance Sheet.
S-114
<PAGE> 145

NOTES TO UNAUDITED PRO FORMA CONDENSED COMBINED BALANCE SHEET

(A) The Plutonic historical balance sheet at December 31, 1997 has been adjusted
to reflect (i) presentation in accordance with U.S. GAAP and the format and
classifications utilized by Homestake and (ii) translation into US dollars
at the December 31, 1997 exchange rate of approximately 0.6514 US dollars
for each Australian dollar. The following table shows adjustments made to
reflect the historical Plutonic Australian dollar balance sheet in
conformity with Homestake's presentation and U.S. GAAP (see Note 37
"Reconciliation to U.S. GAAP" in Plutonic's historical consolidated
financial statements for the year ended 31 December 1997 included in
Appendix D in this Document) and translation into US dollars (in thousands):

<TABLE>
<CAPTION>
AUSTRALIAN DOLLARS
---------------------------------------- PLUTONIC
ADJUSTED HISTORICAL
PLUTONIC PLUTONIC AS ADJUSTED
HISTORICAL ADJUSTMENTS HISTORICAL (US DOLLARS)
---------- ----------- ---------- ------------
<S> <C> <C> <C> <C>
ASSETS
Current Assets
Cash and equivalents.......................... $ 45,069 $ 45,069 $ 29,358
Receivables................................... 4,855 4,855 3,163
Gold bullion.................................. 31,496 31,496 20,516
Inventories................................... 26,396 26,396 17,194
Deferred income and mining taxes.............. $ 6,324(4c) 6,324 4,119
Other......................................... 5,600 5,600 3,648
-------- -------- -------- --------
Total current assets........................ 113,416 6,324 119,740 77,998
-------- -------- -------- --------
Property, Plant and Equipment -- net 115,645 (2,000)(4b)
232,829(8) 346,474 225,693
Investments and Other Assets
Noncurrent investments........................ 7,228 (1,955)(7)
8,194(6) 13,467 8,773
Other assets.................................. 27,045 27,045 17,617
Deferred cost of mineral properties........... 284,891 (94,457)(1)
13,192(2)
(540)(3)
45,043(4a)
(15,300)(4b)
(232,829)(8) -- --
Deferred income taxes......................... 27,084 (6,324)(4c)
47,056(5) 67,816 44,176
-------- -------- -------- --------
Total investments and other assets.......... 346,248 (237,920) 108,328 70,566
-------- -------- -------- --------
Total Assets........................... $575,309 $ (767) $574,542 $374,257
======== ======== ======== ========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities............................. $ 36,261 $ 5,208(4c)
(5,647)(9) $ 35,822 $ 23,334
-------- -------- -------- --------
Long-term Liabilities
Long-term debt................................ 170,000 170,000 110,738
Other long-term obligations................... 5,061 5,061 3,297
Deferred income and taxes..................... 24,776 45,043(4a)
(5,208)(4c)
3,829(5) 68,440 44,582
-------- -------- -------- --------
Total long-term liabilities................. 199,837 43,664 243,501 158,617
-------- -------- -------- --------
Minority Interests 2,751 6,044(6) 8,795 5,729
-------- -------- -------- --------
Shareholders' Equity............................ 336,460 (94,457)(1)
13,192(2)
(540)(3)
(17,300)(4b)
43,227(5)
2,150(6)
(1,955)(7)
5,647(9) 286,424 186,577
-------- -------- -------- --------
Total Liabilities and Shareholders'
Equity............................... $575,309 $ (767) $574,542 $374,257
======== ======== ======== ========
</TABLE>

S-115
<PAGE> 146

- ---------------

(1) Plutonic defers ongoing exploration expenditures until the viability of
a project is determined. If a decision is made to proceed with a
project the expenditures are transferred to pre-production cost to be
amortized over the life of the mine. If a decision is made to abandon a
project the expenditures are written off at the time of such
determination. Under U.S. GAAP, exploration expenditures incurred prior
to the completion of a favorable feasibility study are expensed as
incurred. Following completion of a favorable feasibility study,
development and drilling expenditures are capitalized and are amortized
using the units-of-production method based on proven and probable
reserves when commercial production begins.

(2) Plutonic accounts for business combinations using the purchase method.
In its application of the purchase method, Plutonic may assign a
portion of the purchase price to acquired exploration potential
("AEP"). AEP is amortized using the straight-line method over periods
not exceeding ten years. If it is subsequently determined that the
exploration properties acquired in a business combination do not
contain significant mineralization, the remaining unamortized AEP
associated with that business combination would be written down at the
time of such determination. Under U.S. GAAP, AEP would be specifically
allocated to individual exploration properties. If it is subsequently
determined that significant mineralization does not exist on any of
these individual properties, they would be written down at the time of
such determination. If a property becomes a producing mine, its
carrying value would be amortized using the units-of-production method
based on proven and probable reserves.

(3) Plutonic amortizes mine development and pre-production expenditures
together with estimates of expected future development expenditures
using the units-of-production method based on its estimate of future
life-of-mine production. Plutonic's estimate of future life-of-mine
production includes proven and probable reserves plus a portion of
mineralized material which has not yet been converted to reserves but
which Plutonic believes there is sufficient confidence that such
material will be converted to reserves after further delineation
drilling. Plutonic has a history of successfully converting mineralized
material included in its life-of-mine plans into reserves. If a
significant change in the estimated future life-of-mine production
occurs during the period, amortization expense is adjusted to reflect
the change. Under U.S. GAAP, mine development expenditures, excluding
any provision for expected future development expenditures, are
amortized using the units-of-production method based on proven and
probable reserves only. Any significant changes in proven and probable
reserves are accounted for prospectively for amortization purposes from
the date of the change.

(4) Plutonic uses the liability method of accounting for income taxes,
which also is required under U.S. GAAP. However, there are differences
in the application of the liability method under U.S. GAAP. The most
significant differences relate to acquisitions accounted for using the
purchase method, recognition of future income tax benefits, and the
presentation of the current and long-term portions of future tax
benefits and deferred tax liabilities in the balance sheet.

a) Under Australian GAAP, when an acquisition price exceeds the
underlying net book value of the assets acquired, the excess purchase
price is allocated to the acquired assets and liabilities based on fair
values. Deferred taxes are not established for any differences between
the book and tax bases of assets, which may arise from this allocation.
The assets are then amortized in accordance with the company's normal
depreciation policies. Under U.S. GAAP, when an acquisition is accounted
for using the purchase method, the excess purchase price paid above the
net book value of the assets acquired also is allocated to the acquired
assets and liabilities based on fair values. However, to the extent that
such allocation creates a temporary difference, deferred taxes are
established and the excess purchase price is increased by an equal
amount. The assets are then amortized in accordance with the company's
normal depreciation policies and the deferred tax provision is accounted
for in accordance with the company's normal tax accounting policies.

b) Under Australian GAAP, future income tax benefits relating to
timing differences are not recognized unless realization of the benefit
is assured beyond reasonable doubt. Future income tax

S-116
<PAGE> 147

benefits resulting from net operating losses are not recognized unless
there is virtual certainty of realization of the benefit. Acquired tax
benefits are valued at market at the time of acquisition, and subsequent
to acquisition are recognized in accordance with the foregoing criteria.
Under U.S. GAAP, a deferred tax asset is recognized for deductible
temporary differences and operating loss and tax credit carry-forwards.
A valuation allowance is recognized if, based on the weight of available
evidence, it is more likely than not that some portion or all of the
deferred tax asset will not be realized.

c) Under Australian GAAP, the current and long-term portions of
future tax benefits and deferred tax liabilities are not separately
disclosed in the balance sheet. Under U.S. GAAP, the current and
long-term portions of future tax benefits and deferred tax liabilities
are separately disclosed in the balance sheet.

(5) Represents the income tax effect that results from the U.S. GAAP
adjustments (1) through (4) above.

(6) To reflect minority interests' share of the U.S. GAAP adjustments (1)
through (5) above.

(7) Plutonic carries investments in listed and unlisted companies at cost
except that declines in market value judged to be other than temporary
are recognized in determining net income. Under U.S. GAAP, Plutonic's
investments would be classified as available-for-sale investments and
would be carried at market value. Unrealized gains and losses on these
investments are recorded as a separate component of shareholders'
equity except that declines in market value judged to be other than
temporary are recognized in determining net income.

(8) To reclassify deferred mining costs to conform to Homestake's
presentation.

(9) Plutonic retroactively records common stock dividends declared after an
accounting period has ended but before the financial statements are
issued. Under U.S. GAAP, common stock dividends payable are recorded in
the period in which they are declared.

(B) Plutonic recognizes revenue and records a receivable for gold bullion (noted
as "gold bullion") at the time it is delivered to a refinery. Homestake
records gold bullion as inventory at the lower of cost or net realizable
value and recognizes revenue when title passes.

(D) Homestake and Plutonic estimate that they will incur a total of
approximately $13 million of transaction costs, consisting primarily of
investment bankers fees, stamp duty taxes, attorneys and accountants fees,
financial printing, and other related charges. These estimates of
merger-related expenses are preliminary and therefore are subject to change.
These nonrecurring expenses are being charged to operations as incurred. The
Pro Forma Condensed Combined Balance Sheet gives effect to the estimated $13
million of transaction costs as if they had been incurred as of December 31,
1997. The Pro Forma Condensed Combined Statements of Operations do not give
effect to the estimated $13 million of merger-related expenses.

Homestake and Plutonic also estimate that they will incur approximately $4
million of one-time post-Combination severance, lease termination and relocation
charges. The Pro Forma Financial Statements do not give effect to these
post-Combination severance, lease termination and relocation charges.

S-117
<PAGE> 148

UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENT OF OPERATIONS

FOR THE YEAR ENDED DECEMBER 31, 1997
(IN THOUSANDS OF US DOLLARS, EXCEPT PER SHARE AMOUNTS)

<TABLE>
<CAPTION>
PLUTONIC
HOMESTAKE HISTORICAL AS PRO FORMA PRO FORMA
HISTORICAL ADJUSTED(A) ADJUSTMENTS COMBINED
---------- ---------------- ----------- ---------
<S> <C> <C> <C> <C>
Revenues
Product sales........................... $ 659,914 $228,868 $ (938)(B) $ 887,844
Interest income......................... 14,215 3,105 17,320
Gain on termination of Santa Fe
merger............................... 62,925 62,925
Other income............................ (13,220) 17,896 4,676
--------- -------- --------- ---------
723,834 249,869 (938) 972,765
--------- -------- --------- ---------
Costs and Expenses
Production costs........................ 473,502 154,047 (1,316)(B) 626,233
Depreciation, depletion and
amortization......................... 112,356 43,467 155,823
Administrative and general expense...... 40,563 9,681 50,244
Exploration expense..................... 48,365 16,873 65,238
Interest expense........................ 11,259 9,158 20,417
Write-downs and other unusual charges... 198,802 86,513 285,315
Other expense........................... 6,836 540 7,376
--------- -------- --------- ---------
891,683 320,279 (1,316) 1,210,646
--------- -------- --------- ---------
Income (Loss) Before Taxes and Minority
Interests............................... (167,849) (70,410) 378 (237,881)
Income and Mining Taxes................... 9,211 30,180 (136)(C) 39,255
Minority Interests........................ (10,241) 6,232 (4,009)
--------- -------- --------- ---------
Net Income (Loss)......................... $(168,879) $(33,998) $ 242 $(202,635)
========= ======== ========= =========
Net Income (Loss) Per Share -- Basic and
Diluted................................. $ (1.15) $ (0.18) $ (0.96)
========= ======== ========= =========
Average Shares Used in the Computation.... 147,734 187,700 (187,700)(D)
63,818(D) 211,552
========= ======== ========= =========
</TABLE>

See notes to Unaudited Pro Forma Condensed Combined Statements of Operations.
S-118
<PAGE> 149

UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENT OF OPERATIONS

FOR THE YEAR ENDED DECEMBER 31, 1996
(IN THOUSANDS OF US DOLLARS, EXCEPT PER SHARE AMOUNTS)

<TABLE>
<CAPTION>
PLUTONIC
HOMESTAKE HISTORICAL PRO FORMA PRO FORMA
HISTORICAL AS ADJUSTED(A) ADJUSTMENTS COMBINED
---------- ---------------- ----------- ----------
<S> <C> <C> <C> <C>
Revenues
Product sales............................ $742,935 $208,644 $ (6,555)(B) $ 945,024
Interest income.......................... 15,054 5,338 20,392
Other income............................. 8,947 23,278 32,225
-------- -------- --------- ----------
766,936 237,260 (6,555) 997,641
-------- -------- --------- ----------
Costs and Expenses
Production costs......................... 475,333 139,962 (3,237)(B) 612,058
Depreciation, depletion and
amortization.......................... 112,353 39,499 151,852
Administrative and general expense....... 36,965 11,831 48,796
Exploration expense...................... 45,382 21,981 67,363
Interest expense......................... 10,644 8,496 19,140
Write-downs and other unusual charges.... 8,983 8,983
Other expense............................ 5,592 1,066 6,658
-------- -------- --------- ----------
695,252 222,835 (3,237) 914,850
-------- -------- --------- ----------
Income (Loss) Before Taxes and Minority
Interests................................ 71,684 14,425 (3,318) 82,791
Income and Mining Taxes.................... (26,333) 2,757 1,194(C) (22,382)
Minority Interests......................... (15,070) 1,802 (13,268)
-------- -------- --------- ----------
Net Income (Loss).......................... $ 30,281 $ 18,984 $ (2,124) $ 47,141
======== ======== ========= ==========
Net Income (Loss) Per Share -- Basic and
Diluted.................................. $ 0.21 $ 0.10 $ 0.22
======== ======== ==========
Average Shares Used in the Computation..... 146,311 187,400 (187,400)(D)
63,716(D) 210,027
======== ======== ========= ==========
</TABLE>

See notes to Unaudited Pro Forma Condensed Combined Statements of Operations.
S-119
<PAGE> 150

UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENT OF OPERATIONS

FOR THE YEAR ENDED DECEMBER 31, 1995
(IN THOUSANDS OF US DOLLARS, EXCEPT PER SHARE AMOUNTS)

<TABLE>
<CAPTION>
PLUTONIC
HISTORICAL
HOMESTAKE AS PRO FORMA PRO FORMA
HISTORICAL ADJUSTED(A) ADJUSTMENTS COMBINED
---------- ----------- ----------- ---------
<S> <C> <C> <C> <C>
Revenues
Product sales.............................. $715,842 $156,920 $ 39,817(B) $912,579
Interest income............................ 16,737 2,415 19,152
Other income............................... 13,786 2,505 16,291
-------- -------- --------- --------
746,365 161,840 39,817 948,022
-------- -------- --------- --------
Costs and Expenses
Production costs........................... 481,886 92,376 28,302(B) 602,564
Depreciation, depletion and amortization... 99,602 23,732 123,334
Administrative and general expense......... 37,283 7,186 44,469
Exploration expense........................ 27,541 15,740 43,281
Interest expense........................... 11,297 1,162 12,459
Other expense.............................. 3,290 675 3,965
-------- -------- --------- --------
660,899 140,871 28,302 830,072
-------- -------- --------- --------
Income (Loss) Before Taxes and Minority
Interests.................................. 85,466 20,969 11,515 117,950
Income and Mining Taxes...................... (39,141) (1,884) (3,779)(C) (44,804)
Minority Interests........................... (15,998) 1,041 (14,957)
-------- -------- --------- --------
Net Income (Loss)............................ $ 30,327 $ 20,126 $ 7,736 $ 58,189
======== ======== ========= ========
Net Income (Loss) Per Share -- Basic and
Diluted.................................... $ 0.22 $ 0.11 $ 0.29
======== ======== ========
Average Shares Used in the Computation....... 138,117 180,200 (180,200)(D)
61,268(D) 199,385
======== ======== ========= ========
</TABLE>

See notes to Unaudited Pro Forma Condensed Combined Statements of Operations.
S-120
<PAGE> 151

NOTES TO UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENTS OF OPERATIONS
(ALL AMOUNTS ARE IN US DOLLARS UNLESS OTHERWISE INDICATED)

(A) The Plutonic historical statements of operations for the years ended
December 31, 1997, 1996, and 1995 have been adjusted to reflect (i)
presentation in accordance with U.S. GAAP and the format and classifications
utilized by Homestake and (ii) translation into U.S. dollars using the
average exchange rate for each period (approximately 0.7442 United States
dollars for each Australian dollar in the year ended 1997, 0.7831 in the
year 1996, and 0.7414 in the year 1995). Adjustments to the statements of
operations may differ in amount from similar adjustments made to the balance
sheet due to converting balance sheet amounts at the period end exchange
rate and statements of operations amounts at the average exchange rate for
each period. The following table shows adjustments made to reflect the
historical Plutonic Australian dollar statements of operations in conformity
with U.S. GAAP (see "Reconciliation to U.S. GAAP", Notes 37 and 35 in
Plutonic's historical consolidated financial statements for the periods
ended 31 December 1997 and 31 December 1996, respectively, included in
Appendix D in this Document) and translation into U.S. dollars (in
thousands):

<TABLE>
<CAPTION>
FOR THE YEAR ENDED 31 DECEMBER
------------------------------------
1997 1996 1995
INCREASE(DECREASE) -------- -------- --------
<S> <C> <C> <C>
Revenue........................................ $ 2,604(4) $ (2,740)(4) --
Depreciation, depletion and amortization....... (2,665)(2) (3,814)(2) $ (2,269)(2)
(5,704)(3) 269(3) (1,521)(3)
12,745(5a) 5,212(5a) 2,831(5a)
Exploration expense............................ 11,677(1) 18,577(1) 12,373(1)
Write-downs and other unusual charges.......... (1,161)(1)
(7,701)(3)
Income tax expense............................. (5,061)(5b) 3,994(5b) (4,374)(5b)
(12,484)(6) (12,902)(6) 3,817(6)
Minority interests............................. 592(7) (1,185)(7) (1,236)(7)
-------- -------- --------
Net income (loss).............................. $ 12,366 $(12,891) $ (9,621)
======== ======== ========
</TABLE>

- ---------------

(1) Plutonic defers ongoing exploration expenditures until the viability of
a project is determined. If a decision is made to proceed with a
project the expenditures associated with that project are transferred
to pre-production costs to be amortized over the life of the mine. If a
decision is made to abandon a project the expenditures are written off
at the time of such determination. Under U.S. GAAP, exploration
expenditures incurred prior to the completion of a favorable
feasibility study are expensed as incurred. Following completion of a
favorable feasibility study, pre-production exploration expenditures
are capitalized and amortized using the units-of-production method
based on proven and probable reserves.

(2) Plutonic accounts for business combinations using the purchase method.
In its application of the purchase method, Plutonic may assign a
portion of the purchase price to acquired exploration potential
("AEP"). AEP is amortized using the straight-line method over periods
not exceeding ten years. If it is subsequently determined that the
exploration properties acquired in a business combination do not
contain significant mineralization, the remaining unamortized AEP
associated with that business combination would be written down at the
time of such determination. Under U.S. GAAP, AEP would be specifically
allocated to individual exploration properties. If it is subsequently
determined that significant mineralization does not exist on any of
these individual properties, they would be written down at the time of
such determination. If a property becomes a producing mine its carrying
value would be amortized using the units-of-production method based on
proven and probable reserves.

(3) Plutonic amortizes mine development and pre-production expenditures
together with estimates of expected future development expenditures
using the units-of-production method based on its

S-121
<PAGE> 152

estimate of future life-of-mine production. Plutonic's estimate of
future life-of-mine production includes proven and probable reserves
plus a portion of mineralized material which has not yet been converted
to reserves but which Plutonic believes there is sufficient confidence
that such material will be converted to reserves after further
delineation drilling. Plutonic has a history of successfully converting
mineralized material included in its life-of-mine plans into reserves.
If a significant change in the estimated future life-of-mine production
occurs during the period, amortization expense is adjusted to reflect
the change. Under U.S. GAAP, mine development and pre-production
expenditures, excluding any provision for expected future development
expenditures, are amortized using the units-of-production method based
on proven and probable reserves only. Any significant changes in proven
and probable reserves are accounted for prospectively for amortization
purposes from the date of the change.

(4) In 1996, Plutonic recognized a gain of A$13 million on the early close
out of certain gold forward sales contracts. Under U.S. GAAP, these
forward sales contracts would have been classified as hedges of future
designated production and the gain realized on the early close out
would have been deferred and recognized in income as the designated
production was delivered. Accordingly, under U.S. GAAP approximately
73% of this gain would have been included in income in the year ended
December 31, 1996 with the balance included in income in the year ended
December 31, 1997.

(5) Plutonic uses the liability method of accounting for income taxes,
which also is required under U.S. GAAP. However, there are differences
in the application of the liability method under U.S. GAAP. The most
significant differences relate to acquisitions accounted for using the
purchase method and recognition of future income tax benefits.

a) Under Australian GAAP, when an acquisition price exceeds the
underlying net book value of the assets acquired, the excess
purchase price is allocated to the acquired assets and
liabilities based on fair values. Deferred taxes are not
established for any differences between the book and tax bases
of assets, which may arise from this allocation. The assets are
then amortized in accordance with the company's normal
depreciation policies. Under U.S. GAAP, when an acquisition is
accounted for using the purchase method, the excess purchase
price paid above the net book value of the assets acquired also
is allocated to the acquired assets and liabilities based on
fair values. However, to the extent that such allocation
creates a temporary difference, deferred taxes are established
and the excess purchase price is increased by an equal amount.
The assets are then amortized in accordance with the company's
normal depreciation policies and the deferred tax provision is
accounted for in accordance with the company's normal tax
accounting policies.

b) Under Australian GAAP, future income tax benefits relating to
timing differences are not recognized unless realization of the
benefit is assured beyond reasonable doubt. Future income tax
benefits resulting from net operating losses are not recognized
unless there is virtual certainty of realization of the
benefit. Acquired tax benefits are valued at market at the time
of acquisition, and subsequent to acquisition are recognized in
accordance with the foregoing criteria. Under U.S. GAAP, a
deferred tax asset is recognized for deductible temporary
differences and operating loss and tax credit carry-forwards. A
valuation allowance is recognized if, based on the weight of
available evidence, it is more likely than not that some
portion or all of the deferred tax asset will not be realized.

(6) Represents the income tax effect that results from the U.S. GAAP
adjustments 1) through 5) above.

(7) To reflect minority interests' share of the above U.S. GAAP
adjustments.

(B) Plutonic recognizes revenue and records a receivable for gold bullion at the
time it is delivered to a refinery. Homestake carries final product as
inventory at the lower of cost or net realizable value and recognizes
revenue when title passes.

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<PAGE> 153

(D) Reflects the pro forma adjustment to average shares outstanding for each
year based on the exchange ratio of 0.34 shares of Homestake Common Stock
for each Plutonic Ordinary Share.

(E) Homestake and Plutonic estimate that they will incur a total of
approximately $13 million of transaction costs, consisting primarily of
investment bankers fees, stamp duty taxes, attorneys and accountants fees,
financial printing, and other related charges. These estimates of
merger-related expenses are preliminary and therefore are subject to change.
These nonrecurring expenses are being charged to operations as incurred. The
Pro Forma Condensed Combined Balance Sheet gives effect to the estimated $13
million of transaction costs as if they had been incurred as of December 31,
1997. The Pro Forma Condensed Combined Statements of Operations do not give
effect to the estimated $13 million of merger-related expenses.

S-123
<PAGE> 154

COMPARATIVE PER SHARE DATA

<TABLE>
<CAPTION>
FOR THE YEAR ENDED
DECEMBER 31,
--------------------------
1997 1996 1995
------ ------ ------
<S> <C> <C> <C>
HISTORICAL:
Per share of Homestake Common Stock:
(Prepared in accordance with U.S. GAAP; amounts in US
dollars)
Book value (1)......................................... $ 3.62 $ 5.24 $ 4.52
Cash dividends......................................... 0.15 0.20 0.20
Net income (loss)(2)................................... (1.15) 0.21 0.22
Per Plutonic Ordinary Share:
(Prepared in accordance with Australian GAAP; amounts in
Australian dollars)
Book value (1)......................................... $ 1.81 $ 2.22 $ 1.97
Cash dividends......................................... 0.03 0.11 0.095
Net income (loss)(2)................................... (0.33) 0.22 0.22
Per Plutonic Ordinary Share:
(Prepared in accordance with U.S. GAAP; amounts in
Australian dollars)
Book value(1).......................................... $ 1.53 $ 1.80 $ 1.65
Cash dividends......................................... 0.07 0.095 0.090
Net income (loss)(2)................................... (0.24) 0.13 0.15
PRO FORMA:
Combined per share of Homestake Common Stock:
(Prepared in accordance with U.S. GAAP; amounts in US
dollars)
Book value(1).......................................... $ 3.34 $ 4.91 $ 4.25
Cash dividends......................................... 0.15 0.21 0.20
Net income (loss)(2)................................... (0.96) 0.22 0.29
Combined per Plutonic Ordinary Share equivalent:(3)
(Prepared in accordance with U.S. GAAP; amounts in US
dollars)
Book value(1).......................................... $ 1.14 $ 1.67 $ 1.44
Cash dividends......................................... 0.05 0.07 0.07
Net income (loss)(2)................................... (0.33) 0.07 0.10
</TABLE>

- ---------------

(1) Book value per share is shareholders' equity divided by common shares (or in
the case of Plutonic, Ordinary Shares) outstanding at December 31, 1997,
1996 and 1995.

(2) Basic and diluted earnings per share, except Plutonic's 1996 earnings per
share on a diluted basis under Australian GAAP was $0.21.

(3) Pro forma combined per Ordinary Share of equivalent information reflects the
pro forma combined per share of Homestake Common Stock amount multiplied by
the Exchange Ratio of 0.34 shares of Homestake Common Stock for each
Ordinary Share.

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<PAGE> 155

DIRECTORS AND MANAGEMENT OF HOMESTAKE AFTER THE COMBINATION

BOARD OF DIRECTORS OF HOMESTAKE AFTER THE COMBINATION

The names, principal occupations and certain other information regarding
the existing members of the Homestake Board, all of whom will continue as
directors of Homestake after the Combination, are set forth below.

The information appearing in the tables and certain information regarding
beneficial ownership of securities by such directors contained in this
Supplement has been furnished to Homestake by the directors.

<TABLE>
<CAPTION>
AGE AT
MARCH 1, DIRECTOR
1998 SINCE BIOGRAPHICAL INFORMATION
-------- -------- ------------------------
<S> <C> <C> <C>
M. Norman Anderson....... 67 1992 Mr. Anderson is President of Norman Anderson &
Associates Ltd. (mining consultants). Mr. Anderson
was a director of Homestake Canada Inc. ("HCI")
from 1987 to 1993, and was the Chairman of the
Board of Directors of HCI from February 1991 to
July 1992, when Homestake acquired the outstanding
voting shares of HCI. He is a director of Prime
(gold mining), Solv-ex Corporation (tar sands
processing), Finning International (construction
equipment sales and service), Buenaventura S.A.
(gold and silver mining) and Toronto Dominion
Bank.

Richard R. Burt.......... 51 1997 Mr. Burt has been the Chairman of IEP Advisors,
Inc. (strategic and financial advisory services)
since June 1993. He is also Chairman of Powerhouse
Technologies, Inc., formerly VLT, Inc. (gaming
software design) and Weirton Steel Company
(integrated steel producer). From April 1991 to
June 1993, he was a partner in McKinsey & Company
(management consultants). Mr. Burt was the United
States Ambassador to the Federal Republic of
Germany from 1985 to 1989. He is a director of
Archer Daniels Midland Company (processing and
sales of agricultural commodities) and Hollinger
International Inc. (publishing).

Robert H. Clark, Jr...... 56 1984 Mr. Clark has been Chief Executive Officer since
1993, President since 1983, and a director since
1968 of Case, Pomeroy & Company, Inc. (mining, oil
and gas, real estate). Mr. Clark is a director of
FINOVA Group Inc. (financial services).

Harry M. Conger.......... 67 1977 Mr. Conger has been Chairman of the Board of
Homestake since 1982. He also was Chief Executive
Officer from 1978 until May 1996. He was also
President of Homestake from 1977 to 1986. He is a
director of ASA Limited (investment company),
CalMat Company (aggregates, asphalt, and property
development), and Pacific Gas and Electric Com-
pany and Apex Silver Mines Limited.
</TABLE>

S-125
<PAGE> 156

<TABLE>
<CAPTION>
AGE AT
MARCH 1, DIRECTOR
1998 SINCE BIOGRAPHICAL INFORMATION
-------- -------- ------------------------
<S> <C> <C> <C>
G. Robert Durham......... 68 1990 Mr. Durham has been a director and Chief Executive
Officer of Walter Industries, Inc. (building
materials, home building, mortgage financing and
natural resource development) since June 1991,
President from June 1991 to October 1995, and
Chairman since October 1995. He was Chairman of
the Board and President of Phelps Dodge
Corporation (mining) from 1987 to 1989, President
and Chief Operating Officer from 1985 to 1987, and
held other executive positions with Phelps Dodge
Corporation or affiliated corporations beginning
in 1977. He is a director of FINOVA Group Inc.
(financial services), Amphenol Corp. (manufacturer
of electronic connectors and coaxial cables), and
a trustee of Mutual Life Insurance Company of New
York.

Douglas W. Fuerstenau.... 69 1977 Mr. Fuerstenau has been a Professor of Metallurgy,
Department of Materials Science and Mineral
Engineering, University of California, Berkeley
from 1959 to 1992. He was P. Malozemoff Professor
of Mineral Engineering from 1987 to 1993, and has
been professor emeritus since 1993 and a professor
in the Graduate School since July 1994.

Henry G. Grundstedt...... 69 1992 Mr. Grundstedt is a mining consultant. He was
Senior Vice President of Capital Guardian Trust
Company (money manager of pension and mutual
funds) from 1973 to 1991 and held other executive
positions with that firm beginning in 1972,
specializing in the mining and metals industry.

John Neerhout, Jr........ 67 1989 Mr. Neerhout has been the Managing Director of
Union Railways Limited (rail transportation) since
April 1997, and a director of London and
Continental Railways Ltd. since March 1997. He has
been a director of The Energy Group Plc (gas and
coal production, power generation and sales) since
February 1997. Mr. Neerhout retired as Executive
Vice President of Bechtel Group Inc. (engineering
and construction) in October 1996, a position he
held since 1986. Mr. Neerhout was also a director
of and held executive positions with Bechtel Group
Inc. and other of its affiliated companies prior
to his retirement.

Peter J. Neff............ 59 1998 Mr. Neff currently serves as a consultant to
Rhone-Poulenc Inc. (chemicals and
pharmaceuticals). He joined Rhone-Poulenc in 1987
as President and Chief Operating Officer and was
elected Chief Executive Officer in 1991 and served
as President and Chief Executive Officer until his
retirement in December 1997. Mr. Neff also writes
and speaks at various industry group conferences
about the challenges facing global organizations.
Mr. Neff is a director of UST Inc. (tobacco and
wine manufacturer and distributor) and Envirogen,
Inc. (environmental services).
</TABLE>

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<PAGE> 157

<TABLE>
<CAPTION>
AGE AT
MARCH 1, DIRECTOR
1998 SINCE BIOGRAPHICAL INFORMATION
-------- -------- ------------------------
<S> <C> <C> <C>
Stuart T. Peeler......... 68 1981 Mr. Peeler has been a petroleum industry
consultant since 1989. From 1982 until 1988 he was
Chairman of the Board and Chief Executive Officer
of Statex Petroleum, Inc. He is a director of
CalMat Company (aggregates, asphalt, and property
development), Chieftain International, Inc. (oil
and gas exploration and production) and Chieftain
International Funding Corp. (financial services).

Carol A. Rae............. 51 1995 Ms. Rae has been the President and Chief Executive
Officer of Integrated Media and Marketing, LLC
(producer of educational video and multimedia
products) since 1995, and the President of MedVal
Technologies International, Inc. (manufacturer of
orthopedic splints) since 1984. She has been a
member of the Board of Directors of the U.S.
Chamber of Commerce since 1994. She was Senior
Vice President and General Manager of the Refrac-
tive Division of Chiron Vision Corporation
(manufacturer of ophthalmic intraocular lenses)
from 1994 until 1995 and Senior Vice President of
Government Affairs of Chiron Vision from 1995
until 1997. She was the President and Chief
Executive Officer of Magnum Diamond Corporation
(manufacturer of surgical instruments) from 1989
to 1995.

Jack E. Thompson......... 47 1994 Mr. Thompson has been the Chief Executive Officer
of Homestake since May 1996, and President and a
director of Homestake since August 1994. He was
Executive Vice President-Canada of Homestake and
President and Chief Executive Officer of Prime and
HCI from July 1992 to August 1994. He was
President of Homestake Mineral Development Company
and North American Metals Corp. (gold mining) from
1988 until July 1992.

Jeffrey L. Zelms......... 53 1997 Mr. Zelms has been the President since 1986 and
the Chief Executive Officer since 1992 of The Doe
Run Company (lead, zinc and copper mining, lead
fabrication and recycling). He is a director of
Phoenix Textile Corporation (linen supplier for
the health industry).
</TABLE>

The Homestake Charter provides for the Homestake Board to be divided into
three classes. Each class of directors elected at an annual meeting of
stockholders is elected for a three-year term. Homestake's directors can be
removed from office only for cause.

The Homestake Board has six committees: the Executive Committee, the
Finance Committee, the Audit Committee, the Compensation Committee, the Director
Affairs Committee and the Environmental, Health and Safety Committee.

The Executive Committee has authority to exercise most of the powers of the
Homestake Board. It is intended to function on a standby basis.

The Finance Committee reviews and makes recommendations to the Homestake
Board about proposed dividends, investments and financial matters, and oversees
pension and savings plan investments.

The Audit Committee recommends to the Homestake Board appointment of the
firm of independent accountants to audit and report to stockholders on the
consolidated financial statements of Homestake, and

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<PAGE> 158

receives and considers the reports of the independent accountants. The Committee
also oversees Homestake's internal auditing.

The Compensation Committee evaluates and recommends to the full Homestake
Board the levels of compensation and benefits for officers and key employees.
The Compensation Committee also administers Homestake's stock option plans and
its Deferred Compensation Plan and Executive Supplemental Retirement Plan.

The Director Affairs Committee reviews and evaluates candidates for
director, including nominees recommended by stockholders, makes recommendations
on candidates to the Homestake Board, evaluates director performance, and make
recommendations regarding director compensation and stock ownership.
Applications and communications relating to candidates for director may be sent
to the Secretary of Homestake at the corporate offices in San Francisco.

The Environment, Health and Safety Committee oversees Homestake's
compliance with environmental, health and safety laws and policies.

DIRECTORS AND MANAGEMENT OF HOMESTAKE AFTER THE COMBINATION; INTENTIONS ABOUT
PLUTONIC

Following the Combination, the existing members of the Homestake Board will
continue as directors of Homestake. It is the expectation of Homestake that
Homestake's Board will invite Mr. Paul McClintock, Chairman of the Plutonic
Board, to become a member of the Homestake Board. In addition, the existing
officers of Homestake are expected to continue to hold their respective
positions.

On completion of the Combination, Plutonic will cease to be a separate,
publicly-held company. As a result, certain administrative, treasury and other
activities of Plutonic will no longer need to be performed after the Combination
is completed. It is also the intention of Homestake to integrate the management,
administrative, exploration, operational and other activities of Plutonic and
HGAL, Homestake's principal Australian company. As a part of that integration,
Homestake expects to close the Plutonic offices in Sydney and to relocate the
continuing Plutonic activities to Perth. Plutonic exploration functions
performed in Sydney, as well as HGAL's exploration department in Perth, will be
relocated to Plutonic's existing Perth exploration offices. Homestake expects to
complete substantially all of the integration during 1998.

Because of the headquarters move, the elimination of certain functions, and
restructuring of the organizations, there will be a reduction in the combined
workforce. As a result, Homestake anticipates that some number of existing
Plutonic and HGAL employees will cease to be employed in the newly consolidated
group, although it cannot now determine the extent thereof. Homestake will
provide and expects that it will cause Plutonic to provide, severance packages
to all employees whose positions are eliminated that are on terms at least as
favorable as those generally offered to similarly situated persons in the
location of employment and the Australian gold mining sector.

The Homestake Bank Credit Agreement permits total borrowings of up to
US$275 million. At December 31, 1997, borrowings under the Homestake Bank Credit
Agreement were US$54 million. Homestake's Bank Credit Agreement also limits the
amount of indebtedness that may be incurred or maintained by certain
subsidiaries. At December 31, 1997, the borrowings by Plutonic under its bank
credit agreement were approximately A$170 million (approximately US$114 million
at A$1 = US$0.67), which is in excess of the borrowings which would be permitted
for Plutonic operating as a subsidiary of Homestake under the Homestake Bank
Credit Agreement. Plutonic's bank credit agreement provides that lenders under
S-128
<PAGE> 159

that agreement have the right to request repayment of outstanding indebtedness
following a change of control of Plutonic. The Combination will constitute a
change of control of Plutonic for purposes of the Plutonic bank credit
agreement. Plutonic's bank credit agreement also permits Plutonic to prepay
outstanding indebtedness at any time. Homestake does not expect any difficulty
in securing the consent of its lenders and the Plutonic lenders to maintain the
existing Plutonic indebtedness outstanding or to refinance the outstanding
Plutonic indebtedness under the Homestake Bank Credit Agreement.

Except as set forth above, Homestake does not intend to materially alter
the business of Plutonic, or dispose of or redeploy any of Plutonic's material
assets, as a result of the Combination.

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<PAGE> 160

BENEFICIAL OWNERSHIP OF SECURITIES

OWNERSHIP OF COMMON STOCK BY HOMESTAKE'S MANAGEMENT

>The following table shows: (i) the number of shares of Homestake Common
Stock beneficially owned by directors and the five highest paid executive
officers, and all directors and executive officers as a group, as of March 1,
1998 (excluding shares which such persons have the right to acquire within 60
days of March 1, 1998 but do not actually own), (ii) the number of shares of
Homestake Common Stock which such persons have the right to acquire within 60
days of March 1, 1998, but do not actually own and (iii) the total number of
shares of Homestake Common Stock which such persons own and have the right to
acquire within 60 days of March 1, 1998. The shares so shown include shares held
in Homestake's Savings Plan for the accounts of executive officers and directors
share rights granted under Homestake's Stock Option and Share Rights
Plan -- 1988 and 1996, which entitle outside directors to receive shares on the
date of ceasing to serve as a director. Other than Mr. Clark (see footnote 2
below), no director or executive officer beneficially owns greater than 1
percent of the total number of shares of Homestake Common Stock outstanding. The
shares of Homestake Common Stock beneficially owned by all directors and
executive officers as a group represent approximately 5.5% of the 146,754,653
shares of Homestake Common Stock outstanding as of March 1, 1998, which includes
shares held by Case, Pomeroy & Company, Inc. (described in footnote 2 below) and
the shares which the identified persons have the right to acquire but do not
own.

<TABLE>
<CAPTION>
NUMBER OF SHARES
BENEFICIALLY RIGHT TO
OWNED AS OF ACQUIRE
MARCH 1, 1998, SHARES TOTAL NUMBER
EXCLUDING WITHIN 60 OF SHARES
RIGHT TO ACQUIRE DAYS OF BENEFICIALLY
NAME SHARES(1) MARCH 1, 1998 OWNED
---- ---------------- -------------- ------------
<S> <C> <C> <C>
M. Norman Anderson.................................... 2,529 6,686 9,215
Richard R. Burt....................................... 0 84 84
Robert H. Clark, Jr.(2)............................... 6,448,776 2,334 6,451,110
Harry M. Conger(3).................................... 176,836 545,725 722,561
G. Robert Durham...................................... 10,000 1,943 11,943
Douglas W. Fuerstenau................................. 1,478 2,367 3,845
Henry G. Grundstedt................................... 1,000 1,497 2,497
John Neerhout, Jr. ................................... 1,000 1,889 2,889
Peter J. Neff......................................... 0 0 0
Stuart T. Peeler(4)................................... 10,000 2,503 12,503
Carol A. Rae.......................................... 500 810 1,310
Jack E. Thompson...................................... 52,072 175,550 227,622
Jeffrey L. Zelms...................................... 50 131 181
Gene G. Elam.......................................... 11,663 122,750 134,413
Wayne Kirk(5)......................................... 8,252 105,500 113,752
Gil J. Leathley....................................... 3,350 72,342 75,692
William F. Lindqvist.................................. 168 86,300 86,468
All Directors and Executive Officers as a Group (24
persons)............................................ 6,757,228 1,399,563 8,156,791
</TABLE>

- ---------------

(1) In some instances voting and investment power is shared with the spouse of
the identified person.

(2) Includes 13,000 shares owned by Mr. Clark's spouse. Also includes 6,411,776
shares owned by Case, Pomeroy & Company, Inc. Mr. Clark is the President and
Chief Executive Officer and, with family members, is a principal shareholder
of Case Pomeroy. The shares beneficially owned by Mr. Clark represent
approximately 4.4 percent of the 146,754,643 shares of Homestake Common
Stock outstanding as of March 1, 1998.

(3) Includes 447 shares held of record by a Savings Plan Trust for Mr. Conger's
spouse. Mr. Conger disclaims beneficial ownership of these shares.

(4) Includes 3,200 shares owned by a corporation of which Mr. Peeler is the sole
shareholder.

(5) Includes 414 shares held of record by two of Mr. Kirk's children. Mr. Kirk
disclaims beneficial ownership of these shares.

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<PAGE> 161

SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS OF HOMESTAKE

As of the date of this Proxy Statement, the only person known to Homestake
to own beneficially five percent or more of the Homestake Common Stock
outstanding was:

<TABLE>
<CAPTION>
NAME AND ADDRESS AMOUNT AND NATURE PERCENT
OF BENEFICIAL OWNER OF BENEFICIAL OWNERSHIP(1) OF CLASS
------------------- -------------------------- --------
<S> <C> <C>
August von Finck.................................... 10,510,100 7.16%
Pacellistrasse 4
80333 Munich, Germany
</TABLE>

- ---------------

(1) The amount and nature of Mr. von Finck's beneficial ownership is based upon
information provided to Homestake pursuant to a Schedule 13D filed on behalf
of Mr. von Finck on March 10, 1998.

Following the Combination, approximately 10.6% of the outstanding Homestake
Common Stock will be held by affiliates of MMC. Affiliates of MMC currently hold
approximately 35% of the Plutonic Ordinary Shares.

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<PAGE> 162

DESCRIPTION OF HOMESTAKE CAPITAL STOCK

GENERAL

The following summary is subject in all respects to the applicable
provisions of the DGCL, the Homestake Charter and the terms of the Homestake
Rights Agreement.

The Homestake Charter currently authorizes the issuance of 250,000,000
shares of Homestake Common Stock and 10,000,000 shares of Homestake Preferred
Stock.

The Homestake Common Stock is listed on the NYSE under the symbol "HM," on
the Swiss Stock Exchange (Basel, Geneva and Zurich) and on the ASX. The transfer
agent and registrar for Homestake Common Stock is BankBoston N.A. Corporate
Registry Services Pty. Ltd. is the Australian co-transfer agent for Homestake
Common Stock.

Homestake Preferred Stock may be issued in one or more series in the
discretion of the Homestake Board, with such rights, preferences and privileges
as to dividends, voting rights, conversion rights, liquidation preferences and
redemption provisions as the Homestake Board may in its discretion establish at
the time of creation of such series.

Holders of Homestake Common Stock are entitled to one vote per share on all
matters requiring a vote of stockholders. Homestake does not have cumulative
voting and, as a result, the holders of a majority of the Homestake Common Stock
represented at a meeting of stockholders and entitled to vote in an election of
directors are able to elect all directors to be elected at the meeting.

Holders of Homestake Common Stock are entitled to receive dividends when
and as declared by the Homestake Board from funds legally available therefor,
subject to the dividend rights of holders of any Homestake Preferred Stock that
may be issued in the future.

The Homestake Common Stock is not redeemable and does not have conversion
or pre-emptive rights.

"FAIR PRICE" CHARTER PROVISION

The Homestake Charter contains a "Fair Price" provision which applies to
mergers and certain other types of business combinations with "Related Persons."
The Fair Price provision defines "Related Person" to include any person who,
together with any affiliate or associate, beneficially owns (or within the
preceding five years owned) 10% or more of the Homestake Common Stock
outstanding or of the voting stock of Homestake outstanding. The Fair Price
provision defines "Business Combination" to include mergers, reorganizations,
sales of assets, issuances of securities, mortgages, leases, and a variety of
transactions which involve the securities or assets of Homestake.

The Fair Price provision requires that Business Combinations between
Homestake and a Related Person meet certain alternative criteria. If none of the
alternative criteria are met, such transactions must be approved by (1) not less
than 80% of the total voting power of Homestake stock entitled to vote on the
matter, and (2) not less than 50% of the voting power held by holders other than
the Related Person and its affiliates and associates. The alternative criteria,
one of which must be met to avoid the special voting requirements, are the
following:

(a) if the Business Combination is approved by the Homestake Board
before the Related Person first became a Related Person;

(b) if the Homestake Board unanimously approves in advance the Related
Person becoming a Related Person and the Business Combinations is then
approved by the Homestake Board after the Related Person became a Related
Person;

(c) if the Business Combination involves solely Homestake and one of
its subsidiaries (50% or more of the voting stock of which is owned by
Homestake and none of which is owned by a Related Person) and all
stockholders are treated equally and receive or retain common stock in the
surviving corporation or other party to the Business Combination;
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<PAGE> 163

(d) if all of the following conditions are satisfied:

(1) the per share consideration to be received by holders of the
Homestake Common Stock in the Business Combination (other than the
Related Person) is not less than the higher of (i) the highest per share
price paid by such Related Person in acquiring any of the Homestake
Common Stock, or (ii) a percentage premium over the market price of
Homestake Common Stock immediately prior to the announcement of such
Business Combination which is at least as high as the percentage premium
paid by the Related Person over the market price of the Homestake Common
Stock immediately prior to the commencement of the acquisition of
Homestake Common Stock by such Related Person, but in no event in excess
of two times the highest per share price determined under (i) above;

(2) after becoming a Related Person and prior to the consummation
of such Business Combination, (i) such Related Person must not have
acquired any newly issued shares from Homestake (except upon conversion
of convertible securities acquired prior to becoming a Related Person or
upon compliance with the Fair Price provision or as a result of a pro
rata stock dividend or stock split) and (ii) such Related Person must
not have received the benefit, directly or indirectly (except
proportionately as a stockholder), of any loans, advances, guarantees,
pledges or other financial assistance or tax credits provided by
Homestake, or made any major change in Homestake's business or equity
capital structure; and

(3) a proxy statement meeting the requirements of the United States
federal securities laws must be used for the purpose of soliciting
stockholder approval of such Business Combination. The proxy statement
must also contain (i) any recommendation as to the advisability of the
Business Combination which any continuing or independent or "outside"
directors may choose to state, and (ii) the opinion of a reputable
national investment banking firm in the United States as to the fairness
of the terms of such Business Combination from the point of view of the
remaining public stockholders of Homestake. The investment banking firm
must be engaged solely on behalf of the public stockholders and must be
selected by a majority of any continuing directors and outside
directors.

The Fair Price provision further provides that if there is a Related
Person, the Fair Price provision cannot be amended or repealed unless such a
change is approved at least 80% of the total voting power and also by a majority
of the total power held by holders who are independent of the Related Person.

All of the foregoing could discourage, delay or prevent certain types of
transactions involving an actual or potential change in control of Homestake,
including transactions in which stockholders might otherwise receive a premium
for their shares over current market prices, and could therefore have a negative
impact on the price of the Homestake Common Stock.

The Fair Price provision does not apply to the Combination.

HOMESTAKE RIGHTS AGREEMENT

On October 16, 1987, Homestake issued one Homestake Right for each issued
and outstanding share of Homestake Common Stock. Pursuant to the Homestake
Rights Agreement, each share of Homestake Common Stock is accompanied by one
Homestake Right. Each Homestake Right entitles the holder thereof to purchase
1/100th of a Series A Participating Cumulative Preferred Share of Homestake at a
price of $75, subject to adjustment (the "Purchase Price").

The Homestake Rights are not exercisable until the "Distribution Date" and
will expire on October 15, 2007 (the "Expiration Date"), unless they are earlier
redeemed by Homestake. The Distribution Date is defined to be the earlier of (i)
such time as Homestake learns that a person or group, together with affiliates
or associates acquired or obtained the right to acquire beneficial ownership of
more than 15% of the Homestake Common Stock outstanding (an "Acquiring Person")
and (ii) such date, as may be designated by the Homestake Board following the
commencement of, or first public disclosure of an intent to commence, a

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<PAGE> 164

tender or exchange offer for outstanding Homestake Common Stock, if upon
consummation, such person could be an Acquiring Person.

Upon a person becoming an Acquiring Person, a holder of a Homestake Right
(except Acquiring Persons) may exercise the right by purchasing for the Purchase
Price such number of one-hundredths ( 1/100ths) of a share of Homestake
Preferred Stock equal to the result obtained by multiplying the Purchase Price
by a fraction, the numerator of which is one and the denominator of which is 50%
of the market value of the Homestake Common Stock on the date on which such
person became an Acquiring Person.

The Homestake Board may, at its option, at any time after a person becomes
an Acquiring Person exchange all or part of then outstanding and exercisable
Homestake Rights (other than Homestake Rights held by an Acquiring Person) for
consideration per Homestake Right consisting of one-half of the securities that
would be otherwise issuable upon the exercise of a Homestake Right, as described
above.

In the event that, following the Distribution Date, Homestake is acquired
in any merger or other business combination by an Acquiring Person (or such
Acquiring Person is merged into Homestake) or 50% or more of Homestake's assets
or assets representing 50% or more of its earning power are sold, leased
exchanged or otherwise transferred to an Acquiring Person and such surviving
corporation or Acquiring Person is a publicly traded corporation, each Homestake
Right will entitle its holder to purchase for the Purchase Price the number of
common shares of the surviving corporation or the Acquiring Person which at the
time of the transaction would have a market value of twice the Purchase Price.
In the event that the surviving corporation or the Acquiring Person is not a
publicly traded corporation, each Homestake Right will entitle its holder to
purchase for the Purchase Price, at such holder's option (i) that number of
shares of such entity which at the time of transaction would have a book value
of twice the Purchase Price or (ii) if such entity has an affiliate which has
publicly traded common shares, that number of shares of such affiliate which at
the time of the transaction would have a market value of twice the Purchase
Price.

Any rights that are at any time beneficially owned by an Acquiring Person
will become null and void and any holder of any such right will be unable to
exercise any such right.

The Homestake Board may redeem the Homestake Rights at any time prior to
the earliest of such time as a person becomes an Acquiring Person and the
Expiration Date for cash or securities equivalent to $0.01 per Homestake Right.

Until a Homestake Right is exercised, the holder will have no rights as a
stockholder of Homestake with respect to the shares purchasable upon exercise of
the Homestake Right.

The Homestake Rights Agreement does not apply to the Combination.

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<PAGE> 165

COMPARISON OF SHAREHOLDERS' RIGHTS

If the Combination is consummated, Plutonic Shareholders and Plutonic
Option Holders will become stockholders of a Delaware corporation and will have
rights and privileges as set out in the Delaware General Corporation Law
("DGCL"), and the Homestake Charter and by-laws (which generally are the
equivalent of the memorandum and articles of an Australian company,
respectively). While the rights and privileges of stockholders of a Delaware
corporation are, in some instances, comparable to those of shareholders of an
Australian corporation, there are some material differences, which are
summarized below.

VOTE REQUIRED FOR ORDINARY TRANSACTIONS; QUORUM

Under the DGCL and the Homestake Charter, matters requiring stockholder
approval generally must be approved by the vote of holders of a majority of the
shares present in person or represented by proxy at the meeting.

With respect to election of directors, the nominees receiving the highest
number of votes are elected. Directors of Homestake are appointed for a term of
three years, with approximately one-third of the directors elected each year.

A majority of the shares of voting stock outstanding on the record date,
present in person or represented by proxy, constitutes a quorum for the
transaction of business at a meeting of stockholders.

Under Australian law, matters which are decided by a general meeting of
shareholders generally require the approval of the shareholders by ordinary
resolution, which is a resolution passed by the majority of shares present in
person or represented by proxy. Some matters (such as amendments to the articles
of association) require approval by special resolution, which is a resolution
passed by at least 75% of the shares present in person or represented by proxy,
where at least 21 days notice of the resolution has been given.

Three shareholders present in person or represented by proxy constitute a
quorum for a meeting under Plutonic's articles of association, except for a
meeting of a class of shareholders, where the quorum is two.

VOTE REQUIRED FOR EXTRAORDINARY TRANSACTIONS

Under Australian law, a combination of Plutonic with another company would
require:

(a) a takeover scheme or takeover announcement in respect of the
shares in Plutonic under Chapter 6 of the NSWL; or

(b) a scheme of arrangement under section 411 of the NSWL.

Neither a takeover scheme nor a takeover announcement requires shareholder
approval. However, a scheme of arrangement requires approval by shareholders at
court convened meetings together with court approval of the scheme. The votes
required to approve the scheme are a majority in number of all shareholders (or
shareholders in a particular class) present and voting, being a majority of
shareholders whose shares have a nominal value of at least 75% of the total
nominal value of all the shares of the shareholders (or of shareholders in a
particular class) present and voting.

A merger of two or more corporations into a single constituent corporation
(a "merger") or the consolidation of two or more corporations into a new
corporation formed by the consolidation (a "consolidation"), in either case
involving Homestake, will be governed, at least in part, by the DGCL. Under the
DGCL, a merger or consolidation requires the approval of each constituent
corporation, except as described in the final sentence of this paragraph. For
Delaware corporations the approval must be of a majority of the outstanding
stock of such corporation entitled to vote thereon. Unless specifically required
in a corporation's certificate of incorporation, and notwithstanding the first
sentence of this paragraph, no vote of stockholders of a constituent corporation
surviving a merger is necessary if (i) the merger is between two Delaware
corporations, (ii) the merger agreement does not amend the certificate of
incorporation of the surviving corporation and (iii) not more than 20% of the
shares of common stock of the surviving corporation outstanding immediately
prior to the merger will be issued pursuant to the merger. (The Homestake
Charter does not require stockholder

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approval in these circumstances.) Approval of stockholders is generally not
required for the issuance of common stock under the DGCL but the NYSE Listing
Rules require stockholder approval if the issuance equals 20% or more of the
common or voting stock of the corporation outstanding immediately prior to the
issuance. (However, stockholder approval is required to increase Homestake's
authorized capital.) Where the corporation is a 90% parent of another
corporation, stockholder approval is not required under the DGCL from either
corporation to merge or consolidate the parent and the other corporation
provided that such merger or consolidation is permitted by the jurisdiction of
incorporation of each constituent corporation and the surviving corporation is a
Delaware corporation.

The dissolution or sale of substantially all the assets of a corporation
governed by the DGCL requires the approval of a majority of the outstanding
stock of such corporation entitled to vote thereon. The dissolution of a
corporation incorporated in Australia requires stockholder approval by way of
special resolution (75% of the shares present or represented by proxy at the
meeting) while the sale of substantially all the assets of a corporation
incorporated in Australia and listed on the ASX requires stockholder approval by
way of ordinary resolution (a majority of the shares present or represented by
proxy at the meeting).

The Homestake Charter contains a "Fair Price" provision which applies to
mergers, reorganizations, sales of assets and a variety of other transactions.
See "Description of Homestake Capital Stock -- "Fair Price" Charter Provision."
The Homestake Rights Agreement also may affect such transactions. See
"Description of Homestake Capital Stock -- Homestake Rights Agreement."

DISTRIBUTION ON WINDING-UP

On a winding up of Homestake, holders of Homestake Common Stock would
receive a distribution on a pro rata basis, after the payment of creditors and
preferred stockholders. (Although the Homestake Charter authorizes the issuance
of preferred stock, none is currently outstanding.)

TRANSACTIONS INVOLVING SHAREHOLDERS, OFFICERS OR DIRECTORS

The ASX Listing Rules require shareholder approval by ordinary resolution
before a listed company may purchase, gain, obtain or otherwise acquire or give,
sell or otherwise dispose of (whether by means of an agreement transaction;
subscription for securities or otherwise) any assets or securities in excess of
5% of shareholders' funds to:

(i) a subsidiary or a related party, including any director, or
secretary of the listed company or its parent entity, or a spouse, de facto
spouse, or a parent, or daughter of such person (at the relevant time or
within the previous six months);

(ii) a shareholder with an entitlement to 10% or more of the company's
voting shares (at the relevant time or within the previous six months);

(iii) a person who is an associate of a person in (i) or (ii); or

(iv) a person whose association with any of the foregoing is such that
the ASX decides the proposed acquisition should be referred to
shareholders.

The DGCL has no equivalent provisions. However, the NYSE Listing Rules
require shareholder approval for the issuance of securities of more than 1%
of the common or voting stock of a corporation to a director, officer,
substantial security holder or any respective affiliate thereof, for the
purchase of certain types of assets from such person.

The NSWL also prohibits a public company or an entity controlled by it from
giving any type of financial benefit to a "related party" (including parent
companies, controlling entities, directors and their families, and entities
which they control) unless the financial benefit:

(i) constitutes reasonable remuneration to an officer;

(ii) is a loan of less than A$2,000;

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(iii) is given between wholly owned entities;

(iv) is given on arm's length terms or pursuant to a court order;

(v) constitutes a benefit given to shareholders in their capacity as
shareholders and does not discriminate unfairly between shareholders (e.g.
a dividend); or

(vi) is approved by a general meeting of shareholders.

The DGCL has no equivalent provisions.

In the case of Homestake, with certain exceptions described below, the DGCL
prohibits a "business combination" between the corporation and an "interested
stockholder" within three years of the stockholder becoming an "interested
stockholder." An "interested stockholder" is one who, directly or indirectly,
controls 15% or more of the issued voting shares. A "business combination"
includes a merger, consolidation, sale or other disposition of assets having an
aggregate value in excess of 10% of the consolidated assets of the corporation,
and certain transactions that would increase the interested stockholder's
proportionate share ownership in the corporation. This provision does not apply
where:

(i) the business combination is approved by the corporation's board of
directors prior to the date the interested stockholder acquired its shares;

(ii) the interested stockholder acquired at least 85% of the issued
and outstanding voting shares of the corporation in the transaction in
which the stockholder became an interested stockholder excluding, in
determining the number of shares outstanding, shares held by persons who
are directors and also officers and by employee stock plans in which
participants do not have the right to determine confidentially whether
shares held subject to the plan will be tendered; or

(iii) the business combination is approved by a majority of the board
of directors and affirmative vote of two-thirds of the votes entitled to be
cast by disinterested shareholders at an annual or special meeting.

As noted above, the Homestake Charter contains a "Fair Price" provision which
will apply to business combinations between Homestake and "Related Persons." See
"Description of Homestake Capital Stock -- "Fair Price" Charter Provisions." The
Homestake Rights Agreement will apply also to certain business combinations. See
"Description of Homestake Capital Stock -- Homestake Rights Agreement."

The DGCL provides that a contract or transaction ("transaction") between a
Delaware corporation and one or more of its directors or officers (an
"interested person"), or an entity in which such person is an officer or
director or has a financial interest, is not void or voidable solely because
such interested person is present at or participates in a board or committee
meeting approving the transaction or solely because such interested person's
votes are counted for such purposes if:

(i) the material facts of the relationship or interest and the
transaction are disclosed to the board or committee and approved in good
faith by a majority of the disinterested directors;

(ii) the material facts of the relationship or interest and the
transaction are disclosed to, and approved in good faith by, the
stockholders; or

(iii) the transaction is fair as to the corporation.

Failure to obtain approval as set out in (i) or (ii) above, means, in
essence, that if the transaction is challenged, the interested person has the
burden of proving that the transaction was fair as to the corporation.

TAKEOVER REGULATION

Takeovers in Australia are regulated principally by Chapter 6 of the NSWL.
Persons who acquire an entitlement in 5% or more of a corporation subject to
Chapter 6 must make public disclosure of that entitlement, and of any changes to
that entitlement of 1% or more. A person must not acquire an entitlement to more
than 20% of the voting shares of such a corporation, unless that entitlement is
acquired under a

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takeover scheme or announcement (subject to a limited number of exemptions). A
takeover scheme or announcement must include an offer to all shareholders. The
consideration offered must be no less than the consideration paid by the offeror
for shares in the target in the 4 months preceding the bid. The offeror must
also send a disclosure document to all shareholders with the offer, and the
target company must respond with a disclosure document, the contents of which
are prescribed by Chapter 6.

Under U.S. federal securities laws a stockholder may accumulate up to but
not including 5% of a class of equity securities of a corporation without making
public disclosure. At or above the 5% level, the stockholder must make public
disclosure including such stockholder's intentions regarding its holdings (i.e.
whether the accumulation is for investment purposes or to seek control of the
corporation).

There is no U.S. legal requirement to extend an offer to purchase
securities of a corporation to all security holders solely as a result of
accumulations of securities above a certain threshold of ownership. If, however,
a tender offer is made to purchase securities, certain procedural and disclosure
rules must be followed, including:

(i) provision of a disclosure document to all security holders;

(ii) a requirement that the offer remain open for at least 20 business
days;

(iii) pro rata allocation of tenders if the tender offer is for less
than all the securities outstanding;

(iv) availability of the offer to all security holders on the same
terms;

(v) offer consideration that is no less than the highest consideration
paid or to be paid by the offeror to any security holder during the time of
the tender offer; and

(vi) a requirement for a response to the tender offer from the target
board of directors within 10 business days of the filing of the offeror's
disclosure document.

Compulsory acquisition of securities is permitted under the DGCL if a
person acquires at least 90% of the outstanding shares of each class of the
stock of a corporation. In that case, the persons from whom securities are to be
acquired will have the dissenters appraisal rights described below.

DISSENTERS APPRAISAL RIGHTS

The DGCL generally entitles a stockholder voting against a merger or
consolidation to exercise dissenters appraisal rights upon a merger or
consolidation of the corporation if the stockholder complies with certain
procedural requirements. Exercise of appraisal rights requires the acquisition
by the surviving corporation of the dissenters' shares at a fair value,
generally determined by a court.

Unless specified in the corporation's certificate of incorporation, the
DGCL does not provide dissenters appraisal rights for stockholders of a
corporation that engages in:

(i) a sale of substantially all its assets;

(ii) an amendment to its certificate of incorporation; or

(iii) a merger or consolidation where the consideration received
consists solely of shares of the surviving or resulting corporation, or
shares of any other corporation listed on a national securities exchange in
the United States or held by more than 2,000 stockholders (and cash in lieu
of fractional shares) and either:

(A) the corporation before the merger or consolidation was listed
on a national securities exchange or its shares were held by more than
2,000 stockholders; or

(B) the corporation survived the merger or consolidation and the
approval of its stockholders was not required because the merger or
consolidation agreement did not amend the surviving corporation's
certificates of incorporation and did not provide for the issue of
common shares of the survivor in excess of 20% of such survivor's shares
issued and outstanding immediately prior to the merger or consolidation.
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The Homestake Charter does not provide dissenters appraisal rights in such
circumstances.

Because Homestake Common Stock is listed on the NYSE (a national securities
exchange) and the Homestake Charter does not provide otherwise, Homestake
Stockholders would not have dissenters appraisal rights in the event that
Homestake is a constituent corporation to a merger or consolidation which
otherwise would give rise to dissenters appraisal rights under the DGCL and the
consideration meets the requirement of (iii) above.

The NSWL has no equivalent provisions.

OPPRESSION REMEDY

Under the NSWL, a shareholder or the ASC (following an investigation) may
apply to the court if that person or the ASC, following an investigation,
believes:

(i) the affairs of the company are being conducted in a manner which
is oppressive or unfairly prejudicial to, or unfairly discriminatory
against, a shareholder or shareholders, or in a manner that is contrary to
the interests of the shareholders as a whole; or

(ii) that an actual or proposed act or omission by or on behalf of the
company or an actual or proposed resolution of a class of shareholders was
or would be oppressive or unfairly prejudicial to, or unfairly
discriminatory against, a shareholder or shareholders, or was or would be
contrary to the interests of the shareholders as a whole.

The court has power to make such order or orders as it sees fit to deal
with any oppressive or unfairly prejudicial matter. These orders include orders
for:

(i) winding up of the company;

(ii) regulation of the company's affairs or appointment of a receiver
or receiver and manager; or

(iii) purchase of shares by another shareholder or by the company.

The NSWL and the general law also provide a range of legal and equitable
remedies for breach of duty by directors of a company.

The DGCL does not provide a statutory remedy like the NWSL oppression
remedy. However, the DGCL provides a variety of legal and equitable remedies to
a corporation's shareholders for improper acts or omissions of its officers and
directors. Under the DGCL, stockholders can bring an action alleging a breach of
fiduciary duty by the directors of a corporation. In order to be successful, the
stockholder must overcome the "business judgment rule" which, simply stated,
means that absent a showing of intentional misconduct, gross negligence or a
conflict of interest, disinterested directors' decisions are presumed (subject
to rebuttal) by the courts to have been made in good faith and in the best
interests of the corporation.

LIMITATION OF DIRECTOR LIABILITY

The NSWL provides that a company or related body corporate must not
indemnify a person who is or has been an officer (including a director) or
auditor against a liability incurred in that capacity, or exempt such a person
from such a liability. However, a person may be indemnified:

(i) against a liability (other than to the company) unless the
liability arises out of conduct involving a lack of good faith; or

(ii) against a liability for costs and expenses incurred in defending
civil or criminal proceedings where judgment is given in favour of the
person, the person is acquitted or the court grants relief to the person
under the NSWL.

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The Homestake Charter contains a provision, permitted by the DGCL, limiting
the personal monetary liability of directors for breach of fiduciary duties as a
director. The DGCL provides that such a provision does not eliminate or limit
liability:

(i) for any breach of the director's duty of loyalty to Homestake or
its stockholders;

(ii) for unlawful payments of dividends or unlawful stock repurchases
or redemptions as provided in the DGCL;

(iii) for acts or omissions not in good faith or which involve
intentional misconduct or a knowing violation of law; or

(iv) for any transaction from which the director derived an improper
personal benefit.

The DGCL permits indemnification against expenses (including attorneys'
fees), judgments, fines and amounts paid in settlement actually and reasonably
incurred in connection with actions, suits, or proceedings in which an officer,
director, employee or agent is a party by reason of the fact that he is or was
such a director, officer, employee or agent, if he acted in good faith and in a
manner he reasonably believed to be in or not opposed to the best interests of
the corporation and, with respect to any criminal action or proceeding, had no
reasonable cause to believe his conduct was unlawful. However, in connection
with actions by or in the right of the corporation, such indemnification is not
permitted if such person has been adjudged liable for negligence or misconduct
in the performance of his duty to the corporation unless the court determines
that, under all of the circumstances, such person is nonetheless fairly and
reasonably entitled to indemnity for such expenses as the court deems proper.
Under Homestake's by-laws, Homestake must indemnify directors and officers to
the fullest extent permitted by law.

The DGCL also permits a corporation to purchase and maintain insurance on
behalf of its directors and officers against any liability which may be asserted
against, or incurred by, such persons in their capacities as directors or
officers of the corporation whether or not the corporation would have the power
to indemnify such persons against such liabilities. Homestake has purchased such
insurance. The DGCL further provides that the statutory provision is not
exclusive of any right which may exist under any by-law, agreement, vote of
stockholders or independent directors, or otherwise.

DISTRIBUTIONS AND DIVIDENDS

Under the NSWL, a corporation may only pay dividends out of profits, as
determined under Australian law and accounting standards, or, in certain
instances, out of the share premium account. The Plutonic articles of
association add that declaration of dividends is a matter for the discretion of
the directors, where profits are available for distribution. The directors are
empowered to declare dividends and fix a time for the distribution of such
dividends.

Under the DGCL, directors of a corporation may pay dividends out of surplus
and, if there is no surplus, out of net profits for the current and/or the
preceeding fiscal year, unless the net assets of the corporation are less than
the capital represented by issued and outstanding stock having a preference on
asset distributions. Surplus is defined in the DGCL as the excess of the net
assets (essentially, the amount by which total assets exceed total liabilities)
over capital (essentially, the aggregate par value of the shares of the
corporation having a par value that have been issued plus consideration paid for
shares without par value), as such capital may be adjusted by the corporation's
board of directors.

The Homestake Charter allows the Homestake Board to set the dividend
structure, if any, of any shares of preferred stock. Frequently, the certificate
of designation for preferred stock provides that no dividends shall be paid to
holders of common stock until all accrued and unpaid dividends are paid to the
holders of preferred stock. No shares of Homestake Preferred Stock have been
issued. Consequently, there are currently no limitations on the payment of
dividends to the holders of Homestake Common Stock, except as otherwise imposed
by the DGCL, and except that Homestake's bank credit agreement requires that
Homestake shareholders' equity be greater than US$500 million. At December 31,
1997, Homestake's shareholders' equity was US$532 million.

