<PAGE> 1
- - --------------------------------------------------------------------------------
- - --------------------------------------------------------------------------------
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, 1994.
[ ] 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 1-9666
---------------------
BATTLE MOUNTAIN GOLD COMPANY
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
<TABLE>
<S> <C>
NEVADA 76-0151431
(STATE OR OTHER JURISDICTION OF (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) IDENTIFICATION NO.)
</TABLE>
333 CLAY STREET, 42ND FLOOR, HOUSTON, TEXAS 77002
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES INCLUDING ZIP CODE)
(713) 650-6400
(REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE)
---------------------
NONE
(FORMER NAME, FORMER ADDRESS AND FORMER FISCAL YEAR IF
CHANGED SINCE LAST REPORT)
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
Number of shares of common stock outstanding as of the latest practicable
date, August 9, 1994: 80,886,922
- - --------------------------------------------------------------------------------
- - --------------------------------------------------------------------------------
<PAGE> 2
BATTLE MOUNTAIN GOLD COMPANY
INDEX
<TABLE>
<CAPTION>
Page
----
<S> <C>
Part I. Financial Information
Condensed Consolidated Balance Sheet at
June 30, 1994, and December 31, 1993 1
Condensed Consolidated Statement of Income
for the three and six months ended June 30, 1994,
and 1993 2
Condensed Consolidated Statement of
Cash Flows for the six months ended
June 30, 1994, and 1993 3
Notes to Condensed Consolidated Financial
Statements 4 - 5
Statistical Information 6 - 7
Management's Discussion and Analysis of
Financial Condition and Results
of Operations 8 - 17
Part II. Other Information 18
</TABLE>
<PAGE> 3
PART I. FINANCIAL INFORMATION
ITEM I. FINANCIAL STATEMENTS
BATTLE MOUNTAIN GOLD COMPANY
CONDENSED CONSOLIDATED BALANCE SHEET
(UNAUDITED)
<TABLE>
<CAPTION>
June 30, December 31,
1994 1993
----------- -----------
(Expressed in thousands)
<S> <C> <C>
ASSETS
Current assets
Cash and cash equivalents $ 93,247 $115,338
Accounts receivable 23,963 37,349
Inventories 3,534 1,068
Materials and supplies, at average cost 25,990 22,916
Other current assets 3,844 3,949
-------- --------
TOTAL CURRENT ASSETS 150,578 180,620
Investments 39,977 28,111
Net property, plant and equipment 476,033 453,242
Other assets 5,913 6,179
-------- --------
TOTAL ASSETS $672,501 $668,152
======== ========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities
Current maturities of long-term debt $ 13,431 $ 13,431
Accounts payable 10,156 13,171
Payroll and related benefits accrued 4,467 2,354
Accrued interest 3,978 6,527
Other current liabilities 2,771 4,789
-------- --------
TOTAL CURRENT LIABILITIES 34,803 40,272
Long-term debt 172,288 179,053
Other liabilities 27,982 24,607
-------- --------
TOTAL LIABILITIES 235,073 243,932
Minority interest 61,378 54,660
Shareholders' equity 376,050 369,560
-------- --------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $672,501 $668,152
======== ========
</TABLE>
The accompanying notes are an integral part of these financial statements.
1
<PAGE> 4
PART I. FINANCIAL INFORMATION - Continued
BATTLE MOUNTAIN GOLD COMPANY
CONDENSED CONSOLIDATED STATEMENT OF INCOME
(UNAUDITED)
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
June 30, June 30,
-------------------- --------------------
1994 1993 1994 1993
---- ---- ---- ----
(Expressed in thousands
except per share amounts)
<S> <C> <C> <C> <C>
GROSS REVENUE $ 60,180 $ 42,144 $112,958 $102,119
Less: Freight, allowances and royalties 3,144 1,626 5,005 7,656
-------- -------- -------- --------
NET SALES 57,036 40,518 107,953 94,463
-------- -------- -------- --------
COSTS AND EXPENSES
Mining costs 10,711 10,403 17,647 21,316
Milling and other plant costs 19,864 17,445 37,423 44,593
Depreciation, depletion and amortization 12,368 8,663 24,071 19,364
Exploration, evaluation and other lease costs 3,256 3,210 5,907 5,260
General and administrative expenses 4,345 5,016 8,635 9,386
Taxes, other than income 464 748 1,060 1,499
-------- -------- -------- --------
Total 51,008 45,485 94,743 101,418
-------- -------- -------- --------
OPERATING INCOME (LOSS) 6,028 (4,967) 13,210 (6,955)
Interest income 1,611 1,199 3,027 1,791
Interest expense (2,440) (2,553) (4,738) (4,134)
Other income (expense), net (763) 535 (694) (894)
-------- -------- -------- --------
INCOME (LOSS) BEFORE INCOME TAXES AND MINORITY INTEREST 4,436 (5,786) 10,805 (10,192)
Income tax expense (benefit) 224 (2,869) 2,253 (6,122)
Minority interest (1,128) 328 ( 2,620) (1,684)
-------- -------- -------- --------
NET INCOME (LOSS) 3,084 (2,589) 5,932 (5,754)
Preferred dividends 1,869 - 3,738 -
-------- -------- -------- --------
NET INCOME (LOSS) TO COMMON SHARES $ 1,215 $ (2,589) $ 2,194 $ (5,754)
======== ======== ======== ========
INCOME (LOSS) PER COMMON SHARE $ .01 $ (0.03) $ .03 $ (0.07)
======== ======== ======== ========
DIVIDENDS PER COMMON SHARE $ - $ - $ .025 $ .025
======== ======== ======== ========
AVERAGE COMMON SHARES OUTSTANDING
FOR INCOME (LOSS) PER SHARE PURPOSES 86,008 80,062 85,865 80,042
</TABLE>
The accompanying notes are an integral part of these financial statements.
2
<PAGE> 5
PART I. FINANCIAL INFORMATION - Continued
BATTLE MOUNTAIN GOLD COMPANY
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
Six Months Ended
June 30,
------------------------------
1994 1993
---- ----
(Expressed in thousands)
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
NET INCOME (LOSS) $ 5,932 $ (5,754)
Adjustments to reconcile net income (loss) to cash flows
from operating activities:
Depreciation, depletion and amortization 24,071 19,364
Exploration and evaluation costs 3,992 3,736
Accrued reclamation costs 918 827
Change in current assets and liabilities 6,217 (17,160)
Other net changes 5,209 2,194
-------- --------
Total Adjustments 40,407 8,961
-------- --------
NET CASH FLOWS FROM OPERATING ACTIVITIES 46,339 3,207
-------- --------
CASH FLOWS FROM INVESTING ACTIVITIES:
Acquisition of minority interest (5,200) -
Investment in Crown Jewel project (7,821) (3,817)
Capital expenditures (44,164) (31,801)
Exploration and evaluation expenditures (4,144) (3,736)
Other, net 382 1,303
-------- --------
NET CASH FLOWS USED IN INVESTING ACTIVITIES (60,947) (38,051)
-------- --------
CASH FLOWS FROM FINANCING ACTIVITIES:
Cash proceeds from stock issuance 6,217 111,845
Cash proceeds from borrowings - 36,855
Dividends for minority interest (971) -
Cash dividend payments (5,746) (2,000)
Debt repayments (7,173) (53,077)
-------- --------
NET CASH FLOWS FROM (USED IN) FINANCING ACTIVITIES (7,673) 93,623
-------- --------
EFFECT OF EXCHANGE RATE CHANGES 190 (113)
-------- --------
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS (22,091) 58,666
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 115,338 45,377
-------- --------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 93,247 $104,043
======== ========
</TABLE>
The accompanying notes are an integral part of these financial statements.
3
<PAGE> 6
BATTLE MOUNTAIN GOLD COMPANY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
Note 1. General Information
The unaudited condensed consolidated financial statements included
herein have been prepared pursuant to the rules and regulations of the
Securities and Exchange Commission and include all adjustments, consisting only
of normal recurring accruals, which are, in the opinion of management of Battle
Mountain Gold Company ("BMG"), necessary for a fair presentation. These
financial statements include the accounts of BMG and its wholly owned and
majority-owned subsidiaries (the "Company"). Certain information and footnote
disclosures required by generally accepted accounting principles have been
condensed or omitted pursuant to such rules and regulations. These financial
statements should be read in conjunction with the financial statements and the
notes thereto which are included in the Company's Annual Report on Form 10-K
(File No. 1-9666) for the year ended December 31, 1993.
