<PAGE> 1
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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
-------------
FORM 10-K/A
(Amendment No. 3)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF
THE SECURITIES EXCHANGE ACT OF 1934
FOR THE FISCAL YEAR ENDED DECEMBER 31, 1995 COMMISSION FILE NO.1-9666
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF
THE SECURITIES EXCHANGE ACT OF 1934
FOR THE TRANSITION PERIOD FROM TO
---------- ----------
BATTLE MOUNTAIN GOLD COMPANY
(EXACT NAME OF 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) (Zip Code)
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: (713) 650-6400
SECURITIES REGISTERED PURSUANT TO SECTION 12(B) OF THE ACT:
Name of each Exchange
Title of each class on which registered
------------------- -------------------
Common Stock New York Stock Exchange
$3.25 Convertible Preferred Stock New York Stock Exchange
Rights to Purchase Preferred Stock New York Stock Exchange
SECURITIES REGISTERED PURSUANT TO SECTION 12(G) OF THE ACT: NONE
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
--- ---
Indicate by check mark if disclosure of delinquent filers pursuant to
Item 405 of Regulation S-K is not contained herein, and will not be contained,
to the best of registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. [x]
The number of outstanding shares of the registrant's common stock as of
October 10, 1996 is 108,507,678. In addition, as of such date there were
outstanding 121,344,106 exchangeable shares of Battle Mountain Canada Ltd.,
which are exchangeable into an equal number of shares of the registrant's common
stock, entitle their holders to dividend and other rights economically
equivalent to those of the registrant's common stock and, through a voting
trust, to vote at meetings of stockholders of the registrant. The aggregate
market value of the voting stock held by non-affiliates of the registrant was
approximately $1.8 billion as of October 10, 1996, based on the closing sales
price of the registrant's common stock as reported on the New York Stock
Exchange Composite Tape on such date and the sum of the number of shares of the
registrant's common stock outstanding and the number of shares of the
registrant's common stock into which the outstanding exchangeable shares were
exchangeable as of such date. For purposes of the foregoing sentence only, all
directors and officers of the registrant are assumed to be affiliates.
DOCUMENTS INCORPORATED BY REFERENCE:
LIST HEREUNDER THE FOLLOWING DOCUMENTS IF INCORPORATED BY REFERENCE
AND THE PART OF THE FORM 10-K INTO WHICH THE DOCUMENT IS INCORPORATED: NONE.
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<PAGE> 2
The information appearing in Part II, Item 8 and Part IV of Battle Mountain Gold
Company's Annual Report on Form 10-K for the fiscal year ended December 31, 1995
is hereby amended to read in its entirety as set forth below. The two primary
revisions to the Form 10-K are as follows:
(1) The inclusion of Price Waterhouse LLP's reports on the Company's
consolidated financial statements as of December 31, 1994 and for the two
years then ended in place of the corresponding report issued on those years
by the Company's predecessor accountants, Arthur Andersen LLP. Recently,
the Company requested Price Waterhouse LLP to perform a reaudit of its 1993
and 1994 financial statements in order to streamline its prospective
filings under the Securities Act of 1933, as amended.
(2) The addition of a subsequent events footnote (Note 17) highlighting the
Company's recent merger with Hemlo Gold Mines Inc.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
Index to Consolidated Financial Statements
<TABLE>
<CAPTION>
Page
----
<S> <C>
I. BATTLE MOUNTAIN GOLD COMPANY
Report of Independent Accountants.................................... 2
Consolidated Statement of Income..................................... 3
Consolidated Balance Sheet........................................... 4
Consolidated Statement of Shareholders' Equity....................... 5
Consolidated Statement of Cash Flows................................. 6
Notes to Consolidated Financial Statements........................... 7
Supplemental Financial Information................................... 28
(Unaudited)
II. LIHIR GOLD LIMITED (A DEVELOPMENT STAGE COMPANY)
Report of Independent Accountants.................................... 29
Profit and Loss Accounts............................................. 30
Balance Sheet........................................................ 31
Statement of Cash Flows.............................................. 32
Notes to Financial Statements........................................ 33
</TABLE>
<PAGE> 3
Report of Independent Accountants
October 10, 1996
To the Board of Directors and
Shareholders of Battle Mountain Gold Company
In our opinion, the consolidated financial statements of Battle Mountain Gold
Company listed in the index appearing under Item 14(a)(1) and (2) on page 45
present fairly, in all material respects, the financial position of Battle
Mountain Gold Company and its subsidiaries at December 31, 1995 and 1994, and
the results of their operations and their cash flows for each of the three years
in the period ended December 31, 1995, in conformity with generally accepted
accounting principles. These financial statements are the responsibility of the
Company's management; our responsibility is to express an opinion on these
financial statements based on our audits. We conducted our audits of these
statements in accordance with generally accepted auditing standards which
require that we plan and perform the audit to obtain reasonable assurance about
whether the financial statements are free of material misstatement. An audit
includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements, assessing the accounting principles
used and significant estimates made by management, and evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for the opinion expressed above.
Price Waterhouse LLP
Houston, Texas
2
<PAGE> 4
BATTLE MOUNTAIN GOLD COMPANY
CONSOLIDATED STATEMENT OF INCOME
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-------------------------------------------
1995 1994 1993
-------- -------- --------
(Expressed in thousands except
per share amounts)
<S> <C> <C> <C>
GROSS REVENUE $299,295 $242,984 $207,251
Less: freight, allowances and royalties 15,035 13,314 13,836
-------- -------- --------
NET REVENUE 284,260 229,670 193,415
COSTS AND EXPENSES
Mining costs 43,963 30,404 35,906
Milling and other plant costs 117,409 98,566 97,163
Depreciation, depletion and amortization 70,752 51,247 41,389
Exploration, evaluation and other lease costs 18,032 14,542 9,474
Asset write-downs 2,222 - -
General and administrative expenses 13,161 12,376 12,901
Taxes, other than income 2,737 2,593 2,316
-------- -------- --------
Total costs and expenses 268,276 209,728 199,149
-------- -------- --------
OPERATING INCOME(LOSS) 15,984 19,942 (5,734)
Interest income 3,125 4,149 2,689
Interest (expense) (14,099) (13,722) (13,103)
Interest capitalized 6,675 6,353 6,655
Other income (expense), net 6,912 (244) 5,708
-------- -------- --------
INCOME (LOSS) BEFORE INCOME TAXES AND
MINORITY INTEREST 18,597 16,478 (3,785)
Income tax (benefit) expense (2,804) 2,519 (4,089)
Minority interest in net (income) loss (6,156) (4,387) (4,709)
-------- -------- --------
NET INCOME (LOSS) 15,245 9,572 (4,405)
Preferred dividends 7,475 7,475 3,738
-------- -------- --------
NET INCOME (LOSS) TO COMMON SHARES $ 7,770 $ 2,097 $ (8,143)
======== ======== ========
NET INCOME (LOSS) PER SHARE: $ .09 $ .02 $ (.10)
DIVIDENDS PER COMMON SHARE $ .05 $ .05 $ .05
AVERAGE COMMON SHARES OUTSTANDING FOR
INCOME PER SHARE PURPOSES 86,327 86,071 80,132
</TABLE>
The accompanying notes are an integral part of these financial statements.
3
<PAGE> 5
BATTLE MOUNTAIN GOLD COMPANY
CONSOLIDATED BALANCE SHEET
<TABLE>
<CAPTION>
DECEMBER 31,
------------------------------
1995 1994
---------- ---------
<S> <C> <C>
ASSETS (Expressed in thousands)
Current assets:
Cash and cash equivalents $ 46,071 $ 76,464
Accounts receivable 26,320 22,810
Inventories 4,158 5,048
Materials and supplies, at average cost 26,563 27,730
Other current assets 12,846 7,014
---------- ---------
Total Current assets 115,958 139,066
Investments 230,652 4,092
Property, plant and equipment, net 524,148
360,270
Other assets 30,259 12,463
---------- ---------
Total assets $ 737,139 $ 679,769
========== =========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Short term borrowings $ 2,571 $ -
Current maturities of long-term debt 13,427 13,427
Accounts payable 13,251 14,527
Payroll and related benefits accrued 5,039 4,226
Accrued interest 7,198 6,714
Other current liabilities 5,448 3,425
---------- ---------
Total current liabilities 46,934 42,319
---------- ---------
Long-term debt 169,175 165,602
Other liabilities 38,199 32,043
---------- ---------
Total liabilities 254,308 239,964
---------- ---------
Minority interest 111,773 64,171
---------- ---------
Commitments and Contingencies (Note 14) - -
Shareholders' equity:
Preferred stock, $1.00 par value:
Authorized - 20,000,000 shares; issued and outstanding,
1995 and 1994 - 2,299,980 shares 110,578 110,578
Common stock, $.10 par value:
Authorized - 200,000,000 shares; issued and outstanding,
1995 - 81,133,540 shares and 1994 - 80,934,793 shares 8,113 8,094
Additional paid-in capital 199,533 206,735
Retained earnings 53,971 50,327
Cumulative foreign currency translation adjustment (1,137) (100)
---------- ---------
Total shareholders' equity 371,058 375,634
---------- ---------
Total liabilities and shareholders' equity $ 737,139 $ 679,769
========== =========
</TABLE>
The accompanying notes are an integral part of these financial statements.
4
<PAGE> 6
BATTLE MOUNTAIN GOLD COMPANY
CONSOLIDATED STATEMENT OF SHAREHOLDERS' EQUITY
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-------------------------------------------------------------------------------------------
1995 1994 1993
--------------------------- -------------------------- ---------------------------
(Expressed in thousands)
--------------------------
Preferred Common Preferred Common Preferred Common
Shares Shares Amount Shares Shares Amount Shares Shares Amount
----- ------ -------- ----- ------ -------- ----- ------ --------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
PREFERRED STOCK, $1.00 par value;
Authorized 20,000,000 shares;
$50.00 liquidation preference
per share:
Balance January 1 2,300 - $110,578 2,300 - $110,579 - - $ -
Shares issued - - - - - - 2,300 - 110,579
Shares converted to Common - - - - - (1) - - -
----- ------ -------- ----- ------ -------- ----- ------ --------
Balance December 31 2,300 - 110,578 2,300 - 110,578 2,300 - 110,579
----- ------ -------- ----- ------ -------- ----- ------ --------
COMMON STOCK, $.10 par value;
Authorized 200,000,000 shares:
Balance January 1 - 80,935 8,094 - 80,266 8,027 - 80,016 8,002
Shares issued - 199 19 - 669 67 - 250 25
----- ------ -------- ----- ------ -------- ----- ------ --------
Balance December 31 - 81,134 8,113 - 80,935 8,094 - 80,266 8,027
----- ------ -------- ----- ------ -------- ----- ------ --------
ADDITIONAL PAID-IN CAPITAL:
Balance January 1 - - 206,735 - - 202,011 - - 202,417
Shares issued - - 1,705 - - 5,933 - - 1,732
Exercise of Niugini Mining - - (2,208) - - (1,209) - - -
options
Niugini Mining equity offering - - - - - - - - (2,138)
LGL equity offering - - (6,699) - - - - - -
----- ------ -------- ----- ------ -------- ----- ------ --------
Balance December 31 - - 199,533 - - 206,735 - - 202,011
----- ------ -------- ----- ------ -------- ----- ------ --------
RETAINED EARNINGS:
Balance January 1 - - 50,327 - - 52,260 - - 62,410
Net income (loss) - - 15,245 - - 9,572 - - (4,405)
Common stock dividends - - (4,126) - - (4,030) - - (2,007)
Preferred stock dividends - - (7,475) - - (7,475) - - (3,738)
----- ------ -------- ----- ------ -------- ----- ------ --------
Balance December 31 - - 53,971 - - 50,327 - - 52,260
----- ------ -------- ----- ------ -------- ----- ------ --------
CUMULATIVE FOREIGN CURRENCY
TRANSLATION ADJUSTMENT - - (1,137) - - (100) - - (3,317)
----- ------ -------- ----- ------ -------- ----- ------ --------
TOTAL SHAREHOLDERS' EQUITY 2,300 81,134 $371,058 2,300 80,935 $375,634 2,300 80,266 $369,560
===== ====== ======== ===== ====== ======== ===== ====== ========
</TABLE>
The accompanying notes are an integral part of these financial statements.
5
<PAGE> 7
BATTLE MOUNTAIN GOLD COMPANY
CONSOLIDATED STATEMENT OF CASH FLOWS
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-----------------------------------------
1995 1994 1993
---------- ---------- -----------
(Expressed in thousands)
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss) $ 15,245 $ 9,572 $ (4,405)
---------- ---------- -----------
Adjustments to reconcile net income (loss)
to cash flows from operating activities:
Depreciation, depletion and amortization 70,752 51,247 41,389
Exploration and evaluation costs 11,740 10,312 6,621
Unproven leases abandoned 279 59 146
Gain (loss) from sales of assets (5,153) 243 (6,429)
Asset write-downs 2,222 - -
Increase in accrued reclamation costs 143 1,341 1,517
Loss (gain) on foreign currency transactions 439 2,075 (228)
(Increase) decrease in accounts and notes receivable (3,212) 14,542 (13,337)
Decrease (increase) in inventories 841 (4,469) 6,857
Decrease (increase) in materials and supplies 1,167 (4,555) (1,762)
(Increase) in other current assets (5,832) (3,065) (2,091)
(Increase) in non-current portion of deferred mining costs (2,312) (6,566) -
Increase (decrease) in accounts payable and other current 3,356 3,212 (5,058)
liabilities
Deferred income tax (benefit) expense (4,968) 3,581 -
Minority interest 6,156 4,387 4,709
Other net changes (278) 1,203 2,136
---------- ---------- -----------
TOTAL ADJUSTMENTS 75,340 73,547 34,470
---------- ---------- -----------
NET CASH FLOWS FROM OPERATING ACTIVITIES 90,585 83,119 30,065
--------- --------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from sales of assets 5,636 257 10,729
Acquisition of minority interest - (5,200) -
Capital expenditures (120,010) (85,335) (64,665)
Exploration and evaluation expenditures (12,229) (10,301) (6,621)
(Increase) decrease in restricted cash (4,964) - (53)
Other, net (1,112) (193) 329
---------- ---------- -----------
NET CASH FLOWS USED IN INVESTING ACTIVITIES (132,679) (100,772) (60,281)
---------- ---------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Cash proceeds from stock issuances 19,350 6,397 130,934
Cash proceeds from borrowings 64,964 - 36,891
Cash dividend payments (11,524) (11,505) (7,743)
Debt repayments (59,322) (13,558) (59,869)
Other, net (88) (104) -
---------- ---------- -----------
NET CASH FLOWS FROM (USED IN) FINANCING ACTIVITIES 13,380 (18,770) 100,213
---------- ---------- -----------
EFFECT OF EXCHANGE RATE CHANGES ON CASH (1,679) (2,451) (36)
---------- ---------- -----------
NET (DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS (30,393) (38,874) 69,961
CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR 76,464 115,338 45,377
---------- ---------- -----------
CASH AND CASH EQUIVALENTS AT END OF YEAR $ 46,071 $ 76,464 $ 115,338
========== ========== ===========
</TABLE>
The accompanying notes are an integral part of these financial statements.
