<PAGE>
================================================================================
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 2000
[ ] 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, October 31, 2000: 133,313,940. In addition, as of such date,
there were outstanding 96,626,893 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.
================================================================================
<PAGE>
BATTLE MOUNTAIN GOLD COMPANY
INDEX
<TABLE>
<CAPTION>
Page
----
<S> <C>
Part I. Financial Information (Unaudited)
Condensed Consolidated Statement of Operations
for the three and nine months ended September 30, 2000 and 1999 1
Condensed Consolidated Balance Sheet
at September 30, 2000 and December 31, 1999 2
Condensed Consolidated Statement of Cash Flows
for the nine months ended September 30, 2000 and 1999 3
Notes to Condensed Consolidated Financial Statements 4
Supplemental Information 10
Management's Discussion and Analysis of Financial Condition
and Results of Operations 11
Quantitative and Qualitative Disclosures about Market Risk 16
Part II. Other Information 16
</TABLE>
<PAGE>
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
BATTLE MOUNTAIN GOLD COMPANY
CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
(UNAUDITED)
<TABLE>
<CAPTION>
Three months ended Nine months ended
September 30 September 30
------------------ ------------------
MILLIONS, EXCEPT PER SHARE AMOUNTS 2000 1999 2000 1999
------ ------ ------- -------
<S> <C> <C> <C> <C>
Sales $ 57.4 $ 54.6 $ 179.1 $ 161.8
Costs and expenses
Production costs 37.0 35.8 112.6 107.4
Depreciation, depletion and amortization 15.0 16.6 47.7 46.8
Exploration, evaluation & other lease costs, net 3.2 3.9 10.6 13.1
Environmental remediation charge (NOTE 8) 5.6 9.5 5.6 9.5
Merger expense (NOTE 2) 1.7 - 2.4 -
General and administrative expenses 2.8 4.5 8.7 11.9
------ ------ ------- -------
Total costs and expenses 65.3 70.3 187.6 188.7
------ ------ ------- -------
Operating Loss (7.9) (15.7) (8.5) (26.9)
Interest expense (3.7) (3.7) (11.2) (11.2)
Interest income 1.0 1.6 3.0 5.2
Equity in losses (income) & impairment of Lihir (NOTE 3) - 0.2 - (26.2)
Foreign currency exchange gain (loss), net (2.7) 0.1 (6.6) 6.9
Minority interest in net loss 0.2 - 1.0 4.0
Other income, net 0.2 0.5 0.3 1.3
------ ------ ------- -------
Loss Before Income Taxes (12.9) (17.0) (22.0) (46.9)
Income tax benefit (expense) (0.1) 1.0 (1.1) 3.2
Mining income tax expense (1.3) (2.1) (0.2) (2.4)
------ ------ ------- -------
Net Loss (14.3) (18.1) (23.3) (46.1)
Preferred dividends 1.9 1.9 5.6 5.6
------ ------ ------- -------
Net Loss to Common Shares $(16.2) $(20.0) $ (28.9) $ (51.7)
====== ====== ======= =======
Loss per Common Share - Basic and Diluted (NOTE 4) $ (.07) $ (.09) $ (.13) $ (.22)
====== ====== ======= =======
Average Common Shares Outstanding for
Basic and Diluted Loss per Share Purposes 229.9 229.9 229.9 229.9
====== ====== ======= =======
</TABLE>
The accompanying notes are an integral part of these financial statements.
1
<PAGE>
BATTLE MOUNTAIN GOLD COMPANY
CONDENSED CONSOLIDATED BALANCE SHEET
(UNAUDITED)
<TABLE>
<CAPTION>
September 30, December 31,
MILLIONS 2000 1999
-------- ------------- ------------
ASSETS (as restated)
<S> <C> <C>
Current assets
Cash and cash equivalents (NOTE 1) $ 11.2 $ 67.5
Restricted cash 0.4 0.2
Accounts and notes receivable, net (NOTE 1) 10.7 36.7
Product inventories 11.4 8.7
Materials and supplies, net, at average cost 20.4 22.4
Marketable equity securities (NOTE 3) 36.9 -
Prepayments 6.1 3.9
Other current assets 1.1 3.8
------- -------
Total current assets 98.2 143.2
------- -------
Investments
Investment in Lihir (NOTE 3) - 68.4
Other investments 12.1 10.6
------- -------
Total investments 12.1 79.0
------- -------
Restricted cash 41.9 40.0
Property, plant and equipment, net 275.0 299.6
Other assets 4.1 6.7
------- -------
Total Assets $ 431.3 $ 568.5
======= =======
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities
Current maturities of long-term debt $ 10.6 $ 2.6
Debt due upon disposal of Lihir 30.0 30.0
Accounts payable 16.3 16.0
Income taxes and mining income taxes payable 16.7 16.7
Interest payable 4.7 6.4
Accrued reclamation and closure costs 4.0 6.3
Other current liabilities 13.5 10.9
------- -------
Total current liabilities 95.8 88.9
Long-term debt (NOTE 6) 155.1 176.8
Deferred income taxes and mining income taxes 55.4 64.5
Other liabilities 57.7 54.5
------- -------
Total Liabilities 364.0 384.7
Commitments and contingencies (NOTES 2, 7 AND 8) - -
Minority interest 4.5 65.1
Shareholders' equity (NOTE 5) 62.8 118.7
------- -------
Total Liabilities and Shareholders' Equity $ 431.3 $ 568.5
======= =======
</TABLE>
The accompanying notes are an integral part of these financial statements.
2
<PAGE>
BATTLE MOUNTAIN GOLD COMPANY
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
Nine months ended
September 30
------------------------
MILLIONS 2000 1999
-------- ------- -------
(as restated)
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss $ (23.3) $ (46.1)
Adjustments to reconcile net loss to net cash
flows from operating activities:
Depreciation, depletion and amortization 47.7 46.8
Environmental remediation charge 5.6 9.5
Deferred income taxes and mining income taxes (5.8) (2.8)
Equity in losses and impairment of Lihir - 26.2
Foreign currency exchange loss (gain), net 6.6 (6.9)
Change in working capital accounts, net 26.3 9.1
Other, net (4.9) (5.2)
------- -------
Net Cash Flows Provided by Operating Activities 52.2 30.6
------- -------
CASH FLOWS FROM INVESTING ACTIVITIES
Capital expenditures (34.8) (37.3)
Crown Butte liquidating dividend to minority shareholders - (11.0)
Proceeds from sale of assets 1.5 11.3
Effects on cash of the Niugini Mining and Lihir merger (54.7) -
Other, net (1.4) (2.9)
------- -------
Net Cash Flows Used in Investing Activities (89.4) (39.9)
------- -------
CASH FLOWS FROM FINANCING ACTIVITIES
Debt repayments (15.1) (30.8)
Decrease in short-term borrowings - (14.9)
Cash dividend payments (5.6) (5.6)
Increase in restricted cash (2.0) (32.0)
Other, net - 0.1
------- -------
Net Cash Flows Used in Financing Activities (22.7) (83.2)
------- -------
Effect of Exchange Rate Changes on Cash 3.6 1.4
------- -------
Net Decrease in Cash and Cash Equivalents (56.3) (91.1)
Cash and cash equivalents at beginning of period, as restated 67.5 156.9
------- -------
Cash and Cash Equivalents at End of Period $ 11.2 $ 65.8
======= =======
</TABLE>
The accompanying notes are an integral part of these financial statements.
