<PAGE> 1
PROXY STATEMENT PURSUANT TO SECTION 14(A) OF THE SECURITIES
EXCHANGE ACT OF 1934 (AMENDMENT NO. )
Filed by the registrant /X/
Filed by a party other than the registrant / /
Check the appropriate box:
/ / Preliminary proxy statement
/X/ Definitive proxy statement
/ / Definitive additional materials
/ / Soliciting material pursuant to Rule 14a-11(c) or Rule 14a-12
NEWMONT GOLD COMPANY
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(Name of Registrant as Specified in its Charter)
NEWMONT GOLD COMPANY
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(Name of Person(s) Filing Proxy Statement)
Payment of filing fee (Check the appropriate box):
/X/ $125 per Exchange Act Rule 0-11(c)(1)(ii), 14a-6(i)(1), or
14a-6(j)(2).
/ / $500 per each party to the controversy pursuant to Exchange Act Rule
14a-6(i)(3).
/ / Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and
0-11.
(1) Title of each class of securities to which transaction applies:
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(2) Aggregate number of securities to which transactions applies:
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(3) Per unit price or other underlying value of transaction computed pursuant to
Exchange Act Rule 0-11:(1)
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(4) Proposed maximum aggregate value of transaction:
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/X/ Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was
paid previously. Identify the previous filing by registration statement
number, or the form or schedule and the date of its filing.
(1) Amount previously paid:
$125
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(2) Form, schedule or registration statement no.:
Preliminary Proxy Statement on Schedule 14A
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(3) Filing party:
Newmont Gold Company
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(4) Date filed:
December 23, 1993
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(1) Set forth the amount on which the filing fee is calculated and state how it
was determined.
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NEWMONT GOLD COMPANY
1700 LINCOLN STREET
DENVER, COLORADO 80203
February 16, 1994
TO OUR STOCKHOLDERS:
A Special Meeting of Stockholders of Newmont Gold Company (the "Company")
will be held on March 18, 1994 at 9:00 a.m., local time, at 1700 Lincoln Street,
41st Floor, Denver, Colorado.
As the enclosed proxy statement indicates, the purpose of this meeting is
to consider and vote upon a transaction between the Company and its 90.1%
stockholder, Newmont Mining Corporation ("Newmont Mining"). This transaction
will involve the transfer by Newmont Mining to the Company of all of the assets
of Newmont Mining, other than 85,850,101 shares of the Company's common stock
owned by Newmont Mining, in exchange for (i) the assumption by the Company of
all the liabilities (contingent or otherwise) of Newmont Mining, but not Newmont
Mining's obligations with respect to its $5.50 Convertible Preferred Stock
(other than accrued and unpaid dividends as of December 31, 1993) and employee
stock options exercisable for Newmont Mining common stock, (ii) the issuance by
the Company to Newmont Mining of preferred stock of the Company and (iii) the
issuance by the Company to Newmont Mining of stock options exercisable for the
Company's common stock. You will also be asked to consider and vote upon an
amendment to the Certificate of Incorporation of the Company to permit the
issuance of the preferred stock mentioned above.
The Board of Directors of the Company, based on the unanimous
recommendation of an independent Special Committee of the Board established for
the purpose of considering the transaction, has unanimously approved the
proposed transaction and unanimously recommends that you vote for the
transaction and the proposed amendment to the Company's Certificate of
Incorporation.
In substance, the result of the proposed transaction will be the creation
of one worldwide gold mining entity with two identical sets of shares traded
publicly. The combination will provide the Company access to the worldwide
operations, gold reserves and potential that has been developed by Newmont
Mining. The transaction is tax free to the Company's minority stockholders.
Your vote on the matters to be considered at the Special Meeting is
important. If the majority of the shares voted by the Company's 9.9% minority
stockholders at the Special Meeting are voted for the proposed transaction and
the proposed amendment, Newmont Mining will vote a sufficient number of shares
owned by it to assure approval by a majority of the shares outstanding, thereby
effectively requiring approval by a majority of the shares voted by the
Company's minority stockholders for the Company to be able to proceed with the
proposed transaction and amend the Company's Certificate of Incorporation.
You are encouraged to attend the meeting. However, to assure your
representation at the meeting, you are urged to sign, date and return the
accompanying proxy in the enclosed postage-prepaid envelope.
Sincerely,
RONALD C. CAMBRE
Vice Chairman and Chief Executive Officer
<PAGE> 3
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NEWMONT GOLD COMPANY
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NOTICE OF SPECIAL MEETING
A Special Meeting of Stockholders of NEWMONT GOLD COMPANY will be held on
March 18, 1994 at 9:00 a.m., at 1700 Lincoln Street, 41st Floor, Denver,
Colorado to consider and act upon the following matters:
1. a proposed transaction between Newmont Gold Company (the "Company")
and its 90.1% stockholder, Newmont Mining Corporation ("Newmont Mining"),
for the transfer to the Company of all of the assets of Newmont Mining,
other than 85,850,101 shares of the Company's common stock, par value $0.01
per share (the "NGC Common Stock"), owned by Newmont Mining (approximately
89.22% of the outstanding shares of NGC Common Stock following completion
of the Transaction (as defined below)), in exchange for (i) the assumption
by the Company of all liabilities (contingent or otherwise) of Newmont
Mining, but not Newmont Mining's obligations with respect to the $5.50
Convertible Preferred Stock of Newmont Mining (the "NMC Preferred Stock")
(other than accrued and unpaid dividends as of December 31, 1993) and
employee stock options of Newmont Mining (the "NMC Options") exercisable
for the common stock, par value $1.60 per share, of Newmont Mining (the
"NMC Common Stock"), (ii) the issuance by the Company to Newmont Mining of
preferred stock of the Company (the "NGC Preferred Stock") having terms
identical to the NMC Preferred Stock (except that upon conversion, Newmont
Mining will be entitled to receive shares of NGC Common Stock (instead of
NMC Common Stock)), and (iii) the issuance by the Company to Newmont Mining
of options exercisable for NGC Common Stock (the "NGC Options") on the same
terms as the NMC Options (the preceding in its entirety, the
"Transaction"); and
2. an amendment (the "Amendment") to the Certificate of Incorporation
of the Company to authorize 5,000,000 shares of preferred stock, par value
$5.00 per share.
Stockholders are cordially invited to attend the meeting.
TIMOTHY J. SCHMITT
Secretary
1700 Lincoln Street
Denver, Colorado 80203
February 16, 1994
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IF YOU ARE UNABLE TO ATTEND THE MEETING IN PERSON, PLEASE MARK,
SIGN AND DATE THE ACCOMPANYING PROXY CARD AND RETURN IT
PROMPTLY IN THE ACCOMPANYING ENVELOPE.
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<PAGE> 4
PROXY STATEMENT
GENERAL INFORMATION
STOCKHOLDERS ENTITLED TO VOTE. Holders of NGC Common Stock of record at
the close of business on January 21, 1994 are entitled to vote at the Special
Meeting of Stockholders (the "Special Meeting"). As of January 10, 1994, there
were 104,875,000 shares of NGC Common Stock outstanding. Each share of NGC
Common Stock entitles its owner to one vote. The holders of a majority of the
shares entitled to vote at the Special Meeting must be present in person or
represented by proxy in order to constitute a quorum for all matters to come
before the meeting. If a majority of the shares voted by the Company's 9.9%
minority stockholders at the Special Meeting are voted in favor of the
Transaction and the Amendment, Newmont Mining has agreed to vote a sufficient
number of shares of NGC Common Stock owned by it at the Special Meeting for the
Transaction and the Amendment to assure approval by a majority of the shares
outstanding, thereby effectively requiring approval by a majority of the shares
voted by the Company's minority stockholders for the Company to be able to
proceed with the Transaction and approve the Amendment.
Votes at the Special Meeting will be tabulated by two inspectors of
election, who shall be appointed by the Chairman of the Special Meeting. The
inspectors of election will treat shares of NGC Common Stock represented by a
properly signed and returned proxy as present at the Special Meeting for
purposes of determining a quorum, without regard to whether the proxy is marked
as casting a vote or abstaining.
All matters to come before the Special Meeting require the approval of
stockholders owning a majority of the outstanding NGC Common Stock. Under the
Company's Certificate of Incorporation, By-laws and Delaware law, abstentions
and broker "non-votes" as to particular matters will not count as votes cast for
or against any matters, and are counted only for purposes of determining whether
a quorum is present at the Special Meeting. If no direction is indicated on a
properly signed proxy, the NGC Common Stock represented thereby will be voted as
unanimously recommended by the Board of Directors, FOR the Transaction and FOR
the Amendment.
The Company and Newmont Mining do not intend to proceed with any part of
the Transaction unless all parts thereof are consummated simultaneously.
Therefore, in the event of a failure to receive approval of the Company's
stockholders, including approval by a majority of the shares voted by the
Company's minority stockholders, for either of the matters put to a vote at the
Special Meeting, the Board of Directors of the Company will abandon all parts of
the Transaction.
PROXY SOLICITATION. The accompanying proxy is solicited by the Board of
Directors of the Company. This Proxy Statement is being mailed to the
stockholders on or about February 17, 1994. In addition to solicitation by mail,
solicitation of proxies may be made by certain officers and regular employees of
the Company by mail, telephone, telegraph or personal interview. Such officers
and employees of the Company will receive no additional compensation in
connection with any such solicitation activities. The Company also has retained
Georgeson & Company Inc. to aid in the solicitation of brokers, banks and other
institutional stockholders for a fee of $6,000. All costs of the solicitation of
proxies will be borne by the Company. The Company will also reimburse brokerage
firms and others for their expenses in forwarding proxy materials to beneficial
owners of NGC Common Stock. A stockholder who executes a proxy may revoke it by
(i) delivering to the Secretary of the Company, at any time before the proxies
are voted, a written notice of revocation bearing a later date than the proxy,
(ii) duly executing a later dated proxy relating to the same shares and
delivering it to the Secretary of the Company before the taking of the vote at
the Special Meeting or (iii) attending the Special Meeting and voting in person
(although attendance at the Special Meeting will not in and of itself constitute
a revocation of a proxy). Written notice revoking a proxy should be sent to the
attention of the Secretary of the Company at 1700 Lincoln Street, Denver,
Colorado 80203. A stockholder may substitute another person in place of those
persons presently named as proxies.
STOCKHOLDER PROPOSALS. Any stockholder proposals requested to be included
in the Board of Directors' Proxy Statement for the 1994 Annual Meeting of
Stockholders were required to have been received by the Company on or before
November 30, 1993. The Company did not receive any stockholder proposals by such
date.
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RELATIONSHIP WITH INDEPENDENT PUBLIC ACCOUNTANTS. Arthur Andersen & Co.
has acted as principal auditors for the Company since 1967. In addition to audit
services, Arthur Andersen & Co. has regularly provided tax consulting services
to the Company. Representatives of Arthur Andersen & Co. will be present at the
Special Meeting and will be allowed to make a statement if they wish.
Additionally, they will be available to respond to appropriate questions from
stockholders during the Special Meeting.
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
General Information................................................................... 1
Summary............................................................................... 3
The Transaction....................................................................... 7
Transfer of Assets of Newmont Mining to the Company................................... 13
Amendment of the Certificate of Incorporation and Issuance of the NGC Preferred
Stock............................................................................... 21
Issuance of NGC Options............................................................... 26
Stockholder Litigation................................................................ 26
Description of Newmont Mining and the Company......................................... 27
Stock Ownership of the Company and Newmont Mining..................................... 35
Principal Stockholders of the Company and Newmont Mining.............................. 35
Section 16(a) Reporting............................................................... 40
Incorporation of Certain Documents by Reference....................................... 40
Appendix I -- Audited combined financial statements of Newmont Mining Corporation
and its subsidiaries excluding Newmont Gold Company
Exhibit A -- Letter Agreement between Newmont Mining Corporation and Newmont Gold
Company, dated December 15, 1993
Exhibit B -- Fairness Opinion of Dillon, Read & Co. Inc., dated December 15, 1993
Exhibit C -- Proposed Amendment to the Certificate of Incorporation of Newmont Gold
Company
</TABLE>
2
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SUMMARY
The following is a brief summary of detailed information contained
elsewhere in this Proxy Statement. This summary is not a complete statement of
all facts material to a stockholder's decision with respect to the matters to be
voted on at the Special Meeting. This summary should only be read in conjunction
with, and is qualified in its entirety by reference to, the more detailed
information contained in the remainder of this Proxy Statement.
THE PARTIES
THE COMPANY
Based on 1992 production, the Company is the largest gold producer from
North American operations according to published reports. The Company's
operations are located on the geological feature known as the Carlin Trend, near
Carlin, Nevada. The Carlin Trend is the largest gold district discovered in
North America this century. The Company has expanded its production dramatically
on the Carlin Trend during the past five years. Its production in 1988 was
895,500 ounces and in 1993 it produced approximately 1.7 million ounces. The
Company's cash costs of production (which are equal to operating costs
(excluding general and administrative expense) plus deferred stripping costs)
were $214 per ounce sold in 1993 which, according to published industry sources,
were lower than the cash costs associated with approximately two-thirds of all
gold produced in the western world in 1992. At the end of 1993, the Company had
17.8 million ounces of gold in proven and probable ore reserves on the Carlin
Trend. For 1994, gold production at the Company is expected to be approximately
1.6 million ounces and per ounce operating costs are expected to increase five
to ten percent over those incurred in 1993. The principal executive offices of
the Company are located at 1700 Lincoln Street, Denver, Colorado 80203,
telephone number (303) 863-7414.
NEWMONT MINING
Newmont Mining is a United States based, international gold company with
advanced gold exploration and development projects around the world, including
participation in joint ventures at the Muruntau mine in Uzbekistan and the
Yanacocha project in Peru (which commenced production in 1993). Newmont Mining,
through its wholly-owned subsidiary, Newmont Exploration Limited ("Newmont
Exploration"), and certain other affiliates, explores for gold worldwide.
Currently, substantially all of Newmont Mining's sales, operating profit and
identifiable assets relate to the Company's gold-mining activities. Newmont
Mining owns 90.1% of the Company. The principal executive offices of Newmont
Mining are located at 1700 Lincoln Street, Denver, Colorado 80203, telephone
number (303) 863-7414.
THE TRANSACTION
TRANSFER OF ASSETS AND LIABILITIES FROM NEWMONT MINING TO THE COMPANY
Newmont Mining will transfer all of its assets other than 85,850,101 shares
of NGC Common Stock (approximately 89.22% of the outstanding shares of NGC
Common Stock after completion of the Transaction) to the Company pursuant to a
letter agreement dated December 15, 1993. The letter agreement is attached to
this Proxy Statement as Exhibit A. The assets to be transferred consist of (i)
the stock of Newmont Exploration and the other subsidiaries of Newmont Mining,
(ii) all of Newmont Mining's tangible and intangible personal property, (iii)
8,649,899 of the shares of NGC Common Stock owned by Newmont Mining and (iv) any
other tangible or intangible assets other than the 85,850,101 shares of NGC
Common Stock to be retained by Newmont Mining. See "Transfer of Assets of
Newmont Mining to the Company."
In exchange for the transfer of Newmont Mining's assets, the Company has
agreed to assume all liabilities (contingent or otherwise) of Newmont Mining.
The liabilities assumed by the Company will also include all liabilities of
Newmont Mining arising after completion of the Transaction. However, the Company
has not agreed to assume Newmont Mining's obligations with respect to the NMC
Preferred Stock (other than accrued and unpaid dividends as of December 31,
1993) and the NMC Options.