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INDEPENDENT ACCOUNTANTS

Homestake's consolidated financial statements as of December 31, 1997 and
for each of the three years in the period ended December 31, 1997, included in
this Document, have been audited by Coopers & Lybrand L.L.P., independent
accountants, as stated in their report appearing herein.

Plutonic's consolidated financial statements as of 31 December 1997 and for
the year then ended, and Plutonic's consolidated financial statements as of 31
December 1996 and for the year then ended, included in this Document, have been
audited by Ernst & Young, independent accountants, as stated in their reports
appearing herein.

Representatives of Coopers & Lybrand L.L.P. are expected to be present at
the Homestake Special Meeting and will have the opportunity to make a statement
if they desire to do so and will be available to respond to appropriate
questions.

Representatives of Ernst & Young are expected to be present at the Scheme
meetings.

LEGAL MATTERS

Material United States federal income tax consequences of the Combination
will be passed upon for Plutonic by Skadden, Arps, Slate, Meagher & Flom LLP,
Los Angeles, California, and material Australian income tax consequences of the
Combination will be passed upon for Plutonic by Allen Allen & Hemsley, Sydney,
NSW, Australia.

STOCKHOLDER PROPOSALS

Homestake anticipates that its 1998 Annual Meeting of Stockholders will be
held on or about July 24, 1998 (the "Homestake Annual Meeting"). In such event,
any stockholder proposal for the Homestake Annual Meeting must have been
submitted to Homestake on or before March 12, 1998, for inclusion, if
appropriate, in Homestake's proxy statement and the form of proxy relating to
the Homestake Annual Meeting.

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APPENDIX A

HOMESTAKE MINING COMPANY
AND
PLUTONIC RESOURCES LIMITED
COMBINATION IMPLEMENTATION AGREEMENT
<PAGE> 173

COMBINATION IMPLEMENTATION AGREEMENT

AGREEMENT dated 22 December 1997 between

1. HOMESTAKE MINING COMPANY of 650 California Street, San Francisco,
California (Homestake); and

2. PLUTONIC RESOURCES LIMITED (ACN 006 245 629) of Level 37, 100 Miller
Street, North Sydney, New South Wales (Plutonic).

RECITALS

A. Homestake and Plutonic have agreed to combine by means of schemes of
arrangement under Part 5.1 of the Corporations Law between Plutonic and each
class of its members and Plutonic and the Option Holders.

B. Plutonic has agreed in good faith to implement each of the schemes of
arrangement upon and subject to the terms and conditions of this Agreement.

IT IS AGREED as follows.

1. AGREEMENT TO PROCEED WITH PLUTONIC SCHEMES

The parties agree to propose the Plutonic Schemes upon and subject to the
terms and conditions of this Agreement.

2. CONDITIONS PRECEDENT

2.1 Subject to this clause 2, the obligations of the parties under this
Agreement are subject to the satisfaction of each of the following conditions
precedent to the extent and in the manner set out in clauses 2.2 and 2.3:

(a) FIRB: One of the following events occurs prior to the Second Court
Date:

(i) A notice in writing is issued by or on behalf of the Treasurer
of the Commonwealth of Australia stating that the Commonwealth
Government does not object to Homestake entering into and completing
this Agreement; or

(ii) The Treasurer of the Commonwealth of Australia is or becomes
precluded from making an order in respect of the entry into or
completion by Homestake of this Agreement under the Foreign Acquisitions
and Takeovers Act 1975 (Cth).

HSR: The expiry or termination of the waiting period under the
Hart-Scott-Rodino Antitrust Improvements Act of 1976, if applicable,
prior to the Second Court Date.

OTHER: No temporary restraining order, preliminary or permanent
injunction or other order issued by any court of competent jurisdiction
or other legal restraint or prohibition preventing the consummation of
the Combination shall be in effect.

(b) COMPLIANCE BY PLUTONIC WITH CLAUSE 8.1: Plutonic and its directors
have complied in all material respects with their obligations under clause
8.1.

(c) PLUTONIC MATERIAL ADVERSE CHANGE: Between the date of this
Agreement and the Second Court Date, no Plutonic Material Adverse Change
occurs.

(d) PLUTONIC PRESCRIBED OCCURRENCE: Between the date of this Agreement
and the Second Court Date, no Plutonic Prescribed Occurrence occurs other
than as required or contemplated by this Agreement or the Plutonic Schemes.

(e) POOLING LETTERS: Homestake has received a letter from Coopers &
Lybrand LLP dated as of the Business Day preceding the date of despatch of
the Proxy Statement and reaffirmed as at the Second
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Court Date and addressed to Homestake, and Plutonic shall have received a
letter from Ernst & Young LLP dated as of the Business Day preceding the
date of despatch of the Proxy Statement and reaffirmed as at the Second
Court Date and addressed to Plutonic, in each case stating that the
Combination will qualify as a pooling-of-interests transaction under
Opinion 16 of the Accounting Principles Board.

(f) HOMESTAKE PRESCRIBED OCCURRENCE: Between the date of this
Agreement and the Second Court Date, no Homestake Prescribed Occurrence
occurs other than as required or contemplated by this Agreement or the
Plutonic Schemes.

(g) COMPLIANCE BY HOMESTAKE WITH CLAUSE 8.2: Homestake and its
directors have complied in all material respects with their obligations
under clause 8.2.

(h) LISTING OF HOMESTAKE STOCK: The Homestake Stock to be issued to
Scheme Participants shall have been approved for listing on the New York
Stock Exchange, subject to official notice of issuance, and approved for
official quotation by the ASX, in each case, prior to the Second Court
Date.

(i) HOMESTAKE MATERIAL ADVERSE CHANGE: Between the date of this
Agreement and the Second Court Date, no Homestake Material Adverse Change
occurs.

(j) HOMESTAKE REPRESENTATIONS AND WARRANTIES: The representations and
warranties of Homestake set forth in this Agreement that are qualified as
to materiality shall be true and correct, and the representations and
warranties of Homestake set forth in this Agreement that are not so
qualified shall be true and correct in all material respects, in each case
as of the date of this Agreement and as of the Second Court Date as though
made on and as of the Second Court Date, except to the extent any such
representation or warranty expressly relates to an earlier date (in which
case as of such date).

(k) PLUTONIC REPRESENTATIONS AND WARRANTIES: The representations and
warranties of Plutonic set forth in this Agreement that are qualified as to
materiality shall be true and correct, and the representations and
warranties of Plutonic set forth in this Agreement that are not so
qualified shall be true and correct in all material respects, in each case
as of the date of this Agreement and as of the Second Court Date as though
made on and as of the Second Court Date, except to the extent any such
representation or warranty expressly relates to an earlier date (in which
case as of such date).

(l) COURT ORDERS: A certified copy of the Court orders approving such
of the Plutonic Schemes as are approved by the relevant Scheme Participants
at the Court convened Meetings shall have been lodged with the Commission
within fifteen Trading Days of the Second Court Date.

(m) PLUTONIC AFFILIATE LETTERS: Homestake has received the affiliate
letters from Plutonic referred to in clause 13.1.

(n) HOMESTAKE AFFILIATE LETTERS: Plutonic has received the affiliate
letters from Homestake referred to in clause 13.2.

2.2 Obligations affected by conditions precedent

(a) HOMESTAKE'S OBLIGATIONS: The obligations of Homestake under
clauses 3, 4 and 5 are subject to satisfaction of each of the conditions
precedent in clause 2.1 that are, pursuant to clause 2.3, for Homestake's
benefit.

(b) PLUTONIC'S OBLIGATIONS: The obligations of Plutonic under clauses
3, 4 and 5 are subject to satisfaction of each of the conditions precedent
in clauses 2.1 that are, pursuant to clause 2.3, for Plutonic's benefit.

2.3 Benefit of certain conditions precedent

(a) HOMESTAKE'S BENEFIT: Homestake alone has the benefit of the
conditions precedent in clauses 2.1(b), (c), (d), (k), (l) and (m) and any
breach or non-fulfilment of any such conditions may be relied upon only by
Homestake which may at any time and from time to time in its sole and
absolute discretion waive the breach or non-fulfilment.

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(b) PLUTONIC'S BENEFIT: Plutonic alone has the benefit of the
conditions precedent in clauses 2.1(f), (g), (i), (j) and any breach or
non-fulfilment of those conditions may be relied upon only by Plutonic
which may at any time and from time to time in its sole and absolute
discretion waive the breach or non-fulfilment.

(c) EACH PARTY'S BENEFIT: Plutonic and Homestake together have the
benefit of the Regulatory Condition and the conditions precedent in clauses
2.1(e), (h) and (n) and any breach or non-fulfilment of those conditions
may only be waived with the written consent of both parties.

2.4 Best endeavours

Each of Homestake and Plutonic agrees to use its best endeavours to procure
that each of the conditions precedent in clause 2.1 is satisfied as soon as
practicable after the date of this Agreement or that there is no occurrence that
would prevent the conditions in clause 2.1 being satisfied (as the context
requires). Without limiting the generality of the foregoing:

(a) Homestake shall promptly apply for the FIRB approval and provide
to Plutonic a copy of that application;

(b) Homestake will prepare and provide to Plutonic the Homestake
Information for inclusion in the Scheme Booklets;

(c) Plutonic will prepare the Scheme Booklets in accordance with the
Corporations Law, PS 60, the Listing Rules of the ASX and any applicable
provisions of the Securities Act and the Exchange Act:

(i) with a view to ensuring that the terms of the Plutonic Schemes
are fully and fairly portrayed; and

(ii) in consultation with Homestake and subject to Homestake's
approval, such approval limited solely to ensuring that the final text
of the Scheme Booklets complies with the Securities Act and the Exchange
Act (such approval not to be unreasonably withheld);

(d) Plutonic will prepare and provide to Homestake the Plutonic
Information for inclusion in the Proxy Statement;

(e) Homestake will prepare the Proxy Statement in accordance with all
applicable provisions of the Securities Act and the Exchange Act in
consultation with Plutonic and subject to Plutonic's approval, such
approval limited solely to ensuring that the final text of the Proxy
Statement complies with the Corporations Law and the Listing Rules of the
ASX (such approval not to be unreasonably withheld);

(f) Between the date of this Agreement and the Second Court Date,
Plutonic will ensure that a Plutonic Prescribed Occurrence does not occur;
and

(g) Between the date of this Agreement and the Second Court Date,
Homestake will ensure that a Homestake Prescribed Occurrence does not
occur.

2.5 Approval of Scheme Booklets and the Proxy Statement

(a) PLUTONIC TO PROVIDE SCHEME BOOKLETS: As soon as practicable after
Plutonic has completed the preparation of the final form of the Scheme
Booklets, Plutonic will forward copies to Homestake.

(b) HOMESTAKE TO PROVIDE THE PROXY STATEMENT: As soon as practicable
after Homestake has completed the preparation of the final form of the
Proxy Statement, Homestake will forward copies to Plutonic.

(c) MEETING OF DIRECTORS OF PLUTONIC: As soon as practicable after
preparation of the final form of the Scheme Booklets and the Proxy
Statement, a meeting of the Plutonic Board will be convened for the purpose
of approving the Scheme Booklets.

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(d) MEETING OF DIRECTORS OF HOMESTAKE: As soon as practicable after
preparation of the final form of the Scheme Booklets and the Proxy
Statement, a meeting of the Homestake Board will be convened for the
purpose of approving the Proxy Statement.

2.6 Public announcements of Plutonic Schemes

Forthwith after the execution of this Agreement, Plutonic and Homestake
will issue public announcements in the form of Schedule III or such other form
acceptable to the parties but including:

(a) a unanimous recommendation by the directors of Plutonic directed
to Scheme Participants that all of the Plutonic Schemes be approved; and

(b) the unanimous approval by the directors of Homestake of the
Combination.

2.7 Consultation on failure of condition precedents

(a) CONSULTATION: If a condition precedent contained in clause 2.1 is
not satisfied or there is an occurrence that will prevent a condition
precedent being satisfied by the date specified in this Agreement for its
satisfaction or the Effective Date has not occurred by the Quit Date,
Plutonic and Homestake will consult in good faith:

(i) with a view to determining whether the Plutonic Schemes, or the
Plutonic Scheme in issue, may proceed by way of alternative means or
methods; or

(ii) to extend the relevant date or Quit Date.

(b) FAILURE TO AGREE: If the parties are unable to reach agreement
under clause 2.7(a) within 5 Business Days after the relevant date or Quit
Date:

(i) subject to sub-paragraph (ii), either party may terminate this
Agreement; or

(ii) if a condition precedent contained in clause 2.1 exists for
the benefit of one party only, that party only may waive that condition
precedent or terminate this Agreement,

in each case without any liability to the other party by reason of that
termination unless the failure of the condition precedent to be
satisfied or of the Effective Date to occur arises out of a breach by
the terminating party of clause 8 or this clause 2.

2.8 Certain Notices

(a) NOTICE OF A HOMESTAKE OR A PLUTONIC PRESCRIBED OCCURRENCE: If,
prior to the Second Court Date, any event which constitutes a Homestake or
a Plutonic Prescribed Occurrence occurs, or any event that will prevent a
condition precedent being satisfied, Plutonic or Homestake, as the case may
be, will forthwith give written notice to the other of that event.

(b) NOTICE OF CHANGES: Homestake and Plutonic shall promptly advise
the other party orally and in writing of any change or event causing, or
which, insofar as can reasonably be foreseen, would cause:

(i) a representation or warranty provided in this Agreement to be
false; or

(ii) a Homestake Material Change or a Plutonic Material Change (as
the case may be).

3. ORDINARY SCHEME

3.1 Ordinary Scheme

Plutonic agrees to propose a Scheme under which all of the Ordinary Shares
other than those held by or on behalf of Homestake or any of its subsidiaries
will be cancelled and the Ordinary Scheme Members will be entitled to receive a
number of Homestake Stock calculated in accordance with clause 3.2 by way of
Scheme Consideration, for each Ordinary Share held at the Record Date.

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3.2 Scheme Consideration

Homestake covenants in favour of Plutonic (in its own right and on behalf
of the Ordinary Scheme Members) that in consideration for the delivery up and
cancellation of an Ordinary Share held by an Ordinary Share Member under the
terms of the Ordinary Scheme and for the allotment to Homestake of the
Recapitalisation Shares, Homestake will issue to such Ordinary Scheme Member
0.34 Homestake Stock for each such Ordinary Share.

3.3 Condition

The Ordinary Scheme shall be subject to and conditional upon the PP Scheme
and the Option Scheme becoming Effective provided that such condition may be
waived, in whole or in part, by Homestake in its absolute discretion by notice
in writing given to Plutonic within 5 Business Days of the date on which either
the PP Scheme or the Option Scheme is rejected by PP Scheme Members or Option
Holders, as the case may be.

4. PP SCHEME

4.1 PP Scheme

Plutonic agrees to propose a Scheme under which all of the PP Shares will
be cancelled and the PP Scheme Members will be entitled to receive a number of
Homestake Stock calculated in accordance with clause 4.2 by way of Scheme
Consideration for each PP Share held at the Record Date.

4.2 Scheme Consideration

Homestake covenants in favour of Plutonic (in its own right and on behalf
of the PP Scheme Members) that in consideration for the delivery up and
cancellation of a PP Share under the terms of the PP Scheme and for the
allotment to Homestake of the Recapitalisation Shares, Homestake will issue to
such PP Scheme Member the number of Homestake Stock as determined below:

<TABLE>
<CAPTION>
CLASS BY EXCHANGE RATIO
UNPAID CAPITAL FOR A PP SHARE
- -------------- ----------------
<S> <C>
$0.75 0.303
$0.85 0.299
$0.90 0.296
</TABLE>

4.3 Condition

The PP Scheme shall be subject to and conditional upon the Ordinary Scheme
and the Option Scheme becoming Effective provided that such condition may be
waived in whole or part by Homestake in its absolute discretion by notice in
writing given to Plutonic within 5 Business Days of the date on which either the
Ordinary Scheme or the Option Scheme is rejected by Ordinary Scheme Members or
Option Holders as the case may be.

5. OPTION SCHEME

5.1 Option Scheme

Plutonic agrees to propose a Scheme under which all of the Options will be
cancelled and the Option Holders will be entitled to receive a number of
Homestake Stock calculated in accordance with clause 5.2 by way of Scheme
Consideration for each Option held at the Record Date.

5.2 Scheme Consideration

Homestake covenants in favour of Plutonic (in its own right and on behalf
of the Option Holders) that in consideration for the delivery up and
cancellation of an Option held by an Option Holder under the terms of the Option
Scheme and for the allotment to Homestake of the Recapitalisation Shares
Homestake will allot to

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such Option Holder for each Ordinary Share over which an Option is held on the
Record Date the number of Homestake Stock as determined below:

<TABLE>
<CAPTION>
NUMBER OF
ORDINARY SHARES
OVER WHICH NUMBER OF EXERCISE EXCHANGE
EXPIRY OPTIONS GRANTED OPTIONS PRICE RATIO
------ ---------------- --------- -------- --------
<S> <C> <C> <C> <C>
October 12, 1999.................... 228,000 8 $6.04 0.070
November 28, 2000................... 40,000 1 $5.87 0.088
December 5, 2000.................... 200,000 1 $6.04 0.084
May 21, 2001........................ 200,000 1 $7.75 0.060
May 21, 2001........................ 200,000 1 $8.75 0.048
June 24, 2001....................... 765,000 11 $7.75 0.060
June 24, 2001....................... 765,000 11 $8.75 0.049
June 26, 2001....................... 340,000 13 $7.75 0.061
June 26, 2001....................... 340,000 13 $8.75 0.049
June 4, 2002........................ 70,000 3 $5.66 0.104
June 4, 2002........................ 70,000 3 $6.40 0.089
</TABLE>

5.3 Condition

The Option Scheme shall be subject to and conditional upon the Ordinary
Scheme and the PP Scheme becoming Effective provided that such condition may be
waived in whole or part by Homestake in its absolute discretion by notice in
writing given to Plutonic within 5 Business Days of the date on which either the
Ordinary Scheme or the PP Scheme is rejected by Ordinary Scheme Members or PP
Scheme Members, as the case may be.

6. SHARE PURCHASE

Prior to the Court Order Time (subject to compliance with the Corporations
Law) Homestake or one of its subsidiaries will purchase Plutonic Shares.

7. TERMINATION

7.1 This Agreement may be terminated at any time prior to the Second Court
Date:

(a) By either Homestake or Plutonic if at a duly held stockholders
meeting of Homestake the Homestake Resolutions are defeated.

(b) By either Homestake or Plutonic if any Court or Government Agency
has issued an order, decree of ruling or taken any other action permanently
enjoining, restraining or otherwise prohibiting the merger and such order,
decree, ruling or other action shall have become final and nonappealable.

(d) By Plutonic if the Homestake Board has:

(i) failed to recommend to Homestake's stockholders that they
approve the Homestake Resolutions;

(ii) taken any action described in clause 11.2(b)(i) or (ii); or

(iii) failed to publicly reaffirm in terms no less favourable than
and subject to no further qualifications than those contained in the
announcement made pursuant to clause 2.6 to Homestake stockholders that
they approve the Homestake Resolutions within 14 days after Plutonic has
made a written request to Homestake to do so (which written request may
be made by Plutonic at any time after the public disclosure of a
Homestake Takeover Proposal).

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(e) By Homestake if the Plutonic Board has:

(i) failed to recommend to the Scheme Participants that they
approve the Ordinary Scheme, the PP Scheme and the Option Scheme;

(ii) taken any action described in clause 11.1(b)(i)or (ii); or

(iii) failed to publicly reaffirm in terms no less favourable than
and subject to no further qualifications than those contained in the
announcement made pursuant to clause 2.6 to Plutonic shareholders that
they approve the Plutonic Schemes within 14 days after Homestake has
made a written request to Plutonic to do so (which written request may
be made by Homestake at any time after the public disclosure of a
Plutonic Takeover Proposal).

(f) By either Homestake or Plutonic if the other is in material breach
of any clause of this Agreement (other than a warranty in schedule 1 or
schedule 2 which is qualified by a materiality test, in which case any
breach shall suffice) before the Second Court Date provided that either
Homestake or Plutonic, as the case may be, has given notice to the other
setting out the relevant circumstances and stating an intention to
terminate and, if the relevant circumstances continue to exist seven
Business Days (or any shorter period ending at 12 noon on the day before
the Second Court Date) from the time such notice is given, the terminating
party may, in its absolute discretion, terminate this Agreement by a
further notice in writing to the other party.

(g) By either Homestake or Plutonic in accordance with clause 2.7(b).

(h) By:

(i) either Homestake or Plutonic if at a duly held meeting the
Ordinary Scheme Members; or

(ii) by Homestake if at a duly held meeting the PP Scheme Members
or the Option Holders do not approve the applicable Scheme by the
majorities required under the Corporations Law.

(i) By Homestake if Plutonic takes any action in breach of clause
11.1(a) or any action permitted by the proviso to that clause.

(j) By Plutonic if Homestake takes any action in breach of clause
11.2(a) or any action permitted by the proviso to that clause.

(k) By Homestake in accordance with clause 7.3(b).

7.2 Effect of Termination

In the event of termination of this Agreement by either Homestake or
Plutonic pursuant to clause 7, except to the extent that such termination
results from a wilful breach by any party of its obligations under this
Agreement (other than under clause 10) this Agreement shall become void and have
no effect, without any liability or obligation on the part of Homestake or
Plutonic, other than the provisions of clauses 22 and 26.

7.3 Termination in respect of Superior Proposals

(a) Plutonic may terminate this Agreement pursuant to clause 7.1(c)
only if:

(i) the Plutonic Board has received a Superior Plutonic Proposal;

(ii) in light of such Superior Plutonic Proposal the Plutonic Board
has determined in good faith, based upon the written advice of outside
counsel, that it is necessary for the Plutonic Board to withdraw or
modify its approval or recommendation of the Combination or this
Agreement in order to comply with its fiduciary duty under applicable
law;

(iii) Plutonic is in compliance with clause 11.1; and

(iv) the Plutonic Board concurrently approves or recommends the
implementation of such Superior Plutonic Proposal.

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(b) Homestake may terminate this Agreement pursuant to clause 7.1(k)
only if:

(i) the Homestake Board has received a Superior Homestake Proposal;

(ii) in the light of such Superior Homestake Proposal the board of
directors of Homestake has determined in good faith, based upon the
written advice of outside counsel, that it is necessary for the
Homestake Board to withdraw or modify its approval or recommendation of
the Combination or this Agreement in order to comply with its fiduciary
duty under applicable law;

(iii) Homestake is in compliance with clause 11.2; and

(iv) the Homestake Board concurrently approves or recommends the
implementation of such Superior Homestake Proposal.

(c) Homestake may only terminate this Agreement pursuant to clause
7.1(i) and Plutonic may only terminate this Agreement pursuant to clause
7.1(j) if, at the time the terminating party purports to terminate this
Agreement, the other party has not given written notice to the terminating
party that it has (and has in fact) ceased to participate in the
discussions and to provide the information which gave rise to the right to
terminate.

7.4 Notwithstanding any other provision of this Agreement a breach of the
warranties and representations given by Plutonic in paragraphs (h) or (i) of
Schedule II to this Agreement or given by Homestake in paragraph (h) of Schedule
I to this Agreement shall:

(a) not entitle Homestake or Plutonic, as the case may be, to
terminate this Agreement; and

(b) not amount to a failure to satisfy the condition precedent in
clause 2.1(k),

unless such breach results in or discloses anything which would amount to a
Plutonic Material Adverse Change or a Homestake Material Adverse Change, as the
case may be.

8. IMPLEMENTATION

8.1 Plutonic's Obligations

Plutonic shall execute all documents and do all acts and things necessary
for the implementation and performance of the Plutonic Schemes including the
following.

(a) SCHEME BOOKLETS: The preparation and the despatch of a Scheme
Booklet in respect of each Plutonic Scheme to be despatched to the Scheme
Participants which shall comply with the Corporations Law, PS 60, the
Listing Rules of the ASX and any applicable provisions of the Securities
Act and the Exchange Act.

(b) DIRECTORS' RECOMMENDATION: Plutonic will state (on the basis of
statements made to it by each of its directors) that each of the directors
of Plutonic recommends to Scheme Participants that all of the Plutonic
Schemes be approved, which statement shall be made on or immediately
following the execution of this Agreement in the announcements contemplated
by clause 2.6.

(c) EMPLOYEE SHARE PLAN: Such actions as shall be necessary to ensure
that between the date of this Agreement and the Effective Date no new
shares or options are allotted or issued or agreed to be allotted or issued
under the Plutonic Share Plans except new shares issued pursuant to options
granted prior to the date of this Agreement;

(d) S.411(17)(B) STATEMENT: Apply to the Commission for the production
of a statement pursuant to section 411(17)(b) of the Corporations Law
stating that the Commission has no objection to the Plutonic Schemes.

(e) COURT CONVENED MEETINGS: Apply to the Court for orders convening
the Court Convened Meetings, each to be held on the same day.

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(f) GENERAL MEETINGS: The convening of the following general meetings
of Plutonic to be held immediately following the Court Convened Meetings:

(i) REDUCTION OF CAPITAL: a general meeting to consider and, if
thought fit, approve special resolutions to cancel the Scheme Securities
in accordance with the terms of the Plutonic Schemes; and

(ii) RECAPITALISATION: a general meeting to consider and, if
thought fit, approve resolutions to allot sufficient ordinary shares in
Plutonic to Homestake to ensure, in accordance with the terms of the
Plutonic Schemes, that Plutonic is in Homestake's opinion adequately
capitalised, being the number of such shares specified in writing by
Homestake to Plutonic for the purpose.

(g) COURT APPROVAL: Apply to the Court for:

(i) orders approving such of the Plutonic Schemes as are approved
by the relevant Scheme Participants at the Court Convened Meetings; and

(ii) for orders confirming the reductions of capital incidental to
those Plutonic Schemes.

(h) LODGE COPY OF COURT ORDERS: Forthwith lodge with the Commission a
certified copy of the Court orders approving such of the Plutonic Schemes
as are approved by the relevant Scheme Participants at the Court Convened
Meetings.

(i) ALLOTMENT OF RECAPITALISATION SHARES: Immediately following the
Effective Date, Plutonic shall allot the Recapitalisation Shares, which
shares shall be allotted fully paid up by capitalising the capital
reduction reserve created by Plutonic following the cancellation of the
Scheme Securities.

(j) CONDUCT OF BUSINESS BY PLUTONIC: During the period from the date
of this Agreement to the Effective Date, Plutonic shall, and shall cause
its subsidiaries to, carry on their respective businesses in the usual,
regular and ordinary course in substantially the same manner as heretofore
conducted and in compliance in all material respects with all applicable
laws and regulations and, to the extent consistent therewith, use
reasonable efforts to preserve intact their current business organisations,
keep available the services of their current officers and employees and
preserve their relationships with customers, suppliers, licensors,
licensees and others having business dealings with them. Without limiting
the generality of the foregoing, during the period from the date of this
Agreement to the Effective Date, Plutonic shall not and shall not permit
any of its subsidiaries (without the consent of Homestake such consent not
to be unreasonably withheld or delayed) to:

(i) incur any expenditure which:

(A) would individually or in aggregate cause actual expenditure
to exceed by 10% or more, the amount provided for that type of
expenditure in the Budget; or

(B) is in excess of $200,000 for any single item or $1 million
in aggregate which is not provided for in the Budget,

without the written consent of Homestake;

(ii) acquire or agree to acquire:

(A) by merging or consolidating with, or by purchasing a
substantial portion of the assets of, or by any other manner, any
business or any corporation, partnership, limited liability company,
joint venture, association or other business organisation or division
thereof; or

(B) any assets that are material, individually or in the
aggregate, to Plutonic and its subsidiaries taken as a whole;

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(iii) sell, lease, license, mortgage or otherwise encumber or
subject to any lien or otherwise dispose (which for the purposes of this
clause includes disposing of any economic or beneficial interest) of any
company property (or agree to do any of these things) other than:

(A) sales and dispositions of interests or rights with respect
to raw materials, obsolete equipment, mine output and other
inventories, in each case only if in the ordinary course of business
consistent with past practice; and

(B) encumbrances that are incurred in the ordinary course of
business consistent with past practice;

(iv) except pursuant to existing employment agreements (or
arrangements set out in the Plutonic Disclosure Letter) or as required
by applicable laws:

(A) increase the compensation payable or to become payable to
its executive officers or employees;

(B) grant any severance or termination pay to, or enter into any
employment or severance agreement with, and director or executive
officer or employee of Plutonic or any of its subsidiaries; or

(C) establish, adopt, enter into or amend or take any action to
accelerate any rights or benefits under any collective bargaining
agreement or any bonus, pension, profit sharing, deferred
compensation, incentive compensation, stock ownership, stock
purchase, stock option, phantom stock, retirement, vacation,
severance, disability, death benefit, hospitalisation, medical or
other plan, arrangement or understanding (whether or not legally
binding) providing benefits to any current or former employee,
officer or director of Plutonic or any of its subsidiaries; or

(v) authorise any of, or commit or agree to take any of, the
foregoing actions.

8.2 Homestake's Obligations

Homestake shall execute all documents and do all acts and things necessary
for the implementation and performance of the Plutonic Schemes, including:

(a) STOCKHOLDER MEETINGS: The convening of a general meeting of
Homestake (using a proxy statement prepared in accordance with applicable
laws) to be held at least 1 Business Day before the Court Convened Meetings
are held to consider, and if thought fit, approve the issue of Homestake
Stock as the Scheme Consideration; and

(b) REPRESENTATION: Procuring that Homestake is represented by counsel
at the Court hearings convened for the purposes of section 411(4)(b) of the
Corporations Law, at which through its counsel Homestake will undertake (if
requested by the Court) to do all such things and take all such steps
within its power as may be necessary in order to ensure the fulfilment of
its obligations under this Agreement and the Plutonic Schemes.

(c) PROXY STATEMENT: Homestake will prepare and file with the SEC the
Proxy Statement. Homestake will use its best efforts to act to cause the
Proxy Statement to be mailed to Homestake's stockholders as soon as
practicable after the date hereof.

(d) CONDUCT OF BUSINESS BY HOMESTAKE: During the period from the date
of this Agreement to the Effective Date, Homestake shall, and shall cause
its subsidiaries to, carry on their respective businesses in the usual,
regular and ordinary course in substantially the same manner as heretofore
conducted and in compliance in all material respects with all applicable
laws and regulations and, to the extent consistent therewith, use
reasonable efforts to preserve intact their current business organisations,
keep available the services of their current officers and employees and
preserve their relationships with customers, suppliers, licensors,
licensees and others having business dealings with them.

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8.3 Accounting Treatment

Each of Homestake and Plutonic shall not take any action and shall not fail
to take any action which action or failure to act would prevent, or be likely to
prevent the Combination from qualifying for pooling-of-interests accounting
treatment.

8.4 Pooling Covenants

Except as disclosed in the Plutonic Disclosure Letter or the Homestake
Disclosure Letter from 11 November 1997 neither Homestake nor Plutonic nor any
of their respective subsidiaries has and from that date will not:

(a) Issue ordinary shares, options or other types of equity securities
or securities convertible into equity securities, except pursuant to
previously outstanding agreements or except in the ordinary course
consistent with past practice in the case of employee or director stock
options and directors share rights.

(b) Enter into or amend employment or termination agreements with
officers or directors that would be triggered by completion of the
transaction.

(c) Dispose of (or enter into agreements to dispose of) any
significant assets. For purposes of this provision, dispose includes
disposing of any economic or beneficial interest in an asset and all of the
following apply:

(i) the relative value of the assets disposed of cannot exceed 10%
of the disposing party's consolidated net assets on a book value or
market value basis;

(ii) the revenue of the business being disposed of cannot exceed
10% of the disposing party's consolidated prior year's revenues.

(iii) the earnings of the business being disposed of cannot exceed
10% of the disposing party's prior year's earnings;

(iv) the gain or loss recognised on the disposition cannot exceed
10% of the disposing party's prior year's earnings.

(d) Except as permitted by clause 6 distribute assets to its
shareholders, other than regular dividends in the ordinary course and time
at rates consistent with past practices (which for Plutonic would be a
final dividend for the year ended 31 December 1997 not exceeding $0.03 per
Ordinary Share), or purchase, redeem or otherwise acquire any shares of
capital stock of Plutonic or any of its subsidiaries or any other
securities thereof or any rights, warrants or options to acquire any such
shares or other securities.

8.5 Appointment of Plutonic Directors

As soon as practicable:

(a) after the Second Court Date, Plutonic shall use its best
endeavours to appoint three nominees of Homestake to the Plutonic Board;
and

(b) after the Scheme Consideration has been paid Plutonic shall use
its best endeavours to ensure that all directors other than Homestake
nominees resign.

8.6 Budget

The parties shall negotiate in good faith and use their best endeavours to
agree, an operating budget for Plutonic and its subsidiaries for the period from
the date of this Agreement until 30 June 1998. Without affecting each party's
obligation of good faith, if the parties are unable to agree on such budget or
any item in such budget, either party may elect to refer the matter to a nominee
of Homestake and a nominee of Plutonic for negotiation. If the matter is not
resolved within 7 days, then the matter will be referred to the Plutonic board
for its determination which will bind both parties.

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9. RANKING

9.1 All Homestake Stock to be issued to Scheme Participants pursuant to
the Plutonic Schemes shall, as from the date of issue, rank equally with all
other Homestake Stock on issue.

10. REPRESENTATIONS AND WARRANTIES

10.1 Homestake's Representations

Homestake represents and warrants to Plutonic at the date of this Agreement
and as at the Second Court Date as set forth in Schedule I.

10.2 Plutonic's Representations

Plutonic represents and warrants to Homestake and its directors at the date
of this Agreement and as at the Second Court Date as set forth in Schedule II.

10.3 Non-Survival of Representation and Warranties

The representations and warranties in clauses 10.1 and 10.2 shall expire on
the Second Court Date.

10.4 Release of officers and directors

(a) Neither Homestake nor any officer or director of Homestake will be
liable for anything done or purported to be done in connection with the
Combination or any transaction contemplated by this Agreement in good
faith, but nothing in this clause shall exclude any liability that may
arise from a grossly negligent act or omission on the part of such a
person. Homestake receives and holds the benefit of this release, to the
extent it relates to its officers and directors as agent for them.

(b) Subject to section 241 of the Corporations Law, neither Plutonic
nor any officer or director of Plutonic will be liable for anything done or
purported to be done in connection with the Combination or any transaction
contemplated by this Agreement in good faith, but nothing in this clause
shall exclude any liability which may arise from a grossly negligent act or
omission on the part of such a person. Plutonic receives and holds the
benefit of this release, to the extent it relates to its officers and
directors as agent for them.

11. EXCLUSIVITY

11.1 No Solicitation by Plutonic

(a) Plutonic shall not, nor shall it permit any of its subsidiaries
to, nor shall it authorise or permit any affiliate, officer, director or
employee of, or any investment banker, attorney or other advisor or
representative of, Plutonic, any of its subsidiaries or affiliates to:

(i) directly or indirectly solicit, initiate or encourage the
submission of any Plutonic Takeover Proposal; or

(ii) enter into any agreement with respect to any Plutonic Takeover
Proposal or directly or indirectly participate in any discussions or
negotiations regarding, or furnish to any person any information with
respect to, or take any other action to facilitate any inquiries or the
making of any proposal that constitutes, or may reasonably be expected
to lead to, any Plutonic Takeover Proposal,

provided, however, that after the First Court Date but only to the extent
required by the fiduciary obligations of the Plutonic Board, as determined
in good faith by it based on the written opinion of outside counsel,
Plutonic may, in response to a Plutonic Takeover Proposal that was not
solicited by Plutonic and that did not otherwise result from a breach or a
deemed breach of this clause 11.1(a), and subject to the compliance with
clause 11.1(c):

(A) furnish information with respect to Plutonic and to any
person pursuant to a customary confidentiality agreement not less
restrictive of the other party than the Confidentiality Agreement;
and
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(B) participate in discussions or negotiations with such person
regarding any Plutonic Takeover Proposal.

(b) Unless the Plutonic Board determines in good faith (based on the
written opinion of outside counsel) that it is required to do so by its
fiduciary obligations, until this Agreement is terminated in accordance
with clause 7.1, neither the Plutonic Board nor any committee thereof
shall:

(i) withdraw or modify, or propose to withdraw or modify, in a
manner adverse to Homestake, the approval or recommendation by the
Plutonic Board or any such committee of this Agreement or the
Combination; or

(ii) approve any letter of intent, agreement in principle,
acquisition agreement or similar agreement relating to any Plutonic
Takeover Proposal.

(i) immediately following

(A) the provision (in writing or orally) of any information in
relation to Plutonic; or

(B) any discussions or negotiations,

by Plutonic or any person referred to in clause 11.1(d) to or with
any person in relation to a Plutonic Takeover Proposal, advise
Homestake in writing of the general terms of any Plutonic Takeover
Proposal (including details on timing, Australian/foreign offeror,
gold company/ diversified resource company, scrip/cash, scheme of
arrangement/takeover bid and the material conditions relating thereto
and whether the market capitalisation of the other party exceeds $1
billion);

(ii) keep Homestake informed of any change to the general terms of
any Plutonic Takeover Proposal;

(iii) provide to Homestake as soon as practicable after delivery
thereof, full details of the written material relating to Plutonic
provided to other persons in connection with any Plutonic Takeover
Proposal or inquiry and where the relevant information has not already
been given to Homestake, provide copies of the information to Homestake;

(iv) provide to Homestake as soon as practicable after receipt
thereof, any information or analysis regarding Homestake or Homestake
Stock provided (in writing or orally) to Plutonic by any person in
connection or association with a Plutonic Takeover Proposal;

(v) within 14 days of first entering into discussions with the
person who has made a Plutonic Takeover Proposal, notify Homestake in
writing:

(A) of the determinations described in clause 7.3(a)(ii) and all
material terms (including the parties) of the Superior Plutonic
Proposal; or

(B) that Plutonic has ceased discussions in relation to that
Plutonic Takeover Proposal; and

(vi) at least seven days following receipt by Homestake of a notice
referred to in clause 11.1(c)(v)(A), and taking into account any revised
proposal made by Homestake since receipt of a notice referred to in
clause 11.1(c)(v)(A) notify Homestake in writing that the Superior
Plutonic Proposal remains a Superior Plutonic Proposal and the Plutonic
Board has again made the determinations referred to in clause
7.3(a)(ii).

(d) Without limiting the foregoing, it is understood that any
violation of the restrictions set forth in this clause 11.1 by any
executive officer of Plutonic or any of its subsidiaries or affiliates,
investment bankers, attorneys or other advisors or representatives of
Plutonic or any of its subsidiaries, whether or not such person is
purporting to act on behalf of Plutonic or any of its subsidiaries or
otherwise, shall be deemed to be a breach of this clause 11.1 by Plutonic.
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11.2 No Solicitation by Homestake

(a) Homestake shall not, nor shall it permit any of its subsidiaries
to, nor shall it authorise or permit any affiliate, officer, director or
employee of, or any investment banker, attorney or other advisor or
representative of, Homestake, any of its subsidiaries or affiliates to:

(i) directly or indirectly solicit, initiate or encourage the
submission of any Homestake Takeover Proposal;

(ii) enter into any agreement with respect to any Homestake
Takeover Proposal or directly or indirectly participate in any
discussions or negotiations regarding, or furnish to any person any
information with respect to, or take any other action to facilitate any
inquiries or the making of any proposal that constitutes, or may
reasonably be expected to lead to, any Homestake Takeover Proposal,

provided, however, that to the extent required by the fiduciary obligations
of the Homestake Board, as determined in good faith by it based on the
written opinion of outside counsel, Homestake may, in response to a
Homestake Takeover Proposal that was not solicited by Homestake and that
did not otherwise result from a breach or a deemed breach of this clause
11.2(a), and subject to the compliance with clause 11.2(c):

(A) furnish information with respect to Homestake and to any
person pursuant to a customary confidentiality agreement not less
restrictive of the other party than the Confidentiality Agreement;
and

(B) participate in discussions or negotiations with such person
regarding any Homestake Takeover Proposal,

(b) Unless the Homestake Board determines in good faith (based on the
written opinion of outside counsel) that it is required to do so by its
fiduciary obligations, until this Agreement is terminated in accordance
with clause 7.1, neither the Homestake Board nor any committee thereof
shall:

(i) withdraw or modify, or propose to withdraw or modify, in a
manner adverse to Plutonic, the approval or recommendation by the
Homestake Board or any such committee of this Agreement or the
Combination; or

(ii) approve any letter of intent, agreement in principle,
acquisition agreement or similar agreement relating to any Homestake
Takeover Proposal.

(i) immediately following

(A) the provision (in writing or orally) of any information in
relation to Homestake; or

(B) any discussions or negotiations,

by Homestake or any person referred to in clause 11.2(d) to or with
any person in relation to a Homestake Takeover Proposal, advise
Plutonic in writing of the general terms of any Homestake Takeover
Proposal (including details on timing, US/foreign offeror, gold
company/diversified resource company, scrip/cash, nature of offer and
the material conditions relating thereto and whether the market
capitalisation of the other party exceeds $1 billion);

(ii) keep Plutonic informed of any change to the general terms of
any Homestake Takeover Proposal;

(iii) provide to Plutonic as soon as practicable after delivery
thereof, full details of the written material relating to Homestake
provided to other persons in connection with any Homestake Takeover
Proposal or inquiry and where the relevant information has not already
been given to Plutonic, provide copies of the information to Plutonic;

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(iv) provide to Plutonic as soon as practicable after receipt
thereof, any information or analysis regarding Plutonic provided (in
writing or orally) to Homestake by any person in connection or
association with a Homestake Takeover Proposal;

(v) within 14 days of first entering into discussions with the
person who has made a Homestake Takeover Proposal, notify Plutonic in
writing:

(A) of the determinations described in clause 7.3(b)(ii) and all
material terms (including the parties) of the Superior Homestake
Proposal; or

(B) that Homestake has ceased discussions in relation to that
Homestake Takeover Proposal;

(vi) at least seven days following receipt by Plutonic of a notice
referred to in clause 11.2(c)(v)(A), and taking into account any revised
proposal made by Plutonic since receipt of a notice referred to in
clause 11.2(c)(v)(A) notify Plutonic in writing that the Superior
Homestake Proposal remains a Superior Homestake Proposal and the
Homestake Board has again made the determinations referred to in clause
7.3(b)(ii);

(d) Without limiting the foregoing, it is understood that any
violation of the restrictions set forth in this clause 11.2 by any
executive officer of Homestake or any of its subsidiaries or affiliates,
investment bankers, attorneys or other advisors or representatives of
Homestake or any of its subsidiaries, whether or not such person is
purporting to act on behalf of Homestake or any of its subsidiaries or
otherwise, shall be deemed to be a breach of this clause 11.2 by Homestake.

12. ACCESS TO INFORMATION

12.1 Each of Plutonic and Homestake shall, and shall cause each of its
respective subsidiaries to, afford to the other party and to the officers,
directors, employees, accountants, counsel, financial advisors and other
representatives of such other party, reasonable access during normal business
hours during the period prior to the Effective Date to all their respective
properties, books, contracts, commitments, personnel and records and, during
such period, each of Plutonic and Homestake shall, and shall cause each of its
respective subsidiaries to, furnish promptly to the other party:

(a) a copy of each report, schedule, registration statement and other
document filed by it during such period pursuant to the requirements of
applicable corporate or securities laws; and

(b) all other information concerning its business, properties and
personnel as such other party may reasonably request.

Without limiting the generality of the foregoing, Plutonic shall, within 2
business days of request therefor, provide to Homestake:

(i) access without requiring Homestake to comply with any procedural
requirements prescribed by law, to any information which a shareholder of
Plutonic is entitled to receive or gain access to under the Corporations
Law and to any registers or other information required to be kept by
Plutonic under the Corporations Law;

(ii) provide any information in relation to Plutonic's share register
including any CHESS subregister and any other subregister, whether
electronic or otherwise; and

(iii) provide any indications of the voting intentions of Plutonic's
shareholders which Plutonic has received, including information regarding
proxies.

12.2 The information to be provided pursuant to clause 12.1 shall be used
to satisfy the obligations, fiduciary and otherwise, of the parties and their
directors, officers and advisors under applicable corporate and securities laws,
to solicit approval of the Plutonic Schemes from Scheme Participants, to verify
that the representations and warranties in this Agreement are not materially
incorrect, to verify the satisfaction of conditions precedent and (in the case
of Homestake) to assist in integrating the two companies.
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13. AFFILIATES

13.1 Prior to the First Court Date Plutonic shall deliver to Homestake a
letter identifying all persons who are at that time Affiliates (including all
directors of Plutonic) of Plutonic. Prior to the Second Court Date Plutonic
shall deliver to Homestake an updated letter identifying all persons who are at
the time of the Court Convened Meetings Affiliates of Plutonic. Plutonic shall
use reasonable efforts to cause each such person to deliver to Homestake prior
to the Second Court Date or such later date as the parties agree a written
agreement substantially in the form of Schedule IV.

13.2 Prior to the First Court Date Homestake shall deliver to Plutonic a
letter identifying all persons who are at that time Affiliates of Homestake.
Prior to the Second Court date Homestake shall deliver to Plutonic an updated
letter identifying all persons who were at the time of the Homestake
Stockholders Meeting Affiliates of Homestake. Homestake shall use reasonable
efforts to cause each such person to deliver to Plutonic prior to the Second
Court Date or such later date as the parties agree a written agreement
substantially in the form of Schedule V.

14. BUSINESS DAY

Except where otherwise expressly provided, where under this Agreement the
day on which any act, matter or thing is to be done is a day other than a
Business Day, such act matter or thing shall be done on the immediately
succeeding Business Day.

15. WAIVER, REMEDIES CUMULATIVE

15.1 Waiver

The waiver by either party of a breach or default by the other party of
this Agreement or a failure to satisfy a condition shall not be construed as a
waiver of any other breach or default or non-fulfilment of this Agreement or of
any other provisions of this Agreement and shall not impair the exercise of any
rights accruing to it under this Agreement thereafter. All waivers must be in
writing. Any delay or omission on the part of either party to exercise or avail
itself of any rights accruing to it under this Agreement shall not operate as a
waiver by such party of any breach or default by the other party of any of the
said provisions.

15.2 Remedies Cumulative

All rights and remedies provided in this Agreement are cumulative and are
not exclusive of any rights or remedies provided by law.

16. NOTICES

Any notice given under this Agreement:

(a) must be in writing addressed to the intended recipient at the
address shown below or the address last notified by the intended recipient
to the sender:

<TABLE>
<S> <C>
Homestake
Attention: VP, General Counsel and Company Secretary
Fax: 415 397 0952
Copied to: VP, Corporate Development
Fax: 415 397 2641
Plutonic
Attention: Chairman
Fax: 2 9221 8364
</TABLE>

(b) must be signed by a person duly authorised by the sender; and

(c) will be taken to have been given when delivered, received or left
at the above address (whether by fax or otherwise). If delivery or receipt
occurs on a day when business is not generally carried on in the
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place to which the notice is sent, or is later than 4 pm (local time), it
will be taken to have been duly given at the commencement of business on
the next day when business is generally carried on in that place.

17. ENTIRE AGREEMENT

Subject to clause 23, this Agreement and the Confidentiality Agreement:

(a) contain the entire agreement of the parties with respect to their
subject matter; and

(b) set out the only conduct relied on by the parties and supersedes
all earlier conduct and any written agreement by the parties covering or
with respect to the subject matter of these agreements.

18. AMENDMENT

This Agreement may be amended only by another agreement executed by each
party.

19. ASSIGNMENT

The rights and obligations of each party under this Agreement are personal.
They cannot be assigned, charged or otherwise dealt with, and no party shall
attempt or purport to do so, without the prior written consent of the other
party.

20. NO MERGER

The rights and obligations of the parties will not merge on completion of
any transaction under this Agreement. They will survive the execution and
delivery of any assignment or other document entered into for the purpose of
implementing any transaction.

21. PUBLIC ANNOUNCEMENT

21.1 Public Announcement and Submissions

No public announcement of a transaction undertaken in connection with any
Transaction Document and no submission for the approval of any Regulatory
Authority pursuant to this Agreement shall be made other than in a form approved
by both parties, but each party will use all reasonable endeavours to provide
such approval as soon as practicable.

21.2 Required Disclosure

Where a party is required by law to make any announcement or make any
disclosure relating to matters the subject of a Transaction Document, it may do
so only after it has given at least seven days or such lesser period as may be
required or permitted by the effect of a legal obligation, but in any event
prior notice to the other party and has consulted to the fullest extent possible
with the other party and its legal advisers.

22. CONFIDENTIALITY

22.1 Confidentiality Agreement

Each Party acknowledges and agrees that it continues to be bound by the
Confidentiality Agreement in respect of all information received by it from the
other party before or after the date of this Agreement.

22.2 Survival of Obligations

The rights and obligations of the parties with respect to confidentiality
shall survive termination of this Agreement.

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23. FURTHER ASSURANCES

Each party shall exercise all such powers as are available to it, do all
such acts matters and things and sign, execute and deliver all such documents
and instruments as may be necessary or reasonably required to give full force
and effect to the provisions of this Agreement.

24. COUNTERPARTS

This Agreement may be executed in any number of counterparts, each of which
when so executed shall be deemed to be an original and such counterparts shall
together constitute one and the same instrument.

25. ATTORNEYS

Each of the Attorneys executing this Agreement respectively states in the
presence of each other person executing this Agreement that he has at the time
of execution no notice of revocation of the power of attorney under the
authority of which he does so.

26. COSTS

26.1 Except as provided below, each party shall bear its own costs charges
and expenses arising out of or incidental to the negotiations leading to or the
preparation of this Agreement and the proposed, attempted or actual
implementation of this Agreement, the Plutonic Schemes and the Transaction
Documents. Homestake shall pay any stamp duty that is payable in relation to
this Agreement or the Plutonic Schemes or the steps to be taken under the
Plutonic Schemes.

26.2 Plutonic shall pay to Homestake a fee of US$4,500,000 if Homestake
terminates this Agreement pursuant to clause 7.1(f) or Plutonic or Homestake
terminates this Agreement where Plutonic has approved or recommended the
implementation of a Superior Plutonic Proposal in accordance with the terms of
this Agreement.

26.3 Any fee due under clause 26.2 shall be paid by wire transfer of
same-day funds on the date of termination of this Agreement.

26.4 Homestake shall pay to Plutonic a fee of US$4,500,000 if Plutonic
terminates this Agreement pursuant to clause 7.1(f) or Homestake or Plutonic
terminates this Agreement where Homestake has approved or recommended the
implementation of a Superior Homestake Proposal in accordance with the terms of
this Agreement. Homestake shall reimburse certain of Plutonic's costs in
relation to the Combination up to a maximum of US$1 million if Plutonic
terminates this Agreement pursuant to clause 7.1(a) but only if Plutonic
provides invoices in relation to the costs referred to in clause 26.6.

26.5 Any fee or reimbursement due under clause 26.4 shall be paid by wire
transfer of same-day funds on the date of termination of this Agreement.

26.6 (a) The parties acknowledge that each party will suffer significant
costs and losses if the parties enter into this Agreement to participate in the
Combination and the Combination is subsequently not implemented. These costs
include:

(i) advisory costs, legal costs, costs of increased advertising
expenditure, costs of management and directors' time and costs of
convening and holding shareholder meetings;

(ii) costs of planning and merging information technology,
software, telecommunications and other services of Homestake and
Plutonic;

(iii) costs of not pursuing independent or alternative co-operative
arrangements in relation to information technology, software,
telecommunications and other services in contemplation of the Scheme;
and

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<PAGE> 191

(iv) costs of any other steps that Homestake or Plutonic could have
taken to further its business objectives on a stand alone basis (or
taking different steps in relation to any of those matters from those it
could have taken on a stand alone basis);

(v) without limiting clauses (iii) and (iv) above, costs of not
pursuing alternative acquisitions or strategic initiatives;

(vi) the reputational costs associated with a failed transaction
and the implications of those costs in the event either party seeks to
execute alternative acquisitions in the future; and

(vii) costs of the uncertainty and possible long-term harm to the
trading price of the parties' securities.

(b) Each party acknowledges that the costs outlined in this clause
26.6 are hard to calculate and that US$4,500,000 represents a fair and
reasonable estimate thereof. Each party acknowledges that the other party
has requested the inclusion of portions of this clause 26 and would not
otherwise have entered into this Agreement or the other Transaction
Documents to participate in the Combination. Each party believes that the
Combination will provide significant benefits to such party and its
shareholders and that it is appropriate to agree to inclusion of this
clause 26 in order to secure such benefits.

27. GOVERNING LAW

This Agreement is governed by the laws of New South Wales. The parties
submit to the non-exclusive jurisdiction of courts exercising jurisdiction
there.

28. ENFORCEMENT

(a) If any clause of this Agreement is held to be invalid as a
consequence of a breach of the duties of the directors of Plutonic caused
by Plutonic entering into this Agreement, this Agreement shall be void.

(b) Each party acknowledges that:

(i) the Plutonic Schemes would only be available for consideration
by Scheme Participants if the directors of Plutonic agreed to each
provision in this Agreement; and

(ii) the restrictions and obligations in this Agreement are
reciprocal in all material respects and supported by valuable
consideration.

29. LACHLAN RESOURCES NL

The parties agree that for the purposes of the definition of Plutonic
Prescribed Occurrence and clause 8.4 an occurrence in relation to Lachlan
Resources NL which would otherwise be a Plutonic Prescribed Occurrence or breach
clause 8.4 shall not be a Plutonic Prescribed Occurrence or breach clause 8.4 if
it is an occurrence or event which has been approved by Homestake, such approval
not to be unreasonably withheld or delayed except where the occurrence or event
would:

(a) prejudice the Combination qualifying as a pooling-of-interests; or

(b) cause or reasonably be expected to cause or have a material
adverse effect on Plutonic of more than $10 million.

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30. DEFINITIONS AND INTERPRETATION

30.1 Definitions

In this document unless the context otherwise requires the following words
and expressions shall have meanings as follows:

ACCOUNTS means, collectively, the audited consolidated financial
statements for Plutonic for the year ended 31 December 1996, and the
unaudited consolidated financial statements for Plutonic for the nine
months ended 30 September 1997.

AFFILIATE means for the purposes of clause 13.1 and 13.2, an affiliate
as such term is:

(a) defined for the purposes of paragraphs (c) and (d) of Rule 145
of the general rules and regulations of the SEC under the Securities
Act; or

(b) used in and for the purposes of Accounting Series Releases 130
and 135, as amended, of the SEC.

APPLICATIONS means the rights, titles, leases, concessions, licences
and other entitlements to explore for, mine, extract and process all and
any Minerals applied for by the Company or any of its subsidiaries anywhere
in the world.

ASX means Australian Stock Exchange Limited.

AUSTRALIAN GAAP means generally accepted accounting principles in
Australia.

BUDGET means the operating budget of Plutonic and its subsidiaries
contemplated by clause 8.6.

BUSINESS DAY means a weekday on which trading banks are open for
business in Sydney and San Francisco.

COMBINATION means the implementation of the Plutonic Schemes.

COMMISSION means the Australian Securities Commission.

CONFIDENTIALITY AGREEMENT means the agreement dated 8 December 1997
entered into between Homestake and Plutonic as amended by Annexure A.

CONTROL in relation to a corporation means having the capacity and
power (whether directly or indirectly and whether by the ownership of share
capital, the possession of voting power, contract or otherwise) to appoint
and/or remove the majority of the directors of that corporation or
otherwise to control or have the power to control the affairs and policies
of that corporation.

CORPORATIONS LAW means the Corporations Law as it applies in New
Plutonic Wales.

COURT means a court of competent jurisdiction under the Corporations
Law.

COURT CONVENED MEETINGS means each of the meetings to be convened by
the Court pursuant to the Plutonic Schemes.

COURT ORDER TIME means the time the Court makes an order confirming
the reduction of capital referred to in clause 8.1(g).

DIRECTORS OPTION PLAN means the Plutonic Non-Executive Directors
Option Scheme.

EFFECTIVE, when used in relation to a Scheme, means the coming into
effect, pursuant to section 411(10) of the Corporations Law, of the order
of the Court made under section 411(4)(b) in relation to that Scheme.

EFFECTIVE DATE means the date on which the Ordinary Scheme, the PP
Scheme and the Option Scheme becomes Effective.

EMPLOYEE SHARE PLAN means the Plutonic Employee Share Participation
Plan.
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ENVIRONMENTAL LAW means any law concerning environmental matters and
includes, but is not limited to, a law concerning land use, development,
pollution, waste disposal, toxic and hazardous substances, conservation of
natural or cultural resources, resource allocation or the exploration for
or development of any natural resource.

ENVIRONMENTAL LIABILITY means any obligation, expense, penalty or fine
under Environmental Law that would or could be imposed upon such person or
any of its subsidiaries or any occupier of its properties as a result of
activities carried on during the ownership or occupation of the property by
such person or any of its subsidiaries, or by the members predecessor in
title or any previous occupier of the Properties.

EXCHANGE ACT means the United States Securities Exchange Act of 1934
and the rules and regulations thereunder.

EXCHANGES means the New York Stock Exchange and the Australian Stock
Exchange Limited.

FIRB means the Australian Foreign Investment Review Board.

FIRST COURT DATE means the date on which the Court makes an order
under Section 411(1) of the Corporation Law to convene the Court Convened
Meetings.

GENERAL RESOLUTION means the special resolution of Plutonic
shareholders approving the reduction of capital contemplated by the
Plutonic Schemes pursuant to Section 195(1) of the Corporations Law.

GOVERNMENTAL AGENCY means any federal, State or territory government
in Australia or the United States of America or any federal, State or
territory governmental, regulatory, semi-governmental or judicial entity or
authority in Australia or the United States of America.

HOMESTAKE BOARD means the board of directors of Homestake.

HOMESTAKE DISCLOSURE LETTER means the letter from Homestake to
Plutonic, dated the date of this Agreement, disclosing various matters
pertaining to the business and operations of Homestake.

HOMESTAKE INFORMATION means such information regarding Homestake and
Homestake Stock required under the Corporations Law or as may be
appropriate under PS 60 to enable the applications for the Regulatory
Approvals and the Scheme Booklets to be prepared and completed.

HOMESTAKE MATERIAL ADVERSE CHANGE: means one or more occurrences or
matters individually or in aggregate (other than disclosed in the Homestake
Disclosure Letter) that:

(a) have a material adverse effect on the business, properties,
financial condition or results of operations of Homestake and its
subsidiaries, taken as a whole (other than effects relating to the gold
mining industry in general) in relation to which creates or could
reasonably be expected to create liabilities, or results or could
reasonably be expected to result in a diminution of the value of
Homestake's assets, which in aggregate exceed US$150 million; or

(b) prevent Homestake and its subsidiaries from performing their
respective obligations under this Agreement.

HOMESTAKE PRESCRIBED OCCURRENCE means other than disclosed in the
Homestake Disclosure Letter or as required by this Agreement or the
Plutonic Schemes, between the date of this Agreement and the Effective
Date, none of the following shall have occurred in relation to Homestake:

(a) Homestake reclassifying, reducing or splitting its outstanding
stock by way of capital stock split, payment of any dividend payable in
stock, or otherwise.

(b) The board of directors of Homestake, enacting a resolution
providing for the reduction, by repurchase or otherwise, of the number
of outstanding shares of capital stock of such entity;

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(c) Homestake entering into an agreement to purchase any of its
outstanding shares of capital stock, or the board of directors of
Homestake enacting a resolution approving the terms of such an
agreement;

(e) Homestake, or a subsidiary thereof, issuing, or agreeing to
issue, convertible notes;

(f) Homestake, or any subsidiary thereof, disposing, agreeing to
dispose, of the whole, or a substantial part, of the business or
property of the Homestake group as a whole;

(h) The board of directors of Homestake, or any subsidiary thereof,
enacting a resolution providing for the winding up, bankruptcy,
liquidation or dissolution of Homestake or a subsidiary thereof except
for a subsidiary having assets of less than US$250,000;

(i) The appointment of a receiver, bankruptcy trustee, liquidator,
administrator, custodian or other similar official of Homestake or any
subsidiary thereof except for a subsidiary having assets of less than
US$250,000;

(j) The entry by a court of competent jurisdiction of an order or
decree providing for the winding up of Homestake or a subsidiary thereof
except for a subsidiary having assets of less than US$250,000; or

(k) Homestake, or a subsidiary thereof, entering into a Chapter 11
bankruptcy.

HOMESTAKE RESOLUTIONS means the resolutions to be put to stockholders
of Homestake to approve the issue of Homestake Stock as the Scheme
Consideration pursuant to the Schemes described in this Agreement.

HOMESTAKE STOCK means common stock, par value US$1.00 of Homestake.

HOMESTAKE STOCKHOLDERS MEETING means the meeting of stockholders of
Homestake to which the Homestake Resolutions will be put.

HOMESTAKE TAKEOVER PROPOSAL means any proposal for a takeover bid,
share purchase, scheme, capital reconstruction purchase of assets, merger,
amalgamation, consolidation or other business combination involving
Homestake or any of its subsidiaries, any proposal for the issuance by
Homestake of a material amount of its equity securities as consideration
for the assets or securities of another person or any proposal or offer to
acquire in any manner, directly or indirectly, a material equity interest
in, any voting securities of, or a substantial portion of the assets of
Homestake or any of its subsidiaries, other than the transactions
contemplated by this Agreement.

LIEN means and includes all pledges, claims, liens, charges,
encumbrances and security interests of any kind or nature whatsoever.

MINERALS means the minerals mined, produced, processed, sold or traded
by the Company.

MINERAL RIGHTS means all rights, titles, leases, concessions, licences
and other entitlements to explore for, mine, extract and process all and
any Minerals including, without limitation (and where the context so
requires), the Applications.

OPTION means an option granted pursuant to the Directors' Option Plan
or the Employee Share Plan.

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OPTION HOLDER means each person who is registered in the register of
option holders' of Plutonic as the holder of an Option as at the Record
Date.

OPTION SCHEME means the Scheme between Plutonic and the Option Holders
as described in clause 5.

ORDINARY SCHEME means the Scheme between Plutonic and the Ordinary
Scheme Members as described in clause 3.

ORDINARY SCHEME MEMBER means each person, other than Homestake or any
of its subsidiaries, who is registered in the register of members of
Plutonic as the holder of an Ordinary Share as at the Record Date.

ORDINARY SHARE means a fully paid ordinary share of $0.50 each in
Plutonic.

PERMITS means all certificates, franchises, licenses, leases, mining
tenements, permits, authorisations and approvals issued to or granted by
Governmental Agencies.

PLUTONIC BOARD means the board of directors of Plutonic.

PLUTONIC DISCLOSURE LETTER means the letter from Plutonic to
Homestake, dated the date of this Agreement, disclosing various matters
pertaining to the business and operations of Plutonic.

PLUTONIC INFORMATION means such information regarding Plutonic and its
operations as is required by Homestake and applicable U.S. securities laws
to prepare and file with the SEC the Proxy Statement or to enable
preparation of the applications for the Regulatory Approvals.

PLUTONIC MATERIAL ADVERSE CHANGE means one or more occurrences or
matters individually or in aggregate (other than disclosed in the Plutonic
Disclosure Letter) that:

(a) have a material adverse effect on the business, properties,
financial condition or results of operations of Plutonic and its
subsidiaries, taken as a whole (other than effects relating to the gold
mining industry in general) which creates or could reasonably be
expected to create liabilities, or results or could reasonably be
expected to result in a diminution of the value of Plutonic's assets,
which in aggregate exceed $50 million; or

(b) prevent Plutonic and its subsidiaries from performing their
respective obligations under this Agreement.

PLUTONIC PRESCRIBED OCCURRENCE means other than disclosed in the
Plutonic Disclosure Letter or as required by the Agreement or the Plutonic
Schemes, between the date of this Agreement and the Effective Date, none of
the following shall have occurred in relation to Plutonic:

(a) any one or more of the provisions of the constitution of
Plutonic or any material subsidiary of Plutonic being altered in any of
the ways mentioned in section 193(1) of the Corporations Law;

(b) Plutonic or any material subsidiary of Plutonic resolving to
reduce its share capital in any way;

(c) Plutonic making an allotment of, or granting an option to
subscribe for, any of its Ordinary Shares, PP Shares or Options or
agreeing to make such an allotment or to grant such an option other than
allotments of Ordinary Shares or PP Shares following an election to
convert by the holder of an Option or any material subsidiary of
Plutonic doing any of the foregoing with respect to its own securities;

(d) Plutonic or a subsidiary of Plutonic issuing, or agreeing to
issue, convertible notes or other debt securities (other than the issue
of non-convertible debt securities in the ordinary course of business);

(e) Plutonic or any material subsidiary of Plutonic disposing, or
agreeing to dispose, of the whole, or a substantial part, of its
business or property;
A-23
<PAGE> 196

(g) Plutonic or any material subsidiary entering into any onerous
or long term contract or commitment otherwise than in the ordinary
course of business;

(h) Plutonic or any material subsidiary of Plutonic resolving that
it be wound up;

(i) the appointment of a provisional liquidator or administrator of
Plutonic or of any material subsidiary of Plutonic;

(j) the making of an order by a Court for the winding up of
Plutonic or of any material subsidiary of Plutonic;

(k) an administrator of Plutonic, or of any material subsidiary of
Plutonic being appointed under sections 436A, 436B or 436C of the
Corporations Law;

(l) Plutonic or any material subsidiary of Plutonic executing a
deed of company arrangement;

(m) the appointment of a receiver or a receiver and manager, in
relation to the whole, or a substantial part, of the property of
Plutonic or of any material subsidiary of Plutonic; or

(n) Plutonic or any material subsidiary of Plutonic:

(i) entering into a buy-back agreement; or

(ii) resolving to approve the terms of a buy-back agreement
under the Corporations Law.

For the purposes of this definition a material subsidiary includes any
subsidiary which has assets of more than $100,000.

PLUTONIC SCHEMES means the Ordinary Scheme, the PP Scheme and the
Option Scheme.

PLUTONIC SHARE PLANS means the Employee Share Plan and the Directors
Option Plan.

PLUTONIC TAKEOVER PROPOSAL means any proposal for a takeover bid,
share purchase, scheme, capital reconstruction, purchase of assets, merger,
amalgamation, consolidation or other business combination involving
Plutonic or any of its subsidiaries, any proposal for the issuance by
Plutonic of a material amount of its equity securities as consideration for
the assets or securities of another person or any proposal or offer to
acquire in any manner, directly or indirectly, a material equity interest
in, any voting securities of, or a substantial proportion of the assets of
Plutonic or any of its subsidiaries, other than the transactions
contemplated by this Agreement.

PP SCHEME means the Scheme between Plutonic and the PP Scheme Members
as described in clause 4.

PP SCHEME MEMBER means each person who is registered in the register
of members of Plutonic as the holder of a PP Share as at the Record Date.

PP SHARE means a partly paid ordinary share of par value $0.50 paid to
$0.05 each issued by Plutonic pursuant to the Employee Share Plan.

PROPERTIES means the properties owned, leased or occupied under
licence by such person or any of its subsidiaries.

PROXY STATEMENT means a proxy statement issued by Homestake in
relation to the Homestake Resolutions complying with the provisions of
Regulation 14A promulgated under the Exchange Act.

PS 60 means Policy Statement 60 issued by the Commission on 15 July
1993.

QUIT DATE means 30 June 1998.

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<PAGE> 197

RECAPITALISATION SHARES means the number of Ordinary Shares specified
by Homestake under clause 8.1(f)(ii).

REGULATORY APPROVALS means such consent, approvals or other acts by a
Regulatory Authority necessary to satisfy the Regulatory Conditions.

REGULATORY AUTHORITY includes:

(a) government or governmental, semi-governmental or judicial
entity or authority;

(b) minister, department, office, commission, delegate,
instrumentality, agency, board, authority or organisation of
any government;

(d) the Exchanges.

REGULATORY CONDITION means the conditions precedent specified in
clause 2.1(a).

RECORD DATE means 5.00pm on the Business Day preceding the Effective
Date.

SCHEME means a scheme of arrangement under Part 5.1 of the
Corporations Law.

SCHEME BOOKLETS means, in respect of the Plutonic Schemes, the
information described in clause 8.1(a) to be despatched to the Scheme
Participants and approved by the Court which must include the Plutonic
Schemes, an explanatory statement complying with the requirements of the
Corporations Law and notices of meeting and proxy forms in such form as the
parties may agree.

SCHEME CONSIDERATION means:

(a) in respect of the Ordinary Scheme, the consideration to be
provided by Homestake under clause 3.2;

(b) in respect of the PP Scheme, the consideration to be provided
by Homestake under clause 4.2; and

SCHEME PARTICIPANTS means the Ordinary Scheme Members, the PP Scheme
Members and the Option Holders.

SCHEME SECURITIES means the Ordinary Shares (other than Ordinary
Shares held by Homestake or any wholly owned subsidiary of Homestake), the
PP Shares and the Options.

SEC means the United States Securities and Exchange Commission.

