UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(x) Quarterly report pursuant to section 13 or 15(d) of the Securities Exchange
Act of 1934.
For the Quarterly Period Ended June 30, 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
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.
2
<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.
3
<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.
4
<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
5
<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.
6
<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>
7
<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$150 million. Interest on the
Canadian dollar borrowings is payable quarterly and is based on the
Bankers' Acceptance discount rate plus a stamping fee. At June 30, 1999
this interest rate was 5.71%.
The Company has classified the balance of the convertible subordinated
notes, which mature on June 23, 2000, as long-term debt since the Company
has the ability under the credit facility, and the intent, to refinance
these obligations for a period longer than one year from June 30, 1999.
7. Foreign Currency, Gold and Other Commitments
Foreign Currency Contracts
Under the Company's foreign currency protection program, the Company has
entered into a series of foreign currency option contracts which establish
trading ranges within which the United States dollar may be exchanged for
foreign currencies by setting minimum and maximum exchange rates.
8
<PAGE>
Homestake Mining Company and Subsidiaries
At June 30, 1999 the Company had foreign currency option contracts
outstanding as follows:
<TABLE>
<CAPTION>
Expected Maturity or Transaction Date
Total or
US$ 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.
9
<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>
10
<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>
11
<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.
12
<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. 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 share, 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, 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 an intercompany note payable by HCI to its parent company.
This transfer was accounted for as a purchase and accordingly, the assets
transferred were recorded in the books of HCI at fair market value as of
the transfer date.
13
<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 714,607 526,463
---------------- ------------------
Total assets $ 765,974 $ 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 94,055 247,092
---------------- ------------------
Total liabilities and
shareholders' equity $ 765,974 $ 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>
14
<PAGE>
Homestake Mining Company and Subsidiaries
Item 2 - Management's Discussion and Analysis of Financial Condition 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. Homestake reports per ounce production costs in accordance
with the "Gold Institute Production Cost Standard.")
The following provides information which management believes is
relevant to an assessment and understanding of Homestake Mining Company's
("Homestake" or the "Company") consolidated results of operations and financial
condition. The discussion should be read in conjunction with the Management's
Discussion and Analysis included in Homestake's 1998 Annual Report on Form 10-K.
On April 29, 1999 Homestake acquired Argentina Gold Corp. ("Argentina
Gold"), a Canadian gold exploration company. Homestake issued 20.8 million
common shares, valued at approximately $190 million, to acquire all of the
shares of Argentina Gold. Argentina Gold's principal asset is its 60% interest
in the Veladero property located in northwest Argentina along the El Indio gold
belt. This business combination was accounted for as a pooling of interests, and
accordingly, the Company's consolidated financial statements include Argentina
Gold for all periods.
RESULTS OF OPERATIONS
SUMMARY
Homestake recorded net income of $0.1 million ($0.00 per share) and a
net loss of $0.8 million ($0.00 per share) in the quarter and six months ended
June 30, 1999 compared with losses of $43.1 million ($0.19 per share) and $50.8
million ($0.22 per share) in the respective 1998 periods. Second quarter and
year-to-date results in 1999 include after-tax foreign currency exchange gains
of $13.9 million ($0.05 per share) and $20.2 million ($0.08 per share),
respectively, and non-recurring charges of $7.8 million ($0.03 per share) and
$9.1 million ($0.04 per share), respectively. Second quarter and year-to-date
results in 1998 include after-tax foreign currency exchange losses of $20.4
million ($0.09 per share) and $16.9 million ($0.07 per share), respectively, and
non-recurring charges of $27.8 million ($0.12 per share) and $36.4 million
($0.16 per share), respectively.
After-tax non-recurring charges are as follows:
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
June 30, June 30,
(in millions) 1999 1998 1999 1998
--------- --------- --------- ----------
<S> <C> <C> <C> <C>
Business combination and integration cost $ 3.5 $15.0 $ 4.8 $ 17.7
Exploration property write-downs 3.5 12.8 3.5 12.8
Severance and other termination costs 0.8 - 0.8 -
Homestake mine restructuring charges - - - 5.9
--------- --------- --------- ----------
$ 7.8 $27.8 $ 9.1 $ 36.4
========= ========= ========= ==========
</TABLE>
15
<PAGE>
Homestake Mining Company and Subsidiaries
Excluding the effect of non-recurring items and foreign exchange gains
and losses, the Company incurred net losses of $6.0 million ($0.02 per share)
and $11.9 million ($0.05 per share) in the quarter and six months ended June 30,
1999 compared with net income of $5.1 million ($0.02 per share) and $2.5 million
($0.01 per share) in the respective periods in 1998. The current year's net
losses reflect lower realized gold prices and sales volumes, offset partially by
a reduction in unit operating costs.
GOLD OPERATIONS
Homestake's 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.
Homestake delivered or financially settled forward sales and option
contracts for 177,500 ounces of gold at an average price of $312 per ounce
during the second quarter of 1999 and 235,000 ounces of gold at an average price
of $324 per ounce during the first half of 1999. This compares to the prior year
when Homestake delivered or financially settled forward sales and option
contracts for 310,900 ounces of gold at an average price of $340 per ounce
during the 1998 second quarter and 688,900 ounces at an average price of $335
per ounce during the first half of 1998. Homestake also delivered or financially
settled option contracts for 830,000 ounces of silver at $6.36 per ounce and
1,585,000 ounces at $6.35 per ounce, during the second quarter and first half
periods of 1999, respectively. The Company's gold and silver hedging activities
increased second quarter and first half 1999 revenues by approximately $8
million and $14 million, respectively. The estimated fair value of the Company's
gold and silver hedging position at June 30, 1999 was approximately $103
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.
