<PAGE>
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 SEPTEMBER 30, 1995
[ ] 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 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, November 8, 1995: 81,092,148
<PAGE>
BATTLE MOUNTAIN GOLD COMPANY
INDEX
<TABLE>
<CAPTION>
Page
----
<S> <C> <C>
Part I. Financial Information
Condensed Consolidated Balance Sheet at
September 30, 1995 and December 31, 1994 1
Condensed Consolidated Statement of Income
for the three and nine months ended September 30, 1995 and 1994 2
Condensed Consolidated Statement of Cash Flows
for the nine months ended September 30, 1995 and 1994 3
Notes to Condensed Consolidated Financial Statements 4
Statistical Information 6
Management's Discussion and Analysis of Financial Condition and Results
of Operations 8
Part II. Other Information 16
</TABLE>
<PAGE>
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
BATTLE MOUNTAIN GOLD COMPANY
CONDENSED CONSOLIDATED BALANCE SHEET
(UNAUDITED)
(in thousands)
<TABLE>
<CAPTION>
September 30, December 31,
1995 1994
------------- ------------
<S> <C> <C>
ASSETS
Current assets
Cash and cash equivalents $ 32,897 $ 76,464
Accounts and notes receivable 28,023 22,810
Inventories 13,047 5,048
Materials and supplies, at average
cost 26,309 27,730
Other current assets 18,961 13,580
-------- --------
Total Current Assets 119,237 145,632
Investments 48,222 43,405
Net property, plant and equipment 530,619 484,835
Other assets 5,787 5,897
-------- --------
TOTAL ASSETS $703,865 $679,769
======== ========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities
Short term borrowings $ 31,874 $ -
Current maturities of long-term debt 13,428 13,427
Accounts payable 10,663 14,527
Accrued payroll and related benefits 5,502 4,226
Accrued interest 6,195 6,714
Other current liabilities 3,314 3,425
-------- --------
Total Current Liabilities 70,976 42,319
Long-term debt 158,832 165,602
Other liabilities 29,472 32,043
-------- --------
Total Liabilities 259,280 239,964
Minority interest 66,573 64,171
Shareholders' equity 378,012 375,634
-------- --------
TOTAL LIABILITIES AND SHAREHOLDERS'
EQUITY $703,865 $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 Nine Months ended
September 30, September 30,
-------------------- --------------------
1995 1994 1995 1994
--------- --------- --------- ---------
<S> <C> <C> <C> <C>
GROSS REVENUE $67,990 $59,810 $210,483 $172,768
Less: Freight, allowances and royalties 2,505 3,983 9,653 8,988
------- ------- -------- --------
NET SALES 65,485 55,827 200,830 163,780
------- ------- -------- --------
Mining costs 9,888 3,121 30,342 20,768
Milling and other plant costs 26,647 30,502 82,950 70,731
Depreciation, depletion and
amortization 16,608 12,394 48,046 36,465
Exploration, evaluation and other
lease costs 5,398 4,301 12,831 10,208
Write-off of property, plant and
equipment - - 2,222 -
General and administrative expenses 3,577 2,900 9,750 8,729
Taxes, other than income 654 753 1,949 1,813
------- ------- -------- --------
Total 62,772 53,971 188,090 148,714
------- ------- -------- --------
OPERATING INCOME 2,713 1,856 12,740 15,066
Interest income 606 955 2,339 2,970
Interest expense (1,997) (1,917) (5,241) (5,643)
Other income(expense), net 354 18 6,069 (676)
------- ------- -------- --------
INCOME BEFORE INCOME TAXES AND
MINORITY INTEREST 1,676 912 15,907 11,717
Income tax benefit (expense) 1,817 1,155 725 (1,098)
Minority interest (740) (616) (3,768) (3,236)
------- ------- -------- --------
NET INCOME 2,753 1,451 12,864 7,383
Preferred dividends 1,869 1,868 5,607 5,606
------- ------- -------- --------
NET INCOME(LOSS) TO COMMON SHARES $ 884 $ (417) $ 7,257 $ 1,777
======= ======= ======== ========
INCOME(LOSS) PER COMMON SHARE $.01 $(.01) $.08 $.02
======= ======= ======== ========
DIVIDENDS PER COMMON SHARE $.025 $.025 $.050 $.050
======= ======= ======== ========
AVERAGE COMMON SHARES OUTSTANDING
FOR INCOME PER SHARE PURPOSES 86,365 80,887 86,320 85,993
</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>
Nine months Ended
September 30,
-----------------------
1995 1994
---------- ---------
CASH FLOWS FROM OPERATING ACTIVITIES:
<S> <C> <C>
NET INCOME $ 12,864 $ 7,383
Adjustments to reconcile net income to
cash flows from operating activities:
Depreciation, depletion and
amortization 48,046 36,465
Exploration and evaluation costs 8,518 7,300
Gain on sale of assets (4,590) -
Write-off of property, plant and
equipment 2,222 -
Deferred income tax expense(benefit) (1,709) 2,113
Change in current assets and
liabilities (13,505) 6,856
Other changes, net 4,092 5,052
--------- --------
Total Adjustments 43,074 57,786
--------- --------
NET CASH FLOWS FROM OPERATING ACTIVITIES 55,938 65,169
--------- --------
CASH FLOWS USED IN INVESTING ACTIVITIES:
Proceeds from sale of assets 4,843 153
Acquisition of minority interest - (5,200)
Investment in Crown Jewel project (4,088) (9,301)
Capital expenditures (108,776) (69,591)
Exploration and evaluation expenditures (8,226) (7,296)
Other, net (657) 204
--------- --------
NET CASH FLOWS USED IN INVESTING
ACTIVITIES (116,904) (91,031)
CASH FLOWS FROM (USED IN) FINANCING
ACTIVITIES:
Cash proceeds from stock issuances 2,579 6,323
Cash proceeds from borrowings 36,903 -
Cash dividend payments (9,658) (9,636)
Debt repayments (12,304) (7,358)
Other, net (59) -
--------- --------
NET CASH FLOWS FROM (USED IN) FINANCING
ACTIVITIES 17,461 (10,671)
--------- --------
EFFECT OF EXCHANGE RATE CHANGES ON CASH
AND CASH EQUIVALENTS (62) (638)
--------- --------
NET DECREASE IN CASH AND CASH
EQUIVALENTS (43,567) (37,171)
CASH AND CASH EQUIVALENTS AT BEGINNING
OF PERIOD 76,464 115,338
--------- --------
CASH AND CASH EQUIVALENTS AT END OF
PERIOD $ 32,897 $ 78,167
========= ========
</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.
Certain reclassifications have been made to the balance sheet at
December 31, 1994, and income statements for the three and nine months ended
September 30, 1994, to conform to the current year presentation.
Note 2. Income Per Common Share
For the three months ended September 30, 1995, and the nine months ended
September 30, 1995 and 1994, income per common share is computed based on the
weighted average number of shares of common stock and common stock equivalents
outstanding during the periods. 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 loss per share for the three months ended September 30, 1994,
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. Subsequent Events
Lihir Gold Limited ("LGL"), which is a Company created specifically for the
development, financing, operating and owning of the Lihir project in Papua New
Guinea, completed an initial public offering of common stock on October 6, 1995.
LGL was formed and previously owned by the prior participants in the Lihir Joint
Venture which included a 30 percent ownership by Niugini Mining, a 40 percent
ownership by a subsidiary of RTZ Corporation, plc and a 30 percent ownership by
an entity of the PNG government. As a result of the initial public offering,
Niugini Mining now owns a 17.15 percent interest in LGL and BMG's attributable
interest is 8.6 percent. Niugini Mining's interest in LGL will be accounted for
using the equity method of accounting.
This offering is the final transaction in a series of transactions which
restructured and reduced BMG's participation in the Lihir Project. In the
fourth quarter of 1995, the Company will record the effects of this series of
transactions. An increase in Niugini Mining's shareholders' equity of
approximately $57 million related to the issuance of the common stock by LGL at
a value in excess of Niugini Mining's carrying value per share in LGL will be
recorded. This increase will be recorded as a credit to additional paid-in
capital consistent with the Company's accounting policy with regard to
transactions of this nature. An offsetting increase in the carrying value of
the Niugini Mining's investment in LGL will be recorded. The Company will
attribute $28 million of this increase to minority interest in its consolidated
financial statements; the remainder will be credited to additional paid-in
capital of the Company. Also, as a result of these transactions, the Company
will amortize approximately $35 million of its investment in Niugini Mining,
which has been
4
<PAGE>
attributed to the investment in LGL, as a result of these transactions. This
amortization will be recorded as a charge to additional paid-in capital. The net
result of these transactions in the Company's Consolidated Financial Statements
will be an increase in the carrying value of the LGL investment of approximately
$22 million, an increase in minority interest of approximately $28 million and a
net decrease in additional paid-in capital of approximately $6 million.
5
<PAGE>
PART I. FINANCIAL INFORMATION - Continued
STATISTICAL INFORMATION (UNAUDITED)
<TABLE>
<CAPTION>
Three months ended Nine months ended
September 30, September 30,
--------------------- --------------------
1995 1994(4) 1995 1994(4)
-------- ----------- ------- -----------
<S> <C> <C> <C> <C>
BATTLE MOUNTAIN COMPLEX Operating Data
Production statistics
Gold recovered (000s oz) 18 10 56 32
Silver recovered (000s oz) 51 19 153 65
- - ----------------------------------------------------------------------------------
Cost Per Equivalent Gold Ounce (1)
Cash production costs $ 293 $ 232 $ 305 $ 240
Taxes, other than income 11 23 11 17
DD&A 104 90 71 147
----- ----- ----- ------
Total operating costs $ 408 $ 345 $ 387 $ 404
- - ----------------------------------------------------------------------------------
SAN LUIS Operating Data
Production statistics
Gold Recovered (000s oz) 18 18 54 56
Silver Recovered (000s oz) 8 6 23 15
- - ----------------------------------------------------------------------------------
Cost Per Equivalent Gold Ounce (1)
Cash production costs $ 236 $ 272 $ 231 $ 246
Taxes, other than income 14 18 12 12
DD&A 104 69 99 66
----- ----- ----- ------
Total operating costs $ 354 $ 359 $ 342 $ 324
- - ----------------------------------------------------------------------------------
PAJINGO Operating Data
Production statistics
Gold recovered (000s oz) 10 8 26 23
Silver recovered (000s oz) 6 17 38 69
Cost Per Equivalent Gold Ounce (1)
Cash production costs $ 201 $ 135 $ 155 $ 158
Taxes, other than income 2 3 2 2
DD&A 172 53 107 43
----- ----- ----- ------
Total operating costs $ 375 $ 191 $ 264 $ 203
- - ----------------------------------------------------------------------------------
KORI KOLLO Operating Data
Production statistics
Gold recovered BMG share (000s oz) (2) 78 66 222 199
Silver recovered BMG share (000s oz) (2) 268 300 839 938
Gold recovered (000s oz) 89 74 252 227
Silver recovered (000s oz) 305 341 953 1,075
- - ----------------------------------------------------------------------------------
Cost Per Equivalent Gold Ounce (1)
Cash production costs $ 170 $ 175 $ 168 $ 164
Taxes, other than income - - - -
DD&A 90 99 90 96
----- ----- ----- ------
Total operating costs $ 260 $ 274 $ 258 $ 260
- - ----------------------------------------------------------------------------------
</TABLE>
See Page 7 for footnotes
6
<PAGE>
PART I. FINANCIAL INFORMATION - Continued
STATISTICAL INFORMATION (UNAUDITED)
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
September 30, September 30,
--------------------------- ----------------------
1995 1994(4) 1995 1994(4)
--------- ------------ ---------- ----------
<S> <C> <C> <C> <C>
SAN CRISTOBAL Operating
Data
Production statistics
Gold recovered BMG
share (000s oz) (3) 11 11 32 28
Silver recovered BMG
share (000s oz) (3) 27 26 73 70
Gold recovered (000s oz) 21 20 62 53
Silver recovered (000s oz) 54 50 144 133
- - ------------------------------------------------------------------------------------
Cost Per Equivalent Gold
Ounce (1)
Cash production costs $ 279 $ 259 $ 285 $ 258
Taxes, other than income - - - -
DD&A 87 80 87 78
------ ------ ------ ------
Total operating costs $ 366 $ 339 $ 372 $ 336
- - ------------------------------------------------------------------------------------
RED DOME Operating Data
Production statistics
Gold recovered BMG
share (000s oz) (3) 15 5 40 11
Silver recovered BMG
share (000s oz) (3) 59 61 243 93
Copper recovered BMG
share (000s lb) (3) 993 2,068 4,226 4,606
Gold recovered (000s oz) 29 8 78 20
Silver recovered (000s oz) 116 118 474 179
Copper recovered (000s lb) 1,964 4,016 8,267 8,838
- - ------------------------------------------------------------------------------------
Cost Per Equivalent Gold
Ounce (1)
Cash production costs $ 150 $ 308 $ 156 $ 316
Taxes, other than income - - - -
DD&A 41 33 73 17
------ ------ ------ ------
Total operating costs $ 191 $ 341 $ 229 $ 333
- - ------------------------------------------------------------------------------------
AGGREGATE DATA
Gold recovered BMG
share (000s oz) 150 118 430 349
Gold sales BMG share
(000s oz) 144 114 422 343
Gold recovered (000s oz) 185 138 528 411
Gold sales (000s oz) 169 135 509 405
Average price per oz
realized $ 387 $ 386 $ 384 $ 386
- - ------------------------------------------------------------------------------------
Silver recovered BMG
share (000s oz) 419 429 1,369 1,250
Silver sales BMG share
(000s oz) 370 415 1,290 1,228
Silver recovered (000s oz) 540 551 1,785 1,536
Silver sales (000s oz) 439 533 1,622 1,505
Average price per oz
realized $5.09 $5.38 $5.19 $5.37
- - ------------------------------------------------------------------------------------
Weighted Average Cost Per
Equivalent Gold Ounce (1)
Cash production costs $ 199 $ 208 $ 198 $ 199
Taxes, other than income 3 5 3 3
DD&A 92 84 87 86
------ ------ ------ ------
Total operating costs $ 294 $ 297 $ 288 $ 288
- - ------------------------------------------------------------------------------------
</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 52.6 percent equity interest for January through June 1994, a
51.4 percent equity interest for July 1994 through May 1995 and an average
50.5 percent equity interest thereafter.
