<PAGE>
================================================================================
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q/A
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED JUNE 30, 1995
[ ] TRANSITION REPORT PURSUANT TO SECTIONS 13 OR 15(D) OF
THE SECURITIES EXCHANGE ACT OF 1934
FOR THE TRANSITION PERIOD FROM ___________________ TO ___________________
COMMISSION FILE NUMBER 1-9666
BATTLE MOUNTAIN GOLD COMPANY
(EXACT NAME OF THE REGISTRANT AS SPECIFIED IN ITS CHARTER)
Nevada 76-0151431
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
333 Clay Street, 42nd Floor, Houston, Texas 77002
(Address of principal executive offices including Zip Code)
(713) 650-6400
(Registrant's telephone number, including area code)
NONE
(former name, former address and former fiscal year if
changed since last report)
Indicate by check mark whether the registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the Securities Exchange
Act of 1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
Yes X No _______
-------
Number of shares of common stock outstanding as of the latest
practicable date, August 9, 1995: 81,078,593
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<PAGE>
BATTLE MOUNTAIN GOLD COMPANY
INDEX
<TABLE>
<CAPTION>
Page
<S> <C> <C>
Part I. Financial Information
Condensed Consolidated Balance Sheet at
June 30, 1995 and December 31, 1994 1
Condensed Consolidated Statement of Income
for the three and six months ended June 30, 1995 and 1994 2
Condensed Consolidated Statement of Cash Flows
for the six months ended June 30, 1995 and 1994 3
Notes to Condensed Consolidated Financial Statements 4
Statistical Information 5
Management's Discussion and Analysis of Financial Condition
and Results of Operations 7
Part II. Other Information 14
</TABLE>
<PAGE>
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
BATTLE MOUNTAIN GOLD COMPANY
CONDENSED CONSOLIDATED BALANCE SHEET
(UNAUDITED)
(in thousands)
<TABLE>
<CAPTION>
June 30, December 31,
1995 1994
-------- ------------
<S> <C> <C>
ASSETS
Current assets
Cash and cash equivalents $ 34,881 $ 76,464
Accounts receivable 35,913 22,810
Inventories 6,676 5,048
Materials and supplies, at average
cost 27,967 27,730
Other current assets 11,011 7,014
-------- --------
Total Current Assets 116,448 139,066
Investments 46,635 43,405
Net property, plant and equipment 537,129 491,401
Other assets 6,071 5,897
-------- --------
TOTAL ASSETS $706,283 $679,769
======== ========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities
Short term borrowings $ 31,883 $ -
Current maturities of long-term debt 13,430 13,427
Accounts payable 16,549 14,527
Accrued payroll and related benefits 4,655 4,226
Accrued interest 4,053 6,714
Other current liabilities 4,937 3,425
-------- --------
Total Current Liabilities 75,507 42,319
Long-term debt 158,837 165,602
Other liabilities 30,082 32,043
-------- --------
Total Liabilities 264,426 239,964
Minority interest 65,195 64,171
Shareholders' equity 376,662 375,634
-------- --------
TOTAL LIABILITIES AND SHAREHOLDERS'
EQUITY $706,283 $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 Six Months ended
June 30, June 30,
-------------------- --------------------
1995 1994 1995 1994
--------- --------- --------- ---------
<S> <C> <C> <C> <C>
GROSS REVENUE $86,373 $60,180 $142,493 $112,958
Less: Freight, allowances and
royalties 5,110 3,144 7,148 5,005
------- ------- -------- --------
NET SALES 81,263 57,036 135,345 107,953
------- ------- -------- --------
COSTS AND EXPENSES
Mining costs 11,488 10,711 20,454 17,647
Milling and other plant costs 33,456 21,271 56,303 40,228
Depreciation, depletion and
amortization 19,080 12,368 31,438 24,071
