<PAGE> 1
================================================================================
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED JUNE 30, 1996
[ ] TRANSITION REPORT PURSUANT TO SECTIONS 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
FOR THE TRANSITION PERIOD FROM _________TO__________
COMMISSION FILE NUMBER 1-9666
BATTLE MOUNTAIN GOLD COMPANY
(EXACT NAME OF THE REGISTRANT AS SPECIFIED IN ITS CHARTER)
Nevada 76-0151431
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
333 Clay Street, 42nd Floor, Houston, Texas 77002
(Address of principal executive offices including Zip Code)
(713) 650-6400
(Registrant's telephone number, including area code)
NONE
(former name, former address and former fiscal year if
changed since last report)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
Yes X No
--- ---
Number of shares of Common Stock outstanding as of the latest practicable
date, August 9, 1996: 95,499,977. In addition, as of such date there were
outstanding 133,995,545 Exchangeable Shares of Battle Mountain Canada Ltd.,
which entitle their holders to dividend and other rights economically
equivalent to those of the Common Stock, and through a voting trust, to vote at
meetings of stockholders of the Registrant.
================================================================================
<PAGE> 2
BATTLE MOUNTAIN GOLD COMPANY
INDEX
<TABLE>
<CAPTION>
Page
----
<S> <C> <C>
Part I. Financial Information (Unaudited)
Condensed Consolidated Balance Sheet at
June 30, 1996, and December 31, 1995 1
Condensed Consolidated Statement of Income
for the three months ended June 30, 1996 and 1995 2
Condensed Consolidated Statement of Income
for the six months ended June 30, 1996 and 1995 3
Condensed Consolidated Statement of Cash Flows
for the six months ended June 30, 1996 and 1995 4
Notes to Condensed Consolidated Financial Statements 5
Statistical Information 6
Management's Discussion and Analysis of Financial
Condition and Results of Operations 13
Part II. Other Information 20
</TABLE>
<PAGE> 3
Part I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
BATTLE MOUNTAIN GOLD COMPANY
CONDENSED CONSOLIDATED BALANCE SHEET
(UNAUDITED)
<TABLE>
<CAPTION>
Supplemental Information
Battle Mountain Gold Company
& Hemlo Gold Mines Inc. Combined Battle Mountain Gold Company
-----------------------------------------------------------------
June 30, December 31, June 30, December 31,
1996 1995 1996 1995
-----------------------------------------------------------------
(in thousands of US$)
<S> <C> <C> <C> <C>
Assets
Current Assets
Cash and cash equivalents $ 141,628 $ 142,202 $ 38,649 $ 46,071
Accounts and notes receivable 49,362 30,591 44,933 26,320
Product inventories 8,106 6,286 5,930 4,158
Materials and supplies 35,106 31,695 30,057 26,563
Other current assets 18,306 13,031 15,800 12,846
---------- ---------- -------- --------
Total current assets 252,508 223,805 135,369 115,958
---------- ---------- -------- --------
Investments 247,342 244,352 233,643 230,652
Property, plant and equipment, net 625,219 640,764 346,576 360,270
Other assets 36,339 36,063 30,770 30,259
---------- ---------- -------- --------
Total assets $1,161,408 $1,144,984 $746,358 $737,139
========== ========== ======== ========
Liabilities & Shareholders' Equity
Current liabilities
Short term borrowings $ 5,230 $ 14,835 $ 5,230 $ 2,571
Current maturities of long term debt 15,067 13,427 15,067 13,427
Accounts payable and accrued liabilities 36,366 34,869 26,754 25,488
Other current liabilities 23,171 15,407 4,691 5,448
---------- ---------- -------- --------
Total current liabilities 79,834 78,538 51,742 46,934
---------- ---------- -------- --------
Long term debt 180,852 169,175 180,852 169,175
Deferred income and mining taxes 107,609 109,754 8,288 8,840
Other liabilities 39,276 34,536 33,641 29,359
---------- ---------- -------- --------
Total liabilities 407,571 392,003 274,523 254,308
---------- ---------- -------- --------
Minority interest 122,778 123,569 110,983 111,773
Shareholders' equity 631,059 629,412 360,852 371,058
---------- ---------- -------- --------
Total liabilities and shareholders' equity $1,161,408 $1,144,984 $746,358 $737,139
========== ========== ======== ========
</TABLE>
The accompanying notes are an integral part of these financial statements.
1
<PAGE> 4
BATTLE MOUNTAIN GOLD COMPANY
CONDENSED CONSOLIDATED INCOME STATEMENT
(UNAUDITED)
THREE MONTHS ENDED JUNE 30,
<TABLE>
<CAPTION>
Supplemental Information
Battle Mountain Gold Company & Battle Mountain Gold
Hemlo Gold Mines Inc. Combined Company
----------------------------------------------------------
1996 1995 1996 1995
---------------- ------------ ------------ ------------
(in thousands, except per share data, of US$)
<S> <C> <C> <C> <C>
Sales $120,361 $122,342 $80,148 $86,373
Costs and expenses
Production costs 69,119 64,692 54,407 50,554
Depreciation, depletion and amortization 25,400 24,338 19,056 19,080
Exploration, evaluation and other lease costs 8,622 6,803 5,538 4,211
Asset write-downs - 2,222 - 2,222
General and administrative expenses 4,767 4,447 4,053 3,699
-------- -------- ------- -------
Total costs and expenses 107,908 102,502 83,054 79,766
-------- -------- ------- -------
Operating income 12,453 19,840 (2,906) 6,607
Investment income 2,314 2,482 658 786
Interest (expense) (1,558) (1,580) (1,558) (1,533)
Other income (expense), net 2,079 5,065 (266) 5,065
-------- -------- ------- -------
Income (loss) before income taxes and
minority interest 15,288 25,807 (4,072) 10,925
Income tax (expense) (6,424) (5,619) (280) (832)
Mining taxes (3,924) (2,992) - -
Minority interest in net (income) loss 301 (2,463) 301 (2,463)
-------- -------- ------- -------
Net income (loss) 5,241 14,733 (4,051) 7,630
Preferred dividends 1,868 1,869 1,868 1,869
-------- -------- ------- -------
Net income (loss) to common shares $ 3,373 $ 12,864 $(5,919) $ 5,761
======== ======== ======= =======
Net income (loss) per share $ 0.01 $ 0.05 $ (0.07) $ 0.07
======== ======== ======= =======
Dividends per common share $ - $ - $ - $ -
======== ======== ======= =======
Average common shares outstanding for
income (loss) per share purposes 229,430 234,236 81,332 86,322
======== ======== ======= =======
</TABLE>
The accompanying notes are an integral part of these financial statements.
2
<PAGE> 5
BATTLE MOUNTAIN GOLD COMPANY
CONDENSED CONSOLIDATED INCOME STATEMENT
(UNAUDITED)
SIX MONTHS ENDED JUNE 30,
<TABLE>
Supplemental Information
Battle Mountain Gold
Company & Hemlo Gold Battle Mountain Gold
Mines Inc. Combined Company
-----------------------------------------------------
1996 1995 1996 1995
-----------------------------------------------------
(in thousands, except per share data, of US$)
<S> <C> <C> <C> <C>
Sales $225,358 $219,593 $140,387 $142,493
Costs and expenses
Production costs 127,208 113,864 97,267 84,752
Depreciation, depletion and amortization 46,214 42,503 33,539 31,438
Exploration, evaluation and
other lease costs 17,989 12,004 10,377 7,433
Asset write-downs - 2,222 - 2,222
General and administrative expenses 9,184 8,217 7,631 6,622
-------- -------- -------- --------
Total costs and expenses 200,595 178,810 148,814 132,467
-------- -------- -------- --------
Operating income (loss) 24,763 40,783 (8,427) 10,026
Investment income 4,711 6,185 1,466 1,733
Interest (expense) (3,245) (3,384) (3,245) (3,244)
Other income (expense), net 568 5,715 (1,777) 5,715
-------- -------- -------- --------
Income (loss) before income taxes and
minority interest 26,797 49,299 (11,983) 14,230
Income tax benefit (expense) (10,295) (12,340) 2,265 (1,093)
Mining taxes (7,756) (7,029) - -
Minority interest in net (income) loss 1,664 (3,026) 1,664 (3,026)
-------- -------- -------- --------
Net income (loss) 10,410 26,904 (8,054) 10,111
Preferred dividends 3,737 3,738 3,737 3,738
-------- -------- -------- --------
Net income (loss) to common shares $ 6,673 $ 23,166 $(11,791) $ 6,373
======== ======== ======== ========
Net income (loss) per share $ .03 $ .10 $ (.15) $ .07
======== ======== ======== ========
Dividends per common share $ .025 $ .025 $ .025 $ .025
======== ======== ======== ========
Average common shares outstanding for
income (loss) per share purposes 229,352 233,059 81,285 86,310
======== ======== ======== ========
</TABLE>
The accompanying notes are an integral part of these financial statements.