(4) 1994 costs per equivalent ounce restated to include reallocated divisional
and corporate administrative costs.
7
<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 September 30, 1995, the Company had cash and cash equivalents of $32.9
million, of which $7.4 million was held by BMG, $11.1 million was held by
Niugini Mining and $14.4 million was held by Inti Raymi.
Operating Activities
The Company generated cash flow of $55.9 million from operating activities
during the nine months ended September 30, 1995, compared with cash flow from
operations of $65.2 million for the nine months ended September 30, 1994.
The decrease in cash flows from operations resulted from several factors,
including reduced receipts of recoverable value added taxes (VAT) and import
duties due to Inti Raymi from the Bolivian government. The balance of VAT and
import duties receivable increased by $6.9 million during the nine months ended
September 30, 1995. Cash flow from operations also decreased because of
increased mining, milling and other plant costs on a cash basis at the Red Dome
and the Battle Mountain Complex mines. At the Red Dome mine, even though
accrual basis cash costs per ounce decreased compared to last year, cash basis
total costs have increased because mined ore at the Red Dome mine is being
stockpiled in order to complete as much mining as possible prior to the
beginning of the rainy season which generally starts after the beginning of the
calendar year. While cash is being expended for such mining, the cost is not
being charged against Red Dome operating income. At the Reona mine, cash is also
being expended for mining and crushing of ore used to build leach heaps. These
accumulated costs related to both mines are being deferred and included in other
current assets on the balance sheet and will be charged against operations as
gold, silver and copper are produced and sold over the life of each mine. The
balance of these accumulated mining and crushing costs increased by
approximately $7.1 million during the nine months ended September 30, 1995.
There were no deferred mining and crushing costs in the first nine months of
1994 for these mines, which were in the development stage at that time.
Investing Activities
The Company used cash of $112.9 million, including $4.1 million for the
Crown Jewel project, for capital expenditures during the nine months ended
September 30, 1995. The Company expects to spend a total of $115 million on
capital expenditures and investments in 1995. The Company has spent
approximately $71 million on the Lihir project during the nine months ended
September 30, 1995, and does not expect to make any further expenditures on this
project in 1995. Expenditures through September 30, 1995, include the
acquisition by Niugini Mining of an additional interest in the Lihir joint
venture (see "Investing Activities - Lihir Project" below). At the Kori Kollo
mine, the Company expects to spend a total of approximately $14.7 million on a
recovery enhancement system, of which $14.5 million has been spent through
September 30, 1995 and a total of $7.0 million on a tailings treatment facility,
of which approximately $6.3 million has been spent through September 30, 1995.
Work is being completed on the new recovery
8
<PAGE>
enhancement system at Kori Kollo which is expected to be in full operation in
January 1996. Based on results to date from partial system operation, there is
expected to be an approximate three percent improvement in recovery, or about
six percent less than pre-design metallurgical testing had indicated. The
Company is reviewing metallurgy in order to optimize the operating mode in an
effort to maximize future recovery from the system. Other throughput efforts to
date have increased the recovery rate for sulfide ore by six percent compared to
feasibility study levels.
During the nine months ended September 30, 1995, the Company spent
approximately $12.8 million on exploration and evaluation, including $8.2
million on project exploration. The Company currently estimates that it will
spend approximately $16 million on its 1995 exploration and evaluation 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 $125 million, of which $5.4 million has been spent
through September 30, 1995. The estimated cost of the project has increased from
the previous estimate of $87 million because it is now assumed that the mining
equipment will be purchased rather than leased and additional pre-mining
stripping will be incurred. Both of these items have the effect of reducing
projected operating costs. 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. A Draft Environmental Impact Statement was issued
at the end of June 1995 and the 60 day public comment period has concluded. The
lead permitting agencies are finalizing their timetable for the issuance of the
Environmental Impact Statement ("EIS"), which is currently expected in the late
summer of 1996.
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 $113 million, of which, as of
September 30, 1995, $52.2 million ($43.9 million of which has been capitalized)
has been incurred.
Lihir Project - BMG holds an indirect interest in the Lihir project through
its 50.3 percent ownership of Niugini Mining, which in turn now owns 17.15
percent of Lihir Gold Limited ("LGL"). With RTZ Corporation, plc ("RTZ") as
operator, LGL is now developing and constructing the Lihir Project in Papua New
Guinea ("PNG"), as financings have been secured. The financings included
arrangements of debt facilities from a syndicate of international commercial
banks and an initial public offering of common stock of LGL. The initial public
offering was completed on October 6, 1995. The following paragraphs describe the
series of now completed transactions related to the funding of the Lihir Project
and the restructuring of its ownership.
In March 1995, the Special Mining Lease ("SML") for the Lihir project was
executed by the PNG government and final landowner agreements were executed in
April 1995. The SML provided Niugini Mining, and subsidiaries of RTZ and the PNG
government, as joint venture partners, the right to develop and operate the
Lihir gold project. In connection with the execution of the SML, an entity of
the PNG government acquired an intermediate 30 percent joint venture interest,
pro rata from RTZ's 80 percent position and Niugini Mining's 20 percent
position. In June 1995, Niugini Mining acquired an additional 16 percent of the
Lihir joint venture from a subsidiary of RTZ for $54.1 million, which included
payment of Niugini Mining's share of joint venture costs and interest dating
back to January 1, 1994. Niugini Mining then owned a 30 percent interest in the
Lihir joint venture.
Niugini Mining, and subsidiaries of RTZ and the PNG government (the
"Sponsoring Parties") had formed LGL for the sole purpose of ownership and
development of the Lihir project. Initially, LGL was owned 30 percent by Niugini
Mining, 40 percent by a subsidiary of RTZ and 30 percent by an entity of the
PNG government. On October 6, 1995, LGL completed an initial public offering of
common stock raising approximately $450 million to be used for the construction,
development and initial operation of the Lihir Project.
9
<PAGE>
Prior to consummation of the offering, the joint venture assets related to the
Lihir Project were contributed by the Sponsoring Parties to LGL. Additional
funding required for the project is to be provided in the form of debt financing
by LGL. In connection with the LGL debt financing, Niugini Mining has
guaranteed, until project completion, 30 percent of LGL's obligations under the
facility (which obligations include up to $300 million of senior facility debt,
up to $10 million of subordinated debt incurred to fund the purchase of
instruments required in connection with hedging activities and up to $50 million
of potential liabilities under hedging arrangements). Neither BMG nor its non-
Niugini Mining subsidiaries have any obligation or liability under this
guarantee. In addition, Niugini Mining has pledged its LGL shares as security
under the facility until project completion.
The initial public offering was the final transaction in the series of
transactions which restructured and reduced BMG's participation in the Lihir
Project. As a result of the initial public offering, Niugini Mining now owns a
17.15 percent interest in LGL and BMG's attributable interest is 8.6 percent. In
the fourth quarter of 1995, the Company will record the effects of this series
of transactions. An increase in Niugini Mining's shareholders' equity of
approximately $57 million related to the issuance of the common stock by LGL at
a value in excess of Niugini Mining's carrying value per share in LGL will be
recorded. This increase will be recorded as a credit to additional paid-in
capital consistent with the Company's accounting policy with regard to
transactions of this nature. An offsetting increase in the carrying value of the
Niugini Mining's investment in LGL will be recorded. The Company will attribute
$28 million of this increase to minority interest in its consolidated financial
statements; the remainder will be credited to additional paid-in capital of the
Company. Also, as a result of these transactions, the Company will amortize
approximately $35 million of its investment in Niugini Mining, which has been
attributed to the investment in LGL. This amortization will be recorded as a
charge to the Company's additional paid-in capital. The net result of these
transactions in the Company's Consolidated Financial Statements to be reported
in the fourth quarter of 1995 will be an increase in the carrying value of the
LGL investment of approximately $22 million, an increase in minority interest of
approximately $28 million and a net decrease in additional paid-in capital of
approximately $6 million. As of September 30, 1995, the carrying value of the
Company's investment in the Lihir project was approximately $206.3 million.
Niugini Mining's interest in LGL will be accounted for using the equity method
of accounting.
Financing Activities
In May 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. As of November 3, 1995, approximately, 393,000 options have been
exercised for total proceeds of approximately US$579,000. 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. Additionally, Niugini
Mining has agreed to a bridge financing facility of US$30 million which was
drawn down in June 1995 to enable consummation of the purchase of the additional
interest in the Lihir joint venture (see "Investing Activities" above). 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 share of the options for approximately US$17
million.
During the nine months ended September 30, 1995, BMG received $5.8 million
in dividends from Inti Raymi, net of applicable Bolivian withholding taxes. The
amount received during this period was significantly less than originally
anticipated by the Company for 1995 because of Inti Raymi's decreased cash flow
resulting from increased capital expenditures and lower than expected receipts
of Bolivian tax and import duty refunds, as discussed above. Dividends from Inti
Raymi are expected to increase significantly beginning in the fourth quarter of
1995 because of much lower capital expenditures and the receipt by Inti Raymi of
tax notes from the Bolivian government for the tax and import duty refunds. The
tax notes can be sold by Inti Raymi.