6
<PAGE> 8
BATTLE MOUNTAIN GOLD COMPANY
Notes to Consolidated Financial Statements
Note 1. Summary of Significant Accounting Policies
Principles of Consolidation - The accompanying consolidated financial
statements include the accounts of the Battle Mountain Gold Company ("BMG") and
its wholly-owned and majority-owned subsidiaries (the "Company"). The accounts
of Niugini Mining Limited, a Papua New Guinea precious metals exploration,
development and production company ("Niugini Mining"), have been consolidated
with the Company's from January 1, 1989 (See Note 10). The accounts of Empresa
Minera Inti Raymi S.A., a Bolivian gold mining company ("Inti Raymi"), have
been consolidated with the Company's from April 1, 1990 (See Note 10). All
significant intercompany transactions have been eliminated in consolidation.
Certain prior- period items have been reclassified in the consolidated
financial statements in order to conform with current year presentation.
Inventories - Inventories, consisting of gold, silver and copper, are reported
at the lower of cost or market, using the first-in, first-out method.
Property, Plant and Equipment - Property, plant and equipment are stated at
cost. Expenditures for development of new mines and major development
expenditures at existing mines, which are expected to benefit future periods,
are capitalized and amortized, generally, on the units of production method.
Exploration and development costs expended to maintain production at operating
mines are charged to expense as incurred. In certain cases, mining costs
associated with waste rock removal are deferred as development costs and
charged to operations on the basis of the average stripping ratio over the life
of the mine.
Other property, plant and equipment includes capitalized lease costs
and mine development costs for projects in progress. Capitalized exploration
costs are evaluated on an annual basis and costs attributable to unproductive
projects are charged directly to abandonment expense.
Generally, depreciation, depletion and amortization of mining
properties and related assets are determined using the units of production
method based upon estimated recoverable ore reserve tonnages or reserve ounces
at the beginning of each quarter. However, assets having an estimated life of
less than the estimated life of the mineral deposits are depreciated on the
straight-line method based on the expected life of the asset. Write-downs and
write-offs of depreciable properties are included in accumulated depreciation,
depletion and amortization. Effective December 31, 1995, the Company adopted
SFAS 121, "Impairment of Long-lived Assets". There was no effect on the
carrying value of the Company's assets as a result of this adoption.
Exploration and Evaluation Expenditures- With the exception of lease
acquisition costs incurred to acquire mineral rights, the Company charges all
exploration and predevelopment evaluation
7
<PAGE> 9
expenditures to expense as incurred prior to delineation of economic
mineralization. Exploration costs incurred subsequent to delineation of
economic mineralization are capitalized.
Capitalization of Operating Results During Mine Development - During the
start-up period for each developing mine, operating costs may exceed revenues
earned from the sale of precious metals produced. In these instances, all
costs incurred during this pre-commercial production period, net of revenues
earned, are capitalized as property costs.
Capitalization of Interest - Interest expense incurred attributable to
pre-commercial production stage projects is capitalized until those projects
commence commercial production.
Reclamation and Closure Costs - Reserves for estimated future reclamation and
closure costs of the Company's operating sites are accrued on a units of
production basis over the estimated lives of the respective mines. These costs
are charged to milling and other plant costs as accrued (See Note 14).
Revenue Recognition - Revenue is recognized when the dore (a combination of
gold and silver) or concentrates are delivered against sales agreements or
contracts and risk of loss passes to the buyer.
Currency Translation - Foreign currency financial statements are translated
into U.S. dollars using current exchange rates and translation gains and losses
are accumulated in the balance sheet caption "Cumulative foreign currency
translation adjustment," a separate component of shareholders' equity.
Effective January 1, 1994, Niugini Mining changed its functional
currency from the Papua New Guinea kina to U.S. dollars for financial reporting
purposes.
Income (Loss) Per Share - Income (loss) per share is computed by dividing net
income (loss) attributable to common shareholders by the weighted average
number of common shares outstanding for the year, adjusted for common stock
equivalents, if dilutive. The effects of common stock equivalents are not
included in the computation of income per share for 1993 because of their
antidilutive effect. Fully diluted earnings per share are not presented for
any year because the effect of other dilutive securities would be antidilutive.
Statement of Cash Flows - At December 31, 1995, cash and cash equivalents
included $29.4 million and $10.6 million attributable to Niugini Mining and
Inti Raymi, respectively. Cash and cash equivalents at December 31, 1994,
included $39.9 million and $15.4 million held by Niugini Mining and Inti Raymi,
respectively. At December 31, 1995 and December 31, 1994, other assets
included $5.8 million and $.9 million, respectively, of restricted cash held
by Niugini Mining.
For purposes of the Consolidated Statement of Cash Flows, the Company
considers all highly liquid instruments purchased with a maturity of three
months or less to be cash equivalents.
8
<PAGE> 10
During the year ended December 31, 1995, the Company paid foreign
withholding taxes of $2.2 million. During the year ended December 31, 1994,
the Company received a U.S. income tax refund of $4.3 million and paid foreign
withholding taxes of .9 million. During the year ended December 31, 1993, the
Company paid $.7 million in U.S. income taxes. The Company paid $10.1 million,
$6.4 million and $6.8 million in interest, net of amounts capitalized, during
1995, 1994 and 1993, respectively.
During 1995, the Company's investing activities included the exchange
of Niugini Mining's interest in the Lihir Joint Venture for the common stock of
Lihir Gold Limited ("LGL"). During 1994, the Company's investing activities
included the issuance of 435,897 shares of BMG's common stock (market value of
$4.25 million) and payment of $4.25 million cash for the purchase of an
additional 3 percent interest in the Crown Jewel Project. During 1993, the
Company's investing activities did not include any significant non-cash
transactions.
Issuance of Stock by Subsidiaries - The issuance of stock by subsidiaries is
accounted for as a capital transaction in the Consolidated Financial
Statements.
Forward Sales Contracts, Options and Interest Rate Caps - The Company may enter
into fixed forward and spot deferred sales contracts for the sale of its metals
as a hedge against changes in prices. Gains, losses or expenses related to
these transactions are netted against revenue when the hedged production is
sold. The Company may also purchase put options for the sale of its produced
metals. The premiums paid for the acquisition of put options are netted
against revenue in the period of expiry.
Spot deferred sales contracts allow the Company to defer the delivery
of gold under the contract to a later date at the original contract price plus
the prevailing premium at the time of the deferral, as long as certain
conditions are satisfied. Although spot deferred sales contracts could limit
amounts realizable during a period of rising prices, the Company may "roll
forward" its spot deferred contracts to future periods in order to realize
current market price increases, while maintaining future downside protection.
Premiums paid for purchased interest rate caps are amortized as
interest expense over the terms of the interest rate cap agreement.
Unamortized premiums are included in other assets in the Consolidated Balance
Sheet. Amounts earned under cap agreements are accrued as a reduction of
interest expense.
Estimates, risks and uncertainties - The preparation of financial statements in
conformity with generally accepted accounting principles requires management to
make estimates and assumptions that affect the reported amounts of certain
assets and liabilities and disclosures of contingent assets and liabilities at
the date of the financial statements and the related reported amounts of
revenues and expenses during the reporting period. Actual results could differ
from these estimates. Management believes that the estimates are reasonable.
9
<PAGE> 11
Realization of the Company's assets is subject to various risks including
permitting of the Company's new mines, reserves estimation, gold prices and
environmental factors.
Note 2. Investments
The Company's long-term investments as of December 31 include the
following:
<TABLE>
<CAPTION>
1995 1994
--------- --------
(expressed in thousands)
<S> <C> <C>
Lihir Gold Limited $ 225,150 $ -
Other joint ventures 325 91
Cash surrender value of life
insurance, net 4,549 3,600
Other 628 401
--------- --------
$ 230,652 $ 4,092
========= ========
</TABLE>
Lihir Gold Limited ("LGL"), which is a company created specifically
for the development, financing, operating and ownership of the Lihir project in
Papua New Guinea, completed an initial public offering of common stock on
October 6, 1995. LGL was formed and initially 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 8.7 percent. Niugini Mining's interest
in LGL is accounted for using the equity method of accounting, effective from
October 1995, while the Company's investment in the Lihir Joint Venture was
previously recorded in property, plant and equipment.
The initial public offering by LGL was the final transaction in a
series of planned transactions which restructured and reduced BMG's
participation in the Lihir project. The Company recorded the effects of this
series of transactions in the fourth quarter of 1995. 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 was recorded. This increase was 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 Niugini Mining's investment in LGL was recorded. The
Company attributed $28 million of this increase to minority interest in its
consolidated financial statements; the remainder was credited to additional
paid-in capital. As a result of these transactions, the Company also amortized
approximately $35 million of its investment in Niugini Mining attributable to
the investment in LGL. This amortization was recorded as a charge to
additional paid-in capital. The net result of these transactions in the
Company's consolidated financial statements was 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.
10
<PAGE> 12
Interest costs amounting to $7.8 million in 1995 and $6 million per
year in 1994 and 1993 each were capitalized in connection with the Company's
investment in the Lihir project.
Note 3. Property, plant and equipment
Property, plant and equipment as of December 31 consists of the
following:
<TABLE>
<CAPTION>
1995 1994
-------- ---------
(expressed in thousands)
<S> <C> <C>
Leasehold and mine development $ 96,624 $132,803
Mining, milling and other equipment 336,839 314,231
Other 184,470 322,508
-------- ---------
617,933 769,542
Accumulated depreciation, depletion and amortization (257,663) (245,394)
-------- ---------
$360,270 $ 524,148
======== =========
</TABLE>
Note 4. Asset Write-downs
In June 1995, the Company decommissioned and dismantled the milling
facility formerly used at the depleted Fortitude mine in Nevada. Accordingly
the remaining net carrying value of this mill and related facilities of
approximately $2.2 million was charged to operations. In addition, $.9 million
was charged to milling and other plant costs, representing the carrying value
of spare parts rendered obsolete by the decommissioning of the milling
facility. The Company did not recognize any charges for asset write-downs
during 1994 or 1993.
Note 5. Debt
The Company had the following long-term debt outstanding as of
December 31:
<TABLE>
<CAPTION>
1995 1994
----------- ----------
(expressed in thousands)
<S> <C> <C>
Convertible subordinated debentures, due 2005, 6% $ 99,980 $ 100,000
Revolving credit facility, due 2000, variable rate 17,000 -
Inti Raymi Kori Kollo project financing:
IFC loan, variable rate 22,500 27,500
IFC convertible loan, variable rate with 11% minimum 5,000 5,000
OPIC loan, variable rate 25,800 31,500
Restructured OPIC loans, 10.5% 2,644 3,231
CAF loan, variable rate 9,643 11,786
Other 35 12
----------- ----------
Total 182,602 179,029
Less current portion of long-term debt 13,427 13,427
----------- ----------
Total long-term debt $ 169,175 $ 165,602
=========== ==========
</TABLE>
11
<PAGE> 13
The convertible subordinated debentures are convertible into shares of
the Company's common stock at a conversion price of $20 5/8 per share, subject
to anti-dilution adjustment in certain circumstances. There are 4.8 million
shares of the Company's common stock reserved for issuance upon conversion of
the debentures. The debentures are now redeemable at the Company's option at
any time at par value plus accrued interest. There are no sinking fund
requirements. Interest is payable annually. Proceeds from the issuance were
added to working capital and used for general corporate purposes, including
mineral acquisitions and development of properties.
On November 6, 1995, the Company entered into a new committed
non-reducing revolving credit agreement with a syndicate of six banks, led by
Citibank N.A. as agent. In connection with the new revolving credit agreement
the Company terminated its previous existing committed revolving credit
agreement. The new facility, which has a termination date of November 6, 2000,
provides for unsecured borrowings of up to $75 million. Interest rates under
the facility are based on the facility agent's base rate, LIBOR, applicable
certificate of deposit rates or gold funding rates plus an applicable margin
which is subject to adjustment in case of certain changes in BMG's credit
rating and certain financial ratios. Additionally, interest charges increase
when outstanding borrowings under this facility exceed $25 million and, again,
when such borrowings exceed $50 million. Other costs associated with the new
facility include commitment fees of one-eighth percent per annum on the unused
portion of the facility and facility fees of one-eighth percent per annum on
the average daily commitment, in each case subject to adjustment in case of
certain changes in credit rating or ratios. The revolving credit agreement
imposes certain financial covenants upon the Company which include covenants
relating to leverage, net worth, contained production, mineral reserves and
working capital, as well as certain restrictions on liens, investments,
additional debt, lease obligations, and the acquisition or disposition of
assets. In addition, the agreement sets forth restrictions limiting the amount
of dividends that BMG may pay based on $20 million plus 50% of consolidated net
income since December 31, 1994, plus 50% of proceeds received from the sale of
BMG's capital stock on a cumulative basis from the date of the agreement. The
weighted average interest rate for borrowings under this facility for the year
ended December 31, 1995, was 6.7 percent. No borrowings were outstanding under
the previous facility in 1994. Interest charges applicable to the previous
facility for the year ended December 31, 1993, were based on a weighted average
interest rate ranging from 3.9 percent to 6.0 percent.
During 1992, Inti Raymi, established separate but coordinated term
credit facilities with the Overseas Private Investment Corporation ("OPIC"),
International Finance Corporation ("IFC") and Corporacion Andina de Fomento
("CAF") for the development of its Kori Kollo expansion project in Bolivia.
Each loan is secured by a lien on the project and is to be repaid in
semi-annual installments which commenced in December 1993 and will continue
through June 2000, with certain provisions for accelerated repayment in the
event of substantial Kori Kollo reserve losses or significantly improved gold
market conditions. Through certain ratio tests, each loan may restrict
payments of intercompany debt and dividends by Inti Raymi to the owners of
shares of its capital stock. Additional covenants exist which limit fixed
asset purchases, additional debt and liens, and require compliance with
applicable environmental laws. During
12
<PAGE> 14
1993, the project met the prerequisite physical and financial completion tests
as set forth in the facility agreements and in April 1994 achieved project
completion status.
The OPIC and IFC loan agreements require that the current mining plan
indicate that production from the Kori Kollo mine extends at least three years
beyond the final scheduled principal payment ("Reserve Life Provision").