3
<PAGE> 6
BATTLE MOUNTAIN GOLD COMPANY
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
(UNAUDITED)
SIX MONTHS ENDED JUNE 30,
<TABLE>
<CAPTION>
Supplemental Information
Battle Mountain Gold
Company & Hemlo Gold Battle Mountain Gold
Mines Inc. Combined Company
------------------------------------------------
1996 1995 1996 1995
------------------------------------------------
(in thousands of US$)
<S> <C> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
NET INCOME (LOSS) $ 10,410 $ 26,904 $ (8,054) $ 10,111
Adjustments to reconcile net income (loss) to cash flows
from operating activities:
Depreciation, depletion and amortization 46,214 42,503 33,539 31,438
Exploration and evaluation costs 15,415 9,328 7,803 4,757
Gain on sale of assets (95) (4,190) (95) (4,190)
Write-off of property, plant and equipment - 2,222 - 2,222
Deferred income tax expense (benefit) (3,849) 73 (2,265) (1,010)
Change in current assets and liabilities (11,249) (35,515) (17,995) (7,933)
Other changes, net 1,158 2,625 923 2,193
-------- --------- -------- --------
Total Adjustments 47,594 17,046 21,910 27,477
-------- --------- -------- --------
NET CASH FLOWS FROM OPERATING ACTIVITIES 58,004 43,950 13,856 37,588
-------- --------- -------- --------
CASH FLOWS USED IN INVESTING ACTIVITIES:
Proceeds from sale of assets 553 524 553 524
Capital expenditures (35,893) (108,710) (25,050) (95,187)
Exploration and evaluation expenditures (15,322) (9,250) (7,710) (4,679)
Other, net (1,013) (496) (1,013) (496)
-------- --------- -------- --------
NET CASH FLOWS USED IN INVESTING ACTIVITIES (51,675) (117,932) (33,220) (99,838)
-------- --------- -------- --------
CASH FLOWS FROM FINANCING ACTIVITIES:
Cash proceeds from stock issuances 1,948 2,791 1,249 2,404
Cash proceeds from borrowings 18,775 31,476 18,775 31,476
Cash dividend payments (13,098) (13,042) (5,768) (5,761)
Debt repayments (7,639) (15,556) (7,639) (6,860)
Increase (decrease) in short term borrowings (7,749) - 4,515 -
Other, net 74 (51) 74 (51)
-------- --------- -------- --------
NET CASH FLOWS (USED IN) FROM FINANCING ACTIVITIES (7,689) 5,618 11,206 21,208
-------- --------- -------- --------
EFFECT OF EXCHANGE RATE CHANGES ON CASH AND
CASH EQUIVALENTS 786 1,541 736 (541)
-------- --------- -------- --------
NET DECREASE IN CASH AND CASH EQUIVALENTS (574) (66,823) (7,422) (41,583)
CASH AND CASH EQUIVALENTS AT
BEGINNING OF THE PERIOD 142,202 218,316 46,071 76,464
-------- --------- -------- --------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $141,628 $ 151,493 $ 38,649 $ 34,881
======== ========= ======== ========
</TABLE>
The accompanying notes are an integral part of these financial statements
4
<PAGE> 7
BATTLE MOUNTAIN GOLD COMPANY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
Note 1. General Information
The unaudited condensed consolidated financial statements included herein
have been prepared pursuant to the rules and regulations of the Securities and
Exchange Commission and include all adjustments, consisting only of normal
recurring accruals, which are, in the opinion of the management of Battle
Mountain Gold Company (BMG), necessary for a fair presentation. These financial
statements include the accounts of BMG and its wholly-owned and majority-owned
subsidiaries (the "Company"). Certain information and footnote disclosures
required by generally accepted accounting principles have been condensed or
omitted pursuant to such rules and regulations. These financial statements
should be read in conjunction with the financial statements and the notes
thereto which are included in the Company's Annual Report on Form 10-K (File
No. 1-9666) for the year ended December 31, 1995.
Business combination
On July 19, 1996, Hemlo Gold Mines Inc. ("Hemlo Gold") was combined with
Battle Mountain Gold Company. The combination will be accounted for as a
pooling of interests. Financial statements showing the effect of the
combination on the Company's Consolidated Balance Sheets at June 30, 1996, and
December 31, 1995, Statements of Income for the three and six months ended June
30, 1996 and 1995 and Statements of Cash Flows for the six months ended June
30, 1996 and 1995 have been included as supplemental information along with the
Company's historical financial statements. The supplemental financial
statements do not include estimated combination related expenses of
approximately $18 million that will be charged to operations during the third
quarter of 1996.
Note 2. Income Per Common Share
The effect of common stock equivalents is not included in the calculation
of income per share for the three and six months ended June 30, 1996 because
the effect is antidilutive. Fully diluted income per share is not presented
because the effect of other potentially dilutive securities is antidilutive for
the periods presented. For purposes of the supplemental presentation, the
Exchangeable Shares of Hemlo Gold are treated as identical to shares of BMG's
Common Stock.
Note 3. Stock-Based Compensation
In October 1995, the Financial Accounting Standards Board issued Statement
of Accounting Standards ("SFAS") No. 123, "Accounting for Stock-Based
Compensation," with an effective date for fiscal years beginning after
December 15, 1995. As permitted under SFAS No. 123, the Company has elected to
continue to measure compensation costs for stock-based employee compensation
plans as prescribed by Accounting Principals Board Opinion No. 25, "Accounting
for Stock Issued to Employees." The Company will comply with the pro forma
disclosure requirements of SFAS No. 123 in 1996 as required under the
pronouncement.
Note 4. Subsequent Event
On August 12, 1996, the Company announced that it would vote its sixty
percent interest in Crown Butte Resources, Inc. ("Crown Butte") in favor of an
agreement entered into with the U.S. government that provides a framework for
Crown Butte to exchange its interests in the New World mining district near
Yellowstone National Park for government owned property interests having a
value of $65 million. Crown Butte would set aside $22.5 million from the sale
of the exchange property into an escrow account for reclamation purposes in the
New World district. Crown Butte would suspend permitting efforts pending the
completion of the exchange of property interests and such exchange would result
in the settlement of litigation under the Clean Water Act relating to historic
mining impacts and releases between the parties as to any further environmental
liabilities. The Company's decision was based on, among other things, reduced
economic expectations as a result of protracted permitting and potential
environmental liabilities related to historic mining at New World. The
agreement contains a number of conditions including the identification and
acceptance by Crown Butte of the exchange property and subsequent approval by
the requisite number of Crown Butte shareholders.
5
<PAGE> 8
BATTLE MOUNTAIN GOLD COMPANY
OPERATING DATA (Unaudited)*
<TABLE>
<CAPTION>
Three months ended Six months ended
June 30, June 30,
------------------ ----------------
1996 1995** 1996 1995**
------- ------- ------- ------
<S> <C> <C> <C> <C>
KORI KOLLO
Gold recovered BMG share (000s oz) 67 73 136 144
Silver recovered BMG share (000s oz) 212 269 426 571
Gold recovered (000s oz) 77 83 155 163
Silver recovered (000s oz) 241 305 484 648
Gold sold BMG share (000s oz) 69 75 139 144
Silver sold BMG share (000s oz) 217 280 438 577
Gold sold (000s oz) 78 85 158 164
Silver sold (000s oz) 246 318 498 656
- ------------------------------------------------------------------------------------
Cost Per Gold Ounce Sold
Cash production costs $ 229 $ 176 $ 222 $ 173
Depreciation, depletion and amortization 103 85 101 87
Reclamation and mine closure costs 3 3 3 3
----- ----- ----- -----
Total Production costs $ 335 $ 264 $ 326 $ 263
- ------------------------------------------------------------------------------------
BATTLE MOUNTAIN COMPLEX
Gold recovered (000 oz) 19 22 36 38
Silver recovered (000 oz) 62 60 126 102
Gold sold (000s oz) 20 22 36 38
Silver sold (000s oz) 68 60 126 102
- ------------------------------------------------------------------------------------
Cost Per Gold Ounce Sold
Cash production costs $ 311 $ 308 $ 319 $ 327
Depreciation, depletion and amortization 70 43 72 52
Reclamation and mine closure costs 6 4 17 4
----- ----- ----- -----
Total Production costs $ 387 $ 355 $ 408 $ 383
- ------------------------------------------------------------------------------------
SAN LUIS
Gold recovered (000 oz) 18 20 33 36
Silver recovered (000 oz) 12 9 19 15
Gold sold (000s oz) 18 20 33 37
Silver sold (000s oz) 11 9 19 15
- ------------------------------------------------------------------------------------
Cost Per Gold Ounce Sold
Cash production costs $ 270 $ 236 $ 291 $ 252
Depreciation, depletion and amortization 86 96 86 96
Reclamation and mine closure costs 11 7 17 8
----- ----- ----- -----
Total Production costs $ 367 $ 339 $ 394 $ 356
- ------------------------------------------------------------------------------------
