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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
(MARK ONE)
{X} ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934 {FEE REQUIRED}
FOR THE FISCAL YEAR ENDED DECEMBER 31, 1993
OR
{ } TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934 {NO FEE REQUIRED}
FOR THE TRANSITION PERIOD FROM TO
COMMISSION FILE NUMBER: 1-9184
NEWMONT GOLD COMPANY
(Exact name of registrant as specified in its charter)
<TABLE>
<S> <C>
DELAWARE 13-2526632
(State or other jurisdiction of (I.R.S. employer
incorporation or organization) identification no.)
1700 LINCOLN STREET
DENVER, COLORADO 80203
(Address of principal executive offices) (Zip Code)
</TABLE>
Registrant's telephone number, including area code (303) 863-7414
Securities registered pursuant to Section 12(b) of the Act:
<TABLE>
<CAPTION>
NAME OF EACH EXCHANGE
TITLE OF EACH CLASS ON WHICH REGISTERED
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<S> <C>
COMMON STOCK, $0.01 PAR VALUE NEW YORK STOCK EXCHANGE
PARIS BOURSE
</TABLE>
Securities registered pursuant to Section 12(g) of the Act: NONE
INDICATE BY CHECK MARK WHETHER THE REGISTRANT (1) HAS FILED ALL REPORTS REQUIRED
TO BE FILED BY SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 DURING
THE PRECEDING 12 MONTHS (OR FOR SUCH SHORTER PERIOD THAT THE REGISTRANT WAS
REQUIRED TO FILE SUCH REPORTS), AND (2) HAS BEEN SUBJECT TO SUCH FILING
REQUIREMENTS FOR THE PAST 90 DAYS. Yes X No
INDICATE BY CHECK MARK IF DISCLOSURE OF DELINQUENT FILERS PURSUANT TO ITEM 405
OF REGULATION S-K IS NOT CONTAINED HEREIN, AND WILL NOT BE CONTAINED, TO THE
BEST OF REGISTRANT'S KNOWLEDGE, IN DEFINITIVE PROXY OR INFORMATION STATEMENTS
INCORPORATED BY REFERENCE IN PART III OF THIS FORM 10-K OR ANY AMENDMENT TO THIS
FORM 10-K. / /
THE AGGREGATE MARKET VALUE OF THE VOTING STOCK HELD BY NON-AFFILIATES OF THE
REGISTRANT (BASED ON THE CLOSING SALE PRICE OF THE SHARES ON THE NEW YORK STOCK
EXCHANGE) AT MARCH 21, 1994 WAS APPROXIMATELY $464,281,000.
THE NUMBER OF SHARES OF REGISTRANT'S COMMON STOCK OUTSTANDING AT MARCH 21, 1994
WAS 96,225,101.
DOCUMENTS INCORPORATED BY REFERENCE
PORTIONS OF REGISTRANT'S DEFINITIVE PROXY STATEMENT TO BE FILED PURSUANT TO
REGULATION 14A PROMULGATED UNDER THE SECURITIES EXCHANGE ACT OF 1934 FOR THE
ANNUAL MEETING OF STOCKHOLDERS TO BE HELD ON MAY 12, 1994 (PART III).
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PART I
ITEM 1. BUSINESS
INTRODUCTION
Newmont Gold Company ("NGC") is a worldwide company engaged in gold
production, exploration for gold and acquisition of gold properties. NGC was
incorporated in Delaware in 1965 under the name of Carlin Gold Mining Company as
a wholly-owned subsidiary of Newmont Mining Corporation ("NMC"). Following two
public offerings of NGC's shares, one in June 1986, and the second in April
1987, and consummation of the transaction with NMC described below, NMC now owns
89.22% of the outstanding common shares, 100% of the preferred shares of NGC and
options to purchase additional shares of common stock of NGC. NGC and its
subsidiaries collectively are referred to herein as the "Company".
Based on 1993 production as set forth in published reports, the Company is
the largest producer of gold from North American operations. In 1993, the
Company produced approximately 1.7 million ounces of gold on the Carlin Trend in
Nevada. The Company also produces gold through a 38% owned venture in Peru,
which commenced operations in August 1993. The Company additionally has a 50%
owned joint venture in Uzbekistan and an 80% owned venture in Indonesia, both of
which are scheduled to commence gold production in 1995. The Company also owns
100% of Newmont Exploration Limited ("NEL") which, together with various other
NGC affiliates, explore worldwide for gold. All of the Company's consolidated
sales, operating profit and identifiable assets in 1993, 1992 and 1991 were
related to the Company's gold mining activities in the United States. Gold sales
accounted for all of the Company's consolidated sales revenues from continuing
operations in 1993, 1992 and 1991.
OPERATIONS
CARLIN, NEVADA
The Company's North American operations are located on the geographical
feature known as the Carlin Trend, near Carlin, Nevada. See map on page 5
herein. The Carlin Trend is the largest gold district discovered in North
America this century. From the Carlin Trend, the Company produced approximately
1,666,400 ounces in 1993 compared with approximately 1,587,900 ounces in 1992
and approximately 1,576,900 ounces in 1991. Gold production at the Company's
Nevada operations is expected to be approximately 1.6 million ounces in 1994.
The Company's cash cost of production in Nevada (which is equal to
operating costs, excluding general and administrative expense, plus royalties
and capitalized mining costs) was $214 per ounce sold in 1993 which, according
to published industry sources, was lower than the cash costs associated with
approximately two-thirds of all gold produced in the western world in 1992. For
1994, per ounce cash costs at the Company's Nevada operations are expected to
increase 5% to 10% over that incurred in 1993. At the end of 1993, the Company
had 17.8 million ounces of gold in proven and probable ore reserves on the
Carlin Trend.
PERU
The Company also produces gold through the Minera Yanacocha venture in
Peru. Minera Yanacocha S.A. has mining rights with respect to a 63,000 acre land
position, which includes the Carachugo deposit and other numerous deposits,
located in northwest Peru. See map on page 6 herein. Minera Yanacocha S.A., a
Peruvian corporation which controls the multi-deposit project, is 38% owned by
the Company; 32.3% by Compania de Minas Buenaventura, S.A. ("Buenaventura"), a
Peruvian mining company; 24.7% by an affiliate of Bureau de Recherches
Geologiques et Minieres, the geological mining bureau of the French government;
and 5% by the International Finance Corporation, which provided $26 million in
financing for the project. The project's mining rights were acquired through an
assignment of a government concession held by a related entity. The assignment
has a term of 20 years, renewable at the option of Minera Yanacocha for another
20 years. NGC manages the project and production commenced in August 1993 at the
Carachugo deposit. Total project costs with respect to such deposit were
approximately $45 million (of which 38% was attributable to
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the Company). Total proven and probable reserves for the project as of December
31, 1993 were 3,780,000 ounces compared with 1,275,000 ounces as of December 31,
1992.
During the final five months of the year, production was 81,500 ounces from
the Carachugo mine and production in 1994 is expected to be approximately
220,000 ounces. The 1994 Minera Yanacocha operating plan calls for leaching
13,000 tons of ore per day. Gold recovery is expected to be at 70% to 80% which
was the approximate rate of recovery in 1993. The cash cost of production for
gold produced in 1993 was approximately $150 per ounce. Contract mining is
employed and the power for the project is provided by generators owned by the
project.
Following the results of continuing exploration, an operating plan
incorporating significantly higher levels of production at Minera Yanacocha has
been implemented for 1995 than is expected for 1994. Minera Yanacocha is
scheduled to commence gold production from the Maqui Maqui deposit at an
estimated annual rate of 180,000 ounces at the end of 1994. The additional
production from the Maqui Maqui deposit will increase total production in 1995
to approximately 350,000 to 400,000 ounces. The Maqui Maqui deposit is located
approximately three miles north of current mining operations at Carachugo. Total
capital costs of the expansion of mining operations into the Maqui Maqui deposit
are estimated at approximately $40 million which is to be funded from Minera
Yanacocha's operating cash flow and borrowings.
THE TRANSACTION
In a transaction (the "Transaction") effective as of January 1, 1994, NGC
acquired all of NMC's assets, other than 85,850,101 shares of the NGC's common
stock, par value $0.01 per share (the "NGC Common Stock"), owned by NMC and
assumed all liabilities (contingent or otherwise) of NMC, except for NMC's
obligations with respect to the $5.50 convertible preferred stock, par value
$5.00 per share, of NMC (the "NMC Preferred Stock") (other than accrued and
unpaid dividends as of December 31, 1993) and employee stock options of NMC (the
"NMC Options") exercisable for the common stock, par value $1.60 per share, of
NMC (the "NMC Common Stock"). The assets of NMC transferred to NGC consisted of
(i) all of the stock of the other subsidiaries of NMC, (ii) all of NMC's
tangible and intangible personal property, (iii) 8,649,899 shares of NGC Common
Stock owned by NMC and (iv) all other tangible or intangible assets other than
the 85,850,101 shares of NGC Common Stock retained by NMC.
As part of the Transaction, NGC (i) issued to NMC 2,875,000 shares of $5.50
convertible preferred stock, par value $5.00 per share, of NGC (the "NGC
Preferred Stock"), with terms identical to the NMC Preferred Stock, except that
on conversion NMC will be entitled to receive shares of NGC Common Stock
(instead of NMC Common Stock) and (ii) issued to NMC options to purchase shares
of NGC Common Stock (the "NGC Options") in the same number and with the same
exercise prices (after adjusting for a stock split effected in connection with
the Transaction) as the NMC Options. As a result of the Transaction, all
operating activities will be conducted by NGC and its subsidiaries and NMC will
have no business other than the ownership of the NGC Common Stock, the NGC
Preferred Stock and the NGC Options and its obligations with respect to the NMC
Preferred Stock and the NMC Options.
GOLD MARKET
Gold has two main categories of use -- product fabrication and bullion
investment. Fabricated gold has a wide variety of end uses. Purchasers of
official coins and high-carat jewelry frequently are motivated by investment
considerations, so that net private bullion purchases alone do not necessarily
represent the total investment activity in physical gold.
The profitability of the Company's current operations is significantly
affected by the market price of gold. Market gold prices can fluctuate widely
and are affected by numerous factors beyond the Company's control, including
industrial and jewelry demand, expectations with respect to the rate of
inflation, the strength of the dollar (the currency in which the price of gold
is generally quoted) and of other currencies, interest rates, central bank
sales, forward sales by producers, global or regional political or economic
events and production costs in major gold-producing regions such as South Africa
and the former Soviet Union. The demand for and supply of gold affect gold
prices, but not necessarily in the same manner as supply and demand may affect
the
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prices of other commodities. The supply of gold consists of a combination of new
mine production and existing stocks of bullion and fabricated gold held by
governments, public and private financial institutions, industrial organizations
and private individuals. As the amounts produced in any single year constitute a
very small portion of the total potential supply of gold, normal variations in
current production do not necessarily have a significant impact on the supply of
gold or on its price. If the Company's revenue from gold sales falls for a
substantial period below its cost of production at any or all of its operations,
the Company could determine that it is not economically feasible to continue
commercial production at any or all of its operations. The Company's costs of
production (which are equal to its costs applicable to sales on its income
statement) were $200 per ounce of gold sold in 1993, $198 in 1992 and $190 in
1991.
The volatility of gold prices is illustrated in the following table of
annual high, low and average gold fixing prices per ounce on the London Bullion
Market:
<TABLE>
<CAPTION>
YEAR HIGH LOW AVERAGE
----------------------------------------------------- ----- ----- -------
<S> <C> <C> <C>
1984................................................. $ 406 $ 308 $ 360
1985................................................. 341 284 317
1986................................................. 438 326 368
1987................................................. 500 390 446
1988................................................. 484 395 437
1989................................................. 416 356 381
1990................................................. 424 346 383
1991................................................. 403 344 362
1992................................................. 360 330 344
1993................................................. 406 326 360
1994 (through March 4)............................... 395 376 384
</TABLE>
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Source of Data: Metals Week
On March 4, 1994, the afternoon fixing for gold on the London Bullion
Market was $376 and the spot market price of gold on the New York Commodity
Exchange was $378. Gold prices on both the London Bullion Market and the New
York Commodity Exchange are regularly published in most major financial
publications and many nationally recognized newspapers.
REFINING AND MARKETING
The Company currently has refining arrangements with four domestic and
foreign refiners to further refine dore bullion produced at the Company's
refinery located on its Nevada properties. Under the terms of the agreements
with these refiners, the gold is toll refined and returned to the Company's
account for sale to third parties. Management believes that because of the
availability of alternative refiners, each able to supply all services needed by
the Company, no adverse effect would result if the Company lost the services of
any of its current refiners. Gold sales generally are made at the monthly
average market price prevailing during the month before the gold is delivered
plus a "contango" which is essentially an interest factor, from the end of the
month until the date of delivery. See Note 8 to Item 8 for information regarding
major customers and export sales.
EXPLORATION AND DEVELOPMENT
GENERAL
Worldwide exploration activities are conducted through NEL and certain
other NGC affiliates. NEL was responsible for the discovery in 1961 of the
Carlin Trend in Nevada. NMC discovered the existence of gold at the Yanacocha
deposit in Peru in the 1980s. Management believes that it has one of the largest
exploration and development budgets in the minerals industry based on published
reports. The Company's 1994 budget for exploration and reserve development is
$70 million.
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The Company is exploring for gold in other areas which management believes
are highly prospective. The Company's exploration team is staffed by
approximately 250 persons, the majority of whom are geologists, geochemists or
geophysicists.
CARLIN, NEVADA
Carlin Trend -- 100% owned
The Company conducts extensive exploration along the Carlin Trend. Prior to
the consummation of the Transaction, NGC owned or otherwise controlled the
mineral interests on approximately 55 square miles along the Carlin Trend (the
"NGC Property"). These 55 square miles contained all of NGC's operating mines
and proven and probable reserves as of December 31, 1993. As a result of the
Transaction, NGC acquired from NMC ownership or control of mineral interests on
an additional approximately 630 square miles of property along the Carlin Trend
(which, together with the NGC Property, is herein referred to as the "Nevada
Property"). Ongoing exploration on the Carlin Trend is focused on discovery of
new gold deposits and extensions to known deposits and determining through
drilling the mineable ore reserves within these deposits. In 1993 exploration by
underground methods at Carlin was initiated to facilitate the possible location
of deeper deposits of gold ore.
Exploration and development activity on the Carlin Trend in 1993 was
consistent with the Company's objective to conduct systematic exploration
throughout such area, with the purpose of locating and testing all gold
prospects, whether oxide or refractory, near-surface or deep. Oxide ore is ore
which is amenable to gold extraction through the use of conventional
size-reduction processes, such as blasting, crushing and grinding, and the
dissolution of the gold in such ore using cyanidation treatment techniques
common to the industry. Refractory ore contains minerals which require an
additional treatment process, which is normally not necessary with oxide ore, to
optimize the recovery of gold.
In 1993, a total of 1,067 holes, totalling 649,100 feet, were drilled by
the Company and NMC on the Carlin Trend in connection with reserve development
and exploration activities. This compares with approximately 1,264 holes,
totalling 816,000 feet, drilled in 1992.
In 1993, approximately $26 million was spent by the Company and NMC on
reserve development and exploration on the Carlin Trend. For 1994, reserve
development and exploration expenditures on the Carlin Trend are expected to be
approximately $28 million.
The exploration activities on the Carlin Trend described above include
activities conducted in connection with the Ivanhoe Joint Venture. The Ivanhoe
Joint Venture consists of approximately 125 square miles of land, held primarily
through unpatented mining claims, which lie immediately northwest of the
Company's operating mines. A 75% interest in the property was acquired in March
1992 for $20.1 million. The remaining 25% is held by Touchstone Resources
Company, a subsidiary of Cornucopia Resources Ltd. The Ivanhoe Joint Venture
agreement provides that upon unilateral termination of the agreement by one
party, the other party accedes to the interests of the terminating party in the
joint venture property. Based on drilling by NMC and the prior owners,
management believes that the property may have significant potential; however,
there can be no assurance that such potential will be realized.
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{INSERT NEVADA MAP -- FULL PAGE}
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PERU
Minera Yanacocha S.A. -- 38% owned
Northern Peru Joint Venture -- 65% interest
Further exploration continues to be conducted at the numerous deposits
owned by the Minera Yanacocha venture. See "Operations." In addition, a second
Peruvian joint venture in Northern Peru has been formed between the Company and
Buenaventura. The joint venture, in which the Company has a 65% interest, has
staked claims on 500,000 acres of prospective ground along North and South
extensions of the volcanic belt hosting the Yanacocha deposits. Initial
exploration work is under way in this prospective area.
{INSERT PERU MAP}
UZBEKISTAN
Zarafshan-Newmont -- 50% owned
In Uzbekistan, one of the Central Asian republics of the former Soviet
Union, the Company has a 50/50 joint venture ("Zarafshan-Newmont") with the
Uzbekistan State Committee for Geology and Mineral Resources, and Navoi Mining
and Metallurgical Combine, state entities of the Republic of Uzbekistan, to
produce gold from existing stockpiles of low-grade oxide ore from the Muruntau
mine through leaching the ore. Uzbekistan was the second largest gold producer
among the republics of the former Soviet Union, accounting for approximately 30%
of the former Soviet Union's gold production. These state entities of the
Uzbekistan government have guaranteed 242.5 million tons of ore with an average
grade of 0.036 ounces of gold per ton, containing approximately 8.7 million
ounces of gold. Net recovery is expected to be approximately 4.8 million ounces
of gold over the life of the project, 50% of which will be attributable to the
Company.
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The Company is managing the Zarafshan-Newmont joint venture. Production is
expected to commence in early 1995 at an annual rate of approximately 450,000
ounces. Power for the project is provided by a contractual arrangement with
Navoi Mining and Metallurgical Combine, which has its own power-generating
facilities. The capital costs are estimated at approximately $150 million, half
of which is attributable to the Company. The Zarafshan-Newmont joint venture
completed a $105 million credit facility for the project in November 1993. The
Company provided to its joint venture partners such partners' share of the
equity capital required for the project in exchange for a portion of the
existing stockpiles. See Item 7 -- "Management's Discussion and Analysis of
Results of Operations and Financial Condition." The project's gold will be sold
in international markets for U.S. dollars.
{INSERT UZBEKISTAN MAP}
INDONESIA
Minahasa -- 80% owned
Batu Hijau -- 80% owned
The Company has two advanced gold projects in Indonesia, both of which are
80% owned with the remainder held by its partner, Mr. Jusuf Merukh, an
Indonesian national. Both projects hold mineral rights pursuant to contracts of
work with the Republic of Indonesia. Such contracts provide for an eight-year
term for exploration and feasibility analysis and a 30-year term for mining.
The more advanced of these projects is Minahasa, a multi-deposit project on
the island of Sulawesi. The Mesel deposit is scheduled to commence production in
late 1995 at an annual rate of approximately 100,000 ounces. Initial cash
operating costs have been estimated at approximately $200 an ounce. A
preliminary feasibility study of the Mesel deposit was completed on this project
in October 1993. The Minahasa project is undergoing further study to achieve 35%
of required engineering to determine more
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precise capital requirements, which preliminarily have been estimated at $100
million. This process is scheduled to be completed by April 1994.
Minahasa has six deposits. The project's main deposit, Mesel, has been
fully drilled and at the end of 1993 had 1.8 million ounces in proven and
probable reserves. It contains both oxidized and refractory gold mineralization,
and would require the construction of a small roaster plant, which pretreats
refractory ore by oxidizing it prior to milling. There are five additional small
gold deposits within a three-mile radius of the Mesel pit which are still
undergoing exploratory drilling for assessment purposes. The Minahasa project is
in close proximity to the coast of Sulawesi and does not present any significant
logistical difficulties for transportation of materials and equipment.
The second Indonesian project is the Batu Hijau deposit, on the island of
Sumbawa. Batu Hijau is a porphyry gold/copper deposit that was discovered in
1990. While the economics of the deposit have not been determined, it is one of
the largest single occurrences of gold mineralization ever discovered by the
Company or NMC. It is located 10 miles from the island's coast, and has access
to natural harbors which can be developed for transportation of materials and
equipment. Seventy-nine holes have been drilled in this deposit to an average
depth of 1,500 feet. A preliminary feasibility study has been completed and a
full feasibility study is anticipated to commence in late 1994 to determine the
economic potential of the property. Batu Hijau is considered to have significant
potential, although there can be no assurance that such potential could or will
be realized.
{INSERT INDONESIAN MAP}
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NORTHWESTERN UNITED STATES
Grassy Mountain -- Vale, Oregon -- 100% interest
Musgrove Creek, Idaho -- 100% interest
The Company owns the exploration, development and mining rights on two
properties acquired from Atlas Corporation ("Atlas") -- Grassy Mountain in
Malheur County, Oregon, and Musgrove Creek in Lemhi County, Idaho. The rights
were acquired in October 1992 through two 35-year leases, each with options for
three 10-year extensions. The total lease payment was $22.5 million, which has
been fully paid, plus a 5% royalty on production from Grassy Mountain against
which an advance payment of $7.5 million was made.