10
<PAGE>
Conclusion
The Company expects cash on hand, along with cash flows from operations and
existing credit facilities, to be adequate to meet its cash needs through the
end of 1996. BMG has available commitments under a new committed non-reducing
revolving credit agreement of $75 million as of November 6, 1995, under which
BMG has no amounts currently outstanding. In connection with the new revolving
credit agreement, the Company terminated its previously existing committed
revolving credit agreement. Other possible financing sources include public
offerings of securities under the Company's universal shelf registration
statement, assuming any such offering could be completed under satisfactory
terms, although no such offering is currently contemplated.
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 or 1996. 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 or severance tax. 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 or
severance tax. These projects, as well as reclamation and closure activities at
the Battle Mountain Complex, could be subject to additional permitting and
environmental requirements. Mineral surveys have been completed for the claims
constituting the unpatented portion of the Reona and Phoenix project reserves. A
patent covering the unpatented portion of the Crown Jewel ore body has been
applied for, and the "first half" of the final certificate has been received.
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.
The Company has investigated the discharge to groundwater of chloride (salt)
from the tailings facility at the Battle Mountain Complex. This facility was
unlined at the time it was constructed in keeping with then accepted
practice. The Company is currently evaluating mitigation alternatives to
achieve applicable water quality standards. While the Company currently expects
to achieve the applicable standards by utilizing the high chloride water in
connection with its proposed Phoenix operation, other likely alternatives
involving a combination of Phoenix operation usage and natural evaporation could
cost up to $6 million more than currently projected. Additionally, recent
groundwater samples were taken from a highly mineralized area near historic
copper leach activities. The results indicate that groundwater in this vicinity
is acidic and high in metals. Pursuant to the State-issued Water Pollution
Control Permit covering the site, the Company has prepared and submitted a work
plan for further investigation of groundwater in this area. Due to the
preliminary nature of this investigation, it is not possible to estimate what,
if any, remediation might be required.
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 in early 1996. The new regulations generally are
expected to require the preparation of environmental impact studies, set air and
water quality discharge standards and provide protocols for dealing with and
remediating the effects on the environment of hazardous substances and provide
procedures and schedules for existing operations to come into compliance. Such
regulations are expected to result in new environmental standards and
requirements applicable to the Company's Kori Kollo project which, in turn,
could require expenditures and changes in operations. At this time the Company
is not able to determine the form the new regulations will take, but,
11
<PAGE>
depending on the content of the new regulations, it is possible that compliance
could have a material adverse effect on the Company's financial condition or
results of operations. However, based on the various versions of the regulations
currently proposed, the Company does not anticipate that compliance will have a
material adverse effect on the Company's financial condition or results of
operations.
Forward Sales and Hedging
The Company has limited involvement with derivative financial instruments
and does not use them for trading purposes. Such instruments are used to manage
defined interest rate, commodity price and 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 September 30,
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 approximately $544,000 at
September 30, 1995, has been included in other assets. These agreements were
effective June 1, 1994. Since that date approximately $159,000 has been
amortized and approximately $178,000 has been received.
The Company uses forward sales contracts and put options to hedge
anticipated sales prices of gold, silver and copper. The following table
summarizes the Company's contracts at September 30, 1995:
<TABLE>
<CAPTION>
Average Forward
Sales Price
Amount Per Unit Period
------------ -------------------- ---------------
<S> <C> <C> <C>
BMG
Gold 140,000 oz. US$395 Oct 95 - Aug 96
Niugini Mining
Gold 102,000 oz. A$528 Oct 95 - Dec 96
Silver 42,000 oz. US$5.80 Oct 95
Copper 1,000 tonnes US$2,655 Dec 95
Inti Raymi
Forward sales contracts
Gold 98,500 oz. US$394 Oct 95 - Apr 96
Purchased put options
Gold 73,000 oz. US$385 Oct 95 - Apr 96
</TABLE>
Deferred costs associated with the Inti Raymi forward sales contracts
and purchased put options amounted to $1.5 million and $.4 million,
respectively, at September 30, 1995.
The aggregate amount by which the net market value of the Company's open
forward sales contracts is greater than the spot price of $384 per ounce of
gold, $5.53 per ounce of silver and $2,927 per tonne of copper, as of September
30, 1995, before consideration of the deferred costs referred to above, is $3.7
million, of which $.7 million is attributable to minority interests. Australian
dollar contracts were converted to U.S. dollars at the September 1995 month end
exchange rate of US$.76 to A$1.
12
<PAGE>
Niugini Mining has entered into two US$/A$ hedging arrangements in
connection with the bonus issue of options and the US$30 million financing
facility. In one agreement, Niugini Mining and BMG have entered a private swap
contract with respect to BMG's subunderwritten portion. In the other agreement
Niugini Mining has also entered a collared arrangement for the swap of the
additional currency exchange rate exposure. As of September 30, 1995, the
Company is in a net gain position of $.6 million related to these contracts.
In future periods, the Company may continue to employ selective hedging
strategies.
Foreign Operations
The Company's identifiable assets attributable to foreign operations as of
September 30, 1995, were approximately $611 million and foreign mining
operations represented approximately 79 percent of the total gross revenues of
the Company for the nine months ended September 30, 1995. As a result, the
Company is exposed to risks normally associated with foreign operations,
including political, economic, social and labor instabilities, evolving
environmental laws, 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 Nine Months Ended
September 30, September 30,
--------------------- --------------------
1995 1994(1) 1995 1994(1)
-------- ----------- -------- ----------
<S> <C> <C> <C> <C>
Revenue, net of hedging costs $ 388 $ 385 $ 383 $ 386
Freight, allowances and royalties $ 14 $ 26 $ 18 $ 20
Mining, milling and other plant costs $ 209 $ 216 $ 206 $ 204
Depreciation, depletion and amortization $ 95 $ 80 $ 88 $ 81
</TABLE>
(1) Certain reclassifications have been made to conform to the current year
presentation.
Gross Revenue
Gross revenue increased for the three and nine months ended September 30,
1995, compared with the same periods of 1994 because of increased sales volumes
from most of the Company's mines. Production and sales volumes increased
primarily because of production from the new Reona heap leach mine and the
pushback of the Red Dome mine, which mine areas were not in production during
the first nine months of 1994. Higher milled ore grades and increased throughput
at the Kori Kollo mine also contributed to the increased sales volumes. The
average realized sales price of gold decreased slightly to $384 per ounce for
the nine months ended September 30, 1995, compared with $386 per ounce in the
same period of 1994, slightly offsetting the increase in sales volumes. The
average realized sales price of gold was $387 per ounce for the three months
ended September 30, 1995, compared with $386 per ounce for the three months
ended September 30, 1994.
Selling and Operating Costs
Mining, milling and other plant costs increased for the three and nine month
periods ended September 30, 1995, compared with the same periods of 1994. These
costs increased primarily because of increased sales volumes.
13
<PAGE>
Mining, milling and other plant costs decreased on a per equivalent ounce of
gold sold basis for the three months ended September 30, 1995, compared with the
three months ended September 30, 1994, primarily because of decreased costs per
equivalent ounce at the Red Dome and Kori Kollo mines. The decreased costs at
the Red Dome mine resulted from sales of product coming from the pushback area
in which mining commenced during the last quarter of 1994. The per ounce costs
of production in the pushback area are significantly lower than per ounce costs
of production from the older mine area where mining occurred during the first
nine months of 1994. The cost of product sold per equivalent ounce decreased at
the Kori Kollo mine because of increased milled ore grades. The reduction in per
ounce costs for the three months ended September 30, 1995, was partially offset
by an increase in per equivalent ounce costs at the Battle Mountain Complex.
These per equivalent ounce costs were higher for the 1995 period at the Battle
Mountain Complex primarily because of the overall higher cash costs of the Reona
leach mine production compared with the 1994 cash costs of the Basin leach mine.
Mining, milling and other plant costs increased on a per equivalent ounce of
gold sold basis for the nine months ended September 30, 1995, compared with the
nine months ended September 30, 1994, primarily from increased costs per
equivalent ounce at the Battle Mountain Complex and the San Cristobal mine. Per
equivalent ounce costs were higher in 1995 at the Battle Mountain Complex
because sales of product were from the higher cost Reona mine during 1995 as
compared to production at the lower cost Basin Leach operation during 1994. The
expensing of approximately $900,000 of obsolete mining and milling equipment
parts related to management's decision in June 1995 to dismantle a portion of
the mill from the now terminated Fortitude mine operation also contributed to
the increase in costs per equivalent ounce at the Battle Mountain Complex. The
costs per equivalent ounce increased at the San Cristobal mine because metal
grades in the leach solution were lower than last year resulting in lower metal
production and sales. The increase in costs per equivalent ounce at the Battle
Mountain Complex and the San Cristobal mine were partially offset by a
significant reduction in the per equivalent ounce production costs at the Red
Dome mine. These costs decreased at the Red Dome mine because of the sale of
product produced from the lower cost pushback area of the Red Dome mine.
Depreciation, depletion and amortization increased in total and on
a cost per equivalent ounce sold basis for the three and nine months ended
September 30, 1995, when compared with the same periods of 1994. Total costs
increased primarily because of increased sales volumes as discussed above. Costs
per equivalent ounce increased primarily because of sales of product produced at
the Red Dome mine. Because of the high capital costs incurred for the pushback
of the Red Dome mine pit and the small amount of added reserves due to the
pushback; depreciation, depletion and amortization costs per equivalent ounce
are very high for this mine. Depreciation, depletion and amortization per
equivalent ounce of gold sold also increased at the Pajingo mine because of the
processing of ore from the open pit area of the Cindy deposit which has a
relatively high capital cost in relation to the remaining reserves.
Exploration, Evaluation and Other Lease Costs
Exploration, evaluation and other lease costs increased for the three and
nine months ended September 30, 1995, because of the expansion of the Company's
exploration activities in Australia, Indonesia and Bolivia.
Write-off of Property, Plant and Equipment
In June 1995, management decided that the Company would dismantle portions
of the decommissioned milling facility used for the milling of ore from the
depleted Fortitude mine in Nevada rather than renovate it for use in the Phoenix
project or other possibilities. Consequently, the net carrying value of this
mill and related facilities was written off during June 1995 and resulted in a
charge to operations of approximately $2.2 million. Spare parts related to this
milling facility were rendered obsolete due to this decision and, therefore,
$900,000 was charged to milling and other plant costs to expense these now
obsolete parts.
14
<PAGE>
Other
Other income(expense) for the nine months ended September 30, 1995, includes
a $4.2 million gain on the sale of the Plutonic Bore exploration project in
Australia in June 1995. There was no similar transaction included in other
income for the nine months ended September 30, 1994.
The Company's effective income tax benefit rate is six percent for 1995, as
compared with an effective income tax expense rate of 13 percent in 1994. The
Company revised its estimate of its 1995 income tax rate during the third
quarter of 1995 because of the revision of its budget. The revised 1995
earnings forecast for its domestic operations was reduced, eliminating projected
taxable income for U.S. income tax purposes. The year to date effect of this
reduced income tax rate is included in the Company's provision for income taxes
for the three months ended September 30, 1995. The effective income tax rate
for 1995 has been affected by the 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.
Net income attributable to minority interest increased for the three and
nine months ended September 30, 1995, because of increased profits generated by
the Company's majority owned subsidiaries Inti Raymi and Niugini Mining.
15
<PAGE>
PART II. OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
*3(a) Restated Articles of Incorporation of the Company, as amended
and restated through May 11, 1988 (Exhibit 4(a) to the Company's
Registration Statement on Form S-3 as filed with the Commission
on January 14, 1994; Registration No. 33-51921).
*3(b) Certificate of Resolution Establishing Designation, Preferences
and Rights of $3.25 Convertible Preferred Stock (Exhibit 4(b) to
the Company's Registration Statement on Form S-3 as filed with
the Commission on January 14, 1994; Registration No. 33-51921).