3
<PAGE>
BATTLE MOUNTAIN GOLD COMPANY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
Note 1. General Information
The unaudited condensed consolidated financial statements included
herein have been prepared pursuant to the rules and regulations of the
Securities and Exchange Commission and include all normal recurring adjustments
which are, in the opinion of the management of Battle Mountain Gold Company,
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 Battle Mountain Gold Company and its wholly-owned and
majority-owned subsidiaries ("Battle Mountain") and should be read in
conjunction with the consolidated financial statements which are included in
Battle Mountain's Annual Report on Form 10-K/A, Amendment No. 2, for the year
ended December 31, 1999.
During the third quarter of 2000, Battle Mountain changed its
presentation of bullion and bullion settlements in the condensed consolidated
balance sheet and statement of cash flows to a more widely accepted
presentation. These accounts were previously presented as components of cash
and cash equivalents, and are currently presented as components of accounts
and notes receivable. Accordingly, the condensed consolidated balance sheet
as of December 31, 1999 and the condensed consolidated statement of cash
flows for the nine months ended September 30, 1999 were restated in order to
conform to the current reporting presentation. The effect of this restatement
on the December 31, 1999 balance sheet compared to amounts previously
presented was a $23.5 million decrease in cash and cash equivalents and a
corresponding $23.5 million increase in accounts and notes receivable. The
effects on the cash flow statement for the nine month period ended September 30,
1999 period were a $14.1 million increase in cash flows provided by operating
activities due to a change in working capital, a $40.3 million decrease in
cash at December 31, 1998 and a $26.2 million decrease in cash at September
30, 1999. Certain other amounts for prior years have been reclassified in
order to conform to the current reporting presentation.
The Securities and Exchange Commission issued Staff Accounting Bulletin
("SAB") No. 101, "Revenue Recognition in Financials Statements," in December
1999 which summarizes certain of its views in applying generally accepted
accounting principles to revenue recognition in financial statements. Battle
Mountain will implement the bulletin effective with its December 31, 2000
financial statements and believes that implementation of this bulletin will not
have a material effect on consolidated results of operations, financial position
or liquidity.
Note 2. Merger Announcement
On June 21, 2000, Battle Mountain and Newmont Mining Corporation
entered into a merger agreement under which Battle Mountain will become a wholly
owned subsidiary of Newmont Mining subject to the satisfaction or waiver of the
conditions set forth in the merger agreement. Under the agreement, each of
Battle Mountain's 133.3 million shares of common stock and Battle Mountain
Canada Ltd.'s 96.6 million exchangeable shares will be exchanged for the right
to receive 0.105 shares of Newmont common stock. In addition, each of Battle
Mountain's 2.3 million shares of convertible preferred stock will be exchanged
for one share of Newmont convertible preferred stock having substantially
identical terms and conditions. It is expected that the transaction will be
accounted for as a pooling of interests and will be completed around the end of
the fourth quarter of 2000, following regulatory approvals and approval by
Battle Mountain and Battle Mountain Canada shareholders. Noranda Inc., a 28%
shareholder of Battle Mountain, has agreed to vote in favor of the merger.
Battle Mountain incurred $0.7 million of merger- related expenses in the second
quarter of 2000 and $1.7 million in the third quarter of 2000.
4
<PAGE>
Note 3. Niugini Mining and Lihir
Niugini Mining and Lihir merged on February 2, 2000. As a result,
Battle Mountain, which held a 50.45% interest in Niugini Mining prior to the
merger, received 111.3 million shares of Lihir, representing a 9.74% equity
interest in Lihir. Battle Mountain, through its investment in Niugini Mining,
held a 7.52% equity interest in Lihir at December 31, 1999.
As a result of the merger, Battle Mountain no longer owns shares of
Niugini Mining. The post-merger investment in the Lihir shares has been
classified as marketable securities, available for sale, in the condensed
consolidated balance sheet. The market value of the Lihir shares decreased $7.0
million in the third quarter of 2000 and $24.8 million in the first nine months
of 2000. These decreases were recorded as a part of comprehensive loss in
shareholders' equity in the condensed consolidated balance sheet. In 1999,
Battle Mountain recorded impairment charges of $11.0 million in the first
quarter and $12.4 million ($9.2 million net of minority interest) in the second
quarter as a result of decreases in the market value of the Lihir shares then
held by Niugini Mining. The investment in Lihir was accounted for under the
equity method in 1999 and the decreases in value were considered to be other
than temporary.
Note 4. Loss per Common Share
Battle Mountain's outstanding common stock options, convertible
debentures and convertible preferred stock were anti-dilutive and therefore not
included in the calculations of basic and diluted loss per share amounts
presented in the condensed consolidated statement of operations.
Note 5. Comprehensive Loss
Battle Mountain's comprehensive loss follows:
<TABLE>
<CAPTION>
Three months ended Nine months ended
September 30 September 30
------------------ -------------------
MILLIONS 2000 1999 2000 1999
-------- ---- ---- ---- ----
<S> <C> <C> <C> <C>
Net loss $ (14.3) $ (18.1) $ (23.3) $ (46.1)
Foreign currency translation adjustments (2.2) (2.1) (2.6) (4.1)
Unrealized losses on marketable equity securities (7.0) - (24.8) -
------- ------- ------- -------
Comprehensive loss $ (23.5) $ (20.2) $ (50.7) $ (50.2)
======= ======= ======= =======
</TABLE>
Note 6. Debt
During the first nine months of 2000, Battle Mountain made $12.0
million of early debt payments to the Canadian Imperial Bank of Commerce because
the market value of the Lihir shares held by Battle Mountain declined to less
than the level required by the loan agreement, and also made $0.5 million of
early payments due to the sale by Battle Mountain Canada of a power line to a
Canadian power company. In addition, subsequent to September 30, 2000 through
the date of this report, Battle Mountain made another $2.0 million of early debt
payments related to the market value of the Lihir shares and another $0.2
million payment related to the power line sale. Further declines in the market
value of the shares of Lihir may result in additional principal repayments.