PAJINGO
Gold recovered (000 oz) 9 7 20 16
Silver recovered (000 oz) 5 14 10 32
Gold sold (000s oz) 9 7 20 15
Silver sold (000s oz) 5 14 10 33
- ------------------------------------------------------------------------------------
Cost Per Gold Ounce Sold
Cash production costs $ 189 $ 157 $ 262 $ 136
Depreciation, depletion and amortization 87 42 106 49
Reclamation and mine closure costs 2 5 3 7
----- ----- ----- -----
Total Production costs $ 278 $ 204 $ 371 $ 192
- ------------------------------------------------------------------------------------
</TABLE>
6
<PAGE> 9
BATTLE MOUNTAIN GOLD COMPANY
OPERATING DATA (Unaudited)*
<TABLE>
<CAPTION>
Three months ended Six months ended
June 30, June 30,
-------------------- -----------------
1996 1995** 1996 1995**
--------- ------- -------- -------
<S> <C> <C> <C> <C>
SAN CRISTOBAL
Gold recovered BMG share (000s oz) 10 12 21 21
Silver recovered BMG share (000s oz) 26 25 52 46
Gold recovered (000s oz) 20 23 41 41
Silver recovered (000s oz) 52 49 103 90
Gold sold BMG share (000s oz) 10 12 21 21
Silver sold BMG share (000s oz) 26 25 52 46
Gold sold (000s oz) 20 23 41 42
Silver sold (000s oz) 52 49 102 90
- -------------------------------------------------------------------------------------
Cost Per Gold Ounce Sold
Cash production costs $ 345 $ 287 $ 349 $ 303
Depreciation, depletion and amortization 101 94 98 89
Reclamation and mine closure costs - - - -
----- ----- ----- -----
Total Production costs $ 446 $ 381 $ 447 $ 392
- -------------------------------------------------------------------------------------
RED DOME
Gold recovered BMG share (000s oz) 10 15 22 25
Silver recovered BMG share (000s oz) 54 108 159 183
Gold recovered (000s oz) 20 28 45 49
Silver recovered (000s oz) 107 212 316 358
Copper recovered (000s lbs) 1,636 3,761 5,161 6,303
Gold sold BMG share (000s oz) 17 21 20 22
Silver sold BMG share (000s oz) 144 144 148 147
Gold sold (000s oz) 34 41 40 44
Silver sold (000s oz) 286 282 293 288
Copper sold (000s lbs) 4,515 5,258 4,515 5,258
- -------------------------------------------------------------------------------------
Cost Per Gold Ounce Sold
Cash production costs $ 219 $ 130 $ 228 $ 147
Depreciation, depletion and amortization 148 154 140 151
Reclamation and mine closure costs 7 (2) 8 (6)
----- ----- ----- -----
Total Production costs $ 374 $ 282 $ 376 $ 292
- -------------------------------------------------------------------------------------
</TABLE>
7
<PAGE> 10
BATTLE MOUNTAIN GOLD COMPANY
OPERATING DATA (Unaudited)*
<TABLE>
<CAPTION>
Three months ended Six months ended
June 30, June 30,
-------------------- ----------------
1996 1995** 1996 1995**
--------- ------- -------- ------
<S> <C> <C> <C> <C>
AGGREGATE DATA
Gold recovered BMG share (000s oz) 134 148 269 281
Gold sold BMG share (000s oz) 144 157 269 278
Gold recovered (000s oz) 163 183 330 344
Gold sold (000s oz) 180 198 328 340
Average price per oz realized $ 399 $ 382 $ 397 $ 382
- -----------------------------------------------------------------------------------
Silver recovered BMG share (000s oz) 373 485 793 949
Silver sold BMG share (000s oz) 471 531 793 921
Silver recovered (000s oz) 481 649 1,059 1,246
Silver sold (000s oz) 668 731 1,048 1,185
Average price per oz realized $5.34 $5.48 $ 5.38 $ 5.23
- -----------------------------------------------------------------------------------
Weighted Average Cost Per Gold Ounce Sold
Cash production costs $ 251 $ 198 $ 259 $ 210
Depreciation, depletion and amortization 105 96 101 91
Reclamation and mine closure costs 5 3 6 2
----- ----- ------ ------
Total Production costs $ 361 $ 297 $ 366 $ 303
- -----------------------------------------------------------------------------------
</TABLE>
* BMG has begun reporting its operating costs on the basis adopted earlier
this year by The Gold Institute. As a result, in addition to mining,
milling and plant level G&A expenses, cash production costs include
royalties, freight, smelting costs and allowances and production taxes.
Credits for by-product silver and copper are offset against these cash
production costs. This new North American standard also provides for
reporting on a cost per gold ounce basis, rather than cost per equivalent
gold ounce.
** Restated to conform with new operating cost reporting standard.
8
<PAGE> 11
SUPPLEMENTAL INFORMATION
BATTLE MOUNTAIN GOLD COMPANY & HEMLO GOLD MINES INC. COMBINED
OPERATING DATA (Unaudited)*
<TABLE>
<CAPTION>
Three months ended Six months ended
June 30, June 30,
------------------ ----------------
1996 1995** 1996 1995**
------- ------- ------- -------
<S> <C> <C> <C> <C>
GOLDEN GIANT
Gold recovered (000s oz) 97 86 201 187
Silver recovered (000s oz) 5 4 8 10
Gold sold (000s oz) 97 86 201 187
Silver sold (000s oz) 5 4 8 10
- -------------------------------------------------------------------------------------
Cost Per Gold Ounce Sold
Cash production costs $ 126 $ 122 $ 124 $ 122
Depreciation, depletion and amortization 62 56 60 55
Reclamation and mine closure costs 2 2 2 2
----- ----- ----- -----
Total Production costs $ 190 $ 180 $ 186 $ 179
- -------------------------------------------------------------------------------------
KORI KOLLO
Gold recovered BMG share (000s oz) 67 73 136 144
Silver recovered BMG share (000s oz) 212 269 426 571
Gold recovered (000s oz) 77 83 155 163
Silver recovered (000s oz) 241 305 484 648
Gold sold BMG share (000s oz) 69 75 139 144
Silver sold BMG share (000s oz) 217 280 438 577
Gold sold (000s oz) 78 85 158 164
Silver sold (000s oz) 246 318 498 656
- ------------------------------------------------------------------------------------
Cost Per Gold Ounce Sold
Cash production costs $ 229 $ 176 $ 222 $ 173
Depreciation, depletion and amortization 103 85 101 87
Reclamation and mine closure costs 3 3 3 3
----- ----- ----- -----
Total Production costs $ 335 $ 264 $ 326 $ 263
- -------------------------------------------------------------------------------------
BATTLE MOUNTAIN COMPLEX
Gold recovered (000 oz) 19 22 36 38
Silver recovered (000 oz) 62 60 126 102
Gold sold (000s oz) 20 22 36 38
Silver sold (000s oz) 68 60 126 102
- -------------------------------------------------------------------------------------
Cost Per Gold Ounce Sold
Cash production costs $ 311 $ 308 $ 319 $ 327
Depreciation, depletion and amortization 70 43 72 52
Reclamation and mine closure costs 6 4 17 4
----- ----- ----- -----
Total Production costs $ 387 $ 355 $ 408 $ 383
- -------------------------------------------------------------------------------------
</TABLE>
9
<PAGE> 12
SUPPLEMENTAL INFORMATION
BATTLE MOUNTAIN GOLD COMPANY & HEMLO GOLD MINES INC. COMBINED
OPERATING DATA (Unaudited)*
<TABLE>
<CAPTION>
Three months ended Six months ended
June 30, June 30,
------------------ ----------------
1996 1995** 1996 1995**
--------- ------- -------- ------
<S> <C> <C> <C> <C>
SAN LUIS
Gold recovered (000 oz) 18 20 33 36
Silver recovered (000 oz) 12 9 19 15
Gold sold (000s oz) 18 20 33 37
Silver sold (000s oz) 11 9 19 15
- -----------------------------------------------------------------------------------
Cost Per Gold Ounce Sold
Cash production costs $ 270 $ 236 $ 291 $ 252
Depreciation, depletion and amortization 86 96 86 96
Reclamation and mine closure costs 11 7 17 8
----- ----- ----- -----
Total Production costs $ 367 $ 339 $ 394 $ 356
- -------------------------------------------------------------------------------------
PAJINGO
Gold recovered (000 oz) 9 7 20 16
Silver recovered (000 oz) 5 14 10 32
Gold sold (000s oz) 9 7 20 15
Silver sold (000s oz) 5 14 10 33
- -------------------------------------------------------------------------------------
Cost Per Gold Ounce Sold
Cash production costs $ 189 $ 157 $ 262 $ 136
Depreciation, depletion and amortization 87 42 106 49
Reclamation and mine closure costs 2 5 3 7
----- ----- ----- -----
Total Production costs $ 278 $ 204 $ 371 $ 192
- -------------------------------------------------------------------------------------
SAN CRISTOBAL
Gold recovered BMG share (000s oz) 10 12 21 21
Silver recovered BMG share (000s oz) 26 25 52 46
Gold recovered (000s oz) 20 23 41 41
Silver recovered (000s oz) 52 49 103 90
Gold sold BMG share (000s oz) 10 12 21 21
Silver sold BMG share (000s oz) 26 25 52 46
Gold sold (000s oz) 20 23 41 42
Silver sold (000s oz) 52 49 102 90
- -------------------------------------------------------------------------------------
Cost Per Gold Ounce Sold
Cash production costs $ 345 $ 287 $ 349 $ 303
Depreciation, depletion and amortization 101 94 98 89
Reclamation and mine closure costs - - - -
----- ----- ----- -----
Total Production costs $ 446 $ 381 $ 447 $ 392
- -------------------------------------------------------------------------------------
</TABLE>
10
<PAGE> 13
SUPPLEMENTAL INFORMATION
BATTLE MOUNTAIN GOLD COMPANY & HEMLO GOLD MINES INC. COMBINED
OPERATING DATA (Unaudited)*
<TABLE>
Three months ended Six months ended
June 30, June 30,
------------------ ----------------
1996 1995** 1996 1995**
--------- ------- -------- ------
<S> <C> <C> <C> <C>
RED DOME
Gold recovered BMG share (000s oz) 10 15 22 25
