PROSPECTUS
148,617,459 SHARES
BATTLE MOUNTAIN GOLD COMPANY
COMMON STOCK
(PAR VALUE $0.10 PER SHARE)
Each share of common stock, par value $0.10 per share (the "Battle
Mountain Common Stock"), of Battle Mountain Gold Company, a Nevada corporation
("Battle Mountain"), offered hereby is issuable upon exchange or redemption of
an exchangeable share (an "Exchangeable Share") of Hemlo Gold Mines Inc., an
Ontario corporation ("Hemlo Gold"), issued by Hemlo Gold in exchange for Hemlo
Gold Common Shares in connection with the combination of Battle Mountain and
Hemlo Gold. In connection with the combination, Hemlo Gold has changed its name
to Battle Mountain Canada Ltd. ("Battle Mountain Canada"). Shares of Battle
Mountain Common Stock are being offered on a continuous basis pursuant to Rule
415 under the Securities Act of 1933, as amended (the "Securities Act"), during
the period of time that the Registration Statement to which this prospectus
relates remains effective. Battle Mountain, Battle Mountain Canada and Battle
Mountain Canada Holdco, Inc., an indirect, wholly owned subsidiary of Battle
Mountain organized under the laws of the State of Nevada ("Battle Mountain
Sub"), will offer shares of Battle Mountain Common Stock in exchange for
Exchangeable Shares from time to time. Upon such exchange, holders of
Exchangeable Shares will be entitled to receive for each Exchangeable Share one
share of Battle Mountain Common Stock, plus an additional amount equivalent to
the full amount of all declared and unpaid dividends on such Exchangeable Share.
See "PLAN OF DISTRIBUTION." All expenses of registration incurred in connection
with this offering are being paid by Battle Mountain. Battle Mountain, Battle
Mountain Canada and Battle Mountain Sub will receive the Exchangeable Shares
exchanged for the shares of Common Stock offered hereby. The Battle Mountain
Common Stock is traded on the New York Stock Exchange (the "NYSE") and certain
other stock exchanges outside the United States under the symbol "BMG." On July
19, 1996, the closing price of the Battle Mountain Common Stock on the NYSE was
$8 3/8 per share.
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SEE "RISK FACTORS" BEGINNING AT PAGE 3 HEREOF FOR A DISCUSSION OF CERTAIN
FACTORS THAT SHOULD BE CONSIDERED IN CONNECTION WITH ANY INVESTMENT IN THE
BATTLE MOUNTAIN COMMON
STOCK OFFERED HEREBY.
--------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION NOR HAS THE SECURITIES AND EXCHANGE
COMMISSION OR ANY STATE SECURITIES COMMISSION
PASSED UPON THE ACCURACY OR ADEQUACY OF THIS
PROSPECTUS. ANY REPRESENTATION TO THE
CONTRARY IS A CRIMINAL OFFENSE.
THE DATE OF THIS PROSPECTUS IS JULY 19, 1996.
<PAGE>
AVAILABLE INFORMATION
Battle Mountain is subject to the information requirements of the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), and in
accordance therewith files reports, proxy statements and other information with
the Securities Exchange Commission (the "Commission"), which can be inspected
and copied at the public reference facilities maintained by the Commission at
450 Fifth Street, N.W., Judiciary Plaza, Room 1024, Washington, D.C. 20549; and
at the regional offices of the Commission at Citicorp Center, 13th Floor, 500
West Madison Street, Suite 1400, Chicago, Illinois 60661 and at Seven World
Trade Center, New York, New York 10048. Copies of such material can be obtained
from the Public Reference Section of the Commission at 450 Fifth Street, N.W.,
Judiciary Plaza, Washington, D.C. 20549 at prescribed rates or on the Internet
at http://www.sec.gov. Such reports, proxy statements and other information
concerning Battle Mountain also may be inspected at the offices of the NYSE, 20
Broad Street, New York, New York 10005.
Battle Mountain has filed with the Commission a registration statement
(the "Registration Statement") under the Securities Act with respect to the
shares of Battle Mountain Common Stock offered hereby. This Prospectus does not
contain all of the information set forth in the Registration Statement and the
exhibits and schedules thereto, certain parts of which are omitted in accordance
with the rules and regulations of the Commission. For further information with
respect to Battle Mountain and such Battle Mountain Common Stock, reference is
made to such Registration Statement and to the exhibits and schedules thereto.
Statements contained in this Prospectus as to the contents of any contract or
any other document referred to are not necessarily complete, and in each
instance reference is made to the copy of such contract or other document filed
as an exhibit to the Registration Statement, each such statement being qualified
in all respects by such reference. A copy of the Registration Statement may be
obtained at the public reference facilities maintained by the Commission as
provided in the preceding paragraph.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents, which have been filed by Battle Mountain with the
Commission pursuant to the Exchange Act (File No. 1-9666), are incorporated in
this Prospectus by reference and shall be deemed to be a part hereof:
(a) Battle Mountain's Annual Report on Form 10-K for the year ended
December 31, 1995, as amended by Form 10-K/A (Amendment No. 1) dated April
29, 1996 and Form 10-K/A (Amendment No. 2) dated July 12, 1996;
(b) Battle Mountain's Quarterly Report on Form 10-Q for the quarter
ended March 31, 1996;
(c) Battle Mountain's Current Reports on Form 8-K dated March 11,
June 11 and June 27, 1996;
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(d) The description of the Battle Mountain Common Stock contained in
Battle Mountain's Registration Statement on Form 8-A dated August 12, 1987
(as amended by a Form 8 dated April 25, 1991); and
(e) The description of the preferred stock purchase rights
associated with the Battle Mountain Common Stock contained in Battle
Mountain's Registration Statement on Form 8-A dated November 15, 1988 (as
amended by a Form 8 dated November 29, 1988).
All documents filed by Battle Mountain pursuant to Section 13(a), 13(c),
14 or 15(d) of the Exchange Act subsequent to the date of this Prospectus and
prior to the termination of the offering made hereby shall be deemed to be
incorporated by reference in this Prospectus and to be a part hereof from the
date of the filing of such documents. Any statement contained in this
Prospectus, in a supplement to this Prospectus or in a document incorporated or
deemed to be incorporated by reference herein shall be deemed to be modified or
superseded for purposes of this Prospectus to the extent that a statement
contained herein or in any subsequently filed supplement to this Prospectus or
in any document that also is or is deemed to be incorporated by reference herein
modifies or supersedes such statement. Any statement so modified or superseded
shall not be deemed, except as so modified or superseded, to constitute a part
of this Prospectus.
Battle Mountain hereby undertakes to provide without charge to each
person, including any beneficial owner, to whom a copy of this Prospectus has
been delivered, on the written or oral request of any such person, a copy of any
or all of the documents referred to above which have been or may be incorporated
in this Prospectus by reference, other than exhibits to such documents (unless
such exhibits are specifically incorporated by reference in such documents).
Written or telephone requests for such copies should be directed to Battle
Mountain at its principal executive offices located at 333 Clay Street, 42nd
Floor, Houston, Texas 77002, Attention: Secretary (telephone number: (713)
650-6400).
RISK FACTORS
Investors should consider carefully the following factors, in addition to
the other information contained in this Prospectus, before exchanging their
Exchangeable Shares for the shares of Battle Mountain Common Stock offered
hereby.
TAXABILITY OF THE EXCHANGE
The exchange of Exchangeable Shares for shares of Battle Mountain Common
Stock is generally a taxable event in Canada and the United States. A holder's
tax consequences can vary depending on a number of factors, including the
residency of the holder, the method of the exchange (redemption or exchange) and
the length of time that the Exchangeable Shares were held prior to exchange. See
"TAX CONSIDERATIONS."
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DIFFERENCES IN CANADA AND U.S. TRADING MARKETS
The Toronto Stock Exchange (the "TSE") has accepted notice of the
Arrangement and has conditionally approved the listing of the Exchangeable
Shares on the effective date of the Arrangement, subject to the satisfaction of
customary requirements of the TSE. The Battle Mountain Common Stock is listed on
the NYSE and certain other exchanges outside the United States. Battle Mountain
has agreed that the shares of Battle Mountain Common Stock issuable from time to
time in exchange for the Exchangeable Shares will be listed on the NYSE. There
is no current intention to list the Exchangeable Shares or Battle Mountain
Common Stock on any other stock exchange in Canada or the United States. As a
result of the foregoing, the price at which the Exchangeable Shares will trade
will be based upon the market for such shares on the TSE and the price at which
the shares of Battle Mountain Common Stock will trade will be based upon the
market for such shares on the NYSE and such other exchanges. Although Battle
Mountain believes that the market price of the Exchangeable Shares on the TSE
and the market price of the Battle Mountain Common Stock on the NYSE and such
other exchanges will reflect essentially equivalent values, there can be no
assurances that the market price of the Battle Mountain Common Stock will be
identical, or even similar, to the market price of the Exchangeable Shares.
FOREIGN PROPERTY
So long as they are listed on a prescribed stock exchange in Canada (which
currently includes the TSE), the Exchangeable Shares will not be foreign
property under the Income Tax Act (Canada), as amended (the "Canadian Tax Act"),
for trusts governed by registered pension plans, registered retirement savings
plans, registered retirement income funds and deferred profit sharing plans or
for certain other tax-exempt persons. Battle Mountain Common Stock will,
however, be foreign property for such plans or persons.
THE COMPANY
Battle Mountain's principal executive offices are located at 333 Clay
Street, 42nd Floor, Houston, Texas 77002, and its telephone number is (713)
650-6400.
USE OF PROCEEDS
Because the shares of Battle Mountain Common Stock will be issued upon
exchange or redemption of the Exchangeable Shares, Battle Mountain will receive
no net cash proceeds upon such issuance.
DESCRIPTION OF BATTLE MOUNTAIN CAPITAL STOCK
As of the date of this Prospectus, Battle Mountain is authorized by its
Restated Articles of Incorporation (the "Battle Mountain Articles") to issue
500,000,000 shares of Battle Mountain
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Common Stock, 50,000,000 shares of preferred stock, par value $1.00 per share
(the "Battle Mountain Preferred Stock"), and one share of special voting stock,
par value $0.10 per share (the "Special Voting Stock"). As of the date of this
Prospectus, there are 2,300,000 shares of Battle Mountain Preferred Stock
designated by the Board of Directors of Battle Mountain as $3.25 Convertible
Preferred Stock (the "Convertible Preferred Stock") and an additional 5,000,000
shares of Battle Mountain Preferred Stock designated by the Board of Directors
of Battle Mountain as Series A Junior Participating Preferred Stock (the "Series
A Preferred Stock"). Shares of Series A Preferred Stock have been initially
reserved for issuance upon exercise of the Rights hereinafter described. See
"--Battle Mountain Preferred Stock--Series A Preferred Stock." On June 30, 1996,
there were (i) 81,339,897 shares of Battle Mountain Common Stock issued and
outstanding, (ii) 2,299,980 shares of Convertible Preferred Stock issued and
outstanding and (iii) 4,847,516 shares and 10,952,505 shares of Battle Mountain
Common Stock reserved for issuance upon conversion of the Company's 6%
Convertible Subordinated Debentures due 2005 and of the Convertible Preferred
Stock, respectively. In addition, as of June 30, 1996, 11,068,910 shares of
Battle Mountain Common Stock were authorized and remained available for issuance
under Battle Mountain's stock option plans and other employee benefit plans. As
of the date of this Prospectus, an additional 148,617,459 shares of Battle
Mountain Common Stock have been reserved for issuance in exchange for
Exchangeable Shares.
