<PAGE> 1
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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q/A
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED MARCH 31, 1998
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
FOR THE TRANSITION PERIOD FROM TO
------ -------
COMMISSION FILE NUMBER 1-9666
BATTLE MOUNTAIN GOLD COMPANY
(EXACT NAME OF THE REGISTRANT AS SPECIFIED IN ITS CHARTER)
Nevada 76-0151431
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
333 Clay Street, 42nd Floor, Houston, Texas 77002
(Address of principal executive offices, including Zip Code)
(713) 650-6400
(Registrant's telephone number, including area code)
NONE
(Former name, former address and former fiscal year if
changed since last report)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
Yes X No
--- ---
Number of shares of Common Stock outstanding as of the latest
practicable date, April 22, 1998: 125,236,990. In addition, as of such date,
there were outstanding 104,560,976 Exchangeable Shares of Battle Mountain Canada
Ltd. which are exchangeable at any time into Common Stock on a one-for-one
basis, entitle their holders to dividend and other rights economically
equivalent to those of the Common Stock, and through a voting trust, vote at
meetings of stockholders of the Registrant.
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<PAGE> 2
BATTLE MOUNTAIN GOLD COMPANY
INDEX
<TABLE>
<CAPTION>
Page
----
<S> <C>
Part I. Financial Information (Unaudited)
Condensed Consolidated Statement of Operations
for the three months ended March 31, 1998 and 1997 1
Condensed Consolidated Balance Sheet
at March 31, 1998 and December 31, 1997 2
Condensed Consolidated Statement of Cash Flows
for the three months ended March 31, 1998 and 1997 3
Notes to Condensed Consolidated Financial Statements 4
Supplemental Information 6
Management's Discussion and Analysis of Financial Condition
and Results of Operations 9
Part II. Other Information 13
</TABLE>
DISCLOSURE REGARDING FORWARD-LOOKING STATEMENTS
The U.S. securities laws provide a "safe harbor" for certain
forward-looking statements. This report contains forward-looking statements that
involve risks and uncertainties that could cause actual results to differ
materially from those projected in such forward-looking statements. Statements
regarding the expected commencement dates of mining operations, projected
quantities of future production, capital costs, production rates, costs and
expenditures and other operating and financial data are based on expectations
that the Company believes are reasonable, but it can give no assurance that such
expectations will prove to have been correct. Factors that could cause actual
results to differ materially include, among others: risks and uncertainties
relating to general domestic and international economic and political
conditions, the cyclical and volatile prices of gold, silver and copper,
political and economic risks associated with foreign operations, unanticipated
ground and water conditions, unanticipated grade and geological problems,
metallurgical and other processing problems, availability of materials and
equipment, the delays in the receipt of or failure to receive necessary
governmental permits, changes in laws or regulations or the interpretation and
enforcement thereof, the occurrence of unusual weather or operating conditions,
force majeure events, lower than expected ore grades, the failure of equipment
or processes to operate in accordance with specifications or expectations, labor
relations, accidents, delays in anticipated start-up dates, environmental risks,
the results of financing efforts and financial market conditions. These and
other risk factors are discussed in more detail in the Company's Annual Report
on Form 10-K (File No. 1-9666) for the year ended December 31, 1997. Many of
such factors are beyond the Company's ability to control or predict. Readers are
cautioned not to put undue reliance on forward-looking statements. The Company
disclaims any intent or obligations to update these forward-looking statements,
whether as a result of new information, future events or otherwise.
<PAGE> 3
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
BATTLE MOUNTAIN GOLD COMPANY
CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
(UNAUDITED)
<TABLE>
<CAPTION>
Three months ended
March 31
------------------
Millions, except per share amounts 1998 1997
- ---------------------------------- ---- ----
<S> <C> <C>
Sales $ 78.9 $ 76.5
---------- ----------
Costs and expenses
Production costs 43.7 51.1
Depreciation, depletion and amortization 22.9 17.5
Exploration, evaluation & other lease costs, net 5.3 5.9
Merger expense (Note 2) -- 2.2
General and administrative expenses 3.7 3.9
---------- ----------
Total costs and expenses 75.6 80.6
---------- ----------
Operating income (loss) 3.3 (4.1)
Interest expense (4.8) (3.4)
Other income, net (Note 3) 1.8 2.9
---------- ----------
Income (loss) before income taxes and
minority interest 0.3 (4.6)
Income tax expense (benefit) (0.2) 2.1
Mining taxes 1.8 1.6
Minority interest in net loss (income) (0.3) 0.2
---------- ----------
Income (loss) before cumulative effect
of accounting change (1.6) (8.1)
Cumulative effect of accounting change (Note 4) -- (3.7)
---------- ----------
Net income (loss) (1.6) (11.8)
Preferred dividends 1.9 1.9
---------- ----------
Net income (loss) to common shares $ (3.5) $ (13.7)
========== ==========
Income (loss) per common share (Note 5)
Before cumulative effect of accounting change $ (.02) $ (.04)
Accounting change -- (.02)
---------- ----------
Basic and diluted $ (.02) $ (.06)
========== ==========
Dividends per common share $ .025 $ .025
========== ==========
Average common shares outstanding for
income (loss) per share purposes - basic and diluted 229.8 229.7
========== ==========
</TABLE>
The accompanying notes are an integral part of these financial statements.