A significant portion of the Company's operating expenses are incurred
in Australian and Canadian currencies. The Company's profitability is impacted
by fluctuations in these currencies' exchange rates relative to the United
States dollar. Under its 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. In the three and six months ended June 30,
1999, the Company recorded gains of $9 million and $16.9 million, respectively,
on these contracts. At June 30, 1999, the Company had a net unrealized gain of
$28 thousand on open contracts under this program.
Revenues from gold, ore and concentrate sales totaled $169.1 million
and $328.3 million during the second quarter and first six months of 1999,
respectively, compared to $210.7 million and $405 million in the comparable
periods of 1998. Lower 1999 revenues reflect lower average realized gold prices
and lower sales volumes. During the three and six-month periods ended June 30,
1999, 630,900 and 1,185,000 gold equivalent ounces were sold at average realized
prices of $283 per ounce and $290 per ounce, respectively. This compares to gold
equivalent sales of 693,800
16
<PAGE>
Homestake Mining Company and Subsidiaries
ounces and 1,332,500 ounces at an average realized price of $316 per ounce
during the comparable periods in 1998.
Consolidated gold production for the second quarter and first half of
1999 was 627,300 ounces and 1,186,300 ounces, respectively, compared to 650,400
ounces and 1,291,700 ounces, respectively, in the comparable periods of 1998.
Lower consolidated production was due to declines in production at the
Homestake, Snip and Kalgoorlie operations and the absence of production from the
closed Mt Morgans mine, partially offset by higher production at the Eskay Creek
and Darlot mines.
Production costs for the three and six-month periods ended June 30,
1999 declined to $123.8 million and $232.6 million, respectively, from $142.7
million and $278.3 million for the similar periods in 1998. Lower costs reflect
ongoing cost containment efforts at the Company's operations as well as reduced
production. Total cash costs per ounce during the 1999 second quarter and first
half periods declined by 3% and 6%, respectively, to $195 per ounce and $194 per
ounce, from the corresponding periods of 1998.
United States
Gold production from United States operations decreased 9% percent to
165,400 ounces in the second quarter of 1999 compared to 182,600 ounces in the
second quarter of 1998. Second quarter weighted-average total cash costs per
ounce declined 7% to $201 in 1999 from $216 in 1998, resulting primarily from
lower cash costs per ounce at the Ruby Hill mine and a reduction in production
at the higher-cost Homestake and Pinson mines.
At the Homestake mine in South Dakota, a 19 percent decline in second
quarter 1999 gold production to 57,100 ounces compared to 1998 reflects the
completion of mining at the Open Cut during the fourth quarter of 1998, offset
partially by processing of residual stockpiled ore. Processing from stockpiles
is expected to continue into the fourth quarter of 1999. Cash costs for the
three months ended June 30, 1999 declined slightly to $253 per ounce from $256
per ounce in the prior year as cost containment efforts and improved ore grades
resulting from reduced mining dilution in the underground operations offset the
impact of the lower production. At the Ruby Hill mine near Eureka, Nevada, gold
production increased 9% to 33,100 ounces at a total cash cost of $100 per ounce
in the second quarter of 1999 compared to 30,400 ounces at a cash cost of $123
per ounce in the second quarter of 1998. Ruby Hill continues to be Homestake's
lowest cash cost operation. The McLaughlin mine in northern California produced
33,600 ounces from residual stockpiled ore during the three months ended June
30, 1999 compared to 34,800 ounces in the comparable quarter of 1998. The lower
production reflects lower grade and throughput, partially offset by increased
recovery. Cash costs per ounce declined 2% due to reduced operating costs.
Homestake's share of production at the Round Mountain mine in central Nevada
declined to 35,400 ounces at a total cash cost of $206 per ounce during the
second quarter of 1999 from 36,500 ounces at a cash cost of $194 per ounce for
the same period in 1998. Lower production and higher total cash costs per ounce
primarily are attributable to mining equipment being diverted for the removal of
higher-than-normal overburden. Mining at the Pinson mine near Winnemucca, Nevada
ceased in January 1999 due to continuing low gold prices and production
shortfalls. Work is ongoing to recontour, cover and revegetate the waste rock
piles and tailings facility, and to neutralize the leach pads.
17
<PAGE>
Homestake Mining Company and Subsidiaries
Canada
Canadian gold production increased to 259,700 ounces in the second
quarter of 1999 compared to 233,400 ounces in the second quarter of 1998,
primarily due to increased production at the Eskay Creek mine. During the second
quarter of 1999, the weighted average total cash costs declined to $160 per
ounce compared to $163 per ounce in 1998 as a result of a 2% decline in the
Canadian currency in relation to the United States dollar. On a local currency
basis, total cash costs per ounce remained the same.
Production at the Eskay Creek mine in British Columbia increased to
162,900 gold equivalent ounces in the second quarter of 1999 compared to 130,000
gold equivalent ounces in 1998 primarily as a result of increased ore and
concentrate shipments and improved recovery in the mill, partially offset by
slightly lower ore grades. Total cash costs of $135 per ounce for the quarter
were essentially unchanged from the second quarter of 1998. At the Hemlo
district's Williams and David Bell mines, Homestake's 50% share of second
quarter 1999 and 1998 production totaled 73,200 ounces and 73,800 ounces,
respectively. Total cash costs increased slightly to $202 per ounce during the
second quarter of 1999 compared to $200 per ounce in the prior year. In June
1999, milling operations at David Bell were suspended and ore from both
operations now is processed through the Williams mill. Homestake and its joint
venture partner expanded the Williams processing facility and expect to achieve
a $5 per ton cost savings on processing David Bell ore as a result of
decommissioning the David Bell processing plant. All mining and milling
activities at the Snip mine in British Columbia were completed during the second
quarter of 1999 as the mine's reserves were depleted. Reclamation activities
have commenced at the minesite.