Battle Mountain's ability to pay dividends is subject to certain
restrictions contained in its revolving credit facility.
BATTLE MOUNTAIN COMMON STOCK
Subject to the prior rights of any shares of Battle Mountain Preferred
Stock that may from time to time be outstanding, holders of Battle Mountain
Common Stock are entitled to share ratably in such dividends as may be lawfully
declared by the Board of Directors and paid by Battle Mountain and, in the event
of liquidation, dissolution or winding up of Battle Mountain, are entitled to
share ratably in all assets available for distribution. Battle Mountain is
prohibited from declaring or paying dividends on the Battle Mountain Common
Stock unless Battle Mountain Canada is able to, and simultaneously does, declare
or pay an equivalent dividend on the Exchangeable Shares. In the event of
liquidation, dissolution or winding up of Battle Mountain, each outstanding
Exchangeable Share (other than Exchangeable Shares held by Battle Mountain,
Battle Mountain Sub or a single wholly owned subsidiary of Battle Mountain
incorporated under the federal laws of Canada or a province thereof ("Canada
Holdco")) will be purchased by Battle Mountain in exchange for one share of
Battle Mountain Common Stock, plus an additional amount equivalent to the full
amount of all declared and unpaid dividends on each such Exchangeable Share.
The Battle Mountain Common Stock is entitled to one vote per share held of
record on each matter submitted to a vote of stockholders. Except as otherwise
provided by law or the Battle Mountain Articles, the Common Stock and the
Special Voting Stock will vote together as a single class in the election of
directors and on all matters submitted to a vote of stockholders of Battle
Mountain. The holders of Battle Mountain Common Stock have no preemptive rights
to purchase any securities of Battle Mountain or cumulative voting rights.
Preferred stock purchase rights are
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issuable in respect of all shares of Battle Mountain Common Stock issued prior
to certain events. See "--Battle Mountain Preferred Stock--Series A Preferred
Stock." All outstanding shares of Battle Mountain Common Stock are validly
issued, fully paid and nonassessable. Battle Mountain is not prohibited by the
Battle Mountain Articles from repurchasing shares of Battle Mountain Common
Stock. Any such repurchases would be subject to any limitations on the amount
available for such purpose under applicable corporate law, any applicable
restrictions under the terms of any outstanding Battle Mountain Preferred Stock
or indebtedness and, in the case of market purchases, such restrictions on the
timing, manner and amount of such purchases as might apply in the circumstances
under applicable securities laws.
The outstanding Battle Mountain Common Stock is listed on the NYSE, the
Australian Stock Exchange Limited, the Swiss Stock Exchange and the Frankfurt
Stock Exchange under the symbol "BMG." Battle Mountain has agreed that the
shares of Battle Mountain Common Stock issuable from time to time in exchange
for the Exchangeable Shares will be listed on the NYSE.
The transfer agent, registrar and dividend disbursing agent for the Battle
Mountain Common Stock is The Bank of New York.
BATTLE MOUNTAIN SPECIAL VOTING STOCK
A single share of Battle Mountain Special Voting Stock will be authorized
for issuance and will have a par value of US$0.10 per share. Except as otherwise
required by law or the Battle Mountain Articles, the share of Special Voting
Stock will possess a number of votes equal to the number of outstanding
Exchangeable Shares from time to time not owned by Battle Mountain or certain
subsidiaries of Battle Mountain, and may be voted in the election of directors
and on all other matters submitted to a vote of stockholders of Battle Mountain.
The holders of Battle Mountain 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
Battle Mountain Articles. In the event of any liquidation, dissolution or
winding up of Battle Mountain, the holder of the share of Special Voting Stock
will not be entitled to receive any assets of Battle Mountain available for
distribution to its stockholders. The holder of the share of Special Voting
Stock is not entitled to receive dividends. Pursuant to the Combination
Agreement by and between Battle Mountain and Hemlo Gold 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 Battle Mountain, Battle
Mountain Canada and the trustee thereunder (the "Voting, Support and Exchange
Trust Agreement"). 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 Battle Mountain or certain subsidiaries of Battle Mountain, 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 Battle Mountain or certain subsidiaries of Battle Mountain),
the share of Special Voting Stock will be canceled.
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BATTLE MOUNTAIN PREFERRED STOCK
Battle Mountain's Board of Directors is authorized, without any further
vote or action by Battle Mountain's stockholders, to divide the Battle Mountain
Preferred Stock into series and, with respect to each series, to determine the
dividend rights, dividend rates, conversion rights, voting rights (which may be
greater or lesser than the voting rights of the Battle Mountain Common Stock),
redemption rights and terms, liquidation preferences, sinking fund rights and
terms, the number of shares constituting the series and the designation of each
series.
CONVERTIBLE PREFERRED STOCK. Holders of shares of Battle Mountain's
Convertible Preferred Stock are entitled to receive, when, as and if declared by
the Board of Directors of Battle Mountain, an annual cash dividend of US$3.25
per share, payable in equal quarterly installments. Except as required by law or
as described in the next sentence, holders of shares of Convertible Preferred
Stock have no voting rights. Whenever dividends on the Convertible Preferred
Stock are in arrears for at least six full quarterly dividends, holders of the
Convertible Preferred Stock will be entitled (voting separately as a class
together with holders of shares of any one or more other series of capital stock
of Battle Mountain ranking on a parity with the Convertible Preferred Stock as
to dividends and having like voting rights) to elect two additional directors
until such dividend arrearage is eliminated. Each share of Convertible Preferred
Stock is convertible at any time, at the option of the holder, into shares of
Battle Mountain Common Stock at a conversion rate of 4.762 shares of Battle
Mountain Common Stock for each share of Convertible Preferred Stock, subject to
adjustment under certain circumstances. The Convertible Preferred Stock is
redeemable at any time on and after May 15, 1996, at the option of Battle
Mountain, in whole or in part, in exchange for shares of Battle Mountain Common
Stock at a redemption price of US$52.275 per share of Convertible Preferred
Stock, and thereafter at prices decreasing ratably annually to US$50.00 per
share on or after May 15, 2003, plus accrued and unpaid dividends. The number of
shares of Battle Mountain Common Stock to be issued upon the redemption of any
share of Convertible Preferred Stock will be equal to the then-current
redemption price divided by the lower of (i) the average of the daily closing
prices of the Battle Mountain Common Stock for the 20 consecutive trading days
immediately preceding the first business day immediately preceding the date of
any applicable redemption notice or (ii) the closing price of the Battle
Mountain Common Stock on the trading day immediately preceding the first
business day immediately preceding the date of any applicable redemption notice.
At no time is the Convertible Preferred Stock redeemable for cash.
In the event of any liquidation, dissolution or winding up of Battle
Mountain, the holders of shares of Convertible Preferred Stock are entitled to
receive a liquidation preference of US$50.00 per share, plus an amount equal to
any accrued and unpaid dividends to the date of payment, before any distribution
of assets is made to holders of Battle Mountain Common Stock or any other stock
that ranks junior to the Convertible Preferred Stock as to liquidation rights.
The holders of Convertible Preferred Stock and all series or classes of Battle
Mountain's stock that rank on a parity as to liquidation rights with the
Convertible Preferred Stock are entitled to share ratably, in accordance with
the respective preferential amounts payable on such stock, in any distribution
which is not sufficient to pay in full the aggregate of the amounts payable
thereon.
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The Convertible Preferred Stock is listed for trading on the NYSE. The
registrar, transfer agent, conversion agent and dividend disbursing agent for
the Convertible Preferred Stock is The Bank of New York.
SERIES A PREFERRED STOCK. On November 10, 1988, the Board of Directors of
Battle Mountain declared a dividend of one Right (a "Right") for each
outstanding share of Battle Mountain Common Stock to stockholders of record at
the close of business on November 21, 1988. Rights are issuable in respect of
all shares of Battle Mountain Common Stock issued after such record date but
prior to the earliest of (i) the Distribution Date (as defined below), (ii) the
date on which the Rights are redeemed as provided below and (iii) November 10,
1998. Each Right entitles the registered holder to purchase from Battle Mountain
a unit consisting of one one-hundredth of a share (a "Unit") of Battle
Mountain's Series A Junior Participating Preferred Stock (the "Series A
Preferred Stock"), at a purchase price of US$60 per Unit, subject to adjustment
(the "Purchase Price").
The Rights are now attached to all Battle Mountain Common Stock
certificates representing outstanding shares, and no separate Rights
Certificates have been distributed. The Rights will separate from the Battle
Mountain Common Stock and a "Distribution Date" will occur upon the earlier of
(i) 10 days following a public announcement that a person or group of affiliated
or associated persons (an "Acquiring Person") has acquired, or obtained the
right to acquire, beneficial ownership of 20 percent or more of the outstanding
shares of Battle Mountain Common Stock (the date of the announcement being the
"Stock Acquisition Date") or (ii) 10 business days (or such later date as may be
determined by Battle Mountain's Board of Directors before the Distribution Date
occurs) following the commencement of a tender offer or exchange offer that
would result in a person or group beneficially owning 30 percent or more of such
outstanding shares of Battle Mountain Common Stock. The Rights Agreement
specifying the terms of the Rights (the "Rights Agreement") provides that
Noranda Inc., an Ontario corporation ("Noranda"), will not be an Acquiring
Person solely as a result of becoming the beneficial owner of Exchangeable
Shares upon consummation of the arrangement referred to in the Combination
Agreement or Battle Mountain Common Stock acquired in exchange therefor unless
and until it or any of its affiliates or associates purchase or otherwise become
the beneficial owner of any additional shares of Battle Mountain Common Stock or
any other person or persons who is (or collectively are) the beneficial owners
of any shares of Battle Mountain Common Stock become an affiliate or associate
of Noranda unless (x) in either such case, Noranda, together with all of its
affiliates or associates, is not then the beneficial owner of 20 percent or more
of the shares of Battle Mountain 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 Battle Mountain Common
Stock and not for any purpose with any effect of changing or influencing control
of Battle Mountain, Noranda (or such affiliate or associate) promptly divests or
causes to be divested such additional shares. The Rights Agreement further
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 Battle Mountain Common
Stock and calculations of percentage ownership, the number of shares outstanding
and
8
related provisions are made on a basis that treats the Battle Mountain Common
Stock and Exchangeable Shares as though they are the same security. The Rights
are not exercisable until the Distribution Date and will expire at the close of
business on November 10, 1998, unless earlier redeemed by Battle Mountain as
described below. 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 Series A Preferred Stock (or in certain
circumstances Battle Mountain Common Stock or other securities).