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In addition, as part of the Transaction, the Company will (a) issue to
Newmont Mining 2,875,000 shares of $5.50 convertible preferred stock, par value
$5.00 per share ("NGC Preferred Stock"), with terms identical to the NMC
Preferred Stock, except that on conversion Newmont Mining will be entitled to
receive shares of NGC Common Stock (instead of NMC Common Stock) and (b) issue
to Newmont Mining options to purchase shares of NGC Common Stock in the same
number and with the same exercise prices (after adjusting for the effect of the
NMC Stock Split (as defined below)) as the NMC Options. See "Amendment of the
Certificate of Incorporation and Insurance of the NGC Preferred Stock" and
"Issuance of NGC Options." Following the consummation of the Transaction,
Newmont Mining will have no business other than its ownership of 85,850,101
shares of NGC Common Stock, 2,875,000 shares of NGC Preferred Stock and the NGC
Options and its obligations with respect to the NMC Preferred Stock and NMC
Options. Therefore, as a result of the Transaction, the Company and Newmont
Mining will operate as a single economic unit for the equal benefit of the
stockholders of both companies. Subsequent to completion of the Transaction, the
Company and Newmont Mining intend to equalize dividends at the level payable
from time to time on the NMC Common Stock (subject to adjustment for the NMC
Stock Split).
BACKGROUND OF THE TRANSACTION
The Board of Directors of the Company appointed an independent Special
Committee of the Board (the "Special Committee") on July 14, 1993 composed of
Robert H. Quenon and James V. Taranik to evaluate and negotiate the Transaction
on behalf of the Company after being informed by Newmont Mining that Newmont
Mining intended to make a proposal to combine the operations of Newmont Mining
and the Company. Neither Mr. Quenon nor Mr. Taranik are officers of the Company
or officers or directors of Newmont Mining or otherwise affiliated with Newmont
Mining. The Special Committee retained Dillon, Read & Co. Inc. ("Dillon Read")
to assist it in evaluating a possible transaction with Newmont Mining. The
Special Committee also retained the law firm of Dewey Ballantine to provide
assistance to it.
After extensive due diligence by the Special Committee and its financial
and legal advisors of the assets and liabilities of Newmont Mining, the Special
Committee met on December 7, 1993 and received an offer from Newmont Mining
outlining the basis upon which Newmont Mining proposed to combine the operations
of the Company and Newmont Mining. The Special Committee determined that the
value of NGC Common Stock which Newmont Mining proposed to transfer to the
Company was inadequate and proposed a higher value to Newmont Mining. After
negotiations with Newmont Mining with respect to the value of Newmont Mining's
assets and liabilities and consultations with its financial and legal advisors,
the Special Committee and Newmont Mining agreed on the terms of the Transaction
on December 8, 1993. See "The Transaction -- Background of the Transaction."
REASONS FOR THE TRANSACTION
The Company became a public company at a time when Newmont Mining was a
diversified natural resource company engaged in the exploration for, development
and mining of copper, gold, coal, lithium, and other minerals, and the
exploration for, development and production of oil and gas reserves in the
United States and abroad. Following a strategic decision to focus on gold
production only, Newmont Mining commenced a debt reduction program and divested
all of its non-gold business segments. Now both the Company and Newmont Mining
are pure gold companies with only financial structures and spheres of influence
to distinguish them. By limiting its activities to the Carlin Trend, the Company
would be limited in its ability to expand its reserve base. The Company has
significantly expanded its productive capacity since 1988. The acquisition of
Newmont Mining's assets will give the Company access to the worldwide
operations, reserves and exploration potential that have been developed by
Newmont Exploration and its affiliates and will potentially increase reserve
life. The Transaction will also eliminate any potential conflict between the
interests of the Company's stockholders and Newmont Mining's stockholders, as
well as the corresponding management time and expenses required to prevent such
conflicts. Furthermore, as a result of the Transaction, any valuation
differential between the market prices of NGC Common Stock and NMC Common Stock
is expected to be substantially reduced. See "The Transaction -- Reasons for the
Transaction."
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RECOMMENDATION OF THE BOARD OF DIRECTORS
The Board of Directors of the Company, based on the unanimous
recommendation of the Special Committee, has unanimously approved the
Transaction and unanimously recommends that the stockholders of the Company vote
for the Transaction and for the Amendment to the Certificate of Incorporation.
OPINION OF DILLON READ
On September 16, 1993, the Special Committee retained Dillon Read to advise
it in connection with the Transaction. Dillon Read spent several months
analyzing the business, assets and liabilities of Newmont Mining. During this
period, Dillon Read also met with the Special Committee to report on its
progress and with Newmont Mining to collect relevant financial and other
information with respect to Newmont Mining. Representatives of Dillon Read
advised the Special Committee during the negotiation of the terms of the
Transaction with Newmont Mining. Subsequently, the Special Committee requested
that Dillon Read render an opinion as to the fairness, from a financial point of
view, of the terms of the proposed Transaction to the stockholders of the
Company (other than Newmont Mining). On December 8, 1993, Dillon Read orally
rendered its opinion to the Special Committee that, as of such date, the terms
of the Transaction are fair, from a financial point of view, to the stockholders
of the Company (other than Newmont Mining). In a written opinion to the Special
Committee and the Board of Directors dated December 15, 1993, Dillon Read
confirmed its oral opinion. Dillon Read's opinion is directed only to the
Special Committee and the Board of Directors and does not constitute a
recommendation to any stockholder as to how such stockholder should vote at the
Special Meeting. A copy of the opinion is attached to this Proxy Statement as
Exhibit B. See "The Transaction -- Opinion of Dillon Read."
APPROVAL BY THE COMPANY'S STOCKHOLDERS
The Company and Newmont Mining do not intend to proceed with any part of
the Transaction unless all parts thereof are consummated simultaneously.
Therefore, in the event of a failure to receive approval of the Company's
stockholders, including approval by a majority of the shares voted by the
Company's minority stockholders, for either of the measures put to a vote at the
Special Meeting, the Board of Directors of the Company will abandon all parts of
the Transaction.
APPROVAL BY NEWMONT MINING
The Board of Directors of Newmont Mining has also unanimously approved the
Transaction. The Newmont Mining Board retained Lazard Freres & Co. ("Lazard") to
advise it with respect to the Transaction. Lazard spent several months analyzing
the business, assets and liabilities of Newmont Mining and representatives of
Lazard advised Newmont Mining during the negotiation of the terms of the
Transaction with the Special Committee. Lazard rendered its written opinion to
the Newmont Mining Board of Directors, dated December 15, 1993, that, taken as a
whole, the Transaction is fair, from a financial point of view, to the holders
of preferred and common stock of Newmont Mining. No approval by the stockholders
of Newmont Mining is required to consummate the Transaction.
NGC PREFERRED STOCK
Newmont Mining has outstanding 2,875,000 shares of $5.50 convertible
preferred stock, $5.00 par value (the "NMC Preferred Stock"). The NMC Preferred
Stock is convertible into shares of NMC Common Stock at a stated conversion
price of $45.425, subject to adjustment on occurrence of certain events and
transactions, including the NMC Stock Split. The NMC Preferred Stock is also
entitled, on liquidation, to a liquidating distribution of $100 per share. In
connection with the Transaction, the Company proposes to issue to Newmont Mining
2,875,000 shares of $5.50 convertible preferred stock, $5.00 par value (the "NGC
Preferred Stock"). The NGC Preferred Stock will have terms identical to the NMC
Preferred Stock, except that on conversion Newmont Mining will be entitled to
receive shares of NGC Common Stock instead of NMC Common Stock. The Company's
Certificate of Incorporation does not provide for the Company to issue any
shares of preferred stock. One of the matters to be voted on at the Special
Meeting is an amendment (the
5
<PAGE> 9
"Amendment") to the Company's Certificate of Incorporation to authorize the
issuance of 5,000,000 shares of preferred stock, par value $5.00 per share. The
text of the proposed Amendment is attached hereto as Exhibit C. See "Amendment
of the Certificate of Incorporation and Issuance of NGC Preferred Stock --
Description of Preferred Stock."
NGC OPTIONS
As of January 10, 1994, Newmont Mining had outstanding options (the "NMC
Options") exercisable for 1,614,701 shares of NMC Common Stock, at prices
ranging from $33.94 to $70.00 per share. The NMC Options expire between December
16, 1997 and December 13, 2003. As part of the Transaction, the Company will
issue options (the "NGC Options") to Newmont Mining to purchase shares of NGC
Common Stock in the same number and at the same exercise prices (after adjusting
for the effect of the NMC Stock Split) as the NMC Options, including NMC Options
granted after completion of the Transaction. It is the intent that, through
exercise of the NGC Options by Newmont Mining when and as the NMC Options are
exercised by the holders thereof, the number of shares of NGC Common Stock
outstanding held by Newmont Mining will always equal the number of shares of NMC
Common Stock outstanding (after giving effect to the NMC Stock Split).
NMC STOCK SPLIT
In connection with the Transaction, the Board of Directors of Newmont
Mining intends to approve a split of the NMC Common Stock (the "NMC Stock
Split"), payable in the form of a stock dividend. The amount of the NMC Stock
Split will be calculated so that the number of shares of NMC Common Stock
outstanding following the NMC Stock Split will equal the number of shares of NGC
Common Stock held by Newmont Mining at that time.
THE COMPANY'S DIVIDEND POLICY
Newmont Mining in recent years has paid an annual dividend of $0.60 per
share of NMC Common Stock. Assuming the NMC Stock Split had taken place on
December 9, 1993, the adjusted annual dividend would have been $0.48 per share
of NMC Common Stock. The Company's annual dividend has been $0.05 per share of
NGC Common Stock. Subsequent to completion of the Transaction, the Company
currently intends to increase its annual dividend to the level which has
recently been paid on the NMC Common Stock (after adjusting for the effect of
the NMC Stock Split). 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.
NO APPRAISAL OR SIMILAR RIGHTS FOR DISSENTERS
If the stockholders of the Company approve the Transaction at the Special
Meeting, the stockholders of the Company will have no appraisal, dissenter's or
similar rights under Delaware law.
STOCKHOLDER LITIGATION
Two identical actions have been filed in the Court of Chancery for the
State of Delaware by alleged stockholders of the Company. Both actions purport
to be stockholder derivative actions and seek relief for alleged breaches of
fiduciary duties by the Company's Board of Directors and seek to enjoin the
Transaction. Management of the Company believes that the claims are without
merit and is informed that defendants intend to defend against them vigorously.
See "Stockholder Litigation."
FEDERAL TAX CONSEQUENCES TO STOCKHOLDERS OF THE COMPANY
There will not be any federal income tax consequences of the Transaction to
the Company's minority stockholders.
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<PAGE> 10
THE TRANSACTION
SUMMARY DESCRIPTION
On December 15, 1993, the Board of Directors of the Company, after
receiving the unanimous recommendation of the Special Committee, unanimously
approved the Transaction and the execution and delivery by the Company of a
letter agreement dated December 15, 1993 between the Company and Newmont Mining
(the "Purchase Agreement"). The Purchase Agreement is attached to this Proxy
Statement as Exhibit A. Pursuant to the Purchase Agreement:
- Newmont Mining will transfer to the Company all its operating assets, as
well as 8,649,899 of the shares of NGC Common Stock owned by Newmont
Mining;
- the Company will assume all liabilities (contingent or otherwise) of
Newmont Mining, but not Newmont Mining's obligations with respect to the
NMC Preferred Stock (other than accrued and unpaid dividends as of
December 31, 1993) and the NMC Options;
- the Company will issue 2,875,000 shares of NGC Preferred Stock to Newmont
Mining;
- the Company will issue the NGC Options to Newmont Mining; and
- the Company will pay all costs and liabilities incurred by Newmont Mining
in the future, whether existing at the time of the Transaction or arising
thereafter, including all costs and expenses incurred by Newmont Mining,
in connection with the Transaction.
The foregoing transactions are collectively referred to herein as the
"Transaction."
At a meeting held on December 15, 1993, the Board of Directors of Newmont
Mining unanimously approved the Purchase Agreement and the consummation by
Newmont Mining of the Transaction. No approval by the Newmont Mining
stockholders is required for consummation of the Transaction.
In connection with the Transaction, the Board of Directors of Newmont
Mining intends to approve the NMC Stock Split, payable in the form of a
dividend. The amount of the NMC Stock Split will be calculated so that the
number of shares of NMC Common Stock outstanding following the NMC Stock Split
will equal the number of shares of NGC Common Stock held by Newmont Mining at
that time.
Newmont Mining in recent years has paid an annual dividend of $0.60 per
share of NMC Common Stock. Assuming the NMC Stock Split had taken place on
December 9, 1993, the adjusted annual dividend would have been $0.48 per share
of NMC Common Stock. The Company's annual dividend has been $0.05 per share of
NGC Common Stock. Subsequent to completion of the Transaction, the Company
currently intends to increase its annual dividend to the level which has
recently been paid on the NMC Common Stock (after adjusting for the NMC Stock
Split). 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.
It is the intention of the Company and Newmont Mining that following
completion of the Transaction, Newmont Mining will have no business other than
its ownership of 85,850,101 shares of NGC Common Stock, 2,875,000 shares of NGC
Preferred Stock and the NGC Options and its obligations with respect to the NMC
Preferred Stock and NMC Options. Therefore, the Company and Newmont Mining will
operate as a single economic unit for the equal benefit of the stockholders of
both companies.
STOCKHOLDER ACTION PROPOSED
In connection with and furtherance of the foregoing, at the Special Meeting
the stockholders of the Company will be asked to vote on the following specific
actions:
(1) To approve the Transaction; and
(2) To approve an amendment (the "Amendment") to the Company's
Certificate of Incorporation to authorize the issuance of 5,000,000 shares
of preferred stock, par value $5.00 per share.
The Company and Newmont Mining do not intend to proceed with any part of
the Transaction unless all parts thereof are consummated simultaneously.
Therefore, in the event of failure to receive approval of the stockholders,
including approval by a majority of the shares voted by the Company's minority
stockholders, for
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either of the measures put to a vote at the Special Meeting, the Board of
Directors of the Company will abandon all parts of the Transaction.
The approval of stockholders owning a majority of the outstanding NGC
Common Stock is necessary to take the actions described above. If a majority of
the shares voted by the Company's 9.9% minority stockholders at the Special
Meeting are voted in favor of the Transaction and the Amendment, Newmont Mining
has agreed to vote a sufficient number of shares of NGC Common Stock owned by it
at the Special Meeting for the Transaction and the Amendment to assure approval
by a majority of the shares outstanding, thereby effectively requiring approval
by a majority of the shares voting on behalf of the Company's minority
stockholders for the Company to be able to proceed with the Transaction and
approve the Amendment.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT THE STOCKHOLDERS VOTE
"FOR" THE FOREGOING PROPOSALS AND, UNLESS A STOCKHOLDER GIVES INSTRUCTIONS ON
THE PROXY CARD TO THE CONTRARY, THE APPOINTEES NAMED THEREON INTEND SO TO VOTE.
BACKGROUND OF THE TRANSACTION
The Board of Directors of the Company appointed an independent Special
Committee of the Board (the "Special Committee") on July 14, 1993 composed of
Robert H. Quenon and James V. Taranik to evaluate and negotiate the Transaction
on behalf of the Company after being informed by Newmont Mining that Newmont
Mining intended to make a proposal to combine the operations of Newmont Mining
and the Company. Neither Mr. Quenon nor Mr. Taranik are officers of the Company
or officers or directors of Newmont Mining or otherwise affiliated with Newmont
Mining. On September 16, 1993, the Special Committee retained Dillon Read & Co.