3(c) Bylaws of the Company, as amended through March 1, 1994.
10(a) Special Mining Lease No. 6, dated March 17, 1995, granted by the
Independent State of Papua New Guinea to Kennecott Explorations
(Australia) Ltd., Niugini Mining Limited and Mineral Resources
Lihir Pty. Limited.
10(b) Specimen of the Company's Supplemental Executive Retirement Plan
Agreement.
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 nine month period ended
September 30, 1995.
---------------
* Incorporated by reference as indicated
(b) No report on Form 8-K has been filed by BMG during the quarter for
which this report is filed.
16
<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: November 13, 1995 /s/ R. Dennis O'Connell
---------------------------------
R. Dennis O'Connell, Vice President-
Finance and Chief Financial Officer
(Principal Financial and Chief
Accounting Officer)
17
<PAGE>
INDEX OF EXHIBITS
Exhibit No. Document
*3(a) Restated Articles of Incorporation of the Company, as amended and
restated through May 11, 1988 (Exhibit 4(a) to the Company's
Registration Statement on Form S-3 as filed with the Commission on
January 14, 1994; Registration No. 33-51921).
*3(b) Certificate of Resolution Establishing Designation, Preferences and
Rights of $3.25 Convertible Preferred Stock (Exhibit 4(b) to the
Company's Registration Statement on Form S-3 as filed with the
Commission on January 14, 1994; Registration No. 33-51921)
3(c) Bylaws of the Company, as amended through March 1, 1994.
10(a) Special Mining Lease No. 6, dated March 17, 1995, granted by
the Independent State of Papua New Guinea to Kennecott Explorations
(Australia) Ltd., Niugini Mining Limited and Mineral Resources Lihir
Pty. Limited.
10(b) Specimen of the Company's Supplemental Executive Retirement Plan
Agreement.
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 nine month period ended
September 30, 1995
- - ----------------
* Incorporated by reference as indicated
<PAGE>
EXHIBIT 3C
BATTLE MOUNTAIN GOLD COMPANY
AMENDED BYLAWS
ARTICLE I
MEETINGS OF STOCKHOLDERS
SECTION 1. The annual meeting of the stockholders of this Corporation shall
be held on such date and at such time and place, within or without the State of
Nevada, as the Board of Directors of the Corporation may designate, and on any
subsequent day or days and at the time and place to which such meeting may be
adjourned, for the purposes of electing directors and of transacting such other
business as may properly come before the meeting. The Board of Directors shall
give at least ten (10) days' notice of the date, time and place of the meeting
to the stockholders.
SECTION 2. Any action required or permitted to be taken by the stockholders
of the Corporation must be effected at a duly called annual or special meeting
of stockholders and may not be effected by any consent in writing by
stockholders. Except as otherwise required by law and subject to the rights of
the holders of any class or series of stock having a preference over the Common
Stock as to dividends or upon liquidation, special meetings of stockholders of
the Corporation may be called only by the Board of Directors pursuant to a
resolution approved by a majority of the entire Board of Directors or by the
Chairman of the Board or by the President of the Corporation. Upon written
request of the Board of Directors, the Chairman of the Board or the President,
after the Chairman of the Board or the President after having duly called a
special meeting of stockholders, it shall be the duty of the Secretary or any
Assistant Secretary of the Corporation to fix the date of the meeting to be held
not less than ten (10) nor more than sixty (60) days after receipt of the
request and to give due notice thereof.
SECTION 3. Every special meeting of stockholders shall be held at such place
within or without the State of Nevada as the Board of Directors may designate.
SECTION 4. Written notice of every meeting of stockholders shall be given by
the Secretary of the Corporation to each stockholder of record entitled to vote
at the meeting, by placing such notice in the mail at least ten (10) days, but
not more than sixty (60) days, prior to the day named for the meeting addressed
to each stockholder at his address appearing on the books of the Corporation.
SECTION 5. The Board of Directors may fix a date, not less than ten (10) nor
more than sixty (60) days preceding the date of any meeting of stockholders, as
a record date for the determination of stockholders entitled to notice of, and
to vote at, any such meeting. The Board of Directors shall not close the books
of the Corporation against transfers of shares during the whole or any part of
such period.
<PAGE>
SECTION 6. The notice of every meeting of stockholders may be accompanied by
a form of proxy approved by the Board of Directors in favor of such person or
persons as the Board of Directors may select.
SECTION 7. Except as otherwise provided by law, the Articles of
Incorporation of the Corporation or these Bylaws, the presence in person or by
proxy of the holders of a majority of the outstanding shares of stock of the
Corporation entitled to vote thereat shall constitute a quorum at each meeting
of stockholders. The stockholders present at any duly organized meeting may
continue to do business until adjournment, notwithstanding the withdrawal of
enough stockholders to leave less than a quorum. Directors shall be elected by a
plurality of the votes cast in the election. For all matters as to which no
other voting requirement is specified by law, the Articles of Incorporation of
the Corporation or these Bylaws, the affirmative vote required for stockholder
action shall be that of a majority of the shares of stock entitled to vote
thereon present in person or represented by proxy at the meeting (as counted for
purposes of determining the existence of a quorum at the meeting). In the case
of a matter submitted for a vote of the stockholders as to which a stockholder
approval requirement is applicable under the stockholder approval policy of the
New York Stock Exchange, the requirements of Rule 16b-3 under the Securities
Exchange Act of 1934 or any provision of the Internal Revenue Code, in each case
for which no higher voting requirement is specified by law, the Articles of
Incorporation of the Corporation or these Bylaws, the vote required for approval
shall be the requisite vote specified in such stockholder approval policy, Rule
16b-3 or Internal Revenue Code provision, as the case may be (or the highest
such requirement if more than one is applicable). For the approval of the
appointment of independent public accountants (if submitted for a vote of the
stockholders), the vote required for approval shall be a majority of the votes
cast on the matter.
SECTION 8. Any meeting of stockholders may be adjourned from time to time,
without notice other than by announcement at the meeting at which such
adjournment is taken, and at any such adjourned meeting at which a quorum shall
be present any action may be taken that could have been taken at the meeting
originally called; provided that if the adjournment is for more than thirty (30)
days, or if, after the adjournment, a new record date is fixed for the adjourned
meeting, a notice of the adjourned meeting shall be given to each stockholder of
record entitled to vote at the adjourned meeting.
ARTICLE II
BOARD OF DIRECTORS
SECTION 1. The business, affairs and property of the Corporation shall be
managed by a board of directors divided into three classes as provided in the
Articles of Incorporation of the Corporation. The number of directors
constituting the entire Board of Directors shall be fixed from time to time by
resolution of the entire Board of Directors but shall be not less than three nor
more than twelve. Each director shall hold office for the full term to which he
shall have been elected and until his successor is duly elected and shall
qualify, or until his earlier death, resignation or removal. A director need
not be a resident of the State of Nevada or a stockholder of the Corporation.
2
<PAGE>
SECTION 2. Except as provided in the Articles of Incorporation of the
Corporation and subject to the rights of holders of any class or series of stock
having a preference over the Common Stock as to dividends or upon liquidation to
elect directors under specified circumstances, newly created directorships
resulting from any increase in the number of directors and any vacancies on the
Board of Directors resulting from death, resignation, disqualification, removal
or other cause shall be filled by the affirmative vote of a majority of the
remaining directors then in office, even though less than a quorum of the Board
of Directors. Any director elected in accordance with the preceding sentence
shall hold office for the remainder of the full term of the class of directors
in which the new directorship was created or the vacancy occurred and until such
director's successor shall have been elected and qualifies. No decrease in the
number of directors constituting the Board of Directors shall shorten the term
of any incumbent director.
SECTION 3. No director of the Corporation shall be removed from office as a
director without cause except by the affirmative vote of the holders of 80% of
the number of shares of Common Stock then outstanding. A Director may be
removed from office for cause only by the affirmative vote of the holders of not
less than a majority of the Common Stock then outstanding. Except as otherwise
provided by law or fixed pursuant to the provisions of Article FOURTH of the
Corporation's Restated Articles of Incorporation relating to the rights of
holders of any class or series of stock having a preference over the Common
Stock as to dividends or upon liquidation, this Section 3 shall not apply with
respect to any director elected by the holders of any such class or series
having preference.
SECTION 4. Subject to the rights of holders of any class or series having a
preference over the Common Stock as to dividends or upon liquidation,
nominations for the election of directors may be made by the Board of Directors
or a proxy committee appointed by the Board of Directors or by any stockholder
entitled to vote in the election of directors. Any stockholder entitled to vote
in the election of directors may nominate one or more persons for election as
directors only at a meeting of stockholders and only if written notice of such
stockholder's intent to make such nomination or nominations have been given,
either by personal delivery or by United States mail, postage prepaid, to the
Secretary of the Corporation not later than (i) with respect to an election to
be held at an annual meeting of stockholders, ninety (90) days in advance of
such meeting, and (ii) with respect to an election to be held at a special
meeting of stockholders for the election of directors, the close of business on
the seventh day following the date on which notice of such meeting is first
given to stockholders.
Each such notice shall set forth: (a) the name and address of the stockholder
who intends to make the nomination and of the person or persons to be nominated;
(b) a representation that the stockholder is a holder of record of stock of the
Corporation entitled to vote at such meeting and intends to appear in person or
by proxy at the meeting to nominate the person or persons specified in the
notice; (c) a description of all arrangements or understandings between the
stockholder and each nominee and any other person or persons (naming such person
or person) pursuant to which the nomination or nominations are to be made by the
stockholder; (d) such other information regarding each nominee proposed by such
stockholder as would be required to be included in a proxy statement filed
pursuant to the proxy rules of the Securities and Exchange Commission, as then
in effect, had the nominee been
3
<PAGE>
nominated, or intended to be nominated, by the Board of Directors; and (e) the
consent of each nominee to serve as a director of the Corporation if so elected.
SECTION 5. Regular meetings of the Board of Directors shall be held at such
place or places within or without the State of Nevada and at such time and on
such day as may be fixed by resolution of the Board of Directors, without
further notice of such meetings. The time or place of holding regular meetings
of the Board of Directors may be changed by the Chairman of the Board of
Directors or the President of the Corporation by giving written notice thereof
as provided in Section 7 of this Article II.
SECTION 6. Special meetings of the Board of Directors shall be held,
whenever called by the Chairman of the Board of Directors, the Chairman of the
Executive Committee of the Board of Directors, the President of the Corporation,
or by resolution adopted by the entire Board of Directors, at such place or
places within or without the State of Nevada as may be stated in the notice of
the meeting.
SECTION 7. Written notice of the time and place of, and general nature of
the business to be transacted at, all special meetings of the Board of
Directors, and written notice of any change in the time or place of holding the
regular meetings of the Board of Directors, shall be given to each director
personally or by mail or by telegraph, telecopier or similar communication;
provided, however, that notice of any meeting need not be given to any director
if waived by him in writing, or if he shall be present at such meeting.
SECTION 8. A majority of directors in office shall constitute a quorum of
the Board of Directors for the transaction of business, but a lesser number may
adjourn from day to day until a quorum is present. Except as otherwise provided
by law or in these Bylaws, all questions shall be decided by a vote of a
majority of the directors present.
SECTION 9. Any action that may be taken at a meeting of the Board of
Directors or members of the Executive Committee may be taken without a meeting
if consent in writing setting forth the action so taken shall be signed by all
of the directors or members of the Executive Committee, as the case may be, and
shall be filed with the Secretary of the Corporation.
SECTION 10. The Board of Directors may designate one or more of its number
to be Vice Chairman of the Board, Chairman of the Executive Committee and
Chairman of any other committees of the Board of Directors and to hold such
other positions on the Board as the Board of Directors may designate.