Failure to meet this Reserve Life Provision results in the suspension of all
debt repayments from Inti Raymi to its shareholders and all Inti Raymi dividend
payments until such time as compliance with the Reserve Life Provision is
achieved by either a prepayment of a sufficient portion of the debt or an
increase in the Kori Kollo mine ore reserves. The IFC and CAF loan agreements
contain provisions which entitle their respective agencies to receive principal
prepayments proportionate to those received by OPIC. In the third quarter of
1994, the Company completed a rescheduling of the life of mine production and
observed that the new schedule was not in compliance with the Reserve Life
Provision due to more rapid mining and production than originally planned. The
then-current plan indicated that production would extend approximately 2.8
years beyond the date of the final scheduled principal payment. To allow
continuing payments of dividends and the repayment of intercompany debts, Inti
Raymi obtained a temporary waiver, permitting noncompliance with the Reserve
Life Provision until June 30, 1996. Inti Raymi has recently announced reserve
additions which the lenders have approved as sufficient to satisfy the Reserve
Life Provision well in advance of the scheduled expiration of the temporary
waiver.
The OPIC facility provided for borrowings of $40 million. Interest
rates under the variable rate facility are based on LIBOR plus 2 percent.
Additionally, $4.1 million of previously existing OPIC loans to Inti Raymi were
restructured as loan obligations under the terms of the agreement, with the
exception that they are subject to their originally agreed interest rates.
Weighted average interest rates for borrowings under this facility for the
years ended December 31, 1995, 1994 and 1993, were 8.5 percent, 6.7 percent and
5.6 percent, respectively.
Under the IFC commitment, borrowings of $40 million were made. The
interest rate for the non-convertible portion of the loan is based on LIBOR
plus 2.375 percent, but Inti Raymi has the right to request an interest rate
cap or collar, or may elect at any time to pay a fixed rate of interest. Of
the total IFC borrowings, $5 million represents a convertible loan due on March
1, 2002, carrying a fixed annual interest rate of 11 percent with an additional
interest rate provision which varies with the price of gold. Weighted average
interest rates for borrowings under this facility for the years ended December
31, 1995, 1994 and 1993 were 8.6 percent, 6.9 percent and 6.0 percent,
respectively, for the non-convertible portion of the loan and 12.8 percent,
13.7 percent and 12 percent, respectively, for the convertible portion of the
loan. The loan may be converted, at IFC's option, into an equity interest of
up to a 3.98 percent in Inti Raymi. Upon the conversion of the convertible
loan into equity, the Company and Inti Raymi's minority owner would have their
interests in the capital stock of Inti Raymi diluted proportionately. Each
share of Inti Raymi common stock issued by Inti Raymi as a result of such
conversion will have an associated put option which, if exercised by IFC, would
require BMG and Inti Raymi's minority shareholder to purchase such share at its
fair market value as determined at the time the put is exercised.
13
<PAGE> 15
The CAF facility provided for borrowings of $15 million. Interest
rates under the facility are based on LIBOR. These funds were obtained from
several sources. CAF charged a supervision and oversight fee and a commitment
fee in addition to fees charged by the participants in the funding. Weighted
average interest rates for borrowings under this facility for the years ended
December 31, 1995, 1994 and 1993, were 7.3 percent, 5.5 percent and 4.7
percent, respectively.
The Company has a $15 million uncommitted revolving credit facility
with the Union Bank of Switzerland. Interest rates under the facility are
variable, based on either the bank's base rate or a negotiated rate. There are
no additional costs or financial restrictions under this facility. No loans
were outstanding under this revolving credit facility as of December 31, 1995
and 1994; however, letters of credit amounting to $2.2 million and $4.8 million
had been issued against this facility as of December 31, 1995 and 1994,
respectively. The weighted average interest rate for borrowings under this
facility for the year ended December 31, 1995, was 6.7 percent. There were no
interest charges for the year ended December 31, 1994, since the Company did
not borrow against this facility in 1994. Interest charges for the year ended
December 31, 1993, were based on weighted average interest rates of 3.5 to 4.3
percent.
Scheduled maturities of the Company's long-term debt for each of the
next five years are $13.4 million for 1996 through 1999 and $6.9 million in
2000. In addition, all borrowings then outstanding under the new revolving
credit facility are due and payable on November 6, 2000.
BMG has effective a registration statement under the Securities Act of
1933, as amended, for what is commonly referred to as a "universal shelf"
filing covering up to $200 million of its debt securities, preferred stock,
depositary shares, common shares and warrants which may be offered from time to
time.
Note 6. Shareholders' Equity
Reference is made to Note 5 for information regarding the number of
shares of common stock reserved for issuance for the conversion of the
Company's outstanding convertible subordinated debentures.
The Company's Board of Directors is authorized to divide the preferred
stock into series. With respect to each series the Board may determine the
dividend rights, dividend rates, conversion rights and voting rights (which may
be greater or less than the voting rights of the common stock). The Board may
also determine the redemption rights and terms, liquidation preferences,
sinking fund rights and terms, the number of shares constituting the series and
the designation of each series.
Pursuant to their authority to divide the preferred stock into series,
the Board of Directors in 1988 designated 2,000,000 shares of preferred stock
as "Series A Junior Participating Preferred Stock" for possible issuance upon
the exercise of stock rights as described below.
14
<PAGE> 16
Stock Rights - Since November 21, 1988, when the Company's Board of Directors
declared a dividend of one right for each outstanding share of the Company's
common stock, each share of the Company's outstanding common stock carries with
it such right. Each right entitles the holder to purchase from the Company one
one-hundredth of a share of Series A Junior Participating Preferred Stock, par
value $1.00 per share, for an exercise price of $60, subject to adjustment.
The rights expire on November 10, 1998. They will not be exercisable nor
transferable apart from the common stock until such time as a person or group
acquires 20 percent of the Company's common stock or initiates a tender offer
that will result in ownership of 30 percent of the Company's common stock. In
the event that the Company is merged, and its common stock is exchanged or
converted, the rights will entitle the holders to buy shares of the acquirer's
common stock at a 50 percent discount. Under certain other circumstances, the
rights can become rights to purchase the Company's common stock at a 50 percent
discount. The rights may be redeemed by the Company for one cent per right at
any time until 10 days following the first public announcement of a 20 percent
acquisition of beneficial ownership of the Company's common stock.
Convertible Preferred Stock - On May 20, 1993, the Company received $111
million in net proceeds from the issuance of 2.3 million shares of its
convertible preferred stock with a liquidation preference of $50 per share plus
any accrued and unpaid dividends. Each share of preferred stock will pay an
annual cumulative dividend of $3.25 and is convertible at any time at the
option of the holder into 4.762 shares of the Company's common stock. The
preferred stock is redeemable at the option of the Company solely for shares of
the Company's common stock beginning May 15, 1996. There are approximately 11
million shares of the Company's common stock reserved for issuance upon
conversion of the preferred stock.
Note 7. Federal and Foreign Income Tax
Federal and foreign income tax (benefit) expense consisted of the
following at December 31:
<TABLE>
<CAPTION>
1995 1994 1993
---------- ----------- ---------
(expressed in thousands)
<S> <C> <C> <C>
Current
United States $ - $ (2,288) $ (5,117)
Foreign 2,164 1,226 1,028
---------- ----------- ---------
Total current 2,164 (1,062) (4,089)
---------- ----------- ---------
Deferred
United States (10,171) - -
Foreign 5,203 3,581 -
---------- ----------- ---------
Total deferred (4,968) 3,581 -
---------- ----------- ---------
$ (2,804) $ 2,519 $ (4,089)
========== =========== =========
</TABLE>
Consolidated income before income taxes includes income from foreign
operations of $36.1 million, $32.7 million and $13.8 million in 1995, 1994 and
1993, respectively.
15
<PAGE> 17
The Company's net deferred tax position at December 31, is comprised
of the following:
<TABLE>
<CAPTION>
1995 1994
--------- ---------
(expressed in thousands)
<S> <C> <C>
Deferred tax assets $ 74,415 $ 55,275
Deferred tax liabilities (72,035) (57,822)
Valuation allowance (993) (1,034)
--------- ---------
Net deferred tax asset (liability) $ 1,387 $ (3,581)
========= =========
</TABLE>
Temporary differences and carryforwards which gave rise to significant
portions of deferred tax assets and liabilities at December 31 are as follows:
<TABLE>
<CAPTION>
1995 1994
---------- ----------
(expressed in thousands)
<S> <C> <C>
Net operating loss carryforwards $ 25,131 $ 24,975
Alternative minimum tax credit carryforward 4,552 4,552
Employee compensation and benefits accrued 5,480 5,052
Foreign tax credit carryforwards 11,859 -
Property, plant and equipment (21,319) (22,126)
Undistributed earnings of foreign subsidiaries (23,493) (17,556)
Other, net 170 2,556
Valuation allowance (993) (1,034)
---------- ----------
Net deferred tax asset (liability) $ 1,387 $ (3,581)
========== =========
</TABLE>
A reconciliation of income tax at the U.S. statutory rate to income
tax (benefit) expense as of December 31 follows:
<TABLE>
<CAPTION>
1995 1994 1993
-------- ------- ---------
(expressed in thousands)
<S> <C> <C> <C>
Income tax based on statutory rate of 35% $ 4,354 $ 4,232 $ (2,973)
Increases (reductions) resulting from:
Foreign withholding tax, net - 4,377 -
Change in filing position regarding foreign tax
credits (7,125) - -
Undistributed (income) losses of foreign
subsidiaries not subject to income tax (630) 302 (1,030)
Change in valuation allowance (41) (7,327) 722
Other, net 638 935 (808)
-------- ------- ---------
Income tax (benefit) expense $ (2,804) $ 2,519 $ (4,089)
======== ======= =========
</TABLE>
The Omnibus Budget Reconciliation Act of 1993, enacted on August 10,
1993, retroactively increased the federal statutory income tax from 34 percent
to 35 percent for periods beginning on or after January 1, 1994. The effect of
the rate change was not significant to the Company's net deferred income tax
position.
U.S. taxes have been provided on the undistributed earnings of
subsidiaries and joint ventures with the exception of Niugini Mining which is
in a cumulative loss position.
16
<PAGE> 18
The Company and its domestic subsidiaries file a consolidated U.S.
federal income tax return. Such returns have been closed through the year
1991.
At December 31, 1995, the Company had approximately $71.8 million of
regular net operating losses and $9.3 million of alternative minimum tax net
operating loss carryforwards expiring beginning in 2007, available to offset
future U.S. federal income tax and approximately $4.6 million of alternative
minimum tax credits available on an indefinite carryforward basis. Changes in
the ownership of a company can result in an annual limitation under IRC section
382 on the amount of the tax net operating loss carryforwards which can be
utilized in any one year. The annual limitation is based on the value of the
company as of the ownership change date multiplied by the federal long-term tax
exempt rate. It is not anticipated that the section 382 limitation will
significantly restrict the future utilization of BMG's net operating loss
carryforwards.
Note 8. Major Customers and Export Gross Revenues
All sales of the Company's products are made to precious metals
smelters, refiners or traders. Accordingly, the precious metals industry has
substantial influence over the market for the Company's products.
During 1995, gross revenues from five separate buyers accounted for
$83.2 million, $72.9 million, $35.6 million, $25.2 million and $22.5 million of
total gross revenues, respectively, representing 80.0 percent of total gross
revenues. International gross revenues for 1995 were $299.3 million, of which
$58.1 million were from export of U.S. product. In 1994, gross revenues from
four separate buyers of $69.0 million, $64.8 million, $36.8 million and $17.1
million, respectively, accounted for 77.3 percent of total gross revenues. Of
the Company's $243.0 million international gross revenues in 1994, $46.6
million were from export of U.S. product. For 1993, 80.1 percent of the
Company's total gross revenues were distributed among six separate buyers who
accounted for $55.3 million, $36.2 million, $25.3 million, $17.4 million, $17.0
million and $14.8 million in gross revenues, respectively. International gross
revenues of $207.2 million in 1993 included $47.9 million from export of U.S.
product. Alternate buyers are available to replace the loss of any of the
Company's principal customers.
17
<PAGE> 19
Note 9. Other Income (Expense), Net
Included in other income (expense), net, are certain non-operating
revenues, net of related expenses, consisting of:
<TABLE>
<CAPTION>
1995 1994 1993
--------- --------- ----------
(expressed in thousands)
<S> <C> <C> <C>
Foreign currency exchange gains (losses) $ (431) $ (2,075) $ 228
Gain on sale of investments - 725 2,697
Gain on sale of property, plant and equipment 5,542 - 3,730
Royalty income 1,331 820 -
Other 470 286 (947)
--------- --------- ----------
$ 6,912 $ (244) $ 5,708
========= ========= ==========
</TABLE>
Note 10. Acquisitions
Niugini Mining - In the aggregate, since January 1, 1989, the Company has paid
$204.1 million for 59.3 million shares of the common stock of Niugini Mining
representing a 50.5 percent ownership interest as of December 31, 1995. In
December 1993, Niugini Mining issued 5.8 million of its common shares at A$5.00
per share in a public offering which provided net proceeds of approximately
$19.1 million U.S. equivalent. As a result of this stock offering, BMG's
ownership interest in Niugini Mining decreased from 56.5 percent to 52.6
percent. In December 1993, the Company recorded a $2.1 million adjustment to
reduce the carrying value of its investment in Niugini Mining to reflect the
reduction in ownership interest. In 1995 and 1994, BMG's ownership interest
was diluted to 50.6 percent and 51.4 percent, respectively, due to employee
stock options that were exercised during the year. In May 1995 and June 1994
the Company recorded adjustments of $2.2 million and $1.2 million,
respectively, to reduce the carrying value of its investment in Niugini Mining
to reflect these reductions in ownership interest. In December 1995, the
Company paid approximately $17 million to purchase 11.9 million additional
shares of Niugini Mining through exercise of its share of options issued to
Niugini Mining's shareholders in May 1995.
At December 31, 1995, the carrying value attributed to the Company's
proportionate share of Niugini Mining's investment in LGL exceeded its
proportionate share of Niugini Mining's historical cost basis in LGL by $102
million. Such excess will be amortized against the Company's share of the
earnings of LGL based on the estimated recoverable reserves attributable to the
Lihir project upon commencement of production (See Note 2).
Inti Raymi - On March 8, 1994, the Company purchased an additional 3 percent of
Inti Raymi's outstanding stock for $5.2 million from Zeland Mines, S.A. to
increase the Company's ownership interest to 88 percent. As of December 31,
1995, the Company had invested an aggregate of $41.1 million in cash and 9
million of its common shares (valued at approximately $76.3 million) to acquire
its 88 percent equity interest in Inti Raymi.
At December 31, 1995, the carrying value, net of accumulated
amortization, attributed to the Company's share of the Kori Kollo and Llallagua
gold deposits exceeded its proportionate
18
<PAGE> 20
share of Inti Raymi's historical cost basis in the deposits by $82.8 million.
This excess has been capitalized to property and is being amortized by the
units of production method based on the deposits' estimated recoverable
reserves. Amortization of the excess cost amounted to $10.8 million, $11.1
million and $8.6 million in 1995, 1994 and 1993, respectively.
Interest costs amounting to $.7 in 1995, $.4 million in 1994 and $.6
million in 1993 were capitalized in connection with the Kori Kollo project.