Australia
Production from Australian operations, all of which are located in
Western Australia, decreased to 196,200 ounces during the second quarter of 1999
compared to 227,900 ounces in the second quarter of 1998. This decline primarily
was due to lower production at the Kalgoorlie operations and the absence of
production from the closed Mt Morgans mine, partially offset by higher
production at the Darlot mine. Weighted-average total cash costs increased to
$236 per ounce during the second quarter of 1999 from $229 per ounce during the
second quarter of 1998 due to a 4% increase in the average Australian/U.S.
dollar exchange rate. The exchange rate fluctuation increased second quarter
1999 cash costs by approximately $9 per ounce compared to 1998.
Homestake's 50% share of gold production from the Kalgoorlie operations
declined by 30% to 72,900 ounces during the second quarter of 1999 compared to
104,800 ounces in the corresponding period of 1998 as a result of reduced mill
throughput and grade. Second quarter 1999 mill throughput was 16 percent lower
than in 1998 as mill capacity was limited to 65% by reduced rotation speed of
the Fimiston SAG mill to minimize stress on its cracked ring gear and by
unplanned downtime to repair a crack in the ball mill girth gear. The ring gear
was replaced in May 1999. In addition, the grade of ore blocks mined in the
current mining sequence was 10% lower than the ore grade mined during the second
quarter of 1998. Total cash costs increased by $59 to $278 per ounce during the
second quarter of 1999 from $219 per ounce during the second quarter of 1998 due
to the lower gold production and a temporary increase in mining costs associated
with an interim mining agreement with the contract miner.
18
<PAGE>
Homestake Mining Company and Subsidiaries
Kalgoorlie operations will begin the transition to owner mining during the third
quarter of 1999. Homestake expects the benefit of owner mining to reduce cash
costs by approximately $26 per ounce. However, the benefit will not be fully
reflected in cash costs until early in 2000. In July 1999, a 40-person reduction
in workforce at the Mt Charlotte underground mine was announced. Development
will be suspended and activities will concentrate on mining the developed ore
blocks. Ore currently is available to provide production from Mt Charlotte for
approximately one year.
Gold production at the Plutonic mine totaled 57,200 ounces at a total
cash cost of $237 per ounce in the second quarter of 1999 compared to 55,700
ounces at a cash cost of $247 per ounce in the second quarter of 1998. Cash
costs per ounce declined primarily due to lower labor and supply costs. During
the second quarter of 1999, gold production at the Darlot mine increased by 84%
to 27,100 ounces from 14,700 ounces in the corresponding period of the prior
year. Total cash costs during the second quarter of 1999 were $214 per ounce, a
reduction of $75 per ounce compared to the corresponding period in 1998.
Improved performance is attributable to increased production from the
higher-grade Centenary orebody which has increased the overall grade of ore
processed during the second quarter of 1999 by 84% over the comparable quarter
of the prior year. The capacity of both the gravity and leaching circuits was
expanded to accommodate the higher grades from the underground orebodies. At the
Lawlers mine, second quarter 1999 gold production of 32,500 ounces increased by
6% compared to 30,800 ounces produced during the comparable period in 1998
primarily due to higher throughput and recovery. Second quarter total cash costs
were reduced by $32 per ounce to $171 per ounce compared to the similar period
in 1998 due to higher tonnage processed at similar grades and reductions in
operating costs. Homestake's 67% share of production at the Peak Hill mine was
4% below the same period in 1998. Final reclamation has commenced and processing
of residual stockpiles will continue through October 1999.
Main Pass 299
Revenues from Main Pass 299 operations in the first six months of 1999
decreased to $9.2 million compared to revenues in the first six months of 1998
of $11.8 million, and first half 1999 operating losses were $1.9 million
compared to losses of $1.7 million in the comparable 1998 period. The lower 1999
results reflect decreased sales volumes and higher per-unit production costs for
both sulfur and oil, partially offset by higher sulfur sales prices and lower
depreciation charges as the oil assets have been fully depreciated. Sulfur sales
decreased to 66,200 long tons at an average realized price of $64 per ton during
the 1999 second quarter from 77,900 long tons at an average realized price of
$58 during the 1998 second quarter.
Other income for the three and six months ended June 30, 1999 includes foreign
currency exchange gains of $17.4 million and $26.8 million, respectively. The
foreign currency exchange gains in the six month period include $16.9 million
related to foreign currency exchange options and $9.9 million primarily for
intercompany advances. Other income for the six months ended June 30, 1998
includes foreign currency exchange losses of $25.4 million, including losses of
$22.4 million related to foreign currency exchange options, and gains on sales
of investments of $4.3 million.
Depreciation, depletion and amortization expense decreased to $67.9 million
during the six months ended 1999 compared to $73.5 million for the comparable
1998 period.
19
<PAGE>
Homestake Mining Company and Subsidiaries
The decrease primarily reflects write-downs of property, plant and equipment at
the Homestake and Mt Charlotte mines during the third quarter of 1998, partially
offset by an increase in depreciation expense at the Eskay Creek mine as a
result of the December 1998 acquisition of the Prime minority interests.
Administrative and general expense declined to $21.7 million during the six
months ended June 30, 1999 compared to $24.2 million during the prior year
primarily as a result of cost reduction efforts. In addition, in July 1999 the
Company announced a 10% reduction of overhead cost, that along with the
reduction of exploration expense discussed below, is expected to reduce costs by
$25-$30 million annually.
Exploration expense for the first six months of 1999 decreased to $21.1 million
from $24.6 million during the 1998 first half. As a result of lower gold prices,
the Company has initiated exploration and corporate overhead cost reduction
programs. Exploration expenditures will be reduced by over 45% to an annualized
level of approximately $25 million. Exploration field offices in Peru, Brazil
and Eastern Europe have been closed. Ongoing expenditures will be devoted to
more advanced exploration projects that have the greatest prospect of creating
commercially viable mines.
