<PAGE>
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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 MARCH 31, 1995
[ ] TRANSITION REPORT PURSUANT TO SECTIONS 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 THE REGISTRANT AS SPECIFIED IN ITS CHARTER)
NEVADA 76-0151431
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
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, May 10, 1995: 81,002,055
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<PAGE>
BATTLE MOUNTAIN GOLD COMPANY
INDEX
PAGE
----
Part I. Financial Information
Condensed Consolidated Balance Sheet at
March 31, 1995, and December 31, 1994 1
Condensed Consolidated Statement of Income
for the three months ended March 31, 1995 and 1994 2
Condensed Consolidated Statement of Cash Flows
for the three months ended March 31, 1995 and 1994 3
Notes to Condensed Consolidated Financial Statements 4
Statistical Information 5
Management's Discussion and Analysis of Financial Condition
and Results of Operations 7
Part II. Other Information 13
<PAGE>
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
BATTLE MOUNTAIN GOLD COMPANY
CONDENSED CONSOLIDATED BALANCE SHEET
(UNAUDITED)
(in thousands)
<TABLE>
<CAPTION>
March 31, December 31,
1995 1994
--------- ------------
<S> <C> <C>
ASSETS
Current assets
Cash and cash equivalents $ 53,238 $ 76,464
Accounts receivable 26,680 22,810
Inventories 13,193 5,048
Materials and supplies, at average cost 26,878 27,730
Other current assets 7,404 7,014
--------- --------
TOTAL CURRENT ASSETS 127,393 139,066
Investments 45,018 43,405
Net property, plant and equipment 490,722 491,401
Other assets 5,693 5,897
--------- --------
TOTAL ASSETS $ 668,826 $ 679,769
--------- --------
--------- --------
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities
Current maturities of long-term debt $ 13,525 $ 13,427
Accounts payable 11,732 14,527
Payroll and related benefits accrued 3,685 4,226
Accrued interest 3,289 6,714
Other current liabilities 3,068 3,425
--------- --------
TOTAL CURRENT LIABILITIES 35,299 42,319
Long-term debt 165,602 165,602
Other liabilities 31,271 32,043
--------- --------
TOTAL LIABILITIES 232,172 239,964
Minority interest 63,438 64,171
Shareholders' equity 373,216 375,634
--------- --------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $ 668,826 $ 679,769
--------- --------
--------- --------
</TABLE>
The accompanying notes are an integral part of these financial statements.
1
<PAGE>
BATTLE MOUNTAIN GOLD COMPANY
CONDENSED CONSOLIDATED STATEMENT OF INCOME
(UNAUDITED)
(in thousands, except per share data)
<TABLE>
<CAPTION>
Three Months Ended
March 31,
----------------------
1995 1994
-------- --------
<S> <C> <C>
GROSS REVENUE $ 56,120 $ 52,778
Less: Freight, allowances and royalties 2,038 1,861
-------- --------
NET SALES 54,082 50,917
-------- --------
COSTS AND EXPENSES
Mining costs 8,966 6,936
Milling and other plant costs 22,845 18,957
Depreciation, depletion and amortization 12,358 11,703
Exploration, evaluation and other lease costs 3,222 2,651
General and administrative expenses 2,709 2,892
Taxes, other than income 562 596
-------- --------
Total 50,662 43,735
-------- --------
OPERATING INCOME 3,420 7,182
Interest income 947 1,416
Interest expense (1,711) (2,298)
Other income, net 650 69
-------- --------
INCOME BEFORE INCOME TAXES AND
MINORITY INTEREST
3,306 6,369
Income tax expense 261 2,029
Minority interest (563) (1,492)
-------- --------
NET INCOME 2,482 2,848
Preferred dividends 1,869 1,869
-------- --------
NET INCOME TO COMMON SHARES $ 613 $ 979
-------- --------
-------- --------
INCOME PER COMMON SHARE $ .01 $ .01
-------- --------
-------- --------
DIVIDENDS PER COMMON SHARE $ .025 $ .025
-------- --------
-------- --------
AVERAGE COMMON SHARES OUTSTANDING
FOR INCOME PER SHARE PURPOSES 86,294 85,693
</TABLE>
The accompanying notes are an integral part of these financial statements.
2
<PAGE>
BATTLE MOUNTAIN GOLD COMPANY
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
(UNAUDITED)
(in thousands)
<TABLE>
<CAPTION>
Three Months Ended
March 31,
----------------------
1995 1994
-------- --------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
NET INCOME $ 2,482 $ 2,848
Adjustments to reconcile net income to cash flows from
operating activities:
Depreciation, depletion and amortization 12,358 11,703
Exploration and evaluation costs 3,058 1,683
Deferred taxes (316) -
Change in current assets and liabilities (10,740) 1,827
Other net change 125 268
-------- --------
Total Adjustments 4,485 15,481
-------- --------
NET CASH FLOWS FROM OPERATING ACTIVITIES 6,967 18,329
-------- --------
CASH FLOWS FROM INVESTING ACTIVITIES:
Investment in Crown Jewel project (1,372) (1,338)
Capital expenditures (21,268) (21,994)
Exploration and evaluation expenditures (2,949) (1,683)
Other, net (192) (1,453)
-------- --------
NET CASH FLOWS USED IN INVESTING ACTIVITIES (25,781) (26,468)
-------- --------
CASH FLOWS FROM FINANCING ACTIVITIES:
Cash dividend payments (3,892) (3,877)
Other, net (103) 219
-------- --------
NET CASH FLOWS USED IN FINANCING ACTIVITIES (3,995) (3,658)
-------- --------
EFFECT OF EXCHANGE RATE CHANGES (417) 120
-------- --------
NET DECREASE IN CASH AND CASH EQUIVALENTS (23,226) (11,677)
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 76,464 115,338
-------- --------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 53,238 $103,661
-------- --------
-------- --------
</TABLE>
The accompanying notes are an integral part of these financial statements.