Exploration, evaluation and other
lease costs 4,211 3,256 7,433 5,907
Write-off of property, plant and
equipment 2,222 - 2,222 -
General and administrative
expenses 3,465 2,938 6,173 5,830
Taxes, other than income 734 464 1,296 1,060
------- ------- -------- --------
Total 74,656 51,008 125,319 94,743
------- ------- -------- --------
OPERATING INCOME 6,607 6,028 10,026 13,210
Interest income 786 1,039 1,733 2,015
Interest expense (1,533) (1,868) (3,244) (3,726)
Other income(expense), net 5,065 (763) 5,715 (694)
------- ------- -------- --------
INCOME BEFORE INCOME TAXES AND
MINORITY INTEREST 10,925 4,436 14,230 10,805
Income tax expense (832) (224) (1,093) (2,253)
Minority interest (2,463) (1,128) (3,026) (2,620)
------- ------- -------- --------
NET INCOME 7,630 3,084 10,111 5,932
Preferred dividends 1,869 1,869 3,738 3,738
------- ------- -------- --------
NET INCOME TO COMMON SHARES $ 5,761 $ 1,215 $ 6,373 $ 2,194
======= ======= ======== ========
INCOME PER COMMON SHARE $.07 $.01 $.07 $.03
======= ======= ======== ========
DIVIDENDS PER COMMON SHARE $ - $ - $.025 $.025
======= ======= ======== ========
AVERAGE COMMON SHARES OUTSTANDING
FOR INCOME PER SHARE PURPOSES 86,322 86,008 86,310 85,865
</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>
Six months Ended
June 30,
--------------------
1995 1994
--------- ---------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
NET INCOME $ 10,111 $ 5,932
Adjustments to reconcile net income to
cash flows from operating activities:
Depreciation, depletion and
amortization 31,438 24,071
Exploration and evaluation costs 4,757 3,992
Gain on sale of assets (4,190) -
Write-off of property, plant
and equipment 2,222 -
Deferred income tax
expense(benefit) (1,010) 966
Change in current assets and
liabilities (7,933) 6,217
Other changes, net 2,193 4,190
-------- --------
Total Adjustments 27,477 39,436
-------- --------
NET CASH FLOWS FROM OPERATING ACTIVITIES 37,588 45,368
-------- --------
CASH FLOWS USED IN INVESTING ACTIVITIES:
Proceeds from sale of assets 524 -
Acquisition of minority interest - (5,200)
Investment in Crown Jewel
project (2,663) (7,821)
Capital expenditures (92,524) (44,164)
Exploration and evaluation
expenditures (4,679) (4,144)
Other, net (496) 382
-------- --------
NET CASH FLOWS USED IN INVESTING
ACTIVITIES (99,838) (60,947)
-------- --------
CASH FLOWS FROM FINANCING ACTIVITIES:
Cash proceeds from stock
issuances 2,404 6,217
Cash proceeds from borrowings 31,476 -
Cash dividend payments (5,761) (5,746)
Debt repayments (6,860) (7,173)
Other, net (51) -
-------- --------
NET CASH FLOWS FROM FINANCING ACTIVITIES 21,208 (6,702)
-------- --------
EFFECT OF EXCHANGE RATE CHANGES ON CASH
AND CASH EQUIVALENTS (541) 190
-------- --------
NET DECREASE IN CASH AND CASH
EQUIVALENTS (41,583) (22,091)
CASH AND CASH EQUIVALENTS AT BEGINNING
OF PERIOD 76,464 115,338
-------- --------
CASH AND CASH EQUIVALENTS AT END OF
PERIOD $ 34,881 $ 93,247
======== ========
</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.
Milling and other plant costs for 1994 have been restated to include
certain operating mine related divisional and corporate administrative costs
that were previously included in general and administrative costs. This
reclassification caused milling and other plant costs to increase by $1,407,000
and $2,805,000 for the three and six months ended June 30, 1994, respectively.
Note 2. Income Per Common Share
For the three and six months ended June 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. Because the effect
of conversion of the Company's $3.25 convertible preferred stock into common
stock would be anti-dilutive, fully diluted earnings per share are not
presented.