Note 2. Income (Loss) Per Common Share
For the three and six months ended June 30, 1994, income (loss) per
common share is computed based on the weighted average number of shares of
common stock and common stock equivalents outstanding during the period. Common
stock equivalents include shares reserved for issuance upon conversion of the
Company's $100 million 6 percent convertible subordinated debentures due January
2005 and upon exercise of outstanding stock options. Common stock equivalents
are not included in the computation of the loss per share for the 1993 periods
because of their anti-dilutive effect. Because the effect of conversion of the
Company's $3.25 convertible preferred stock into common stock would be
anti-dilutive, fully diluted earnings per share are not presented.
Note 3. Debt
As of June 30, 1994, long-term debt included BMG's $100 million
convertible subordinated debentures due January 2005, and $82 million owed by
the Company's majority-owned subsidiary Empresa Minera Inti Raymi, S.A., a
Bolivian precious metals mining company ("Inti Raymi"), under project financing
agreements with three international lending agencies. Inti Raymi's project
financing debt includes $13.4 million which is due on or before June 30, 1995,
and is classified as a current liability as of June 30, 1994.
As of June 30, 1994, approximately $94 million remained available under
a committed revolving credit agreement. Available commitments under this
agreement decrease by $9.4 million each quarter through December 31, 1996. There
have been no borrowings under this agreement during the six months ended June
30, 1994.
During the second quarter of 1994, Inti Raymi successfully obtained
lender acceptance of project completion status under the Kori Kollo project
financing agreements referred to above. Accordingly, BMG is no longer required
to provide financial support to Inti Raymi under the terms of these agreements.
4
<PAGE> 7
On March 21, 1994, Inti Raymi paid $.7 million to purchase interest rate
caps to mitigate its exposure to interest rate increases for the floating rate
debt associated with the financing of Inti Raymi's Kori Kollo project. These
caps gradually escalate from 4.5 percent currently to 7.2 percent in late 1997.
The majority of interest rate exposure related to the Kori Kollo project
financing has been hedged through December 1997.
Note 4. Acquisitions
In March 1994, an arbitrator held that BMG was entitled, under "force
majeure" provisions of BMG's joint venture agreement covering its Crown Jewel
project, to suspend quarterly payments of $1 million to its co-venturer for the
third and fourth quarters of 1993 because of delays in the permitting process.
On May 10, 1994, BMG announced that it had resolved outstanding contractual
issues with the co-venturer, including all issues relating to BMG's obligation
to subsequently make such quarterly $1 million payments. As part of the
agreement to resolve these issues, BMG acquired the right to earn an additional
3 percent joint venture interest in the Crown Jewel project. The consideration
paid by BMG to the co-venturer totalled $4.25 million in cash and 435,897 shares
of BMG common stock. As a result of this agreement, BMG has the right to earn a
54 percent interest in the project, and the joint venture agreement has been
amended to delete the terms requiring $1 million quarterly payments to the
co-venturer. The 3 percent additional interest will apply only until the joint
venture recovers 1.6 million ounces of gold from the project at which time BMG's
interest will be reduced to 51 percent.
5
<PAGE> 8
PART I. FINANCIAL INFORMATION - Continued
STATISTICAL INFORMATION (UNAUDITED)
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
June 30, June 30,
------------------ ----------------
1994 1993 1994 1993
---- ---- ---- ----
<S> <C> <C> <C> <C>
BATTLE MOUNTAIN COMPLEX Operating Data
Production statistics
Gold recovered (000s oz) 10 12 22 40
Silver recovered (000s oz) 22 18 46 76
_____________________________________________________________________________________________________________________
Cost Per Equivalent Gold Ounce (1)
Cash production costs $ 242 $ 353 $ 217 $ 375
Taxes, other than income 10 21 13 15
DD&A 191 73 173 32
----- ----- ----- -----
Total operating costs $ 443 $ 447 $ 403 $ 422
_____________________________________________________________________________________________________________________
SAN LUIS Operating Data
Production Statistics
Gold Recovered (000s oz) 18 18 38 33
Silver Recovered (000s oz) 4 7 9 14
_____________________________________________________________________________________________________________________
Cost Per Equivalent Gold Ounce (1)
Cash production costs $ 223 $ 222 $ 221 $ 243
Taxes, other than income 9 14 9 14
DD&A 65 85 65 83
----- ----- ----- -----
Total operating costs $ 297 $ 321 $ 295 $ 340
_____________________________________________________________________________________________________________________
PAJINGO Operating Data
Production statistics
Gold recovered (000s oz) 8 8 15 17
Silver recovered (000s oz) 26 30 52 68
_____________________________________________________________________________________________________________________
Cost Per Equivalent Gold Ounce (1)
Cash production costs $ 125 $ 186 $ 165 $ 185
Taxes, other than income 1 2 1 2
DD&A 35 45 37 43
----- ----- ----- -----
Total operating costs $ 161 $ 233 $ 203 $ 230
_____________________________________________________________________________________________________________________
KORI KOLLO Operating Data
Production statistics
Gold recovered BMG share (000s oz) (2) 67 48 133 79
Silver recovered BMG share (000 oz) (2) 272 339 638 594
Gold recovered (000s oz) 76 56 153 92
Silver recovered (000s oz) 309 399 734 699
_____________________________________________________________________________________________________________________
Cost Per Equivalent Gold Ounce (1)
Cash production costs $ 152 $ 157 $ 147 $ 158
Taxes, other than income - - - 1
DD&A 98 117 94 117
----- ----- ----- -----
Total operating costs $ 250 $ 274 $ 241 $ 276
_____________________________________________________________________________________________________________________
</TABLE>
See page 7 for footnotes
6
<PAGE> 9
PART I. FINANCIAL INFORMATION - Continued
STATISTICAL INFORMATION (UNAUDITED)
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
June 30, June 30,
------------------ ----------------
1994 1993 1994 1993
---- ---- ---- ----
<S> <C> <C> <C> <C>
SAN CRISTOBAL Operating Data
Production statistics
Gold recovered BMG share (000s oz)(3) 9 6 17 13
Silver recovered BMG share (000s oz)(3) 26 19 44 38
Gold recovered (000s oz) 19 10 33 22
Silver recovered (000s oz) 49 34 83 68
_____________________________________________________________________________________________________________________
Cost Per Equivalent Gold Ounce (1)
Cash production costs $ 188 $ 439 $ 257 $ 383
Taxes, other than income - - - -
DD&A 83 76 76 80
----- ----- ----- -----
Total operating costs $ 271 $ 515 $ 333 $ 463
_____________________________________________________________________________________________________________________
RED DOME Operating Data
Production statistics
Gold recovered BMG share (000s oz)(3) 2 9 6 17
Silver recovered BMG share (000s oz)(3) 17 22 32 118
Copper recovered BMG share (000s lbs)(3) 1,187 687 2,538 2,535
Gold recovered (000s oz) 5 16 12 32
Silver recovered (000s oz) 33 39 61 207
Copper recovered (000s lbs) 2,256 1,217 4,822 4,489
_____________________________________________________________________________________________________________________
Cost Per Equivalent Gold Ounce (1)
Cash production costs $ 365 $ 289 $ 327 $ 186
Taxes, other than income - - - -
DD&A 4 2 3 14
----- ----- ----- -----
Total operating costs $ 369 $ 291 $ 330 $ 200
_____________________________________________________________________________________________________________________
AGGREGATE DATA
Gold recovered BMG share (000s oz) 114 101 231 199
Gold sales BMG share (000s oz) 117 96 229 208
Gold recovered (000s oz) 136 120 273 236
Gold sales (000s oz) 140 112 270 253
Average price per oz realized $ 384 $ 360 $ 384 $ 356
_____________________________________________________________________________________________________________________
Silver recovered BMG share (000s oz) 367 435 821 908
Silver sales BMG share (000s oz) 372 398 813 970
Silver recovered (000s oz) 443 527 985 1,132
Silver sales (000s oz) 454 461 972 1,239
Average Price per oz realized $ 5.24 $4.61 $5.29 $3.97
_____________________________________________________________________________________________________________________
Weighted Average Cost Per Equivalent Gold Ounce (1)
Cash production costs $ 181 $ 220 $183 $ 231
Taxes, other than income 2 5 3 5
DD&A 91 89 87 75
----- ----- ----- -----
Total operating costs $ 274 $ 314 $ 273 $ 311
_____________________________________________________________________________________________________________________
</TABLE>
(1) Represents production costs incurred which, because of changes in
inventory, may not be included in operating results for the period.