SECOND COURT DATE means the day on which the Court makes an order
pursuant to Section 411(4)(b) approving each of the Plutonic Schemes.

SECURITIES ACT means the United States Securities Act of 1933 and the
rules and regulations thereunder.

SUPERIOR HOMESTAKE PROPOSAL means any proposal made by a third party
to acquire a significant proportion (15% or more) of Homestake pursuant to
a takeover bid, share purchase, scheme, capital reconstruction, tender or
exchange offer, a merger, a sale of all or substantially all of its assets
or otherwise on terms which the board of directors of Homestake determines
in its good faith judgment to be more favourable to the holders of
Homestake Stock than the transactions contemplated by this Agreement (based
on the written opinion, with only customary qualifications, of Homestake's
independent financial advisor), taking into account all the terms and
conditions of such proposal and this Agreement.

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<PAGE> 198

SUPERIOR PLUTONIC PROPOSAL means any proposal made by a third party to
acquire a significant proportion (15% or more) of Plutonic pursuant to a
takeover bid, share purchase, scheme, capital reconstruction, tender or
exchange offer, a merger, a sale of all or substantially all of its assets
or otherwise on terms which the board of directors of Plutonic determines
in its good faith judgment to be more favourable to the holders of Ordinary
Shares than the transactions contemplated by this Agreement (based on the
written opinion, with only customary qualifications, of Plutonic's
independent financial advisor), taking into account all the terms and
conditions of such proposal and this Agreement.

TAX means any tax, levy, charge, impost, duty, fee, deduction,
compulsory loan or withholding, which is assessed, levied, imposed or
collected by any Governmental Agency and includes, but is not limited to
any interest, fine, penalty, charge, fee or any other amount imposed on, or
in respect of any of the above.

TRADING DAY means a day upon which the ASX is open for trading.

TRANSACTION DOCUMENTS means this Agreement, the Proxy Statement, the
Confidentiality Agreement and the Scheme Booklets.

U.S. GAAP means generally accepted accounting principles in the United
States.

30.2 Interpretation

HEADINGS are for convenience only and do not affect interpretation.
The following rules of interpretation apply unless the context requires
otherwise.

(a) The singular includes the plural and conversely.

(b) A gender includes all genders.

(d) A reference to a person includes a body corporate, an
unincorporated body or other entity and conversely.

(e) A reference to a clause or schedule is to a clause of or
schedule to this Agreement.

(f) A reference to any agreement or document is to that agreement
or document as amended, novated, supplemented, varied or replaced from
time to time, except to the extent prohibited by this Agreement or that
other agreement or document.

(g) A reference to any legislation or to any provision of any
legislation includes any modification or re-enactment of it, any
legislative provision substituted for it and all regulations and
statutory instruments issued under it.

(h) Mentioning anything after include, includes or including does
not limit what else might be included.

(i) A reference to dollars or $ is to Australian currency.

(j) A reference to a particular time of day shall be a reference to
that time in Sydney.

(k) A word or expression to which a meaning is attributed in the
Corporations Law shall bear that meaning.

EXECUTED in Sydney.

A-26
<PAGE> 199

<TABLE>
<S> <C>
SIGNED FOR AND ON BEHALF OF
HOMESTAKE MINING COMPANY
by Wayne Kirk
in the presence of:

/s/ CATHY COLE KIRK /s/ WAYNE KIRK
- ----------------------------------------------------- -----------------------------------------------------
Witness

SIGNED FOR AND ON BEHALF OF
PLUTONIC RESOURCES LIMITED

by E P McClintock
in the presence of:

/s/ STUART MCCULLOCH /s/ E P MCCLINTOCK
- ----------------------------------------------------- -----------------------------------------------------
Witness
</TABLE>

A-27
<PAGE> 200

SCHEDULE I

HOMESTAKE REPRESENTATIONS AND WARRANTIES

Except as disclosed in the Homestake Disclosure Letter Homestake represents
and warrants to Plutonic that:

(a) The Homestake Information provided to Plutonic for inclusion in
the Scheme Booklets will, as at the First Court Date, be sufficient to
allow Plutonic to comply with the requirements of Part 5.1 of the
Corporations Law, the ASX Listing Rules and PS60.

(b) The Homestake Information will be provided in good faith and on
the understanding that Plutonic will rely on the Homestake Information for
the purposes of preparing the Scheme Booklets and proposing and
implementing the Plutonic Schemes.

(c) The Homestake Information contained in the Scheme Booklets, as at
the date the Scheme Booklets are despatched to Scheme Participants, will
not contain any material statement which is false or misleading nor contain
any material omission.

(d) Homestake will, as a continuing obligation, provide to Plutonic
all such further or new information which may arise after the Scheme
Booklets have been despatched until the date of the Court Convened Meetings
which may be necessary to ensure that there would be no breach of paragraph
(b) if it applied as at the date upon which that information arose.

(e) The authorised capital of Homestake consists of 250,000,000 shares
of common stock, US$1 par value per share and 10,000,000 shares of
preferred stock, par value US$1 per share of which 2,500,000 are "Series A"
preferred stock. The issued capital of Homestake consists of 146,734,868
shares of common stock. Neither Homestake nor any of its subsidiaries is
under any obligation to issue or allot, nor has granted any person the
right to call for the issue or allotment, of any shares or other securities
of Homestake or any of its subsidiaries.

(f) The execution and delivery by Homestake of this Agreement do not,
and the performance by Homestake of the transactions contemplated thereby
will not, conflict with, or result in any violation of, or default (with or
without notice or lapse of time, or both) under, or give rise to a right of
consent, termination, purchase, cancellation or acceleration of any
obligation or to loss of any property, rights or benefits under, or result
in the imposition of any additional obligation under, or result in the
creation of any Lien upon any of the properties or assets of Homestake or
and of its subsidiaries under:

(i) the Restated Certificate of Incorporation or By-laws of
Homestake or the comparable organisational documents of any of its
subsidiaries;

(ii) any contract, instrument, or other legally binding agreement,
whether oral or written, applicable to Homestake or any of its
subsidiaries or their respective properties or assets; or

(iii) subject to the approval of any Governmental Agency, any
judgment, law or regulation applicable to Homestake or any of its
subsidiaries or their respective properties or assets,

other than, in the case of clauses (ii) and (iii), any such conflicts,
violations or defaults etc that individually or in the aggregate would not
cause a Homestake Material Adverse Change.

(g) There is no suit, action or proceeding pending or, to the
knowledge of Homestake, threatened against Homestake or any of its
subsidiaries (and Homestake does not have any reasonable basis to expect
any such suit, action or proceeding to be commenced) that, individually or
in the aggregate, could reasonably be expected to cause a Homestake
Material Adverse Change, and there is not any judgment, decree, injunction,
rule or order of any Governmental Agency or arbitrator outstanding against
Homestake or any of its subsidiaries causing, or which, insofar as
reasonably can be foreseen, in the future would cause, any Homestake
Material Adverse Change.

(h) (i) Homestake has filed all required reports, schedules, forms,
statements and other documents with the SEC since January 1, 1996 (the
Homestake SEC Documents). As of its date, each
A-28
<PAGE> 201

Homestake SEC Document complied in all material respects with the
requirements of the Securities Act or the Exchange Act, as the case may
be, and the rules and regulations of the SEC promulgated thereunder
applicable to such Homestake SEC Documents. None of the Homestake SEC
Documents contains any untrue statement of a material fact or omits to
state a material fact required to be stated therein or necessary in
order to make the statements therein, in light of the circumstances
under which they were made, not misleading, except to the extent that
such statements have been modified or superseded by a later filed
Homestake SEC Document. The consolidated financial statements of
Homestake included in the Homestake SEC Documents comply as to form in
all material respects with applicable accounting requirements and the
published rules and regulations of the SEC with respect thereto, have
been prepared in accordance with US GAAP (except, in the case of
unaudited statements, as permitted by Form 10-Q of the SEC) applied on a
consistent basis during the periods involved (except as may be indicated
in the notes thereto) and fairly present the consolidated financial
position of Homestake as of the dates thereof and the consolidated
results of its operations and cash flows for the periods then ended
(subject, in the case of unaudited statements, to normal year-end audit
adjustments).

(ii) All information given in writing by or on behalf of Homestake
or its advisers to Plutonic or its advisers prior to the date of this
Agreement in connection with Homestake's investigation of the
Transactions is accurate and complete in all material respects.

(iii) Except as set forth in the Homestake SEC Documents, neither
Homestake nor any of its subsidiaries has any liabilities or obligations
of any nature (whether accrued, absolute, contingent or otherwise)
required by GAAP to be set forth on a consolidated balance sheet of
Homestake and its consolidated subsidiaries or in the notes thereto and
which, individually or in the aggregate, could reasonably be expected to
cause a Homestake Material Adverse Change. Except for Prime Resources
Group Inc. none of Homestake's subsidiaries is, or has been, subject to
the reporting requirements of Sections 13(a) or 15 of the Exchange Act
since 1 January 1993.

(i) Except as disclosed in the Homestake SEC Documents, from 31
December 1996, to the date of this Agreement, Homestake has conducted its
business only in the ordinary course and there has not been any Homestake
Material Adverse Change.

(j) Neither Homestake nor any of its subsidiaries has violated or
failed to comply with any statute, law, ordinance, regulation, rule,
judgment, decree or order of any governmental entity applicable to its
business or operations, except for violations and failures to comply that
could not, individually or in the aggregate, reasonably be expected to
cause a Homestake Material Adverse Change.

(k) (i) There is no material Environmental Liability, nor factors likely
to give rise to any material Environmental Liability, affecting any of
the material Properties of Homestake or any of its subsidiaries apart
from those disclosed in the Homestake SEC Documents or in the Homestake
Disclosure Letter that, individually or in the aggregate, could
reasonably be expected to cause a Homestake Material Adverse Change.

(ii) Neither Homestake nor any of its subsidiaries has materially
violated or materially infringed any Environmental Law now in effect or
has materially violated or materially infringed any then current
Environmental Law as applied at that time that, individually or in the
aggregate, could reasonably be expected to cause a Homestake Material
Adverse Change.

(l) Except as disclosed in the Homestake Disclosure Letter, Homestake
and its subsidiaries possess all Permits, including pursuant to any
Environmental Law, necessary to conduct their business as such business is
currently conducted or is expected to be conducted, except for such
Permits, the lack of possession of which has not, and is not reasonably
expected to cause, a Homestake Material Adverse Change. Except as disclosed
in the Homestake Disclosure Letter:

(i) all such Permits are validly held by Homestake or one of its
subsidiaries, and Homestake and its subsidiaries have complied in all
respects with all terms and conditions thereof, except for such
instances where the failure to validly hold such Permits or the failure
to have complied with
A-29
<PAGE> 202

such Permits has not caused, and is not reasonably expected to cause, a
Homestake Material Adverse Change;

(ii) none of such Permits will be subject to suspension,
modification, revocation or non-renewal as a result of the execution and
delivery of this Agreement or the consummation of the Combination, other
than such Permits the suspension, modification or non-renewal of which,
individually or in the aggregate, have not had and could not reasonably
be expected to cause a Homestake Material Adverse Change; and

(iii) between 31 December 1996 and the date of this Agreement,
neither Homestake nor any of its subsidiaries has received any written
warning, notice, notice of violation or probable violation, notice of
revocation, or other written communication from or on behalf of any
Governmental Agency, alleging:

(A) any violation of such Permit; or

(B) that Homestake or any of its subsidiaries requires any
Permit required for its business, as such business is currently
conducted that is not currently held by it,

which if sustained and acted upon by the Governmental Agency could
reasonably be expected, individually or in the aggregate, to cause a
Homestake Material Adverse Change.

(m) The Homestake Stock to be issued as the Scheme Consideration will
either be registered under or exempt from registration under the Securities
Act.

A-30
<PAGE> 203

SCHEDULE II

PLUTONIC REPRESENTATIONS AND WARRANTIES

Except as disclosed in the Plutonic Disclosure Letter Plutonic represents
and warrants to Homestake that:

(a) The Plutonic Information will, as at the date of filing and
despatch of the Proxy Statement to Homestake's Stockholders not contain any
material statement which is false or misleading nor contain any material
omission.

(b) The Plutonic Information was and will be provided in good faith
and on the understanding that Homestake will rely on that information for
the purposes of preparing the Proxy Statement and implementing the Plutonic
Schemes.

(c) Plutonic will, as a continuing obligation, provide to Homestake
all such further or new information which may arise after the Proxy
Statement has been filed and despatched until the date of the Homestake
Stockholders Meeting which may be necessary to ensure that there would be
no breach of paragraph (a) if it applied as at the date upon which that
information arose.

(d) Plutonic will, as a continuing obligation, provide to Homestake
all such further or new information which may arise after the Scheme
Booklets have been despatched until the date of the Court Convened Meetings
which may be necessary to ensure that there would be no breach of paragraph
(a) if it applied as at the date upon which that information arose.

(e) The issued share capital of Plutonic is:

- 188,115,785 Ordinary Shares; and

- 1,077,087 PP Shares of which 211,250 remain unpaid as to 75c,
702,962 remain unpaid as to 85c and 162,875 remain unpaid as to
90c.

The number of options Plutonic has issued is as follows:

<TABLE>
<CAPTION>
NUMBER OF
ORDINARY SHARES
OVER WHICH NUMBER OF EXERCISE
EXPIRY OPTIONS GRANTED OPTIONS PRICE
------ --------------- --------- --------
<S> <C> <C> <C>
October 12, 1999......................... 228,000 8 $6.04
November 28, 2000........................ 40,000 1 $5.87
December 5, 2000......................... 200,000 1 $6.04
May 21, 2001............................. 200,000 1 $7.75
May 21, 2001............................. 200,000 1 $8.75
June 24, 2001............................ 765,000 11 $7.75
June 24, 2001............................ 765,000 11 $8.75
June 26, 2001............................ 340,000 13 $7.75
June 26, 2001............................ 340,000 13 $8.75
June 4, 2002............................. 70,000 3 $5.66
June 4, 2002............................. 70,000 3 $6.40
</TABLE>

Except as disclosed above neither Plutonic nor any of its subsidiaries is
under any obligation to issue or allot, nor has granted any person the right to
call for the issue or allotment, of any shares or other securities of Plutonic
or any of its subsidiaries.

(f) The execution and delivery by Plutonic of this Agreement do not,
and the performance by Plutonic of the transactions contemplated thereby
will not, conflict with, or result in any violation of, or default (with or
without notice or lapse of time, or both) under, or give rise to a right of
consent, termination, purchase, cancellation or acceleration of any
obligation or to loss of any property, rights or

A-31
<PAGE> 204

benefits under, or result in the imposition of any additional obligation
under, or result in the creation of any Lien upon any of the properties or
assets of Plutonic or and of its subsidiaries under:

(i) the Memorandum or Articles of Association of Plutonic or the
comparable organisational documents of any of its subsidiaries;

(ii) any contract, instrument, or other legally binding agreement,
whether oral or written, applicable to Plutonic or any of its
subsidiaries or their respective properties or assets; or

(iii) subject to the approval of any Governmental Agency, any
judgment, law or regulation applicable to Plutonic or any of its
subsidiaries or their respective properties or assets, other than, in
the case of clauses (ii) and (iii), any such conflicts or violations or
default etc that individually or in the aggregate would not cause a
Plutonic Material Adverse Change.

(g) There is no suit, action or proceeding pending or, to the
knowledge of Plutonic, threatened against Plutonic or any of its
subsidiaries (and Plutonic does not have any reasonable basis to expect any
such suit, action or proceeding to be commenced) that, individually or in
the aggregate, could reasonably be expected to cause a Plutonic Material
Adverse Change, and there is not any judgment, decree, injunction, rule or
order of any Governmental Agency or arbitrator outstanding against Plutonic
or any of its subsidiaries causing, or which, insofar as reasonably can be
foreseen, in the future would cause, any Plutonic Material Adverse Change.
Except as disclosed in the Plutonic Disclosure letter, no native title
claims have been lodged with the Native Title Tribunal or otherwise in
relation to the Mineral Rights and the Company is not aware of any
threatened or potential native title claims in relation to the Mineral
Rights that, individually or in the aggregate, could reasonably be expected
to cause a Plutonic Material Adverse Change.

(h) The Accounts, as provided to Homestake:

(i) have been prepared in accordance with Australian GAAP;

(ii) show a true and far view of the consolidated financial
position and the assets and liabilities of Plutonic at their respective
dates and of the consolidated income, expenses and results of the
operations of Plutonic for the financial period then ended;

(iii) include and disclose all gains and losses, whether realised
or unrealised;

(iv) include all reserves and provisions for taxation that are
necessary to cover all Taxes of Plutonic and its subsidiaries in respect
of any period;

(v) include all consolidated liabilities of Plutonic at their
respective dates; and

(vi) set out all consolidated contingent liabilities of Plutonic at
their respective dates.

(i) (i) Plutonic has filed all required forms, reports and documents
with the Australian Securities Commission since January 1, 1996 (the
Australian Securities Documents). As of its respective date, each
Plutonic Australian Securities Document complied in all material
respects with the requirements of the Australian Corporations Law. As of
its respective date, none of the Australian Securities Documents
contains any untrue statement of a material fact or omits to state a
material fact required to be stated therein or necessary in order to
make the statements made therein, in light of the circumstances under
which they were made, not misleading. Neither Plutonic nor any of its
subsidiaries is, or has been, subject to the reporting requirements of
Sections 13(a) or 15 of the Exchange Act.

(ii) All information given in writing by or on behalf of Plutonic
[or its advisers] to Homestake or its advisers prior to the date of this
Agreement in connection with Homestake's investigation of the
Transactions is accurate and complete in all material respects.

(iii) Except as set forth in the Australian Securities Documents,
neither Plutonic nor any of its subsidiaries has any liabilities or
obligations of any nature (whether accrued, absolute, contingent or
otherwise) required by Australian GAAP to be set forth on a consolidated
balance sheet of Plutonic
A-32
<PAGE> 205

and the consolidated Plutonic Subsidiaries or in the notes thereto and
which, individually or in the aggregate, could reasonably be expected to
cause a Plutonic Material Adverse Change.

(j) Except as disclosed in the Australian Securities Documents, from
December 31, 1996, to the date of this Agreement, Plutonic has conducted
its business only in the ordinary course and there has not been any
Plutonic Material Adverse Change.

(k) Neither Plutonic nor any of its subsidiaries has violated or
failed to comply with any statute, law, ordinance, regulation, rule,
judgment, decree or order of any governmental entity applicable to its
business or operations, except for violations and failures to comply that
could not, individually or in the aggregate, reasonably be expected to
cause a Plutonic Material Adverse Change.

(l) (i) There is no material Environmental Liability, nor factors likely
to give rise to any material Environmental Liability, affecting any of
the material Properties of Plutonic or any of its subsidiaries apart
from those disclosed in the Accounts or in the Plutonic Disclosure
Letter that, individually or in the aggregate, could reasonably be
expected to cause a Plutonic Material Adverse Change.

(ii) Neither Plutonic nor any of its subsidiaries has materially
violated or materially infringed any Environmental Law now in effect or
has materially violated or materially infringed any then current
Environmental Law as applied at that time that, individually or in the
aggregate, could reasonably be expected to cause a Plutonic Material
Adverse Change.

(m) Except as disclosed in the Plutonic Disclosure Letter, Plutonic
and its subsidiaries possess all Permits, including pursuant to any
Environmental Law, necessary to conduct their business as such business is
currently conducted or is expected to be conducted, except for such
Permits, the lack of possession of which has not, and is not reasonably
expected to cause, a Plutonic Material Adverse Change. Except as disclosed
in the Plutonic Disclosure letter:

(i) all such Permits are validly held by Plutonic or one of its
subsidiaries, and Plutonic and its subsidiaries have complied in all
respects with all terms and conditions thereof, except for such
instances where the failure to validly hold such Permits or the failure
to have complied with such Permits has not caused, and is not reasonably
expected to cause, a Plutonic Material Adverse Change;

(iii) between December 31, 1996 and the date of this Agreement,
neither Plutonic nor any of its subsidiaries has received any written
warning, notice, notice of violation or probable violation, notice of
revocation, or other written communication from or on behalf of any
Governmental Agency, alleging:

(A) any violation of such Permit; or

(B) that Plutonic or any of its subsidiaries requires any Permit
required for its business, as such business is currently conducted
that is not currently held by it,

which if sustained and acted upon by the Governmental Agency could
reasonably be expected, individually or in the aggregate, to cause a
Plutonic Material Adverse Change.

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<PAGE> 206

SCHEDULE III

CLAUSE 2.6
PUBLIC ANNOUNCEMENTS

[INTENTIONALLY OMITTED]

A-34
<PAGE> 207

SCHEDULE IV

CLAUSE 13
PLUTONIC AFFILIATE LETTERS

, 199

Homestake Mining Company
650 California Street
San Francisco, CA

Ladies and Gentlemen:

This letter agreement (this "Agreement") is being delivered in accordance
with clause 13.1 of the Combination Implementation Agreement, dated as of
December , 1997, (the "Implementation Agreement"), by and between HOMESTAKE
MINING COMPANY, a Delaware corporation ("Homestake") and PLUTONIC RESOURCES
LIMITED (ACN 006 245 629), an Australian corporation ("Plutonic"). The
Implementation Agreement provides, among other things, that Homestake will issue
shares of Homestake common stock ("Homestake Common Shares") to all holders of
all Plutonic ordinary shares and Plutonic partly paid shares outstanding, except
the Plutonic ordinary shares held by Homestake. Pursuant to the Scheme (as
defined in the Implementation Agreement), in consideration of the issue of
Homestake Common Shares, all Plutonic ordinary shares other than those held by
Homestake will be cancelled, so that only the Plutonic ordinary shares held by
Homestake will continue to be outstanding.

1. The undersigned ("Stockholder") hereby represents, warrants, covenants
and agrees with respect to all Homestake Common Shares received as a result of
the Scheme as follows:

(a) Stockholder understands that as of the date of this letter
Stockholder may be deemed to be an "affiliate" of Plutonic as such term is
(i) defined for purposes of paragraphs (c) and (d) of Rule 145 of the
general rules and regulations (the "Rules and Regulations") of the United
States Securities and Exchange Commission (the "Commission") under the
United States Securities Act of 1933, as amended (the "Act"), or (ii) used
in and for purposes of Accounting Series Releases 130 and 135, as amended,
of the Commission (in either such case, an "Affiliate").

(b) Stockholder shall not make any sale, transfer or other disposition
of Homestake Common Stock in violation of the Act or the Rules and
Regulations.

(c) Stockholder has carefully read this letter and the Implementation
Agreement and has had an opportunity to discuss the requirements of such
documents and any other applicable limitations upon Stockholder's ability
to sell, transfer or otherwise dispose of Homestake Common Shares with his
counsel or counsel for Plutonic.

(d) Stockholder has been advised that the issuance of Homestake Common
Shares to Stockholder pursuant to the Scheme has been registered with the
Commission under the Act or was exempt from registration. Stockholder also
has been advised that, since at the time the Scheme is submitted to a vote
of the stockholders of Plutonic, Stockholder may be deemed to be an
Affiliate of Plutonic and the distribution by Stockholder of Homestake
Common Shares will not have been registered under the Act, Stockholder may
not offer to sell, sell, transfer or otherwise dispose of Homestake Common
Shares issued to Stockholder in the Scheme unless (i) such offer, sale,
transfer or other disposition has been registered under the Act or is made
in conformity with Rule 145 under the Act, or (ii) in the opinion of
counsel reasonably acceptable to Homestake, or pursuant to a "no-action"
letter obtained by Stockholder from the staff of the Commission, such sale,
transfer or other disposition is otherwise exempt from registration under
the Act.

(e) Stockholder understands that Homestake will give stop transfer
instructions to Homestake's transfer agent with respect to Homestake Common
Shares, that the Homestake Common Shares issued

A-35
<PAGE> 208

to Stockholder will all be in certified form and that the certificates
therefor, or any substitutions thereof, will bear a legend substantially to
the following effect:

"THE SECURITIES REPRESENTED BY THIS CERTIFICATE WERE ISSUED IN A
TRANSACTION TO WHICH RULE 145 UNDER THE SECURITIES ACT OF 1933 APPLIES.
THE SECURITIES REPRESENTED BY THIS CERTIFICATE MAY ONLY BE SOLD,
TRANSFERRED OR OTHERWISE DISPOSED OF IN ACCORDANCE WITH THE TERMS OF AN
AGREEMENT DATED , 199 , BETWEEN THE REGISTERED HOLDER HEREOF
AND HOMESTAKE, A COPY OF WHICH AGREEMENT IS ON FILE AT THE PRINCIPAL
OFFICES OF HOMESTAKE."

(f) Stockholder also understand that unless the transfer by
Stockholder of Stockholder's Homestake Common Shares has been registered
under the Act or is a sale made in conformity with the provisions of Rule
145, Homestake reserves the right to place a legend substantially to the
following effect on the certificates issued to any transferee:

"THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933 AND WERE ACQUIRED FROM A PERSON WHO
RECEIVED SUCH SECURITIES IN A TRANSACTION TO WHICH RULE 145 UNDER THE
SECURITIES ACT OF 1933 APPLIES. THE SECURITIES HAVE NOT BEEN ACQUIRED BY
THE HOLDER WITH A VIEW TO, OR FOR RESALE IN CONNECTION WITH, ANY
DISTRIBUTION THEREOF WITHIN THE MEANING OF THE SECURITIES ACT OF 1933
AND MAY NOT BE SOLD, TRANSFERRED OR OTHERWISE DISPOSED OF EXCEPT
PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT OR IN ACCORDANCE WITH AN
EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT OF
1933."

(g) It is understood and agreed that the legends set forth in Sections
1(e) and 1(f) above shall be removed by delivery of substitute certificates
without such legend if such legend is not required for purposed of the Act.
It is understood and agreed that, unless Stockholder is an Affiliate of
Homestake at such time, such legends and the stop orders referred to above
will be removed if (i) one year shall have elapsed from the date
Stockholder acquired Homestake Common Shares in the Scheme and the
provisions of Rule 145(d)(2) are then available to the undersigned, (ii)
two years shall have elapsed from the date Stockholder acquired Homestake
Common Shares in the Scheme and the provisions of Rule 145(d)(3) are then
available to the undersigned, or (iii) Homestake has received either an
opinion of counsel, which opinion and counsel shall be reasonably
satisfactory to Homestake, or a "no-action" letter obtained by Stockholder
from the staff of the Commission, to the effect that the restrictions
impose by Rule 145 under the Act no longer apply to Stockholder.

(h) This Section 1(h) will apply for the benefit of any Stockholder
who is an Affiliate of Plutonic and who will receive pursuant to the Scheme
more than one percent (1%) of the Homestake Common Shares outstanding after
the consummation of the Scheme (a "Specified Affiliate"). At any time from
and after the date (the "Acquisition Date") upon which a Specified
Affiliate receives Homestake Common Shares in the Scheme (such shares
received, the "Registrable Securities") to but excluding the date one year
from the Acquisition Date, such Specified Affiliate shall have the right to
request (the "Demand") in writing that Homestake register pursuant to the
Act some or all of the Registrable Securities of such Specified Affiliate
by filing with the Commission a registration statement (the "Registration
Statement") covering the Registrable Securities sought to be registered.
Homestake shall have the obligation to effect only two registrations
pursuant to this Section 1(h) and in connection with each such registration
shall be obligated to:

(1) as soon as practicable after the Demand, prepare the
Registration Statement and cause it to be filed with the Commission;

(2) use reasonable efforts to cause the Registration Statement to
become effective and to keep the Registration Statement continuously
effective for up to 30 days after its effective date;
A-36
<PAGE> 209

(3) enter into customary arrangements (including underwriting
agreements in customary form, and including provisions with respect to
indemnity of the underwriters and the Specified Affiliate in customary
form) with underwriters who shall be selected by such Specified
Affiliate with the consent of Homestake (such consent not to be
unreasonably withheld);

(4) pay reasonable and customary registration expenses incident to
the registration contemplated by this Section 1(h) (not including
underwriting discounts or commissions or similar fees, or counsel fees
of the Specified Affiliate); and

(5) do all other things reasonable and customary in connection with
the registration contemplated by this Section 1(h).

A registration pursuant to this Section 1(h) may be delayed for up to 90 days if
Homestake, prior to the time it would otherwise have been required to file the
Registration Statement or cause it to become effective, determines, in its
reasonable judgment, that such filing or effectiveness would require disclosure
that would be detrimental to Homestake.

2. Stockholder understands that implementation of the Scheme will be
accounted for using the "pooling-of-interests" method and that such treatment
for financial accounting purposes is dependent upon the accuracy of certain of
the representations and warranties, and the compliance by Stockholder with
certain of the covenants and agreements, set forth herein. Accordingly,
Stockholder further hereby represents and covenants that Stockholder has not
since November 11, 1997, sold transferred or otherwise disposed of, or reduced
its risk with respect to, (except pursuant to the Scheme) any Plutonic ordinary
shares or Plutonic partly paid shares and that Stockholder will not sell,
transfer or otherwise dispose of, or reduce its risk with respect to, (except
pursuant to the Scheme) any Plutonic ordinary shares or Plutonic partly paid
shares or any Homestake Common Shares received by Stockholder in the Scheme, in
each case until after Homestake shall have publicly released a report (the
"Combined Financial Results Report") including the combined financial results of
Homestake and Plutonic for a period of at least 30 days of combined operations
of Homestake and Plutonic. Stockholder understands that stop transfer
instructions may be given to the transfer agent of Homestake in order to prevent
any breach of the covenants and agreements made by Stockholder in this Section
2, although such stop transfer instructions will be promptly rescinded upon the
publication of the Combined Financial Report.

3. Homestake will publish the Combined Financial Results Report as promptly
as practicable following completion of the Scheme, and in any event within 30
days after the end of the first full calendar month following completion of the
Scheme.

4. Stockholder further understands and agrees that the representations,
warranties, covenants and agreements of Stockholder set forth herein are for the
benefit of Homestake and Plutonic and will be relied upon by such entities and
their respective counsel and accountants.

5. This Agreement will be binding upon the enforceable against
administrators, executors, representatives, heirs, legatees and devisees of
Stockholder and any pledgees holding Plutonic ordinary shares or Homestake
Common Shares as collateral. If the Implementation Agreement is terminated in
accordance with its terms prior to completion of the Scheme, this Agreement will
thereupon automatically terminated.

A-37
<PAGE> 210

Execution of this letter should not be considered an admission on the
Stockholder's part that it is an "Affiliate" of Plutonic as described in Section
(a) of this Agreement.

Very truly yours,

--------------------------------------
Name:
Address:
Agreed to and accepted:

HOMESTAKE MINING COMPANY

BY:
- ---------------------------------------------------
Name:
Title:

A-38
<PAGE> 211

SCHEDULE V

CLAUSE 13
HOMESTAKE AFFILIATE LETTERS

, 1997

Homestake Mining Company
650 California Street
San Francisco, CA

Ladies and Gentlemen:

This letter agreement (this "Agreement") is being delivered in accordance
with clause 13.2 of the Combination Implementation Agreement, dated as of
December , 1997, (the "Implementation Agreement"), by and between HOMESTAKE
MINING COMPANY, a Delaware corporation ("Homestake") and PLUTONIC RESOURCES
LIMITED (ACN 006 245 629), an Australian corporation ("Plutonic"). The
Implementation Agreement provides, among other things, that Homestake will issue
shares of Homestake common stock ("Homestake Common Shares") to all holders of
all Plutonic ordinary shares and Plutonic partly paid shares outstanding, except
the Plutonic ordinary shares held by Homestake. Pursuant to the Scheme (as
defined in the Implementation Agreement), in consideration of the issue of
Homestake Common Shares, all Plutonic ordinary shares other than those held by
Homestake will be cancelled, so that only the Plutonic ordinary shares held by
Homestake will continue to be outstanding.

1. The undersigned ("Stockholder") hereby represents, warrants, covenants
and agrees as follows:

(a) Stockholder understands that as of the date of this letter
Stockholder may be deemed to be an "affiliate" of Homestake as such term is
used in and for purposes of Accounting Series Releases 130 and 135, as
amended, of the Commission (an "Affiliate").

(b) Stockholder has carefully read this letter and the Implementation
Agreement and has had an opportunity to discuss the requirements of such
documents and any other applicable limitations upon Stockholder's ability
to sell, transfer or otherwise dispose of Homestake Common Shares with his
counsel or counsel for Plutonic.

2. Stockholder understands that implementation of the Scheme will be
accounted for using the "pooling-of-interests" method and that such treatment
for financial accounting purposes is dependent upon the accuracy of certain of
the representations and warranties, and the compliance by Stockholder with
certain of the covenants and agreements, set forth herein. Accordingly,
Stockholder further hereby represents and covenants that Stockholder has not
since November 11, 1997, sold, transferred or otherwise disposed of, or reduced
its risk with respect to, any Homestake Common Shares and that Stockholder will
not sell, transfer or otherwise dispose of, or reduced its risk with respect to,
any Homestake Common Shares until after Homestake shall have publicly released a
report (the "Combined Financial Results Report") including the combined
financial results of Homestake and Plutonic for a period of at least 30 days of
combined operations of Homestake and Plutonic. Stockholder understands that stop
transfer instructions may be given to the transfer agents of Homestake in order
to prevent any breach of the covenants and agreements made by Stockholder in
this Section 2, although such stop transfer instructions will be promptly
rescinded upon the publication of the Combined Financial Report.

3. Homestake will publish the Combined Financial Results Report as promptly
as practicable following the Scheme, and in any event within 30 days after the
end of the first full calendar month following the Scheme.

5. This Agreement will be binding upon and enforceable against
administrators, executors, representatives, heirs, legatees and devisees of
Shareholder and any pledgees holding Homestake Common Shares as
A-39
<PAGE> 212

collateral. If the Implementation Agreement is terminated in accordance with its
terms prior to completion of the Scheme, this Agreement will thereupon
automatically terminate.

Execution of this letter should not be considered an admission on the
Stockholder's part that it is an "Affiliate" of Homestake as described in
Section 1(a) of this Agreement.

Very truly yours,

--------------------------------------
Name:
Address:

Agreed to and accepted:
HOMESTAKE MINING COMPANY

By:
- -------------------------------------------------
Name:
Title:

, 1997

A-40
<PAGE> 213

ANNEX A

CLAUSE 30
AMENDMENT TO CONFIDENTIALITY AGREEMENT

[INTENTIONALLY OMITTED]

A-41
<PAGE> 214

APPENDIX B

OPINION OF HOMESTAKE'S INVESTMENT ADVISOR
<PAGE> 215

January 23, 1998

Board of Directors
Homestake Mining Company
650 California Street
San Francisco, California 94108-2788

Madam and Gentlemen:

We understand that the Homestake Mining Company ("Homestake" or the
"Company") is considering a transaction (the "Combination") whereby, as a result
of the issuance of shares of common stock, par value $1.00 per share, of the
Company ("Homestake Common Stock") to holders of fully paid ordinary shares, par
value A$0.50 per share ("Ordinary Shares"), partly paid shares and stock options
of Plutonic Resources Limited ("Plutonic"), pursuant to the terms of the
Combination Implementation Agreement, dated December 22, 1997 (the
"Implementation Agreement"), Plutonic will become a wholly-owned subsidiary of
the Company. In the Combination, each fully paid Ordinary Share would be
canceled in consideration of the issue of 0.34 shares (the "Conversion Number")
of Homestake Common Stock. Partly paid shares and stock options would also be
canceled in consideration of the issue of Homestake Common Stock in amounts
provided in the Implementation Agreement, which you have advised us were
calculated with reference to the Conversion Number. The terms and conditions of
the Combination are more fully set forth in the Implementation Agreement.

You have requested our opinion as to whether the Conversion Number is fair
to the stockholders of the Company from a financial point of view.

SBC Warburg Dillon Read Inc. ("SBC Warburg Dillon Read") has acted as
financial advisor to the Board of Directors of the Company in connection with
the Combination and will receive a fee for its services, a substantial portion
of which is contingent upon the consummation of the Combination. In the past,
SBC Warburg Dillon Read and its predecessors have provided investment banking
services to the Company and have received customary compensation for the
rendering of such services. In the ordinary course of business, SBC Warburg
Dillon Read and its affiliates may actively trade or hold the equity securities
of the Company or Plutonic for their own accounts and the accounts of their
customers and, accordingly, may at any time hold a long or short position in
such securities.

Our opinion does not address the Company's underlying business decision to
effect the Combination or constitute a recommendation to any stockholder of the
Company as to how such stockholder should vote with respect to the Combination.
Our opinion does not imply any conclusion as to the likely trading range for the
Homestake Common Stock following the consummation of the Combination, which may
vary depending on numerous factors which generally influence the prices of
securities. With your consent, we have assumed that the Combination will not
result in taxable income for the Company or its stockholders and will be
accounted for as a pooling-of-interests.

In arriving at our opinion, we have, among other things: (i) reviewed
certain publicly available business and historical financial information
relating to the Company and Plutonic, (ii) reviewed certain internal financial
information and other data relating to the business and prospects of the
Company, including financial estimates prepared by the management of the
Company, that were provided to us by the Company and are not publicly available,
(iii) reviewed certain internal financial information and other data relating to
the business and prospects of Plutonic, including financial estimates prepared
by Homestake, that were provided to us by Homestake and are not publicly
available, (iv) conducted discussions with members of the senior management of
the Company, (v) reviewed the historical market prices and trading activity of
the common stocks of the Company and Plutonic, (vi) considered certain pro forma
effects of the Combination on the financial results of the Company (including
the effects of assumed Combination savings that were provided to us by
Homestake), (vii) reviewed publicly available financial and stock market data
with respect to certain other publicly traded companies that we believe to be
generally comparable to the Company and Plutonic, (viii) compared the financial
terms of the Combination with the financial terms of certain other mergers and
acquisitions that we believe to be relevant, (ix) reviewed the Implementation
Agreement, and (x) conducted

B-1
<PAGE> 216

such other financial studies, analyses and investigations, and considered such
other information as we deemed necessary or appropriate.

In connection with our review, we have not, with your consent, assumed any
responsibility for independent verification of any of the information reviewed
by us for the purpose of this opinion and have, with your consent, relied on its
being complete and accurate in all material respects. In addition, with your
consent, we have not made any independent evaluation or appraisal of any of the
assets or liabilities (contingent or otherwise) of the Company or Plutonic, nor
have we been furnished with any such evaluation or appraisal. With respect to
the financial estimates (including the effects of assumed Combination savings)
provided to or otherwise reviewed by or discussed with us, we have assumed, with
your consent, that they have been reasonably prepared on bases reflecting the
best currently available estimates and judgments of the Company's management as
to the future financial performance of each company. With respect to the
business and financial information pertaining to Plutonic, we have not, with
Homestake's consent, held any independent discussions with Plutonic's management
as to any aspect of the information provided. Our opinion is necessarily based
on economic, monetary, market and other conditions as in effect on, and the
information made available to us as of, the date hereof.

Based upon and subject to the foregoing, it is our opinion that, as of
December 22, 1997, the Conversion Number is fair to the stockholders of the
Company from a financial point of view.

Very truly yours,

/s/ SBC WARBURG DILLON READ INC.

SBC WARBURG DILLON READ INC.

B-2
<PAGE> 217

APPENDIX C
HOMESTAKE MINING COMPANY

CONSOLIDATED FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
(ALL DOLLAR AMOUNTS ARE UNITED STATES DOLLARS UNLESS OTHERWISE STATED)

INDEX

FOR THE YEARS ENDED DECEMBER 31, 1997, 1996 AND 1995:
Management's Discussion and Analysis...................... C-1
Statements of Consolidated Operations for the Years Ended
December 31, 1997, 1996, and 1995...................... C-11
Consolidated Balance Sheets as of December 31, 1997 and
1996................................................... C-12
Statements of Consolidated Shareholders' Equity for the
Years Ended December 31, 1997, 1996, and 1995.......... C-13
Statements of Consolidated Cash Flows for the Years Ended
December 31, 1997, 1996, and 1995...................... C-14
Notes to Consolidated Financial Statements................ C-15
Report of Independent Auditors............................ C-37
Quarterly Selected Data (unaudited)....................... C-39
</TABLE>
<PAGE> 218

HOMESTAKE MANAGEMENT'S DISCUSSION AND ANALYSIS
(ALL AMOUNTS IN US DOLLARS UNLESS OTHERWISE INDICATED)

FOR THE YEARS ENDED DECEMBER 31, 1997, 1996 AND 1995

(Unless specifically stated otherwise, the following information relates to
amounts included in the consolidated financial statements, without reduction for
minority interests. Homestake reports per ounce production costs in accordance
with the "Gold Institute Production Cost Standard".)

RESULTS OF OPERATIONS

Homestake Mining Company ("Homestake" or the "Company") recorded a net loss
of $168.9 million or $1.15 per share during 1997 compared to net income of $30.3
million or $0.21 per share during 1996 and $30.3 million or $0.22 per share
during 1995. The 1997 loss includes net nonrecurring expenses amounting to
$103.4 million or $0.70 per share compared to net nonrecurring income of $10.4
million or $0.07 per share in 1996 and $6.7 million or $0.05 per share in 1995.

Nonrecurring items in 1997 included:

- $84.9 million ($107.8 million pretax) write-down of Homestake's
investment in the Main Pass 299 sulfur mine

- $22.9 million ($24.8 million pretax) write-down of certain investments

- $20.3 million ($26.9 million pretax) reduction in the carrying values of
short-lived mining properties

- $21.5 million ($29.1 million pretax) increase in the accrual for
estimated future reclamation expenditures

- $9.1 million ($10.2 million pretax) in other charges, primarily foreign
exchange losses on intercompany redeemable preferred stock and losses on
an intercompany gold loan

- $47.2 million ($62.9 million pretax) gain on the fee received from Santa
Fe Pacific Gold Corporation ("Santa Fe") upon termination of Homestake's
merger agreement with Santa Fe

- $8.1 million ($13.5 million pretax) gain on the sale of the George Lake
and Back River joint venture interests in the Northwest Territories of
Canada

Nonrecurring items in 1996 included:

- $24 million reduction in the accrual for prior year income taxes

- $4.9 million ($5.5 million pretax) of proceeds from a litigation recovery

- $8.3 million ($9 million pretax) write-down of mining investments

- $7.4 million ($8.9 million pretax) of foreign exchange losses primarily
on advances to Homestake's wholly-owned subsidiary, Homestake Canada Inc.
("HCI")

- $2.8 million ($3.4 million pretax) of expenses related to the termination
of Homestake's proposed combination with Santa Fe

Nonrecurring items in 1995 included a gain of $4.2 million ($5.4 million
pretax) on the sale of the Company's remaining uranium inventory.

Excluding the effect of the nonrecurring items, Homestake incurred a net
loss of $65.5 million or $0.45 per share in 1997 compared to earnings of $19.9
million or $0.14 per share in 1996 and $23.6 million or $0.17 per share in 1995.
The lower 1997 results primarily are due to significantly lower gold prices,
higher exploration expenditures and increased administrative and general
expenses. After adjusting for nonrecurring items, the reduction in 1996 earnings
from 1995 reflects higher gold prices, higher gold production and sales volumes
and lower per ounce total cash costs, offset by higher depreciation charges,
substantially increased exploration expenditures and lower returns from the Main
Pass 299 sulfur operations.

C-1
<PAGE> 219

GOLD OPERATIONS: The results of the Company's operations are affected
significantly by the market price of gold. Gold prices are influenced by
numerous factors over which the Company has no control, including expectations
with respect to the rate of inflation, the relative strength of the United
States dollar and certain other currencies, interest rates, global or regional
political or economic crises, demand for gold for jewelry and industrial
products, and sales by holders and producers of gold in response to these
factors.

Homestake's gold hedging policy provides for the use of forward sales
contracts for up to 30% of each of the following ten year's expected annual gold
production at prices in excess of certain targeted prices, and the use of
combinations of put and call option contracts to establish minimum floor prices
while allowing participation in future increases in the price of gold. In 1997,
Homestake entered into a series of put and call options which provide a floor
price of $325 per ounce for 900,000 ounces of 1998 production while allowing for
full participation in any increase in the price of gold above $336 per ounce. In
1996, Homestake sold for future delivery, at an average price of $426 per ounce,
680,100 ounces of the gold expected to be recovered from the McLaughlin mine
stockpiles through 2003. During 1997, the Company delivered or financially
settled 120,100 ounces of gold at an average realized price of $385 per ounce
under the McLaughlin program. Revenues in 1996 and 1995 include 70,000 and
113,200 ounces of gold sold at average prices of $421 per ounce and $398 per
ounce, respectively, under the Nickel Plate mine hedging program which was
completed in 1996. These hedging activities increased revenues by approximately
$6.5 million, $2.1 million and $1.2 million during 1997, 1996 and 1995,
respectively. The estimated liquidation value of Homestake's gold hedging
position at December 31, 1997 was approximately $80 million. See note 21 to the
consolidated financial statements for further information and details of these
hedging programs.

In February 1998, Prime adopted a gold and silver hedging policy which
provides for the use of forward sales contracts for up to 40% of each of the
following five year's expected annual gold and silver production at prices in
excess of certain targeted prices.

A significant portion of the Company's operating expenses is incurred in
Australian and Canadian currencies. The Company's profitability is impacted by
fluctuations in these currencies' exchange rates relative to the United States
dollar. Under the Company's foreign currency protection program, the Company has
entered into a series of foreign currency option contracts which establish
trading ranges within which the United States dollar may be exchanged for
Australian and Canadian dollars. During 1997, both the Australian and Canadian
currencies weakened significantly in relation to the U.S. dollar and the Company
recorded foreign currency losses of $28.5 million under this program of which
$20.4 million were unrealized at December 31, 1997. See note 21 to the
consolidated financial statements for additional information regarding this
program.

Revenues from gold and ore sales totaled $633.1 million during 1997
compared to revenues of $712.2 million in 1996 and $675.2 million in 1995. The
decrease in revenue during 1997 reflects significantly lower gold prices
partially offset by higher production. The increase in revenues in 1996 from
1995 reflects higher sales volumes and higher gold prices. During 1997, the
Company sold 2,012,800 equivalent ounces of gold at an average price of $333 per
ounce compared to 1,952,400 equivalent ounces of gold sold at an average price
of $389 per ounce in 1996 and 1,873,500 equivalent ounces sold at an average
price of $386 per equivalent ounce during 1995.

Total gold production increased to 1,996,000 equivalent ounces during 1997
compared to 1,968,100 equivalent ounces produced during 1996 and 1,877,300
equivalent ounces produced during 1995. The higher 1997 production primarily is
due to production increases at the Kalgoorlie, Eskay Creek, Snip and Round
Mountain operations, the commencement of production at the La Falda mine, and
initial production at the Ruby Hill mine, partially offset by significantly
lower production at the McLaughlin mine and the absence of production from the
Nickel Plate mine. The increase in production during 1996 from 1995 primarily is
due to production increases at the Kalgoorlie, Eskay Creek, David Bell and Round
Mountain operations and the purchase of an additional 60% interest in the Snip
mine, partially offset by lower production following the completion of mining
operations at the McLaughlin and Nickel Plate mines.

C-2
<PAGE> 220

CONSOLIDATED PRODUCTION COSTS PER OUNCE

<TABLE>
<CAPTION>
1997 1996 1995
---- ---- ----
(PER OUNCE OF GOLD)
<S> <C> <C> <C>
Direct mining costs................................... $210 $222 $233
Deferred stripping adjustments........................ 4 7 2
Costs of third-party smelters......................... 17 17 16
Other................................................. 1 (5) (1)
---- ---- ----
Cash Operating Costs.................................. 232 241 250
Royalties............................................. 4 4 4
Production taxes...................................... 1 3 3
---- ---- ----
Total Cash Costs............................ 237 248 257
Depreciation and amortizaton.......................... 51 53 46
Reclamation........................................... 3 5 5
---- ---- ----
Total Production Costs...................... $291 $306 $308
==== ==== ====
</TABLE>

Homestake's consolidated total cash cost per equivalent ounce amounted to
$237 during 1997 compared to $248 and $257 during 1996 and 1995, respectively.
The lower 1997 total cash costs per ounce primarily reflect higher production
and a weaker Australian dollar at the Kalgoorlie operations, higher shipments
and higher gold grades at the Eskay Creek mine and higher production at the
Round Mountain mine, partially offset by lower grades at the Williams and David
Bell mines. The decrease in total cash costs per ounce during 1996 from 1995
primarily reflects higher silver grades at the Eskay Creek mine, higher
production and the purchase of the disproportionate sharing arrangement at the
Kalgoorlie operations, higher production at the David Bell mine, and an increase
in ownership at the low-cost Snip mine, partially offset by lower production at
the McLaughlin mine and the effects of a stronger Australian dollar.

Homestake's total noncash cost per equivalent ounce was $54 during 1997
compared to $58 and $51 per ounce during 1996 and 1995, respectively. The
decrease in noncash costs in 1997 primarily is due to reserve expansions at the
Eskay Creek and Snip mines. The increase in 1996 noncash costs from 1995
reflects additional depreciation and amortization charges resulting from the
purchases of the Homestake Gold of Australia Limited ("HGAL") minority
interests, the disproportionate sharing arrangement and the additional interest
in the Snip mine.

RECONCILIATION OF TOTAL CASH COSTS PER OUNCE TO FINANCIAL STATEMENTS

<TABLE>
<CAPTION>
1997 1996 1995
------------ ------------ ------------
(THOUSANDS OF DOLLARS, EXCEPT PER OUNCE AMOUNTS)
<S> <C> <C> <C>
Production Costs per Financial Statements.......... $ 473,502 $ 475,333 $ 481,886
Costs not included in Homestake's production costs:
Costs of third-party smelters(1)................. 34,530 33,098 29,214
Production costs of equity-accounted
investments................................... 1,947 12,907 11,752
Sulfur and oil production costs.................... (25,477) (23,208) (26,917)
Reclamation accruals............................... (6,569) (9,579) (8,754)
By-product silver revenues......................... (2,610) (3,059) (2,334)
Inventory movements and other...................... (6,620) 2,993 (2,659)
---------- ---------- ----------
Production Costs for Per Ounce Calculation
Purposes......................................... $ 468,703 $ 488,485 $ 482,188
========== ========== ==========
Ounces Produced During the Year.................... 1,995,948(2) 1,968,119 1,877,329
Total Cash Costs Per Ounce............... $ 237 $ 248 $ 257
</TABLE>

- ---------------

(1) Eskay Creek sells ore containing gold and silver directly to third-party
smelters. For comparison purposes, cash operating costs per ounce include
estimated third-party costs incurred by smelters and others to produce
marketable gold and silver.

(2) Includes 16,600 ounces produced at the Ruby Hill mine during 1997, prior to
commercial production, which are excluded from the calculation.

C-3
<PAGE> 221

As a result of lower gold prices, at September 30 and December 31, 1997 the
Company reviewed the carrying values of its gold mining operations using a $325
per ounce gold price for its short-lived operations and a $350 per ounce gold
price for its operations with longer lives. The Company determined that
impairment write-downs totaling $26.9 million were required to reduce the
carrying values of several of its assets or operations with short remaining
lives, including the Pinson mine in Nevada, the Homestake mine's Open Cut, and
low-grade stockpiled ore and certain redundant mining equipment at the
Kalgoorlie operations. The Company determined that no adjustments to the
carrying values of its longer-lived operations were required.

At the Homestake mine in South Dakota, production decreased slightly to
397,300 ounces during 1997 from 407,300 ounces during 1996 and 402,900 ounces
during 1995. The decrease in production in 1997 primarily is a result of a
decrease in the grade of ore from the underground operations partially offset by
an increase in the grade of ore from the Open Cut. The increase in 1996
production from 1995 is a result of an increase in production from the Open Cut,
partially offset by lower production from the underground operations. During
1995, harder than normal ore from the Open Cut had reduced mill throughput.
Total cash costs of $310 per ounce during 1997 compare to total cash costs of
$304 per ounce during 1996 and $303 per ounce during 1995.

In January 1998, the Company announced the implementation of a major
restructuring of operations at the Homestake mine in order to reduce operating
costs. Gold production will be reduced to approximately 150,000 to 180,000
ounces per year by the beginning of 1999. To implement the plan, the Company
suspended underground mining while it completed the final details of the new
operating plan and readied the underground mine to begin operating on the
restructured basis. Open Cut ore stockpiles continued to be processed through
the mill at an accelerated rate while the underground operations were suspended.
The new operating plan involves closing parts of the mine and concentrating on
substantially fewer production levels. The new operating plan, which has
resulted in a 1.5 million ounce reduction in reserves before considering 1997
production, should increase the mine's future total cash flow significantly.
Underground crews commenced returning to work on a limited basis on March 26,
1998, and the remaining underground work force, expected to be about one-half of
the size of the pre-shutdown work force, will return on a phased basis through
April 1998.

Production at the McLaughlin mine in northern California decreased to
118,500 ounces during 1997 from 185,500 ounces during 1996 and 241,800 ounces
during 1995. In June 1996, mining operations were completed and the autoclaves
were shut down as the ore body was depleted. Through 2003, lower-grade
stockpiled ore will be processed through a conventional carbon-in-pulp circuit.
The effect of the decrease in production on unit operating costs largely has
been offset by a reduction in expenditures. Total cash costs in 1997 were $254
per ounce compared to $250 per ounce in 1996 and $242 per ounce in 1995.

The Company's share of production from the Round Mountain mine in Nevada
totaled 120,000 ounces in 1997 compared to production of 102,700 ounces in 1996
and 86,100 ounces in 1995. The higher 1997 production is a result of higher
recoveries on the reusable pad and an increase in the volume of ore placed on
the dedicated pad. The increase in 1996 production from 1995 was due to higher
grades and volumes of ore placed on the reusable pad and an increase in
dedicated pad capacity. Total cash costs of $226 per ounce in 1997 compare to
total cash costs of $256 per ounce and $254 per ounce in 1996 and 1995,
respectively. The decrease in cash costs in 1997 is due to the higher
production.

During the third quarter of 1997, a new Round Mountain mining plan was
approved. The new plan is expected to increase the mine's cash flow and
profitability and reduce total cash costs. Primarily as result of the new plan,
Homestake's share of Round Mountain ore reserves decreased by approximately
315,000 ounces at December 31, 1997, before considering 1997 production. A new
8,000 tons-per-day gravity mill to process higher-grade sulfide ores commenced
commercial production in November 1997. The mill, which is expected to produce
approximately 23,000 ounces (Homestake's share) of gold during 1998, was
constructed at a cost $62.2 million (Homestake's share -- $15.5 million).

Development of the new Ruby Hill mine in Nevada was completed in 1997 at a
total capital cost of $64.7 million. The mine, which poured its first gold on
November 6, 1997, produced 16,600 ounces of gold during 1997. The mine commenced
commercial production effective January 1, 1998 and is budgeted to produce
110,000 ounces of gold in 1998 at a total cash cost of $123 per ounce.

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The Eskay Creek mine in British Columbia, Canada sold 121,500 tons of ore
containing 244,700 ounces of gold and 11.8 million ounces of silver during 1997
(equivalent to approximately 417,300 ounces of gold), compared to 115,900 tons
of ore sold in 1996 containing 211,300 ounces of gold and 12.1 million ounces of
silver (equivalent to approximately 372,300 ounces of gold), and 104,100 tons of
ore sold during 1995 containing 196,500 ounces of gold, and 9.9 million ounces
of silver (equivalent to approximately 331,300 ounces of gold). The increase in
1997 shipments reflects slightly higher shipments under the two long-term
smelter contracts and 12,000 tons of spot sales to an additional smelter. The
higher shipments in conjunction with higher gold grades and a decrease in the
gold/silver equivalency ratio were the primary reasons for the 45,000-ounce
increase in production during 1997. The increase in shipments in 1996 from 1995
reflects 14,000 tons of spot ore sales to two additional smelters. Total cash
costs, including third-party smelter costs, decreased to $157 per equivalent
ounce during 1997 from $170 per equivalent ounce during 1996 from $185 per
equivalent ounce during 1995. The lower 1997 costs per ounce primarily are a
result of higher production, higher gold grades and productivity improvements,
partially offset by lower silver grades. The lower 1996 costs per ounce in
comparison to 1995 primarily are a result of lower development costs, and higher
gold and silver ore grades.

Following a successful 1997 exploration program, Homestake's 50.6% share of
Eskay Creek's proven and probable ore reserves increased by approximately
190,000 ounces of gold and 9.1 million ounces of silver at December 31, 1997,
before considering 1997 production. The new gravity/flotation mill facility at
the Eskay Creek mine site, which was constructed at a cost of $12 million, was
commissioned in December 1997. The mill, which is expected to increase annual
production by approximately 30,000 ounces of gold over the remaining mine life,
will improve the profitability of certain Eskay Creek ore that would otherwise
be shipped directly to third-party smelters and upgrade other material that
previously was not economic.

The Company's share of gold production from the Williams mine in the Hemlo
mining camp in Canada amounted to 201,100 ounces at a total cash cost of $229
per ounce during 1997 compared to 205,500 ounces at a total cash cost of $222
per ounce during 1996 and 202,600 ounces produced at a total cash cost of $222
per ounce during 1995. The slight decrease in production and corresponding
increase in total cash costs during 1997 primarily is due to lower ore grades.
Production at the Williams mine is expected to remain at current levels for the
next few years.

The Company's share of production at the David Bell mine, also in the Hemlo
mining camp, amounted to 90,000 ounces during 1997 compared to production of
97,700 ounces during 1996 and 79,400 ounces during 1995. The decrease in
production during 1997 is due to lower ore grades partially offset by higher
throughput. During 1996, mining in the higher-grade areas of the mine offset
production difficulties that had reduced throughput. An accelerated development
program was initiated to increase throughput by providing access to additional
mining areas. Total cash costs were $194 per ounce during 1997 compared to $172
per ounce during 1996 and $203 per ounce during 1995. Production is expected to
decline further in 1998 as the grade of ore to be mined approaches the remaining
life-of-mine reserve grade.

Homestake's share of production from the Snip mine increased to 115,600
ounces during 1997 from 101,800 ounces during 1996 and 51,300 ounces during
1995. Excluding the effects of the purchase of the additional 60% interest in
the mine in April 1996, production decreased by 6% during 1997. The lower
production primarily is due to lower mill throughput caused by an increase in
more labor-intensive conventional mining as the remaining ore blocks become
narrower as the mine nears the end of its economic life. Total cash costs
increased to $213 per ounce during 1997 from $190 per ounce during 1996 and $176
per ounce during 1995. Production in 1998 is expected to be derived primarily
from conventional mining areas. As a result, total cash costs are expected to
increase further and 1998 production is expected to be approximately 100,000
ounces.

HGAL's share of production from the Kalgoorlie operations in Western
Australia increased to 425,900 ounces during 1997 from 368,800 ounces during
1996 and 311,400 ounces during 1995. The increase in HGAL's share of production
during 1997 reflects higher mill throughput, ore grades and recoveries. The
increase in HGAL's share of production during 1996 from 1995 primarily was a
result of an increase in mill throughput and the purchase of the
disproportionate sharing arrangement from HGAL's joint venture partner.

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During 1995, HGAL paid 13,000 ounces to its joint venture partner under the
disproportionate sharing arrangement. In addition, the lower 1995 production
reflects a temporary decline in production while the new Fimiston mill additions
were integrated with the existing complex, and lower production at the Mt.
Charlotte mine due to operational difficulties which hampered production early
in the year. Total cash costs at the Kalgoorlie operations decreased to $259 per
ounce during 1997 from $291 per ounce in 1996 and $296 per ounce in 1995. The
decrease in cash costs in 1997 reflects the higher production, the installation
of a recycle crusher at the Fimiston mill earlier in the year, and a weakening
of the Australian dollar in relation to the U.S. dollar. The reduction in cash
costs in 1996 from 1995 reflects higher production, partially offset by the
effects of a stronger Australian dollar.

The new Agua de la Falda mine (51% owned by Homestake, 49% by Codelco)
commenced mining operations late in 1996 and the first gold was poured in April
1997. The mine produced 31,400 ounces of gold during 1997. Both the average ore
grade and ore production rates have been higher than expected. As a result,
total cash costs of $213 per ounce are well below earlier estimates. The
operation expects to produce between 40,000 and 45,000 ounces of gold in 1998.

MAIN PASS 299: The Company has a 16.7% undivided interest in the Main Pass
299 sulfur mine and oil recovery operations in the Gulf of Mexico. At December
31, 1997 the Main Pass 299 sulfur mine had proven recoverable reserves of
approximately 64.3 million long tons (100% basis) of sulfur. Main Pass 299 oil
production, which peaked in 1992, is expected to continue to decline over the
next few years. During 1997, continuing low sulfur prices, reduced sales volumes
and higher operating costs for both sulfur and oil operations resulted in
Homestake recording a Main Pass 299 operating loss of $3.6 million compared to
operating profits of $1.3 million and $5.7 million during 1996 and 1995,
respectively.

The sulfur operations incurred an operating loss of $4.5 million in 1997
compared to an operating loss of $3.1 million in 1996 and operating earnings of
$3.7 million in 1995. In response to the continued weak market for sulfur, Main
Pass 299 maintained the reduced production levels established in 1996. The
Company's share of sulfur revenues totaled $18.3 million during 1997 compared to
$20.1 million during 1996 and $30.5 million during 1995. During 1997, the
Company sold 307,000 tons of sulfur at an average price of $59 per ton compared
to 333,300 tons of sulfur at an average price of $60 per ton during 1996 and
445,600 tons at an average price of $68 per ton during 1995. The Company's share
of production was 316,000 tons in 1997 compared to 325,000 tons in 1996 and
365,100 tons in 1995.

Planned write-downs during the third quarter of 1997 by Homestake's joint
venture partners caused the Company to reexamine the carrying value of its
investment in Main Pass 299. Due to a prolonged period of low sulfur prices and
Homestake's current assessment of estimated future cash flows from the Main Pass
299 sulfur mine, the Company recorded a write-down of $107.8 million in its
investment in Main Pass 299. As a result of this write-down, the Company's
carrying value of the Main Pass 299 sulfur property, plant and equipment was
reduced to zero at September 30, 1997.

The Company's share of oil revenues amounted to $8.5 million in 1997
compared to $10.7 million and $10.1 million in 1996 and 1995, respectively.
Operating earnings from oil operations totaled $0.9 million in 1997 compared to
operating earnings of $4.4 million in 1996 and $2.1 million in 1995. The lower
1997 operating results reflect lower oil sales volumes and prices and higher
production costs. The improved 1996 results in comparison to 1995 primarily are
due to higher oil prices and lower operating costs, partially offset by a
decline in production.

OTHER INCOME: A loss of $13.2 million in 1997 compares to income of $8.9
million in 1996 and $13.8 million in 1995. The 1997 figure includes foreign
currency losses of $34.1 million and a gain of $13.5 million from the sale of
the George Lake and Back River joint venture interests in the Northwest
Territories of Canada. Other income in 1996 includes a $2.9 million gain from
the litigation recovery and $8.9 million of foreign exchange losses, primarily
on advances to HCI, which are denominated in Canadian dollars.

DEPRECIATION, DEPLETION AND AMORTIZATION: Depreciation, depletion and
amortization of $112.4 million during 1997 compares to $112.4 million during
1996 and $99.6 million during 1995. Depreciation, depletion

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and amortization expense in 1997 reflects higher production offset by reserve
expansions at the Eskay Creek and Snip mines. The increase in depreciation,
depletion and amortization in 1996 from 1995 primarily is due to higher
production, and additional depreciation charges resulting from the purchases of
the HGAL minority interests, the disproportionate sharing arrangement and the
additional interest in the Snip mine.

ADMINISTRATIVE AND GENERAL EXPENSE: During 1997, administrative and general
expense increased to $40.6 million from $37 million and $37.3 million during
1996 and 1995, respectively. This increase primarily reflects increased
corporate development activity and the costs associated with employee
relocations to the new Agua de la Falda and Ruby Hill mines.

EXPLORATION EXPENSE: Exploration expense, excluding capitalized costs
associated with development stage projects, increased to $48.4 million during
1997 from $45.4 million in 1996 and $27.5 million in 1995. The increase in
exploration expense in 1997 primarily is due to increased activity as the
Company continues to pursue numerous prospective exploration targets and
prospects. During 1997, advanced exploration continued in the northern part of
South America at the El Foco concession in Venezuela, the St. Pierre concession
in French Guiana and the Tapajos area in Brazil. Exploration results were
disappointing in Venezuela and French Guiana, and exploration efforts in this
part of the world in 1998 will be directed to the largely under explored Tapajos
area. Exploration in the Yilgarn area of Western Australia resulted in the
discovery of poly-metallic mineralization at the Kundip project. In addition,
exploration activities were conducted at and around the Kalgoorlie, Eskay Creek,
Homestake, Snip, La Falda, Ruby Hill and Pinson operations. The Company
currently plans to spend $35 million on existing Homestake exploration projects
during 1998.

INCOME AND MINING TAXES: The Company's income and mining tax rate was 5.5%
during 1997 compared to 37% and 46% during 1996 and 1995, respectively. The low
1997 effective tax rate is due to the geographic mix of pretax income and
losses. During 1997, the Company had pretax income of $50.6 million in Canada,
and pretax losses of $167.6 million, $37.1 million and $13.8 million in the
United States, Australia and other foreign jurisdictions, respectively. The
effective Canadian tax rate was 57% during 1997, reflecting high statutory tax
rates and certain nondeductible expenses. In the United States, where the
Company is subject to the Alternative Minimum Tax, the effective rate was 16% in
1997. The effective Australian tax rate was 32% in 1997 reflecting the statutory
rate of 36% and certain nondeductible expenses. No tax benefit was recognized on
losses incurred in other foreign jurisdictions, primarily South America
exploration expenditures, due to the uncertainty of their realization. On a
consolidated basis the tax benefits related to the losses incurred the United
States and Australia are largely offset by the tax expense recorded with respect
to the Canadian earnings, and the result is a consolidated tax benefit of only
$9.2 million.

Income and mining tax expense in 1996 includes a $24 million decrease in
the consolidated tax provision due to a reduction in prior years' income tax
accruals for certain contingencies which were resolved in 1996. The 1996 tax
expense also includes a $2.6 million gain relating to the tax portion of a
litigation recovery.

At December 31, 1997 and 1996 the Company had tax valuation allowances of
$89.7 million and $72.2 million, respectively. While circumstances could occur
which would permit the Company to reduce its deferred tax valuation allowances
in future years, based on the Company's current projections it does not expect
significant future reductions. Events that would allow the Company to 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
post-retirement benefit obligations and (iii) the future disposal of certain
non-amortizable United States and Australia land and mineral properties at such
time as the Company determines the properties have no further significant
exploration potential.

See note 7 to the consolidated financial statements for further discussion
of tax matters.

MINORITY INTERESTS: Income allocable to minority interests in consolidated
subsidiaries amounted to $10.2 million in 1997 compared to $15.1 million in 1996
and $16 million in 1995. The decrease in income allocable to minority interests
in 1997 is due to reduced earnings from the Eskay Creek and Snip mines both of
which are owned by Prime Resources Group Inc. ("Prime"), a 50.6%-owned
subsidiary of Homestake, and an increase in exploration expenditures incurred by
the Company's 51%-owned subsidiary, Agua de la Falda S.A.

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LIQUIDITY AND CAPITAL RESOURCES

During 1997, Homestake's cash and equivalents and short-term investment
balances increased by $16.2 million to $235.9 million. Net cash provided by
operations in 1997 amounted to $102.3 million compared to $180.4 million and
$153.5 million in 1996 and 1995, respectively. The decrease in cash provided by
operations primarily is due to lower gold prices. Investing activities in 1997
include capital expenditures of $131.5 million, a $16 million investment in
mining and exploration interests in Bulgaria, and $13.4 million of proceeds from
asset sales. Financing activities in 1997 include dividends paid of $24.2
million and net additional borrowings of $84.3 million.

The Company has a United States/Canadian/Australian cross-border credit
facility providing a total availability of $275 million. The Company pays a
commitment fee of 0.15% per annum on the unused portion of this facility. The
credit facility is available through September 2001 and provides for borrowings
in United States, Canadian, or Australian dollars, or gold, or a combination of
these. The credit agreement requires a minimum consolidated net worth of $500
million. At December 31, 1997 HGAL had borrowed $48.9 million under this
agreement primarily to repay intercompany advances. The interest rate on these
borrowings is based on the Australian Bank Bill Swap Rate plus 0.4%. At December
31, 1997 this rate was 5.25%.

In 1993, the Company sold $150 million of 5.5% convertible subordinated
notes maturing June 23, 2000. Interest on the notes is payable semi-annually in
June and December. The notes are convertible into the Company's common shares at
a rate of $23.06 per common share and are redeemable by the Company in whole at
any time.

In December 1996, Homestake and Santa Fe announced that they had entered
into an agreement whereby Homestake would acquire Santa Fe by an exchange of
common stock for common stock. In March 1997, the Company announced that Santa
Fe had terminated the agreement and, in accordance with the terms of the merger
agreement, had paid Homestake a $65 million termination fee. As a result,
Homestake recorded a gain of $62.9 million ($47.2 million after tax), net of
merger related expenses incurred in 1997 of $2.1 million.