The Grassy Mountain project was drilled extensively by Atlas. The drilling
has delineated an oxide ore gold deposit containing 995,900 ounces of gold and
2,467,000 ounces of silver. These reserves are contained in approximately 16
million tons of ore at an average grade of 0.062 ounces of gold per ton. The
development plan prepared by Atlas for Grassy Mountain contemplated production
of approximately 100,000 ounces of gold annually, at an estimated average
operating cost over the life of the mine of approximately $150 to $200 per
ounce. The Company is undertaking an engineering and geological review of the
Atlas plan, which could increase or decrease the reserves, or alter the
production schedule and/or costs. Subject to the results of these studies and
obtaining necessary permits, production could begin in 1997. Further, the
Company has begun limited exploration efforts on the Grassy Mountain property in
areas outside the Atlas reserve. The 43 square miles of land which make up the
Grassy Mountain property are considered to have significant additional
potential, although there can be no assurance that such potential will be
realized until further geological work is complete.
{INSERT GRASSY MOUNTAIN MAP}
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The Musgrove Creek prospect in Idaho, which covers approximately 24 square
miles, is in the very early stages of exploration, but management believes the
exploration potential appears promising based on results from a limited drilling
program by Atlas and subsequent exploration and drilling by NMC.
LAOS
Newmont Viengkham Limited -- 93% owned
The Company has a 93% interest in a joint venture for exploration in Laos.
This joint venture agreement covers approximately 2,500 square miles of land
which management believes is highly prospective.
OTHER
In addition to the exploratory projects specifically discussed above, the
Company is in the preliminary stages of exploration and/or joint venture
discussions in other parts of the world, including Chile, Ecuador, Mexico and
Canada. There can be no assurances that any of these activities by the Company
will result in any new joint ventures or other projects or that such new joint
ventures or projects would result in profitable operations.
ENVIRONMENTAL MATTERS
GENERAL
The Company's United States gold mining and processing operations are
subject to extensive federal, state and local governmental regulations for the
protection of the environment, including such as relate to the protection of air
and water quality and mine reclamation, and for the promotion of mine and
occupational safety. Management believes that these regulations have not had,
and will not in the future have, a materially more severe impact on the
Company's United States operations than is experienced by other gold mining
companies in the United States. Management does not believe that compliance with
such regulations will have a material adverse effect on its competitive
position. At this time the Company does not expect any material impact on future
recurring operating costs of compliance with currently enacted environmental
regulations. Ongoing costs to comply with environmental obligations have not
been significant to the Company's total costs of operations. Since the Company
is not able to pass on any net increases in costs to its customers, any such
increases could have an effect on future profitability of the Company depending
upon the price of gold. Amendments to current laws and regulations governing
operations and activities of mining companies or the stringent implementation
thereof could have a material adverse impact on the Company in terms of
increased capital and operating expenditures.
The Company's operations outside of the United States are also subject to
governmental regulations for the protection of the environment. Management
believes that these regulations have not had, and will not have, a material
adverse effect on the Company's operations or its competitive position. The
adoption of new laws or regulations, or amendments to current laws or
regulations, regarding the operations and activities of mining companies could
have a material adverse impact on the Company's capital and operating
expenditures. It is estimated that compliance with regulations for the
protection of the environment will require capital expenditures of approximately
$3 million in 1994 in connection with the Zarafshan-Newmont joint venture and a
total of approximately $5 to $10 million in 1994, 1995 and 1996 in connection
with the Minahasa project in Indonesia.
NEVADA OPERATIONS
The Company's Nevada gold mining and processing operations generate solid
waste which is subject to regulation under the federal Resource Conservation and
Recovery Act ("RCRA") and similar laws of the State of Nevada. Solid waste that
is considered "hazardous" is subject to extensive regulation by the U.S.
Environmental Protection Agency (the "EPA") and the State of Nevada under
Subtitle C of RCRA, while non-hazardous solid waste is governed by a less
stringent program under Subtitle D of RCRA and solid waste management
regulations of the State of Nevada. A 1980 amendment to RCRA temporarily
excluded from Subtitle C regulation all solid waste from the "extraction,
beneficiation, and processing of ores and minerals,"
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until at least six months after the submission to Congress by the EPA of a study
of such wastes and promulgation by the EPA of appropriate regulations.
The EPA's study of "extraction" and "beneficiation" wastes from mining
operations was submitted to Congress at the end of 1985. Six months later the
EPA issued a determination that the regulation of such wastes under Subtitle C
of RCRA was not warranted, and that it intended to develop specific regulations
for such wastes under Subtitle D. The process of developing such regulations
under Subtitle D has been underway since mid-1986. The Company is participating
in that process. The EPA has indicated that the regulations for these wastes
will be more stringent than the current Subtitle D program but less stringent
than the hazardous waste regulations under Subtitle C. At the present time,
however, there is not a sufficient basis to accurately predict the potential
impacts of such regulations on the Company.
With regard to wastes from the "processing" of ores and minerals (including
refining wastes), the EPA adopted an interpretation of the exclusion of such
wastes from Subtitle C regulation to limit it only to certain very high volume
wastes. This interpretation became effective in the State of Nevada in August
1990. However, due to the fact that the Company recycles all potentially
hazardous secondary materials generated during refining operations, this
interpretation has not had, and is not expected to have, any material impact on
the Company's operations.
The Company's Nevada operations are subject to stringent state permitting
regulations for protection of surface and ground water, as well as wildlife.
These regulations address the design, construction, operation and closure of
mining facilities, and may require additional capital and operating expenditures
for current operations, expansions and development of new projects. Requirements
for the closure and reclamation of pits, tailings impoundments and leaching
facilities may significantly increase costs when these operations are closed.
New procedural requirements may result in substantial delays when bringing new
projects into production and when modifying or expanding existing operations.
The Company's gold mining operations have the potential to produce fugitive
dust, primarily from unpaved roads and material handling. These fugitive dust
emissions are controlled by the use of water with chemical binders as a dust
suppressant. Fugitive dust emissions are subject to regulation under the laws of
the State of Nevada. The EPA's current regulations under the federal Clean Air
Act exclude fugitive dust from surface mines in determining whether new or
expanded sources need permits for construction under the regulations for
prevention of significant deterioration ("PSD") of air quality. Extensive
amendments to the federal Clean Air Act were enacted by Congress in late 1990.
These amendments could ultimately increase the Company's compliance costs for
air pollution permitting and/or control at its gold mining operations, but the
impact on such operations is so dependent on future regulations and other
contingencies that it cannot reasonably be predicted at this time.
It is estimated that with respect to the Company's U.S. operations,
compliance with federal, state and local regulations relating to the discharge
of material into the environment, or otherwise relating to the protection of the
environment, required capital expenditures of approximately $66 million in 1993,
primarily as part of the construction of the Company's refractory ore treatment
plant (see Item 2 -- "Refractory Ore Treatment Plant at Carlin"), and will
require approximately $85 to $90 million of such capital expenditures in 1994,
again largely due to the construction of the refractory ore treatment plant.
Thereafter, annual capital expenditures for such compliance measures are
expected to be less than $20 million.
ENVIRONMENTAL LIABILITIES
The Company is involved in several matters concerning environmental
liabilities primarily associated with former mining activities of three
subsidiaries of NGC (which were acquired from NMC in the Transaction) -- Idarado
Mining Company ("Idarado") in the State of Colorado, Resurrection Mining Company
("Resurrection") in the State of Colorado and Dawn Mining Company ("Dawn") in
the State of Washington. These liabilities were assumed by NGC in connection
with the Transaction.
Idarado is an 80.1% owned subsidiary of NGC. In 1992, Idarado and NMC
entered into a consent decree to settle a lawsuit brought by the State of
Colorado against them under the Comprehensive Environmental
11
<PAGE> 13
Response, Compensation and Liability Act, generally referred to as the
"Superfund Act." As well as settling natural resource damages and past and
future response costs, Idarado agreed in the consent decree to undertake
specified reclamation and remediation work, including ongoing care, maintenance
and monitoring costs related to its former mining activities in the
Telluride/Ouray area of Colorado.
Resurrection is a wholly owned subsidiary of NGC and is a partner in a
mining joint venture with ASARCO Incorporated ("ASARCO") near Leadville,
Colorado. Resurrection, NMC, the joint venture and ASARCO are defendants in a
lawsuit brought under the Superfund Act. The proceedings seek to compel the
defendants to remediate the impacts of pre-existing mining activities which are
alleged to be causing substantial environmental problems in the Leadville area.
The Company is currently actively negotiating with the EPA, the State of
Colorado and ASARCO to develop a reclamation and remediation plan for the site
and to specify the financial obligations of the involved parties. In addition to
costs of remedial action, the state and federal governments will seek to recover
past and future response costs to be incurred at the site and may seek to
recover damages for natural resources. The full extent of the costs to be
incurred in this matter cannot yet be determined. For additional information on
this matter, see Item 3 -- "Legal Proceedings."
Dawn is 51% owned by NGC. Dawn leased a currently inactive open-pit uranium
mine near Spokane, Washington and also owns a nearby uranium mill site facility.
Dawn does not presently have sufficient funds to pay for reclaiming the leased
land or to pay for the closure of its mill. Dawn has submitted to the State of
Washington a mill closure plan which could potentially generate the necessary
funds to reclaim the mine and the mill. At the request of the State of
Washington, Dawn is presently doing detailed engineering for the plan. A formal
decision on the plan by the State of Washington is not expected before the
fourth quarter of 1994. If Dawn is not able to fund the mine and mill closure
costs, the U.S. Department of Interior has notified Dawn that it would seek to
hold Dawn and NMC liable for any costs incurred as a result of Dawn's failure to
comply with the lease and applicable regulations for such closure. The Company
intends to vigorously contest any such claims.
At December 31, 1993, $62.7 million was accrued with respect to these
matters. Depending upon the ultimate resolution of these matters, management
believes that it is reasonably possible that the liability for these matters
could be as much as 60% greater or 20% lower than this amount. In addition, at
December 31, 1993, $42.2 million was recorded as a receivable from third parties
for costs previously expended in connection with these matters and for the
future liabilities estimated in connection with these matters. The third parties
involved are primarily insurance carriers, who have reserved their rights or
disclaimed liability under their respective policies. Certain carriers have
commenced declaratory judgment actions seeking a determination that the claims
are not covered. The Company is negotiating with some of the carriers for
recovery of past and future costs relating to certain of the environmental
matters herein discussed. NMC has also had preliminary settlement negotiations
with the entire group of insurance carriers; however, these discussions are
preliminary and the Company cannot reasonably predict the outcome of these
negotiations at this time. In addition, NMC has instituted suit against certain
of the insurance carriers in the state courts of Colorado seeking a judicial
declaration that those insurance carriers are jointly and severally liable to
NMC for all costs and damages that NMC has incurred or may incur in the future
in connection with the Idarado consent decree described above. The Company
cannot reasonably predict the outcome of this action at this time. The total
receivables recorded as of December 31, 1993 represents a reasonably probable
amount the Company expects to receive based upon its discussions with counsel.
Although the Company cannot reasonably predict the outcome of its negotiations
with the insurance carriers, it believes that ultimately a recovery of claimed
costs will be made from the insurance carriers.
GENERAL
The Company does not hold material patents or other material licenses,
franchises or concessions in connection with its business.
Capital expenditures incurred by NGC were approximately $200 million, $167
million and $97 million in 1993, 1992 and 1991, respectively.
12
<PAGE> 14
There were 2,140 persons employed by NGC at December 31, 1993 (exclusive of
NEL employees working on NGC Property and at other locations on behalf of NGC),
of which 1,333 were hourly and 807 were salaried staff. The Company's hourly
production and maintenance employees at Carlin are represented by a union and
covered by a collective bargaining agreement which expires on September 30,
1996. Giving effect to the Transaction, there would have been 2,370 persons
employed by the Company at December 31, 1993.
ITEM 2. PROPERTIES
PRODUCTION
CARLIN, NEVADA -- 100% OWNED
The Company's operations along the Carlin Trend are divided geographically
into three management areas: the North Area which includes the Post, Carlin and
Genesis mines and Mills No. 1 and No. 4; the South Area which includes the Gold
Quarry mine and Mills No. 2 and No. 5; and the Rain Area which includes the Rain
mine and Mill No. 3. Each of these areas has a leach facility. See map on page 5
herein.
In 1993, ore was produced from five open pit mines -- Genesis, Post,
Carlin, Gold Quarry and Rain. It is expected that the Rain mine will be
decommissioned in late 1994 when its ore reserves are fully depleted. The Post
mine is being mined by Barrick Goldstrike Mines, Inc. ("Barrick") under a joint
mining agreement executed in December 1992 by NGC and Barrick for the
exploitation of the shared Post deposit and other related matters. The lower and
deep zones of this ore body contain approximately 9.25 million ounces of gold,
of which NGC owns 4.88 million ounces and Barrick the remaining 4.37 million
ounces. The parties will share the cost of mining the ore body in proportion to
their interests in the contained gold. The Company will benefit from lower costs
of mining than if it had separately mined its portion of the Post ore body. See
Item 7 -- "Management's Discussion and Analysis of Results of Operations and
Financial Condition." See map on page 5 herein.
MINE PRODUCTION
DRY SHORT TONS
(000S)
<TABLE>
<CAPTION>
1993 1992
----------------------------------- ----------------------------------
MILL LEACH MILL LEACH
ORE ORE WASTE TOTAL ORE ORE WASTE TOTAL
------ ------ ------- ------- ------ ------ ------ -------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
North Area -- Genesis............................ 2,336 12,704 50,413 65,453 690 10,383 31,449 42,522
-- Carlin............................. 64 2,789 3,929 6,782 77 1,409 2,073 3,559
-- Post............................... 420 1,066 15,188 16,674 1,845 6,190 6,616 14,651
------ ------ ------- ------- ------ ------ ------ -------
2,820 16,559 69,530 88,909 2,612 17,982 40,138 60,732
South Area -- Gold Quarry........................ 11,005 36,760 56,283 104,048 10,364 22,141 47,107 79,612
Rain Area -- Rain............................... 1,049 2,951 7,758 11,758 901 1,700 10,268 12,869
------ ------ ------- ------- ------ ------ ------ -------
Total.................................... 14,874 56,270 133,571 204,715 13,877 41,823 97,513 153,213
------ ------ ------- ------- ------ ------ ------ -------
------ ------ ------- ------- ------ ------ ------ -------
</TABLE>
The Company has an established program for the maintenance and repair of
its equipment and facilities. Management believes that the facilities are
generally in a state of good repair. The Company has a continuous program of
capital investment that includes, as necessary or advisable, the replacement,
modernization or expansion of its equipment and facilities. For a discussion of
anticipated future capital expenditures at the Company's Nevada operations, see
Item 7 -- "Management's Discussion and Analysis of Results of Operations and
Financial Condition." Power for the Company's Nevada operations is provided by
public utilities.
With the principal exception of its Gold Quarry and Rain properties, the
Company's Nevada properties are owned primarily in fee, having been acquired
from the United States by mineral patents and from others. The Company owns in
fee or controls through long-term mining leases and unpatented mining claims all
of the minerals and surface area within the boundaries of the present and
projected mining areas of the Gold Quarry property. Such long-term leases extend
for at least the anticipated life of the mine. In a substantial
13
<PAGE> 15
portion of such present and projected mining areas, the Company owns a 10%
undivided interest in the minerals and with respect to the remaining 90% has
agreed to pay a royalty to third party lessors that is equivalent to
approximately 18% of production therefrom. The Company also has less significant
royalty commitments to other parties with respect to other portions of the Gold
Quarry property and certain of its other properties, notably Rain. See Item
7 -- "Management's Discussion and Analysis of Results of Operations and
Financial Condition."
The U.S. Congress is considering various proposed amendments, including
proposals supported by the Clinton Administration, to the General Mining Law of
1872, which governs mining claims and related activities on federal public
lands. Among other things, these proposals would impose royalties on gold
production from claims on federal lands. Approximately 94% of the Company's
proven and probable ore reserves in Nevada are located on private land and,
therefore, not potentially subject to such government proposals to impose a
royalty on gold production from federal lands.
Mill Facilities at Carlin
Mill No. 1 was built in 1965 and has treated ore from mines in the North
Area such as Carlin, Genesis and Post. It treated an average of 2,600 tons per
day of refractory and oxide ores in 1993. The treatment processes include
primary and secondary crushing, grinding and cyanide leaching with gold recovery
onto activated carbon using a carbon-in-pulp ("CIP") circuit. Mill No. 1 also
contains a chlorination pre-treatment circuit for the processing of carbonaceous
refractory gold ores. After pre-treatment, the ore pulp is combined with the
oxide ore pulp for cyanide leaching with gold recovery onto activated carbon.
The gold is then stripped from the carbon and refined to ore at NGC's refinery.
Mill No. 2 was commissioned in 1985 and is located in the South Area
adjacent to the Gold Quarry open pit mine. It treated an average of 9,200 tons
per day of oxide ore in 1993. The treatment processes consist of primary
crushing, semi-autogenous grinding and cyanide leaching with gold recovery by
CIP and carbon-in-column ("CIC") technologies. Mill No. 2 will be taken out of
service in 1994, once the refractory ore treatment plant becomes fully
operational, which is expected to occur in the third quarter of 1994. See
"Refractory Ore Treatment Plant at Carlin."
Mill No. 3 was commissioned in 1988 and is located in the Rain Area some
thirteen miles southeast of the town of Carlin, Nevada. In 1993, it treated an
average of 2,500 tons of oxide ore per day. The treatment processes consist of
primary and secondary crushing, a grinding circuit and cyanide leaching with
gold recovery onto activated carbon through the use of a CIP circuit. This mill
is expected to be decommissioned in late 1994 when the Rain Mine ore reserves
are fully depleted.
Mill No. 4 was commissioned in 1989 and is located in the North Area
approximately one mile northeast of the Post deposit. In 1993, it treated an
average of 7,400 tons of oxide ore per day from the Post and Genesis mines. The
treatment process is similar to Mill No. 2, but instead of a leach tank and CIP
circuit, carbon-in-leach ("CIL") and CIC circuits are in place.
Mill No. 5 was commissioned in 1988 and is located in the South Area
adjacent to Mill No. 2. In 1993, it treated an average of 17,600 tons of oxide
ore per day. The treatment process is similar to Mill No. 4.
MILL PRODUCTION
<TABLE>
<CAPTION>
1993 1992
--------------------------------------------- ---------------------------------------------
DRY SHORT DRY SHORT
TONS GRADE OUNCES TONS GRADE OUNCES
MILLED (OUNCES INDICATED PRODUCED MILLED (OUNCES INDICATED PRODUCED
(000S) PER TON) RECOVERY (000S) (000S) PER TON) RECOVERY (000S)
--------- -------- -------- -------- --------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Mill No. 1 -- North Area... 960 0.094 85.6% 82.5 562 0.087 82.7% 40.9
Mill No. 2 -- South Area... 3,368 0.090 81.4% 239.2 3,652 0.083 80.4% 238.1
Mill No. 3 -- Rain Area.... 903 0.101 85.7% 77.0 903 0.118 85.3% 95.9
Mill No. 4 -- North Area... 2,692 0.111 84.9% 252.5 2,416 0.114 85.0% 241.2
Mill No. 5 -- South Area... 6,419 0.081 80.5% 412.3 6,231 0.084 79.7% 417.3
--------- -------- --------- --------
Total.............. 14,342 0.091 82.4% 1,063.5 13,764 0.091 81.6% 1,033.4
--------- -------- --------- --------
--------- -------- --------- --------
</TABLE>
14
<PAGE> 16
Refractory Ore Treatment Plant at Carlin
The Company is building a low-temperature roaster plant to oxidize
refractory ores in conjunction with existing milling facilities in the South
Area of operations on the Carlin Trend. This modern roaster, which is scheduled
to be completed in the third quarter of 1994, will be capable of treating 8,000
tons of ore per day and is expected to cost approximately $300 million which is
to be funded from cash balances, operating cash flow and borrowings.
The plant will enable the Company to oxidize and treat higher grades of
refractory ores that contain both sulfides and active carbon. While the capital
costs per ton of capacity for a roaster are higher than those of an autoclave
(an oxidation process in which high temperatures and pressures are applied to
convert refractory sulfidic mineralization into cyanide amenable oxide ore), the
nearest alternative process for mill-grade refractory ore, the roaster's
operating costs per ton are expected to be lower than the costs of operating an
autoclave. Autoclaves, furthermore, will not treat ores containing active
carbon, as do modern roasters.
Leaching Facilities at Carlin
Processing at the Carlin leaching operations consists of crushing, dump
leaching, and carbon adsorption facilities. The ore is hauled from the mines to
crushing plants for size reduction. The ore is then agglomerated with cement at
a controlled moisture content and stacked on impermeable pads. Leach ore which
is mined in excess of crushing capacity is placed directly on the leach pads,
without first being crushed, to avoid stockpile rehandling costs. The ore is
then leached with a low concentration cyanide solution. The gold leaching
solutions are collected and passed through columns of activated carbon wherein
the removal of gold is accomplished by adsorption. The barren solutions are then
returned for re-use in the process. Gold recovery from carbon is accomplished at
a central carbon handling facility. See "Other Facilities at Carlin." The South
Area leach facility, commissioned in 1989, was expanded during 1991 and 1992.
The North Area leach facility was commissioned in 1988 and expanded in 1991,
1992 and 1993. In 1994 expansions are planned in both the North and South Areas.