Battle Mountain established a $10.0 million, variable interest
rate-based credit facility with an Australian bank in July 2000. The credit
facility, expiring May 10, 2001, contains various financial and operational
covenants, which include the maintenance of various financial ratios, and
restrictions on liens and dividend payments. No amounts were outstanding under
this credit facility at September 30, 2000.
5
<PAGE>
Note 7. Derivative Financial Instruments
Gold contracts outstanding at September 30, 2000 were as follows:
<TABLE>
<CAPTION>
Total or
OUNCES IN THOUSANDS 2000 2001 2002 2003 2004 Average
------------------- ---- ---- ---- ---- ---- --------
<S> <C> <C> <C> <C> <C> <C>
Net written call options
Ounces 38 149 149 149 20 505
Average price per ounce $ 358 $ 358 $ 358 $ 358 $ 372 $ 359
Net purchased put options
Ounces 38 149 149 149 20 505
Average price per ounce $ 297 $ 297 $ 297 $ 297 $ 302 $ 297
Flat forwards
Ounces 9 38 38 38 2 125
Average price per ounce $ 316 $ 317 $ 317 $ 317 $ 326 $ 317
Forwards
Ounces - 98 - - - 98
Average price per ounce - $ 289 - - - $ 289
</TABLE>
The put options are the minimum price Battle Mountain will receive,
while the call options, having a higher price, allow participation in a rising
gold market. All ounces sold through the forwards will be at the stated prices.
The above derivatives have no margin requirements nor do they subject Battle
Mountain to lease rate exposure. Ounces covered by the derivatives, except the
forwards, represent between 3% and 25% of estimated production for each period
from October 1, 2000 through March 31, 2004, with a weighted average of
approximately 18% of total estimated production for those periods combined.
During the nine months ended September 30, 2000, Battle Mountain
delivered or financially settled put options for 77,252 ounces of gold at an
average price of $301 per ounce and flat forward sales contracts for 25,002
ounces of gold at an average price of $316 per ounce. No settlements were made
during the same period in 1999. Put options for 10,625 ounces and call options
for 115,877 ounces of gold expired during the first nine months of 2000. The
estimated fair value of put and call options outstanding at September 30, 2000,
net, was $6.2 million. The estimated fair value of the flat forwards outstanding
was $2.1 million and the estimated fair value of the forwards outstanding was
$1.0 million. Increases in the aforementioned fair values compared to the fair
values at December 31, 1999 were attributable to lower gold prices and increased
volumes at September 30, 2000.
The forwards are part of Battle Mountain's overall financial planning.
These contracts cover gold that was on deposit at a refinery or leased to third
parties. All the contracts mature by March 30, 2001. Battle Mountain, at times,
is a party to lease transactions and will sell the leased gold into the spot
market. Whenever a spot sale is made, a forward purchase contract is entered
into to assure delivery of the gold at the end of the lease. Battle Mountain
Canada had lease contracts outstanding with Battle Mountain for 97,550 ounces of
gold at September 30, 2000. All such contracts mature by March 30, 2001.
Statement of Financial Accounting Standards No. 133, "Accounting for
Derivative Instruments and Hedging Activities," was issued in June 1998. This
standard was amended by Accounting Standard No. 137, which deferred the
effective date of implementation to the first quarter of fiscal years
beginning after June 15, 2000, and also by Accounting Standard No. 138, which
contains various other modifications including an expanded exemption for
normal course purchases and sales. Accounting Standard No. 133, as amended,
requires companies to record derivative financial instruments on the balance
sheet as assets or liabilities, as appropriate, at fair value. Gains or
losses resulting from changes in the fair values of those derivatives are
included in earnings or comprehensive income depending on the intent and
nature of the derivative instrument. Battle Mountain expects its forward and
flat forward sales contracts to be exempt from Accounting Standard No. 133 as
normal course sales as it intends to physically deliver gold pursuant to the
terms of its forward contracts in normal quantities.
6
<PAGE>
However, its puts and calls that are part of an integrated contract (referred
to as "collars") will be subject to the requirements of Accounting Standard
No. 133. Based on Battle Mountain's positions as of September 30, 2000, if
the collars were accounted for in accordance with Accounting Standard
No. 133, current assets, other assets and accumulated comprehensive income
would have increased by $1.7 million, $4.5 million and $6.2 million,
respectively. Also, Battle Mountain believes the collars would qualify as
cash flow hedges and, therefore, any future changes in their fair market
value, to the extent the hedge is effective, would be included in
comprehensive income until they were no longer effective as hedges or the
anticipated transactions occurred, at which time they would be included in
earnings. Battle Mountain will be adopting this amended standard effective
January 1, 2001.
Note 8. Other Matters
SAN LUIS. Battle Mountain's Annual Report on Form 10-K/A, Amendment No.
2, for the year ended December 31, 1999 contained a description of closure and
reclamation efforts and technical long-term water quality issues at the San Luis
mine in Colorado, which ceased operations in November 1996.
In 1998, Battle Mountain provided notice to the requisite regulatory
agencies and undertook implementation of a response plan triggered by the
identification of elevated levels of naturally occurring constituents detected
in a monitoring well located downgradient from the West Pit. The Colorado Mined
Land Reclamation Board held a formal public hearing to consider the matter on
January 26, 1999 and determined that no violation had occurred and ordered
Battle Mountain to implement the response plan. Battle Mountain has received
final approval of a technical revision to the facility's permit which sets forth
the response measures contemplated for the facility and has implemented all of
the approved response measures.
On August 20, 1999, the Colorado Department of Public Health and
Environment (the "Department of Public Health") issued a Notice of Violation and
Cease and Desist Order to Battle Mountain, alleging discharges to waters not
permitted under the Colorado Water Quality Control Act. Battle Mountain filed an
Answer to the Notice denying that such a violation has occurred, has commenced
treatment and discharge operations as authorized by an October 1999 Amendment of
the Notice and is awaiting final approval of a Colorado Discharge Permit System
permit for discharges from the long-term operation of a water treatment facility
at the site. Battle Mountain negotiated a settlement with the Department of
Public Health which resolved the violations alleged in the Notice of Violation.