Income and mining tax expense for the six months ended June 30, 1999 was $17
million compared to $2.3 million for the same period in 1998. The increase in
tax expense resulted from the increase in pretax income and a one-time charge of
approximately $3 million related to the repatriation of cash to the United
States from the Company's Canadian subsidiaries. In addition to the increase in
US taxes as a result of the repatriation of cash, the consolidated effective tax
rate of 111% during the first six months of 1999 reflects the geographic mix
of pretax income and losses, and acquisition costs and other nondeductible
expenses for which no tax benefit was recorded. Homestake had pretax earnings in
Canada and Australia, which are subject to high rates of tax and pretax losses
in other foreign jurisdictions on which it was unable to record a tax benefit
due to the uncertainty of realization. The consolidated effective tax rate
during the first six months of 1998 was 5% as benefits related to losses
incurred in the United States and Australia were more than offset by tax expense
recorded on Canadian earnings. The Company's consolidated effective income and
mining tax rate will fluctuate depending on the geographical mix of pretax
income.
Minority interests: For the first six months of 1999, minority interests' share
of losses in consolidated subsidiaries was $0.8 million compared to minority
interests' share of income in consolidated subsidiaries of $5.6 million in the
first six months of 1998. The decrease in minority interests' share of income is
due to Homestake's December 1998 acquisition of the minority interests of Prime
Resources Group Inc.
The following chart details Homestake's gold production and total cash
costs per ounce by location, and consolidated revenue and production costs per
ounce.
20
<PAGE>
Homestake Mining Company and Subsidiaries
<TABLE>
<CAPTION>
Production
(Ounces in thousands)
Three Months Ended Six Months Ended
June 30, June 30,
Mine (Percentage interest) 1999 1998 1999 1998
- ------------------------------- -------------------------- --------------------------
<S> <C> <C> <C> <C>
Homestake (100) 57.1 70.4 102.8 146.4
Ruby Hill (100) 33.1 30.4 58.3 61.0
McLaughlin (100) 33.6 34.8 63.8 64.9
Round Mountain (25) 35.4 36.5 65.2 69.5
Pinson (50) 1.3 4.5 4.9 10.9
Marigold (33) 4.9 6.0 12.8 12.2
------------ ----------- ------------ -----------
Total United States 165.4 182.6 307.8 364.9
Eskay Creek (100) (1) 162.9 130.0 286.4 271.1
Williams (50) 53.8 50.9 105.7 95.6
David Bell (50) 19.4 22.9 38.1 41.1
Quarter Claim (25) 2.8 2.8 5.6 5.6
Snip (100) (2) 20.8 26.8 41.9 50.5
------------ ----------- ------------ -----------
Total Canada 259.7 233.4 477.7 463.9
Kalgoorlie (50) 72.9 104.8 155.9 198.9
Plutonic (100) 57.2 55.7 105.5 112.0
Darlot (100) 27.1 14.7 55.0 30.3
Lawlers (100) 32.5 30.8 59.8 62.4
Peak Hill (67) 6.5 6.8 12.0 12.6
Mt Morgans (80) - 15.1 - 34.6
------------ ----------- ------------ -----------
Total Australia 196.2 227.9 388.2 450.8
Agua de la Falda (51) 6.0 6.5 12.6 12.1
------------ ----------- ------------ -----------
Total Production 627.3 650.4 1,186.3 1,291.7
Minority Interests - (77.5) - (158.9)
------------ ----------- ------------ -----------
Homestake's Share 627.3 572.9 1,186.3 1,132.8
============ =========== ============ ===========
</TABLE>
21
<PAGE>
Homestake Mining Company and Subsidiaries
<TABLE>
<CAPTION>
Total Cash Costs
(Dollars per ounce)
Three Months Ended Six Months Ended
June 30, June 30,
Mine (Percentage interest) 1999 1998 1999 1998
- ---------------------------------- --------------------------- ----------------------------
<S> <C> <C> <C> <C>
United States
Homestake (100) $253 $256 $261 $250
Ruby Hill (100) 100 123 109 126
McLaughlin (100) 196 201 219 216
Round Mountain (25) 206 194 202 200
Pinson (50) 241 447 242 374
Marigold (33) 260 261 216 253
Canada
Eskay Creek (100) (3) 135 134 129 127
Williams (50) 205 209 212 226
David Bell (50) 193 180 204 206
Quarter Claim (25) 166 169 164 170
Snip (100) (3) 203 203 208 213
Australia
Kalgoorlie (50) (4) 278 219 242 239
Plutonic (100) 237 247 249 256
Darlot (100) 214 289 194 312
Lawlers (100) 171 203 167 195
Peak Hill (67) 179 253 178 278
Mt Morgans (80) - 222 - 227
Chile
Agua de la Falda (51) 176 191 195 202
------------ ------------ ------------ ------------
Weighted Average $195 $201 $194 $207
============ ============ ============ ============
</TABLE>
22
<PAGE>
Homestake Mining Company and Subsidiaries
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
June 30, June 30,
Per Ounce of Gold 1999 1998 1999 1998
------------------------- ---------------------------
<S> <C> <C> <C> <C>
Revenue $283 $316 $290 $316
========================= ===========================
Per Ounce Costs
Cash Operating Costs (5) $190 $198 $190 $204
Other Cash Costs (6) 5 3 4 3
------------------------- ---------------------------
Total Cash Costs 195 201 194 207
Noncash Costs (7) 54 56 54 56
------------------------- ---------------------------
Total Production Costs $249 $257 $248 $263
========================= ===========================
<FN>
(1) Ounces produced are expressed on a gold equivalent basis and include 90,300
(70,000 in 1998) ounces of gold and 3.8 million (3.1 million in 1998)
ounces of silver contained in ore and concentrates sold to smelters in the
second quarter, and 160,500 (143,400 in 1998) ounces of gold and 6.7
million (6.3 million in 1998) ounces of silver contained in ore and
concentrates sold to smelters in the six month period.
(2) Includes ounces of gold contained in dore and concentrates.
(3) For comparison purposes, total cash costs per ounce include estimated
third-party costs incurred by smelter owners and others to produce
marketable gold and silver.