The Rain Area leach facility was commissioned in 1988.
LEACH PRODUCTION
<TABLE>
<CAPTION>
1993 1992
------------------------------------ ------------------------------------
DRY SHORT DRY SHORT
TONS GRADE OUNCES TONS GRADE OUNCES
PLACED (OUNCES PRODUCED(1) PLACED (OUNCES PRODUCED(1)
(000S) PER TON) (000S) (000S) PER TON) (000S)
--------- -------- ----------- --------- -------- -----------
<S> <C> <C> <C> <C> <C> <C>
North Area................................ 19,466 0.019 235.7 20,532 0.024 263.7
South Area................................ 36,557 0.019 344.3 21,366 0.020 272.4
Rain Area................................. 2,922 0.021 22.9 1,897 0.022 18.4
--------- ----- --------- -----
Total............................. 58,945 0.019 602.9 43,795 0.022 554.5
--------- ----- --------- -----
--------- ----- --------- -----
</TABLE>
- ---------------
(1) Leach recovery from tons placed fluctuates from year-to-year due to ore
grade, differing solution application rates, cycle times, as well as varying
inventories of unleached material placed on pads.
Bioleaching at Carlin
As an extension of its current leaching operations, field tests have
confirmed the commercial viability of a patented bioleaching process to recover
gold from low-grade sulfidic materials that previously could not be treated
economically. The Company's patented process has proved economic on lowgrade
sulfidic material that already has been mined as a consequence of activity to
recover higher-grade sulfidic material or oxidized ores. In the bioleaching
process, high-density cultures of naturally occurring bacteria are added to
low-grade ore as it is placed on leach pads. The bacteria break down the sulfide
crystal structure in the ore, allowing the gold subsequently to be dissolved and
recovered through normal heap leaching processes.
The Company has a second bioleaching process under longer-range commercial
tests which is aimed at recovering gold from low-grade sulfidic material that
contains active carbon. Such carbon currently prevents economic recovery of
contained gold by absorbing gold from the solution into which it has been
dissolved.
15
<PAGE> 17
The Company has an agreement with Barrick which could allow NGC the
opportunity to treat and recover gold from Barrick's low-grade refractory
material. If the Company's patented bioleaching process has commercial
applicability to Barrick's material, the Company could construct and operate a
facility for such treatment in return for a 50% share of the profits, after
recovery of capital.
Other Facilities at Carlin
As discussed above, all of the Company's Carlin milling and leaching plants
recover gold onto activated carbon. The gold-bearing activated carbon from all
of these plants is processed at the Company's central carbon processing plant
located in its South Area of operations. The gold is stripped from the
gold-bearing carbon into a solution which is then subjected to an electrowining
process at the Company's refinery, located near the carbon handling plant. After
the gold is stripped from the carbon at the carbon processing plant, the carbon
is then "re-activated" and returned to the various milling and leaching
facilities for reuse. The refinery also includes a retorting process to remove
mercury, which would otherwise be vaporized and released to the atmosphere, from
the electrowining product. The mercury is sold as a by-product. The refinery
produces dore bullion which typically has a gold and silver content of 85% to
95%. This dore bullion is then sent to custom toll refiners who further refine
the dore and recover the gold and silver at, typically, a pureness of 99.99%.
The refinery, analytical laboratory and administration offices are located
in the vicinity of Mills Nos. 2 and 5 in the South Area. The Company also has an
advanced metallurgical research laboratory in Salt Lake City, Utah.
MINERA YANACOCHA -- 38% OWNED
Minera Yanacocha commenced production in August 1993. During the final five
months of the year, it produced a total of 81,500 ounces of gold from the
Carachugo mine. This was equivalent to an annual rate of approximately 220,000
ounces. The Maqui Maqui deposit is expected to commence production at a rate of
approximately 180,000 ounces annually at the end of 1994. Minera Yanacocha's
total production is expected to be approximately 350,000 to 400,000 ounces in
1995.
PROVEN AND PROBABLE ORE RESERVES
The Company's proven and probable reserves, on a pro forma basis giving
effect to the Transaction, were approximately 25,977,000 ounces and 23,755,000
ounces of gold at December 31, 1993 and December 31, 1992, respectively.
16
<PAGE> 18
CARLIN, NEVADA
The Company's estimate of its proven and probable ore reserves at Carlin,
Nevada at December 31, 1993 and 1992 is set forth in the table below. The proven
and probable reserves were determined by the use of mapping, drilling, sampling,
assaying and evaluation methods generally applied in the mining industry.
Calculations with respect to the estimates as of December 31, 1993 and 1992, are
based on a gold price of $400 per ounce. NGC's management believes that if its
reserve estimates were to be based on gold prices as low as $300 per ounce with
current operating costs, 1993 year-end reserves would decrease by approximately
16%. Conversely, if its reserve estimates were to be based on a gold price of
$500 per ounce with current operating costs, 1993 year-end reserves would
increase by approximately 19%. These reserves represent the total quantity of
ore to be extracted from the deposits or stockpiles, allowing for mining
efficiencies and ore dilution.
<TABLE>
<CAPTION>
DECEMBER 31, 1993 DECEMBER 31, 1992
------------------------------------- -------------------------------------
DRY SHORT DRY SHORT
DEPOSITS WITH TONS GRADE CONTAINED TONS GRADE CONTAINED
PROVEN AND (2)(3) (OUNCES OUNCES(5) (2)(3) (OUNCES OUNCES(5)
PROBABLE RESERVES(1) (000S) PER TON)(4) (000S) (000S) PER TON)(4) (000S)
- ---------------------------------------- --------- ----------- --------- --------- ----------- ---------
<S> <C> <C> <C> <C> <C> <C>
North Area
Capstone/Bootstrap.................... 22,956 0.037 838 22,956 0.037 838
Carlin................................ 2,069 0.034 71 9,119 0.028 256
Deep Star............................. 849 0.929 789 849 0.929 789
Genesis............................... 65,875 0.032 2,090 74,493 0.032 2,358
North Star(6)......................... -- -- -- 5,700 0.035 200
Pete.................................. 6,423 0.026 169 6,423 0.026 169
Post.................................. 30,812 0.169 5,217 32,589 0.162 5,264
Tara.................................. 5,133 0.057 292 -- -- --
Stockpiles............................ 9,488 0.034 321 11,404 0.039 440
--------- --------- --------- ---------
143,605 0.068 9,787 163,533 0.063 10,314
--------- --------- --------- ---------
South Area
Gold Quarry........................... 145,189 0.041 5,906 179,915 0.041 7,299
MAC................................... 5,677 0.016 89 5,677 0.016 89
Tusc.................................. 13,378 0.062 827 13,378 0.062 827
Stockpiles............................ 18,463 0.046 849 9,566 0.050 479
--------- --------- --------- ---------
182,707 0.042 7,671 208,536 0.042 8,694
--------- --------- --------- ---------
Rain Area
Emigrant Springs...................... 4,864 0.035 169 4,853 0.035 168
Rain/SMZ.............................. 979 0.054 53 4,575 0.050 227
Stockpiles............................ 2,830 0.031 89 1,776 0.032 57
--------- --------- --------- ---------
8,673 0.036 311 11,204 0.040 452
--------- --------- --------- ---------
334,985 0.053 17,769(7) 383,273 0.051 19,460
--------- --------- --------- ---------
--------- --------- --------- ---------
</TABLE>
- ---------------
(1) The term "reserve" means that part of a mineral deposit which can be
reasonably assumed to be economically and legally extracted or produced at
the time of the reserve determination.
The term "economically," as used in the definition of reserve, implies that
profitable extraction or production under defined investment assumptions has
been established or analytically demonstrated. The assumptions made must be
reasonable, including assumptions concerning the prices and costs that will
prevail during the life of the project.
The term "legally," as used in the definition of reserve, does not imply
that all permits needed for mining and processing have been obtained or that
other legal issues have been completely resolved. However, for a reserve to
exist, there should not be any significant uncertainty concerning issuance
of these permits or resolution of legal issues.
The term "proven reserves" means reserves for which (a) quantity is computed
from dimensions revealed in outcrops, trenches, workings or drill holes; (b)
grade and/or quality are computed from the result of detailed sampling; and
(c) the sites for inspection, sampling and measurements are spaced so
closely and the geologic character is sufficiently defined that size, shape,
depth and mineral content of reserves are well established.
The term "probable reserves" means reserves for which quantity and grade are
computed from information similar to that used for proven reserves but the
sites for sampling are farther apart or are otherwise less adequately
spaced. The degree of assurance, although lower than that for proven
reserves, is high enough to assume continuity between points of observation.
17
<PAGE> 19
(2) Represents the total quantity of ore to be extracted from each deposit or
stockpile, allowing for mining efficiencies and ore dilution.
(3) Calculated using cutoff grades for 1993 and 1992 as follows: oxide leach
material not less than 0.006 ounce per ton; refractory mill material not
less than 0.07 ounce per ton; oxide mill material varies. Ore reserves were
calculated using different recoveries depending on each deposit's
metallurgical properties and process. The average oxide mill recoveries
utilized were as follows (1992 values in parenthesis): Mill No. 1 -- 85%
(85%); Mill No. 2 -- 85% (85%); Mill No. 3 -- 86% (86%); Mill No. 4 -- 82%
(84%); Mill No. 5 -- 85% (85%). The average refractory mill recoveries
utilized were: Mill No. 1 -- 85% (85%). Roaster -- (engineered estimate) 88%
(88%). The following average leach recoveries utilized were used for oxide
material: North Area -- 65% (66%); South Area -- 70% (70%); Rain Area -- 56%
(57%).
The term "cut-off grade" means the lowest grade of mineralized rock that
qualifies as ore in a given deposit. Cut-off grades vary between deposits
depending upon prevailing economic conditions, mineability of the deposit,
amenability of the ore to gold extraction, and milling or leaching
facilities available.
(4) The stated average grade (ounces per ton) may not correspond to that
determined by direct calculation due to rounding.
(5) Contained ounces are prior to any losses during metallurgical treatment.
(6) North Star's 1993 year-end reserves are included with the 1993 year-end
Genesis reserves. The latter's ultimate pit area now includes North Star.
(7) Approximately 50% of these reserves are refractory in nature. Refractory ore
is not amenable to the normal cyanidation recovery processes currently used
by NGC. Such ore must be oxidized before it is subjected to the normal
recovery processes. All refractory reserves are of mill-grade material
containing at least 0.07 ounces per ton.
NON CARLIN TREND PROVEN AND PROBABLE RESERVES
Proven and probable ore reserves acquired from NMC in the Transaction as of
December 31, 1993 and 1992, other than those on the Carlin Trend, are listed
below, together with the Company's equity interest in such projects and
prospects. These reserves represent the total quantity of ore to be extracted
from the deposits or stockpiles, allowing for mining efficiencies and ore
dilution. Contained ounces are prior to any losses during metallurgical
treatment.
<TABLE>
<CAPTION>
DECEMBER 31, 1993
-----------------------------------------------------------
COMPANY'S
DRY EQUITY IN
SHORT GRADE CONTAINED CONTAINED
COMPANY'S TONS (OUNCES PER OUNCES OUNCES
EQUITY (000S) TON)(5) (000S) (000S)
--------- --------- ----------- --------- ---------
<S> <C> <C> <C> <C> <C>
Zarafshan-Newmont
(Uzbekistan).... 50% 242,508(1) 0.036(1) 8,674 4,337
Minahasa
(Indonesia)....... 80% 8,380(2) 0.215(2) 1,799 1,439
Minera
Yanacocha
(Peru)............ 38% 84,666(3) 0.045(3) 3,780 1,436
Grassy
Mountain
(Oregon)......... 100% 15,984(4) 0.062(4) 996 996
--------- --------- ---------
Total............ 351,538 15,249 8,208
--------- --------- ---------
--------- --------- ---------
</TABLE>
<TABLE>
<CAPTION>
DECEMBER 31, 1992
-----------------------------------------------------------
COMPANY'S
DRY EQUITY IN
SHORT GRADE CONTAINED CONTAINED
COMPANY'S TONS (OUNCES PER OUNCES OUNCES
EQUITY (000S) TON)(5) (000S) (000S)
--------- --------- ----------- --------- ---------
<S> <C> <C> <C> <C> <C>
Zarafshan-Newmont
(Uzbekistan)... 50% 165,347(1) 0.034(1) 5,578 2,789
Minahasa
(Indonesia)...... 80% -- -- -- --
Minera
Yanacocha
(Peru)........... 40% 31,689(3) 0.040(3) 1,275 510
Grassy
Mountain
(Oregon)........ 100% 15,984(4) 0.062(4) 996 996
------- ----- -----
Total........... 213,020 7,849 4,295
------- ----- -----
------- ----- -----
</TABLE>
- ---------------
(1) Material available to Zarafshan-Newmont for processing, from designated
stockpiles or from other specified sources. All ore is oxidized. Tonnage and
gold content of material available to the Company for processing, from the
designated stockpiles or from other specified sources, are guaranteed by
state entities of Uzbekistan. The Company has completed confirmatory
surveying, sampling, assaying and metallurgical testing on a substantial
part of this material. Material will be crushed and leached. The feasibility
study prepared by the joint venture used a gold price of $350 per ounce and
50% to 65% leach recovery rate, depending on material type.
(2) Calculated by the Company using a gold price of $350 per ounce, a cutoff
grade of 0.058 ounces per ton and mill recovery rates of 80% to 89%
depending on material type. Substantially all the ore is refractory.
(3) Calculated by the Company using a gold price of $350 per ounce and a cutoff
grade not less than 0.010 ounces per ton. Reserves are contained in four
deposits. Material is being leached. Assumed leach recovery is 60% to 83%,
depending on each deposit's metallurgical properties. All ore is oxidized.
(4) As published by Atlas Corporation in its Annual Report for the year ended
June 30, 1991. All ore is oxidized and will be leached or milled.
Feasibility study used a gold price of $350 per ounce, a 52.5% leach
recovery rate, a 94% mill recovery rate and variable cutoff grades of at
least 0.018 ounces per ton.
(5) The stated average grade (ounces per ton) may not correspond to that
determined by direct calculation due to rounding.
18
<PAGE> 20
ITEM 3. LEGAL PROCEEDINGS
LITIGATION RELATING TO THE TRANSACTION
On January 13 and 19, 1994, respectively, two identical actions, both of
which purported to be stockholder derivative actions, were commenced in the
Court of Chancery for the State of Delaware, by alleged stockholders of the
Company. The original defendants in the actions were NMC and the members of
NGC's Board of Directors (collectively, the "Original Defendants"). The separate
actions were consolidated on February 17, 1994 (the "Action"). The complaints
sought relief for alleged breaches of fiduciary duties by the Original
Defendants in connection with (i) a series of intercompany advances from NGC to
NMC which the plaintiffs claimed were made at rates that did not approximate
negotiated, arm's-length rates, thereby wasting NGC's assets, and (ii) the
Transaction described in Item 1, which the plaintiffs claimed would not benefit
NGC and would waste its corporate assets. The plaintiffs thereafter filed an
amended complaint asserting claims for injunctive relief and for damages against
the Original Defendants and NGC (collectively, the "Defendants") on behalf of a
class of NGC stockholders (other than the Original Defendants) as of January 21,
1994, the record date for voting with respect to the proposed Transaction, and
their successors in interest. In addition to alleging that certain of the
disclosures in the Proxy Statement relating to the Transaction were inadequate,
the amended complaint claimed that consummation of the proposed Transaction
would be unfair to the minority stockholders of NGC and a breach of fiduciary
duties of the Defendants.
On March 4, 1994, following certain discovery, the parties reached an
agreement in principle to settle all claims asserted in the Action (as described
below, the "Settlement"). Under that agreement, the essential terms of which are
set forth in a Memorandum of Understanding dated March 4, 1994, the parties
agreed to certification of a class for settlement purposes only consisting of
all holders of record of NGC Common Stock (other than NMC, the individual
Defendants, members of their immediate families and their legal representatives,
heirs, successors or assigns) as of January 21, 1994 and their successors in
interest (collectively, the "Settlement Class").
Under the terms of the Settlement, NGC has agreed to make to all members of
the Settlement Class who were stockholders of record on January 21, 1994 a
special payment of 6 1/2 cents per share. NGC has also agreed as part of the
Settlement to pay for the costs of notice and administration of the Settlement.
In addition, NGC has agreed to pay the plaintiffs' reasonable attorneys' fees
and expenses in an amount to be determined by the Court, which shall not exceed
$300,000.
NMC, NGC and each of the members of the Board of Directors of NGC believe
that the claims asserted in the Action are without merit, but have agreed to
settle the Action solely to avoid the expense and inconvenience of further
protracted and time-consuming litigation. The Settlement is conditioned upon,
among other things, (i) the execution of a definitive settlement agreement; (ii)
final Court approval; and (iii) no other actions being filed which, in the
reasonable judgement of the Defendants, would materially undermine the
Defendants' rationale for settling (i.e., to eliminate the cost of further
protracted litigation relating to the Transaction). If the Court, following
notice to the Settlement Class and a hearing, approves the Settlement, it will
be asked to enter an order and judgement providing for (a) the dismissal of the
Action on the merits, and with prejudice as against NGC and the members of the
Settlement Class, and (b) the general release of all claims which have been or
could have been asserted by NGC or any member of the Settlement Class against
the Defendants relating to or arising out of or in connection with any of the
claims, transactions, facts, disclosures, matters or occurrences referred to in,
or which are the subject matter of, the amended complaint in the Action.
OTHER LITIGATION
In December 1983, the State of Colorado filed a lawsuit in the United
States District Court for the District of Colorado under the Comprehensive
Environmental Response Compensation and Liability Act of 1980 (CERCLA), 42
U.S.C. 9601 et seq., seeking clean-up and damages for alleged injury to natural
resources due to releases of hazardous substances into the environment. This
case, State of Colorado v. ASARCO, Inc., et al. (Civil Action No. 83-C-2388),
has since been consolidated with another action, United States of America v.
Apache Energy & Minerals, et al. (Civil Action No. 86-C-1676), which was filed
19
<PAGE> 21
August 6, 1986, and involves allegations of environmental impairment in the
vicinity of Leadville, Colorado, including the area of the operations and
property of the Res-ASARCO Joint Venture which owns the Black Cloud Mine, the
Yak Tunnel, and adjacent property. The State and the United States seek remedial
actions and damages from a number of defendants, including NMC and NGC's
wholly-owned subsidiary, Resurrection Mining Company, which is a partner with
ASARCO in the Res-ASARCO Joint Venture. In connection with the Transaction, NGC
assumed, among other things, all liabilities of NMC relating to this lawsuit.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No matters were submitted to a vote of security holders, through the
solicitation of proxies or otherwise, during the quarter ended December 31,
1993.
ITEM 4A. EXECUTIVE OFFICERS OF THE REGISTRANT
NGC's executive officers as of March 4, 1994 were:
<TABLE>
<CAPTION>
NAME AGE OFFICE
- --------------------- --- ------------------------------------------
<S> <C> <C>
Gordon R. Parker 58 Chairman
Ronald C. Cambre 55 Vice Chairman and Chief Executive Officer
T. Peter Philip 61 President and Chief Operating Officer
Graham M. Clark, Jr. 48 Senior Vice President and General Counsel
Walter R. Lawrence 47 Senior Vice President, Operations
Wayne W. Murdy 49 Senior Vice President and Chief Financial
Officer
David A. Baker 39 Vice President, Environmental Affairs
Mary E. Donnelly 42 Vice President, Government Relations
Gary E. Farmar 39 Vice President and Controller
Eric Hamer 51 Vice President, Indonesian Projects
James F. Hill 58 Vice President, Corporate Relations
Donald G. Karras 40 Vice President, Taxes
Michael G. Moran 52 Vice President, Engineering Services
W. James Mullin 48 Vice President and General Manager
Jean-Michel Rendu 50 Vice President, Mine Engineering and
Information Systems
Timothy J. Schmitt 51 Vice President, Secretary and Assistant
General Counsel
Patricia A. Flanagan 35 Treasurer and Assistant Secretary
</TABLE>
There are no family relationships by blood, marriage or adoption among any
of the above executive officers of NGC. All executive officers are elected
annually by the Board of Directors, or until their respective successors are
chosen and qualify. There is no arrangement or understanding between any of the
above executive officers and any other person pursuant to which he or she was
selected as an officer.
Mr. Parker has been Chairman of NGC for more than five years. He was Chief
Executive Officer from October 31, 1988 to November 1, 1993. He is also Chairman
of NMC.
Mr. Cambre was elected Vice Chairman and Chief Executive Officer of NGC on
September 23, 1993 (effective November 1, 1993). Previously he served as Vice
President and Senior Technical Advisor to the Office of Chairman of
Freeport-McMoRan Inc., a natural resources company, since 1988. He is also Vice
Chairman and Chief Executive Officer of NMC.
Mr. Philip has been President and Chief Operating Officer of NGC since
October 31, 1988. Previously, he was President of NGC. He is also President and
Chief Operating Officer of NMC.
20
<PAGE> 22
Mr. Clark was elected a Senior Vice President of NGC on October 30, 1991
(effective September 11, 1991). He was elected Vice President and General
Counsel as of October 31, 1988. Previously, he was Western Regional Counsel and
Assistant Secretary of NGC. He is also Senior Vice President and General Counsel
of NMC.