4
<PAGE>
PART I. FINANCIAL INFORMATION - Continued
STATISTICAL INFORMATION (UNAUDITED)
<TABLE>
<CAPTION>
Three months ended Six months ended
June 30, June 30,
--------------------- -------------------
1995 1994(4) 1995 1994(4)
-------- ----------- ------- ----------
<S> <C> <C> <C> <C>
BATTLE MOUNTAIN COMPLEX Operating Data
Production statistics
Gold recovered (000s oz) 21 10 38 22
Silver recovered (000s oz) 60 22 102 46
- ---------------------------------------------------------------------------------
Cost Per Equivalent Gold Ounce (1)
Cash production costs $ 292 $ 269 $ 311 $ 243
Taxes, other than income 9 10 11 13
DD&A 49 191 55 173
----- ----- ----- -----
Total operating costs $ 350 $ 470 $ 377 $ 429
- ---------------------------------------------------------------------------------
SAN LUIS Operating Data
Production statistics
Gold Recovered (000s oz) 19 18 36 38
Silver Recovered (000s oz) 9 4 15 9
- ---------------------------------------------------------------------------------
Cost Per Equivalent Gold Ounce (1)
Cash production costs $ 210 $ 235 $ 229 $ 234
Taxes, other than income 13 9 11 9
DD&A 97 65 96 65
----- ----- ----- -----
Total operating costs $ 320 $ 309 $ 336 $ 308
- ---------------------------------------------------------------------------------
PAJINGO Operating Data
Production statistics
Gold recovered (000s oz) 8 8 16 15
Silver recovered (000s oz) 14 26 32 52
- ---------------------------------------------------------------------------------
Cost Per Equivalent Gold Ounce (1)
Cash production costs $ 144 $ 131 $ 127 $ 171
Taxes, other than income 2 1 2 1
DD&A 86 35 68 37
----- ----- ----- -----
Total operating costs $ 232 $ 167 $ 197 $ 209
- ---------------------------------------------------------------------------------
KORI KOLLO Operating Data
Production statistics
Gold recovered BMG share (000s oz) (2) 73 67 144 133
Silver recovered BMG share (000s oz) (2) 269 272 571 638
Gold recovered (000s oz) 82 76 163 153
Silver recovered (000s oz) 305 309 648 734
- ---------------------------------------------------------------------------------
Cost Per Equivalent Gold Ounce (1)
Cash production costs $ 171 $ 164 $ 165 $ 159
Taxes, other than income - - - -
DD&A 98 98 96 94
----- ----- ----- -----
Total operating costs $ 269 $ 262 $ 261 $ 253
- ---------------------------------------------------------------------------------
</TABLE>
See Page 6 for footnotes
5
<PAGE>
PART I. FINANCIAL INFORMATION - Continued
STATISTICAL INFORMATION (UNAUDITED)
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
June 30, June 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) 12 9 21 17
Silver recovered BMG share (000s oz)(3) 25 26 46 44
Gold recovered (000s oz) 23 19 41 33
Silver recovered (000s oz) 49 49 90 83
- ---------------------------------------------------------------------------------------------------------
Cost Per Equivalent Gold Ounce (1)
Cash production costs $ 244 $ 188 $ 269 $ 257
Taxes, other than income - - - -
DD&A 92 83 87 76
------ ------ ------ ------
Total operating costs $ 336 $ 271 $ 356 $ 333
- ---------------------------------------------------------------------------------------------------------
RED DOME Operating Data
Production statistics
Gold recovered BMG share (000s oz)(3) 14 2 25 6
Silver recovered BMG share (000s oz)(3) 108 17 184 32
Gold recovered (000s oz) 28 5 49 12
Silver recovered (000s oz) 212 33 358 61
Copper recovered (000s lbs) 3,761 2,256 6,303 4,822
- ---------------------------------------------------------------------------------------------------------
Cost Per Equivalent Gold Ounce (1)
Cash production costs $ 186 $ 365 $ 205 $ 327
Taxes, other than income - - - -
DD&A 144 4 87 3
------ ------ ------ ------
Total operating costs $ 330 $ 369 $ 292 $ 330
- ---------------------------------------------------------------------------------------------------------
AGGREGATE DATA
Gold recovered BMG share (000s oz) 147 114 280 231
Gold sales BMG share (000s oz) 154 117 278 229
Gold recovered (000s oz) 181 136 343 273
Gold sales (000s oz) 198 140 340 270
Average price per oz realized $ 384 $ 384 $ 382 $ 384
- ---------------------------------------------------------------------------------------------------------
Silver recovered BMG share (000s oz) 485 367 950 821
Silver sales BMG share (000s oz) 532 372 920 813
Silver recovered (000s oz) 649 443 1,245 985
Silver sales (000s oz) 730 454 1,183 972
Average price per oz realized $ 5.56 $ 5.24 $ 5.18 $ 5.29
- ---------------------------------------------------------------------------------------------------------
Weighted Average Cost
Per Equivalent Gold
Ounce (1)
Cash production costs $ 199 $ 192 $ 201 $ 195
Taxes, other than income 3 2 3 3
DD&A 96 91 87 87
------ ------ ------ ------
Total operating costs $ 298 $ 285 $ 291 $ 285
- ---------------------------------------------------------------------------------------------------------
</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 a 50.5
percent equity interest thereafter.