In the event that (i) Battle Mountain is the surviving corporation in a
merger with an Acquiring Person and the Battle Mountain Common Stock is not
changed or exchanged, (ii) a person becomes the beneficial owner of 30 percent
or more of the then outstanding shares of Battle Mountain Common Stock (except
pursuant to a tender or exchange offer for all outstanding shares of Battle
Mountain Common Stock at a price and on terms that a majority of the independent
directors of Battle Mountain determines to be fair to and otherwise in the best
interests of Battle Mountain and its stockholders), (iii) an Acquiring Person
engages in one or more "self-dealing" transactions as set forth in the Rights
Agreement or (iv) during such time as there is an Acquiring Person, an event
involving Battle Mountain or a subsidiary of Battle Mountain occurs that results
in such Acquiring Person's ownership interest being increased by more than one
percent (e.g., a reverse stock split), at any time following the Distribution
Date, each holder of a Right will thereafter have the right to receive, upon
exercise, Battle Mountain Common Stock (or, in certain circumstances, cash,
property or other securities of Battle Mountain) having a value equal to two
times the exercise price of the Right. The exercise price is the Purchase Price
multiplied by the number of Units issuable upon exercise of the Right prior to
the event described in this paragraph (initially, one). Notwithstanding any of
the foregoing, following the occurrence of any of the events set forth in this
paragraph, all Rights that are, or (under certain circumstances specified in the
Rights Agreement) were, beneficially owned by any Acquiring Person (or by
certain related parties) will be null and void. However, Rights are not
exercisable following the occurrence of any of the events set forth above until
such time as the Rights are no longer redeemable by Battle Mountain as set forth
below.
In the event that, on or after the Stock Acquisition Date, (i) Battle
Mountain is acquired in a merger or other business combination transaction
(other than a merger described in the preceding paragraph or a merger which
follows an offer described in the preceding paragraph) or (ii) 50 percent or
more of Battle Mountain's assets or earning power is sold or transferred, each
holder of a Right (except Rights which previously have been voided as set forth
above) will thereafter have the right to receive, upon exercise, common stock of
the acquiring company having a value equal to two times the exercise price of
the Right.
At any time until 10 days following the Stock Acquisition Date, Battle
Mountain may redeem the Rights in whole, but not in part, at a price of US$0.01
per Right, payable, at the option of Battle Mountain, in cash, shares of Battle
Mountain Common Stock or such other consideration as the Board of Directors may
determine. The Rights may have certain antitakeover effects, including deterring
someone from acquiring control of Battle Mountain in a manner or on terms not
approved
9
by the Board of Directors of Battle Mountain. The Rights should not interfere
with any merger or other business combination approved by the Board of Directors
of Battle Mountain.
Any shares of Series A Preferred Stock that may be issued upon exercise of
the Rights will be nonredeemable. The holders of shares of Series A Preferred
Stock will be entitled to receive, when, as and if declared, a preferential
quarterly dividend in an amount per share effectively equal to the greater of
US$2.00 per share or 100 times any cash or noncash dividend or other
distribution declared on the Battle Mountain Common Stock (other than dividends
payable in shares of Battle Mountain Common Stock), in like kind. In the event
of liquidation, the holders of the Series A Preferred Stock will be entitled to
receive a liquidation payment per share in an amount effectively equal to the
greater of US$100 per share or 100 times the per share amount distributed to
holders of Battle Mountain Common Stock. In the event of any merger,
consolidation or other transaction in which shares of Battle Mountain Common
Stock are exchanged, the holder of the shares of Series A Preferred Stock will
be entitled to receive per share 100 times the amount received per share of
Battle Mountain Common Stock. Holders of Series A Preferred Stock will have 100
votes per share of Series A Preferred Stock and, except as otherwise provided in
the Battle Mountain Articles or required by law, will vote together with holders
of Battle Mountain Common Stock as a single class. The rights of the Series A
Preferred Stock as to dividends, liquidation and voting are protected by
antidilution provisions. Whenever dividend payments on the Series A Preferred
Stock are in arrears, Battle Mountain will not (i) purchase or redeem any shares
of Series A Preferred Stock or shares ranking on a parity with respect to the
Series A Preferred Stock except in accordance with a purchase offer to all
holders, (ii) declare or pay dividends on or purchase or redeem any shares of
stock ranking junior to the Series A Preferred Stock or (iii) declare or pay
dividends on or purchase or redeem any shares of stock ranking on a parity with
the Series A Preferred Stock except dividends paid ratably on the Series A
Preferred Stock and all such parity stock and except purchases or redemptions of
such parity stock in exchange for junior stock. If dividend payments on the
Series A Preferred Stock are in arrears for six quarters, the holders of the
Series A Preferred Stock (altogether with holders of any other Preferred Stock
with similar rights) will have the right to elect two additional directors of
Battle Mountain.
OTHER MATTERS
ANTITAKEOVER PROVISIONS. The Battle Mountain Articles and the bylaws, as
amended, of Battle Mountain ("Battle Mountain Bylaws") contain certain
provisions that might be characterized as antitakeover provisions. Such
provisions may render more difficult certain possible takeover proposals to
acquire control of Battle Mountain and make removal of management of Battle
Mountain more difficult.
PROVISIONS OF THE BATTLE MOUNTAIN ARTICLES AND BATTLE MOUNTAIN BYLAWS. The
Battle Mountain Articles and the Battle Mountain Bylaws set the number of
directors at a minimum of three and a maximum of 12, as may be fixed from time
to time by resolution of the entire Board of Directors, and provide that the
membership of the classified Board of Directors shall be divided into three
classes, as nearly equal in number as possible, each of which serves for three
years, with the term of each class ending in a successive year. Under the Nevada
General Corporation Law (the
10
"NGCL"), any director may be removed from office upon the vote of stockholders
representing not less than two-thirds of the issued and outstanding capital
stock entitled to voting power, unless a corporation's articles require the
concurrence of a larger percentage of the stock entitled to voting power. As
permitted by the NGCL, the Battle Mountain Articles provide that a director may
be removed from office without cause only by the affirmative vote of the holders
of not less than 80 percent of the number of shares of Battle Mountain Common
Stock then outstanding.
Pursuant to the Battle Mountain Articles, the vote of holders of 80
percent of the voting power of all stock of Battle Mountain entitled to vote in
elections of directors (excluding stock entitled so to be voted only upon the
happening of some contingency unless such contingency shall have occurred and is
continuing) is required for approval of, with certain exceptions, a merger or
consolidation of Battle Mountain with or into another corporation, a sale or
lease of all or substantially all the assets of Battle Mountain to another
corporation, person or entity and, under certain conditions, a sale or lease to
Battle Mountain of assets in exchange for voting securities (or securities
convertible into or exchangeable for voting securities) of Battle Mountain or
any of its subsidiaries, in each case where the other party to the transaction
is the beneficial owner, directly or indirectly, of 5 percent or more of the
outstanding shares of any class or series of voting stock of Battle Mountain. In
addition, for any transaction to be effected for which the foregoing 80 percent
vote is required, it is also required that such transaction be approved by a
majority of the outstanding voting power of the voting stock of Battle Mountain,
exclusive of the voting stock beneficially owned, directly or indirectly, by the
party whose interest in the transaction and stock ownership in Battle Mountain
gives rise to the requirement of the 80 percent vote. The foregoing requirements
described in this paragraph do not apply to a transaction if (i) the Board of
Directors of Battle Mountain has approved a memorandum of understanding with
respect to such transaction with the other party to the transaction prior to the
time the 5 percent beneficial ownership position is acquired or (ii) the
transaction is made with a corporation of which 50 percent or more of its
outstanding voting stock is beneficially owned, directly or indirectly, by
Battle Mountain.
As permitted by the NGCL, the Battle Mountain Articles provide that no
action may be taken by stockholders without a meeting except by the unanimous
written consent of all stockholders entitled to vote on such action. Special
meetings of stockholders may be called only by a majority of the Board of
Directors, the Chairman of the Board or the President of Battle Mountain.
The Battle Mountain Articles require approval of at least 80 percent of
the total voting power of the voting stock of Battle Mountain and approval of
the holders of at least a majority of the voting power of the voting stock of
Battle Mountain exclusive of all voting stock of Battle Mountain owned by
beneficial owners of 5 percent or more of the outstanding shares of any class or
series of voting stock of Battle Mountain to effect an amendment or repeal of,
or the adoption of any provision inconsistent with, the provisions of such
articles relating to (i) the alteration, amendment or repeal of the Battle
Mountain Bylaws by stockholders, (ii) the organization and powers of the Board
of Directors and the nomination, election and removal of directors, (iii)
stockholder action without meetings and the calling of special stockholder
meetings or (iv) the affirmative vote required for approval of the transactions
described in the preceding paragraph between Battle Mountain and beneficial
owners of 5 percent or more of the outstanding shares of any class or series of
voting stock
11
of Battle Mountain. The Battle Mountain Articles also require the same
affirmative vote for the amendment or repeal of the foregoing provision.
The Battle Mountain Articles and the Battle Mountain Bylaws provide that
the Bylaws may be altered, amended or repealed by the stockholders only by the
affirmative vote of at least 80 percent of the voting power of all shares of
Battle Mountain represented at any regular meeting of stockholders (or at any
special meeting thereof duly called for that purpose) and entitled to vote
generally in the election of directors, voting together as a class.
The ability of the Board of Directors to determine the preferences,
relative rights, qualifications and restrictions of the Preferred Stock and to
issue Preferred Stock without stockholder approval could have an antitakeover
effect.
The Board of Directors has adopted a preferred stock purchase rights plan
which has an antitakeover effect. See "--Battle Mountain Preferred Stock
- --Series A Preferred Stock" for a description of the plan.
Battle Mountain's committed revolving credit facility provides that it is
an event of default thereunder if (a) any person or group acquires beneficial
ownership of 20 percent or more of the voting stock of Battle Mountain or (b)
during any period of up to 24 consecutive months, individuals who at the
beginning of such 24-month period were directors of Battle Mountain cease for
any reason to constitute a majority of the Board of Directors of Battle
Mountain. (This provision does not apply to the acquisition by Noranda of
Exchangeable Shares as provided in the Combination Agreement or the change in
composition of Battle Mountain's Board of Directors that occurred upon
consummation of the Combination Agreement.)
