UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q/A
(Amendment No. 1)
(x) Quarterly report pursuant to section 13 or 15(d) of the Securities Exchange
Act of 1934.
For the Quarterly Period Ended June 30, 1999
( ) Transition report pursuant to section 13 or 15(d) of the Securities
Exchange Act of 1934.
For the transition period from _______ to ________
Commission File Number 1-8736
HOMESTAKE MINING COMPANY
A Delaware Corporation
IRS Employer Identification No. 94-2934609
650 California Street
San Francisco, California 94108-2788
Telephone: (415) 981-8150
http://www.homestake.com
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15 (d) of the Securities Exchange Act of 1934
during the preceding 12 months (or for such shorter period that the registrant
was required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes X No ______
-----------
The number of shares of common stock outstanding as of July 31, 1999 was
260,227,000.*
* Includes 6,994,000 Homestake Canada Inc. exchangeable shares that may be
exchanged at any time for Homestake common stock on a one-for-one basis.
<PAGE>
HOMESTAKE MINING COMPANY AND SUBSIDIARIES
Form 10-Q/A
Amendment No. 1
The undersigned registrant hereby amends its quarterly report on Form 10-Q for
the quarterly period ended June 30, 1999 to revise Note 10 (entitled Homestake
Canada Inc. "HCI") to the condensed consolidated financial statements. On April
29, 1999 Homestake Mining Company acquired Argentina Gold in a business
combination accounted for as a pooling of interests and transferred its
investment in Argentina Gold to HCI in exchange for an intercompany note. Note
10 to the condensed consolidated financial statements has been revised to
reflect the difference between the historical cost basis and fair value of the
equity of Argentina Gold at the date of transfer as a reduction to HCI's
shareholders' equity. A revised Item 1, Financial Statements, of Part I of the
Form 10-Q is hereby submitted in its entirety.
2
<PAGE>
HOMESTAKE MINING COMPANY AND SUBSIDIARIES
PART 1 - FINANCIAL INFORMATION
Item 1. Financial Statements
A. Condensed Consolidated Balance Sheets (unaudited)
(In thousands, except per share amount)
<TABLE>
<CAPTION>
June 30, December 31,
1999 1998
---------------- ----------------
<S> <C> <C>
ASSETS
Current Assets
Cash and equivalents $ 167,630 $ 147,519
Short-term investments 83,127 154,346
Receivables 41,181 45,929
Inventories:
Finished products 15,011 13,312
Ore and in process 44,381 39,465
Supplies 24,056 26,129
Deferred income and mining taxes 19,028 22,792
Other 9,128 5,105
---------------- ----------------
Total current assets 403,542 454,597
---------------- ----------------
Property, Plant and Equipment - at cost 2,644,178 2,525,793
Accumulated depreciation, depletion and amortization (1,519,608) (1,423,054)
---------------- ----------------
Property, plant and equipment - net 1,124,570 1,102,739
---------------- ----------------
Investments and Other Assets
Noncurrent investments 10,054 12,945
Other assets 67,399 81,616
---------------- ----------------
Total investments and other assets 77,453 94,561
---------------- ----------------
Total Assets $ 1,605,565 $ 1,651,897
================ ================
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities
Accounts payable $ 34,624 $ 43,457
Accrued liabilities:
Payroll and other compensation 27,779 31,587
Reclamation and closure costs 23,295 23,206
Other 29,901 23,317
Unrealized (gain) loss on foreign currency exchange contracts (28) 24,003
Income and other taxes payable 2,066 3,151
---------------- ----------------
Total current liabilities 117,637 148,721
---------------- ----------------
Long-term Liabilities
Long-term debt 304,542 357,410
Other long-term obligations 167,878 168,178
---------------- ----------------
Total long-term liabilities 472,420 525,588
---------------- ----------------
Deferred Income and Mining Taxes 243,785 230,567
Minority Interests in Consolidated Subsidiaries 7,167 7,825
Shareholders' Equity
Capital stock, $1 par value per share:
Authorized - Preferred: 10,000 shares; no shares outstanding
- Common: 450,000 shares
Outstanding - HCI exchangeable shares: 1999 - 6,998; 1998 - 11,139
- Common: 1999 - 253,212; 1998 - 247,483 253,212 247,483
Other shareholders' equity 511,344 491,713
---------------- ----------------
Total shareholders' equity 764,556 739,196
---------------- ----------------
Total Liabilities and Shareholders' Equity $ 1,605,565 $ 1,651,897
================ ================
</TABLE>
See notes to condensed consolidated financial statements.