In February 1997, Homestake completed the sale of its interests in the
George Lake and Back River joint ventures in Canada to Kit Resources Corporation
("Kit") for $9.3 million in cash and 3.6 million shares of Kit common stock. As
a result of this transaction, the Company recorded a pretax gain of $13.5
million ($8.1 million after tax).

In April 1997, the Company filed a shelf registration with the Securities
and Exchange Commission for the potential sale of up to 20 million shares of
Homestake common stock. The proceeds from any such offering would be available
for general corporate purposes, which could include capital expenditures,
repayment of debt and future acquisitions which have the potential to add to the
Company's gold reserves and future gold production.

In July 1997, Lawrence County, South Dakota issued $30 million of South
Dakota Solid Waste Disposal Revenue Bonds ("Waste Disposal Bonds") and $18
million of South Dakota Pollution Control Refunding Revenue Bonds ("Pollution
Control Bonds"), both of which are due in 2032. Proceeds from the Waste Disposal
Bonds were loaned to the Company and proceeds from the Pollution Control Bonds
were used to redeem outstanding South Dakota pollution control bonds. The
Company is responsible for funding principal and interest payments on these
bonds. See note 14 to the Consolidated Financial Statements for further
information on these bonds.

In 1995, Homestake acquired for $24 million a 10% interest in Navan
Resources plc ("Navan"), an Irish public company with diverse mineral interests
in Europe. At December 31, 1996 Homestake reduced the carrying value of its
investment in Navan to the quoted market value through a $7.2 million charge to
income. During 1997, Homestake recorded additional write-downs of $10.1 million
with respect to the carrying value of the investment in Navan.

In November 1997, Homestake purchased a 20% interest in Navan Bulgarian
Mining BV ("Navan BV"), a wholly-owned subsidiary of Navan, for $12 million.
Homestake has agreed, under certain circum-

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stances, to invest an additional $18 million in Navan BV, which would result in
Homestake owning 51% of Navan BV, and give Homestake the right to become
operator of the Chelopech project in Bulgaria. See note 11 to the Consolidated
Financial Statements for further information on this investment.

During November 1997, Homestake acquired a 32% interest in Navan's
Bulgarian exploration projects and program for $4 million. Homestake is
obligated to invest an additional $4 million in the exploration program during
the next three years, which will result in Homestake's owning a 50% interest in
and having the right to become the operator of the exploration program.

In April 1996, Prime purchased Cominco's 60% interest in the Snip mine for
$39.3 million in cash.

In June 1996, the Company paid $51.4 million to purchase past and all
future rights and entitlements under the disproportionate sharing arrangement
covering gold production from a portion of the Super Pit operation at the
Kalgoorlie operations. The Company now shares equally with its joint venture
partner in all gold produced at the Kalgoorlie operations.

During the fourth quarter of 1995 and the first quarter of 1996, Homestake
acquired the 18.5% of HGAL it did not already own. The total purchase price was
$164.9 million, including $141.7 million for 8.5 million newly issued shares of
the Company, $19.5 million in cash and $3.7 million of transaction expenses.

Additions to property, plant and equipment in 1997 totaled $131.5 million
compared to $105.9 million and $81 million in 1996 and 1995, respectively.
Capital additions in 1997 include $56.1 million for construction and development
work at the Ruby Hill mine, $14.8 million at the Round Mountain mine primarily
for the new mill, $13.7 million at the Kalgoorlie operations primarily for a
decline from surface and a ventilation raise at the Mt. Charlotte mine, $15.4
million at the Eskay Creek mine primarily for the construction of the new
gravity/flotation mill, and $16 million at the Homestake mine primarily for a
tailings dam lift and improvements in the underground operations. The remaining
expenditures primarily were for replacement capital to maintain existing
production capacity.

In addition to sustaining capital, planned capital expenditures of
approximately $50 million at Homestake's existing operations during 1998
include, $13 million at the Homestake mine primarily for the operations
restructuring and completion of the tailings dam lift, and $14 million at the
Kalgoorlie operations primarily to extend the new Mt. Charlotte decline further
into the mine's workings and increase the flotation capacity at the Fimiston
mill.

Total dividends paid by the Company, including $2.2 million of dividends
paid by Prime to its minority shareholders, amounted to $24.2 million in 1997
compared to $31.5 million and $27.6 million during 1996 and 1995, respectively.
During 1997, Homestake reduced its dividend rate to two semi-annual payments of
$.05 each.

The Company paid cash income and mining taxes (net of tax refunds) of $66.2
million in 1997 compared to $17.1 million and $22.7 million in 1996 and 1995,
respectively. The 1997 tax payments include $30.9 million of final payments for
the 1996 tax year and $35.3 million of estimated payments for the 1997 tax year.
The increase in tax payments is due to the exhaustion of the majority of the
Company's Canadian income and mining tax pools during 1996.

The Company spent $3.1 million for reclamation-related expenditures during
1997 at its discontinued uranium facility at Grants, New Mexico. In accordance
with the Energy Policy Act of 1992, the United States Department of Energy
("DOE") is responsible for 51.2% of all past and future reclamation expenditures
at this facility. The Company has received $21 million to date from the DOE and
the accompanying balance sheet at December 31, 1997 includes a receivable of
$10.9 million for the DOE's share of reclamation expenditures made by the
Company through 1997. The total future cost for reclamation, remediation,
monitoring and maintaining compliance at the Grants site is estimated to be
$17.5 million. The Company believes that its share of the estimated remaining
cost of reclaiming the Grants facility is fully provided in the financial
statements at December 31, 1997.

The Company evaluates its accruals for remediation, reclamation and site
restoration regularly. The Company believes it has fully provided for all
remediation liabilities and for estimated reclamation and site

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restoration costs at its nonoperating properties. At its 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.

At September 30, 1997, the Company determined that it was necessary to
increase the reclamation accruals at certain of its nonoperating properties
including the Santa Fe mine in Nevada, the Nickel Plate mine in Canada and the
Grants uranium complex in New Mexico to reflect revised estimates, changed
conditions and more stringent future reclamation requirements. Accordingly, a
charge of $29.1 million was recorded at that time.

See note 20 to the consolidated financial statements for discussion of
certain legal matters.

The Company has completed a review of its computer-based operating systems
and has developed a plan to ensure all of these systems will be year 2000
compliant. The Company does not expect to incur significant costs in this
regard.

Future results will be impacted by such factors as the market price of
gold, silver and sulfur, 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, planned capital expenditures, and anticipated dividends.

PLUTONIC RESOURCES LIMITED: On December 21, 1997, Homestake announced it
had entered into an agreement to acquire Plutonic Resources Limited
("Plutonic"), an Australian gold producer, by an exchange of common stock for
common stock. Homestake expects to issue approximately 64.4 million shares to
acquire Plutonic (0.34 of a Homestake common share for each Plutonic fully-paid
ordinary share).

Following completion of this transaction, Homestake's Australian operations
will be the second largest in that country with substantial potential for
reserve growth. Homestake will have 17 mines in four countries. Homestake's 1998
Australian gold production is expected to be 850,000 ounces, or approximately 35
percent of the Company's total production, increasing to 1 million ounces and 40
percent, respectively, in 1999.

The transaction, which has been approved unanimously by the Boards of both
companies, is expected to close in May 1998. The transaction is subject to
approval by shareholders of both companies, qualification as a pooling of
interests for accounting purposes, and certain other conditions.

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HOMESTAKE MINING COMPANY AND SUBSIDIARIES

STATEMENTS OF CONSOLIDATED OPERATIONS
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)

<TABLE>
<CAPTION>
FOR THE YEARS ENDED DECEMBER 31,
---------------------------------
1997 1996 1995
--------- -------- --------
<S> <C> <C> <C>
REVENUES:
Gold and ore sales...................................... $ 633,093 $712,186 $675,222
Sulfur and oil sales.................................... 26,821 30,749 40,620
Interest income......................................... 14,215 15,054 16,737
Gain on termination of Santa Fe merger (note 4)......... 62,925
Other income (note 5)................................... (13,220) 8,947 13,786
--------- -------- --------
723,834 766,936 746,365
--------- -------- --------
COSTS AND EXPENSES:
Production costs........................................ 473,502 475,333 481,886
Depreciation, depletion and amortization................ 112,356 112,353 99,602
Administrative and general expense...................... 40,563 36,965 37,283
Exploration expense..................................... 48,365 45,382 27,541
Interest expense........................................ 11,259 10,644 11,297
Write-downs and other unusual charges (note 6).......... 198,802 8,983
Other expense........................................... 6,836 5,592 3,290
--------- -------- --------
891,683 695,252 660,899
--------- -------- --------
INCOME (LOSS) BEFORE TAXES AND MINORITY INTERESTS......... (167,849) 71,684 85,466
INCOME AND MINING TAXES (NOTE 7).......................... 9,211 (26,333) (39,141)
MINORITY INTERESTS........................................ (10,241) (15,070) (15,998)
--------- -------- --------
NET INCOME (LOSS)......................................... $(168,879) $ 30,281 $ 30,327
========= ======== ========
NET INCOME (LOSS) PER SHARE -- BASIC AND DILUTED.......... $ (1.15) $ 0.21 $ 0.22
========= ======== ========
AVERAGE SHARES USED IN THE COMPUTATION.................... 146,719 146,311 138,117
========= ======== ========
</TABLE>

See notes to consolidated financial statements.

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HOMESTAKE MINING COMPANY AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS, EXCEPT PER SHARE AMOUNT)

ASSETS

<TABLE>
<CAPTION>
DECEMBER 31,
------------------------
1997 1996
---------- ----------
<S> <C> <C>
CURRENT ASSETS
Cash and equivalents...................................... $ 94,725 $ 89,599
Short-term investments.................................... 141,221 130,158
Receivables (note 8)...................................... 40,366 47,650
Inventories (note 9)...................................... 69,258 91,127
Deferred income and mining taxes (note 7)................. 20,894 12,263
Other..................................................... 9,506 8,551
---------- ----------
Total current assets.............................. 375,970 379,348
PROPERTY, PLANT AND EQUIPMENT -- NET (notes 3 and 10)....... 812,046 1,007,030
INVESTMENTS AND OTHER ASSETS
Noncurrent investments (note 11).......................... 32,321 39,606
Other assets (note 12).................................... 84,392 56,124
---------- ----------
Total investments and other assets................ 116,713 95,730
---------- ----------
TOTAL ASSETS...................................... $1,304,729 $1,482,108
========== ==========
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable.......................................... $ 43,843 $ 36,171
Accrued liabilities (note 13)............................. 64,786 42,174
Income and other taxes payable............................ 277 38,386
---------- ----------
Total current liabilities......................... 108,906 116,731
LONG-TERM LIABILITIES
Long-term debt (note 14).................................. 263,855 185,000
Other long-term obligations (note 15)..................... 142,382 114,168
---------- ----------
Total long-term liabilities....................... 406,237 299,168
DEFERRED INCOME AND MINING TAXES (NOTE 7)................... 155,449 201,454
MINORITY INTERESTS IN CONSOLIDATED SUBSIDIARIES............. 102,387 96,203
SHAREHOLDERS' EQUITY (NOTE 18)
Capital stock, $1 par value per share:
Preferred -- 10,000 shares authorized; no shares
outstanding
Common -- 250,000 shares authorized; shares
outstanding: 1997 -- 146,735; 1996 -- 146,672.......... 146,735 146,672
Additional paid-in capital................................ 478,707 477,880
Retained earnings (deficit)............................... (80,801) 110,085
Accumulated currency translation adjustments.............. (14,907) 37,753
Other..................................................... 2,016 (3,838)
---------- ----------
Total shareholders' equity........................ 531,750 768,552
---------- ----------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY........ $1,304,729 $1,482,108
========== ==========
</TABLE>

Commitments and Contingencies -- see notes 20 and 21.
See notes to consolidated financial statements.

C-12
<PAGE> 230

HOMESTAKE MINING COMPANY AND SUBSIDIARIES

STATEMENTS OF CONSOLIDATED SHAREHOLDERS' EQUITY
(IN THOUSANDS)

<TABLE>
<CAPTION>
ACCUMULATED
ADDITIONAL RETAINED CURRENCY
FOR THE YEARS ENDED COMMON PAID-IN EARNINGS TRANSLATION
DECEMBER 31, 1997, 1996 AND 1995 STOCK CAPITAL (DEFICIT) ADJUSTMENTS OTHER TOTAL
- -------------------------------- -------- ---------- --------- ----------- ------- ---------
<S> <C> <C> <C> <C> <C> <C>
BALANCES, DECEMBER 31, 1994..... $137,785 $339,785 $ 106,405 $ 8,869 $(4,074) $ 588,770
Net income.................... 30,327 30,327
Dividends paid................ (27,587) (27,587)
Exercise of stock options..... 206 2,680 2,886
Stock issued for purchase of
HGAL minority interests
(note 3)................... 2,550 39,849 42,399
Currency translation
adjustments................ (1,041) (1,041)
Change in unrealized loss on
investments................ 162 162
Other......................... (59) (59)
-------- -------- --------- -------- ------- ---------
BALANCES, DECEMBER 31, 1995..... 140,541 382,314 109,145 7,828 (3,971) 635,857
Net income.................... 30,281 30,281
Dividends paid................ (29,341) (29,341)
Exercise of stock options..... 167 2,431 2,598
Stock issued for purchase of
HGAL minority interests
(note 3)................... 5,976 93,370 99,346
Currency translation
adjustments................ 29,925 29,925
Change in unrealized loss on
investments................ 10 10
Other......................... (12) (235) 123 (124)
-------- -------- --------- -------- ------- ---------
BALANCES, DECEMBER 31, 1996..... 146,672 477,880 110,085 37,753 (3,838) 768,552
Net loss...................... (168,879) (168,879)
Dividends paid................ (22,007) (22,007)
Exercise of stock options..... 63 827 890
Currency translation
adjustments................ (52,660) (52,660)
Change in unrealized loss on
investments................ 3,638 3,638
Other......................... 2,216 2,216
-------- -------- --------- -------- ------- ---------
BALANCES, DECEMBER 31, 1997..... $146,735 $478,707 $ (80,801) $(14,907) $ 2,016 $ 531,750
======== ======== ========= ======== ======= =========
</TABLE>

See notes to consolidated financial statements.

C-13
<PAGE> 231

HOMESTAKE MINING COMPANY AND SUBSIDIARIES

STATEMENTS OF CONSOLIDATED CASH FLOWS
(IN THOUSANDS)

<TABLE>
<CAPTION>
FOR THE YEARS ENDED DECEMBER 31,
----------------------------------
1997 1996 1995
--------- --------- --------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATIONS:
Net income (loss)...................................... $(168,879) $ 30,281 $ 30,327
Reconciliation to net cash provided by operations:
Depreciation, depletion and amortization............ 112,356 112,353 99,602
Write-downs and other unusual charges (note 6)...... 198,802 8,983
Foreign currency exchange losses on intercompany
debt (note 5)..................................... 5,657 8,943 883
Gains on asset disposals............................ (16,712) (3,836) (5,024)
Deferred income and mining taxes (note 7)........... (46,071) (15,615) 19,475
Minority interests.................................. 10,241 15,070 15,998
Reclamation -- net.................................. 784 (1,472) (6,044)
Other noncash items -- net.......................... 2,327 6,984 5,634
Effect of changes in operating working capital
items:
Receivables....................................... (2,198) 13,754 821
Inventories....................................... 9,208 (15,851) 1,324
Accounts payable.................................. 7,399 (450) (852)
Accrued liabilities and taxes payable............. (11,058) 21,451 (7,456)
Other............................................. 433 (217) (1,231)
--------- --------- --------
Net cash provided by operations........................ 102,289 180,378 153,457
--------- --------- --------
INVESTMENT ACTIVITIES:
Decrease (increase) in short-term investments.......... (11,063) (63,742) 33,063
Proceeds from asset sales.............................. 13,359 16,141 13,295
Additions to property, plant and equipment............. (131,474) (105,923) (80,979)
Increase in restricted cash............................ (15,990)
Investments in mining companies........................ (17,312) (12,224) (37,314)
Purchase of HGAL minority interests (note 3)........... (6,435) (16,714)
Purchase of interest in Snip mine (note 3)............. (39,279)
Other.................................................. (2,430) 3,264 3,296
--------- --------- --------
Net cash used in investment activities................. (164,910) (208,198) (85,353)
--------- --------- --------
FINANCING ACTIVITIES:
Borrowings............................................. 102,270
Debt repayments........................................ (18,000)
Dividends paid on common shares -- Homestake........... (22,007) (29,341) (27,587)
-- Prime minority
interests........................................... (2,151) (2,205)
Common shares issued................................... 889 2,599 2,886
Other.................................................. 4,235
--------- --------- --------
Net cash provided by (used in) financing activities.... 65,236 (28,947) (24,701)
--------- --------- --------
EFFECT OF EXCHANGE RATE CHANGES ON CASH AND
EQUIVALENTS............................................ 2,511 409 (3,147)
--------- --------- --------
NET INCREASE (DECREASE) IN CASH AND EQUIVALENTS.......... 5,126 (56,358) 40,256
CASH AND EQUIVALENTS, JANUARY 1.......................... 89,599 145,957 105,701
--------- --------- --------
CASH AND EQUIVALENTS, DECEMBER 31........................ $ 94,725 $ 89,599 $145,957
========= ========= ========
</TABLE>

See notes to consolidated financial statements.

C-14
<PAGE> 232

HOMESTAKE MINING COMPANY AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNLESS OTHERWISE NOTED, ALL TABULAR AMOUNTS ARE IN THOUSANDS)

NOTE 1: NATURE OF OPERATIONS

Homestake Mining Company ("Homestake" or the "Company") is engaged in gold
mining and related activities including exploration, extraction, processing,
refining and reclamation. Gold bullion, the Company's principal product, is
produced and sold in the United States, Canada, Australia and Chile. Ore and
concentrates, containing gold and silver from the Eskay Creek and Snip mines in
Canada, are sold directly to smelters. Through its investment in Main Pass 299,
the Company also produces and sells sulfur and oil.

NOTE 2: SIGNIFICANT ACCOUNTING POLICIES

The consolidated financial statements include Homestake and its
majority-owned subsidiaries and their undivided interests in joint ventures
after elimination of intercompany amounts. At December 31, 1997 the Company
owned 50.6% of Prime Resources Group Inc. ("Prime") and 51% of Agua de la Falda
S.A. with the remaining interests reflected as minority interests in the
consolidated financial statements. Undivided interests in gold mining operations
(the Round Mountain, Pinson and Marigold mines in the United States; Homestake
Gold of Australia Limited's ("HGAL") interest in the gold mining operations in
Kalgoorlie, Western Australia; and Homestake Canada Inc.'s ("HCI") interests in
the Williams and David Bell mines in Canada) and in the sulfur and oil recovery
operations at Main Pass 299 in the Gulf of Mexico are reported using pro rata
consolidation whereby the Company reports its proportionate share of assets,
liabilities, income and expenses.

USE OF ESTIMATES: The preparation of financial statements in conformity
with United States generally accepted accounting principles requires the
Company's management to make estimates and assumptions that affect the reported
amounts of assets and liabilities, the disclosure of contingent assets and
liabilities at the date of the financial statements, and the reported amounts of
revenues and expenses during the reporting period. Actual results could differ
from those estimates.

CASH AND EQUIVALENTS include all highly-liquid investments with a maturity
of three months or less at the date of purchase. The Company minimizes its
credit risk by investing its cash and equivalents with major international banks
and financial institutions located principally in the United States, Canada and
Australia. The Company believes that no concentration of credit risk exists with
respect to investment of its cash and equivalents.

SHORT-TERM INVESTMENTS principally consist of highly-liquid United States
and foreign government and corporate securities with original maturities in
excess of three months. The Company classifies all short-term investments as
available-for-sale securities. Unrealized gains and losses on these investments
are recorded as a separate component of shareholders' equity, except that
declines in market value judged to be other than temporary are recognized in
determining net income.

INVENTORIES, which include finished products, ore in process, stockpiled
ore, ore in transit, and supplies, are stated at the lower of cost or net
realizable value. The cost of gold produced by certain United States operations
is determined principally by the last-in, first-out method ("LIFO"). The cost of
other inventories is determined primarily by averaging methods.

EXPLORATION COSTS are expensed as incurred. All costs related to property
acquisitions are capitalized.

DEVELOPMENT COSTS: Following completion of a favorable feasibility study,
development costs incurred to place new mines into production and to complete
major development projects at operating mines are capitalized. Ongoing costs to
maintain production are expensed as incurred.

DEPRECIATION, DEPLETION AND AMORTIZATION of mining properties, mine
development costs and major plant facilities is computed principally by the
units-of-production method based on estimated proven and probable ore reserves.
Proven and probable ore reserves reflect estimated quantities of ore which can
be recovered

C-15
<PAGE> 233
HOMESTAKE MINING COMPANY AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(UNLESS OTHERWISE NOTED, ALL TABULAR AMOUNTS ARE IN THOUSANDS)

economically in the future from known mineral deposits. Such estimates are based
on current and projected costs and prices. Other equipment and plant facilities
are depreciated using straight-line or accelerated methods principally over
estimated useful lives of three to ten years.

PROPERTY EVALUATIONS: Long-lived assets are reviewed for impairment
whenever events or changes in circumstances indicate that the carrying amount of
an asset may not be recoverable. If deemed impaired, an impairment loss is
measured and recorded based on the fair value of the asset, which generally will
be computed using discounted cash flows.

Estimated future net cash flows from each mine are calculated using
estimates of proven and probable ore reserves, estimated future sales prices
(considering historical and current prices, price trends and related factors),
production costs, capital and reclamation costs. (See note 6.)

The Company's estimates of future cash flows are subject to risks and
uncertainties. Therefore, it is possible that changes could occur which may
affect the recoverability of the Company's investments in mineral properties and
other assets.

Undeveloped properties upon which the Company has not performed sufficient
exploration work to determine whether significant mineralization exists are
carried at original acquisition cost. If it is determined that significant
materialization does not exist, the property would be written down to estimated
net realizable value at the time of such determination.

RECLAMATION AND REMEDIATION: Reclamation costs and related accrued
liabilities, which are based on the Company's interpretation of current
environmental and regulatory requirements, are accrued and expensed, principally
by the units-of-production method based on estimated proven and probable ore
reserves. Remediation liabilities, including estimated governmental oversight
costs, are expensed upon determination that a liability has been incurred and
where a minimum cost or reasonable estimate of the cost can be determined. (See
note 6.)

The Company provides for all costs of reclamation, including long-term care
and monitoring and maintenance costs. The Company uses undiscounted current
costs in preparing its estimates of future reclamation costs. The Company
regularly updates its estimates of reclamation costs. Amounts to be received
from the United States Federal Government for its 51.2% share of the cost of
future reclamation activities at the Grants, New Mexico uranium facility are
offset against the remaining estimated Grants reclamation liabilities.
Receivables are recorded for the United States Federal Government's share of
reclamation expenditures at the Grants uranium facility in the period that such
expenditures are made.

Based on current environmental regulations and known reclamation
requirements, the Company has included its best estimates of these obligations
in its reclamation accruals. However, the Company's estimates of its ultimate
reclamation liabilities could change as a result of changes in regulations or
cost estimates.

NONCURRENT INVESTMENTS include investments in mining securities and assets
held in trust to fund employee benefits.

Investments in mining securities that have readily determinable fair values
and assets held in trust to fund employee benefits are classified as
available-for-sale investments. Unrealized gains and losses on these investments
are recorded as a separate component of shareholders' equity, except that
declines in market value judged to be other than temporary are recognized in
determining net income. Realized gains and losses on these investments are
included in determining net income. (See note 6.)

PRODUCT SALES are recognized when title passes at the shipment or delivery
point.

DERIVATIVE FINANCIAL INSTRUMENTS: The Company uses derivative financial
instruments as part of an overall risk-management strategy. These instruments
are used as a means of hedging exposure to precious

C-16
<PAGE> 234
HOMESTAKE MINING COMPANY AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(UNLESS OTHERWISE NOTED, ALL TABULAR AMOUNTS ARE IN THOUSANDS)

metals prices and foreign currency exchange rates. The Company does not hold or
issue derivative financial instruments for trading purposes. The Company's
accounting for derivative financial instruments is in accordance with the
concepts established in Statement of Financial Accounting Standards ("SFAS") No.
80, "Accounting for Futures Contracts," SFAS No. 52, "Foreign Currency
Translation," American Institute of Certified Public Accountants Statement of
Positions 86-2, "Accounting for Options," and various Emerging Issues Task Force
("EITF") pronouncements.

The Company uses forward sales contracts and combinations of put and call
options to hedge its exposure to precious metals prices. The underlying hedged
production is designated at the inception of the hedge. Deferral accounting is
applied only if the derivatives continue to reduce the price risk associated
with the underlying hedged production. Contracted prices on forward sales
contracts and options are recognized in product sales as the designated
production is delivered or sold. In the event of early settlement of hedge
contracts, gains and losses are deferred and recognized in income at the
originally designated delivery date.

The Company uses combinations of put and call options to hedge its exposure
to foreign currency exchange rates. Currently, these options do not qualify for
deferral accounting and, accordingly, are marked to market at each balance sheet
date. Realized and unrealized gains and losses on these options are recognized
in other income.

INCOME TAXES: The Company follows the liability method of accounting for
income taxes whereby deferred income taxes are recognized for the tax
consequences of temporary differences by applying statutory tax rates applicable
to future years to differences between the financial statement carrying amounts
and the tax bases of certain assets and liabilities. Changes in deferred tax
assets and liabilities include the impact of any tax rate changes enacted during
the year. Mining taxes represent Canadian provincial taxes levied on mining
operations.

FOREIGN CURRENCY: Substantially all assets and liabilities of foreign
subsidiaries are translated at exchange rates in effect at the end of each
period. Revenues and expenses are translated at the average exchange rate for
the period. Accumulated currency translation adjustments are included as a
separate component of shareholders' equity. Foreign currency transaction gains
and losses are included in the determination of net income.

PENSION PLANS AND OTHER POSTRETIREMENT BENEFITS: Pension costs related to
United States employees are determined using the projected unit credit actuarial
method. Pension plans are funded through annual contributions. In addition, the
Company provides medical and life insurance benefits for certain retired
employees and accrues the cost of such benefits over the period in which active
employees become eligible for the benefits. The costs of the postretirement
medical and life insurance benefits are paid at the time such benefits are
provided.

NET INCOME PER SHARE is computed by dividing net income by the weighted
average number of common shares outstanding during the year. Basic and diluted
net income per share are the same since the exercise of stock options and the
conversion of the 5.5% convertible subordinated notes would produce
anti-dilutive results.

PREPARATION OF FINANCIAL STATEMENTS: Certain amounts for 1996 and 1995 have
been reclassified to conform to the current year's presentation. All dollar
amounts are expressed in United States dollars unless otherwise indicated.

COMPREHENSIVE INCOME: In June 1997, the Financial Accounting Standards
Board ("FASB") issued SFAS 130, "Reporting Comprehensive Income." SFAS 130
establishes standards for the reporting and display of comprehensive income. The
purpose of reporting comprehensive income is to present a measure of all changes
in shareholders' equity that result from recognized transactions and other
economic events of the period, other than transactions with shareholders in
their capacity as shareholders. SFAS 130 will be effective

C-17
<PAGE> 235
HOMESTAKE MINING COMPANY AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(UNLESS OTHERWISE NOTED, ALL TABULAR AMOUNTS ARE IN THOUSANDS)

for Homestake's 1998 financial statements. Adoption of SFAS 130 will result in
additional disclosures in Homestake's financial statements but will not impact
the Company's reported net income or net income per share.

NOTE 3: ACQUISITIONS AND DIVESTITURES

HOMESTAKE GOLD OF AUSTRALIA LIMITED: During the fourth quarter of 1995 and
the first quarter of 1996, Homestake acquired the 18.5% of HGAL it did not
already own. The total purchase price was $164.9 million, including $141.7
million for 8.5 million newly issued shares of the Company, $19.5 million in
cash and $3.7 million of transaction expenses. The acquisition of the HGAL
minority interests was accounted for as a purchase.

SNIP MINE: On April 30, 1996 Prime purchased Cominco Ltd.'s ("Cominco") 60%
interest in the Snip mine in British Columbia, Canada for $39.3 million in cash.
As a result of this purchase Prime became the sole owner of the Snip mine.

AGUA DE LA FALDA S.A.: In July 1996, Homestake and Corporacion Nacional del
Cobre Chile ("Codelco"), a state-owned mining company in Chile, formed a new
company, Agua de la Falda S.A. ("La Falda") to conduct exploration and mining
activities near Homestake's former El Hueso mine in northern Chile. Homestake
owns 51% of the corporation and Codelco owns 49%. Codelco and Homestake have
contributed property interests in the area to the new company. In addition,
Codelco contributed the existing El Hueso plant, which had been under lease to
Homestake. Homestake also contributed $5.1 million for exploration and
development, including $3.7 million of exploration and development expenditures
incurred prior to the formation of La Falda.

PINSON MINING COMPANY: In December 1996, Homestake increased its interest
in the Pinson Mining Company partnership ("Pinson Partnership") from 26.25% to
50% and became the operator of the Pinson mine. Barrick Gold Corporation
("Barrick") owns the remaining 50% interest. The purchase price for the
additional 23.75% partnership interest consisted of $4.4 million in cash, a net
smelter royalty on certain future Pinson Partnership production and assumption
of a proportionate increase of the Pinson Partnership's liabilities, including
reclamation.

GEORGE LAKE AND BACK RIVER JOINT VENTURES: In February 1997, Homestake sold
its interests in the George Lake and Back River joint ventures in Canada to Kit
Resources Corporation ("Kit") for $9.3 million in cash and 3.6 million shares of
Kit common stock. As a result of this transaction, the Company recorded a pretax
gain of $13.5 million in the first quarter of 1997, which was included in other
income. The write-downs of noncurrent investments recorded in the third and
fourth quarters of 1997 (see note 6) includes $5.5 million related to the
Company's investment in Kit.

TORRES MINING COMPLEX: In 1995, the Company sold its 28% equity interest in
the Torres silver mining complex in Mexico for $6 million. This sale resulted in
a pretax gain of $2.7 million, which was included in other income.

NOTE 4: GAIN ON TERMINATION OF SANTA FE MERGER

In March 1997, Santa Fe Pacific Gold Corporation terminated its previously
announced merger agreement with Homestake and paid Homestake a $65 million
termination fee. As a result, in 1997 the Company recorded a pretax gain of
$62.9 million ($47.2 million after tax), net of merger related expenses of $2.1
million incurred in 1997. Other expense for the year ended December 31, 1996
included $3.4 million of expenses related to this proposed merger.

C-18
<PAGE> 236
HOMESTAKE MINING COMPANY AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(UNLESS OTHERWISE NOTED, ALL TABULAR AMOUNTS ARE IN THOUSANDS)

NOTE 5: OTHER INCOME

<TABLE>
<CAPTION>
1997 1996 1995
-------- ------- -------
<S> <C> <C> <C>
Gains on asset disposals..................... $ 16,712 $ 3,836 $ 5,024
Royalty income............................... 2,425 2,888 2,252
Foreign currency contract gains (losses)..... (28,453) 1,632 (151)
Foreign currency exchange losses on
intercompany advances...................... (5,657) (8,943) (883)
Pension curtailment gain..................... 1,868
Other........................................ 1,753 7,666 7,544
-------- ------- -------
$(13,220) $ 8,947 $13,786
======== ======= =======
</TABLE>

NOTE 6: WRITE-DOWNS AND OTHER UNUSUAL CHARGES

<TABLE>
<CAPTION>
1997 1996
-------- ------
<S> <C> <C>
Write-down of Homestake's investment in the Main Pass 299
sulfur mine(a)......................................... $107,761
Reduction in the carrying values of short-lived mining
properties(b).......................................... 26,885
Increase in the estimated accrual for future reclamation
expenditures(c)........................................ 29,156
Write-downs of noncurrent investments(d)................. 24,770 $8,983
Other(e)................................................. 10,230
-------- ------
$198,802 $8,983
======== ======
</TABLE>

- ---------------

a) Homestake owns a 16.7% undivided interest in the Main Pass 299 sulfur mine
located in the Gulf of Mexico. Planned write-downs by Homestake's joint
venture partners caused the Company to reexamine the carrying value of its
investment in Main Pass 299. Due to a prolonged period of low sulfur prices
and Homestake's current assessment of estimated future cash flows from the
Main Pass 299 sulfur mine, in the third quarter of 1997 the Company recorded
a write-down of $107.8 million in its investment in Main Pass 299. As a
result of this write-down, the Company's carrying value of the Main Pass 299
sulfur property, plant and equipment was reduced to zero at September 30,
1997.

b) As a result of lower gold prices, the Company reviewed the carrying values of
its gold mining operations using a $325 per ounce gold price for its
short-lived operations and a $350 per ounce gold price for its operations
with longer lives. The Company determined that impairment write-downs were
required to reduce the carrying value of several of its assets or operations
with short remaining lives, including the Pinson mine in Nevada, the
Homestake mine's Open Cut in South Dakota, and low-grade stockpiled ore and
certain redundant mining equipment at the Kalgoorlie operations in Western
Australia. The Company determined that no adjustments to the carrying values
of its longer-lived operations were required.

c) As a result of a review of the Company's reclamation liabilities, the Company
determined that it was necessary to increase the reclamation accruals at
certain of its nonoperating properties including the Santa Fe mine in Nevada,
the Nickel Plate mine in Canada and the Grants uranium complex in New Mexico
to reflect revised estimates, changed conditions and more stringent future
reclamation requirements.

d) Low gold prices and lower market valuations for junior mining companies have
caused the value of certain of the Company's noncurrent investments in other
companies to decline significantly. The Company

C-19
<PAGE> 237
HOMESTAKE MINING COMPANY AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(UNLESS OTHERWISE NOTED, ALL TABULAR AMOUNTS ARE IN THOUSANDS)

recorded in income the reductions in the carrying values that it deemed to be
other than temporary. (See note 11.)

e) Other consists primarily of foreign exchange losses on intercompany
redeemable preferred stock and a loss on repayment of an intercompany gold
loan.

NOTE 7: INCOME TAXES

The provision for income and mining taxes consists of the following:

<TABLE>
<CAPTION>
1997 1996 1995
-------- -------- -------
<S> <C> <C> <C>
Current
Income taxes
Federal................................................ $ 1,023 $ (1,999) $ 7,375
Canadian............................................... 26,048 28,367 1,928
Other.................................................. (8) 616 115
-------- -------- -------
27,063 26,984 9,418
Canadian mining taxes..................................... 9,797 14,964 10,248
-------- -------- -------
Total current taxes............................... 36,860 41,948 19,666
-------- -------- -------
Deferred
Income taxes
Federal................................................ (29,203) (3,879) (3,743)
State.................................................. 2,026 (1,300) 436
Canadian............................................... (7,039) (14,588) 25,347
Other foreign.......................................... (12,035) 1,981 (2,041)
-------- -------- -------
(46,251) (17,786) 19,999
Canadian mining taxes..................................... 180 2,171 (524)
-------- -------- -------
Total deferred taxes...................................... (46,071) (15,615) 19,475
-------- -------- -------
Total income and mining taxes..................... $ (9,211) $ 26,333 $39,141
======== ======== =======
</TABLE>

The provision for income taxes is based on pretax income (loss) before
minority interests as follows:

<TABLE>
<CAPTION>
1997 1996 1995
--------- -------- -------
<S> <C> <C> <C>
United States.............................................. $(167,570) $(14,003) $17,607
Canada..................................................... 50,592 95,548 71,333
Other foreign.............................................. (50,871) (9,861) (3,474)
--------- -------- -------
$(167,849) $ 71,684 $85,466
========= ======== =======
</TABLE>

C-20
<PAGE> 238
HOMESTAKE MINING COMPANY AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(UNLESS OTHERWISE NOTED, ALL TABULAR AMOUNTS ARE IN THOUSANDS)

Deferred tax liabilities and assets as of December 31, 1997 and 1996 relate
to the following:

<TABLE>
<CAPTION>
DECEMBER 31,
--------------------
1997 1996
-------- --------
<S> <C> <C>
Deferred tax liabilities
Depreciation and other resource property differences
United States.......................................... $ 18,598 $ 64,855
Canada -- Federal...................................... 29,906 32,395
Canada -- Provincial................................... 61,509 69,069
Australia.............................................. 61,319 74,869
-------- --------
171,332 241,188
Other..................................................... 19,048 15,342
-------- --------
Gross deferred tax liabilities.............................. 190,380 256,530
-------- --------
Deferred tax assets
Tax loss carry-forwards
Canada -- Federal...................................... 2,001
Australia.............................................. 7,698 16,680
Chile.................................................. 23,943 19,929
Other.................................................. 2,512 162
-------- --------
34,153 38,772
Reclamation costs
United States.......................................... 16,827 6,783
Other.................................................. 9,685 6,226
-------- --------
26,512 13,009
Employee benefit costs.................................... 27,816 26,959
Alternative minimum tax credit carry-forwards............. 14,215
Land and other resource property.......................... 11,337 15,225
Inventory................................................. 7,924
Foreign tax credit carry-forwards......................... 5,857 12,725
Unrealized foreign exchange losses........................ 9,157 2,543
Write-downs of noncurrent investments..................... 9,410 2,869
Other..................................................... 13,394 13,174
-------- --------
Gross deferred tax assets................................... 145,560 139,491
Deferred tax asset valuation allowances..................... (89,735) (72,152)
-------- --------
Net deferred tax assets..................................... 55,825 67,339
-------- --------
Net deferred tax liability.................................. $134,555 $189,191
======== ========
Net deferred tax liability consists of
Current deferred tax assets............................... $(20,894) $(12,263)
Long-term deferred tax liability.......................... 155,449 201,454
-------- --------
Net deferred tax liability........................ $134,555 $189,191
======== ========
</TABLE>

The classification of deferred tax assets and liabilities is based on the
related asset or liability creating the deferred tax. Deferred taxes not related
to a specific asset or liability are classified based on the estimated period of
reversal. The $89.7 million deferred tax valuation allowance at December 31,
1997 represents the portion of the Company's consolidated deferred tax assets
which, based on projections at December 31, 1997, the Company does not believe
that realization is "more likely than not." The deferred tax valuation allowance

C-21
<PAGE> 239
HOMESTAKE MINING COMPANY AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(UNLESS OTHERWISE NOTED, ALL TABULAR AMOUNTS ARE IN THOUSANDS)

consists of United States, Chile, Australia and Canada unrealized deferred tax
assets of $56.6 million, $27.1 million, $5.7 million, and $.3 million,
respectively. The increase in the valuation allowance for deferred tax assets of
$17.6 million in 1997 is comprised primarily of the following: an increase of
$9.9 million for future alternative minimum tax credits that the Company
projects it will be unable to utilize; an increase of $6.2 million for potential
capital losses for which the Company currently has no tax strategy to utilize;
an increase of $6.3 million for additional unrealized tax loss carry-forwards in
South America; and a decrease of $6.8 million for a reduction of the Company's
foreign tax credit carryover. For income tax purposes, the Company has United
States foreign tax credit carry-forwards of approximately $5.9 million, which
are due to expire at various times through the year 2003.

The largest portion of the $89.7 million of unrealized deferred tax assets
is comprised of $46.8 million of future United States ($40.8 million), Australia
($5.7 million), and Canada ($.3 million) tax benefits relating to expenses that
the Company projects will not be deductible for tax return purposes until after
the year 2011. In projecting United States source income beyond this period, the
Company currently does not meet the SFAS 109 "more likely than not" criteria
required to recognize the United States tax benefits. In addition, there
currently is not a tax strategy which would result in the realization of the
Australian tax benefit. The remaining $42.9 million principally is comprised of
future Chilean tax benefits, United States foreign tax credit carry-forwards and
future alternative minimum tax credits that the Company projects it will be
unable to realize.

Major items causing the Company's income tax provision to differ from the
federal statutory rate of 35% were as follows:

<TABLE>
<CAPTION>
1997 1996 1995
-------- -------- -------
<S> <C> <C> <C>
Income tax (credit) based on statutory rate................. $(58,748) $ 25,089 $29,913
Percentage depletion........................................ (900) (7,611) (9,879)
Earnings in foreign jurisdictions at different rates........ 559 (1,899) (1,019)
State income taxes, net of federal benefit.................. 1,219 333 340
Australian investment allowance............................. (125) (2,097)
Unrealized minimum tax credits.............................. 21,201 5,645 4,790
Reduction of prior year accruals............................ (24,048)
Other nondeductible losses.................................. 16,784 13,340 6,231
Deferred tax assets not recognized in prior years........... (2,504) (1,262)
Foreign taxes withheld...................................... 465 1,430 1,965
Litigation recovery......................................... (2,629)
Other -- net................................................ 357 2,052 435
-------- -------- -------
Total income taxes.......................................... (19,188) 9,198 29,417
Canadian mining taxes....................................... 9,977 17,135 9,724
-------- -------- -------
Total income and mining taxes..................... $ (9,211) $ 26,333 $39,141
======== ======== =======
</TABLE>

The Company's 1996 income tax expense includes a $24 million benefit
relating to a reduction of prior years' income tax accruals for certain
contingencies which were resolved in 1996 and a $2.6 million benefit relating to
the tax portion of litigation recovery proceeds.

Deferred tax assets not recognized in prior years include reversals of
prior year valuation allowances of $2.5 million in 1996 and $1.3 million in
1995.

C-22
<PAGE> 240
HOMESTAKE MINING COMPANY AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(UNLESS OTHERWISE NOTED, ALL TABULAR AMOUNTS ARE IN THOUSANDS)

NOTE 8: RECEIVABLES

<TABLE>
<CAPTION>
DECEMBER 31,
-----------------
1997 1996
------- -------
<S> <C> <C>
Trade accounts............................................. $23,180 $24,485
U.S. Government receivable (see note 20)................... 5,500 5,500
Interest and other......................................... 11,686 17,665
------- -------
$40,366 $47,650
======= =======
</TABLE>

NOTE 9: INVENTORIES

<TABLE>
<CAPTION>
DECEMBER 31,
-----------------
1997 1996
------- -------
<S> <C> <C>
Finished products.......................................... $15,546 $21,132
Ore and in-process......................................... 25,881 39,980
Supplies................................................... 27,831 30,015
------- -------
$69,258 $91,127
======= =======
</TABLE>

At December 31, 1997 and 1996, the cost of certain finished gold
inventories in the United States stated on the LIFO cost basis totaled $5.5
million and $2.1 million, respectively. Such inventories would have approximated
$6.2 million and $3.7 million, respectively, if stated at the lower of market or
current year average production costs.

At December 31, 1997 and 1996, ore stockpiles in the amounts of $14.5
million and $10.9 million, respectively, not expected to be processed within the
12 months following the end of each year are included in other noncurrent assets
(see note 12).

NOTE 10: PROPERTY, PLANT AND EQUIPMENT

<TABLE>
<CAPTION>
DECEMBER 31,
------------------------
1997 1996
----------- ----------
<S> <C> <C>
Mining properties and development costs.............. $ 952,040 $1,013,309
Plant and equipment.................................. 981,229 932,826
Land and royalty interests........................... 4,325 3,905
Construction and mine development in progress........ 21,628 20,260
----------- ----------
1,959,222 1,970,300
Accumulated depreciation, depletion and
amortization....................................... (1,147,176) (963,270)
----------- ----------
$ 812,046 $1,007,030
=========== ==========
</TABLE>

At September 30, 1997 the Company wrote down the carrying value of its
16.7% undivided interest in the Main Pass 299 sulfur mine and the carrying
values of certain short-lived mining properties (see note 6).

NOTE 11: NONCURRENT INVESTMENTS

<TABLE>
<CAPTION>
1997 1996
------- -------
<S> <C> <C>
Navan Resources plc (note 6)............................... $ 6,685 $16,800
Navan Bulgarian Mining BV.................................. 12,000
Other investments (note 6)................................. 13,636 22,806
------- -------
$32,321 $39,606
======= =======
</TABLE>

C-23
<PAGE> 241
HOMESTAKE MINING COMPANY AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(UNLESS OTHERWISE NOTED, ALL TABULAR AMOUNTS ARE IN THOUSANDS)

In 1995, Homestake acquired for $24 million a 10% interest in Navan
Resources plc ("Navan"), an Irish public company with diverse mineral interests
in Europe. At December 31, 1996 Homestake reduced the carrying value of its
investment in Navan to the quoted market value. The resulting charge of $7.2
million was recorded in income. During 1997, Homestake recorded in income
additional write-downs of $10.1 million with respect to the carrying value of
the investment in Navan.

In November 1997, Homestake purchased a 20% interest in Navan Bulgarian
Mining BV ("Navan BV"), a wholly-owned subsidiary of Navan, for $12 million.
Navan BV is a Netherlands company, which in turn owns 68% of Bimak AD, a
Bulgarian company that owns and operates the surface facilities at the Chelopech
copper-gold mine near Sofia, Bulgaria. The other 32% of Bimak is owned by
Chelopech EAD ("Chelopech"), a government-owned corporation that owns and
operates the Chelopech mine. Bimak AD provides consulting services to Chelopech
and purchases the ore from the Chelopech mine at cost plus a 1% gross royalty.
Homestake has agreed, under certain circumstances, to invest an additional $18
million in Navan BV, which would result in Homestake owning 51% of Navan BV, and
give Homestake the right to become operator of the project. The investment of
the additional $18 million is dependent on certain conditions including Navan BV
acquiring at least 80% of Chelopech, securing the Chelopech mine concession,
approval by Homestake and Navan of an expansion plan for the mine and mill, and
receipt of financial commitments from lenders for additional funding for the
expansion plan.

NOTE 12: OTHER ASSETS

<TABLE>
<CAPTION>
DECEMBER 31,
-----------------
1997 1996
------- -------
<S> <C> <C>
Assets held in trust (see note 16)......................... $38,975 $25,252
Restricted cash (see note 14).............................. 15,990
Ore stockpiles (see note 9)................................ 14,508 10,946
U.S. Government receivable (see note 20)................... 5,362 10,663
Other...................................................... 9,557 9,263
------- -------
$84,392 $56,124
======= =======
</TABLE>

NOTE 13: ACCRUED LIABILITIES

<TABLE>
<CAPTION>
DECEMBER 31,
-----------------
1997 1996
------- -------
<S> <C> <C>
Accrued payroll and other compensation..................... $21,848 $23,085
Accrued reclamation and closure costs...................... 11,818 10,055
Unrealized loss on foreign currency exchange contracts..... 20,416
Other...................................................... 10,704 9,034
------- -------
$64,786.. $42,174
======= =======
</TABLE>

C-24
<PAGE> 242
HOMESTAKE MINING COMPANY AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(UNLESS OTHERWISE NOTED, ALL TABULAR AMOUNTS ARE IN THOUSANDS)

NOTE 14: LONG-TERM DEBT

<TABLE>
<CAPTION>
DECEMBER 31,
-------------------
1997 1996
-------- --------
<S> <C> <C>
Convertible subordinated notes (due 2000)................ $150,000 $150,000
Pollution control bonds
Lawrence County, South Dakota (due 2032)............... 48,000
Lawrence County, South Dakota (due 2003)............... 18,000
State of California (due 2004)......................... 17,000 17,000
Borrowings under credit agreement (due 2001)............. 48,855
-------- --------
$263,855 $185,000
======== ========
</TABLE>

CONVERTIBLE SUBORDINATED NOTES: The Company's 5.5% convertible subordinated
notes, which mature on June 23, 2000, are convertible into common shares at a
price of $23.06 per common share and are redeemable by the Company in whole at
any time. Interest on the notes is payable semi-annually in June and December.
Issuance costs of $3.9 million were capitalized and are being amortized over the
life of the notes.

POLLUTION CONTROL BONDS: In July 1997, Lawrence County, South Dakota issued
$30 million of South Dakota Solid Waste Disposal Revenue Bonds ("Waste Disposal
Bonds") and $18 million of South Dakota Pollution Control Refunding Revenue
Bonds ("Pollution Control Bonds"), both of which are due in 2032. Proceeds from
the Waste Disposal Bonds were lent to the Company and proceeds from the
Pollution Control Bonds were used to redeem outstanding South Dakota pollution
control bonds. The Company is responsible for funding principal and interest
payments on these bonds. Proceeds from the Waste Disposal Bonds are being used
for construction of a new tailings dam lift and other qualifying expenditures at
the Homestake mine. Qualifying expenditures of $14 million had been incurred
through December 31, 1997. The remaining $16 million, which is held in a trustee
account, is included in "other assets" in the accompanying balance sheet at
December 31, 1997.

The Company pays interest monthly on the pollution control bonds based on
variable short-term, tax-exempt obligation rates. Interest rates at December 31,
1997 and 1996 were 4.6% and 4.3%, respectively. No principal payments are
required until cancellation, redemption or maturity. Bondholders have the right
to tender the bonds for payment at any time on seven days notice. The Company
has arrangements with underwriters to remarket any tendered bonds and also with
a bank to provide liquidity and credit support to the Company and to purchase
and hold for up to 15 months any tendered bonds that the underwriters are unable
to remarket.

LINES OF CREDIT: The Company has a United States/Canadian/Australian
cross-border credit facility providing a total availability of $275 million. The
Company pays a commitment fee of .15% per annum on the unused portion of this
facility. The credit facility is available through September 20, 2001 and
provides for borrowings in United States, Canadian or Australian dollars, or
gold or a combination of these. The credit agreement requires a minimum
consolidated net worth of $500 million. During 1997 HGAL borrowed A$75 million
(equal to US$48.9 million at the December 31, 1997 exchange rate) under the
credit agreement primarily for the repayment of intercompany debt. Interest on
these Australian dollar borrowings are payable quarterly or semiannually,
depending on the interest rate period as determined on each borrowing date,
based on the Australian Bank Bill Swap Rate plus .4%. The interest rate at
December 31, 1997 was 5.25%.

In addition, Prime has an $11 million credit facility. No amount has been
borrowed under this credit agreement.

C-25
<PAGE> 243
HOMESTAKE MINING COMPANY AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(UNLESS OTHERWISE NOTED, ALL TABULAR AMOUNTS ARE IN THOUSANDS)

NOTE 15: OTHER LONG-TERM OBLIGATIONS

<TABLE>
<CAPTION>
DECEMBER 31,
--------------------
1997 1996
-------- --------
<S> <C> <C>
Accrued reclamation and closure costs.................. $ 71,178 $ 45,388
Accrued pension and other postretirement benefit
obligations (see note 16)............................ 60,942 59,273
Other.................................................. 10,262 9,507
-------- --------
$142,382 $114,168
======== ========
</TABLE>

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 for operating properties, plus previously
accrued reclamation and remediation liabilities for nonoperating properties,
will be approximately $160 million. This figure includes approximately $9
million of reclamation costs at the Grants uranium facility which will be funded
by the United States Federal Government. At December 31, 1997 the Company had
accrued $83 million for estimated ultimate reclamation and site restoration
costs and remediation liabilities (see notes 13 and 20).

NOTE 16: EMPLOYEE BENEFIT PLANS

PENSION PLANS: The Company has pension plans covering substantially all
United States employees. Plans covering salaried and other nonunion employees
provide pension benefits based on years of service and the employee's highest
compensation during any 60 consecutive months prior to retirement. Plans
covering union employees provide defined benefits for each year of service.

Pension costs for 1997, 1996 and 1995 for Company-sponsored United States
employee plans included the following components:

<TABLE>
<CAPTION>
1997 1996 1995
-------- -------- --------
<S> <C> <C> <C>
Service cost -- benefits earned during the
year..................................... $ 4,308 $ 4,519 $ 3,573
Interest cost on projected benefit
obligations.............................. 15,958 15,319 14,476
Actual net return on assets................ (43,955) (34,693) (44,788)
Net amortization........................... 26,523 20,696 32,405
Pension curtailment gain................... (1,868)
-------- -------- --------
$ 2,834 $ 3,973 $ 5,666
======== ======== ========
</TABLE>

Assumptions used in determining net periodic pension cost for 1997, 1996
and 1995 include discount rates of 7%, 7%, and 8%, respectively, an assumed rate
of increase in compensation of 5% for each year and an assumed long-term rate of
return on assets of 8.5% for each year. Assumptions used in determining the
projected benefit obligations at December 31, 1997 and 1996 include discount
rates of 7% and an assumed rate of increase in compensation of 5%.

C-26
<PAGE> 244
HOMESTAKE MINING COMPANY AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(UNLESS OTHERWISE NOTED, ALL TABULAR AMOUNTS ARE IN THOUSANDS)

The funded status and amounts recognized for pension plans in the
consolidated balance sheets are as follows:

<TABLE>
<CAPTION>
DECEMBER 31, 1997 DECEMBER 31, 1996
PLANS WHERE PLANS WHERE
--------------------------- ---------------------------
ACCUMULATED ACCUMULATED
ASSETS EXCEED BENEFITS ASSETS EXCEED BENEFITS
ACCUMULATED EXCEED ACCUMULATED EXCEED
BENEFITS ASSETS BENEFITS ASSETS
------------- ----------- ------------- -----------
<S> <C> <C> <C> <C>
Actuarial present value of benefit obligations
Vested benefits.............................. $(165,437) $(15,122) $(162,100) $(17,700)
========= ======== ========= ========
Accumulated benefits......................... $(186,583) $(20,035) $(180,800) $(18,900)
========= ======== ========= ========
Projected benefits........................... $(210,156) $(27,195) $(202,200) $(21,000)
Plan assets at fair value(1)................... 257,147 224,064
--------- -------- --------- --------
Plan assets in excess of (less than) projected
benefit obligation........................... 46,991 (27,195) 21,864 (21,000)
Unrecognized net loss (gain)................... (45,960) (1,666) (22,467) 51
Unrecognized net transition obligation (asset)
amortized over 15 years...................... (2,810) 365 (3,364) 547
Unrecognized prior service cost (benefit)...... (398) 8,020 141 2,459
Additional minimum liability................... (251) (957)
--------- -------- --------- --------
Pension liability recognized in the
consolidated balance sheets.................. $ (2,177) $(20,727) $ (3,826) $(18,900)
========= ======== ========= ========
</TABLE>

- ---------------

(1) Approximately 99% and 98% of the plan assets were invested in listed stocks
and bonds and the balance was invested in fixed-rate insurance contracts at
December 31, 1997 and 1996, respectively.

Amounts shown under "plans where accumulated benefits exceed assets" at
December 31, 1997 and 1996 consist of liabilities for a nonqualified
supplemental pension plan covering certain employees and a nonqualified pension
plan covering directors of the Company. These plans are unfunded. The Company
has established a grantor trust, consisting of money market funds, mutual funds
and corporate-owned life insurance policies, to provide funding for the benefits
payable under these nonqualified plans and certain other deferred compensation
plans. The grantor trust, which is included in other assets, amounted to $39.0
million at December 31, 1997 and $25.3 million at December 31, 1996.

Certain of the Company's foreign operations participate in pension plans.
The Company's share of contributions to these plans was $1.5 million in 1997,
$1.4 million in 1996, and $1.1 million in 1995.

POSTRETIREMENT BENEFITS OTHER THAN PENSIONS: The Company provides medical
and life insurance benefits for certain retired employees, primarily retirees of
the Homestake mine. Retirees generally are eligible for benefits upon retirement
if they are at least age 55 and have completed five years of service. Net
periodic postretirement benefit costs were $2.6 million in 1997, $3.1 million in
1996 and $3.5 million in 1995.

The actuarial assumptions used in determining net periodic postretirement
benefit costs include discount rates of 7% for 1997 and 1996 and 8% for 1995,
initial health care trend rates of 9.5% for 1997, 10% for 1996 and 11.5% for
1995, grading down to an ultimate health care cost trend rate of 5%. The
ultimate trend rate is expected to be achieved by 2006. Actuarial gains and
losses are amortized over five years. The actuarial assumptions used in
determining the Company's accumulated postretirement benefit obligation at
December 31, 1997 and 1996 include a discount rate of 7%. A one percentage-point
increase in the assumed health care cost trend rate would result in an increase
of approximately $5.6 million in the accumulated

C-27
<PAGE> 245
HOMESTAKE MINING COMPANY AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(UNLESS OTHERWISE NOTED, ALL TABULAR AMOUNTS ARE IN THOUSANDS)

postretirement benefit obligation at December 31, 1997 and an increase of
approximately $.6 million in net periodic postretirement benefit costs for 1997.

The following table sets forth amounts recorded in the Company's
consolidated balance sheets at December 31, 1997 and 1996. The Company has not
funded any of its estimated future obligation.

<TABLE>
<CAPTION>
DECEMBER 31,
--------------------
1997 1996
-------- --------
<S> <C> <C>
Accumulated postretirement benefit obligation
Retirees............................................. $(27,000) $(29,000)
Fully-eligible active plan participants.............. (1,000) (1,000)
Other active plan participants....................... (9,000) (7,000)
-------- --------
(37,000) (37,000)
Unrecognized net gain.................................. (4,995) (4,364)
Unrecognized prior service cost........................ 557 617
-------- --------
Accumulated postretirement benefit obligation liability
recognized in the consolidated balance sheets........ $(41,438) $(40,747)
======== ========
</TABLE>

STOCK OPTION AND SHARE RIGHTS PLAN: The Company's 1996 Stock Option and
Share Rights Plan ("1996 Plan") provides for grants of up to 6 million common
shares. At December 31, 1997, stock options and share rights for 1.0 million
shares were outstanding under the 1996 Plan and stock options for 2.5 million
shares were outstanding under prior plans. The exercise price of each stock
option granted under these plans is equal to the market price of the Company's
stock on the date of grant and an option's maximum term is ten years. Options
usually vest over a four-year period.

A summary of the status of the Company's stock options as of December 31,
1997, 1996 and 1995 and changes during the years ending on those dates is
presented below:

<TABLE>
<CAPTION>
1997 1996 1995
------------------ ------------------ ------------------
NUMBER AVERAGE NUMBER AVERAGE NUMBER AVERAGE
OF PRICE PER OF PRICE PER OF PRICE PER
SHARES SHARE SHARES SHARE SHARES SHARE
------ --------- ------ --------- ------ ---------
<S> <C> <C> <C> <C> <C> <C>
Balance at January 1........................ 2,603 2,309 2,301
Granted................................... 794 $15.11 466 $19.19 361 $15.58
Exercised................................. (63) 13.99 (168) 19.71 (206) 13.90
Expired................................... (46) 32.27 (4) 19.38 (147) 16.92
----- ----- -----
Balance at December 31...................... 3,288 2,603 2,309
===== ===== =====
Options exercisable at December 31.......... 2,041 1,854 1,500
Fair value of options granted during the
year...................................... $ 4.95 $ 5.84 $ 5.06
</TABLE>

The fair value of each stock option is estimated on the date of grant using
a Black-Scholes option-pricing model with the following weighted-average
assumptions: an expected life of 1.7, 1.8 and 1.8 years from the vest date (with
incremental vesting over four years) for 1997, 1996 and 1995, respectively,
expected volatility of 30.9%, 31.7% and 33.3% for 1997, 1996 and 1995,
respectively, a dividend yield of 1%, 1% and 1.3% for 1997, 1996 and 1995,
respectively, and a risk-free interest rate of 6.6%, 5.4% and 6.9% in 1997, 1996
and 1995, respectively.

C-28
<PAGE> 246
HOMESTAKE MINING COMPANY AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(UNLESS OTHERWISE NOTED, ALL TABULAR AMOUNTS ARE IN THOUSANDS)

The following table summarizes information about stock options
outstanding at December 31, 1997:

<TABLE>
<CAPTION>
OPTIONS OUTSTANDING OPTIONS EXERCISABLE
------------------------------------------------- ------------------------------
RANGE OF WEIGHTED-AVERAGE WEIGHTED-AVERAGE WEIGHTED-AVERAGE
EXERCISE PRICES NUMBER REMAINING EXERCISE PRICE NUMBER EXERCISE PRICE
PER SHARE OUTSTANDING CONTRACTUAL LIFE PER SHARE EXERCISABLE PER SHARE
- ---------------- ----------- ---------------- ---------------- ----------- ----------------
<S> <C> <C> <C> <C> <C>
$12.18 to $15.23 1,315 7.2 years $14.19 548 $12.94
15.38 to 19.13 1,392 6.0 years 17.16 956 16.81
19.70 to 39.79 581 3.1 years 27.36 537 27.92
----- -----
3,288 2,041
===== =====
</TABLE>

At December 31, 1997, there were .2 million share rights (1996:nil)
outstanding under the 1996 plan. Share rights are converted into common stock
when certain performance measurement or vesting criteria are met.

An additional 5 million and 6 million shares were available for future
grants at December 31, 1997 and 1996, respectively.

The Company elected to use the pro forma disclosure provisions of SFAS 123,
"Accounting for Stock-Based Compensation," and has applied Accounting Principles
Board Opinion 25 and related Interpretations in accounting for its stock
options. Accordingly, no compensation cost has been recognized for the Company's
stock options. The compensation cost for share rights is being recognized based
on the fair value of the Company's stock over the period that the performance
measurement and vesting criteria are estimated to be met. Had compensation
expense for the Company's stock options been determined based on the fair value
of options at the grant dates as calculated in accordance with SFAS 123, the
Company's net income and earnings per share for the years ended December 31,
1997 and 1996 would have been as follows:

<TABLE>
<CAPTION>
1997 1996 1995
--------------------- ---------------------- ----------------------
LOSS EARNINGS EARNINGS
NET LOSS PER SHARE NET INCOME PER SHARE NET INCOME PER SHARE
--------- --------- ---------- --------- ---------- ---------
<S> <C> <C> <C> <C> <C> <C>
As reported................ $(168,879) $(1.15) $30,281 $0.21 $30,327 $0.22
Pro forma.................. (170,830) (1.16) 28,913 0.20 29,773 0.22
</TABLE>

During the initial phase-in period of SFAS 123, disclosures are not likely
to be representative of the pro forma effects on reported net income for future
years, as the disclosures only include the pro forma effects of options granted
on or after January 1, 1995.

OTHER PLANS: Substantially all full-time United States employees of the
Company are eligible to participate in the Company's defined contribution
savings plans. The Company's matching contribution was approximately $2.6
million in 1997, $2.2 million in 1996 and $1.6 million in 1995.

NOTE 17: FAIR VALUE OF FINANCIAL INSTRUMENTS

At December 31, 1997 and 1996 the carrying values of the Company's cash and
equivalents and short-term investments, noncurrent investments, long-term debt
and foreign currency options approximated their estimated fair values. The
estimated total liquidation value at December 31, 1997 of the gold forward sales
contracts and the gold put and call option contracts held by the Company at that
date is approximately $80 million. No amounts are included in the accompanying
balance sheet at December 31, 1997 for these contracts (see note 21).

C-29
<PAGE> 247
HOMESTAKE MINING COMPANY AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(UNLESS OTHERWISE NOTED, ALL TABULAR AMOUNTS ARE IN THOUSANDS)

NOTE 18: SHAREHOLDERS' EQUITY

Other equity includes deductions of $1.4 million and $3.5 million at
December 31, 1997 and 1996, respectively, for loans made to certain former HCI
employees and directors for the purchase of HCI common shares. The loans are
non-interest bearing, are collateralized by a pledge of shares, and are not
required to be paid until the securities purchased are equal to or greater than
the value of the respective loans.

In September 1997, the Company's Board of Directors extended the term of
the Rights Agreement until October 2007 and amended certain terms of the Rights
Agreement. A summary of the amended Rights Agreement is as follows:

Each share of common stock includes and trades with a right. Rights are not
exercisable currently. Rights will become exercisable on a date designated by
the Board of Directors following the commencement of, or announcement of an
intent to commence, a tender offer by any person, entity or group for 15% or
more of the Company's common stock. When so exercisable, each right initially
entitles the owner to purchase from the Company one one-hundredth of a share of
Series A Participating Preferred Stock, par value $1 per share, at a price of
$75 per share (the "Purchase Price"). In addition, if any person, entity or
group (an "Acquiring Person") acquires 15% or more of the Company's common
stock, each right (whether or not previously exercisable) thereafter entitles
the owner (other than an Acquiring Person or its affiliates and associates) to
purchase for the Purchase Price the number of one one-hundredth of a share of
Series A Preferred Stock equal to the Purchase Price divided by one-half of the
market price of the Company's common stock. In lieu of the rights holder
exercising such right, the Board of Directors has the option to issue, in
exchange for each right, one-half of the number of shares of preferred stock (or
common stock having a value equal to the Purchase Price) that would be issuable
on exercise of the right. If the Board of Directors has not exchanged shares for
the rights and the Company engages in a business combination with an Acquiring
Person (or affiliate or associate thereof), the holder of rights will be
entitled to purchase for the Purchase Price (i) common stock of the surviving
company or its publicly held affiliate having a market value equal to twice the
Purchase Price, or (ii) common stock of the surviving company having a book
value equal to twice the Purchase Price if the surviving company and its
affiliates are not publicly held. The numbers of shares and the Purchase Price
are subject to adjustment for stock dividends, stock splits and other changes in
capitalization. The rights expire on October 15, 2007.

NOTE 19: ADDITIONAL CASH FLOW INFORMATION

Cash paid for interest and for income and mining taxes is as follows:

<TABLE>
<CAPTION>
1997 1996 1995
------- ------- -------
<S> <C> <C> <C>
Interest, net of amounts capitalized.......... $10,848 $10,643 $11,292
Income and mining taxes....................... 66,227 17,163 22,650
</TABLE>

Certain investing and financing activities of the Company affected its
financial position but did not affect its cash flows. During the 1995 fourth
quarter and the 1996 first quarter, the Company issued 2.6 million common shares
and 6 million common shares valued at $42.4 million and $99.3 million,
respectively, as part of the purchase consideration in the acquisition of the
HGAL minority interests (see note 3).

NOTE 20: CONTINGENCIES

ENVIRONMENTAL CONTINGENCIES

The Comprehensive Environmental Response, Compensation and Liability Act
("CERCLA") imposes heavy liabilities on persons who discharge hazardous
substances. The Environmental Protection Agency ("EPA") publishes a National
Priorities List ("NPL") of known or threatened releases of such substances.

C-30
<PAGE> 248
HOMESTAKE MINING COMPANY AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(UNLESS OTHERWISE NOTED, ALL TABULAR AMOUNTS ARE IN THOUSANDS)

GRANTS: Homestake's former uranium millsite near Grants, New Mexico is
listed on the NPL. The EPA asserted that leachate from the tailings contaminated
a shallow aquifer used by adjacent residential subdivisions. Homestake paid the
costs of extending the municipal water supply to the affected homes and
continues to operate a water injection and collection system that has
significantly improved the quality of the aquifer. The Company has
decommissioned and disposed of the mills and has covered the tailings
impoundments at the site. The total future cost for reclamation, remediation,
monitoring and maintaining compliance at the Grants site is estimated to be
$17.5 million.

Title X of the Energy Policy Act of 1992 (the "Act") and subsequent
amendments to the Act authorized appropriations of $335 million to cover the
Federal Government's share of certain costs of reclamation, decommissioning and
remedial action for by-product 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 DOE is
responsible for 51.2% of past and future costs of reclaiming the Grants site in
accordance with Nuclear Regulatory Commission license requirements. Through
December 31, 1997, Homestake had received $21 million from the DOE and the
accompanying balance sheet at December 31, 1997 includes an additional
receivable of $10.9 million (see notes 8 and 12) for the DOE's share of
reclamation expenditures made by Homestake through 1997. Homestake believes that
its share of the estimated remaining cost of reclaiming the Grants facility is
fully provided in the financial statements at December 31, 1997.

In 1983, the state of New Mexico made a claim against Homestake for
unspecified natural resource damages resulting from the Grants tailings. New
Mexico has taken no action to enforce its claim.

WHITEWOOD CREEK: Whitewood Creek was a site where mining companies
operating in the Black Hills of South Dakota, including Homestake, placed mine
tailings (ground rock) beginning in the nineteenth century. Some tailings placed
in Whitewood Creek eventually flowed into the Belle Fourche River, the Cheyenne
River and Lake Oahe. Placement of mine tailings into Whitewood Creek was
authorized by the laws of the United States, the Dakota territory and the State
of South Dakota, and Whitewood Creek was later specifically designated by the
State of South Dakota as a disposal stream for mine tailings and for the
disposal of raw sewage and other municipal waste. In response to changes in
legal requirements, Homestake ceased the placement of mine tailings into
Whitewood Creek and for many years the Homestake mine has impounded all mine
tailings that are not redeposited in the mine.

Deposits of tailings along an 18-mile stretch of Whitewood Creek formerly
constituted a site on the NPL. The EPA asserted that discharges of tailings by
mining companies, including Homestake, contaminated the soil and streambed.
Homestake signed a Consent Decree with the EPA and carried out remedial work.
The site was deleted from the NPL on August 13, 1996. In the deletion notice,
the EPA stated that "EPA, in consultation with the State of South Dakota, have
determined that the Site poses no significant threat to public health or the
environment."