Mr. Lawrence was elected Senior Vice President, Operations of NGC on
October 30, 1991. Previously, he was a Vice President of NGC serving in various
capacities in operations and project development. He is also Senior Vice
President, Operations of NMC.
Mr. Murdy was elected Senior Vice President and Chief Financial Officer of
NGC on December 16, 1992 (effective December 31, 1992). Previously, he served as
Senior Vice President and Chief Financial Officer of Apache Corporation, an oil
and gas exploration and production company, since May 1991. Prior to that he had
been Chief Financial Officer of Apache Corporation since December 1987 and a
Vice President since February 1987. He is also Senior Vice President and Chief
Financial Officer of NMC.
Mr. Baker was elected Vice President, Environmental Affairs of NGC on April
24, 1991 (effective March 11, 1991). Previously, he held various environmental
positions with NGC and NMC. He is also Vice President, Environmental Affairs of
NMC.
Ms. Donnelly was elected Vice President, Government Relations of NGC on
June 12, 1990. She has also held various government relations positions with NMC
for more than five years. She is also Vice President, Government Relations of
NMC.
Mr. Farmar was elected Vice President of NGC on December 16, 1992 and
Controller on October 30, 1991. He had served as Assistant Controller since
January 28, 1989. Prior to that he served as Controller of Petro-Lewis
Corporation, an independent oil and gas producer, for three years. He is also
Vice President and Controller of NMC.
Mr. Hamer was elected a Vice President of NGC as of October 31, 1988. He
served as Vice President and General Manager from October 30, 1991 to December
31, 1992. Previously, he served as Vice President and Resident Manager since
March 11, 1991 and as Vice President, Operations from October 31, 1988 to March
10, 1991. He is also Vice President, Indonesian Projects of NMC.
Mr. Hill was elected Vice President, Public Relations of NGC as of October
31, 1988. He is also Vice President, Corporate Relations of NMC.
Mr. Karras was elected Vice President, Taxes of NGC on December 16, 1992
(effective November 9, 1992). Previously, he served as director of taxes of
Kennecott Corporation, a natural resources company, for four years. He is also
Vice President, Taxes of NMC.
Mr. Moran was elected Vice President, Engineering Services of NGC on
December 15, 1993 (effective January 17, 1994). Previously, he was employed by
BHP Minerals International Inc., a natural resources company, for more than five
years where he was responsible for the development and management of major
construction projects.
Mr. Mullin was elected Vice President and General Manager of NGC on
December 15, 1993. Previously, he served as Acting General Manager of NGC from
January 1, 1993 to December 14, 1993. Prior to that he held various senior
operating positions with NGC.
Mr. Rendu was elected a Vice President of NGC as of October 31, 1988. He
was designated Vice President, Information Systems on November 26, 1991 and Vice
President, Mine Engineering on March 11, 1991 having previously served as Vice
President, Technical and Scientific Systems since October 31, 1988. Prior to
that he was Director of Technical and Scientific Systems of NEL. He is also Vice
President, Mine Engineering and Information Systems of NMC.
Mr. Schmitt was elected a Vice President of NGC as of October 31, 1988. He
was elected Secretary of NGC on February 22, 1989 (effective March 1, 1989). He
was designated Assistant General Counsel on October 30, 1991 having previously
served as Chief Accounting Officer since October 31, 1988. He is also Vice
President, Secretary and Assistant General Counsel of NMC.
21
<PAGE> 23
Ms. Flanagan was elected Treasurer of NGC on December 16, 1992. Previously
she was an Assistant Treasurer from October 28, 1988 through December 15, 1992.
She was appointed Assistant Secretary on June 24, 1992. She is also Treasurer
and Assistant Secretary of NMC.
PART II
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED
STOCKHOLDER MATTERS
NGC's Common Stock is traded on the New York Stock Exchange. NGC's stock
prices in 1993 and 1992 were:
<TABLE>
<CAPTION>
1993 1992
-------------- --------------
HIGH LOW HIGH LOW
---- ---- ---- ----
<S> <C> <C> <C> <C>
First quarter................................................... $40 3/8 $27 7/8 $46 5/8 $37
Second quarter.................................................. $49 $35 7/8 $46 3/4 $35 3/4
Third quarter................................................... $51 5/8 $38 1/2 $51 5/8 $39 1/2
Fourth quarter.................................................. $47 5/8 $39 5/8 $42 3/4 $29 7/8
</TABLE>
On March 21, 1994, the approximate number of holders of record of NGC's
Common Stock was 1,270.
An annual dividend of $0.05 per share ($5,244,000 in the aggregate) was
declared on October 25, 1993 and on October 27, 1992. NGC currently intends to
increase its annual dividend to the level which has recently been paid on the
NMC Common Stock (after adjusting for the stock split effected in connection
with the Transaction). The determination of the amount of future dividends,
however, will be made by the Company's Board of Directors from time to time and
will depend on the Company's future earnings, capital requirements, financial
condition and other relevant factors. Under a revolving credit facility assumed
by NGC in the Transaction, as of December 31, 1993, the amount available for
payment of future dividends to common and preferred shareholders was limited to
$173.6 million.
ITEM 6. SELECTED FINANCIAL DATA
<TABLE>
<CAPTION>
FOR THE YEARS ENDED DECEMBER 31,
------------------------------------------------
1993 1992 1991 1990 1989
-------- ------ ------ ------ ------
(IN MILLIONS, EXCEPT PER SHARE)
<S> <C> <C> <C> <C> <C>
Sales............................................ $ 601.6 $546.4 $572.7 $643.2 $559.2
Income before cumulative effect of changes in
accounting principles.......................... $ 113.1 $ 87.4 $125.9 $141.7 $118.0
Net income....................................... $ 115.8 $ 81.1 $125.9 $141.7 $118.0
Earnings per share:
Income before cumulative effect of changes in
accounting principles....................... $ 1.08 $ 0.83 $ 1.20 $ 1.35 $ 1.13
Net income..................................... $ 1.10 $ 0.77 $ 1.20 $ 1.35 $ 1.13
Dividends declared per share..................... $ 0.05 $ 0.05 $ 0.05 $ 0.05 $ 0.05
AT DECEMBER 31,
Total assets..................................... $1,021.9 $905.3 $816.7 $706.9 $662.6
Stockholders' equity............................. $ 924.0 $810.4 $734.6 $614.0 $477.5
</TABLE>
22
<PAGE> 24
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF
OPERATIONS AND FINANCIAL CONDITION
RESULTS OF OPERATIONS
Before the cumulative effect of changes in accounting principles, the
Company earned $113.1 million, or $1.08 per share; $87.4 million, or $0.83 per
share; and $125.9 million, or $1.20 per share, in 1993, 1992 and 1991,
respectively. The change in income between years is largely a reflection of the
average annual gold price received by the Company which was $361 per ounce in
1993, $344 per ounce in 1992 and $363 per ounce in 1991. The Company recognized
the cumulative effect of a change in accounting principles in 1993 and 1992. In
1993, the Company adopted Statement of Financial Accounting Standards No. 109,
"Accounting for Income Taxes," which resulted in a benefit for the cumulative
effect of $2.7 million, or $0.02 per share. Further information about this
change in accounting for income taxes can be found in Note 5 to Item 8. In 1992,
the Company adopted Statement of Financial Accounting Standards No. 106,
"Employers' Accounting for Postretirement Benefits Other Than Pensions," which
resulted in a charge for the cumulative effect of $6.4 million, or $0.06 per
share. Further information about this accounting change is included in Note 7 to
Item 8.
Effective January 1, 1994, the Company acquired all of the assets and
liabilities of its parent company, Newmont Mining Corporation ("NMC"), as
further discussed in Note 13 to Item 8. On a pro forma basis, the Company would
have earned $90.2 million, or $0.94 per share, in 1993 assuming the transaction
had been consummated at the beginning of 1993. See the end of "Results of
Operations" for a further discussion of the impacts of this transaction on the
Company's operations.
The Company's operations have been concentrated in the Carlin Trend area of
Nevada. Changes in sales revenues between 1993, 1992 and 1991 are a function of
the average price received for gold each year and gold production levels. The
Company produced 1,666,400 ounces of gold in 1993, 1,587,900 ounces in 1992 and
1,576,900 ounces in 1991. The effects on sales revenues of the changes in the
average annual gold price received and annual production levels between years
are reflected in the following table (in thousands):
<TABLE>
<CAPTION>
1993 VS. 1992 1992 VS. 1991
------------- -------------
<S> <C> <C>
Increase (decrease) in sales revenue due to:
Gold price............................................... $28,150 $ (30,313)
Production............................................... 27,019 3,995
------------- -------------
Total............................................ $55,169 $ (26,318)
------------- -------------
------------- -------------
</TABLE>
Although production from the Company's Nevada operations has slightly
increased over the past two years, the Company expects there will be a slight
decline over the next several years before the deeper and higher grade portions
of the Company's Post deposit are mined. The Company has targeted 1994 Nevada
production at approximately 1.6 million ounces, with approximately 200,000
ounces expected to come from the new $300 million refractory ore treatment plant
("roaster") which is expected to begin production in the third quarter of 1994.
This plant will allow the Company to effectively treat carbonaceous and sulfidic
refractory ores which are becoming more dominant in the Nevada mines.
The Company's costs applicable to sales consist primarily of production
costs and royalties, and on a per ounce of production basis were as follows for
the last three years:
<TABLE>
<CAPTION>
1993 1992 1991
---- ---- ----
<S> <C> <C> <C>
Production costs.............................................. $165 $162 $150
Royalties..................................................... 29 29 33
Other......................................................... 6 7 7
---- ---- ----
Total............................................... $200 $198 $190
---- ---- ----
---- ---- ----
</TABLE>
23
<PAGE> 25
Production costs consist principally of charges for mining ore and waste
associated with current period production and processing ore through milling and
leaching facilities. Primarily because of tons mined increasing each year, total
production costs increased from $236.7 million in 1991 to $256.9 million in 1992
to $275.0 million in 1993. Tons mined, excluding tons attributable to
capitalized mining costs discussed below, increased from 124 million in 1991 to
139 million in 1992 to 188 million in 1993.
In addition to the production costs expensed, the Company is capitalizing a
portion of mining costs associated with its Post deposit. This deposit is being
mined under a joint mining agreement signed in December 1992 by the Company and
Barrick Goldstrike Mines, Inc. ("Barrick"). Under the agreement, Barrick, which
has a separate and distinct interest in the same ore body, mines the deposit and
charges the Company on a basis that will result in both companies ultimately
bearing the same cost per contained ounce of gold mined. Since a significant
portion of the Company's contained ounces in this deep deposit are not expected
to be mined for at least three years, the mining costs are being capitalized and
will be matched against the revenue from the ounces when they are produced. The
Company incurred $23.6 million and $5.2 million of such costs in 1993 and 1992,
respectively. These capitalized costs are expected to increase again in 1994 by
almost 50% over the 1993 level due to expected increased mining rates.
Royalty costs were $51.4 million in 1991, $46.6 million in 1992 and $47.6
million in 1993. More than half of the decrease between 1991 and 1992 was due to
the lower average gold price received in 1992 relative to 1991. The balance of
the decrease was due to treating less royalty-burdened ore in 1992. Total
royalty ounces produced declined again in 1993 but the increase in the average
gold price more than offset the decline. In general, royalty ounces are expected
to continue to decline in the future as the Company expects to treat less
royalty burdened ore.
The federal government is studying proposals to impose royalties on
revenues from production of hard-rock minerals, including gold, from federal
land. Because 94% of the Company's proven and probable gold reserves are on
private land, these proposals would not have a substantial impact on current
operations. However, these proposals, if enacted into law, could adversely
impact the Company's ability to find and exploit additional resources in the
United States as most exploration prospects are on federal land.
Costs applicable to sales per ounce have increased over the periods as a
result of a decrease in the overall ore grade of the material processed combined
with the higher mining rates. The overall grade of material processed has
decreased from 0.047 ounces per ton in 1991 to 0.038 ounces per ton in 1992 to
0.033 ounces per ton in 1993. With the roaster beginning operations in 1994,
total production costs are expected to again increase, resulting in costs
applicable to sales per ounce of production increasing annually approximately 5%
to 10% in 1994 and 1995. Per ounce costs are expected to decline once greater
quantities of higher grade refractory ore from the Company's Post deposit begin
to be treated, which current mine plans project to occur in 1997.
The Company considers its cash cost per ounce of production to be the sum
of its costs applicable to sales plus capitalized mining costs divided by its
total production. The cash cost per ounce of production was $214, $201 and $190
in 1993, 1992 and 1991, respectively.
Depreciation, depletion and amortization expense ("DD&A") has increased
over the last three years. The increase between 1991 and 1992 was primarily due
to an increase in the Company's estimate of future mine dewatering costs. The
increase in 1993 from 1992 was primarily due to a higher level of property,
plant and equipment in service. Although the Company will incur significant
capital expenditures in 1994, DD&A is expected to be approximately the same as
in 1993. This is primarily due to the retirement of Mill No. 2 in the South Area
of operations (which will be replaced by the roaster), and Mill No. 3 in the
Rain Area of operations, due to the depletion of that deposit. No material gain
or loss is anticipated from the retirement of these facilities.
Exploration and research expense reflects the Company's exploration efforts
on the Carlin Trend in Nevada. This expense has varied between years primarily
in relation to the level of annual exploration activity. As a result of the
transaction with NMC previously mentioned, going forward the Company will
conduct
24
<PAGE> 26
worldwide exploration with a coincident significant increase in exploration
expense as reflected in the pro forma income statement in Note 13 to Item 8.
General and administrative expense ("G&A") has decreased over the past
three years primarily as a result of ever greater percentages of the Company's
G&A being allocated to NMC pursuant to the Company's management services
agreement with NMC. As a result of the transaction with NMC previously
mentioned, the management services agreement was terminated and no G&A will be
allocated to NMC in the future.
The Company's effective tax rates are significantly less than the corporate
statutory rates primarily because of the impact of percentage depletion.
General inflation over the past three years has not had a material effect
on the Company's cost of doing business and is not expected to have a material
effect in the foreseeable future. Changes in the price received for gold will
impact the Company's revenue stream, as previously discussed.
The previously mentioned transaction with NMC results in the Company
acquiring worldwide gold reserves of 8.2 million contained ounces as of December
31, 1993, as well as worldwide exploration prospects. Although the immediate
impact of the transaction, as reflected by the pro forma income statement in
Note 13 to Item 8, is that certain expenses such as exploration, G&A and
interest will significantly increase, by 1995 revenues are expected to increase
as the gold reserves acquired are developed and brought into production. It is
expected that these operations will have operating costs per ounce of production
comparable to or less than experienced by the Company's Nevada operations in
recent years. The Company is targeting to have annual production attributable to
its interests in gold properties in excess of two million ounces by 1997. In
addition, the Company expects its worldwide exploration effort will enhance its
ability to expand its reserve base and provide for additional future growth.
LIQUIDITY AND CAPITAL RESOURCES
During 1993, the Company's capital expenditures of $200.3 million exceeded
cash flow provided by operating activities of $157.5 million. This shortfall was
funded primarily by a net reduction in the Company's advances to NMC of $38.5
million. Under NMC's cash management system prior to consummation of the
transaction, all cash generated by the Company was transferred to NMC and was
payable on demand. NMC credited the Company in amounts equal to the average rate
NMC earned on its short-term cash investments. Cash provided by operations
decreased by $41.2 million in 1993 from 1992, primarily because the Company's
inventory levels increased $42.8 million in 1993 from 1992. Ore inventories
accounted for $27.3 million of the increase due to the higher mining rates
mentioned in "Results of Operations." Ore inventories related to the Nevada
operations are expected to increase again in 1994, but by a lesser amount than
they did in 1993. The remaining increase in inventories in 1993 is attributable
to precious metals, the level of which can fluctuate significantly from
year-to-year depending on gold dore shipping dates.
As a result of the transaction with NMC, the Company's liquidity situation
will significantly change. As reflected by the pro forma balance sheet in Note
13 to Item 8, the Company assumed $192 million of long-term indebtedness. In
addition, the Company assumed approximately $88 million of cash and short-term
investments as of December 31, 1993. The Company's advances to NMC were
eliminated in the transaction but were included as a liability in valuing NMC's
assets and liabilities being acquired. In addition, as a result of the
transaction, future annual common stock dividends are expected to increase from
$5.2 million to approximately $46 million and preferred stock dividend
requirements will be $15.8 million.
Approximately $400 million of capital expenditures are expected to be
required in 1994. Of this amount, approximately $300 million is expected to be
required for the Nevada operations, with almost one-half of this amount required
to complete the roaster. The remaining $100 million required for capital
expenditures is expected to be spent on reserve development projects acquired
from NMC located in Uzbekistan and Indonesia. The Company's available cash and
operating cash flow in 1994 will not be sufficient to cover these expenditures.
As a result of the transaction, the Company has an unused $280 million revolving
credit facility and expects to have $150 million available under a medium-term
note program. In addition, project financing
25
<PAGE> 27
of $52.5 million has been arranged for the Company's share of capital
expenditures required for the Uzbekistan project. The Company believes these
facilities provide adequate liquidity to finance the Company's capital
investment programs. However, the Company continuously monitors capital markets
and may utilize alternative sources of funds available to it. The Company
expects to fund maturities of its debt through operating cash flow and/or by
refinancing the debt as it becomes due.
Capital expenditures are expected to decrease after 1994. The Company
expects it would be able to finance any amounts needed for future capital
expenditures that are in excess of operating cash flow with debt and may
specifically arrange project financing on major projects.
The Company has also assumed environmental liabilities associated with
former mining activities of NMC. Approximately $63 million had been accrued at
December 31, 1993 for these liabilities by NMC. Because of the uncertain nature
of these liabilities, the Company estimates that it is reasonably possible that
the ultimate liability may be as much as 60% greater or 20% lower than the
amount accrued at December 31, 1993. Because actual cash payments on these
liabilities will occur over a number of years, the settlement of such
liabilities is not expected to have a material impact on the Company's
liquidity. In addition, the Company expects to recover a significant portion of
these costs from insurance carriers, but when such recovery will occur is not
certain. Absent concurrent insurance recoveries, on-going cash payments will be
funded out of operating cash flows or borrowings.
Of the Company's $200 million capital expenditures in 1993, it is estimated
that approximately $66 million was required to comply with environmental
regulations. The Company estimates that in 1994 approximately $90 million to $95
million will be spent for capital expenditures to comply with environmental
regulations. A significant portion of the 1993 and 1994 expenditures are related
to the roaster. Upon completion of this facility, environmental capital
expenditures are not expected to be more than approximately $20 million
annually. Ongoing costs to comply with environmental regulations are not
significant. The Company provides for future reclamation and mine closure costs
on a units-of-production basis. The annual accrual of such costs has not been
significant. The Company reviews the adequacy of its reclamation and closure
reserves in light of current laws and regulations and makes provisions as
necessary. In addition, periodic internal environmental audits are conducted to
evaluate environmental compliance. Cash flow from the Company's operations and
salvage values are expected to provide funding for reclamation and closure
costs. The Company believes that its current operations are in compliance with
applicable laws and regulations designed to protect the public health and
environment.
26
<PAGE> 28
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
MANAGEMENT'S REPORT
NEWMONT GOLD COMPANY AND SUBSIDIARY
Management is responsible for the preparation of the accompanying
consolidated financial statements and for the other financial and operating
information presented in this annual report. It believes that its accounting
systems and internal accounting controls, together with other controls, provide
assurance that all accounts and records are maintained by qualified personnel in
requisite detail, and accurately and fairly reflect transactions of Newmont Gold
Company and its subsidiary (the "Company") in accordance with established
policies and procedures.
The Board of Directors has an Audit Committee whose members are neither
officers nor employees of the Company. During 1993, the Audit Committee held
three meetings. The Audit Committee recommends independent public accountants to
act as auditors for the Company for consideration by the Board of Directors;
reviews the Company's financial statements; confers with the independent public
accountants with respect to the scope and results of their audit of the
Company's financial statements and their reports thereon; reviews the Company's
accounting policies, tax matters and internal controls; and oversees compliance
by the Company with requirements of the Financial Accounting Standards Board and
federal regulatory agencies. The Audit Committee also reviews non-audit services
furnished to the Company by the independent public accountants. Access to the
Audit Committee is given to the Company's financial and accounting officers.
27
<PAGE> 29
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To Newmont Gold Company:
We have audited the accompanying consolidated balance sheets of Newmont
Gold Company (a Delaware corporation) and subsidiary as of December 31, 1993 and
1992, and the related statements of consolidated income, changes in
stockholders' equity and cash flows for each of the three years in the period
ended December 31, 1993. These financial statements are the responsibility of
the Company's management. Our responsibility is to express an opinion on these
financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the financial position of Newmont Gold
Company and subsidiary as of December 31, 1993 and 1992, and the results of
their operations and their cash flows for each of the three years in the period
ended December 31, 1993 in conformity with generally accepted accounting
principles.
As discussed in Note 5 to the consolidated financial statements, effective
January 1, 1993, the Company changed its method of accounting for income taxes.