(4) 1994 costs per equivalent ounce restated to include reallocated divisional
and corporate administrative costs.
6
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
General
This discussion should be read in conjunction with Management's
Discussion and Analysis of Financial Condition and Results of Operations
included in the Company's Annual Report on Form 10-K (File No. 1-9666) for the
year 1994 (1994 Form 10-K) and the historical condensed consolidated financial
statements and notes thereto preceding this discussion.
Liquidity and Capital Resources
Summary
At June 30, 1995, the Company had cash and cash equivalents of $34.9
million, of which $4.6 million was held by BMG, $19.7 million was held by
Niugini Mining and $10.6 million was held by Inti Raymi.
Operating Activities
The Company generated cash flow of $37.6 million from operating
activities during the six months ended June 30, 1995, compared with cash flow
from operations of $45.4 million for the six months ended June 30, 1994.
The decrease in cash flows from operations resulted from several
factors including the temporary delay in the payment of recoverable value added
taxes and import duties due to Inti Raymi from the Bolivian government. The
balance of value added taxes and import duties receivable from the Bolivian
government increased by approximately $6.6 million during the six months ended
June 30, 1995. Cash flow from operations also decreased because of increased
cash basis mining, milling and other plant costs at the Red Dome and the Battle
Mountain Complex mines. Even though accrual basis cash costs per ounce
decreased at these mines compared to last year, cash basis costs have increased
for the following reasons. 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. While the mining costs are being paid they are not being charged
against Red Dome operations. These mining costs are being accumulated and are
included in other current assets on the balance sheet. Mining and crushing
costs related to building the initial leach heaps at the Reona mine are also
being incurred and paid but are not being charged to operations. These costs are
also being accumulated and included in other current assets on the balance
sheet. These accumulated costs will be charged against operations as the ounces
of gold, silver and copper are produced and sold. The balance of these
accumulated mining and crushing costs increased by approximately $4.8 million
during the six months ended June 30, 1995. There were no mining and crushing
costs being accumulated in the first half of 1994 for these mines.
Investing Activities
The Company used cash of $95.2 million, including $2.7 million for the
Crown Jewel project, for capital expenditures during the six months ended June
30, 1995. A total of $115 million is projected to be expended in 1995 on
capital expenditures. The Company has expended approximately $59 million on the
Lihir project through June 30, 1995, and expects to spend a total of
approximately $69 million in 1995. Expenditures through June 30, 1995, include
the acquisition by Niugini Mining of an additional interest in the Lihir joint
venture (see "Investing Activities - Lihir Project" below).
During the six months ended June 30, 1995, the Company spent
approximately $7.4 million on exploration and evaluation including $4.8 million
on project exploration. The Company currently estimates that it will spend
approximately $16 million on its 1995 exploration and evaluation programs.
7
<PAGE>
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 $87 million of which $4.4 million has been spent
through June 30, 1995. The reserves are estimated to be approximately 1.5
million contained ounces of gold and 8.8 million contained ounces of silver.
Crown Jewel Project - BMG is continuing to seek permits for the Crown Jewel
project in Washington state. A Draft Environmental Impact Statement was issued
at the end of June 1995 and a 60 day public comment period is now under way.
Following the public comment period, it is expected that approximately nine
months to one year of work by the various agencies involved in the Environmental
Impact Statement (EIS) preparation will be required before the final EIS is
issued.
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 $110.3 million, of which, as
of June 30, 1995, $50.6 million ($42.3 million of which has been capitalized)
has been incurred.
Lihir Project - BMG holds an interest in the Lihir project through its 50.5
percent ownership of Niugini Mining. Niugini Mining's ownership interest in the
Lihir project is in a state of transition as explained below. Niugini Mining's
ownership interest is subject to a joint venture agreement with a subsidiary of
RTZ Corporation plc ("RTZ") and Mineral Resources Lihir Pty. Ltd., a wholly-
owned entity of the PNG government.
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 provides Niugini Mining, RTZ and the PNG government, as
joint venture partners, the right to develop and operate the Lihir gold project.
The Lihir Island landowners executed agreements with the Lihir joint venture
providing for the landowners' ongoing compensation, social well-being from
development of the mine and eventual participation in the project. In connection
with the execution of the SML, the PNG government acquired a 30 percent joint
venture interest, pro rata from RTZ and Niugini Mining.