NEVADA CORPORATION LAW. Sections 78.378 ET SEQ. of the NGCL generally
disallow the exercise of voting rights with respect to "control shares" of an
"issuing corporation" held by an "acquiring person," unless such voting rights
are conferred by a majority vote of the disinterested stockholders. "Control
shares" are the voting shares of an issuing corporation acquired in connection
with the acquisition of a "controlling interest." "Controlling interest" is
defined in terms of threshold levels of voting share ownership, which
thresholds, whenever each may be crossed, trigger application of the voting bar
with respect to the shares newly acquired. The issue of voting rights is
presented at the next annual or special meeting of stockholders after the
acquisition in question, unless a special meeting of stockholders is requested
sooner by the acquiring person. At such meeting, the votes of an "interested
stockholder" are not counted towards the majority approval requirement under
this statute. In the event that the control shares are accorded full voting
rights (but only if the acquiring person has acquired a majority voting interest
in the issuing corporation), any stockholder, other than the acquiring person,
who has not voted in favor of authorizing voting rights for the control shares
is entitled to demand payment for the fair value of his shares. Such right of
payment may, however, be expressly withdrawn by the corporate charter or bylaws.
Any charter or bylaw amendment withdrawing such right must be adopted prior to
the 10th day following the acquisition of a controlling interest. In the event
that the control shares are not accorded full voting rights, the issuing
corporation may call for redemption of all, but not less than all, of the
control
12
shares at the average price paid for such shares, but only if the corporate
charter or bylaws expressly permit such redemption. Any charter or bylaw
amendment providing for such right of redemption must be adopted prior to the
10th day following the acquisition of a controlling interest. Battle Mountain's
bylaws were amended in connection with the consummation of the Combination
Agreement to provide that provisions of the NGCL described in this paragraph do
not apply to the acquisition by Noranda of up to 65,242,526 Exchangeable Shares
or shares of Battle Mountain Common Stock in the arrangement referred to in the
Combination Agreement (including shares of Battle Mountain Common Stock issuable
upon exchange for or redemption of such Exchangeable Shares).
Battle Mountain is subject to Sections 78.411, ET SEQ. of the NGCL, which
generally prohibit a publicly held Nevada corporation from engaging in any
"combination" with an "interested stockholder" for three years after the date
the interested stockholder became an interested stockholder unless, prior to
that date, either the combination or the purchase of shares that resulted in the
interested stockholder becoming such is approved by the board of directors of
the corporation. An "interested stockholder" is a person who, together with
affiliates and associates, is the beneficial owner (or within the previous three
years was the beneficial owner) of 10 percent or more of the voting power of the
corporation's outstanding voting shares. A "business combination" generally
includes mergers, asset sales and share issuances above threshold sizes, and
certain other transactions resulting in financial benefit to the interested
stockholder. Even after the expiration of the three-year period in which such
business combinations with an interested stockholder are prohibited, a
corporation may not engage in a business combination with an interested
stockholder unless, in addition to meeting applicable requirements of the
corporation's articles of incorporation, either (1) the combination is approved
by the affirmative vote of a majority of the outstanding voting power of the
corporation not beneficially owned by the interested stockholder (or affiliates
or associates) at a meeting called for that purpose not earlier than the end of
such three-year period or (2) certain requirements for the minimum consideration
payable to holders other than the disinterested holder are met (based on the
higher of (a) the highest price per share paid by the interested stockholder
within prescribed periods and (b) the market value per share on the date of
announcement of the transaction or the date the interested stockholder became
such (in each case plus an amount based on an interest factor net of certain
dividends) and (c) in the case of a class other than common stock, the highest
preferential amount payable upon liquidation.
DIRECTOR AND OFFICER LIABILITY PROVISIONS. The Battle Mountain Articles
eliminate the personal liability of each director and officer of Battle Mountain
to Battle Mountain or any of its stockholders for damages resulting from
breaches of fiduciary duty as a director or officer involving any act or
omission of any such director or officer occurring on or after April 28, 1987.
The Battle Mountain Articles do not limit or eliminate the liability of a
director or officer for actions or omissions involving intentional misconduct,
fraud, a knowing violation of law or payment of an unlawful dividend.
GENERAL. The summary references above regarding the Battle Mountain
Articles and the Battle Mountain Bylaws, filed as exhibits to the Registration
Statement of which this Prospectus is
13
a part, do not purport to be complete and are qualified in their entirety by
reference to the Battle Mountain Articles and the Battle Mountain Bylaws.
PLAN OF DISTRIBUTION
EXCHANGEABLE SHARES
Pursuant to the terms of a plan of arrangement (the "Plan of Arrangement")
under section 182 of the Business Corporations Act (Ontario) (the "OBCA"),
Battle Mountain Canada underwent a reorganization of capital whereby, among
other things, it issued 1.48 Exchangeable Shares in exchange for each existing
Hemlo Gold Common Share (other than Hemlo Gold Common Shares held by Battle
Mountain and by holders who properly exercised their rights of dissent and are
ultimately entitled to be paid fair value for their shares) (the "Arrangement")
at the effective time (the "Effective Time") of the combination of Hemlo Gold
and Battle Mountain (the "Combination").
Battle Mountain Common Stock may be issued to holders of Exchangeable
Shares as follows: (i) holders of Exchangeable Shares may require at any time
that such shares be exchanged for an equivalent number of shares of Battle
Mountain Common Stock (see "-- Procedures for Issuance of Battle Mountain Common
Stock -- Election by Holders to Exchange Exchangeable Shares"); (ii) Battle
Mountain, Battle Mountain Sub and Battle Mountain Canada may redeem such
Exchangeable Shares by exchanging therefor an equal number of shares of Battle
Mountain Common Stock (see "-- Procedures for Issuance of Battle Mountain Common
Stock -- Redemption of Exchangeable Shares"); and (iii) upon liquidation of
Battle Mountain or Battle Mountain Canada, holders of Exchangeable Shares may be
required to, or may elect to, exchange such Exchangeable Shares for shares of
Battle Mountain Common Stock (see "-- Procedures for Issuance of Battle Mountain
Common Stock -- Liquidation of Battle Mountain Canada" and "--Liquidation of
Battle Mountain"). No broker, dealer or underwriter has been engaged in
connection with the offering of the Battle Mountain Common Stock covered hereby.
The following is a description of certain rights, privileges, restrictions
and conditions attaching to the Exchangeable Shares that relate to the terms on
which Battle Mountain Common Stock may be issued in exchange for or redemption
of the Exchangeable Shares. Such provisions are set forth in the Exchangeable
Share provisions attached to the Plan of Arrangement (the "Exchangeable Share
Provisions"), and certain provisions of the Voting, Support and Exchange Trust
Agreement. The Plan of Arrangement and the Voting, Support and Exchange Trust
Agreement are included as exhibits to the Registration Statement of which this
Prospectus constitutes a part, and the following description is qualified in its
entirely by reference to the Plan of Arrangement and the Voting, Support and
Exchange Trust Agreement.
PROCEDURES FOR ISSUANCE OF BATTLE MOUNTAIN COMMON STOCK
ELECTION BY HOLDERS TO EXCHANGE EXCHANGEABLE SHARES. Holders of the
Exchangeable Shares are entitled at any time to retract (I.E., require Battle
Mountain Canada to redeem) any or all such
14
Exchangeable Shares owned by them and to receive an equivalent number of shares
of Battle Mountain Common Stock, plus an additional amount equivalent to all
declared and unpaid dividends on such Exchangeable Shares, subject to the rights
of Battle Mountain and Battle Mountain Sub described below. Holders of the
Exchangeable Shares may effect such retraction by presenting a certificate or
certificates to Battle Mountain Canada or its transfer agent representing the
number of Exchangeable Shares the holder desires to retract, together with a
duly executed statement (the "Retraction Request") specifying the number of
Exchangeable Shares the holder wishes to retract and such other documents as may
be required to effect the retraction of the Exchangeable Shares. The retraction
will become effective five business days after the request is received by Battle
Mountain Canada (the "Retraction Date").
Upon receipt of a Retraction Request, Battle Mountain Canada is required
to immediately notify Battle Mountain and Battle Mountain Sub of such Retraction
Request. Battle Mountain or Battle Mountain Sub will thereafter have two
business days in which to exercise its overriding right (the "Retraction Call
Right") to purchase all of the Exchangeable Shares submitted by the holder
thereof by the delivery of an equivalent number of shares of Battle Mountain
Common Stock plus an additional amount equivalent to the full amount of all
declared and unpaid dividends on the Exchangeable Shares (the "Retraction
Price") to the transfer agent for delivery to such holder on the Retraction
Date. If either Battle Mountain or Battle Mountain Sub so advises Battle
Mountain Canada within such two business day period, Battle Mountain Canada will
notify the holder as soon as possible thereafter that the Retraction Call Right
will be exercised. A holder may revoke his or her Retraction Request at any time
prior to the close of business on the business day preceding the Retraction
Date, in which case the holder's Exchangeable Shares will neither be purchased
by Battle Mountain or Battle Mountain Sub nor redeemed by Battle Mountain
Canada. In the event neither Battle Mountain nor Battle Mountain Sub determines
to exercise its Retraction Call Right and provided that the Retraction Request
is not revoked by the holder, Battle Mountain Canada is obligated to deliver to
the holder the number of shares of Battle Mountain Common Stock equal to the
number of Exchangeable Shares submitted by the holder for retraction, plus an
additional amount equivalent to the full amount of all declared and unpaid
dividends on such Exchangeable Shares. If only a part of the Exchangeable Shares
represented by any certificate is redeemed, a new certificate for the balance of
such Exchangeable Shares will be issued to the holder at Battle Mountain
Canada's expense. If, as a result of solvency provisions of applicable law,
Battle Mountain Canada is not permitted to redeem all Exchangeable Shares
tendered by a retracting holder, Battle Mountain Canada will redeem only those
Exchangeable Shares tendered by the holder (rounded down to a whole number of
shares) as would not be contrary to such provisions of applicable law.
Exchangeable Shares not redeemed by Battle Mountain Canada as a result of such
solvency provisions are subject to redemption pursuant to the optional exchange
right granted to the trustee under the Voting, Support and Exchange Trust
Agreement as described below under "-- Liquidation of Battle Mountain Canada."
The Retraction Call Right may, in general, be exercised, at the election
of Battle Mountain, by either Battle Mountain or Battle Mountain Sub, but with
respect to holders of Exchangeable Shares who acquired in the Arrangement
Exchangeable Shares that are exchangeable into more than 5 percent of the number
of shares of Battle Mountain Common Stock outstanding at the Effective
15
Time and who have properly requested that Battle Mountain enter into a tax
cooperation agreement pursuant to the Combination Agreement ("Initial 5 Percent
Holders"), may be exercised only by Battle Mountain Sub unless certain
conditions have occurred.