1
<PAGE> 4
BATTLE MOUNTAIN GOLD COMPANY
CONDENSED CONSOLIDATED BALANCE SHEET
<TABLE>
<CAPTION>
March 31 December 31
1998 1997
---------- ----------
<S> <C> <C>
Millions (Unaudited)
- --------
Assets
Current assets
Cash and cash equivalents $ 154.5 $ 185.0
Restricted cash 33.7 17.7
Accounts and notes receivable 25.6 33.0
Inventories 10.4 8.3
Materials and supplies, at average cost 22.6 25.4
Assets held for sale 42.5 42.5
Other current assets 11.3 12.1
---------- ----------
Total current assets 300.6 324.0
Investments 253.6 255.2
Property, plant and equipment, net 477.6 489.3
Other assets 22.9 24.7
---------- ----------
Total assets $ 1,054.7 $ 1,093.2
========== ==========
Liabilities and Shareholders' Equity
Current liabilities
Short-term borrowings $ -- $ 4.9
Current maturities of long-term debt 43.9 44.0
Accounts payable 21.3 24.0
Income and mining taxes payable 15.3 10.1
Other current liabilities 10.2 23.1
---------- ----------
Total current liabilities 90.7 106.1
Long-term debt 228.3 241.0
Deferred income and mining taxes 80.8 84.1
Other liabilities 49.9 48.3
---------- ----------
Total liabilities 449.7 479.5
Minority interest 108.1 107.7
Commitments and contingencies (Note 6) -- --
Shareholders' equity 496.9 506.0
---------- ----------
Total liabilities and shareholders' equity $ 1,054.7 $ 1,093.2
========== ==========
</TABLE>
The accompanying notes are an integral part of these financial statements.
2
<PAGE> 5
BATTLE MOUNTAIN GOLD COMPANY
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
Three months ended
March 31
------------------
Millions 1998 1997
- -------- ------ -------
<S> <C> <C>
Cash flows from operating activities
Net income (loss) $ (1.6) $ (11.8)
Adjustments to reconcile net income (loss) to cash flows
from operating activities:
Depreciation, depletion and amortization 22.9 17.5
Deferred income tax benefit (3.9) (0.9)
Cumulative effect of accounting change (Note 4) -- 3.7
Equity in losses of equity investee 1.4 --
Change in working capital accounts, net 1.4 6.2
Other, net 2.9 (0.3)
-------- -------
Net cash flows provided by operating activities 23.1 14.4
-------- -------
Cash flows from investing activities
Capital expenditures (14.0) (23.6)
Other, net -- (0.5)
-------- -------
Net cash flows used in investing activities (14.0) (24.1)
-------- -------
Cash flows from financing activities
Debt repayments (11.6) --
Decrease in short-term borrowings (4.9) (19.9)
Cash dividend payments (7.6) (7.6)
Increase in restricted cash (16.0) --
Other, net -- 0.4
-------- -------
Net cash flows used in financing activities (40.1) (27.1)
-------- -------
Effect of exchange rate changes on cash and cash equivalents 0.5 (1.5)
-------- -------
Net decrease in cash and cash equivalents (30.5) (38.3)
Cash and cash equivalents at beginning of period 185.0 94.0
-------- -------
Cash and cash equivalents at end of period $ 154.5 $ 55.7
======== =======
</TABLE>
The accompanying notes are an integral part of these financial statements.
3
<PAGE> 6
BATTLE MOUNTAIN GOLD COMPANY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
Note 1. General Information
The unaudited condensed consolidated financial statements included
herein have been prepared pursuant to the rules and regulations of the
Securities and Exchange Commission and include all normal recurring adjustments
which are, in the opinion of the management of Battle Mountain Gold Company
(BMG), necessary for a fair presentation. Certain information and footnote
disclosures required by generally accepted accounting principles have been
condensed or omitted pursuant to such rules and regulations. These financial
statements include the accounts of BMG and its wholly-owned and majority-owned
subsidiaries (the Company) and should be read in conjunction with the financial
statements which are included in the Company's Annual Report on Form 10-K (File
No. 1-9666) for the year ended December 31, 1997. Certain amounts for prior
periods may have been reclassified in order to conform to the current reporting
presentation and requirements.
The Company implemented Statement of Financial Accounting Standards No.
130, "Reporting Comprehensive Income," effective January 1, 1998. This standard
requires that all items required to be recognized under this standard as
components of comprehensive income, such as the Company's foreign currency
translation adjustments, be reported in a financial statement. The Company's
comprehensive income (loss) was as follows:
<TABLE>
<CAPTION>
Three Months Ended
March 31
------------------
Millions 1998 1997
- -------- ------ ------
<S> <C> <C>
Net income (loss) $(1.6) $(11.8)
Foreign currency translation adjustments (0.2) (3.3)
----- ------
Comprehensive income (loss) $(1.8) $(15.1)
===== ======
</TABLE>
Note 2. Merger Expenses
In connection with the 1996 combination of BMG and Battle Mountain
Canada Ltd. ("BMCL"), formerly Hemlo Gold Mines Inc., an additional $2.2 million
of merger expenses were incurred in the first quarter of 1997, consisting
primarily of merger-related severance payments made to BMG employees.
Note 3. Other Income, net
Other income, net consisted of the following:
<TABLE>
<CAPTION>
Three months ended
March 31
----------------------
Millions 1998 1997
-------- ---- ----
<S> <C> <C>
Interest income $ 2.6 $ 1.3
Equity in losses of equity investee (1.4) -
Other, net 0.6 1.6
------ ------
Total $ 1.8 $ 2.9
====== ======
</TABLE>
4
<PAGE> 7
Note 4. Change in Accounting Method
Effective January 1, 1997, Empresa Minera Inti Raymi S.A. ("Inti
Raymi"), the Company's 88%-owned Bolivian gold mining subsidiary, changed its
method of calculating depreciation, depletion and amortization ("DD&A") of
mining properties and certain related assets at its Kori Kollo mine. Under the
newly adopted method, Inti Raymi calculates units-of-production DD&A on an
ounces-produced basis and applies such DD&A rate to the total estimated
development costs to be incurred throughout the mine life of Kori Kollo. The
Company correspondingly changed its method of amortizing the premium associated
with its investment in Inti Raymi to an ounces-produced basis. Previously, both
such DD&A calculations were based on a tonnes-milled rate applied to the capital
costs incurred to date.
The cumulative effect of this accounting change for periods ending
prior to January 1, 1997 was a decrease in net income of $3.7 million, or $.02
per common share, net of minority interests of $0.5 million and income tax of
$0.5 million.