Silver recovered BMG share (000s oz) 54 108 159 183
Gold recovered (000s oz) 20 28 45 49
Silver recovered (000s oz) 107 212 316 358
Copper recovered (000s lbs) 1,636 3,761 5,161 6,303
Gold sold BMG share (000s oz) 17 21 20 22
Silver sold BMG share (000s oz) 144 144 148 147
Gold sold (000s oz) 34 41 40 44
Silver sold (000s oz) 286 282 293 288
Copper sold (000s lbs) 4,515 5,258 4,515 5,528
- -------------------------------------------------------------------------------------
Cost Per Gold Ounce Sold
Cash production costs $ 219 $ 130 $ 228 $ 147
Depreciation, depletion and amortization 148 154 140 151
Reclamation and mine closure costs 7 (2) 8 (6)
----- ----- ----- -----
Total Production costs $ 374 $ 282 $ 376 $ 292
- -------------------------------------------------------------------------------------
SILIDOR JOINT VENTURE (55% INTEREST)
Gold recovered (000s oz) 6 7 13 14
Silver recovered (000s oz) - - - -
Gold sold (000s oz) 6 7 13 14
Silver sold (000s oz) - - - -
- -------------------------------------------------------------------------------------
Cost Per Gold Ounce Sold
Cash production costs $ 370 $ 368 $ 353 $ 349
Depreciation, depletion and amortization 56 63 52 65
Reclamation and mine closure costs - 8 - 8
----- ----- ----- -----
Total Production costs $ 426 $ 439 $ 405 $ 422
- -------------------------------------------------------------------------------------
</TABLE>
11
<PAGE> 14
SUPPLEMENTAL INFORMATION
BATTLE MOUNTAIN GOLD COMPANY & HEMLO GOLD MINES INC. COMBINED
OPERATING DATA (Unaudited)*
<TABLE>
Three months ended Six months ended
June 30, June 30,
-------------------- ----------------
1996 1995** 1996 1995**
--------- ------- -------- ------
<S> <C> <C> <C> <C>
AGGREGATE DATA
Gold recovered BMG share (000s oz) 237 241 483 482
Gold sold BMG share (000s oz) 247 249 483 479
Gold recovered (000s oz) 267 276 544 545
Gold sold (000s oz) 283 291 542 541
Average price per oz realized $ 396 $ 384 $ 397 $ 382
- -------------------------------------------------------------------------------------
Silver recovered BMG share (000s oz) 377 489 801 959
Silver sold BMG share (000s oz) 475 535 801 932
Silver recovered (000s oz) 485 653 1,067 1,256
Silver sold (000s oz) 672 735 1,056 1,195
Average price per oz realized $5.34 $5.48 $ 5.38 $ 5.23
- -------------------------------------------------------------------------------------
Weighted Average Cost Per Gold Ounce Sold
Cash production costs $ 210 $ 180 $ 211 $ 183
Depreciation, depletion and amortization 89 83 84 78
Reclamation and mine closure costs 4 2 5 2
----- ----- ------ ------
Total Production costs $ 303 $ 265 $ 300 $ 263
- -------------------------------------------------------------------------------------
</TABLE>
* BMG has begun reporting its operating costs on the basis adopted earlier
this year by The Gold Institute. As a result, in addition to mining,
milling and plant level G&A expenses, cash production costs include
royalties, freight, smelting costs and allowances and production taxes.
Credits for by-product silver and copper are offset against these cash
production costs. This new North American standard also provides for
reporting on a cost per gold ounce basis, rather than cost per equivalent
gold ounce.
** Restated to conform with new operating cost reporting standard.
12
<PAGE> 15
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
---------------------------------------------
This discussion should be read in conjunction with Management's Discussion
and Analysis of Financial Condition and Results of Operations included in the
Company's Annual Report on Form 10-K (File No. 1-9666) for the year 1995 (1995
Form 10-K) and the historical condensed consolidated financial statements and
notes thereto preceding this discussion.
LIQUIDITY AND CAPITAL RESOURCES
Summary - At June 30, 1996, the Company had cash and cash equivalents of $38.6
million, of which $6.7 million was held by BMG, $20.8 million was held by
Niugini Mining and $11.1 million was held by Inti Raymi. On an combined basis,
at June 30, 1996, the Company including Hemlo Gold had cash and cash
equivalents of $141.6 million.
Operating Activities - The Company and the combined Company including Hemlo
Gold generated cash flow of $13.9 million and $58.0 million, respectively, from
operating activities during the six months ended June 30, 1996, compared with
$37.6 million and $44.0 million, respectively, for the six months ended June
30, 1995. The decrease in cash flows from operations for the Company was
primarily the result of higher production costs at the Kori Kollo, Red Dome and
Pajingo mines. (See "- Results of Operations - Production Costs"). The
increase in operating cash flows from the combined companies was also impacted
by the final payment of 1994 income taxes by Hemlo Gold in February 1995.
Investing Activities - The Company and the combined Company including Hemlo
Gold used cash of $25.1 million and $35.9 million, respectively, for capital
expenditures during the six months ended June 30, 1996. These amounts include
$6.0 million in interest that has been capitalized related to the Company's
investment in Lihir Gold Limited.
During the six months ended June 30, 1996, the Company and the combined
Company including Hemlo Gold spent approximately $10.3 million and $17.9
million, respectively, on exploration and evaluation. The Company and Hemlo
Gold currently estimate that they will spend a total of approximately $30
million on the 1996 exploration program. Exploration and evaluation
expenditures increased for the six months ended June 30, 1996 compared with the
same period of 1995 primarily because of the expansion of the Company's
exploration activities.
On August 12, 1996, the Company announced that it would vote its sixty
percent interest in Crown Butte Resources, Inc. ("Crown Butte") in favor of an
agreement entered into with the U.S. government that provides a framework for
Crown Butte to exchange its interests in the New World mining district near
Yellowstone National Park for government owned property interests having a value
of $65 million. Crown Butte would set aside $22.5 million from the sale of the
exchange property into an escrow account for reclamation purposes in the New
World district. Crown Butte would suspend permitting efforts pending the
completion of the exchange of property interests and such exchange would result
in the settlement of litigation under the Clean Water Act relating to historic
mining impacts and releases between the parties as to any further environmental
liabilities. The Company's decision was based on, among other things, reduced
economic expectations as a result of protracted permitting and potential
environmental liabilities related to historic mining at New World. The agreement
contains a number of conditions including the identification and acceptance by
Crown Butte of the exchange property and subsequent approval by the requisite
number of Crown Butte shareholders.
Financing Activities - During the first half of 1996, BMG borrowed an additional
$18 million under its $75 million revolving credit facility, resulting in a
total of $35 million outstanding under this facility as of June 30, 1996. The
Company expects that all outstanding balances under this facility will be repaid
by August 16, 1996, and the Company has notified the lenders of its intention to
terminate such facility on that date. The Company also borrowed $5 million
under its $15 million uncommitted revolving credit facility, resulting in a
total of $5 million outstanding under this facility as of June 30, 1996. During
the first half of 1996, BMG received $3.9 million in dividends from Inti Raymi,
net of applicable Bolivian withholding taxes. Further dividends are expected
from Inti Raymi as earnings and cash are available.
13
<PAGE> 16
Conclusion - The Company expects cash on hand, along with cash flows from
operations including cash and cash flows to be generated by Hemlo Gold and its
$15 million uncommitted revolving credit facility currently in place, to be
adequate to meet its cash needs at least through the end of 1997. The Company
is currently planning to replace its $75 million revolving credit facility with
a facility better suited to the enhanced credit profile of the combined Company.
On July 19, 1996, the Company consummated its combination with Hemlo Gold.
Under the terms of the agreement Hemlo Gold became a wholly-owned subsidiary
of BMG and Hemlo Gold's shareholders received 1.48 shares of a newly issued
class of exchangeable shares of Battle Mountain Canada Ltd., the new name for
the former Hemlo Gold. At the option of the holder, each exchangeable share is
exchangeable for one share of BMG common stock and entitles its holder to
dividend and other rights economically equivalent to those of the BMG common
stock and, through a voting trust, to vote at meetings of stockholders of BMG.
Forward Sales and Hedging - The Company and the combined Company including
Hemlo Gold have limited involvement with derivative financial instruments and
do not use them for trading purposes.