In September, 1997 the State of South Dakota filed an action against
Homestake, alleging that Homestake's disposal of mine tailings in Whitewood
Creek resulted in injuries to natural resources in Whitewood Creek, the Belle
Fourche River, the Cheyenne River and Lake Oahe (collectively the "NRD Site").
The complaint also alleges that the tailings constitute a continuing public
nuisance. The complaint asks for abatement of the nuisance, response costs,
damages in an unspecified amounts, litigation costs and interest. In November
1997, the United States government and the Cheyenne River Sioux Tribe (the
"federal trustees") filed a similar action alleging injuries to natural resource
and seeking response costs, damages in unspecified amounts, litigation costs and
attorneys fees.

In its answers, Homestake denies that there has been any continuing damage
to natural resources or nuisance as a result of the placement of tailings in
Whitewood Creek. Among other defenses, it is also the

C-31
<PAGE> 249
HOMESTAKE MINING COMPANY AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(UNLESS OTHERWISE NOTED, ALL TABULAR AMOUNTS ARE IN THOUSANDS)

position of Homestake that as a result of the State of South Dakota's ownership
of Whitewood Creek and state and federal designation of Whitewood Creek as an
authorized disposal site, the State of South Dakota and the federal government
are responsible for all past and future damages. Homestake has also
counterclaimed against the State of South Dakota and the federal trustees
seeking cost recoupment, contribution and indemnity.

Homestake intends to vigorously defend this action and to seek recovery,
contribution and indemnity from the State of South Dakota and the federal
trustees for past and future expenditures. Homestake also expects to seek
recovery, contribution and indemnity from other government entities and other
persons who participated in ownership and/or operation of Whitewood Creek as a
waste disposal site or who disposed of waste in the NRD Site.

In the opinion of Homestake, there is no basis for the claims by the State
of South Dakota or by the federal trustees. Homestake is also of the opinion
that Homestake has valid defenses and counterclaims against the State of South
Dakota and the federal trustees, and cross-claims for recovery, contribution and
indemnity against other government entities and other persons who participated
in ownership and/or operation of Whitewood Creek as a waste disposal site or who
disposed of waste in the NRD Site. Homestake does not believe that resolution of
these matters will have a material effect on the business or financial condition
or results of operations of Homestake.

OTHER CONTINGENCIES

In addition to the above, the Company is party to legal actions and
administrative proceedings and is subject to claims arising in the ordinary
course of business. The Company believes the disposition of these matters will
not have a material adverse effect on its financial position or results of
operations.

NOTE 21: FOREIGN CURRENCY, GOLD AND OTHER COMMITMENTS

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. Net unrealized
gains (losses) on contracts outstanding at December 31, 1997 and 1996 were
$(20.4) million and $.3 million, respectively. Other income for the years ended
December 31, 1997, 1996 and 1995 included income (losses) of $(28.5) million,
$1.6 million, and $(.2) million, respectively, related to the foreign currency
protection program. At December 31, 1997 the Company had foreign currency
contracts outstanding as follows:

<TABLE>
<CAPTION>
WEIGHTED-AVERAGE EXCHANGE
RATES TO U.S. DOLLARS
AMOUNT COVERED EXPIRATION
CURRENCY (U.S. DOLLARS) PUT OPTIONS CALL OPTIONS DATES
-------- -------------- ----------- ------------ ----------
<S> <C> <C> <C> <C>
Canadian $196,040 0.72 0.76 1998
Canadian 67,440 0.71 0.74 1999
Canadian 50,770 0.70 0.73 2000
Australian 104,750 0.74 0.77 1998
Australian 61,600 0.68 0.72 1999
Australian 3,000 0.65 0.68 2000
--------
$483,600
========
</TABLE>

In addition to amounts related to the foreign currency option contracts,
the Company recorded mark-to-market foreign currency losses on intercompany debt
of $5.7 million in 1997, $8.9 million in 1996, and

C-32
<PAGE> 250
HOMESTAKE MINING COMPANY AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(UNLESS OTHERWISE NOTED, ALL TABULAR AMOUNTS ARE IN THOUSANDS)

$.9 million in 1995 which were included in other income. These foreign currency
exchange losses are related to the Company's Canadian and Australian dollar
denominated advances to HCI and HGAL.

In 1996, the Company entered into forward sales commitments for 680,100
ounces expected to be produced from the McLaughlin mine stockpiles from 1997
through 2003. In addition, during the second quarter of 1997 the Company entered
into forward sales commitments for 20,000 ounces of gold to be produced in 2001
and 2002. Gold sales for 1997 include 120,100 ounces at an average price of $385
per ounce. Gold sales for 1996 and 1995 included 70,000 ounces and 88,800 ounces
sold under the now-completed Nickel Plate mine program at an average price of
$421 per ounce and $398 per ounce, respectively.

At December 31, 1997 the Company's forward sales commitments were as
follows:

<TABLE>
<CAPTION>
AVERAGE PRICE OF
FORWARD SALES FORWARD SALES
YEAR (OUNCES) (PER OUNCE)
---- ------------- ----------------
<S> <C> <C>
1998..................................... 120,000 $399
1999..................................... 109,900 415
2000..................................... 85,100 430
2001..................................... 95,000 441
2002..................................... 95,000 457
2003..................................... 75,000 481
-------
580,000
=======
</TABLE>

To provide protection against a decrease in gold prices, during the third
quarter of 1997 the Company entered into a series of put and call option
contracts which provide a floor price of $325 per ounce for 900,000 ounces of
Homestake's 1998 gold production. The Company purchased put options for 900,000
ounces of gold exercisable during 1998 at a price of $325 per ounce. The Company
also sold call options for 900,000 ounces of gold exercisable during 1998 at a
price of $325 per ounce and purchased call options for 900,000 ounces of gold
exercisable during 1998 at $336 per ounce. These option contracts were
established at no net cost to the Company.

The Company also purchased put options for 30,000 ounces of gold
exercisable during 2000 at a price of $350 per ounce and sold call options for
15,000 ounces of gold exercisable during 2000 at an average price of $395 per
ounce.

The Company does not require or place collateral for its foreign currency
and gold hedging derivatives. However, the Company minimizes its credit risk by
dealing with only major international banks and financial institutions.

The Company has entered into various commitments during the ordinary course
of its business, which include commitments to perform assessment work and other
obligations necessary to maintain or protect its interests in mining properties,
financing and other obligations to joint ventures and partners under venture and
partnership agreements, and commitments under federal and state environmental
health and safety permits.

NOTE 22: GEOGRAPHIC AND SEGMENT INFORMATION

The Company primarily is engaged in gold mining and related activities.
Interests in joint ventures are included in segment operations and identifiable
assets. Operating earnings, which are defined as operating revenues less
operating costs and exploration expenses, exclude corporate income and expenses,
and income and mining taxes. Identifiable assets represent those assets used in
a segment's operations. Corporate assets are principally cash and equivalents,
short-term investments and assets related to operations not significant enough
to require classification as a business segment.

C-33
<PAGE> 251
HOMESTAKE MINING COMPANY AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(UNLESS OTHERWISE NOTED, ALL TABULAR AMOUNTS ARE IN THOUSANDS)

GEOGRAPHIC INFORMATION

<TABLE>
<CAPTION>
1997 1996 1995
---------- ---------- ----------
<S> <C> <C> <C>
REVENUES
United States(1)(2).................................. $ 330,698 $ 310,881 $ 349,461
Canada(3)............................................ 261,167 304,530 264,548
Australia............................................ 120,787 147,241 120,898
Latin America........................................ 11,182 4,284 11,458
---------- ---------- ----------
$ 723,834 $ 766,936 $ 746,365
========== ========== ==========
EXPLORATION EXPENSE
United States........................................ $ 13,902 $ 11,861 $ 12,750
Canada............................................... 8,406 9,751 2,797
Australia............................................ 8,750 7,863 4,745
Latin America and other.............................. 17,307 15,907 7,249
---------- ---------- ----------
$ 48,365 $ 45,382 $ 27,541
========== ========== ==========
OPERATING EARNINGS (LOSS)
United States(4)..................................... $ (144,105) $ 23,124 $ 32,623
Canada(3)............................................ 82,186 103,640 86,662
Australia(5)......................................... (10,473) 1,914 4,516
Latin America and other.............................. (16,523) (14,606) (6,544)
---------- ---------- ----------
$ (88,915) $ 114,072 $ 117,257
========== ========== ==========
IDENTIFIABLE ASSETS AS OF DECEMBER 31
United States........................................ $ 507,845 $ 522,565 $ 618,267
Canada............................................... 427,388 494,083 432,087
Australia............................................ 353,885 451,973 264,238
Latin America and other.............................. 15,611 13,487 7,041
---------- ---------- ----------
$1,304,729 $1,482,108 $1,321,633
========== ========== ==========
</TABLE>

- ---------------

(1) Includes a gain of $62.9 million in 1997 on the fee received upon
termination of Homestake's merger agreement with Santa Fe Pacific Gold
Corporation.

(2) Includes foreign currency exchange losses of $5.7 million in 1997 and $8.9
million in 1996 related to the Company's Canadian and Australian dollar
denominated advances to HCI and HGAL.

(3) Includes a gain of $13.5 million in 1997 on the sale of the George Lake and
Back River joint venture interests in the Northwest Territories of Canada.

(4) Includes write-downs in 1997 of $107.8 million on Homestake's investment in
the Main Pass 299 sulfur mine and $20.8 million in the carrying values of
short-lived mining properties.

(5) Includes write-downs in 1997 of $6.1 million in the carrying values of
short-lived mining properties.

C-34
<PAGE> 252
HOMESTAKE MINING COMPANY AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(UNLESS OTHERWISE NOTED, ALL TABULAR AMOUNTS ARE IN THOUSANDS)

SEGMENT INFORMATION

<TABLE>
<CAPTION>
1997 1996 1995
---------- ---------- ----------
<S> <C> <C> <C>
REVENUES
Gold................................................. $ 633,093 $ 713,774 $ 677,377
Sulfur and oil....................................... 26,821 30,749 40,620
Interest and other(1)(2)(3).......................... 63,920 22,413 28,368
---------- ---------- ----------
$ 723,834 $ 766,936 $ 746,365
========== ========== ==========
OPERATING EARNINGS (LOSS)
Gold(3)(4)........................................... $ 22,472 $ 112,800 $ 111,564
Sulfur and oil(5).................................... (111,387) 1,272 5,693
---------- ---------- ----------
Operating earnings (loss)............................ (88,915) 114,072 117,257
Net corporate expense(2)(6)(7)....................... (78,934) (42,388) (31,791)
---------- ---------- ----------
INCOME (LOSS) BEFORE TAXES AND MINORITY INTEREST....... $ (167,849) $ 71,684 $ 85,466
========== ========== ==========
DEPRECIATION, DEPLETION AND AMORTIZATION
Gold................................................. $ 106,328 $ 105,020 $ 90,237
Sulfur and oil....................................... 5,013 6,302 8,055
Corporate............................................ 1,015 1,031 1,310
---------- ---------- ----------
$ 112,356 $ 112,353 $ 99,602
========== ========== ==========
EXPLORATION EXPENSE
Gold................................................. $ 48,365 $ 45,382 $ 27,541
========== ========== ==========
ADDITIONS TO PROPERTY, PLANT AND EQUIPMENT
Gold(8).............................................. $ 129,621 $ 262,235 $ 147,549
Sulfur and oil....................................... 1,181 1,541 1,604
Corporate............................................ 672 440 483
---------- ---------- ----------
$ 131,474 $ 264,216 $ 149,636
========== ========== ==========
IDENTIFIABLE ASSETS AS OF DECEMBER 31
Gold................................................. $ 976,590 $1,038,156 $ 870,512
Sulfur and oil....................................... 15,181 126,499 134,990
Corporate:
Cash and equivalents and short-term investments... 235,946 219,757 212,373
Other............................................. 77,012 97,696 103,758
---------- ---------- ----------
$1,304,729 $1,482,108 $1,321,633
========== ========== ==========
</TABLE>

- ---------------

(1) Includes a gain of $62.9 million in 1997 on the fee received upon
termination of Homestake's merger agreement with Santa Fe Pacific Gold
Corporation.

(2) Includes foreign currency exchange losses of $5.7 million in 1997 and $8.9
million in 1996 related to the Company's Canadian and Australian dollar
denominated advances to HCI and HGAL.

(3) Includes a gain of $13.5 million in 1997 on the sale of the George Lake and
Back River joint venture interests in the Northwest Territories of Canada.

(4) Includes write-downs in 1997 of $26.9 million in the carrying values of
short-lived mining properties.

(5) Includes a write-down in 1997 of $107.8 million on Homestake's investment in
the Main Pass 299 sulfur mine.

C-35
<PAGE> 253
HOMESTAKE MINING COMPANY AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(UNLESS OTHERWISE NOTED, ALL TABULAR AMOUNTS ARE IN THOUSANDS)

(6) Includes, in 1997, write-downs of $24.8 million in the carrying value of
investments in mining company securities, an increase of $29.1 million in
the accrual for estimated future reclamation expenditures, and $10.2 million
in other charges, primarily foreign exchange losses on intercompany
redeemable preferred stock and losses on an intercompany gold loan.

(7) Includes write-downs in 1996 of $9 million in the carrying value of
investments in mining company securities.

(8) Includes additions to property, plant and equipment of $35.6 million in 1996
related to the purchase of Cominco's 60% interest in the Snip mine and
additions of $122.6 million and $68.7 million in 1996 and 1995,
respectively, related to the acquisition of the 18.5% of HGAL the Company
did not already own (including deferred tax purchase adjustments of $32.5
million and $18.2 million, respectively).

In June 1997, the FASB issued SFAS 131, "Disclosures About Segments of an
Enterprise and Related Information." SFAS 131 specifies revised guidelines for
determining an entity's operating segments and the type and level of financial
information to be disclosed. SFAS 131 is effective for fiscal years beginning
after December 15, 1997. Adoption of SFAS 131 will not have a material impact on
Homestake's current geographic and segment disclosures.

Sales to individual customers exceeding 10% of the Company's consolidated
revenues were as follows:

<TABLE>
<CAPTION>
1997 1996 1995
-------- -------- --------
<S> <C> <C> <C>
Customer A..................................... $143,000 $117,000 $102,000
B.................................... 100,000 129,000 92,000
C.................................... 80,000
D.................................... 77,000
E.................................... 77,000
F.................................... 101,000
G.................................... 91,000
</TABLE>

Because of the active worldwide market for gold, Homestake believes that
the loss of any of these customers would not have a material adverse impact on
the Company.

NOTE 23: PLUTONIC RESOURCES LIMITED

On December 21, 1997, Homestake announced it had entered into an agreement
to acquire Plutonic Resources Limited ("Plutonic"), an Australian gold producer,
by an exchange of common stock for common stock. Homestake expects to issue
approximately 64.4 million shares to acquire Plutonic (0.34 of a Homestake
common share for each fully-paid Plutonic ordinary share).

C-36
<PAGE> 254

REPORT OF INDEPENDENT AUDITORS

The Shareholders and
Board of Directors of
Homestake Mining Company:

We have audited the consolidated balance sheets of Homestake Mining Company
and Subsidiaries as of December 31, 1997 and 1996, and the related statements of
consolidated operations, shareholders' equity and cash flows for each of the
three years in the period ended December 31, 1997. These financial statements
are the responsibility of the Company's management. Our responsibility is to
express an opinion on the financial statements based on our audits.

We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the financial position of Homestake
Mining Company and Subsidiaries at December 31, 1997 and 1996, and the results
of their operations and their cash flows for each of the three years in the
period ended December 31, 1997 in conformity with generally accepted accounting
principles.

/s/ Coopers & Lybrand L.L.P.

San Francisco, California
February 9, 1998

C-37
<PAGE> 255

[THIS PAGE INTENTIONALLY LEFT BLANK]

C-38
<PAGE> 256

QUARTERLY SELECTED DATA
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)

<TABLE>
<CAPTION>
FIRST SECOND THIRD FOURTH
QUARTER QUARTER QUARTER QUARTER YEAR
-------- -------- --------- -------- ---------
<S> <C> <C> <C> <C> <C>
1997:
Revenues..................... $250,187 $168,659 $ 158,224 $146,764 $ 723,834
Net income (loss)............ 49,860(1) (16,222) (163,682)(2) (38,835)(3) (168,879)(1)(2)(3)
Per common share:
Net income (loss).......... $ 0.34(1) $ (0.11) $ (1.12)(2) $ (0.26)(3) $ (1.15)(1)(2)(3)
Dividends paid............. 0.05 0.05 -- 0.05 0.15
1996:
Revenues..................... $202,808 $201,492 $ 183,683 $178,953 $ 766,936
Net income................... 13,653(4) 6,776 7,427(5) 2,425(5)(6)(7) 30,281(4)(5)(6)(7)
Per common share:
Net income................. $ 0.09(4) $ 0.05 $ 0.05(5) $ 0.02(5)(6)(7) $ 0.21(4)(5)(6)(7)
Dividends paid............. 0.05 0.05 0.05 0.05 0.20
</TABLE>

- ---------------

(1) Includes a gain of $47.2 million ($62.9 million pretax) or $0.32 per share,
on the fee received upon termination of Homestake's merger agreement with
Santa Fe Pacific Gold Corporation and a gain of $8.1 million ($13.5 million
pretax) or $0.06 per share on the sale of the George Lake and Back River
joint venture interests in the Northwest Territories of Canada.

(2) Includes write-downs and unusual charges of $145.1 million ($183.6 million
pretax) or $0.99 per share, including (i) a write-down of $84.9 million
($107.8 million pretax) of Homestake's investment in the Main Pass 299
sulfur mine, (ii) a reduction of $18.2 million ($24.3 million pretax) in the
carrying value of short-lived mining properties, (iii) an increase of $21.5
million ($29.1 million pretax) in the estimated accrual for future
reclamation expenditures, (iv) write-downs of $14.7 million ($16.5 million
pretax) of certain mining investments, and (v) other charges of $5.8 million
($5.9 million pretax) primarily related to foreign exchange losses on
intercompany redeemable preferred stock.

(3) Includes write-downs and unusual charges of $13.6 million ($15.2 million
pretax) or $0.09 per share including, (i) a reduction of $2.1 million ($2.6
million pretax) in the carrying value of short-lived mining properties, (ii)
write-downs of $8.2 million ($8.3 million pretax) of certain mining
investments, and (iii) other charges of $3.3 million ($4.3 million pretax)
primarily losses on an intercompany gold loan.

(4) Includes income of $4.9 million ($5.5 million pretax) or $0.03 per share
from a litigation recovery.

(5) Includes $2.7 million or $0.02 per share and $21.3 million or $0.14 per
share in the third and fourth quarters, respectively, for reductions in the
Company's accrual for prior year income taxes.

(6) Includes foreign currency exchange losses on intercompany advances of $7.2
million ($8.7 million pretax) or $0.05 per share and $7.4 million ($8.9
million pretax) or $0.05 per share in the 1996 fourth quarter and
year-to-date periods, respectively, primarily related to the Company's
Canadian-dollar denominated advances to HCI.

(7) Includes write-downs of $8.3 million ($9 million pretax) or $0.06 per share
in the carrying value of investments in mining company securities.

C-39
<PAGE> 257

COMMON STOCK PRICE RANGE
(PRICES AS QUOTED ON THE NEW YORK STOCK EXCHANGE)

<TABLE>
<CAPTION>
FIRST SECOND THIRD FOURTH
QUARTER QUARTER QUARTER QUARTER YEAR
------- ------- ------- ------- ------
<S> <C> <C> <C> <C> <C>
1997:
High.......................................... $16.63 $15.25 $15.38 $15.56 $16.63
Low........................................... 13.13 12.75 12.31 8.31 8.31
1996:
High.......................................... $20.63 $20.88 $18.00 $16.63 $20.88
Low........................................... 15.75 16.88 14.25 13.63 13.63
</TABLE>

C-40
<PAGE> 258

APPENDIX D
PLUTONIC RESOURCES LIMITED
A.C.N. 006 245 629
AND CONTROLLED ENTITIES

CONSOLIDATED FINANCIAL STATEMENTS
(ALL DOLLAR AMOUNTS ARE AUSTRALIAN DOLLARS UNLESS OTHERWISE STATED)

INDEX

<TABLE>
<CAPTION>
PAGE
-----
<S> <C>
MANAGEMENT'S DISCUSSION AND ANALYSIS FOR THE YEARS ENDED 31
DECEMBER 1997, 1996 AND 1995.............................. D-1

CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31
DECEMBER 1997:
Directors' Report......................................... D-9
Profit and Loss Statements for the year ended 31 December
1997................................................... D-15
Balance Sheets As At 31 December 1997..................... D-16
Statements of Cash Flows for the year ended 31 December
1997................................................... D-17
Notes To and Forming Part of the Financial Statements At
31 December 1997....................................... D-18
Statement by Directors.................................... D-54
Independent Auditor's Report.............................. D-55
CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31
DECEMBER 1996:
Directors' Report......................................... D-57
Profit and Loss Statements for the year ended 31 December
1996................................................... D-62
Balance Sheets As At 31 December 1996..................... D-63
Statements of Cash Flows for the year ended 31 December
1996................................................... D-64
Notes To and Forming Part of the Financial Statements At
31 December 1996....................................... D-65
Statement by Directors.................................... D-98
Independent Auditor's Report.............................. D-99
</TABLE>

THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEARS ENDED 31 DECEMBER 1997,
OTHER THAN NOTE 37 TO THE NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS
AT 31 DECEMBER 1997, ARE EXTRACTED FROM THE 1997 PLUTONIC ANNUAL REPORT. THE
CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEARS ENDED 31 DECEMBER 1996, OTHER
THAN NOTE 35 TO THE NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS AT 31
DECEMBER 1996, ARE EXTRACTED FROM THE 1996 PLUTONIC ANNUAL REPORT. REFERENCES
THEREIN TO "THIS REPORT" REFER TO THE RESPECTIVE ANNUAL REPORTS.
<PAGE> 259

PLUTONIC RESOURCES LIMITED

MANAGEMENT'S DISCUSSION & ANALYSIS
OF FINANCIAL POSITION AND RESULTS OF OPERATIONS

(Unless specifically stated otherwise, the following information relates to
amounts included in the consolidated financial statements without reduction for
minority interests. All amounts included are in Australian Dollars. References
to the "Company" are to Plutonic Resources Limited and, where the context so
requires, its subsidiaries and predecessor entities. Reference is made to the
sections entitled "Risk Factors" and "Cautionary Statements" in the Supplement.)

Plutonic Resources Limited was incorporated as Noranda Limited in Victoria
in 1984 and listed on the Australian Stock Exchange ("ASX") in August 1985. It
transferred its incorporation to New South Wales in 1990. In this document, the
term "Plutonic" or the "Company" refers to Plutonic Resources Limited and its
subsidiaries.

The Company currently has interests in five active gold mines in Western
Australia with operations at the Plutonic, Darlot, Lawlers, Mt Morgans and Peak
Hill gold mines. The Bellevue gold mine was placed on care and maintenance on 30
April 1997. The operations all lie within a circle of 300 kilometre radius,
stretching from the Plutonic mine in the north to the Mt Morgans mine in the
south, an area which the Company terms the Plutonic Circle.

Plutonic also has a portfolio of exploration and pre-development base metal
interests through its 62% owned subsidiary Lachlan Resources NL ("Lachlan"), a
company listed on the ASX. Lachlan's exploration is focused on a number of base
metal deposits located throughout Australia. Despite the significance of the
Lachlan portfolio, the base metal assets of Lachlan are a relatively minor
proportion of the total asset base of Plutonic.

YEARS ENDED 31 DECEMBER 1997, 1996 AND 1995

RESULTS OF OPERATIONS

Plutonic recorded a consolidated operating loss attributable to members of
the Company after income tax of $62.3 million ($0.33 per share) during 1997, a
profit of $40.7 million ($0.22 per share) during 1996 and a profit of $40.1
million ($0.22 per share) during 1995. After adjusting for one-time
non-recurring items of $114.2 million ($84.3 million after tax and minority
interests), the 1997 earnings of $25.7 million ($22 million after tax and
minority interests before abnormals) reflect higher gold production and sales
volumes and lower production costs offset by lower realised gold prices.
Non-recurring items in 1997 included a gain resulting from Edensor Nominees Pty,
Ltd. ("Edensor") exercising its right to cancel Plutonic's option over 19.9% of
the issued capital of Great Central Mines Limited ("Great Central") of $14
million ($14.0 million after tax and minority interests), writedown of mine
carrying values and related assets of $70.8 million ($51.4 million after tax),
writedown of investments of $31.1 million ($30.5 million after tax and minority
interests), writedown of exploration properties of $18.7 million ($11.6 million
after tax and minority interests) and mining contractor variations of $7.5
million ($4.8 million after tax and minority interests). The writedown in
mining, exploration and strategic investment assets resulted from a reassessment
of the Company's operations in light of continued weak gold prices and was based
on a spot price of not more than $450 per ounce. Non-recurring items in 1996
included a realised gain of $13 million ($8.3 million after tax) on close out of
forward contracts covering 200,000 ounces of gold and a gain of $10.1 million
($10.1 million after tax) on the sale of an investment in Eagle Mining
Corporation NL ("Eagle Mining") which was acquired in 1995. Non-recurring items
in 1995 included a tax benefit of $17.4 million for previously unrecorded income
tax benefits.

Gold Operations. Plutonic's profitability is affected by the market price
of gold. Gold prices are influenced by numerous factors over which Plutonic has
no control including expectations with respect to the rate of inflation, the
relative strength of the Australian dollar in relation to the US dollar,
interest rates, global or regional political or economic crises, demand for gold
jewellery and industrial products and sales by holders and producers of gold in
response to these factors. The supply of gold consists of a combination of new
mine

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production and sales from existing stocks of bullion and fabricated gold held by
governments, public and private financial institutions, and individuals.

Plutonic's general policy is to forward sell or hedge a portion of future
production in Australian dollars. This strategy has the dual objectives of
underpinning the continued long term viability of the operations by removing the
price risk due to fluctuations in the spot gold prices and, at the same time,
allowing shareholders the opportunity to benefit from future increases in the
gold price. During 1997, 1996 and 1995 all of the Company's gold production was
covered by the forward sales program. At 31 December 1997, the Company had
committed 1,227,490 ounces of gold for sale under forward contracts at an
average price of $507 per ounce. Refer to Note 36 of the consolidated financial
statements for details of these forward sales. Net revenues from gold sales
during 1997 totalled $307.5 million compared to $279.4 million in 1996 and
$211.7 million in 1995. The revenue increase in 1997 reflects record gold
production of 548,400 ounces. The 1996 revenue increase compared to 1995
reflects higher gold sales volumes and lower realised prices.

During 1997, the Company recorded revenue for 550,400 ounces of gold at an
average delivery price of $553 per ounce compared to an average spot price of
$446 per ounce (a gain of $58.9 million over spot). Revenue during 1996 included
the delivery of 450,000 ounces of gold at an average price of $600 per ounce
compared to an average spot price of $495 (a gain of $47.3 million over the spot
price of gold) and closeout of forward contracts realising an additional gain of
$13 million. During 1995, revenue included the delivery of 349,000 ounces of
gold at an average price of $612 per ounce compared to an average spot of $519
per ounce (a gain of $32.5 million over the spot price of gold).

Total gold production increased to 548,400 ounces during 1997 compared to
449,800 ounces produced during 1996 and 348,700 ounces produced during 1995. The
higher 1997 production primarily is due to production increases at the Plutonic
and Lawlers Gold mines offset by lower production at the depleting Peak Hill
Gold mine. The increased production in 1996 is primarily due to production
increases at the Plutonic, Darlot and Lawlers operations together with
production from the 80% interest in the Mt Morgans mine which was acquired in
late 1995, partially offset by lower production resulting from a reduction in
the level of mining operations at the Bellevue mine.

At the Plutonic Gold Mine, located 180 kilometres northeast of Meekatharra
in Western Australia, production hit a new record in 1997 of 274,600 ounces
compared to 183,700 and 165,900 ounces in 1996 and 1995, respectively. This
increase in production is primarily due to 72,500 ounces of new production from
the Salmon and Perch open pits, which were activated to provide ore for the
plant expansion project and an increase of 31,100 ounces from the expanding
Plutonic underground operations. The increase in 1996 production from 1995 was
the result of higher ore grade from both the open pit and underground operations
and higher ore throughput following the completion of the plant expansion
project in November 1996. The effects of the higher grades and recoveries were
partially offset by lower metallurgical recovery from primary ores. Cash
operating costs of $337 per ounce were achieved in 1997 compared to $373 per
ounce during 1996 and $318 per ounce during 1995. The increase in production
costs reflects the shift from mining soft oxide ore to mining harder primary
ore.

The Plutonic mine is being transformed over time from being a large
open-pit operation to one of Australia's largest underground gold mining
operations. During 1997, ore sourced from the underground provided 26% of total
production compared to 22% in 1996 and only 3% in 1995. The 1997 year was one of
consolidation as the underground mine became established as a significant ore
source, the Main Pit continued to operate at a depth where all ore was derived
from hard, fresh rock and the Perch and Salmon pits supplied oxide ore to the
processing plant. Mining ceased in the Main Pit in December 1997. The
construction of a gas fired power station on site was completed in 1997. Gas is
provided via a 20 kilometres spur line from the Goldfields Gas Transmission
pipeline. The conversion to gas will continue to reduce cash operating costs.

Production at the Darlot Gold Mine, located 110 kilometres north of Leonora
in Western Australia, increased to 65,200 ounces in 1997 compared to 62,800 and
41,400 ounces during 1996 and 1995, respectively. Production in 1997 was sourced
from the underground mine. In 1996 production was sourced mainly from the
expanding underground mine with the balance from low-grade stockpiles. During
1995, the mine underwent a major transformation from an open pit to an
underground operation. The open pit was completed in 1995 and
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underground development of the Darlot lode below the pit commenced on a trial
basis. The gravity and leach circuits in the treatment plant were upgraded
during 1996 to maximise gold recovery and were commissioned in February 1997.
Production had been hindered in 1995 by delays in the stoping of the underground
orebody, completion of open-pit mining, and difficulties in obtaining acceptable
mill throughput due to the high proportion of hard primary ore in the mill feed.
Cash operating costs of $427 per ounce were achieved in 1997 compared to $448
per ounce during 1996 and $533 per ounce in 1995.

Production at the Lawlers Gold Mine, located about 120 kilometres northwest
of Leonora, Western Australia, increased to 87,500 ounces in 1997 compared to
50,600 and 42,500 ounces during 1996 and 1995, respectively. This increase was
primarily due to new ore sourced from the New Holland pit. Difficulties
encountered in 1995 as a result of lower than anticipated grades in all pits
were rectified during 1996. The higher production in conjunction with successful
cost reduction efforts undertaken during the year reduced cash operating costs
to $353 per ounce in 1997 compared to $553 per ounce during 1996 and $620 per
ounce in 1995.

The Company's share of production from the Bellevue Gold Project, located
40 kilometres north of Leinster in Western Australia, was 14,400 ounces in 1997,
compared to 17,300 ounces in 1996 and 17,600 ounces in 1995. In July 1995 the
Company increased its interest in this mine from 50% to 100%. Excluding the
effects of the purchase of the additional 50% interest, production continued to
decline in 1996 primarily due to a reduction in the level of operations which
began in 1995 as underground mineable reserves were depleted or became
inaccessible. Following completion of mining in the Orleans open pit in August
1996, the treatment plant was placed on care and maintenance with all subsequent
ore produced from underground sources being trucked 80 kilometres to the mill at
the Lawlers mine for treatment. In April 1997 all mining operations were placed
on care and maintenance due to insufficient ore sources being available to cover
site overheads. Stockpiles continue to be treated at the Lawlers mill as and
when appropriate.

Effective 1 October 1995, the Company acquired an 80% interest in the Mt
Morgans Gold Mine, located 50 kilometres west of Laverton. The Mt Morgans mine
consists of the Jupiter open pit and the Westralia and Transvaal underground
mines. The Company's share of production from the Mt Morgans mine was 73,600
ounces in 1997 compared to 75,000 ounces in 1996 and 24,900 ounces for the
fourth quarter of 1995. Cash operating costs were $479 in 1997 compared to $491
per ounce in 1996 and $390 during the fourth quarter of 1995. The annualised
decline in production and increase in production costs during 1997 and 1996 was
largely due to lower than expected head grades and ore tonnage from the Jupiter
open pit, and stope wall failures in the Westralia underground mine which
reduced production. Mining from the Jupiter open pit ceased by the end of 1996.
During 1997, ore was sourced from the Transvaal and Westralia underground mines
with the balance of the mill feed derived from Jupiter stockpiles and Westralia
tailings. Mining operations at Mt Morgans are likely to cease during 1998.

The Company's share of production from the Peak Hill Mine (66.67%
interest), located approximately 130 kilometres west of the Plutonic mine,
decreased to 33,100 ounces from 60,400 ounces in 1996 and 56,700 ounces in 1995.
This decrease and the corresponding increase in cash operating costs is
attributable to the declining reserves and the impact of treating an increasing
proportion of lower grade ore stockpiles. The Harmony pit ceased production in
the fourth quarter of 1997 and stockpiled ore will continue to be processed
through to mid 1998 with longer term production being dependent on the
development of satellite pits. Production from the Contact Deposit (Harmony Pit)
commenced in 1995. Plutonic increased its interest in the Peak Hill mine from
50% to 66.67% effective 1 February 1995. Cash operating costs were $390 per
ounce in 1997 compared to $209 per ounce during 1996 and $183 per ounce in 1995.

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The following chart details Plutonic's gold production and cash operating
costs per ounce by operation for the years ended 31 December 1997, 1996 and
1995.

<TABLE>
<CAPTION>
PRODUCTION CASH OPERATING COSTS
('000 OZ) ($ PER OZ)
PERCENTAGE ----------------------- --------------------
OWNERSHIP 1997 1996 1995 1997 1996 1995
---------- ----- ----- ----- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C>
Plutonic Gold Mine................. 100.00% 274.6 183.7 165.9 337 373 318
Darlot Gold Mine................... 100.00% 65.2 62.8 41.1 427 448 533
Lawlers Gold Mine.................. 100.00% 87.5 50.6 42.5 353 553 620
Bellevue Gold Project(2)........... 100.00% 14.4 17.3 17.6 (1) (1) (1)
Mt Morgans Gold Mine(3)............ 80.00% 73.6 75.1 24.9 479 491 390
Peak Hill Gold Mine................ 66.67% 33.1 60.4 56.7 390 209 183
----- ----- ----- --- --- ---
Total.................... 548.4 449.8 348.7 373 403 378
===== ===== ===== === === ===
</TABLE>

- ---------------

(1) This operation has been placed on care and maintenance. Therefore, it is
not meaningful to report cash operating costs.

(2) The Company increased its ownership in Bellevue from 50% to 100% effective
1 July 1995.

(3) The Company acquired an 80% interest in Mt Morgans effective 1 October
1995.

Base Metals. The Company has interests in base metal exploration and
pre-development projects through its 62% owned subsidiary, Lachlan. In 1996,
Lachlan added to its portfolio of base metal properties through acquisition of
Archaean Gold NL ("Archaean"), which owns a silver-zinc discovery near
Kalgoorlie.

Interest Income. Interest income of $4.2 million in 1997 compares to $6.8
million in 1996 and $3.3 million in 1995. The decrease in interest income in
1997 compared to 1996 reflects lower cash and equivalent balances, the repayment
of the loan made to Edensor in August 1997 and continuing lower interest rates.
The increase in interest income in 1996 compared to 1995 reflects higher average
cash and equivalent balances during the year and the loan made to Edensor.

Other Income. Other income of $20.5 million in 1997 compares to $33.2
million in 1996 and $3.8 million in 1995. Other income in 1997 includes $14.0
million from an agreement to sell a right to cancel the Company's option to
acquire 19.9% of the issued capital of Great Central under certain conditions.
In 1996, other income included a realised gain of $13.0 million on the early
close out of forward contracts covering 200,000 ounces of gold, a gain of $10.1
million on the sale of an investment in Eagle Mining which had been acquired in
1995, and $6 million from execution of the agreement with Great Central.

Amortisation and Depreciation. Amortisation and depreciation increased to
$86.7 million during 1997 from $48.3 million during 1996 and $33.3 million
during 1995. The increase is primarily due to a writedown of mine carrying
values and related assets and increased production. The increase in 1996 from
1995 primarily is due to increased production, a full year of depreciation on
new capital additions and additional depreciation charges resulting from
amortisation of acquired exploration potential and other acquisition costs.

Exploration Written Off. Exploration expenditure written off relates to
areas of interest where incurred exploration expenditure is expensed in
accordance with the Company's accounting policy as set out in Note 1 to the
financial statements. Exploration expenditure written off amounted to $25.7
million during 1997, $4.3 million in 1996 and $4.5 million in 1995. The increase
in 1997 is primarily due to a writedown in the carrying value of acquired
exploration properties ($18.7 million).

Interest Expense. Interest expense of $11.6 million in 1997 compares to
$10.4 million in 1996 and $1.1 million in 1995. Interest expense increased
significantly in 1996 from 1995 primarily as a result of the draw down of $120
million on the Company's finance facility in late 1995 and an additional net $60
million draw down in 1996. The Company's average rate of interest on its
long-term debt was 6% in 1997 compared to 8% and 9% in 1996 and 1995,
respectively.

Income Taxes. The Company's effective income tax rate was 19% during 1997
compared to 16% during 1996 and 8% during 1995. Income tax expense includes the
effect of recognition of previously unrecognised
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<PAGE> 263

income tax benefits. These tax benefits were acquired with past acquisitions,
but were only able to be recognised after certain tax strategies were put in
place and operational performance made realisation probable.

The Company paid $1.6 million in tax in 1997 compared to receipt of a net
income tax refund in 1996 of $1.6 million and to net cash taxes paid of $8.0
million in 1995.

At 31 December 1997 the Company had unrecognised future income tax benefits
of $39.6 million compared to $42.3 million and $56.6 million, in 1996 and 1995
respectively. While circumstances could occur which would permit the Company to
recognise these income tax benefits in future years, based on the Company's
current projections it does not expect significant amounts to be recognised in
the immediate future.

LIQUIDITY AND CAPITAL RESOURCES

During 1997, Plutonic's cash and equivalents balances increased by $27.4
million to $76.6 million as a result of the repayment of the $50.0 million loan
to Edensor and receipt of $14.0 million in payments under the Great Central
option cancellation agreement, $27.2 million of proceeds realised on the sale of
investments and other non-current investments and strong operating cash flows
from the Company's operations, offset by capital expenditures of $123.0 million,
the purchase of investments of $7.6 million, and a decrease in net debt
outstanding of $10.0 million. During 1996, Plutonic's cash and equivalents
balances decreased by $11.3 million to $49.1 million as a result of capital
expenditures of $126.4 million, the purchase by Lachlan of Archaean Gold NL
("Archaean") for $41.5 million, and the purchase of investments of $31.4
million, offset by $41.0 million of proceeds received from the issue of shares
to shareholders of Dominion Mining Limited ("Dominion"), $50.3 million of
proceeds realised on the sale of investments and other non-current investments,
an increase in net debt outstanding of $60 million and strong operating cash
flows from the Company's operations. Net cash provided from operating activities
was $96.5 million in 1997 compared to $60.1 million in 1996 and $49.8 million in
1995.

In June 1997, the Company replaced its unsecured debt facility with ABN
AMRO Australia Limited with a $400 million unsecured syndicated debt facility
arranged by the Chase Manhattan Bank, Credit Suisse First Boston and ABN AMRO
Australia Limited. The facility consists of a term debt facility ($285 million)
which expires in June 2002 and a standby facility ($115 million) which expires
in June 1998. Interest is charged at domestic bank bill rates plus a lender's
margin. At 31 December 1997, the Company had drawn down $170.0 million under
this facility compared to borrowings of $180.0 million in 1996 and $120.0
million in 1995.

During 1998 the Company has budgeted for capital expenditure of $52.6
million with expenditure being primarily directed to development of the Plutonic
($22.7 million), Darlot ($14.0 million) and Lawlers ($3.3 million) underground
mines, and expansion of the Darlot plant and facilities ($6.5 million).

CAPITAL EXPENDITURES

Capital expenditures in 1997 totalled $123.0 million consisting of $36.9
million for plant and equipment, $53.4 million for mine development, including
advanced mining, and $32.7 million for deferred costs of mineral properties.
This compares to 1996 capital expenditures of $126.4 million and $64.7 million
in 1995.

Additions to property, plant and equipment of $36.9 million in 1997
compares to $31.6 million in 1996 and $9.7 million in 1995. Capital additions in
1997 included $22.0 million at the Plutonic mine for projects related to
improving the mine's efficiency including a 19MW base load gas fired power
station, and $5.8 million at the Darlot mine for various efficiency improvement
projects including expansion of the treatment plant to increase annual
throughput from 480,000 tonnes to approximately 680,000 tonnes. Remaining
property, plant and equipment expenditures primarily were for replacement
capital to maintain existing production capacity.

Additions to mine development costs in 1997 totalled $53.4 million compared
to $62.2 million in 1996 and $55.0 million in 1995. The 1997 additions included
$29.7 million for further Plutonic mine underground development, $15.8 million
at the Darlot mine primarily for the Centenary decline and $4.4 million for
underground development at the Mt Morgans mine. The 1996 additions included
$35.8 million for the

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<PAGE> 264

Plutonic mine including $23.6 million for underground development, $7.7 million
for open cut pre-stripping costs and $4.1 million for exploration, $9.8 million
at Lawlers mine including $5.2 million for open cut pre-stripping costs and $1.8
million for exploration, $11.3 million at the Darlot mine including $6.2 million
for exploration, $11.2 million at the Bellevue mine including $1.6 million for
pre-stripping costs and $1.4 million for exploration, $8.1 million at the Mt
Morgans mine including $6.5 million for development of the Transvaal underground
operations and $1.1 million for exploration. In addition, a further $13.1
million of exploration expenditure was spent at other locations within or
surrounding the Plutonic Circle region.

Total exploration expenditure in 1997 was $32.7 million compared to $30.1
million in 1996 and $24.6 million in 1995. The 1997 expenditure includes $22.4
million for exploration undertaken on the Company's tenements within the
Plutonic Circle including new exploration around existing mines and $5.4 million
of exploration expenditure incurred by Lachlan.

DIVIDENDS

Total dividends declared during 1997 were $5.7 million compared to $20.6
million during 1996 and $17.5 million during 1995. During 1997, the dividend was
reduced to 3 cents per share unfranked compared to 11 cents and 9.5 cents per
share unfranked in 1996 and 1995, respectively.

OTHER MATTERS

Effective 1 October 1995, Plutonic acquired most of Dominion's gold assets
including an 80% interest in the Mt Morgans Gold Project, a 100% interest in the
Meekatharra Project and other exploration interests in Western Australia,
Queensland and the Northern Territory. The net purchase price after working
capital adjustments was $52.7 million. As part of its agreement with Dominion,
Plutonic issued a prospectus dated 22 December 1995 offering Dominion
shareholders the opportunity to apply their entitlement to a return of capital
to subscribe for Plutonic shares which resulted in 6,684,417 Plutonic shares
being issued to Dominion shareholders on 29 January 1996 for consideration of
$41 million.

In January 1996, the Company made an unsuccessful bid for all the shares in
Coolawin Resources Limited, the owner of a 20% interest in the Mt Morgans mine,
but exited with a small gain after covering costs in connection with this offer.

In June 1996, the Company recorded a gain of $10.1 million on the sale of
its 17.3% holding in Eagle Mining. Plutonic acquired its interest in Eagle
Mining from Dominion in November 1995. At the same time, the Company acquired a
further 15% interest in Wiluna Mines Limited bringing its interest to 19.9%.

In July 1996, Lachlan made a $47 million takeover offer for Archaean. As a
result, Lachlan and its associates became entitled to a 90.7% interest in
Archaean. In 1997 a scheme of arrangement was implemented for the remaining
shareholders and option holders which resulted in Archaean becoming a
wholly-owned subsidiary within the Plutonic/Lachlan group. This takeover was
funded by a loan from Plutonic which, together with capitalised interest up to
August 1997, totalled $50.9 million. The loan became non interest bearing in
September 1997. Lachlan plans to repay the loan by means of share placement to
Forsayth NL (a 100% subsidiary of Plutonic) which will increase Plutonic's
interest in Lachlan from approximately 62% to 81%.

In 1995, Plutonic agreed to provide Edensor with a loan facility up to $50
million and was granted an option to acquire 19.9% of the issued capital of
Great Central in consideration for this loan. In July 1996, an agreement was
concluded for the sale of a right to cancel Plutonic's option to acquire 19.9%
of the shares of Great Central. Plutonic was paid $6 million in 1996 and a
further $14 million in 1997 in respect to this option agreement.

In October 1996, the Company discovered the Centenary gold deposit. The
high grade, thickness and continuity of the Centenary deposit's mineralisation
indicate its capacity to support a substantial, low cost, underground mining
operation. Mine planning and evaluation have indicated that this deposit is
amenable to low cost bulk stoping, that geotechnical conditions are very good
and that there is minimal groundwater. Access to Centenary is via an extension
of the Darlot decline which intersected the Centenary deposit in
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<PAGE> 265

September 1997 approximately 350 metres below the surface. First development ore
was subsequently fed to the upgraded Darlot processing plant. A raise bored
ventilation shaft is currently being constructed, which will complete the
Centenary ventilation circuit and also provide the second egress for the mine.
Initial orebody development and in-fill diamond drilling has commenced. It is
planned that initial sub-level stoping of the thick central section of the
Centenary deposit will commence prior to mid-1998. The thinner extremities of
the deposit are suitable for sub-level open stoping or room and pillar stoping
as successfully utilised at Darlot. A feasibility study to determine optimum
plant size is continuing as the size of the Centenary deposit is further defined
from on-going exploration drilling.

During 1997 Plutonic undertook a review of the Year 2000 issues and the
effect of the new millennium on its financial systems. The current financial
systems do not handle the new millennium without upgrading to later versions.
However, Plutonic has committed to the implementation of a new financial package
at all main offices and operating mines during 1998. The new package is
century-compliant and satisfies, among other requirements, all maintenance,
stores, accounts, purchasing and expenditure control requirements of the
Plutonic group. The cost to implement the new systems is estimated to be $0.7
million. The Year 2000 issues and corresponding solutions may change if the
proposed combination with Homestake Mining Company and Plutonic Resources
Limited occurs.

ENVIRONMENTAL ISSUES

The Company evaluates its accruals for restoration, rehabilitation and
environmental costs regularly. With respect to non-operating properties, the
Company believes it has fully provided for all 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 life of its individual operations
using the units of production method. During 1996, the first formal
environmental audit of each managed site was completed and further audits were
completed in 1997. These audits and regular environmental reviews revealed no
new significant environmental issues.

In 1997, expenditure on rehabilitation totalled $1.6 million as compared to
$1.8 million in 1996 and $0.6 million in 1995. Major waste dump rehabilitation
programs were completed at the Lawlers and Mt Morgans mines in 1996. Significant
portions of these programs related to mining activities carried out prior to
Plutonic's ownership of these sites.

RECONCILIATION TO U.S. GAAP

The Company has reconciled its 1997, 1996 and 1995 consolidated profit and
loss accounts determined in accordance with generally accepted accounting
principles in Australia to net income under accounting principles generally
accepted in the United States. Refer to Note 37 of the 1997 financial statements
for details of this reconciliation to U.S. GAAP.

D-7
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PLUTONIC RESOURCES LIMITED
A.C.N. 006 245 629
AND CONTROLLED ENTITIES
CONSOLIDATED FINANCIAL STATEMENTS
31 DECEMBER 1997

D-8
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PLUTONIC RESOURCES LIMITED AND ITS CONTROLLED ENTITIES

DIRECTORS' REPORT

The Directors of Plutonic Resources Limited ("the Chief Entity" or
"Company") present their report for the year ended 31 December 1997.

DIRECTORS

The Directors of the Chief Entity in office at the date of this report are:

E PAUL MCCLINTOCK -- Chairman: BA, LLB Director of McClintock Associates
Group, Tower Life Australia Limited, Ashton Mining Limited and The Institute of
Respiratory Medicine.

RONALD J HAWKES -- Managing Director: Geologist, BSc, FAusIMM, FGAC, MCIM,
33 years experience in the mining industry. Director of Lachlan Resources NL and
Archaean Gold NL.

TAN SRI IBRAHIM MENUDIN -- BCom, CA, ACA. Group Chief Executive Officer of
Malaysia Mining Corporation Berhad, Chairman of Malaysian Smelting Corporation
Berhad. Director of Ashton Mining Limited and National Consolidated Limited.

ABDUL SAMAD HAJI ALIAS -- BCom, FCA (Aust), CPA. Managing Partner, Arthur
Andersen Malaysia, Director of Malaysia Mining Corporation Berhad, MMC
Engineering Group Berhad, Ashton Mining Limited and IGB Corporation Berhad.

WILLIAM A BENNETT -- BEng (Hons), MSc, AMICE, FAICD, Director of Brambles
Industries Limited, Eastern Aluminium Limited and Barnardos Australia.

JOHN M CLARK -- BSc, MEngSc, FAusIMM, Director of An Feng Kingstream Steel
Ltd and Cordukes Ltd, and Chairman Unisearch Limited.

CHE WAN LIM -- Alternate Director for Tan Sri Ibrahim Menudin. PEng, CEng,
BE (Mech) (Hons), BE (Mining) (Hons), MIEM, MIMM. Director and Chief Executive
Officer of Tronoh Mines Malaysia Berhad, Director of Ashton Mining Limited,
Lachlan Resources NL and Hillgrove Gold NL.

LEONG KIM PHAN -- Alternate Director for Mr Abdul Samad Haji Alias. FCA
(ICAEW), Group General Manager Finance of Malaysia Mining Corporation Berhad,
Director of National Consolidated Limited, Hillgrove Gold NL, Cityview Energy
Corporation Limited and Alternate Director of Ashton Mining Limited.

DIRECTORS' INTERESTS

Mr R J Hawkes has notified the chief entity of his interest in a service
contract between himself and a controlled entity which encompasses the terms of
his employment.

No other Director has any interest in a contract or proposed contract with
the Chief Entity being an interest in the nature of which has been declared in
accordance with section 231 of the Corporations Law.

D-9
<PAGE> 268
PLUTONIC RESOURCES LIMITED AND ITS CONTROLLED ENTITIES

PRINCIPAL ACTIVITIES

The principal activities for the year were gold mining and direct
participation and investment in mineral exploration. There were no significant
changes in the nature of those activities during the year.

CONSOLIDATED RESULT

<TABLE>
<CAPTION>
1997 1996
------- ------
$'000 $'000
(ROUNDING OFF TO
THE NEAREST
THOUSANDS DOLLARS
HAS BEEN ADOPTED)
<S> <C> <C>
The operating profit (loss) of the Economic Entity for the
period after income tax expense was..................... (71,469) 39,914
Amounts attributable to outside equity interests.......... 9,170 788
------- ------
Profit (loss) attributable to members of Plutonic
Resources Limited....................................... (62,299) 40,702
======= ======
</TABLE>

DIVIDENDS

An unfranked dividend of 7 cents per share was declared out of profits of
the Chief Entity for the year ended 31 December 1996 and was paid on 2 April
1997.

The Directors have declared a final unfranked dividend of 3 cents per
share.

No other dividends were paid or declared during the year.

REVIEW OF OPERATIONS AND LIKELY DEVELOPMENTS

Gold production for 1997 attributable to the Plutonic group from its six
mines totalled 548,375 ounces (up 98,564 ounces or 22% over the 1996 production
of 449,811 ounces) at a cash operating cost of $373 per ounce (1996: $403).

The Plutonic Gold Mine in 1997 produced a record 274,608 ounces (1996:
183,691 ounces), an increase of 90,917 ounces or 49% year on year. Cash
operating costs declined to $337 per ounce (1996: $373).

Mining of the Plutonic Gold Mine Main Pit was completed in December 1997.
Underground development accelerated with initial development of a portion of
Zone 124, the key underground orebody, being achieved late in 1997. Results from
development and underground drilling in Zone 124 have been in line with
expectations and interpretations from earlier surface drilling. In 1997
underground ore was drawn largely from the North Western Extension and oxide ore
was mined from Plutonic East. In 1998 ore will be derived from open pits at
Plutonic East from underground operations and from stockpiles.

Darlot Gold Mine produced 65,153 ounces at a cash operating cost of $427
per ounce in 1997 mostly from the Darlot underground mine. The future focus of
the Darlot Project will, however, be the development of the new Centenary
orebody which was discovered in late 1996. Drilling in 1997 considerably
expanded the Centenary deposit and a reserve of 7.2 million tonnes at 6.0 g/t
gold (1.4 million contained ounces) was announced in December 1997. Underground
development of Centenary has progressed well with first development ore being
extracted in late 1997 from a depth of approximately 350 metres only a little
more than a year after discovery. The performance of the Darlot Project is
expected to improve as the proportion of Centenary ore milled increases.

The Lawlers Gold Mine had a record production year with 87,471 ounces
produced at a cash operating cost of $353 per ounce. Additionally 14,441 ounces
of gold from the Bellevue Gold Mine (closed 30 April 1997) were produced through
the Lawlers plant. In 1998 ore will be largely derived from the new Fairyland
Pit, the New Holland Pit and the New Holland South Underground operation
underpinning the performance of the Lawler's Project.

D-10
<PAGE> 269
PLUTONIC RESOURCES LIMITED AND ITS CONTROLLED ENTITIES

Both the 80% owned Mt Morgans Gold Mine (Plutonic share 1997: 73,588 ounces
at $479 per ounce) and the 66.67% owned Peak Hill Gold Mine (Plutonic share
1997: 33,104 ounces at $390 per ounce) are both nearing full depletion and are
expected to close during 1998.

Plutonic Resources Limited for the twelve month period ended 31 December
1997 recorded an operating profit of $22.0 million after tax and outside equity
interests but before abnormals (1996: $30.6 million). After abnormals ($84.3
million after tax) the Company recorded a consolidated operating loss after tax
and outside equity interests of $62.3 million. (1996: $40.7 million profit).

The abnormals largely reflect the deterioration of external conditions for
gold miners such as Plutonic during 1997. The Company reassessed its operations
at the half year in light of continued weak gold prices and determined that the
carrying values of all mining assets and strategic investments should be based
on a spot gold Australian dollar price of not more than $450 per ounce. Abnormal
losses (after tax and minorities) of $71.2 million resulted in a consolidated
operating loss after tax and outside equity interest of $63.0 million for the
first half. At year end additional writedowns of the value of exploration assets
and provisions for investments resulted in total abnormal losses (after tax and
minorities) for the year of $84.3 million giving rise to the consolidated
operating loss after tax and outside equity interest of $62.3 million for the
entire year.

Future gold prices and interest rates, which are factors beyond the
Company's control, will impact future profitability. Some protection against any
future weak gold price is provided by the Company's forward sales which at 31
December 1997 totalled 1,227,490 ounces at an average market close out price of
$483 per ounce compared to a year end spot price of $445 per ounce (1996: $463).

Plutonic and Homestake Mining Company announced on 22 December 1997 the
proposed merger of Plutonic and Homestake to create one of the largest gold
mining companies in the world. The Plutonic board has recommended the
transaction to shareholders. Should the transaction be concluded the change of
control may influence the future development of the Company.

SIGNIFICANT CHANGES IN THE STATE OF AFFAIRS

On 22 December 1997 the Company and Homestake Mining Company entered into a
Combination Implementation Agreement which provides for the merger of the
Company and Homestake by schemes of arrangement which, if approved by the
Company's shareholders would result in the Company becoming a wholly-owned
subsidiary of Homestake. The proposed merger is also subject to the approval of
Homestake stockholders and the satisfaction of certain conditions precedent set
out in the Combination Implementation Agreement.

SUBSEQUENT EVENTS

There were no significant events occurring after balance date.

OPTIONS

On 5 June 1997, PCM Investments (NSW) Pty Limited, a Company controlled by
the Chairman, Mr E P McClintock, was granted 60,000 options and each of Tan Sri
Ibrahim Menudin and Mr W A Bennett was granted 40,000 options under the Plutonic
Resources Non-Executive Directors' Option Scheme. Half of the options granted to
each grantee have an exercise price of $5.66 per share. The remainder have an
exercise price of $6.40 per share. The options can be exercised by each grantee
as follows: 10% on or after 5 June 1998, 20% on or after 5 June 1999, 30% on or
after 5 June 2000 and 40% on or after 5 June 2001. All of the options expire on
4 June 2002. The grantees do not have and have not had rights to participate in
a share issue of any other body corporate by virtue of the options granted.

No other options were granted during or since the end of the financial year
to which this report relates. The names of all persons who currently hold
options, granted at any time, are entered in the register kept by the Company
pursuant to Section 216C of the Corporations Law which may be inspected free of
charge. The
D-11
<PAGE> 270
PLUTONIC RESOURCES LIMITED AND ITS CONTROLLED ENTITIES

Directors have relied on ASC Class Order 97/1011 which relieves them from the
requirement to disclose details of a person (other than Directors or certain
other persons) and options granted to that person pursuant to an employee
incentive scheme.

No shares in Plutonic Resources Limited were issued during or since the
financial year by virtue of the exercise of an option.

At the date of this report the Company has the following ordinary fifty
cent shares under option:

<TABLE>
<CAPTION>
ORDINARY 50C EXERCISE PRICE
SHARES UNDER OPTION ($) EXPIRY DATE
- ------------------- -------------- -----------
<S> <C> <C>
228,000 6.04 12.10.99
40,000 5.87 28.11.00
200,000 6.04 05.12.00
200,000 7.75 21.05.01
200,000 8.75 21.05.01
765,000 7.75 24.06.01
765,000 8.75 24.06.01
340,000 7.75 26.06.01
340,000 8.75 26.06.01
70,000 5.66 04.06.02
70,000 6.40 04.06.02
</TABLE>

The holders of the options have no rights to participate in any share issue
of any other body corporate by virtue of the options.

ROUNDING OF AMOUNTS

The Chief Entity is of a kind referred to in Section 311 and in regulation
3.6.05(6) of the Corporations Law being a Chief Entity with total assets of the
Economic Entity in excess of $10,000,000. Accordingly amounts shown in the
financial statements and in the Directors Report have been rounded off to the
nearest thousand dollars.

DIRECTORS' MEETINGS

The following table sets out the number of meetings of Directors of the
Chief Entity held during the year ended 31 December 1997 and the number of
meetings attended by each Director.

<TABLE>
<CAPTION>
COMMITTEE MEETINGS
FULL MEETING OF ---------------------
DIRECTORS REMUNERATION AUDIT
--------------- ------------ -----
<S> <C> <C> <C>
Number of meetings held.................. 10 1 3
E P McClintock........................... 10 1 2
R J Hawkes............................... 10 1 N/A
Abdul Samad Haji Alias................... 8 N/A 3
D L Cooper (1)........................... 3 N/A N/A
Tan Sri Ibrahim Menudin.................. 8 1 N/A
W A Bennett.............................. 10 1 3
J M Clark (2)............................ 4 N/A N/A
C W Lim (Alternate)...................... 2 N/A N/A
L K Phan (Alternate)..................... 0 N/A N/A
</TABLE>

- ---------------

(1) Retired 20 May 1997 (maximum number of meetings: 3)

(2) Appointed 6 August 1997 (maximum number of meetings: 5)

D-12
<PAGE> 271
PLUTONIC RESOURCES LIMITED AND ITS CONTROLLED ENTITIES

DIRECTORS' SHAREHOLDINGS AT THE DATE OF THIS REPORT

At the date of this report the interests of the Directors in the shares of
the Company and related bodies corporate were:

<TABLE>
<CAPTION>
PLUTONIC RESOURCES LIMITED
--------------------------
50C SHARES OPTIONS OVER ORDINARY 50C SHARES
ISSUED UNDER ----------------------------------- LACHLAN RESOURCES NL
ORDINARY ESPP* AND NO. OF SHARES SUBJECT EXERCISE --------------------
50C SHARES PAID TO 5C EACH OPTIONS TO OPTIONS PRICE ORDINARY 25C SHARES
---------- ---------------- ------- -------------- -------- --------------------
<S> <C> <C> <C> <C> <C> <C>
E P McClintock....... 20,000 -- 30,000 30,000 $ 5.66 78,000
30,000 30,000 $ 6.40
R J Hawkes........... 4,551 521,250 1 200,000 $ 7.75 --
1 200,000 $ 8.75
Tan Sri Ibrahim
Menudin............ 48,200 -- 20,000 20,000 $ 5.66 --
20,000 20,000 $ 6.40
Abdul Samad Haji
Alias.............. -- -- 40,000 40,000 $ 5.87 --
W A Bennett.......... -- -- 20,000 20,000 $ 5.66
20,000 20,000 $ 6.40
J M Clark............ 15,000 -- -- -- -- --
C W Lim
(alternate)........ 1,500 -- -- -- -- 10,000
L K Phan
(alternate)........ -- -- -- -- -- --
</TABLE>

* "ESPP" means the Plutonic Resources Limited Employee Share Participation Plan

INDEMNIFICATION AND INSURANCE OF OFFICERS

During the financial year:

(a) pursuant to Article 156 of the Company's Articles of Association,
the Company agreed to indemnify:

(i) each of the Directors named on page D-9 and the secretary, Ms K
Everett; and

(ii) every person who is or has been a general manager, manager or
treasurer of the Company; and

(b) pursuant to deeds of indemnity, the Company agreed to indemnify
Directors of the Company's wholly-owned subsidiaries

against any liability:

(a) incurred by that person in his or her capacity as an officer of
the Company or a Director of a wholly-owned subsidiary of the Company (as
the case may be) to any other person (other than the Company or a related
body corporate) unless the liability arises out of conduct involving a lack
of good faith; and

(b) for costs and expenses incurred by that person in defending any
proceedings in which judgement is given in that person's favour or in which
the person is acquitted and in connection with an application in relation
to those proceedings in which the court grants relief to the person under
the Corporations Law.

D-13
<PAGE> 272
PLUTONIC RESOURCES LIMITED AND ITS CONTROLLED ENTITIES

During or since the end of the financial year, the Company has paid or
agreed to pay premiums in respect of contracts insuring against liability:

(a) each of the Directors named on page D-9 and the secretary, Ms K
Everett;

(b) every person who is or has been a general manager, manager or
treasurer of the Company; and

The contracts of insurance prohibit the disclosure of the amount of the
premiums and the nature of the liability.

DIRECTORS' BENEFITS

During or since the end of the financial year, no Director of the Company
has received or become entitled to receive a benefit (other than a benefit
included in the aggregate amount of emoluments received or due and receivable by
the Directors shown in Note 30 of the financial statements) by reason of a
contract entered into by the Company or a controlled entity or related body
corporate of the Company with a Director, a firm or which a Director is a member
or an entity in which the Director has a substantial financial interest with the
exception of:

(a) PCM Investments (NSW) Pty Limited a Company in which Mr E P
McClintock has a substantial financial interest, Tan Sri Ibrahim Menudin
and Mr W A Bennett each of whom was granted options under the Plutonic
Resources NonExecutive Directors' Option Scheme on 5 June 1997. Details of
the options granted to PCM Investments (NSW) Pty Limited, Tan Sri Ibrahim
Menudin and Mr Bennett are set out in this report under the heading
"Options"; and

(b) Mr D L Cooper who is a consultant to the firm of Deacons, Graham
and James, Melbourne which received fees for legal services rendered to the
Company in the ordinary course of business.

(c) Mr E P McClintock is a Director of and has a substantial interest
in McClintock Associates Pty Limited which received fees for services
provided in connection with the settlement of litigation against CRA
Limited and has been appointed to assist the Company in its negotiations
with Homestake Mining Company concerning the proposed merger of the Company
and Homestake.

This report is made in accordance with a resolution of the Directors.

On behalf of the Board

Paul McClintock /s/ PAUL McCLINTOCK

---------------------------------------------------------
Chairman

Ronald J Hawkes /s/ RONALD J HAWKES

---------------------------------------------------------
Managing Director

Sydney, March 1998.

D-14
<PAGE> 273

PLUTONIC RESOURCES LIMITED AND ITS CONTROLLED ENTITIES

PROFIT AND LOSS STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 1997

<TABLE>
<CAPTION>
PLUTONIC RESOURCES
CONSOLIDATED LIMITED
---------------------- -----------------------
NOTE 1997 1996 1997 1996
---- --------- --------- --------- ----------
$000 $000 $000 $000
(ROUNDING OFF TO THE NEAREST THOUSAND DOLLARS HAS
BEEN ADOPTED.)
<S> <C> <C> <C> <C> <C>
Operating Revenue............................ 2 361,579 340,461 32,309 35,294
======= ======= ====== =======
Operating (loss)/profit before income tax.... 3,4 (88,447) 47,770 2,134 29,233
Income tax benefit/(expense)................. 5 16,978 (7,856) (139) 209
------- ------- ------ -------
Operating (loss)/profit after income tax..... (71,469) 39,914 1,995 29,442
Outside Equity Interest...................... 24 9,170 788 0 0
------- ------- ------ -------
OPERATING (LOSS)/PROFIT AFTER INCOME TAX
ATTRIBUTABLE TO MEMBERS OF PLUTONIC
RESOURCES LIMITED.......................... 6 (62,299) 40,702 1,995 29,442
Retained profits brought forward............. 147,297 127,225 10,644 1,832
------- ------- ------ -------
Retained profits available for
appropriation.............................. 84,998 167,927 12,639 31,274
Dividends.................................... 7 (5,658) (20,630) (5,658) (20,630)
------- ------- ------ -------
RETAINED PROFITS AT END OF YEAR.............. 79,340 147,297 6,981 10,644
======= ======= ====== =======
</TABLE>

The accompanying notes form part of these financial statements.
D-15
<PAGE> 274

PLUTONIC RESOURCES LIMITED AND ITS CONTROLLED ENTITIES

BALANCE SHEETS
AS AT 31 DECEMBER 1997

<TABLE>
<CAPTION>
PLUTONIC RESOURCES
CONSOLIDATED LIMITED
------------------------ ------------------------
NOTE 1997 1996 1997 1996
---- ---------- ---------- ---------- ----------
$000 $000 $000 $000
(ROUNDING OFF TO THE NEAREST THOUSAND DOLLARS HAS
BEEN ADOPTED.)
<S> <C> <C> <C> <C> <C>
CURRENT ASSETS
Cash........................................ 8 45,069 18,912 897 82
Receivables and Bullion..................... 9 36,351 37,547 50,925 112
Inventories................................. 10 26,396 35,092 0 0
Other....................................... 11 5,600 4,838 0 0
------- ------- ------- -------
TOTAL CURRENT ASSETS........................ 113,416 96,389 51,822 194
======= ======= ======= =======
NON-CURRENT ASSETS
Receivables................................. 12 0 50,000 260,628 233,530
Investments................................. 13 7,228 63,109 111,298 133,846
Inventories................................. 10 27,045 40,625 0 0
Property, Plant & Equipment................. 14 115,645 97,299 0 0
Deferred Cost of Mineral Prospects.......... 15 284,891 307,079 312 411
Other....................................... 16 27,084 23,510 22 197
------- ------- ------- -------
TOTAL NON-CURRENT ASSETS.................... 461,893 581,622 372,260 367,984
======= ======= ======= =======
TOTAL ASSETS................................ 575,309 678,011 424,082 368,178
======= ======= ======= =======
CURRENT LIABILITIES
Creditors and Borrowings.................... 17 27,413 117,187 1,834 74
Provisions.................................. 18 8,848 15,891 5,647 13,126
------- ------- ------- -------
TOTAL CURRENT LIABILITIES................... 36,261 133,078 7,481 13,200
======= ======= ======= =======
NON-CURRENT LIABILITIES
Creditors and Borrowings.................... 19 170,000 87,500 152,389 87,602
Provisions.................................. 20 29,837 40,864 111 148
------- ------- ------- -------
TOTAL NON-CURRENT LIABILITIES............... 199,837 128,364 152,500 87,750
======= ======= ======= =======
TOTAL LIABILITIES........................... 236,098 261,442 159,981 100,950
======= ======= ======= =======
NET ASSETS.................................. 339,211 416,569 264,101 267,228
======= ======= ======= =======
SHAREHOLDERS' EQUITY
Share Capital............................... 21 94,112 93,828 94,112 93,828
Reserves.................................... 23 163,008 162,756 163,008 162,756
Retained Profits............................ 79,340 147,297 6,981 10,644
------- ------- ------- -------
Shareholders Equity attributable to Plutonic
Resources Limited......................... 336,460 403,881 264,101 267,228
Outside Equity Interests.................... 24 2,751 12,688 0 0
------- ------- ------- -------
TOTAL SHAREHOLDERS' EQUITY.................. 339,211 416,569 264,101 267,228
======= ======= ======= =======
</TABLE>

The accompanying notes form part of these financial statements.
D-16
<PAGE> 275

PLUTONIC RESOURCES LIMITED AND ITS CONTROLLED ENTITIES

STATEMENTS OF CASH FLOWS FOR THE YEAR ENDED 31 DECEMBER 1997

<TABLE>
<CAPTION>
PLUTONIC RESOURCES
CONSOLIDATED LIMITED
--------------------- -------------------
NOTE 1997 1996 1997 1996
---- --------- --------- -------- --------
$000 $000 $000 $000
(ROUNDING OFF TO THE NEAREST
THOUSAND DOLLARS HAS BEEN ADOPTED)
<S> <C> <C> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Cash receipts received in the course of
operations.................................... 310,090 281,952 0 0
Cash payments paid in the course of
operations.................................... (213,601) (223,497) (6,234) (2,399)
Income tax refund (paid)........................ 0 1,618 0 0
--------- --------- ------- -------
NET CASH PROVIDED BY OPERATING ACTIVITIES....... 35 96,489 60,073 (6,234) (2,399)
--------- --------- ------- -------
CASH FLOWS FROM INVESTING ACTIVITIES
Dividends received.............................. 485 335 0 0
Interest received -- external entities.......... 4,172 6,817 130 179
Proceeds on sale of investments................. 26,455 39,179 2,813 0
Recoveries from joint venture parties........... 1,497 2,491 27 175
Proceeds on sale of property, plant and
equipment..................................... 601 3,064 0 0
Proceeds on sale of non-current assets.......... 192 2,014 0 0
Proceeds on sale of option...................... 14,000 6,000 0 0
Payment for investments......................... (1,584) (31,413) 0 0
Payments for acquisition of controlled
entities...................................... (5,992) (41,504) 0 0
Cash acquired from acquisition of controlled
entities...................................... 0 5,516 0 0
Repayment/advances of loans -- external
entities...................................... 50,000 (8,427) 0 0
Payments for property, plant & equipment........ (36,894) (31,633) 0 0
Payment for advanced stripping costs............ (2,004) (14,460) 0 0
Payments for tenement exploration............... (34,204) (32,574) (146) (493)
Payments for preproduction activities........... (51,480) (47,770) 0 0
Payments for tenement acquisition............... (83) (2,358) 0 0
--------- --------- ------- -------
NET CASH INVESTING ACTIVITIES................... (34,839) (144,723) 2,824 (139)
--------- --------- ------- -------
CASH FLOWS FROM FINANCING ACTIVITIES
Interest paid................................... (11,634) (10,397) 0 0
Proceeds from share issue....................... 536 41,521 536 41,521
Proceeds from borrowings
-- external entities.......................... 0 72,500 0 0
-- related entities........................... 0 0 64,352 (21,228)
Repayments of borrowings
-- external entities.......................... (10,000) (12,500) 0 0
Loan to related party........................... 0 0 (47,528) 0
Dividends paid.................................. (13,135) (17,798) (13,135) (17,798)
--------- --------- ------- -------
NET CASH PROVIDED BY FINANCING ACTIVITIES....... (34,233) 73,326 4,225 2,495
--------- --------- ------- -------
Net increase/(decrease) in cash held............ 27,417 (11,324) 815 (43)
Cash at the beginning of the financial year..... 49,148 60,472 82 125
--------- --------- ------- -------
CASH AT THE END OF THE FINANCIAL YEAR........... 35 76,565 49,148 897 82
========= ========= ======= =======
</TABLE>

D-17
<PAGE> 276

PLUTONIC RESOURCES LIMITED AND ITS CONTROLLED ENTITIES

NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS
AT 31 DECEMBER 1997

1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

The financial report is a general purpose financial report which has been
prepared in accordance with the requirements of the Corporations Law which
include disclosures required by applicable Accounting Standards. Other mandatory
professional requirements (Urgent Issues Group Consensus Views) have also been
complied with.