Inc. ("Dillon Read") to assist it in evaluating a possible transaction with
Newmont Mining. The Special Committee also retained the law firm of Dewey
Ballantine to provide assistance to it. Neither Dillon Read nor Dewey Ballantine
had any prior relationship with the Company or Newmont Mining prior to being
retained by the Special Committee.
After retaining Dillon Read, over the next several months the Special
Committee and its financial and legal advisors performed an extensive
investigation of the assets and liabilities of Newmont Mining that will be
transferred to the Company in the Transaction. The investigation included an
analysis of Newmont Mining's development projects in Peru, Uzbekistan, Indonesia
and the Northwestern United States. To assist it in its review of the mine plans
for the development projects, Dillon Read retained the services of The Winters
Company, a mine engineering firm. During this period, Dillon Read and Dewey
Ballantine met with Newmont Mining and its representatives and advisors,
including Lazard Freres & Co. ("Lazard"), financial advisors to Newmont Mining,
to exchange information and answer questions. Newmont Mining did not limit the
information which the Special Committee and its advisors received and provided
all information to Dillon Read which it had provided to Lazard for purposes of
analyzing the assets and liabilities of Newmont Mining. The Special Committee
met with its financial and legal advisors in October and December to discuss
their analyses of the assets and liabilities of Newmont Mining and their views
on the development projects.
On December 7, 1993, the Special Committee met with its financial and legal
advisors to review the final results of their investigation. The Special
Committee concluded that it would be in the best interests of the Company and
its stockholders to combine the operations of the Company and Newmont Mining if
the terms of the proposed transaction were fair to the Company and its
stockholders (other than Newmont Mining). Later in the day, the Special
Committee and its advisors met with Newmont Mining and its advisors and received
a written offer from Newmont Mining outlining the basis upon which Newmont
Mining proposed to combine the operations of the Company and Newmont Mining. The
Newmont Mining proposal contemplated that Newmont Mining would transfer all the
assets and liabilities (contingent or otherwise) of Newmont Mining other than
the NGC Common Stock owned by Newmont Mining, Newmont Mining's obligations with
respect to the NMC Preferred Stock (other than accrued and unpaid dividends as
of December 31, 1993) and the NMC Options. The Newmont Mining proposal also
contemplated the issuance to Newmont Mining of the NGC Preferred Stock and the
NGC Options and the transfer of an amount of the NGC Common Stock owned by
Newmont Mining (valued at the average closing market price of NGC Common Stock
the ten trading days before the announcement of the Transaction) to the Company
equal to $300 million.
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Based on the Special Committee's view of the value of the assets proposed
to be transferred and the liabilities proposed to be assumed, after conferring
with its financial and legal advisors, the Special Committee did not believe
that the value of the NGC Common Stock which Newmont Mining proposed to transfer
to the Company was adequate. The Special Committee then met again with Newmont
Mining to negotiate the terms of the proposed transaction. Dillon Read and
Lazard were present during these negotiations to advise their respective clients
with respect to their independent valuation of Newmont Mining's assets and
liabilities. During these negotiations Newmont Mining provided the Special
Committee with a detailed explanation of the basis for its $300 million
proposal. Upon conclusion of these negotiations, the Special Committee met with
its advisors to consider Newmont Mining's supporting arguments for its proposal.
After concluding that Newmont Mining's proposal was not adequate, the Special
Committee proposed to Newmont Mining that the value of the NGC Common Stock
which Newmont Mining proposed to transfer to the Company be increased to $374
million. On December 8, 1993, after conferring with its advisors and considering
further the arguments made by the Special Committee and discussing it with
several members of the Newmont Mining Board of Directors, Newmont Mining
informed the Special Committee that it had accepted the counterproposal of $374
million made by the Special Committee the previous day. Dillon Read orally
advised the Special Committee that in its opinion the terms of the Transaction
are fair, from a financial point of view, to the Company's stockholders (other
than Newmont Mining) as of such date. The Company and Newmont Mining
subsequently announced the Transaction on December 9, 1993.
REASONS FOR THE TRANSACTION
The Company became a public company at a time when Newmont Mining was a
diversified natural resource company engaged in the exploration for, development
of and mining of copper, gold, coal, lithium, and other minerals, and the
exploration for, development of and producing of oil and gas reserves in the
United States and abroad. Following a strategic decision to focus on gold
production only, Newmont Mining commenced a debt reduction program and divested
all of its non-gold business segments. Now both the Company and Newmont Mining
are pure gold companies with only financial structures and spheres of influence
to distinguish them. Neither the Company nor Newmont Mining believe that there
is any advantage to competing with each other and that it would be advantageous
to both companies and their stockholders if the assets and opportunities of
Newmont Mining throughout the world were made available to the Company. By
limiting its activities to the Carlin Trend, the Company would be limited in its
ability to expand its reserve base. The Company has significantly expanded its
productive capacity since 1988; however, the Company does not have any
exploration prospects outside of the Carlin Trend. Such exploration is conducted
by Newmont Exploration Limited, a subsidiary of Newmont Mining. The acquisition
of Newmont Mining's assets will give the Company access to the worldwide
operations, reserves and exploration potential that has been developed by
Newmont Exploration and its affiliates, and will potentially increase reserve
life. The Transaction will also free management of any possible future conflict
between the interests of the stockholders of the Company and the stockholders of
Newmont Mining, as well as the corresponding management time and expenses
required to prevent such conflicts. Furthermore, as a result of the Transaction,
any valuation differential between the market prices of NGC Common Stock and NMC
Common Stock is expected to be substantially reduced.
RECOMMENDATION OF THE BOARD OF DIRECTORS
The Board of Directors of the Company met on December 15, 1993 and the
Special Committee unanimously recommended to the Board that it approve the
Transaction. In addition, at the meeting Dillon Read delivered to the Special
Committee and the Board of Directors its written opinion that the terms of the
Transaction are fair, from a financial point of view, to the stockholders of the
Company (other than Newmont Mining), as of such date. Based on the unanimous
recommendation of the Special Committee, the Board of Directors of the Company
unanimously approved the Transaction, authorized the Company to enter into the
Purchase Agreement and resolved to unanimously recommend that the Company's
stockholders approve the Transaction and the Amendment.
In reaching its conclusion and making such recommendation, the Board of
Directors and the Special Committee considered the following factors: (1) that
the acquisition of the Newmont Mining assets would increase the Company's gold
reserves which presently are limited to the potential in the Carlin Trend; (2)
that
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<PAGE> 13
the Transaction would enhance dramatically the scope of the gold mining
operations in which the Company would have an interest; (3) the elimination of
potential conflicts of interest between the Company's stockholders and the
Newmont Mining stockholders; (4) the enhanced ability of the Company to raise
capital after the Transaction; (5) the opportunities that the Company would have
for future growth; and (6) the written opinion of Dillon Read, dated December
15, 1993, that, as of such date, the terms of the Transaction are fair, from a
financial point of view, to the stockholders of the Company (other than Newmont
Mining).
OPINION OF DILLON READ
The Special Committee retained Dillon Read to act as its financial advisor
in connection with the Transaction. In connection with the Transaction, Dillon
Read was asked to evaluate the fairness, from a financial point of view, of the
terms of the Transaction to the stockholders of the Company (other than Newmont
Mining). Dillon Read rendered its oral opinion to the Special Committee at a
meeting on December 8, 1993 that, as of that date, the terms of the Transaction
are fair, from a financial point of view, to the stockholders of the Company
(other than Newmont Mining). In a written opinion to the Special Committee and
the entire Board of Directors of the Company dated December 15, 1993, Dillon
Read confirmed its oral opinion as of such date. No limitations were imposed by
the Board of Directors or the Special Committee upon Dillon Read with respect to
the investigations made or procedures followed by Dillon Read in rendering its
opinion.
The full text of the written opinion of Dillon Read, which sets forth the
assumptions made, matters considered and limits on the review undertaken, is
attached hereto as Exhibit B. The Company's stockholders are urged to read this
opinion in its entirety for information with respect to the procedures followed,
assumptions made and matters considered by Dillon Read in rendering such
opinion. Dillon Read's opinion is directed only to the financial terms of the
Transaction and does not constitute a recommendation to any stockholder of the
Company as to how such stockholder should vote at the Special Meeting. The
summary of the opinion of Dillon Read set forth in this Proxy Statement contains
all material provisions thereof but does not purport to be complete and is
qualified in its entirety by reference to the full text of such opinion.
In connection with its opinion, Dillon Read reviewed, analyzed and relied
upon material relating to the financial and operating condition, results of
operations and prospects of the Company and Newmont Mining, including, among
other things, the following: (i) the Purchase Agreement; (ii) the Company's and
Newmont Mining's Annual Reports to Stockholders and Annual Reports on Form 10-K
for the five years ended December 31, 1992; (iii) certain interim reports to
stockholders of the Company and Newmont Mining, the Company's and Newmont
Mining's Quarterly Reports on Form 10-Q and certain other communications of the
Company and Newmont Mining to their respective stockholders; (iv) certain
financial analyses and forecasts for the Company and Newmont Mining prepared by
their respective managements (based upon, in part, information from independent
consultants retained by the Company and Newmont Mining, respectively); (v)
certain publicly available information concerning the trading of, and the
trading market for, the NGC Common Stock, the NMC Preferred Stock and the NMC
Common Stock; and (vi) certain publicly available information with respect to
gold mining companies and the nature and terms of certain other transactions
that Dillon Read considered relevant to its inquiry. In addition, Dillon Read
held discussions with the senior managements of the Company and Newmont Mining
concerning the past and current operations and financial condition and prospects
of the Company and Newmont Mining, respectively.
In conducting its review and arriving at its opinion, Dillon Read relied
upon and assumed the accuracy and completeness of all of the financial and other
information provided to it or publicly available, and Dillon Read did not
attempt to verify such information independently. Dillon Read relied upon the
managements of the Company and Newmont Mining as to the reasonableness and
achievability of the financial and operating forecasts and projections (and the
assumptions and bases therefor) provided to it and assumed that such forecasts
and projections reflected the best then available estimates and judgments of
management and that such forecasts and projections will be realized in the
amounts and in the time periods then estimated by management. Dillon Read has
also obtained and relied upon a report of The Winters Company, international
mining consultants, regarding Newmont Mining's gold projects. Other than The
Winters Company report, Dillon Read has not prepared or obtained any independent
evaluation or appraisal of the Company's or Newmont Mining's assets or
liabilities (contingent or otherwise) for purposes of the Transaction.
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<PAGE> 14
In preparing its opinion to the Board of Directors of the Company and the
Special Committee, Dillon Read performed a variety of financial and comparative
analyses, including those summarized below. This summary of the analysis
underlying Dillon Read's opinion contains all material considerations, but does
not purport to be complete. The preparation of a fairness opinion is a complex
analytic process involving various determinations as to the appropriate and
relevant methods of financial analyses and the application of those methods to
the particular circumstances and, therefore, such an opinion is not readily
susceptible to summary description. In arriving at its opinion, Dillon Read did
not attribute any particular weight to any analysis or factor considered by it,
but rather made qualitative judgments as to the significance and relevance of
cash flow analysis and other factors. Accordingly, Dillon Read believes that its
analyses must be considered as a whole and that selecting portions of its
analyses and factors, without considering all analyses and factors, could create
a misleading or incomplete view of the processes underlying such analyses and
its opinion. In its analyses, Dillon Read made numerous assumptions with respect
to Newmont Mining's assets, including its development properties, general
business, economic, market and financial conditions and other matters, many of
which are beyond the control of Newmont Mining. The estimates contained in such
analyses are not necessarily indicative of actual values or predictive of future
results or values, which may be significantly more or less favorable than those
suggested by such analyses. In addition, analyses relating to the value of
businesses or securities do not purport to be appraisals or to reflect the
prices at which businesses or securities actually may be sold. Accordingly, such
analyses and estimates are inherently subject to substantial uncertainty.
DISCOUNTED CASH FLOW ANALYSES. Dillon Read performed discounted cash flow
analyses of the projected free cash flow of various development projects for the
period December 31, 1993 through the life of the mines, using various discount
ranges from 4% to 12%, depending on the degree of political and project risk
associated with a particular project and real gold prices of $350 and $400 per
ounce throughout the life of the mines. Utilizing these assumptions, Dillon Read
arrived at estimated ranges of equity value for the Uzbekistan project, the Batu
Hijau project, the Minahasa project, the Yanacocha project and the Grassy
Mountain project as of December 31, 1993.
Dillon Read also used discounted cash flow analyses of the estimated
environmental remediation costs for various environmental contingent liabilities
and other liabilities for which Newmont Mining or its subsidiaries have
indicated that they are responsible.
PRO FORMA TRANSACTION ANALYSES. Dillon Read analyzed certain pro forma
effects resulting from the Transaction, including the impact of the Transaction
on the Company's balance sheet and income statement. Dillon Read also analyzed
the pro forma effects of the Transaction on revenues, operating profit and net
income. Based upon the historical results of the Company, the results of the pro
forma transaction analysis suggest that the Transaction would have been
accretive to the Company in fiscal 1992 and dilutive for the nine months ended
September 30, 1993 on an income per share basis.
OTHER FACTORS AND COMPARATIVE ANALYSES. In rendering its opinion, Dillon
Read considered certain other factors and conducted certain other comparative
analyses, including, among other things, a review of (i) Newmont Mining's and
the Company's historical financial results; (ii) the history of trading prices
for NGC Common Stock and NMC Common Stock and the relationship between changes
in trading prices of both such common stocks, movements of the common stock of
comparable companies and movements in gold prices; and (iii) the implied current
market valuation differential between the Company and Newmont Mining.
Newmont Mining has various assets and liabilities which did not lend
themselves to discounted cash flow analysis but Dillon Read reviewed the
valuations of such assets and liabilities using various valuation methodologies.
Such methodologies included public market quotations, recent appraisals, recent
offers to acquire Newmont Mining assets, reserving methodologies, Black Scholes
option valuation and comparable land valuation.
COMPARABLE COMPANY AND SELECTED TRANSACTION ANALYSES. No company,
transaction or business used in the comparable company and selected merger and
acquisition transaction analyses, as the case may be, is truly comparable
largely due to the development nature of Newmont Mining's projects and the
political risks associated with such projects. Accordingly, an analysis of the
results of the foregoing is not entirely
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<PAGE> 15
mathematical; rather, it involves complex considerations and judgments
concerning differences in financial and operating characteristics and other
factors that could affect the acquisition or public trading value of the
businesses to which they are being compared. However, Dillon Read did review
selected comparable gold mining companies and selected gold mining mergers and
acquisitions.
Using publicly available information, Dillon Read analyzed, among other
things, the closing stock prices and market values of selected gold mining
companies, including the Company, Newmont Mining, American Barrick, Echo Bay
Mines, Homestake Mining and Placer Dome. Dillon Read compared market values as
multiples of gold reserves, gold production, revenues, operating income,
operating cash flow and historical and projected net income. Using publicly
available information, Dillon Read analyzed the transaction values in the
following selected merger and acquisition transactions in the gold mining
industry: Homestake Mining Company/International Corona, American
Barrick/Newmont Mining (transaction not completed), LAC Minerals/Bond,
Placer/Dome and MINORCO/Freeport.