(2) Reflects BMG's 85 percent equity interest through February 1994 and an 88
percent interest thereafter.
(3) Reflects BMG's 56.5 percent equity interest for 1993 and a 52.6 percent
equity interest for January 1994 through May 1994 and a 51.5 percent equity
interest for June 1994.
7
<PAGE> 10
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
General
This discussion should be read in conjunction with Management's
Discussion and Analysis of Financial Condition and Results of Operations
included in the Company's Annual Report on Form 10-K (File No. 1-9666) for the
calendar year 1993 and the historical condensed consolidated financial
statements and notes thereto preceding this discussion.
Liquidity and Capital Resources
As of June 30, 1994, the Company had net working capital of $115.8
million and a current ratio of 4.3 to 1 as compared with net working capital of
$140.3 million and a current ratio of 4.5 to 1 at December 31, 1993. The
decrease in working capital resulted primarily from the use of cash for capital
expenditures. A decrease in accounts receivable of $13.4 million was
attributable primarily to the collection of receivables from a shipment made
late in 1993 at the Red Dome mine and the refund of value added taxes (VAT) paid
by Inti Raymi during the construction of the Kori Kollo sulfide plant. Product
inventory increased by $2.5 million, primarily due to the timing of shipments at
the Red Dome mine. A $3.1 million increase in materials and supplies
inventories resulted from a continued build-up at the Kori Kollo sulfide mine in
Bolivia to help assure an adequate supply of critical maintenance and repair
parts at this remote location. Of the Company's $115.8 million net working
capital at June 30, 1994, $42.9 million was attributable to the Company's
majority-owned subsidiary Niugini Mining Limited, a Papua New Guinea precious
metals mining company ("Niugini Mining"), and $31.0 million was attributable to
Inti Raymi.
Financing
As of February 9, 1994, BMG has effective a registration statement under
the Securities Act of 1933 for what is commonly referred to as a "universal
shelf" filing covering up to $200 million of debt securities, preferred stock,
depositary shares, common shares and warrants, which BMG may elect to offer from
time to time and in any combination. BMG currently has no specific plans for the
issuance of any securities under this registration statement.
BMG can borrow funds under a committed revolving credit agreement, which
is scheduled to expire on December 31, 1996. Scheduled $9.4 million quarterly
reductions in commitments under the agreement began on March 31, 1993, and will
continue until the agreement expires. As of June 30, 1994, the remaining
availability under this agreement was $94 million. This agreement contains
certain financial covenants as well as restrictions on additional dispositions
of major assets and the payment of dividends. These restrictions are not
expected to affect planned operations. In May 1994, the credit agreement was
amended to permit Niugini Mining to pledge its Red Dome mine assets to secure a
portion of the financing for its acquisition of an additional ownership interest
in the Lihir project. As of August 12, 1994, there were no amounts outstanding
under this agreement. BMG may borrow an additional $15 million through a
separate uncommitted revolving credit facility. As of August 12, 1994, the
Company had utilized a portion of this facility to obtain $4.8 million principal
amount of letters of credit to satisfy certain environmental bonding
requirements.
8
<PAGE> 11
Inti Raymi has borrowed funds from three international agencies, the
Overseas Private Investment Corporation ($40 million), the International
Finance Corporation ("IFC") ($40 million) and the Corporacion Andina de Fomento
($15 million) under three separate but coordinated financing agreements. These
agreements provided most of the funding necessary for the development of Inti
Raymi's Kori Kollo mine. Each of these agreements imposes restrictions on
dividend payments and loan repayments by Inti Raymi to its shareholders, and
limits additional fixed asset purchases or dispositions, debt and liens. As of
August 12, 1994, Inti Raymi owed an aggregate of $82 million under these
agreements. The IFC agreement includes a $5 million convertible loan payable on
March 1, 2002, which may be converted at any time, at IFC's option, into a 3.98
percent ownership interest in Inti Raymi. Other than the convertible portion,
loans under the agreements are to be repaid in semi-annual installments which
commenced in December 1993 and will continue through June 2000. Certain
prepayments would be required in the event of substantial Kori Kollo reserve
losses or significantly improved gold prices (currently the price would need to
be in excess of $430 per ounce of gold).
During the second quarter of 1994, Inti Raymi successfully obtained
lender acceptance of project completion status under the Kori Kollo project
financing agreements referred to above. Accordingly, BMG is no longer required
to provide financial support to Inti Raymi under the terms of these agreements.
Subject to other restrictions in the financing agreements and general operating
needs, Inti Raymi may generally pay dividends up to the amount of Inti Raymi's
net income for the preceding fiscal year, which ends September 30. During the
second quarter of 1994, Inti Raymi paid dividends of $8.1 million to its
shareholders ($7.1 million to BMG). This represented Inti Raymi's net income
for the year ended September 30, 1993. For the nine months ended June 30,
1994, Inti Raymi generated net income of $25.7 million, which may be available
for payment of dividends subsequent to September 30, 1994, subject to meeting
certain financial restrictions and tests required in its financing agreements.
Based on currently foreseeable circumstances BMG does not expect these
restrictions and tests to prevent Inti Raymi from paying dividends in the
future up to the amount of Inti Raymi's net income in future periods.
In March 1994, the Company increased its ownership interest in Inti
Raymi to 88 percent from 85 percent by purchasing additional shares of common
stock from Zeland Mines S.A. for $5.2 million.
During the three months ended June 30, 1994, Niugini Mining issued 2.1
million shares of its common stock upon the exercise of stock options which
provided net proceeds of $5.7 million. As a result of these issuances, BMG's
ownership interest in Niugini Mining decreased from 52.6 percent to 51.5
percent. As a result, the Company recorded a $1.2 million adjustment to reduce
the carrying value of its investment in Niugini Mining to reflect the reduction
in ownership interest. Pursuant to the Company's policy, this adjustment was
charged directly to shareholders' equity.
The Company has included $25.5 million in its 1994 budget for capital
expenditures to complete a recovery enhancement program at the Kori Kollo
mine which has entered the final engineering and procurement stage. The
Company expects to use cash generated from Inti Raymi's operations or possibly
additional outside financing for this project.
9
<PAGE> 12
Niugini Mining expects to make additional cash contributions to the
Lihir joint venture to fund preliminary development in anticipation of reaching
final agreement on the allocation of equity interests, the issuance of the
Special Mining Lease and completion of debt and equity project financing
arrangements. Niugini Mining has obtained a line of credit for A$25 million
(US$18.5 million). No funding will be required by BMG.
The Company does not currently expect Niugini Mining to pay dividends
because of Niugini Mining's business commitments and plans for its working
capital (see "Development Projects" below).
Development Projects
At present, the Company has interests in five projects which have
matured beyond the evaluation stage.
Reona Project - BMG has commenced development of the Reona project with
reserves of approximately 370,000 ounces of gold in the Copper Canyon area of
the Battle Mountain complex. The cost of developing the project is estimated to
be approximately $19.3 million, of which $10.5 million has been spent through
June 30, 1994. The estimated cost includes certain pre-mining stripping costs
that were not included in the original estimate and cost revisions due to a more
aggressive completion schedule. The project could potentially be impacted by
proposed federal legislation to amend or replace the General Mining Law.
Cindy Project - In Queensland, Australia, BMG is proceeding with the
$3.4 million development of the Cindy ore deposit, containing approximately
42,500 ounces of gold. Through June 30, 1994, $2.0 million has been spent on
this development project. Ore from the Cindy deposit is to be processed at the
existing Pajingo milling facility beginning in September 1994 and is expected to
extend the productive life of the Pajingo district to October 1995.