(4) Includes the effect of insurance proceeds received and credited to
processing costs of $2.6 million and $4.6 million in the 1999 second
quarter and six month periods, respectively.
(5) Cash operating 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.
(6) Other cash costs are costs that are not directly related to, but may result
from, gold production; includes production taxes and royalties.
(7) Noncash costs are costs that typically are accounted for ratably over the
life of an operation; includes depreciation, depletion, 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.
</FN>
</TABLE>
23
<PAGE>
Homestake Mining Company and Subsidiaries
LIQUIDITY AND CAPITAL RESOURCES
Cash provided by operations totaled $47.6 million during the first six
months of 1999 compared to $62.9 million during the first six months of 1998.
Working capital at June 30, 1999 amounted to $285.9 million, including cash and
equivalents and short-term investments of $250.8 million.
Capital expenditures of $35.6 million during the first six months of
1999 compare to capital expenditures of $33.9 million during the first six
months of 1998. Capital expenditures in 1999 include approximately $18 million
at the Plutonic, Darlot and Lawlers mines primarily for underground development
work. The balance of the 1999 capital expenditures primarily relates to
underground mobile mining equipment purchases at the Homestake mine and
sustaining capital at the Company's other operating mines. Capital additions
during 1998 include $13.7 million primarily for underground development work at
the Plutonic and Darlot mines. Capital expenditures for the remainder of 1999
are expected to total approximately $72 million. In addition to sustaining
capital, planned expenditures include approximately $30 million to acquire
equipment for owner mining at the Super Pit that may be financed with capital
leases if favorable terms can be obtained.
Long-term debt repayments, net of borrowings under the cross-border
credit facility (the "credit facility"), during the first six months of 1999
were $61 million, compared to $8.1 million for the first half of 1998. Net debt
repayments in 1999 reflect the repurchase of $2.4 million of outstanding
convertible subordinated notes and repayment of all Australian
dollar-denominated borrowings under the cross-border credit facility (the
"credit facility") from existing cash and short-term investment balances and
$101 million of Canadian dollar-denominated borrowings under the credit
facility. In addition, as a result of a reduction in the size of the Homestake
mine tailings project, $10 million of the South Dakota Waste Disposal Bonds were
repaid from funds held in trust.
The credit facility provides total availability of $430 million.
Borrowings under the credit facility, which may be drawn in the United States,
Canada or Australia, are available in United States, Canadian or Australian
dollars, or gold, or a combination of these subject to certain conditions. The
credit facility contains certain financial covenants, the most restrictive of
which requires a minimum consolidated net worth, as defined in the agreement
(primarily shareholders' equity plus the amount of noncash write-downs made
after December 31, 1997), of $500 million.
The Company has classified the $147.6 million of convertible
subordinated notes outstanding at June 30, 1999, 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.
In May 1999, Company paid a dividend of $0.05 per common share (C$0.075
per HCI exchangeable share).
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.
24
<PAGE>
Homestake Mining Company and Subsidiaries
In June 1998, FASB 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. 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 SFAS 133 earlier than January 1, 2001.
Future results will be impacted by such factors as the market price of
gold and, to a lesser extent, silver, the Company's ability to expand its ore
reserves, and 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.
Gold Prices
The market price for gold is a worldwide market. Gold prices are
subject to volatile price movements over short periods of time and are
influenced by numerous factors over which Homestake has no control, including
expectations with respect to the rate of inflation, the relative strength of the
United States, Canadian and Australian dollars, interest rates, global or
regional political or economic crises, demand for jewelry and industrial
products containing gold, speculation, and sales by central banks and other
holders and producers of gold in response to these factors.
The Company continues to evaluate its long-term gold price assumptions
used in its mine-by-mine evaluations of mining properties. Recently, the price
of gold has been in decline, falling to 20-year lows during the second quarter
of 1999. If the recent decline in gold prices should continue or if prices are
sustained at current levels for a substantial period of time, the Company could
determine that it may not be able to recover the carrying values of certain of
its assets or that it may not be economically feasible to continue commercial
production at one or more of its mines. If such determinations were made, the
Company would be required to record impairment write-downs and/or other
provisions at that time.
Year 2000 Compliance
The Company has completed a review of its computer-based information
systems and has developed a plan to ensure all of these systems will be Year
2000 compliant. Year 2000 compliant upgrades for the Company's core financial
systems have been installed and testing of these systems has been completed.
25
<PAGE>
Homestake Mining Company and Subsidiaries
The Company currently is in the process of reviewing all
microprocessor-controlled devices, including process-monitoring systems, in use
at its operating locations to determine whether they are Year 2000 compliant.
The identification phase has been completed and assessment research of the
identified devices is ongoing. The Company will upgrade systems and/or develop
contingency plans based on this research and expects to complete any necessary
remediation by August 31, 1999. In addition, the Company is monitoring similar
Year 2000 related activities at its joint venture operations where it is not the
operator. A Year 2000 related microprocessor problem that is not identified or
remedied at an operating location potentially could result in a production
disruption at that location.
The Company's total expenditures for the above Year 2000 activities are
expected to be approximately $1.5 million and should not adversely impact other
information system initiatives. Year 2000 expenditures to date total
approximately $1.3 million.
The Company has surveyed all major suppliers and customers to assess
their Year 2000 compliance and, where practical, will make specific contingency
plans based on the results of this survey. The greatest risk to the Company in
this regard would be interruptions in the supply of power and/or water to
certain of its operating locations. A disruption in the supply of either of
these utilities could significantly hamper or curtail production at an operating
location until the service is restored. A disruption in the supply of other
services or supplies at an operating location potentially could result in a
production disruption at that location.
With the exception of ore and concentrates produced at the Eskay Creek
and Snip mines, which are sold directly to smelters, the Company's principal
product is finished gold bullion, which is sold to major financial institutions.