The summary set forth above describes all material presentations by Dillon
Read to the Company's Board of Directors and the Special Committee of the
analyses performed by Dillon Read, but does not purport to be a complete
description of the presentations. The preparation of a fairness opinion is not
necessarily susceptible to partial analysis or summary description. Dillon Read
believes that its analysis and the summary set forth above must be considered as
a whole and that selecting portions of its analyses, or selecting part or all of
the above summary without considering all factors and analyses, would create an
incomplete view of the processes underlying Dillon Read's presentations and
opinion. The fact that any specific analysis has been referred to in the summary
above is not meant to indicate that such analysis was given greater weight than
any other analyses.
The valuation methodologies described above were the most significant of
those utilized by Dillon Read in performing its analysis. However, because of
the numerous types of assets and liabilities analyzed and the use of different
valuation methodologies depending on the nature of the particular asset or
liability being analyzed, a summary of Dillon Read's analysis and the valuation
ranges it produced on an asset by asset basis (or liability by liability basis)
is not practicable. In addition, the nature of certain of the assets reviewed,
such as Newmont Mining's long-term development projects, result in extremely
wide valuation ranges for such assets. If considered independent of the other
analyses and factors considered by Dillon Read, such wide valuation ranges would
create an incomplete view of Dillon Read's opinion. In rendering its opinion,
therefore, Dillon Read considered the separately analyzed collection of assets
and liabilities as a whole resulting in a valuation range for the transfer of
shares of NGC Common Stock owned by Newmont Mining to the Company of $220
million to $466 million.
As described above, Dillon Read's opinion and presentation to the Company's
Board of Directors and the Special Committee were among the many factors taken
into consideration by the Company's Board of Directors and the Special Committee
in making its determination to unanimously approve the Transaction. For a
description of the other factors taken into consideration by the Board of
Directors and the Special Committee, see "The Transaction -- Reasons for the
Transaction." In addition, the Board of Directors took into consideration the
fact the Transaction was negotiated and unanimously approved by the Special
Committee and that consummation of the Transaction would be subject to the
approval of a majority of the Company's minority stockholders voting.
Dillon Read is an investment banking firm with experience in the valuation
of businesses and their securities in connection with transactions, including
mergers and acquisitions. The Special Committee selected Dillon Read to act as
its financial advisor in connection with the Transaction on the basis of such
experience. For its services in connection with rendering an opinion to the
Company's Board of Directors and the Special Committee, the Company has paid
Dillon Read $800,000. The Company also agreed to reimburse Dillon Read for its
reasonable out-of-pocket expenses, and to indemnify Dillon Read against certain
liabilities, including liabilities under the federal securities laws, relating
to or arising out of Dillon Read's engagement as financial advisor.
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<PAGE> 16
ACCOUNTING TREATMENT OF THE TRANSACTION
The Transaction will be accounted for by the Company as a transfer between
entities under common control. The transfer will be recorded at historical cost
by the Company, with a charge to the Company's retained earnings for the
difference in the historical cost of the assets transferred and the sum of the
liabilities assumed, the par value of the NGC Preferred Stock issued and the net
book value of the NGC Common Stock transferred from Newmont Mining to the
Company.
APPRAISAL RIGHTS OF DISSENTING STOCKHOLDERS
If the stockholders of the Company approve the Transaction at the Special
Meeting, the stockholders will have no appraisal, dissenter's or similar rights
under Delaware law.
FEDERAL TAX CONSEQUENCES TO STOCKHOLDERS OF THE COMPANY
There will not be any federal income tax consequences of the Transaction to
the Company's minority stockholders.
OTHER APPROVALS REQUIRED FOR CONSUMMATION OF THE TRANSACTION
Other than the approvals to be sought from the stockholders of the Company
at the Special Meeting, there are no other approvals to be obtained in
connection with the consummation of the Transaction.
CONSUMMATION OF TRANSACTION CONTINGENT UPON APPROVAL OF ENTIRE PLAN
The Company and Newmont Mining do not intend to proceed with any part of
the Transaction unless all parts thereof are consummated simultaneously.
Therefore, in the event of a failure to receive approval of the Company's
stockholders for either of the measures put to a vote at the Special Meeting,
the Board of Directors of the Company will abandon all parts of the Transaction.
TRANSFER OF ASSETS OF NEWMONT MINING TO THE COMPANY
Pursuant to a letter agreement dated December 15, 1993 between the Company
and Newmont Mining (the "Purchase Agreement"), a copy of which is annexed to
this Proxy Statement as Exhibit A, Newmont Mining has agreed to transfer all of
its assets other than 85,850,101 shares of NGC Common Stock to the Company.
In exchange for such assets, the Company has agreed in the Purchase
Agreement to assume all liabilities (contingent or otherwise) of Newmont Mining,
other than Newmont Mining's obligations with respect to the NMC Preferred Stock
(except accrued and unpaid dividends as of December 31, 1993) and the NMC
Options. The liabilities assumed by the Company will include all liabilities of
Newmont Mining arising after completion of the Transaction, including all costs
and expenses incurred by Newmont Mining in connection with the Transaction.
Newmont Mining's assets to be transferred include 8,649,899 shares of NGC
Common Stock (which will be placed in treasury upon receipt by the Company), the
stock of Newmont Exploration and the other subsidiaries of Newmont Mining (other
than the Company), all of Newmont Mining's tangible and intangible personal
property and the mining assets and operations described below.
NEWMONT MINING'S MINING ASSETS
The following is a description of Newmont Mining's current mining assets
and operations. Unless the context otherwise requires, as used in the following
discussion "Newmont Mining" means Newmont Mining Corporation together with its
consolidated subsidiaries except the Company.
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<PAGE> 17
PERU
The Yanacocha project covers 63,000 acres and is located in northwest Peru.
Minera Yanacocha S.A. ("Minera Yanacocha"), the Peruvian corporation which owns
the multi-deposit project, is 38% owned by Newmont Mining; 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 and
mining bureau of the French government; and 5% by the International Finance
Corporation, which provided $12 million in financing for the project. The
existence of gold in this area of Peru was discovered by Newmont Mining's
geologists in the 1980's. Newmont Mining manages the project and production
commenced in August 1993. Total project costs were approximately $45 million (of
which 38% was attributable to Newmont Mining). Production in 1993 was 81,500
ounces and production in 1994 is estimated to be approximately 220,000 ounces.
Total proven and probable reserves, as of December 31, 1993, were 3,780,000
ounces compared with 1,275,000 ounces as of December 31, 1992.
The 1994 operating plan calls for mining and leaching of 18,000 tons of ore
per day. Gold recovery is estimated at 70% to 80%, which was the approximate
rate of recovery for 1993. The initial cash costs of production have been
approximately $150 per ounce. Contract mining is employed. Following the results
of continuing exploration, an operating plan incorporating significantly higher
levels of production has been implemented for 1995. Minera Yanacocha will
commence production in the Maqui-Maqui deposit, approximately four miles north
of current mining operations, in 1994. The additional production from the Maqui-
Maqui deposit will increase total production in 1995 to approximately 350,000
ounces. Total capital costs of the expansion of mining operations into the
Maqui-Maqui deposit are estimated at approximately $40 million.
A second Peruvian corporate joint venture has been formed between Newmont
Mining and Buenaventura. The joint venture, in which Newmont Mining has a 65%
interest, has staked claims on 500,000 acres of prospective ground along an
extension of the volcanic belt hosting the Yanacocha deposits. Initial
exploration work is under way in this prospective area.
{INSERT CRC PERU MAP}
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REPUBLIC OF UZBEKISTAN
In the Republic of Uzbekistan, one of the Central Asian republics of the
former Soviet Union, Newmont Mining has entered into a 50/50 joint venture
("Zarafshan-Newmont") with the Uzbek State Committee for Geology and Mineral
Resources, a state entity of the Republic of Uzbekistan, and Navoi Mining and
Metallurgical Combine, a state entity 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. State entities of the Uzbek
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.
Newmont Mining is managing the Zarafshan-Newmont joint venture. Production
is expected to commence in early 1995 and is expected to vary from 240,000 to
458,000 ounces annually over approximately 17 years. The capital costs are
estimated at approximately $150 million, half of which is attributable to
Newmont Mining. The Zarafshan-Newmont joint venture completed a $105 million
credit facility for the project, led by the European Bank for Reconstruction and
Development, in November 1993. Newmont Mining has agreed to advance to its joint
venture partners, against future oxide ore deliveries, such partners' share of
the equity required for the project. The project's gold will be sold in
international markets for U.S. dollars.
{INSERT CRC UZBEKISTAN MAP}
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INDONESIA
Newmont Mining has two gold projects in Indonesia, both of which are 80%
owned by Newmont Mining with the remainder held by its partner, Mr. Jusuf
Merukh, an Indonesian national.
The more advanced of these projects is Minahasa, a multi-deposit project on
the island of Sulawesi. Minahasa is scheduled to commence production in 1995 at
an annual rate of approximately 120,000 ounces. Cash operating costs have been
estimated at approximately $135 an ounce. A preliminary feasibility study was
completed on this project in October 1993. The Minahasa project is undergoing
further study to achieve 35% of required engineering in order to determine more
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, 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 has 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
1991. While the economics of the deposit have not been determined, it is one of
the largest occurrences of gold mineralization ever discovered by Newmont
Mining. 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. Eighty holes have been drilled in this deposit to an average depth of
1,474 feet. A preliminary feasibility study has been completed and a full
feasibility study is anticipated 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 CRC INDONESIA MAP}
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NORTHWESTERN UNITED STATES
In October 1992, Newmont Mining acquired the exploration, development and
mining rights on two properties from Atlas Corporation ("Atlas") -- Grassy
Mountain in Malheur County, Oregon, and Musgrove Creek in Lemhi County, Idaho.
The rights were acquired 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 against which Newmont Mining has
made an advance payment of $7.5 million.
The Grassy Mountain project was drilled extensively by Atlas. The drilling
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 operating cost of $150
to $200 per ounce. Newmont Mining is undertaking an engineering and geological
review of the Atlas plan, which could increase or decrease the reserves,
production schedule and/or costs. Subject to the results of these studies and
obtaining necessary permits, production is expected to begin in 1997. Further,
Newmont Mining 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 completed.
The Musgrove Creek prospect in Idaho, which covers approximately 20 square
miles, is in the very early stages of exploration, but Newmont Mining believes
the exploration potential appears promising based on results from a limited
drilling program by Atlas and subsequent exploration and drilling by Newmont
Mining.
NEVADA (IVANHOE JOINT VENTURE)
The Ivanhoe Joint Venture consists of approximately 125 square miles of
land in Nevada on the Carlin Trend which lies immediately northwest of the
Company's operating mines. A 75% interest in the property was acquired by
Newmont Mining 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 Newmont
Mining and the prior owners, Newmont Mining believes that the property may have
significant potential; however, there can be no assurance that such potential
will be realized. Newmont Mining is currently evaluating the previous owners'
drill results and is conducting its own exploration program on promising areas
of the property. The property also includes an inactive gold mine. Solutions are
being applied to ore on a leach pad constructed by the previous owners, and
Newmont Mining's share of production was 11,000 and 6,600 ounces of gold in 1992
and the first nine months of 1993, respectively.
OTHER
Newmont Mining has a 93% interest in a joint venture in Laos. This joint
venture agreement covers approximately 2,500 square miles of land which Newmont
Mining believes is highly prospective.
In addition to the exploratory projects specifically discussed above,
Newmont Mining is in the preliminary stages of exploration in other parts of the
world, including China, Chile, Mexico and Ecuador. There can be no assurances
that any of these activities by Newmont Mining will result in any new joint
venture or other projects or that such new joint ventures or projects would
result in profitable operations.
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<PAGE> 21
NON-CARLIN TREND PROVEN AND PROBABLE ORE RESERVES
Proven and probable ore reserves as of December 31, 1993 of the projects
and prospects in which Newmont Mining has an interest, other than the Company,
are listed below, together with Newmont Mining'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. Processing losses have not been taken into account.
<TABLE>
<CAPTION>
NEWMONT
GRADE MINING'S
NEWMONT (OUNCES EQUITY IN
MINING'S DRY SHORT PER CONTAINED CONTAINED
EQUITY TONS (000S) TON) OUNCES (000S) OUNCES (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>
- ---------------
(1) Material available to Zarafshan-Newmont for processing, from designated
stockpiles or from other specified sources. Tonnage and gold content of
material available to Newmont Mining for processing, from the designated
stockpiles or from other specified sources, are guaranteed by state entities
of the Republic of Uzbekistan. Newmont Mining 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 at gold price of $350 per ounce, cutoff grade of 0.058 ounces per
ton and mill recovery rates of 80% to 89% depending on material type.
(3) Calculated at gold price of $350 per ounce and cutoff grade of 0.010 ounces
per ton. Reserves are contained in four deposits. Ore is being leached.
Expected leach recovery is 80% to 83%, depending on each deposit's
metallurgical properties.
(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.
LIABILITIES OF NEWMONT MINING TO BE ASSUMED BY THE COMPANY
Pursuant to the terms of the Transaction, the Newmont Mining liabilities to
be assumed by the Company include all of Newmont Mining's liabilities
(contingent or otherwise), but not Newmont Mining's obligations with respect to
the NMC Preferred Stock (other than accrued and unpaid dividends as of December
31, 1993) and the NMC Options. The liabilities assumed by the Company will
include all liabilities of Newmont Mining arising after completion of the
Transaction. The principal liabilities are described below.
LONG-TERM DEBT
8 5/8% NOTES DUE 2002
In April 1992, Newmont Mining issued unsecured notes with a principal
amount of $150 million due April 1, 2002 and bearing interest at the rate of
8 5/8% per annum. Interest is payable semi-annually in April and October and the
notes are not redeemable prior to maturity.
MEDIUM-TERM NOTES
Beginning in May 1992, Newmont Mining issued notes under its $150 million
medium-term note program. Notes totalling $42 million with a weighted average
interest rate of 7.7% and maturing on various dates ranging from mid-1999 to
late 2004 had been issued as of December 15, 1993 under the medium-term note
program.
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<PAGE> 22
REVOLVING CREDIT FACILITY
In May 1992, Newmont Mining entered into a revolving credit facility which
expires in April 1997. Under this revolving credit facility, Newmont Mining may
borrow up to $280 million. No amounts were drawn down under the facility as of
December 31, 1993 and no borrowings were outstanding during 1992 or 1993 under
this facility. Interest rates are variable at the lenders' base rate plus 0.3%
until May 1995 and 0.425% thereafter. Newmont Mining has the option to fix the
rate for up to six months. There is an annual facility fee for the revolving
credit facility of 0.2% on the lenders' total commitment. Newmont Mining's
revolving credit facility, which will be assigned to the Company in connection
with the Transaction, contains restrictive covenants which limit consolidated
indebtedness, as defined, and which limit the payment of future dividends to
common and preferred stockholders.
SHORT-TERM DEBT
All short-term debt at December 31, 1993 consisted of bank debt.
Newmont Mining currently has unsecured demand bank lines of credit
aggregating $16.0 million, of which $15.7 million was outstanding at December
31, 1993. These facilities bear interest at customary short-term rates for
borrowers with similar credit ratings. The interest rates on this short-term
bank debt averaged 6.0%, 6.1% and 8.5% in 1993, 1992 and 1991, respectively, and
were 6.0% at both December 31, 1993 and 1992, respectively.
ENVIRONMENTAL LIABILITIES
Newmont Mining is involved in several matters concerning environmental
liabilities primarily associated with former mining activities. Three
subsidiaries of Newmont Mining -- Idarado Mining Company ("Idarado"),
Resurrection Mining Company ("Resurrection") and Dawn Mining Company ("Dawn") --
are involved with these liabilities.