Note 5. Income (Loss) per Common Share
The computations of the Company's basic and diluted income (loss) per
share amounts were the same for the respective periods of the three months ended
March 31, 1998 and 1997. Other securities that could potentially dilute basic
income (loss) per share amounts in each of those periods that were not included
in the calculations because they were anti-dilutive were the Company's
outstanding common stock options, convertible debentures and convertible
preferred stock.
Note 6. Contingencies
See "Part II - Other Information - Legal Proceedings" for information
concerning significant legal proceedings of the Company. In addition to the
legal proceedings described therein, the Company is party to a number of actions
arising in the ordinary course of business. While the final outcome of these
actions cannot be predicted with certainty, the Company believes that the
outcome of these actions will not have a material adverse effect on the
Company's financial condition, results of operations or cash flows.
Note 7. Battle Mountain Canada Ltd. Summarized Financial Information
The following summarized information of Battle Mountain Canada Ltd. is
presented in accordance with the Securities Exchange Commission's reporting
requirements as they pertain to the BMCL Exchangeable Shares:
<TABLE>
<CAPTION>
Three months ended
March 31
-----------------------
Millions 1998 1997
-------- ---- ----
<S> <C> <C>
Sales $ 42.0 $ 34.1
Costs and expenses 34.3 27.6
------ ------
Operating income $ 7.7 $ 6.5
====== ======
Net income $ 2.0 $ 3.8
====== ======
</TABLE>
5
<PAGE> 8
BATTLE MOUNTAIN GOLD COMPANY
SUPPLEMENTAL INFORMATION
OPERATING DATA (Unaudited) (1)
(All production data reflects BMG attributable interests)
<TABLE>
<CAPTION>
Three months ended
March 31
------------------
1998 1997
------- --------
<S> <C> <C>
GOLDEN GIANT
Gold recovered (000s oz) 103 80
Silver recovered (000s oz) 10 5
- --------------------------------------------------------------
Cost per Gold Ounce Sold
Cash production costs $114 $161
Depreciation, depletion and amortization 69 70
Reclamation and mine closure costs 4 4
---- ----
Total production costs $187 $235
- --------------------------------------------------------------
KORI KOLLO (88% Interest)
Gold recovered (000s oz) 77 63
Silver recovered (000s oz) 236 175
- --------------------------------------------------------------
Cost per Gold Ounce Sold (2)
Cash production costs $167 $203
Depreciation, depletion and amortization 135 124
Reclamation and mine closure costs 10 8
---- ----
Total production costs $312 $335
- --------------------------------------------------------------
HOLLOWAY (84.7% Interest)
Gold recovered (000s oz) 18 14
- --------------------------------------------------------------
Cost per Gold Ounce Sold
Cash production costs $250 $327
Depreciation, depletion and amortization 117 122
Reclamation and mine closure costs 2 2
---- ----
Total production costs $369 $451
- --------------------------------------------------------------
BATTLE MOUNTAIN COMPLEX
Gold recovered (000s oz) 15 18
Silver recovered (000s oz) 23 34
- --------------------------------------------------------------
Cost per Gold Ounce Sold
Cash production costs $225 $304
Depreciation, depletion and amortization 31 27
Reclamation and mine closure costs -- 46
---- ----
Total production costs $256 $377
- --------------------------------------------------------------
</TABLE>
6
<PAGE> 9
BATTLE MOUNTAIN GOLD COMPANY
SUPPLEMENTAL INFORMATION
OPERATING DATA (Unaudited) (1)
(All production data reflects BMG attributable interests)
<TABLE>
<CAPTION>
Three months ended
March 31
------------------
1998 1997
------- -------
<S> <C> <C>
LIHIR(3)
Gold recovered (000s oz) 12
- ----------------------------------------------------------------
Cost per Gold Ounce Sold
Cash production costs $178
Depreciation, depletion and amortization 173
----
Total production costs $351
- ----------------------------------------------------------------
VERA/NANCY (50% Interest) (3)
Gold recovered (000s oz) 12
Silver recovered (000s oz) 10
- ----------------------------------------------------------------
Cost per Gold Ounce Sold
Cash production costs $136
Depreciation, depletion and amortization 28
Reclamation and mine closure costs 1
----
Total production costs $165
- ----------------------------------------------------------------
SAN CRISTOBAL (50.5% Interest)
Gold recovered (000s oz) 8 8
Silver recovered (000s oz) 13 18
- ----------------------------------------------------------------
Cost per Gold Ounce Sold
Cash production costs (4) $219 $417
Depreciation, depletion and amortization 102 46
---- ----
Total production costs $321 $463
- ----------------------------------------------------------------
RED DOME (50.5% Interest) (5)
Gold recovered (000s oz) 11
Silver recovered (000s oz) 52
Copper recovered (000s lb) 784
- ----------------------------------------------------------------
Cost per Gold Ounce Sold
Cash production costs $228
Depreciation, depletion and amortization 20
Reclamation and mine closure costs 13
----
Total production costs $261
- ----------------------------------------------------------------
</TABLE>
7
<PAGE> 10
BATTLE MOUNTAIN GOLD COMPANY
SUPPLEMENTAL INFORMATION
OPERATING DATA (Unaudited) (1)
(All production data reflects BMG attributable interests)
Three months ended
March 31
------------------
1998 1997
---- ----
SILIDOR (55% Interest) (5)
Gold recovered (000s oz) 5
-----------------------------------------------------------------------------
Cost per Gold Ounce Sold
Cash production costs $ 329
Depreciation, depletion and amortization 74
Reclamation and mine closure costs 9
------
Total production costs $ 412
- --------------------------------------------------------------------------------
AGGREGATE DATA
Gold recovered BMG share (000s oz) 246 200
Gold sold BMG share (000s oz) 244 190
Gold recovered (000s oz) 264 227
Gold sold (000s oz) 262 210
Average price per oz realized $ 307 $ 358
- --------------------------------------------------------------------------------
Silver recovered BMG share (000s oz) 291 284
Silver sold BMG share (000s oz) 288 235
Silver recovered (000s oz) 336 378
Silver sold (000s oz) 332 280
Average price per oz realized $ 6.37 $ 4.99
- --------------------------------------------------------------------------------
Weighted Average Cost per Gold Ounce Sold
Cash production costs $ 156 $ 215
Depreciation, depletion and amortization 95 86
Reclamation and mine closure costs 5 9
------- ------
Total production costs $ 256 $ 310
- --------------------------------------------------------------------------------
(1) Cash production costs are presented in accordance with guidelines
established by The Gold Institute. In addition to mining, milling and
plant level general and administrative expenses, cash production costs
include royalties, freight, smelting costs and allowances, and
production taxes. Credits for by-product silver and copper are offset
against these cash production costs. This standard also provides for
reporting on a cost per gold ounce basis, rather than cost per
equivalent gold ounce.