3
<PAGE>
HOMESTAKE MINING COMPANY AND SUBSIDIARIES
B. Condensed Statements of Consolidated Operations (unaudited)
(In thousands, except per share amounts)
<TABLE>
<CAPTION>
Three Months Ended June 30, Six Months Ended June 30,
1999 1998 1999 1998
-------------- -------------- -------------- --------------
<S> <C> <C> <C> <C>
Revenues
Gold and ore sales $ 169,076 $ 210,687 $ 328,303 $ 405,026
Sulfur and oil sales 5,345 5,665 9,196 11,798
Interest income 3,629 5,282 7,792 9,558
Other income 21,290 (26,284) 32,663 (14,790)
-------------- -------------- -------------- --------------
199,340 195,350 377,954 411,592
-------------- -------------- -------------- --------------
Costs and Expenses
Production costs 123,786 142,749 232,573 278,306
Depreciation, depletion and amortization 36,197 37,402 67,859 73,492
Administrative and general expense 10,549 11,538 21,746 24,177
Exploration expense 11,651 13,370 21,112 24,634
Interest expense 4,073 5,216 8,618 10,328
Business combination and integration costs 3,476 17,934 4,764 20,710
Write-downs and other unusual charges 3,500 13,061 3,500 21,940
Other expense 1,795 419 2,381 798
-------------- -------------- -------------- --------------
195,027 241,689 362,553 454,385
-------------- -------------- -------------- --------------
Income (Loss) Before Taxes and Minority Interests 4,313 (46,339) 15,401 (42,793)
Income and Mining Taxes (4,549) 4,878 (17,021) (2,342)
Minority Interests 352 (1,688) 787 (5,616)
-------------- -------------- -------------- --------------
Net Income (Loss) $ 116 $ (43,149) $ (833) $ (50,751)
============== ============== ============== ==============
Net Income (Loss) Per Share - Basic and Diluted $ 0.00 $ (0.19) $ (0.00) $ (0.22)
============== ============== ============== ==============
Average Shares Used in the Computation 260,084 229,107 259,641 228,907
============== ============== ============== ==============
Dividends Paid Per Common Share $ 0.05 $ 0.05 $ 0.05 $ 0.05
============== ============== ============== ==============
</TABLE>
See notes to condensed consolidated financial statements.
4
<PAGE>
HOMESTAKE MINING COMPANY AND SUBSIDIARIES
C. Condensed Statements of Consolidated Cash Flows (unaudited)
(In thousands)
<TABLE>
<CAPTION>
Six Months Ended June 30,
1999 1998
-------------- --------------
<S> <C> <C>
Cash Flows from Operations
Net loss $ (833) $ (50,751)
Reconciliation to net cash provided by operations:
Depreciation, depletion and amortization 67,859 73,492
Write-downs 3,500 13,061
Gains on asset disposals (851) (1,854)
Deferred taxes, minority interests and other 7,890 (19,548)
Effect of changes in operating working capital items (29,942) 48,465
-------------- --------------
Net cash provided by operations 47,623 62,865
-------------- --------------
Investment Activities
Decrease (increase) in short-term investments 73,287 (11,231)
Capital additions (35,634) (33,873)
Proceeds from asset sales 2,095 7,841
Decrease (increase) in restricted cash 11,816 (429)
Other - 542
-------------- --------------
Net cash provided by (used in) investment activities 51,564 (37,150)
-------------- --------------
Financing Activities
Borrowings 101,008 -
Debt repayments (162,012) (8,083)
Dividends paid (12,085) (11,933)
Common shares issued 6,707 1,038
Other - 2,531
-------------- --------------
Net cash used in financing activities (66,382) (16,447)
-------------- --------------
Effect of Exchange Rate Changes on Cash and Equivalents (12,694) (2,197)
-------------- --------------
Net Increase in Cash and Equivalents 20,111 7,071
Cash and Equivalents, January 1 147,519 128,890
-------------- --------------
Cash and Equivalents, June 30 $ 167,630 $ 135,961
============== ==============
</TABLE>
See notes to condensed consolidated financial statements.