4
<PAGE>
ARTICLE III
EXECUTIVE COMMITTEE
The Board of Directors may, by resolution adopted by a majority of the
entire Board, designate two or more of its number to constitute an Executive
Committee that shall have and exercise the authority of the Board of Directors
in the management of the business of the Corporation to the extent permitted by
law during intervals between meetings of the Board. The Board of Directors may,
by resolution adopted by a majority of the entire Board, designate two or more
of its number to constitute any other Committee or Committees with such powers,
duties, responsibilities and duration of existence as the Board of Directors
shall deem necessary or desirable.
ARTICLE IV
OFFICERS
SECTION 1. The officers of the Corporation shall consist of a Chairman of
the Board of Directors, President, Secretary, Treasurer and such Executive,
Group, Senior or other Vice Presidents, and other officers as may be elected or
appointed by the Board of Directors. Any number of offices may be held by the
same person. All officers shall hold office until their successors are elected
or appointed, except that the Board of Directors may remove any officer at any
time at its discretion.
SECTION 2. The officers of the Corporation shall have such powers and duties
as generally pertain to their offices, except as modified herein or by the Board
of Directors, as well as such powers and duties as from time to time may be
conferred by the Board of Directors. The Chairman of the Board shall be the
chief executive officer of the Corporation and shall have general supervision of
the business, affairs, and property of the Corporation and over its several
officers, and shall preside at meetings of the Board of Directors and at
meetings of stockholders. The President shall be the chief operating officer of
the Corporation and shall have such other duties as may be assigned to him by
the Board of Directors.
ARTICLE V
SEAL
The seal of the Corporation shall be in such form as the Board of Directors
shall prescribe.
5
<PAGE>
ARTICLE VI
CERTIFICATES OF STOCK
The shares of stock of the Corporation shall be represented by certificates
of stock, signed by the President or such Vice President or other officer
designated by the Board of Directors, countersigned by the Treasurer or the
Secretary and bearing the seal of the Corporation; and such signature of the
President, Vice President, or other officer, such countersignature of the
Treasurer or Secretary, and such seal, or any of them, may be executed in
facsimile, engrave or printed. In case any officer who has signed or whose
facsimile signature has been placed upon any share certificate shall have ceased
to be such officer because of death, resignation or otherwise before the
certificate is issued, the share certificate may be issued by the Corporation
with the same effect as if the officer had not ceased to be such at the date of
its issue. Said certificates of stock shall be in such form as the Board of
Directors may from time to time prescribe.
ARTICLE VII
INDEMNIFICATION
SECTION 1. Right to Indemnification - General. The Corporation shall
indemnify and hold harmless each person who was or is, or is threatened to be
made, a party to or otherwise involved in any threatened, pending or completed
action, suit, arbitration, alternate dispute resolution mechanism,
investigation, administrative hearing or other proceeding, whether civil,
criminal, administrative or investigative in nature (any such threatened,
pending or completed proceeding being hereinafter called a "Proceeding") by
reason of the fact that he is or was a director or officer of the Corporation or
is or was serving at the request of the Corporation as a director, officer,
employee, agent or fiduciary of another corporation, partnership, joint venture,
trust, employee benefit plan or other enterprise (whether the basis of his
involvement in such Proceeding is alleged action in an official capacity or in
any other capacity while serving as such), to the fullest extent permitted by
applicable law in effect on April 28, 1987, and to such greater extent as
applicable law may thereafter from time to time permit, from and against all
expense, liability and loss (including Expenses, as hereinafter defined,
judgments, penalties, ERISA excise taxes, fines and amounts paid or to be paid
in settlement) actually and reasonably incurred by him or on his behalf or
suffered in connection with such Proceeding or any claim, issue or matter
therein; provided, however, that, except as provided in Section 5 of this
Article VII, the Corporation shall indemnify any such person claiming indemnity
in connection with a Proceeding initiated by such person only if such Proceeding
was authorized by the Board of Directors. Such indemnification rights shall
include, but not be limited to, the right to be indemnified to the fullest
extent permitted by N.R.S. (S)(S)78.751(2) and (3) in the case of Proceedings by
or in the right of the Corporation and to the fullest extent permitted by N.R.S.
(S)(S)78.751(1) and (3) in the case of all other Proceedings.
SECTION 2. Certain Provisions Respecting Indemnification for and Advancement
of Expenses. (a) Without limiting any other right of indemnification provided
for in this Article VII, to the extent that a person referred to in Section 1 of
this Article VII claiming indemnity thereunder is successful on the merits or
otherwise in defense of any Proceeding, he must be indemnified against all
6
<PAGE>
Expenses actually and reasonably incurred by him or on his behalf in connection
with such Proceeding. If such person is not wholly successful in defense of
such Proceeding but is successful on the merits or otherwise therein, the
Corporation must indemnify such person against all Expenses actually and
reasonably incurred by him or on his behalf in connection with each successfully
resolved claim, issue or matter. The termination of any claim, issue or matter
in such a Proceeding by dismissal, with or without prejudice, shall be deemed to
be a successful result as to such claim, issue or matter.
(b) To the extent that a person referred to in Section 1 of this
Article VII is required to serve as a witness in any Proceeding referred to
therein, he shall be indemnified against all Expenses actually and
reasonably incurred by him or on his behalf in connection with serving as a
witness.
(c) The Corporation must from time to time pay, in advance of final
disposition, all reasonable Expenses incurred, as such Expenses are
incurred, by or on behalf of any person referred to in Section 1 of this
Article VII claiming indemnity thereunder in respect of any Proceeding
referred to therein. Each such advance shall be made within ten (10) days
after the receipt by the Corporation of a statement from the claimant
requesting the advance, which statement shall reasonably evidence the
relevant Expenses and be accompanied or preceded by any such undertaking as
may be required by applicable law respecting the contingent repayment of
such Expenses.
SECTION 3. Procedure for Determination of Entitlement to Indemnification.
(a) To obtain indemnification under this Article VII, a claimant shall submit to
the Secretary of the Corporation a written application. The Secretary of the
Corporation shall, promptly upon receipt of such an application for
indemnification, advise the Board of Directors in writing of the application. In
connection with any such application, the claimant shall provide such
documentation and information as is requested by the Corporation and reasonably
available to him and relevant to a determination of entitlement to
indemnification.
(b) Any indemnification under this Article VII, unless otherwise
ordered by a court or advanced pursuant to Paragraph (c) of Section 2 of
this Article VII, must be made by the Corporation upon a determination that
indemnification is proper in the circumstances. The determination must be
made: (i) by the Board of Directors by a majority vote of such quorum
consisting of Disinterested Directors, (ii) by Independent Counsel in a
written opinion, if a quorum of the Board of Directors consisting of
Disinterested Directors is not obtainable or, even if obtainable, a majority
vote of such quorum of Disinterested Directors so directs, or (iii) by the
stockholders of the Corporation; provided, however, that if a Change of
Control, as hereinafter defined, shall have occurred, no determination of
entitlement to indemnification adverse to the claimant shall be made other
than one made or concurred in by Independent Counsel, selected as provided
in Paragraph (d) of this Section 3, in a written opinion.
(c) If the determination of entitlement to indemnification is to be made
by Independent Counsel in the absence of a Change of Control, the
Corporation shall furnish notice to the claimant within ten (10) days after
receipt of the application for indemnification, specifying the identity and
address of Independent Counsel. The claimant may, within fourteen (14) days
after receipt of such written notice of selection, deliver to the
Corporation a written objection to such selection, subject to
7
<PAGE>
Paragraph (e) of this Section 3. If such an objection is made, either the
Corporation or the claimant may petition any court of competent
jurisdiction for a determination that the objection is without a reasonable
bases and/or for the appointment as Independent Counsel of counsel selected
by the Court.
(d) If there has been a Change of Control, Independent Counsel to act
as and to the extent required by Paragraph (b) of this Section 3 shall be
selected by the claimant, who shall give the Corporation written notice
advising of the identity and address of the Independent Counsel so selected.
The Corporation may, within seven (7) days after receipt of such written
notice of selection, deliver to the claimant a written objection to such
selection, subject to Paragraph (e) of this Section 3. The claimant may,
within five (5) days after the receipt of such objection, select other
counsel to act as Independent Counsel, and the Corporation may, within seven
(7) days after receipt of such written notice of selection, deliver to the
claimant a written objection, as aforesaid, to such second selection. In the
case of any such objection, the claimant may petition any Court of competent
jurisdiction for a determination that the objection is without a reasonable
basis and/or for the appointment as Independent Counsel of counsel selected
by the Court.
(e) Any objection to the selection of Independent Counsel may be
asserted only on the ground that the counsel so selected does not qualify as
Independent Counsel under the definition contained in Section 8 of this
Article VII, and the objection shall set forth with particularity the basis
of such assertion. No counsel selected by the Corporation or by the claimant
may serve as Independent Counsel if a timely objection has been made to his
selection unless a Court has determined that such objection is without a
reasonable basis.
(f) The Corporation shall pay any and all reasonable fees and expenses
of Independent Counsel acting pursuant to this Article VII and in any
proceeding to which such counsel is a party or a witness in respect of its
investigation and report. The Corporation shall pay all reasonable fees and
expenses incident to the procedures of this Section 3 regardless of the
manner in which Independent Counsel is selected or appointed.
SECTION 4. Presumptions and Effect of Certain Proceedings. (a) A person
referred to in Section 1 of this Article VII claiming a right to indemnification
under this Article VII shall be presumed (except as may be otherwise expressly
provided in this Article VII or required by applicable law) to be entitled to
such indemnification upon submission of an application for indemnification in
accordance with Section 3, and the Corporation shall have the burden of proof to
overcome the presumption by clear and convincing evidence in any determination
contrary to the presumption.
(b) Unless the determination is to be made by Independent Counsel, if
the person or persons empowered under Section 3 of this Article VII to
determine entitlement to indemnification shall not have made and furnished
the determination in writing to the claimant within sixty (60) days after
receipt by the Corporation of the application for indemnification, the
determination of entitlement to indemnification, shall be deemed to have
been made in favor of the claimant unless the claimant knowingly
misrepresented a material fact in connection with the application or such
indemnification is prohibited by law. The termination of any Proceeding
described in Section 1 of this Article VII, or of any claim, issue or matter
therein, by judgment, order, settlement or conviction, or upon a plea of
nolo contendere or its equivalent, shall not (except as may be otherwise
expressly provided in this Article
8
<PAGE>
VII or required by applicable law) of itself adversely affect the right of
a claimant to indemnification or create a presumption that a claimant did
not act in good faith and in a manner which he reasonably believed to be in
or not opposed to the best interests of the Corporation, or with respect to
any criminal Proceeding, that he had reasonable cause to believe that his
conduct was unlawful.
SECTION 5. Right of Claimant to Bring Suit. (a) If (i) a determination is
made pursuant to the procedures contemplated by Section 3 of this Article VII
that a claimant is not entitled to indemnification under this Article VII, (ii)
advancement of Expenses is not timely made pursuant to Paragraph (c) of Section
2 of this Article VII, (iii) Independent Counsel has not made and delivered a
written opinion as to entitlement to indemnification within ninety (90) days
after the selection or appointment of counsel has become final by virtue of the
lapse of time for objection or the overruling of objections or appointment of
counsel by a Court, or (iv) payment of a claim for indemnification is not made
within ten (10) days after a favorable determination of entitlement to
indemnification has been made or deemed to have been made pursuant to Section 3
or 4 of this Article VII, the claimant shall be entitled to bring suit against
the Corporation to establish his entitlement to such indemnification or
advancement of Expenses and to recover the unpaid amount of his claim. Neither
the failure of the Corporation (including its Board of Directors, Independent
Counsel or its stockholders) to have made a determination prior to the
commencement of such action that indemnification of the claimant is proper under
the circumstances, nor an actual determination by the Corporation (including its
Board of Directors, Independent Counsel or its stockholders) that
indemnification is not proper in the circumstances, shall be a defense to the
action or create a presumption that indemnification is not proper in the
circumstances, and the claimant shall be entitled to a de novo trial on the
merits as to any such matter as to which no determination or an adverse
determination has been made.