(2) Royalties paid to the Bolivian government for the Kori Kollo mine are
treated as income tax for per ounce calculations and therefore are not
included in these cost per ounce calculations.
(3) Production started at Vera/Nancy and at Lihir during the third and
fourth quarters of 1997, respectively.
(4) Includes deferred stripping costs of $78 per ounce and a deferred
stripping credit of $78 per ounce for three months ended March 31, 1998
and 1997, respectively.
(5) Production ceased at Silidor and at Red Dome during the third and
fourth quarters of 1997, respectively.
8
<PAGE> 11
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
This discussion should be read in conjunction with Management's
Discussion and Analysis of Financial Condition and Results of Operations
included in the Company's Annual Report on Form 10-K (File No. 1-9666) for the
year ended December 31, 1997 and the historical condensed consolidated financial
statements and notes thereto preceding this discussion.
Summary - The Company substantially increased gold production and lowered cash
production costs during the first three months of 1998, as compared with the
same period in 1997, resulting in reduced losses attributable to common
shareholders and improved cash flow from operating activities, despite lower
gold prices.
LIQUIDITY AND CAPITAL RESOURCES
At March 31, 1998, the Company had cash and cash equivalents of $154.5
million, of which $118.4 million was held by BMG and its wholly-owned
subsidiaries, $31.6 million was held by Niugini Mining Limited ("NML") and $4.5
million was held by Inti Raymi. An additional $25.2 million of restricted cash
was held by NML related to a guarantee of Lihir debt and $8.5 million of
restricted cash was held by Inti Raymi for future debt service.
See Part II - Other Information - Legal Proceedings and Note 6 of Notes
to Condensed Consolidated Financial Statements for a discussion of material
contingencies.
The Company expects that cash currently held, along with future cash
flows from operations, will be sufficient to meet future cash needs at least
through the end of 1998.
Operating Activities - The Company generated cash flow of $23.1 million from
operating activities during the three months ended March 31, 1998 compared with
$14.4 million for the three months ended March 31, 1997. The increase in cash
flow from operations was primarily the result of higher production and lower
operating costs in 1998, despite lower gold prices.
Investing Activities - Capital expenditures totaled $14.0 million during the
three months ended March 31, 1998 as compared with $23.6 million during the same
period in 1997. Capital expenditures for the three months ended March 31, 1998
and 1997, included $4.5 million and $6.0 million, respectively, of capitalized
interest for its investment in NML, a Papua New Guinea company with an equity
investment in Lihir Gold Limited. The Company has reduced its total 1998
projected capital expenditures to $50 million due to a revised construction
schedule for the Crown Jewel Project. The Company is evaluating strategic
opportunities that may exist in the marketplace as a result of depressed gold
prices.
Financing Activities - The Company made $11.6 million of scheduled debt payments
during the three months ended March 31, 1998. In addition, NML increased its
restricted cash balance by $16.0 million to $25.2 million as required by the
Lihir financing agreement.
Hedging - The Company has only limited involvement with derivative financial
instruments and does not use them for trading purposes. Derivative instruments
are generally used to manage well-defined interest rate, foreign currency
exchange rate and commodity price risks.
9
<PAGE> 12
The Company utilizes fixed forward sales contracts and spot deferred
sales contracts and may use options to hedge anticipated sales of gold and
silver. The following summarizes open forward gold sales contracts of the
Company at March 31, 1998:
<TABLE>
<CAPTION>
Average Price
Amount Per Unit Period
--------- ------------- ------------------
<S> <C> <C> <C>
BMG 15,620 oz $427 April 98 - July 98
NML 2,000 oz $423 April 98
</TABLE>
The aggregate amount by which the net market value of the Company's
open forward sales contracts is greater than the spot price of $301 per ounce of
gold as of March 31, 1998, is $2.2 million, of which $0.1 million is
attributable to minority interests.
Foreign Operations - Identifiable assets attributable to operations of the
Company outside the U.S. and Canada as of March 31, 1998 were approximately $524
million. Mining operations outside the U.S. and Canada represented approximately
45% of the total gross revenues of the Company for the three months ended March
31, 1998. As a result, the Company is exposed to risks normally associated with
operations located outside the U.S. and Canada, including political, economic,
social and labor instabilities, as well as foreign exchange controls, currency
fluctuations and taxation changes.
Year 2000 Issue - The Company is currently conducting an inventory of all its
computer systems. Software vendors will be contacted to verify year 2000
compliance, and where possible and necessary, the systems will be tested.
Systems that have known year 2000 problems are being replaced. An outside
contractor is assisting the Company with this and it is expected that all
testing and necessary replacements will be completed by the first quarter of
1999. The Company does not anticipate any material adverse effect on operations
regarding year 2000 compliance.