Crown Jewel Project - BMG is continuing to seek permits for the Crown
Jewel project in Washington state. BMG expects to construct a 3,000 ton per day
milling facility with start-up in early 1997, depending on the length of the
permitting process, the effect of possible legal challenges by project
opponents and the potential impact of legislation recently enacted in the State
of Washington and of proposed federal legislation to amend or replace the
General Mining Law. Implementing regulations which are expected to clarify
several aspects of the legislation are expected to be developed. The delays in
obtaining permits for the Crown Jewel project relate primarily to delays in
regulatory approvals for certain site data collection activities and the time
taken for agency development of certain wildlife studies.
In March 1994, an arbitrator held that BMG was entitled, under "force
majeure" provisions of BMG's joint venture agreement covering its Crown Jewel
Project, to suspend quarterly payments of $1 million to its co-venturer for the
third and fourth quarters of 1993 because of delays in the permitting process.
On May 10, 1994, BMG announced that it had resolved outstanding contractual
issues with the co-venturer, including all issues relating to BMG's obligation
to subsequently make such quarterly $1 million payments. As part of its
agreement to resolve these issues, BMG acquired the right to earn an additional
3 percent joint venture interest in the Crown Jewel project. The consideration
paid by BMG to the co-venturer totaled $4.25 million in cash and 435,897 shares
10
<PAGE> 13
of BMG common stock. As a result of this agreement, BMG has the right
to earn a 54 percent interest in the project, and the joint venture agreement
has been amended to delete the terms requiring $1 million quarterly payments to
the co-venturer. The 3 percent additional interest will apply only until the
joint venture recovers 1.6 million ounces of gold from the project at which
time BMG's interest will be reduced to 51 percent. BMG has filed a registration
statement with the Securities and Exchange Commission to cover the resale by
the co-venturer of the 435,897 shares of BMG common stock.
To earn the 54 percent ownership interest in the project, BMG will have
to fund all expenditures for exploration, evaluation and development of the
project through commencement of commercial production. Under the amended terms
of the joint venture agreement, the minority partner will not reimburse BMG for
any portion of funding provided through the commencement of commercial
production. These expenditures, plus acquisition costs, are currently estimated
to be approximately $107.8 million, of which, as of June 30, 1994, $36.8 million
($28.3 million of which has been capitalized) has been incurred. The current
estimate of $107.8 million includes approximately $8.5 million related to the
acquisition of the additional 3 percent interest in the project and the
resolution of certain contractual issues.
Red Dome Expansion - Niugini Mining is continuing with the expansion of
the existing Red Dome pit. It is estimated that the total cost of the expansion
will be approximately $32.5 million, of which $29.3 million had been spent
through June 30, 1994. The increase in the total cost estimate is primarily
due to corrections of problems related to a pit wall slippage. The expansion,
now scheduled to be completed in the third quarter of 1994, is expected to
extend the life of the mine through 1996.
Lihir Project - The current term of the Exploration License is
expected to continue in respect to the Lihir project area until a decision is
made by the Papua New Guinea ("PNG") government regarding the Special Mining
Lease application which has been submitted by the joint venture. Discussions
are continuing among the PNG government and the joint venturers regarding the
timing and conditions of project development and the allocation of equity
interests in the project. Discussions by the joint venture partners are also
being held with bankers and lenders regarding the terms and conditions for debt
and equity financing for the project. As of June 30, 1994, the carrying value
of the Company's investment in the Lihir Project was approximately $137.6
million.
New Reserve Potential
BMG is continuing to evaluate the feasibility of mining and milling
deposits of low grade sulfide mineralization known as the Phoenix project
located in the Copper Canyon area of the Battle Mountain complex. Feasibility of
this project is expected to be determined in September 1994.
Government Regulation
All of the Company's mining and processing operations are subject to
reclamation requirements. The Company believes it is making sufficient accruals
for known reclamation obligations. Such accruals, amounting to an aggregate of
$10 million at June 30, 1994, are included as long-term liabilities in the
Company's consolidated balance sheet. At the Battle Mountain complex, assuming
the Phoenix project proceeds, aggregate reclamation expenditures required to be
11
<PAGE> 14
spent in the area are expected to amount to approximately $7.7 million. The
Company has already spent $2.7 million for reclamation and $4.2 million remains
accrued at June 30, 1994. Estimated reclamation obligations and related
amounts accrued as of June 30, 1994, respectively, for each of the Company's
other operating mines are as follows: San Luis $3.3 million and $1.2 million,
Pajingo $2.6 million and $1.0 million, Kori Kollo $10 million and $.7 million,
and Red Dome $4.2 million and $2.8 million. Reclamation expenditures for the
Company's San Cristobal mine are not expected to be material.
Exploration and Capital Expenditures
The Company currently estimates that it will spend approximately $15.8
million on its 1994 exploration programs to identify potential additional
mineral deposits. Of this amount, 18 percent is budgeted to be spent in North
America, 27 percent in Latin America and the Caribbean, 31 percent in Australia
and the South Pacific and 24 percent in various countries by Niugini Mining.
During the six months ended June 30, 1994, the Company spent approximately
$6.5 million on exploration and evaluation and related capital
expenditures.
The Company has budgeted $98.9 million for capital expenditures for
1994, of which $55.7 million has been spent through June 30, 1994. Total
projected 1994 expenditures include $16.6 million for construction and
development of the Reona project, $8.8 million for the Red Dome expansion, $17.7
million for the development of Lihir, $25.5 million for the expansion of the
Kori Kollo processing facilities, and lesser amounts for development of the
Crown Jewel, Phoenix and Cindy expansion projects and $11.9 million for
additions and replacements. Of the total 1994 budget, 33 percent is expected to
be spent in North America, 34 percent in Latin America, 29 percent in various
countries by Niugini Mining and 4 percent in the South Pacific. The Company
routinely evaluates additional capital project, acquisition and merger
opportunities.
12
<PAGE> 15
Forward Sales and Hedging
In order to minimize exposure to decreasing prices for portions of its
production, the Company has in the past, and may in the future, hedge the sale
prices of future production by entering into contracts, such as spot deferred
sales contracts, fixed forward sales contracts and put options.
As of June 30, 1994, the following table summarized the Company's
hedging positions:
<TABLE>
<CAPTION>
Weighted
Average Price
Per Unit Period
------------- ------
<S> <C> <C>
BMG:
Spot deferred sales contracts
145,000 oz gold $371 Aug 94 - Jun 95
Niugini Mining:
Spot deferred sales contracts
103,000 oz gold $380 Jul 94
300,000 oz silver $5.53 Jul 94
Fixed forward sales contracts
143,000 oz gold $359 Aug 94 - Dec 96
150,000 oz silver $5.63 Oct 94
6,063,000 lbs copper $ .91 Jul 94 - Nov 94
Inti Raymi:
Spot deferred sales contracts
98,500 oz gold $373 Sep 94 - Jan 95
Purchased put options
45,000 oz gold $350 Jul 94 - Aug 94
</TABLE>
Gains and losses related to these hedging transactions are recognized in
revenues when the related production is sold. In addition, costs associated
with the purchase of certain of the hedge instruments, amounting to $.2 million
for open put options and $1.5 million for Inti Raymi's open spot deferred sales
contracts as of June 30, 1994, are also deferred and recognized concurrently
with the revenues related to the hedged production.
The aggregate amount by which the net market value of the Company's open
fixed forward and spot deferred sales contracts is less than the spot price of
$379 per ounce of gold as of August 8, 1994, is $5.2 million, of which $1.8
million is attributable to minority interests.
During the second quarter of 1994, the Company allowed options contracts
covering 67,500 ounces of gold to expire. In July 1994, the Company allowed
options contracts covering 22,500 ounces of gold to expire and rolled forward
spot deferred sales contracts covering 95,700 ounces of gold and 300,000 ounces
of silver to future periods. At the August 8, 1994, market price of $379
13
<PAGE> 16
per ounce of gold, the Company would allow all remaining open put option
contracts (covering 22,500 ounces of gold) to expire. Open spot deferred sales
contracts would be evaluated to determine if it would be in the best long-term
interests of the Company to either "roll the contracts forward" or deliver
against them. Delivery against spot deferred sales contracts in a period in
which current market prices exceed contract prices will result in recognition
of revenues at prices below current market conditions.
In future periods, the Company may continue to employ selective hedging
strategies, where appropriate, to protect cash flow for specific needs.