In June 1995, Niugini Mining acquired an additional 16 percent of the Lihir
joint venture 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's rights and obligations under the carried interest agreement were
terminated at the same time. Niugini Mining currently owns a 30 percent
interest in the Lihir joint venture.
Niugini Mining, RTZ and the PNG government (the "Sponsoring Parties") have
executed other agreements which will govern the ownership of the project and
provide the legal and financial framework for the development and operation of
the Lihir mine. The parties have formed a new company named Lihir Gold Limited
("LGL") for the ownership and development of the Lihir project. Initially, the
new company will be owned 30 percent by Niugini Mining, 40 percent by a
subsidiary of RTZ and 30 percent by the PNG government. The project is expected
to be partially funded through an initial public offering of LGL common stock.
The Sponsoring Parties have also tentatively agreed to underwrite up to $40
million of additional equity. Niugini Mining's interest in LGL will thereby be
proportionately reduced depending on the portion of LGL which is sold.
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 is required to guarantee, 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). Niugini
Mining's obligations under this guaranty do not involve any personal liability
on the part of BMG or its non-Niugini Mining subsidiaries.
8
<PAGE>
As of June 30, 1995, the carrying value of the Company's investment in the
Lihir project was approximately $198.1 million.
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. 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.
In May 1995, BMG received $3.1 million in dividends from Inti Raymi, net of
applicable Bolivian withholding taxes. Further dividends are expected from Inti
Raymi as earnings and cash are available.
BMG has effective a registration statement under the Securities Act of 1933
for what is commonly referred to as a "universal shelf" filing covering up to
$200 million of debt securities, preferred stock, depository shares, common
shares and warrants, which BMG may elect to offer from time to time and in any
combination. BMG currently has no plans for the issuance of any securities
under this registration statement.
Conclusion
The Company expects cash on hand, along with cash flows from operations and
existing facilities, to be adequate to meet its cash needs through the end of
1995. BMG has available commitments under its committed revolving credit
agreement of $57 million as of June 30, 1995, under which BMG has no amounts
currently outstanding. Because the available commitments under this agreement
decrease by $9.4 million per quarter and because BMG anticipates the need for
borrowing in 1996, BMG will need to replace this facility with a new bank credit
agreement or other replacement financing sources. BMG is currently engaged in
negotiations for a replacement bank credit agreement and management expects that
agreement can be reached on a replacement facility during the third quarter of
1995. 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, but 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. 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.
These projects, as well as reclamation and closure activities at the Battle
Mountain Complex, could be subject to additional permitting and environmental
requirements. The Company has applied for mineral surveys for the claims
constituting the unpatented portion of the Reona and Phoenix project reserves.
The Company has
9
<PAGE>
applied for patents covering the unpatented portion of the Crown Jewel ore body
and during the first half of 1995 received the "first half" of the final
certificate. The extent to which existing law might change is not yet known. The
Company cannot yet predict the impact of any such change on its U.S. activities.
However, the passage of legislation that can be reasonably anticipated is not
expected to render uneconomic any of the Company's existing operating mines or
development projects, assuming current gold prices.
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 the 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 is preparing 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.
A tailings treatment facility was constructed at the Kori Kollo mine and was
operational by the end of July 1995. In Bolivia, new environmental regulations
are being developed to implement federal legislation passed in 1992. Various
versions of the proposed regulations are currently being reviewed by several
governmental agencies and final regulations are expected by late 1995. 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, depending on the content of the new regulations, it
is possible that compliance could have a material effect on the Company's
financial condition or results of operations.
Forward Sales and Hedging
The Company has only limited involvement with derivative financial
instruments and does not use them for trading purposes. Such instruments are
used to manage defined interest rate, 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 June 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 $588,000 at
June 30, 1995, has been included in other assets. These agreements were
effective June 1, 1994. Since that date approximately $115,000 has been
amortized and approximately $175,000 has been received.