RESULTS OF OPERATIONS
Net income (loss) - The Company recorded a net loss of $3.5 million, or $.02 per
share, attributable to common shareholders for the three months ended March 31,
1998. This compares with a net loss of $13.7 million, or $.06 per share, for the
three months ended March 31, 1997. Results in 1998 were favorably impacted by
significantly lower operating costs and increased production, partially offset
by lower gold prices and higher DD&A. Included in the first quarter 1997 net
loss were $2.2 million of merger expenses and a $3.7 million charge related to a
change in accounting method.
<TABLE>
<CAPTION>
Three months ended
March 31
---------------------
1998 1997
------ ------
<S> <C> <C>
Gold sales (000 oz.) - 100% 262 210
Gold revenue realized per ounce $ 307 $ 358
Average London PM fix per ounce $ 294 $ 351
</TABLE>
10
<PAGE> 13
Sales - Sales increased for the three months ended March 31, 1998, as compared
with the same period in 1997, because of increased gold production, partially
offset by lower average realized gold sales prices. Gold production increased
46,000 ounces, primarily as a result of increases at the Golden Giant mine.
Increased production at Golden Giant during the first quarter of 1998, as
compared with the same period in 1997, was the result of ore grades mined in
1998 being higher than the average reserve grade, and technical problems
encountered at the Golden Giant mill in 1997, which resulted in approximately
11,000 ounces of in-process gold. The Company expects ore grades mined at Golden
Giant during the remainder of 1998 to be closer to the average reserve grade.
Increased production during the quarter was also attributable to an increase at
Kori Kollo, and production at the Vera/Nancy and Lihir mines, which commenced
operations during the second half of 1997. Partially offsetting these increases
were the effects of ceasing of production at the Red Dome and Silidor mines in
the second half of 1997 following depletion of the ore bodies.
The average realized price of gold decreased for the three months ended
March 31, 1998, compared with the same period in 1997, as a result of decreased
spot gold prices. Average realized prices for the three month period ended March
31, 1998 were slightly higher than the average London PM fix price for the same
period due to gains recognized from the Company's forward sales.
<TABLE>
<CAPTION>
Three months ended
CONSOLIDATED PRODUCTION COSTS PER OUNCE OF GOLD SOLD March 31
--------
1998 1997
---- ----
<S> <C> <C>
Direct mining costs $ 155 $ 227
Deferred stripping adjustments 4 (6)
Third party smelting, refining and transportation costs 3 3
By-product credits included in sales (8) (7)
------ ------
Cash operating costs 154 217
Royalties* 4 5
Production taxes - 1
------ ------
Total cash costs 158 223
Depreciation, depletion and amortization 95 83
Reclamation and mine closure costs 5 9
------ ------
Total production costs $ 258 $ 315
====== ======
RECONCILIATION OF TOTAL CASH COSTS PER OUNCE TO CONSOLIDATED FINANCIAL
STATEMENTS
Three months ended
March 31
-------------------
Millions, except ounces sold and per ounce amounts 1998 1997
- -------------------------------------------------- ---- ----
<S> <C> <C>
Production costs per financial statements $43.7 $ 51.1
By-product credits included in sales (2.1) (1.4)
Reclamation and mine closure costs (1.3) (1.8)
Other* 1.2 (1.2)
----- ------
Production costs for per ounce calculation purposes $41.5 $ 46.7
===== ======
Gold ounces sold (000s) 262 210
===== ======
Total cash costs per gold ounce sold $ 158 $ 223
===== ======
</TABLE>
* Royalties paid to the Bolivian government for the Kori Kollo mine are
treated as income tax for per ounce calculations and therefore are not
included in these cost per ounce calculations.
11
<PAGE> 14
Production costs - Total production costs decreased for the three months ended
March 31, 1998 compared with 1997. Contributing to the decrease were the
closures of the Red Dome and Silidor mines in the second half of 1997 and
decreased production costs at the Battle Mountain Complex and San Cristobal
mines. These decreases were partially offset by production costs at the
Vera/Nancy mine, which commenced operations during the third quarter of 1997,
and increased production costs at Kori Kollo due to higher production.
Consolidated per ounce cash costs decreased for the three months ended
March 31, 1998 compared with the same period in 1997. All of the Company's mines
showed significant per ounce cash cost reductions in 1998 compared with 1997.
Golden Giant's cash costs per ounce decreased from $161 per ounce to $114 per
ounce as a result of higher ore grades mined, while Kori Kollo cash costs per
ounce decreased primarily due to increased production.
Depreciation, depletion and amortization - DD&A increased in total and on a cost
per gold ounce sold basis for the three months ended March 31, 1998 compared
with the same period in 1997. DD&A increased in total primarily as a result of
increases at Kori Kollo, largely due to increased production and depreciation on
1997 capital expenditures, and at Golden Giant due to increased production. On a
cost per ounce of gold sold basis, including BMG's share of Lihir's DD&A, DD&A
increased primarily due to increases at Kori Kollo, and depreciation at the
Vera/Nancy and Lihir mines, which commenced commercial production in the second
half of 1997.
Exploration, evaluation and other lease costs, net - Exploration, evaluation and
other lease costs decreased for the three months ended March 31, 1998, compared
with the same period in 1997, as the Company has reduced exploration
expenditures and is focusing on high priority projects.
Merger expenses - Additional merger expenses of $2.2 million were recorded in
the first quarter of 1997, consisting primarily of merger-related severance
payments made to certain former BMG employees related to the 1996 combination of
BMG and BMCL.
Interest expense - Interest expense increased in the three months ended March
31, 1998, as compared with the same period in 1997, as a result of interest on
the $145 million bank borrowing by BMCL in September 1997.
Other income, net - Interest income increased in the three month period ended
March 31, 1998, as compared with the same period in 1997, due to higher levels
of cash invested. Other income, net decreased in the three months ended March
31, 1998 primarily as a result of decreased capitalized interest, as interest
related to Lihir is no longer capitalized, effective October 1, 1997.