Under applicable law, the settlement agreement became final and effective upon
the final imposition of its terms by the Department of Public Health pursuant to
an Order for Civil Penalty dated September 1, 2000 (the "Order"). Battle
Mountain has made the $0.1 million civil penalty payment required by the Order
and was notified by the Department of Public Health that the matter was assigned
a "closed status effective September 15, 2000." On October 6, 2000 the
Department of Public Health received an Application for Reconsideration of Order
for Civil Penalty filed by project opponents seeking to appeal the civil penalty
terms of the settlement. On October 16, 2000 the Application for Reconsideration
was denied in its entirety by the Department of Public Health. Project opponents
have filed a judicial appeal of the Order in the District Court for Costilla
County, Colorado, naming the Department of Public Health as defendant.
It is not possible to predict the nature or scope of any further action
that might be taken by regulatory authorities, which actions could include
seeking injunctive relief, mandating the posting of additional financial
assurances, requiring further on-site response actions and the imposition of
additional monetary penalties. Battle Mountain has in place certain
environmental and reclamation financial assurances related to the San Luis
property and additional financial assurances could be required over time. There
can be no guarantee that Battle Mountain will be able to maintain and/or put in
place the necessary assurances.
An environmental remediation charge of $9.5 million was recorded in the
third quarter of 1999 based upon Battle Mountain's best estimate at that time of
costs to address technical long-term water quality issues at the San Luis
property. In the third quarter of 2000, an additional $5.6 million environmental
remediation charge was recorded. This charge was attributable to, among other
things, increased anticipated costs due to changes in the scope and timing of
the remediation project caused by investigating and responding to evolving
regulatory issues associated with the permitting of the discharge,
7
<PAGE>
the unanticipated redesign of the water treatment plant, and the permitting,
in-field modification and construction of a stormwater diversion and
conveyance system. In addition, a $1.1 million reclamation charge was
recorded in the third quarter of 2000 for additional future reclamation at
the San Luis property caused in part by changes in the remediation project.
It is reasonably possible that current estimates of the ultimate costs of the
remediation and reclamation activities at the San Luis property may change in
future reporting periods as further information becomes available.
INVESTMENTS. Battle Mountain Canada sold, at book value, its investment
in First Toronto Investments Limited for $10.2 million in the third quarter of
1999.
OTHER. Battle Mountain is party to a number of other legal actions
arising in the ordinary course of business. While the final outcome of these
other actions cannot be predicted with certainty, it is the opinion of
management that none of these actions when resolved will have a material adverse
effect on results of operations, financial position or cash flows.
Assuming that the merger between Battle Mountain and Newmont is
completed around the end of the fourth quarter of 2000 as expected, Battle
Mountain believes that its pre-merger cash requirements will be funded
through a combination of current cash, future cash flows from operations,
short-term lines of credit, monetization of derivative financial instruments
and/or contributions from Newmont. If the merger is delayed or does not
close, Battle Mountain believes that its cash requirements over the next
twelve months will be funded through a combination of current cash, future
cash flows from operations, proceeds from potential asset sales, short-term
lines of credit, and/or monetization of derivative financial instruments. In
order to continue the development of Battle Mountain's current and future
mining projects, including the Phoenix project, significant additional
capital will be required in the foreseeable future. Without the merger with
Newmont, Battle Mountain's ability to raise capital is highly dependent upon
the commercial viability of its projects and the availability of new capital,
which in turn is dependent upon the price of gold. Because of continued low
gold prices and their effect on Battle Mountain's financial condition, our
short-term liquidity and ability to raise additional capital for long-term
development projects may be impaired in the absence of the merger with
Newmont. In this case, management will defer planned capital and exploration
expenditures as needed to conserve cash and defer capital projects, including
the Phoenix project, until funds are obtained for their development.
Various laws require that financial assurances be in place for
certain environmental and reclamation obligations and potential liabilities.
Battle Mountain currently has in place certain environmental and reclamation
financial assurances in the form of surety bonds, letters of credit and
corporate guarantees and will be required to put additional financial
assurances in place in the near future. There can be no guarantee that Battle
Mountain will be able to maintain and/or put in place the necessary
assurances. The corporate guarantees utilized by Battle Mountain, totaling
$2.6 million, are provided by Newmont Mining Corporation. Battle Mountain's
ability to continue utilizing these guarantees is contingent upon the
completion of the merger of Battle Mountain and Newmont.
Note 9. Summarized Financial Information
The following summarized information of Battle Mountain Canada is
presented in accordance with the Securities and Exchange Commission's reporting
requirements as they pertain to the Battle Mountain Canada Exchangeable Shares:
<TABLE>
<CAPTION>
Three months ended Nine months ended
September 30 September 30
------------------ ------------------
MILLIONS 2000 1999 2000 1999
-------- ------ ------ ------ ------
<S> <C> <C> <C> <C>
Sales $ 29.8 $ 31.9 $ 93.9 $ 88.9
Costs and expenses 26.1 31.2 84.1 89.1
------ ------ ------ ------
Operating income (loss) $ 3.7 $ 0.7 $ 9.8 $ (0.2)
====== ====== ====== ======
Net income (loss) $ 0.7 $ (1.0) $ 3.2 $(18.4)
====== ====== ====== ======
</TABLE>
8
<PAGE>
Note 10. Geographic and Segment Information
Financial information by segment for the applicable periods presented
in the condensed consolidated financial statements follows:
<TABLE>
<CAPTION>
Golden Kori Battle Vera/ Corp &
MILLIONS Total Giant Kollo Holloway Mountain Nancy Other
-------- ----- ------ ----- -------- -------- ----- -----
<S> <C> <C> <C> <C> <C> <C> <C>
Three months ended
September 30, 2000