Foreign Operations
The Company continues to expand and geographically diversify its
resource base through the exploration, acquisition, development and exploitation
of foreign gold reserves. The Company's identifiable assets attributable to
foreign mining as of June 30, 1994, were approximately $499 million and foreign
mining operations represented approximately 80 percent of the total gross
revenues of the Company for the six months ended June 30, 1994. As a result,
the Company is exposed to risks normally associated with foreign operations,
including political, economic, social and labor instabilities, as well as
foreign exchange controls and currency fluctuations. Foreign operations and
investments may also be subject to laws and policies of the United States
affecting foreign trade, investment and taxation which could affect the conduct
or profitability of those operations.
Conclusion
The Company expects the cash currently remaining from its 1993
convertible preferred stock offering along with cash flows from operations and
financing facilities currently in place to be adequate to meet its foreseeable
future cash needs. Funding may also be provided from offerings of additional
securities under the Company's $200 million universal shelf registration
statement, assuming any such offering could be completed under satisfactory
terms.
Inflation and Changing Prices
Gold production costs and corporate expenses are subject to normal
inflationary pressures, which, to date, have not had a significant impact on the
Company. The Company's results of operations and cash flows may also be
affected by fluctuations in the market prices of gold, silver and copper, and to
a lesser extent by changes in foreign currency exchange rates. While gold prices
for the last three years have remained, on average, well below 1990 levels,
prices have recently strengthened. Changing gold prices, in conjunction with
operating costs incurred by the Company for its operations, affect the net
margins realized by the Company.
Results of Operations
Net income for the six months ended June 30, 1994, was favorably
impacted by higher average realized gold and silver prices and sharply lower
per ounce operating costs when compared to the six months ended June 30, 1993.
The lower operating costs resulted largely from productivity improvements at
the San Luis and Kori Kollo mines, and the absence of higher operating costs
incurred in
14
<PAGE> 17
the first six months of 1993, which were largely associated with the phasing
down of the Fortitude mine and adverse weather at the Battle Mountain complex.
Revenues
Gross revenue of $113 million (293,000 equivalent gold ounces) for the
six months ended June 30, 1994, represented an increase of 11 percent from
gross revenue of $102.1 million (287,000 equivalent gold ounces) during the
same period in 1993. Second quarter 1994 gross revenues increased by 43
percent to $60.2 million (156,000 equivalent gold ounces) from $42.1 million
(117,000 equivalent gold ounces) during the same quarter of the previous year.
Revenues increased for the six months ended June 30, 1994 due to increased
sales volumes from the Kori Kollo mine and higher average realized gold prices.
Average realized gold prices increased from $360 per ounce and $356 per ounce
for the three and six months ended June 30, 1993, respectively, to $384 per
ounce for the three and six months ended June 30, 1994. Production volumes
from the Kori Kollo mine increased due to increased recoveries and the
re-treatment of used cathodes by electro-winning. Increased production at the
San Luis and San Cristobal mines also contributed to the increase in revenues
for the six months. Volumes increased at San Luis due to higher ore grades.
Upgrading of the crushing facilities at San Cristobal caused the increase in
its volume.
Revenues for the quarter increased compared to the previous year due to
increased production volumes at the Kori Kollo and San Cristobal mines for the
reasons discussed previously. Sales volumes increased at the Red Dome mine due
to a greater number of shipments in the 1994 quarter compared to the same
quarter of 1993. Increased gold prices were also a factor contributing to the
increase in revenues.
Selling and Operating Costs
Freight, allowances and royalties decreased to $5.0 million ($17 per
equivalent ounce of gold sold) for the six months ended June 30, 1994, compared
with $7.7 million ($27 per equivalent ounce of gold sold) for the six months
ended June 30, 1993. Freight, allowances and royalties increased to $3.1
million ($20 per equivalent ounce of gold sold) from $1.6 million ($14 per
equivalent ounce of gold sold) during the second quarter of 1994 compared to the
second quarter of 1993. These costs decreased for the six months when compared
to the same period of the previous year due to the recognition of fewer
concentrate sales from the Red Dome mine this year. These shipments carry high
freight charges. Conversely, the freight, allowance and royalties costs were
higher for the second quarter of 1994 compared to 1993 due to the recognition of
more concentrate sales during the second quarter of this year compared to the
second quarter of 1993.
Mining, milling and other plant costs decreased for the six months ended
June 30, 1994, by 16 percent to $55.1 million ($188 per equivalent ounce of gold
sold) from $65.9 million ($230 per equivalent ounce of gold sold) for the six
months ended June 30, 1993. Mining, milling and other plant costs increased for
the three months ended June 30, 1994, by 10 percent to $30.6 million ($197 per
equivalent ounce of gold sold) from $27.9 million ($238 per equivalent ounce
of gold sold). These costs decreased for the six month period because of an
increased proportion of sales volumes from the lower cash operating cost Kori
Kollo mine in relation to the higher cost Red Dome and Battle Mountain complex
mines. The cash operating costs at the Kori Kollo mine were lower due to
15
<PAGE> 18
improved recoveries and the re-treatment of used cathodes by electro-winning.
Increased volumes sold from the San Cristobal mine, where costs have decreased
due to improved efficiencies resulting from the addition of more efficient
crushing equipment, also contributed to the reduction of mining and milling
costs for the six month period. These costs increased for the second quarter
of 1994 compared to the second quarter of 1993 due to increased sales volumes,
partially offset by a higher proportion of sales volumes from the lower cost
Kori Kollo mine and the San Cristobal mine, the costs of which have decreased
as previously discussed.
Depreciation, depletion and amortization has increased by 24 percent to
$24.1 million ($82 per equivalent ounce of gold sold) from $19.4 million ($68
per equivalent ounce of gold sold) for the six months ended June 30, 1994
compared to the six months ended June 30, 1993. Depreciation, depletion and
amortization has increased by 43 percent to $12.4 million ($80 per equivalent
ounce of gold sold) from $8.7 million ($74 per equivalent ounce of gold sold)
for the three months ended June 30, 1994, when compared to the same period of
1993. The increase in depreciation, depletion and amortization for the three
and six months ended June 30, 1994, when compared to the same periods of 1993,
resulted primarily from increased production and sales volumes and from a higher
proportion of such volumes being produced at the Kori Kollo mine, which has
higher capitalized costs compared to the Company's other mines.
Exploration Costs
Exploration, evaluation and other lease costs increased slightly to $5.9
million for the six months ended June 30, 1994, compared with $5.3 million for
the six months ended June 30, 1993, because of the Company's expanded 1994
exploration program. Exploration, evaluation and other lease costs increased
slightly to $3.3 million for the three months ended June 30, 1994, compared with
$3.2 million for the three months ended June 30, 1993.
Other
The Company had interest income of $1.6 million and $3.0 million for the
three and six months ended June 30, 1994, compared with $1.2 million and $1.8
million for the three and six months ended June 30, 1993. The increased
interest income resulted from the investment of cash remaining from the
Company's preferred stock offering completed during May 1993.
Interest expense was $2.4 million and $4.7 million for the three and six
months ended June 30, 1994, compared with $2.6 million and $4.1 million for the
same periods of the previous year. Interest expense increased for the six
months as a result of the commencement of commercial production at the Kori
Kollo mine on February 1, 1993. The interest on borrowings used for the
construction of the Kori Kollo mining facilities was capitalized prior to the
commencement of commercial production.
The Company incurred income tax expense of $.2 million and $2.3 million
for the three and six months ended June 30, 1994, compared with an income tax
benefit of $2.9 million and $6.1 million for the three and six months ended June
30, 1993. The income tax expense during the six months ended June 30, 1994,
is a result of pre-tax income. The effective tax rate is 28 percent for 1994
as compared with a benefit of 52 percent in 1993.
16
<PAGE> 19
Net income attributable to minority interests was $2.6 million for
the six months ended June 30, 1994, as compared to $1.7 million for the same
period of 1993. The increase in this amount can be primarily attributed
to the increased earnings of Inti Raymi partially offset by a decrease in the
minority interest ownership percentage of Inti Raymi.
17
<PAGE> 20
PART II. OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
4 Amendment to Credit Agreement, dated April 30, 1994, among the
Company, the lenders parties thereto and Citibank, N.A., as
agent.
10 Specimen of BMG's 1994 Long-Term Incentive Plan Performance Unit
Agreement.