Income and mining taxes - The Company's provision for income taxes was $2.1
million for the three months ended March 31, 1997, although the Company recorded
a loss before taxes and minority interests of $4.6 million. This provision was
primarily the function of the provision for Canadian income taxes of $2.5
million on Canadian income and an increase in income tax benefits generated by
U.S. net operating losses which were fully offset by an increase in the
Company's deferred tax asset valuation allowance.
Mining taxes increased for the three months ended March 31, 1998, as
compared with the same period in 1997, due to increased mining income from the
Company's Canadian mines.
Cumulative effect of accounting change - Effective January 1, 1997, Inti Raymi
changed its method of calculating DD&A of mining properties and certain related
assets at its Kori Kollo mine. See Note 4 of Notes to Condensed Consolidated
Financial Statements for further discussion.
12
<PAGE> 15
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
New World Project
The New World project is owned by a subsidiary of Crown Butte Resources
Ltd. ("CBR"), a Canadian corporation in which the Company owns a 60% interest.
In 1993, several special interest groups filed a complaint in U.S. District
Court against CBR and others, alleging that certain discharges from the
CBR-controlled New World site were in violation of the federal Clean Water Act.
On October 13, 1995, the District Court found CBR and other defendants liable
for violations of the Clean Water Act. As a result of that ruling, CBR and other
defendants may be liable for costs of remediation, civil penalties and
attorneys' fees. It is not possible to predict the amount of such liability at
this time. The federal judge hearing the case has stayed all matters in the case
in light of the August 1996 Agreement between CBR, the U.S. government and
certain special interest groups (the "August 1996 Agreement"). The August 1996
Agreement provides a framework whereunder CBR would exchange property interests
within the New World Mining District for U.S. interests or assets having a value
of $65 million, and then set aside $22.5 million for the completion of
reclamation and restoration programs in the District. The exchange would result
in the settlement of existing litigation under the federal Clean Water Act
relating to historic mining impacts by the parties to the August 1996 Agreement
and mutual releases between the parties to the August 1996 Agreement as to any
further environmental liabilities.
The August 1996 Agreement contains a number of conditions beyond the
control of CBR, including obtaining shareholder approval, CBR acquiring fee
title (or such other interests as are acceptable to the United States) in
certain lands currently leased to CBR and confirmation by appraisal that the
interests to be acquired by the U.S. have a fair market value of at least $65
million. Failure to complete the exchange contemplated in the August 1996
Agreement would result in the legal action under the Clean Water Act proceeding
and, as was the case prior to the August 1996 Agreement, there can be no
assurance that any renewed permitting efforts would be successful.
Crown Jewel
The following legal proceedings relate to the Crown Jewel project in
Washington State in which the Company is earning an interest of up to 54%.
During the first quarter of 1997, the final Environmental Impact Statement
("EIS") for the Crown Jewel project was issued. The EIS was prepared pursuant to
the National Environmental Policy Act ("NEPA") and State Environmental Policy
Act ("SEPA"). Certain positive permit decisions and approvals have been received
for the project, but additional state and federal permit decisions and approvals
are pending. Among the positive permit decisions were: 1) approval in September
1997 by the Washington Department of Ecology ("WDOE") of conditional coverage
under the Modified General Permit for Construction Activity for certain
construction activities; 2) approval by WDOE in September 1997 of a Dam Safety
Permit for the proposed tailings facility; 3) approval by WDOE in November 1997
of certain applications for new water rights and certain applications for
changes to existing water rights that are necessary for the Crown Jewel project,
and 4) approval by WDOE in January 1998 of an air quality permit to construct
and operate the mine. The existing legal proceedings evidence opposition to the
project by certain persons and special interest groups, including the Okanogan
Highlands Alliance ("OHA"), the Washington Environmental Council ("WEC"), the
Center for Environmental Law and Policy ("CELP") and the Confederated Tribes of
the Colville Reservation ("CCT"). The Company expects that additional appeals
may be filed and that injunctions will be sought. The impact and exact timing of
final resolution of
13
<PAGE> 16
the existing appeals, or any future appeals related to the project, cannot at
this time be determined with any accuracy.
OKANOGAN HIGHLANDS ALLIANCE V. WILLIAMS, ET AL., UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF OREGON, CIVIL NO. 97-806JE
During the first quarter of 1997, the United States Forest Service
("USFS") issued a Record of Decision ("ROD") which approved the Crown Jewel
project subject to the requirement that the Company obtain USFS approval of a
detailed Plan of Operations. The USFS received four administrative appeals to
its EIS and ROD, which were denied in May 1997. On May 29, 1997, OHA, WEC, the
Colville Indian Environmental Protection Alliance and the Kettle Range
Conservation Group instituted the above-referenced action against the USFS and
certain USFS decision makers in United States District Court for the District of
Oregon. The action appeals the EIS, the ROD and the denial of the administrative
appeals. The action seeks the following rulings: 1) that the EIS and ROD are
inadequate and violate NEPA and the Administrative Procedures Act ("APA"); 2)
that the USFS's decision not to prepare and issue a supplemental EIS was not in
accordance with law; and 3) that the ROD violates certain specified laws. The
action also seeks an award of fees and costs associated with the litigation and
indicates that the plaintiffs will seek injunctive relief restraining the USFS
from approving or authorizing the Plan of Operations or any other action related
to the Crown Jewel project. The Company has intervened in the action. On
November 5, 1997, CCT moved to intervene as a matter of right. On March 19,
1998, the court ruled in favor of the USFS and the Company by denying the
plaintiffs' challenge to the contents and scope of the administrative record. It
is now anticipated that briefing of the case on the merits will occur in the
second and third quarters of 1998.
OKANOGAN HIGHLANDS ALLIANCE, ET AL. V. STATE OF WASHINGTON DEPARTMENT OF
ECOLOGY, ET AL., WASHINGTON POLLUTION CONTROL HEARINGS BOARD, PCHB NO. 97-146
(CONSOLIDATED WITH PCHB NOS. 97-182; 97-183; 97-185; AND 97-186)
Pursuant to the Company's request, PCHB Nos. 97-182; 97-183; 97-185;
and 97-186 have been consolidated for hearing with PCHB No. 146. A consolidated
hearing is presently scheduled to conclude in the second quarter of 1998. At a
March 5, 1998 Scheduling Conference, the Board decided that the water quality
issues raised by the pending appeals would not be heard during the consolidated
hearing, but instead would be heard at an unspecified future date.