10
<PAGE>
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 June 30, 1995:
<TABLE>
<CAPTION>
Average Forward
Sales Price
Per Unit Period
--------------- ----------------
<S> <C> <C> <C>
BMG
Gold 145,000 oz. US$392 Jul 95 - Apr 96
Niugini Mining
Gold 16,000 oz. US$396 Jul 95
147,000 oz. A$521 Jul 95 - Dec 96
Silver 112,000 oz. US$5.77 Jul 95
Copper 3,375 tonnes US$2,807 Jul 95 - Dec 96
Inti Raymi
Forward sales
contracts
Gold 98,500 oz. US$389 Jul 95 - Dec 95
Purchased put options
Gold 105,000 oz. US$385 Jul 95 - Apr 96
</TABLE>
Deferred costs associated with the Inti Raymi forward sales contracts and
purchased put options amounted to $1.5 million and $.6 million, respectively, at
June 30, 1995.
The aggregate amount by which the net market value of the Company's open
forward sales contracts is less than the spot price of $387 per ounce of gold,
$5.33 per ounce of silver and $2,973 per tonne of copper, as of June 30, 1995,
before consideration of the deferred costs referred to above, is $1.4 million,
of which $1.2 million is attributable to minority interests. Australian dollar
contracts were converted to U.S. dollars at the June 1995 month end exchange
rate of US$.72 to A$1.
Niugini Mining has entered into two US$/A$ hedging arrangements in
connection with the bonus issue of options and the US$30 million financing
facility. Niugini Mining and BMG have entered a private swap contract for BMG's
subunderwritten portion. Niugini Mining has also entered a collared arrangement
for the swap of the additional exposure.
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
June 30, 1995, were approximately $606 million and foreign mining operations
represented approximately 79 percent of the total gross revenues of the Company
for the six months ended June 30, 1995. As a result, the Company is exposed to
risks normally associated with foreign operations, including political,
economic, social and labor instabilities, as well as foreign exchange controls
and currency fluctuations. Foreign operations and investments may also be
subject to laws and policies of the United States affecting foreign trade,
investment and taxation which could affect the conduct or profitability of those
operations.
11
<PAGE>
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 Six Months Ended
June 30, June 30,
--------------------- -------------------
1995 1994(1) 1995 1994(1)
-------- ----------- ------- ----------
<S> <C> <C> <C> <C>
Revenue, net of hedging costs $ 382 $ 388 $ 381 $ 386
Freight, allowances and royalties $ 23 $ 20 $ 19 $ 17
Mining, milling and other plant costs $ 199 $ 206 $ 205 $ 198
Depreciation, depletion and amortization $ 84 $ 80 $ 84 $ 82
</TABLE>
(1) Mining, milling and other plant costs for 1994 have been restated to
include certain operating mine related divisional and corporate
administrative costs that were previously included in general and
administrative costs. This reclassification caused mining, milling and
other plant costs to increase by $9 and $10 per ounce for the three and six
months ended June 30, 1994, respectively.
Gross Revenue
Gross revenue increased for the three and six months ended June 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 half of
1994. Upgrading and fine tuning of the processing facilities at the San
Cristobal mine 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 $382 per ounce for the six months ended June 30, 1995,
compared with $384 per ounce in same period of 1994 slightly offsetting the
increase in sales volumes. The average realized sales price of gold was $384
per ounce for the three months ended June 30, 1995, and 1994.
Selling and Operating Costs
Mining, milling and other plant costs increased for the three and six month
periods ended June 30, 1995, compared with the same periods of 1994. These
costs increased primarily because of increased sales volumes.
Mining, milling and other plant costs decreased on a per equivalent ounce
of gold sold basis for the three months ended June 30, 1995, compared with the
three months ended June 30, 1994, primarily because of significantly decreased
costs per equivalent ounce at the Red Dome mine. The decreased costs at the Red
Dome mine resulted from sales of product coming from the pushback area in which
mining commenced during the latter half 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 which is where mining occurred during the
first half of 1994. The reduction in per ounce costs for the three months ended
June 30, 1995, was partially offset by an increase in per equivalent ounce costs
at the Battle Mountain Complex and the Kori Kollo mine. These per equivalent
ounce costs were higher for the 1995 period at the Battle Mountain Complex
primarily because of 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. The cost of product sold per equivalent ounce increased at the Kori
Kollo mine because of a higher stripping ratio causing higher mining costs per
ounce and lower recoveries compared with the second quarter of 1994.