Note 11. Common Stock and Stock Options
Stock Options - Under the Company's 1994 Long-term Incentive Plan and
a predecessor stock option plan, 5,980,000 shares of the Company's Common Stock
were reserved for issuance as of December 31, 1995. Of this number 3,240,582
shares and 3,641,173 shares, respectively, were available for future grants of
stock options, restricted stock, performance shares or other stock awards at
December 31, 1995 and 1994, respectively.
Non-employee directors of the Company are granted non-qualified stock
options under a separate stock option plan for outside directors. Under this
plan, a total of 250,000 shares of the Company's common stock are reserved for
issuance, of which 150,000 shares and 160,500 shares are available for future
grants at December 31, 1995 and 1994, respectively.
Options granted under the above plans are exercisable under the terms
of the respective option agreements at the market price of the common stock at
the date of grant, subject to anti-dilution adjustments in certain
circumstances. Payment of the exercise price may be made in cash or in shares
of common stock previously owned by the optionee, valued at current market
value.
Under a deferred income stock option plan for officers and directors,
each participant may elect to receive a non-qualified stock option in lieu of a
portion of his compensation. A maximum of 2,000,000 shares of common stock is
issuable under the plan, of which 1,729,328 shares and 1,751,391 shares are
available for future grants at December 31, 1995 and 1994, respectively.
Options granted pursuant to the plan become exercisable at the beginning of the
calendar year immediately following the year in which the option was granted.
They expire no later than 10 years after the date of grant. The amount of
deferred compensation is accrued as compensation expense during the period
earned.
19
<PAGE> 21
Additional information for 1995 related to the Company's stock option
plans follows:
<TABLE>
<CAPTION>
Number of Shares Option Price
Under Option Range Per Share
----------------- ---------------
<S> <C> <C>
Outstanding at December 31, 1994 2,175,648 $ 4.83 to $ 20.75
Granted 496,950 $ 9.25 to $ 11.38
Exercised (94,363) $ 6.00 to $ 11.19
Expired (63,796) $ 6.88 to $ 11.38
---------
Outstanding at December 31, 1995 2,514,439 $ 4.83 to $ 20.75
=========
Exercisable at December 31, 1995 1,760,174 $ 4.83 to $ 20.75
=========
</TABLE>
At December 31, 1995, expiration dates for the outstanding options
ranged from July 1, 1996, to August 24, 2005. The weighted average exercise
price per share was $9.51.
Note 12. Benefits Plans
Pension Plans - Substantially all U.S. employees of the Company are covered by
non-contributory pension plans. The U.S. plans provide benefits based on
participants' years of service and compensation or defined amounts for each
year of service. The Company makes annual contributions to the U.S. plans that
comply with the minimum funding provisions of the Employee Retirement Income
Security Act ("ERISA").
During 1993, the plans for BMG's Australian employees were changed
from non-contributory defined benefit plans to defined contribution plans.
Pension costs are generally accrued and charged to expense currently.
Net periodic pension cost included the following components:
<TABLE>
<CAPTION>
1995 1994 1993
----------- --------- ----------
(expressed in thousands)
<S> <C> <C> <C>
Service cost - benefits earned during the year $ 518 $ 599 $ 648
Interest cost on projected benefit obligations 1,618 1,499 1,611
Expected return on plan assets (1,888) (2,060) (1,773)
Net amortization and deferral 246 258 (88)
----------- ---------- ----------
Net periodic pension cost $ 494 $ 296 $ 398
=========== ========== ==========
</TABLE>
At December 31, 1995, 1994 and 1993, the projected long-term rate of
return on plan assets was 9 percent.
Actual return on the plans' assets was $6.4 million for the year ended
December 31, 1995, $1.4 million for the year ended December 31, 1994, and $.3
million for the year ended December 31, 1993.
20
<PAGE> 22
The following sets forth the plans' funded status and related amounts
as of December 31:
<TABLE>
<CAPTION>
1995 1994
--------- ---------
(Expressed in thousands)
<S> <C> <C>
Actuarial present value of
benefit obligations:
Vested benefit obligation $ 20,282 $ 17,148
========= =========
Accumulated benefit obligation $ 21,712 $ 18,163
========= =========
Projected benefit obligation $ 23,386 $ 19,299
Plan assets at fair value 26,724 21,498
--------- ---------
Plan assets in excess of projected benefit
obligation 3,338 2,199
Unrecognized net gain and effects of
changes in actuarial assumptions (3,953) (2,585)
Unrecognized net asset at transition (796) (914)
Prior service cost not yet recognized in net
periodic pension cost 2,879 3,262
--------- ---------
Prepaid pension cost $ 1,468 $ 1,962
========= =========
</TABLE>
Plan assets include equity securities, common trust funds and various
debt securities. Weighted average rate assumptions used in determining
estimated benefit obligations were as follows:
<TABLE>
<CAPTION>
1995 1994
---- ----
<S> <C> <C>
Discount Rate 7.5% 8.5%
Rate of increase in compensation levels 8.8% 6.0%
</TABLE>
Contribution Plans - The Company has defined contribution plans available for
all full-time U.S. salaried employees and all full-time U.S. hourly employees.
The plans provide for savings contributions by employees from 1 to 16 percent
of their compensation, subject to ERISA limitations. The Company matches 50 to
100 percent of employee contributions with BMG's common stock, subject to a
limit of 6 percent of an employee's compensation during each plan year.
The Company has defined contribution plans available for all BMG's
Australian salaried and hourly employees. The Company's contributions to the
salaried plan are determined in accordance with the trust deed. The Company's
contributions to the hourly plan are determined in accordance with the union
award.
All Company contributions to the plans are expensed and funded
currently. The cost of such Company contributions to the U.S. plans was $.4
million, $.3 million and $.5 million in 1995, 1994 and 1993, respectively. The
cost attributable to the Australian plans was $.8 million, $.7 million and $.6
million in 1995, 1994 and 1993, respectively.
Postretirement Health Care and Life Insurance Benefits - Substantially all of
the Company's U.S. employees may become eligible for certain unfunded health
care and life insurance benefits when they reach retirement age while working
for the Company.
21
<PAGE> 23
Net periodic postretirement benefit cost included the following
components:
<TABLE>
<CAPTION>
1995 1994 1993
-------- -------- --------
(expressed in thousands)
<S> <C> <C> <C>
Service cost $ 275 $ 460 $ 367
Interest cost on accumulated benefit obligation 502 554 644
Amortization of (gain)loss (108) - -
-------- -------- --------
Net periodic postretirement benefit cost $ 669 $ 1,014 $ 1,011
======== ======== ========
</TABLE>
The following table presents the plans' status at December 31:
<TABLE>
<CAPTION>
1995 1994
---------- --------
(expressed in thousands)
<S> <C> <C>
Accumulated postretirement benefit
obligation:
Retirees $ 4,863 $ 3,940
Fully eligible active plan participants 591 720
Other active plan participants 2,133 2,299
---------- --------
7,587 6,959
Unrecognized net gain (loss) 1,215 1,510
---------- --------
Accrued postretirement benefit cost $ 8,802 $ 8,469
========== ========
</TABLE>
The discount rate used in determining the accumulated postretirement
benefit obligation was 7.5 percent for 1995 and 8.5 percent for 1994. For 1995
and 1994, the assumed annual rate of increase in the per capita cost of covered
health care benefits was 9 and 12 percent, respectively. For 1995
calculations, a gradual decrease in the rate is assumed through the year 2000
when the rate is estimated to reach 6 percent and remain at that level
thereafter. For 1994 calculations, a gradual decrease in the rate is assumed
through the year 1999 when the rate is estimated to reach 6 percent and remain
at that level thereafter. A one percent increase in the assumed health care
cost trend rates would increase the accumulated postretirement benefit
obligation as of December 31, 1995, by approximately $1.1 million, and would
increase the total of the service and interest cost components of net periodic
postretirement health care cost for 1995 by approximately $.1 million.
Postemployment Benefits - Effective January 1, 1994, the Company adopted SFAS
No. 112, "Employers' Accounting for Postemployment Benefits". This standard
requires that the expected cost of these benefits must be charged to expense
during the periods that employees vest in these benefits. The Company had
previously recognized these costs as an expense when paid. Adoption of the
standard did not have a material effect on the Company's financial position or
on its results of operations. Postemployment benefit costs recognized under
this standard do not differ significantly from those that would have been
reported under the previous method.
22
<PAGE> 24
Note 13. Geographic Segment Information
The following table sets forth certain financial information relating
to international and domestic operations:
<TABLE>
<CAPTION>
Year Ended December 31,
------------------------------------------------
1995 1994 1993
------------ ---------- -----------
(expressed in thousands)
<S> <C> <C> <C>
Gross revenues:
United States $ 58,058 $ 46,562 $ 47,915
Austral Pacific 73,326 40,314 57,060
South America 167,911 156,108 102,276
------------ ---------- -----------
$ 299,295 $ 242,984 $ 207,251
============ ========== ===========
Operating Income (Loss):
United States $ (13,098) $ (10,673) $ (19,239)
Austral Pacific 1,051 (2,976) 7,046
South America 29,065 34,861 7,434
Other International (1,034) (1,270) (975)
------------ ---------- -----------
15,984 19,942 (5,734)
Interest and Other income (expense), net 2,613 (3,464) 1,949
------------ ---------- -----------
Income (Loss) Before Income Taxes and Minority
Interest $ 18,597 $ 16,478 $ (3,785)
============ ========== ===========
Identifiable Assets:
United States $ 109,618 $ 114,789 $ 132,669
Austral Pacific 295,423 228,989 216,200
South America 331,035 335,683 318,959
Other International 1,063 308 324
------------ ---------- -----------
$ 737,139 $ 679,769 $ 668,152
============ ========== ===========
</TABLE>
Note 14. Commitments and Contingencies
Total operating lease rental expenses (exclusive of mineral leases)
were $3.4 million, $2.2 million and $1.4 million for 1995, 1994 and 1993,
respectively.
Aggregate minimum rentals (exclusive of mineral leases) subsequent to
December 31, 1995, under non-cancelable leases for the years ending December
31, 1996 to 2000, are estimated to be $3.1 million, $2.4 million, $1.8 million,
$1.0 million and $.6 million, respectively. Lease commitments beyond the year
2000 total $1.8 million.
Pursuant to pricing provisions as set out in dore customer contracts,
as of December 31, 1995, the Company had committed to sell 14,300 ounces of
gold contained in dore valued at approximately $5.6 million at prices
determined during various pricing periods in 1995, none of which exceeds 45
days. The average price of gold sold under this commitment is approximately
$389 per ounce.
23
<PAGE> 25
All of the Company's mining and processing operations are subject to
reclamation and closure requirements. The Company monitors such requirements
and periodically revises its cost estimates to meet the legal and regulatory
requirements of the various jurisdictions in which it conducts its business.
Where possible, plans for ongoing operations and future mine development are
implemented in a manner that contributes to the fulfillment of reclamation and
closure obligations in a cost effective manner through the conduct of ongoing
operating activities. Costs estimated to be incurred in future periods which
cannot be addressed in this manner are charged to operations through provisions
based on the units of production method such that the estimated cost of
ultimate reclamation is fully provided for by the time mineral reserves are
depleted. The timing of actual cash expenditures for reclamation may be
accelerated or deferred depending on cost and other determinations which may
make such decisions prudent in the circumstances. The Company believes that
these policies and practices adequately address its reclamation obligations and
provide a systematic and rational method of charging such costs to operations
consistent with industry practice. Accruals amounting to an aggregate of $8.0
million at December 31, 1995, are included as long-term liabilities in the
Company's Consolidated Balance Sheet. At the Battle Mountain Complex,
aggregate reclamation expenditures estimated to be spent in future periods are
expected to amount to approximately $7.8 million. Actual expenditures made to
date have equaled the total amount accrued to date, therefore there is no net
accrued liability at December 31, 1995 for this location. Estimated ultimate
reclamation obligations and related accrued liability balances at December 31,
1995, respectively, for each of the Company's other operating mines is as
follows: San Luis $3.3 million and $1.7 million, Pajingo $2.6 million and $1.5
million, Kori Kollo $10.0 million and $1.9 million and Red Dome $3.7 million
and $2.9 million. Reclamation expenditures for the San Cristobal mine are not
expected to be material.
Note 15. Forward Sales and Hedging
The Company has only limited involvement with derivative financial
instruments and does not use them for trading purposes. Derivative instruments
are used to manage well-defined interest rate, foreign currency exchange rate
and commodity price risks.
Interest rate cap agreements are used to reduce the potential impact
of increases in interest rates on floating-rate long-term debt. At December
31, 1995, Inti Raymi was party to three interest rate cap agreements which were
effective June 1, 1994, each with a term of three years. The agreements
entitle Inti Raymi to receive from counterparties on a quarterly basis the
amounts, if any, by which Inti Raymi's interest payments on a portion of its
LIBOR based floating-rate Kori Kollo project financing exceed various fixed
rates over the term of the caps. The fixed rates in the cap agreements
gradually escalate from 5.4 percent in 1995 to 7.2 percent in 1997. Inti Raymi
has hedged 50 percent of its net interest rate exposure currently related to
the Kori Kollo LIBOR based 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 $.5 million at December 31, 1995, has been
included in other assets. Since the interest rate caps were put in place, the
Company has amortized approximately $.2 million of such premiums and has
received approximately $.2 million in settlement of expiring caps.
24
<PAGE> 26
The Company uses fixed forward sales contracts, spot deferred sales
contracts and put options to hedge anticipated sales of gold, silver and
copper. The following table summarizes the Company's forward sales contracts
at December 31, 1995:
<TABLE>
<CAPTION>
Average Price
Amount Per Unit Period
------ ------------------ --------------------
<S> <C> <C> <C>
BMG
Forward sales contracts
Gold 129,977 oz US$397 Jan 96 - Oct 96
Niugini Mining
Forward sales contracts
Gold 91,529 oz A$536 Jan 96 - Dec 96
28,679 oz US$386 Jan 96
Silver 12,568 oz US$5.87 Jan 96
Copper 2,000 tonnes US$2,654 Jan 95 - Feb 96
Inti Raymi
Forward sales contracts
Gold 83,500 oz US$396 Jan 96 - Jun 96
Purchased put options
Gold 42,000 oz US$385 Jan 96 - Apr 96
</TABLE>
Deferred costs associated with Inti Raymi's forward sales contracts
amounted to $1.3 million and $1.5 million at December 31, 1995 and 1994,
respectively. Deferred costs associated with put options amounted to $.2
million at December 31, 1995. The Company did not own any put options at
December 31, 1994.
At December 31, 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 $387 per ounce of gold, $5.19 per ounce of silver, and $2,815 per
tonne of copper, before consideration of the deferred costs referred to above,
is $2.6 million, of which $.4 million is attributable to minority interests.
Australian dollar contracts were converted to U.S. dollars at the December 1995
month end exchange rate of US$.74 to A$1.
The Company is exposed to credit-related losses in the event of
nonperformance by the counterparties to its interest rate caps and forward
sales contracts, but does not expect any counterparties to fail to meet their
obligations. The Company does not obtain collateral or other security to
support financial instruments subject to credit risk but monitors the credit
standing of counterparties.