PCHB No. 97-146. On October 16, 1997, OHA and WEC instituted the action
designated PCHB No. 97-146 against WDOE and the Company. The action appeals
WDOE's issuance of the Dam Safety Permit, WDOE's approval of conditional
coverage under the Modified General Permit for Construction Activity and WDOE's
acceptance of performance securities related thereto. The action also requests
that the EIS be remanded to the WDOE for further review and compliance with
SEPA. On February 26, 1998, the PCHB granted the Company's motion for summary
judgment and dismissal of all of the storm water and dam safety claims.
PCHB No. 97-182. On December 1, 1997, Roger Lorenz instituted the
action designated PCHB No. 97-182 against WDOE, which action appeals WDOE's
approval of one new water right application and one water right change
application.
14
<PAGE> 17
PCHB No. 97-183. On December 1, 1997, OHA, WEC and CELP instituted the
action designated PCHB No. 97-183 against WDOE and the Company. The action
challenges WDOE's water rights decisions, claiming that such decisions violated
the State Water Code, Water Resources Act, APA and SEPA. The action seeks an
order reversing WDOE decisions or, in the alternative, vacating the Reports of
Examination and remanding the applications to WDOE for further study. The action
has been joined by Triple Creek, a nonprofit corporation.
PCHB No. 97-185. On December 3, 1997, Lori Bialic instituted the action
designated PCHB No. 97-185 against the WDOE, which action appeals the WDOE's
approval of two applications for changes of water rights.
PCHB No. 97-186. On December 2, 1997, CCT instituted the action
designated PCHB No. 97-186 against the WDOE and the Company. The action makes
the same challenge and seeks the same relief as PCHB No. 97-183.
OKANOGAN HIGHLANDS ALLIANCE V. STATE OF WASHINGTON DEPARTMENT OF ECOLOGY, ET
AL., WASHINGTON POLLUTION CONTROL HEARINGS BOARD, PCHB NO. 98-019
On February 3, 1998, OHA instituted the action designated PCHB No.
98-019 against the WDOE and the Company. The action challenges the air quality
permit to construct and operate the mine.
OKANOGAN HIGHLANDS ALLIANCE V. STATE OF WASHINGTON DEPARTMENT OF ECOLOGY, ET
AL., SUPERIOR COURT OF THE STATE OF WASHINGTON FOR THURSTON COUNTY, CIVIL NO.
97-2-02869-5
On December 4, 1997, OHA instituted the above-referenced action against
WDOE, the Company and Crown Resources Corporation in the Superior Court of the
State of Washington in and for Thurston County. The action challenges WDOE's
determinations that the proposed tailings facility and the proposed waste rock
disposal sites at the Crown Jewel project do not need a Solid Waste Permit. The
action seeks to have the court issue an order declaring a historic WDOE
rulemaking to be in excess of statutory authority and/or arbitrary and
capricious. In the event that the Court determines the rulemaking to be valid,
Plaintiffs seek a hearing on whether the Crown Jewel tailings constitute a
"liquid waste" subject to a federal or state water pollution permit and on
whether the Crown Jewel waste rock constitutes an "inert waste," such that the
tailings facility and waste rock sites are not respectively required to have a
Solid Waste Permit and meet certain location standards. The action also seeks
orders declaring that the Crown Jewel tailings and waste rock must be disposed
of at a licensed solid waste disposal facility, any other relief deemed
necessary and an award of fees and costs. On April 16, 1998, OHA dismissed the
action without prejudice.
CONFEDERATED TRIBES OF THE COLVILLE RESERVATION V. STATE OF WASHINGTON
DEPARTMENT OF ECOLOGY, ET AL., SUPERIOR COURT OF THE STATE OF WASHINGTON FOR
THURSTON COUNTY, CIVIL NO. 97-2-02840-7
WDOE granted the Company's applications for new water rights and
changes to existing water rights in part based upon a streamflow mitigation
plan. On December 2, 1997, CCT instituted the above-referenced action against
the WDOE and the Company. The action seeks an order holding that WDOE's approval
of the streamflow mitigation plan constituted a rulemaking in violation of the
APA and an order that such approval exceeds WDOE's statutory authority,
conflicts with existing law and is irrational. The action also seeks an order
mandating a rulemaking to develop guidelines and criteria for approving water
resource mitigation measures and an injunction on the approval of water rights
applications until the conclusion of such rulemaking. Reversal of WDOE's
decisions with respect to the Company's water rights
15
<PAGE> 18
applications is also sought, along with an injunction precluding the Company
from taking action in reliance on such decisions. The Plaintiff also seeks costs
and attorney fees.
OKANOGAN HIGHLANDS ALLIANCE, ET AL., V. WASHINGTON STATE DEPARTMENT OF ECOLOGY,
ET AL., SUPERIOR COURT OF THE STATE OF WASHINGTON FOR THURSTON COUNTY, CIVIL NO.
97-2-02831-8
On December 2, 1997, OHA, WEC and CELP instituted the above referenced
action against WDOE and the Company. The action makes the same challenges and
seeks the same relief as Confederated Tribes of the Colville Reservation v.
State of Washington Department of Ecology, et al., Superior Court of the State
of Washington for Thurston County, Civil No. 97-2-02849-7.
ITEM 5. OTHER INFORMATION
Reduction in the size of Board of Directors. The Board of Directors, by
a unanimous vote, determined that it would be more effective and in the best
interest of the Company to reduce the size of the Board of Directors from 12
members to 10 members. Pursuant to this reduction, one Class I position and one
Class II position were eliminated. In order to facilitate such reduction, E.