(b) If a claimant is successful in whole or in part in prosecuting any
claim referred to in Paragraph (a) of this Section 5, the claimant shall
also be entitled to recover from the Corporation, and shall be indemnified
by the Corporation against, any and all Expenses actually and reasonably
incurred by him in prosecuting such claim if such Expenses have not already
been paid by the Corporation.
SECTION 6. Non-Exclusivity, Insurance and Survival of Rights. The rights of
indemnification and to receive advancement of Expenses contemplated by this
Article VII shall not be exclusive of any other right to which any person may at
any time be entitled under any applicable law, provision of the Articles of
Incorporation, bylaw, agreement, vote of stockholders or resolution of
directors, or otherwise. Without limiting the generality of the foregoing, the
Corporation may, by action of its Board of Directors, provide indemnification to
other employees and agents of the Corporation with the same or lesser scope and
effect as the indemnification of directors and officers authorized by this
Article VII.
The Corporation may purchase and maintain insurance or make other financial
arrangements on behalf of any person who is or was a director, officer, employee
or agent of the Corporation, or is or was serving at the request of the
Corporation as a director, officer, employee or agent of another corporation,
partnership, joint venture, trust or other enterprise for any liability asserted
against him and liability and expenses incurred by him in this capacity as a
director, officer,
9
<PAGE>
employee or agent, or arising out of his status as such, whether or not the
Corporation has the authority to indemnify him against such liability and
expenses under the Corporation Law of Nevada.
The other financial arrangements made by the Corporation may include the
following:
(a) The creation of a trust fund.
(b) The establishment of a program of self-insurance.
(c) The securing of its obligation of indemnification by granting a
security interest or other lien on any assets of the Corporation.
(d) The establishment of a letter of credit, guaranty or surety.
No financial arrangement made pursuant to this subsection may provide
protection for a person adjudged by a court of competent jurisdiction, after
exhaustion of all appeals therefrom, to be liable for intentional misconduct,
fraud or a knowing violation of law, except with respect to the advancement of
expenses or indemnification ordered by a court.
The right to indemnification conferred in this Article VII shall be a
contract right, and no amendment, alteration or repeal of this Article VII or
any provision thereof shall restrict the indemnification rights granted by this
Article VII as to any person claiming indemnification with respect to acts,
events and circumstances that occurred, in whole or in part, before such
amendment, alteration or repeal. The provisions of this Article VII shall
continue as to a person who has ceased to be a director or officer and shall
inure to the benefit of his heirs, executors and administrators.
SECTION 7. Severability. If any provision of this Article VII shall be held
to be invalid, illegal or unenforceable for any reason whatsoever, the validity,
legality and enforceability of the remaining provisions shall not in any way be
affected or impaired thereby; and, to the fullest extent possible, the
provisions of this Article VII shall be construed so as to give effect to the
intent manifested by the provision held invalid, illegal or unenforceable.
SECTION 8. Definitions. For purposes of this Article VII:
(a) "Change of Control" 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 Corporation representing thirty percent (30%) or more of
the combined voting power of the Corporation'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 Corporation before the
Transaction shall cease to constitute a majority of the Board of Directors
of the Corporation or any successor to the Corporation; (iii) the
Corporation is merged or consolidated with another corporation, and as a
result of such merger or consolidation less than seventy percent (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
Corporation, 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 Corporation
representing thirty percent (30%) or more of the combined voting power of
the
10
<PAGE>
Corporation's then outstanding voting securities; or (v) the Corporation
transfers substantially all of its assets to another corporation that is
not a wholly-owned corporation of the Corporation.
(b) "Disinterested Director" means a director of the Corporation who is
not and was not a party to the Proceeding in respect of which
indemnification is sought as provided in this Article VII.
(c) "Expenses" shall include all reasonable attorneys' fees, retainers,
court costs, transcript costs, fees of experts, witness fees, travel
expenses, duplicating costs, printing and binding costs, telephone charges,
postage, delivery service fees, and all other disbursements or expenses of
the types customarily incurred in connection with prosecuting, defending,
preparing to prosecute or defend, investigating, or being or preparing to be
a witness in a Proceeding.
(d) "Independent Counsel" means a law firm, or a member of a law firm,
with substantial experience in matters of corporation law and that neither
presently is, nor in the five (5) years previous to his selection or
appointment has been, retained to represent: (i) the Corporation or person
claiming indemnification in any matter material to either, or (ii) any other
party to the Proceeding giving rise to a claim for indemnification
hereunder, and is not otherwise precluded under applicable professional
standards from acting in the capacity herein contemplated.
(e) "N.R.S." means the Nevada Revised Statutes.
ARTICLE VIII
AMENDMENTS
Subject to the provisions of the Articles of Incorporation, these Bylaws may
be altered, amended or repealed at any regular meeting of stockholders (or at
any special meeting thereof duly called for that purpose) only by the
affirmative vote of the holders of at least eighty percent (80%) of the voting
power of all shares of the Corporation represented at such meeting and entitled
to vote generally in the election of directors, voting together as a class,
provided that in the notice of any such special meeting notice of such purpose
shall be given. Subject to the laws of the State of Nevada, the Articles of
Incorporation and these Bylaws, the Board of Directors may alter, amend or
repeal these Bylaws, or enact such other Bylaws as in their judgment may be
advisable for the regulation of the conduct of the affairs of the Corporation,
by majority vote of those present at any meeting of the Board of Directors at
which a quorum is present (except so far as Bylaws adopted by stockholders shall
otherwise provide).
March 1, 1994
11
<PAGE>
PAPUA NEW GUINEA
DEPARTMENT OF
MINING AND PETROLEUM
OFFICE OF THE REGISTRAR
OF TENEMENTS
[Emblem of The Independent State of Papua New Guinea]
GRANT
SPECIAL MINING LEASE NO.6
KENNECOTT EXPLORATIONS (AUSTRALIA) LTD
NIUGINI MINING LIMITED
MINERAL RESOURCES LIHIR PTY LIMITED
<PAGE>
[Emblem of The Independent State of Papua New Guinea]
INDEPENDENT STATE OF PAPUA NEW GUINEA
Mining Act 1992
Mining Regulation 1992
Act, Sec. 33, 36. Form 3.
Reg. Sec 2
SPECIAL MINING LEASE No.6
I, WIWA KOROWI, G.C.M.G., K.St.J, Governor-General of the Independent State of
Papua New Guinea (the State) by virtue of the powers conferred by the Mining Act
1992 (the Act) and all powers me enabling, and in accordance with the Mining
Development Contract dated 17th March, 1995 acting with and in accordance with
the advice of the National Executive Council, HEREBY GRANT to Kennecott
Explorations (Australia) Ltd, a company incorporated in Delaware, U.S.A. and
registered as a foreign company in Papua New Guinea with its registered office
at 7th Floor, Pacific Place, Musgrave Street, Port Moresby, Papua New Guinea,
and Niugini Mining Limited, a company incorporated in Papua New Guinea with its
registered office at Allotment 3, Section 2, Kainantu, Papua New Guinea, and
Mineral Resources Lihir Pty Limited, a company incorporated in Papua New Guinea
with its registered office at 8th Floor, Investment Haus, Douglas Street, Port
Moresby (collectively referred to as the "Lessee") Special Mining Lease No.6
(the "Lease") over land situated near Potzlaka Government Station, Lihir Island
in the New Ireland Province and more particularly described in Appendix 1 (the
"Land"), as may be varied from time to time, for a term of Forty (40) years from
the date hereof, and such extensions of the term as may be endorsed hereon for
the purpose of mining minerals in accordance with the Act and subject to the
following conditions:-
(1) The Lessee shall comply with the Approved Proposal for Development attached
hereto as Appendix 2, as may be varied from time to time;
(2) Without limiting the obligations imposed on the Lessee, the Lessee shall
compensate the owners of land which is located within the boundaries of
this Special Mining Lease in accordance with the Act and the Approved
Proposal for Development;
(3) The Lessee shall provide the Department of Mining and Petroleum with six
monthly reports on any exploration activity carried out on the Land;
(4) The Lessee shall construct or provide improvements on the Land,
substantially as specified in the Approved Proposal for Development, or as
otherwise agreed from time to time between the Lessee and the State;
<PAGE>
(5) The Lessee shall not, without the consent of the State, which consent shall
not be unreasonably withheld, use the Land for any purpose other than for
which it was granted pursuant to the Mining Development Contract, the Act
and the Approved Proposal for Development;
(6) The Lessee shall use its best efforts to accommodate traditional land uses
to the degree that such uses are consistent with efficient and safe mining
practices and are compatible with the performance of the Lessees'
obligations under the Mining Development Contract;
(7) This Special Mining Lease, or any renewal thereof, may not be cancelled
under the Mining Act unless the Mining Development Contract has been
terminated and therefore this Special Mining Lease shall only terminate:
(a) if the Mining Development Contract is properly terminated in accordance
with its terms or by the agreement of all the parties to the Mining
Development Contract for the time being; or
(b) on the expiry of its term including any extension thereof,
whichever occurs first.
(8) Reference to the "Mining Development Contract" in this Lease means the
mining development contract between Kennecott Explorations (Australia) Ltd,
Niugini Mining Limited, Mineral Resources Lihir Pty Limited and the State
dated 17th March, 1995 ("MDC-1") and includes a reference to the Mining
Development Contract between Lihir Gold Pty Limited and the State of the
same date ("MDC-2") which is proposed to replace MDC-1 on satisfaction of
the condition precedent in Clause 2.3 of MDC-2, and for the purposes of
condition 7, the Mining Development Contract shall not be taken to have
been terminated if MDC-1 is terminated and replaced by MDC-2.