Note 16. Fair Value of Financial Instruments
SFAS No. 107, "Disclosures about Fair Value of Financial Instruments,"
defines the fair value of a financial instrument as the amount at which the
instrument could be exchanged in a
25
<PAGE> 27
current transaction between willing parties. The following table presents the
carrying amounts and estimated fair values of the Company's financial
instruments at December 31:
<TABLE>
<CAPTION>
1995 1994
------------------------------ -------------------------------
Carrying Fair Carrying Fair
Amount Value Amount Value
-------- ----- -------- -----
(expressed in thousands)
<S> <C> <C> <C> <C>
Financial Assets
Interest rate caps $ 490 $ 23 $ 685 $ 1,677
Financial Liabilities
Debt $ 182,603 $ 157,108 $ 179,029 $ 158,662
</TABLE>
The carrying amounts of the interest rate caps and debt shown in the
table are included in the Consolidated Balance Sheet under Other Assets and
Long-Term Debt, respectively.
The following methods and assumptions were used to estimate the fair
value of each class of financial instruments:
Cash, cash equivalents, trade receivables, and trade payables - The carrying
amounts approximate fair value because of the short maturity of those
instruments.
Other assets - The amounts reported relate to the interest rate cap agreements
described in Note 15 . The carrying amount comprises the unamortized premiums
paid for the contracts. The fair value is estimated using option pricing
models.
Debt - The fair value of the Company's convertible subordinated debentures is
based on the quoted market price of the debentures at the reporting date. Due
to the generally variable interest rate features of the OPIC, IFC and CAF
loans, the Company believes the carrying amounts approximate the fair value of
this debt at the reporting date.
The Company has issued corporate guarantees totaling $4.5 million to
ensure that the reclamation of the Battle Mountain Complex mines will be
performed as specified in the operating permits issued by the State of Nevada.
In addition, the Company has a letter of credit outstanding for $2.2 million as
collateral for surety bonds provided as security for various reclamation
obligations. The Company believes the carrying value of these financial
instruments approximates their fair market value.
26
<PAGE> 28
Note 17. Subsequent Event
On July 19, 1996, the Company combined with Hemlo Gold Mines Inc.
(Hemlo) in a transaction accounted for as a pooling of interests. The
expected unaudited pro forma combined condensed balance sheet of the Company
and Hemlo as of December 31, 1995 giving effect to the transaction is as
follows (in millions):
<TABLE>
<S> <C>
Assets $ 1,145
==========
Liabilities 392
Shareholders' equity 753
----------
Total liabilities and shareholders' equity $ 1,145
==========
</TABLE>
27
<PAGE> 29
SUPPLEMENTAL FINANCIAL INFORMATION
(UNAUDITED)
QUARTERLY RESULTS
<TABLE>
<CAPTION>
Earnings Dividends per Dividends
Net Operating Net (Loss) Per Common per
Sales Income Income Common Share Share Preferred Share
---------- --------- --------- ------------ ------------- ---------------
(expressed in thousands except per share amounts)
<S> <C> <C> <C> <C> <C> <C>
1995
----
First Quarter $ 54,082 $ 3,420 $ 2,482 $ .01 $ .025 $ .8125
Second Quarter 81,263 6,607 7,630 .06 - .8125
Third Quarter 65,485 2,713 2,753 .01 .025 .8125
Fourth Quarter 83,430 3,244 2,380 .01 - .8125
---------- --------- --------- ----- ------- ---------
$ 284,260 $ 15,984 $ 15,245 $ .09 $ .050 $ 3.2500
========== ========= ========= ===== ======= =========
1994
----
First Quarter $ 50,917 $ 7,182 $ 2,848 $ .01 $ .025 $ .8125
Second Quarter 57,036 6,028 3,084 .01 - .8125
Third Quarter 55,827 1,856 1,451 (.01) .025 .8125
Fourth Quarter 65,890 4,876 2,189 .01 - .8125
---------- --------- --------- ----- ------- ---------
$ 229,670 $ 19,942 $ 9,572 $ .02 $ .050 $ 3.2500
========== ========= ========= ===== ======= =========
</TABLE>
28
<PAGE> 30
LIHIR GOLD LIMITED
(A DEVELOPMENT STAGE COMPANY)
REPORT OF INDEPENDENT ACCOUNTANTS
The Board of Directors
Lihir Gold Limited
Port Moresby
Papua New Guinea
We have audited the financial statements of Lihir Gold Limited for the year
ended 31 December 1995 as set out on pages 30 to 44. The Company's Directors
are responsible for the preparation and presentation of the financial statements
and the information they contain. We have conducted an independent audit of
these financial statements in order to express an opinion on them to the members
of the Company.
Our audit has been conducted in accordance with International Standards on
Auditing which are substantially similar to U.S. standards, to provide
reasonable assurance as to whether the financial statements are free of material
misstatement. Our procedures included examination, on a test basis, of evidence
supporting the amounts and other disclosures in the financial statements, and
the evaluation of accounting policies and significant accounting estimates.
These procedures have been undertaken to form an opinion as to whether, in all
material respects, the financial statements are presented fairly in accordance
with Accounting Standards adopted for use in Papua New Guinea and Papua New
Guinea statutory requirements so as to present a view which is consistent with
our understanding of the Company's financial position and the results of its
operations.
The audit opinion expressed in the Report has been formed on the above basis.
As described in Note 20 to the financial statements, the Company's accounting
policies vary in certain important respects from the accounting principles
generally accepted in the United States. Note 20 reconciles these differences.
AUDIT OPINION
In our opinion:
(a) the financial statements of Lihir Gold Limited are properly drawn up:
(i) so as to give a true and fair view of the state of affairs of
the Company at 31 December 1995 and of the results and cash
flows of the Company for the year ended on that date; and
(ii) in accordance with the provisions of the Companies Act
(Chapter 146); and
(iii) in accordance with applicable Accounting Standards;
(b) the accounting and other records (including registers) examined by us
have been properly kept in accordance with the Companies Act.
COOPERS & LYBRAND
By R. Hubbard
Registered under the Accountants Registration Act (Chapter 89)
PORT MORESBY, PAPUA NEW GUINEA
On 27th day of June 1996
29
<PAGE> 31
LIHIR GOLD LIMITED
(A DEVELOPMENT STAGE COMPANY)
PROFIT AND LOSS ACCOUNTS
FOR THE YEAR ENDED 31 DECEMBER 1995, 1994 AND 1993
<TABLE>
<CAPTION>
US $ 000
NOTE 1995 1994 1993
(NOTE 1(a)) (NOTE 1(1)) (NOTE 1(a))
<S> <C> <C> <C> <C>
Operating profit before income tax 5 - - -
Income tax attributable to operating profit - - -
- ---------------------------------------------------------------------------------------------------------------
Operating profit after income tax - - -
Retained profits at the beginning of the financial period - - -
- ---------------------------------------------------------------------------------------------------------------
Retained profits at end of the financial period - - -
===============================================================================================================
</TABLE>
The accompanying notes form part of these financial accounts
30
<PAGE> 32
LIHIR GOLD LIMITED
(A DEVELOPMENT STAGE COMPANY)
BALANCE SHEET
AS AT 31 DECEMBER 1995 AND 1994
<TABLE>
<CAPTION>
US $ 000
NOTE 1995 1994
(NOTE 1(a)) (NOTE 1(1))
<S> <C> <C> <C>
CURRENT ASSETS
Cash 8 363,099 -
Receivables 9 420 -
- -----------------------------------------------------------------------------
TOTAL CURRENT ASSETS 363,519 -
- -----------------------------------------------------------------------------
NON-CURRENT ASSETS
Development properties 10 268,235 151,624
- -----------------------------------------------------------------------------
TOTAL NON-CURRENT ASSETS 268,235 151,624
- -----------------------------------------------------------------------------
TOTAL ASSETS 631,754 151,624
- -----------------------------------------------------------------------------
CURRENT LIABILITIES
Creditors and borrowings 11 10,054 -
Employee benefits 218 -
Retention 168 -
- -----------------------------------------------------------------------------
TOTAL CURRENT LIABILITIES 10,440 -
- -----------------------------------------------------------------------------
COMMITMENTS AND CONTINGENCIES 14,15
- -----------------------------------------------------------------------------
NET ASSETS 621,314 151,624
=============================================================================
SHAREHOLDERS' EQUITY
Ordinary Shares, par value PGK $0.10:
Issued and outstanding: 900,000,000 Shares
in 1995 and none in 1994 12 68,085 -
Reserves 13 553,229 -
Joint venture contributions - 151,624
- -----------------------------------------------------------------------------
TOTAL SHAREHOLDERS' EQUITY 621,314 151,624
=============================================================================
</TABLE>
The accompanying notes form part of these financial accounts
31
<PAGE> 33
LIHIR GOLD LIMITED
(A DEVELOPMENT STAGE COMPANY)
STATEMENT OF CASH FLOWS
FOR THE YEARS ENDING 31 DECEMBER 1995, 1994 AND 1993
<TABLE>
<CAPTION>
US $ 000
1995 1994 1993
(NOTE 1(a)) (NOTE 1 (1)) (NOTE 1 (a))
<S> <C> <C> <C>
BALANCE AT BEGINNING OF PERIOD - - -
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from issue of shares 431,754 - -
Joint venture contributions 37,936 12,812 -
- ----------------------------------------------------------------------------------
469,690 12,812 -
- ----------------------------------------------------------------------------------
CASH FLOWS FROM INVESTING ACTIVITIES
Development properties (123,877) (12,812) -
Interest received 7,266 - -
Increase in current assets (420) - -
Increase in current liabilities 10,440 (12,812) -
- ----------------------------------------------------------------------------------
(106,591) - -
- ----------------------------------------------------------------------------------
NET INCREASE IN CASH HELD 363,099 - -
- ----------------------------------------------------------------------------------
BALANCE AT END OF PERIOD 363,099 - -
==================================================================================
</TABLE>
The accompanying notes form part of these financial statements
32
<PAGE> 34
LIHIR GOLD LIMITED
(A DEVELOPMENT STAGE COMPANY)
NOTES TO AND FORMING PART
OF THE ACCOUNTS
FOR THE YEAR ENDED 31 DECEMBER, 1995
NOTE 1: STATEMENT OF ACCOUNTING POLICIES
The financial statements have been prepared in accordance with applicable
International Accounting Standards (IAS). The financial statements have also
been prepared on the basis of historical costs and do not take into account
changing money values. Cost is based on the fair values of the consideration
given in exchange for assets. The accounting policies have been consistently
applied, unless otherwise stated.
The following is a summary of the significant accounting policies adopted by
the Company in the preparation of the financial statements.
(a) UNITING OF INTERESTS
The transfer of the Lihir Project to the Company has been accounted
for as a uniting of interests of the Company with the respective
interests of each participant in the Lihir Project. A uniting of
interests is accounted for by using the pooling of interests method in
accordance with IAS 22. Accordingly, the assets and liabilities
identified with the Lihir Project have been transferred to the
Company at historical cost and the Company's financial statements have
been restated to reflect the Lihir Project accounts for all periods
prior to the uniting of interests.
The substance of a uniting of interests is that no acquisition has
occurred and there has been a continuation of the mutual sharing of
risks and benefits that existed prior to the business combination.
Use of the pooling of interests method recognises this by accounting
for the combined enterprises as though the separate businesses were
continuing as before, though now jointly owned and managed.
(b) EXPLORATION AND EVALUATION EXPENDITURE
Exploration and evaluation expenditure is accumulated separately for
each area of interest.
Exploration expenditure is fully written off in the financial year in
which it is incurred, unless recoupment from revenue to be derived
from the relevant area of interest/mineral resource, or from the sale
of that area of interest, is reasonably assured.
Evaluation expenditure is capitalised, to the extent to which its
recoupment out of revenue to be derived from the relevant area of
interest/mineral resource, or from sale of that area of interest, is
reasonably assured.
Exploration or evaluation expenditure written off, or provided
against, is reinstated when recoupment out of revenue to be derived
from the relevant area of interest/mineral resource or from sale of
that area of interest, is reasonably assured.
(c) DEVELOPMENT PROPERTIES
Development expenditure is accumulated separately for each area of
interest in which economically recoverable mineral reserves have been
identified and are reasonably assured.
Once a development decision has been taken, all past and future
exploration and evaluation expenditure in respect of the area of
interest is aggregated with the costs of development and classified
under non-current assets as "Development Properties".
All expenditure incurred prior to the commencement of commercial levels
of production from each development property is carried forward to the
extent to which recoupment out of revenue to be derived from the sale
of production from the relevant development property, or from sale of
that property, is reasonably assured.
33
<PAGE> 35
No amortisation is provided in respect of development properties until
they are reclassified as "Mine Properties", following the commencement
of commercial production.
(d) MINE PROPERTIES
Mine properties represent the accumulation of all exploration,
evaluation, and development expenditure incurred by or on behalf of
the Company in relation to areas of interest in which mining of a
mineral resource has commenced.
When further development expenditure is incurred in respect of a mine
property after the commencement of production, such expenditure is
carried forward as part of the cost of that mine property, only when
substantial future economic benefits are thereby established,
otherwise such expenditure is classified as part of the cost of
production.
Amortisation of costs is provided on the unit-of-production method,
separate calculations being made for each mineral resource. The
unit-of-production basis results in an amortisation charge
proportional to the depletion of estimated recoverable gold ounces
contained in Ore Reserves (comprising both Proved and Probable Ore
Reserves).
(e) CAPITALISATION OF FINANCING COSTS
Interest, other financing costs and foreign exchange differences are
classified as part of development and mine properties where they
relate to funds raised for developing those properties. Interest
earned on the temporary investment of borrowed funds and funds
received in connection with the sale of equity securities prior to the
expenditure being made is deducted from interest paid on the borrowed
funds in arriving at the amounts so capitalised.
(f) MINE BUILDINGS, MACHINERY AND EQUIPMENT
The cost of each item of buildings, machinery and equipment is
depreciated over the expected useful life adopting the
unit-of-production method. Each item's economic life has due regard
to both physical life limitations and to present assessments of
economically recoverable reserves of the mine property and to possible
future variations in those assessments. Estimates of remaining useful
lives are made on a regular basis for all assets, with annual
reassessments for major items.
The total net carrying values of mine building, machinery and
equipment at each mine property are reviewed regularly and, to the
extent to which these values exceed their recoverable amounts, that
excess is fully provided against in the financial year in which this
is determined.
Major spares purchased specifically for particular plant are included
in the cost of plant and are depreciated over the expected useful life
of the item of plant.
(g) REMAINING MINE LIVES
In estimating the remaining life of the mine at each mine property for
the purpose of amortisation/depreciation calculations, due regard is
given, not only to the volume of remaining recoverable mineral
reserves, but also to limitations which could arise from the potential
for changes in technology, demand, product substitution and other
issues which are inherently difficult to estimate over a lengthy time
frame.