11 Computation of Earnings per Common Share.
12 Computation of Ratio of Earnings to Fixed Charges and
Earnings to Combined Fixed Charges and Preferred Dividends.
(b) No report on Form 8-K has been filed by BMG during the quarter for
which this report is filed.
18
<PAGE> 21
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
BATTLE MOUNTAIN GOLD COMPANY
Date: August 15, 1994 /s/ R. Dennis O'Connell
______________________________________
R. Dennis O'Connell, Vice President-
Finance and Chief Financial Officer
(Principal Financial and Chief
Accounting Officer)
19
<PAGE> 22
INDEX OF EXHIBITS
Exhibit No. Document
- - ----------- --------
4 Amendment to Credit Agreement, dated April 30, 1994,
among the Company, the lenders parties thereto and
Citibank, N.A., as agent.
10 Specimen of BMG's 1994 Long-Term Incentive Plan
Performance Unit Agreement.
11 Computation of Earnings per Common Share.
12 Computation of Ratio of Earnings to Fixed Charges and
Earnings to Combined Fixed Charges and Preferred
Dividends.
<PAGE> 1
EXHIBIT 4
CONFORMED COPY
AMENDMENT TO CREDIT AGREEMENT
This Amendment to Credit Agreement ("Amendment") is dated as of April
30, 1994 and is among Battle Mountain Gold Company, a Nevada corporation
("Borrower"), the lenders parties hereto ("Banks") and Citibank, N.A., as agent
("Agent"). In consideration of the mutual covenants contained herein, the
Borrower, the Agent and the Banks agree as set forth herein.
1. Amendments to the Agreement.
The Credit Agreement dated as of December 29, 1989 among the Borrower,
the Agent and the lenders parties thereto, as heretofore amended ("Agreement"),
is hereby further amended as follow:
1.1 Section 5.01. Section 5.01(h) of the Agreement is hereby amended
by replacing the amount "$150,000,000" appearing therein with the amount
"$350,000,000".
1.2 Section 5.02(a). Section 5.02(a) of the Agreement is amended by
adding, immediately after the word "above" in the first parenthetical phrase of
clause (iii) thereof, the words "or clauses (iv) or (v) below".
1.3 Section 5.02(b). Section 5.02(b) of the Agreement is amended by
(1) adding, immediately after the word "above" in clause (vii) thereof, the
words "or clauses (viii) or (ix) below", (2) deleting the word "and" at the end
of clause (vii) thereof, (3) replacing the period at the end of clause (viii)
thereof with "; and" and (4) adding a new clause (ix) reading in its entirety
as follows:
(ix) Debt of Red Dome Pty Limited owed to AIDC Ltd. in the maximum
principal amount of 30,000,000 Australian dollars if neither the
Borrower nor any Material Subsidiary (other than Red Dome Pty
Limited or Niugini Mining Limited) has any personal liability
for such Debt.
2. Miscellaneous
2.1 Amendments, Etc. No amendment or waiver of any provision of this
Amendment, nor consent to any departure by the Borrower herefrom, shall in any
event be effective unless effected in accordance with Section 8.01 of the
Agreement.
<PAGE> 2
2.2 Governing Law. This Amendment and the Agreement as amended
hereby shall be governed by, and construed in accordance with, the laws of the
State of New York.
2.3 Preservation. Except as specifically modified by the terms of
this Amendment, all of the terms, provisions, covenants, warranties and
agreements contained in the Agreement (including, without limitation, exhibits
thereto) or any of the Notes remain in full force and effect. Terms used
herein which are not defined herein and are defined in the Agreement, as
amended hereby, are used herein as defined in the Agreement, as amended hereby.
2.4 Execution in Counterparts. This Amendment may be executed in any
number of counterparts and by different parties hereto in separate
counterparts, each of which when so executed shall be deemed to be an original
and all of which taken together shall constitute one and the same agreement.
2.5 Bank Credit Decision. Each Bank acknowledges that it has,
independently and without reliance upon the Agent or any other Bank and based
on such documents and information as it has deemed appropriate, made its own
credit analysis and decision to enter into this Amendment and to agree to the
various matters set forth herein. Each Bank also acknowledges that it will,
independently and without reliance upon the Agent or any other Bank and based
on such documents and information as it shall deem appropriate at the time,
continue to make its own credit decisions in taking or not taking action under
the Agreement as amended hereby.
2.6 Representation. The Borrower hereby represents and warrants to
the Agent and the Banks that:
(i) The representations and warranties contained in Section 4.01 of
the Agreement (other than any representation and warranty that
by its terms relates exclusively to a prior date) are correct in
all material respects on and as of the date hereof as though
made on and as of the date hereof; and
(ii) No event has occurred and is continuing, or would result from this
Amendment, which constitutes an Event of Default or would
constitute an Event of Default but for the requirement that
notice be given or time elapse or both.
-2-
<PAGE> 3
2.7 Authority, etc. The Borrower hereby represents and warrants to
the Agent and the Banks, effective as of the Effective Date (as defined in
Section 2.9 hereof) that (i) the Borrower is a corporation duly organized,
validly existing and in good standing under the laws of the State of Nevada,
(ii) the execution, delivery and performance of this Amendment, and the
performance of the Agreement, as amended hereby, by the Borrower are within the
power of the Borrower, have been duly authorized by all necessary corporate
action, do not violate any provision of the Borrower's charter or by-laws, any
contractual restriction binding on or affecting the Borrower or any
Governmental Requirement and will not result in or require the creation or
imposition of any Lien prohibited by the Agreement, (iii) this Amendment has
been duly executed and delivered by the Borrower, (iv) this Amendment and the
Agreement, as amended hereby, constitute legal, valid and binding obligations
of the Borrower enforceable against the Borrower in accordance with their
respective terms, from and after the Effective Date, subject to bankruptcy,
insolvency, reorganization, moratorium or other similar laws of general
application relating to or affecting the enforcement of creditors' rights
generally, and to general principles of equity (regardless of whether such
enforceability is considered in a proceeding in equity or at law), and (v) no
authorization, consent or approval of, or other action by, and no notice to or
filing with, any governmental authority, regulatory body or other Person is
required for the due execution, delivery and performance of this Amendment or
the performance of the Agreement, as amended hereby.
2.8 Default. Without limiting any other event which may constitute
an Event of Default, in the event any representation or warranty set forth
herein shall prove to have been incorrect in any material respect when made,
such event shall constitute an "Event of Default" under the Agreement, as
amended hereby.
2.9 Effectiveness. This Amendment shall become effective on the
first date (the "Effective Date") upon which the conditions set forth below
shall have been fulfilled:
(a) The Borrower and the Majority Lenders each shall have
executed a counterpart hereof and delivered the same (or a copy
thereof) to the Agent or, in the case of any Bank as to which an
executed counterpart hereof shall not have been so delivered, the Agent
shall have been notified by such Bank that such Bank has executed it.
-3-
<PAGE> 4
(b) The Agent shall have received from the Borrower a
certificate of an officer of the Borrower, dated on or before the
Effective Date and certifying (A) that attached thereto is a true and
complete copy of resolutions of the Board of Directors of the Borrower
authorizing the execution, delivery and performance of this Amendment
and (B) as to the names and true signatures of the officers of the
Borrower authorized to sign this Amendment.
2.19 Expenses. The Borrower agrees to pay on demand all costs and
expenses in connection with the preparation, negotiation, execution and
delivery of this Amendment, including, without limitation, the reasonable fees
and out-of-pocket expenses of counsel for the Agent with respect thereto.
IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be
executed by their respective officers thereunto duly authorized, as of the date
first above written.
BORROWER:
BATTLE MOUNTAIN GOLD COMPANY
By: /s/ H. Les Sarles
----------------------------
Name: H. Les Sarles
----------------------------
Title: Treasurer
----------------------------
AGENT:
CITIBANK, N.A., as Agent
By: /s/ John K. Hammes
----------------------------
Name: John K. Hammes
----------------------------
Title: Vice President
----------------------------
BANKS:
CITIBANK, N.A.
By: /s/ John K. Hammes
----------------------------
Name: John K. Hammes
----------------------------
Title: Vice President
----------------------------
-4-
<PAGE> 5
THE BANK OF NOVA SCOTIA,
ATLANTA AGENCY
By: /s/ A. S. Norsworthy
----------------------------
Name: A. S. Norsworthy
----------------------------
Title: Assistant Agent
----------------------------
THE BANK OF NEW YORK
By: /s/ Andrew G. Mathews
----------------------------
Name: Andrew G. Mathews
----------------------------
Title: Vice President
----------------------------
CIBC, INC.