Because of government mandated Year 2000 compliance programs in the financial
industry, the Company expects that their core financial and operating systems
will be Year 2000 compliant, and that there will be no significant disruption in
the Company's ability to sell its gold production. The smelters which purchase
the ore and concentrates produced at the Eskay Creek and Snip mines have been
contacted directly, and though they have not completed all of their Year 2000
compliance activities, they do not expect any significant disruptions related to
Year 2000 issues.
Homestake's management information systems and operations staff will
monitor critical operations during certain Year 2000 rollover dates including
September 8-9, 1999, December 31, 1999 - January 1, 2000, February 28-29, 2000,
and December 31, 2000 - January 1, 2001.
The foregoing Year 2000 disclosures are based on Homestake's current
expectations, estimates and projections. Because of uncertainties, the actual
effects of the Year 2000 issues on Homestake may be different from the Company's
current assessment. Factors, many of which are outside the control of the
Company, that could affect Homestake's ability to be Year 2000 compliant by the
end of 1999 include the failure of customers, suppliers, governmental entities
and others to achieve compliance, and Homestake's inability or failure to
identify all critical Year 2000 issues or to develop appropriate contingency
plans for all Year 2000 issues that ultimately may arise.
26
<PAGE>
Homestake Mining Company and Subsidiaries
Part II - OTHER INFORMATION
tem 4. - Submission of Matters to a Vote of Security Holders
1) At the Annual Meeting of Stockholders held on May 11, 1999, stockholders
voted on and approved (i) the election of four Class III directors to serve
until the 2002 Annual Meeting, and (ii) the appointment of
PricewaterhouseCoopers LLP as independent auditors for 1999. Stockholder
votes were as follows:
<TABLE>
<CAPTION>
(i) Election of four Class III Directors: Votes For Votes Withheld
------------------------------------ --------- --------------
<S> <C> <C>
Gerhard Ammann 184,200,035 1,207,214
Richard R. Burt 184,084,482 1,322,767
Peter J. Neff 184,218,697 1,188,552
Carol A. Rae 184,100,738 1,306,511
</TABLE>
In addition to the aforementioned directors, the following directors
continued in office: M. Norman Anderson, Robert H. Clark, Jr., E. Paul
McClintock, John Neerhout, Jr., Stuart T. Peeler, Jack E. Thompson and
Jeffrey L. Zelms.
On May 11, 1999 Douglas W. Fuerstenau and G. Robert Durham retired as
directors.
(ii) Approval of PricewaterhouseCoopers LLP as independent auditors:
<TABLE>
<CAPTION>
Votes For Votes Against Abstain
<S> <C> <C>
184,609,772 441,426 356,051
</TABLE>
Item 5. - Other Information
CAUTIONARY STATEMENT UNDER THE PRIVATE SECURITIES LITIGATION REFORM ACT
OF 1995
Certain statements contained in this Form 10-Q that are not statements
of historical facts are "forward looking statements" within the meaning
of the Private Securities Litigation Reform Act of 1995. Such
statements are based on beliefs of management, as well as assumptions
made by and information currently available to management. Forward
looking statements include those preceded by the words "believe,"
"estimate," "expect," "intend," "will," and similar expressions, and
include estimates of reserves, future production, costs per ounce,
dates of construction completion, costs of capital projects and
commencement of operations. Forward looking statements are subject to
risks, uncertainties and other factors that could cause actual results
to differ materially from expected results. Some important factors and
assumptions that could cause actual results to differ materially from
expected results are discussed below. Those listed are not exclusive.
Estimates of reserves and future production for particular properties
and for the Company as a whole are derived from annual mine plans that
have been developed based on mining experience, assumptions regarding
ground conditions and physical characteristics of ore (such as hardness
and metallurgical characteristics), expected rates and costs of
production, and estimated future sales prices. Actual production may
vary for a variety of reasons, such as the factors described above, ore
mined varying from estimates
27
<PAGE>
Homestake Mining Company and Subsidiaries
of grade and metallurgical and other characteristics, mining dilution,
actions by labor, and government imposed restrictions. Estimates of
production from properties and facilities not yet in production are
based on similar factors but there is a greater likelihood that actual
results will vary from estimates due to a lack of actual experience.
Cash cost estimates are based on such things as past experience,
reserve and production estimates, anticipated mining conditions,
estimated costs of materials, supplies and utilities, and estimated
exchange rates. Noncash cost estimates are based on total capital
costs and reserve estimates, change based on actual amounts of
unamortized capital, changes in reserve estimates, and changes in
estimates of final reclamation. Estimates of future capital costs are
based on a variety of factors and 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 by Company personnel and outside
consultants, and other factors. Capital cost estimates for new
projects are subject to greater uncertainties than additional capital
costs for existing operations. Estimated time for completion of
capital projects is based on such factors as the Company's 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 reflect assumptions
about factors beyond the Company's control, such as the time
government agencies take in processing applications, issuing permits
and otherwise completing processes required under applicable laws and
regulations. Actual time to completion can vary significantly from
estimates.
See the Company's Form 10-K Report for the year ended December 31,
1998, "RISK FACTORS" and "CAUTIONARY STATEMENTS" included under Part I
- Item 1, for a more detailed discussion of factors that may impact on
expected future results.
28
<PAGE>
Homestake Mining Company and Subsidiaries
Item 6.
<TABLE>
<CAPTION>
(a) Exhibits Method of Filing
<S> <C> <C>
11 Computation of Earnings Per Share Filed herewith
electronically
27.1 Financial Data Schedule - June 30, 1999 Filed herewith
electronically
27.2 Financial Data Schedule - March 31, 1999 Filed herewith
(restated for pooling of interests) electronically
27.3 Financial Data Schedule - years ended Filed herewith
December 31, 1998, 1997 and 1996 electronically
(restated for pooling of interests)
27.4 Financial Data Schedule - periods ended Filed herewith
March 31, June 30, and September 30, 1998 electronically
(restated for pooling of interests)
</TABLE>
(b) Reports on Form 8-K
One report on Form 8-K was filed during the quarter ended June 30, 1999.