3
<PAGE>
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 the 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, 1994.
Note 2. Income Per Common Share
For the three months ended March 31, 1995, income 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. 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.
4
<PAGE>
PART I. FINANCIAL INFORMATION - Continued
STATISTICAL INFORMATION (UNAUDITED)
<TABLE>
<CAPTION>
Three months ended
March 31,
----------------------
1995 1994
-------- --------
<S> <C> <C>
BATTLE MOUNTAIN COMPLEX Operating Data
Production statistics
Gold recovered (000s oz) 17 12
Silver recovered (000s oz) 42 24
- -------------------------------------------------------------------------------
Cost Per Equivalent Gold Ounce (1)
Cash production costs $334 $222
Taxes, other than income 12 16
DD&A 62 158
---- ----
Total operating costs $408 $396
- -------------------------------------------------------------------------------
SAN LUIS Operating Data
Production statistics
Gold Recovered (000s oz) 17 20
Silver Recovered (000s oz) 6 5
- -------------------------------------------------------------------------------
Cost Per Equivalent Gold Ounce (1)
Cash production costs $250 $223
Taxes, other than income 7 10
DD&A 96 64
---- ----
Total operating costs $353 $297
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PAJINGO Operating Data
Production statistics
Gold recovered (000s oz) 8 7
Silver recovered (000s oz) 18 26
- -------------------------------------------------------------------------------
Cost Per Equivalent Gold Ounce (1)
Cash production costs $110 $220
Taxes, other than income 2 2
DD&A 54 40
---- ----
Total operating costs $166 $262
- -------------------------------------------------------------------------------
KORI KOLLO Operating Data
Production statistics
Gold recovered BMG share (000s oz) (2) 71 66
Silver recovered BMG share (000s oz) (2) 302 366
Gold recovered (000s oz) 81 77
Silver recovered (000s oz) 343 425
- -------------------------------------------------------------------------------
Cost Per Equivalent Gold Ounce (1)
Cash production costs $157 $154
Taxes, other than income - -
DD&A 93 90
---- ----
Total operating costs $250 $244
- -------------------------------------------------------------------------------
</TABLE>
See Page 6 for footnotes
5
<PAGE>
PART I. FINANCIAL INFORMATION - Continued
STATISTICAL INFORMATION (UNAUDITED)
<TABLE>
<CAPTION>
Three months ended
March 31,
----------------------
1995 1994
-------- --------
<S> <C> <C>
SAN CRISTOBAL Operating Data
Production statistics
Gold recovered BMG share (000s oz)(3) 9 8
Silver recovered BMG share (000s oz)(3) 21 18
Gold recovered (000s oz) 18 14
Silver recovered (000s oz) 41 34
- -------------------------------------------------------------------------------
Cost Per Equivalent Gold Ounce (1)
Cash production costs $301 $347
Taxes, other than income - -
DD&A 81 67
---- ----
Total operating costs $382 $414
- -------------------------------------------------------------------------------
RED DOME Operating Data
Production statistics
Gold recovered BMG share (000s oz)(3) 11 4
Silver recovered BMG share(000s oz)(3) 76 15
Gold recovered (000s oz) 21 7
Silver recovered (000s oz) 146 28
Copper recovered (000s lbs) 2,542 2,566
- -------------------------------------------------------------------------------
Cost Per Equivalent Gold Ounce (1)
Cash production costs $317 $281
Taxes, other than income - -
DD&A 14 3
---- ----
Total operating costs $331 $284
- -------------------------------------------------------------------------------
AGGREGATE DATA
Gold recovered BMG share (000s oz) 133 117
Gold sales BMG share (000s oz) 124 112
Gold recovered (000s oz) 162 137
Gold sales (000s oz) 142 130
Average price per oz realized $382 $385
- -------------------------------------------------------------------------------
Silver recovered BMG share (000s oz) 465 454
Silver sales BMG share (000s oz) 388 441
Silver recovered (000s oz) 596 542
Silver sales (000s oz) 453 518
Average price per oz realized $4.83 $5.30
- -------------------------------------------------------------------------------
Weighted Average Cost Per Equivalent Gold Ounce (1)
Cash production costs $210 $196
Taxes, other than income 3 3
DD&A 79 84
---- ----
Total operating costs $292 $283
- -------------------------------------------------------------------------------
<FN>
(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 52.6 percent equity interest for January through June
1994 and a 51.4 percent equity interest thereafter.
</TABLE>
6
<PAGE>
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
year 1994 (1994 Form 10-K) and the historical condensed consolidated financial
statements and notes thereto preceding this discussion.