REDEMPTION OF EXCHANGEABLE SHARES. Subject to applicable law and the
Redemption Call Right of Battle Mountain and Battle Mountain Sub described
below, on any date on or after July 31, 2003 specified by the Battle Mountain
Canada Board of Directors or such earlier date as specified by the Battle
Mountain Canada Board of Directors if there are fewer than 5,000,000
Exchangeable Shares outstanding (other than Exchangeable Shares held by Battle
Mountain and its direct and indirect subsidiaries and subject to adjustment to
such number of shares to reflect permitted changes to Exchangeable Shares) (the
"Optional Redemption Date"), Battle Mountain Canada will redeem all of the then
outstanding Exchangeable Shares in exchange for an equal number of shares of
Battle Mountain Common Stock, plus an additional amount equivalent to the full
amount of all declared and unpaid dividends on such Exchangeable Shares (the
"Redemption Price"). Notwithstanding any proposed redemption of the Exchangeable
Shares by Battle Mountain Canada, Battle Mountain and Battle Mountain Sub will
have the overriding right (the "Redemption Call Right") to purchase on the
Optional Redemption Date all of the outstanding Exchangeable Shares (other than
Exchangeable Shares held by Battle Mountain, Battle Mountain Sub or Canada
Holdco) in exchange for the Redemption Price and, upon the exercise of the
Redemption Call Right, each holder thereof will be obligated to sell such shares
to Battle Mountain or Battle Mountain Sub, as applicable. If Battle Mountain
and/or Battle Mountain Sub exercises the Redemption Call Right, Battle Mountain
Canada's right to redeem the Exchangeable Shares on such Optional Redemption
Date will terminate.
Battle Mountain Canada will, at least 120 days before the Optional
Redemption Date, provide the registered holders of Exchangeable Shares with
written notice of the proposed redemption of the Exchangeable Shares by Battle
Mountain Canada. On or after the date such proposed redemption is exercised,
upon the holder's presentation and surrender of the certificates representing
the Exchangeable Shares and such other documents as may be required at the
office of the transfer agent or the registered office of Battle Mountain Canada,
Battle Mountain Canada will deliver the Redemption Price to the holder at the
address of the holder recorded in the securities register or by holding the
Redemption Price for pick up by the holder at the registered office of Battle
Mountain Canada or the office of the transfer agent as specified in the written
notice.
The Redemption Call Right may, in general, be exercised with respect to
each holder of Exchangeable Shares, at the election of Battle Mountain, by
either Battle Mountain or Battle Mountain Sub, but with respect to an Initial 5
Percent Holder, may be exercised only by Battle Mountain Sub unless certain
conditions have occurred. If the Redemption Call Right is exercised, Battle
Mountain Canada may elect to redeem all then outstanding Exchangeable Shares on
a subsequent Optional Redemption Date.
LIQUIDATION OF BATTLE MOUNTAIN CANADA. In the event of the liquidation,
dissolution or winding up of Battle Mountain Canada or any other proposed
distribution of the assets of Battle Mountain Canada among its shareholders for
the purpose of winding up its affairs, holders of the
16
Exchangeable Shares will be entitled to receive from Battle Mountain Canada one
share of Battle Mountain Common Stock for each Exchangeable Share they hold,
plus an additional amount equivalent to the full amount of all declared and
unpaid dividends on each such Exchangeable Share (the "Liquidation Amount").
Upon the occurrence of such liquidation, dissolution or winding up, Battle
Mountain and Battle Mountain Sub will have the right (the "Liquidation Call
Right") to purchase all of the outstanding Exchangeable Shares (other than
Exchangeable Shares held by Battle Mountain, Battle Mountain Sub or Canada
Holdco) from the holders thereof on the effective date of such liquidation,
dissolution or winding up (the "Liquidation Date") in exchange for the
Liquidation Amount and, upon the exercise of the Liquidation Call Right, each
holder thereof will be obligated to sell such shares to Battle Mountain or
Battle Mountain Sub, as applicable. Upon the occurrence of a Battle Mountain
Canada Insolvency Event, the trustee under the Voting, Support and Exchange
Trust Agreement will have the right to require Battle Mountain to purchase any
or all of the Exchangeable Shares then outstanding (other than Exchangeable
Shares held by Battle Mountain and certain of its subsidiaries) for the
Liquidation Amount. A "Battle Mountain Canada Insolvency Event" is the
institution by Battle Mountain Canada of any proceeding to be adjudicated a
bankrupt or insolvent or to be dissolved or wound up, or the consent of Battle
Mountain Canada to the institution of bankruptcy, insolvency, dissolution or
winding-up proceedings against it, or the filing of a petition, answer or
consent seeking dissolution or winding up under any bankruptcy, insolvency or
analogous laws, including without limitation the Companies Creditors'
Arrangement Act (Canada) and the Bankruptcy and Insolvency Act (Canada), and the
failure by Battle Mountain Canada to contest in good faith any such proceedings
commenced in respect of Battle Mountain Canada within 15 days of becoming aware
thereof, or the consent by Battle Mountain Canada to the filing of any such
petition or to the appointment of a receiver, or the making by Battle Mountain
Canada of a general assignment for the benefit of creditors, or the admission in
writing by Battle Mountain Canada of its inability to pay its debts generally as
they become due, or Battle Mountain Canada not being permitted, pursuant to
solvency requirements of applicable law, to redeem any Exchangeable Shares
pursuant to the Exchangeable Share Provisions.
On or after the Liquidation Date, a holder of Exchangeable Shares may
surrender certificates representing such Exchangeable Shares, together with such
other documents as may be required, to Battle Mountain Canada's registered
office or the office of the transfer agent. Upon receipt of the certificates and
other documents and subject to the exercise by Battle Mountain and Battle
Mountain Sub of the Liquidation Call Right, Battle Mountain Canada will deliver
the Liquidation Amount to such holder at the address recorded in the securities
register or by holding the Liquidation Amount for pick up by the holder at
Battle Mountain Canada's registered office or the office of the transfer agent,
as specified by Battle Mountain Canada in a notice to such holders.
The Liquidation Call Right may, in general, be exercised with respect to
each holder of Exchangeable Shares, at the election of Battle Mountain, by
either Battle Mountain or Battle Mountain Sub, but with respect to an Initial 5
Percent Holder, may be exercised only by Battle Mountain Sub unless certain
conditions have occurred.
LIQUIDATION OF BATTLE MOUNTAIN. Upon the occurrence of a Battle Mountain
Liquidation Event, in order for the holders of the Exchangeable Shares to
participate on a pro rata basis with the
17
holders of Battle Mountain Common Stock, Battle Mountain will purchase each
outstanding Exchangeable Share (other than Exchangeable Shares held by Battle
Mountain, Battle Mountain Sub or Canada Holdco), and holders of such
Exchangeable Shares will be required to sell the Exchangeable Shares held by
them at that time, in exchange for the Liquidation Amount on the fifth business
day prior to the effective date of the liquidation, dissolution or winding up
contemplated by a Battle Mountain Liquidation Event. A "Battle Mountain
Liquidation Event" means (i) any determination by Battle Mountain's Board of
Directors to institute voluntary liquidation, dissolution or winding-up
proceedings with respect to Battle Mountain or to effect any other distribution
of assets of Battle Mountain among its stockholders for the purpose of winding
up its affairs or (ii) receipt by Battle Mountain of notice of, or Battle
Mountain otherwise becoming aware of, any threatened or instituted claim, suit,
petition or other proceeding with respect to the involuntary liquidation,
dissolution or winding up of Battle Mountain or to effect any other distribution
of assets of Battle Mountain among its stockholders for the purpose of winding
up its affairs.
Upon a holder's request and surrender of Exchangeable Share certificates,
duly endorsed in blank and accompanied by such instruments of transfer as Battle
Mountain may reasonably require, Battle Mountain will deliver to such holder
certificates representing an equivalent number of shares of Battle Mountain
Common Stock plus a check in the amount equivalent to the full amount of all
declared and unpaid dividends on the Exchangeable Shares.
TAX CONSIDERATIONS
CANADIAN FEDERAL INCOME TAX CONSIDERATIONS
In the opinion of McCarthy Tetrault, who acted as counsel for Hemlo Gold
in connection with the Arrangement, the following is a summary of the principal
Canadian federal income tax considerations under the Canadian Tax Act generally
applicable to Battle Mountain Canada shareholders who, for purposes of the
Canadian Tax Act, hold their Exchangeable Shares and Battle Mountain Common
Stock as capital property and deal at arm's length with Battle Mountain Canada,
Battle Mountain and Battle Mountain Sub. This summary does not apply to a
shareholder with respect to whom Battle Mountain or Battle Mountain Sub is or
will be a foreign affiliate within the meaning of the Canadian Tax Act or who
holds more than 10 percent of the Exchangeable Shares.
The Exchangeable Shares will generally be considered to be capital
property to a shareholder unless held in the course of carrying on a business,
in an adventure in the nature of trade or as "mark-to-market" property for
purposes of the Canadian Tax Act. Shareholders who are resident in Canada and
whose Exchangeable Shares might not otherwise qualify as capital property may be
entitled to obtain such qualification by making the irrevocable election
provided by subsection 39(4) of the Canadian Tax Act. Shareholders who do not
hold their Exchangeable Shares as capital property should consult their own tax
advisors regarding their particular circumstances and, in the case of certain
"financial institutions" (as defined in the Canadian Tax Act), the potential
application to them of the special "mark-to-market" rules in the Canadian Tax
Act, as the following discussion does not apply to such shareholders.
18
This summary is based on the Canadian Tax Act, the regulations thereunder,
the CanadaUnited States Income Tax Convention (the "Tax Treaty") and counsel's
understanding of the administrative practices published by Revenue Canada,
Customs, Excise and Taxation ("Revenue Canada"), all in effect as of the date of
this Prospectus. This summary takes into account specific proposals to amend the
Canadian Tax Act and regulations announced prior to the date hereof (the "Tax
Proposals"), although no assurances can be given that the Tax Proposals will be
enacted in the form presented, or at all. This summary does not take into
account or anticipate any other changes in law, whether by judicial,
governmental or legislative action or decision, nor does it take into account
provincial, territorial or foreign income tax legislation or considerations,
which may differ from the Canadian federal income tax considerations described
herein. No advance income tax ruling has been obtained from Revenue Canada to
confirm the tax consequences of any of the transactions described herein.
THIS SUMMARY IS OF A GENERAL NATURE ONLY AND IS NOT INTENDED TO BE, AND
SHOULD NOT BE CONSTRUED TO BE, LEGAL, BUSINESS OR TAX ADVICE TO ANY PARTICULAR
BATTLE MOUNTAIN CANADA SHAREHOLDER. SHAREHOLDERS SHOULD CONSULT THEIR OWN TAX
ADVISORS AS TO THE TAX CONSEQUENCES OF THE TRANSACTIONS IN THEIR PARTICULAR
CIRCUMSTANCES.
In computing a shareholder's liability for tax under the Canadian Tax Act,
(i) any cash amount received by the shareholder in U.S. dollars must be
converted into the product obtained by multiplying the U.S. dollar amount by the
noon spot exchange rate on such date for U.S. dollars expressed in Canadian
dollars as reported by the Bank of Canada and (ii) the amount of any non-cash
consideration received by the shareholder must be expressed in Canadian dollars,
generally determined at the time such consideration is received.
SHAREHOLDERS RESIDENT IN CANADA
The following portion of the summary is applicable to Battle Mountain
Canada shareholders who, for purposes of the Canadian Tax Act, are resident or
deemed to be resident in Canada.