Dated at PORT MORESBY this SEVENTEENTH day of MARCH 1995
Signed for and on behalf of the )
INDEPENDENT STATE OF PAPUA )
NEW GUINEA by the Governor-General )
Sir Wiwa Korowi, G.C.M.G., K.St.J acting )
with the advice of the National Executive)
Council in the presence of: ) /s/ Sir Wiwa Korowi
-----------------------------
/s/ Sir Julius Chan
- - -----------------------------
Witness
Name (printed): Sir Julius Chan
<PAGE>
Endorsement for Extensions of Term
<TABLE>
<CAPTION>
Period Extended Signature
(Years) Governor-General Witness Date
<S> <C> <C> <C>
__________ ______________ _______________ _____________
__________ ______________ _______________ _____________
__________ ______________ _______________ _____________
__________ ______________ _______________ _____________
</TABLE>
ACCOMPANYING APPENDIXES
Appendix 1. Description of boundary
Appendix 2. Approved Proposal for Development
<PAGE>
[Emblem of The Independent State of Papua New Guinea]
APPENDIX 1
TO ACCOMPANY GRANT DOCUMENT FOR SML 6
BOUNDARY DESCRIPTION FOR SPECIAL MINING LEASE NO.6 - LIHIR
<TABLE>
<S> <C> <C> <C> <C> <C> <C> <C> <C>
A line starting at 3 degrees 07 feet 15.4 inches S 152 degrees 39 feet 23.8 inches E
then to 3 degrees 07 feet 16.0 inches S 152 degrees 39 feet 24.0 inches E
then to 3 degrees 07 feet 17.6 inches S 152 degrees 39 feet 22.9 inches E
then to 3 degrees 07 feet 20.0 inches S 152 degrees 39 feet 21.6 inches E
then to 3 degrees 07 feet 21.1 inches S 152 degrees 39 feet 22.4 inches E
then to 3 degrees 07 feet 25.7 inches S 152 degrees 39 feet 23.2 inches E
then to 3 degrees 07 feet 30.3 inches S 152 degrees 39 feet 16.1 inches E
then to 3 degrees 07 feet 31.6 inches S 152 degrees 39 feet 14.1 inches E
then to 3 degrees 07 feet 35.0 inches S 152 degrees 39 feet 11.6 inches E
then to 3 degrees 07 feet 33.3 inches S 152 degrees 39 feet 09.6 inches E
then to 3 degrees 07 feet 34.4 inches S 152 degrees 39 feet 06.3 inches E
then to 3 degrees 07 feet 36.8 inches S 152 degrees 39 feet 01.2 inches E
then to 3 degrees 07 feet 33.4 inches S 152 degrees 38 feet 55.7 inches E
then to 3 degrees 07 feet 34.4 inches S 152 degrees 38 feet 55.1 inches E
then to 3 degrees 07 feet 35.2 inches S 152 degrees 38 feet 54.9 inches E
then to 3 degrees 07 feet 36.3 inches S 152 degrees 38 feet 54.8 inches E
then to 3 degrees 07 feet 37.8 inches S 152 degrees 38 feet 55.1 inches E
then to 3 degrees 07 feet 39.3 inches S 152 degrees 38 feet 55.6 inches E
then to 3 degrees 07 feet 40.4 inches S 152 degrees 38 feet 55.3 inches E
then to 3 degrees 07 feet 41.8 inches S 152 degrees 38 feet 55.6 inches E
then to 3 degrees 07 feet 43.2 inches S 152 degrees 38 feet 55.3 inches E
then to 3 degrees 07 feet 44.3 inches S 152 degrees 38 feet 54.5 inches E
</TABLE>
<PAGE>
<TABLE>
<S> <C> <C> <C> <C> <C> <C> <C> <C>
then to 3 degrees 07 feet 45.2 inches S 152 degrees 38 feet 53.9 inches E
then to 3 degrees 07 feet 46.5 inches S 152 degrees 38 feet 53.7 inches E
then to 3 degrees 07 feet 47.8 inches S 152 degrees 38 feet 53.9 inches E
then to 3 degrees 07 feet 48.3 inches S 152 degrees 38 feet 54.5 inches E
then to 3 degrees 07 feet 49.6 inches S 152 degrees 38 feet 54.7 inches E
then to 3 degrees 07 feet 50.5 inches S 152 degrees 38 feet 54.9 inches E
then to 3 degrees 07 feet 51.2 inches S 152 degrees 38 feet 54.7 inches E
then to 3 degrees 07 feet 52.2 inches S 152 degrees 38 feet 54.3 inches E
then to 3 degrees 07 feet 58.5 inches S 152 degrees 38 feet 52.9 inches E
then to 3 degrees 08 feet 24.4 inches S 152 degrees 38 feet 45.1 inches E
then to 3 degrees 08 feet 32.0 inches S 152 degrees 38 feet 28.9 inches E
then to 3 degrees 08 feet 39.8 inches S 152 degrees 38 feet 18.0 inches E
then to 3 degrees 08 feet 49.7 inches S 152 degrees 38 feet 06.8 inches E
then to 3 degrees 08 feet 55.9 inches S 152 degrees 37 feet 56.6 inches E
then to 3 degrees 08 feet 57.3 inches S 152 degrees 37 feet 47.0 inches E
then to 3 degrees 08 feet 55.7 inches S 152 degrees 37 feet 40.3 inches E
then to 3 degrees 08 feet 53.5 inches S 152 degrees 37 feet 32.9 inches E
then to 3 degrees 08 feet 49.5 inches S 152 degrees 37 feet 22.5 inches E
then to 3 degrees 08 feet 48.9 inches S 152 degrees 37 feet 21.8 inches E
then to 3 degrees 08 feet 41.1 inches S 152 degrees 37 feet 10.6 inches E
then to 3 degrees 08 feet 31.5 inches S 152 degrees 37 feet 06.0 inches E
then to 3 degrees 08 feet 22.0 inches S 152 degrees 36 feet 59.5 inches E
then to 3 degrees 08 feet 04.8 inches S 152 degrees 36 feet 56.2 inches E
then to 3 degrees 07 feet 51.9 inches S 152 degrees 36 feet 55.6 inches E
then to 3 degrees 07 feet 37.4 inches S 152 degrees 36 feet 54.6 inches E
then to 3 degrees 07 feet 18.8 inches S 152 degrees 37 feet 01.0 inches E
</TABLE>
<PAGE>
<TABLE>
<S> <C> <C> <C> <C> <C> <C> <C> <C>
then to 3 degrees 07 feet 10.1 inches S 152 degrees 37 feet 04.0 inches E
then to 3 degrees 06 feet 59.1 inches S 152 degrees 37 feet 05.2 inches E
then to 3 degrees 06 feet 40.4 inches S 152 degrees 37 feet 12.9 inches E
then to 3 degrees 06 feet 21.2 inches S 152 degrees 37 feet 22.7 inches E
then to 3 degrees 06 feet 08.7 inches S 152 degrees 37 feet 31.5 inches E
then to 3 degrees 06 feet 03.7 inches S 152 degrees 37 feet 37.6 inches E
then to 3 degrees 05 feet 57.6 inches S 152 degrees 37 feet 52.1 inches E
then to 3 degrees 05 feet 48.8 inches S 152 degrees 38 feet 00.3 inches E
then to 3 degrees 05 feet 47.3 inches S 152 degrees 38 feet 02.1 inches E
then to 3 degrees 05 feet 44.5 inches S 152 degrees 38 feet 03.8 inches E
then to 3 degrees 05 feet 43.5 inches S 152 degrees 38 feet 06.1 inches E
then to 3 degrees 05 feet 44.4 inches S 152 degrees 38 feet 08.3 inches E
then to 3 degrees 05 feet 44.4 inches S 152 degrees 38 feet 11.3 inches E
then to 3 degrees 05 feet 45.5 inches S 152 degrees 38 feet 13.9 inches E
then to 3 degrees 05 feet 44.7 inches S 152 degrees 38 feet 15.9 inches E
then to 3 degrees 07 feet 15.4 inches S 152 degrees 39 feet 23.8 inches E
</TABLE>
being the point of commencement.
Total area of lease 1739 hectares
<PAGE>
APPENDIX II
<PAGE>
[LETTERHEAD OF OFFICE OF THE MINISTER
MINISTRY OF MINING AND PETROLEUM]
10 March 1995
Kennecott Exploration (Australia) Ltd
7th Floor Pacific Place
Musgrave Street
Port Moresby
Niugini Mining Limited
Allotment 3, Section 2
Kainantu
Dear Sirs,
RE: LIHIR PROJECT
I am pleased to advise that under Section 43(5) of the Mining Act 1992, I
approve the proposal for development for the Lihir Project as submitted by you
on the 1st March 1995.
Yours faithfully,
/s/ Hon. John Giheno
HON. JOHN GIHENO, MP
Minister for Mining and Petroleum
<PAGE>
LIHIR PROJECT
PROPOSAL FOR DEVELOPMENT
To: The Minister for Mining and Petroleum
as the representative of the Independent State of Papua New Guinea
(the "State")
Department of Mining and Petroleum
Konedobu
Papua New Guinea
1. INTRODUCTION
1.1 Kennecott Explorations (Australia) Ltd. ("Kennecott"), a related
corporation of The RTZ Corporation PLC ("RTZ"), and Niugini Mining Limited
("Niugini") are the holders of Exploration Licence No. 485 covering Lihir
Island in Papua New Guinea, which was first granted as a prospecting
authority on 19 June 1983 for two years and has successively been extended
for further periods until 30 March 1996 (the "Exploration Licence").
1.2 Under the Exploration Licence, first Kennecott on behalf of itself and
Niugini and subsequently Lihir Management Company Pty Limited as manager on
behalf of Kennecott and Niugini have carried out extensive exploration and
associated investigations and studies to determine the feasibility of
developing, mining and processing the body of gold-bearing ore in or near
the caldera surrounding Luise Harbour on Lihir Island (the "Development
Area"). The results of this work are set out in the Feasibility Report
dated March 1992, the Feasibility Report Amendment dated September 1993 and
the Feasibility Report Amendment No. 2 dated October 1994, the volumes of
which are listed in Schedule 1 to this Proposal (the "Feasibility Report").
These have been submitted to the State for review together with the
supporting studies and associated plans also listed in Schedule 1.
1.3 Kennecott and Niugini, as Joint Venturers, entered into a Joint Venture
Agreement dated 10 May 1990 which was amended and restated on 6 August 1993
and is about to be further amended by a Deed of Accession and Amendment in
February or March 1995 (the "Joint Venture Agreement") for the further
exploration and the development, mining and processing of the ore body in
the Development Area (the "Project").
1.4 Kennecott and Niugini are about to enter an agreement with the State (the
"State Equity Acquisition Agreement") whereby Mineral Resources Lihir Pty
Limited as the State's nominee (the "Nominee") will acquire a 30% interest
in the Project under and in accordance with the Joint Venture Agreement.
1.5 Kennecott and Niugini hereby submit this document as their proposal for
development of the ore bodies in the Development Area and associated
processing facilities and infrastructure which will, subject to the
conditions specified in Section 3 below and
<PAGE>
2.
following its approval by the State, become an Approved Proposal for
Development for the purposes of the Special Mining Lease covering the
Development Area and the Mining Development Contract (the "MDC") to be
entered into between the State on the one hand and Kennecott, Niugini and
the Nominee as Joint Venturers (the "Joint Venturers") on the other.
1.6 It is intended that the Project will be commenced by the Joint Venturers
but that:
(a) a Papua New Guinea company to be called Lihir Gold Limited will be
incorporated, owned initially by the Joint Venturers or their assignees, to
take over the Project (the "Company");
(b) the Company will make arrangements to raise money by a public issue of its
shares and debt finance for the purpose of funding the Project;
(c) when these arrangements are in place, Kennecott, Niugini and the Nominee or
their assignees will transfer their interests in the Project to the Company
in consideration for an issue of its shares; and
(d) thereafter, the Project will be carried on by the Company.
2. PROPOSAL
2.1 Subject to Sections 2.2, 3 and 4 below, and to the State performing its
obligations under the MDC, Kennecott and Niugini hereby propose that the
Project be developed as described in Volumes 4, 5, 7, 8 and 9 of the
Feasibility Report (as amended by the two Feasibility Report Amendments)
which will also involve the implementation of:
(a) the environmental management and protection measures and controls included
in Sections 4, 8 and 10 of Volume B of the Final Environmental Plan
referred to in Schedule 1;
(b) the employee training proposals in the Training Plan referred to in
Schedule 1;
(c) the proposals concerning business development in the Business Development
Plan referred to in Schedule 1; and
(d) the proposals to raise debt and equity funds in the Financial Plan referred
to in Schedule 1.
2.2 In addition, in constructing the infrastructure facilities described in
Volume 8 of the Feasibility Report, Kennecott and Niugini will observe and
implement, and expect the State to observe and implement, the additional
infrastructure requirements set out in Schedule 2. However, Kennecott and
Niugini shall not be obliged to construct and bring into operation any
infrastructure facilities which the State or an agency or instrumentality
of the State agrees to provide under the MDC.
<PAGE>
3.
3. CONDITIONS
3.1 This Proposal and any commitments resulting from this Proposal are subject
to and conditional upon the following conditions precedent:
(a) Execution of the State Equity Acquisition Agreement and payment or securing
of the full Purchase Price thereunder.
(b) Acceptance and approval of this Proposal and the Feasibility Report by the
State. Any amendments to the Proposal required by the State will subject
the whole Proposal, as amended, to approval by the Boards of Directors of
RTZ and Niugini.