Idarado is an 80.1% owned subsidiary of Newmont Mining. In 1992, Idarado
and Newmont Mining entered into a consent decree to settle a lawsuit brought by
the State of Colorado against them under the Comprehensive Environmental
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 and to meet certain measurement
criteria.
Resurrection is a wholly-owned subsidiary of Newmont Mining and is a
partner in a mining joint venture with ASARCO Incorporated ("ASARCO") near
Leadville, Colorado. Resurrection, Newmont Mining, 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. Newmont Mining is currently actively negotiating with the
U.S. Environmental Protection Agency, 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 for damages to
natural resources. The full extent of the costs to be incurred in this matter
cannot yet be determined.
Dawn is 51% owned by Newmont Mining. 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. The State of
Washington has not yet responded to this plan. The U.S. Department of Interior
has notified Dawn that it would seek to hold Dawn and Newmont Mining liable for
any costs incurred as a result of Dawn's failure to comply with the lease and
applicable regulations. Newmont Mining intends to vigorously contest any such
claims.
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<PAGE> 23
At September 30, 1993, Newmont Mining had accrued $69.0 million with
respect to these matters. Depending upon the ultimate resolution of these
matters, Newmont Mining believes that it is possible that the gross liability
for these matters could be as much as 50% greater or 20% lower than this amount.
For financial reporting purposes at September 30, 1993, the $69.0 million was
reduced by $21.9 million for amounts expected to be recovered from third
parties. In addition, at September 30, 1993, Newmont Mining had $20.2 million
recorded as a receivable from third parties for costs previously expended 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. Newmont Mining
is negotiating with some of the carriers for recovery of past and future costs
relating to certain of the environmental matters herein discussed. Newmont
Mining has also had preliminary settlement negotiations with the entire group of
insurance carriers; however, these discussions are preliminary and Newmont
Mining cannot reasonably predict the outcome of these negotiations at this time.
In addition, Newmont Mining recently 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
Newmont Mining for all costs and damages that Newmont Mining has incurred or may
incur in the future in connection with the Idarado consent decree described
above. Newmont Mining can not reasonably predict the outcome of this action at
this time. The total receivables recorded as of September 30, 1993 represent the
minimum probable amount Newmont Mining expects to receive based upon its
discussions with counsel and settlement offers from the insurance carriers.
Although Newmont Mining cannot reasonably predict the outcome of its
negotiations with insurance carriers, it believes that ultimately a substantial
recovery of claimed costs will be made from the insurance carriers.
For additional information on these environmental liabilities, see Notes 12
and 13 in "Notes to Combined Financial Statements" included in Appendix I.
At this time Newmont Mining does not expect any material impact on future
recurring operating costs of compliance with currently enacted environmental
regulations. Since neither Newmont Mining nor the Company is able to pass on any
net increases in costs to its customers, following the consummation of the
Transaction any such increases could have an effect on future profitability of
the Company depending upon the price of gold.
OTHER ACCRUED LIABILITIES
Besides indebtedness and environmental liabilities, the Company will assume
all accounts payable and other accrued liabilities of Newmont Mining. The
recorded amount of such liabilities, which excludes accrued interest and the
environmental liabilities discussed previously, totalled $127.7 million at
September 30, 1993. Among other things, such liabilities include income and
payroll taxes, employee benefit obligations, loss reserves associated with an
inactive insurance subsidiary, certain lease obligations and exploration costs.
The Company's intercompany balances with Newmont Mining will be eliminated if
the Transaction is consummated.
GUARANTEE OF INDEBTEDNESS WITH RESPECT TO CERTAIN JOINT VENTURES
In connection with the financing of the Yanacocha project described above,
Minera Yanacocha currently has outstanding project finance loans of $12 million
from the International Finance Corporation, $14 million from a commercial bank
and $5.5 million from a German development bank, for a total of $31.5 million.
Newmont Mining has agreed to guarantee up to 40% of Minera Yanacocha's
obligations under the loans. Newmont Mining's obligations will expire upon the
satisfaction of various completion tests, which are expected to occur not later
than March 1994.
In connection with the Uzbekistan project described above, the
Zarafshan-Newmont joint venture has entered into a credit facility of $105
million to cover a portion of the estimated $150 million in initial capital
costs of the project. The European Bank for Reconstruction and Development has
provided $52.5 million of the credit facility and a bank syndicate has provided
the balance of the credit facility. The credit facility was completed in
November 1993. Newmont Mining has provided a repayment guarantee for amounts
outstanding
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<PAGE> 24
under the bank syndicate's credit facility. This guarantee will terminate when
the project has met various completion tests, which are expected to occur not
later than October 1996.
GUARANTEE OF THIRD PARTY INDEBTEDNESS
Newmont Mining guarantees $35.7 million of Magma Copper Company's Pollution
Control Revenue Bonds due 2009. Magma Copper Company is a former subsidiary of
Newmont Mining. Newmont Mining expects that it will be required to remain liable
on this guarantee so long as the bonds relating thereto are outstanding.
CONTINUING LIABILITIES OF NEWMONT MINING
The Company has agreed that, following the consummation of the Transaction,
it will be responsible for all of the costs and expenses incurred by Newmont
Mining after consummation of the Transaction, including the costs and expenses
of maintaining Newmont Mining as a public corporation and any indemnification
obligations to Newmont Mining, other than liability for dividends on, and
redemptions of, the NMC Preferred Stock (other than accrued and unpaid dividends
as of December 31, 1993) and dividends on the NMC Common Stock. The Company has
agreed to indemnify Newmont Mining against all liabilities assumed by the
Company under the terms of the Purchase Agreement. The Company has also agreed
to pay all costs and expenses (including, without limit, all accounting, legal
and investment banking fees) incurred by Newmont Mining in connection with the
Transaction.
OTHER COMMITMENTS AND CONTINGENCIES
Since 1987, Newmont Mining has sold certain subsidiaries and non-gold
business segments to third parties. In connection with such dispositions, in
certain cases, Newmont Mining has undertaken to indemnify the relevant third
parties against certain liabilities with respect to the subsidiaries and assets
disposed. Such indemnification may give rise to liabilities which the Company
will have agreed to assume as part of the Transaction. However, Newmont Mining
has stated that it is not aware of any existing liabilities with respect to the
past dispositions and has no reason to believe that any material liabilities
will arise in the future with respect to the past dispositions.
Newmont Mining is involved from time to time in legal proceedings of a
character incident to its business. Newmont Mining has stated that 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 are significant and
all of the legal proceedings in which Newmont Mining is involved have been
disclosed to the Company. For a discussion of certain stockholder litigation
relating to the Transaction, see "Stockholder Litigation."
AMENDMENT OF THE CERTIFICATE OF INCORPORATION AND
ISSUANCE OF THE NGC PREFERRED STOCK
One of the matters to be voted on at the Special Meeting is an amendment
(the "Amendment") to the Certificate of Incorporation of the Company to
authorize 5,000,000 shares of preferred stock, par value $5.00 per share
("Preferred Stock"). The text of the proposed Amendment is attached hereto as
Exhibit C. The primary purpose of the Amendment is to give the Company the
ability to issue to Newmont Mining 2,875,000 shares of $5.50 convertible
preferred stock, $5.00 par value (the "NGC Preferred Stock") described below.
DESCRIPTION OF PREFERRED STOCK
The proposed Amendment to the Certificate of Incorporation would give the
Company's Board of Directors the power to issue up to 5,000,000 shares of
Preferred Stock in one or more series, with such powers, designations,
preferences and rights as determined by the Company's Board of Directors without
further stockholder authorization or action (subject to applicable law and the
rules of any stock exchange on which the Company's securities may be listed).
Except for the issuance of the NGC Preferred Stock in connection with the
Transaction, the Company's Board of Directors has no present plans to create any
series of Preferred
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<PAGE> 25
Stock. The Company's Certificate of Incorporation does not presently authorize
the issuance of Preferred Stock.
The terms of any specific series of Preferred Stock will be determined at
the time such series is established. Such terms could include the payment of
preferential dividends on any issued shares of Preferred Stock, preferential
distributions in the event of any liquidation or dissolution of the Company,
preferences relating to voting (including the right to vote as a class) and
conversion and redemption rights. To the extent that any such series of
Preferred Stock contain rights to preferential dividends and/or preferential
distribution, it would reduce the amounts otherwise available to the holders of
NGC Common Stock for dividends and distributions in the event of a liquidation
or merger of the Company.
In addition to allowing the Company to issue the NGC Preferred Stock in
connection with the Transaction, the Amendment would provide the Company with an
additional means for raising capital, making acquisitions and other general
corporate purposes. The Company currently has no agreements, plans or
arrangements, written or oral, to issue any shares of Preferred Stock other than
the NGC Preferred Stock if the Transaction is approved by the stockholders of
the Company.
DESCRIPTION OF NGC PREFERRED STOCK
GENERAL
The statements set forth below are summaries of certain provisions relating
to the NGC Preferred Stock that will be issued to Newmont Mining if the
Transaction is approved by the stockholders of the Company. This description is
a summary of all material terms of the NGC Preferred Stock, but does not purport
to be complete.
RANKING
The NGC Preferred Stock will rank senior with respect to the payment of
dividends and the distribution of assets upon liquidation to any shares of any
series of preferred stock of the Company which by its terms is expressly made
junior to the NGC Preferred Stock. The NGC Preferred Stock will rank on a parity
with respect to the payment of dividends and the distribution of assets upon
liquidation with any other series of Preferred Stock of the Company.
DIVIDEND RIGHTS
Newmont Mining, as the holder of shares of NGC Preferred Stock, will be
entitled to receive, when, as and if declared by the Company's Board of
Directors, out of funds legally available for payment, cumulative dividends at
an annual rate of $5.50 per share, payable quarterly on each March 15, June 15,
September 15 and December 15. The first dividend will be payable on the first
dividend payment date subsequent to the consummation of the Transaction,
representing the full cumulative dividend which would have been payable had the
NGC Preferred Stock been outstanding from January 1, 1994. Dividends on the NGC
Preferred Stock will accrue and be cumulative from the date of its original
issue and will be payable to the holder of record on such respective record
dates as may be fixed by the Company's Board of Directors in advance of the
payment of each dividend. After full cumulative dividends on the NGC Preferred
Stock for all past and current quarterly dividend periods have been paid in
full, the NGC Preferred Stock will not be entitled to participate with the NGC
Common Stock in any further distributions of the Company. Dividends payable on
the NGC Preferred Stock for any period greater or less than a full dividend
period shall be computed on the basis of a 360-day year consisting of twelve
30-day months (other than the initial dividend payable on the first dividend
payment date subsequent to the consummation of the Transaction). Dividends
payable on the NGC Preferred Stock for each full dividend period shall be
computed by dividing the annual dividend rate by four. Accumulations of
dividends on shares of NGC Preferred Stock do not bear interest.
Unless full cumulative dividends on the NGC Preferred Stock have been paid,
or declared and set aside for payment, no dividends (other than in NGC Common
Stock or any other stock ranking junior to the NGC Preferred Stock as to the
distribution of assets and the payment of dividends) may be paid or declared or
other
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<PAGE> 26
distribution made upon the NGC Common Stock or on any other stock of the Company
ranking junior to the NGC Preferred Stock as to the distribution of assets and
the payment of dividends nor may any NGC Common Stock or any other stock of the
Company ranking junior to the NGC Preferred Stock as to the distribution of
assets and the payment of dividends be redeemed or purchased by the Company
(other than in exchange for NGC Common Stock or any other stock ranking junior
to the NGC Preferred Stock as to the distribution of assets and the payment of
dividends) or any payment made to or available for a sinking fund for the
redemption of any share of such stock.
VOTING RIGHTS
Except for the voting rights described below and except as otherwise
provided by law, Newmont Mining, as the holder of shares of NGC Preferred Stock,
will not be entitled to vote on any matter or to receive notice of, or to
participate in, any meeting of stockholders of the Company.
If six quarterly dividends payable on the NGC Preferred Stock, or on any
other Preferred Stock of the Company entitled to receive cumulative dividends,
are in default, the number of directors of the Company will be increased by two
and the holders of all outstanding shares of such cumulative preferred stock as
to which such default shall exist, voting as a single class, will be entitled to
elect the additional two directors until all such cumulative dividends have been
paid in full or set apart for payment on each cumulative series then entitled to
vote.
LIQUIDATION RIGHTS
In the event of any voluntary or involuntary liquidation, dissolution or
winding up of the Company, Newmont Mining, as the holder of shares of NGC
Preferred Stock, will be entitled to receive out of the assets of the Company
available for distribution to stockholders $100.00 per share in cash plus
accrued and unpaid dividends before any distribution is made to the holders of
the NGC Common Stock or any other stock of the Company ranking junior to the NGC
Preferred Stock as to the distribution of assets upon liquidation, dissolution
or winding up of the affairs of the Company.
If upon any such liquidation, dissolution or winding up of the Company, its
net assets are insufficient to permit the payment in full of the amounts to
which Newmont Mining, as the holder of all shares of NGC Preferred Stock and the
holders of all other series of preferred stock ranking on a parity with the NGC
Preferred Stock with respect to such distributions are entitled, the entire
remaining net assets of the Company will be distributed among such holders in
amounts proportionate to the full amounts to which they are respectively so
entitled.
CONVERSION RIGHTS
Shares of NGC Preferred Stock will be convertible at any time at the option
of Newmont Mining into such number of whole shares of NGC Common Stock as is
equal to the aggregate liquidation preference of the shares of NGC Preferred
Stock surrendered for conversion divided by the initial conversion price per
share of NGC Common Stock which shall be equal to the conversion price for the
NMC Preferred Stock (after adjusting for the effect of the NMC Stock Split
described below), subject to adjustment as described below. Shares of NGC
Preferred Stock surrendered for conversion during the period after any dividend
payment record date and prior to the corresponding dividend payment date must be
accompanied by payment of an amount equal to the dividend payable on such shares
on such dividend payment date. Except as specified herein, no payment or
adjustment will be made on account of accrued and unpaid dividends upon
conversion of the NGC Preferred Stock. No fractional shares of NGC Common Stock
will be issued upon conversion and, in lieu thereof, an adjustment in cash will
be made based upon the closing price (as defined in the Amendment) of the NGC
Common Stock on the last trading day preceding the date of the conversion.
Shares of NGC Preferred Stock called for redemption will not be convertible
after the close of business on the day that is 10 days prior to the date fixed
for redemption (or, if such day is not a business day, the next preceding
business day), unless the Company defaults in payment of the redemption price.
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<PAGE> 27
The initial conversion price per share of NGC Common Stock is subject to
adjustment (under formulae to be set forth in the Certificate of Designations
with respect to the NGC Preferred Stock, the purpose of which is to retain
economic equivalence between the NGC Preferred Stock and the NMC Preferred
Stock) in certain events, including:
(i) the issuance of NGC Common Stock as a dividend on NGC Common Stock
of the Company;
(ii) certain subdivisions and combinations of the NGC Common Stock;
(iii) the issuance to all holders of NGC Common Stock of certain
rights or warrants to purchase NGC Common Stock at less than the current
market price; and
(iv) the distribution to all holders of NGC Common Stock of shares of
capital stock of the Company (other than NGC Common Stock) or evidences of
indebtedness of the Company or assets (excluding cash dividends out of
funds legally available therefor) or rights or warrants to subscribe or
purchase any of its securities (excluding those rights or warrants referred
to in the preceding clause (iii)).
The Certificate of Designations with respect to the NGC Preferred Stock
will describe other events which would require an adjustment to the conversion
price.