------------------
Gross revenues $ 57.4 $ 23.8 $ 20.5 $ 5.4 $ - $ 7.0 $ 0.7
Production costs 37.0 12.6 16.0 4.5 - 2.8 1.1
Deprec., deplet. & amort. 15.0 5.5 6.0 2.5 - 0.9 0.1
Environmental remediation 5.6 - - - - - 5.6
Other expenses 7.7 - - - - - 7.7
------ ------ ------ ------ ------ ------ ------
Operating income (loss) (7.9) 5.7 (1.5) (1.6) - 3.3 (13.8)
====== ====== ====== ====== ====== ======
Foreign currency exch. loss (2.7)
Interest & other expense (2.3)
------
Loss before income taxes (12.9)
======
Three months ended
September 30, 1999
------------------
Gross revenues 54.6 25.1 18.8 6.8 - 3.9 -
Production costs 35.8 12.1 15.8 6.4 (0.1) 1.8 (0.2)
Deprec., deplet. & amort. 16.6 6.0 6.5 3.5 - 0.6 -
Environmental remediation 9.5 - - - - - 9.5
Other expenses 8.4 - - - - - 8.4
------ ------ ------ ------ ------ ------ ------
Operating income (loss) (15.7) 7.0 (3.5) (3.1) 0.1 1.5 (17.7)
====== ====== ====== ====== ====== ======
Lihir equity inc./impairment 0.2
Foreign currency exch. gain 0.1
Interest & other expenses (1.6)
------
Loss before income taxes (17.0)
======
Nine months ended
September 30, 2000
------------------
Gross revenues 179.1 73.7 60.5 18.6 - 24.2 2.1
Production costs 112.6 39.4 48.3 14.9 (0.2) 9.1 1.1
Deprec., deplet. & amort. 47.7 17.0 18.1 8.7 - 3.4 0.5
Environmental remediation 5.6 - - - - - 5.6
Other expenses 21.7 - - - - - 21.7
------ ------ ------ ------ ------ ------ ------
Operating income (loss) (8.5) 17.3 (5.9) (5.0) 0.2 11.7 (26.8)
====== ====== ====== ====== ====== ======
Foreign currency exch. loss (6.6)
Interest & other expense (6.9)
------
Loss before income taxes (22.0)
======
Nine months ended
September 30, 1999
------------------
Gross revenues 161.8 69.9 60.9 19.0 - 12.0 -
Production costs 107.4 39.7 48.6 15.7 (0.3) 5.4 (1.7)
Deprec., deplet. & amort. 46.8 16.8 18.6 9.2 - 1.6 0.6
Environmental remediation 9.5 - - - - - 9.5
Other expenses 25.0 - - - - - 25.0
------ ------ ------ ------ ------ ------ ------
Operating income (loss) (26.9) 13.4 (6.3) (5.9) 0.3 5.0 (33.4)
====== ====== ====== ====== ====== ======
Lihir equity loss/impairment (26.2)
Foreign currency exch. gain 6.9
Interest & other expense (0.7)
------
Loss before income taxes (46.9)
======
TOTAL ASSETS
------------
Sept. 30, 2000 431.3 118.2 63.3 67.9 62.6 29.0 90.3
====== ====== ====== ====== ====== ====== ======
Dec. 31, 1999 (as restated) 568.5 118.1 78.4 76.1 54.3 36.0 205.6
====== ====== ====== ====== ====== ====== ======
</TABLE>
9
<PAGE>
BATTLE MOUNTAIN GOLD COMPANY
SUPPLEMENTAL INFORMATION - (UNAUDITED) (1)
(Data reflects BMG attributable interests, except as noted)
(Ounces in thousands)
<TABLE>
<CAPTION>
Three months ended Nine months ended
September 30 September 30
------------------ -----------------
2000 1999 2000 1999
----- ----- ----- -----
<S> <C> <C> <C> <C>
GOLDEN GIANT
Gold ounces recovered 82 94 255 258
Silver ounces recovered 6 9 18 16
-------------------------------------------------------------------------------------------------------
Cost per Gold Ounce Produced
Cash production costs $ 145 $ 126 $ 148 $ 147
Depreciation, depletion and amortization 67 64 66 65
Reclamation and mine closure costs 6 3 6 3
----- ----- ----- -----
Total production costs $ 218 $ 193 $ 220 $ 215
-------------------------------------------------------------------------------------------------------
KORI KOLLO (88% Interest)
Gold ounces recovered 63 61 181 187
Silver ounces recovered 155 150 453 516
-------------------------------------------------------------------------------------------------------
Cost per Gold Ounce Produced (2)
Cash production costs $ 191 $ 196 $ 203 $ 191
Depreciation, depletion and amortization 84 92 88 89
Reclamation and mine closure costs 7 11 6 11
----- ----- ----- -----
Total production costs $ 282 $ 299 $ 297 $ 291
-------------------------------------------------------------------------------------------------------
HOLLOWAY (84.65% Interest)
Gold ounces recovered 20 28 64 71
-------------------------------------------------------------------------------------------------------
Cost per Gold Ounce Produced
Cash production costs $ 223 $ 162 $ 216 $ 188
Depreciation, depletion and amortization 134 130 134 131
Reclamation and mine closure costs 3 2 3 2
----- ----- ----- -----
Total production costs $ 360 $ 294 $ 353 $ 321
-------------------------------------------------------------------------------------------------------
VERA/NANCY (50% Interest)
Gold ounces recovered 26 15 86 45
Silver ounces recovered 20 11 65 35
-------------------------------------------------------------------------------------------------------
Cost per Gold Ounce Produced
Cash production costs $ 108 $ 112 $ 101 $ 116
Depreciation, depletion and amortization 32 39 40 36
Reclamation and mine closure costs 2 2 2 1
----- ----- ----- -----
Total production costs $ 142 $ 153 $ 143 $ 153
-------------------------------------------------------------------------------------------------------
=======================================================================================================
AGGREGATE DATA
Gold ounces recovered 191 198 586 561
Average price per gold ounce realized $ 283 $ 262 $ 287 $ 272
Silver ounces recovered 181 170 536 567
Average price per silver ounce realized $4.83 $5.26 $4.79 $5.20
-------------------------------------------------------------------------------------------------------
Weighted Average Cost per Gold Ounce Produced
Cash production costs $ 164 $ 152 $ 166 $ 164
Depreciation, depletion and amortization 73 80 76 79
Reclamation and mine closure costs 6 5 5 6
----- ----- ----- -----
Total production costs $ 243 $ 237 $ 247 $ 249
=======================================================================================================
</TABLE>
10
<PAGE>
BATTLE MOUNTAIN GOLD COMPANY
SUPPLEMENTAL INFORMATION - (UNAUDITED) (1)
(Data reflects BMG attributable interests, except as noted)
(Ounces in thousands)
<TABLE>
<CAPTION>
Three months ended Nine months ended
September 30 September 30
-------------------- -----------------
2000 1999 2000 1999
---- ---- ---- ----
<S> <C> <C> <C> <C>
AGGREGATE DATA (cont.)
Gold ounces recovered - 100% 200 207 611 587
Gold ounces sold - 100% 199 205 614 585
Gold ounces sold - BMG share 190 195 589 558
------------------------------------------------------------------------------------------
Silver ounces recovered - 100% 202 190 598 637
Silver ounces sold - 100% 202 184 597 631
Silver ounces sold - BMG share 180 165 535 562
==========================================================================================
</TABLE>
(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.
(2) Royalties paid to the Bolivian government for the Kori Kollo mine are
treated as income tax for per ounce cost calculations and are therefore not
included in these cost calculations.