These Financial Statements have been prepared on a basis which does not
take into account the possible changes, if any, that may occur if the
acquisition by Homestake Mining Company takes place.

(a) Principles of Consolidation

The consolidated accounts are those of the Economic Entity, comprising
Plutonic Resources Limited (the Chief Entity) and all entities which Plutonic
Resources Limited controlled from time to time during the year and at year end.
All intercompany balances and transactions, and unrealised profits resulting
from intra-economic entity transactions have been eliminated. The interests of
outside shareholders in the operating results and net assets of controlled
entities are stated separately in the consolidated profit and loss statement and
balance sheet respectively. Where there is a gain or loss of control of a
controlled entity, the consolidated accounts include the results for the part of
the reporting period during which the parent entity had control. A list of
controlled entities is included in Note 13.

(b) Income Tax

The Economic Entity adopts the liability method of tax effect accounting
whereby the income tax expense shown in the profit and loss statement is based
on the operating profit before income tax adjusted for any permanent
differences.

Timing differences which arise due to the different accounting periods in
which items of revenue and expense are included in the determination of
operating profit before income tax and taxable income are brought to account as
either provision for deferred income tax or an asset described as future income
tax benefit at the rate of income tax applicable to the period in which the
benefit will be received or the liability will become payable.

Future income tax benefits are not brought to account unless realisation of
the asset is assured beyond reasonable doubt. Future income tax benefits in
relation to tax losses are not brought to account unless there is virtual
certainty of realisation of the benefit.

The amount of benefits brought to account or which may be realised in the
future is based on the assumption that no adverse change will occur in income
taxation legislation, the anticipation that the Economic Entity will derive
sufficient future assessable income to enable the benefit to be realised and
comply with the conditions of deductibility imposed by law.

Cash is represented by cash on hand, at financial institutions at call and
bank bills and deposits. For the purposes of the Cash Flow Statement cash
includes cash at bank and bullion readily convertible to cash.

(d) Revenue Recognition

Revenue from production of gold is recognised when all of the following
"collective tests" have been met:

(i) the product is in a form suitable for delivery and no further
processing is required by or on behalf of the Economic Entity;

(ii) the quantity and quality of the product can be determined with
reasonable accuracy;

D-18
<PAGE> 277
PLUTONIC RESOURCES LIMITED AND ITS CONTROLLED ENTITIES

NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS (CONTINUED)
AT 31 DECEMBER 1997

(iii) the selling price can be determined with reasonable accuracy;

(iv) the product has been despatched to a refiner and is no longer
under the physical control of the Economic Entity.

(e) Bullion

In accordance with the policy on revenue recognition, gold bullion is taken
up as a sale when it is delivered to a gold refinery. Gold bullion held at the
refinery at the end of the year is valued at net realisable value which is
either the market price ruling on that date or the forward rate where gold has
subsequently been delivered and the revenue realised. Gold bullion is shown as a
receivable in the financial statements. Bullion includes gold poured within
three days of the end of the year.

(f) Inventories

(i) Gold in Process -- Gold is valued at the lower of cost and net
realisable value using a delivery price of $450.00 per ounce. Gold in process
includes gold in circuit and gold contained in stockpiled ore as determined by
production records. The cost of gold in process includes the cost of direct
materials, labour and variable and fixed overheads relating to mining
activities.

(ii) Consumable Stores and Spare Parts -- Consumable stores and spare parts
have been measured by physical stocktake and valued at the lower of cost and net
realisable value.

(iii) Other -- Other inventories have been measured by physical stocktake
and valued at the lower of cost and net realisable value.

(g) Investments

The Economic Entity's interests in companies (other than controlled
entities) are shown as investments, and dividend income only is taken into
profit as it is received. Long term investments are stated at cost less amounts
provided against permanent diminution in the value of investments. Investments
held for resale are stated at the lower of cost or net realisable value.

(h) Property Plant and Equipment

Fixed assets are included at cost. The cost of fixed assets constructed
within the Economic Entity includes the cost of materials, direct labour and an
appropriate proportion of fixed and variable overheads.

(i) Depreciation

(i) Plant Construction Costs -- The cost of these assets is being
depreciated over their useful economic lives using the straight line method.

(ii) Other Fixed Assets -- Other fixed assets including buildings, but
excluding land, are depreciated over their useful economic lives using the
diminishing value method.

(j) Exploration Expenditure

Costs arising from exploration and evaluation related to an area of
interest are written off as incurred, except that they may be carried forward as
deferred costs provided the rights to tenure of the area of interest are
current; and

D-19
<PAGE> 278
PLUTONIC RESOURCES LIMITED AND ITS CONTROLLED ENTITIES

NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS (CONTINUED)
AT 31 DECEMBER 1997

(i) exploration activities in each area of interest have not yet
reached a stage which permits a reasonable assessment of the existence or
otherwise of economically recoverable reserves, and active and significant
operations in relation to the area are continuing; or

(ii) such costs are expected to be recouped through successful
development and exploitation of each area of interest, or alternatively, by
its sale.

(k) Acquired Exploration Expenditure

The fair value of exploration tenements attributable as part of the
acquisition of a business prior to 16 October 1996 being the date of UIG Release
Note 10 is amortised over a period not exceeding ten years.

(l) Acquisition Costs

(i) Mines -- The direct cost of acquiring mining leases is being amortised
based on the production output method.

(ii) Other -- The direct costs of acquiring mining properties is carried
forward as a deferred cost until such time as:

(1) a mining operation is commenced when it will be amortised over the
life of the mine; or

(2) the project is sold or abandoned,

provided that the carrying value does not exceed the amount that it would have
been reasonable for the Company to spend to acquire the asset at the end of the
financial year.

(m) Preproduction Costs

Preproduction costs for each tenement comprise direct development
expenditure, pre-operating and equipment startup costs, exploration expenditure
carried forward at the date of the decision to mine plus any continuing
exploration expenditure on the area of interest.

Preproduction costs are carried forward to the extent to which recoupment
out of future revenues from the sale of product from the property is reasonably
assured.

Preproduction costs are amortised over the life of the relevant mine using
the production output method.

(n) Employee Entitlements

(i) Wages, Annual Leave, Long Service Leave, Sick Leave -- The provision
for employee entitlements relating to wages annual leave and sick leave is based
on legal and contractual entitlements and assessments having regard to the
Economic Entity's experience of staff departures and leave utilisation. Vested
entitlements are shown as current liabilities.

Current wage rates and on-costs are used in the calculation of this
provision.

The provision for employee entitlements relating to long service leave
represents the net present value of the estimated future cash outflows to be
made resulting from employees' services provided up to the balance date. In
assessing the liability for employee entitlements which are not expected to be
settled within twelve months the relevant cash flows have been discounted.
Consideration has been given to future salary increases and the economic
entity's experience with staff departures. Related on costs have also been
included in the calculation of the provision.

(ii) Superannuation -- Contributions are made by the economic entity to
employee superannuation funds and are charged to expenses when incurred.
D-20
<PAGE> 279
PLUTONIC RESOURCES LIMITED AND ITS CONTROLLED ENTITIES

NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS (CONTINUED)
AT 31 DECEMBER 1997

The Economic Entity does not record, as an asset or a liability, the
difference between the employer established defined benefit superannuation
plan's accrued benefits and the net market value of the plan's assets.

(o) Restoration, Rehabilitation and Environmental Costs

Restoration and rehabilitation of mine sites is carried out on an on-going
basis during the production life of the mine.

Provision is made for the cost of any restoration and rehabilitation work
required to be completed at the end of the production life of the mine. This
provision is assessed by technically qualified personnel on an annual basis. The
provision is raised progressively over the life of the project using current
undiscounted costs. Any revisions in the estimates of costs are reflected in the
provision when they are made.

(p) Foreign Currency

Amounts payable to and by the Company in foreign currencies have been
translated to Australian currency at rates of exchange ruling at year end.

The results of a controlled entity are denominated in New Zealand dollars.
Monetary assets and liabilities have been translated at the year end exchange
rate while non monetary assets have been translated at the historical exchange
rate. All profits and losses arising from translation have been taken directly
to the profit and loss account during the period.

(q) Joint Ventures

The Economic Entity's interest in exploration joint ventures is brought to
account based on the actual expenditures incurred by the Economic Entity in
contributing to the joint venture's exploration programme and is included in
deferred cost of mineral prospects.

The Economic Entity's interests in mining joint ventures are recorded in
the accounts by including in the respective classifications the entity's share
of assets employed, the share of liabilities incurred and the share of any
expenses incurred. Details are shown in Note 27.

(r) Leases

Payments made under operating leases are charged against profits in equal
instalments over the accounting periods covered by the term of the lease.

Details of commitments under leases are included in Note 28(b).

The Economic Entity has not entered into any finance leases at 31 December
1997.

(s) Recoverable Amount

Non-current assets are not revalued to an amount above their recoverable
amount, and where carrying values exceed this recoverable amount assets are
written down. In determining recoverable amount the expected net cash flows have
not been discounted to their present values.

(t) Comparative Figures

Where required, comparative figures have been adjusted to conform with
changes in presentation for the current financial year.

D-21
<PAGE> 280
PLUTONIC RESOURCES LIMITED AND ITS CONTROLLED ENTITIES

NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS (CONTINUED)
AT 31 DECEMBER 1997

2. OPERATING REVENUE

3. OPERATING PROFIT

Operating profit before income tax has been determined after:

D-22
<PAGE> 281
PLUTONIC RESOURCES LIMITED AND ITS CONTROLLED ENTITIES

NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS (CONTINUED)
AT 31 DECEMBER 1997

(b) Crediting as Revenue:

<TABLE>
<S> <C> <C> <C> <C>
Dividends received............................. 485 335 20,000 20,000
Interest received.............................. 4,172 6,817 11,906 8,856
Profit on sale of investments.................. 245 10,340 0 0
Profit on sale of plant and equipment.......... 535 450 0 0
Amounts written back from provision for:
Doubtful debts................................. 212 12 0 0
Diminution of Investments...................... 0 134 0 0
Profit on close out of forward contracts....... 0 12,960 0 0
Profit on sale of option....................... 14,000 6,000 0 0
</TABLE>

D-23
<PAGE> 282
PLUTONIC RESOURCES LIMITED AND ITS CONTROLLED ENTITIES

NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS (CONTINUED)
AT 31 DECEMBER 1997

4. ABNORMAL ITEM

Included in the operating profit (loss) are the following items:

<TABLE>
<CAPTION>
PLUTONIC RESOURCES
CONSOLIDATED LIMITED
------------------- ------------------
1997 1996 1997 1996
-------- ------- ------- -------
$000 $000 $000 $000
(ROUNDING OFF TO THE NEAREST THOUSAND
DOLLARS
HAS BEEN ADOPTED)
<S> <C> <C> <C> <C>
Profit on sale of investment................... 0 10,077 0 0
Applicable income tax.......................... 0 0 0 0
-------- ------- ------- -------
0 10,077 0 0
-------- ------- ------- -------
Write-down of mine carrying values and related
assets....................................... (70,809) 0 0 0
Applicable income tax.......................... 19,430 0 0 0
-------- ------- ------- -------
(51,379) 0 0 0
-------- ------- ------- -------
Write-down of investments...................... (31,123) 0 (15,877) 0
Applicable income tax.......................... 0 0 0 0
-------- ------- ------- -------
(31,123) 0 (15,877) 0
-------- ------- ------- -------
Exploration expenditure written off............ (18,728) 0 0 0
Applicable income tax.......................... 0 0 0 0
-------- ------- ------- -------
(18,728) 0 0 0
-------- ------- ------- -------
Mining contract variations..................... (7,500) 0 0 0
Applicable income tax.......................... 2,700 0 0 0
-------- ------- ------- -------
(4,800) 0 0 0
-------- ------- ------- -------
Edensor option payments........................ 14,000 0 0 0
Applicable income tax.......................... 0 0 0 0
-------- ------- ------- -------
14,000 0 0 0
-------- ------- ------- -------
Total Abnormals................................ (114,160) 10,077 (15,877) 0
Applicable income tax.......................... 22,130 0 0 0
-------- ------- ------- -------
(92,030) 10,077 (15,877) 0
======== ======= ======= =======
</TABLE>

5. INCOME TAX

<TABLE>
<CAPTION>
PLUTONIC RESOURCES
CONSOLIDATED LIMITED
------------------- ------------------
1997 1996 1997 1996
-------- ------- ------- -------
$000 $000 $000 $000
(ROUNDING OFF TO THE NEAREST THOUSAND
DOLLARS
HAS BEEN ADOPTED)
<S> <C> <C> <C> <C>
(a) Income tax expense:
Prima facie income tax expense on
operating profit....................... (31,841) 17,197 1,131 10,524
Income tax effect of
(b) Permanent Differences:
Amortisation of acquisition costs......... 8,985 5,787 0 0
Amortisation of acquired exploration
expenditure............................ 1,830 1,829 0 0
Non allowable expense..................... 598 993 77 39
Rebateable dividends...................... (174) (119) (7,200) (7,200)
Other items (net)......................... (1,303) 0 0 0
</TABLE>

D-24
<PAGE> 283
PLUTONIC RESOURCES LIMITED AND ITS CONTROLLED ENTITIES

NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS (CONTINUED)
AT 31 DECEMBER 1997

D-25
<PAGE> 284
PLUTONIC RESOURCES LIMITED AND ITS CONTROLLED ENTITIES

NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS (CONTINUED)
AT 31 DECEMBER 1997

6. CONSOLIDATED PROFIT

<TABLE>
<CAPTION>
CONSOLIDATED
---------------------
1997 1996
--------- --------
$000 $000
(ROUNDING OFF TO THE
NEAREST THOUSAND
DOLLARS HAS BEEN
ADOPTED)
<S> <C> <C>
Contributions to Consolidated Profit:
Plutonic Resources Limited.............................. (11,499) 6,250
Plutonic Operations Limited............................. (4,138) 28,513
Plutonic Administration Services Pty Ltd................ 97 40
Plutonic Finance Pty Ltd................................ (2,272) (808)
Plutonic Gold Pty Ltd................................... 446 (1,123)
Plutonic Mining Services Pty Ltd........................ (563) (406)
Plutonic (Baxter) Pty Ltd............................... (2,359) 9,340
Rubyset Pty Limited..................................... 228 396
Lachlan Resources NL.................................... (13,066) (869)
Lachlan Pacific NL...................................... (1) (1)
Quotidian No. 101 Pty Limited........................... 16 (2)
Archaean Gold NL........................................ (2,003) (378)
Forsayth NL............................................. (7) 546
Forsayth (Gibson) Ltd................................... 0 (3)
Forsayth Group Management Pty Ltd....................... 0 0
Forsayth Mining Services Ltd............................ 0 0
Forsayth (New Zealand) Ltd.............................. 0 0
Forsayth Securities Ltd................................. 0 0
Forsayth Tenements Ltd.................................. 0 0
Blacksmith Holdings Pty Ltd............................. (4,360) 302
Canaustra Holdings Pty Ltd.............................. 0 0
Bellevue Gold Project Pty Ltd........................... 0 0
Red Rock Mining Corporation Ltd......................... 579 549
Red Rock Canada Inc..................................... 0 0
Red Rock Pacific Ltd.................................... 0 0
Red Rock Europe BV...................................... 0 0
Grants Patch Mining Limited............................. (3,108) (2,685)
Publishing Investments Company Pty Ltd.................. 0 0
Sundowner Minerals NL................................... (11,799) (1,019)
Patshore Pty Ltd........................................ 0 6
Austwhim Resources NL................................... (7,147) 1,534
Whim Creek Consolidated NL.............................. (1,343) 520
------- ------
(62,299) 40,702
======= ======
</TABLE>

D-26
<PAGE> 285
PLUTONIC RESOURCES LIMITED AND ITS CONTROLLED ENTITIES

NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS (CONTINUED)
AT 31 DECEMBER 1997

7. DIVIDENDS PAID OR PROVIDED

<TABLE>
<CAPTION>
PLUTONIC RESOURCES
CONSOLIDATED LIMITED
---------------------- ----------------------
1997 1996 1997 1996
--------- --------- --------- ---------
$000 $000 $000 $000
(ROUNDING OFF TO THE NEAREST THOUSAND DOLLARS
HAS BEEN ADOPTED)
<S> <C> <C> <C> <C>
PAID
Under provision from prior years paid from
profit and loss............................... 11 5 11 5
Interim dividend (1996: 4 cents unfranked)...... 0 7,499 0 7,499
PROVIDED
Final dividend of 3 cents per share unfranked
(1996:
7 cents unfranked)............................ 5,647 13,126 5,647 13,126
------- ------- ------- -------
5,658 20,630 5,658 20,630
======= ======= ======= =======
FRANKING CREDITS
The amount of franking credits available for the
subsequent financial year:
Balance as at 31 December 1997.................. 1,772 258
Franking credits arising from payment of income
tax for the year ended 1997................... 0 0
Franking debits arising from payment of franked
dividends for year ended 1997................. 0 0
Franking credits that the entity may be
prevented from distributing in 1998........... 1,437 258
</TABLE>

8. CASH

D-27
<PAGE> 286
PLUTONIC RESOURCES LIMITED AND ITS CONTROLLED ENTITIES

NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS (CONTINUED)
AT 31 DECEMBER 1997

9. RECEIVABLES AND BULLION -- CURRENT

10. INVENTORIES

<TABLE>
<CAPTION>
PLUTONIC RESOURCES
CONSOLIDATED LIMITED
--------------------- --------------------
1997 1996 1997 1996
--------- -------- -------- --------
$000 $000 $000 $000
(ROUNDING OFF TO THE NEAREST THOUSAND DOLLARS
HAS BEEN ADOPTED)
<S> <C> <C> <C> <C>
CURRENT
Gold (at cost)................................. 10,213 9,444 0 0
Gold (at net realisable value)................. 7,949 18,243 0 0
Consumable Stores and Spares (at cost)......... 8,081 7,206 0 0
Other (at cost)................................ 153 199 0 0
-------- ------- ------- -------
26,396 35,092 0 0
======== ======= ======= =======
NON-CURRENT
Gold (at cost)*................................ 1,210 31,899 0 0
Gold (at net realisable value)*................ 25,835 8,726 0 0
-------- ------- ------- -------
27,045 40,625 0 0
======== ======= ======= =======
53,441 75,717 0 0
======== ======= ======= =======
</TABLE>

- ---------------

* Represents stockpiled ore which is not expected to be processed in the
following twelve months.

11. OTHER CURRENT ASSETS

D-28
<PAGE> 287
PLUTONIC RESOURCES LIMITED AND ITS CONTROLLED ENTITIES

NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS (CONTINUED)
AT 31 DECEMBER 1997

12. RECEIVABLES -- NON-CURRENT

13. INVESTMENTS

<TABLE>
<CAPTION>
PLUTONIC RESOURCES
CONSOLIDATED LIMITED
--------------------- --------------------
1997 1996 1997 1996
--------- -------- -------- --------
$000 $000 $000 $000
ROUNDING OFF TO THE NEAREST THOUSAND DOLLARS
HAS BEEN ADOPTED
<S> <C> <C> <C> <C>
Investments comprise:
INVESTMENTS IN CONTROLLED ENTITIES
Shares listed on a prescribed stock Exchange --
at cost...................................... 0 0 29,622 29,622
Less provision for diminution in value**....... (8,194) 0 (25,130) (9,253)
-------- ------- ------- -------
0 0 4,492 20,369
-------- ------- ------- -------
Shares in unlisted corporations -- at Cost..... 0 0 106,806 106,806
-------- ------- ------- -------
(8,194) 0 111,298 127,175
======== ======= ======= =======
INVESTMENTS IN OTHER CORPORATIONS
Shares listed on a prescribed stock exchange --
at cost...................................... 25,545 63,900 0 6,671
Less provision for diminution in value......... (10,123) (791) 0 0
-------- ------- ------- -------
15,422 63,109 0 6,671
======== ======= ======= =======
Shares in unlisted corporations -- at cost..... 0 2,041 0 0
Units in unlisted corporations -- at cost...... 495 495 0 0
Less provision for diminution in value......... (495) (2,536) 0 0
-------- ------- ------- -------
0 0 0 0
======== ======= ======= =======
7,228 63,109 111,298 133,846
======== ======= ======= =======
Aggregate quoted market value of shares listed
on a prescribed stock exchange at 31 December
1997
-- controlled entity........................... 0 0 17,705 28,118
======== ======= ======= =======
-- other investments........................... 13,467 53,257 0 3,457
======== ======= ======= =======
</TABLE>

- ---------------

** Represents a provision for the proposed placement of Lachlan Resources NL
shares with Forsayth NL (100% subsidiary of Plutonic Resources Limited) at 30
cents per share increasing Plutonic's ownership of Lachlan from 62% to 81%.

D-29
<PAGE> 288
PLUTONIC RESOURCES LIMITED AND ITS CONTROLLED ENTITIES

NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS (CONTINUED)
AT 31 DECEMBER 1997

The Directors consider that the underlying value of the investments is not
less than the current carrying value.

<TABLE>
<CAPTION>
PERCENTAGE HELD AMOUNT OF PLUTONIC
BY PLUTONIC RESOURCES LIMITED'S
RESOURCES LIMITED DIRECT INVESTMENT
------------------ --------------------
1997 1996 1997 1996
------- ------- -------- --------
<S> <C> <C> <C> <C>
% % $000 $000

<CAPTION>
(ROUNDING OFF TO THE NEAREST THOUSAND
DOLLARS
HAS BEEN ADOPTED)
<S> <C> <C> <C> <C>
Plutonic Operations Limited(1).......................... 100 100 24,500 24,500
CONTROLLED ENTITIES OF PLUTONIC OPERATIONS LIMITED
Rubyset Pty Limited(1)................................ 100 100 -- --
Plutonic (Baxter) Pty Ltd(1)............................ 100 100 -- --
Plutonic Administration Services Pty Ltd(1)(7).......... 100 100 0 0
Plutonic Finance Pty Ltd(1)(7).......................... 100 100 0 0
Plutonic Gold Pty Ltd(1)(7)............................. 100 100 0 0
Plutonic Mining Services Pty Ltd(1)(7).................. 100 100 0 0
Lachlan Resources NL(1)................................. 62.13 62.13 29,622 29,622
CONTROLLED ENTITIES OF LACHLAN RESOURCES NL
Lachlan Pacific NL(5)(6).............................. 55.91 55.91 -- --
Quotidian No 101 Pty Limited(1)....................... 62.13 62.13 -- --
Archaean Gold NL(8)(1)................................ 62.13 57.50 -- --
Forsayth NL(1).......................................... 100 100 82,306 82,306
CONTROLLED ENTITIES OF FORSAYTH NL
Forsayth (New Zealand) Ltd(1)......................... 100 100 -- --
Forsayth Securities Ltd(1)............................ 100 100 -- --
Forsayth Tenements Ltd(1)............................. 100 100 -- --
Forsayth Mining Services Ltd(1)....................... 100 100 -- --
Forsayth (Gibson) Ltd(1).............................. 100 100 -- --
Forsayth Group Management Pty Ltd(1).................. 100 100 -- --
Blacksmith Holdings Pty Ltd(1)........................ 100 100 -- --
Canaustra Holdings Pty Ltd(1)......................... 100 100 -- --
Bellevue Gold Project Pty Ltd(1)...................... 100 100 -- --
Patshore Pty Ltd(1)................................... 100 100 -- --
CONTROLLED ENTITIES OF PATSHORE PTY LTD
Austwhim Resources NL(1).............................. 100 100 -- --
Whim Creek Consolidated NL(1)......................... 100 100 -- --
Red Rock Mining Corp Ltd(1)............................. 100 100 -- --
CONTROLLED ENTITIES OF RED ROCK MINING CORP LTD
Red Rock Canada Inc(2)(6)............................. 100 100 -- --
Red Rock Pacific Ltd(3)(6)............................ 100 100 -- --
Red Rock Europe BV(4)(6).............................. 100 100 -- --
Grants Patch Mining Limited(1).......................... 100 100 -- --
CONTROLLED ENTITIES OF GRANTS PATCH MINING LIMITED
Publishing Investments Company Pty Ltd(1)............. 100 100 -- --
Sundowner Minerals NL(1).............................. 100 100 -- --
------- -------
136,428 136,428
Less provision for diminution in value................ (25,130) (9,253)
------- -------
111,298 127,175
======= =======
</TABLE>

D-30
<PAGE> 289
PLUTONIC RESOURCES LIMITED AND ITS CONTROLLED ENTITIES

NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS (CONTINUED)
AT 31 DECEMBER 1997

- ---------------

(1) Incorporated in Australia

(2) Incorporated in Canada

(3) Incorporated in Cook Islands

(4) Incorporated in Netherlands

(5) Incorporated in New Zealand

(6) These companies operate in their country of incorporation

(7) Rounding off to the nearest thousand dollars has eliminated the following
investments.

Actual dollars are shown below:

<TABLE>
<CAPTION>
1997 1996
------ ------
$000 $000
(ROUNDING OFF TO
THE NEAREST
THOUSAND DOLLARS
HAS BEEN
ADOPTED)
<S> <C> <C>
Plutonic Administration Services Pty Ltd 1 1
Plutonic Finance Pty Ltd 1 1
Plutonic Gold Pty Ltd 1 1
Plutonic Mining Services Pty Ltd 2 2
</TABLE>

(8) Acquired 9.33% by Lachlan Resources NL during the year from outside
remaining shareholders and 3% from Forsayth NL to acquire 100%.

D-31
<PAGE> 290
PLUTONIC RESOURCES LIMITED AND ITS CONTROLLED ENTITIES

NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS (CONTINUED)
AT 31 DECEMBER 1997

14. PROPERTY PLANT AND EQUIPMENT

<TABLE>
<CAPTION>
PLUTONIC
RESOURCES
CONSOLIDATED LIMITED
------------------------- ------------------
1997 1996 1997 1996
----------- ---------- ------- -------
$000 $000 $000 $000
(ROUNDING OFF TO THE NEAREST THOUSAND DOLLARS
HAS BEEN ADOPTED)
<S> <C> <C> <C> <C>
Land and Buildings
Freehold land -- at cost................................. 249 249 0 0
Buildings -- at cost..................................... 14,242 13,363 0 0
Accumulated depreciation................................. (10,266) (8,358) 0 0
-------- ------- -- --
4,225 5,254 0 0
-------- ------- -- --
Motor vehicles
At cost.................................................. 6,619 5,568 0 0
Accumulated depreciation................................. (3,527) (2,325) 0 0
-------- ------- -- --
3,092 3,243 0 0
-------- ------- -- --
Plant and equipment
At cost.................................................. 19,593 12,196 0 0
Accumulated depreciation................................. (8,338) (5,989) 0 0
-------- ------- -- --
11,255 6,207 0 0
-------- ------- -- --
Plant Construction Costs
At cost.................................................. 131,311 84,238 0 0
Accumulated depreciation................................. (35,514) (21,882) 0 0
-------- ------- -- --
95,797 62,356 0 0
-------- ------- -- --
Capital Works in Progress at cost........................ 1,276 20,239 0 0
-------- ------- -- --
115,645 97,299 0 0
======== ======= == ==
</TABLE>

D-32
<PAGE> 291
PLUTONIC RESOURCES LIMITED AND ITS CONTROLLED ENTITIES

NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS (CONTINUED)
AT 31 DECEMBER 1997

15. DEFERRED COST OF MINERAL PROSPECTS

(a) Exploration Expenditure

<TABLE>
<CAPTION>
PLUTONIC
RESOURCES
CONSOLIDATED LIMITED
------------------------- ------------------
1997 1996 1997 1996
----------- ---------- ------- -------
$000 $000 $000 $000
(ROUNDING OFF TO THE NEAREST THOUSAND DOLLARS
HAS BEEN ADOPTED)
<S> <C> <C> <C> <C>
Opening Balance................................ 109,318 63,235 411 504
Acquisition of Controlled Entity............... 5,259 37,644 0 0
Incurred during year........................... 34,204 32,574 146 493
-------- ------- ---- ----
148,781 133,453 557 997
Less:
Amounts recovered from JV parties.............. (1,497) (2,491) (27) (175)
Other proceeds................................. (192) (2,014) 0 0
Amounts written off............................ (25,709) (4,347) (218) (411)
Amortisation................................... (5,082) (5,082) 0 0
Transferred to:
-- acquisition costs........................... 0 (305) 0 0
-- preproduction costs......................... (9,375) (9,896) 0 0
-------- ------- ---- ----
106,926 109,318 312 411
======== ======= ==== ====
</TABLE>

The above exploration expenditure includes costs arising from acquisitions,
exploration and evaluation related to areas of interest where exploration
activities have not reached a stage which permits reasonable assesssment of the
existence or otherwise of economically recoverable reserves and active and
significant operations in relation to those areas are continuing.

The Directors have considered their obligation under Section 294(4) of the
Corporations Law and have concluded for certain areas of interest it is not
possible to presently conclude whether it would have been reasonable for the
Company to spend the current carrying value to acquire these assets as at the
end of the accounting period until further exploration work is carried out on
these areas of interest.

D-33
<PAGE> 292
PLUTONIC RESOURCES LIMITED AND ITS CONTROLLED ENTITIES

NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS (CONTINUED)
AT 31 DECEMBER 1997

(b) Acquisition Costs

<TABLE>
<CAPTION>
PLUTONIC
RESOURCES
CONSOLIDATED LIMITED
-------------------- --------------
1997 1996 1997 1996
-------- -------- ----- -----
$000 $000 $000 $000
(ROUNDING OFF TO THE NEAREST THOUSAND
DOLLARS HAS BEEN ADOPTED)
<S> <C> <C> <C> <C>
Opening Balance.................................. 69,464 82,877 0 0
Incurred during year............................. 83 2,358 0 0
Transferred from exploration costs............... 0 305 0 0
------- ------- --- ---
69,547 85,540 0 0
Amortisation..................................... (24,957) (16,076) 0 0
------- ------- --- ---
44,590 69,464 0 0
======= ======= === ===
(c) Preproduction Costs
Opening Balance.................................. 105,828 66,581 0 0
Incurred during year............................. 51,480 47,770 0 0
Transferred from exploration expenditure......... 9,375 9,896 0 0
------- ------- --- ---
166,683 124,247 0 0
Amortisation..................................... (38,531) (18,419) 0 0
------- ------- --- ---
128,152 105,828 0 0
======= ======= === ===
(d) Advanced Stripping Costs
Opening Balance.................................. 22,469 8,009 0 0
Net movement for year............................ (17,246) 14,460 0 0
------- ------- --- ---
5,223 22,469 0 0
======= ======= === ===
284,891 307,079 312 411
======= ======= === ===
</TABLE>

16. OTHER NON-CURRENT ASSETS

(a) Future Income Tax Benefits Recognised

The future income tax benefit is made up of the following estimated tax
benefits:

D-34
<PAGE> 293
PLUTONIC RESOURCES LIMITED AND ITS CONTROLLED ENTITIES

NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS (CONTINUED)
AT 31 DECEMBER 1997

(b) Future Income Tax Benefits Not Recognised

Future income tax benefits not brought to account, the benefits of which
will only be realised if the condition for deductibility set out in Note
1(b) occur.

17. CREDITORS AND BORROWINGS -- CURRENT

18. PROVISIONS -- CURRENT

19. CREDITORS AND BORROWINGS -- NON CURRENT

D-35
<PAGE> 294
PLUTONIC RESOURCES LIMITED AND ITS CONTROLLED ENTITIES

NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS (CONTINUED)
AT 31 DECEMBER 1997

20. PROVISIONS -- NON-CURRENT

<TABLE>
<CAPTION>
PLUTONIC RESOURCES
CONSOLIDATED LIMITED
--------------------------- --------------------------
1997 1996 1997 1996
------------ ----------- ----------- -----------
$000 $000 $000 $000
(ROUNDING OFF TO THE NEAREST THOUSAND DOLLARS HAS BEEN
ADOPTED)
<S> <C> <C> <C> <C>
Deferred Income Tax................................ 24,776 38,180 111 148
Employee entitlements.............................. 493 134 0 0
Mine Rehabilitation................................ 3,560 1,984 0 0
Other.............................................. 1,008 566 0 0
-------- ------- ------- -------
29,837 40,864 111 148
======== ======= ======= =======
</TABLE>

21. SHARE CAPITAL

<TABLE>
<CAPTION>
PLUTONIC RESOURCES
CONSOLIDATED LIMITED
--------------------------- --------------------------
1997 1996 1997 1996
------------ ----------- ----------- -----------
$000 $000 $000 $000
(ROUNDING OFF TO THE NEAREST THOUSAND DOLLARS HAS BEEN
ADOPTED)
<S> <C> <C> <C> <C>
Authorised 800,000,000 ordinary shares of 50c each
(1996: 800,000,000 shares)....................... 400,000 400,000 400,000 400,000
======== ======= ======= =======
Issued and paid up 188,115,785 ordinary shares of
50c each fully paid (1996: 187,487,785 shares)... 94,058 93,743 94,058 93,743
1,077,087 -- ordinary shares of 50c each paid to 5c
(1996: 1,705,087 shares)......................... 54 85 54 85
-------- ------- ------- -------
TOTAL ISSUED SHARE CAPITAL.................... 94,112 93,828 94,112 93,828
======== ======= ======= =======
</TABLE>

(a) Issues during year

(i) There were no fully paid ordinary 50c shares issued in 1997
(1996 -- 7,071,108) and there were no bonus shares issued in 1997
(1996 -- 560) on the exercise of options issued under the Plutonic
Resources Limited Employee Share Participation Plan;

(ii) There were no fully paid ordinary 50c shares issued in 1997
(1996 -- 95,000) and there were no bonus shares issued in 1997
(1996 -- 6,756) on the exercise of options issued under the Plutonic
Resources Non-Executive Directors' Option Scheme;

(iii) 628,000 fully paid ordinary 50c shares (1996 -- 76,875) issued on
partly paid shares being paid in full; and

(iv) There were no ordinary 50c shares each paid to 5c issued in 1997
(1996 -- 1,490,837) on the exercise of options issued under the
Plutonic Resources Limited Employee Share Participation Plan.

(b) Partly Paid Shares

<TABLE>
<CAPTION>
CALLS TO BE ON ISSUE OPTIONS CALLS ON ISSUE
RECEIVED 31.12.96 EXERCISED RECEIVED 31.12.97
- ----------- --------- --------- -------- ---------
<S> <C> <C> <C> <C>
75c 211,250 0 0 211,250
85c 1,330,962 0 628,000 702,962
90c 162,875 0 0 162,875
--------- -- ------- ---------
1,705,087 0 628,000 1,077,087
========= == ======= =========
</TABLE>

D-36
<PAGE> 295
PLUTONIC RESOURCES LIMITED AND ITS CONTROLLED ENTITIES

NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS (CONTINUED)
AT 31 DECEMBER 1997

22. OPTIONS

(a) Plutonic Resources Employee Share Participation Plan ("the Plan")

The plan operates by the granting of options over shares in the Chief
Entity to employees. The options can be exercised at the discretion of the
employee over a period of five years generally to the maximum extent of 10, 20,
30 and 40 percent per annum from either the date of grant and the 1st, 2nd and
3rd anniversaries of the date of grant, or, the 1st, 2nd, 3rd and 4th
anniversaries of the date of grant respectively. Options are granted by the
Directors at various times. The maximum number of shares which may be subject to
employee options is 5% of the issued capital of the Chief Entity. Options over a
further 6,187,789 shares may be granted. The options expire after five years
from the date of grant of the option or on termination of the employees
services, whichever occurs first.

Employees may exercise their options by paying either 5 cents per share or
by paying the full exercise price per share.

Options and partly paid shares are not transferable until the full exercise
price has been paid and fully paid shares issued to the option holder.

The Chief Entity does not provide any assistance to employees in funding
the exercise of options.

The share price at 31 December was $4.28 (1996: $5.75).

The total market value of shares issued upon the exercise of options during
the year was $Nil (1996 -- $1,521,533). Proceeds from the issue of these shares
was $Nil (1996 -- $301,680).

Details of movements during the year are shown in the table below.

Movement during year in the number of shares subject to options granted
under the Plan

<TABLE>
<CAPTION>
DATE OUTSTANDING OUTSTANDING
OF EXERCISE AT LAPSED ON AT
GRANT PRICE 31.12.96 GRANTED EXERCISED TERMINATION 31.12.97
- --------- -------- ----------- ------- --------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
12-Oct-94 6.04 288,000 0 0 60,000 228,000
12-Aug-95 6.04 200,000 0 0 0 200,000
21-May-96 7.75 200,000 0 0 0 200,000
21-May-96 8.75 200,000 0 0 0 200,000
24-Jun-96 7.75 765,000 0 0 0 765,000
24-Jun-96 8.75 765,000 0 0 0 765,000
26-Jun-96 7.75 460,000 0 0 120,000 340,000
26-Jun-96 8.75 460,000 0 0 120,000 340,000
--------- -- -- ------- -----------
3,338,000 0 0 300,000 3,038,000
========= == == ======= ===========
</TABLE>

(b) Plutonic Resources Non-Executive Directors' Option Scheme (the Scheme)

The scheme operates by the granting of options over shares in the Chief
Entity to Directors. The options can be exercised at the discretion of the
Director at any time within five years of the date of grant. Options recommended
by the Directors are approved for granting by shareholders at the Annual General
Meeting. The maximum number of shares which may be subject to Non-Executive
Director options is 500,000 shares. Options over a further 320,000 shares may be
granted. The options expire after five years from the date of grant or on
resignation of the Director from the Board.

Options are not transferable until the full exercise price has been paid
and fully paid shares issued to the option holder.

D-37
<PAGE> 296
PLUTONIC RESOURCES LIMITED AND ITS CONTROLLED ENTITIES

NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS (CONTINUED)
AT 31 DECEMBER 1997

The Chief Entity does not provide any assistance to Directors in funding
the exercise of options.

The total market value of shares issued during the year was $Nil (1996
$677,100). Proceeds from the issue of these shares was $Nil (1996 -- $89,300).

Details of movements during the year are shown in the table below.

Movement during year in the number of shares subject to options granted
under the Scheme

<TABLE>
<CAPTION>
OUTSTANDING AT OUTSTANDING AT
DATE OF GRANT EXERCISE PRICE 31.12.96 GRANTED EXERCISED 31.12.97
- ------------- -------------- -------------- ------- --------- --------------
<S> <C> <C> <C> <C> <C>
28-Nov-95 5.87 40,000 0 0 40,000
05-Jun-97 5.66 0 70,000 0 70,000
05-Jun-97 6.40 0 70,000 0 70,000
------ ------- -- -------
40,000 140,000 0 180,000
====== ======= == =======
</TABLE>

23. RESERVES
<TABLE>
<CAPTION>
PLUTONIC RESOURCES
CONSOLIDATED LIMITED
------------------ ------------------
1997 1996 1997 1996
------- ------- ------- -------
<S> <C> <C> <C> <C>
$'000 $'000 $'000 $'000

<CAPTION>
(ROUNDING OFF TO THE NEAREST THOUSANDS
DOLLARS HAS BEEN ADOPTED)
<S> <C> <C> <C> <C>
SHARE PREMIUM ACCOUNT............................... 163,008 162,756 163,008 162,756
======= ======= ======= =======
Balance at 31 December 1996......................... 162,756 124,840 162,756 124,840
Premium on shares issued pursuant to:
-- Share Issue................................. 0 37,633 0 37,633
-- Employee Share Participation Plan........... 252 245 252 245
-- Non-Executive Directors' Option Scheme...... 0 42 0 42
Bonus Issue of ordinary shares pursuant to:
-- Non-Executive Directors' Option Scheme...... 0 (4) 0 (4)
------- ------- ------- -------
Balance at 31 December 1997....................... 163,008 162,756 163,008 162,756
======= ======= ======= =======
</TABLE>

24. OUTSIDE EQUITY INTERESTS IN CONTROLLED ENTITIES

<TABLE>
<CAPTION>
SHARE
CAPITAL RESERVES PROFIT & LOSS TOTAL
------------- -------- ------------- ------
$000 $000 $000 $000
(ROUNDING OFF TO THE NEAREST THOUSANDS DOLLARS HAS
BEEN ADOPTED)
<S> <C> <C> <C> <C>
Balance at 31 December 1996..................... 16,653 1,873 (5,838) 12,688
Movement for year............................... (783) (79) 95 (767)
Profit/(Loss) for year.......................... 0 0 (9,170) (9,170)
------ ----- ------- ------
Net movement for year........................... (783) (79) (9,075) (9,937)
------ ----- ------- ------
Balance 31 December 1997........................ 15,870 1,794 (14,913) 2,751
====== ===== ======= ======
</TABLE>

25. UNSECURED FINANCE FACILITY

The finance facility represents advances which may be drawn down with a
syndicate of banks arranged by ABN AMRO Australia Limited, The Chase Manhattan
Bank and Credit Suisse First Boston. At 31 December 1997 $170,000,000
(1996 -- $180,000,000) has been drawn down. The maximum amount available is
$400,000,000 (1996 -- $250,000,000).

D-38
<PAGE> 297
PLUTONIC RESOURCES LIMITED AND ITS CONTROLLED ENTITIES

NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS (CONTINUED)
AT 31 DECEMBER 1997

26. SUPERANNUATION COMMITMENTS

The Economic Entity contributes to three active superannuation funds
covering all of its employees.

The Plutonic Resources Superannuation Plan provides defined pension and/or
lump sum benefits for certain employees on retirement or death based on years of
plan membership and average salary over the last three years of employment.
Benefits on an accumulation basis are provided for terminations other than
retirement or death. The Plan is noncontributory whereby only the Company
contributes to the Plan at rates determined by the Plan Actuary.

The last actuarial review of the Plan dated 21 December 1995 covered the
actuarial assessment as at 1 July 1995, and was made by consulting actuaries
William M Mercer Pty Ltd (Actuary Mr Ian W Orchard FIA FIAA). The next actuarial
review of this plan will be carried out as at 1 July 1998.

The following details were shown in the Plan's financial statements as at
30 June 1997 being the date to which the latest financial statements of the plan
have been prepared.

<TABLE>
<CAPTION>
1997
----------------
$000
(ROUNDING OFF TO
THE NEAREST
THOUSAND DOLLARS
HAS BEEN
ADOPTED)
<S> <C>
Net market value of Plan assets as at 30 June 1995.... 2,724
Accrued benefits at the date of the last actuarial
review(1)........................................... 2,526
-----
Surplus of Net Market Value of Plan assets over
Accrued Benefits.................................... 198
-----
Vested Benefits of the Plan as at 30 June 1997........ 3,035
=====
</TABLE>

- ---------------

(1) Accrued benefits as at 1 July 1995 being the date of the last actuarial
review.

All other employees have contributions made to funds providing benefits on
an accumulation basis, covering award productivity superannuation requirements
and personal superannuation requirements with transportability of benefits.

The economic entity has satisfied the legally enforceable contribution rate
of 6% of employees wages and salaries.

D-39
<PAGE> 298
PLUTONIC RESOURCES LIMITED AND ITS CONTROLLED ENTITIES

NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS (CONTINUED)
AT 31 DECEMBER 1997

27. JOINT VENTURES

The economic entity has interests in the following material joint ventures,
whose principal activities are exploration and the production of gold:

Joint venture contribution to operation profit/(loss)

<TABLE>
<CAPTION>
INTEREST HELD INTEREST HELD
31 DECEMBER 1997 31 DECEMBER 1996 1997 1996
---------------- ---------------- --------- --------
$000 $000
(ROUNDING OFF TO THE
NEAREST THOUSAND
DOLLARS HAS BEEN
ADOPTED)
<S> <C> <C> <C> <C>
Baxter.................. 66.67% 66.67% (6,524) 11,088
Keith Kilkenny.......... 45.45% 49% 0 0
Mt Morgans.............. 80% 80% (14,861) 3,410
Peak Hill............... 66.67% 66.67% 0 0
------- ------
(21,385) 14,498
======= ======
</TABLE>

The interests in joint ventures are included in the accounts as follows:

<TABLE>
<CAPTION>
1997 1996
-------- --------
$000 $000
(ROUNDING OFF TO THE
NEAREST THOUSAND
DOLLARS HAS BEEN
ADOPTED)
<S> <C> <C>
Current assets
Cash and deposits...................................... 1,210 1,268
Receivables and bullion................................ 6,343 8,030
Inventories............................................ 8,729 19,277
Other Current Assets................................... 82 43
------ ------
16,364 28,618
====== ======
Non-Current assets
Deferred cost of mineral prospects..................... 22,939 18,403
Other Non-Current assets............................... 4,967 8,478
------ ------
27,906 26,881
====== ======
Current liabilities
Creditors and borrowings............................... 4,478 5,739
Provisions............................................. 666 592
------ ------
5,144 6,331
====== ======
Non-Current liabilities
Provisions............................................. 1,120 678
====== ======
</TABLE>

28. COMMITMENTS

ECONOMIC ENTITY

(a) Exploration Joint Ventures

Controlled Entities are contributing parties to exploration joint venture
agreements. Under the terms of those agreements the controlled entities will be
required to contribute toward the exploration and other costs if they are to
maintain or increase their percentage holdings.

D-40
<PAGE> 299
PLUTONIC RESOURCES LIMITED AND ITS CONTROLLED ENTITIES

NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS (CONTINUED)
AT 31 DECEMBER 1997

Expenditure commitments as at 31 December 1997 are:

<TABLE>
<CAPTION>
PLUTONIC
RESOURCES
CONSOLIDATED LIMITED
--------------------- --------------
1997 1996 1997 1996
--------- -------- ----- -----
$000 $000 $000 $000
(ROUNDING OFF TO THE NEAREST THOUSAND
DOLLARS HAS BEEN ADOPTED)
<S> <C> <C> <C> <C>
Not later than 1 year................................. 500 317 0 0
Later than 1 year and not later than 2 years.......... 4,332 0 0 0
Later than 2 years and not later than 5 years......... 6,940 14,312 0 0
Later than 5 years.................................... 500 850 0 0
-------- ------- --- ---
(b) Lease Commitments.................................... 12,272 15,479 0 0
======== ======= === ===
Operating Leases
Office and equipment lease commitments
Not later than 1 year................................. 996 860 0 0
Later than 1 year and not later than 2 years.......... 996 828 0 0
Later than 2 years and not later than 5 years......... 2,948 1,449 0 0
Later than 5 years.................................... 73 0 0 0
-------- ------- --- ---
5,013 3,137 0 0
======== ======= === ===

Contracts for capital expenditure committed at 31
December 1997....................................... 1,200 21,600 0 0

(d) Tenement Expenditure Commitments

Expenditure required to maintain tenements in good
standing.

(i) Rentals 1998..................................... 1,261 2,126 5 24
(ii) Expenditure requirements 1998.................... 18,134 26,235 59 348
</TABLE>

29. CONTINGENT LIABILITIES

CHIEF ENTITY

UNSECURED

Guarantees

The Chief Entity has given guarantees to third parties in respect of leases
of controlled entities. The maximum amount of the liability is $5,013,000
(1996 -- $3,137,000).

HOMESTAKE MINING COMPANY PROPOSED ACQUISITION OF PLUTONIC

If there is a material breach of the Combination Implementation Agreement
dated 22 December 1997 between the Company and Homestake Mining Company or
either party receives a superior proposal for a third party to acquire 15% or
more of the Company, the Agreement may be terminated and upon termination the
Company or Homestake may be required to pay the other party a fee of US$4.5
million. If Homestake stockholders do not approve of the Combination, Homestake
will be required to reimburse Plutonic up to US$1 million of expenses.

D-41
<PAGE> 300
PLUTONIC RESOURCES LIMITED AND ITS CONTROLLED ENTITIES

NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS (CONTINUED)
AT 31 DECEMBER 1997

ECONOMIC ENTITY

UNSECURED

(a) Service Agreements

The maximum contingent liability of the Chief Entity and its controlled
entities for termination benefits under service agreements with Directors and
persons who take part in the management of the Company as at 31 December 1997
was $1,943,458 (1996 -- $1,588,613).

(b) Further amounts payable on the acquisition of assets

Controlled entities have purchased interests in tenements and Joint
Ventures and shares in controlled entities. The purchase agreements provide that
additional purchase price may be paid conditional upon certain events. The
maximum amount to be paid is $4m.

SECURED

Guarantees

Controlled entities have given guarantees amounting to $5,158,500
(1996 -- $3,522,700) relating to various tenements.

30. REMUNERATION OF DIRECTORS

<TABLE>
<CAPTION>
PLUTONIC
RESOURCES
CONSOLIDATED LIMITED
----------------- -----------------
1997 1996 1997 1996
------- ------- ------- -------
$000 $000 $000 $000
(ROUNDING OFF TO THE NEAREST THOUSAND
DOLLARS HAS BEEN ADOPTED)
<S> <C> <C> <C> <C>
Amounts paid or payable to Directors by the entities
of which they are Directors or any related party,
including retirement benefits.................... 854 1,652
Amounts paid or payable to Directors of Plutonic
Resources Limited from the entity or any related
party............................................ 809 826
Number of Directors of Plutonic Resources Limited
whose remuneration including retirement benefits
were within the following bands:
$10,000 -- $19,999 1 0
$30,000 -- $39,999 1 1
$40,000 -- $49,999 2 3
$70,000 -- $79,999 0 1
$100,000 -- $109,999 1 0
$110,000 -- $119,999 1 0
$190,000 -- $199,999 0 1
$390,000 -- $399,999 0 1
$450,000 -- $459,999 1 0
</TABLE>

The economic entity has adopted ASC Class Order 96/1171 with respect to
disclosure of Directors' remuneration.

D-42
<PAGE> 301
PLUTONIC RESOURCES LIMITED AND ITS CONTROLLED ENTITIES

NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS (CONTINUED)
AT 31 DECEMBER 1997

31. REMUNERATION OF EXECUTIVES

<TABLE>
<CAPTION>
PLUTONIC RESOURCES
CONSOLIDATED LIMITED
-------------- ------------------
1997 1996 1997 1996
----- ----- ------- -------
$'000 $'000 $'000 $'000
(ROUNDING OFF TO THE NEAREST
THOUSAND DOLLARS HAS BEEN ADOPTED)
<S> <C> <C> <C> <C>
Amounts received or due and receivable by executive
officers of the Economic Entity whose remuneration
exceeds $100,000.................................. 3,556 3,168
Number of executives whose remuneration exceeds
$100,000.......................................... 20 19
Amounts received or due and receivable by executive
officers of Plutonic Resources Limited including
executive Directors whose remuneration exceeds
$100,000.......................................... 3,556 3,168
Number of executives whose remuneration exceeds
$100,000.......................................... 20 19
Number of executive officers of Plutonic Resources
Ltd who received remuneration in excess of
$100,000 were within the following bands:
$100,000 - $109,999................................. 1 1
$110,000 - $119,999................................. 1 5
$120,000 - $129,999................................. 4 2
$130,000 - $139,999................................. 4 1
$140,000 - $149,999................................. 1 1
$150,000 - $159,999................................. 1 1
$170,000 - $179,999................................. 1 1
$180,000 - $189,999................................. 0 3
$190,000 - $199,999................................. 1 0
$200,000 - $209,999................................. 1 2
$210,000 - $219,999................................. 1 0
$220,000 - $229,999................................. 1 0
$230,000 - $239,999................................. 0 1
$260,000 - $269,999................................. 2 0
$390,000 - $399,999................................. 0 1
$450,000 - $459,999................................. 1 0
</TABLE>

32. SEGMENT REPORTING

The Economic Entity carries out mining operations and mineral exploration
predominantly in Australia.

33. RELATED PARTY DISCLOSURES

The names of the Directors of the Chief Entity who held office during the
year are:

<TABLE>
<S> <C>
E P McClintock R J Hawkes
Tan Sri Ibrahim Menudin Abdul Samad Haji Alias
W A Bennett D L Cooper (retired 20 May 1997)
J M Clark
</TABLE>

D-43
<PAGE> 302
PLUTONIC RESOURCES LIMITED AND ITS CONTROLLED ENTITIES

NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS (CONTINUED)
AT 31 DECEMBER 1997

Alternate Directors

C W Lim (alternate for Tan Sri Ibrahim Menudin) L K Phan (alternate for
Abdul Samad Haji Alias)

Transactions with related parties during the year were as follows:

(a) Directors

Legal fees amounting to $875,536 (1996 -- $2,902,512) were paid to Deacons
Graham & James, Melbourne (of which Mr D L Cooper is a consultant).

Consulting fees amounting to $9,000 (1996 -- Nil) were paid to McClintock
Associates Pty Limited (of which Mr E P McClintock is a Director and
Shareholder).

(b) Director Related Entities

Consulting fees amounting to $35,000 (1996 -- $43,897) were paid or are
payable to Sir Eric McClintock.

These payments were made for services rendered in the ordinary course of
business and on normal commercial terms and conditions.

Controlled entities made payments and received funds on behalf of the Chief
Entity and other controlled entities by way of intercompany loan accounts
with each controlled entity. These transactions are in the normal course of
business and on normal terms and conditions.

<TABLE>
<CAPTION>
1997 1996
------- -------
$'000 $'000
(ROUNDING OFF TO
THE NEAREST
THOUSAND DOLLARS
HAS BEEN ADOPTED)
<S> <C> <C>
Interest received................................ 11,776 8,677
Dividend received................................ 20,000 20,000
Interest paid.................................... 5,498 3,248
Other Income..................................... 0 6,000
</TABLE>

The amounts receivable from controlled entities at balance date:

<TABLE>
<S> <C> <C>
Receivables -- Non-Current....................... 260,628 233,530
Creditors and Borrowings -- Non-Current.......... 152,389 87,602
</TABLE>

(d) Controlled Entities -- Partly Owned

Overhead recovery fees of $384,000 received from Lachlan Resources NL
pursuant to arrangements under which the Chief Entity manages and performs
all Lachlan's operations and head office functions and provides Lachlan
with office accommodation and other facilities.

(e) Joint Venture Parties

Controlled entities acted as operators of projects conducted with joint
venture parties. Amounts receivable from joint venture parties as at 31
December 1997 totalled $913,833 (1996 -- $881,250).

D-44
<PAGE> 303
PLUTONIC RESOURCES LIMITED AND ITS CONTROLLED ENTITIES

NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS (CONTINUED)
AT 31 DECEMBER 1997

34. EARNINGS PER SHARE

<TABLE>
<CAPTION>
1997 1996
------ ------
<S> <C> <C>
(a) Basic
Weighted average number of ordinary shares (millions) on
issue used in the calculation of basic earnings per
share..................................................... 187.7 187.4
Basic earnings per share (cents per share).................. (33.2) 21.7
(b) Diluted
Weighted average number of ordinary shares (millions) and
options on issue used in the calculation of diluted
earnings per share........................................ 190.9 190.8
Diluted earnings per share (cents per share)................ (33.1) 21.3
</TABLE>

35. CASH FLOW STATEMENT

(a) Reconciliation of Cash

<TABLE>
<CAPTION>
PLUTONIC
RESOURCES
CONSOLIDATED LIMITED
-------------------- ----------------
1997 1996 1997 1996
-------- -------- ------ ------
$000 $000 $000 $000
(ROUNDING OFF TO THE NEAREST THOUSAND
DOLLARS HAS BEEN ADOPTED.)
<S> <C> <C> <C> <C>
Cash................................................ 43,340 13,779 897 82
Commercial bills and deposits....................... 1,729 5,133 0 0
Gold bullion........................................ 31,496 30,236 0 0
------ ------ --- --
76,565 49,148 897 82
====== ====== === ==
</TABLE>

D-45
<PAGE> 304
PLUTONIC RESOURCES LIMITED AND ITS CONTROLLED ENTITIES

NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS (CONTINUED)
AT 31 DECEMBER 1997

(b) Reconciliation of Operating Profit After Income Tax to Net Cash Provided
by(used in) Operating Activities

<TABLE>
<CAPTION>
PLUTONIC RESOURCES
CONSOLIDATED LIMITED
------------------- ------------------
1997 1996 1997 1996
-------- ------- ------- -------
$000 $000 $000 $000
(ROUNDING OFF TO THE NEAREST THOUSAND
DOLLARS HAS BEEN ADOPTED)
<S> <C> <C> <C> <C>
Operating profit after income tax.............. (71,469) 39,914 1,995 29,442
Add (less) items classified as
investing/financing activities:
(Profit)/loss on sale of investments........... 13,484 (10,340) 3,858 0
(Profit)/loss on sale of non-current assets.... (174) (450) 0 0
Interest paid -- external entities............. 11,634 10,397 0 0
Dividends received -- external entities........ (485) (335) 0 0
Interest received -- external entities......... (4,172) (6,817) (130) (179)
Exploration expenditure written off............ 25,709 4,347 218 411
Profit on sale of option....................... (14,000) (6,000) 0 0
Add (less) non cash items:
Amounts set aside to provision for
Amortisation of acquired exploration
expenditure............................... 5,082 5,082 0 0
Amortisation of acquisition costs............ 24,957 16,076 0 0
Amortisation of pre-production costs......... 38,531 18,419 0 0
Depreciation of non-current assets........... 18,121 8,735 0 0
Advanced waste charged....................... 19,250 0 0
Diminution of investment (written back)...... 17,526 134 15,877 0
Employee benefits............................ 834 304 0 0
Doubtful debts (written back)................ 0 28 0 0
Restoration and rehabilitation............... 1,301 364 0 0
Interest paid -- related entity................ 0 0 5,498 3,248
Interest received -- related entity............ 0 0 (11,776) (8,677)
Other income -- related entity................. 0 0 0 (6,000)
Overhead recovery fees received................ 0 0 (384) (384)
Dividend received -- related entity............ 0 0 (20,000) (20,000)
(Decrease)/increase in income taxes payable.... 0 (16) 0 0
(Decrease)/increase in deferred taxes
payable...................................... (16,978) 9,494 138 (208)
-------- ------- ------- -------
Net cash provided by(used in) operating
activities before change in assets and
liabilities.................................. 69,151 89,336 (4,706) (2,347)
</TABLE>

D-46
<PAGE> 305
PLUTONIC RESOURCES LIMITED AND ITS CONTROLLED ENTITIES

NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS (CONTINUED)
AT 31 DECEMBER 1997

<TABLE>
<CAPTION>
PLUTONIC RESOURCES
CONSOLIDATED LIMITED
------------------- ------------------
1997 1996 1997 1996
-------- ------- ------- -------
$000 $000 $000 $000
(ROUNDING OFF TO THE NEAREST THOUSAND
DOLLARS HAS BEEN ADOPTED)
<S> <C> <C> <C> <C>
Change in assets and liabilities adjusted for
effects of purchase of a controlled entity
during the financial year:
(Increase)/decrease in receivables............. 2,457 (1,809) 112 42
(Increase)/decrease in other current assets.... 21,515 (34,062) (3,400) 0
(Decrease)/increase in creditors............... 2,725 7,100 1,760 (94)
(Decrease)/increase in provisions.............. 641 (492) 0 0
-------- ------- ------- -------
Net cash provided by(used in) operating
activities................................... 96,489 60,073 (6,234) (2,399)
======== ======= ======= =======
</TABLE>

On 1 July 1996, Lachlan Resources NL, a controlled entity, acquired a
controlling interest in the issued capital of Archaean Gold NL. The remaining
outside interests in Archaean Gold NL were acquired during April 1997.

FAIR VALUE OF NET ASSETS OF ENTITY ACQUIRED:

<TABLE>
<CAPTION>
1997 1996
-------- --------
$'000 $'000
(ROUNDING OFF TO THE
NEAREST THOUSAND
DOLLARS HAS BEEN
ADOPTED)
<S> <C> <C>
Cash....................................................... 3,032 3,032
Short term bills and deposits.............................. 2,484 2,484
Plant and Equipment........................................ 132 132
Prepayments................................................ 16 16
Deferred cost of mineral prospects......................... 42,839 37,644
Receivables................................................ 79 79
Trade creditors and accruals............................... (772) (772)
Provisions................................................. (314) (314)
------ ------
47,496 42,301
Outside equity interests at acquisition.................... 0 (797)
------ ------
Consideration:
Existing Investment...................................... 41,504 0
Outflow of Cash.......................................... 5,992 41,504
------ ------
47,496 41,504
====== ======
</TABLE>

36. DERIVATIVE FINANCIAL INSTRUMENTS

(a) Use of Financial Instruments

The Economic Entity makes use of certain derivative financial instruments
which are commonly used in the gold mining industry. They are not used for
trading purposes, but are entered into to manage the exposure to movements in
the gold price and Australian/United States dollar (AUD/USD) exchange rate. This
exposure is minimised by the Company entering into gold forward and option
contracts, and AUD/USD

D-47
<PAGE> 306
PLUTONIC RESOURCES LIMITED AND ITS CONTROLLED ENTITIES

NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS (CONTINUED)
AT 31 DECEMBER 1997

foreign exchange forward and option contracts. Details of the derivative
financial instruments used by the Economic Entity, the value of which are not
recognised in the financial statements at year end, are provided at (b) below.

(b) Gold Hedging

As at 31 December 1997, the Economic Entity had entered into the following
gold hedging contracts:

<TABLE>
<CAPTION>
PLUTONIC
CONSOLIDATED RESOURCES LIMITED
1997 1997
------------------------ ------------------------
SALE SALE
OUNCES PRICE OUNCES PRICE
FORWARD CONTRACTS ------------ -------- ---------- ----------
$/OZ $/OZ
(ROUNDING OFF TO THE NEAREST THOUSAND DOLLARS HAS
BEEN ADOPTED)
<S> <C> <C> <C> <C>
Maturity within one year............................. 945,490 484
Maturity between one and two years................... 82,000 649
Maturity between two and three years................. 24,800 526
Maturity between three and four years................ 24,800 526
Maturity between four and five years................. 74,800 609
Maturity over five years............................. 75,600 526
--------- ----- ------ ------
1,227,490 507 -- --
--------- ----- ------ ------
</TABLE>

<TABLE>
<CAPTION>
PLUTONIC
CONSOLIDATED RESOURCES LIMITED
1996 1996
-------------------- ----------------------
SALE SALE
OUNCES PRICE OUNCES PRICE
FORWARD CONTRACTS --------- ------- --------- ---------
$/OZ $/OZ
(ROUNDING OFF TO THE NEAREST THOUSAND DOLLARS
HAS BEEN ADOPTED)
<S> <C> <C> <C> <C>
Maturity within one year............................... 608,040 563
Maturity between one and two years..................... 80,000 649
Maturity between two and three years................... 82,000 649
------- ----- ------ ------
770,040 581 -- --
------- ----- ------ ------
</TABLE>

D-48
<PAGE> 307
PLUTONIC RESOURCES LIMITED AND ITS CONTROLLED ENTITIES

NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS (CONTINUED)
AT 31 DECEMBER 1997

As at 31 December 1997, the Economic Entity and the parent entity had
entered into the following foreign currency contracts:

(1) AUSTRALIAN DOLLAR/UNITED STATES DOLLAR

<TABLE>
<CAPTION>
PLUTONIC
CONSOLIDATED RESOURCES LIMITED
1997 1997
------------------------- -------------------------
AVERAGE AVERAGE
CONTRACTS STRIKE PRICE CONTRACTS STRIKE PRICE
US$ AUD/USD US$ AUD/USD
--------- ------------ --------- ------------
<S> <C> <C> <C> <C>
Maturity within one year........................ 20,000 0.6779 20,000 0.6779
Maturity between one and two years.............. 0 0 0 0
Maturity between two and three years............ 0 0 0 0
------ ------ ------ ------
20,000 0.6779 20,000 0.6779
------ ------ ------ ------
</TABLE>

<TABLE>
<CAPTION>
PLUTONIC
CONSOLIDATED RESOURCES LIMITED
1996 1996
------------------------- -------------------------
AVERAGE AVERAGE
CONTRACTS STRIKE PRICE CONTRACTS STRIKE PRICE
US$ AUD/USD US$ AUD/USD
--------- ------------ --------- ------------
<S> <C> <C> <C> <C>
Maturity within one year........................ 0 0 0 0
Maturity between one and two years.............. 0 0 0 0
Maturity between two and three years............ 0 0 0 0
------ ------ ------ ------
0 0 0 0
====== ====== ====== ======
</TABLE>

37. RECONCILIATION TO US GAAP

The following footnote has been prepared in order to comply with United
States generally accepted accounting principles for presentation in Homestake
Mining Company's ("Homestake") document relating to Homestake and Plutonic
agreeing to combine by means of a scheme of arrangement.

Financial statements in the United States are prepared in accordance with
accounting principles generally accepted in the United States ("US GAAP"). In
Australia, financial statements are prepared in accordance with accounting
standards issued by the Australian Accounting Standards Board ("Australian
GAAP"), which are codified in Australian Corporations Law. Certain differences
between US GAAP and Australian GAAP as they relate to the conversion of
Plutonic's financial statements to US GAAP are summarised below:

(a) Plutonic defers ongoing exploration expenditures until the
viability of a project is determined. If a decision is made to proceed with
a project the expenditures are transferred to pre-production cost to be
amortised over the life of the mine. If a decision is made to abandon a
project the expenditures are written off at the time of such determination.
Under US GAAP, exploration expenditures incurred prior to the completion of
a favourable feasibility study are expensed as incurred. Following
completion of a favourable feasibility study, pre-production exploration
expenditures are capitalised and amortised using the units-of-production
method based on proven and probable reserves.