OPTIONAL REDEMPTION
The NGC Preferred Stock will not be redeemable prior to November 15, 1995.
Thereafter, the NGC Preferred Stock may be redeemed, in whole or in part, at the
option of the Company, upon at least 30 days and not more than 90 days' notice,
to Newmont Mining, as the holder of record of those shares of NGC Preferred
Stock to be redeemed, at redemption prices per share of NGC Preferred Stock as
set forth in the Certificate of Designations, plus, in each case, accrued and
unpaid dividends to and including the date fixed for redemption (subject to the
right of any holder of record on the relevant record date to receive the
dividend payable on a dividend payment date that is on or prior to the
redemption date).
There is no mandatory redemption or sinking fund obligation with respect to
the NGC Preferred Stock.
DESCRIPTION OF NMC PREFERRED STOCK
Newmont Mining issued 2,875,000 shares of NMC Preferred Stock in 1992. All
such shares remain outstanding on the date hereof.
The NMC Preferred Stock has terms identical to the NGC Preferred Stock,
except that upon conversion, holders of NMC Preferred Stock are entitled to
receive shares of NMC Common Stock. The initial conversion price for the NMC
Preferred Stock is $45.425 per share of NMC Preferred Stock, subject to
adjustment on occurrence of the same events that, as described above, would
require adjustment of the conversion price for the NGC Preferred Stock. As of
the date of this Proxy Statement, no event has occurred that requires adjustment
of such conversion price. However, in connection with the Transaction, the Board
of Directors of Newmont Mining intends to approve a split of the NMC Common
Stock (the "NMC Stock Split"), payable in the form of a stock dividend. The
amount of the NMC Stock Split will be calculated so that the number of shares of
NMC Common Stock outstanding following the NMC Stock Split will equal the number
of shares of NGC Common Stock held by Newmont Mining at that time. After the NMC
Stock Split, the conversion price of the NMC Preferred Stock will be adjusted to
take into account the effect of the NMC Stock Split.
DESCRIPTION OF DEPOSITARY SHARES. The NMC Preferred Stock is held through
a Depositary Share arrangement. Each Depositary Share represents one-half of a
share of NMC Preferred Stock deposited under the Deposit Agreement, dated as of
November 15, 1992 (the "Deposit Agreement"), among Newmont Mining, Chemical
Bank, as Depositary (the "Depositary"), and all holders from time to time of
depositary receipts issued thereunder (the "Depositary Receipts"). Subject to
the terms of the Deposit Agreement, each owner of a Depositary Share is
entitled, in proportion to the applicable fraction of a share of NMC Preferred
Stock represented by such Depositary Share, to all the rights, preferences and
privileges of the NMC Preferred Stock represented thereby (including dividend,
voting, conversion, redemption and liquidation
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rights), and subject to all of the limitations of the NMC Preferred Stock
represented thereby, contained in Newmont Mining's Certificate of Incorporation
and the Certificate of Designations for the NMC Preferred Stock.
The Depositary acts as transfer agent, registrar and paying agent for the
payment of dividends with respect to the Depositary Shares.
The Depositary Shares are evidenced by the Depositary Receipts. Immediately
following the issuance of the NMC Preferred Stock, Newmont Mining deposited the
NMC Preferred Stock with the Depositary, which then issued and delivered the
Depositary Receipts to Newmont Mining. Newmont Mining, in turn, delivered the
Depositary Receipts to the purchaser thereof.
A holder of Depositary Shares is not entitled to receive the shares of NMC
Preferred Stock underlying the Depositary Shares. The Depositary Receipts are
issuable in registered form only. Depositary Receipts may be issued in
denominations of any even whole number of Depositary Shares.
REASON FOR ISSUANCE OF NGC PREFERRED STOCK
Through the NGC Preferred Stock, the Company will, subsequent to completion
of the Transaction, facilitate compliance by Newmont Mining with its continuing
obligations under the NMC Preferred Stock. Dividends paid by the Company to
Newmont Mining on account of the NGC Preferred Stock will in turn be paid by
Newmont Mining to the holders of the NMC Preferred Stock. The Company will only
exercise its redemption right under the NGC Preferred Stock at the times and to
the extent the corresponding right is exercised by Newmont Mining. In addition,
Newmont Mining intends to convert its shares of NGC Preferred Stock only at the
times and to the extent the NMC Preferred Stock is converted. This will insure
that the number of outstanding shares of NGC Common Stock held by Newmont Mining
will equal the number of outstanding shares of NMC Common Stock.
DESCRIPTION OF THE COMPANY'S CAPITAL STOCK
Before giving effect to the Amendment, the total amount of the authorized
capital shares of the Company consists of 250,000,000 shares of common stock,
$0.01 par value, of which 104,875,000 shares were issued and outstanding as of
January 10, 1994. The issued and outstanding shares of NGC Common Stock are
validly issued, fully paid and nonassessable. The holders of outstanding shares
are entitled to receive dividends out of assets legally available therefor at
such times and in such amounts as the Company's Board of Directors may from time
to time determine.
The shares of NGC Common Stock are neither redeemable nor convertible, and
the holders thereof have no preemptive or subscription rights to purchase any
securities of the Company. Upon liquidation, dissolution or winding up of the
Company, the holders of NGC Common Stock are entitled to receive pro rata the
assets of the Company which are legally available for distribution, after
payment of all debts and other liabilities.
Each outstanding share of NGC Common Stock is entitled to one vote on all
matters submitted to a vote of stockholders. There is no cumulative voting. The
Company's Board of Directors is expressly authorized to adopt, amend or repeal
the By-laws of the Company in any manner not inconsistent with the laws of the
State of Delaware or the Certificate of Incorporation of the Company, subject to
the power of the stockholders to adopt, amend or repeal the By-laws or to limit
or restrict the power of the Board of Directors to adopt, amend or repeal the
By-laws, and the Company may in its By-laws confer powers and authorities upon
its Board of Directors in addition to those conferred upon it by statute.
25
<PAGE> 29
ISSUANCE OF NGC OPTIONS
As part of the Transaction, the Company will issue options (the "NGC
Options") to Newmont Mining to purchase shares of NGC Common Stock. The terms of
the NGC Options are intended to make the NGC Options approximately equal in
theoretical value to the NMC Options.
Substantially all of the NMC Options have been granted to participants
under Newmont Mining's 1982 Key Employees Stock Option Plan, 1987 Key Employees
Stock Option Plan and 1992 Key Employees Stock Plan (collectively, the "Plans").
Newmont Mining expects to continue to grant NMC Options to eligible participants
under its 1987 Key Employees Stock Option Plan and 1992 Key Employees Stock Plan
after consummation of the Transaction. The Plans contain anti-dilution
provisions and the NMC Options granted thereunder become exercisable at
different times and expire at different times.
As of January 10, 1994, there were outstanding NMC Options exercisable for
1,614,701 shares of NMC Common Stock, at prices ranging from $33.94 to $70.00
per share. The NMC Options currently outstanding expire between December 16,
1997 and December 13, 2003. At the time of completion of the Transaction, the
Company will issue NGC Options in the same number and at the same exercise
prices (after adjusting for the effect of the NMC Stock Split) as all of the NMC
Options then outstanding. Additional NGC Options will be issued to Newmont
Mining to match the terms of NMC Options granted following completion of the
Transaction.
The NGC Options will contain anti-dilution provisions intended to retain
the economic parity between the NGC Options and the NMC Options. Newmont Mining
intends to exercise its NGC Options only at the times and to the extent the
grantees exercise their NMC Options. A valuation of certain of the outstanding
NMC Options has been previously disclosed in Newmont Mining's Proxy Statement
mailed to its stockholders in connection with its 1993 Annual Meeting of
Stockholders which was incorporated by reference in its Annual Report on Form
10-K for the year ended December 31, 1992 which has been incorporated by
reference in this Proxy Statement.
STOCKHOLDER LITIGATION
On January 13 and 19, 1994, respectively, two identical actions both of
which purport to be stockholder derivative actions, were commenced in the Court
of Chancery for the State of Delaware, by alleged stockholders of the Company.
The defendants in the actions are Newmont Mining and the members of the
Company's Board of Directors. The complaint seeks relief for alleged breaches of
fiduciary duties by the defendants in connection with (i) a series of loans from
the Company to Newmont Mining which the plaintiffs claim were made at rates that
did not approximate negotiated, arm's-length rates, thereby wasting the
Company's assets, and (ii) the Transaction, which the plaintiffs claim will not
benefit the Company and will waste its corporate assets. The plaintiffs are
seeking to enjoin the Transaction, to require Newmont Mining to repay all
outstanding loans from the Company, and to require the individual defendants to
account for any money damages suffered by the Company as a result of the loan
transactions. On January 18, 1994, the plaintiff in the first filed action filed
a motion for a preliminary injunction seeking (a) to require the directors of
the Company to demand from Newmont Mining immediate repayment of all loans the
Company has extended to Newmont Mining and (b) to require the Company to
withhold from Newmont Mining its pro rata share of any dividend paid on the NGC
Common Stock as a setoff of the obligations Newmont Mining owes to the Company.
No date has been set for a hearing on the motion. Management of the Company
believes that the claims are without merit and is informed that the defendants
intend to defend against them vigorously.
26
<PAGE> 30
DESCRIPTION OF NEWMONT MINING AND THE COMPANY
Newmont Mining is a United States based, international gold company with
production in the United States (as a result of its ownership interest in the
Company) and Peru and with advanced gold exploration and development projects
around the world. Unless the context otherwise requires, as used in the
following discussion "Newmont Mining" means Newmont Mining Corporation together
with its consolidated subsidiaries. Newmont Mining owns 90.1% of the Company,
which is the largest gold producer from North American operations based on 1992
production according to published reports, and 100% of Newmont Exploration
Limited ("Newmont Exploration"), which, together with certain other affiliates,
explores for gold worldwide. Currently, substantially all of Newmont Mining's
sales, operating profit and identifiable assets relate to gold mining activities
in the United States by the Company. Newmont Mining believes that the Company's
gold operations in Nevada are among the world's lowest in cost of production.
Both the Company and Newmont Mining are Delaware corporations.
In the early 1960's, Newmont Mining discovered the Carlin Trend in
northeastern Nevada. Newmont Mining and the Company today retain the largest
land position of any gold company in the area of the Carlin Trend. Between 1965
and 1986, Newmont Mining operated Carlin Gold Mining Company, a wholly-owned
subsidiary, on the Carlin Trend. In 1986 and 1987, shares of Carlin Gold Mining
Company, renamed Newmont Gold Company, were sold to the public, resulting in
Newmont Mining's owning 90.1% of the Company's shares. The Company is Newmont
Mining's major asset and its most significant source of gold production.
The Company, Newmont Mining and Newmont Exploration are parties to an
exploration agreement (the "Exploration Agreement") under which Newmont
Exploration has agreed to perform mine geology and exploration on all lands now
or in the future owned or controlled by the Company in an area of approximately
2,300 square miles surrounding the Company's mines and operations along the
Carlin Trend (the "Area of Interest"). Newmont Mining and the Company own or
control the mineral rights on approximately 630 and 58 square miles,
respectively, in the Area of Interest. The remaining lands comprising the Area
of Interest are owned by the public or third parties. Under the Exploration
Agreement, the Company has the right, at any time prior to January 1, 1997, to
acquire from Newmont Mining any land held by or for Newmont Mining in the Area
of Interest on which gold discoveries are made, in return for a 10% royalty
payable to Newmont Mining. Newmont Exploration's rights and obligations to
perform exploration services under the Exploration Agreement are terminable by
the Company on 60 days' written notice and by Newmont Exploration on six months'
written notice. Following completion of the Transaction, the Exploration
Agreement will be unnecessary and it (including any royalty obligations created
thereunder) will be terminated.
A variety of corporate relationships are maintained among the Company,
Newmont Mining and Newmont Exploration. Newmont Mining's directors are also
directors of the Company, which has two additional directors who are not
affiliated with Newmont Mining. Newmont Mining and the Company also are parties
to a management services agreement under which the Company provides to Newmont
Mining such general executive, administrative and other services as Newmont
Mining requires from time to time in the ordinary course of its business.
Newmont Mining reimburses the Company for the costs incurred for providing such
services on an allocable basis, including salaries and other compensation costs
of executive officers of the Company who perform services for Newmont Mining.
The Company and Newmont Mining are also parties to a tax sharing agreement.
Following completion of the Transaction, the management services agreement will
be terminated and the tax sharing agreement will be amended effective as of
January 1, 1994 to appropriately reflect the fact that as part of the
Transaction, among other things, the Company is assuming all of Newmont Mining's
liabilities for taxes, interest and penalties attributable to tax periods ending
on or before December 31, 1993 and any tax liabilities of Newmont Mining arising
after consummation of the Transaction.
The Company has agreed to pay all costs and expenses (including, without
limitation, all accounting, legal and investment banking fees) incurred by
Newmont Mining in connection with the Transaction. The Company has also agreed
that, following the consummation of the Transaction, it will be responsible for
all of the costs and expenses incurred by Newmont Mining or obligations of
Newmont Mining arising after the consummation of the Transaction, including the
costs and expenses of maintaining Newmont Mining as a public corporation and any
indemnification obligations of Newmont Mining. The Company will indemnify
27
<PAGE> 31
Newmont Mining against all liabilities assumed by it in connection with the
Transaction. Following the consummation of the Transaction, Newmont Mining will
have no business other than its ownership of 85,850,101 shares of NGC Common
Stock, 2,875,000 shares of NGC Preferred Stock and the NGC Options and its
obligations with respect to the NMC Preferred Stock and NMC Options.
TRADING PRICES OF COMMON STOCK OF THE COMPANY AND NEWMONT MINING. On
December 8, 1993, the day preceding public announcement of the transactions
described herein, the high and low sales prices per share of NGC Common Stock
and NMC Common Stock, as reported on the New York Stock Exchange Composite Tape,
were as follows:
<TABLE>
<CAPTION>
HIGH LOW
---- ---
<S> <C> <C>
NGC Common Stock....................................... $45 3/4 $44
NMC Common Stock....................................... $56 1/8 $53 3/4
Depositary Share of NMC Preferred Stock*............... $68 $67 1/4
</TABLE>
- ---------------
* Because the Depositary Shares representing the NMC Preferred Stock are not
publicly traded, the noted high and low prices are bid/ask prices per
Depositary Share of NMC Preferred Stock as compiled by Lazard Freres & Co.,
the underwriters of the Depositary Shares. Each Depositary Share represents
one-half of a share of NMC Preferred Stock. See "Amendment of the Certificate
of Incorporation and Issuance of the NGC Preferred Stock -- Description of NMC
Preferred Stock."
RECENT DEVELOPMENTS
On January 26, 1994, Newmont Mining and the Company announced their results
for the fourth quarter of 1993 and the year ended December 31, 1993. Newmont
Mining reported a rise in fourth quarter net income to $16.9 million, or $0.19
per common share after preferred dividends, compared with $4.0 million, or $0.03
per common share after preferred dividends, in the fourth quarter of 1992. The
rise in income was due to increased production at the Company, higher gold
prices and equity income from Minera Yanacocha in Peru. Minera Yanacocha, 38%
owned by Newmont Mining, began production of gold in August 1993. Newmont's
equity in Minera Yanacocha's income was $4.2 million in the 1993 fourth quarter.