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 Battle Mountain's Annual Report on Form 10-K/A, Amendment No. 2, for
the year ended December 31, 1999 and the unaudited condensed consolidated
financial statements and notes preceding this discussion.
MERGER ANNOUNCEMENT. On June 21, 2000, Battle Mountain and Newmont
Mining Corporation entered into a merger agreement under which Battle Mountain
will become a wholly owned subsidiary of Newmont Mining subject to the
satisfaction or waiver of the conditions set forth in the merger agreement.
Under the agreement, each of Battle Mountain's 133.3 million shares of common
stock and Battle Mountain Canada Ltd.'s 96.6 million exchangeable shares will be
exchanged for the right to receive 0.105 shares of Newmont common stock. In
addition, each of Battle Mountain's 2.3 million shares of convertible preferred
stock will be exchanged for one share of Newmont convertible preferred stock
having substantially identical terms and conditions. It is expected that the
transaction will be accounted for as a pooling of interests and will be
completed around the end of the fourth quarter of 2000, following regulatory
approvals and approval by Battle Mountain and Battle Mountain Canada
shareholders. Noranda Inc., a 28% shareholder of Battle Mountain, has agreed to
vote in favor of the merger. Battle Mountain incurred $0.7 million of merger-
related expenses in the second quarter of 2000 and $1.7 million in the third
quarter of 2000.
11
<PAGE>
OVERVIEW
Reclamation and remediation charges related to the San Luis property
and foreign currency exchange losses, partially offset by higher gold prices,
lower exploration and lower general and administrative expenses resulted in net
losses of $16.2 million for the third quarter of 2000 and $28.9 million for the
nine month period of 2000. Cash flows from operations increased to $52.2 million
for the first nine months compared with $30.6 million for the same period in
1999. Cash and cash equivalents decreased $56.3 million, primarily due to the
effects of the merger of Niugini Mining and Lihir, capital expenditures and debt
payments, partially offset by lower accounts receivable.
LIQUIDITY AND CAPITAL RESOURCES
OPERATING ACTIVITIES. Battle Mountain generated cash flows of $52.2
million from operating activities during the nine months ended September 30,
2000 compared with $30.6 million for the same period in 1999. The increase was
primarily the result of higher production and improved gold prices.
INVESTING ACTIVITIES. Capital expenditures totaled $34.8 million in the
nine months in 2000 compared with $37.3 million in the nine month period in
1999. Battle Mountain currently expects to invest $40 million to $45 million on
capital expenditures in 2000.
Niugini Mining and Lihir merged on February 2, 2000. As a result,
Battle Mountain, which held a 50.45% interest in Niugini Mining prior to the
merger, received 111.3 million shares of Lihir, representing a 9.74% equity
interest in Lihir. The effect of the merger on cash and cash equivalents was a
decrease of $54.7 million due to the deconsolidation of Niugini Mining. See Note
3 of Notes to Condensed Consolidated Financial Statements in Item 1 for further
discussion.
In March 1999, an $11.0 million liquidating dividend was paid to Crown
Butte Resources Ltd. minority shareholders. Battle Mountain Canada sold, at book
value, its investment in First Toronto Investments Limited for $10.2 million in
the third quarter of 1999.
FINANCING ACTIVITIES. Battle Mountain made $15.1 million of debt
payments in the first nine months of 2000 compared with $45.7 million of debt
and short-term borrowing repayments in the same period of 1999. During the first
nine months of 2000, Battle Mountain made $12.0 million of early debt payments
to the Canadian Imperial Bank of Commerce because the market value of the Lihir
shares held by Battle Mountain declined to less than the level required by the
loan agreement, and also made $0.5 million of early payments due to the sale by
Battle Mountain Canada of a power line to a Canadian power company. In addition,
subsequent to September 30, 2000 through the date of this report, Battle
Mountain made another $2.0 million of early debt payments related to the market
value of the Lihir shares and another $0.2 million payment related to the power
line sale. Further declines in the market value of the shares of Lihir may
result in additional principal repayments.
Battle Mountain established a $10.0 million, variable interest
rate-based credit facility with an Australian bank in July 2000. The credit
facility, expiring May 10, 2001, contains various financial and operational
covenants, which include the maintenance of various financial ratios, and
restrictions on liens and dividend payments. No amounts were outstanding under
this credit facility at September 30, 2000.
Battle Mountain has an effective registration statement on file with
the Securities and Exchange Commission (the "SEC") for the issuance of up to
$150.0 million of debt and/or equity securities. As of the date of this report,
no securities have been issued nor are there any current plans to issue any
securities under this registration statement. Battle Mountain also has
registration statements on file with the SEC and regulatory authorities in
Canada which qualify for sale the 65.2 million shares of Battle Mountain common
stock effectively held by Noranda Inc. Battle Mountain will not receive proceeds
from the sales of any shares that may be sold under the registration statements
covering the shares held by Noranda.
12
<PAGE>
CONCLUSION. Assuming that the merger between Battle Mountain and
Newmont is completed around the end of the fourth quarter of 2000 as
expected, Battle Mountain believes that its pre-merger cash requirements will
be funded through a combination of current cash, future cash flows from
operations, short-term lines of credit, monetization of derivative financial
instruments and/or contributions from Newmont. If the merger is delayed or
does not close, Battle Mountain believes that its cash requirements over the
next twelve months will be funded through a combination of current cash,
future cash flows from operations, proceeds from potential asset sales,
short-term lines of credit, and/or monetization of derivative financial
instruments. In order to continue the development of Battle Mountain's
current and future mining projects, including the Phoenix project,
significant additional capital will be required in the foreseeable future.
Without the merger with Newmont, Battle Mountain's ability to raise capital
is highly dependent upon the commercial viability of its projects and the
availability of new capital, which in turn is dependent upon the price of
gold. Because of continued low gold prices and their effect on Battle
Mountain's financial condition, our short-term liquidity and ability to raise
additional capital for long-term development projects may be impaired in the
absence of the merger with Newmont. In this case, management will defer
planned capital and exploration expenditures as needed to conserve cash and
defer capital projects, including the Phoenix project, until funds are
obtained for their development.
RESULTS OF OPERATIONS
Battle Mountain recorded net losses to common shares of $16.2 million
($.07 per share) for the three month period ended September 30, 2000 and $28.9
million ($.13 per share) for the nine month period then ended. This compares
with net losses to common shares of $20.0 million ($.09 per share) and $51.7
million ($.22 per share) during the same periods in 1999. Higher gold prices and
production in 2000 were partially offset by merger related expenses and foreign
currency exchange losses in 2000, as compared to foreign currency exchange gains
in the 1999 periods. Results in 1999 also included $23.4 million of impairment
charges to the investment in Lihir. Environmental remediation charges related to
the San Luis property were recorded in the third quarters totaling $5.6 million
in 2000 and $9.5 million in 1999.