(b) Plutonic accounts for business combinations using the purchase
method. In its application of the purchase method, Plutonic may assign a
portion of the purchase price to acquired exploration potential ("AEP").
AEP is amortised using the straight-line method over periods not exceeding
ten years. If it is subsequently determined that the exploration properties
acquired in a business combination

D-49
<PAGE> 308
PLUTONIC RESOURCES LIMITED AND ITS CONTROLLED ENTITIES

NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS (CONTINUED)
AT 31 DECEMBER 1997

do not contain significant mineralisation, the remaining unamortised AEP
associated with that business combination would be written down at the time
of such determination. Under US GAAP, AEP would be specifically allocated
to individual exploration properties. If it is subsequently determined that
significant mineralisation does not exist on any of these individual
properties, they would be written down at the time of such determination.
If a property becomes a producing mine, its carrying value would be
amortised using the units-of-production method based on proven and probable
reserves.

(c) Plutonic amortises mine development and pre-production
expenditures together with estimates of expected future development
expenditures using the units-of-production method based on its estimate of
future life-of-mine production. Plutonic's estimate of future life-of-mine
production includes proven and probable reserves plus a portion of
resources which has not yet been converted to reserves but which Plutonic
believes there is sufficient confidence that such resources will be
converted to reserves after further delineation drilling. Plutonic has a
history of successfully converting resources included in its life-of-mine
plans into reserves. If a significant change in estimated future
life-of-mine production occurs during the period, amortisation expense for
that period is adjusted to reflect the change. Under US GAAP, mine
development and pre-production expenditures, excluding any provision for
expected future development expenditures, are amortised using the
units-of-production method based on published proven and probable reserves
only. A significant change in proven and probable reserves is treated
prospectively for amortisation purposes.

(d) In 1996, Plutonic recognised a gain of $13 million on the early
close out of certain gold forward sales contracts. Under US GAAP, these
forward sales contacts would have been classified as hedges of future
designated production and the gain realised on the early close out would
have been deferred and recognised in income as the designated production
was delivered.

(e) Plutonic uses the liability method of accounting for income
taxes, which also is required under US GAAP. However, there are differences
in the application of the liability method under US GAAP. The most
significant differences relate to acquisitions accounted for using the
purchase method, recognition of future income tax benefits and the
presentation of the current and long-term portion of future tax benefits
and deferred tax liabilities in the Balance Sheet.

1. Under Australian GAAP, when an acquisition price exceeds the
underlying net book value of the assets acquired, the excess purchase
price is allocated to the acquired assets and liabilities based on fair
values. Deferred taxes are not established for any differences between
the book and tax bases of assets, which may arise from this allocation.
The assets are then amortised in accordance with the company's normal
depreciation policies. Under US GAAP, when an acquisition is accounted
for using the purchase method, the excess purchase price paid above the
net book value of the assets acquired also is allocated to the acquired
assets and liabilities based on fair values. However, to the extent that
such allocation creates a temporary difference, deferred taxes are
established and the excess purchase price is increased by an equal
amount. The assets are then amortised in accordance with the company's
normal depreciation policies and the deferred tax provision is accounted
for in accordance with the company's normal tax accounting policies.

2. Under Australian GAAP, future income tax benefits relating to
timing differences are not recognised unless realisation of the benefit
is assured beyond reasonable doubt. Future income tax benefits resulting
from net operating losses are not recognised unless there is virtual
certainty of realisation of the benefit. Acquired tax benefits are
valued at market at the time of acquisition and subsequent to
acquisition recognised in accordance with the foregoing criteria. Under
US GAAP, a deferred tax asset is recognised for deductible temporary
differences and operating loss and tax credit carry-forwards. A
valuation allowance is recognised if, based on the weight of available
evidence, it is more likely than not that some portion or all of the
deferred tax asset will not be realised.

D-50
<PAGE> 309
PLUTONIC RESOURCES LIMITED AND ITS CONTROLLED ENTITIES

NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS (CONTINUED)
AT 31 DECEMBER 1997

3. Under Australian GAAP, the current and long-term portion of
future tax benefits and deferred tax liabilities are not separately
disclosed in the Balance Sheet. Under US GAAP, the current and long term
portions of future tax benefits and deferred tax liabilities are
separately disclosed.

(f) Represents the income tax effect resulting from (a) to (e) above.

(g) To reflect minority interests' share of the above US GAAP
adjustments and to present minority interest outside of shareholders'
equity in accordance with US GAAP.

(h) Plutonic carries investments in listed and unlisted companies at
cost except that declines in market value judged to be other than temporary
are recognised in determining net income. Under US GAAP, Plutonic's
investments would be classified as available-for-sale investments and would
be carried at market value. Unrealised gains and losses on these
investments are recorded as a separate component of shareholders' equity
except that declines in market value judged to be other than temporary are
recognised in determining net income.

(i) Plutonic retroactively records common stock dividends declared
after an accounting period has ended but before the financial statements
are issued. Under U.S. GAAP, common stock dividends payable are recorded in
the period in which they are declared.

<TABLE>
<CAPTION>
FOR THE YEAR
ENDED
31 DECEMBER,
------------
1997
------------
$'000
<S> <C>
Operating loss after income tax and outside equity interests
as reported under Australian GAAP......................... (62,299)
Reconciliation to US GAAP:
Accounting for ongoing exploration expenditure(a)......... (14,130)
Accounting for acquired exploration properties(b)......... 3,581
Accounting for capitalised expenditure(c)................. 18,012
Accounting for forward contract closeouts(d).............. 3,499
Accounting for income taxes:(e)1.......................... (17,126)
(e)2....................... 6,800
Income tax effect of (a) to (e)(f)........................ 16,775
Accounting for minority interests(g)...................... (796)
Net loss in accordance with US GAAP......................... (45,684)
=======
Net loss per share in accordance with US GAAP............... (0.24)
=======
</TABLE>

D-51
<PAGE> 310
PLUTONIC RESOURCES LIMITED AND ITS CONTROLLED ENTITIES

NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS (CONTINUED)
AT 31 DECEMBER 1997

Consolidated balance sheets prepared in accordance with US GAAP are as
follows:

<TABLE>
<CAPTION>
AUSTRALIAN US
GAAP ADJUSTMENTS GAAP
---------- -------------------- -------
$'000 $'000 $'000
<S> <C> <C> <C> <C>
AS AT 31 DECEMBER 1997
Current Assets
Cash Assets..................................... 45,069 45,069
Receivables & Bullion........................... 36,351 36,351
Inventories..................................... 26,396 26,396
Other........................................... 5,600 5,600
Future income tax benefits...................... 0 (e)3 6,324 6,324
TOTAL CURRENT ASSETS......................... 113,416 119,740
------- -------
Non-Current Assets
Investments..................................... 7,228 (h) (1,955)
(g) 8,194 13,467
Inventories..................................... 27,045 27,045
Property, plant & equipment..................... 115,645 (e)2 (2,000) 113,645
Deferred cost of mineral prospects.............. 284,891 (a) (94,457)
(b) 13,192
(c) (540)
(e)1 45,043
(e)2 (15,300) 232,829
Future income tax benefits...................... 27,084 (e)3 (6,324)
(f) 47,056 67,816
TOTAL NON-CURRENT ASSETS................ 461,893 454,802
------- -------
TOTAL ASSETS...................................... 575,309 574,542
======= =======
</TABLE>

D-52
<PAGE> 311
PLUTONIC RESOURCES LIMITED AND ITS CONTROLLED ENTITIES

NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS (CONTINUED)
AT 31 DECEMBER 1997

<TABLE>
<CAPTION>
AUSTRALIAN US
GAAP ADJUSTMENTS GAAP
---------- -------------------- -------
$'000 $'000 $'000
(ROUNDING OFF TO THE NEAREST THOUSAND DOLLARS
HAS BEEN ADOPTED)
<S> <C> <C> <C> <C>
AS AT 31 DECEMBER 1997
Current Liabilities
Creditors and borrowings........................ 27,413 27,413
Provisions and other............................ 8,848 (i) (5,647) 3,201
Deferred income taxes........................... 0 (e)3 5,208 5,208
------- -------
TOTAL CURRENT LIABILITIES............... 36,261 35,822
------- -------
Non-Current Liabilities
Creditors and borrowings........................ 170,000 170,000
Provisions...................................... 5,061 5,061
Deferred income taxes........................... 24,776 (e)1 45,043
(e)3 (5,208)
(f) 3,829 68,440
TOTAL NON-CURRENT LIABILITIES........... 199,837 243,501
------- -------
TOTAL LIABILITIES................................. 236,098 279,323
OUTSIDE EQUITY INTERESTS.......................... 2,751 (g) 6,044 8,795
------- -------
NET ASSETS........................................ 336,460 286,424
======= =======
Shareholders' Equity
Share capital................................... 94,112 94,112
Reserves........................................ 163,008 163,008
Unrealised gain (loss) on investments........... 0 (h) (1,955) (1,955)
Accumulated profits............................. 79,340 (a) (94,457)
(b) 13,192
(c) (540)
(e)2 (17,300)
(f) 43,227
(g) 2,150
(i) 5,647 31,259
------- -------
TOTAL SHAREHOLDERS' EQUITY........................ 336,460 286,424
======= =======
</TABLE>

D-53
<PAGE> 312

PLUTONIC RESOURCES LIMITED AND ITS CONTROLLED ENTITIES

STATEMENT BY DIRECTORS

In accordance with a resolution of the Directors of Plutonic Resources
Limited, we state that --

(1) In the opinion of the Directors:

(a) the profit and loss account is drawn up so as to give a true
and fair view of the profit of the Company for the financial year ended
31 December 1997;

(b) the balance sheet is drawn up so as to give a fair view of the
state of affairs of the Company as at 31 December 1997; and

(c) at the date of this statement there are reasonable grounds to
believe that the Company will be able to pay its debts as and when they
fall due.

(2) In the opinion of the Directors the consolidated accounts:

(a) give a true and fair view of:

(i) the loss of the Economic Entity, constituted by the Company
and its entities it controlled from time to time during the financial
year, for the financial year ended 31 December 1997; and

(ii) the state of affairs of the Economic Entity constituted by
the Company and its entities that it controls at the year's end, as
at 31 December 1997; and

(b) have been made out in accordance with Divisions 4A and 4B of
Part 3.6 of the Corporations Law

On behalf of the Board.

Paul McClintock /s/ PAUL McCLINTOCK

---------------------------------------------------------
Chairman

Ronald J Hawkes /s/ RONALD J HAWKES

---------------------------------------------------------
Managing Director

Sydney, 3 March 1998.

THIS STATEMENT BY DIRECTORS IS DATED AS OF 3 MARCH 1998 AND DOES NOT RELATE
TO NOTE 37, WHICH IS DATED AS OF 9 MARCH 1998. FURTHER, NOTE 37 IS NOT REQUIRED
UNDER THE CORPORATION LAW.

D-54
<PAGE> 313

PLUTONIC RESOURCES LIMITED AND ITS CONTROLLED ENTITIES

INDEPENDENT AUDITOR'S REPORT

To the Members of Plutonic Resources Limited

SCOPE

We have audited the accompanying financial statements of Plutonic Resources
Limited being the Profit and Loss Statements for the year ended 31 December
1997, the Balance Sheets at 31 December 1997 and the Statements of Cash Flows
for the year ended 31 December 1997, Notes and the Statement by Directors. The
financial statements include the accounts of Plutonic Resources Limited, and the
consolidated accounts of the economic entity comprising Plutonic Resources
Limited and the entities it controlled from time to time during the financial
year and at the year's end. The company's directors are responsible for the
preparation and presentation of the financial statements and the information
they contain. We have conducted an independent audit of these financial
statements in order to express an opinion on them to the members of the company.

Our audit has been conducted in accordance with Australian Auditing
Standards, which do not differ in any material respect from Auditing Standards
generally accepted in the United States, to provide reasonable assurance as to
whether the financial statements are free of material misstatement. Our
procedures included examination, on a test basis, of evidence supporting the
amounts and other disclosures in the financial statements, and the evaluation of
accounting policies and significant accounting estimates. These procedures have
been undertaken to form an opinion as to whether, in all material respects, the
financial statements are presented fairly in accordance with Australian
Accounting Standards, statutory requirements and other mandatory professional
reporting requirements so as to present a view which is consistent with our
understanding of the company's and the economic entity's financial position and
the results and cash flows of their operations.

We were the auditors of Plutonic Resources Limited for the year ended 31
December 1996 and on 27 February 1997 we expressed an unqualified opinion on the
financial statements prepared for the Company for that period. Those financial
statements have been presented with the financial statements for the year ended
31 December 1997 for comparative purposes.

The audit opinion expressed in this report has been formed on the above
basis.

AUDIT OPINION

In our opinion, the financial statements of Plutonic Resources Limited are
properly drawn up:

(a) so as to give a true and fair view of:

(i) the state of affairs of the company and of the economic entity
as at 31 December 1997, and of the loss and cash flows of the
company and of the economic entity for the financial year ended
on that date; and

(ii) the other matters required by Division 4, 4A and 4B of Part
3.6 of the Corporations Law to be dealt with in the financial
statements;

(iii) the comparative financial information for the year ended 31
December 1996;

(b) in accordance with the provisions of the Corporations Law; and

Accounting principles generally accepted in Australia vary in certain
respects from accounting principles generally accepted in the United States. The
application of the latter would have affected the determination of the
consolidated operating result for the years ended 31 December 1997 and 1996 and
the determination of consolidated shareholders' equity attributable to
shareholders of Plutonic Resources Limited as at 31 December 1997 and 1996 to
the extent indicated in Note 37 to the financial statements.

ERNST & YOUNG

/s/ M.A. ELLIOTT

M.A. Elliott

Partner

Sydney, Australia

Date opinion formed: 3 March 1998, except for Note 37 for which the opinion was
formed on 9 March 1998.

D-55
<PAGE> 314

PLUTONIC RESOURCES LIMITED
A.C.N. 006 245 629
AND CONTROLLED ENTITIES

CONSOLIDATED FINANCIAL STATEMENTS
31 DECEMBER 1996

D-56
<PAGE> 315

DIRECTORS' REPORT

The Directors of Plutonic Resources Limited ("the Chief Entity" or
"Company") present their report for the year ended 31 December 1996.

DIRECTORS

The Directors of the Chief Entity in office at the date of this report are:

MR E PAUL MCCLINTOCK. Chairman. BA, LLB. Director of McClintock
Associates Group, Tower Life Australia Limited and The Institute of
Respiratory Medicine.

MR RONALD J HAWKES. Managing Director: Geologist, B.Sc, F AusIMM,
FGAC, M.C.I.M, 32 years experience in the mining industry. Director of
Lachlan Resources N.L. and Archaean Gold NL.

MR ABDUL SAMAD HAJI ALIAS. B. Com., FCA (Aust), CPA. Managing Partner,
Arthur Andersen Malaysia. Director of Malaysia Mining Corporation Berhad.
Director of Ashton Mining Limited and IGB Corporation Berhad.

MR WILLIAM A BENNETT. B. Eng. (Hons), M. Sc., AMICE, FAICD, Director
of Brambles Industries Limited, Eastern Aluminium Limited and Barnardos
Australia.

MR DONALD L COOPER. Solicitor: LL.B., Consultant to the firm of
Deacons, Graham & James, Melbourne. Director of various proprietary
companies associated with clients of that firm.

TAN SRI IBRAHIM MENUDIN. B. Com., CA, ACA. Group Chief Executive
Officer of Malaysia Mining Corporation Berhad, Chairman of Malaysian
Smelting Corporation Berhad. Director of Ashton Mining Limited and National
Consolidated Limited.

MR CHE WAN LIM. Alternate Director for Tan Sri Ibrahim Menudin.
Mechanical and Mining Engineer: P. Eng., C. Eng., B.E. (Mech) (Hons), B.E.
(Mining) (Hons), M.I.M.E., M.I.M.M., Director and Chief Executive Officer
of Tronoh Mines Malaysia Berhad. Director of Ashton Mining Limited.
Alternate Director of Lachlan Resources N.L.

MR LEONG KIM PHAN. Alternate Director for Mr Abdul Samad Haji Alias.
FCA (ICAEW). Group General Manager Finance of Malaysia Mining Corporation
Berhad. Alternate director of Ashton Mining Limited and National
Consolidated Limited.

DIRECTORS' INTERESTS

Mr R J Hawkes has notified the chief entity of his interest in a service
contract between himself and a controlled entity which encompasses the terms of
his employment.

PRINCIPAL ACTIVITIES

CONSOLIDATED RESULT

<TABLE>
<CAPTION>
1996 1995
------ ------
$000 $000
<S> <C> <C>
The operating profit of the Economic Entity for the period
after income tax expense was............................. 39,914 40,387
Amounts attributable to outside equity interests........... 788 (263)
------ ------
Profit attributable to members of Plutonic Resources
Limited.................................................. 40,702 40,124
====== ======
</TABLE>

D-57
<PAGE> 316

DIVIDENDS

An unfranked dividend of 5.5 cents per share was declared out of profits of
the Chief Entity for the year ended 31 December 1995 and was paid on 3 April
1996.

An unfranked interim dividend of 4 cents per share was declared out of
profits for the year ended 31 December 1996 and was paid on 2 October 1996.

No other dividends were paid or declared during the year.

The directors declared a final dividend of 7 cents per share unfranked be
paid out of profits for the year.

REVIEW OF OPERATIONS

A review of the operations of the Economic Entity during the financial year
and the results of those operations are given on pages 9 to 24 of this report.

SIGNIFICANT CHANGES IN THE STATE OF AFFAIRS

There were no significant changes in the state of affairs of the Economic
Entity during the year.

SUBSEQUENT EVENTS

There were no significant events occurring after balance date.

LIKELY DEVELOPMENTS AND EXPECTED RESULTS

Information relating to likely developments in the operations of the
Economic Entity and the expected results of those operations in the financial
years subsequent to the year ended 31 December 1996 is included on pages 2 to 24
of this report.

OPTIONS

Options granted by the Company during the financial year were as follows:

(a) On 21 May 1996, Mr Ronald J Hawkes was granted two options under
the Plutonic Resources Limited Employee Share Participation Plan, each in
respect of 200,000 ordinary fifty cent shares. One option has an exercise
price of $7.75 per share, the other, an exercise price of $8.75 per share.
Both options are exercisable on a staged basis with 10% of the shares
subject to the option able to be exercised on or after 21 May 1997, 20% on
or after 21 May 1998, 30% on or after 21 May 1999 and 40% on or after 21
May 2000. The options expire on 21 May 2001. Mr Hawkes does not have and
has not had a right to participate in a share issue of any other body
corporate by virtue of the options.

(b) On 24 June 1996, twenty options under the Plutonic Resources
Limited Employee Share Participation Plan were granted to ten executive
officers of the Company or their nominated associates. The options granted
were in respect of a total of 1.53 million ordinary fifty cent shares and
are exercisable on a staged basis with 10% of the shares subject to the
option able to be exercised on or after 24 June 1997, 20% on or after 24
June 1998, 30% on or after 24 June 1999 and 40% on or after 24 June 2000.
The options expire on 24 June 2001. None of the options have been
exercised.

(c) On 26 June 1996, thirty eight options under the Plutonic Resources
Limited Employee Share Participation Plan were granted to nineteen
employees of the Company or their nominated associates. The options granted
were in respect of a total of 920,000 ordinary fifty cent shares and are
exercisable on a staged basis with 10% of the shares subject to the option
able to be exercised on or after 24 June 1997, 19 December 1997 or 4 March
1998 (depending on the date on which the employee commenced employment with
the Company), 20% on or after 26 June 1998, 30% on or after 26 June 1999
and 40% on or after 26 June 2000. The options expire on 24 June 2001. None
of the options have been exercised.

D-58
<PAGE> 317

The names of all persons who currently hold options, granted at any time,
are entered in the register kept by the Company pursuant to Section 216C of the
Corporations Law which may be inspected free of charge. The Directors have
relied on ASC Class Order 94/284 which relieves them from the requirement to
disclose details of a person or options granted to that person pursuant to an
employee incentive scheme.

The following shares in Plutonic Resources Limited were issued during or
since the financial year by virtue of the exercise of an option:

1,490,837 ordinary fifty cent shares each paid to five cents
390,816 fully paid ordinary fifty cent shares

At the date of this report the Company has the following ordinary fifty
cent shares under option:

<TABLE>
<CAPTION>
ORDINARY 50C
SHARES EXERCISE PRICE
UNDER OPTION ($) EXPIRY DATE
- ------------------- -------------- -----------
<S> <C> <C>
288,000 6.04 12.10.99
40,000 5.87 28.11.00
200,000 6.04 05.12.00
200,000 7.75 21.05.01
200,000 8.75 21.05.01
765,000 7.75 24.06.01
765,000 8.75 24.06.01
460,000 7.75 26.06.01
460,000 8.75 26.06.01
</TABLE>

The holders of the options have no rights to participate in any share issue
of any other body corporate by virtue of the options.

ROUNDING OF AMOUNTS

The Chief Entity is of a kind referred to in Section 311 and in regulation
3.6.05(6) of the Corporations Law being a Chief Entity with total assets of the
Economic Entity in excess of $10,000,000. Accordingly amounts shown in the
financial statements and in the Directors Reports have been rounded off to the
nearest thousand dollars.

DIRECTORS' MEETINGS

The following table sets out the number of meetings of directors of the
Chief Entity held during the year ended 31 December 1996 and the number of
meetings attended by each director.

<TABLE>
<CAPTION>
FULL MEETINGS COMMITTEE MEETINGS
OF ---------------------
DIRECTORS REMUNERATION AUDIT
--------------- ------------ -----
<S> <C> <C> <C>
NUMBER OF MEETINGS HELD.................. 10 1 3
E P McClintock........................... 10 1 3
R J Hawkes............................... 10 1 N/A
Abdul Samad Haji Alias................... 8 N/A 3
W A Bennett.............................. 10 1 3
D L Cooper(2)............................ 9 N/A 1
Tan Sri Ibrahim Menudin.................. 7 1 N/A
C W Lim (Alternate)...................... 3 N/A N/A
L K Phan (Alternate)..................... 1 N/A N/A
Sir Eric McClintock(1)................... 2 N/A N/A
</TABLE>

- ---------------

(1) Retired 22 March 1996 (maximum number of meetings: 2)

(2) Resigned from Audit Committee 20.08.96 (maximum number of meetings: 1)

D-59
<PAGE> 318

DIRECTORS' SHAREHOLDINGS AT THE DATE OF THIS REPORT

<TABLE>
<CAPTION>
SHARES
SHARES OPTIONS SUBJECT TO
HELD HELD OPTIONS
--------- ------- ----------
<S> <C> <C> <C> <C>
E PAUL MCCLINTOCK
PLUTONIC RESOURCES LIMITED
Ordinary fully paid shares....................... (i) 14,000
LACHLAN RESOURCES N.L.
Ordinary fully paid shares....................... (i) 78,000
RONALD J HAWKES
PLUTONIC RESOURCES LIMITED
Ordinary fully paid shares....................... (i) 4,551
Partly paid shares............................... (ii) 1,111,250
Options at $7.75 per share....................... (ii) 1 200,000
Options at $8.75 per share....................... (ii) 1 200,000
ABDUL SAMAD HAJI ALIAS
PLUTONIC RESOURCES LIMITED
Options at $5.87 per share....................... (iii) 40,000 40,000
WILLIAM A BENNETT..................................... Nil Nil Nil
DONALD L COOPER
PLUTONIC RESOURCES LIMITED
Ordinary fully paid shares....................... (i) 48,200
TAN SRI IBRAHIM MENUDIN
PLUTONIC RESOURCES LIMITED
Ordinary fully paid shares....................... (i) 48,200
CHE WAN LIM (ALTERNATE)
PLUTONIC RESOURCES LIMITED
Ordinary fully paid shares....................... (i) 1,500
LACHLAN RESOURCES N.L.
Ordinary fully paid shares....................... (i) 10,000
LEONG KIM PHAN (ALTERNATE)............................ Nil Nil Nil
</TABLE>

- ---------------

(i) Beneficial interest

(ii) Pursuant to Employee Share Participation Plan.

(iii) Pursuant to Non-Executive Directors Option Scheme.

INDEMNIFICATION AND INSURANCE OF OFFICERS

During the financial year:

(a) pursuant to Article 156 of the Company's Articles of Association,
the Company agreed to indemnify:

(i) each of the directors named on page 2 and the secretary, Ms K
Everett; and

(ii) every person who is or has been a general manager, manager or
treasurer of the Company; and

D-60
<PAGE> 319

(b) pursuant to deeds of indemnity, the Company agreed to indemnify
directors of the Company's wholly-owned subsidiaries
against any liability:

(a) incurred by that person in his or her capacity as an officer of
the Company or a director of a wholly-owned subsidiary of the Company (as
the case may be) to any other person (other than the Company or a related
body corporate) unless the liability arises out of conduct involving a lack
of good faith; and

During or since the end of the financial year, the Company has paid or
agreed to pay premiums in respect of contracts insuring against liability:

(a) each of the directors named on page D-9 and the secretary, Ms K
Everett;

(b) every person who is or has been a general manager, manager or
treasurer of the Company; and

The contracts of insurance prohibit the disclosure of the amount of the
premiums and the nature of the liability.

DIRECTORS' BENEFITS

During or since the end of the financial year, no Director of the Company
has received or become entitled to receive a benefit (other than a benefit
included in the aggregate amount of emoluments received or due and receivable by
the Directors shown in Note 29 of the financial statements) by reason of a
contract entered into by the Company or a controlled entity or related body
corporate of the Company with a Director, a firm or which a Director is a member
or an entity in which the Director has a substantial financial interest with the
exception of:

(a) Mr R J Hawkes who was granted two options under the Plutonic
Resources Limited Employee Share Participation Plan pursuant to two
agreements dated 21 May 1996 details of which are set out in this report;
and

(b) Mr D L Cooper who is a consultant to the firm of Deacons, Graham
and James, Melbourne which received fees for legal services rendered to the
Company in the ordinary course of business.

This report is made in accordance with a resolution of the Directors.

On behalf of the Board
/s/ PAUL MCCLINTOCK
Paul McClintock --------------------------------------
Chairman
/s/ RONALD J HAWKES
Ronald J Hawkes --------------------------------------
Managing Director

Sydney, 27 February 1997.

D-61
<PAGE> 320

PROFIT AND LOSS STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 1996

<TABLE>
<CAPTION>
PLUTONIC RESOURCES
NOTE CONSOLIDATED LIMITED
---- ------------------ ------------------
1996 1995 1996 1995
------- ------- ------- -------
$000 $000 $000 $000
(ROUNDING OFF TO THE NEAREST THOUSAND
DOLLARS
HAS BEEN ADOPTED)
<S> <C> <C> <C> <C> <C>
Operating Revenue........................... 2 340,461 222,691 35,294 16,727
======= ======= ======= =======
Operating profit before income tax.......... 3,4 47,770 43,680 29,233 13,086
Income tax expense.......................... 5 (7,856) (3,293) 209 741
------- ------- ------- -------
Operating profit after income tax........... 39,914 40,387 29,442 13,827
Outside Equity Interest..................... 23 788 (263) 0 0
------- ------- ------- -------
OPERATING PROFIT AFTER INCOME TAX
ATTRIBUTABLE TO MEMBERS OF PLUTONIC
RESOURCES LIMITED......................... 6 40,702 40,124 29,442 13,827
Retained profits brought forward............ 127,225 104,623 1,832 5,527
------- ------- ------- -------
Retained profits available for
appropriation............................. 167,927 144,747 31,274 19,354
Dividends................................... 7 (20,630) (17,522) (20,630) (17,522)
------- ------- ------- -------
RETAINED PROFITS AT END OF YEAR............. 147,297 127,225 10,644 1,832
======= ======= ======= =======
</TABLE>

The accompanying notes form part of these financial statements.
D-62
<PAGE> 321

BALANCE SHEETS
AS AT 31 DECEMBER 1996
<TABLE>
<CAPTION>
PLUTONIC RESOURCES
CONSOLIDATED LIMITED
------------------ ------------------
NOTE 1996 1995 1996 1995
---- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C>
$000 $000 $000 $000

<CAPTION>
(ROUNDING OFF TO THE NEAREST THOUSAND
DOLLARS
HAS BEEN ADOPTED)
<S> <C> <C> <C> <C> <C>
CURRENT ASSETS
Cash........................................ 8 18,912 48,234 82 128
Receivables and Bullion..................... 9 37,547 27,289 112 154
Inventories................................. 10 35,092 42,695 0 0
Other....................................... 11 4,838 3,782 0 0
------- ------- ------- -------
Total Current Assets.............. 96,389 122,000 194 282
======= ======= ======= =======
NON-CURRENT ASSETS
Receivables................................. 12 50,000 41,573 233,530 165,079
Investments................................. 13 63,109 60,669 133,846 133,846
Inventories................................. 10 40,625 0 0 0
Property, Plant and Equipment............... 14 97,299 76,913 0 0
Other....................................... 15 330,589 238,979 608 526
------- ------- ------- -------
Total Non-Current Assets.......... 581,622 418,134 367,984 299,451
======= ======= ======= =======
TOTAL ASSETS...................... 678,011 540,134 368,178 299,733
======= ======= ======= =======
CURRENT LIABILITIES
Creditors and Borrowings.................... 16 117,187 26,445 74 171
Provisions.................................. 17 15,891 12,854 13,126 10,294
------- ------- ------- -------
Total Current Liabilities......... 133,078 39,299 13,200 10,465
======= ======= ======= =======
NON-CURRENT LIABILITIES
Creditors and Borrowings.................... 18 87,500 120,000 87,602 72,192
Provisions.................................. 19 40,864 25,868 148 181
-- ------- ------- ------- -------
Total Non-Current Liabilities..... 128,364 145,868 87,750 72,373
======= ======= ======= =======
TOTAL LIABILITIES................. 261,442 185,167 100,950 82,838
======= ======= ======= =======
NET ASSETS........................ 416,569 354,967 267,228 216,895
======= ======= ======= =======
SHAREHOLDERS' EQUITY
Share Capital............................... 20 93,828 90,223 93,828 90,223
Reserves.................................... 22 162,756 124,840 162,756 124,840
Retained Profits............................ 147,297 127,225 10,644 1,832
------- ------- ------- -------
Shareholders Equity attributable to Plutonic
Resources Limited......................... 403,881 342,288 267,228 216,895
Outside Equity Interests.................... 23 12,688 12,679 0 0
------- ------- ------- -------
TOTAL SHAREHOLDERS' EQUITY........ 416,569 354,967 267,228 216,895
======= ======= ======= =======
</TABLE>

The accompanying notes form part of these financial statements.
D-63
<PAGE> 322

STATEMENTS OF CASH FLOWS
FOR THE YEAR ENDED 31 DECEMBER 1996
<TABLE>
<CAPTION>
PLUTONIC RESOURCES
CONSOLIDATED LIMITED
-------------------- ------------------
NOTE 1996 1995 1996 1995
---- -------- -------- ------- -------
<S> <C> <C> <C> <C> <C>
$000 $000 $000 $000

<CAPTION>
(ROUNDING OFF TO THE NEAREST THOUSAND
DOLLARS HAS BEEN ADOPTED)
<S> <C> <C> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Cash receipts in the course of
operations.............................. 281,952 212,311 0 2
Cash payments in the course of
operations.............................. (223,497) (154,559) (2,399) (3,177)
Income tax refund (paid).................. 1,618 (7,990) 0 0
-------- -------- ------- -------
NET CASH PROVIDED BY OPERATING
ACTIVITIES.............................. 34 60,073 49,762 (2,399) (3,175)
-------- -------- ------- -------
CASH FLOWS FROM INVESTING ACTIVITIES
Dividends received........................ 335 562 0 0
Interest received -- external entities.... 6,817 3,258 179 35
Proceeds on sale of investments........... 39,179 3,051 0
Recoveries from joint venture parties..... 2,491 639 175 0
Proceeds on sale of property, plant and
equipment............................... 3,064 436 0 0
Proceeds on sale of non-current assets.... 2,014 0 0 0
Proceeds on sale of option................ 6,000 0 0 0
Payment for investments................... (31,413) (33,436) 0 0
Payments for acquisition of controlled
entities................................ (41,504) (52,645) 0 0
Cash acquired from increase in ownership
of
a JV.................................... 0 222 0 0
Cash acquired from acquisition of
controlled entities..................... 5,516 262 0 0
Advances of loans -- external entities.... (8,427) (41,272) 0 0
Payments for property, plant and
equipment............................... (31,633) (9,699) 0 0
Payment for advanced stripping costs...... (14,460) (8,009) 0 0
Payments for tenement exploration......... (32,574) (25,282) (493) (197)
Payments for preproduction activities..... (47,770) (21,676) 0 0
Payments for tenement acquisition......... (2,358) 0 0 0
-------- -------- ------- -------
NET CASH INVESTING ACTIVITIES............. (144,723) (183,589) (139) (162)
======== ======== ======= =======
CASH FLOWS FROM FINANCING ACTIVITIES
Interest paid............................. (10,397) (1,148) 0 0
Proceeds from share issue................. 41,521 394 41,521 394
Proceeds from borrowings
-- external entities.................... 72,500 120,000 0 0
-- related entities..................... 0 0 (21,228) 18,278
Repayments of borrowings
-- external entities.................... (12,500) (13,500) 0 0
Lease payments............................ 0 (12) 0 0
Dividends paid............................ (17,798) (16,229) (17,798) (16,229)
-------- -------- ------- -------
NET CASH PROVIDED BY FINANCING
ACTIVITIES.............................. 73,326 89,505 2,495 2,443
======== ======== ======= =======
Net(decrease) in cash held................ (11,324) (44,322) (43) (894)
Cash at the beginning of the financial
year.................................... 60,472 104,794 125 1,019
-------- -------- ------- -------
CASH AT THE END OF THE FINANCIAL YEAR..... 34 49,148 60,472 82 125
======== ======== ======= =======
</TABLE>

The accompanying notes form part of these financial statements.
D-64
<PAGE> 323

PLUTONIC RESOURCES LIMITED

NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS
AT 31 DECEMBER 1996

1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

The financial report is a general purpose financial report which has been
prepared in accordance with the requirements of the Corporations Law which
include disclosures required by Schedule 5 and applicable Accounting Standards.
Other mandatory professional requirements (Urgent Issues Group Consensus Views)
have also been complied with.

(a) Principles of Consolidation

(b) Income Tax

Cash is represented by cash on hand, at financial institutions at call and
bank bills and deposits.

(d) Revenue Recognition

Revenue from production of gold is recognised when all of the following
"collective tests" have been met:

(i) the product is in a form suitable for delivery and no further
processing is required by or on behalf of the Economic Entity;

(ii) the quantity and quality of the product can be determined with
reasonable accuracy;

(iii) the selling price can be determined with reasonable accuracy;

D-65
<PAGE> 324
PLUTONIC RESOURCES LIMITED

NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS (CONTINUED)
AT 31 DECEMBER 1996

1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
(iv) the product has been despatched to a refiner and is no longer
under the physical control of the Economic Entity.

(e) Bullion

(f) Inventories

(i) Gold in Process. Gold is valued at the lower of cost and net realisable
value using market price at year end or where applicable a forward contract
price. Gold in process includes gold in circuit and gold contained in stockpiled
ore as determined by production records. The cost of gold in process includes
the cost of direct materials, labour and variable and fixed overheads relating
to mining activities.

(ii) Consumable Stores and Spare Parts. Consumable stores and spare parts
have been measured by physical stocktake and valued at the lower of cost and net
realisable value.

(iii) Other. Other inventories have been measured by physical stocktake and
valued at the lower of cost and net realisable value.

(g) Investments

The Economic Entity's interests in companies (other than controlled
entities) are shown as investments, and dividend income only is taken into
profit as it is received. Long term investments are stated at cost less amounts
provided against permanent diminution in the value of investments. Investments
held for re-sale are stated at the lower of cost or net realisable value.

(h) Property Plant and Equipment

(i) Depreciation

(i) Plant Construction Costs. The cost of these assets is being depreciated
over their useful economic lives using the straight line method.

(ii) Other Fixed Assets. Other fixed assets including buildings, but
excluding land, are depreciated over their useful economic lives using the
diminishing value method.

D-66
<PAGE> 325
PLUTONIC RESOURCES LIMITED

NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS (CONTINUED)
AT 31 DECEMBER 1996

1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
(j) Exploration Expenditure

(ii) such costs are expected to be recouped through successful
development and exploitation of each area of interest, or alternatively, by
its sale.

(k) Acquired Exploration Expenditure

The fair value of exploration tenements attributable as part of the
acquisition of a business is amortised over a period not exceeding ten years.

(l) Acquisition Costs

(i) Mines. The direct cost of acquiring mining leases is being amortised
based on the production output method.

(ii) Other. The direct costs of acquiring mining properties is carried
forward as a deferred cost until such time as:

(1) a mining operation is commenced when it will be amortised over the
life of the mine; or

(2) the project is sold or abandoned, provided that the carrying value
does not exceed the amount that it would have been reasonable for the
company to spend to acquire the asset at the end of the financial year.

(m) Preproduction Costs

Preproduction costs for each tenement comprise direct development
expenditure, pre-operating and equipment start-up costs, exploration expenditure
carried forward at the date of the decision to mine plus any continuing
exploration expenditure on the area of interest.

Preproduction costs are carried forward to the extent to which recoupment
out of future revenues from the sale of product from the property is reasonably
assured.

Preproduction costs are amortised over the life of the relevant mine using
the production output method.

(n) Employee Entitlements

(i) Wages, Annual Leave, Long Service Leave, Sick Leave. The provision for
employee entitlements relating to wages annual leave and sick leave is based on
legal and contractual entitlements and assessments having regard to the Economic
Entity's experience of staff departures and leave utilisation. Vested
entitlements are shown as current liabilities.

Current wage rates and on-costs are used in the calculation of this
provision.

NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS (CONTINUED)
AT 31 DECEMBER 1996

1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
date. In assessing the liability for employee entitlements which are not
expected to be settled within twelve months the relevant cash flows have been
discounted. Consideration has been given to future salary increases and the
economic entity's experience with staff departures. Related costs have also been
included in the calculation of the provision.

(ii) Superannuation. Contributions are made by the economic entity to
employee superannuation funds and are charged to expenses when incurred.

The economic entity does not record, as an asset or a liability, the
difference between the employer established defined benefit superannuation
plan's accrued benefits and the net market value of the plan's assets.

(o) Restoration, Rehabilitation and Environmental Costs

Restoration and rehabilitation of mine sites is carried out on an on-going
basis during the production life of the mine.

(p) Foreign Currency

Amounts payable to and by the company in foreign currencies have been
translated to Australian currency at rates of exchange ruling at year end.

(q) Joint Ventures

The Economic Entity's interest in exploration joint ventures are brought to
account based on the actual expenditures incurred by the Economic Entity in
contributing to the joint venture's exploration programme and is included in
deferred cost of mineral prospects.

(r) Leases

Payments made under operating leases are charged against profits in equal
instalments over the accounting periods covered by the term of the lease.

Details of commitments under leases are included in Note 27(b).

The Economic Entity has not entered into any finance leases at 31 December
1996.

D-68
<PAGE> 327
PLUTONIC RESOURCES LIMITED

NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS (CONTINUED)
AT 31 DECEMBER 1996

1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
(s) Recoverable Amount

(t) Comparative Figures

Where required, comparative figures have been adjusted to conform with
changes in presentation for the current financial year.

2. OPERATING REVENUE

<TABLE>
<CAPTION>
PLUTONIC RESOURCES
CONSOLIDATED LIMITED
------------------ ------------------
1996 1995 1996 1995
------- ------- ------- -------
$000 $000 $000 $000
(ROUNDING OFF TO THE NEAREST THOUSAND
DOLLARS HAS BEEN ADOPTED)
<S> <C> <C> <C> <C>
Gold mining revenues.................................. 279,394 211,654 0 0
Wet Mess sales........................................ 2,558 1,657 0 0
Dividends received from controlled entity............. 0 0 20,000 14,458
Dividends received from non-related entities.......... 335 562 0 0
Interest received from non-related entities........... 6,817 3,258 179 35
Interest received from controlled entities............ 0 0 8,677 1,848
Proceeds on sale of plant and equipment............... 3,064 436 0 0
Proceeds on sale of option............................ 6,000 0 6,000 0
Proceeds on sale of investments....................... 39,179 3,051 0 0
Other................................................. 3,114 2,073 438 386
------- ------- ------ ------
Operating Revenue..................................... 340,461 222,691 35,294 16,727
======= ======= ====== ======
</TABLE>

D-69
<PAGE> 328
PLUTONIC RESOURCES LIMITED

NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS (CONTINUED)
AT 31 DECEMBER 1996

3. OPERATING PROFIT

Operating profit before income tax has been determined after:

<TABLE>
<CAPTION>
PLUTONIC RESOURCES
CONSOLIDATED LIMITED
------------------ ------------------
1996 1995 1996 1995
------- ------- ------- -------
$000 $000 $000 $000
(ROUNDING OFF TO THE NEAREST THOUSAND
DOLLARS HAS BEEN ADOPTED)
<S> <C> <C> <C> <C>
(a) Charging as Expenses:
Amounts received or due and receivable by Chief Entity
auditors for:
-- Auditing......................................... 229 198 50 122
-- Other Services (the auditors received no other
benefits)........................................ 260 171 59 16
Amounts received or due and receivable by other
auditors for:
-- Auditing......................................... 2 0 0 0
-- Other Services (the auditors received no other
benefits)........................................ 0 0 0 0
Amounts set aside to provision for:
Amortisation of acquisition costs................... 16,076 11,042 0 0
Amortisation of acquired exploration expenditure.... 5,082 3,590 0 0
Amortisation of preproduction costs................. 18,419 10,856 0 0
Depreciation of fixed assets........................ 8,735 7,815 0 0
Employee benefits................................... 304 876 0 0
Restoration and rehabilitation...................... 364 0 0 0
Bad debts written off................................. 28 0 0 0
Borrowing costs....................................... 452 418 0 0
Exploration expenditure written off................... 4,347 4,541 411 0
Interest paid to non-related entities................. 10,397 1,148 0 0
Interest paid to controlled entities.................. 0 0 3,248 353
Lease Finance charges................................. 0 1 0 0
Loss on sale of plant and equipment................... 25 112 0 0
Loss on sale of investments........................... 0 192 0 0
Operating Lease Rental................................ 1,522 1,337 0 0
Superannuation contributions to defined benefits
scheme.............................................. 964 729 0 0

(b) Crediting as Revenue:
Dividends received.................................... 335 562 20,000 14,458
Interest received..................................... 6,817 3,258 8,856 1,883
Profit on sale of investments......................... 10,340 35 0 0
Profit on sale of plant and equipment................. 450 709 0 0
Amounts written back from provision for:
Doubtful debts...................................... 12 58 0 0
Diminution of Investments........................... 134 0 0 0
Profit on close out of forward contracts.............. 12,960 5 0 0
Profit on sale of option.............................. 6,000 0 6,000 0
</TABLE>

D-70
<PAGE> 329
PLUTONIC RESOURCES LIMITED

NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS (CONTINUED)
AT 31 DECEMBER 1996

4. ABNORMAL ITEM

Included in the operating profit is the following abnormal item:

5. INCOME TAX

<TABLE>
<CAPTION>
PLUTONIC RESOURCES
CONSOLIDATED LIMITED
------------------ ------------------
1996 1995 1996 1995
------- ------- ------- -------
$000 $000 $000 $000
(ROUNDING OFF TO THE NEAREST THOUSAND
DOLLARS
HAS BEEN ADOPTED)
<S> <C> <C> <C> <C>
(a) Income tax expense
Prima facie income tax expense on operating
profit......................................... 17,197 15,725 10,524 4,710
Income tax effect of
(a) Permanent Differences:
Amortisation of acquisition costs................ 5,787 3,975 0 0
Amortisation of acquired exploration
expenditure.................................... 1,829 1,293 0 0
Non allowable expenses........................... 993 178 39 0
Rebateable dividends............................. (119) (186) (7,200) (4,661)
Other items (net)................................ 0 280 0 0
Non allowable tax losses......................... 594 0 0 0
Non assessable capital gain...................... 0 0 (2,160) 0
(b) Future tax benefits not previously brought to
account relating to:
Deferred exploration expenditure
-- Current year................................. (12,457) (17,355) 0 0
Carry forward tax losses......................... 0 0 (1,412) 0
Capital losses................................... (5,873) 0 0 0
Overprovision in prior years..................... (95) (1,749) 0 (808)
(c) Change in the company tax rate from 33% to 36%.... 0 1,132 0 18
------- ------- ------ ------
Income tax expense............................... 7,856 3,293 (209) (741)
======= ======= ====== ======
Income Tax expense comprises amounts set aside
as:
Provision for income tax attributable to current
year........................................... (1,638) 2,020 0 (808)
Provision for income tax attributable to future
years:
-- Provision for deferred income tax............. 14,727 2,898 (33) 80
-- Future income tax benefits.................... (5,233) (1,625) (176) (13)
------- ------- ------ ------
Income Tax Expense.................................... 7,856 3,293 (209) (741)
======= ======= ====== ======
</TABLE>

D-71
<PAGE> 330
PLUTONIC RESOURCES LIMITED

NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS (CONTINUED)
AT 31 DECEMBER 1996

6. CONSOLIDATED PROFIT

<TABLE>
<CAPTION>
1996 1995
------ ------
$000 $000
(ROUNDING OFF TO THE
NEAREST THOUSAND
DOLLARS HAS BEEN
ADOPTED)
<S> <C> <C>
Contributions to Consolidated Profit:
Plutonic Resources Limited.................................. 6,250 (87)
Plutonic Operations Limited................................. 28,513 30,154
Plutonic Administration Services Pty Ltd.................... 40 227
Plutonic Finance Pty Ltd.................................... (808) (1,796)
Plutonic Gold Pty Ltd....................................... (1,123) 3,509
Plutonic Mining Services Pty Ltd............................ (406) (303)
Plutonic (Baxter) Pty Ltd................................... 9,340 4,140
Rubyset Pty Limited......................................... 396 93
Lachlan Resources N.L....................................... (869) 456
Lachlan Pacific N.L......................................... (1) 4
Quotidian No. 101 Pty Limited............................... (2) (28)
Archaean Gold NL............................................ (378) 0
Forsayth N.L................................................ 546 1,698
Forsayth (Gibson) Ltd....................................... (3) (117)
Forsayth Group Management Pty Ltd........................... 0 0
Forsayth Mining Services Ltd................................ 0 (7)
Forsayth (New Zealand) Ltd.................................. 0 (3)
Forsayth Securities Ltd..................................... 0 (1)
Forsayth Tenements Ltd...................................... 0 (1)
Blacksmith Holdings Pty Ltd................................. 302 517
Canaustra Holdings Pty Ltd.................................. 0 0
Bellevue Gold Project Pty Ltd............................... 0 0
Red Rock Mining Corporation Ltd............................. 549 406
Red Rock Canada Inc......................................... 0 0
Red Rock Pacific Ltd........................................ 0 0
Red Rock Europe BV.......................................... 0 0
Grants Patch Mining Limited................................. (2,685) 6,283
Publishing Investments Company Pty Ltd...................... 0 (1)
Sundowner Minerals N.L...................................... (1,019) (4,152)
Patshore Pty Ltd............................................ 6 0
Austwhim Resources NL....................................... 1,534 (744)
Whim Creek Consolidated NL.................................. 520 (123)
------ ------
40,702 40,124
====== ======
</TABLE>

D-72
<PAGE> 331
PLUTONIC RESOURCES LIMITED

NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS (CONTINUED)
AT 31 DECEMBER 1996

7. DIVIDENDS PAID OR PROVIDED

<TABLE>
<CAPTION>
PLUTONIC RESOURCES
CONSOLIDATED LIMITED
------------------ --------------------
1996 1995 1996 1995
------ ------ ------ ------
$000 $000 $000 $000
(ROUNDING OFF TO THE NEAREST THOUSAND DOLLARS
HAS BEEN ADOPTED)
<S> <C> <C> <C> <C>
PAID
Under provision from prior years paid from
profit and loss......................... 5 28 5 28
Interim dividend of 4 cents unfranked
(1995: 4 cents unfranked)............... 7,499 7,200 7,499 7,200
PROVIDED
Final dividend of 7 cents per share
unfranked (1995 -- 5.5 cents
unfranked).............................. 13,126 10,294 13,126 10,294
------ ------ ------ ------
20,630 17,522 20,630 17,522
====== ====== ====== ======
</TABLE>

8. CASH

<TABLE>
<CAPTION>
PLUTONIC RESOURCES
CONSOLIDATED LIMITED
------------------ --------------------
1996 1995 1996 1995
------ ------ ------ ------
$000 $000 $000 $000
(ROUNDING OFF TO THE NEAREST THOUSAND DOLLARS
HAS BEEN ADOPTED)
<S> <C> <C> <C> <C>
Cash on hand.............................. 13,779 31,878 82 128
Commercial Bills and Deposits............. 5,133 16,356 0 0
------ ------ ------ ------
18,912 48,234 82 128
====== ====== ====== ======
</TABLE>

9. RECEIVABLES AND BULLION -- CURRENT

<TABLE>
<CAPTION>
PLUTONIC RESOURCES
CONSOLIDATED LIMITED
------------------ --------------------
1996 1995 1996 1995
------ ------ ------ ------
$000 $000 $000 $000
(ROUNDING OFF TO THE NEAREST THOUSAND DOLLARS
HAS BEEN ADOPTED)
<S> <C> <C> <C> <C>
Trade Receivables......................... 3,627 3,236 112 0
Other Receivables......................... 3,714 2,211 0 0
Less provision for doubtful debts......... (30) (24) 0 0
------ ------ ------ ------
7,311 5,423 112 0
Amounts due from controlled entities...... 0 0 0 154
Gold Bullion.............................. 30,236.. 21,866 0 0
------ ------ ------ ------
37,547 27,289 112 154
====== ====== ====== ======
</TABLE>

D-73
<PAGE> 332
PLUTONIC RESOURCES LIMITED

NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS (CONTINUED)
AT 31 DECEMBER 1996

10. INVENTORIES
<TABLE>
<CAPTION>
CONSOLIDATED PLUTONIC RESOURCES LIMITED
-------------------- --------------------------
1996 1995 1996 1995
------- ------- --------- ---------
<S> <C> <C> <C> <C>
$000 $000 $000 $000

<CAPTION>
(ROUNDING OFF TO THE NEAREST THOUSAND DOLLARS HAS BEEN
ADOPTED)
<S> <C> <C> <C> <C>
CURRENT
Gold (at cost)........................ 9,444 36,076 0 0
Gold (at net realisable value)........ 18,243 0 0 0
Consumable Stores and Spares (at
cost)............................... 7,206 6,458 0 0
Other (at cost)....................... 199 161 0 0
------- ------- ------- -------
35,092 42,695 0 0
======= ======= ======= =======
NON-CURRENT
Gold (at cost)*....................... 31,899 0 0 0
Gold (at net realisable value)*....... 8,726 0 0 0
------- ------- ------- -------
40,625 0 0 0
======= ======= ======= =======
75,717 42,695 0 0
======= ======= ======= =======
</TABLE>

- ---------------

* represents stockpiled ore which is not expected to be processed in the
following twelve months.

11. OTHER CURRENT ASSETS
<TABLE>
<CAPTION>
CONSOLIDATED PLUTONIC RESOURCES LIMITED
-------------------- --------------------------
1996 1995 1996 1995
------- ------- --------- ---------
<S> <C> <C> <C> <C>
$000 $000 $000 $000

<CAPTION>
(ROUNDING OFF TO THE NEAREST THOUSAND DOLLARS HAS BEEN
ADOPTED)
<S> <C> <C> <C> <C>
Prepayments........................... 4,671 3,603 0 0
Refundable deposits................... 167 179 0 0
------- ------- ------- -------
4,838 3,782 0 0
======= ======= ======= =======
</TABLE>

12. RECEIVABLES -- NON-CURRENT
<TABLE>
<CAPTION>
CONSOLIDATED PLUTONIC RESOURCES LIMITED
-------------------- --------------------------
1996 1995 1996 1995
------- ------- --------- ---------
<S> <C> <C> <C> <C>
$000 $000 $000 $000

<CAPTION>
(ROUNDING OFF TO THE NEAREST THOUSAND DOLLARS HAS BEEN
ADOPTED)
<S> <C> <C> <C> <C>
Receivables........................... 50,000 41,573 0 0
Amounts receivable from
controlled entities................. 0 0 233,530 165,079
------- ------- ------- -------
50,000 41,573 233,530 165,079
======= ======= ======= =======
</TABLE>

D-74
<PAGE> 333
PLUTONIC RESOURCES LIMITED

NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS (CONTINUED)
AT 31 DECEMBER 1996

13. INVESTMENTS

<TABLE>
<CAPTION>
PLUTONIC RESOURCES
CONSOLIDATED LIMITED
---------------- ------------------
1996 1995 1996 1995
------ ------ ------- -------
$000 $000 $000 $000
(ROUNDING OFF TO THE NEAREST THOUSAND
DOLLARS HAS BEEN ADOPTED)
<S> <C> <C> <C> <C>
Investments comprise:
INVESTMENTS IN CONTROLLED ENTITIES
Shares listed on a prescribed stock exchange -- at
cost................................................ 0 0 29,622 29,622
Less provision for diminution in value................ 0 0 (9,253) (9,253)
------ ------ ------- -------
0 0 20,369 20,369
------ ------ ------- -------
Shares in unlisted corporations -- at cost............ 0 0 106,806 106,806
------ ------ ------- -------
0 0 127,175 127,175
====== ====== ======= =======
INVESTMENTS IN OTHER CORPORATIONS
Shares listed on a prescribed stock exchange -- at
cost................................................ 63,900 61,573 6,671 6,671
Less provision for diminution in value................ (791) (904) 0 0
------ ------ ------- -------
63,109 60,669 6,671 6,671
====== ====== ======= =======
Shares in unlisted corporations -- at cost............ 2,041 1,836 0 0
Units in unlisted corporations -- at cost............. 495 495 0 0
Less provision for diminution in value................ (2,536) (2,331) 0 0
------ ------ ------- -------
0 0 0 0
====== ====== ======= =======
63,109 60,669 133,846 133,846
====== ====== ======= =======
Aggregate quoted market value of shares listed on a
prescribed stock exchange at 31 December 1996
-- controlled entities.............................. 0 0 28,118 27,079
------ ------ ------- -------
-- other investments................................ 53,257 59,659 3,457 5,223
====== ====== ======= =======
</TABLE>

The directors consider that the underlying value of the investments is not less
than the current carrying value.

<TABLE>
<CAPTION>
PERCENTAGE HELD AMOUNT OF PLUTONIC
BY PLUTONIC RESOURCES LIMITED'S
RESOURCES LIMITED DIRECT INVESTMENT
------------------ --------------------
1996 1995 1996 1995
------- ------- -------- --------
% % $000 $000
<S> <C> <C> <C> <C>
Plutonic Operations Limited(1).......................... 100 100 24,500 24,500
CONTROLLED ENTITIES OF PLUTONIC OPERATIONS LIMITED
Rubyset Pty Limited(1)............................. 100 100 -- --
Plutonic (Baxter) Pty Ltd(1)............................ 100 100 -- --
Plutonic Administration Services Pty Ltd(1,7)........... 100 100 0 0
Plutonic Finance Pty Ltd(1,7)........................... 100 100 0 0
Plutonic Gold Pty Ltd(1,7).............................. 100 100 0 0
Plutonic Mining Services Pty Ltd(1,7)................... 100 100 0 0
Lachlan Resources N.L.(1)............................... 62.13 62.13 29,622 29,622
</TABLE>

D-75
<PAGE> 334
PLUTONIC RESOURCES LIMITED

NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS (CONTINUED)
AT 31 DECEMBER 1996

<TABLE>
<CAPTION>
PERCENTAGE HELD AMOUNT OF PLUTONIC
BY PLUTONIC RESOURCES LIMITED'S
RESOURCES LIMITED DIRECT INVESTMENT
------------------ --------------------
1996 1995 1996 1995
------- ------- -------- --------
% % $000 $000
13. INVESTMENTS (CONTINUED)
<S> <C> <C> <C> <C>
CONTROLLED ENTITIES OF LACHLAN RESOURCES N.L.
Lachlan Pacific N.L.(5,6).......................... 55.91 55.91 -- --
Quotidian No. 101 Pty Limited(1)................... 62.13 62.13 -- --
Archaean Gold NL(8,1).............................. 57.50 0 -- --
Forsayth N.L.(1)................................... 100 100 82,306 82,306
CONTROLLED ENTITIES OF FORSAYTH N.L.
Forsayth (New Zealand) Ltd(1)...................... 100 100 -- --
Forsayth Securities Ltd(1)......................... 100 100 -- --
Forsayth Tenements Ltd(1).......................... 100 100 -- --
Forsayth Mining Services Ltd(1).................... 100 100 -- --
Forsayth (Gibson) Ltd(1)........................... 100 100 -- --
Forsayth Group Management Pty Ltd(1)............... 100 100 -- --
Blacksmith Holdings Pty Ltd(1)..................... 100 100 -- --
Canaustra Holdings Pty Ltd(1)...................... 100 100 -- --
Bellevue Gold Project Pty Ltd(1)................... 100 100 -- --
Patshore Pty Ltd(1)................................ 100 100 -- --
CONTROLLED ENTITIES OF PATSHORE PTY LTD
Austwhim Resources NL(1)........................... 100 100 -- --
Whim Creek Consolidated NL(1)...................... 100 100 -- --
Red Rock Mining Corp Ltd(1)........................ 100 100 -- --
CONTROLLED ENTITIES OF RED ROCK MINING CORP LTD
Red Rock Canada Inc(2,6)........................... 100 100 -- --
Red Rock Pacific Ltd(3,6).......................... 100 100 -- --
Red Rock Europe BV(4,6)............................ 100 100 -- --
Grants Patch Mining Limited(1)..................... 100 100 -- --
CONTROLLED ENTITIES OF GRANTS PATCH MINING LIMITED
Publishing Investments Company Pty Ltd(1).......... 100 100 -- --
Sundowner Minerals NL(1)........................... 100 100 -- --
------- -------
136,428 136,428
Less provision for diminution in value.................. (9,253) (9,253)
------- -------
127,175 127,175
======= =======
</TABLE>

- ---------------

(1) Incorporated in Australia

(2) Incorporated in Canada

(3) Incorporated in Cook Islands

(4) Incorporated in Netherlands

(5) Incorporated in New Zealand

(6) These companies operate in their country of incorporation

D-76
<PAGE> 335
PLUTONIC RESOURCES LIMITED

NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS (CONTINUED)
AT 31 DECEMBER 1996

13. INVESTMENTS (CONTINUED)
(7) Rounding off to the nearest thousand dollars has eliminated the following
investments.

<TABLE>
<C> <S> <C> <C>
Actual dollars are shown below:
Plutonic Administration Services Pty Ltd.................... 1 1
Plutonic Finance Pty Ltd.................................... 1 1
Plutonic Gold Pty Ltd....................................... 1 1
Plutonic Mining Services Pty Ltd............................ 2 2
</TABLE>

(8) Acquired 87.67% by Lachlan Resources NL and 3% by Forsayth NL during the
year

14. PROPERTY PLANT AND EQUIPMENT

<TABLE>
<CAPTION>
PLUTONIC RESOURCES
CONSOLIDATED LIMITED
------------------ ------------------
1996 1995 1996 1995
------- ------- ------ ------
<S> <C> <C> <C> <C>
$000 $000 $000 $000

<CAPTION>
(ROUNDING OFF TO THE NEAREST THOUSAND
DOLLARS HAS BEEN ADOPTED)
<S> <C> <C> <C> <C>
Land and Buildings
Freehold land -- at cost............................... 249 332 0 0
Buildings -- at cost................................... 13,363 14,661 0 0
Accumulated depreciation............................... (8,358) (11,831) 0 0
------- ------- ---- ---
5,254 3,162 0 0
------- ------- ---- ---
Motor vehicles
At cost................................................ 5,568 4,564 0 0
Accumulated depreciation............................... (2,325) (1,696) 0 0
------- ------- ---- ---
3,243 2,868 0
------- ------- ---- ---
Plant and equipment
At cost................................................ 12,196 8,924 0 0
Accumulated depreciation............................... (5,989) (4,435) 0 0
------- ------- ---- ---
6,207 4,489 0 0
------- ------- ---- ---
Plant Construction Costs
At cost................................................ 84,238 79,920 0 0
Accumulated depreciation............................... (21,882) (17,487) 0 0
------- ------- ---- ---
62,356 62,433 0 0
------- ------- ---- ---
Capital Works in Progress at cost...................... 20,239 3,961 0 0
------- ------- ---- ---
97,299 76,913 0 0
======= ======= ==== ===
</TABLE>

D-77
<PAGE> 336
PLUTONIC RESOURCES LIMITED

NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS (CONTINUED)
AT 31 DECEMBER 1996

15. OTHER NON-CURRENT ASSETS

A. DEFERRED COST OF MINERAL PROSPECTS
<TABLE>
<CAPTION>
PLUTONIC RESOURCES
CONSOLIDATED LIMITED
------------------ ------------------
1996 1995 1996 1995
------- ------- ------ ------
<S> <C> <C> <C> <C>
$000 $000 $000 $000

<CAPTION>
(ROUNDING OFF TO THE NEAREST THOUSAND
DOLLARS HAS BEEN ADOPTED)
<S> <C> <C> <C> <C>
(A) EXPLORATION EXPENDITURE
Opening Balance................................... 63,235 65,871 504 307
Acquisition of Controlled Entity.................. 37,644 13,148 0 0
Incurred during year.............................. 32,574 21,869 493 197
------- ------- ---- ---
133,453 100,888 997 504
Less:
Amounts recovered from Joint Venture parties...... (2,491) (639) (175) 0
Other proceeds.................................... (2,014) 0 0 0
Amounts written off............................... (4,347) (4,541) (411) 0
Amortisation...................................... (5,082) (3,590) 0 0
Transferred to acquisition costs.................. (305) (22,000) 0 0
Transferred to preproduction costs................ (9,896) (6,883) 0 0
------- ------- ---- ---
109,318 63,235 411 504
======= ======= ==== ===
(B) ACQUISITION COSTS
Opening Balance................................... 82,877 51,287 0 0
Incurred during year.............................. 2,358 20,632 0 0
Transferred from exploration costs................ 305 22,000 0 0
------- ------- ---- ---
85,540 93,919 0 0
Amortisation...................................... (16,076) (11,042) 0 0
------- ------- ---- ---
69,464 82,877 0 0
======= ======= ==== ===
(C) PREPRODUCTION COSTS
Opening Balance................................... 66,581 48,878 0 0
Incurred during year.............................. 47,770 21,676 0 0
Transferred from exploration expenditure.......... 9,896 6,883 0 0
------- ------- ---- ---
124,247 77,437 0 0
Amortisation...................................... (18,419) (10,856) 0 0
------- ------- ---- ---
105,828 66,581 0 0
======= ======= ==== ===
(D) ADVANCED STRIPPING COSTS
Opening Balance................................... 8,009 0 0 0
Net movement for year............................. 14,460 8,009 0 0
------- ------- ---- ---
22,469 8,009 0 0
======= ======= ==== ===
307,079 220,702 411 504
======= ======= ==== ===
</TABLE>

D-78
<PAGE> 337
PLUTONIC RESOURCES LIMITED

NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS (CONTINUED)
AT 31 DECEMBER 1996

15. OTHER NON-CURRENT ASSETS (CONTINUED)
B. FUTURE INCOME TAX BENEFITS RECOGNISED

The future income tax benefit is made up of the following estimated tax
benefits:
<TABLE>
<CAPTION>
PLUTONIC RESOURCES
CONSOLIDATED LIMITED
------------------ ------------------
1996 1995 1996 1995
------- ------- ------ ------
<S> <C> <C> <C> <C>
$000 $000 $000 $000

<CAPTION>
(ROUNDING OFF TO THE NEAREST THOUSAND
DOLLARS HAS BEEN ADOPTED)
<S> <C> <C> <C> <C>
Tax losses............................................. 12,082 3,379 0 0
Timing differences..................................... 11,428 14,898 197 22
------- ------- ---- ---
23,510 18,277 197 22
======= ======= ==== ===
330,589 238,979 608 526
======= ======= ==== ===
</TABLE>

C. FUTURE INCOME TAX BENEFITS NOT RECOGNISED

Future income tax benefits not brought to account, the benefits of which
will only be realised if the conditions for deductibility set out in Note 1(b)
occur.
<TABLE>
<CAPTION>
PLUTONIC RESOURCES
CONSOLIDATED LIMITED
------------------ ------------------
1996 1995 1996 1995
------- ------- ------ ------
<S> <C> <C> <C> <C>
$000 $000 $000 $000

<CAPTION>
(ROUNDING OFF TO THE NEAREST THOUSAND
DOLLARS HAS BEEN ADOPTED)
<S> <C> <C> <C> <C>
Timing differences.................................. 25,161 30,335 0 0
Tax losses.......................................... 17,166 26,123 0 0
------- ------- ------ ------
42,327 56,458 0 0
======= ======= ====== ======
</TABLE>

16. CREDITORS AND BORROWINGS -- CURRENT
<TABLE>
<CAPTION>
PLUTONIC RESOURCES
CONSOLIDATED LIMITED
------------------ ------------------
1996 1995 1996 1995
------- ------- ------ ------
<S> <C> <C> <C> <C>
$000 $000 $000 $000

<CAPTION>
(ROUNDING OFF TO THE NEAREST THOUSAND
DOLLARS HAS BEEN ADOPTED)
<S> <C> <C> <C> <C>
Bank Overdraft -- Unsecured......................... 0 9,628 0 3
Bank Loan -- Unsecured (Note 24).................... 92,500 0 0 0
Trade creditors and accruals........................ 21,762 14,277 46 140
Other creditors..................................... 2,925 2,540 28 28
------- ------- ------ ------
117,187 26,445 74 171
======= ======= ====== ======
</TABLE>

D-79
<PAGE> 338
PLUTONIC RESOURCES LIMITED

NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS (CONTINUED)
AT 31 DECEMBER 1996

17. PROVISIONS -- CURRENT
<TABLE>
<CAPTION>
PLUTONIC RESOURCES
CONSOLIDATED LIMITED
------------------ ------------------
1996 1995 1996 1995
------- ------- ------ ------
<S> <C> <C> <C> <C>
$000 $000 $000 $000

<CAPTION>
(ROUNDING OFF TO THE NEAREST THOUSAND
DOLLARS HAS BEEN ADOPTED)
<S> <C> <C> <C> <C>
Income Tax.......................................... 0 16 0 0
Dividends........................................... 13,126 10,294 13,126 10,294
Employee entitlements............................... 2,672 2,385 0 0
Other............................................... 93 159 0 0
------- ------- ------ ------
15,891 12,854 13,126 10,294
======= ======= ====== ======
</TABLE>

18. CREDITORS AND BORROWINGS -- NON CURRENT
<TABLE>
<CAPTION>
PLUTONIC RESOURCES
CONSOLIDATED LIMITED
------------------ ------------------
1996 1995 1996 1995
------- ------- ------ ------
<S> <C> <C> <C> <C>
$000 $000 $000 $000

<CAPTION>
(ROUNDING OFF TO THE NEAREST THOUSAND
DOLLARS HAS BEEN ADOPTED)
<S> <C> <C> <C> <C>
Amounts payable to controlled entities.............. 0 0 87,602 72,192
Bank Loan -- Unsecured (Note 24).................... 87,500 120,000 0 0
------- ------- ------ ------
87,500 120,000 87,602 72,192
======= ======= ====== ======
</TABLE>

19. PROVISIONS -- NON-CURRENT
<TABLE>
<CAPTION>
PLUTONIC RESOURCES
CONSOLIDATED LIMITED
------------------ ------------------
1996 1995 1996 1995
------- ------- ------ ------
<S> <C> <C> <C> <C>
$000 $000 $000 $000

<CAPTION>
(ROUNDING OFF TO THE NEAREST THOUSAND
DOLLARS HAS BEEN ADOPTED)
<S> <C> <C> <C> <C>
Deferred Income Tax................................. 38,180 23,453 148 181
Employee entitlements............................... 134 117 0 0
Mine Rehabilitation................................. 1,984 1,955 0 0
Other............................................... 566 343 0 0
------- ------- ------ ------
40,864 25,868 148 181
======= ======= ====== ======
</TABLE>

D-80
<PAGE> 339
PLUTONIC RESOURCES LIMITED

NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS (CONTINUED)
AT 31 DECEMBER 1996

20. SHARE CAPITAL
<TABLE>
<CAPTION>
PLUTONIC RESOURCES
CONSOLIDATED LIMITED
------------------ ------------------
1996 1995 1996 1995
------- ------- ------ ------
<S> <C> <C> <C> <C>
$000 $000 $000 $000

<CAPTION>
(ROUNDING OFF TO THE NEAREST THOUSAND
DOLLARS HAS BEEN ADOPTED)
<S> <C> <C> <C> <C>
Authorised 800,000,000 ordinary shares of 50c each
(1995 -- 800,000,000 shares)...................... 400,000 400,000 400,000 400,000
Issued and paid up 187,487,785 ordinary shares of
50c each fully paid (1995 -- 180,416,677
shares)........................................... 93,743 90,208 93,743 90,208
1,705,087 ordinary shares of 50c each paid to 5c
(1995 -- 291,125 shares).......................... 85 15 85 15
------- ------- ------ ------
Total Issued Share Capital................ 93,828 90,223 93,828 90,223
======= ======= ====== ======
</TABLE>

(a) Issues during year

(i) 6,684,417 fully paid ordinary 50c shares to shareholders of Dominion
Mining Limited on 29 January 1996;

(ii) 207,500 fully paid ordinary 50c shares (1995 -- 271,375) and 560 bonus
shares (1995 -- 16,080) on the exercise of options issued under the Plutonic
Resources Limited Employee Share Participation Plan;

(iii) 95,000 fully paid ordinary 50c shares (1995 -- 90,000) and 6,756
bonus shares (1995 -- 3,200) on the exercise of options issued under the
Plutonic Resources Non-Executive Directors' Option Scheme;

(iv) 76,875 fully paid ordinary 50c shares (1995 -- 13,000) issued on
partly paid shares being paid in full; and

(v) 1,490,837 ordinary 50c shares each paid to 5c (1995 -- 291,125) on the
exercise of options issued under the Plutonic Resources Limited Employee Share
Participation Plan.