5
<PAGE>
Homestake Mining Company and Subsidiaries
Notes to Condensed Consolidated Financial Statements (unaudited)
1. General Information
The condensed consolidated financial statements include Homestake Mining
Company and its majority-owned subsidiaries, and their undivided interests
in joint ventures (collectively, "Homestake" or the "Company") after
elimination of intercompany amounts.
The information furnished in this report reflects all normal recurring
adjustments which, in the opinion of management, are necessary for a fair
statement of the results for the interim periods. Results of operations for
interim periods are not necessarily indicative of results for the full
year. These unaudited condensed consolidated financial statements should be
read in conjunction with the financial statements and notes thereto, which
include information as to significant accounting policies, in the Company's
Annual Report on Form 10-K for the year ended December 31, 1998.
All dollar amounts are in United States dollars unless otherwise indicated.
In June 1998, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 133 ("SFAS 133"), "Accounting for
Derivative Instruments and Hedging Activities." SFAS 133 requires that all
derivatives be recognized as assets or liabilities and be measured at fair
value. Gains or losses resulting from changes in the values of those
derivatives would be accounted for depending on the use of the derivatives
and whether they qualify for hedge accounting as either a fair value hedge
or a cash flow hedge. The key criterion for hedge accounting is that the
hedging relationship must be highly effective in achieving offsetting
changes in fair value or cash flows of the hedging instruments and the
hedged items. SFAS 133 is effective for fiscal years beginning after June
15, 2000 but earlier adoption is permitted. The Company believes that under
SFAS 133, changes in unrealized gains and losses on Homestake's foreign
currency contracts will qualify for hedge accounting and be deferred in
other comprehensive income. However, there are many complexities to this
new standard and the Company currently is evaluating the impact that SFAS
133 will have on reported operating results and financial position and has
not yet determined whether it will adopt earlier than January 1, 2001.
2. Acquisitions
On April 29, 1999, Homestake completed the acquisition of Argentina Gold
Corp. ("Argentina Gold"), a publicly-traded Canadian gold exploration
company, by an exchange of common stock for common stock. Homestake issued
20.8 million common shares to acquire all of the shares of Argentina Gold
based on an exchange ratio of 0.545 Homestake common shares for each share
of Argentina Gold. The transaction has been accounted for as a pooling of
interests and accordingly, Homestake's consolidated financial statements
include Argentina Gold for all periods. Argentina Gold's principal asset is
its 60% interest in the Veladero property located in northwest Argentina
along the El Indio gold belt.
The Company recorded business combination expenses of $3.5 million and $4.8
million, in the three and six month periods ended June 30, 1999,
respectively, related to this transaction. Combined and separate
preacquisition results for Homestake and
6
<PAGE>
Homestake Mining Company and Subsidiaries
Argentina Gold for the three months ended March 31, 1999 and for the three
and six months ended June 30, 1998 are as follows (in thousands):
<TABLE>
<CAPTION>
Argentina
Homestake Gold
Historical Historical (a) Combined
--------------------------------------------------------------
<S> <C> <C> <C>
Three months ended March 31, 1999:
Revenues $ 178,533 $ 81 $ 178,614
Net income (loss) 2,198 (3,147) (949)
Three months ended June 30, 1998:
Revenues $ 195,285 $ 65 $ 195,350
Net loss (30,931) (12,218) (43,149)
Six months ended June 30, 1998:
Revenues $ 411,502 $ 90 $ 411,592
Net loss (37,517) (13,234) (50,751)
Shareholders' equity:
at March 31, 1999 $ 737,843 $ 6,526 $ 744,369
at December 31, 1998 735,832 3,364 739,196
at June 30, 1998 604,748 2,336 607,084
<FN>
a) The Argentina Gold historical results of operations have been adjusted
to reflect i) United States generally accepted accounting principles
and the format, classifications and accounting policies utilized by
Homestake, and ii) translation into U.S. dollars using the average
exchange rate for each period. Shareholders' equity has been translated
into U.S. dollars using the end-of-period exchange rates.
</FN>
</TABLE>
On April 30, 1998 Homestake acquired Plutonic Resources Limited
("Plutonic"), a publicly-traded Australian gold producer, by an exchange of
common stock for common stock. Homestake issued 64.4 million common shares
to acquire Plutonic based on an exchange ratio of 0.34 Homestake common
shares for each Plutonic share. The business combination with Plutonic was
accounted for as a pooling of interests. Business combination and
integration costs of $17.9 million and $20.7 million related to this
acquisition were recorded in the three and six months ended June 30, 1998,
respectively.