LIQUIDITY AND CAPITAL RESOURCES
Summary
At March 31, 1995, the Company had cash and cash equivalents of $53.2
million, of which $9.1 million was held by BMG, $31.5 million was held by
Niugini Mining and $12.6 million was held by Inti Raymi.
Operating Activities
The Company generated cash flow of $7.0 million from operating
activities during the three months ended March 31, 1995, compared with cash flow
from operations of $18.3 million for the three months ended March 31, 1994.
The decrease in cash flows from operations resulted primarily from the
payment of approximately $4.2 million of recoverable value added taxes to the
Bolivian government in connection with the construction of the recovery
enhancement and tailings treatment facilities at the Kori Kollo mine during the
first quarter of 1995. An increase in product inventories of $5.3 million also
contributed to the decrease in cash flow from operations. The increase in
product inventories is primarily attributable to the accumulating of gold,
silver and copper concentrates from the Red Dome mine in Australia. Since this
product is processed outside Australia, the Company realizes significant savings
in transportation costs by shipping this product in large quantities.
Investing Activities
The Company used cash of $22.6 million, including $1.4 million for the
Crown Jewel project, for capital expenditures during the three months ended
March 31, 1995. A total of $100.7 million is projected to be expended in 1995
on capital expenditures. The Company expects to spend $67.3 million for the
Lihir project, including the acquisition by Niugini Mining of an additional
interest in the Lihir joint venture. The Lihir expenditures are expected to be
funded from Niugini Mining's working capital, other available borrowing
facilities and from bridge financing obtained in connection with Niugini
Mining's recently announced bonus issue of options (see "Financing Activities"
below).
During the three months ended March 31, 1995, the Company spent
approximately $2.9 million on exploration and evaluation. The Company currently
estimates that it will spend approximately $14.5 million on its 1995 exploration
programs.
PHOENIX PROJECT - BMG is seeking to develop the Phoenix project at the
Battle Mountain Complex in Nevada. The development of the Phoenix project is
subject to obtaining requisite permits and approvals. Project costs are
estimated at approximately $85 million of which $3.0 million has been spent
through March 31, 1995. The reserves are estimated to be approximately 1.5
million contained ounces of gold and 8.8 million contained ounces of silver.
CROWN JEWEL PROJECT - BMG is continuing to seek permits for the Crown
Jewel project in Washington state.
7
<PAGE>
To earn a 54 percent ownership interest in the Crown Jewel project, BMG
will have to fund all expenditures for exploration, evaluation and development
of the project through commencement of commercial production. 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 $108 million, of which, as of
March 31, 1995, $49.5 million ($41.0 million of which has been capitalized) has
been incurred.
On April 17, 1995, BMG proposed a merger with Crown Resources
Corporation ("Crown"), BMG's joint venture partner at the Crown Jewel project
(See "Financing Activities" below).
LIHIR PROJECT - BMG holds an interest in the Lihir project through its
51.4 percent ownership of Niugini Mining. Niugini Mining's ownership interest
in the Lihir project is in a state of transition as explained below. Niugini
Mining's ownership interest is subject to a joint venture agreement with a
subsidiary of RTZ Corporation plc ("RTZ") and Mineral Resources Lihir Pty. Ltd.,
a wholly-owned entity of the PNG government.
On March 17, 1995, the Special Mining Lease (the "SML") for the Lihir
project was executed by the PNG government and final landowner agreements were
executed on April 26, 1995. The SML provides Niugini Mining, RTZ and the PNG
government, as joint venture partners, the right to develop and operate the
Lihir gold project. The Lihir Island landowners executed agreements with the
Lihir joint venture providing for the landowners' ongoing compensation, social
well-being from development of the mine and eventual participation in the
project.
Niugini Mining is expected to acquire an additional 16 percent of the
Lihir joint venture for $48 million, within 30 days of the April 26, 1995,
signing of the landowner agreements. In connection with the execution of the
SML, the PNG government acquired a 30 percent joint venture interest, pro rata
from RTZ and Niugini Mining. Following the acquisition of the interest by the
government and consummation of Niugini Mining's purchase of the additional
interest from RTZ, Niugini Mining will have a 30 percent interest in the project
and a subsidiary of RTZ will retain a 40 percent interest.
Niugini Mining, RTZ and the PNG government have executed other
agreements which will govern the ownership of the project and provide the legal
and financial framework for the development and operation of the Lihir mine.
The parties have formed a new company named Lihir Gold Limited ("LGL") for the
ownership and development of the Lihir project. Initially, the new company will
be owned 30 percent by Niugini Mining, 40 percent by a subsidiary of RTZ and 30
percent by the PNG government. Related to this restructuring, the carried
interest arrangement between Niugini Mining and RTZ has been terminated with no
further rights or obligations continuing to either party. The project is
expected to be partially funded through an initial public offering of LGL common
stock. Niugini Mining's interest in LGL will thereby be proportionately reduced
depending on the portion of the company which is sold. Additional funding
required for the project is expected to be provided in the form of debt
financing by LGL.
As of March 31, 1995, the carrying value of the Company's investment in
the Lihir project was approximately $143 million.