Consolidated sales revenues for the 1993 fourth quarter were $160.8 million
compared with $140.9 million in the final quarter of 1992. The consolidated
average sales price received for gold was $388 an ounce in the fourth quarter of
1993 compared with $362 an ounce in the last quarter of 1992. Both periods
included the hedging effects from payments on Newmont Mining's 1988 gold loan,
which now has been fully repaid.
For the 1993 year, Newmont Mining had net income of $133.1 million, or
$1.71 a share after preferred dividends, compared with $79.0 million, or $1.13 a
share after preferred dividends, in 1992. The 1993 year included a benefit of
$38.5 million due to a change in accounting for income taxes. In 1992 there was
an $11.6 million after-tax charge due to a change in accounting for
postretirement benefits other than pensions. Consolidated sales in 1993 were
$634.3 million, compared with $613.2 million in 1992. The average prices
received for gold were $376 an ounce in 1993 and $379 an ounce in 1992. The
average gold prices for both years reflect the effect of hedging by Newmont
Mining of a portion of its production, including gold loan repayments. No
production after 1993 is currently hedged. Newmont Mining's total debt balance
at December 31, 1993 was approximately $208 million. Consolidated capital
expenditures for 1993 were approximately $235 million (including approximately
$200 million at the Company). Cash flow from operations for 1993 was
approximately $33 million.
The Company reported a 41% increase in 1993 fourth quarter net income to
$23.9 million, or $0.23 a share, compared with $16.9 million, or $0.16 a share,
in the fourth quarter of 1992. The increase was due to higher production and
higher gold prices than in the 1992 quarter. Revenues in the 1993 quarter were
$153.8 million, compared with $128.4 million in the 1992 quarter, based on sales
of 410,200 ounces of gold in the 1993 period, compared with sales of 378,700
ounces in the 1992 period. The average sales price received for gold was $375 an
ounce in the 1993 quarter, compared with $339 an ounce in the 1992 quarter.
For the 1993 year, the Company's net income was $115.8 million, or $1.10 a
share, compared with $81.1 million, or $0.77 a share, in 1992. The 1993 period
included a benefit of $2.7 million, or $0.02 a share, due to a
28
<PAGE> 32
change in accounting for income taxes, and in 1992 there was a net charge of
$6.4 million, or $0.06 a share, due to a change in accounting for postretirement
benefits other than pensions. Revenues in 1993, were $601.6 million compared
with $546.4 million in 1992. The Company sold 1,666,400 ounces in 1993, compared
with 1,587,900 ounces in 1992. The average price received for gold was $361 an
ounce in 1993 and $344 an ounce in 1992. The Company's capital expenditures in
1993 were approximately $200 million. Cash flow from operations for 1993 was
approximately $157.5 million.
Newmont Mining expects capital expenditures in 1994 to increase to
approximately $400 million. Approximately $300 million of such amount will be
incurred by the Company and the balance will be incurred in connection with the
Uzbekistan project and the Minahasa project. Of the $300 million expected to be
spent by the Company in 1994, approximately $120 million to $130 million will be
spent on the construction of an ore roaster which was delayed approximately six
weeks due to the later than anticipated receipt of various required
environmental permits. Steps are being taken to accelerate portions of the
construction in order to make up some of this delay. Completion is currently
estimated for mid-July 1994.
Although expected cash flow from operating activities in 1994 and available
cash balances will not be sufficient to cover the capital expenditures, Newmont
Mining believes that it will have (and, after consummation of the Transaction,
the Company believes it will have) sufficient capital resources available to it
to fund these expenditures. These resources include Newmont Mining's unused $280
million revolving credit facility and its other debt financing capacity (each of
which will be made available to the Company upon consummation of the
Transaction).
SELECTED HISTORICAL AND PRO FORMA FINANCIAL DATA
THE COMPANY
The following table sets forth certain selected historical and pro forma
financial data of the Company for the respective periods presented. The pro
forma information gives effect to the Transaction as if it had occurred on
September 30, 1993 with respect to the balance sheet amounts and as of the
beginning of 1992 with respect to the income statement amounts. Unless the
context otherwise requires, as used in the following tables, "Newmont Mining"
means Newmont Mining Corporation together with its consolidated subsidiaries.
The pro forma dividend amounts are based upon equating the Company's dividend to
Newmont Mining's historical dividend which the Company's Board of Directors
intends to implement after the consummation of the Transaction. This information
should be read in conjunction with the pro forma financial statements of the
Company included in this Proxy Statement under "Pro Forma Consolidated Financial
Information of the Company," the consolidated financial statements of the
Company contained in the Company's Annual Report on Form 10-K for the year ended
December 31, 1992 and Quarterly Report on Form 10-Q for the quarter ended
September 30, 1993, each of which are incorporated herein by reference, and the
consolidated financial statements of Newmont Mining contained in its Annual
Report on Form 10-K for the year ended December 31, 1992 and its Quarterly
Report on Form 10-Q for the quarter ended September 30, 1993, each of which are
incorporated herein by reference. See "Incorporation of Certain Documents by
Reference." The selected historical financial data for the five years ended
December 31, 1992 were derived from the Company's consolidated financial
statements, which statements have been audited by Arthur Andersen & Co.,
independent public accountants. The data presented for the nine months ended
September 30, 1993 and 1992 were derived from the Company's unaudited
consolidated financial statements incorporated by reference herein which, in the
opinion of management, include all adjustments necessary for the fair
presentation of the Company's financial position and results of operations. All
adjustments were of a normal recurring nature except for the following: (a) a
benefit to income and the establishment of a net deferred tax asset of $2.7
million for the cumulative effect of a change in accounting principle effective
January 1, 1993 for the adoption of Statement of Financial Accounting Standards
No. 109, "Accounting for Income Taxes" and (b) a charge to income and the
establishment of a long-term liability of $6.4 million and $7.2 million,
respectively, for the cumulative effect of a change in accounting principle
effective January 1, 1992 for the adoption of Statement of Financial Accounting
Standards No. 106, "Employers' Accounting for Postretirement Benefits Other than
Pensions." The operating results for interim periods are not necessarily
indicative of results to be expected for the full year.
29
<PAGE> 33
NEWMONT GOLD COMPANY
SELECTED FINANCIAL DATA
HISTORICAL DATA:
<TABLE>
<CAPTION>
NINE MONTHS
ENDED
SEPTEMBER 30, YEARS ENDED DECEMBER 31,
---------------- ----------------------------------------------
1993 1992 1992 1991 1990 1989 1988
------ ------ ------ ------ ------ ------ ------
(IN MILLIONS, EXCEPT PER SHARE)
<S> <C> <C> <C> <C> <C> <C> <C>
INCOME STATEMENT DATA:
Sales........................... $447.8 $418.0 $546.4 $572.8 $643.3 $559.2 $388.8
Income from continuing
operations................... 89.2 70.5 87.4 125.9 141.7 118.0 108.1
Income from continuing
operations per common
share........................ 0.85 0.67 0.83 1.20 1.35 1.13 1.03
Cash dividends declared per
common share................. -- -- 0.05 0.05 0.05 0.05 0.05
BALANCE SHEET DATA:
Total assets.................... 992.2 881.8 905.3 816.7 706.9 662.6 597.7
Long-term debt -- parent........ -- -- -- -- -- -- 87.0
Stockholders' equity............ 902.3 798.8 810.4 734.6 614.0 477.5 364.7
</TABLE>
HISTORICAL AND PRO FORMA DATA:
<TABLE>
<CAPTION>
NINE MONTHS ENDED YEAR ENDED
SEPTEMBER 30, 1993 DECEMBER 31, 1992
------------------------ ------------------------
HISTORICAL PRO FORMA HISTORICAL PRO FORMA
---------- --------- ---------- ---------
(IN MILLIONS, EXCEPT PER SHARE)
<S> <C> <C> <C> <C>
INCOME STATEMENT DATA:
Sales.......................................... $447.8 $ 473.5 $546.4 $ 613.2
Income from continuing operations.............. 89.2 86.8 87.4 98.6
Income from continuing operations per common
share....................................... 0.85 0.78 0.83 1.01
Cash dividends declared per common share....... -- 0.36 0.05 0.48
BALANCE SHEET DATA:
Total assets................................... 992.2 1,202.8 905.3 1,215.0
Long-term debt, including current portion...... -- 214.6 -- 265.7
Stockholders' equity........................... 902.3 700.8 810.4 608.7
Book value per common share outstanding........ 8.60 7.28 7.73 6.33
</TABLE>
30
<PAGE> 34
NEWMONT MINING EXCLUDING ITS INTEREST IN THE COMPANY
The following table sets forth certain selected historical combined
financial data of Newmont Mining excluding its interest in the Company, for the
respective periods presented. The selected historical financial data for the
years ended December 31, 1992 and 1991 were derived from Newmont Mining
Corporation's combined financial statements excluding its interest in the
Company, which statements have been audited by Arthur Andersen & Co.,
independent public accountants. The data presented for the nine months ended
September 30, 1993 were derived from Newmont Mining's unaudited combined
financial statements excluding its interest in the Company, which, in the
opinion of management, include all adjustments necessary for the fair
presentation of financial position and results of operations for Newmont Mining
excluding its interest in the Company. All adjustments were of a normal
recurring nature except for the following: (a) a benefit to income and reduction
in the net deferred tax liability of $35.8 million for the cumulative effect of
a change in accounting principle effective January 1, 1993 for the adoption of
Statement of Financial Accounting Standards No. 109, "Accounting for Income
Taxes" and (b) a charge to income of $11.2 million less $6.0 million of income
tax benefits and the establishment of a long-term liability of $11.2 million for
the cumulative effect of a change in accounting principle effective January 1,
1992 for the adoption of Statement of Financial Accounting Standards No. 106,
"Employers' Accounting for Postretirement Benefits Other Than Pensions." The
operating results for the interim periods are not necessarily indicative of
results to be expected for the full year. The combined financial statements for
the years ended December 31, 1992 and 1991 and the nine months ended September
30, 1993 and 1992 are included in this Proxy Statement in Appendix I. The
selected historical financial data for the three years ended December 31, 1990
were derived from Newmont Mining's audited historical consolidated financial
statements for those periods, and they were then adjusted to exclude Newmont
Mining's interest in the Company. In the opinion of management, such data fairly
represents the operations and financial position of Newmont Mining excluding its
interest in the Company. As the combined deficit in the combined financial
statements does not represent shareholders' deficit of any particular corporate
enterprise, no earnings or dividend per share information is presented. There
would be no significant difference in the historical financial data on a pro
forma basis as a result of the Transaction.
NEWMONT MINING CORPORATION EXCLUDING ITS
INTEREST IN THE COMPANY
SELECTED COMBINED FINANCIAL DATA
<TABLE>
<CAPTION>
NINE MONTHS
ENDED
SEPTEMBER 30, YEARS ENDED DECEMBER 31,
------------------ -----------------------------------------------------
1993 1992 1992 1991 1990 1989 1988
------- ------- ------- ------- ------- --------- -------
(IN MILLIONS)
<S> <C> <C> <C> <C> <C> <C> <C>
HISTORICAL INCOME STATEMENT
DATA:
Sales..................... $ 25.7 $ 54.3 $ 66.8 $ 50.0 $ 40.2 $ 22.9 $ 5.8
Income (loss) from
continuing operations... (2.4) 22.4 11.2 (19.2) 40.8 (28.0) (52.3)
HISTORICAL BALANCE SHEET
DATA:
Total assets.............. 391.5 286.6 507.7 164.5 325.5 694.2 790.6
Long-term debt, including
current portion......... 214.6 287.2 265.7 224.4 414.2 1,076.4 926.4
Combined deficit.......... (201.5) (460.4) (201.7) (460.5) (443.7) (629.8) (620.4)
</TABLE>
31
<PAGE> 35
PRO FORMA CONDENSED CONSOLIDATED FINANCIAL INFORMATION OF THE COMPANY
Set forth below are unaudited pro forma condensed consolidated statements
of income from continuing operations of the Company for the nine months ended
September 30, 1993 and the year ended December 31, 1992 and an unaudited pro
forma condensed consolidated balance sheet of the Company as of September 30,
1993 which reflect, as described elsewhere within this Proxy Statement, the
transfer of all of the assets of Newmont Mining, including 8,649,899 shares of
NGC Common Stock owned by Newmont Mining (but excluding 85,850,101 shares of NGC
Common Stock retained by Newmont Mining), to the Company and the assumption by
the Company of all of the liabilities of Newmont Mining. In addition, the
issuances of the NGC Preferred Stock and NGC Options to Newmont Mining are
reflected. The pro forma statements were prepared by the Company's management
based on the historical financial statements of the Company and of Newmont
Mining excluding its interest in the Company, giving effect to the assumptions
and adjustments described in the accompanying notes to the pro forma financial
statements. The pro forma statements of income include the historical amounts
for the Company, adjusted to reflect the historical amounts of Newmont Mining
excluding its interest in the Company for the same periods and the elimination
of intercompany interest amounts. The pro forma balance sheet includes the
historical amounts reported by the Company as of September 30, 1993, adjusted to
reflect the historical amounts of Newmont Mining excluding its interest in the
Company as of the same date and the elimination of intercompany advances. The
pro forma balance sheet amounts are recorded at historical cost due to the
Transaction being between entities under common control. These pro forma
financial statements should be read in conjunction with the consolidated
financial statements of the Company for the year ended December 31, 1992 and the
nine months ended September 30, 1993, contained in the Company's Annual Report
on Form 10-K for the year ended December 31, 1992 and Quarterly Report on Form
10-Q for the quarter ended September 30, 1993, respectively, which are
incorporated herein by reference (see "Incorporation of Certain Documents by
Reference") as well as the combined financial statements of Newmont Mining
excluding its interest in the Company, included in this Proxy Statement in
Appendix I.
This pro forma information is presented for illustrative purposes only and
is not necessarily indicative of the Company's future operating results or
financial condition.
32
<PAGE> 36
PRO FORMA CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(IN THOUSANDS, EXCEPT PER SHARE)
<TABLE>
<CAPTION>
NINE MONTHS ENDED YEAR ENDED
SEPTEMBER 30, 1993 DECEMBER 31, 1992
------------------------------------------- -------------------------------------------
PRO FORMA PRO FORMA
HISTORICAL ADJUSTMENTS PRO FORMA HISTORICAL ADJUSTMENTS PRO FORMA
---------- ------------------ --------- ---------- ------------------ ---------
(A) (B),(C) (A) (B),(C)
-------- ------- -------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Sales and other income
Sales............................... $ 447,817 $ 25,721 $473,538 $ 546,432 $ 66,764 $613,196
Dividends, interest and other....... 261 14,709 14,970 220 18,241 18,461
Interest from parent................ 3,928 -- $(3,928)(B) -- 7,382 -- $(7,382)(B) --
Gain on sale of affiliate shares.... -- 29,607 29,607 -- -- --
---------- -------- ------- --------- ---------- -------- ------- ---------
452,006 70,037 (3,928) 518,115 554,034 85,005 (7,382) 631,657
---------- -------- ------- --------- ---------- -------- ------- ---------
Costs and expenses
Costs applicable to sales........... (244,203) (6,304) (250,507) (314,581) (8,676) (323,257)
Depreciation, depletion and
amortization...................... (80,964) (2,230) (83,194) (96,745) (2,015) (98,760)
Exploration and research............ (6,216) (31,610) (37,826) (14,658) (37,335) (51,993)
General and administrative.......... (7,819) (17,730) (25,549) (13,345) (22,048) (35,393)
Interest expense, net............... -- (10,308) (10,308) -- (14,555) (14,555)
Related party interest.............. -- (3,928) 3,928 (B) -- -- (7,382) 7,382 (B) --
Other............................... (337) (8,217) (8,554) (3,879) (2,402) (6,281)
---------- -------- ------- --------- ---------- -------- ------- ---------
(339,539) (80,327) 3,928 (415,938) (443,208) (94,413) 7,382 (530,239)
---------- -------- ------- --------- ---------- -------- ------- ---------
Income (loss) before income taxes..... 112,467 (10,290) 102,177 110,826 (9,408) 101,418
Income tax benefit (provision)........ (23,269) 7,929 (15,340) (23,412) 20,634 (2,778)
---------- -------- --------- ---------- -------- ---------
Income (loss) from continuing
operations.......................... 89,198 (2,361) 86,837 87,414 11,226 98,640
Preferred stock dividends............. -- (11,913) (11,913) -- (1,747) (1,747)
---------- -------- ------- --------- ---------- -------- ------- ---------
Income (loss) from continuing
operations applicable to common
shares.............................. $ 89,198 $(14,274) $ -- $ 74,924(D) $ 87,414 $ 9,479 $ -- $ 96,893(D)
---------- -------- ------- --------- ---------- -------- ------- ---------
---------- -------- ------- --------- ---------- -------- ------- ---------
Income per share from continuing
operations.......................... $ 0.85 $ 0.78 $ 0.83 $ 1.01
---------- --------- ---------- ---------
---------- --------- ---------- ---------
Weighted average shares outstanding... 104,875 (8,416)(C) 96,459 104,875 (8,504)(C) 96,371
---------- ------- --------- ---------- ------- ---------
---------- ------- --------- ---------- ------- ---------
</TABLE>
- ---------------
(A) Reflects the combined operations of Newmont Mining excluding its interest in
the Company, before the cumulative effects of changes in accounting
principles. See Appendix I.