At June 30, 1996, 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 to 7.2 percent by 1997. The net
unamortized cost of the premiums paid for these caps, amounting to $.3 million
at June 30, 1996, has been included in other assets. Since the interest rate
caps were put in place, the Company has amortized approximately $.4 million of
such premiums and has received approximately $.2 million in settlement of
expiring caps.
The Company and the combined Company including Hemlo Gold use fixed
forward sales contracts, spot deferred sales contracts and may use put options
to hedge anticipated sales of gold, silver and copper. The following table
summarizes such contracts of the Company and the combined Company including
Hemlo Gold at June 30, 1996:
<TABLE>
<CAPTION>
Average Price
Amount Per Unit Period
------------- ------------- ---------------
<S> <C> <C> <C>
BMG
Forward sales contracts
Gold 121,000 oz US$406 Jul 96 - May 97
Niugini Mining
Forward sales contracts
Gold 73,000 oz A$552 Jul 96 & Dec 96
52,000 oz US$399 Jul 96
Copper 5,291,088 lbs US$1.12 Sep 96 & Feb 97
Inti Raymi
Forward sales contracts
Gold 64,000 oz US$403 Jul 96 - Nov 96
</TABLE>
Deferred costs associated with Inti Raymi's forward sales contracts
amounted to $.6 million at June 30, 1996.
14
<PAGE> 17
The aggregate amount by which the net market value of open forward sales
contracts of the Company and the combined Company including Hemlo Gold is
greater than the spot price of $380 per ounce of gold and $.86 per pound of
copper, as of June 30, 1996, before consideration of the deferred costs referred
to above, is $11.0 million, of which $3.3 million is attributable to minority
interests. The foregoing amounts were calculated assuming conversion of
Australian dollar contracts to U.S. dollars at the June 1996 month end exchange
rate of US$.77 to A$1.
Foreign Operations - The identifiable assets attributable to foreign operations
of the Company and the combined Company including Hemlo Gold as of June 30,
1996, were approximately $529 million and $816 million, respectively, and
foreign mining operations represented approximately 80 percent and 88 percent,
respectively, of the total gross revenues of the Company for the six months
ended June 30, 1996. As a result, the Company is exposed to risks normally
associated with foreign operations, including political, economic, social and
labor instabilities, as well as foreign exchange controls, currency fluctuations
and taxation changes.
RESULTS OF OPERATIONS
PRIMARY FINANCIAL INFORMATION
Battle Mountain Gold Company
<TABLE>
<CAPTION>
Three months ended Six months ended
June 30, June 30,
---------------------- --------------------
1996 1995 1996 1995
---------- ---------- --------- ---------
<S> <C> <C> <C> <C>
Gold sales (ounces - 100%) 180,000 198,000 328,000 340,000
Gold sales realized per ounce $399 $382 $397 $382
Average London PM fix per ounce $390 $388 $395 $383
</TABLE>
Sales - Sales decreased for the three and six months ended June 30, 1996
compared with the same periods of 1995 primarily because of decreased sales
volumes from the Kori Kollo and Red Dome mines. Sales volumes decreased at the
Kori Kollo and Red Dome mines because of reduced production caused by the
mining and processing of lower grade ore during the periods. The decreased
sales volumes were partially offset by an increase in the average realized
price of gold. The average realized price of gold increased for the three and
six months ended June 30, 1996 because of increased spot gold prices.
Average realized prices for the three and six month periods ended June 30, 1996
were higher than the average London PM fix because of the Company's practice of
pricing its gold shipments 20 to 45 days in advance of shipment.
The Company has begun reporting its operating costs on the basis adopted
earlier this year by The Gold Institute. As a result, in addition to mining,
milling and plant level G&A expenses, cash production costs include royalties,
freight, smelting costs and allowances and production taxes. Credits for
by-product silver and copper are offset against these cash production costs.
This new North American standard also provides for reporting on a cost per gold
ounce basis, rather than cost per equivalent gold ounce.
15
<PAGE> 18
<TABLE>
<CAPTION>
Consolidated Production Costs Per Ounce
(per ounce of gold sold):
- ---------------------------------------
Three months ended Six months ended
June 30, June 30,
--------------------- -------------------
1996 1995 1996 1995
--------- --------- -------- --------
<S> <C> <C> <C> <C>
Direct mining costs $ 269 $ 224 $ 263 $ 227
Deferred stripping adjustments 1 2 4 (1)
Third party smelting, refining and transportation costs 11 15 8 11
By-product credits included in sales (47) (54) (32) (38)
--------- --------- -------- --------
Cash operating costs 234 187 243 199
Royalties 12 10 13 10
Production taxes 5 1 3 1
--------- --------- -------- --------
Total cash costs 251 198 259 210
Depreciation, depletion and amortization 105 96 101 91
Reclamation and mine closure costs 5 3 6 2
--------- --------- -------- --------
Total production costs $ 361 $ 297 $ 366 $ 303
========= ======== ======== ========
<CAPTION>
Reconciliation of Total Cash Costs per Ounce to
Financial Statements
(in thousands, except per ounce amounts):
- ------------------------------------------------
Three months ended Six months ended
June 30, June 30,
--------------------- -------------------
1996 1995 1996 1995
--------- --------- -------- --------
<S> <C> <C> <C> <C>
Production costs per Financial Statements $ 54,407 $ 50,554 $ 97,267 $ 84,752
By-product credits included in sales (8,368) (10,720) (10,445) (12,714)
Reclamation and mine closure costs (859) (374) (2,061) (688)
Other 3 (5) 2 (6)
--------- --------- -------- --------
Production costs for per ounce calculation purposes $ 45,183 $ 39,455 $ 84,763 $ 71,344
========= ========= ======== ========
Gold ounces sold 180 198 328 340
========= ========= ======== ========
Total cash costs per gold ounce sold $ 251 $ 198 $ 259 $ 210
========= ========= ======== ========
</TABLE>
Production Costs - Production costs increased on a total and per ounce of gold
sold basis for the three and six month periods ended June 30, 1996, compared
with the corresponding periods of 1995. Production costs increased primarily
because of increased per ounce production costs primarily at the Kori Kollo,
Red Dome and Pajingo mines. These unit costs increased at the Kori Kollo mine
because of lower mill head grades and increases in materials costs. The Company
has been conducting additional drilling and other studies, on factors such as
ore control procedures, in an attempt to determine the reasons for the lower
mill head grades and any potential impact this may have on, among other things,
operating costs and estimated reserves at Kori Kollo. The planned processing
of lower grade stockpiled and mined ore from the Red Dome mine caused unit
costs to increase at that location. Unit costs increased at the Pajingo mine
complex because second half 1996 production came from ore recovered from the
higher cost underground section of the Cindy deposit. Mining and milling was
completed at the Cindy deposit in the second quarter of 1996 and a portion of
second quarter 1996 production was from low grade stockpiles remaining from the
previously depleted Scott Lode at the Pajingo mine complex which resulted in
reduced per gold ounce production costs in the second
16
<PAGE> 19
quarter compared with the first quarter of 1996. The Company expects production
from the remaining low grade stockpiles at the Pajingo mine complex to be
completed near the end of the third quarter of 1996.
Depreciation, depletion and amortization increased in total for the six
months ended June 30, 1996 and on the basis of cost per gold ounce sold for the
three and six months ended June 30, 1996, when compared with the corresponding
periods of 1995, primarily as a result of increased per ounce costs at the
Pajingo mine complex and the Kori Kollo mine. Depreciation, depletion and
amortization at the Kori Kollo mine increased because more tons of ore were
mined than last year and fewer ounces of gold were produced because of lower ore
grades. Depreciation, depletion and amortization at the Pajingo mine complex is
higher because of the high cost of the development of the underground portion of
the Cindy mine relative to the number of ounces that were produced from that
mine. The cessation of production from the Cindy mine during the second quarter
of 1996 will cause a reduction of depreciation, depletion and amortization
charges at the Pajingo mine complex in the third quarter of 1996.
Other - The Company had other expense in the amount of $.3 million and $1.8
million for the three and six months ended June 30, 1996, compared with other
income of $5.1 million and $5.7 million for the three and six months ended June
30, 1995. The other expense in 1996 resulted primarily from foreign exchange
losses incurred in the first quarter of the year in the amount of approximately
$2.1 million. Most of these foreign exchange losses resulted from losses
recorded on U.S. dollar cash deposits maintained by Niugini Mining (Australia)
Pty. Ltd. ("NMA"), an Australian dollar functional currency subsidiary of
Niugini Mining. The losses occurred because of the strengthening of the
Australian dollar compared with the US dollar. The U.S. dollar cash deposits
were from sales of gold, silver and copper from the Red Dome mine. Under the
terms of a short term loan agreement, Niugini Mining was required to keep U.S.
dollars received from the sales of its metals from the Red Dome mine in a U.S.
dollar bank account maintained by NMA. At the end of March 1996, this loan was
repaid and there are no further restrictions imposed by the loan agreement on
the transfer of funds between NMA and its affiliates. This will allow Niugini
Mining more flexibility in managing its foreign currency gains and losses.