7
<PAGE>
Homestake Mining Company and Subsidiaries
3. Other Income
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
June 30, June 30,
------------------------- ------------------------
(in millions) 1999 1998 1999 1998
---------- ----------- ---------- -----------
<S> <C> <C> <C> <C>
Gains on asset disposals $ 0.7 $ 1.6 $ 0.9 $ 1.9
Gain on sales of Rabbi
Trust investments 0.4 0.3 0.4 4.3
Royalty income 0.5 0.6 1.1 1.2
Foreign currency
contract gains (losses) 9.0 (26.5) 16.9 (22.4)
Foreign currency exchange gains (losses)
on intercompany advances 8.9 (4.4) 10.2 (3.5)
Other foreign currency gains (losses) (0.5) 0.4 (0.3) 0.5
Other 2.3 1.7 3.5 3.2
---------- ----------- ---------- -----------
$ 21.3 $(26.3) $ 32.7 $(14.8)
========== =========== ========== ===========
</TABLE>
4. Write-downs and Other Unusual Charges
During the second quarter of 1999, the Company determined that further
participation in an exploration joint venture in Eastern Europe was
unwarranted. As a result, Homestake recorded a write-down of $3.5 million
related to the carrying value of this investment.
Write-downs and other unusual charges for the three and six months ended
June 30, 1998 include $13.1 million to write down exploration properties,
including $10.2 million related to property of Argentina Gold. Write-downs
and other unusual charges for the six months ended June 30, 1998 also
includes $8.9 million related to the first quarter of 1998 restructuring of
the Homestake mine in South Dakota.
5. Comprehensive Income (Loss)
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
June 30, June 30,
------------------------------ ----------------------------
(in thousands) 1999 1998 1999 1998
------------- -------------- ------------ -------------
<S> <C> <C> <C> <C>
Net Income (Loss) $ 116 $ (43,149) $ (833) $ (50,751)
Other Comprehensive Income (Loss)
Currency translation adjustments 18,104 (33,160) 28,287 (27,401)
Unrealized losses on securities (5) (1,154) (40) (3,448)
------------- -------------- ------------ -------------
Total Other Comprehensive Income (Loss) 18,099 (34,314) 28,247 (30,849)
------------- -------------- ------------ -------------
Comprehensive Income (Loss) $ 18,215 $ (77,463) $27,414 $ (81,600)
============= ============== ============ =============
</TABLE>
8
<PAGE>
Homestake Mining Company and Subsidiaries
6. Long-term Debt
<TABLE>
<CAPTION>
June 30, December 31,
(in thousands) 1999 1998
--------------------------------------
<S> <C> <C>
Convertible subordinated notes (due 2000) $ 147,640 $ 150,000
Pollution control bonds:
Lawrence County, South Dakota (due 2032) 38,000 48,000
State of California (due 2004) 17,000 17,000
Cross-border credit facility (due 2003):
Canadian dollar-denominated borrowings 101,902 -
Australian dollar-denominated borrowings - 142,410
--------------------------------------
$ 304,542 $ 357,410
======================================
</TABLE>
During the first six months of 1999, the Company repurchased convertible
subordinated notes having a principal amount of $2.4 million and repaid all
Australian dollar-denominated borrowings under the cross-border credit
facility (the "credit facility"). The Company also borrowed C$150 million
under the credit facility. In addition, $10 million of the South Dakota
Waste Disposal Bonds were repaid from funds held in trust. Borrowings
outstanding at June 30, 1999 under the credit facility consist of the
Canadian dollar-denominated borrowings of C$150 million. Interest on the
Canadian dollar borrowings is payable quarterly and is based on the
Bankers' Acceptance discount rate plus a stamping fee. At June 30, 1999
this interest rate was 5.71%.
The Company has classified the balance of the convertible subordinated
notes, which mature on June 23, 2000, as long-term debt since the Company
has the ability under the credit facility, and the intent, to refinance
these obligations for a period longer than one year from June 30, 1999.
7. Foreign Currency, Gold and Other Commitments
Foreign Currency Contracts
Under the Company's foreign currency protection program, the Company has
entered into a series of foreign currency option contracts which establish
trading ranges within which the United States dollar may be exchanged for
foreign currencies by setting minimum and maximum exchange rates.