(b) Partly Paid Shares

<TABLE>
<CAPTION>
CALLS TO BE ON ISSUE OPTIONS CALLS ON ISSUE
RECEIVED 31.12.95 EXERCISED RECEIVED 31.12.96
- ----------- -------- --------- -------- ---------
<S> <C> <C> <C> <C>
$ .75 236,250 -- 25,000 211,250
.84 9,000 -- 9,000 --
.85 32,375 1,330,462 31,875 1,330,962
.89 -- 8,000 8,000 --
.90 13,500 149,375 -- 162,875
$5.99 -- 3,000 3,000 --
------- --------- ------ ---------
291,125 1,490,837 76,875 1,705,087
------- --------- ------ ---------
</TABLE>

21. OPTIONS

(A) PLUTONIC RESOURCES EMPLOYEE SHARE PARTICIPATION PLAN ("THE PLAN")

The plan operates by the granting of options over shares in the Chief
Entity to employees. The options can be exercised at the discretion of the
employee over a period of five years to the maximum extent of 10, 20, 30 and 40
percent per annum from the date of grant and the 1st, 2nd and 3rd anniversaries
of the date of grant respectively. Options are granted by the directors at
various times. The maximum number of shares which may be subject to employee
options is 5% of the issued capital of the Chief Entity. Options over a further

D-81
<PAGE> 340
PLUTONIC RESOURCES LIMITED

NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS (CONTINUED)
AT 31 DECEMBER 1996

21. OPTIONS (CONTINUED)
6,036,389 shares may be granted. The options expire after five years from the
date of grant of the option or on termination of the employees' services,
whichever occurs first.

Employees may exercise their options by paying either 5 cents per share or
by paying the full exercise price per share.

Options and partly paid shares are not transferable until the full exercise
price has been paid and fully paid shares issued to the option holder.

The Chief Entity does not provide any assistance to employees in funding
the exercise of options.

The share price at 31 December was $5.75 (1995: $6.30).

The total market value of shares issued during the year was $1,521,533
(1995 -- $1,535,000). Proceeds from the issue of these shares was $301,680
(1995 -- $272,000).

Details of movements during the year are shown in the table below.

<TABLE>
<CAPTION>
MOVEMENT DURING YEAR IN THE NUMBER OF SHARES SUBJECT TO OPTIONS GRANTED UNDER THE PLAN
- -------------------------------------------------------------------------------------------
DATE OUTSTANDING OUTSTANDING
OF EXERCISE AT LAPSED ON AT
GRANT PRICE 31.12.95 GRANTED EXERCISED TERMINATION 31.12.96
- ---------- -------- ----------- ----------- ----------- ------------- -----------
<S> <C> <C> <C> <C> <C> <C>
04.12.91 $ .90 1,455,962 0 1,455,962 0 0
04.12.91 .95 181,875 0 181,875 0 0
09.01.92 .90 24,250 0 23,000 1,250 0
09.01.92 .95 4,500 0 4,500 0 0
12.10.94 6.04 320,000 0 25,000 7,000 288,000
08.12.95 6.04 200,000 0 0 0 200,000
21.05.96 7.75 0 200,000 0 0 200,000
21.05.96 8.75 0 200,000 0 0 200,000
24.06.96 7.75 0 765,000 0 0 765,000
24.06.96 8.75 0 765,000 0 0 765,000
26.06.96 7.75 0 460,000 0 0 460,000
26.06.96 8.75 0 460,000 0 0 460,000
--------- --------- --------- ----- ---------
2,186,587 2,850,000 1,690,337 8,250 3,338,000
========= ========= ========= ===== =========
</TABLE>

(B) PLUTONIC RESOURCES NON-EXECUTIVE DIRECTORS' OPTION SCHEME (THE SCHEME)

The scheme operates by the granting of options over shares in the Chief
Entity to Directors. The options can be exercised at the discretion of the
director at any time within five years of the date of grant. Options recommended
by the directors are approved for granting by shareholders at the Annual General
Meeting. The maximum number of shares which may be subject to non-executive
director options is 500,000 shares. Options over a further 460,000 shares may be
granted. The options expire after five years from the date of grant or on
resignation of the director from the Board.

Options are not transferable until the full exercise price has been paid
and fully paid shares issued to the option holder.

The Chief Entity does not provide any assistance to directors in funding
the exercise of options.

D-82
<PAGE> 341
PLUTONIC RESOURCES LIMITED

NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS (CONTINUED)
AT 31 DECEMBER 1996

21. OPTIONS (CONTINUED)
The total market value of shares issued during the year was $677,100
(1995 -- $605,000). Proceeds from the issue of these shares was $89,300
(1995 -- $110,250).

Details of movements during the year are shown in the table below.

<TABLE>
<CAPTION>
MOVEMENT DURING YEAR IN THE NUMBER OF SHARES SUBJECT TO OPTIONS GRANTED UNDER THE SCHEME
- ---------------------------------------------------------------------------------------------
DATE OUTSTANDING OUTSTANDING
OF EXERCISE AT AT
GRANT PRICE 31.12.95 GRANTED EXERCISED 31.12.96
- ------------ ------------ --------------- ----------- ------------- ---------------
<S> <C> <C> <C> <C> <C>
31.05.91 $ .94 95,000 0 95,000 0
28.11.95 $5.87 40,000 0 0 40,000
------- -- ------ ------
135,000 0 95,000 40,000
======= == ====== ======
</TABLE>

22. RESERVES
<TABLE>
<CAPTION>
PLUTONIC RESOURCES
CONSOLIDATED LIMITED
----------------- -------------------
1996 1995 1996 1995
------- ------- -------- --------
<S> <C> <C> <C> <C>
$000 $000 $000 $000

<CAPTION>
(ROUNDING OFF TO THE NEAREST
THOUSAND DOLLARS HAS BEEN ADOPTED)
<S> <C> <C> <C> <C>
Share premium account................................ 162,756 124,840 162,756 124,840
======= ======= ======= =======
Balance at 31 December 1995.......................... 124,840 124,657 124,840 124,657
Premium on shares issued pursuant to:
-- Share Issue..................................... 37,633 0 37,633 0
-- Employee Share Participation Plan............... 245 128 245 128
-- Non-Executive Directors' Option Scheme.......... 42 65 42 65
Bonus Issue of ordinary shares pursuant to:
-- Employee Share Participation Plan............... 0 (8) 0 (8)
-- Non-Executive Directors' Option Scheme......... (4) (2) (4) (2)
------- ------- ------- -------
BALANCE AT 31 DECEMBER 1996.......................... 162,756 124,840 162,756 124,840
======= ======= ======= =======
</TABLE>

23. OUTSIDE EQUITY INTERESTS IN CONTROLLED ENTITIES
<TABLE>
<CAPTION>
SHARE CAPITAL RESERVES PROFIT & LOSS TOTAL
------------- -------- ------------- ------
<S> <C> <C> <C> <C>
$000 $000 $000 $000

<CAPTION>
(ROUNDING OFF TO THE NEAREST
THOUSAND DOLLARS HAS BEEN ADOPTED)
<S> <C> <C> <C> <C>
Balance at 31 December 1995...................... 15,869 1,795 (4,985) 12,679
Movement for year................................ 784 78 (65) 797
Profit/(Loss) for year........................... 0 0 (788) (788)
------ ----- ------ ------
Net movement for year............................ 784 78 (835) 9
------ ----- ------ ------
BALANCE 31 DECEMBER 1996......................... 16,653 1,873 (5,838) 12,688
====== ===== ====== ======
</TABLE>

24. UNSECURED FINANCE FACILITY

The finance facility represents advances which may be drawn down with ABN
AMRO Australia Limited. At 31 December 1996 $180,000,000 (1995 -- $120,000,000)
has been drawn down. The maximum amount available is $250,000,000
(1995 -- $250,000,000).

D-83
<PAGE> 342
PLUTONIC RESOURCES LIMITED

NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS (CONTINUED)
AT 31 DECEMBER 1996

25. SUPERANNUATION COMMITMENTS

The Economic Entity contributes to three active superannuation funds
covering all of its employees.

The Plutonic Resources Superannuation Plan provides defined pension and/or
lump sum benefits for certain employees on retirement or death based on years of
plan membership and average salary over the last three years of employment.
Benefits on an accumulation basis are provided for terminations other than
retirement or death. The Plan is non-contributory whereby only the company
contributes to the Plan at rates determined by the Plan Actuary.

The following details were shown in the Plan's financial statements as at
30 June 1996 being the date to which the latest financial statements of the plan
have been prepared.
<TABLE>
<CAPTION>
1996 1995
----- -----
<S> <C> <C>
$000 $000

<CAPTION>
(ROUNDING OFF TO
THE NEAREST
THOUSAND DOLLARS
HAS BEEN ADOPTED)
<S> <C> <C>
Net market value of Plan assets as at 30 June 1996.......... 3,510 2,724
Accrued benefits at the date of the last actuarial
review(1)................................................. 2,526 2,526
----- -----
Surplus of Net Market Value of Plan assets over Accrued
Benefits.................................................. 984 198
----- -----
Vested benefits of the plan as at 30 June 1996.............. 2,199 1,667
===== =====
</TABLE>

- ---------------

(1) Accrued benefits as at 1 July 1995 being the date of the last actuarial
review.

The economic entity has satisfied the legally enforceable contribution rate
of 6% of employees wages and salaries.

26. JOINT VENTURES:

The economic entity has interests in the following material joint ventures,
whose principal activities are exploration and the production of gold:

<TABLE>
<CAPTION>
JOINT VENTURE CONTRIBUTION TO OPERATING
PROFIT/(LOSS)
----------------------------------------
INTEREST HELD INTEREST HELD
31 DECEMBER 1996 31 DECEMBER 1995 1996 1995
------------------ ------------------ ------ ------
$000 $000
(ROUNDING OFF TO THE NEAREST THOUSAND DOLLARS HAS BEEN
ADOPTED)
<S> <C> <C> <C> <C>
Baxter................. 66.67% 66.67% 11,088 5,520
Keith Kilkenny......... 50.00% 50.00% 0 0
Mt Morgans............. 80.00% 80.00% 3,410 (744)
Peak Hill.............. 66.67% 66.67% 0 4,903
------ ------
14,498 9,679
====== ======
</TABLE>

D-84
<PAGE> 343
PLUTONIC RESOURCES LIMITED

NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS (CONTINUED)
AT 31 DECEMBER 1996

26. JOINT VENTURES (CONTINUED):
The interests in joint ventures are included in the account as follows:
<TABLE>
<CAPTION>
1996 1995
------ ------
<S> <C> <C>
$000 $000

<CAPTION>
(ROUNDING OFF TO THE
NEAREST THOUSAND
DOLLARS HAS BEEN
ADOPTED)
<S> <C> <C>
Current assets
Cash and deposits................................ 1,268 2,217
Receivables and bullion.......................... 8,030 5,317
Inventories...................................... 19,277 10,901
Other Current Assets............................. 43 0
------ ------
28,618 18,435
====== ======
Non-current assets
Deferred costs of mining properties.............. 18,403 16,631
Other Non-Current Assets......................... 8,478 9,761
------ ------
26,881 26,392
====== ======
Current liabilities
Creditors and borrowings......................... 5,739 10,259
Provisions....................................... 592 373
------ ------
6,331 10,632
====== ======
Non-current liabilities
Provisions....................................... 678 634
====== ======
</TABLE>

27. COMMITMENTS

ECONOMIC ENTITY

(A) EXPLORATION JOINT VENTURES

Expenditure commitments as at 31 December 1996 are:
<TABLE>
<CAPTION>
PLUTONIC RESOURCES
CONSOLIDATED LIMITED
---------------- ------------------
1996 1995 1996 1995
------ ------ ---- ----
<S> <C> <C> <C> <C>
$000 $000 $000 $000

<CAPTION>
(ROUNDING OFF TO THE NEAREST THOUSAND
DOLLARS HAS BEEN ADOPTED)
<S> <C> <C> <C> <C>
Not later than 1 year................................. 317 1,071 0 0
Later than 1 year and not later than 2 year........... 0 1,306 0 0
Later than 2 years and not later than 5 years......... 14,312 8,341 0 0
Later than 5 years.................................... 850 0 0 0
------ ------ --- ---
15,479 10,718 0 0
====== ====== === ===
</TABLE>

D-85
<PAGE> 344
PLUTONIC RESOURCES LIMITED

NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS (CONTINUED)
AT 31 DECEMBER 1996

27. COMMITMENTS (CONTINUED)
(B) LEASE COMMITMENTS
<TABLE>
<CAPTION>
PLUTONIC RESOURCES
CONSOLIDATED LIMITED
---------------- ------------------
1996 1995 1996 1995
------ ------ ----- -----
<S> <C> <C> <C> <C>
$000 $000 $000 $000

<CAPTION>
(ROUNDING OFF TO THE NEAREST THOUSAND
DOLLARS HAS BEEN ADOPTED)
<S> <C> <C> <C> <C>
Operating Leases:
Office and equipment lease commitments:
Not later than 1 year................................. 860 1,105 0 0
Later than 1 year and not later than 2 years.......... 828 37 0 0
Later than 2 years and not later than 5 years......... 1,449 0 0 0
Later than 5 years.................................... 0 0 0 0
------ ------ --- ---
3,137 1,142 0 0
====== ====== === ===
</TABLE>

(C) CAPITAL EXPENDITURE
<TABLE>
<CAPTION>
PLUTONIC RESOURCES
CONSOLIDATED LIMITED
---------------- ------------------
1996 1995 1996 1995
------ ------ ----- -----
<S> <C> <C> <C> <C>
$000 $000 $000 $000

<CAPTION>
(ROUNDING OFF TO THE NEAREST THOUSAND
DOLLARS HAS BEEN ADOPTED)
<S> <C> <C> <C> <C>
Contracts for capital expenditure committed at 31
December 1996......................................... 21,600 10,000 0 0
</TABLE>

(D) TENEMENT EXPENDITURE COMMITMENTS

Expenditure required to maintain tenements in good standing.
<TABLE>
<CAPTION>
PLUTONIC RESOURCES
CONSOLIDATED LIMITED
---------------- ------------------
1996 1995 1996 1995
------ ------ ----- -----
<S> <C> <C> <C> <C>
$000 $000 $000 $000

<CAPTION>
(ROUNDING OFF TO THE NEAREST THOUSAND
DOLLARS HAS BEEN ADOPTED)
<S> <C> <C> <C> <C>
(i) Rentals 1997........................................ 2,126 1,309 24 23
(ii) Expenditure requirements 1997...................... 26,235 17,437 348 381
</TABLE>

(E) FORWARD GOLD SALES CONTRACTS

As at 31 December 1996, 770,040 ounces (1995 -- 780,950 ounces ) of gold
had been committed for sale under forward contracts at a year end value of $581
(1995 -- $612) per ounce.

28. CONTINGENT LIABILITIES

CHIEF ENTITY

UNSECURED

Guarantees

The Chief Entity has given guarantees to third parties in respect of leases
of controlled entities. The maximum amount of the liability is $3,137,000
(1995 -- $627,395).

D-86
<PAGE> 345
PLUTONIC RESOURCES LIMITED

NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS (CONTINUED)
AT 31 DECEMBER 1996

28. CONTINGENT LIABILITIES (CONTINUED)
ECONOMIC ENTITY

UNSECURED

(a) Service Agreements

The maximum contingent liability of the Chief Entity and its controlled
entities for termination benefits under service agreements with directors and
persons who take part in the management of the company as at 31 December 1996
was $1,588,613 (1995 -- $2,397,000).

(b) Further amounts payable on the acquisition of assets

SECURED

Security Deposits

Controlled entities have given guarantees amounting to $3,522,700
(1995 -- $1,695,000) in respect of security deposits relating to various
tenements. The guarantees are secured by deposits with the bank.

29. REMUNERATION OF DIRECTORS
<TABLE>
<CAPTION>
PLUTONIC RESOURCES
CONSOLIDATED LIMITED
------------- ------------------
1996 1995 1996 1995
----- ---- ---- ----
<S> <C> <C> <C> <C>
$000 $000 $000 $000

<CAPTION>
(ROUNDING OFF TO THE NEAREST
THOUSAND DOLLARS HAS BEEN ADOPTED)
<S> <C> <C> <C> <C>
Amounts received or due and receivable by directors of the
Economic Entity including retirement benefits........... 1,652 648
Amounts received or receivable by directors of Plutonic
Resources Limited....................................... 826 648
</TABLE>

D-87
<PAGE> 346
PLUTONIC RESOURCES LIMITED

NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS (CONTINUED)
AT 31 DECEMBER 1996

29. REMUNERATION OF DIRECTORS (CONTINUED)
Number of directors of Plutonic Resources Limited whose remuneration
including retirement benefits were within the following bands.
<TABLE>
<CAPTION>
PLUTONIC RESOURCES
LIMITED
------------------
1996 1995
---- ----
<S> <C> <C>
$000 $000

<CAPTION>
(ROUNDING OFF TO
THE NEAREST
THOUSAND DOLLARS
HAS BEEN ADOPTED)
<S> <C> <C>
$ 0 - $ 9,999......................................... 0 2
$ 10,000 - $ 19,999......................................... 0 1
$ 30,000 - $ 39,999......................................... 1 4
$ 40,000 - $ 49,999......................................... 3 0
$ 70,000 - $ 79,999......................................... 1 1
$ 80,000 - $ 89,999......................................... 0 1
$190,000 - $199,999......................................... 1 0
$320,000 - $329,999......................................... 0 1
$390,000 - $399,999......................................... 1 0
</TABLE>

The economic entity has adopted ASC Class Order 96/1171 with respect to
disclosure of directors' remuneration.

30. REMUNERATION OF EXECUTIVES
<TABLE>
<CAPTION>
PLUTONIC RESOURCES
CONSOLIDATED LIMITED
-------------- ------------------
1996 1995 1996 1995
----- ----- ------ ------
<S> <C> <C> <C> <C>
$000 $000 $000 $000

<CAPTION>
(ROUNDING OFF TO THE NEAREST
THOUSAND DOLLARS HAS BEEN ADOPTED)
<S> <C> <C> <C> <C>
Amounts received or due and receivable by executive
officers of the Economic Entity whose remuneration
exceeds $100,000........................................ 3,168 1,828
Number of executives whose remuneration exceeds
$100,000................................................ 19 10
Amounts received or due and receivable by executive
officers of Plutonic Resources Limited including
executive directors whose remuneration exceeds
$100,000................................................ 3,168 1,828
Number of executives whose remuneration exceeds
$100,000................................................ 19 10
</TABLE>

D-88
<PAGE> 347
PLUTONIC RESOURCES LIMITED

NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS (CONTINUED)
AT 31 DECEMBER 1996

30. REMUNERATION OF EXECUTIVES (CONTINUED)
Number of executive officers of Plutonic Resources Limited who received
remuneration in excess of $100,000 were within the following bands:

31. SEGMENT REPORTING

The Economic Entity carries out mining operations and mineral exploration
predominantly in Australia.

32. RELATED PARTY DISCLOSURES

The names of the Directors of the Chief Entity who held office during the
year are:

<TABLE>
<S> <C>
Mr E P McClintock Mr R J Hawkes
Tan Sri Ibrahim Menudin Mr Abdul Samad Haji Alias
Mr W A Bennett Mr D L Cooper
Sir Eric McClintock (Retired
22.3.96)
</TABLE>

Alternate Directors

Mr C W Lim (alternate for Tan Sri Ibrahim Menudin)

Mr L K Phan (alternate for Mr Abdul Samad Haji Alias -- appointed 23 May
1996)

Mr R Rae (alternate for Mr Abdul Samad Haji Alias -- resigned 23 May
1996)

Transactions with related parties during the year were as follows:

(A) DIRECTORS

Legal fees amounting to $2,902,512 (1995 -- $586,000) were paid to Deacons
Graham & James, Melbourne (of which Mr D L Cooper is a consultant).

These payments were made for services rendered in the ordinary course of
business and on normal commercial terms and conditions.

D-89
<PAGE> 348
PLUTONIC RESOURCES LIMITED

NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS (CONTINUED)
AT 31 DECEMBER 1996

32. RELATED PARTY DISCLOSURES (CONTINUED)
(B) CONTROLLED ENTITIES -- WHOLLY OWNED

Controlled entities made payments and received funds on behalf of the Chief
Entity and other controlled entities by way of intercompany loan accounts with
each controlled entity. These transactions are in the normal course of business
and on normal terms and conditions.
<TABLE>
<CAPTION>
1996 1995
------- -------
<S> <C> <C>
$000 $000

<CAPTION>
(ROUNDING OFF TO THE
NEAREST THOUSAND DOLLARS
HAS BEEN ADOPTED)
<S> <C> <C>
Interest received................................ 8,677 1,848
Dividend received................................ 20,000 14,458
Interest paid.................................... 3,248 353
Other Income..................................... 6,000 0
</TABLE>

The amounts receivable from controlled entities at balance date:
<TABLE>
<CAPTION>
1996 1995
------- -------
<S> <C> <C>
$000 $000

<CAPTION>
(ROUNDING OFF TO THE
NEAREST THOUSAND DOLLARS
HAS BEEN ADOPTED)
<S> <C> <C>
Receivables -- Non-Current....................... 233,530 165,079
Creditors and Borrowings -- Non-Current.......... 87,602 72,192
</TABLE>

Controlled entities acted as operators of projects conducted with joint
venture parties. Amounts receivable from joint venture parties as at 31 December
1996 totalled $881,250 (1995-$424,089).

33. EARNINGS PER SHARE

(A) BASIC

<TABLE>
<CAPTION>
1996 1995
----- -----
<S> <C> <C>
Weighted average number of ordinary shares (millions) on
issue used in the calculation of basic earnings per
share..................................................... 187.4 180
Basic Earnings per share (cents per share).................. 21.7 22.3
</TABLE>

(B) DILUTED

<TABLE>
<CAPTION>
1996 1995
----- -----
<S> <C> <C>
Weighted average number of ordinary shares (millions) and
options on issue used in the calculation of diluted
earnings per share........................................ 190.8 183.0
Diluted Earnings per share (cents per share)................ 21.3 21.9
</TABLE>

D-90
<PAGE> 349
PLUTONIC RESOURCES LIMITED

NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS (CONTINUED)
AT 31 DECEMBER 1996

34. CASH FLOW STATEMENT

(A) RECONCILIATION OF CASH

Cash includes cash, short term bills and deposits at call and gold bullion,
net of outstanding overdrafts. Cash as at the end of the financial year as shown
in the statements of cash flows is reconciled to the related items in the
balance sheet as follows:
<TABLE>
<CAPTION>
PLUTONIC RESOURCES
CONSOLIDATED LIMITED
------------------ ------------------
1996 1995 1996 1995
------- ------- ------- -------
<S> <C> <C> <C> <C>
$000 $000 $000 $000

<CAPTION>
(ROUNDING OFF TO THE NEAREST THOUSAND
DOLLARS HAS BEEN ADOPTED)
<S> <C> <C> <C> <C>
Cash................................................ 13,779 31,878 82 128
Commercial bills and deposits....................... 5,133 16,356 0 0
Gold bullion........................................ 30,236 21,866 0 0
Bank overdraft...................................... 0 (9,628) 0 (3)
------- ------- ------- -------
49,148 60,472 82 125
======= ======= ======= =======
</TABLE>

D-91
<PAGE> 350
PLUTONIC RESOURCES LIMITED

NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS (CONTINUED)
AT 31 DECEMBER 1996

34. CASH FLOW STATEMENT (CONTINUED)
(b) RECONCILIATION OF OPERATING PROFIT AFTER INCOME TAX TO NET CASH PROVIDED BY
(USED IN) OPERATING ACTIVITIES
<TABLE>
<CAPTION>
PLUTONIC RESOURCES
CONSOLIDATED LIMITED
------------------ ------------------
1996 1995 1996 1995
------- ------- ------- -------
<S> <C> <C> <C> <C>
$000 $000 $000 $000

<CAPTION>
(ROUNDING OFF TO THE NEAREST THOUSAND
DOLLARS HAS BEEN ADOPTED)
<S> <C> <C> <C> <C>
Operating profit after income tax................... 39,914 40,387 29,442 13,827
Add (less) items classified as investing/financing
activities:
(Profit)/loss on sale of investments................ (10,340) 2,041 0 0
(Profit)/loss on sale of non-current assets......... (450) (709) 0 0
Interest paid -- external entities.................. 10,397 1,148 0 0
Dividends received -- external entities............. (335) (562) 0 0
Interest received -- external entities.............. (6,817) (3,258) (179) (35)
Exploration expenditure written off................. 4,347 4,541 411 0
Profit on sale of option............................ (6,000) 0 0 0
Add (less) non cash items:
Amounts set aside to provision for:
Amortisation of acquired exploration
expenditure.................................... 5,082 3,590 0 0
Amortisation of acquisition costs................. 16,076 11,042 0 0
Amortisation of pre-production costs.............. 18,419 10,856 0 0
Depreciation of non-current assets................ 8,735 7,815 0 0
Diminution of investments (written back).......... 134 (1,884) 0 0
Employee benefits................................. 304 876 0 0
Doubtful debts (written back)..................... 28 (58) 0 0
Restoration and rehabilitation.................... 364 0 0 0
Interest paid -- related entity..................... 0 0 3,248 353
Interest received -- related entity................. 0 0 (8,677) (1,848)
Other income -- related entity...................... 0 0 (6,000) 0
Overhead recovery fees received..................... 0 0 (384) (384)
Dividend received -- related entity................. 0 0 (20,000) (14,458)
(Decrease)/increase in income taxes payable......... (16) (9,220) 0 (808)
(Decrease)/increase in deferred taxes payable....... 9,494 4,523 (208) 67
------- ------- ------- -------
Net cash provided by (used in) operating activities
before change in assets and liabilities........... 89,336 71,128 (2,347) (3,286)
Change in assets and liabilities adjusted for
effects of purchase of a controlled entity during
the financial year:
(Increase)/decrease in receivables.................. (1,809) (9,621) 42 0
(Increase)/decrease in other current assets......... (34,062) (21,367) 0 0
(Decrease)/increase in creditors.................... 7,100 7,539 (94) 111
(Decrease)/increase in provisions................... (492) 2,083 0 0
------- ------- ------- -------
Net cash provided by (used in) operating
activities........................................ 60,073 49,762 (2,399) (3,175)
======= ======= ======= =======
</TABLE>

D-92
<PAGE> 351
PLUTONIC RESOURCES LIMITED

NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS (CONTINUED)
AT 31 DECEMBER 1996

34. CASH FLOW STATEMENT (CONTINUED)
(c) CONTROLLED ENTITIES ACQUIRED

On 1 July 1996, Lachlan Resources NL, a controlled entity, acquired a
controlling interest in the issued capital of Archaean Gold NL

On 15 December 1995 Forsayth NL, a controlled entity, acquired a 100%
interest in the issued capital of Patshore Pty Ltd.
<TABLE>
<CAPTION>
1996 1995
FAIR VALUE OF NET ASSETS OF ENTITY ACQUIRED: ------ ------
<S> <C> <C>
$000 $000

<CAPTION>
(ROUNDING OFF TO THE
NEAREST THOUSAND
DOLLARS HAS BEEN
ADOPTED)
<S> <C> <C>
Cash................................................. 3,032 262
Short-term bills and deposits........................ 2,484 0
Plant and equipment.................................. 132 12,565
Inventories.......................................... 0 3,625
Prepayments.......................................... 16 273
Deferred cost of mineral prospects................... 37,644 33,300
Receivables.......................................... 79 2,771
Trade creditors and accruals......................... (772) (8,496)
Provisions........................................... (314) (2,126)
Future Income Tax Benefit............................ 0 10,471
------ ------
42,301 52,645
Outside equity interests at acquisition.............. (797) 0
------ ------
Consideration........................................ 41,504 52,645
====== ======
</TABLE>

35. RECONCILIATION TO U.S. GAAP

Financial statements in the United States are prepared in accordance with
accounting principles generally accepted in the United States ("U.S. GAAP"). In
Australia, financial statements are prepared in accordance with accounting
standards issued by the Australian Accounting Standards Board ("Australian
GAAP"), which are codified in Australian Corporations Law. Certain differences
between U.S. GAAP and Australian GAAP as they relate to the conversion of
Plutonic's financial statements to U.S. GAAP are summarised below:

(a) Plutonic defers ongoing exploration expenditures until the
viability of a project is determined. If a decision is made to
proceed with a project the expenditures are transferred to pre-
production cost to be amortised over the life of the mine. If a
decision is made to abandon a project the expenditures are written
off at the time of such determination. Under U.S. GAAP, exploration
expenditures incurred prior to the completion of a favourable
feasibility study are expensed as incurred. Following completion of
a favourable feasibility study, pre-production exploration
expenditures are capitalised and amortised using the
units-of-production method based on proven and probable reserves.

D-93
<PAGE> 352
PLUTONIC RESOURCES LIMITED

NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS (CONTINUED)
AT 31 DECEMBER 1996

35. RECONCILIATION TO U.S. GAAP (CONTINUED)
(b) Plutonic accounts for business combinations using the purchase
method. In its application of the purchase method, Plutonic may
assign a portion of the purchase price to acquired exploration
potential ("AEP"). AEP is amortised using the straight-line method
over periods not exceeding ten years. If it is subsequently
determined that the exploration properties acquired in a business
combination do not contain significant mineralisation, the
remaining unamortised AEP associated with that business combination
would be written down at the time of such determination. Under U.S.
GAAP, AEP would be specifically allocated to individual exploration
properties. If it is subsequently determined that significant
mineralisation does not exist on any of these individual
properties, they would be written down at the time of such
determination. If a property becomes a producing mine, its carrying
value would be amortised using the units-of-production method based
on proven and probable reserves.

(c) Plutonic amortises mine development and pre-production expenditures
together with estimates of expected future development expenditures
using the units-of-production method based on its estimate of
future life-of-mine production. Plutonic's estimate of future
life-of-mine production includes proven and probable reserves plus
a portion of resources which has not yet been converted to reserves
but which Plutonic believes there is sufficient confidence that
such resources will be converted to reserves after further
delineation drilling. Plutonic has a history of successfully
converting resources included in its life-of-mine plans into
reserves. If a significant change in estimated future life-of-mine
production occurs during the period, amortisation expense for that
period is adjusted to reflect the change. Under U.S. GAAP, mine
development and pre-production expenditures, excluding any
provision for expected future development expenditures, are
amortised using the units-of-production method based on published
proven and probable reserves only. A significant change in proven
and probable reserves is treated prospectively for amortisation
purposes.

(d) In 1996, Plutonic recognised a gain of $13 million on the early
close out of certain gold forward sales contracts. Under U.S. GAAP,
these forward sales contacts would have been classified as hedges
of future designated production and the gain realised on the early
close out would have been deferred and recognised in income as the
designated production was delivered.

(e) Plutonic uses the liability method of accounting for income taxes,
which also is required under U.S. GAAP. However, there are
differences in the application of the liability method under U.S.
GAAP. The most significant differences relate to acquisitions
accounted for using the purchase method, recognition of future
income tax benefits and the presentation of the current and
long-term portion of future tax benefits and deferred tax
liabilities in the Balance Sheet.

1. Under Australian GAAP, when an acquisition price exceeds the
underlying net book value of the assets acquired, the excess
purchase price is allocated to the acquired assets and liabilities
based on fair values. Deferred taxes are not established for any
differences between the book and tax bases of assets, which may
arise from this allocation. The assets are then amortised in
accordance with the company's normal depreciation policies. Under
U.S. GAAP, when an acquisition is accounted for using the purchase
method, the excess purchase price paid above the net book value of
the assets acquired also is allocated to the acquired assets and
liabilities based on fair values. However, to the extent that such
allocation creates a temporary difference, deferred taxes are
established and the excess purchase price is increased by an equal
amount. The assets are then amortised in accordance with the
company's normal depreciation policies and the deferred tax
provision is accounted for in accordance with the company's normal
tax accounting policies.
D-94
<PAGE> 353
PLUTONIC RESOURCES LIMITED

NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS (CONTINUED)
AT 31 DECEMBER 1996

35. RECONCILIATION TO U.S. GAAP (CONTINUED)
2. Under Australian GAAP, future income tax benefits relating to
timing differences are not recognised unless realisation of the
benefit is assured beyond reasonable doubt. Future income tax
benefits resulting from net operating losses are not recognised
unless there is virtual certainty of realisation of the benefit.
Acquired tax benefits are valued at market at the time of
acquisition and subsequent to acquisition recognised in accordance
with the foregoing criteria. Under U.S. GAAP, a deferred tax asset
is recognised for deductible temporary differences and operating
loss and tax credit carry-forwards. A valuation allowance is
recognised if, based on the weight of available evidence, it is
more likely than not that some portion or all of the deferred tax
asset will not be realised.

3. Under Australian GAAP, the current and long-term portion of future
tax benefits and deferred tax liabilities are not separately
disclosed in the Balance Sheet. Under U.S. GAAP, the current and
long term portions of future tax benefits and deferred tax
liabilities are separately disclosed.

(f) Represents the income tax effect resulting from (a) to (e) above.

(g) To reflect minority interests' share of the above U.S. GAAP
adjustments and to present minority interest outside of
shareholders' equity in accordance with U.S. GAAP.

(h) Plutonic carries investments in listed and unlisted companies at
cost except that declines in market value judged to be other than
temporary are recognised in determining net income. Under U.S.
GAAP, Plutonic's investments would be classified as
available-for-sale investments and would be carried at market
value. Unrealised gains and losses on these investments are
recorded as a separate component of shareholders' equity except
that declines in market value judged to be other than temporary are
recognised in determining net income.

(i) Plutonic retroactively records common stock dividends declared
after an accounting period has ended but before the financial
statements are issued. Under U.S. GAAP, common stock dividends
payable are recorded in the period in which they are declared.

<TABLE>
<CAPTION>
FOR THE YEAR
ENDED
31 DECEMBER
1996
$'000
------------
<S> <C> <C>
Operating profit after income tax and outside equity interests as
reported under Australian GAAP.......................................... 40,702
Reconciliation to U.S. GAAP:
Accounting for ongoing exploration expenditure (a)................... (23,722)
Accounting for acquired exploration properties (b)................... 4,871
Accounting for capitalised expenditure (c)................... (344)
Accounting for forward contract closeouts (d)................... (3,499)
Accounting for income taxes: (e) 1................. (6,655)
(e) 2................. (5,100)
Income tax effect of above (f)................... 16,476
Accounting for minority interests (g)................... 1,513
Net income in accordance with U.S. GAAP................................. 24,242
=======
Earnings per share in accordance with U.S. GAAP......................... 0.13
=======
</TABLE>

D-95
<PAGE> 354
PLUTONIC RESOURCES LIMITED

NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS (CONTINUED)
AT 31 DECEMBER 1996

35. RECONCILIATION TO U.S. GAAP (CONTINUED)
Consolidated balance sheets prepared in accordance with U.S. GAAP are as
follows:

<TABLE>
<CAPTION>
AUSTRALIAN U.S.
GAAP ADJUSTMENTS GAAP
$'000 $'000 $'000
---------- ----------- -------
<S> <C> <C> <C> <C>
As at 31 December 1996
Current Assets
Cash...................................................... 18,912 18,912
Receivables & Bullion..................................... 37,547 37,547
Inventories............................................... 35,092 35,092
Other..................................................... 4,838 4,838
Future income tax benefits................................ 0 (e)3 9,359 9,359
TOTAL CURRENT ASSETS............................... 96,389 105,748
------- -------
Non-Current Assets
Receivables............................................... 50,000 50,000
Investments............................................... 63,109 (h) (9,852) 53,257
Inventories............................................... 40,625 40,625
Property, plant & equipment............................... 97,299 (e)2 (2,000) 95,299
Deferred cost of mineral prospects........................ 307,079 (a) (80,327)
(b) 9,611
(c) (18,552)
(e)1 53,896
(e)2 (15,300) 256,407
Future income tax benefits................................ 23,510 (e)3 (9,359)
(f) 36,431 50,582
TOTAL NON-CURRENT ASSETS........................... 581,622 546,170
------- -------
TOTAL ASSETS................................................ 678,011 651,918
======= =======
As at 31 December 1996
Current Liabilities
Creditors and borrowings.................................. 117,187 117,187
Provisions and other...................................... 15,891 (d) 3,499
(i) (13,126) 6,264
Deferred income taxes..................................... 0 (e)3 7,458 7,458
TOTAL CURRENT LIABILITIES.......................... 133,078 130,909
------- -------
Non-Current Liabilities
Creditors and borrowings.................................. 87,500 87,500
Provisions................................................ 2,684 2,684
Deferred income taxes..................................... 38,180 (e)1 53,896
(e)3 (7,458)
(f) (348) 84,270
TOTAL NON-CURRENT LIABILITIES...................... 128,364 174,454
------- -------
TOTAL LIABILITIES........................................... 261,442 305,363
======= =======
OUTSIDE EQUITY INTERESTS.................................... 12,688 (g) (2,946) 9,742
======= =======
NET ASSETS.................................................. 403,881 336,813
======= =======
</TABLE>

D-96
<PAGE> 355
PLUTONIC RESOURCES LIMITED

NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS (CONTINUED)
AT 31 DECEMBER 1996

<TABLE>
<CAPTION>
AUSTRALIAN U.S.
GAAP ADJUSTMENTS GAAP
$'000 $'000 $'000
---------- ----------- -------
35. RECONCILIATION TO U.S. GAAP (CONTINUED)
<S> <C> <C> <C> <C>
Shareholders' Equity
Share capital............................................. 93,828 93,828
Reserves.................................................. 162,756 162,756
Unrealized gain (loss) on investments..................... 0 (h) (9,852) (9,852)
Accumulated profits....................................... 147,297 (a) (80,327)
(b) 9,611
(c) (18,552)
(d) (3,499)
(e)2 (17,300)
(f) 36,779
(g) 2,946
(i) 13,126 90,081
------- -------
TOTAL SHAREHOLDERS' EQUITY.................................. 403,881 336,813
======= =======
</TABLE>

D-97
<PAGE> 356

STATEMENT BY DIRECTORS

In accordance with a resolution of the directors of Plutonic Resources
Limited, we state that --

(1) In the opinion of the directors:

(a) the profit and loss account is drawn up so as to give a true and
fair view of the profit of the Company for the financial year ended 31
December 1996;

(b) the balance sheet is drawn up so as to give a fair view of the
state of affairs of the Company as at 31 December 1996; and

(c) at the date of this statement there are reasonable grounds to
believe that the Company will be able to pay its debts as and when they
fall due.

(2) In the opinion of the directors the consolidated accounts:

(a) give a true and fair view of:

(i) the profit of the Economic Entity, constituted by the Company
and its entities it controlled from time to time during the financial
year, for the financial year ended 31 December 1996; and

(ii) the state of affairs of the Economic Entity constituted by the
Company and its entities that it controls at the year's end, as at 31
December 1996; and

(b) have been made out in accordance with Divisions 4A and 4B of Part
3.6 of the Corporations Law

On behalf of the Board.

<TABLE>
<S> <C>
Paul McClintock /s/ PAUL MCCLINTOCK
-----------------------------------------------------
Chairman

Ronald J Hawkes /s/ RONALD J HAWKES
-----------------------------------------------------
Managing Director

Sydney, 27 February 1997.
</TABLE>

THIS STATEMENT BY DIRECTORS IS DATED AS OF 27 FEBRUARY 1997 AND DOES NOT
RELATE TO NOTE 35, WHICH IS DATED AS OF 15 JANUARY 1998. FURTHER, NOTE 35 IS NOT
REQUIRED UNDER THE CORPORATION LAW.

D-98
<PAGE> 357

INDEPENDENT AUDITOR'S REPORT

To the Members of Plutonic Resources Limited

SCOPE

We have audited the accompanying financial statements of Plutonic Resources
Limited, being the Profit and Loss Statements for the year ended 31 December
1996, the Balance Sheets at 31 December 1996 and the Statements of Cash Flows
for the year ended 31 December 1996, Notes and the Statement by Directors. The
financial statements include the accounts of Plutonic Resources Limited and the
consolidated accounts of the economic entity comprising Plutonic Resources
Limited and the entities it controlled from time to time during the financial
year and at the year's end. The company's directors are responsible for the
preparation and presentation of the financial statements and the information
they contain. We have conducted an independent audit of these financial
statements in order to express an opinion on them to the members of the company.

We were the auditors of Plutonic Resources Limited for the year ended 31
December 1995 and on 4 March 1996 we expressed an unqualified opinion on the
financial statements prepared for the Company for that period. Those financial
statements have been presented with the financial statements for the year ended
31 December 1996 for comparative purposes.

The audit opinion expressed in this report has been formed on the above
basis.

AUDIT OPINION

In our opinion, the financial statements of Plutonic Resources Limited are
properly drawn up:

(a) so as to give a true and fair view of:

(i) the state of affairs of the company and of the economic entity
as at 31 December 1996, and of the profit and cash flows of the
company and of the economic entity for the financial year ended
on that date; and

(ii) the other matters required by Division 4, 4A and 4B of Part
3.6 of the Corporations Law to be dealt with in the financial
statements;

(iii) the comparative financial information for the year ended 31
December 1995;

(b) in accordance with the provisions of the Corporations Law; and

Accounting principles generally accepted in Australia vary in certain
respects from accounting principles generally accepted in the United States. The
application of the latter would have affected the determination of the
consolidated operating profit for the year ended 31 December 1996 and the
determination of consolidated shareholders' equity attributable to shareholders
of Plutonic Resources Limited as at 31 December 1996 to the extent indicated in
Note 35 to the financial statements.

ERNST & YOUNG

/s/ M.A. ELLIOTT

M.A. Elliott

Partner

Sydney, Australia

Date opinion formed: 27 February 1997, except for Note 35 for which the opinion
was formed on 15 January 1998.

D-99
<PAGE> 358

APPENDIX E

COMPARISON OF CERTAIN SEC AND JORC CODE
REPORTING REQUIREMENTS
<PAGE> 359

Following is a comparison of United States Securities and Exchange
Commission ("SEC") requirements for reporting ore reserves and the Australasian
Code for Reporting of Identified Mineral Resources and Ore Reserves ("JORC
Code").

Information in the accompanying Document with respect to ore reserves and
mineralized material for Homestake has been prepared and defined in accordance
with SEC definitions and practices, as follows.

"Mineralized material" is a mineralized body which has been delineated
by appropriate drilling and/or underground sampling to support a sufficient
tonnage and average grade of metal. Under SEC standards, mineralization
does not qualify as a reserve until a comprehensive evaluation, based upon
unit cost, grade recoveries and other factors necessary to conclude
economic viability is concluded. Under SEC requirements, reporting issuers
may report mineralization as "mineralized material" in terms of tons and
grade, but mineralized material is not reportable in ounces of contained
metal, and is not reportable as a "resource."

"Ore Reserves" are that part of a mineralized body which can be
economically and legally extracted or produced at the time of the reserve
determination.

Under SEC practice, "reserves" are reported separately from and are not
included as part of "mineralized material."

For SEC purposes, ore reserves may be proven or probable:

"Proven (Measured) Reserves" are those reserves for which (a) quantity
is computed from dimensions revealed in outcrops, trenches, workings, or
drill holes; grade and/or quality are computed from results of detailed
sampling and (b) the sites for inspection, sampling, and measurement are so
closely spaced and the geologic character is so well defined that size,
shape, depth, and mineral content of reserves are well-established.

"Probable (Indicated) Reserves" are those reserves for which quantity
and grade and/or quality are computed from information similar to that for
proven (measured) reserves, but the sites for inspection, sampling, and
measurement are farther apart or are otherwise less adequately spaced. The
degree of assurance, although lower then that for proven (measured)
reserves, is high enough to assume continuity between points of
observation.

The JORC Code applicable in Australia provides that Australian companies
reporting on mineralization are to prepare information on the following bases.

"Mineral Resource" is defined as an identified in-situ mineral
occurrence from which valuable or useful minerals may be recovered. Mineral
resources are subdivided into:

- Measured Mineral Resources;

- Indicated Mineral Resources; and

- Inferred Mineral Resources.

In reporting a mineral resource, there is a clear implication that there
are reasonable prospects for eventual economic exploitation.

"Measured Mineral Resource" means a mineral resource intersected and
tested by drill holes, underground openings or other sampling procedures at
locations which are spaced closely enough to confirm continuity and where
geoscientific data are reliably known. A measured mineral resource estimate
will be based on a substantial amount of reliable data, interpretation and
evaluation of which allows a clear determination to be made of shapes,
sizes, densities and grades.

"Indicated Mineral Resource" means a mineral resource sampled by drill
holes, underground opening or other sampling procedures at locations too
widely spaced to ensure continuity but close enough to give a reasonable
indication of continuity and where geoscientific date are known with a
reasonable

E-1
<PAGE> 360

level of reliability. An indicated mineral resource estimate will be based
on more data, and therefore will be more reliable, than an inferred mineral
resource estimate.

"Inferred Mineral Resource" means a mineral resource inferred from
geoscientific evidence, drill holes, underground openings or other sampling
procedures where the lack of data is such that continuity cannot be
predicted with confidence and where geoscientific data may not be known
with a reasonable level of reliability.

Under the JORC Code, "Ore Reserve" is defined as that part of a measured or
indicated mineral resource which could be mined, inclusive of dilution, and from
which valuable or useful minerals could be recovered economically under
conditions realistically assumed at the time of reporting. Ore reserves are
subdivided into proved ore reserves and probable ore reserves.

"Proved Ore Reserve" means an ore reserve stated in terms of minable
tonnes/volume and grade in which the corresponding identified mineral
resource has been defined in three dimensions by excavation or drilling
(including minor extensions beyond actual openings and drill holes), and
where the geological factors that limit the ore body are known with
sufficient confidence that the mineral resource is categorized as
"measured."

"Probable Ore Reserve" means an ore reserve stated in terms of minable
tonnes/volume and grades where the corresponding identified mineral
resource has been defined by drilling, sampling of excavation (including
extensions beyond actual openings and drill holes), and where the
geological factors that control the ore body are known with sufficient
confidence that the mineral resource is categorized as "indicated."

Under the JORC Code, "reserves" are reported as an identified component of
"resources", in contrast to the SEC practice where "reserves" are separately
reported from "mineralized material." Under SEC practice, "mineralized material"
includes only measured and indicated mineral resources and the portion of
inferred mineral resources (as defined in the JORC Code) in areas where holes
have been drilled at closer spacing on grids that conform with the "mineralized
material" definition as prescribed by the SEC, and where historical experience
with the ore bodies provides an increased confidence level with respect to the
mineralized material.

HOMESTAKE RECONCILIATION

Except with respect to the Mt Charlotte underground mine at Kalgoorlie,
Homestake believes that its ore reserve estimates reported in the Document,
based on SEC definitions, are approximately the same as those that would result
from the application of the JORC Code for determining proved and probable ore
reserves. Also except with respect to the Mt Charlotte underground mine,
Homestake believes that its mineralized material estimates, based on SEC
requirements, are approximately the same as would result from the application of
the JORC Code for mineral resources, after subtracting that portion of the
resource that contains the proved and probable ore reserves. Exceptions are as
follows:

- Kalgoorlie Consolidated Gold Mines Limited ("KCGM"), the operator of the
Kalgoorlie mines, only includes as proved and probable ore reserves that
mineralization for which a mining plan has been prepared, i.e., stope
design and scheduling has been completed. This is not required by SEC
guidelines and, accordingly, Homestake examines and when necessary,
recalculates Mt Charlotte ore reserves for its reporting purposes. As so
recalculated, Homestake's estimates of Mt Charlotte reserves included an
additional 317,000 ounces of reserves at December 31, 1996 (Homestake's
50% share). These additional reserves would have been reported as a part
of resources other than reserves under the JORC Code. At December 31,
1997, no modifications were made and the reserves reported under the JORC
Code were accepted by Homestake for its reporting according to SEC
guidelines.

Although Homestake ore reserve and mineralized material estimates are believed
to have been prepared and evaluated reliably and professionally, ore reserve and
mineralized material estimates involve interpretation of known data and
subjective judgments regarding grade, mineralization, continuity and, in the
case of ore reserves, economic factors.

E-2
<PAGE> 361

For 1997 reserve calculations, Homestake used US$325 per ounce as the gold
price in evaluating Homestake's short lived operations, and US$350 per ounce for
other operations. For 1996 reserve calculations, Homestake used US$375 per
ounce. Future market price fluctuations, production costs, recovery rates and
many other factors may result in an ore reserve becoming uneconomic or a
mineralized material being upgraded into an ore reserve.

PLUTONIC RECONCILIATION

Plutonic ore reserve estimates reported in the Document are prepared in
accordance with the JORC Code. Plutonic believes that its ore reserve estimates
are approximately the same as those that would result from the application of
the SEC requirements. Plutonic mineralized material reported in the Document
represent Plutonic's estimated resources less that portion of resources from
which reserves have been derived, as prepared in accordance with the JORC Code,
and reported in tonnes and grade. Plutonic believes that its mineralized
material estimates are approximately the same as would result from the
application of the SEC requirements. While the tons and grades of mineralized
material shown include some mineralized material that is classified as an
"Inferred Mineral Resource" under the JORC Code, such tonnages and grades
pertain only to those areas where drill holes have been appropriately drilled at
closer spacing on grids that conform with the mineralized material definition as
prescribed by the SEC, and where historical experience with the ore bodies
provides an increased confidence level with respect to the mineralized material.

Plutonic used A$450 per ounce and A$500 to A$525 per ounce, respectively
for its 1997 and 1996 ore reserve calculations. Future market price
fluctuations, production costs, recovery rates and many other factors may result
in an ore reserve becoming uneconomic or a mineral deposit being upgraded into
an ore reserve.

E-3
<PAGE> 362

APPENDIX F

HOMESTAKE DIFFERENCES BETWEEN U.S. AND AUSTRALIAN GENERALLY ACCEPTED ACCOUNTING
PRINCIPLES
<PAGE> 363

Financial statements in the United States are prepared in accordance with
accounting principles generally accepted in the United States ("U.S. GAAP"). In
Australia, financial statements are prepared in accordance with accounting
standards issued by the Australian Accounting Standards Board ("Australian
GAAP"), which are codified in the Australian Corporations Law. Certain
differences between U.S. GAAP and Australian GAAP as they relate to Homestake's
financial statements presented in the Document are summarised below. This
information has not been audited and may not necessarily detail all differences
between U.S. GAAP and Australian GAAP applicable to Homestake.

BUSINESS COMBINATIONS

Under U.S. GAAP, business combinations are accounted for by either the
purchase method or the pooling-of-interests method. During 1992, Homestake
entered into a business combination with Homestake Canada Inc. ("HCI") which was
accounted for using the pooling-of-interests method.

Under Australian GAAP business combinations may only be accounted for using
the purchase method.

The criteria for the pooling-of-interests method relate to the attributes
of the combining enterprises before the combination, the manner of combining the
enterprises, and the absence of certain planned transactions after the
combination. The pooling-of-interests method accounts for a business combination
as the uniting of the ownership interests of two or more companies by exchange
of equity securities. No acquisition is recognized because the combination is
accomplished without disbursing resources of the constituents. Ownership
interests continue and the former bases of accounting are retained. The recorded
assets and liabilities of the constituents are carried forward to the combined
corporation at their U.S. GAAP amounts. Income of the combined corporation
includes income of the constituents for the entire fiscal period in which the
combination occurs. The U.S. GAAP income of the constituents for prior periods
are combined and restated as income of the combined corporation.

The purchase method accounts for a business combination as the acquisition
of one enterprise by another. The acquiring corporation records at its cost the
acquired assets less liabilities assumed. A difference between the cost of an
acquired enterprise and the sum of the fair values of tangible and identifiable
intangible assets less liabilities assumed is recorded as goodwill. The reported
income of an acquiring corporation includes the results of operations of the
acquired enterprise only after the acquisition, based on the cost to the
acquiring corporation.

INCOME TAXES

U.S. GAAP and Australian GAAP require the use of the liability method of
accounting for income taxes. However, there are differences in the application
of the liability method under U.S. GAAP. The most significant differences relate
to acquisitions accounted for using the purchase method and recognition of
future income tax benefits.

Under Australian GAAP, when an acquisition price exceeds the underlying net
book value of the assets acquired, the excess purchase price is allocated to the
acquired assets and liabilities based on fair values. Deferred taxes are not
established for any differences between the book and tax bases of assets, which
may arise from this allocation. The assets are then amortized in accordance with
the company's normal depreciation policies. Under U.S. GAAP, when an acquisition
is accounted for using the purchase method, the excess purchase price paid above
the net book value of the assets acquired also is allocated to the acquired
assets and liabilities based on fair values. However, to the extent that such
allocation creates a temporary difference, deferred taxes are established and
the excess purchase price is increased by an equal amount. The asset is then
amortized in accordance with the company's normal depreciation policies and the
deferred tax provision is accounted for in accordance with the company's normal
tax accounting policies.

In addition, for Australian GAAP purposes, future income tax benefits
relating to timing differences are not recognized unless realization of the
benefit is assured beyond reasonable doubt. Future income tax benefits resulting
from net operating losses are not recognized unless there is virtual certainty
of realization of the benefit. Under U.S. GAAP, a deferred tax asset is
recognized for deductible temporary differences and
F-1
<PAGE> 364

operating loss and tax credit carry-forwards. A valuation allowance is
recognized if, based on the weight of available evidence, it is more likely than
not that some portion or all of the deferred tax asset will not be realized.

EQUITY ACCOUNTING

U.S. GAAP requires investments in associates, where more than 20% but less
than 50% of the voting shares of the associate are owned, to be accounted for
using the equity method. Under the equity method, the investor's percentage of
the associate's net earnings is included in the investor's net income, and the
carrying value of the investment is adjusted accordingly. Dividends received
from the associate reduce the carrying value of the investment. Under Australian
GAAP, companies account for investments in associates using the cost method.
Under the cost method, the investment is recorded at cost, and dividends paid by
the associate are included in earnings as received. Supplementary financial
information about the associate is disclosed in a note to the financial
statements.

INVESTMENTS IN MARKETABLE EQUITY SECURITIES

U.S. GAAP requires that investments (other than those accounted for under
the equity method as discussed above) in equity securities that have readily
determinable fair values be classified as either "trading securities" or
"available-for-sale securities" and be reported on the balance sheet at fair
value. Changes in unrealized gains and losses on losses on trading securities
are included in earnings. Unrealized gains and losses on available-for-sale
securities are excluded from earnings and are reported as a separate component
of shareholders' equity, except that declines in market value judged to be other
than temporary are included in earnings. Homestake classifies its investments in
equity securities as available-for-sale securities.

Under Australian GAAP, investments in equity securities are carried at
cost, except that declines in market value judged to be other than temporary are
included in earnings.

FOREIGN CURRENCY HEDGING PROGRAM

Under U.S. GAAP, Homestake's foreign currency exchange contracts are deemed
to be hedges of anticipated transactions which do not qualify for hedge
accounting treatment. Therefore, changes in the unrealized gains or losses on
the contracts are included in earnings.

Under Australian GAAP, only realised gains and losses relating to the
foreign currency exchange contracts are included in earnings.

INTEREST CAPITALISED

Under both U.S. GAAP and Australian GAAP interest on debt is capitalised
with respect to assets under construction. Under Australian GAAP interest
capitalised is limited to interest incurred on specific borrowings for such
assets. Under U.S. GAAP any interest within the consolidated entity may be
capitalised.

RETIREMENT BENEFITS

In accounting for retirement benefits, Australian GAAP requires the
recognition of expense only when contributions are paid and payable to the
pension plans.

Under U.S. GAAP, the amount charged to the income statement in each
accounting period is the net periodic retirement benefit expense. This expense
is actuarially determined and is comprised of the actual service cost of the
plan, the interest cost of the projected benefit obligations of the plan, the
amortization of any unrecognized prior service costs, and the amortization of
any actuarial gains or losses (including the effects of changes in the actuarial
assumptions) to the extent recognized, less the actual return achieved by the
assets invested in the plan.

F-2
<PAGE> 365

INVENTORY ACCOUNTING

Under U.S. GAAP, the last-in, first-out method (LIFO) is allowable for
determining the cost of inventory. Homestake uses the LIFO method as the basis
for determining the cost of gold produced at certain of its United States
operations. LIFO cannot be used under Australian GAAP.

AMORTISATION OF MINING INTERESTS

Under U.S. GAAP, the impact of a reassessment of reserves on the
determination of amortisation of mining interests is prospective. Under
Australian GAAP, the amortisation calculation is amended from the commencement
of the reporting period.

CONSOLIDATED FINANCIAL STATEMENTS

Under U.S. GAAP, companies only report consolidated financial results.
Under Australian GAAP, companies also are required to disclose the separate
financial statements of the holding company.

INCOME STATEMENT DISCLOSURE

U.S. GAAP requires a higher level of detail to be disclosed in the income
statement than required by Australian GAAP. Homestake separately discloses
expenses for production costs, administrative and general expense, and
exploration expenses in its statements of consolidated operations.

Under Australian GAAP, items of income or expense which are abnormal by
virtue of their nature or size and are material in amount are required to be
disclosed as abnormal items. Under U.S. GAAP such items are included in the net
income. Items that would be likely to be disclosed as abnormal for Australian
GAAP purposes in Homestake's historical financial statements have been disclosed
by way of footnote in Homestake's Selected Financial Data included elsewhere in
this Document.

CASH FLOW STATEMENT

Australian GAAP requires that statements of cash flow be presented using
the direct method. U.S. GAAP requires that cash flows be classified according to
whether they originate from operating, investing, or financing activities and
allows both direct and indirect methods. Homestake uses the indirect method.

OUTSIDE EQUITY INTERESTS

Outside equity interests (minority interests) are classified as liabilities
for U.S. GAAP purposes but are included as part of total shareholders' equity
under Australian GAAP.

F-3
<PAGE> 366

APPENDIX G

OVERVIEW OF
AUSTRALIAN, CANADIAN AND
UNITED STATES REGULATION OF MINING RIGHTS
<PAGE> 367

AUSTRALIA

The mining of hard rock minerals onshore in Australia is regulated by State
or Territory legislation and regulation which is administered by a responsible
government department within each jurisdiction. Each State and Territory has its
own separate mining regime and there is little uniformity of legislation and
regulations on an Australia-wide basis. In all States and Federal Territories,
gold, silver and uranium belong to the Crown. As a general rule, the Crown is
also vested with ownership of other minerals. Private ownership can, however,
occur in all Australian jurisdictions other than in South Australia and the
Northern Territory. In general, rights to explore, mine and produce minerals
onshore are granted by the State or Territory government where those rights are
sought.

In general, exploration is authorised by statutory title with some
jurisdictions providing for a suite of exploration titles with varying rights
and fees, according to the amount of samples that may be extracted. Such titles
are usually granted for relatively short periods and, in some cases, only upon
approval by the relevant government department of a program of work and
expenditure or subject to minimum expenditure commitments.

Titles which allow mining may be granted, usually with priority given to
the holder of the underlying exploration title for that land, upon application
to the government department in the jurisdiction where the deposit is located.
In respect of most minerals, royalties are payable to the government of the
jurisdiction where production occurs.

A special regime applies in most jurisdictions in respect of mining on
private land. This usually obliges the title holder to pay compensation to the
landowner for losses arising from the exercise of rights to enter, explore or
mine the land.

CANADA

Mining rights are within the authority of the individual provinces.
Although there are some variations among the provinces with regard to specific
features, the general requirements are similar. The ownership of and the
granting of rights to exploit minerals generally remains in the government.
Persons seeking to exploit most minerals (including gold and silver) may stake
claims on government property open to exploitation. An initial fee is payable on
staking of a mining claim. There are annual minimum work requirements although
cash may be paid in lieu of minimum work requirements in most provinces. The
development of a mine requires that mining claims be converted to mining leases.
Mining leases are granted for a specific term of years (up to 21 years in
Ontario and up to 30 years in British Columbia), with the right of renewal.
There are generally limited annual rental or royalty payments. There may be
overlapping use rights on the same property, such as mining and forestry, in
which case the terms on which multiple uses take place will generally be
negotiated between the parties and will be specified in the mining lease.

In December 1997, the Supreme Court of Canada re-affirmed the existence of
aboriginal tribal rights in land in British Columbia used or occupied by their
ancestors in 1846. Those rights may vary from limited rights of use up to
aboriginal title. The decision did not address how aboriginal rights or title
are to be reconciled with property and tenure rights previously sold or granted
by the government. The Court did confirm that the extent of the aboriginal
rights (including whether the rights rise to the level of "aboriginal title")
will depend on, among other things, the extent of prior aboriginal use and
occupation. The Court also confirmed that, depending on the nature of the
aboriginal rights, consultation with and compensation to (and possibly consent
of) aboriginal groups may be required in connection with sales of government
land or granting of mining, forestry and other rights to use government owned
land. In the future, it can be expected that the granting of mining claims and
mining leases may be subject to the determination of aboriginal rights in the
affected property, and may involve negotiation of training and employment,
community improvement, compensation and other agreements with aboriginal groups
having rights in the property. The law in this area is new and developing.

G-1
<PAGE> 368

In some areas there are mineral rights that are privately owned, the rights
having been previously alienated by governmental action. In the case of
privately held mineral rights, the owner is free to negotiate terms on which
mining may take place. If the surface and minerals are held by different
persons, negotiations between the surface and mineral rights holder will be
required if the matter is not governed by pre-existing agreements. In some
jurisdictions disagreements over rights of surface use may be resolved by a
government agency having authority to determine use and compensation.

UNITED STATES

Title to and right to mine hard rock minerals in the United States is
governed by the law of each state, except as to public lands of the United
States federal government that are open to exploration, which are governed by
the Mining Law of 1872, as amended.

In general, real property law in the United States is based on the English
common law of real property. In general, under the law of each state in the
United States, title to minerals and the right to mine is vested in the surface
owner, unless separately alienated. The surface owner can transfer all or part
of the mineral rights separate from the surface, or can transfer the surface and
retain ownership of mineral rights. Mineral rights may be further alienated, may
be leased and subleased, and also may be subdivided among more than one owner,
including alienation with the disposing party retaining the right to receive
royalties or other payments.

If the surface and the mineral rights are held by different persons, state
laws vary as to priority and other rights as between the parties. Transfer
documents by which the surface and mineral rights were separated may govern. In
the absence of agreement or provision in title documentation, in some states,
mineral right holders have priority of use and occupancy but must compensate the
surface holder for injury to the surface estate. In some states, the mineral
right holders have priority of use and no compensation obligation. A few states
have private condemnation statutes, which permit holders of mineral rights to
exercise the power of eminent domain to secure access to minerals and to provide
a portion of the surface for use in the conduct of mining.

Mineral rights holders have no royalty or payment obligation in respect of
minerals to a government entity unless the government entity happens to hold
title to or a royalty or payment interest in the mineral rights in the same way
as a private owner. However, some states have enacted severance taxes applicable
to production of minerals from property within the jurisdiction.

Under the United States Mining Law of 1872, United States citizens
(including corporations incorporated in the United States) may stake mining
claims upon United States federal government property open to exploration
("unpatented mining claims"). An initial fee is payable on staking and annual
maintenance fees are also payable. Under current law, persons staking such
unpatented mining claims, upon the making and documenting of a discovery of most
minerals (including gold and silver) in commercial quantities, are entitled to
mine for the mineral without payment of royalties or other fees (other than the
annual claim maintenance fee). In addition, the holder of an unpatented mining
claim who has made a commercial discovery is entitled to secure title to the
mineral and surface estates of the property subject to the mining claim
("patented mining claim") at nominal cost. Only certain federal public lands,
principally in the Western United States, are open to exploration. A patented
mining claim gives the holder the full fee interest in the property. Holders of
unpatented and patented mining claims may sell or lease claims in the same way
as fee property. See "Risk Factors -- Risks of Government Regulation of Mining
Activities" in the Supplement for a discussion of recent proposals to change the
United States Mining Law of 1872.

G-2
<PAGE> 369

APPENDIX H

MAPS SHOWING

LOCATIONS OF

HOMESTAKE AND PLUTONIC MINES

<PAGE> 370
LOCATION OF HOMESTAKE MINING COMPANY OPERATIONS, SOUTH DAKOTA

Map and detail of map of location of Homestake Mining Company operations in
South Dakota. Shows roads leading to operations in Lead.

H-1
<PAGE> 371
LOCATION OF HOMESTAKE MINING COMPANY OPERATIONS, NEVADA

Map and detail of map of location of Homestake Mining Company operations in
Nevada. Shows roads leading to operations at Pinson, Marigold, Round Mountain
and Ruby Hill.

H-2
<PAGE> 372
LOCATION OF HOMESTAKE MINING COMPANY OPERATIONS, CALIFORNIA

Map and detail of map of location of Homestake Mining Company operations in
California. Shows roads leading to operations at McLaughlin.

H-3
<PAGE> 373
LOCATION OF HOMESTAKE MINING COMPANY OPERATIONS, BRITISH COLUMBIA

Map and detail of map of location of Homestake Mining Company operations in
British Columbia. Shows roads leading to operations at Snip and Eskay Creek.

H-4
<PAGE> 374
LOCATION OF HOMESTAKE MINING COMPANY OPERATIONS, ONTARIO

Map and detail of map of location of Homestake Mining Company operations in
Ontario. Shows roads leading to operations at Williams/David Bell.

H-5
<PAGE> 375
LOCATION OF HOMESTAKE MINING COMPANY OPERATIONS, WESTERN AUSTRALIA

Map and detail of map of location of Homestake Mining Company operations in
Western Australia. Shows roads leading to operations at Mt.
Charlotte/Kalgoorlie Superpit.

H-6
<PAGE> 376
LOCATION OF HOMESTAKE MINING COMPANY OPERATIONS, NORTHERN CHILE

Map and detail of map of location of Homestake Mining Company operations in
Northern Chile. Shows roads leading to operations at Agua de la Falda.

H-7
<PAGE> 377
LOCATION OF PLUTONIC RESOURCES LIMITED OPERATIONS

Map and detail of map of location of Plutonic Resources Limited Operations.
Shows roads leading to operations at Peak Hill, Plutonic, Bellevue, Lawlers,
Darlot/Centenary and Mt Morgans.

H-8
<PAGE> 378

HOMESTAKE MINING COMPANY
650 CALIFORNIA STREET
SAN FRANCISCO, CALIFORNIA 94108

SPECIAL MEETING OF STOCKHOLDERS - April 29, 1998
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS

The undersigned hereby appoints Jack E. Thompson, Gene G. Elam and Gil J.
Leathley as proxies, each with the power to appoint a substitute, and hereby
authorizes a majority (or if only one, then that one) of them to represent and
to vote, as designated on the reverse side, all shares of common stock of
Homestake Mining Company held of record by the undersigned on March 10, 1998
at the special meeting of stockholders, or any postponement or adjournment
thereof.

[X] Please mark votes as in this example.

THIS PROXY WILL BE VOTED AS DIRECTED. IF NO DIRECTIONS ARE GIVEN, THIS PROXY
WILL BE VOTED FOR ITEM NUMBER 1.

1. Approval of issuance of Homestake Common Stock to acquire Plutonic
Resources Limited in accordance with the Exchange Ratios described in the
Proxy Statement dated as of March 30, 1998.

FOR AGAINST ABSTAIN
[ ] [ ] [ ]

MARK HERE FOR ADDRESS CHANGE AND NOTE AT LEFT [ ]

By execution of this proxy the undersigned hereby authorizes such proxies or
their substitutes to vote in their discretion on such other business as may
properly come before the meeting.

Sign exactly as name appears on this proxy card. If shares are held jointly,
each holder should sign. Executors, administrators, trustees, guardians,
attorneys and agents should give their full titles. If stockholder is a
corporation, sign in full corporate name by an authorized officer.

Signature: _____________ Date: ________ Signature: _____________ Date: ________