By: /s/ J. D. Westland
----------------------------
Name: J. D. Westland
----------------------------
Title: Vice President
----------------------------
TEXAS COMMERCE BANK NATIONAL
ASSOCIATION
By: /s/ Larry F. Robinson
----------------------------
Name: Larry F. Robinson
----------------------------
Title: Vice President
----------------------------
FIRST INTERSTATE BANK OF TEXAS, N.A.
By: /s/ Carol D. Birkofer
----------------------------
Name: Carol D. Birkofer
----------------------------
Title: Assistant Vice President
----------------------------
MELLON BANK, N.A.
By: /s/ Karr McCurdy
----------------------------
Name: Karr McCurdy
----------------------------
Title: Vice President
----------------------------
-5-
<PAGE> 1
EXHIBIT 10
1994 LONG-TERM INCENTIVE PLAN
OF
BATTLE MOUNTAIN GOLD COMPANY
Performance Unit Agreement
1. BATTLE MOUNTAIN GOLD COMPANY (the "Company"), a Nevada corporation,
hereby awards to ____________________ (the "Participant"), an employee of the
Company or one of its subsidiaries, ______ units, representing an incentive
award, ("Performance Units"), subject to the following terms and conditions:
2. Performance Unit Subject to Long-Term Incentive Plan. This
Performance Unit is issued in accordance with and subject to all of the terms,
conditions and provisions of the 1994 Long-Term Incentive Plan of Battle
Mountain Gold Company (a copy of which, as in effect on the date hereof, is
attached as Exhibit 1 hereto), and as the same may hereinafter be amended from
time to time (the "Plan"), and administrative interpretations thereunder, if
any, which have been adopted by the Compensation and Stock Option Committee
(the "Committee") and are still in effect on the date hereof. By executing
this Agreement, the Participant acknowledges that he has received a copy of,
and is familiar with the terms of, the Plan and any such administrative
interpretations, which are incorporated herein by reference.
3. Performance Period. The Performance Units hereby awarded represent
an incentive award for achievement during the period _______________, 1994
through ______________, 19__ (the "Performance Period").
4. Performance Unit Account. The Company shall establish an account
for the Participant (the "Performance Unit Account") and shall credit to such
Performance Unit Account the number of Performance Units awarded by the Company
for the Performance Period. A new Performance Unit Account shall be
established for each Performance Period, and the Participant may at any time
have one or more such Performance Unit Accounts.
5. Credits to and Payments From Participants' Performance Unit
Accounts.
(a) The award of a number of Performance Units to the
Participant shall be reflected as a book entry as of the commencement
of the Performance Period in the Participant's Performance Unit
Account.
(b) Subject to the provisions of Section 6 of this Agreement,
the Performance Unit Account of the Participant shall be credited as of
the date of the end of such Performance Period with an amount, not to
exceed $1.50 per Performance Unit, calculated from a formula to be
determined by the Committee incorporating such "performance measures"
(as hereinafter defined) as the Committee in its sole discretion deems
appropriate, all adjusted by a factor of actual performance as a
percentage of targeted performance. For purposes of this Agreement,
performance measure is any one of a number of measures of
<PAGE> 2
Company performance chosen by the Committee for inclusion in
the formula to calculate the Performance Units awarded under this
Agreement. The proposed Performance Measures are to be chosen in part
for their relationship to the creation of value for the Company's
shareholders.
If any performance measure for any year during the Performance
Period shall have been affected by special factors (including material
changes in accounting policies or practices, material acquisitions or
dispositions of property, or other unusual items) which in the
Committee's judgment should or should not be taken into account, in
whole or in part, in the equitable administration of the Plan, the
Committee may, for any purpose of the Plan, adjust the applicable
performance measure as the case may be, for such year (and subsequent
years as appropriate), or any combination of them, and make credits,
payments and reductions accordingly under the Plan.
(c) The Committee shall have authority to make all decisions
with respect to the crediting of amounts to the Participant's
Performance Unit Account with respect to the Performance Period.
(d) Subject to Section 6 of this Agreement, the balance
credited to the Participant's Performance Unit Account shall be paid to
such Participant in the following manner: one-half the credited amount
as soon as practicable following the end of the Performance Period and
one-half the credited amount as soon as practicable following the date
falling exactly one year following the end of the Performance Period in
which the credited amount was earned.
(e) Payments shall be made in cash, shares of Company Class A
common stock, par value $0.10 ("Common Stock") or a combination of cash
and Company Common Stock as determined by the Committee. The initial
method of payment shall be one-half cash and one-half Company Common
Stock, although this method remains subject to change by the Committee.
For the purpose of distribution of Performance Units in Company Common
Stock, the value of such Company Common Stock shall be calculated as
the average of the daily closing sales prices of the shares of Common
Stock on the New York Stock Exchange Composite Tape on the last five
trading days of the Performance Period with respect to which such
payment is being made, or such other appropriate measurement of fair
market value as shall be selected by the Committee.
6. Forfeiture of Performance Unit. Anything contained in the Plan or
this Agreement to the contrary notwithstanding:
(a) All Performance Units and amounts credited to the
Participant's Performance Unit Account with respect to or arising from
this Performance Unit award shall be forfeited immediately in the event
of the "discharge for cause" (as hereinafter defined) of such
Participant. Discharge for cause is the involuntary termination of
employment of the Participant as a result of
-2-
<PAGE> 3
dishonesty or similar serious misconduct directly related to
the performance of duties for the Company.
(b) All Performance Units and amounts credited to the
Participant's Performance Unit Account with respect to or arising from
this Performance Unit award shall, unless and to the extent that the
Committee shall in its absolute discretion otherwise determine by
reason of special mitigating circumstances, be forfeited in the event
that such Participant's employment shall terminate at any time for
reasons other than by death, disability or retirement pursuant to the
provisions of the Company's retirement plan.
(c) If the Participant terminates employment with the Company
by reason of retirement pursuant to the provisions of the Company's
retirement plan (or, in the sole discretion of the Committee, under the
defined benefit retirement plan of a subsidiary of the Company), the
Participant shall be deemed to have earned a portion of the Performance
Units awarded to his Performance Unit Account based on the period of
his service with the Company during that Performance Period prior to
his termination date and on any other criteria that the Committee in
its sole discretion shall select. The crediting of amounts to the
Performance Unit Account pursuant to this paragraph shall be effected
at the end of the Performance Period pursuant to Section 5.
(d) If the Participant terminates employment with the Company
by reason of death or disability (as hereinafter defined) the
Participant shall be deemed to have earned a portion of the Performance
Units awarded to his Performance Unit Account based on the period of
his service with the Company during that Performance Period prior to
his termination date and on any other criteria that the Committee in
its sole discretion shall select. The crediting of amounts to the
Performance Unit Account pursuant to this paragraph shall be effected
at the end of the Performance Period pursuant to Section 5. For
purposes of this paragraph, disability is any disability which
qualifies as a "total disability" under the Long-Term Disability Plan
of the Company.
(e) In the event of a "change in control" of the Company (as
hereinafter defined), Performance Units, or the balance thereof,
credited to the Participant's Performance Unit Account shall become
fully vested and be immediately paid to the Participant in cash, as
soon as practicable after the date of the change of control. In the
event of a change of control of the Company, Performance Units which
have been awarded to the Participant and allocated to his Performance
Unit Account but which have not yet been valued and credited (because
the Performance Period has not yet ended) shall be immediately paid to
the Participant in cash, as soon as practicable after the date of the
change of control. For purposes of making such payment prior to the
end of the Performance Period, each Performance Unit shall be deemed
equal to and shall be valued at $1.00.