Financing Activities
On May 3, 1995, Niugini Mining announced a bonus issue of options under
which its shareholders will receive one option for each four shares of Niugini
Mining stock held as of May 29, 1995. The options expire on December 8, 1995,
and each option allows the holder to purchase one share of Niugini Mining stock
for A$2.00. Upon exercise of all the options, Niugini Mining is expected to
sell approximately 23 million shares of Niugini Mining stock for aggregate
proceeds of approximately A$46 million. Niugini Mining has also entered into an
underwriting agreement under which the underwriter is committed to purchase any
shares issuable upon exercise of options that are not exercised prior to their
expiration. Niugini Mining has agreed to a bridge financing facility of US$30
million which it expects to draw down shortly to enable completion of the
8
<PAGE>
purchase of an additional interest in the Lihir joint venture (see "Investing
Activities"). The bridge financing is secured by the proceeds of the exercise
of the options and by Niugini Mining's rights under the underwriting agreement.
BMG has agreed to sub-underwrite the exercise of its options.
BMG amended its committed revolving credit agreement to accommodate the
above Niugini Mining bridge financing. BMG is also discussing the replacement
of the committed revolving credit agreement as the existing agreement expires in
December 1996 and has a remaining availability of $66 million.
On April 17, 1995, BMG proposed to Crown a merger in which Crown
shareholders would receive .4375 BMG shares for each of Crown's 13.2 million
outstanding shares. On April 26, 1995, Crown rejected the proposal. BMG's
proposal expired on May 2, 1995.
In May 1995, BMG received $3.1 million in dividends from Inti Raymi, net
of applicable Bolivian withholding taxes. Further dividends are expected from
Inti Raymi as earnings and cash are available.
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, depository shares, common
shares and warrants, which BMG may elect to offer from time to time and in any
combination. BMG currently has no plans for the issuance of any securities
under this registration statement.
Conclusion
The Company expects the cash on hand, along with cash flows from
operations and financing facilities currently in place, to be adequate to meet
its cash needs at least through the end of 1995. 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.
Government Regulation
All of the Company's mining and processing operations are subject to
reclamation requirements, as more fully described in the Management's Discussion
and Analysis of Financial Condition and Results of Operations in the 1994 Form
10-K.
Legislative amendment or replacement of the General Mining Law, under
which the Company holds claims on public lands, could take place in 1995. Such
legislation could result in new environmental standards, additional reclamation
requirements and new procedural steps which could result in delays and
additional expenditures for all phases of mining activity. Such legislation
could also impose a royalty. Approximately 40 percent of the Reona reserves, 23
percent of Phoenix project reserves and 80 percent of the Crown Jewel ore body
are on public lands and could be subject to a royalty. These projects, as well
as reclamation and closure activities at the Battle Mountain Complex, could be
subject to additional permitting and environmental requirements. The Company
has applied for mineral surveys for the claims constituting the unpatented
portion of the Reona reserves. The Company has applied for patents covering the
unpatented portion of the Crown Jewel ore body but has not yet received the
"first half" of the final certificate. The extent to which existing law might
change is not yet known. The Company cannot yet predict the impact of any such
change on its U.S. activities. However, the passage of legislation that can be
reasonably anticipated is not expected to render uneconomic any of the Company's
existing operating mines or development projects, assuming current gold prices.
In Bolivia, new environmental regulations are being developed to
implement federal legislation passed in 1992. Various versions of the proposed
regulations are currently being reviewed by several governmental agencies and
final regulations are expected by mid-1995. The new regulations will generally
require the preparation of environmental impact studies, set air and water
discharge standards and provide protocols for dealing with hazardous substances.
Such regulations could result in new environmental standards and requirements
for the Company's Kori Kollo project which, in turn, could require additional
9
<PAGE>
expenditures and changes in operations. At this time, the Company is not able
to determine the impact of these anticipated regulations, but does not expect
that such regulations will have a material adverse effect on the Company's
financial condition or results of operations.
Forward Sales and Hedging
The Company has only limited involvement with derivative financial
instruments and does not use them for trading purposes. Such instruments are
used to manage defined interest rate and commodity price risks and could be used
to manage foreign currency exchange rate risks.
Interest rate cap agreements are used to reduce the potential impact of
increases in interest rates on floating-rate long-term debt. At March 31, 1995,
Inti Raymi was party to three interest rate cap agreements, each with a three
year term. Currently, Inti Raymi has hedged approximately 50 percent of its net
interest rate exposure related to the Kori Kollo project financing. The hedge
increases to 100 percent of its exposure by June 1996. Inti Raymi has not
hedged any of its exposure subsequent to December 1997. The net unamortized
cost of the premiums paid for these caps, amounting to $600,000 at March 31,
1995, has been included in other assets. These agreements were effective June
1, 1994. Since that date $100,000 has been amortized and approximately $53,000
has been received.
The Company uses forward sales contracts and put options to hedge
anticipated sales of gold, silver and copper. The following table summarizes
the Company's contracts at March 31, 1995:
<TABLE>
<CAPTION>
Average Forward
Sales Price
Per Unit Period
---------------- ---------------
<S> <C> <C> <C>
BMG
Gold 145,000 oz. US$386 Apr 95 - Feb 96
Niugini Mining
Gold 16,000 oz. US$386 Apr 95
155,000 oz. A$513 Apr 95
Silver 133,000 oz. US$5.74 Apr 95
Copper 1,650 tonnes US$2,863 Jul 95
Inti Raymi
Gold 98,500 oz. US$383 Apr 95 - Aug 95
</TABLE>
Deferred costs associated with the Inti Raymi sales contracts amounted
to $1.5 million at March 31, 1995. In April 1995, Inti Raymi purchased put
options covering 126,000 ounces of gold for $700,000. These options have a
strike price of $385 per ounce of gold and expire at the rate of 10,500 ounces
of gold per month from May 1995 to April 1996.