12
<PAGE>
Mining, milling and other plant costs increased on a per equivalent ounce
of gold sold basis for the six months ended June 30, 1995, compared with the six
months ended June 30, 1994, primarily from increased costs per equivalent ounce
at the Battle Mountain Complex and the Kori Kollo 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 and because of the
expensing of obsolete parts as discussed above. Sales were from product
produced at the lower cost Basin Leach operation during 1994. Per equivalent
ounce costs were higher at the Kori Kollo mine because of a higher stripping
ratio causing higher mining costs per ounce and because of lower silver and gold
recoveries compared to the first half of 1994. The increase in costs per
equivalent ounce at the Battle Mountain Complex and the Kori Kollo 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 six months ended June 30,
1995, when compared with the same periods of 1994. Total costs increased
partially 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
six months ended June 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.
Other
Interest income decreased for the three months ended June 30, 1995,
compared with the second quarter of 1994 because of a lower level of investable
cash.
Interest expense decreased for the three months as a result of a reduced
level of debt.
Other income(expense) for the three and six months ended June 30, 1995,
includes a $4.2 million gain on the sale of the Plutonic Bore exploration
project in Australia in June 1995.
The Company's effective income tax rate is 9.5 percent for 1995, as
compared with an effective income tax rate of 28 percent in 1994. 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.
13
<PAGE>
Net income attributable to minority interests increased for the three and
six months ended June 30, 1995, because of increased profits generated by the
Company's majority owned subsidiaries Inti Raymi and Niugini Mining.
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 April 27, 1988
(Exhibit 3(b) to the Company's Quarterly Report on Form 10-Q for
the quarter ended March 31, 1988; File No. 1-9666.)
+4(a) Amendment to Credit Agreement, dated May 12, 1995, among the
Company, the lenders parties thereto and Citibank, N.A., as
agent.
+10(a) Battle Mountain Gold Company 1988 Deferred Income Stock Option
Plan, as amended through May 18, 1995.
+10(b)(1) First Amendment to 1985 Stock Option Plan of the Company,
effective May 12, 1995.
+10(b)(2) Specimen Amendment to the Company's 1985 Stock Option Plan
Non-Qualified Stock Option Agreement for executive officers of
the Company.
+10(b)(3) Specimen Amendment to the Company's 1985 Stock Option Plan
Incentive Stock Option Agreement for executive officers of the
Company.
+10(c)(1) Specimen of the Company's 1994 Long-Term Incentive Plan Non-
Qualified Stock Option Agreement.
+10(c)(2) Specimen of the Company's 1994 Long-Term Incentive Plan
Incentive Stock Option Agreement.
+10(d)(1) Battle Mountain Gold Company Supplemental Executive
Retirement Plan.
+10(d)(2) Battle Mountain Gold Company Supplemental Executive
Retirement Plan Trust Agreement.
11 Computation of Earnings per Share
14
<PAGE>
12 Computation of Ratio of Earnings to Fixed Charges and Earnings
to Combined Fixed Charges and Preferred Dividends
27 Financial Data Schedule for the six month period ended June 30,
1995
- ---------------
* Incorporated by reference as indicated
+ Previously filed
(b) No report on Form 8-K has been filed by BMG during the quarter for
which this report is filed.
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 6, 1995 /s/ R. Dennis O'Connell
-------------------------------------------
R. Dennis O'Connell, Vice President-
Finance and Chief Financial Officer
(Principal Financial and Chief
Accounting Officer)
15
<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 April 27, 1988 (Exhibit 3(b)
to the Company's Quarterly Report on From 10-Q for the quarter ended
March 31, 1988; File No. 1-9666.)
+4(a) Amendment to Credit Agreement, dated May 12, 1995, among the Company,
the lenders parties thereto and Citibank, N.A., as agent.
+10(a) Battle Mountain Gold Company 1988 Deferred Income Stock Option Plan,
as amended through May 18, 1995.
+10(b)(1) First Amendment to 1985 Stock Option Plan of the Company, effective
May 12, 1995.
+10(b)(2) Specimen Amendment to the Company's 1985 Stock Option Plan Non-
Qualified Stock Option Agreement for executive officers of the
Company.
+10(b)(3) Specimen Amendment to the Company's 1985 Stock Option Plan Incentive
Stock Option Agreement for executive officers of the Company.
+10(c)(1) Specimen of the Company's 1994 Long-Term Incentive Plan Non-
Qualified Stock Option Agreement.
+10(c)(2) Specimen of the Company's 1994 Long-Term Incentive Plan Incentive
Stock Option Agreement.
+10(d)(1) Battle Mountain Gold Company Supplemental Executive Retirement Plan.