In addition, as discussed in Note 7 to the consolidated financial statements,
effective January 1, 1992, the Company changed its method of accounting for
postretirement benefits other than pensions.
/s/ ARTHUR ANDERSEN & CO.
Arthur Andersen & Co.
Denver, Colorado
January 25, 1994
28
<PAGE> 30
NEWMONT GOLD COMPANY AND SUBSIDIARY
STATEMENTS OF CONSOLIDATED INCOME
(IN THOUSANDS, EXCEPT PER SHARE)
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
------------------------------
1993 1992 1991
-------- -------- --------
<S> <C> <C> <C>
Sales and other income
Sales........................................................ $601,601 $546,432 $572,750
Interest from parent......................................... 5,326 7,382 7,302
Other........................................................ 333 220 (204)
-------- -------- --------
607,260 554,034 579,848
-------- -------- --------
Costs and expenses
Costs applicable to sales.................................... (332,270) (314,581) (299,682)
Depreciation, depletion and amortization..................... (107,169) (96,745) (92,333)
Exploration and research..................................... (10,061) (14,658) (11,206)
General and administrative................................... (11,272) (13,345) (19,977)
Other........................................................ (3,980) (3,879) (9,742)
-------- -------- --------
(464,752) (443,208) (432,940)
-------- -------- --------
Income before income taxes and cumulative effect of changes in
accounting principles........................................ 142,508 110,826 146,908
Income tax provision........................................... (29,392) (23,412) (21,006)
-------- -------- --------
Income before cumulative effect of changes in accounting
principles................................................... 113,116 87,414 125,902
Cumulative effect of changes in accounting principles.......... 2,665 (6,356) --
-------- -------- --------
Net income..................................................... $115,781 $ 81,058 $125,902
-------- -------- --------
-------- -------- --------
Income (loss) per share:
Income before cumulative effect of changes in accounting
principles................................................ $ 1.08 $ 0.83 $ 1.20
Cumulative effect of changes in accounting principles........ 0.02 (0.06) --
-------- -------- --------
Net income per share......................................... $ 1.10 $ 0.77 $ 1.20
-------- -------- --------
-------- -------- --------
Weighted average shares outstanding............................ 104,875 104,875 104,875
-------- -------- --------
-------- -------- --------
</TABLE>
The accompanying notes are an integral part of these statements.
29
<PAGE> 31
NEWMONT GOLD COMPANY AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS, EXCEPT PER SHARE)
<TABLE>
<CAPTION>
AT DECEMBER 31,
----------------------
1993 1992
--------- --------
<S> <C> <C>
ASSETS
Cash................................................................. $ 389 $ 551
Advances to parent................................................... 159,573 198,050
Inventories.......................................................... 118,891 83,759
Other................................................................ 15,948 4,778
--------- --------
Current assets..................................................... 294,801 287,138
Property, plant and mine development, net............................ 695,460 595,244
Other................................................................ 31,609 22,949
--------- --------
Total assets............................................... $1,021,870 $905,331
--------- --------
--------- --------
LIABILITIES
Accounts payable..................................................... $ 15,062 $ 24,431
Other................................................................ 45,195 33,589
--------- --------
Current liabilities................................................ 60,257 58,020
Reclamation liabilities.............................................. 15,142 13,735
Other long-term liabilities.......................................... 22,453 23,129
--------- --------
Total liabilities.......................................... 97,852 94,884
--------- --------
Commitments and contingencies
STOCKHOLDERS' EQUITY
Common stock -- $0.01 par value; 250,000 shares authorized; 104,875
shares issued and outstanding...................................... 1,049 1,049
Capital in excess of par value....................................... 206,260 203,226
Retained earnings.................................................... 716,709 606,172
--------- --------
Total stockholders' equity................................. 924,018 810,447
--------- --------
Total liabilities and stockholders' equity................. $1,021,870 $905,331
--------- --------
--------- --------
</TABLE>
The accompanying notes are an integral part of these statements.
30
<PAGE> 32
NEWMONT GOLD COMPANY AND SUBSIDIARY
STATEMENTS OF CONSOLIDATED CHANGES
IN STOCKHOLDERS' EQUITY
(IN THOUSANDS, EXCEPT PER SHARE)
<TABLE>
<CAPTION>
CAPITAL IN
COMMON EXCESS OF RETAINED
STOCK PAR VALUE EARNINGS
------ ---------- --------
<S> <C> <C> <C>
Balance at December 31, 1990................................... $1,049 $ 203,226 $409,700
Net income................................................... -- -- 125,902
Dividends -- $0.05 per share................................. -- -- (5,244)
------ ---------- --------
Balance at December 31, 1991................................... 1,049 203,226 530,358
Net income................................................... -- -- 81,058
Dividends -- $0.05 per share................................. -- -- (5,244)
------ ---------- --------
Balance at December 31, 1992................................... 1,049 203,226 606,172
Net income................................................... -- -- 115,781
Dividends -- $0.05 per share................................. -- -- (5,244)
Other........................................................ -- 3,034 --
------ ---------- --------
Balance at December 31, 1993................................... $1,049 $ 206,260 $716,709
------ ---------- --------
------ ---------- --------
</TABLE>
The accompanying notes are an integral part of these statements.
31
<PAGE> 33
NEWMONT GOLD COMPANY AND SUBSIDIARY
STATEMENTS OF CONSOLIDATED CASH FLOWS
(IN THOUSANDS)
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
--------------------------------
1993 1992 1991
-------- -------- --------
<S> <C> <C> <C>
Operating Activities
Net income................................................ $115,781 $ 81,058 $125,902
Adjustments to reconcile net income to net cash provided
by operating activities:
Depreciation, depletion and amortization............... 107,169 96,745 92,333
Deferred taxes......................................... (16,068) (4,965) (21,996)
-------- -------- --------
206,882 172,838 196,239
(Increase) decrease in operating assets:
Inventories.......................................... (42,832) 16,278 (34,627)
Other assets......................................... (7,671) (2,064) (669)
Increase (decrease) in operating liabilities:
Accounts payable..................................... (7,617) 8,673 (1,999)
Other liabilities.................................... 8,391 (503) 16,805
Other operating........................................ 354 3,474 6,017
-------- -------- --------
Net cash provided by operating activities................... 157,507 198,696 181,766
-------- -------- --------
Investing Activities
(Advances to) repayments from parent...................... 38,477 (34,976) (81,539)
Additions to property, plant and mine development......... (200,340) (167,397) (97,265)
Other..................................................... 6,404 8,232 2,347
-------- -------- --------
Net cash used in investing activities....................... (155,459) (194,141) (176,457)
-------- -------- --------
Financing Activities
Dividends paid............................................ (5,244) (5,244) (5,244)
Other..................................................... 3,034 -- --
-------- -------- --------
Net cash used in financing activities....................... (2,210) (5,244) (5,244)
-------- -------- --------
Net increase (decrease) in cash............................. (162) (689) 65
Cash at beginning of year................................... 551 1,240 1,175
-------- -------- --------
Cash at end of year......................................... $ 389 $ 551 $ 1,240
-------- -------- --------
-------- -------- --------
</TABLE>
See Note 10 for supplemental cash flow information.
The accompanying notes are an integral part of these statements.
32
<PAGE> 34
NEWMONT GOLD COMPANY AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
PRINCIPLES OF CONSOLIDATION
The consolidated financial statements include the accounts of Newmont Gold
Company and its wholly-owned subsidiary, CG Properties, Inc. (collectively, the
"Company"). All significant intercompany balances and transactions have been
eliminated. Newmont Mining Corporation ("NMC") owns approximately 90% of the
Company.
RECLASSIFICATIONS
Certain amounts in prior years have been reclassified to conform to the
1993 presentation.
INVENTORIES
Ore and in-process inventories and materials and supplies are stated at the
lower of average cost or net realizable value. Precious metals are stated at
market value.
Non-current inventories are stated at the lower of average cost or net
realizable value and represent ore in stockpiles from which no material is
expected to be processed for more than one year after the balance sheet date.
PROPERTY, PLANT AND MINE DEVELOPMENT
Expenditures for new facilities or expenditures which extend the useful
lives of existing facilities are capitalized and depreciated using the
straight-line method at rates sufficient to depreciate such costs over the
estimated productive lives of such facilities, which range from two to fifteen
years.
Mineral exploration costs are expensed as incurred. When it has been
determined that a mineral property has proven and probable ore reserves, the
costs of subsequent reserve definition and the costs incurred to develop such
property, including the costs to remove overburden to initially expose the ore
body, are capitalized. Such costs, and estimated future development costs, are
amortized using a units-of-production method over the estimated life of the ore
body. On-going development expenditures to maintain production are generally
charged to operations as incurred.
Significant payments related to the acquisition of exploration interests
are capitalized. If a mineable ore body is discovered, such costs are amortized
using a units-of-production method. If no mineable ore body is discovered, such
costs are expensed in the period in which it is determined the property has no
future economic value.
Gains or losses from normal sales or retirements of assets are included in
other income or expense.
MINING COSTS
In general, mining costs are charged to operations as incurred. Due to the
diverse waste-to-ore ratios encountered in mining the Company's Post deposit,
mining costs for the Post deposit, to the extent they do not relate to current
production, are capitalized and then charged to operations when the applicable
gold is produced.
RECLAMATION AND MINE CLOSURE COSTS
Estimated future reclamation and mine closure costs are based principally
on legal and regulatory requirements and are accrued and charged over the
expected operating lives of the Company's mines using a units-of-production
method.
33
<PAGE> 35
NEWMONT GOLD COMPANY AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
DEFERRED INCOME TAXES
The Company's taxable income is included in NMC's consolidated federal
income tax return. Pursuant to a tax-sharing agreement with NMC, the Company's
provision for income taxes is calculated as if the Company filed a separate U.S.
federal corporate income tax return.
Prior to 1993, the Company recorded deferred income taxes under Accounting
Principles Board Opinion No. 11, "Accounting for Income Taxes" ("APB 11"). Under
the deferred method of APB 11, the Company recognized certain revenues and
expenses for financial reporting purposes at different times than it recognized
such amounts for income tax purposes, generating a deferred income tax charge or
benefit for the year.
Effective January 1, 1993, the Company adopted Statement of Financial
Accounting Standards No. 109, "Accounting for Income Taxes" ("SFAS 109"). Under
the liability method of SFAS 109, the Company recognizes certain temporary
differences between the financial reporting basis of the Company's liabilities
and assets and the related income tax basis for such liabilities and assets.
This generates a net deferred income tax liability or net deferred income
tax asset for the year, as measured by the statutory tax rates in effect as
enacted. The Company then derives its deferred income tax charge or benefit by
recording the change in the net deferred income tax liability or net deferred
income tax asset balance for the year.
NET INCOME PER SHARE
Net income per share is computed by dividing net income by the weighted
average number of common shares assumed to be outstanding during each period.
There are no common share equivalents.
(2) INVENTORIES
<TABLE>
<CAPTION>
AT DECEMBER 31,
----------------------
1993 1992
-------- -------
(IN THOUSANDS)
<S> <C> <C>
Current:
Ore and in-process inventories.............................. $ 55,761 $36,129
Precious metals............................................. 37,486 21,293
Materials and supplies...................................... 25,644 26,337
-------- -------
$118,891 $83,759
-------- -------
-------- -------
Non-current:
Ore in stockpiles (included in other assets)................ $ 16,400 $ 8,700
-------- -------
-------- -------
</TABLE>
34
<PAGE> 36
NEWMONT GOLD COMPANY AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(3) PROPERTY, PLANT AND MINE DEVELOPMENT
<TABLE>
<CAPTION>
AT DECEMBER 31,
--------------------------
1993 1992
---------- ---------
(IN THOUSANDS)
<S> <C> <C>
Land and mining claims.................................... $ 31,251 $ 34,689
Buildings and equipment................................... 764,042 729,461
Mine development.......................................... 156,615 141,843
Construction-in-progress.................................. 213,573 87,456
---------- ---------
1,165,481 993,449
Less accumulated depreciation, depletion and
amortization............................................ (498,774) (403,355)
Capitalized mining costs.................................. 28,753 5,150
---------- ---------
$ 695,460 $ 595,244
---------- ---------
---------- ---------
</TABLE>
(4) OTHER CURRENT LIABILITIES
<TABLE>
<CAPTION>
AT DECEMBER 31,
---------------------
1993 1992
------- -------
(IN THOUSANDS)
<S> <C> <C>
Payroll and related benefits................................... $13,382 $12,704
Plant and equipment............................................ 20,340 10,386
Royalties...................................................... 5,170 4,127
Other.......................................................... 6,303 6,372
------- -------
$45,195 $33,589
------- -------
------- -------
</TABLE>
(5) INCOME TAXES
SFAS 109 requires that, effective January 1, 1993, the Company account for
income taxes under the liability method, rather than the deferred method
required previously under APB 11. The cumulative effect of this change in
accounting for income taxes is an increase to Company earnings of $2.7 million,
or $0.02 per share, attributable to fiscal years prior to 1993.
Under SFAS 109, the Company must establish deferred income tax liabilities
and deferred income tax assets when temporary differences arise between the
financial reporting basis and the income tax basis of the Company's liabilities
and assets. The actual measurement of the deferred income tax liabilities and
assets is based upon the tax rates and tax law provisions as enacted.
Deferred income tax assets include the Company's future tax benefits such
as net operating losses or tax credit carryforwards. The Company must record a
valuation allowance against any portion of a deferred income tax asset which it
believes it will more likely than not fail to realize.
35
<PAGE> 37
NEWMONT GOLD COMPANY AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Components of the Company's deferred income tax (liabilities) and assets at
December 31, 1993 are as follows (in thousands):
<TABLE>
<S> <C>
Deferred Tax Liabilities:
Accelerated tax depreciation deducted in excess of book depreciation.... $(40,194)
Mine development costs deducted for tax in excess of book
amortization......................................................... (11,738)
Depletion of the cost of land and mining claims for tax in excess of
book amortization.................................................... (3,266)
Other................................................................... (283)
--------
Gross deferred tax liabilities....................................... (55,481)
--------
Deferred Tax Assets:
Alternative minimum tax credit carryforwards............................ 46,103
Inventory costs capitalized for tax in excess of book capitalized
costs................................................................ 6,471
Reclamation costs not deducted in tax return............................ 5,300
Retiree benefit costs not deducted in tax return........................ 2,800
Exploration costs not deducted in tax return............................ 6,476
Other................................................................... 1,191
--------
Gross deferred tax assets............................................ 68,341
--------
Valuation allowance for deferred tax assets............................. (2,800)
--------
Net deferred tax asset.................................................... $ 10,060
--------
--------
</TABLE>
Based upon estimates of future operations and tax planning strategies, the
Company believes that it more likely than not will utilize $65.5 million of the
$68.3 million of gross deferred tax assets at December 31, 1993, reflecting a
valuation allowance of $2.8 million.
The Company gives no outright assurance that it will generate sufficient
taxable income to fully realize the remaining $65.5 of gross deferred income tax
assets. Future levels of taxable income are dependent, in part, upon gold
prices, general economic conditions and other factors beyond the Company's
control.
On August 10, 1993, President Clinton signed into law the Revenue
Reconciliation Act of 1993, raising the federal corporate income tax rate from
34% to 35% (retroactive to January 1, 1993). The Company's provisions for income
taxes before the cumulative effect of changes in accounting principles consist
of (in thousands):
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
-----------------------------------
1993 1992 1991
---------- ------- --------
(SFAS 109) (APB 11)
---------- --------------------
<S> <C> <C> <C>
Current provision.................................. $ 41,495 $28,377 $ 43,002
Deferred benefit................................... (13,482) (4,965) (21,996)
Adjustment in net deferred tax assets for change in
tax rates........................................ 1,379 -- --
---------- ------- --------
Total provision.......................... $ 29,392 $23,412 $ 21,006
---------- ------- --------
---------- ------- --------
</TABLE>
36
<PAGE> 38
NEWMONT GOLD COMPANY AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
In accordance with APB 11, the Company's deferred income tax benefits for
1992 and 1991, before the cumulative effect of a change in accounting principle,
consist of (in thousands):
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
------------------------
1992 1991
------- --------
<S> <C> <C>
Excess depreciation deducted in tax returns................... $(1,468) $(20,465)
Excess mine development and exploration costs deducted in tax
returns..................................................... (2,197) (760)
Costs capitalized to inventory................................ (600) 63
Other......................................................... (700) (834)
------- --------
$(4,965) $(21,996)
------- --------
------- --------
</TABLE>
The provisions for income taxes before the cumulative effect of changes in
accounting principles differ from the amounts computed by applying the U.S.
corporate income tax statutory rate for the following reasons (in thousands):
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
------------------------------------
1993 1992 1991
---------- -------- --------
(SFAS 109) (APB 11)
---------- ---------------------
<S> <C> <C> <C>
U.S. corporate income tax at statutory rate....... $ 49,878 $ 37,681 $ 49,949
Percentage depletion.............................. (22,118) (14,463) (29,568)
Other............................................. 1,632 194 625
---------- -------- --------
$ 29,392 $ 23,412 $ 21,006
---------- -------- --------
---------- -------- --------
</TABLE>
At December 31, 1993, the Company had prepaid income taxes of $5.7 million
to NMC. Included in other long-term liabilities at December 31, 1993 and 1992 is
$7.2 million and $8.9 million, respectively, of taxes payable.
(6) RELATED PARTY TRANSACTIONS
The Company engages in various transactions with NMC and other affiliated
companies of NMC in the ordinary course of its business. Such transactions
include, among other things, advances or borrowings and the filing of
consolidated federal income tax returns with NMC.
The Company and NMC are parties to a management services agreement whereby
the Company agrees to provide NMC general executive, administrative and other
services. Pursuant to this agreement, the Company charged NMC $21.8 million,
$19.6 million and $15.3 million in 1993, 1992 and 1991, respectively.
Advances to parent reflect NMC effectively investing the Company's cash in
less than 90 day money market instruments. The Company is credited with the
average rate of earnings NMC receives on its invested funds. During 1993, 1992
and 1991, the Company was credited with interest at average rates of 2.9%, 3.3%
and 5.8%, respectively. As the advances earn market interest investment rates,
the Company estimates that the recorded amounts approximated fair value at
December 31, 1993 and 1992.
Exploration, mine development and metallurgical research costs incurred for
and charged to the Company by an affiliate of NMC amounted to $19.4 million,
$21.6 million and $21.1 million in 1993, 1992 and 1991, respectively.
37
<PAGE> 39
NEWMONT GOLD COMPANY AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(7) EMPLOYEE BENEFIT PLANS
PENSION BENEFITS -- HOURLY EMPLOYEES
The Company has a qualified non-contributory defined benefit pension plan
which covers substantially all hourly-rated employees. Pension costs are
determined annually by independent actuaries and pension contributions are made
based on funding standards established under the Employee Retirement Income
Security Act of 1974 ("ERISA"). The plan's benefit formula is a flat dollar
amount based on years of credited service. The plan's assets consist primarily
of stocks, bonds and cash.
The components of pension expense for the plan consist of (in thousands):
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
-------------------------
1993 1992 1991
----- ----- -----
<S> <C> <C> <C>
Service cost............................................... $ 589 $ 529 $ 405
Interest cost on projected benefit obligation.............. 323 260 202
Actual return on assets.................................... (340) (323) (255)
Amortization of unrecognized prior service cost and net
accumulated losses less amortization of net transition
asset.................................................... 6 6 5
----- ----- -----
Pension expense....................................... $ 578 $ 472 $ 357
----- ----- -----
----- ----- -----
</TABLE>
The following table sets forth the funded status of the plan and the
amounts recognized in the consolidated balance sheets (in thousands):
<TABLE>
<CAPTION>
AT DECEMBER 31,
-------------------
1993 1992
------- -------
<S> <C> <C>
Actuarial present value of benefit obligations:
Accumulated benefit obligation --
Vested benefits..................................................... $(3,577) $(2,292)
Non-vested benefits................................................. (1,670) (1,821)
------- -------
Accumulated benefit obligation and projected benefit obligation........ (5,247) (4,113)
Plan assets at fair value.............................................. 4,570 4,086
------- -------
Plan assets less than projected benefit obligation..................... (677) (27)
Unrecognized prior service cost........................................ 153 165
Unrecognized net gain.................................................. 221 (160)
Unrecognized net transition asset...................................... (84) (90)
------- -------
Pension liability................................................... $ (387) $ (112)
------- -------
------- -------
</TABLE>
In measuring the projected benefit obligation, weighted-average discount
rates of 7.50% and 7.75% were used in 1993 and 1992, respectively. The
weighted-average expected long-term rate of return on plan assets was assumed to
be 8.25%, 9.25% and 9.50% for 1993, 1992 and 1991, respectively.
PENSION BENEFITS -- SALARIED EMPLOYEES
The Company's salaried employees participate in NMC's qualified
noncontributory defined benefit pension plan. NMC is fully liable for the proper
funding of the plan. The Company is required to pay its allocable portion of any
actuarially determined funding requirements based on funding standards
established by ERISA. The Company's pension expense for participation in this
plan is equal to its annual funding requirement. The Company incurs no cost if
no funding is required. The Company had no funding requirements for 1993 and in
1992 the funding requirements allocable to the Company were approximately
38
<PAGE> 40
NEWMONT GOLD COMPANY AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
$1.2 million. At December 31, 1993 and 1992, the NMC plan had projected benefit
obligations of $57.4 million and $52.2 million, respectively, and plan assets
with a fair value of $60.3 million and $59.3 million, respectively.