The aggregate amount by which the net market value of the Company's open
forward sales contracts is less than the spot price of $391 per ounce of gold,
$5.16 per ounce of silver and $2,920 per tonne of copper, as of March 31, 1995,
before consideration of the deferred costs referred to above, is $4.0 million,
of which $1.3 million is attributable to minority interests. Australian dollar
contracts were converted to U.S. dollars at the March 1995 month end exchange
rate of US$.73 to A$1.
In future periods, the Company may continue to employ selective hedging
strategies.
10
<PAGE>
Foreign Operations
The Company's identifiable assets attributable to foreign operations as
of March 31, 1995, were approximately $568 million and foreign mining operations
represented approximately 77 percent of the total gross revenues of the Company
for the three months ended March 31, 1995. 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.
RESULTS OF OPERATIONS
The following table presents certain results of operations data on a per
equivalent ounce of gold sold basis:
<TABLE>
<CAPTION>
Three months Ended
March 31,
------------------------
1995 1994
-------- --------
<S> <C> <C>
Gross revenue $ 380 $ 383
Freight, allowances and royalties $ 14 $ 14
Mining, milling and other plant costs $ 214 $ 188
Depreciation, depletion and amortization $ 84 $ 85
</TABLE>
Gross Revenue
Gross revenue increased for the three months ended March 31, 1995,
compared with the same period of 1994 because of increased sales volumes from
most of the Company's mines. Production and sales volumes increased primarily
because of the Reona heap leach operation and higher ore grades at the Kori
Kollo, San Cristobal and Pajingo mines. Upgrading and fine tuning of the
crushing facilities at the San Cristobal mine also contributed to the increased
sales volumes. The average realized sales price of gold decreased slightly to
$382 per ounce compared with $385 per ounce in 1994 slightly offsetting the
increase in sales volumes.
Selling and Operating Costs
Mining, milling and other plant costs increased on a total and per
equivalent ounce of gold sold basis for the three month period ended March 31,
1995, compared with the same period of 1994. Total costs increased because of
increased sales volumes. These costs increased on a per equivalent ounce of
gold sold basis because of production coming from the higher cost Reona heap
leach operation and increased costs at the Kori Kollo mine. Production costs
increased at the Kori Kollo mine because of a higher stripping ratio and lower
recoveries compared with the first quarter of 1994.
The increase in depreciation, depletion and amortization, in total for
the three months ended March 31, 1995, when compared with the same period of
1994, resulted primarily from increased sales volumes.
Other
Interest income decreased for the three months ended March 31, 1995
compared with the first quarter of 1994 because of a lower level of investable
cash.
Interest expense decreased for the three months as a result of a
reduced level of debt.
The Company's effective income tax rate is 9.5 percent for 1995, as
compared with an effective income tax rate of 42 percent in 1994. The
effective income tax rate for 1995 has been affected by the
11
<PAGE>
recognition of deferred tax assets related to foreign tax credits. The Company
previously treated foreign taxes paid as deductions for U.S. income tax
purposes, however, the Company has determined that it is more likely than not
that it will be able to utilize foreign tax credits for foreign taxes because of
Inti Raymi's projected net income and its ability to remit earnings in the form
of dividends to BMG.
12
<PAGE>
PART II. OTHER INFORMATION
ITEM 4. SUBMISSION OF MATTER TO A VOTE OF SECURITY HOLDERS
(a) Annual Meeting of Shareholders
April 27, 1995
<TABLE>
<CAPTION>
Broker
(c) Proposals For Against Withheld Abstain Nonvotes
--------- --- ------- -------- ------- --------
<S> <C> <C> <C> <C> <C>
Election of Directors
Jack R. Crosby 67,158,925 * 412,297 * -
Ted H. Pate 67,152,907 * 418,315 * -
William A. Wise 67,165,918 * 405,304 * -
Ratification of
Appointment of Price
Waterhouse LLP as
Independent Public
Accountants 67,090,001 231,178 * 250,043 -
<FN>
*Not Applicable
</TABLE>
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
4(a) Amendment to Investment Agreement and Waiver,
effective as of December 31, 1994, between Empresa
Minera Inti Raymi S.A. and International Finance
Corporation
4(b) Amendment to Loan Agreement, effective as of December
31, 1994, between Empresa Minera Inti Raymi S.A. and
Corporacion Andina de Fomento (English translation)
4(c) Letter Agreement dated December 31, 1994, among
Overseas Private Investment Corporation, Battle
Mountain Gold Company, Kori Kollo Corporation and
Zeland Mines, S.A.