REDEMPTION OF EXCHANGEABLE SHARES
On the redemption (including a retraction) of an Exchangeable Share by
Battle Mountain Canada, the holder of an Exchangeable Share will be deemed to
have received a dividend equal to the amount, if any, by which the redemption
proceeds (the fair market value at that time of Battle Mountain Common Stock
received by the shareholder from Battle Mountain Canada on the redemption plus
the amount of any accrued but unpaid dividends on the Exchangeable Share) exceed
the paid-up capital (for purposes of the Canadian Tax Act) at that time of the
Exchangeable Share so redeemed. The amount of any such deemed dividend will be
subject to the tax treatment described below under "--Deemed Dividends on
Exchangeable Shares." On the redemption, the holder of an Exchangeable Share
will also be considered to have disposed of the Exchangeable Share for proceeds
of disposition equal to the redemption proceeds less the amount of such deemed
dividend. A holder will in general realize a capital loss (or a capital gain)
equal to the amount by
19
which the adjusted cost base to the holder of the Exchangeable Share exceeds (or
is less than) such proceeds of disposition. See "--Taxation of Capital Gain or
Capital Loss" below. In the case of a shareholder that is a corporation, in some
circumstances the amount of any such deemed dividend may be treated as proceeds
of disposition and not as a dividend.
DEEMED DIVIDENDS ON EXCHANGEABLE SHARES
In the case of a shareholder who is an individual, dividends deemed to be
received on the Exchangeable Shares will be included in computing the
shareholder's income and will be subject to the gross-up and dividend tax credit
rules normally applicable to taxable dividends received from taxable Canadian
corporations.
Subject to the discussion below as to the denial of the dividend
deduction, in the case of a shareholder that is a corporation, other than a
"specified financial institution" as defined in the Canadian Tax Act, dividends
deemed to be received on the Exchangeable Shares will be included in computing
its income and will normally be deductible in computing its taxable income. A
corporation is a specified financial institution for purposes of the Canadian
Tax Act if it is a bank, a trust company, a credit union, an insurance
corporation or a corporation whose principal business is the lending of money to
persons with whom the corporation is dealing at arm's length or the purchasing
of debt obligations issued by such persons or a combination thereof, and
corporations controlled by or related to such entities.
In the case of a shareholder that is a specified financial institution,
such a deemed dividend will be deductible in computing its taxable income only
if either:
(i) the specified financial institution did not acquire the Exchangeable
Shares in the ordinary course of the business carried on by such
institution; or
(ii) at the time of the receipt of the deemed dividend by the specified
financial institution, the Exchangeable Shares are listed on a prescribed
stock exchange in Canada (which currently includes the TSE) and the
specified financial institution, either alone or together with persons
with whom it does not deal at arm's length, does not receive (or is not
deemed to receive) dividends in respect of more than 10 percent of the
issued and outstanding Exchangeable Shares.
A shareholder that is a "private corporation" (as defined in the Canadian
Tax Act) or any other corporation resident in Canada and controlled or deemed to
be controlled by or for the benefit of an individual or a related group of
individuals may be liable under Part IV of the Canadian Tax Act to pay a
refundable tax of 331/3 percent on dividends deemed to be received on the
Exchangeable Shares to the extent that such deemed dividends are deductible in
computing the shareholder's taxable income.
If Battle Mountain, Battle Mountain Sub or any other person with whom
Battle Mountain does not deal at arm's length is a specified financial
institution at the time of redemption, then,
20
subject to the exemption described below, dividends received or deemed to be
received by a shareholder that is a corporation will not be deductible in
computing taxable income but will be fully includable in taxable income under
Part I of the Canadian Tax Act. A shareholder that is a "Canadian-controlled
private corporation" (as defined in the Canadian Tax Act) may be liable to pay
an additional refundable tax of 62/3 percent on deemed dividends that are not
deductible in computing taxable income. As set forth and qualified in the
Combination Agreement, Battle Mountain has represented that neither it nor any
person with whom it does not deal at arm's length is a specified financial
institution. Battle Mountain intends to endeavor to avoid such status in the
future, although there can be no assurances that this status will not change
prior to any deemed receipt of any dividend by a corporate shareholder.
This denial of the dividend deduction for a corporate shareholder will not
in any event apply if, at the time of redemption, the Exchangeable Shares are
listed on a prescribed stock exchange (which currently includes the TSE), Battle
Mountain controls Battle Mountain Canada, and the recipient (together with
persons with whom the recipient does not deal at arm's length or any partnership
or trust of which the recipient or person is a member or beneficiary,
respectively) does not receive dividends on more than 10 percent of the issued
and outstanding Exchangeable Shares.
The Exchangeable Shares will be "taxable preferred shares" and "short-term
preferred shares" for purposes of the Canadian Tax Act. Accordingly, Battle
Mountain Canada will be subject to a 662/3 percent tax under Part VI.1 of the
Canadian Tax Act on dividends deemed to be paid on the Exchangeable Shares and
will be entitled to deduct 9/4 of the tax payable in computing its taxable
income under Part I of the Canadian Tax Act.
EXCHANGE OF EXCHANGEABLE SHARES
On the exchange of an Exchangeable Share by the holder thereof with Battle
Mountain or Battle Mountain Sub for Battle Mountain Common Stock, the holder
will in general realize a capital gain (or a capital loss) equal to the amount
by which the proceeds of disposition of the Exchangeable Share, net any
reasonable costs of disposition, exceed (or are less than) the adjusted cost
base to the holder of the Exchangeable Share. For these purposes, the proceeds
of disposition will be the fair market value of Battle Mountain Common Stock at
the time of the exchange plus the amount of any accrued but unpaid dividends on
the Exchangeable Share received by the holder as part of the exchange
consideration. See "--Taxation of Capital Gain or Capital Loss" below.
TAXATION OF CAPITAL GAIN OR CAPITAL LOSS
Three-quarters of any capital gain (the "taxable capital gain") realized
on a retraction, redemption or exchange of Exchangeable Shares or disposition of
Battle Mountain Common Stock will be included in the shareholder's income for
the year of disposition. Three-quarters of any capital loss so realized (the
"allowable capital loss") may be deducted by the holder against taxable capital
gains for the year of disposition. Any excess of allowable capital losses over
taxable capital gains of the shareholder for the year of disposition may be
carried back up to three taxation years or forward indefinitely and deducted
against net taxable capital gains in those other years.
21
Capital gains realized by an individual or trust, other than certain
specified trusts, may give rise to alternative minimum tax under the Canadian
Tax Act. A shareholder that is a Canadiancontrolled private corporation may be
liable to pay an additional refundable tax of 62/3 percent on taxable capital
gains.
If the holder of an Exchangeable Share is a corporation, the amount of any
capital loss arising from a disposition or deemed disposition of an Exchangeable
Share may be reduced by the amount of dividends received or deemed to have been
received by it on such share or on the Hemlo Gold Common Shares previously owned
by such holder, to the extent and under circumstances prescribed by the Canadian
Tax Act. Similar rules may apply where a corporation is a member of a
partnership or a beneficiary of a trust that owns Exchangeable Shares or where a
trust or partnership of which a corporation is a beneficiary or a member is a
member of a partnership or a beneficiary of a trust that owns Exchangeable
Shares.
HOLDING AND DISPOSING OF BATTLE MOUNTAIN COMMON STOCK
The cost of Battle Mountain Common Stock received on the retraction,
redemption or exchange of an Exchangeable Share will be equal to the fair market
value of Battle Mountain Common Stock at the time of such event.
Dividends on Battle Mountain Common Stock will be included in the
recipient's income for the purposes of the Canadian Tax Act. Such dividends
received by an individual shareholder will not be subject to the gross-up and
dividend tax credit rules in the Canadian Tax Act. A corporation that is a
shareholder will include such dividends in computing its income and generally
will not be entitled to deduct the amount of such dividends in computing its
taxable income. A shareholder that is a Canadian-controlled private corporation
may be liable to pay an additional refundable tax of 62/3 percent on dividends.
United States non-resident withholding tax on such dividends will be eligible
for foreign tax credit or deduction treatment where applicable under the
Canadian Tax Act.
A disposition or deemed disposition of Battle Mountain Common Stock by a
holder will generally result in a capital gain (or capital loss) equal to the
amount by which the proceeds of disposition, net of any reasonable costs of
disposition, exceed (or are less than) the adjusted cost base to the holder of
Battle Mountain Common Stock. See "--Taxation of Capital Gain or Capital Loss"
above.
ELIGIBILITY FOR INVESTMENT
Battle Mountain Common Stock will be foreign property under the Canadian
Tax Act for trusts governed by registered pension plans, registered retirement
savings plans, registered retirement income funds and deferred profit sharing
plans or for certain other tax-exempt persons.
Battle Mountain Common Stock will be a qualified investment under the
Canadian Tax Act for trusts governed by registered retirement savings plans,
registered retirement income funds and
22
deferred profit sharing plans provided such shares remain listed on the NYSE (or
are listed on another prescribed stock exchange).
FOREIGN PROPERTY INFORMATION REPORTING
A holder of Battle Mountain Common Stock who is a "specified Canadian
entity" (as defined in the Tax Proposals) and whose cost amount for such shares
at any time in a year or fiscal period exceeds Canadian $100,000 will be
required to file an information return in respect of such shares disclosing the
holder's cost amount, any dividends received in the year and any gains or losses
realized in the year in respect of such shares. A specified Canadian entity
means a taxpayer resident in Canada in the year, other than a corporation or a
trust exempt from tax under Part I of the Canadian Tax Act, a non-resident-owned
investment corporation, a mutual fund corporation, a mutual fund trust and
certain other trusts and partnerships.
SHAREHOLDERS NOT RESIDENT IN CANADA
The following portion of the summary is applicable to holders of
Exchangeable Shares who, for purposes of the Canadian Tax Act, have not been and
will not be resident or deemed to be resident in Canada at any time while they
have held Hemlo Gold Common Shares or hold Exchangeable Shares or Battle
Mountain Common Stock and to whom such shares are not "taxable Canadian
property" (as defined in the Canadian Tax Act) and who do not use or hold and
are not deemed to use or hold such shares in connection with carrying on a
business in Canada.
Generally, such shares will not be taxable Canadian property provided that
such shares are listed on a prescribed stock exchange (which currently include
the TSE and the NYSE), the holder does not use or hold, and is not deemed to use
or hold, such shares, in connection with carrying on a business in Canada and
the holder, alone or together with persons with whom such holder does not deal
at arm's length, has not owned (or had under option) 25 percent or more of the
issued shares of any class or series of the capital stock of Battle Mountain
Canada or Battle Mountain at any time within five years preceding the date of
disposition and, in the case of Battle Mountain, certain other conditions are
met. The Exchangeable Shares have been accepted for listing on the TSE, subject
to the satisfaction of the requirements of the TSE, and Battle Mountain has
indicated that it intends to use its best efforts to cause Battle Mountain
Canada to maintain such listing. Battle Mountain has indicated that it will
maintain the listing of Battle Mountain Common Stock on the NYSE or another
prescribed stock exchange.