RETIREE BENEFITS OTHER THAN PENSIONS
The Company provides defined medical benefits to qualified retirees who
were salaried employees and their eligible dependents, and it provides defined
life insurance benefits to qualifying retirees who were salaried employees. In
general, participants become eligible for these benefits upon retirement
directly from the Company if they are at least 55 years old and the combination
of their age and years of service with the Company equals 75 or more.
The defined medical benefits cover most of the reasonable and customary
charges for hospital, surgical, diagnostic and physician services and
prescription drugs. Life insurance benefits are based on a percentage of final
base annual salary and decline over time after coverage begins. The Company does
not pre-fund these benefits and has no formal policy for funding the benefits.
The Company adopted Statement of Financial Accounting Standards No. 106,
"Employers' Accounting for Postretirement Benefits Other Than Pensions" ("SFAS
106"), effective January 1, 1992. The statement requires that postretirement
benefits other than pensions be accrued during an employee's service to the
Company. Previously, the Company recorded the expense when benefit payments were
made for retirees.
The actuarially-determined accumulated postretirement benefit obligation
("APBO") calculated in accordance with SFAS 106 at January 1, 1992 was $7.2
million. The Company expensed $6.4 million of this amount as a cumulative effect
of a change in accounting principle. The remainder of approximately $0.8 million
was charged to NMC pursuant to the management services agreement with NMC.
The components of expense for postretirement benefits other than pensions
for 1993 and 1992, exclusive of the cumulative effect of adopting SFAS 106 as of
January 1, 1992, are shown in the table below (in thousands):
<TABLE>
<CAPTION>
YEARS ENDED
DECEMBER 31,
-----------------
1993 1992
------ ------
<S> <C> <C>
Service cost....................................................... $1,279 $1,146
Interest cost...................................................... 705 560
------ ------
Expense for postretirement benefits other than pensions............ $1,984 $1,706
------ ------
------ ------
</TABLE>
The Company charged NMC $0.2 million in both 1993 and 1992 for NMC's share
of these costs in accordance with the provisions of the management services
agreement. In 1991, the annual amount expensed for these benefits under the
Company's prior accounting policy was insignificant.
39
<PAGE> 41
NEWMONT GOLD COMPANY AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
The following table sets forth the components of the liability for the
Company's plans for postretirement benefits other than pensions recognized in
its balance sheet (in thousands):
<TABLE>
<CAPTION>
AT DECEMBER 31,
------------------
1993 1992
------- ------
<S> <C> <C>
Actuarial present value of accumulated benefit obligation:
Retirees........................................................ $ 1,182 $1,023
Other fully eligible plan participants.......................... 1,570 1,196
Other active plan participants.................................. 8,738 6,688
------- ------
Total APBO.............................................. 11,490 8,907
Unrecognized net loss........................................... (622) --
------- ------
Accrued liability for postretirement benefits other than
pensions........................................................ $10,868 $8,907
------- ------
------- ------
</TABLE>
Weighted average discount rates of 7.50% and 7.75% were used in calculating
the APBO at December 31, 1993 and 1992, respectively. The assumed health care
cost trend rates to measure the expected cost of benefits at December 31, 1993
start at an 11% annual increase for coverage before the age of 65 and a 10%
annual increase for coverage after the age of 64. These rates were assumed to
decrease one percentage point each year until a 6% annual rate of increase was
reached, at which point a 6% annual rate of increase was assumed thereafter. The
effect of a one percentage point annual increase in the assumed cost trend rates
would increase both the aggregate of service and interest costs and the APBO by
approximately 27%.
SAVINGS PLAN
Salaried employees may participate in NMC's qualified defined contribution
savings plan and hourly employees may participate in the Company's qualified
defined contribution savings plan. In addition, NMC has a non-qualified
supplemental savings plan for salaried employees whose benefits under the
qualified plan are limited by federal regulation.
After six months or one year of service for the salaried and hourly plans,
respectively, the Company generally matches 100% of employee contributions of up
to 6% and 2% of base salary for the salaried and hourly plans, respectively (the
hourly plan percentage increases to 4% as of January 1, 1994).
The Company's matching contributions to the savings plans were $2.0 million
in 1993, $1.9 million in 1992 and $1.8 million in 1991.
(8) MAJOR CUSTOMERS AND EXPORT SALES
The Company is not economically dependent on a limited number of customers
for the sale of its gold because gold commodity markets are well-established
worldwide. During 1993, there were three customers which accounted for $104.9
million, $97.3 million and $78.3 million of total sales, each of which
represented more than 10% of total sales and together accounted for 47% of
annual sales. In 1992, sales to two such major customers accounted for $124.9
million and $65.2 million, or 35% of total sales. In 1991, sales to two such
major customers accounted for $130.1 million and $128.5 million, or 45% of total
sales.
Export sales were $269.1 million, $242.5 million and $212.4 million for
1993, 1992 and 1991, respectively.
(9) OTHER EXPENSES
In December 1993, NMC announced that, effective January 1, 1994, the
Company would combine its operations with NMC by the Company acquiring all of
NMC's assets, except 85,850,101 shares of the
40
<PAGE> 42
NEWMONT GOLD COMPANY AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Company's stock, and liabilities. See Note 13 for additional information about
the transaction. Costs related to the transaction of $3.5 million were expensed
in 1993.
The Company expensed $0.5 million, $3.8 million and $6.0 million in 1993,
1992 and 1991, respectively, when it wrote-down the carrying value of certain
assets.
In November 1991, the Company announced layoffs and certain organizational
changes that resulted in $3.6 million of other expenses for 1991.
(10) SUPPLEMENTAL CASH FLOW INFORMATION
Net cash provided by operating activities includes cash payments for income
taxes of $42.5 million, $32.3 million and $42.7 million for 1993, 1992 and 1991,
respectively.
Excluded from the statements of consolidated cash flows are the effects of
certain non-cash transactions. During 1992, the Company exchanged $10.6 million
of employee housing property for $7.7 million of notes receivable and $2.9
million in cash.
(11) COMMITMENTS AND CONTINGENCIES
In December 1992, the Company finalized an agreement with Barrick
Goldstrike Mines, Inc. ("Barrick") which provides for Barrick to mine the
Company's Post deposit which extends beyond the Company's property boundaries
onto Barrick's property. The Company and Barrick share the costs so that each
ounce of gold mined bears the same mining cost. The Company is obligated to pay
Barrick for such costs as Barrick mines the deposit. In addition, the Company is
obligated to share dewatering costs which are associated with the Company's Post
deposit. The Company incurred $26.2 million of such mining and dewatering costs
in 1993 and expects to incur $30 million to $40 million annually for the near
future.
In conjunction with the construction of its refractory ore treatment plant,
the Company has entered into various contracts for the acquisition of equipment
and related construction services. This plant is expected to cost approximately
$300 million and will be completed in the third quarter of 1994. As of December
31, 1993, $158.2 million had been expended.
The Company has minimum royalty obligations of 80,000 ounces of gold per
year in 1994 and 1995, 55,000 ounces of gold in 1996 and no more than 40,000
ounces of gold per year thereafter for the life of the mine. The amount to be
paid to meet the royalty obligations is based upon a defined average market gold
price. Any amounts paid due to the minimum royalty obligation not being met in
any year are recoverable in future years when the minimum royalty obligation is
exceeded. The Company expects the mines' production will meet the minimum
royalty requirements.
The Company's mining and exploration activities are subject to various
federal and state laws and regulations governing the protection of the
environment. These laws and regulations are continually changing and generally
becoming more restrictive. The Company conducts its operations so as to protect
the public health and environment and believes its operations are in compliance
with all applicable laws and regulations. The Company has made, and expects to
make in the future, expenditures to comply with such laws and regulations. The
Company cannot predict such future expenditures.
The Company is from time to time involved in various legal proceedings of a
character normally incident to its business. It does not believe that adverse
decisions in any pending or threatened proceedings or any amounts which it may
be required to pay by reason thereof will have a material adverse effect on its
financial condition or results of operations.
41
<PAGE> 43
NEWMONT GOLD COMPANY AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(12) UNAUDITED SUPPLEMENTARY DATA
The following is a summary of selected quarterly financial information
(amounts in millions except per share amounts):
<TABLE>
<CAPTION>
1993
-------------------------------------------------
THREE MONTHS ENDED
------------------------------------ YEAR ENDED
MAR 31 JUN 30 SEP 30 DEC 31 DEC 31
------ ------ ------ ------ ----------
<S> <C> <C> <C> <C> <C>
Sales.......................................... $127.9 $150.1 $169.9 $153.7 $601.6
Gross profit (1)............................... $ 25.4 $ 41.4 $ 55.9 $ 39.5 $162.2
Income before cumulative effect of change in
accounting principle......................... $ 19.4 $ 28.1 $ 41.7 $ 23.9 $113.1
Cumulative effect of change in accounting
principle.................................... $ 2.7(2) $ -- $ -- $ -- $ 2.7
Net income..................................... $ 22.1 $ 28.1 $ 41.7 $ 23.9 $115.8
Income per share:
Income before cumulative effect of change in
accounting principle...................... $ 0.18 $ 0.27 $ 0.40 $ 0.23 $ 1.08
Cumulative effect of change in accounting
principle................................. $ 0.02(2) $ -- $ -- $ -- $ 0.02
Net income per share......................... $ 0.20 $ 0.27 $ 0.40 $ 0.23 $ 1.10
Weighted average shares outstanding............ 104.9 104.9 104.9 104.9 104.9
Dividends declared per share................... $ -- $ -- $ -- $ 0.05 $ 0.05
</TABLE>
<TABLE>
<CAPTION>
1992
-------------------------------------------------
THREE MONTHS ENDED
------------------------------------ YEAR ENDED
MAR 31 JUN 30 SEP 30 DEC 31 DEC 31
------ ------ ------ ------ ----------
<S> <C> <C> <C> <C> <C>
Sales............................................ $137.8 $136.7 $143.5 $128.4 $546.4
Gross profit (1)................................. $ 42.5 $ 30.5 $ 38.7 $ 23.4 $135.1
Income before cumulative effect of change in
accounting principle........................... $ 29.6 $ 17.2 $ 23.7 $ 16.9 $ 87.4
Cumulative effect of change in accounting
principle...................................... $ (6.3)(3) $ -- $ -- $ -- $ (6.3)
Net income....................................... $ 23.3 $ 17.2 $ 23.7 $ 16.9 $ 81.1
Income per share:
Income before cumulative effect of change in
accounting principle........................ $ 0.28 $ 0.16 $ 0.23 $ 0.16 $ 0.83
Cumulative effect of change in accounting
principle................................... $(0.06)(3) $ -- $ -- $ -- $(0.06)
Net income per share........................... $ 0.22 $ 0.16 $ 0.23 $ 0.16 $ 0.77
Weighted average shares outstanding.............. 104.9 104.9 104.9 104.9 104.9
Dividends declared per share..................... $ -- $ -- $ -- $ 0.05 $ 0.05
</TABLE>
- ---------------
(1) Sales less costs applicable to sales and depreciation, depletion and
amortization.
(2) Cumulative effect of change in accounting for income taxes (see Note 5).
(3) Cumulative effect of change in accounting for postretirement benefits other
than pensions (see Note 7).
42
<PAGE> 44
NEWMONT GOLD COMPANY AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(13) SUBSEQUENT EVENT
Effective January 1, 1994, the Company acquired all of NMC's operations.
The tax-free transaction included the following: (a) the transfer by NMC to the
Company of 8,649,899 shares of the 94,500,000 shares of common stock of the
Company held by NMC; (b) the transfer by NMC of all of its other assets to the
Company; (c) the assumption by the Company of all the liabilities (contingent or
otherwise) of NMC, but not NMC's obligations with respect to its $5.50
convertible preferred stock (the "NMC Preferred Stock"), (except for accrued and
unpaid dividends as of December 31, 1993) and its employee stock options
exercisable for NMC's common stock; (d) the issuance by the Company to NMC of
2,875,000 shares of $5.50 convertible preferred stock with a par value of $5.00
per share, and having terms identical to the NMC Preferred Stock (except that
upon conversion, NMC will be entitled to receive shares of the Company's common
stock instead of NMC's common stock); and (e) the issuance by the Company to NMC
of stock options exercisable for the Company's common stock. As a result of the
transaction, NMC's only assets are (i) the remaining 85,850,101 shares of common
stock of the Company held by it, or 89.22% of the Company's common stock
outstanding after the transaction, (ii) the 2,875,000 shares of the Company's
$5.50 convertible preferred stock issued to it and (iii) the Company's stock
options issued to it.
The Company's convertible preferred stock has a $5.50 per share annual
dividend requirement that is cumulative from January 1, 1994 and is payable
quarterly commencing June 15, 1994. The shares are convertible at any time at
the option of the holder into shares of common stock of the Company at the rate
of 2.7476 shares of common stock per share of preferred stock, subject to
certain adjustments. The convertible preferred stock is not redeemable prior to
November 15, 1995. On and after such date it is redeemable, in whole or in part,
at the option of the Company, at a beginning redemption price of $103.85 per
share. Such redemption price then declines $0.55 per share annually until it
reaches $100 per share on November 15, 2002, which is also the liquidation
preference per share. The convertible preferred stock does not have voting
rights. In that the Company's convertible preferred stock has essentially
identical terms to the NMC Preferred Stock, conversions and redemptions will be
coincident with those of NMC Preferred Stock.
The exercise prices of the stock options range from $27.19 to $56.09 per
share. The terms of the stock options are essentially identical to NMC's
employee stock options (2,055,087 which were outstanding at December 31, 1993)
and exercises of the Company's stock options by NMC will be coincident with
exercises of NMC's employee stock options by the holders of those options.
The Company accounted for the transaction as a transfer of assets and
liabilities between entities under common control. As a result, the transferred
assets and liabilities were recorded by the Company at NMC's historical cost
with the difference charged to retained earnings. The 8,649,899 common shares
transferred were recorded as treasury stock at the book value of those shares on
December 31, 1993. The convertible preferred stock was recorded at its par
value.
43
<PAGE> 45
NEWMONT GOLD COMPANY AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
The following pro forma condensed consolidated income statement for 1993
reflects the transaction as if it had occurred as of the beginning of 1993 and
the pro forma condensed consolidated balance sheet reflects the transaction as
if it had occurred December 31, 1993. These pro forma financial statements are
presented for illustrative purposes only, and are not necessarily indicative of
the Company's future operating results or financial condition.
PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF INCOME
(IN THOUSANDS, EXCEPT PER SHARE)
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, 1993
----------------------------------------------------
PRO FORMA
HISTORICAL ADJUSTMENTS PRO FORMA
---------- -------------------- ---------
(A) (B),(C)
-------- --------
<S> <C> <C> <C> <C>
Sales and other income
Sales................................... $ 601,601 $ 32,693 $ 634,294
Dividends, interest and other........... 333 19,643 19,976
Interest from parent.................... 5,326 $ (5,326)(B) --
Gain on sale of affiliate shares........ -- 29,607 -- 29,607
---------- -------- -------- ---------
607,260 81,943 (5,326) 683,877
---------- -------- -------- ---------
Costs and expenses
Costs applicable to sales............... (332,270) (6,887) (339,157)
Depreciation, depletion and
amortization......................... (107,169) (2,831) (110,000)
Exploration............................. (10,061) (42,633) (52,694)
General and administrative.............. (11,272) (24,577) (35,849)
Interest expense, net................... -- (12,394) (12,394)
Related party interest.................. -- (5,326) 5,326(B) --
Other................................... (3,980) (5,118) (9,098)
---------- -------- -------- ---------
(464,752) (99,766) 5,326 (559,192)
---------- -------- -------- ---------
Income (loss) before income taxes......... 142,508 (17,823) 124,685
Income tax benefit (provision)............ (29,392) 10,827 (18,565)
---------- -------- -------- ---------
Income (loss) from continuing
operations.............................. 113,116 (6,996) 106,120
Preferred stock dividends................. -- (15,910) (15,910)
---------- -------- -------- ---------
Income (loss) from continuing operations
applicable to common shares............. $ 113,116 $(22,906) $ -- $ 90,210(D)
---------- -------- -------- ---------
---------- -------- -------- ---------
Income per share form continuing
operations.............................. $ 1.08 $ 0.94
---------- ---------
---------- ---------
Weighted average shares outstanding....... 104,875 (8,474)(C) 96,401
---------- -------- ---------
---------- -------- ---------
</TABLE>
- ---------------
(A) Reflects the combined operations of NMC excluding its interest in the
Company, before the cumulative effect of change in accounting principle.
(B) Eliminates intercompany interest between the Company and NMC.
(C) Reflects the 8,650 shares of the Company's common stock transferred to the
Company by NMC, adjusted for 176 common stock equivalent shares resulting
from the options exercisable for the Company's common stock.
(D) NMC's reported consolidated income applicable to common stock ("NMC
consolidated income") can be reconciled to the resulting pro forma income
applicable to common stock as follows:
<TABLE>
<S> <C>
NMC consolidated income.................................................................. $117,229
Cumulative effect of change in accounting principle...................................... (38,470)
NMC's minority interest in the Company................................................... 11,451
--------
Pro forma income applicable to common stock.............................................. $ 90,210
--------
--------
</TABLE>
44
<PAGE> 46
NEWMONT GOLD COMPANY AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET
(IN THOUSANDS, EXCEPT PER SHARE)
<TABLE>
<CAPTION>
AT DECEMBER 31, 1993
-----------------------------------------------------
HISTORICAL PRO FORMA
---------- ---------
PRO FORMA
ADJUSTMENTS
------------------------
(A) (B),(C),(D)
--------- -----------
<S> <C> <C> <C> <C>
Assets
Cash and short-term investments.......... $ 389 $ 88,070 $ 88,459
Advances to parent....................... 159,573 $(159,573)(B) --
Inventories.............................. 118,891 3,355 122,246
Other current assets..................... 15,948 2,311 18,259
---------- --------- ----------- ---------
Current assets........................ 294,801 93,736 (159,573) 228,964
Property, plant and mine development,
net................................... 695,460 99,070 794,530
Other assets............................. 31,609 131,307 162,916
---------- --------- ----------- ---------
Total assets..................... $1,021,870 $ 324,113 $(159,573) $1,186,410
---------- --------- ----------- ---------
---------- --------- ----------- ---------
Liabilities and stockholders' equity
Advances from related party.............. $ -- $ 159,573 $(159,573)(B) $ --
Other current liabilities................ 60,257 49,777 110,034
---------- --------- ----------- ---------
Current liabilities................... 60,257 209,350 (159,573) 110,034
Long-term debt........................... -- 192,000 192,000
Other long-term liabilities.............. 37,595 125,538 163,133
---------- --------- ----------- ---------
Total liabilities................ 97,852 526,888 (159,573) 465,167
Stockholders' equity
Preferred stock -- Pro forma $5.00 par
value; 5,000 shares authorized; 2,875
shares issued of $5.50 convertible.... -- 14,375(C) 14,375
Common stock -- $0.01 par value; 250,000
shares authorized; 104,875 shares
issued................................ 1,049 1,049
Treasury stock -- Pro forma 8,650
shares................................ -- (76,206)(D) (76,206)
Capital in excess of par value........... 206,260 206,260
Retained earnings........................ 716,709 (202,775) (14,375)(C) 575,765
76,206(D)
---------- --------- ----------- ---------
Total stockholders' equity....... 924,018 (202,775) -- 721,243
---------- --------- ----------- ---------
Total liabilities and
stockholders'
equity......................... $1,021,870 $ 324,113 $(159,573) $1,186,410
---------- --------- ----------- ---------
---------- --------- ----------- ---------
</TABLE>
- ---------------
(A) Reflects the transfer at historical cost of NMC's combined assets and
liabilities excluding its interest in the Company at December 31, 1993.
(B) Eliminates intercompany advances between the Company and NMC.
(C) Reflects the issuance at par value of 2,875 shares of the Company's $5.50
convertible preferred stock, $5.00 per share par value, to NMC.
(D) Reflects the transfer at a net book value of $8.81 per share at December 31,
1993 of 8,650 shares of the Company's common stock from NMC to the Company.
The number of shares to be transferred was determined by taking the average
closing market price of the Company's common stock ten trading days before
the public announcement of the transaction and dividing it into $374
million.
45
<PAGE> 47
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
There have been no disagreements with Arthur Andersen & Co., the Company's
independent public accountants, regarding any matter of accounting principles or
practices or financial statement disclosure.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
Information concerning the Company's directors will be contained in the
Company's definitive Proxy Statement to be filed pursuant to Regulation 14A
promulgated under the Securities Exchange Act of 1934 for the 1994 annual
meeting of stockholders and is incorporated herein by reference. Information
concerning the Company's executive officers is set forth under Part I of this
report.