11 Computation of Earnings per Share
12 Computation of Ratio of Earnings to Fixed Charges and
Earnings to Combined Fixed Charges and Preferred
Dividends
27 Financial Data Schedule for the three month period
ended March 31, 1995
(b) Form 8-K dated January 15, 1995
Form 8-K/A dated March 28, 1995
13
<PAGE>
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: May 12, 1995 /s/ R. Dennis O'Connell
--------------------------------------------
R. Dennis O'Connell, Vice President-
Finance and Chief Financial Officer
(Principal Financial and Chief
Accounting Officer)
14
<PAGE>
INDEX OF EXHIBITS
EXHIBIT NO. DOCUMENT
- ----------- --------
4(a) Amendment to Investment Agreement and Waiver, effective as of
December 31, 1994, between Empresa Minera Inti Raymi S.A. and
International Finance Corporation
4(b) Amendment to Loan Agreement, effective as of December 31, 1994,
between Empresa Minera Inti Raymi S.A. and Corporacion Andina de
Fomento (English translation)
4(c) Letter Agreement dated December 31, 1994, among Overseas Private
Investment Corporation, Battle Mountain Gold Company, Kori Kollo
Corporation and Zeland Mines, S.A.
11 Computation of Earnings per Share
12 Computation of Ratio of Earnings to Fixed Charges and Earnings to
Combined Fixed Charges and Preferred Dividends
27 Financial Data Schedule for the three months ended March 31, 1995
<PAGE>
[IFC LETTERHEAD]
March 9, 1995
Empresa Minera Inti Raymi S.A.
Calle Corneta Mamani 1989
La Paz
Bolivia
Dear Sirs,
We refer to your letter dated February 8, 1995 requesting certain
amendments to the Investment Agreement dated May 22, 1992 between the
International Finance Corporation (IFC) and Empresa Minera Inti Raymi S.A.
Terms used in this letter, unless otherwise stated, are as defined in the
Investment Agreement. IFC consents to the amendments which shall become
effective, as of December 31, 1994, upon the signature of all parties below
to evidence acceptance of this letter, as follows:
AMENDMENT I
The definition of "Senior Debt Service Coverage Ratio" as described in
Section 1.02 of the Investment Agreement is hereby amended to read, in
relevant part:
"SENIOR DEBT SERVICE COVERAGE RATIO" means the quotient obtained by
dividing (i) the aggregate of (A) the Internal Cash Generation for the
four Fiscal Quarters immediately preceding the relevant calculation and
(B) the Aggregate Interest payable during such four Fiscal Quarters
period by (ii) the aggregate of (A) the scheduled Principal Repayments
on Senior Loans payable during the four Fiscal Quarters immediately
following the relevant calculation and (B) the aggregate interest on
Senior Loans due on the following two Interest Payment Dates,
calculated at the interest rates applicable at the time of the
calculation;
AMENDMENT II
The definition of "Operating Current Ratio" as described in Section 1.02 of
the Investment Agreement is hereby amended to read, in relevant part:
"OPERATING CURRENT RATIO" means the result obtained by dividing Current
Assets by Current Liabilities;
<PAGE>
AMENDMENT III
Section 7.01(f) of the Investment Agreement is hereby amended to read as
follows:
(f) as soon as available but, in any event, within sixty (60) days
after the end of each calendar year, furnish to IFC a certificate in
form and substance satisfactory to IFC issued by a qualified
independent engineer acceptable to IFC describing the Company's Minable
Reserves as of the end of such calendar year.
AMENDMENT IV
Section 7.02(b)(i) of the Investment Agreement is hereby amended to read as
follows:
(i) the Operating Current Ratio would not be less than 1.2;
AMENDMENT V
Section 7.02(c) of the Investment Agreement is hereby amended to read as
follows:
(c) incur (after December 31, 1994) expenditures or commitments for
expenditures for fixed and other non-current assets, without prior
written approval from IFC, other than up to an aggregate of eight
million Dollars ($8,000,000) equivalent in any Fiscal Year;
No other consent, amendments or waivers of the Investment Agreement are
granted or agreed by this letter.
Yours sincerely,
/s/ M.A.K. Alizai
ACCEPTED AND AGREED:
Empresa Minera Inti Raymi S.A. Battle Mountain Gold Company
By: /s/ Alvaro Ugalde By: /s/ Kenneth R. Werneburg
------------------------ ------------------------
General Manager President
Kori Kollo Corporation Zeland Mines, S.A.
By: /s/ Kenneth R. Werneburg By: /s/ Beatriz Rocabado
------------------------ ------------------------
President
<PAGE>
[IFC LETTERHEAD]
March 3, 1995
Empresa Minera Inti Raymi S.A.
Calle Corneta Mamani 1989
La Paz
Bolivia
Dear Sirs,
We refer to your letter dated February 8, 1995, and your request for a
temporary waiver of Section 3.05(c) of the Investment Agreement dated May 22,
1992 between the International Finance Corporation (IFC) and Empresa Minera
Inti Raymi S.A. IFC consents to the request for a temporary waiver, as
follows:
IFC agrees to waive its option to require the Company to prepay
portions of the Senior Loans under Section 3.05(c) of the Investment
Agreement. This waiver will remain in effect until the earlier of (i)
the date on which the Company provides to IFC a certificate referred to
in Section 7.01(f) of the Investment Agreement showing that, based on
the Company's most recent forecast and the then outstanding balance
under the IFC Loan, the Company's Minable Reserves will not terminate
prior to three (3) years after the then last scheduled principal
installment on the IFC Loan or (ii) June 1, 1996.
No other consent, amendments or waivers of the Investment Agreement are
granted or agreed by this letter.