9
<PAGE>
Homestake Mining Company and Subsidiaries
At June 30, 1999 the Company had foreign currency option contracts
outstanding as follows:
<TABLE>
<CAPTION>
Expected Maturity or Transaction Date
Total or
US$ in millions 1999 2000 2001 Average
---------- ---------- --------- -----------
<S> <C> <C> <C> <C>
Canadian $ / US $ option contracts:
US $ covered $61.4 $93.4 $59.1 $213.9
Written puts, average exchange rate (1) 0.68 0.69 0.66 0.68
US $ covered $61.4 $93.4 $63.1 $217.9
Purchased calls, average exchange rate (2) 0.71 0.72 0.69 0.71
US $ covered $50.8 $93.4 $35.2 $179.4
Purchased puts, average exchange rate (3) 0.65 0.65 0.65 0.65
Australian $ / US $ option contracts:
US $ covered $76.4 $94.1 $23.0 $193.5
Written puts, average exchange rate (1) 0.65 0.65 0.60 0.64
US $ covered $76.4 $94.1 $23.0 $193.5
Purchased calls, average exchange rate (2) 0.67 0.66 0.63 0.66
US $ covered $60.5 $83.2 $12.0 $155.7
Purchased puts, average exchange rate (3) 0.63 0.63 0.61 0.63
<FN>
(1) Assuming exercise by the counter-party at the expiration date, the
Company would exchange US dollars for Canadian or Australian dollars at
the put exchange rate. The counter-party would be expected to exercise
the option if the spot exchange rate was below the put exchange rate.
(2) Assuming exercise by the Company at the expiration date, the Company
would exchange US dollars for Canadian or Australian dollars at the
call exchange rate. The Company would exercise the option if the spot
exchange rate was above the call exchange rate.
(3) Assuming exercise by the Company at the expiration date, the Company
would exchange US dollars for Canadian or Australian dollars at the put
exchange rate. The Company would exercise the option if the spot
exchange rate was below the put exchange rate.
</FN>
</TABLE>
Gold and Silver Contracts
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
current hedging policy provides for the use of forward sales contracts to
hedge up to 30% of each of the following ten year's expected annual gold
production, and up to 30% of each of the following five year's expected
annual silver production, at prices in excess of certain targeted prices.
The policy also provides for the use of combinations of put and call option
contracts to establish minimum floor prices.
10
<PAGE>
Homestake Mining Company and Subsidiaries
At June 30, 1999 the Company had gold forward sales and option contracts
outstanding as follows:
<TABLE>
<CAPTION>
Expected Maturity or Transaction Date
-------------------------------------------------------------------------
There- Total or
1999 2000 2001 2002 2003 after Average
------------ ------------ ----------- ---------- ---------- ------------ ------------
<S> <C> <C> <C> <C> <C> <C> <C>
US $ denominated contracts:
Forward sales contracts:
Ounces 54,960 85,080 95,000 95,000 75,000 - 405,040
Average price ($ per oz.) $419 $430 $441 $457 $481 - $447
Put options owned:
Ounces 140,000 30,000 - - - - 170,000
Average price ($ per oz.) $282 $350 - - - - $294
Call options written:
Ounces - 15,000 - - - - 15,000
Average price ($ per oz.) - $395 - - - - $395
Australian $ denominated contracts: (1)
Forward sales contracts:
Ounces - 24,800 24,800 24,800 24,800 50,800 150,000
Average price (US$ per oz.) - $346 $346 $346 $346 $346 $346
Put options owned:
Ounces 60,000 120,000 120,000 - - - 300,000
Average price (US$ per oz.) $333 $342 $352 - - - $344
<FN>
(1) Expressed in US dollars at an exchange rate of A$ = US$ 0.6576
</FN>
</TABLE>
During the three and six months ended June 30, 1999 and 1998, the Company
delivered or financially settled the following:
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
June 30, June 30,
------------------------------ --------------------------------
1999 1998 1999 1998
-------------- ------------- --------------- -------------
<S> <C> <C> <C> <C>
Gold
Forward sales contracts
Ounces 27,500 85,900 55,000 238,900
Average price (US$ per oz.) $413 $381 $411 $353
Option contracts
Ounces 150,000 225,000 180,000 450,000
Average price (US$ per oz.) $293 $325 $297 $325
Silver
Option Contracts
Ounces 830,000 - 1,585,000 -
Average price (US$ per oz.) $6.36 - $6.35 -
</TABLE>
11
<PAGE>
Homestake Mining Company and Subsidiaries
The Company's gold hedging activities increased year-to-date June 30, 1999
revenues by approximately $14 million.