<TABLE>
<CAPTION>
Three months ended Nine months ended
September 30 September 30
------------------ -----------------
2000 1999 2000 1999
----- ----- ----- -----
<S> <C> <C> <C> <C>
Gold ounces sold - 100%, THOUSANDS 199 205 614 585
Average gold revenue realized per ounce $ 283 $ 262 $ 287 $ 272
Average London PM gold fix per ounce $ 277 $ 259 $ 282 $ 273
</TABLE>
Sales increased $2.8 million (5%) in the three month period ended
September 30, 2000 compared with the same period in 1999 and $17.3 million (11%)
in the nine month period in 2000 compared with the same period in 1999. These
increases were primarily a result of higher gold prices. Higher production at
Vera/Nancy during the three and nine month periods in 2000, attributable to
higher throughput, also contributed to the increases. The average realized price
of gold increased in 2000 as a result of higher spot gold prices and gains on
hedging contracts.
<TABLE>
<CAPTION>
Three months ended Nine months ended
September 30 September 30
AGGREGATE ATTRIBUTABLE PRODUCTION COSTS ------------------ -----------------
PER OUNCE OF GOLD PRODUCED 2000 1999 2000 1999
-------------------------- ---- ---- ---- ----
<S> <C> <C> <C> <C>
Direct mining costs $ 164 $ 152 $ 165 $ 164
Third party smelting, refining and transportation costs 1 2 1 2
By-product credits included in sales (5) (4) (4) (5)
----- ----- ----- -----
Cash operating costs 160 150 162 161
Royalties 4 2 4 3
----- ----- ----- -----
Total cash costs 164 152 166 164
Depreciation, depletion and amortization 73 80 76 79
Reclamation and mine closure costs 6 5 5 6
----- ----- ----- -----
Total production costs $ 243 $ 237 $ 247 $ 249
===== ===== ===== =====
</TABLE>
13
<PAGE>
<TABLE>
<CAPTION>
RECONCILIATION OF AGGREGATE ATTRIBUTABLE CASH COSTS
PER OUNCE TO CONSOLIDATED FINANCIAL STATEMENTS Three months ended Nine months ended
September 30 September 30
------------------ -----------------
MILLIONS, EXCEPT OUNCES PRODUCED AND PER OUNCE AMOUNTS 2000 1999 2000 1999
----------------------------------------------- ----- ----- ------ ------
<S> <C> <C> <C> <C>
Production costs per financial statements $37.0 $35.8 $112.6 $107.4
Minority interest portion of production costs (1.8) (1.7) (5.3) (5.2)
By-product credits included in sales (0.9) (0.8) (2.6) (2.9)
Reclamation and mine closure costs (2.2) (1.2) (4.2) (3.5)
Inventory change and other (0.8) (2.1) (3.4) (3.6)
----- ----- ------ ------
Production costs for per ounce calculation purposes $31.3 $30.0 $ 97.1 $ 92.2
===== ===== ====== ======
Gold ounces produced, THOUSANDS 191 198 586 561
===== ===== ====== ======
Total cash costs per gold ounce produced $ 164 $ 152 $ 166 $ 164
===== ===== ====== ======
</TABLE>
Royalties paid to the Bolivian government for the Kori Kollo mine are treated
as income tax for per ounce cost calculations and are therefore not included in
these cost calculations.
Excluding the $1.1 million reclamation charge recorded in the third
quarter of 2000 related to the San Luis property, total production costs
remained constant in the third quarter of 2000 compared with 1999. Total
production costs increased in the first nine months of 2000 compared with the
same period last year, primarily the result of increased gold sales due to
higher production, mainly at Vera/Nancy. Also contributing to this increase was
the placing of Niugini Mining's San Cristobal mine on care and maintenance
effective January 1, 1999, as San Cristobal's revenues were credited against its
production costs, resulting in net credits to production costs of $0.3 million
in the third quarter of 1999 and $1.6 million in the nine month period in 1999.
Operations of San Cristobal are not included in Battle Mountain's results in
2000 due to the Niugini Mining and Lihir merger. Consolidated per ounce cash
costs increased in the third quarter of 2000, primarily due to lower production
at Golden Giant and Holloway.
Depreciation, depletion and amortization ("DD&A") decreased during the
third quarter of 2000, primarily as a result of lower production. DD&A remained
fairly constant during the nine month periods in 2000 and 1999.
Exploration, evaluation and other lease costs decreased in 2000 due to
planned decreased expenditures. Effective January 1, 2000, expenditures at the
Crown Jewel project are classified as exploration, evaluation and other lease
costs.
Environmental remediation charges of $9.5 million and $5.6 million were
recorded in the third quarters of 1999 and 2000 based upon Battle Mountain's
best estimates at those times of costs to address technical long-term water
quality issues at the San Luis property. See Note 8 of Notes to Condensed
Consolidated Financial Statements in Item 1 for further discussion.
Battle Mountain incurred $0.7 million of merger-related expenses in the
second quarter of 2000 and $1.7 million in the third quarter. General and
administrative expenses decreased during the three and nine month periods in
2000 due to overall decreased expenditures, including the closure of the Toronto
administrative office in late 1999.
Interest expense remained constant as lower levels of average debt
outstanding in the periods in 2000 were offset by higher average interest rates.
Interest income decreased due to lower levels of cash invested.
Equity in income and impairment of Lihir totaled $0.2 million for the
third quarter of 1999 and equity in losses and impairment of Lihir totaled $26.2
million for the nine month period in 1999. Battle Mountain recorded impairment
charges of $23.4 million in the first half of 1999 as a result of decreases in
the market value of the Lihir shares then held by Niugini Mining. See Note 3 of
Notes to Condensed Consolidated Financial Statements in Item 1 for discussion of
the Niugini Mining and Lihir merger and the subsequent accounting treatment for
changes in the value of the investment in Lihir.
14
<PAGE>
Net foreign currency exchange losses totaled $2.7 million in the third
quarter of 2000 and $6.6 million in the first nine months of 2000, primarily on
the U.S. dollar-denominated debt of foreign subsidiaries. This compared with net
foreign currency exchange gains of $0.1 million and $6.9 million during the same
periods in 1999. During the first nine months in 2000, the Australian dollar
exchange rate fell 21% against the U.S. dollar and the Canadian dollar exchange
rate fell 4%.