The report dated June 18, 1999 was submitted in order to file the
following: (a) press release reporting interim results following the
acquisition of Argentina Gold Corp. and (b) Bylaws (as amended through May
11, 1999) decreasing the number of Directors to eleven.
29
<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: August 13, 1999 By /s/ David W. Peat
--------------- -----------------
David W. Peat
Vice President, Finance and
Chief Financial Officer
Date: August 13, 1999 By /s/ James B. Hannan
--------------- -------------------
James B. Hannan
Vice President and Controller
(Chief Accounting Officer)
30
EXHIBIT 11
HOMESTAKE MINING COMPANY AND SUBSIDIARIES
Computation of Earnings Per Share (unaudited)
(In thousands, except per share amounts)
<TABLE>
<CAPTION>
Three Months Ended June 30, Six Months Ended June 30,
BASIC 1999 1998 1999 1998
------------ ----------- ------------ -----------
<S> <C> <C> <C> <C>
Earnings:
Net income (loss) applicable to basic earnings
per share calculation $ 116 $ (43,149) $ (833) $ (50,751)
============ =========== ============ ===========
Weighted average number of shares outstanding 260,084 229,107 259,641 228,907
============ =========== ============ ===========
Net income (loss) per share - basic $ 0.00 $ (0.19) $ (0.00) $ (0.22)
============ =========== ============ ===========
DILUTED
Earnings:
Net income (loss) $ 116 $ (43,149) $ (833) $ (50,751)
Add: Interest relating to 5.5% convertible
subordinated notes, net of tax 1,980 1,629 4,042 3,259
Amortization of issuance costs relating
to 5.5% convertible subordinated notes,
net of tax 134 110 274 221
------------ ----------- ------------ -----------
Net income (loss) applicable to diluted earnings
per share calculation $ 2,230 $ (41,410) $ 3,483 $ (47,271)
============ =========== ============ ===========
Weighted average number of shares outstanding:
Common shares 260,084 229,107 259,641 228,907
Additional average shares outstanding assuming:
Conversion of 5.5% convertible subordinated notes 6,495 6,505 6,500 6,505
------------ ----------- ------------ -----------
266,579 235,612 266,141 235,412
============ =========== ============ ===========
Net income (loss) per share - diluted (a) $ 0.01 $ (0.18) $ 0.01 $ (0.20)
============ =========== ============ ===========
<FN>
(a) This calculation is submitted in accordance with Regulation S-K item 601
(b)(11) although it is contrary to paragraph 13 of SFAS 128 because it
produces an anti-dilutive result. Diluted net income (loss) per share
computed in accordance with SFAS 128 was the same as basic earnings per
share.
</FN>
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the
Consolidated Balance Sheet at June 30, 1999 and the related Statement of
Consolidated Operations for the six months ended June 30, 1999 and is
qualified in its entirety by reference to such financial statements.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-END> JUN-30-1999
<CASH> 167,630
<SECURITIES> 83,127
<RECEIVABLES> 41,181
<ALLOWANCES> 0
<INVENTORY> 83,448
<CURRENT-ASSETS> 403,542
<PP&E> 2,644,178
<DEPRECIATION> (1,519,608)
<TOTAL-ASSETS> 1,605,565
<CURRENT-LIABILITIES> 117,637
<BONDS> 304,542
0
0
<COMMON> 253,212
<OTHER-SE> 511,344
<TOTAL-LIABILITY-AND-EQUITY> 1,605,565
<SALES> 337,499
<TOTAL-REVENUES> 377,954
<CGS> 300,432 <F1>
<TOTAL-COSTS> 322,178 <F2>
<OTHER-EXPENSES> 31,757 <F3>
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 8,618
<INCOME-PRETAX> 15,401
<INCOME-TAX> 17,021
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (833)
<EPS-BASIC> 0.00
<EPS-DILUTED> 0.00
<FN>
<F1> Includes Production costs and Depreciation, depletion and amortization
from the Statement of Consolidated Operations.
<F2> Includes Production costs, Depreciation, depletion and amortization and
Administrative and general expense from the Statement of Consolidated
Operations.
<F3> Includes Exploration expense, Write-downs and other unusual charges,
Business combination and integration costs and Other expense from the
Statement of Consolidated Operations.
</FN>
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the
Consolidated Balance Sheet at March 31, 1999 and the related Statement of
Consolidated Operations for the three months ended March 31, 1999 restated to
reflect the April 29, 1999 pooling of interests with Argentina Gold Corp.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-END> MAR-31-1999
<CASH> 147,704
<SECURITIES> 126,275
<RECEIVABLES> 35,133
<ALLOWANCES> 0
<INVENTORY> 85,836
<CURRENT-ASSETS> 420,625
<PP&E> 2,567,676
<DEPRECIATION> (1,464,416)
<TOTAL-ASSETS> 1,606,802
<CURRENT-LIABILITIES> 145,084
<BONDS> 303,955
0
0
<COMMON> 251,687
<OTHER-SE> 492,682
<TOTAL-LIABILITY-AND-EQUITY> 1,606,802
<SALES> 163,078
<TOTAL-REVENUES> 178,614
<CGS> 140,449 <F1>
<TOTAL-COSTS> 151,555 <F2>
<OTHER-EXPENSES> 11,426 <F3>
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 4,545
<INCOME-PRETAX> 11,088
<INCOME-TAX> 12,472
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (949)
<EPS-BASIC> (0.00)
<EPS-DILUTED> (0.00)
<FN>
<F1> Includes Production costs and Depreciation, depletion and amortization
from the Statement of Consolidated Operations.
<F2> Includes Production costs, Depreciation, depletion and amortization and
Administrative and general expense from the Statement of Consolidated
Operations.