In July 1999, the Company closed out US dollar denominated forward sales
contracts covering 245,016 ounces maturing in the years 2001, 2002 and
2003. The pretax gain of $35 million realized as a result of this action
will be deferred and recorded in income as the originally designated
production is sold.
8. Segment Information
In 1998, the Company adopted SFAS 131, "Disclosures about Segments of an
Enterprise and Related Information." The Company primarily is engaged in
gold mining and related activities. Gold operations are managed and
internally reported based on the following geographic areas: United States,
Australia and Canada. The Company also has gold operations in Chile, other
foreign exploration activities and a sulfur operation in the Gulf of Mexico
which are included in "Corporate and All Other." Within each geographic
segment, operations are managed on a mine-by-mine basis. However, due to
each mine having similar characteristics, the Company has adopted the
aggregation approach available under SFAS 131. Segment information for the
three and six months ended June 30, 1999 and 1998 is as follows (in
thousands):
<TABLE>
<CAPTION>
Corporate
United and All Reconciling
States Australia Canada Other Items Total
--------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
For the three months ended:
June 30, 1999
Revenues $ 51,148 $ 61,382 $ 67,012 $27,462 $ (7,664) $ 199,340
Operating
earnings (loss) 4,433 7,989 15,838 18,761 (7,664) 39,357
June 30, 1998
Revenues $ 63,578 $ 71,860 $ 51,609 $ 8,946 $ (643) $ 195,350
Operating
earnings (loss) 9,672 (5,947) 14,009 (1,892) (643) 15,199
For the six months ended:
June 30, 1999
Revenues $ 93,997 $ 125,734 $ 125,065 $ 43,856 $ (10,698) $ 377,954
Operating
earnings (loss) 7,851 21,366 33,263 25,740 (10,698) 77,522
June 30, 1998
Revenues $ 126,638 $ 145,818 $ 113,702 $ 26,907 $ (1,473) $ 411,592
Operating
earnings (loss) 17,176 (360) 37,914 6,537 (1,473) 59,794
</TABLE>
12
<PAGE>
Homestake Mining Company and Subsidiaries
9. 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.
Grants: Homestake's former uranium millsite near Grants, New Mexico is
listed on the NPL. The total future cost for reclamation, remediation,
monitoring and maintaining compliance at the Grants site is estimated to be
approximately $14 million.
Pursuant to the Energy Policy Act of 1992, the United States Department of
Energy ("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 June 30, 1999 Homestake had received $27.7
million from the DOE and the accompanying balance sheet at June 30, 1999
includes an additional receivable of $6 million for the DOE's share of
reclamation expenditures made by Homestake through 1998. Homestake believes
that its share of the estimated remaining cost of reclaiming the Grants
facility is fully provided in the financial statements at June 30, 1999.
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: Deposits of tailings along an 18-mile stretch of Whitewood
Creek formerly constituted a site on the NPL. Whitewood Creek was a site
where mining companies operating in the Black Hills of South Dakota,
including Homestake, placed mine tailings beginning in the nineteenth
century. Some tailings placed in Whitewood Creek eventually flowed into the
Belle Fourche River, the Cheyenne River and Lake Oahe. Homestake ceased the
placement of mine tailings into Whitewood Creek in 1977 and for more than
21 years the Homestake mine has impounded all mine tailings that are not
redeposited in the mine. The site was deleted from the NPL in 1996.
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 and
downstream receiving waters. The complaint also contained a pendent state
law claim, alleging that the tailings constitute a continuing public
nuisance. The complaint asks for abatement of the nuisance, damages in an
unascertained amount, 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 resources
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. Homestake has also
counterclaimed against the State of South Dakota and the Federal Trustees
seeking cost recoupment, contribution and indemnity.
13
<PAGE>
Homestake Mining Company and Subsidiaries
Homestake, the State of South Dakota and the Federal Trustees engaged in
settlement discussions with respect to these actions and a global
settlement has been reached among the parties. The settlement agreement
provides for Homestake to pay $4 million to be shared equally among the
United States government, the State of South Dakota and the Cheyenne River
Sioux Tribe (the "Tribe") and used for natural resource restoration.