A holder of Exchangeable Shares will not be subject to tax under the
Canadian Tax Act on the exchange of an Exchangeable Share for Battle Mountain
Common Stock (except to the extent the exchange results in a redemption of an
Exchangeable Share) or on the sale or other disposition of Battle Mountain
Common Stock. A holder whose Exchangeable Shares are redeemed (either under
Battle Mountain Canada's redemption right or pursuant to the holder's retraction
rights) will be deemed to receive a dividend as described above for shareholders
resident in Canada under "--Redemption of Exchangeable Shares." The amount of
such deemed dividend will be subject to non-resident withholding tax under the
Canadian Tax Act at the rate of 25 percent, although such
23
rate may be reduced under the provisions of an applicable income tax treaty.
Under the Tax Treaty, the rate is generally reduced to 15 percent in respect of
dividends paid to a person who is the beneficial owner and who is resident in
the United States for purposes of the Tax Treaty.
UNITED STATES FEDERAL TAX CONSIDERATIONS
The following summary of the principal United States federal income tax
considerations generally applicable to a United States Holder (as defined below)
of Exchangeable Shares arising from and relating to the receipt and ownership of
Battle Mountain Common Stock, represents the opinion of Fried, Frank, Harris,
Shriver & Jacobson (a partnership including professional corporations), who
acted as United States counsel to Hemlo Gold in connection with the Arrangement,
insofar as it relates to matters of United States federal income tax law and
legal conclusions with respect thereto.
As used herein, a United States Holder includes a holder of Exchangeable
Shares who is a citizen or individual resident of the United States, a
corporation or partnership created or organized in or under the laws of the
United States, or of any political subdivision thereof, or an estate or trust
the income of which is includible in its gross income for United States federal
income tax purposes without regard to its source, but excludes persons subject
to special provisions of United States federal income tax law, such as
tax-exempt organizations, financial institutions, insurance companies,
broker-dealers, persons having a "functional currency" other than the United
States dollar, holders who hold Exchangeable Shares as part of a straddle, wash
sale, hedging or conversion transaction (other than by virtue of their
participation in an exchange of Exchangeable Shares for Battle Mountain Common
Stock as contemplated herein) and holders who acquired their Exchangeable Shares
through the exercise of employee stock options or otherwise as compensation for
services. This summary is limited to United States Holders who hold Exchangeable
Shares as capital assets.
This summary is based on United States federal income tax law in effect as
of the date of this Prospectus. No statutory, judicial or administrative
authority exists which directly addresses certain of the United States federal
income tax consequences of the ownership of instruments comparable to the
Exchangeable Shares. Consequently, some aspects of the United States federal
income tax treatment of the exchange of Exchangeable Shares for shares of Battle
Mountain Common Stock are not certain. No advance income tax ruling has been
sought or obtained from the United States Internal Revenue Service (the "IRS")
regarding the tax consequences of the transactions described herein.
This summary does not address aspects of United States taxation other than
United States federal income taxation under the United States Internal Revenue
Code of 1986, as amended (the "U.S. Code"), nor does it address all aspects of
United States federal income taxation that may be applicable to a particular
United States Holder in light of the United States Holder's particular
circumstances. In addition, this summary does not address the United States
state or local tax consequences or the foreign tax consequences of the receipt
and ownership of Battle Mountain Common Stock.
24
UNITED STATES HOLDERS ARE URGED TO CONSULT THEIR TAX ADVISORS WITH RESPECT
TO THE UNITED STATES FEDERAL, STATE AND LOCAL TAX CONSEQUENCES AND THE FOREIGN
TAX CONSEQUENCES OF THE RECEIPT AND OWNERSHIP OF BATTLE MOUNTAIN COMMON STOCK.
EXCHANGE OF EXCHANGEABLE SHARES. A United States Holder that exercises
such holder's right to exchange its Exchangeable Shares for shares of Battle
Mountain Common Stock will generally, subject to the discussion below, recognize
gain or loss on such exchange. Such gain or loss will be equal to the difference
between the fair market value of the shares of Battle Mountain Common Stock at
the time of the exchange and the United States Holder's tax basis in the
Exchangeable Shares surrendered. The gain or loss will generally be capital gain
or loss, except that, with respect to any declared but unpaid dividends on the
Exchangeable Shares, ordinary income may be recognized. Capital gain or loss
will generally be long-term capital gain or loss if a United States Holder's
holding period for its Exchangeable Shares is longer than one year at the time
of the exchange. A United States Holder will generally, subject to the
discussion below, have a tax basis in the shares of Battle Mountain Common Stock
received equal to the fair market value of such shares at the time of the
exchange. The holding period for such shares will generally, subject to the
discussion below, begin on the day after the exchange. The IRS could assert,
however, that the Exchangeable Shares and certain of the rights associated
therewith constitute "offsetting positions" for purposes of the straddle rules
set forth in Section 1092 of the U.S. Code. In such case, the holding period of
the Exchangeable Shares would not increase while held by a United States Holder.
It is possible, however, that a United States Holder who holds
Exchangeable Shares not acquired in the Arrangement would not be permitted to
recognize loss on an exchange of such Exchangeable Shares for Battle Mountain
Common Stock. In that case, a United States Holder will have a tax basis in the
shares of Battle Mountain Common Stock received equal to the tax basis of the
Exchangeable Shares exchanged therefor and the United States Holder's holding
period for the Battle Mountain Common Stock received will include the United
States Holder's holding period in the Exchangeable Shares exchanged therefor.
Further, under certain limited circumstances, an exchange by a United States
Holder of Exchangeable Shares for shares of Battle Mountain Common Stock may, in
any event, be characterized as a tax-free exchange. Whether an exchange would be
tax-free will depend upon the facts and circumstances existing at the time of
the exchange and cannot be accurately predicted at the date of this Prospectus.
For United States federal income tax purposes, gain realized on the
exchange of Exchangeable Shares for shares of Battle Mountain Common Stock
generally will be treated as United States source gain, except that, under the
terms of the Tax Treaty, such gain may be treated as sourced in Canada. Any
Canadian tax imposed on the exchange may be available as a credit against United
States federal income taxes, subject to applicable limitations. A United States
Holder that is ineligible for a foreign tax credit with respect to any Canadian
tax paid may be entitled to a deduction therefor in computing United States
taxable income.
PASSIVE FOREIGN INVESTMENT COMPANY CONSIDERATIONS. For United States
federal income tax purposes, Battle Mountain Canada generally will be classified
as a passive foreign investment
25
company (a "PFIC") for any taxable year ending prior to consummation of the
Arrangement during which either (i) 75 percent or more of its gross income was
passive income (as defined for United States federal income tax purposes) or
(ii) on average for such taxable year, 50 percent or more of its assets (by
value) produced or were held for the production of passive income. For purposes
of applying the foregoing tests, the assets and gross income of Battle Mountain
Canada's significant subsidiaries will be attributed to Battle Mountain Canada.
While there can be no assurance with respect to the classification of
Battle Mountain Canada as a PFIC, Battle Mountain Canada believes that it did
not constitute a PFIC during its taxable years ending prior to consummation of
the Arrangement. Currently, Battle Mountain Canada and Battle Mountain intend to
endeavor to cause Battle Mountain Canada to avoid PFIC status in the future,
although there can be no assurance that they will be able to do so or that their
intent will not change. Moreover, in connection with the transactions
contemplated herein, no opinion will be rendered regarding Battle Mountain
Canada's status as a PFIC.
For purposes of applying the 50 percent asset test following the
Arrangement, Battle Mountain Canada's assets must be measured by their adjusted
tax bases (as calculated in order to compute earnings and profits for United
States federal income tax purposes) instead of by value, subject to certain
adjustments. As a result, it is possible that Battle Mountain Canada could be a
PFIC for taxable years ending after the Arrangement even though less than 50
percent of Battle Mountain Canada's assets (measured by the fair market value of
such assets) do not constitute passive assets. After the Arrangement, Battle
Mountain Canada will endeavor to notify United States Holders of Exchangeable
Shares if it believes that Battle Mountain Canada was a PFIC for that taxable
year.
If Battle Mountain Canada is a PFIC during a United States Holder's
holding period for such holder's Exchangeable Shares, and the United States
Holder has not made an election to treat Hemlo Gold as a qualified electing fund
(a "QEF Election") with respect to all taxable years included in the United
States Holder's holding period in which Battle Mountain Canada was a PFIC, then
(i) the United States Holder would be required to allocate gain recognized upon
the exchange of Exchangeable Shares for shares of Battle Mountain Common Stock
ratably over the United States Holder's holding period for such Exchangeable
Shares, (ii) the amount allocated to each year other than (x) the year of the
disposition of the Exchangeable Shares or (y) any year prior to the beginning of
the first taxable year of Battle Mountain Canada for which it was a PFIC, would
be subject to tax at the highest rate applicable to individuals or corporations,
as the case may be, for the taxable year to which such income is allocated, and
an interest charge would be imposed upon the resulting tax attributable to each
such year, and (iii) gain recognized upon the disposition of the Exchangeable
Shares would be taxable as ordinary income.
If a United States Holder has made a QEF Election with respect to all
taxable years included in the United States Holder's holding period in which
Battle Mountain Canada was a PFIC, the United States Holder would recognize gain
or loss on the disposition of Exchangeable Shares without regard to the PFIC
rules. United States Holders should consult their tax advisors concerning
26
the merits and mechanics of making a QEF Election and other relevant
considerations if Battle Mountain Canada is a PFIC for any taxable year.
The foregoing summary of the possible application of the PFIC rules to
Battle Mountain Canada and the United States Holders of Exchangeable Shares is
only a summary of certain material aspects of those rules. Because the United
States federal income tax consequences to United States Holders under the PFIC
provisions are significant and complex, United States Holders are urged to
discuss those consequences with their tax advisors.
SHAREHOLDERS NOT RESIDENT IN OR CITIZENS OF THE UNITED STATES. The
following summary is applicable to a non-United States Holder who acquires
Battle Mountain Common Stock in exchange for Exchangeable Shares. As used
herein, a non-United States Holder is a holder of Exchangeable Shares or of
Battle Mountain Common Stock acquired in exchange for Exchangeable Shares who,
for United States federal income tax purposes, is a non-resident alien
individual, a foreign corporation, a foreign partnership or a foreign estate or
trust, but excludes persons subject to special provisions of United States
federal income tax law, such as tax-exempt organizations, financial
institutions, insurance companies, broker-dealers, holders who hold Exchangeable
Shares as part of a straddle, wash sale, hedging or conversion transaction
(other than by virtue of their participation in an exchange of Exchangeable
Shares for Battle Mountain Common Stock as contemplated herein) and holders who
acquired their Exchangeable Shares through the exercise of employee stock
options or otherwise as compensation for services. A non-United States Holder
seeking benefits under an applicable tax treaty or an exemption from United
States withholding tax for "effectively connected" income, as described below,
may be required to comply with additional certification and other requirements
in order to establish the holder's entitlement to such benefits or exemption.