Courtney Pratt (Class II) resigned effective March 15, 1998, and Ted H. Pate
(Class I) did not stand for re-election at the expiration of his term, which was
April 27, 1998.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
11 Computation of Income (loss) per Common Share
27 Financial Data Schedule
(b) No report on Form 8-K has been filed by BMG during the quarter
for which this report is filed.
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934,
the Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
BATTLE MOUNTAIN GOLD COMPANY
Date: April 28, 1998 /s/ JEFFREY L. POWERS
--------------------------------
Jeffrey L. Powers
Vice President and Controller
16
<PAGE> 19
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- ------- -----------
<S> <C>
11 Computation of Income (Loss) per Common Share
27 Financial Data Schedule
</TABLE>
<PAGE> 1
EXHIBIT 11
BATTLE MOUNTAIN GOLD COMPANY
COMPUTATIONS OF INCOME (LOSS) PER COMMON SHARE
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31
Millions, except per share amounts 1998 1997
- ---------------------------------- ---- ----
<S> <C> <C>
BASIC INCOME (LOSS) PER SHARE
Net income (loss)
Net loss $ (1.6) (11.8)
Deduct dividends on preferred shares (1.9) (1.9)
---------- ----------
Net loss applicable to common stock $ (3.5) $ (13.7)
========== ==========
Shares
Weighted average number of common shares outstanding 229.8 229.7
========== ==========
Basic income (loss) per common share $ (0.015) $ (0.060)
========== ==========
DILUTED INCOME (LOSS) PER SHARE
Net loss applicable to common stock $ (3.5) $ (13.7)
========== ==========
Shares
Weighted average number of common shares outstanding 229.8 229.7
Assuming exercise of stock options reduced by the number of
shares which could have been purchased with the proceeds
from exercise of such options -- --
---------- ----------
Weighted average number of common shares outstanding, as adjusted 229.8 229.7
========== ==========
Diluted income (loss) per share, assuming conversion $ (0.015) $ (0.060)
========== ==========
CALCULATIONS OF CONVERSIONS OF SECURITIES PRODUCING ANTI-DILUTIVE RESULTS
CONVERSION OF PREFERRED SHARES
Net income (loss)
Net loss applicable to common stock $ (3.5) $ (13.7)
Effect on net loss if preferred shares were converted 7.5 7.5
---------- ----------
Net income (loss), as adjusted $ 4.0 $ (6.2)
========== ==========
Shares
Weighted average number of common shares outstanding 229.8 229.7
Effect on average shares outstanding if preferred shares were converted 11.0 11.0
---------- ----------
Weighted average number of common shares outstanding, as adjusted 240.8 240.7
========== ==========
Diluted income (loss) per share, assuming conversion $ 0.017 $ (0.026)
========== ==========
CONVERSION OF DEBENTURES
Net income (loss)
Net loss applicable to common stock $ (3.5) $ (13.7)
Effect on net loss if debentures were converted 1.0 --
---------- ----------
Net loss, as adjusted $ (2.5) $ (13.7)
========== ==========
Shares
Weighted average number of common shares outstanding 229.8 229.7
Effect on average shares outstanding if debentures were converted 4.8 4.8
---------- ----------
Weighted average number of common shares outstanding, as adjusted 234.6 234.5
========== ==========
Diluted income (loss) per share, assuming conversion $ (0.011) $ (0.058)
========== ==========
CONVERSION OF OPTIONS
Net income (loss)
Net loss applicable to common stock $ (3.5) $ (13.7)
========== ==========
Shares
Weighted average number of common shares outstanding 229.8 229.7
Effect on average shares outstanding if options were converted 0.1 0.2
---------- ----------
Weighted average number of common shares outstanding, as adjusted 229.9 229.9
========== ==========
Diluted income (loss) per share, assuming conversion $ (0.015) $ (0.060)
========== ==========
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the Battle
Mountain Gold Company Quarterly Report on Form 10-Q/A for the quarter ended
March 31, 1998, and is qualified in its entirety by reference to such financial
statements.
</LEGEND>
<RESTATED>
<MULTIPLIER> 1,000
<S> <C> <C>
<PERIOD-TYPE> 3-MOS 3-MOS
<FISCAL-YEAR-END> DEC-31-1998 DEC-31-1997
<PERIOD-END> MAR-31-1998 MAR-31-1997<F1>
<CASH> 188,200 0
<SECURITIES> 0 0
<RECEIVABLES> 25,600 0
<ALLOWANCES> 0 0
<INVENTORY> 33,000 0
<CURRENT-ASSETS> 300,600 0
<PP&E> 1,076,000 0
<DEPRECIATION> 598,400 0
<TOTAL-ASSETS> 1,054,700 0
<CURRENT-LIABILITIES> 90,700 0
<BONDS> 228,300 0
0 0
110,600 0
<COMMON> 12,500 0
<OTHER-SE> 373,800 0
<TOTAL-LIABILITY-AND-EQUITY> 1,054,700 0
<SALES> 78,900 76,500
<TOTAL-REVENUES> 78,900 76,500
<CGS> 66,600 68,600
<TOTAL-COSTS> 66,600 68,600
<OTHER-EXPENSES> 5,300 5,900
<LOSS-PROVISION> 0 0
<INTEREST-EXPENSE> 4,800 3,400
<INCOME-PRETAX> 300 (4,600)
<INCOME-TAX> 1,600 3,700
<INCOME-CONTINUING> (1,600) (8,100)
<DISCONTINUED> 0 0
<EXTRAORDINARY> 0 0
<CHANGES> 0 (3,700)
<NET-INCOME> (3,500) (13,700)
<EPS-PRIMARY> (.02) (.06)
<EPS-DILUTED> (.02) (.06)
<FN>
<F1> RESTATED TO REFLECT CUMULATIVE CHANGE IN ACCOUNTING METHOD,
EFFECTIVE JANUARY 1, 1997
</FN>
</TABLE>