Yours sincerely,
/s/ M.A.K. Alizai
<PAGE>
[Empresa Minera Inti Raymi S.A. Letterhead]
February 8, 1995
Corporacion Andina de Fomento
Attn: Jefe Division de Administracion y
Control de Prestamos
Apartado Postal 5086
Caracas, Venezuela
Ladies and Gentlemen:
With reference to the Loan Agreement dated June 29, 1992 between Corporacion
Andina de Fomento ("CAF") and Empresa Minera Inti Raymi S.A. ("Debtor"), the
following amendments are, as of December 31, 1994, agreed to by CAF and the
Debtor:
AMENDMENT I
Clause EIGHT c) of the Loan Agreement
Without the Corporacion's authorization, the Debtor may not incur or
assume any type of indebtedness other than as contemplated in the
financing plan for the project, with the exception of short-term loans not
to exceed US$5,000,000 (five million United States Dollars), provided that
the current ratio (defined as the ratio of Current Assets to Current
Liabilities) is not lower than 1.2.
AMENDMENT II
Clause EIGHT 3)ii) of the Loan Agreement
ii) the current ratio, as defined above, may not be lower than 41.2:1;
AMENDMENT III
Clause EIGHT a) of the Loan Agreement
a) Without the Corporacion's authorization, the Debtor may not acquire
fixed and/or other non-current assets in excess of a total amount
equivalent to US$28,000,000 (two Eight million United States Dollars)
during any one fiscal year.
<PAGE>
Such expenditures are to be substantiated by the Company by submitting,
annually in conjunction with its audited Financial Statements, a listing
of such expenditures in sufficient detail as to define the nature of any
expenditure comprising three percent (3%) or more of total such
expenditures for the Fiscal Year.
If the foregoing correctly sets forth our understanding and agreement, please
confirm your acceptance thereof by signing and returning to the Debtor an
executed counterpart of this Letter Agreement which, upon the Debtor's
receipt thereof, shall constitute an agreement between us effective and
legally binding as of its date.
Very truly yours,
ACKNOWLEDGED AND AGREED:
CORPORACION ANDINA DE FOMENTO EMPRESA MINERA INTI RAYMI S.A.
By: /s/ Hernan Escudero Martinez By: /s/ Alvaro Ugalde C.
---------------------------- --------------------------
Its: Representante Its: General Manager
<PAGE>
[OPIC LETTERHEAD]
December 31, 1994
BATTLE MOUNTAIN GOLD COMPANY
333 Clay Street, 42nd Floor
Houston, TX 77002
KORI KOLLO CORPORATION
333 Clay Street, 42nd Floor
Houston, TX 77002
ZELAND MINES, S.A.
Edificio #10
Calle Rivira Mendez
Panama 5
Republic de Panama
Ladies and Gentlemen:
With reference to the FIRST AMENDMENT TO FINANCE AGREEMENT AND LIMITED
WAIVER dated as of December 31, 1994, made by and among (i) EMPRESA MINERA
INTI RAYMI S.A., a SOCIEDAD ANONIMA organized under the law of Bolivia (the
"Company"), and (ii) OVERSEAS PRIVATE INVESTMENT CORPORATION, an agency of
the United State of America ("OPIC"), a copy of which is attached hereto as
Schedule A (the "Amendment"), this letter (the "Letter Agreement") confirms
the agreement, in consideration of OPIC's consent to certain requests by the
Company reflected in the Amendment, or the undersigned BATTLE MOUNTAIN GOLD
COMPANY, a corporation organized and existing under the laws of the State of
Nevada and having its principal place of business in Houston, Texas ("BMG"),
KORI KOLLO CORPORATION, a corporation organized and existing under the laws
of the State of Delaware and having its principal place of business in
Houston, Texas ("Kori Kollo"), and ZELAND MINES, S.A., a SOCIEDAD ANONIMA
organized and existing under the laws of Panama ("Zeland"), as follows:
1. Each of BMG, Kori Kollo and Zeland covenants and agrees that, if by
June 1, 1996, the Company has not provided to OPIC a Favorable Reserve
Certification (as defined in Section 2.01(b)of the Amendment), then,
June 15, 1996, each of BMG, Kori Kollo and Zeland shall pay to OPIC an
amount equal to the lesser of: (A) OPIC's proportionate share (such
proportionate share to be based on OPIC's share of the balances then
outstanding under the Senior Loans) of the aggregate amount of any
payment(s) such party shall have received from the Company during the
Waiver Period, whether as dividends or with respect to Sponsor
Subordinated Loans (collectively, "Waiver Period Payments"); and (B)
such party's proportionate ownership share (being 63.5% in the case of
<PAGE>
BMG, 24.5% in the case of Kori Kollo, and 12% in the case of Zeland) of
the Required Prepayment Amount (as defined in Section 3.01 of the
Amendment).
2. The obligations of BMG, Kori Kollo and Zeland under this Letter
Agreement are direct, absolute, unconditional, and irrevocable and
shall not to any extent or in any way be reduced, limited, terminated,
discharged, impaired, or otherwise affected by any action of the
Company. Each of BMG, Kori Kollo and Zeland hereby unconditionally
agrees that its payment obligations hereunder will not be discharged
except by payment in full of all amounts due from it. Any and all sums
payable by BMG, Kori Kollo and Zeland hereunder shall be paid in full,
free of any deductions or withholdings for any and all present and
future taxes.