Minority interest in net loss decreased $3.0 million during the nine
month period in 2000 as a result of the minority interest portion of the
impairment charges to the investment in Lihir described above.
Battle Mountain's provision for income taxes was $0.1 million for the
quarter ended September 30, 2000 and $1.1 million for the nine months of 2000.
The increases in taxes compared with the 1999 periods result from Australian
income taxes on earnings from the Vera/Nancy mine and increased earnings of
Battle Mountain Canada. Mining income taxes decreased in 2000 compared with the
same periods in 1999 due to a lower effective tax rate.
OTHER
See Note 8 of Notes to Condensed Consolidated Financial Statements for
a discussion of material contingencies.
Accounting Standard No. 133, "Accounting for Derivative Instruments and
Hedging Activities," was issued in June 1998. This standard was amended by
Accounting Standard No. 137, which deferred the effective date of implementation
to the first quarter of fiscal years beginning after June 15, 2000, and also by
Accounting Standard No. 138. See Note 7 of Notes to Condensed Consolidated
Financial Statements in Item 1 for further discussion.
The Securities and Exchange Commission issued SAB No. 101, "Revenue
Recognition in Financials Statements," in December 1999 which summarizes certain
of its views in applying generally accepted accounting principles to revenue
recognition in financial statements. Battle Mountain will implement the bulletin
effective with its December 31, 2000 financial statements and believes that
implementation of this bulletin will not have a material effect on consolidated
results of operations, financial position or liquidity.
Unless otherwise discussed below, information about market, foreign
currency, interest rate and equity risks for the three month and nine month
periods ended September 30, 2000 does not differ materially from that discussed
under Item 7A of Battle Mountain's Annual Report on Form 10-K/A, Amendment No.
2, for the year ended December 31, 1999. See Note 7 of Notes to Condensed
Consolidated Financial Statements in Item 1 for discussion of derivative
financial instruments.
Battle Mountain's profitability is significantly affected by changes in
the market price of gold. Gold prices can fluctuate widely and are affected by
numerous factors, such as demand, forward selling by producers, central bank
gold sales, purchases and lending, currency valuations, investor sentiment and
production levels. While Battle Mountain is a low-cost gold producer, a
sustained period of low gold prices would have a material adverse effect on
results of operations, financial position and cash flows.
Substantially all revenues generated during the first nine months of
2000 were from mining operations outside the United States, while assets
attributable to those operations totaled approximately $278.4 million at
September 30, 2000. As a result, Battle Mountain is exposed to risks normally
associated with operations located outside the United States, including
political, economic, social and labor instabilities, as well as foreign exchange
controls, currency fluctuations and taxation changes.
15
<PAGE>
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 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 and silver, 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, the
inability to maintain or put in place necessary environmental or reclamation
financial assurances, appeals of agency decisions or other litigation, changes
in laws or regulations or the interpretation and enforcement thereof, the
occurrence of unusual weather or operating conditions, force majeure events, 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 and the results of financing efforts and financial
market conditions. These and other risk factors are discussed in more detail
herein. Many of such factors are beyond Battle Mountain's ability to control or
predict. Readers are cautioned not to put undue reliance on forward-looking
statements. Battle Mountain disclaims any intent or obligations to update these
forward-looking statements, whether as a result of new information, future
events or otherwise.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
See Management's Discussion and Analysis of Financial Condition and
Results of Operations - "Other" in Item 2 for a discussion.
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
On August 20, 1999, the Colorado Department of Public Health and the
Environment (the "Department of Public Health") issued a Notice of Violation and
Cease and Desist Order to Battle Mountain, alleging discharges at the San Luis
mine to waters not permitted under the Colorado Water Quality Control Act.
Battle Mountain filed an Answer to the Notice denying that such a violation had
occurred. Battle Mountain negotiated a settlement with the Department of Public
Health which resolved the violations alleged in the Notice of Violation. The
terms of the settlement are set forth in a Settlement Agreement and Stipulated
Order which has been executed by Battle Mountain and the Director of the
Colorado Water Quality Control Division. Under applicable law, the Settlement
Agreement became final upon final imposition of the terms of the Agreement by
the Department of Public Health pursuant to an Order for Civil Penalty dated
September 1, 2000 (the "Order"). Battle Mountain has made the $0.1 million civil
penalty payment required by the order and received acknowledgement from the
Department of Public Health that the matter was closed. The Order and the
underlying settlement are the subject of a judicial appeal filed by project
opponents in Colorado District Court for Costilla County. See Note 8 of Notes to
Condensed Consolidated Financial Statements under Part I for further discussion.
16
<PAGE>
On June 22, 2000 and July 10, 2000, putative class action lawsuits,
respectively KING V. BATTLE MOUNTAIN GOLD COMPANY, ET AL, and SCHARAN V. BATTLE
MOUNTAIN GOLD COMPANY, ET AL, were commenced by different individual purported
holders of Battle Mountain common stock against Battle Mountain and its
directors and executive officers. The actions were brought on behalf of a
putative class consisting of public shareholders of Battle Mountain that held
their shares as of June 21, 2000. The complaints in the actions allege, among
other things, that the consideration to be paid to holders of Battle Mountain
common stock in the proposed merger between Battle Mountain and Newmont Mining
Corporation is inadequate and unfair, and that the defendants agreed to the
transaction in breach of their fiduciary duties to the public shareholders and
in particular, that the defendants failed to adequately consider alternatives to
the Newmont transaction. The actions were filed in the District Court of the
State of Nevada in and for Clark County. The complaints seek, among other
things, injunctive relief against the transaction and damages in an unspecified
amount. The two complaints have now been consolidated, and the Court has granted
Battle Mountain's motion to transfer the consolidated action to the District
Court in and for Washoe County. Battle Mountain believes that the complaints are
without merit.
Battle Mountain is also party to a number of other legal actions
arising in the ordinary course of business. While the final outcome of these
other actions cannot be predicted with certainty, it is the opinion of
management that none of these actions when resolved will have a material adverse
effect on results of operations, financial position or cash flows.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
11 Computations of Earnings (Loss) per Common Share
27 Financial Data Schedule
99.1 Credit Agreement dated as of July 11, 2000 among Battle
Mountain, Battle Mountain (Australia) Inc. and Macquarie
Inc.
99.2 Amendment to Agreement for Consulting Services, effective
January 1, 2000, between Battle Mountain and Karl E. Elers
(b) Reports on Form 8-K - none
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934,
the Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
BATTLE MOUNTAIN GOLD COMPANY
Date: November 14, 2000 /s/ Jeffrey L. Powers
-----------------------------------
Jeffrey L. Powers
Vice President and Controller
(Chief Accounting Officer)
17