(h) RESTORATION, REHABILITATION AND ENVIRONMENTAL EXPENDITURE
Restoration, rehabilitation and environmental expenditure to be
incurred during the production phase of operations is accrued when the
need for such expenditure is established, and then written off as part
of the cost of production of the mine property concerned. Significant
restoration, rehabilitation and environmental expenditure to be
incurred subsequent to the cessation of production at each mine
property is accrued, in proportion to production, when the amount of
expenditure can be reasonably estimated.
34
<PAGE> 36
(i) INVENTORIES
Inventories of broken ore, concentrate and metal are physically
measured or estimated and valued at the lower of cost and net
realisable value.
Cost comprises direct material, labour and transportation expenditure
in getting such inventories to their existing location and condition,
together with an appropriate portion of fixed and variable overhead
expenditure, based on weighted average costs incurred during the
period in which such inventories are produced. Net realisable value
is the amount estimated to be obtained from sale of the item of
inventory in the normal course of business, less any anticipated costs
to be incurred prior to its sale.
Inventories of consumable supplies and spare parts expected to be used
in production are valued at weighted average cost.
(j) REVENUE RECOGNITION
Sales are recognised as revenue only when there has been a passing of
risk to the customer, and:
* the product is in a form suitable for delivery and no further
processing is required by, or on behalf of, the Company;
* the quantity and quality (grade) of the product can be
determined with reasonable accuracy;
* the product has been despatched to the customer and is no
longer under the physical control of the Company (or property
in the product has earlier passed to the customer); and
* the selling price can be measured reliably.
Sales revenue represents the gross proceeds receivable from the
customer.
Revenue received from sale/disposal of product, materials or services
during the exploration, expenditure or development phases of
operations is offset against expenditure in respect of the area of
interest/mineral resource concerned.
(k) EMPLOYEE ENTITLEMENTS
(i) Wages and Salaries
A liability for wages and salaries is recognised, and measured
as the amount unpaid at balance date at current pay rates in
respect of employees' services up to that date.
(ii) Annual and Long Service Leave
A liability for annual and long service leave is recognised,
and measured as the present value of expected future payments
to be made in respect of services provided by employees up to
balance date. In assessing expected future payments regard is
had to expected future wage and salary levels and experience
of employee departures and periods of service.
(l) FOREIGN CURRENCY TRANSLATION
As the Company's turnover is denominated in US dollars and the
majority of its fixed asset purchases and costs are in US dollars or
currencies related to US dollars, the Company's Directors have adopted
the US dollar as the Company's functional and management reporting
currency.
The Company's Kina figures are translated from US dollars at the rate
prevailing at 31 December 1995 of PGK 1.00 = USD0.75. Movements in the
share capital account are accounted for as a capital reserve.
35
<PAGE> 37
Specific Commitment
Currency hedging could be undertaken to avoid or minimise possible
adverse financial effects of movements in exchange rates. Gains or
costs arising upon entry into a hedging transaction intended to hedge
the purchase or sale of goods or services, together with subsequent
exchange gains or losses resulting from those transactions up to the
date of purchase or sale, are deferred and included in the measurement
of the purchase or sale. In the case of hedges of monetary items,
exchange gains or losses are brought to account in the financial year
in which the exchange rate changes. Gains or costs arising at the
time of entering into such hedging transactions are brought to account
in the profit and loss account over the lives of the hedges.
(m) GOLD HEDGING CONTRACTS
Unrealised gains and losses on gold hedging contracts covering
expected future gold production, are not recognised as revenue until
delivery of gold against the contract occurs. Any instruments entered
into which are not for the purpose of hedging future sales revenues
are recorded at their market value at the year end. Gains and losses
on these instruments are brought to account each year in the profit
and loss account.
(n) INCOME TAX
Tax effect accounting procedures are followed whereby the income tax
expense in the profit and loss account is matched with the accounting
profit (after allowing for permanent differences). The future tax
benefit relating to tax losses is not carried forward as an asset
unless the benefit is assured beyond any reasonable doubt. Income tax
on net cumulative timing differences is set aside to the deferred
income tax and future income tax benefit accounts at the rates which
are expected to apply when those timing differences reverse.
(o) LEASES
Leases of fixed assets where substantially all the risks and benefits
incidental to the ownership of the asset, but not the legal ownership
transferred to the Company, are classified as finance leases. Finance
leases are capitalised, recording an asset and liability equal to the
present value of the minimum lease payments, including any guaranteed
residual values. Leased assets are amortised over their estimated
useful lives. Lease payments are allocated between the reduction of
the lease liability and the lease interest expense for the period.
Lease payments for operating leases, where substantially all the risks
and benefits remain with the lessor, are charged as expenses in the
periods in which they are incurred.
(p) CASH
For the purpose of the statement of cash flows, cash includes:
(i) cash on hand and in at call deposits with banks or financial
institutions, net of bank overdrafts; and
(ii) investments in money market instruments with less than 90 days
to maturity.
(q) GEOGRAPHIC AREA
The Company operates in Papua New Guinea.
(r) COMPARATIVE FIGURES
Comparative figures have been included in accordance with
International Accounting Standards for the pooling of interests.
(s) ROUNDING OF AMOUNTS
The financial statements and directors' report have been rounded to
the nearest thousand dollars.
36
<PAGE> 38
NOTE 2: SPECIAL MINING LEASE
The Special Mining Lease was issued on 17 March, 1995 and has a term of 40
years. Under the Mining Act it may be renewed for subsequent 20 year periods
at the discretion of the PNG Government.
NOTE 3: REQUIREMENTS REGARDING CASH RESERVES
The PNG Central Banking (Foreign Exchange and Gold) Regulations generally
require PNG companies to hold all cash reserves in Kina. Prior approval of the
PNG Central Bank is required to convert funds from Kina into other currencies.
Under the Mining Development Contract, however, the Company has permission to
retain funds in foreign currencies to meet its obligations.
NOTE 4: DIVIDEND RESTRICTIONS
The Loan Agreement prohibits the payment of dividends by the Company prior to
Completion (as defined in the Loan Agreement) and permits the payment of
dividends thereafter only on the quarterly payment dates under the Loan
Agreement and only if certain conditions are met, including a condition that
after payment of such dividends and all other payments required under the Loan
Agreement the company has a specified minimum cash balance in an offshore
account and a Debt Cover ratio (as defined in the Loan Agreement) of not less
than 1.25:1.
NOTE 5: OPERATING PROFIT
<TABLE>
<CAPTION>
US$ 000
1995 1994 1993
<S> <C> <C> <C>
Operating Profit before income
tax expense has been determined
after: - - -
(i) Charging as expenses: - - -
(ii) Crediting as Income: - - -
</TABLE>
It is noted that all items of income and expenditure relate to the development
properties and as such have been capitalised.
37
<PAGE> 39
NOTE 6: REMUNERATION AND RETIREMENT BENEFITS
(a) Directors' and Executive Officers Remuneration (US$000s)
<TABLE>
<CAPTION>
US$000
1995 1994 1993
<S> <C> <C> <C>
Income received or due and receivable by all directors
including insurance premiums to indemnify
liability whilst acting as a director & executive officer: 921 685 -
Executive directors & executive officers: 847 685 -
</TABLE>
The names of Company directors who have held office during the financial year
are:
GARNAUT, Ross G. TELFER, Ian
LEPANI, Charles W. THOMAS, Gavin
LESLIE, Jonathan CA VICKERMAN, Andrew
LOUDON, A. Geoffrey FORBES, Jeffrey I. (Alternate for JCA Leslie)
O'REILLY, John F. KULALA, John (Alternate for CW Lepani)
SOIPANG, Mark LUTYENS, Charles (Retired)
TAUVASA, Joseph J.
TAYLOR, Meg
(b) Retirement and superannuation payments
<TABLE>
<CAPTION>
US$000
1995 1994 1993
<S> <C> <C> <C>
Amounts paid directly on retirement from office or to
prescribed superannuation funds for the
provision of retirement benefits for:
Principal executive officer - - -
Directors - - -
</TABLE>
NOTE 7: AUDITORS' REMUNERATION
<TABLE>
<CAPTION>
Amounts received or due and receivable by US$000
1995 1994 1993
<S> <C> <C> <C>
Company auditors for:
- auditing the accounts 30 7 -
- other services 747 5 -
</TABLE>
38
<PAGE> 40
NOTE 8: CASH
<TABLE>
<CAPTION>
US$000
1995 1994 1993
<S> <C> <C> <C>
CASH AT BANK 1,372 - -
At call deposits with financial institutions 149,012 - -
Treasury bills and commercial paper 212,715 - -
- --------------------------------------------------------------------------------------
363,099 - -
======================================================================================
</TABLE>
NOTE 9: RECEIVABLES
<TABLE>
<CAPTION>
US$000
1995 1994 1993
<S> <C> <C> <C>
CURRENT
Prepayments 41 - -
Amounts receivable from:
- - other related bodies corporate 379 - -
- -------------------------------------------------------------------------------------
420 - -
=====================================================================================
</TABLE>
NOTE 10: OTHER ASSETS
<TABLE>
<CAPTION>
US$000
1995 1994 1993
<S> <C> <C> <C>
NON-CURRENT
DEVELOPMENT PROPERTIES
- - Exploration and evaluation phase 146,005 146,005 -
- - Development phase 115,005 5,619 -
- - Interest received (7,266) - -
- - Borrowing costs 10,054 - -
- - Foreign currency translation 4,437 - -
- -------------------------------------------------------------------------------------
Total development properties 268,235 151,624 -
=====================================================================================
</TABLE>
39
<PAGE> 41
NOTE 11: CREDITORS AND BORROWINGS
<TABLE>
<CAPTION>
US$000
1995 1994 1993
<S> <C> <C> <C>
Current
Creditors and borrowing
Trade creditors and accruals 9,492 - -
Amounts payable to related bodies 562 - -
- --------------------------------------------------------------------------------------
10,054 - -
======================================================================================
</TABLE>
NOTE 12: SHARE CAPITAL
<TABLE>
<CAPTION>
US$000
1995 1994 1993
<S> <C> <C> <C>
(a) AUTHORIZED CAPITAL
2 billion Ordinary Shares of K0.10 each 148,000 - -
- --------------------------------------------------------------------------------------
(b) ISSUED AND OUTSTANDING CAPITAL
900,000,000 Ordinary Shares of K0.10 68,085 - -
each, fully paid
======================================================================================
</TABLE>
(c) On 17 March, 1995 the Company issued 100 shares at K1.00 which were
subsequently split into 1000 shares of K0.10 each on 4 August 1995.
(d) On 13 October, 1995 the company issued 866,475,701 Ordinary Shares
and on 19 October 33,523,299 a total of Ordinary Shares of K0.10 at a
premium as follows:
<TABLE>
<CAPTION>
NO. OF SHARES PREMIUM PER SHARE (US$)
<S> <C> <C> <C>
Shares issued to sponsors 514,461,874* 0.2928 (K0.3904)
Global Offering 385,537,126 1.09157 (K1.45543)
</TABLE>
* The shares issued to the sponsors are held in escrow for a period
of two years commencing 13 October, 1995.
(e) SHARE OPTIONS
The Company granted to the Sponsors 7,200,000 share options at a price
15% above the final institutional price in consideration for their
agreement to underwrite the over-allotment options under the Companies
Global Offering. The option is valid for a period of five years from
13 October 1995 and if exercised during the escrow period the shares
would be subject to the escrow conditions.
40
<PAGE> 42
NOTE 13: RESERVES
<TABLE>
<CAPTION>
US$000
1995 1994 1993
<S> <C> <C> <C>
CAPITAL RESERVE
Share premium reserve 553,229 - -
Foreign currency translation reserve - - -
- ------------------------------------------------------------------------------------------
553,229 - -
==========================================================================================
</TABLE>
<TABLE>
<CAPTION>
US$000
1995 1994 1993
<S> <C> <C> <C>
MOVEMENTS DURING THE YEAR
Share premium reserve
Premium on shares issued 571,475 - -
Less underwriters' fees (18,246) - -
- ------------------------------------------------------------------------------------------
553,229 - -
==========================================================================================
</TABLE>
NOTE 14: CAPITAL AND LEASING COMMITMENTS
<TABLE>
<CAPTION>
US$000
1995 1994 1993
<S> <C> <C> <C>
(a) Operating Lease Commitments
Non-cancellable operating leases for
facilities and automobiles contracted
for but not capitalised in the accounts
Payable
- 1995 - 834 -
- 1996 944 775 -
- 1997 302 159 -
- 1998 - - -
- 1999 - - -
- 2000 - - -
- ------------------------------------------------------------------------------------------
1,246 1,768 -
==========================================================================================
</TABLE>
<TABLE>
<CAPTION>
US$000
1995 1994 1993
<S> <C> <C> <C>
(b) Capital Expenditure Commitments
Capital expenditure commitments contracted for:
Capital expenditure projects 228,231 - -
- ------------------------------------------------------------------------------------------
Payable
- not later than one year 195,755 - -
- later than one year but not later than 2 years 32,476 - -
- ------------------------------------------------------------------------------------------
228,231 - -
==========================================================================================
</TABLE>
41
<PAGE> 43
NOTE 15: CONTINGENT LIABILITIES
There are no material amounts of contingent liabilities, not provided for in
the accounts.
ENVIRONMENTAL CONTINGENT LIABILITY
A contingent liability exists in the Company in relation to the restoration,
monitoring and control of mine sites and in respect of possible but
unidentified remediation requirements on certain such sites. The extent to
which contingent liabilities may involve future costs is not possible to
measure.
NOTE 16: FINANCE FACILITIES
<TABLE>
<CAPTION>
LOAN FACILITIES
US$000
1995 1994 1993
<S> <C> <C> <C>
Loan facilities 310 - -
Amount utilised - - -
- ----------------------------------------------------------------------
Unused loan facilities 310 - -
======================================================================
</TABLE>
The major facilities are summarised as follows:
(a) $300,000,000 Limited Recourse Project Financing Facility with a syndicate
of 25 banks, which expires on 11 August, 2005. Interest payments under the
facility are based on LIBOR plus a margin which varies over time. Mandatory
prepayments are required under the Loan Agreement in certain conditions.
There are certain conditions precedent to first drawdown including hedging
and political risk insurance cover still in place. The first drawdown is
forecast for the fourth quarter 1996. The sponsors have guaranteed the
facility until Completion. The Company has provided a range of covenants
and warranties in relation to the facility.
(b) $10,000,000 Subordinated Priority Loan Agreement with UBS Australia Ltd for
the Purchase of Put Options which expires on 11 August 2005. Interest
payments under the facility are based on LIBOR plus a margin which varies
over time. The Company has provided a range of covenants and warranties in
relation to the facility.