3. This Letter Agreement shall be construed and enforced in accordance
with the laws of the State of New York of the United States of America
without regard to its conflict of laws provisions.
If the foregoing correctly sets forth out understanding and agreement,
please confirm your acceptance thereof by (i) signing and returning to OPIC
an executed counterpart of the Letter Agreement which, upon OPIC's receipt
thereof, shall constitute an agreement between us effective and legally
binding as of its date.
Very truly yours,
OVERSEAS PRIVATE INVESTMENT CORPORATION
By: /s/ Robert O. Draggon
--------------------------
Its: Vice President for Finance
--------------------------
ACKNOWLEDGED AND AGREED
- -----------------------
BATTLE MOUNTAIN GOLD COMPANY KORI KOLLO CORPORATION
By: /s/ Kenneth R. Werneburg By: /s/ Kenneth R. Werneburg
------------------------- -------------------------
Its: President Its: President
ZELAND MINES, S.A.
By: /s/ Beatriz Rocabado
-------------------------
Its:
-------------------------
<PAGE>
Exhibit 11
BATTLE MOUNTAIN GOLD COMPANY
COMPUTATION OF EARNINGS PER COMMON SHARE
(in thousands, except share and per share amounts)
<TABLE>
<CAPTION>
Three months ended
March 31,
----------------------------
1995 1994
----------- -----------
<S> <C> <C>
PRIMARY EARNINGS PER SHARE
Earnings
Net income $ 2,482 $ 2,848
Deduct dividends on preferred shares 1,869 1,869
----------- -----------
Net income applicable to common stock $ 613 $ 979
----------- -----------
----------- -----------
Shares
Weighted average number of common shares outstanding 80,946,628 80,326,139
Assuming exercise of stock options reduced by the number of shares
which could have been purchased with the proceeds from exercise
of such options 498,481 517,930
Assuming conversion of 6% convertible debentures 4,848,485 4,848,485
----------- -----------
Weighted average number of common shares outstanding,
as adjusted 86,293,594 85,692,554
----------- -----------
----------- -----------
Primary earnings per common share $ .01 $ .01
----------- -----------
----------- -----------
FULLY DILUTED EARNINGS PER SHARE (1)
Earnings
Net income $ 2,482 $ 2,848
----------- -----------
----------- -----------
Shares
Weighted average number of common shares outstanding 80,946,628 80,326,139
Assuming conversion of 6% convertible debentures 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 543,759 550,551
Assuming conversion of preferred stock 10,952,600 10,952,600
----------- -----------
Weighted average number of common shares
outstanding, as adjusted 97,291,472 96,677,775
----------- -----------
----------- -----------
Net income per common share assuming full dilution $ .03 $ .03
----------- -----------
----------- -----------
<FN>
(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.
</TABLE>
<PAGE>
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>
Three months Ended
March 31,
----------------------------
1995 1994
----------- -----------
<S> <C> <C>
EARNINGS COMPUTATION USING
CONSOLIDATED INCOME STATEMENT DATA
Income before income taxes and minority interest $ 3,306 $ 6,369
Minority interest in income of majority-owned subsidiaries (563) (1,492)
----------- -----------
Income before income taxes 2,743 4,877
----------- -----------
Add fixed charges included in income:
Interest expense 1,711 2,298
Amortization of deferred financing costs 49 49
Interest portion of rental expenses (33%) 197 841
----------- -----------
Sub-total fixed charges included in income 1,957 3,188
----------- -----------
Income $ 4,700 $ 8,065
----------- -----------
----------- -----------
Fixed Charges
Included in income $ 1,957 $ 3,188
Capitalized interest 1,831 1,479
----------- -----------
Total fixed charges 3,788 4,667
----------- -----------
Preferred dividends 2,066 3,201
----------- -----------
Combined fixed charges and preferred dividends $ 5,854 $ 7,868
----------- -----------
----------- -----------
Ratio of earnings to fixed charges 1.24 1.73
Amount by which fixed charges exceed earnings - -
Ratio of earnings to combined fixed charges
and preferred dividends - 1.03
Amount by which combined fixed charges and
preferred dividends exceed earnings $ 1,154 -
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from Battle
Mountain Gold Company's Condensed Consolidated Balance Sheet at March 31, 1995
and December 31, 1994 and Condensed Consolidated Statements of Income for the
three months ended March 31, 1995 and 1994, and is qualified in its entirety by
reference to such financial statements.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> MAR-31-1995
<CASH> 53,238
<SECURITIES> 0
<RECEIVABLES> 26,680
<ALLOWANCES> 0
<INVENTORY> 13,193
<CURRENT-ASSETS> 127,393
<PP&E> 749,036
<DEPRECIATION> (258,314)
<TOTAL-ASSETS> 668,826
<CURRENT-LIABILITIES> 35,299
<BONDS> 0
<COMMON> 8,096
0
110,578
<OTHER-SE> 254,542
<TOTAL-LIABILITY-AND-EQUITY> 668,826
<SALES> 54,082
<TOTAL-REVENUES> 54,082
<CGS> 31,811
<TOTAL-COSTS> 50,662
<OTHER-EXPENSES> 650
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 1,711
<INCOME-PRETAX> 3,306
<INCOME-TAX> 261
<INCOME-CONTINUING> 2,482
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 2,482
<EPS-PRIMARY> .01
<EPS-DILUTED> 0
</TABLE>