<F3> Includes Exploration expense, Business combination expenses and Other
expense from the Statement of Consolidated Operations.
</FN>
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the
Consolidated Balance Sheets at December 31, 1998, 1997 and 1996 and the related
Statements of Consolidated Operations for the years ended December 31, 1998,
1997 and 1996, respectively, restated to reflect the April 29, 1999 pooling of
interests with Argentina Gold Corp.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C> <C> <C>
<PERIOD-TYPE> 12-MOS 12-MOS 12-MOS
<FISCAL-YEAR-END> DEC-31-1998 DEC-31-1997 DEC-31-1996
<PERIOD-END> DEC-31-1998 DEC-31-1997 DEC-31-1996
<CASH> 147,519 128,890 110,754
<SECURITIES> 154,346 141,221 130,158
<RECEIVABLES> 45,929 43,571 53,548
<ALLOWANCES> 0 0 0
<INVENTORY> 78,906 103,925 139,015
<CURRENT-ASSETS> 454,597 450,267 459,309
<PP&E> 2,525,793 2,235,270 2,295,299
<DEPRECIATION> (1,423,054) (1,201,496) (1,005,088)
<TOTAL-ASSETS> 1,651,897 1,627,144 1,959,809
<CURRENT-LIABILITIES> 148,721 130,171 215,417
<BONDS> 357,410 374,593 255,170
0 0 0
0 0 0
<COMMON> 247,483 228,743 228,466
<OTHER-SE> 491,713 471,049 814,942
<TOTAL-LIABILITY-AND-EQUITY> 1,651,897 1,627,144 1,959,809
<SALES> 803,134 890,449 952,434
<TOTAL-REVENUES> 797,890 971,566 998,793
<CGS> 676,662 <F1> 790,420 <F1> 767,343 <F1>
<TOTAL-COSTS> 723,494 <F2> 839,875 <F2> 816,830 <F2>
<OTHER-EXPENSES> 297,194 <F3> 359,738 <F3> 84,866 <F3>
<LOSS-PROVISION> 0 0 0
<INTEREST-EXPENSE> 20,884 20,756 19,140
<INCOME-PRETAX> (243,682) (248,803) 77,957
<INCOME-TAX> (13,087) (19,458) 22,328
<INCOME-CONTINUING> 0 0 0
<DISCONTINUED> 0 0 0
<EXTRAORDINARY> 0 0 0
<CHANGES> 0 0 0
<NET-INCOME> (233,780) (233,354) 42,361
<EPS-BASIC> (1.01) (1.02) 0.19
<EPS-DILUTED> (1.01) (1.02) 0.19
<FN>
<F1> Includes Production costs and Depreciation, depletion and amortization
from the Statement of Consolidated Operations.
<F2> Includes Production costs, Depreciation, depletion and amortization and
Administrative and general expense from the Statement of Consolidated
Operations.
<F3> Includes Exploration expense, Write-downs and other unusual charges,
Business Combination and integration costs and Other expense from the
Statement of Consolidated Operations.
</FN>
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the
Consolidated Balance Sheets at March 31, June 30 and September 30, 1998 and the
related Statements of Consolidated Operations for the three, six and nine months
ended March 31, June 30 and September 30, 1998, respectively, restated to
reflect the April 29, 1999 pooling of interests with Argentina Gold Corp.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C> <C> <C>
<PERIOD-TYPE> 3-MOS 6-MOS 9-MOS
<FISCAL-YEAR-END> DEC-31-1998 DEC-31-1998 DEC-31-1998
<PERIOD-END> MAR-31-1998 JUN-30-1998 SEP-30-1998
<CASH> 156,923 135,961 151,984
<SECURITIES> 120,288 149,699 157,952
<RECEIVABLES> 48,176 48,743 36,935
<ALLOWANCES> 0 0 0
<INVENTORY> 99,310 83,431 78,724
<CURRENT-ASSETS> 458,148 452,037 442,326
<PP&E> 2,393,216 2,206,329 2,195,595
<DEPRECIATION> (1,367,720) (1,271,791) (1,430,334)
<TOTAL-ASSETS> 1,626,004 1,509,108 1,318,484
<CURRENT-LIABILITIES> 146,720 143,747 158,151
<BONDS> 377,264 356,069 354,451
0 0 0
0 0 0
<COMMON> 228,670 229,209 229,251
<OTHER-SE> 456,455 377,875 178,937
<TOTAL-LIABILITY-AND-EQUITY> 1,626,004 1,509,108 1,318,484
<SALES> 200,472 416,824 609,308
<TOTAL-REVENUES> 216,242 411,592 595,010
<CGS> 171,647 <F1> 351,798 <F1> 513,324 <F1>
<TOTAL-COSTS> 184,286 <F2> 375,975 <F2> 549,910 <F2>
<OTHER-EXPENSES> 23,298 <F3> 68,082 <F3> 274,946 <F3>
<LOSS-PROVISION> 0 0 0
<INTEREST-EXPENSE> 5,112 10,328 15,813
<INCOME-PRETAX> 3,546 (42,793) (245,659)
<INCOME-TAX> 7,220 2,342 (12,998)
<INCOME-CONTINUING> 0 0 0
<DISCONTINUED> 0 0 0
<EXTRAORDINARY> 0 0 0
<CHANGES> 0 0 0
<NET-INCOME> (7,602) (50,751) (233,584)
<EPS-BASIC> (0.03) (0.22) (1.02)
<EPS-DILUTED> (0.03) (0.22) (1.02)
<FN>
<F1> Includes Production costs and Depreciation, depletion and amortization
from the Statement of Consolidated Operations.
<F2> Includes Production costs, Depreciation, depletion and amortization and
Administrative and general expense from the Statement of Consolidated
Operations.
<F3> Includes Exploration expense, Write-downs and other unusual charges,
Business combination and integration costs and Other expense from the
Statement of Consolidated Operations.
</FN>
</TABLE>