ITEM 11. EXECUTIVE COMPENSATION
Information concerning this item will be contained in the Company's
definitive Proxy Statement to be filed pursuant to Regulation 14A promulgated
under the Securities Exchange Act of 1934 for the 1994 annual meeting of
stockholders and is incorporated herein by reference.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT
Information concerning this item will be contained in the Company's
definitive Proxy Statement to be filed pursuant to Regulation 14A promulgated
under the Securities Exchange Act of 1934 for the 1994 annual meeting of
stockholders and is incorporated herein by reference.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Information concerning this item will be contained in the Company's
definitive Proxy Statement to be filed pursuant to Regulation 14A promulgated
under the Securities Exchange Act of 1934 for the 1994 annual meeting of
stockholders and is incorporated herein by reference.
46
<PAGE> 48
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
(a) The following documents are filed as a part of this Report:
1. Financial Statements
<TABLE>
<CAPTION>
10-K
PAGE
----
<S> <C>
Management's Report................................................... 27
Report of Independent Public Accountants.............................. 28
Statements of Consolidated Income..................................... 29
Consolidated Balance Sheets........................................... 30
Statements of Consolidated Changes in Stockholders' Equity............ 31
Statements of Consolidated Cash Flows................................. 32
Notes to Consolidated Financial Statements............................ 33
2. Financial Statement Schedules
Report of Independent Public Accountants on Schedules................. S-1
Schedule V -- Property, Plant and Mine Development.................. S-2
Schedule VI -- Accumulated Depreciation, Depletion and Amortization of
Property, Plant and Mine Development.................. S-3
Schedule X -- Supplementary Income Statement Information............ S-4
</TABLE>
All other schedules have been omitted since they are either not required,
are not applicable, or the required information is shown in financial statements
or related notes.
3. Exhibits
<TABLE>
<S> <C>
3(a). Restated Certificate of Incorporation dated May 2, 1986. Incorporated
by reference to Exhibit 3 to the registrant's Registration Statement
on Form S-1, Amendment No. 2 (No. 33-5565).
3(b). Certificate of Amendment of Certificate of Incorporation dated April
15, 1987. Incorporated by reference to Exhibit 3(b) to registrant's
Registration Statement on Form S-1, Amendment No. 1 (33-12686).
3(c). Certificate of Amendment of Certificate of Incorporation dated March
18, 1994.
3(d). By-Laws as amended through May 8, 1986. Incorporated by reference to
Exhibit 3 to registrant's Registration Statement on Form S-1,
Amendment No. 2 (No. 33-5565).
10(a). Management Services Agreement dated as of January 1, 1989 between
registrant and NMC. Incorporated by reference to Exhibit 10(a) to
registrant's Current Report on Form 8-K, dated November 20, 1989.
10(b). Tax Sharing Agreement dated as of January 1, 1986 between registrant
and NMC. Incorporated by reference to Exhibit 10(b) to registrant's
Registration Statement on Form S-1 (No. 35-5565).
10(c). Exploration Agreement dated May 8, 1986 among registrant, NMC and NEL.
Incorporated by reference to Exhibit 10(c) to registrant's
Registration Statement on Form S-1 (No. 33-5565).
10(d). Letter Agreement dated December 15, 1993, between the registrant and
NMC. Incorporated by reference to Exhibit A to registrant's Proxy
Statement dated February 16, 1994.
10(e). Agreement dated October 15, 1993, effective November 1, 1993, among the
registrant, NMC and Ronald C. Cambre. Incorporated by reference to
Exhibit 10 to the registrant's Quarterly Report on Form 10-Q for the
quarter ended September 30, 1993.
10(f). Consultation Agreement dated as of October 31, 1993 between registrant,
NMC and Gordon R. Parker.
23. Consent of Independent Public Accountants.
24. Power of Attorney.
</TABLE>
(b) Reports on Form 8-K.
No reports on Form 8-K were filed by NGC during the quarter ended December
31, 1993.
47
<PAGE> 49
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS ON SCHEDULES
To Newmont Gold Company:
We have audited in accordance with generally accepted auditing standards,
the consolidated financial statements of Newmont Gold Company and subsidiary,
included in this Form 10-K, and have issued our report thereon dated January 25,
1994. Our audits were made for the purpose of forming an opinion on those
statements taken as a whole. The schedules listed in the accompanying index are
the responsibility of the Company's management and are presented for purposes of
complying with the Securities and Exchange Commission's rules and are not part
of the basic consolidated financial statements. These schedules have been
subjected to the auditing procedures applied in the audits of the basic
consolidated financial statements and, in our opinion, fairly state in all
material respects the financial data required to be set forth therein in
relation to the basic consolidated financial statements taken as a whole.
/s/ ARTHUR ANDERSEN & CO.
Arthur Andersen & Co.
Denver, Colorado
January 25, 1994
S-1
<PAGE> 50
SCHEDULE V
NEWMONT GOLD COMPANY AND SUBSIDIARY
PROPERTY, PLANT AND MINE DEVELOPMENT
FOR THE YEARS ENDED DECEMBER 31, 1993, 1992 AND 1991
(IN THOUSANDS)
<TABLE>
<CAPTION>
OTHER
BALANCE AT CHANGES- BALANCE AT
BEGINNING ADDITIONS ADDITIONS END OF
DESCRIPTION OF PERIOD AT COSTS RETIREMENTS (DEDUCTIONS) PERIOD
- -------------------------------------------- ---------- --------- ----------- ------------ ----------
<S> <C> <C> <C> <C> <C>
1993
Land and mining claims.................... $ 34,689 $ 1,305 $ (4,743) $ -- $ 31,251
Buildings and equipment................... 729,461 41,931 (7,350) -- 764,042
Mine development costs.................... 141,843 16,329 (1,557) -- 156,615
Construction-in-progress.................. 87,456 128,493 (2,376) -- 213,573
Capitalized mining costs.................. 5,150 23,603 -- -- 28,753
---------- --------- ----------- ------------ ----------
$ 998,599 $ 211,661 $ (16,026) $ -- $1,194,234
---------- --------- ----------- ------------ ----------
---------- --------- ----------- ------------ ----------
1992
Land and mining claims.................... $ 29,196 $ 6,454 $ (971) $ 10 $ 34,689
Buildings and equipment................... 661,965 102,325 (34,819) (10) 729,461
Mine development costs.................... 119,862 21,981 -- -- 141,843
Construction-in-progress.................. 51,846 115,352 (79,742) -- 87,456
Capitalized mining costs.................. -- 5,150 -- -- 5,150
---------- --------- ----------- ------------ ----------
$ 862,869 $ 251,262 $ (115,532) $ -- $ 998,599
---------- --------- ----------- ------------ ----------
---------- --------- ----------- ------------ ----------
1991
Land and mining claims.................... $ 25,672 $ 3,546 $ (22) $ -- $ 29,196
Buildings and equipment................... 642,601 36,993 (17,629) -- 661,965
Mine development costs.................... 109,231 14,925 (4,294) -- 119,862
Construction-in-progress.................. 10,994 62,996 (22,144) -- 51,846
---------- --------- ----------- ------------ ----------
$ 788,498 $ 118,460 $ (44,089) $ -- $ 862,869
---------- --------- ----------- ------------ ----------
---------- --------- ----------- ------------ ----------
</TABLE>
S-2
<PAGE> 51
SCHEDULE VI
NEWMONT GOLD COMPANY AND SUBSIDIARY
ACCUMULATED DEPRECIATION, DEPLETION AND AMORTIZATION
OF PROPERTY, PLANT AND MINE DEVELOPMENT
FOR THE YEARS ENDED DECEMBER 31, 1993, 1992 AND 1991
(IN THOUSANDS)
<TABLE>
<CAPTION>
ADDITIONS OTHER
BALANCE AT CHARGED TO CHANGES- BALANCE AT
BEGINNING COSTS AND ADDITIONS END OF
DESCRIPTION OF PERIOD EXPENSES RETIREMENTS (DEDUCTIONS) PERIOD
- --------------------------------------------- ---------- ---------- ----------- ------------ ----------
<S> <C> <C> <C> <C> <C>
1993
Land and mining claims..................... $ 13,450 $ 1,100 $ (4,646) $ -- $ 9,904
Buildings and equipment.................... 318,687 86,000 (5,547) -- 399,140
Mine development costs..................... 71,218 20,069 (1,557) -- 89,730
---------- ---------- ----------- ------------ ----------
$ 403,355 $107,169 $ (11,750) $ -- $ 498,774
---------- ---------- ----------- ------------ ----------
---------- ---------- ----------- ------------ ----------
1992
Land and mining claims..................... $ 12,421 $ 1,029 $ -- $ -- $ 13,450
Buildings and equipment.................... 271,702 67,204 (20,219) -- 318,687
Mine development costs..................... 48,508 22,710 -- -- 71,218
---------- ---------- ----------- ------------ ----------
$ 332,631 $ 90,943 $ (20,219) $ -- $ 403,355
---------- ---------- ----------- ------------ ----------
---------- ---------- ----------- ------------ ----------
1991
Land and mining claims..................... $ 11,485 $ 1,240 $ (304) $ -- $ 12,421
Buildings and equipment.................... 206,764 75,660 (12,866) 2,144(1) 271,702
Mine development costs..................... 33,349 16,407 (1,248) -- 48,508
---------- ---------- ----------- ------------ ----------
$ 251,598 $ 93,307 $ (14,418) $2,144 $ 332,631
---------- ---------- ----------- ------------ ----------
---------- ---------- ----------- ------------ ----------
</TABLE>
- ---------------
(1) Write-down of employee housing.
S-3
<PAGE> 52
SCHEDULE X
NEWMONT GOLD COMPANY AND SUBSIDIARY
SUPPLEMENTARY INCOME STATEMENT INFORMATION*
FOR THE YEARS ENDED DECEMBER 31, 1993, 1992 AND 1991
(IN THOUSANDS)
<TABLE>
<CAPTION>
CHARGED TO INCOME
------------------------------
1993 1992 1991
------- -------- -------
<S> <C> <C> <C>
Maintenance and repairs........................................ $91,387 $101,003 $88,153
------- -------- -------
------- -------- -------
Royalties...................................................... $47,595 $ 46,613 $51,448
------- -------- -------
------- -------- -------
Taxes, other than payroll and income taxes:
Net proceeds of mines........................................ $ 7,306 $ 8,757 $ 9,298
Other........................................................ 16,381 15,028 8,192
------- -------- -------
$23,687 $ 23,785 $17,490
------- -------- -------
------- -------- -------
</TABLE>
- ---------------
* Excludes amortization of mine development costs which are included on Schedule
VI.
S-4
<PAGE> 53
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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.
NEWMONT GOLD COMPANY
By: /s/ TIMOTHY J. SCHMITT
Timothy J. Schmitt
Vice President, Secretary and
Assistant General Counsel
March 29, 1994
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the date indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
- --------------------------------------------- ----------------------- -----------------
<S> <C> <C>
* Chairman and Director
Gordon R. Parker
* Director
Rudolph I. J. Agnew
* Director
John P. Bolduc
* Vice Chairman and Chief
Ronald C. Cambre Executive Officer and
Director
* Director
Joseph P. Flannery
* Director
Thomas A. Holmes
* President and Chief March 29, 1994
T. Peter Philip Operating Officer and
Director
* Director
Robin A. Plumbridge
* Director
William I. M. Turner, Jr.
* Director
Robert H. Quenon
* Director
James V. Taranik
* Senior Vice President
Wayne W. Murdy and Chief Financial
Officer (Principal
Financial Officer)
* Vice President and
Gary E. Farmar Controller (Principal
Accounting Officer)
*By /s/ TIMOTHY J. SCHMITT
Timothy J. Schmitt
as Attorney-in-fact
</TABLE>
<PAGE> 54
Appendix I
The following is a narrative description of certain maps in image form
which have been included in the paper version of the Form 10-K but which have
been excluded from the EDGAR version of the Form 10-K.
1. Map of Location of the Carlin Trend Operations in Nevada --
Page 5 of the Form 10-K.
On page 5 of the Form 10-K, the registrant has included a
map of Nevada with an enlargement of the geographical location
of its operations on the Carlin Trend discussed on page 4 of the
Form 10-K. The map also includes a chart indicating the location
of various deposits including those without proven and probable
reserves.
2. Map of Location of the Yanacocha Project in Peru -- Page 6 of the
Form 10-K.
On page 6 of the Form 10-K, the registrant has included a
map of the Country of Peru showing the geographical location of
the Yanacocha project discussed on page 6 of the Form 10-K. The
map also includes a notation that Minera Yanacocha S.A., the
Peruvian corporation which owns and operates the Yanacocha
project, is 38% owned by the registrant.
3. Map of Location of the Zarafshan-Newmont Project in Uzbekistan --
Page 7 of the Form 10-K.
On page 7 of the Form 10-K, the registrant has included a
map of the Republic of Uzbekistan showing the geographical
location of the Zarafshan-Newmont project discussed on pages 6-7
of the Form 10-K. The map also includes a notation that the
Zarafshan-Newmont joint venture, which operates the project, is
50% owned by the registrant.
4. Map of Locations of the Minahasa Project and the Batu Hijau
Project in Indonesia -- Page 8 of the Form 10-K.
<PAGE> 55
On page 8 of the Form 10-K, the registrant has included a
map of the Republic of Indonesia showing the geographical location
of the Minahasa project and the Batu Hijau project, each of which
is discussed on pages 7-8 of the Form 10-K. The map also includes
a notation that each of the Indonesian companies that operate the
Minahasa project and the Batu Hijau project is 80% owned by the
registrant.
5. Map of Location of the Grassy Mountain Project in Oregon -- Page 9
of the Form 10-K.
On page 9 of the Form 10-K, the registrant has included a map
of Oregon and bordering states showing the geographical location of
the Grassy Mountain project discussed on page 9 of the Form 10-K.
<PAGE> 56
EXHIBIT INDEX
<TABLE>
<S> <C>
3(a). Restated Certificate of Incorporation dated May 2, 1986. Incorporated
by reference to Exhibit 3 to the registrant's Registration Statement
on Form S-1, Amendment No. 2 (No. 33-5565).
3(b). Certificate of Amendment of Certificate of Incorporation dated April
15, 1987. Incorporated by reference to Exhibit 3(b) to registrant's
Registration Statement on Form S-1, Amendment No. 1 (33-12686).
3(c). Certificate of Amendment of Certificate of Incorporation dated March
18, 1994.
3(d). By-Laws as amended through May 8, 1986. Incorporated by reference to
Exhibit 3 to registrant's Registration Statement on Form S-1,
Amendment No. 2 (No. 33-5565).
10(a). Management Services Agreement dated as of January 1, 1989 between
registrant and NMC. Incorporated by reference to Exhibit 10(a) to
registrant's Current Report on Form 8-K, dated November 20, 1989.
10(b). Tax Sharing Agreement dated as of January 1, 1986 between registrant
and NMC. Incorporated by reference to Exhibit 10(b) to registrant's
Registration Statement on Form S-1 (No. 35-5565).
10(c). Exploration Agreement dated May 8, 1986 among registrant, NMC and NEL.
Incorporated by reference to Exhibit 10(c) to registrant's
Registration Statement on Form S-1 (No. 33-5565).
10(d). Letter Agreement dated December 15, 1993, between the registrant and
NMC. Incorporated by reference to Exhibit A to registrant's Proxy
Statement dated February 16, 1994.
10(e). Agreement dated October 15, 1993, effective November 1, 1993, among the
registrant, NMC and Ronald C. Cambre. Incorporated by reference to
Exhibit 10 to the registrant's Quarterly Report on Form 10-Q for the
quarter ended September 30, 1993.
10(f). Consultation Agreement dated as of October 31, 1993 between registrant,
NMC and Gordon R. Parker.
23. Consent of Independent Public Accountants.
24. Power of Attorney.
</TABLE>
<PAGE> 1
NEWMONT GOLD COMPANY
============================================================
CERTIFICATE OF AMENDMENT
OF
CERTIFICATE OF INCORPORATION
============================================================
NEWMONT GOLD COMPANY, a corporation organized and existing
under and by virtue of the General Corporation Law of the State of Delaware,
DOES HEREBY CERTIFY:
FIRST: That the Board of Directors of said corporation, by
the vote of a majority of a quorum of its members at a duly called meeting,
filed with the minutes of the Board of Directors, adopted a resolution
proposing and declaring advisable the following amendment to the Certificate of
Incorporation of said corporation:
Article FOURTH of the Certificate of Incorporation of Newmont
Gold Company shall be amended by deleting the current Article FOURTH in its
entirety and replacing it with the following Article FOURTH:
"FOURTH: The total number of shares of all classes of stock which the Company
shall have authority to issue is Two Hundred and Fifty-Five Million
(255,000,000) of which Five Million (5,000,000) shares shall be Preferred Stock
(hereinafter called "Preferred Stock") of the par value of Five Dollars ($5.00)
per share and Two Hundred and Fifty Million (250,000,000) shares shall be
Common Stock (hereinafter called "Common Stock") of the par value of One Cent
($0.01) per share.
The designations and the powers, preferences and rights, and
the qualifications, limitations or restrictions thereof, of each class of stock
of the Company
<PAGE> 2
which are fixed by this Certificate of Incorporation, and the express grant of
authority to the Board of Directors of the Company to fix by resolution or
resolutions the designations and the powers, preferences and rights, and the
qualifications, limitations or restrictions thereof, of the Preferred Stock
which are not fixed by this Certificate of Incorporation, are as follows:
1. Shares of Preferred Stock may be issued from time to time
in one or more series as in this Article FOURTH provided. All shares of
Preferred Stock shall be of equal rank and shall be identical in all respects,
except in respect of the particulars fixed by the Board of Directors for series
of the Preferred Stock as permitted by the provisions of this Article FOURTH.
Each series of Preferred Stock shall be distinctively designated and all shares
of any one series of Preferred Stock shall be identical in all respects with
all the other shares of such series, except that shares of any one series
issued at different times may differ as to the dates, if any, from which
dividends thereon shall be cumulative.
2. Authority is hereby expressly granted to the Board of
Directors, by resolution or resolutions, from time to time to create and
provide for the issuance of series of the Preferred Stock and, in connection
with the creation of each such series, to fix by the resolution or resolutions
providing for the creation and issue of shares of such series the following
provisions of the shares of such series, so far as not inconsistent with the
provisions of this Article FOURTH applicable to all series of Preferred Stock:
(a) The designation of such series and the number of shares
which shall constitute such series;
(b) The dividend rate per annum, if any, at which holders of
shares of such series shall be entitled to receive dividends, whether
or not dividends on the shares of such series shall be cumulative, the
times at which and the quarterly dividend periods for which dividends
on such series shall be paid, the date or dates, if any, from which
dividends shall be cumulative and the other conditions, if any, on
which such dividends shall be paid;
(c) The time or times, if any, at which the shares of such
series shall be subject to redemption, in whole or in part, the price
or prices to which holders of shares of such series shall be entitled
upon such redemption, and the other terms and conditions, if any, on
which shares of such series may be so redeemed;
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<PAGE> 3
(d) The amount or amounts and the other rights, if any, to
which the holders of shares of such series shall be entitled upon the
dissolution, liquidation or winding up of the affairs of the Company
or upon any other distribution of the assets of the Company;
(e) The sinking fund or purchase fund provisions, if any, for
the redemption or purchase of shares of such series and, if any such
fund is so provided for the benefit of such shares, the amount of such
fund and the manner of its application;
(f) The extent of the voting powers, if any, of the shares of
such series;
(g) Whether or not the shares of such series shall be
convertible into, or exchangeable for, shares of any other class or
classes of stock, or of any series thereof, of the Company and, if so
convertible or exchangeable, the conversion or exchange price or
prices or rate or rates, the adjustments thereof and the other terms
and conditions, if any, on which shares shall be so convertible or
exchangeable; and
(h) Any other preferences and relative, participating,
optional or other special rights, and qualifications, limitations or
restrictions thereof, of shares of such series as are not fixed and
determined in this Article FOURTH.
3. The powers, preferences and rights, and the
qualifications, limitations or restrictions thereof, applicable to the
Preferred Stock of all series are as follows:
(a) Out of the funds of the Company legally available for
dividends, the holders of the Preferred Stock of each series shall be
entitled to receive, when and as declared by the Board of Directors,
cash dividends at such rate, and no more, and payable at such times
and for such quarterly dividend periods as shall be fixed for such
series by the Board of Directors as herein permitted. Dividends on
any shares of Preferred Stock shall be cumulative only if and to the
extent fixed by resolution of the Board of Directors. Accumulations
of dividends, if any, shall not bear interest.
No such dividend shall be paid or declared and set apart for
payment on any share of Preferred Stock for any quarterly dividend
period unless a dividend for the same quarterly dividend period, and
all past quarterly dividend periods, if any, ending within such
quarterly divided period ratably in proportion to the respective
annual dividend rates fixed therefor, shall be or have been paid or
declared and set apart for payment on all shares of Preferred Stock of
all series
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<PAGE> 4
then outstanding and entitled to receive dividends for such quarterly
dividend period or for any past quarterly dividend period, if any,
ending within such quarterly dividend period.