Niugini Mining transferred most of the U.S. dollar cash deposits from NMA to
Niugini Mining in April 1996. Niugini Mining is a U.S. dollar functional
currency company. The other income in 1995 consisted primarily of a gain on the
sale of the Plutonic Bore exploration project in Australia in the amount of $4.2
million.
The Company's effective income tax rate was 22 percent for the first half
of 1996, as compared with an effective income tax rate of 9.5 percent in 1995.
The effective tax rate for 1996 is lower than the U.S. statutory rate primarily
because the income tax effect from the undistributed losses of Niugini Mining
has not been included in the calculation of the income tax rate. The effective
income tax rate for 1995 was affected by the recognition of deferred tax assets
related to foreign tax credits. Prior to 1995, the Company treated foreign
taxes paid as deductions for U.S. income tax purposes. However, the Company
determined in 1995 that it is more likely than not that it will be able to
utilize foreign tax credits for foreign taxes because of Inti Raymi's projected
net income and its ability to remit earnings in the form of dividends to BMG.
17
<PAGE> 20
SUPPLEMENTARY FINANCIAL INFORMATION
Combined Battle Mountain Gold Company & Hemlo Gold Mines Inc.
The following discussion is supplementary, or additional, to the preceding
discussion of Results of Operations unless the information includes the
combined total operations such as cash costs.
<TABLE>
<CAPTION>
Three months ended Six months ended
June 30, June 30,
---------------------- --------------------
1996 1995 1996 1995
---------- ---------- --------- ---------
<S> <C> <C> <C> <C>
Gold sales (ounces - 100%) 283,000 291,000 542,000 541,000
Gold sales realized per ounce $ 396 $ 384 $ 397 $ 382
Average London PM fix per ounce $ 390 $ 388 $ 395 $ 383
</TABLE>
Sales - Sales remained virtually the same for the six months ended June 30,
1996, compared with the same period of 1995 primarily because of increased
sales volumes from the Golden Giant mine. The increase was offset by decreased
sales from the combined company's other mines as discussed above under "Results
of Operations - Primary Financial Information". Sales volumes increased at the
Golden Giant mine primarily because a work slowdown and subsequent strike in
June 1995 caused lower than normal production during the first half of 1995.
Consolidated Production Costs Per Ounce
(per ounce of gold sold):
- ---------------------------------------
<TABLE>
<CAPTION>
Three months ended Six months ended
June 30, June 30,
------------------ ----------------
1996 1995 1996 1995
----- ----- ----- -----
<S> <C> <C> <C> <C>
Direct mining costs $ 217 $ 193 $ 208 $ 188
Deferred stripping adjustments 1 1 2 (1)
Third party smelting, refining and transportation costs 8 11 6 8
By-product credits included in sales (30) (37) (19) (24)
----- ----- ----- -----
Cash operating costs 196 168 197 171
Royalties 11 11 12 11
Production taxes 3 1 2 1
----- ----- ----- -----
Total cash costs 210 180 211 183
Depreciation, depletion and amortization 89 83 84 78
Reclamation and mine closure costs 4 2 5 2
----- ----- ----- -----
Total production costs $ 303 $ 265 $ 300 $ 263
===== ===== ===== =====
</TABLE>
18
<PAGE> 21
Reconciliation of Total Cash Costs per Ounce to
Financial Statements:
- ---------------------------------------------------
<TABLE>
<CAPTION>
Three months ended Six months ended
June 30, June 30,
----------------------- -----------------------
1996 1995 1996 1995
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
Production costs per financial statements $69,119 $ 64,692 $127,208 $113,864
By-product credits included in sales (8,392) (10,740) (10,487) (12,765)
Reclamation and mine closure costs (1,079) (614) (2,499) (1,197)
Operating costs during strike shutdown - (925) - (925)
Other 3 (5) 2 (6)
------- -------- -------- --------
Production costs for per ounce calculation purposes $59,651 $ 52,408 $114,224 $ 98,971
======= ======== ======== ========
Gold ounces sold 283 291 542 541
======= ======== ======== ========
Total cash costs per gold ounce sold $ 210 $ 180 $ 211 $ 183
======= ======== ======== ========
</TABLE>
For a discussion of production costs, depreciation, depletion and amortization
and other income (expense) see the discussion for Battle Mountain Gold Company
above under "Results of Operations - Primary Financial Information".
On a combined basis, the Company's effective income tax rate was 66 percent for
the first half of 1996, compared with an effective income tax rate of 37
percent in 1995. The effective tax rate for 1996 is higher than the U.S.
statutory rate because of the high mining and income tax rates in Canada and
because the income tax effect from the undistributed losses of Niugini Mining
has not been included in the calculation of the effective income tax rate. The
effective income tax rate for 1995 was affected by the recognition of deferred
tax assets related to foreign tax credits, as previously described in the
primary financial information of Battle Mountain Gold Company.
"SAFE HARBOR" STATEMENT UNDER THE UNITED STATES PRIVATE SECURITIES
LITIGATION REFORM ACT OF 1995
With the exception of historical matters, the matters discussed in this report
are forward-looking statements that involve risks and uncertainties that could
cause actual results to differ materially from projected results. Such
forward-looking statements include statements regarding expected commencement
dates of mining operations, projected quantities of future metal production,
projected capital costs, projected production rates, costs and expenditures and
projected demand or supply for the products the Company produces. Factors that
could cause actual results to differ materially include, among others: risks and
uncertainties relating to general domestic and international economic and
political conditions, the cyclical and volatile prices of gold, silver and
copper, political and economic risks associated with foreign operations,
unanticipated ground and water conditions, unanticipated grade and geological
problems, metallurgical and other processing problems, availability of materials
and equipment, delays in the receipt of or failure to receive necessary
governmental permits, changes in laws or regulations or the interpretation and
enforcement thereof, the occurrence of unusual weather or operating conditions,
force majeure events, lower than expected ore grades, the failure of equipment
or processes to operate in accordance with specifications or expectations, labor
relations, accidents, delays in anticipated start-up dates, environmental risks,
the results of financing efforts and financial market conditions, and other risk
factors detailed in the Company's Securities and Exchange Commission filings.
Many of such factors are beyond the Company's ability to control or predict.
Readers are cautioned not to put undue reliance on forward-looking statements.
The Company disclaims any intent or obligations to update publicly these
forward-looking statements, whether as a result of new information, future
events or otherwise.
19
<PAGE> 22
PART II. OTHER INFORMATION
ITEM 2. CHANGES IN SECURITIES
On July 19, 1996, the Company's Restated Articles of
Incorporation were amended (as amended, the "Articles") to increase the number
of authorized shares of common stock, par value $0.10 per share (the "Common
Stock"), from 200,000,000 shares to 500,000,000 shares, increase the number of
authorized shares of preferred stock, par value $1.00 per share, from
20,000,000 shares to 50,000,000 shares and authorize one share of special
voting stock, par value $0.10 per share (the "Special Voting Stock").
Pursuant to the Combination Agreement by and between the
Company and Hemlo Gold Mines Inc. (renamed Battle Mountain Canada Ltd.)
effective as of March 11, 1996, as amended and restated (the "Combination
Agreement"), the share of Special Voting Stock was issued to the trustee
appointed under the Voting, Support and Exchange Trust Agreement entered into
among the Company, Battle Mountain Canada Ltd. ("Battle Mountain Canada") and
the trustee thereunder (the "Voting, Support and Exchange Trust Agreement").
Except as otherwise required by law or the Articles, the share of Special Voting
Stock will possess a number of votes equal to the number of outstanding
exchangeable shares of Battle Mountain Canada (the "Exchangeable Shares") from
time to time not owned by the Company or certain subsidiaries of the Company,
and may be voted in the election of directors and on all other matters submitted
to a vote of stockholders of the Company. The holders of Common Stock and the
holder of the share of Special Voting Stock will vote together as a single class
on all matters, except to the extent voting as a separate class is required by
applicable law or the Articles. Pursuant to the Voting, Support and Exchange
Trust Agreement, holders of Exchangeable Shares will be entitled to instruct the
trustee to exercise one of the votes to which the share of Special Voting Stock
is entitled for each Exchangeable Share held. The holder of the share of
Special Voting Stock is not entitled to receive dividends or to receive any
assets of the Company available for distribution to its stockholders in the
event of any liquidation, dissolution or winding up of the Company. At such
time as the share of Special Voting Stock has no votes attached to it because
there are no Exchangeable Shares outstanding not owned by the Company or certain
subsidiaries of the Company, and there are no shares of stock, debt, options or
other agreements of Battle Mountain Canada that could give rise to the issuance
of any Exchangeable Shares to any person (other than the Company or certain
subsidiaries of the Company), the share of Special Voting Stock will be
canceled.