Additionally, it provides for Homestake to deed 400 acres of land to the
Tribe for noncommercial use, provide $500,000 to the Tribe for
environmental monitoring on the reservation and to assign certain water
rights to the State of South Dakota. The United States government will
receive $500,000 for damage assessment costs and a land exchange for Bureau
of Land Management land believed to be impacted by mine tailings. In
exchange for the covenants and releases provided to Homestake by the
trustees, all of Homestake's counterclaims will be dismissed. Homestake
accrued the estimated cost of the settlement agreement in the third
quarter of 1998.
A proposed Consent Decree settling federal, state and tribal natural
resource damage claims for tailings released from Homestake's mining
operations was lodged with the United States District Court for the
District of South Dakota on July 9, 1999.
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.
10. Homestake Canada Inc. ("HCI")
On December 3, 1998 Homestake completed the acquisition of the 49.4% of
Prime Resources Group Inc. ("Prime") it did not already own. The
acquisition was accounted for as a purchase. Under the Plan of Arrangement,
Prime shareholders had the option of receiving 0.74 of a Homestake common
share or 0.74 of an HCI exchangeable share for each Prime share. Each HCI
exchangeable share is exchangeable for one Homestake common share at any
time at the option of the holder and has essentially the same voting,
dividend (payable in Canadian dollars), and other rights as a Homestake
common share. A share of special voting stock was issued to Montreal Trust
Company of Canada, in trust for the holders of the HCI exchangeable shares,
and provides the mechanism for holders of HCI exchangeable shares to
receive voting rights in Homestake. Homestake owns all of HCI's common
shares outstanding. At June 30, 1999, approximately 7 million HCI
exchangeable shares outstanding were held by the public.
On April 29, 1999, Homestake Mining Company issued common stock in exchange
for the common stock of Argentina Gold, a publicly-traded Canadian
exploration company, in a business combination accounted for as a pooling
of interests. The investment in Argentina Gold was then transferred to HCI
in exchange for a Canadian dollar-denominated intercompany note payable by
HCI to its parent company of approximately C$282 million (US$191 million).
In accordance with United States generally accepted accounting principles,
the assets, liabilities and shareholders' equity of Argentina Gold have
been recorded in HCI's financial statements at the historical cost basis to
the parent company. The difference between the historical cost basis of
Argentina Gold shareholders' equity and its fair value at the date of
transfer has been recorded as a reduction to HCI's shareholders' equity.
14
<PAGE>
Homestake Mining Company and Subsidiaries
Summarized consolidated financial information for HCI, including Argentina
Gold for all periods presented, is as follows:
<TABLE>
<CAPTION>
June 30, December 31,
1999 1998
------------- -------------
<S> <C> <C>
Current assets $ 51,367 $ 151,593
Noncurrent assets 523,735 526,463
------------- -------------
Total Assets $ 575,102 $ 678,056
============= =============
Notes payable to the Company $ 323,922 $ 144,002
Other current liabilities 21,772 41,839
Long-term debt 101,902 -
Other long-term liabilities 14,621 15,882
Deferred income and mining taxes 209,702 193,074
Redeemable preferred stock
held by the Company - 36,167
Shareholders' equity:
HCI shareholders' equity 94,055 247,092
Adustment to conform to the
Company's accounting basis (190,872) -
------------- -------------
Total Liabilities and
Shareholders' Equity $ 575,102 $ 678,056
============= =============
</TABLE>
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
June 30, June 30,
---------------------------------- ----------------------------------
1999 1998 1999 1998
--------------- -------------- --------------- ---------------
<S> <C> <C> <C> <C>
Total revenues $ 68,032 $ 51,674 $ 126,031 $ 113,792
Costs and expenses 64,079 54,376 113,778 97,164
--------------- -------------- --------------- ---------------
Income (loss) before taxes
and minority interests $ 3,953 $ (2,702) $ 12,253 $ 16,628
=============== ============== =============== ===============
Net loss $ (1,559) $ (10,841) $ (755) $ (6,937)
=============== ============== =============== ===============
</TABLE>
15
<PAGE>
Homestake Mining Company and Subsidiaries
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
HOMESTAKE MINING COMPANY
Date: November 16, 1999 By /s/ David W. Peat
--------------- -----------------
David W. Peat
Vice President, Finance and
Chief Financial Officer
Date: November 16, 1999 By /s/ James B. Hannan
--------------- -------------------
James B. Hannan
Vice President and Controller
(Chief Accounting Officer)
16