(c) Execution of the MDC by the State and the Joint Venturers, and the grant by
the Head of State of a Special Mining Lease (SML) to the Joint Venturers in
accordance with the MDC, with provision being made for a substitute MDC
between the State and the Company to come into effect and for the SML to be
transferred to the Company when it assumes the obligations of the Joint
Venturers to carry out the Project.
(d) Completion of satisfactory financing arrangements by the Company,
including:
(i) approval by the Minister for Finance and Planning of the final
Financial Plan to be submitted by the Company which will, upon
approval, be included as part of this Proposal;
(ii) loan agreements for the provision of external finance on the terms
contemplated by the Financial Plan having been executed;
(iii) such loan agreements and any shareholder loan agreements having been
approved unconditionally by the Bank of Papua New Guinea as
"Approved Loan Finance" under the MDC; and
(iv) closing of the initial public offering of shares in the Company and
receipt by the Company of the subscription moneys for such shares.
(e) Execution of agreements with Lihir landowners concerning relocation and
compensation.
4. QUALIFICATIONS
4.1 This Proposal and each of the items set out in Section 2 above are to be
read subject to the qualifications that:
(a) substantial not exact compliance with the relevant sections of the
Feasibility Report will be achieved;
<PAGE>
4.
(b) if a capacity or rate referred to in the Feasibility Report is
substantially achieved or exceeded, the Proposal will have been
fulfilled;
(c) the Proposal will be read and construed as varied or modified in
accordance with the MDC; and
(d) minor and inconsequential variations (whether intended or not) will be
ignored.
4.2 When the Project is transferred to the Company as contemplated by Section
1.6 above, the Company will execute an instrument assuming the obligation
to the State to carry out the Project in accordance with the Proposal, and
thereupon or by the execution of ancillary documents associated with the
transfer of the Project each of Kennecott, Niugini and the Nominee shall be
released and discharged from the obligations arising under or by virtue of
this Proposal (including obligations arising under documents referred to in
this Proposal).
4.3 This Proposal, and any commitments resulting from this Proposal upon
fulfilment of the Conditions in Section 3, will be governed by the law of
Papua New Guinea.
DATED this First day of March 1995
/s/ Dr. Andrew Vickerman /s/ Geoff Loudon, Chairman
- - ---------------------------------- ---------------------------------
Attorney Director
for and on behalf of for and on behalf of
KENNECOTT EXPLORATIONS NIUGINI MINING
AUSTRALIA LTD. LIMITED
<PAGE>
5.
SCHEDULE 1
FEASIBILITY REPORT
Volume No. Title
1 Summary
2 Geology and Mineral Resources
3 Geotechnical Investigations
4 Mine Dewatering and Geothermal Control
5 Mine Planning
6 Metallurgy
7 Mine and Process Plant
8 Infrastructure
9 Project Implementation
10 Capital and Operating Costs
11 Economic Evaluation
12 Feasibility Report Amendment
13 Feasibility Report Amendment No.2
SUPPORT STUDIES
Supply and Procurement Study (submitted to the State in April 1992)
Land Ownership Study (submitted to the State in April 1992)
ASSOCIATED PLANS
Final Environmental Plan (submitted to the State in April 1992)
Training Plan (submitted to the State in April 1992)
Business Development Plan (submitted to the State in April 1992)
Financial Plan (to be submitted)
<PAGE>
6.
SCHEDULE 2
ADDITIONAL INFRASTRUCTURE REQUIREMENTS
AIRPORT
Third parties will be able to use the airstrip and air terminal facilities on
Lihir Island constructed for the Project.
INTERNATIONAL PRIMARY SCHOOL
Lihirians who can pay the fees and meet the normal criteria will be able to
attend the school.
COMMUNICATIONS
Sufficient telephone services will be available on Lihir Island in the
Development Area for Government, business and private use on normal commercial
terms.
POLICE
During construction, transport and accommodation will be provided for five
police officers on a commuter basis from Rabaul and Kavieng.
During operations, five houses and a standard two cell police station will be
provided.
One year after Commencement of Commercial Production, police numbers are to be
reviewed. If it is agreed that additional police are required on Lihir Island,
the Company will provide housing for up to six additional officers.
PUTPUT WHARF
General cargo for the Project will be unloaded at Putput wharf (when ships,
because of their size, cannot berth at the Londolovit wharf) and transported to
third parties who will be billed for stevedoring services.
WATER SUPPLIES
Alternative water supplies to any affected village will be installed before any
existing supplies are disturbed by the Project.
HEALTH FACILITY
The medical centre will include a community clinic with public ward facilities
open to the general public. The State has undertaken to contribute funding to
the construction and operation of this facility.
<PAGE>
7.
LONDOLOVIT LAYOUT
The layout of the Londolovit area will ensure land is available for future
development by the State and at State expense of a Provincial High School.
PUBLIC ROADS
The State has undertaken to upgrade and seal the island ring road. The section
of the ring road which is the responsibility of the Project will be upgraded and
sealed on the same schedule and to the same standard as the work to be
undertaken by the State.
ACCOMMODATION ARRANGEMENTS
The Feasibility Report envisages non-Lihirian Papua New Guinean employees
working a fly-in fly-out commuting schedule.
Non-Papua New Guinean employees will not work a fly-in fly-out commuting
schedule during mining operations but will be accommodated in either single
status or married accommodation on Lihir Island. Such project employees
(including contractors) on single status will have a maximum of six field breaks
per year.
<PAGE>
Agreement
WHEREAS, Battle Mountain Gold Company (the "Company") established and
maintains the Battle Mountain Gold Company Supplemental Executive Retirement
Plan, effective March 1, 1995 ("SERP"); and
WHEREAS, the SERP provides that it replaces for the employee signing below
(the "Employee"): (1) the Battle Mountain Gold Company Executive Supplemental
Retirement Income Plan, which was effective January 1, 1987 (the "Prior Plan"),
and (2) the Executive Supplemental Retirement Income Agreement between the
Company and Employee (the "Prior Agreement"); and that benefits may not be paid
under both the Prior Agreement and the SERP; and
WHEREAS, the Company and the Employee wish to express their agreement to
the SERP, but to modify the Company's right to amend and terminate the SERP with
respect to the Employee to reflect the provisions set forth in the Prior Plan.
NOW, THEREFORE, the parties agree that effective March 1, 1995, the Prior
Agreement terminated and the Employee stopped participating in the Prior Plan
and became a participant in the SERP and that notwithstanding anything to the
contrary in the SERP, the benefits promised to the Employee under the SERP
cannot be modified, amended or terminated except by a writing executed by both
the Company and the Employee.
IN WITNESS WHEREOF, the Company and Employee have caused this Agreement to
be executed on this ______ day of September, 1995, to be effective on March 1,
1995.
BATTLE MOUNTAIN GOLD COMPANY
_________________________________ By:_________________________________
Employee Name, Employee
<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 Nine Months Ended
September 30, September 30,
------------------------- ------------------------
1995 1994 1995 1994
----------- ------------ ----------- -----------
<S> <C> <C> <C> <C>
PRIMARY EARNINGS PER SHARE
Earnings
Net income $ 2,753 $ 1,451 $ 12,863 $ 7,383
Deduct dividends on preferred shares 1,869 1,868 5,606 5,606
----------- ----------- ----------- -----------
Net income applicable to common stock $ 884 $ (417) $ 7,257 $ 1,777
=========== =========== =========== ===========
Shares
Weighted average number of common
shares outstanding 81,064,104 80,887,150 81,004,617 80,604,867
Assuming exercise of stock options
reduced by the number of
shares which could have been
purchased with the proceeds from
exercise of such options 452,363 - 466,470 540,037
Assuming conversion of 6% convertible
debentures 4,848,485 - 4,848,485 4,848,485
----------- ----------- ----------- -----------
Weighted average number of common
shares outstanding, as adjusted 86,364,952 80,887,150 86,319,573 85,993,389
=========== =========== =========== ===========
Primary earnings per common share $.01 $(.01) $.08 $.02
=========== =========== =========== ===========
FULLY DILUTED EARNINGS PER SHARE (1)
Earnings
Net income $ 2,753 $ 1,451 $ 12,863 $ 7,383
=========== =========== =========== ===========
Shares
Weighted average number of common
shares outstanding 81,064,104 80,887,150 81,004,617 80,604,867
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 452,358 593,211 490,509 571,566
Assuming conversion of preferred stock 10,952,600 10,952,600 10,952,600 10,952,600
----------- ----------- ----------- -----------
Weighted average number of common
shares outstanding, as adjusted 97,317,547 97,281,446 97,296,211 96,977,518
=========== =========== =========== ===========
Net income per common share assuming
full dilution $.03 $.01 $.13 $.08
=========== =========== =========== ===========
ADDITIONAL PRIMARY COMPUTATION (1)
Net income (loss) applicable to common
stock, as adjusted per primary
computation above $ (417) $ 1,777
=========== ===========
Additional adjustment to weighted average
number of shares outstanding:
Weighted average number of shares
outstanding, as adjusted per primary
computation above 80,887,150 80,604,867
Anti-dilutive effect of outstanding
options( as determined by the application
of the treasury stock method) 546,864 540,037
Anti-dilutive effect of conversion of
6% convertible debentures 4,848,485 4,848,485
Weighted average number of common ----------- -----------
shares, as adjusted 86,262,500 85,993,389
=========== ===========
Primary earnings (loss) per share,
as adjusted $.00 $.02
=========== ===========
</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>
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>
Nine Months ended
September 30,
---------------------------------
1995 1994
---------- -----------
<S> <C> <C>
EARNINGS COMPUTATION USING
CONSOLIDATED INCOME STATEMENT DATA
Income before income taxes and minority $15,907 $11,717
interest
Minority interest in income of (3,768) (3,236)
majority-owned subsidiaries ------- -------
Income before income taxes 12,139 8,481
------- -------
Add fixed charges included in income:
Interest expense 5,241 7,303
Amortization of deferred financing 156 156
costs
Interest portion of rental expenses 646 1,829
(33%) ------- -------
Sub-total fixed charges included in 6,043 9,288
income ------- -------
Income $18,181 $17,769
======= =======
Fixed Charges
Included in income $ 6,043 $ 9,288
Capitalized interest 5,754 4,488
------- -------
Total fixed charges 11,797 13,776
------- -------
Preferred dividends 5,290 6,440
------- -------
Combined fixed charges and preferred $17,087 $20,216
dividends ======= =======
Ratio of earnings to fixed charges 1.54 1.29
Amount by which fixed charges exceed - -
earnings
Ratio of earnings to combined fixed
charges and preferred dividends 1.06 -
Amount by which combined fixed charges
and preferred dividends exceed earnings - 2,447
</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 SEPTEMBER 30,
1995 AND DECEMBER 31, 1994 AND CONDENSED CONSOLIDATED STATEMENTS OF INCOME FOR
THE NINE MONTHS ENDED SEPTEMBER 30, 1995 AND 1994, AND IS QUALIFIED IN ITS
ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> SEP-30-1995
<CASH> 32,897
<SECURITIES> 0
<RECEIVABLES> 28,023
<ALLOWANCES> 0
<INVENTORY> 13,047
<CURRENT-ASSETS> 119,237
<PP&E> 772,055
<DEPRECIATION> (241,436)
<TOTAL-ASSETS> 703,865
<CURRENT-LIABILITIES> 70,976
<BONDS> 0
<COMMON> 8,109
0
110,579
<OTHER-SE> 259,324
<TOTAL-LIABILITY-AND-EQUITY> 703,865
<SALES> 210,483
<TOTAL-REVENUES> 210,483
<CGS> 113,292
<TOTAL-COSTS> 188,090
<OTHER-EXPENSES> 6,069
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 5,241
<INCOME-PRETAX> 15,907
<INCOME-TAX> 725
<INCOME-CONTINUING> 12,864
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 7,257
<EPS-PRIMARY> .08
<EPS-DILUTED> 0
</TABLE>