Holders of Exchangeable Shares are entitled to receive
dividends equivalent to dividends paid from time to time by the Company on
shares of the Common Stock, and are not otherwise entitled to receive
dividends. Pursuant to the Voting, Support and Exchange Trust Agreement, the
Company is prohibited from declaring or paying dividends on the Common Stock
unless Battle Mountain Canada is able to, and simultaneously does, declare or
pay an equivalent dividend on the Exchangeable Shares. As long as the
Exchangeable Shares remain outstanding, holders of Exchangeable Shares will
have the right to exchange their shares on a one-for-one basis for shares of
Common Stock. In addition, on any date on or after June 30, 2003 (or earlier
if the number of Exchangeable Shares outstanding is below a specified
threshold) Battle Mountain Canada may redeem all of the then outstanding
Exchangeable Shares in exchange for an equal number of shares of Common Stock.
Upon the occurrence of a liquidation, dissolution or winding up of Battle
Mountain Canada (a "Battle Mountain Canada Insolvency Event"), holders of the
Exchangeable Shares will have preferential rights to receive from Battle
Mountain Canada one share of Common Stock for each Exchangeable Share they
hold. In the case of any such redemption at the option of the holder,
redemption at the option of Battle Mountain Canada, or Battle Mountain Canada
Insolvency Event, the Company (or a designated subsidiary) has certain
overriding call rights to purchase the Exchangeable Shares subject thereto for
the same consideration consisting of Common Stock. Upon the occurrence of a
20
<PAGE> 23
liquidation, dissolution or winding up of the Company, in order for the
holders of the Exchangeable Shares to participate on a pro rata basis with the
holders of Common Stock, each holder of Exchangeable Shares will automatically
receive in exchange therefor an equivalent number of shares of Common Stock.
In the event of the exercise of any of the rights described in this paragraph,
an additional amount will be payable equivalent to any declared and unpaid
dividend on the Exchangeable Shares being exchanged. Pursuant to the Voting,
Support and Exchange Trust Agreement, the Company has agreed to take all
actions and do all necessary things to ensure that Battle Mountain Canada is
able to deliver to the holders of the Exchangeable Shares the equivalent number
of shares of Common Stock in the event of a liquidation, dissolution or winding
up of Battle Mountain Canada, an exchange at the option of a holder of
Exchangeable Shares or a redemption of Exchangeable Shares by Battle Mountain
Canada.
On July 19, 1996, the Rights Agreement (the "Rights
Agreement") specifying the terms of the preferred stock purchase rights
associated with the Common Stock (the "Rights") was amended by the Company
pursuant to the terms thereof to provide that Noranda Inc. ("Noranda") will not
be an Acquiring Person (as defined) solely as a result of becoming the
beneficial owner of Exchangeable Shares upon consummation of the arrangement
referred to in the Combination Agreement or Common stock acquired in exchange
therefor unless and until it or any of its affiliates or associates (as defined)
purchase or otherwise become the beneficial owner of any additional shares of
Common Stock or any other person or persons who is (or collectively are) the
beneficial owners of any shares of Common Stock become an affiliate or associate
of Noranda unless (x) in either such case, Noranda, together with all of its
affiliates and associates, is not then the beneficial owner of 20 percent or
more of the shares of Common Stock then outstanding or (y) in case Noranda
becomes the beneficial owner of such additional shares as a result of the
acquisition by it of another person or of another person who is such a
beneficial owner becoming an affiliate or associate of Noranda as a result of
a bona fide transaction undertaken primarily for another purpose not related to
the acquisition of beneficial ownership of shares of Common Stock and not for
any purpose or with any effect of changing or influencing control of the
Company, Noranda (or such affiliate or associate) promptly divests or causes to
be divested such additional shares. The amendment to the Rights Agreement also
provides certain exceptions from the definition of Acquiring Person, conditional
on prompt divestiture. For purposes of the Rights, beneficial ownership of
Exchangeable Shares is treated as beneficial ownership of Common Stock and
calculations of percentage ownership, the number of shares outstanding and
related provisions are made on a basis that treats the Common Stock and
Exchangeable Shares as though they are the same security. Each Exchangeable
Share has an associated right to acquire additional Exchangeable Shares on terms
substantially the same as those on which the Rights confer the right to
acquire the Company's Series A Participating Preferred Stock (or in certain
circumstances Common Stock or other securities).
21
<PAGE> 24
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
- ------- ---------------------------------------------------
(a) Annual Meeting of Shareholders
July 15, 1996
<TABLE>
<CAPTION>
Broker
(c) Proposal For Against Withheld Abstain Nonvotes
-------- --- ------- -------- ------- --------
<S> <C> <C> <C> <C> <C>
Election of Directors
Charles E. Childers 64,063,512 * 3,292,869 * -
Karl E. Elers 64,077,815 * 3,278,566 * -
Kenneth R. Werneburg 64,062,210 * 3,294,171 * -
Proposal to approve
and adopt the
Combination
Agreement effective
as of March 11,
1996 by and between
the Company and
Hemlo Gold Mines
Inc. and the
transactions
contemplated
thereby, including
the amendment of
the Company's
Restated Articles
of Incorporation 42,393,023 6,668,623 * 584,434 17,710,301
Proposal to amend
the Company's 1994
Long-Term Incentive
Plan 36,075,629 12,808,945 * 1,351,620 17,120,187
Ratification of
Appointment of
Price Waterhouse
LLP as Independent
Public Accountants 66,214,597 625,648 * 516,136 -
</TABLE>
* Not Applicable
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
*2(a) Plan of Arrangement of Hemlo Gold Mines Inc. under
Section 182 of the Business Corporations Act (Ontario)
(Annex D to Exhibit 20(a), Joint Management Information
Circular and Proxy Statement, to the Company's Current
Report on Form 8-K dated June 11, 1996, File No. 1-9666).
22
<PAGE> 25
*2(b) Combination Agreement effective as of March 11, 1996 by
and between the Company and Hemlo Mines Inc. (Annex C to
Exhibit 20(a), Joint Management Information Circular and
Proxy Statement, to the Company's Current Report on Form
8-K dated June 11, 1996, File No. 1-9666).
*3(a)(1)Restated Articles of Incorporation of the Company, as
amended and restated through May 11, 1988 (Exhibit
4(a)(1) to the Company's Current Report on Form 8-K dated
July 19, 1996, File No. 1-9666).
*3(a)(2)Certificate of Amendment to Restated Articles of
Incorporation of the Company (Exhibit 4(a)(1) to the
Company's Current Report on Form 8-K dated July 19,
1996, File No. 1-9666).
*3(b) Certificate of Resolution Establishing Designation,
Preferences and Rights of $3.25 Convertible Preferred
Stock (Exhibit 4(b) to the Company's Current Report on
Form 8-K dated July 19, 1996, File No. 1-9666).
*3(c) Certificate of Amendment of Certificate of Resolution
Establishing Designation, Preferences and Rights of
Series A Junior Participating Preferred Stock (Exhibit
4(c) to the Company's Current Report on Form 8-K dated
July 19, 1996, File No. 1-9666).
*3(d) Bylaws of the Company, as amended through July 19, 1996
(Exhibit 4(d) to the Company's Current Report on Form 8-K
dated July 19, 1996, File No. 1-9666).
*4(a) Rights Agreement, dated November 10, 1988, as amended and
restated as of July 19, 1996, between the Company and The
Bank of New York, as Rights Agent (Exhibit 4(e) to the
Company's Current Report on Form 8-K dated July 19,
1996, File No. 1-9666).
*4(b) Rights Agreement, dated July 19, 1996, between Battle
Mountain Canada Ltd. and The R-M Trust Company, as Rights
Agent (Exhibit 4(f) to the Company's Current Report on
Form 8-K dated July 19, 1996, File No. 1-9666).
*4(c) Voting, Support and Exchange Trust Agreement dated as of
July 19, 1996 between the Company, Hemlo Gold Mines Inc.
and The R-M Trust Company (Annex E to Exhibit 20(a),
Joint Management Information Circular and Proxy
Statement, to the Company's Current Report on Form 8-K
dated June 18, 1996, File No. 1-9666).
*10(a) Registration Rights Agreement, dated as of July 19, 1996,
between Noranda Inc., Kerr Addison Mines Limited and the
Company (Exhibit 10(a) to the Company's Current Report on
Form 8-K dated July 19, 1996, File No. 1-9666).
11 Computation of Earnings per Share
12 Computation of Ratio of Earnings to Fixed Charges and
Earnings to combined Fixed Charges and Preferred
dividends
27 Financial Data Schedule for the six month period ended
June 30, 1996.
_____________________
* Incorporated by reference as indicated.
(b) Reports on Form 8-K
Forms 8-K dated June 11, 1996, June 27, 1996 and July 19, 1996.
23
<PAGE> 26
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
BATTLE MOUNTAIN GOLD COMPANY
Date: August 14, 1996 /s/ R. Dennis O'Connell
-------------------------------------------------
R. Dennis O'Connell, Executive Vice President,
Finance and Corporate Development
(Principal Financial and Chief Accounting Officer)
24
<PAGE> 27
INDEX TO EXHIBITS
Exhibit Description
------- -----------
*2(a) Plan of Arrangement of Hemlo Gold Mines Inc. under
Section 182 of the Business Corporations Act (Ontario)
(Annex D to Exhibit 20(a), Joint Management Information
Circular and Proxy Statement, to the Company's Current
Report on Form 8-K dated June 11, 1996, File No. 1-9666).