NOTE 17: SCHEDULE OF DEBTS RECEIVABLE AND DEBTS PAYABLE
<TABLE>
<CAPTION>
US$000
1995 1994 1993
<S> <C> <C> <C>
Debts receivable:
- - not later than one year 420 - -
=================================================================================
Debts payable:
- - not later than one year 10,054 - -
=================================================================================
</TABLE>
42
<PAGE> 44
NOTE 18: EVENTS SUBSEQUENT TO BALANCE DATE
LOAN FACILITY EUROPEAN INVESTMENT BANK ("EIB")/MINERAL RESOURCES DEVELOPMENT
COMPANY PTY LTD ("MRDC")
On 15 February 1996 the Company entered an Agreement with EIB and MRDC whereby
the European Investment Bank will lend funds to MRDC who will on-lend those
funds to the Company. The amount of the loan is 25 million European Currency
Units (ECU's) currently equivalent to approximately US$32 million. The funds are
provided to MRDC at a concessional rate of interest. The drawdown period is up
to 3 years and 11 months from the date of the Agreement. The interest rate
payable by the Company will be 2% above the cost of funds of EIB at the time of
the drawdown. EIB's current cost of funds is approximately 50 points above the
90 day LIBOR rate. The Loan Principal is repayable by way of 16 semi-annual
instalments commencing four years after loan signature. The payment of interest
under the Loan will be deferred during the construction period and will be
repaid when permitted under the Senior Debt Agreement. The Loan is unsecured.
There are various conditions precedent to the loan being drawn by the Company
including the signing of an onlending agreement between the Company and MRDC
which is expected to be finalised shortly.
NOTE 19: RELATED PARTY TRANSACTIONS
Transactions between related parties are on normal commercial terms and
conditions which are no more favourable than those available to other parties.
MANAGEMENT AGREEMENT
Lihir Management Company Pty Ltd (LMC), a wholly owned subsidiary of RTZ,
manages the Company and the Lihir Project pursuant to the Management Agreement
dated 17 March 1995. LMC receives a management fee for managing the project.
There are four directors who are on the Board of the Company and LMC.
<TABLE>
<CAPTION>
US$000
1995 1994 1993
<S> <C> <C> <C>
Related Companies
RTZ supplies labour on a secondment
basis and bears expenses on behalf of
the project which are subsequently
recharged to the project 1,127 640 -
- -----------------------------------------------------------------------------
LMC management fee 875 123 -
=============================================================================
</TABLE>
43
<PAGE> 45
NOTE 20: RECONCILIATION TO US GAAP
The Company's accounting policies vary in certain important respects from the
accounting principles generally accepted in the United States ("US GAAP"). Such
differences principally affect the measurement of mineral development costs and
certain reclassification issues.
Exploration costs
For the purposes of US GAAP, the Company's policy is to expense exploration and
evaluation costs when incurred. When a commercial mineral deposit has been
identified and the decision has been made to formulate a mining plan, the costs
of developing the mine are capitalized. The Company's management determined
that a commercial mineral deposit existed in 1992 and for the purpose of US
GAAP all expenditure incurred since this date has been capitalized. In
accordance with the Company's mineral development properties accounting policy
under IAS, exploration and development costs of $113.7 million incurred prior
to the date that commercial feasibility was determined to exist have been
capitalised as part of the mineral development property asset. Under US GAAP
such costs would have been expensed.
Reconciliation to generally accepted accounting principles in the United States
<TABLE>
<CAPTION>
1995 1994
US $000 US $000
<S> <C> <C>
Shareholders' Equity in accordance with IAS GAAP 621,314 151,624
Plus:
Interest received 7,266 -
Less:
General and administrative costs expensed (7,298) (1,400)
Project financing (8,994) (1,900)
Reversal of exploration and evaluation costs incurred
prior to identification of commercial feasibility (113,700) (113,700)
- -------------------------------------------------------------------------------------------
ACCUMULATED DEFICIT DURING THE DEVELOPMENT STAGE UNDER
US GAAP (122,726) (117,000)
- -------------------------------------------------------------------------------------------
SHAREHOLDERS' EQUITY UNDER US GAAP 498,588 34,624
===========================================================================================
Net Income/loss in accordance with IAS GAAP - -
Plus:
Interest received 7,266 -
Less:
General and administrative costs expensed (5,898) (300)
Project financing (7,094) (1,800)
- -------------------------------------------------------------------------------------------
NET LOSS UNDER US GAAP (5,726) (2,100)
- -------------------------------------------------------------------------------------------
NET LOSS PER ORDINARY SHARE (0.006) -
===========================================================================================
</TABLE>
44
<PAGE> 46
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
(a)(1) As to financial statements and supplementary information,
reference is made to "Index to Consolidated Financial
Statements" on page 1 of this Annual Report on Form 10-K/A.
(a)(2) Financial Statement Schedules.
Schedule I. Condensed Financial Information of
Registrant . . . . . . . . . . . . . . . . . . . . . S-1
Other schedules of Battle Mountain Gold Company and subsidiaries are
omitted because of the absence of the conditions under which they are required
or because the required information is included in the financial statements or
notes thereto.
(a)(3) Exhibits: See attached exhibit index, page E-1, which also
includes the management contracts or compensatory plans or
arrangements required to be filed as exhibits to this Annual
Report by Item 601(10)(iii) of Regulation S-K.
(b) Reports on Form 8-K: None
45
<PAGE> 47
SIGNATURES
PURSUANT TO THE REQUIREMENTS OF SECTION 13 OR 15(D) OF THE SECURITIES
EXCHANGE ACT OF 1934, THE REGISTRANT HAS DULY CAUSED THIS AMENDMENT TO BE
SIGNED ON ITS BEHALF BY THE UNDERSIGNED, THEREUNTO DULY AUTHORIZED.
BATTLE MOUNTAIN GOLD COMPANY
By: /s/ R. Dennis O'Connell
-----------------------------------------
R. Dennis O'Connell
Executive Vice President, Finance and
Corporate Development
Date: October 17, 1996
46
<PAGE> 48
BATTLE MOUNTAIN GOLD COMPANY
SCHEDULE I - CONDENSED FINANCIAL INFORMATION OF REGISTRANT
CONDENSED BALANCE SHEET
<TABLE>
<CAPTION>
December 31,
----------------------------------
1995 1994
---------- ----------
(expressed in thousands)
<S> <C> <C>
Current Assets:
Cash and cash equivalents $ 1,837 $ 19,315
Receivables:
Subsidiaries* 36,283 31,339
Other 2,991 1,834
Materials and supplies, at average cost 1,562 2,165
Other current assets 7,582 5,343
---------- ----------
TOTAL CURRENT ASSETS 50,255 59,996
Investments
Subsidiaries* 373,506 374,724
Other 48,871 42,915
Net property, plant and equipment 38,360 34,296
Deferred tax benefit 10,928 -
Other assets 1,989 1,960
---------- ----------
TOTAL ASSETS $ 523,909 $ 513,891
========== ==========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities:
Accounts payable 1,299 2,290
Payroll and related benefits accrued 1,820 1,797
Accrued interest 6,082 6,000
Other current liabilities 2,117 1,253
---------- ----------
TOTAL CURRENT LIABILITIES 11,318 11,340
Long-term debt 116,980 100,000
Deferred income tax 8,840 9,352
Other liabilities 15,713 17,565
---------- ----------
TOTAL LIABILITIES 152,851 138,257
SHAREHOLDERS' EQUITY 371,058 375,634
---------- ----------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $ 523,909 $ 513,891
========== ==========
</TABLE>
* Eliminated in consolidation
This condensed statement should be read in conjunction with the
Consolidated Financial Statements and Notes thereto which are
included in Item 8 herein.
S-1
<PAGE> 49
BATTLE MOUNTAIN GOLD COMPANY
SCHEDULE I - CONDENSED FINANCIAL INFORMATION OF REGISTRANT
CONDENSED STATEMENT OF INCOME
<TABLE>
<CAPTION>
Year Ended December 31,
-----------------------
1995 1994 1993
---- ---- ----
(Expressed in thousands)
<S> <C> <C> <C>
GROSS REVENUE $30,081 $18,990 $21,854
Less: Freight, allowances & royalties 549 195 262
------- ------- -------
NET REVENUE 29,532 18,795 21,592
------- ------- -------
COSTS AND EXPENSES
Mining costs 6,091 2,939 8,272
Milling and other plant costs 18,387 10,841 15,608
Depreciation, depletion and amortization 4,998 6,453 4,684
Exploration, evaluation and other lease costs 1,651 435 636
Asset write-downs 2,222 - -
General and administrative expenses 7,634 7,512 6,801
Taxes, other than income 1,213 1,113 1,151
------- ------- -------
Total costs and expenses 42,196 29,293 37,152
------- ------- -------
OPERATING (LOSS) (12,664) (10,498) (15,560)
Interest income from subsidiaries, net* 2,693 2,388 2,722
Other interest income, net 310 1,334 180
Other income (expense), net (254) (325) 86
------- ------- -------
INCOME (LOSS) BEFORE INCOME TAXES AND
EQUITY IN INCOME (LOSS) OF SUBSIDIARIES (9,915) (7,101) (12,572)
Income tax (benefit) expense (2,804) 2,519 (4,274)
------- ------- -------
(LOSS) BEFORE EQUITY IN INCOME (LOSS)
OF SUBSIDIARIES (7,111) (9,620) (8,298)
Equity in income of subsidiaries 22,356 19,192 3,893
------- ------- -------
NET INCOME (LOSS) 15,245 9,572 (4,405)
Preferred dividends 7,475 7,475 3,738
------- ------- -------
NET INCOME (LOSS) TO COMMON SHARES $ 7,770 $ 2,097 $(8,143)
======= ======= =======
</TABLE>
* Eliminated in consolidation
This condensed statement should be read in conjunction with the Consolidated
Financial Statements and Notes thereto which are included in Item 8 herein.
S-2
<PAGE> 50
BATTLE MOUNTAIN GOLD COMPANY
SCHEDULE I - CONDENSED FINANCIAL INFORMATION OF REGISTRANT
CONDENSED STATEMENT OF CASH FLOWS
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
--------------------------------------
1995 1994 1993
-------- ------- ---------
(expressed in thousands)
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
NET INCOME (LOSS) $ 15,245 $ 9,572 $ (4,405)
Adjustments to reconcile net income (loss)
to cash flows from operating activities:
Depreciation, depletion and amortization 4,998 6,453 4,684
Exploration and evaluation costs 1,081 435 636
Asset write-downs 2,222 - -
Gain from sale of assets - - (741)
(Increase) decrease in accrued reclamation (2,082) 170 582
Undistributed (income) losses of subsidiaries* 548 (10,071) (3,070)
Deferred income tax benefit (4,967) 3,722 (878)
Change in current accounts receivable and payable with
subsidiaries* 8,818 4,299 1,044
Change in other current assets and liabilities (2,653) 5,483 (7,785)
Other net changes 201 (356) 2,486
-------- -------- --------
Total Adjustments 8,166 10,135 (3,042)
-------- -------- --------
NET CASH FLOWS FROM (USED IN) OPERATING ACTIVITIES 23,411 19,707 (7,447)
-------- -------- --------
CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from sales of assets 582 - 2,878
Investment in subsidiaries* (28,906) (5,200) (12,358)
Investment in Crown Jewel (4,785) (10,305) (7,595)
Capital expenditures (12,884) (30,636) (3,839)
Exploration and evaluation expenditures (1,081) (435) (636)
Other, net 1,143 (1,573) 111
-------- -------- --------
NET CASH FLOWS USED IN INVESTING ACTIVITIES (45,931) (48,149) (21,439)
-------- -------- --------
CASH FLOWS FROM FINANCING ACTIVITIES:
Cash proceeds from stock issuances 606 691 111,840
Cash proceeds from borrowings 32,000 - 30,500
Cash dividend payments (11,524) (11,505) (7,743)
Debt repayments (14,692) - (53,051)
Other, net (1,348) (624) -
-------- -------- --------
NET CASH FLOWS FROM (USED IN) FINANCING ACTIVITIES 5,402 (11,438) 81,546
-------- -------- --------
NET (DECREASE) INCREASE IN CASH AND CASH
EQUIVALENTS (17,478) (39,880) 52,660
CASH AND CASH EQUIVALENTS AT BEGINNING
OF YEAR 19,315 59,195 6,535
-------- -------- --------
CASH AND CASH EQUIVALENTS AT END OF YEAR $ 1,837 $ 19,315 $ 59,195
======== ======== ========
SUPPLEMENTAL DISCLOSURES OF CASH FLOW
INFORMATION:
Cash paid (received) during the year for:
Interest, net of amount capitalized - - 4
Income taxes, net (2,200) (3,405) 892
* Eliminated in consolidation
</TABLE>
This condensed statement should be read in conjunction with the Consolidated
Financial Statements and Notes thereto which are included in Item 8 herein.
S-3
<PAGE> 51
INDEX OF EXHIBITS
<TABLE>
<CAPTION>
Exhibit No. Document
- ----------- --------
<S> <C> <C>
*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 (Exhibit 3(c) to the Company's
Quarterly Report on Form 10-Q for the quarter ended September 30, 1995; File No. 1-9666).
*4(a)(1) -- Rights Agreement, dated November 10, 1988, between the Company and NCNB Texas National Bank, as
Rights Agent (Exhibit to the Company's Form 8 filed with the Commission on November 30, 1988,
amending the Company's Current Report on Form 8-K dated November 21, 1988; File No. 1-9666).
*4(a)(2) -- First Amendment to Rights Agreement, dated July 30, 1992, between the Company and the Bank of
New York, as successor Rights Agent (Exhibit 4(a)(2) to the Company's Annual Report on Form 10-
K for the year ended December 31, 1992; File No. 1-9666).
*4(b) -- Specimen Stock Certificate for the Common Stock of the Company (Exhibit 4(b) to the Company's
Annual Report on Form 10-K for the year ended December 1, 1988; File No. 1-9666).
*4(c) -- Fiscal and Paying Agency Agreement, dated as of January 4, 1990, between the Company and
Citibank, N.A., Fiscal Agent (Exhibit 4(c) to the Company's Annual Report on Form 10-K for the
year ended December 31, 1989; File No. 1-9666).
*4(d)(1) -- Credit Agreement, dated as of December 29, 1989, among the Company, the banks named therein and
Citibank, N.A., as agent, as amended (Exhibit 4(a) to the Company's Quarterly Report on Form
10-Q for the quarter ended June 30, 1992; File No. 1-9666).
</TABLE>
E-1
<PAGE> 52
<TABLE>
<S> <C> <C>
*4(d)(2) -- Amendment to Credit Agreement, dated April 30, 1994, among the Company, the lenders parties
thereto and Citibank, N.A., as agent (Exhibit 4 to the Company's Quarterly Report on Form 10-Q
for the quarter ended June 30, 1994; File No. 1-9666).
*4(d)(3) -- Amendment to Credit Agreement, dated May 12, 1995, among the Company, the lenders parties
thereto and Citibank, N.A., as agent (Exhibit 4(a) to the Company's Quarterly Report on Form
10-Q for the quarter ended June 30, 1995; File No. 1-9666).