-3-
<PAGE> 4
For purposes of this Paragraph 6(e), a "change in control" of
the Company shall be deemed to have occurred if:
(i) any "person," including a "group" as determined in
accordance with Section 13(d)(3) of the Securities Exchange Act
of 1934, as amended (the "Exchange Act"), is or becomes the
beneficial owner, directly or indirectly, of securities of the
Company representing 30% or more of the combined voting power
of the Company's then outstanding securities;
(ii) as a result of, or in connection with, any tender
offer or exchange offer, merger or other business combination,
sale of assets or contested election, or any combination of the
foregoing transactions (a "Transaction"), the persons who were
directors of the Company before the Transaction shall cease to
constitute a majority of the Board of Directors of the Company
or any successor to the Company;
(iii) the Company is merged or consolidated with
another corporation and as a result of such merger or
consolidation less than 70% of the outstanding voting
securities of the surviving or resulting corporation shall then
be owned in the aggregate by the former stockholders of the
Company, other than (x) any party to such merger or
consolidation, or (y) any affiliates to any such party;
(iv) a tender offer or exchange offer is made and
consummated for the ownership of securities of the Company
representing 30% or more of the combined voting securities; or
(v) the Company transfers substantially all of
its assets to another corporation that is not a wholly owned
corporation of the Company.
(f) To the extent that the acceleration of vesting or any
payment made to the Participant hereunder in the event of a change of
control of the Company is subject to federal income, excise, or other
tax at a rate above the rate ordinarily applicable to like payments
paid in the ordinary course of business ("Penalty Tax"), whether as a
result of the provisions of Section 4999 of the Internal Revenue Code
of 1986, as amended (the "Code"), any similar or analogous provisions
of any statute adopted subsequent to the date hereof or otherwise, then
the Company shall be obligated to pay the Participant an additional
amount of cash (the "Additional Amount") such that the net amount
received by the Participant, after paying any applicable Penalty Tax
and any federal or state income tax on such Additional Amount shall be
equal to the amount that Participant would have received if such
Penalty Tax were not applicable.
-4-
<PAGE> 5
7. Assignment or Transfer. The Participant may designate in writing a
beneficiary (including the trustee or trustees of a trust) who shall upon the
death of the Participant be entitled to receive amounts, if any, which would
have been payable hereunder to Participant. Such designation may be rescinded
or changed by the Participant at any time. Except as provided in this Section
7, none of the amounts which may be payable under the Plan or this Agreement
shall be subject in any manner to anticipation, alienation, sale, transfer,
assignment, pledge, encumbrance or charge, and any attempt at such, whether
voluntary or involuntary, by operation of law or otherwise, shall be null and
void, and any such benefit shall not in any way be subject to the debts,
contracts, liabilities, engagements or torts of the person who shall be
entitled to such benefit, nor shall it be subject to attachment or legal
process for or against such person. Except as described herein, no assignment
or transfer of the Participant's rights under and interest in this Agreement
may be made by the Participant otherwise than by will or by the laws of descent
and distribution.
8. Limitation of Rights. The selection of Participant for
participation in the Plan shall not give such Participant any right to be
retained in the employ of the Company and the right of the Company to dismiss
or discharge any such Participant is specifically reserved. The benefits
provided for Participant under the Plan shall be in addition to, and shall in
no way preclude, other forms or compensation to or in respect of such
Participant.
9. Withholding. All payments made pursuant to this Agreement shall be
subject to withholding in respect of income and other taxes required by law to
be withheld, in accordance with procedures to be established by the Committee.
Dated: ______________________, 1994
BATTLE MOUNTAIN GOLD COMPANY
By ________________________________
This Performance Unit has been accepted
as of the above date by the undersigned,
subject to the terms and provisions
of the Plan and administrative
interpretations thereof referred to
above.
______________________________________
Participant
-5-
<PAGE> 1
Exhibit 11
BATTLE MOUNTAIN GOLD COMPANY
COMPUTATION OF EARNINGS PER COMMON SHARE
(expressed in thousands, except share and per share amounts)
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
June 30, June 30,
1994 1993 1994 1993
---- ---- ---- ----
<S> <C> <C> <C> <C>
PRIMARY EARNINGS PER SHARE
Earnings
Net income (loss) $ 3,084 $ (2,589) $ 5,932 $ (5,754)
Deduct dividends on preferred shares 1,869 - 3,738 -
---------- ---------- ---------- ----------
Net income (loss) applicable to common stock $ 1,215 $ (2,589) $ 2,194 $ (5,754)
========== ========== ========== ==========
Shares
Weighted average number of common shares outstanding 80,601,074 80,061,842 80,478,707 80,041,663
Assuming exercise of stock options reduced by the
number of shares which could have been
purchased with the proceeds from exercise of such
options 558,404 - 537,564 -
Assuming conversion of 6% convertible debentures 4,848,485 - 4,848,485 -
---------- ---------- ---------- ----------
Weighted average number of common shares outstanding,
as adjusted 86,007,963 80,061,842 85,864,756 80,041,663
========== ========== ========== ==========
Primary earnings (loss) per common share $ 0.01 $ (0.03) $ 0.03 $ (0.07)
========== ========== ========== ==========
FULLY DILUTED EARNINGS PER SHARE (1)
Earnings
Net income (loss) $ 3,084 $ (2,589) $ 5,932 $ (5,754)
========== ========== ========== ==========
Shares
Weighted average number of common
shares outstanding 80,601,074 80,061,842 80,478,707 80,041,663
Assuming conversion of 6% convertible debentures 4,848,485 4,848,485 4,848,485 4,848,485
Assuming exercise of stock options reduced by the
number of shares which could have been
purchased with the proceeds from exercise of
such options 569,460 143,530 556,123 261,055
Assuming conversion of preferred stock 10,952,600 5,656,837 10,952,600 2,844,045
---------- ---------- ---------- ----------
Weighted average number of common shares
outstanding, as adjusted 96,971,619 90,710,694 96,835,915 87,995,248
========== ========== ========== ==========
Net income (loss) per common share assuming full dilution $ 0.03 $ (0.03) $ 0.06 $ (0.07)
========== ========== ========== ==========
ADDITIONAL PRIMARY COMPUTATION (1)
Net income (loss) applicable to common stock, as adjusted per
primary computation above $ (2,589) $ (5,754)
========== ==========
Additional adjustment to weighted average number of shares
outstanding:
Weighted average number of shares outstanding,
as adjusted per primary computation above 80,061,842 80,041,663
Anti-dilutive effect of outstanding options (as
determined by the application of the treasury stock 27,097 52,474
method)
Anti-dilutive effect of conversion of 6%
convertible debentures 4,848,485 4,848,485
---------- ----------
Weighted average number of common shares, as adjusted 84,937,424 84,942,622
---------- ----------
Primary loss per share, as adjusted $ (0.03) $ (0.07)
========== ==========
</TABLE>
(1) These calculations are submitted in accordance with Regulation S-K Item
601(b)(11) although it is contrary to paragraphs 30 and 40 of APB
Opinion No. 15 because it produces an anti-dilutive result.
<PAGE> 1
Exhibit 12
BATTLE MOUNTAIN GOLD COMPANY
COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES AND EARNINGS TO COMBINED
FIXED CHARGES AND PREFERRED DIVIDENDS
(in thousands except ratios)
<TABLE>
<CAPTION>
Six months Ended
June 30,
1994 1993
-------- -------
<S> <C> <C>
EARNINGS COMPUTATION USING
CONSOLIDATED INCOME STATEMENT DATA
Income (loss) before income taxes and
minority interest $ 10,805 $ (10,192)
Minority interest in income of
majority-owned subsidiaries (2,620) (1,684)
--------- ---------
Income (loss) before income taxes 8,185 (11,876)
--------- ---------
Add fixed charges included in income (loss):
Interest expense 4,738 4,134
Amortization of deferred financing costs 97 956
Interest portion of rental expenses (33%) 1,234 486
--------- ---------
Sub-total fixed charges included in income (loss) 6,069 5,576
--------- ---------
Earnings (loss) $ 14,254 $ (6,300)
========= =========
Fixed Charges
Included in income (loss) $ 6,069 $ 5,576
Capitalized interest 2,975 3,180
--------- ---------
Total fixed charges 9,044 8,756
--------- ---------
Preferred dividends 5,158 -
--------- ---------
Combined fixed charges and
preferred dividends $ 14,202 $ 8,756
========= =========
Ratio of earnings to fixed charges 1.58 -
Amount by which fixed charges exceed earnings - $ 15,056
Ratio of earnings to combined fixed charges
and preferred dividends 1.00 -
Amount by which combined fixed charges and
preferred dividends exceed earnings - $ 15,056
</TABLE>