This summary is limited to non-United States Holders who hold Exchangeable
Shares as capital assets and who will hold Battle Mountain Common Stock as a
capital asset. Moreover, insofar as concerns ownership by a non-United States
Holder of Exchangeable Shares, this discussion is limited to the exchange by
such holder of Exchangeable Shares for Battle Mountain Common Stock and does not
otherwise address U.S. federal tax consequences of the ownership and disposition
of Exchangeable Shares.
An individual may, subject to certain exceptions, be deemed to be a
resident alien (as opposed to a non-resident alien) by virtue of being present
in the United States for at least 31 days in the calendar year and for an
aggregate of at least 183 days during a three-year period ending in the current
calendar year (counting for such purposes all of the days present in the current
year, one-third of the days present in the immediately preceding year, and
one-sixth of the days present in the second preceding year). Resident aliens are
subject to tax as if they were U.S. citizens.
This discussion does not consider specific facts and circumstances that
may be relevant to a particular non-United States Holder's tax position,
including whether such non-United States Holder is a United States expatriate.
Dividends received by a Non-United States Holder with respect to Battle
Mountain Common Stock that are not effectively connected with the conduct by
such holder of a trade or business in the
27
United States will generally be subject to United States withholding tax at a
rate of 30 percent, which rate may be reduced by an applicable income tax treaty
in effect between the United States and the non-United States Holder's country
of residence (currently 15 percent, generally, on dividends paid to residents of
Canada under the Tax Treaty).
Subject to the discussion below, a non-United States Holder generally will
not be subject to United States federal income tax on gain (if any) recognized
on the exchange of the Exchangeable Shares for Battle Mountain Common Stock or
on the sale or exchange of shares of Battle Mountain Common Stock, unless (i)
such gain is effectively connected with a trade or business of the nonUnited
States Holder in the United States, or, if a tax treaty applies, is attributable
to a permanent establishment maintained by the non-United States Holder in the
United States, or (ii) the nonUnited States Holder is an individual who holds
the Exchangeable Shares or the Battle Mountain Common Stock, as the case may be,
as capital assets and is present in the United States for 183 days or more in
the taxable year of disposition, and certain other conditions are satisfied.
Notwithstanding the general rule set forth in the preceding paragraph,
under the Foreign Investment in Real Property Tax Act of 1980 ("FIRPTA"), gain
or loss recognized by a non-United States Holder on the exchange of Exchangeable
Shares for Battle Mountain Common Stock or on the sale or exchange of shares of
Battle Mountain Common Stock will be subject to regular United States federal
income tax, as if such gain or loss were effectively connected with a U.S. trade
or business, if (a) Battle Mountain is a "U.S. real property holding
corporation" ("USRPHC") (as defined below) and (b) such non-United States Holder
is a "greater than 5 percent shareholder" (as defined below) of Battle Mountain
Canada or Battle Mountain, as the case may be.
Battle Mountain will be a USRPHC with respect to any greater than 5
percent shareholder if at any time during the shorter of (x) the five-year
period ending on the date of the sale or exchange of Exchangeable Shares for
Battle Mountain Common Stock or the sale or exchange of Battle Mountain Common
Stock (as the case may be) or (y) the period during which such greater than 5
percent shareholder held such Exchangeable Shares or Battle Mountain Common
Stock (as the case may be) (such period the "FIRPTA holding period"), the fair
market value of Battle Mountain's interests in United States real property
equaled or exceeded 50 percent of the sum of the fair market values of all of
its interests in real property and all of its other assets used or held for use
in a trade or business (as defined in applicable regulations). Battle Mountain
has represented in the Combination Agreement that it is not presently a USRPHC.
Moreover, Battle Mountain considers it unlikely that Battle Mountain will become
a USRPHC in the future unless its interests in United States real property
increase significantly as a result of one or more acquisitions, but there can be
no assurance that Battle Mountain will not in any event become a USRPHC in the
future.
The definition of a "greater than 5 percent shareholder" is complex and
subject to some uncertainty. In the case of a non-United States Holder who owns
only Battle Mountain Common Stock (actually and constructively), such non-United
States Holder will be a greater than 5 percent shareholder if such non-United
States Holder holds more than 5 percent of the total fair market value of the
Battle Mountain Common Stock outstanding (on a non-diluted basis). In the case
of a nonUnited States Holder who owns only Exchangeable Shares (actually and
constructively, other than
28
Battle Mountain Common Stock constructively owned by reason of ownership of
Exchangeable Shares), such non-United States Holder will be a greater than 5
percent shareholder if either (a) such non-United States Holder holds more than
5 percent of the total fair market value of the Exchangeable Shares outstanding
and the Exchangeable Shares are treated as "regularly traded on an established
securities market" or (b) such non-United States Holder holds Exchangeable
Shares with a fair market value on the relevant date of determination greater
than 5 percent of the total fair market value of the Battle Mountain Common
Stock outstanding (on a non-diluted basis) on such date and the Exchangeable
Shares are not treated as "regularly traded on an established securities
market." The Exchangeable Shares will be traded on the TSE which should be
considered an "established securities market" for this purpose. The Exchangeable
Shares will be treated as regularly traded on that market if they are registered
by Battle Mountain under Section 12 of the Exchange Act or Battle Mountain makes
certain filings with the IRS, and certain other conditions are met. Battle
Mountain intends to register the Exchangeable Shares under Section 12 of the
Exchange Act. Notwithstanding the foregoing, the Exchangeable Shares will not be
considered regularly traded on the TSE during any calendar quarter in which 100
or fewer persons own 50 percent or more of the Exchangeable Shares. If a
non-United States Holder which is a greater than 5 percent shareholder during a
period in which Battle Mountain is a USRPHC subsequently disposes of sufficient
Exchangeable Shares or Battle Mountain Common Stock so that such non-United
States Holder is no longer a greater than 5 percent shareholder, such non-United
States Holder will still be subject to United States federal income tax on
subsequent dispositions until Battle Mountain has ceased to be a USRPHC for at
least five years. If at any time, Battle Mountain Common Stock were not
regularly traded on an established securities market, or the Exchangeable Shares
were traded on an established securities market located in the United States,
different rules, not described herein, may apply. Non-United States Holders who
believe they may be greater than 5 percent shareholders are particularly urged
to consult their own tax advisors to determine the possible application of
FIRPTA to them.
A non-United States Holder that is a greater than 5 percent shareholder
may be subject to withholding on the exchange of Exchangeable Shares for Battle
Mountain Common Stock if, at the time of the exchange, the Exchangeable Shares
are not treated as regularly traded on an established securities market. Upon
the exchange of Exchangeable Shares for Battle Mountain Common Stock, the
transferee of the Exchangeable Shares would be required to withhold ten percent
of the amount realized in the exchange unless, in general, the non-United States
Holder obtains from Battle Mountain and provides to the transferee a statement
signed under penalties of perjury to the effect that Battle Mountain is not a
USRPHC and was not a USRPHC at any time during the FIRPTA holding period
(described above). Any tax withheld may be credited against the United States
federal income tax owed by the non-United States Holder for the year in which
the exchange occurs.
The foregoing summary of the possible application of the FIRPTA rules to
non-United States Holders is only a summary of certain material aspects of these
rules. Because the United States federal income tax consequences to a non-United
States Holder under FIRPTA may be significant and are complex, non-United States
Holders are urged to discuss those consequences with their tax advisors.
29
Battle Mountain Common Stock (or a previously triggered obligation of
Battle Mountain or Battle Mountain Sub to deliver Battle Mountain Common Stock
along with unpaid dividends) will be deemed to be a United States situs asset
for purposes of United States federal estate tax law and, therefore, Battle
Mountain Common Stock (or a previously triggered obligation of Battle Mountain
or Battle Mountain Sub to deliver Battle Mountain Common Stock along with unpaid
dividends) held by an individual non-United States Holder at the time of his or
her death will generally be subject to the United States federal estate tax,
except as may otherwise be provided by an applicable tax or estate tax treaty
with the United States.
The Tax Treaty provides that the United States federal estate tax paid by
a resident of Canada will generally be allowed as a deduction from the amount of
any Canadian tax otherwise payable by the individual for the year in which the
individual died on the total of (a) any income, profits or gains of the
individual arising in the United States in that year and (b) where the value at
the time of the individual's death of the individual's entire gross estate,
wherever situated, exceeds $1.2 million, any income, profits or gains of the
individual for that year from property situated in the United States at that
time. This summary does not purport to be a complete description of all of the
provisions of the Tax Treaty that may affect the taxation of Canadian residents.
Non-United States Holders should consult their tax advisors as the tax
consequences to them of the Tax Treaty or another applicable tax or estate tax
treaty with the United States.
LEGAL OPINIONS
Certain legal matters in connection with the Common Stock offered hereby
are being passed upon for Battle Mountain by Baker & Botts, L.L.P., Houston,
Texas. Baker & Botts, L.L.P. will rely as to matters of Nevada law on Marshall
Hill Cassas & de Lipkau, Reno, Nevada. Certain federal U.S. and Canadian tax
consequences have been passed upon by Fried, Frank, Harris, Shriver & Jacobson,
New York, New York (a partnership including professional corporations) and
McCarthy Tetrault, Toronto, Ontario, respectively, as set forth under "TAX
CONSIDERATIONS."
EXPERTS
The consolidated financial statements of Battle Mountain, incorporated by
reference herein as of December 31, 1995, and for the year ended December 31,
1995 have been audited by Price Waterhouse LLP, independent accountants, as set
forth in their report thereon incorporated by reference herein. Such
consolidated financial statements referred to above are incorporated herein by
reference in reliance upon such report given upon the authority of such firm as
experts in accounting and auditing.
The consolidated financial statements and financial statement schedule of
Battle Mountain as of December 31, 1994, and for each of the two years in the
period ended December 31, 1994, incorporated by reference in this Prospectus,
have been audited by Arthur Andersen LLP, independent public accountants, as set
forth in their report. In that report, that firm states that with respect to
certain subsidiaries of Battle Mountain, its opinion is based on the reports of
other independent public accountants, namely Coopers & Lybrand, Sydney,
Australia. The consolidated
30
financial statements and financial statement schedule referred to above have
been incorporated herein in reliance upon the authority of those firms as
experts in giving said reports.
The consolidated financial statements of Hemlo Gold, incorporated by
reference herein as of December 31, 1994 and 1995, and for each of the three
years in the period ended December 31, 1995, have been audited by Ernst & Young,
Chartered Accountants, as set forth in their report thereon incorporated by
reference herein, and are incorporated by reference herein in reliance upon such
report given upon the authority of such firm as experts in accounting and
auditing.
The financial statements of Lihir Gold Limited incorporated by reference
herein as of December 31, 1995 and for the year then ended have been audited by
Coopers & Lybrand, Port Moresby, Papua New Guinea, as set forth in their report
thereon dated June 27, 1996 incorporated by reference herein. Such consolidated
financial statements referred to above are incorporated herein by reference in
reliance upon such report given upon the authority of such firm as experts in
accounting and auditing.
31