*4(e)(1) -- Investment Agreement, dated May 22, 1992, between Empresa Minera Inti Raymi S.A. and
International Finance Corporation (Exhibit 4(e) to the Company's Annual Report on Form 10-K for
the year ended December 31, 1992; File No. 1-9666).
*4(e)(2) -- Amendment to Investment Agreement and Waiver, effective as of December 31, 1994, between
Empresa Minera Inti Raymi S.A. and International Finance Corporation (Exhibit 4(a) to the
Company's Quarterly Report on Form 10-Q for the quarter ended March 31, 1995; File No. 1-9666).
*4(f)(1) -- Finance Agreement, dated as of September 14, 1992, between Empresa Minera Inti Raymi S.A. and
Overseas Private Investment Corporation (Exhibit 4(f) to the Company's Annual Report on Form
10-K for the year ended December 31, 1992; File No. 1-9666).
*4(f)(2) -- First Amendment to Finance Agreement and Limited Waiver, effective as of December 31, 1994,
between Empresa Minera Inti Raymi S.A. and Overseas Private Investment Corporation (Exhibit
4(f)(2) to the Company's Annual Report on Form 10-K for the year ended December 31, 1994; File
No. 1-9666).
*4(f)(3) -- Letter Agreement dated December 31, 1994, among Overseas Private Investment Corporation, Battle
Mountain Gold Company, Kori Kollo Corporation and Zeland Mines, S.A. (Exhibit 4(c) to the
Company's Quarterly Report on Form 10-Q for the quarter ended March 31, 1995, File No. 1-9666).
*4(g)(1) -- Loan Agreement, dated June 29, 1992, between Empresa Minera Inti Raymi S.A. and Corporacion
Andina de Fomento (English translation) (Exhibit 4(g) to the Company's Annual Report on Form
10-K for the year ended December 31, 1992; File No. 1-9666).
</TABLE>
E-2
<PAGE> 53
<TABLE>
<S> <C> <C>
*4(g)(2) -- Amendment to Loan Agreement, effective as of December 31, 1994, between Empresa Minera Inti
Raymi S.A. and Corporacion Andina de Fomento (English translation) (Exhibit 4(b) to the
Company's Quarterly Report on Form 10-Q for the quarter ended March 31, 1995; File No. 1-9666).
++4(h) -- Credit Agreement, dated as of November 6, 1995, among the Company, the banks named therein and
Citibank, N.A., as agent.
+*10(a)(1) -- Battle Mountain Gold Company 1988 Deferred Income Stock Option Plan, as amended through May 18,
1995 (Exhibit 10(a) to the Company's Quarterly Report on Form 10-Q for the quarter ended June
30, 1995; File No. 1-9666).
+*10(a)(2) -- Specimen of Deferred Income Stock Option Agreement for officers of the Company, as amended and
restated (Exhibit 10(a)(4) to the Company's Annual Report on Form 10-K for the year ended
December 31, 1992; File No. 1-9666).
+*10(b)(1) -- 1985 Stock Option Plan of the Company, as amended and restated effective April 7, 1993 (Exhibit
10(a) to the Company's Quarterly Report on Form 10-Q for the quarter ended June 30, 1993; File
No. 1-9666).
+*10(b)(2) -- First Amendment to 1985 Stock Option Plan of the Company, effective May 12, 1995 (Exhibit
10(b)(1) to the Company's Quarterly Report on Form 10-Q for the quarter ended June 30, 1995;
File No. 1-9666).
+*10(b)(3) -- Specimen of the Company's 1985 Stock Option Plan Non-Qualified Stock Option Agreement for
executive officers of the Company (Exhibit 10(a)(1) to the Company's Quarterly Report on Form
10-Q for the quarter ended March 31, 1993; File No. 1-9666).
+*10(b)(4) -- Specimen Amendment to the Company's 1985 Stock Option Plan Non-Qualified Stock Option Agreement
for executive officers of the Company (Exhibit 10(b)(2) to the Company's Quarterly Report on
Form 10-Q for the quarter ended June 30, 1995; File No. 1-9666).
+*10(b)(5) -- Specimen of the Company's 1985 Stock Option Plan Incentive Stock Option Agreement for executive
officers of the Company (Exhibit 10(a)(2) to the Company's Quarterly Report on Form 10-Q for
the quarter ended March 31, 1993; File No. 1-9666).
+*10(b)(6) -- Specimen Amendment to the Company's 1985 Stock Option Plan Incentive Stock Option Agreement for
executive officers of the Company (Exhibit 10(b)(3) to the Company's Quarterly Report on Form
10-Q for the quarter ended June 30, 1995; File No. 1-9666).
</TABLE>
E-3
<PAGE> 54
<TABLE>
<S> <C> <C>
+*10(c)(1) -- Battle Mountain Gold Company 1986 Restricted Stock Plan, as amended and restated (Exhibit 4(d)
to the Company's Quarterly Report on Form 10-Q for the quarter ended March 31, 1988; File No.
1-9666).
+*10(c)(2) -- Specimen of Agreement under the Company's 1986 Restricted Stock Plan (Exhibit 10(c)(2) to the
Company's Annual Report on Form 10-K for the year ended December 31, 1992; File No. 1-9666).
+*10(d)(1) -- Battle Mountain Gold Company 1988 Long-Term Performance Unit Plan, as amended and restated
effective July 1, 1992 (Exhibit 10(d)(1) to the Company's Annual Report on Form 10-K for the
year ended December 31, 1992; File No. 1-9666).
+*10(d)(2) -- Specimen of Agreement under the Company's 1988 Long-Term Performance Unit Plan (Exhibit
10(d)(2) to the Company's Annual Report on Form 10-K for the year ended December 31, 1992; File
No. 1-9666).
+*10(e)(1) -- Battle Mountain Gold Company Deferred Compensation Plan (Exhibit 10(b) to the Company's
Quarterly Report on Form 10-Q for the quarter ended March 31, 1993; File No. 1-9666).
+*10(e)(2) -- Specimen of the Company's Deferred Compensation Agreement for directors of the Company (Exhibit
10(d) to the Company's Annual Report on Form 10-K for the year ended December 31, 1986; File
No. 0-13728).
+*10(f)(1) -- Battle Mountain Gold Company Executive Supplemental Retirement Income Plan (Exhibit 10(f)(1) to
the Company's Annual Report on Form 10-K for the year ended December 31, 1992; File No. 1-
9666).
+_*10(f)(2) -- Specimen of the Company's Executive Supplemental Retirement Income Plan Agreement (Exhibit
10(f)(2) to the Company's Annual Report on Form 10-K for the year ended December 31, 1992; File
No. 1-9666).
+_*10(g)(1) -- Specimen of the Company's Severance Agreements with officers of the Company regarding certain
benefits payable in the event of change of control of the Company (Exhibit 10(f) to the
Company's Annual Report on Form 10-K for the year ended December 31, 1986; File No. 0-13728).
+*10(g)(2) -- Severance Agreement, dated June 5, 1992, between the Company and R. Dennis O'Connell (Exhibit
10(g)(2) to the Company's Annual Report on Form 10-K for the year ended December 31, 1992; File
No. 1-9666).
+*10(h) -- Battle Mountain Gold Company Contribution Equalization Plan, as amended and restated effective
as of November 10, 1988 (Exhibit 10(h) to the Company's Annual Report on Form 10-K for the year
ended December 31, 1992; File No. 1-9666).
</TABLE>
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<TABLE>
<S> <C> <C>
+*10(i) -- Battle Mountain Gold Company Executive Productivity Bonus Plan, as amended and restated
effective January 1, 1994 (Exhibit 10(i) to the Company's Annual Report on Form 10-K for the
year ended December 31, 1993; File No. 1-9666).
*10(j)(1) -- Battle Mountain Gold Company Non-Qualified Stock Option Plan for Outside Directors. (Exhibit
10(m) to the Company's Annual Report on Form 10-K for the year ended December 31, 1991; File
No. 1-9666).
*10(j)(2) -- Amendment to Battle Mountain Gold Company Non-Qualified Stock Option Plan for Outside Directors
effective January 1, 1995 (Exhibit 10(j)(2) to the Company's Annual Report on Form 10-K for the
year ended December 31, 1994; File No. 1-9666).
*10(j)(3) -- Specimen of Director's Stock Option Agreement under the Company's Non-Qualified Stock Option
Plan for Outside Directors (Exhibit 10(j)(2) to the Company's Annual Report on Form 10-K for
the year ended December 31, 1992; File No. 1-9666).
*10(k) -- Heads of Agreement, dated March 23, 1989, among the Company, Niugini Mining Limited and the
individuals listed on the signature page thereto (Exhibit 10(k) to the Company's Annual Report
on Form 10-K for the year ended December 31, 1988; File No. 1-9666).
*10(l) -- Mining Lease, dated May 5, 1987, granted by the Queensland (Australia) Department of Mines to
Pajingo Gold Mine Pty. Ltd. (Exhibit 28(a) to the Company's Current Report on Form 8-K dated
February 14, 1990; File No. 1-9666).
*10(m) -- Mining Lease, dated October 1, 1987, as amended, between Earth Sciences, Inc. and Battle
Mountain Gold Company (Exhibit 28(b) to the Company's Current Report on Form 8-K dated February
14, 1990; File No. 1-9666).
*10(n) -- 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 (Exhibit 10(a) to the Company's Quarterly Report on Form 10-Q for the
quarter ended September 30, 1995, File No. 1-9666).
+*10(o)(1) -- 1994 Long-Term Incentive Plan of Battle Mountain Gold Company, as effective April 21, 1994
(Exhibit 10(a)(1) to the Company's Quarterly Report on Form 10-Q for the quarter ended March
31, 1994; File No. 1-9666).
</TABLE>
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<TABLE>
<S> <C> <C>
+*10(o)(2) -- Specimen of the Company's 1994 Long-Term Incentive Plan Non-Qualified Stock Option Agreement
(Exhibit 10(c)(1) to the Company's Quarterly Report on Form 10-Q for the quarter ended June 30,
1995; File No. 1-9666).
+*10(o)(3) -- Specimen of the Company's 1994 Long-Term Incentive Plan Incentive Stock Option Agreement
(Exhibit 10(c)(2) to the Company's Quarterly Report on Form 10-Q for the quarter ended June 30,
1995; File No. 1-9666).
+*10(o)(4) -- Specimen of the Company's 1994 Long-Term Incentive Plan Restricted Stock Agreement (Exhibit
10(a)(4) to the Company's Quarterly Report on Form 10-Q for the quarter ended March 31, 1994;
File No. 1-9666).
+*10(o)(5) -- Specimen of the Company's 1994 Long-Term Incentive Plan Performance Unit Agreement (Exhibit
10(n)(5) to the Company's Annual Report on Form 10-K for the year ended December 31, 1994; File
No. 1-9666).
+*10(p)(1) -- Specimen Split-Dollar Agreement (Individual) (Exhibit 10(o)(1) to the Company's Annual Report
on Form 10-K for the year ended December 31, 1994; File No. 1-9666).
+*10(p)(2) -- Specimen Amendment to Split-Dollar Agreement (Individual) (Exhibit 10(o)(2) to the Company's
Annual Report on Form 10-K for the year ended December 31, 1994; File No. 1-9666).
+*10(p)(3) -- Specimen Split-Dollar Agreement (Trustee) (Exhibit 10(o)(3) to the Company's Annual Report on
Form 10-K for the year ended December 31, 1994; File No. 1-9666).
+*10(p)(4) -- Specimen Amendment to Split-Dollar Agreement (Trustee) (Exhibit 10(o)(4) to the Company's
Annual Report on Form 10-K for the year ended December 31, 1994; File No. 1-9666).
+*10(q)(1) -- Battle Mountain Gold Company Supplemental Executive Retirement Plan (Exhibit 10(d)(1) to the
Company's Quarterly Report on Form 10-Q for the quarter ended June 30, 1995; File No. 1-9666).
+*10(q)(2) -- Battle Mountain Gold Company Supplemental Executive Retirement Plan Trust Agreement (Exhibit
10(d)(2) to the Company's Quarterly Report on Form 10-Q for the quarter ended June 30, 1995;
File No. 1-9666).
+_*10(q)(3) -- Specimen of the Company's Supplemental Executive Retirement Plan Agreement (Exhibit 10(b) to
the Company's Quarterly Report on Form 10-Q for the quarter ended September 30, 1995, File No.
1-9666).
++11 -- Computation of Earnings Per Common Share.
</TABLE>
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<PAGE> 57
<TABLE>
<S> <C> <C>
++12 -- Computation of Ratio of Earnings to Fixed Charges and Earnings to Combined Fixed Charges and
Preferred Dividends.
++21 -- Subsidiaries of the Company.
23(a) -- Consent of Price Waterhouse LLP.
23(b) -- Consent of Coopers & Lybrand.
++24 -- Powers of Attorney
++27 -- Financial Data Schedule
- ------------------------
</TABLE>
* Incorporated by reference as indicated.
++ Previously filed.
+ Represent management contracts or compensatory plans or arrangements
required to be filed as exhibits to this Annual Report by Item
601(10)(iii) of Regulation S-K.
_ Pursuant to Instruction 2 accompanying paragraph (a) and the
Instruction accompanying paragraph (b)(10)(iii)(B)(6) of Item 601 of
Regulation S-K, the registrant has not filed each executive officer's
individual Executive Supplemental Retirement Income Agreement with the
Company as an exhibit hereto; the registrant has agreements
substantially identical to Exhibit 10(q)(3) above with each of Karl E.
Elers, Kenneth R. Werneburg, Joseph L. Mazur, R. Dennis O'Connell,
Robert J. Quinn and Fred B. Reisbick. In addition, the registrant
has not filed each executive officer's individual Severance Agreement
with the Company as an exhibit hereto; the registrant has agreements
substantially identical to Exhibit 10(g)(1) above with each of Messrs.
Elers, Werneburg, Mazur, Quinn and Reisbick.
E-7
<PAGE> 1
EXHIBIT 23 (a)
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the incorporation by reference in the Prospectus
constituting part of the Registration Statements on Form S-3 (No.
33-51921 and 333-06305) and in the Registration Statements on Form S-8
(Nos. 33-14605, 33-22146, 33-47570 and 33-53195) of Battle Mountain Gold
Company of our report dated October 10, 1996 appearing on page 2 of this
Form 10-K/A.
PRICE WATERHOUSE LLP
Houston,Texas
October 16, 1996
<PAGE> 1
EXHIBIT 23 (b)
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the incorporation by reference in the previously filed
Registration Statements of Battle Mountain Gold Company on Form S-3 No.
33-51921 and 333-06305 and Form S-8 Nos. 33-14605, 33-22146, 33-47570
and 33-53195 of our report dated June 27, 1996, on our audit of the
financial statements of Lihir Gold Ltd. as of December 31, 1995, and
for the year then ended, which report is included in this Annual
Report on Form 10-K/A.
COOPERS & LYBRAND
Port Moresby, Papau New Guinea
October 17, 1996