*2(b) Combination Agreement effective as of March 11, 1996 by
and between the Company and Hemlo Mines Inc. (Annex C to
Exhibit 20(a), Joint Management Information Circular and
Proxy Statement, to the Company's Current Report on Form
8-K dated June 11, 1996, File No. 1-9666).
*3(a)(1) Restated Articles of Incorporation of the Company, as
amended and restated through May 11, 1988 (Exhibit
4(a)(1) to the Company's Current Report on Form 8-K dated
July 19, 1996, File No. 1-9666).
*3(a)(2) Certificate of Amendment to Restated Articles of
Incorporation of the Company (Exhibit 4(a)(1) to the
Company's Current Report on Form 8-K dated July 19,
1996, File No. 1-9666).
*3(b) Certificate of Resolution Establishing Designation,
Preferences and Rights of $3.25 Convertible Preferred
Stock (Exhibit 4(b) to the Company's Current Report on
Form 8-K dated July 19, 1996, File No. 1-9666).
*3(c) Certificate of Amendment of Certificate of Resolution
Establishing Designation, Preferences and Rights of
Series A Junior Participating Preferred Stock (Exhibit
4(c) to the Company's Current Report on Form 8-K dated
July 19, 1996, File No. 1-9666).
*3(d) Bylaws of the Company, as amended through July 19, 1996
(Exhibit 4(d) to the Company's Current Report on Form 8-K
dated July 19, 1996, File No. 1-9666).
*4(a) Rights Agreement, dated November 10, 1988, as amended and
restated as of July 19, 1996, between the Company and The
Bank of New York, as Rights Agent (Exhibit 4(e) to the
Company's Current Report on Form 8-K dated July 19,
1996, File No. 1-9666).
*4(b) Rights Agreement, dated July 19, 1996, between Battle
Mountain Canada Ltd. and The R-M Trust Company, as Rights
Agent (Exhibit 4(f) to the Company's Current Report on
Form 8-K dated July 19, 1996, File No. 1-9666).
*4(c) Voting, Support and Exchange Trust Agreement dated as of
July 19, 1996 between the Company, Hemlo Gold Mines Inc.
and The R-M Trust Company (Annex E to Exhibit 20(a),
Joint Management Information Circular and Proxy
Statement, to the Company's Current Report on Form 8-K
dated June 18, 1996, File No. 1-9666).
*10(a) Registration Rights Agreement dated as of July 19, 1996,
between Noranda Inc., Kerr Addison Mines Limited and the
Company (Exhibit 10(a) to the Company's Current Report
on Form 8-K dated July 19, 1996, File No. 1-9666).
11 Computation of Earnings per Share
12 Computation of Ratio of Earnings to Fixed Charges and
Earnings to combined Fixed Charges and Preferred
dividends
27 Financial Data Schedule for the six month period ended
June 30, 1996.
_____________________
* Incorporated by reference as indicated.
(b) Reports on Form 8-K
Forms 8-K dated June 11, 1996, June 27, 1996 and July 19, 1996.
<PAGE> 1
Exhibit 11
BATTLE MOUNTAIN GOLD COMPANY
COMPUTATION OF EARNINGS PER COMMON SHARE
(in thousands, except share and per share amounts)
<TABLE>
Three months ended Six months ended
June 30, June 30,
------------------------ --------------------------
1996 1995 1996 1995
---------- ----------- ----------- ------------
<S> <C> <C> <C> <C>
PRIMARY EARNINGS PER SHARE
Earnings
Net (loss)income $ (4,051) $ 7,630 $ (8,054) $ 10,111
Deduct dividends on preferred shares 1,868 1,869 3,737 3,738
----------- ----------- ----------- -----------
Net (loss)income applicable to common stock $ (5,919) $ 5,761 $ (11,791) $ 6,373
=========== =========== =========== ===========
Shares
Weighted average number of common shares outstanding 81,331,786 80,994,743 81,285,230 80,972,312
Assuming exercise of stock options reduced by the number of
shares which could have been purchased with the proceeds from
exercise of such options - 479,218 - 489,893
Assuming conversion of 6% convertible debentures - 4,848,485 - 4,848,485
----------- ----------- ----------- -----------
Weighted average number of common shares outstanding, as adjusted 81,331,786 86,322,446 81,285,230 86,310,690
=========== =========== =========== ===========
Primary (loss)earnings per common share $ (.07) $ .07 $ (.15) $ .07
=========== =========== =========== ===========
FULLY DILUTED EARNINGS PER SHARE (1)
Earnings
Net (loss)income $ (4,051) $ 7,630 $ (8,054) $ 10,111
=========== =========== =========== ===========
Shares
Weighted average number of common shares outstanding 81,331,786 80,994,743 81,285,230 80,972,312
Assuming exercise of stock options reduced by the number of
shares which could have been purchased with the proceeds from
exercise of such options 323,998 535,823 371,091 523,929
Assuming conversion of 6% convertible debentures 4,847,515 4,848,485 4,847,515 4,848,485
Assuming conversion of preferred stock 10,952,529 10,952,600 10,952,559 10,952,600
----------- ----------- ----------- -----------
Weighted average number of common shares outstanding, as adjusted 97,455,828 97,331,651 97,456,395 97,297,326
=========== =========== =========== ===========
Net (loss)income per common share assuming full dilution $ (.04) $ .08 $ (.08) $ .10
=========== =========== =========== ===========
ADDITIONAL PRIMARY COMPUTATION (1)
Net income (loss) applicable to common stock, as adjusted per
primary computation above $ (5,919) $ (11,791)
=========== ===========
Weighted average number of shares outstanding, as adjusted per
primary computation above 81,331,786 81,285,230
Anti-dilutive effect of outstanding options (as determined by
the application of the treasury stock method) 323,998 339,630
Anti-dilutive effect of conversion of 6% convertible debentures 4,847,515 4,847,515
----------- -----------
Weighted average number of common shares, as adjusted 86,503,299 86,472,375
=========== ===========
Primary (loss) earnings per share, as adjusted $ (.07) $ (.14)
=========== ===========
</TABLE>
(1) These calculations are submitted in accordance with Regulation S-K Item
601(b)(11) although it is contrary to paragraphs 30 and 40 of APB Opinion
No. 15 because it produces an anti-dilutive result.
<PAGE> 1
Exhibit 12
BATTLE MOUNTAIN GOLD COMPANY
COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES AND EARNINGS TO COMBINED
FIXED CHARGES AND PREFERRED DIVIDENDS
(in thousands, except ratios)
<TABLE>
<CAPTION>
Six months ended
June 30,
----------------------
1996 1995
---------- --------
<S> <C> <C>
EARNINGS COMPUTATION USING
CONSOLIDATED INCOME STATEMENT DATA
(Loss) Income before income taxes and minority interest $(11,983) $14,230
Minority interest in loss (income) of majority-owned subsidiaries 1,664 (3,026)
-------- -------
(Loss) Income before income taxes (10,319) 11,204
-------- -------
Add fixed charges included in (loss) income:
Interest expense 3,245 3,244
Amortization of deferred financing costs 132 97
Interest portion of rental expenses (33%) 931 430
-------- -------
Sub-total fixed charges included in (loss) income 4,308 3,771
-------- -------
(Loss) Income $ (6,011) $14,975
======== =======
Fixed Charges
Included in (loss) income $ 4,308 $ 3,772
Capitalized interest 2,984 3,686
-------- -------
Total fixed charges 7,292 7,458
-------- -------
Preferred dividends 4,788 4,142
-------- -------
Combined fixed charges and preferred dividends $ 12,080 $11,600
======== =======
Ratio of earnings to fixed charges - 2.01
Amount by which fixed charges exceed earnings $ 13,303 -
Ratio of earnings to combined fixed charges
and preferred dividends - 1.29
Amount by which combined fixed charges and
preferred dividends exceed earnings $ 18,091
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from Battle
Mountain Gold Company's Condensed Consolidated Balance Sheet at June 30, 1996
and December 31, 1995 and Condensed Consolidated Statements of Income for the
three and six months ended June 30, 1996 and 1995, and is qualified in its
entirety by reference to such financial statements.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> JUN-30-1996
<CASH> 38,649
<SECURITIES> 0
<RECEIVABLES> 44,933
<ALLOWANCES> 0
<INVENTORY> 5,930
<CURRENT-ASSETS> 135,369
<PP&E> 640,296
<DEPRECIATION> (293,720)
<TOTAL-ASSETS> 746,358
<CURRENT-LIABILITIES> 51,742
<BONDS> 0
<COMMON> 8,134
0
110,578
<OTHER-SE> 242,140
<TOTAL-LIABILITY-AND-EQUITY> 746,358
<SALES> 140,387
<TOTAL-REVENUES> 140,387
<CGS> 97,267
<TOTAL-COSTS> 148,814
<OTHER-EXPENSES> (1,777)
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> (3,245)
<INCOME-PRETAX> (11,791)
<INCOME-TAX> (2,265)
<INCOME-CONTINUING> (8,054)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (8,054)
<EPS-PRIMARY> (.15)
<EPS-DILUTED> 0
</TABLE>