+10(d)(2) Battle Mountain Gold Company Supplemental Executive Retirement Plan
Trust 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 six month period ended June 30, 1995
- ------------------
* Incorporated by reference as indicated
+ Previously filed
<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 Six Months Ended
------------------------ ------------------------
June 30, June 30,
------------------------ ------------------------
1995 1994 1995 1994
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
PRIMARY EARNINGS PER SHARE
Earnings
Net income $ 7,630 $ 3,084 $ 10,111 $ 5,932
Deduct dividends on preferred
shares 1,869 1,869 3,737 3,738
----------- ----------- ----------- -----------
Net income applicable to common
stock $ 5,761 $ 1,215 $ 6,373 $ 2,194
=========== =========== =========== ===========
Shares
Weighted average number of
common shares outstanding 80,994,743 80,601,074 80,972,312 80,478,707
Assuming exercise of stock
options reduced by the
number of shares which could
have been purchased
with the proceeds from exercise
of such options 479,218 558,404 489,893 537,564
Assuming conversion of 6%
convertible debentures 4,848,485 4,848,485 4,848,485 4,848,485
----------- ----------- ----------- -----------
Weighted average number of
common shares
outstanding, as adjusted 86,322,447 86,007,963 86,310,690 85,864,756
=========== =========== =========== ===========
Primary earnings per common share $.07 $.01 $.07 $.03
=========== =========== =========== ===========
FULLY DILUTED EARNINGS PER SHARE (1)
Earnings
Net income $ 7,630 $ 3,084 $ 10,111 $ 5,932
=========== =========== =========== ===========
Shares
Weighted average number of
common shares outstanding 80,994,743 80,601,074 80,972,312 80,478,707
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 535,823 569,460 523,929 556,123
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 97,331,651 96,971,619 97,297,325 96,835,915
=========== =========== =========== ===========
Net income per common share
assuming full dilution $.08 $.03 $.10 $.06
=========== =========== =========== ===========
</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>
Six Months ended
June 30,
--------------------
1995 1994
--------- ---------
<S> <C> <C>
EARNINGS COMPUTATION USING
CONSOLIDATED INCOME STATEMENT DATA
Income before income taxes and minority
interest $14,230 $10,805
Minority interest in income of
majority-owned subsidiaries (3,026) (2,620)
------- -------
Income before income taxes 11,204 8,185
------- -------
Add fixed charges included in income:
Interest expense 3,245 4,738
Amortization of deferred
financing costs 97 97
Interest portion of rental
expenses (33%) 430 1,234
------- -------
Sub-total fixed charges
included in income 3,772 6,069
------- -------
Income $14,976 $14,254
======= =======
Fixed Charges
Included in income $ 3,772 $ 6,069
Capitalized interest 3,686 2,975
------- -------
Total fixed charges 7,458 9,044
------- -------
Preferred dividends 4,142 5,158
------- -------
Combined fixed charges and
preferred dividends $11,600 $14,202
======= =======
Ratio of earnings to fixed charges 2.01 1.58
Amount by which fixed charges exceed
earnings - -
Ratio of earnings to combined fixed
charges and preferred dividends 1.29 1.00
Amount by which combined fixed charges
and preferred dividends exceed earnings - -
</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 June 30, 1995
and December 31, 1994 and Condensed Consolidated Statements of Income for the
six months ended June 30, 1995 and 1994, and is qualified in its entirety by
reference to such financial statements.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> JUN-30-1995
<CASH> 34,881
<SECURITIES> 0
<RECEIVABLES> 35,913
<ALLOWANCES> 0
<INVENTORY> 6,676
<CURRENT-ASSETS> 116,448
<PP&E> 759,144
<DEPRECIATION> (222,015)
<TOTAL-ASSETS> 706,283
<CURRENT-LIABILITIES> 75,507
<BONDS> 0
<COMMON> 8,102
0
110,578
<OTHER-SE> 257,982
<TOTAL-LIABILITY-AND-EQUITY> 706,283
<SALES> 135,345
<TOTAL-REVENUES> 135,345
<CGS> 76,757
<TOTAL-COSTS> 125,319
<OTHER-EXPENSES> 5,715
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 3,244
<INCOME-PRETAX> 14,230
<INCOME-TAX> 1,093
<INCOME-CONTINUING> 10,111
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 6,373
<EPS-PRIMARY> .07
<EPS-DILUTED> .07
</TABLE>