In no event, so long as any Preferred Stock shall remain
outstanding, shall any dividend, other than a dividend payable in
shares of Common Stock or any other class of stock ranking junior to
the Preferred Stock as to the distribution of assets and the payment
of dividends (the Common Stock, and any such other class of stock
being hereinafter sometimes referred to as "junior stock"), be
declared or paid upon, nor shall any distribution be made upon, any
junior stock, nor shall any shares of junior stock be purchased or
redeemed by the Company other than in exchange for junior stock, nor
shall any monies be paid or made available for a sinking fund for the
purchase or redemption of any junior stock, unless in each instance
dividends on all outstanding shares of the Preferred Stock for all
past dividend periods shall have been paid and the dividend on all
outstanding shares of the Preferred Stock for the then applicable
current quarterly dividend period shall have been paid, or declared
and a sum sufficient for the payment thereof set apart.
(b) The Company, at its election expressed by resolution of
the Board of Directors, may redeem the shares of any series of the
Preferred Stock at such time or times, at such price or prices and on
such other terms and conditions (not inconsistent with the provisions
of this subparagraph (b)) as are fixed for such series by the Board of
Directors as permitted herein plus, in each case, an amount equal to
all dividends accrued and unpaid on such series of Preferred Stock to
and including the date fixed for redemption (the total sum so payable
per share on any such redemption being hereinafter called the
"Redemption Price" and the date fixed for redemption being hereinafter
called the "Redemption Date"). If as permitted by the terms fixed for
such series by the Board of Directors, less than all outstanding
shares of any series of Preferred Stock are to be redeemed, the shares
of said series to be redeemed shall be chosen by lot or pro rata in
such equitable manner as the Board of Directors may determine.
Notice of every such redemption shall be mailed not less than
30 nor more than 90 days in advance of the Redemption Date to the
holders of record of the shares of Preferred Stock so to be redeemed
at their respective addresses as the same shall appear on the books of
the Company.
From and after the Redemption Date (unless the Company shall
default in paying or providing the funds necessary for the payment of
the Redemption
-4-
<PAGE> 5
Price of the shares so called for redemption) the right to receive
dividends on all shares of Preferred Stock so called for redemption
shall cease to accrue, and all rights of the holders of the shares of
Preferred Stock so called for redemption shall forthwith, after the
Redemption Date, cease and terminate, excepting only the right of such
holders to receive the Redemption Price for such shares but without
interest, and such shares shall no longer be deemed outstanding. Any
funds so set aside by the Company and unclaimed at the end of six
years from the Redemption Date shall revert to the general funds of
the Company, after which reversion the holders of such shares so
called for redemption shall look only to the Company for payment of
the Redemption Price.
If, on or after the giving of notice of redemption but before
the Redemption Date, the Company shall deposit with any bank or trust
company doing business in the Borough of Manhattan, City of New York,
New York, having capital and surplus of at least $10,000,000, in trust
to be applied to the redemption of the shares of Preferred Stock so
called for redemption, the funds necessary for such redemption, then
all rights of the holders of the shares of Preferred Stock so called
for redemption shall forthwith, after the date of such deposit, cease
and terminate (excepting only the right of such holders to receive the
Redemption Price therefor but without interest and the right to
exercise any conversion privilege not theretofore expired), and such
shares shall not, after the date of such deposit, be deemed
outstanding. Any funds so deposited which shall not be required for
such redemption because of the exercise of any such right of
conversion subsequent to the making of such deposit shall be returned
to the Company. In case the holders of shares of Preferred Stock so
called for redemption shall not, at the end of six years from the
Redemption Date, have claimed any funds so deposited, such bank or
trust company shall upon the request of the Company pay over to the
Company such unclaimed funds, and such bank or trust company shall
thereafter be relieved of all responsibility in respect thereof to
such holders and such holders shall look only to the Company for
payment of the Redemption Price.
Any interest accrued on funds set aside or deposited for
purposes of redemption as above provided shall be paid to the Company
from time to time.
Shares of any series of Preferred Stock which have been
redeemed, retired or purchased by the Company (whether through the
operation of a sinking fund or purchase fund or otherwise) or which,
if convertible or exchangeable, have been converted into or exchanged
for shares of stock of the Company of any other class or classes,
shall, upon appropriate filing and
-5-
<PAGE> 6
recording to the extent required by law, have the status of authorized
and unissued shares of Preferred Stock.
(c) In the event of any liquidation, dissolution or winding
up of the affairs of the Company, the holders of Preferred Stock shall
be entitled to receive, out of the assets of the Company available for
distribution to its stockholders, an amount in cash for each share
equal to the amount payable on such share in such event provided for
by the Board of Directors as permitted herein for the series of
Preferred Stock of which such share is a part plus, in each case, an
amount equal to all dividends accrued and unpaid on such share up to
the date fixed for distribution, and no more, before any distribution
shall be made to the holders of the Common Stock.
If upon any such liquidation, dissolution or winding up of the
Company its net assets shall be insufficient to permit the payment in
full of the respective amounts to which the holders of all outstanding
Preferred Stock of all series are entitled as above provided, the
entire remaining net assets of the Company shall be distributed among
the holders of Preferred Stock of all series in amounts proportionate
to the full amounts to which they are respectively so entitled.
Neither the merger nor consolidation of the Company, nor the
sale, lease or conveyance of all or a part of its assets, shall deemed
to be voluntary or involuntary liquidation, dissolution or winding-up
of the affairs of the Company within the meaning of this subparagraph
(c).
4. (a) Except for such voting powers as may be granted to
the holders of Preferred Stock by law, subparagraph (b) of this paragraph 4, or
as may be granted to the holders of any one or more series of Preferred Stock
by the Board of Directors in accordance with paragraph 2(f) of this Article
FOURTH, voting power shall be vested exclusively in the Common Stock. At every
meeting of the stockholders of the Company, every holder of Common Stock
entitled to vote shall be entitled to one vote for each share of Common Stock
registered in his name on the books of the Company and, except as otherwise
herein or by law provided, the Common Stock and Preferred Stock of the Company
(and any other capital stock of the Company at the time entitled thereto),
shall vote together as a class.
(b) At any time when six (6) quarterly dividends on any one
or more series of Preferred Stock entitled to receive cumulative dividends
shall be in default, the holders of all such cumulative series at the time or
times outstanding as to which such default shall exist shall be entitled, at
the next annual meeting of stockholders or special meeting held in place
thereof at which time the number of directors constituting
-6-
<PAGE> 7
the Board of Directors shall be increased by two, voting as a class, whether or
not the holders thereof shall otherwise be entitled to vote, to the exclusion
of the holders of Common Stock and the holders of any series of non-cumulative
Preferred Stock, to vote for and elect two members of the Board of Directors of
the Company to fill such newly-created directorships. At any time when six (6)
quarterly dividends on any one or more series of non-cumulative Preferred Stock
shall be in default, the holders of all such non-cumulative series at the time
or times outstanding as to which such default shall exist shall be entitled, at
the next annual meeting of stockholders or special meeting held in place
thereof at which time the number of directors constituting the Board of
Directors shall be increased by two, voting as a class, whether or not the
holders thereof shall otherwise be entitled to vote, to the exclusion of the
holders of Common Stock and the holders of any series of cumulative Preferred
Stock, to vote for and elect two members of the Board of Directors of the
Company to fill such newly-created directorships. All rights of all series of
Preferred Stock to participate in the election of directors pursuant to this
subparagraph 4(b) shall continue in effect, in the case of all series of
Preferred Stock entitled to receive cumulative dividends, until cumulative
dividends have been paid in full or set apart for payment on each cumulative
series which shall have been entitled to vote at the previous annual meeting of
stockholders, or special meeting held in place thereof, or, in the case of all
series of non-cumulative Preferred Stock, until non-cumulative dividends have
been paid in full or set apart for payment for four consecutive quarterly
dividend periods on each non-cumulative series which shall have been entitled
to vote at the previous annual meeting of stockholders or special meeting held
in place thereof. Whenever the holders of the Preferred Stock shall be
divested of such voting right hereinabove provided, the directors so elected by
the Preferred Stock shall thereupon cease to be directors of the Company and
thereupon the number of directors shall be reduced by two or four, as the case
may be. Directors elected by the holders of any one or more series of stock
voting separately as a class, may be removed only by a majority vote of such
series, voting separately as a class, so long as the voting power of such
series shall continue. Subject to the voting rights, if any, of any other
series of Preferred Stock, the holders of the Common Stock, voting as a class,
to the exclusion of the holders of such series so entitled to vote for and
elect members of the Board of Directors pursuant to this subparagraph 4(b)
shall be entitled to vote for and elect the balance of the Board of Directors.
Each stockholder entitled to vote at any particular time in accordance with the
foregoing provisions shall not have more than one vote for each share of stock
held of record by him at the time entitled to voting rights.
(c) Subject to the provisions of this Article FOURTH and any
further provisions prescribed in accordance herewith, and after making such
provisions, if any, as the Board of Directors may deem advisable for working
capital or as a reserve fund to meet contingencies or for such other purposes
as the Board of Directors, in their
-7-
<PAGE> 8
discretion, may deem necessary or advisable and in the best interests of the
Company, then, and not otherwise, the holders of the junior stock shall be
entitled to receive, when and as declared by the Board of Directors, out of
funds legally available for that purpose, dividends payable either in cash,
stock or otherwise.
(d) In the event of any liquidation, dissolution or winding
up of the affairs of the Company, if the holders of all series of the Preferred
Stock shall have received all the amounts to which they shall be entitled in
such event in accordance with the provisions of this Article FOURTH and any
further provisions prescribed in accordance herewith, the holders of the junior
stock shall be entitled, to the exclusion of the holders of the Preferred Stock
of all series, to share in all the remaining assets of the Company available
for distribution to the stockholders.
5. Except as may be provided in the provisions fixed by the
Board of Directors for any series of Preferred Stock, the number of authorized
shares of any class of stock of the Company may be increased or decreased by
the affirmative vote of the holders of a majority of the outstanding shares of
stock of the Company entitled to vote.
SECOND: That the stockholders of said corporation, by the
vote of a majority of a quorum of the stockholders at a duly called special
meeting, have approved said amendment in accordance with the provisions of
Section 216 of the General Corporation Law of the State of Delaware.
THIRD: That the aforesaid amendment was duly adopted in
accordance with the applicable provisions of Sections 216 and 242 of the
General Corporation Law of the State of Delaware.
-8-
<PAGE> 9
IN WITNESS WHEREOF, the undersigned have executed this
Certificate of Amendment effective as of March 18, 1994.
/s/ T. Peter Philip
T. Peter Philip
President
/s/ Timothy J. Schmitt
Timothy J. Schmitt
Vice President and Secretary
-9-
<PAGE> 1
EXHIBIT 10 (f)
CONSULTATION AGREEMENT
Gordon R. Parker
AGREEMENT made as of the 31st day of October, 1993 by and
among Newmont Mining Corporation, ("Mining"), Newmont Gold Company ("Gold"),
each a Delaware corporation with offices at 1700 Lincoln Street, Denver,
Colorado 80203 and Gordon R. Parker, residing at 13 Sunset Drive, Englewood,
Colorado 80110 ("Parker"). Gold and Mining are hereinafter sometimes referred
to collectively as the "Companies."
W I T N E S E T H:
WHEREAS, the Companies developed a management succession plan
in which Parker retired as Chief Executive Officer of each of the Companies on
November 1, 1993 and as an employee of Gold on November 30, 1993, and
WHEREAS, the Companies are desirous of retaining Parker's
services as a consultant for a period of time, and
WHEREAS, Parker is willing to render consulting services, and
WHEREAS, Parker is willing to forgo severance benefits to
which he might otherwise have been entitled under an employment agreement,
<PAGE> 2
NOW, THEREFORE, the parties agree as follows:
1. Retirement as an Employee. Parker has retired as an
employee of Gold on November 30, 1993. All rights which Parker may have under
all of the Companies' benefit plans covering their respective employees shall
be determined based upon his termination of employment being effective as of
November 30, 1993, and he shall continue to participate in any such plans
thereafter only to the extent that they accord benefits to a retired employee.
2. Consulting Services. During December 1993 and in
calendar years 1994 and 1995 Parker shall render such advisory, consulting and
other services to the Boards of Directors and the Companies as the Board of
Directors of each of the Companies (in consultation with its Chief Executive
Officer) may reasonably request, provided, however, that Parker shall not be
required to devote over the course of the year more than the equivalent of 50%
of his business time to such services. Parker may engage in other business
activities, provided he remains reasonably available, including availability by
telephone, to perform the services required by this paragraph 2 and subject to
the restrictions contained in paragraph 6.
3. Compensation. Parker shall render services to the
Companies during December 1993 and all of 1994 and 1995 as an independent
contractor and not as an employee.
-2-
<PAGE> 3
He shall receive compensation which shall be paid by Gold at the rate of
$400,000 per annum in December 1993 and in calendar 1994 and at the rate of
$300,000 per annum in calendar 1995, payable monthly in arrears. Such
compensation shall be in lieu of any director's retainer or fees to which he
would otherwise be entitled except for fees paid for attendance at meetings of
the Boards of Directors. Parker shall not be eligible to participate in the
Newmont Mining Corporation Directors' Stock Award Plan or any stock plan for
its directors adopted by Gold.
4. Stock Option Vesting. The terms of all unvested
non-qualified stock options awarded to Parker under the Newmont Mining
Corporation's 1987 Key Employees Stock Option Plan and 1992 Key Employees Stock
Plan (the "Stock Plans") shall be amended effective November 30, 1993 to
provide that such options shall continue to vest during Parker's service during
calendar year 1994, in accordance with the vesting schedule set forth in the
grant of such options.
5. Reimbursement of Expenses. Parker shall be entitled
to be reimbursed for reasonable travel and other expenses incurred in
connection with services rendered to the Boards of Directors and the Companies
during 1994 and 1995 upon a basis consistent with the policies of the
Companies.
-3-
<PAGE> 4
6. Covenant Not to Disclose. Parker acknowledges that
as a result of the services to be rendered to the Companies hereunder, Parker
will be brought into close contact with many confidential affairs of the
Companies, their subsidiaries, affiliates and customers, not readily available
to the public. In recognition of the foregoing, Parker covenants and agrees
that he shall not, except (i) as may be necessary in the discharge of his
duties with the Companies; (ii) as the Board of Directors of either of the
Companies may expressly authorize in writing; or (iii) as may be required by
applicable law or regulations, disclose or use for his own benefit or the
benefit of any person or entity with which he may be associated during the term
of this Agreement and thereafter any such confidential information, knowledge
or data obtained by Parker during or before the term of this Agreement which is
material to the business of either or both of the Companies and not publicly
available, otherwise disclosed by the Companies to third parties or recognized
as standard practice. As a guide, Parker is to consider information
originated, owned, controlled or possessed by the Companies, their subsidiaries
or affiliates which is not disclosed in printed publications stated to be
available for distribution outside the Companies, their subsidiaries and
affiliates as being confidential. In
-4-
<PAGE> 5
instances where doubt does or should reasonably be understood to exist in
Parker's mind as to whether information is confidential to the Companies, their
subsidiaries and affiliates, Parker agrees to request an opinion, in writing,
from the Companies.
7. Release. In consideration of the foregoing, Parker
releases and discharges the Companies and their officers and directors from any
and all claims, obligations or liabilities which have arisen or which may arise
by reason of the termination of Parker's employment with the Companies, except
with respect to enforcement of this Agreement, benefits under any employer
sponsored benefit plan in which Parker participates or Parker's rights to
indemnification by the Companies arising from his status as an officer and
director. The terms "claims, obligations, or liabilities" shall include, but
not be limited to, any and all claims of discrimination under Title VII of the
Civil Rights Act of 1964, as amended; and any other federal, state or local
law, or any other claim before any state or federal court, tribunal, or
administrative agency arising out of or in any way related to Parker's
employment relationship with the Companies and the termination of that
relationship.
8. Termination of Agreement by Parker. Parker may
terminate this Agreement at any time by giving the
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<PAGE> 6
Companies 60 days prior written notice of his election to terminate. Parker
shall be entitled to the compensation and other benefits provided herein
through the effective date of such termination but shall not thereafter be
entitled to receive any compensation or benefits hereunder; provided, however,
that such termination shall not affect any rights he has as a retired employee
under any employee benefit plans of the Companies. The provisions of paragraph
7 shall continue to apply according to its terms.
9. General
(a) Assignment. This Agreement is a personal contract
and, except as specifically set forth herein, the rights and interests of
Parker herein may not be sold, transferred, assigned, pledged or hypothecated.
The rights and obligations of the Companies hereunder shall be binding upon and
run in favor of the successors and assigns of the Companies.
(b) Governing Law; Captions. This Agreement contains the
entire agreement between the parties with respect to the subject matter herein
addressed and shall be governed by the law of the State of Colorado. It may
not be changed orally, but only by agreement in writing signed by the party
against whom enforcement of any waiver, change, modification or discharge is
sought. Paragraph
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<PAGE> 7
headings are for convenience of reference only and shall not be considered a
part of this Agreement.
(c) Prior Agreements. This Agreement supersedes and
terminates all prior agreements between the parties relating to the subject
matter herein addressed, provided, however, that nothing in this Agreement
shall be deemed to restrict or abrogate the supplemental pension benefits and
the right to suitable office space and secretarial facilities to be accorded
to Parker pursuant to the resolution set forth in the minutes of the meeting
of the Board of Directors of Mining dated October 26, 1988.
(d) Notices. Any notice or other communication required
or permitted hereunder shall be sufficiently given if delivered in person (in
the Companies' case to their respective Corporate Secretaries), or sent by
telex, telecopy or by registered or certified mail, postage prepaid, in the
case of Parker, addressed as follows: 13 Sunset Drive, Englewood, Colorado
80110 and in the case of the Companies, addressed as follows: 1700 Lincoln
Street, Denver, Colorado 80203 Attention: Corporate Secretary, or such other
address or number as shall be furnished in writing by either party to the
other, and such notice or communication shall be deemed to have been given as
of the date so delivered, sent by telecopier, telex or mailed.
-7-
<PAGE> 8
IN WITNESS WHEREOF, the Companies have by their appropriate
officers signed this Agreement and Parker has signed this Agreement, as of the
day and year first above written.
NEWMONT MINING CORPORATION
By /s/ RONALD C. CAMBRE
Name: Ronald C. Cambre
Title: Vice Chairman and
Chief Executive
Officer
NEWMONT GOLD COMPANY
By /s/ RONALD C. CAMBRE
Name: Ronald C. Cambre
Title: Vice Chairman and
Chief Executive
Officer
/s/ GORDON R. PARKER
Gordon R. Parker
-8-
<PAGE> 1
EXHIBIT 23
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the
incorporation of our reports included in this Form 10-K, into Newmont Mining
Corporation's previously filed Registration Statements on Form S-8 (Nos.
33-10141, 33-15558 and 33-49872) and Form S-3 (No. 33-45325).
/s/ ARTHUR ANDERSEN & CO.
Arthur Andersen & CO.
Denver, Colorado,
March 26, 1993
<PAGE> 1
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that each person whose
signature appears below constitutes and appoints Timothy J. Schmitt his true
and lawful attorney-in-fact and agent, with full power of substitution and
revocation, in his name and on his behalf, to do any and all acts and things
and to execute any and all instruments which they and each of them may deem
necessary or advisable to enable Newmont Gold Company to comply with the
Securities Exchange Act of 1934, as amended (the "Act"), and any rules,
regulations or requirements of the Securities and Exchange Commission in
respect thereof, including power and authority to sign his name in any and all
capacities (including his capacity as a Director and/or Officer of Newmont Gold
Company) to the Annual Report on Form 10-K of Newmont Gold Company for the
fiscal year ended December 31, 1993 and the undersigned hereby ratifies and
confirms all that said attorney-in-fact and agent shall lawfully do or cause to
be done by virtue hereof.
IN WITNESS WHEREOF, the undersigned have subscribed these
presents as of the 16th day of March 1994.
<TABLE>
<CAPTION>
Signature Title
- --------- -----
<S> <C>
/s/ RUDOLPH I.J. AGNEW Director
- ------------------------------------
Rudolph I.J. Agnew
/s/ JOHN P. BOLDUC Director
- ------------------------------------
John P. Bolduc
/s/ RONALD C. CAMBRE Chief Executive Officer and
- ------------------------------------ Vice Chairman and Director
Ronald C. Cambre (Principal Executive Officer)
/s/ JOSEPH P. FLANNERY Director
- ------------------------------------
Joseph P. Flannery
/s/ THOMAS A. HOLMES Director
- ------------------------------------
Thomas A. Holmes
/s/ GORDON R. PARKER Chairman and Director
- ------------------------------------
Gordon R. Parker
/s/ T. PETER PHILIP President and Chief Operating
- ------------------------------------ Officer and Director
T. Peter Philip
/s/ ROBIN A. PLUMBRIDGE Director
- ------------------------------------
Robin A. Plumbridge
/s/ ROBERT H. QUENON Director
- ------------------------------------
Robert H. Quenon
/s/ JAMES V. TARANIK Director
- ------------------------------------
James V. Taranik
/s/ WILLIAM I.M. TURNER, JR. Director
- ------------------------------------
William I.M. Turner, Jr.
/s/ WAYNE W. MURDY Senior Vice President
- ------------------------------------ and Chief Financial Officer
Wayne W. Murdy (Principal Financial Officer)
/s/ GARY E. FARMAR Vice President and Controller
- ------------------------------------ (Principal Accounting Officer)
Gary E. Farmar
</TABLE>