(B) Eliminates intercompany interest between the Company and Newmont Mining.
(C) Reflects the 8,650 shares of NGC Common Stock transferred to the Company by
Newmont Mining (see Note D to the pro forma condensed consolidated balance
sheet), adjusted for 234 and 146 common stock equivalent shares for the nine
months ended September 30, 1993 and the year ended December 31, 1992,
respectively, resulting from the NGC Options.
(D) Newmont Mining's reported consolidated income applicable to common stock
("NMC consolidated income") can be reconciled to the resulting pro forma
amounts as follows:
<TABLE>
<CAPTION>
NINE MONTHS
ENDED YEAR ENDED
SEPTEMBER 30, DECEMBER 31,
1993 1992
------------- ------------
<S> <C> <C>
NMC consolidated income............................ $ 104,306 $ 77,302
Cumulative effect of changes in accounting
principles....................................... (38,470) 11,572
Newmont Mining's minority interest in the
Company.......................................... 9,088 8,019
------------- ------------
Pro forma income applicable to common stock........ $ 74,924 $ 96,893
------------- ------------
------------- ------------
</TABLE>
33
<PAGE> 37
PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET
(IN THOUSANDS, EXCEPT PER SHARE)
<TABLE>
<CAPTION>
AT SEPTEMBER 30, 1993
-----------------------------------------------------
PRO FORMA ADJUSTMENTS
---------------------
HISTORICAL (A) (B),(C),(D) PRO FORMA
---------- -------- --------- ----------
<S> <C> <C> <C> <C>
Assets
Cash and cash equivalents................. $ 252 $169,775 $ 170,027
Advances to parent........................ 180,839 -- $(180,839)(B) --
Inventories............................... 112,787 5,037 117,824
Other current assets...................... 18,314 25,307 43,621
---------- -------- --------- ----------
Current assets.................... 312,192 200,119 (180,839) 331,472
Property, plant and mine development,
net.................................... 652,171 74,917 727,088
Other assets.............................. 27,845 116,425 144,270
---------- -------- --------- ----------
Total assets...................... $ 992,208 $391,461 $(180,839) $1,202,830
---------- -------- --------- ----------
---------- -------- --------- ----------
Liabilities and stockholders' equity
Advances from related party............... $ -- $180,839 $(180,839)(B) $ --
Other current liabilities................. 50,621 94,541 145,162
---------- -------- --------- ----------
Current liabilities............... 50,621 275,380 (180,839) 145,162
Long-term debt............................ -- 192,000 192,000
Other long-term liabilities............... 39,277 125,570 164,847
---------- -------- --------- ----------
Total liabilities................. 89,898 592,950 (180,839) 502,009
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............................... -- -- (74,389)(D) (74,389)
Capital in excess of par value......... 203,226 -- 203,226
Retained earnings...................... 698,035 (201,489) (14,375)(C) 556,560
74,389 (D)
---------- -------- --------- ----------
Total stockholders' equity........ 902,310 (201,489) -- 700,821
---------- -------- --------- ----------
Total liabilities and
stockholders' equity............ $ 992,208 $391,461 $(180,839) $1,202,830
---------- -------- --------- ----------
---------- -------- --------- ----------
</TABLE>
- ---------------
(A) Reflects the transfer at historical cost of Newmont Mining's combined assets
and liabilities excluding its interest in the Company at September 30, 1993.
See Appendix I.
(B) Eliminates intercompany advances between the Company and Newmont Mining.
(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 Newmont Mining.
(D) Reflects the transfer at a net book value of $8.60 per share at September
30, 1993 of 8,650 shares of NGC Common Stock from Newmont Mining 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. See "The Transaction -- Background of the Transaction."
34
<PAGE> 38
STOCK OWNERSHIP OF THE COMPANY AND NEWMONT MINING
As of January 10, 1994, all directors and executive officers of the Company
as a group beneficially owned 3,775 shares of NGC Common Stock, constituting in
the aggregate less than 1% of the outstanding NGC Common Stock. The nature of
beneficial ownership of all such shares is sole voting and investment power.
Except as described under "Principal Stockholders of the Company and Newmont
Mining", as of January 10, 1994, all directors and executive officers of the
Company as a group beneficially owned 331,583 shares of NMC Common Stock,
constituting in the aggregate less than 1% of the outstanding NMC Common Stock.
The nature of beneficial ownership of all such shares is sole voting and
investment power.
<TABLE>
<CAPTION>
SHARES OF NMC
NAME OF SHARES OF NGC COMMON STOCK
BENEFICIAL OWNER COMMON STOCK OWNED OWNED(1)
-------------------------- ------------------ --------------------
<S> <C> <C>
Rudolph I.J. Agnew.................................... -- 2,000
Ronald C. Cambre...................................... -- 27,840(2)
Graham M. Clark, Jr. ................................. -- 8,050(2)
Joseph P. Flannery.................................... -- 2,200
James M. Goldsmith.................................... -- 500(3)
Pierre Haas........................................... 2,000 2,000
Thomas A. Holmes...................................... -- 5,568
Walter R. Lawrence.................................... -- 51,555(2)
W. James Mullin....................................... -- 3,625(2)
Gordon R. Parker...................................... 1,200 103,886(2)
T. Peter Philip....................................... 100 17,925(2)
Robin A. Plumbridge................................... -- 2,000
Robert H. Quenon...................................... 300 300
James V. Taranik...................................... 100 100
William I.M. Turner, Jr............................... -- 5,700
All directors and executive officers as a group,
including those named above (25 persons)............ 3,775 331,583(2)
</TABLE>
- ---------------
(1) None of the directors or executive officers of the Company beneficially own
any shares of NMC Preferred Stock.
(2) Includes 31,500, 24,000, 5,000, 3,750, 48,159, 3,625 and 202,727 shares
which Messrs. Parker, Cambre, Philip, Clark, Lawrence, Mullin and all
directors and executive officers as a group, respectively, have the right to
acquire within 60 days of January 10, 1994 by the exercise of options
granted by Newmont Mining.
(3) See "Principal Stockholders of the Company and Newmont Mining" for
information concerning shareholdings by DIA Holdings (Overseas) B.V. and
related companies.
PRINCIPAL STOCKHOLDERS OF THE COMPANY AND NEWMONT MINING
PRINCIPAL STOCKHOLDER OF THE COMPANY
Based on the Schedule 13G under the Securities Exchange Act of 1934, as
amended (the "Exchange Act"), filed with the Securities and Exchange Commission
(the "Commission") by Newmont Mining, as of January 10, 1994, Newmont Mining
owned 94,500,000 shares, or 90.1%, of the NGC Common Stock. Following completion
of the Transaction, Newmont Mining's ownership will be reduced to 85,850,101
shares of NGC Common Stock, or 89.22% of the NGC Common Stock then outstanding.
PRINCIPAL STOCKHOLDERS OF NEWMONT MINING
The description of the beneficial ownership of the outstanding NMC Common
Stock and the other information which is set forth below is based upon the
Schedules 13D under the Exchange Act filed with the Commission by the persons
reporting such beneficial ownership and certain additional information provided
by
35
<PAGE> 39
such persons to Newmont Mining. The power of such persons to vote and dispose of
the Shares (as defined below) is subject to the contractual arrangements
described below.
THE GOLDSMITH/ROTHSCHILD RESTRICTED GROUP. As of July 15, 1993, DIA
Holdings (Overseas) B.V. ("DIA Overseas"), Jupiterstraat 158, 2130 AH Hoofddorp,
The Netherlands, was the direct beneficial owner with sole voting and investment
power of 3,400,000 shares, or 4.98%, of the outstanding NMC Common Stock (the
"Shares").
DIA Overseas, DIA Holdings (Antilles) N.V. ("DIA Antilles"), General
Oriental Investments Limited ("GOIL") and Enderbury Limited ("Enderbury") may be
deemed to be the beneficial owners of the Shares with sole voting and investment
power by virtue of the parent/subsidiary relationships of these companies (each
such company being the parent of the company whose name immediately precedes it
in the above listing; in the case of GOIL, as of July 15, 1993, Enderbury was
the owner of approximately 72% of the voting stock of GOIL). The addresses of
these companies (other than DIA Overseas) are as follows:
<TABLE>
<S> <C>
DIA Antilles................... Polarisweg 35A
Willemstad,Curacao
Netherlands Antilles
GOIL........................... P.O. Box 309
Grand Cayman
Cayman Islands
British West Indies
Enderbury...................... P.O. Box 309
Grand Cayman
Cayman Islands
British West Indies
</TABLE>
All the capital stock of Enderbury is owned by Foundation Brunneria
("Brunneria"), a foundation organized under the laws of Liechtenstein, and as a
result of the position of James M. Goldsmith, a director of Newmont Mining
("Goldsmith"), as Chairman of GOIL and certain authority Goldsmith has with
respect to Brunneria, Goldsmith and Brunneria may be deemed to be parents of
GOIL.
As of July 15, 1993, RIT Capital Partners plc ("RIT"), 27 St. James's
Place, London SW1A 1NR, England, was the direct beneficial owner with shared
voting and investment power of 1,000,000 Shares, or 1.46%, of the outstanding
NMC Common Stock.
J. Rothschild Capital Management Limited ("JRCML") is an indirect,
wholly-owned subsidiary of St. James's Place Capital plc ("SJPC"). Pursuant to
the terms of an investment management agreement between RIT and JRCML, JRCML
serves as the investment manager of RIT's portfolio investments and has
authority on behalf of RIT to vote and sell RIT's Shares (subject to the terms
of the Goldsmith/Rothschild Standstill Agreement (as defined below)). As a
result of JRCML's investment management agreement with RIT, and the indirect
ownership of JRCML by SJPC, SJPC may be deemed to own beneficially the Shares
beneficially owned by RIT. The address of both SJPC and JRCML is 27 St. James's
Place, London SW1A 1NR, England.
GOLDSMITH/ROTHSCHILD STANDSTILL AGREEMENT. Newmont Mining is a party to an
agreement dated as of December 7, 1990, as amended by an Amendment thereto dated
May 10, 1993 and certain other letter agreements with respect thereto (the
"Goldsmith/Rothschild Standstill Agreement") with certain entities including
Goldsmith (collectively, with those other entities, the "Goldsmith Group") and
with certain entities including Hornwood Investments N.V., SJPC, RIT and Jacob
Rothschild (collectively, with those other entities, the "Rothschild Group")
(the Goldsmith Group and the Rothschild Group, together the
"Goldsmith/Rothschild Restricted Group") relating to permitted stockholdings and
certain other matters.
The following is a summary of certain provisions of the
Goldsmith/Rothschild Standstill Agreement. This summary contains all material
provisions, but does not purport to be complete and is qualified in its entirety
by reference to the Goldsmith/Rothschild Standstill Agreement, a copy of which
was filed as an exhibit to Newmont Mining's Registration Statement on Form S-3
(Registration Number 33-65274) (the
36
<PAGE> 40
"Registration Statement"), filed with the Commission with respect to the
offering of certain shares of NMC Common Stock owned by DIA Overseas, RIT and
Newgold Limited, an indirect, wholly-owned subsidiary of RIT. Reference should
also be made to the entire Goldsmith/Rothschild Standstill Agreement for the
provisions not summarized below.
Under the Goldsmith/Rothschild Standstill Agreement, members of the
Goldsmith/Rothschild Restricted Group are prohibited, with certain exceptions,
from acquiring, prior to November 1, 1997, beneficial ownership of any
Outstanding Voting Securities (as defined therein) of Newmont Mining if, after
such acquisition, the Goldsmith/Rothschild Restricted Group would beneficially
own in the aggregate more than 36.4% of the Voting Power (as defined therein) of
all Outstanding Voting Securities. However, in certain circumstances, Goldsmith
has the right to make a tender offer, and any member of the Rothschild Group
shall have the right to participate as a bidder in such tender offer, for any
and all Outstanding Voting Securities.
Members of the Goldsmith/Rothschild Restricted Group may acquire beneficial
ownership of any Outstanding Voting Securities from the Soros Restricted Group
(as defined below) so long as the aggregate percentage of the acquired
Outstanding Voting Securities reduces the percentage limitation set forth in the
Soros Standstill Agreement (as defined below) (currently 13.5%) by an amount
equal to the aggregate percentage of Outstanding Voting Securities so
transferred to the Goldsmith/Rothschild Restricted Group and members of the
Soros Restricted Group may acquire beneficial ownership of any Outstanding
Voting Securities from the Goldsmith/Rothschild Restricted Group so long as the
aggregate percentage of the acquired Outstanding Voting Securities reduces the
percent limitations set forth in the Goldsmith/Rothschild Standstill Agreement
(currently 36.4%) by an amount equal to the aggregate percentage of Outstanding
Voting Securities so transferred to the Soros Restricted Group.
So long as the Goldsmith/Rothschild Restricted Group beneficially owns 9.9%
or more of the Voting Power of all Outstanding Voting Securities, Goldsmith will
have the right to recommend for nomination for election as directors of Newmont
Mining a number of persons relative to the number of persons constituting the
whole Board of Directors that is proportional to the percentage of Voting Power
of all Outstanding Voting Securities then beneficially held by the
Goldsmith/Rothschild Restricted Group. Such percentage, however, will be deemed
to be 40% so long as the percentage of Voting Power beneficially held by the
Goldsmith/Rothschild Restricted Group is more than 40%. The Board of Directors
is obligated to nominate for election as directors of Newmont Mining (i) the
number of qualified, acceptable persons recommended by Goldsmith as described
above, and (ii) so long as the Goldsmith/Rothschild Restricted Group
beneficially owns more than 25% of the Voting Securities (as defined therein), a
number of qualified persons who are independent of the management of Newmont
Mining and of the Goldsmith/Rothschild Restricted Group (the "Independent
Directors") such that, if all such persons were elected, the total number of
Independent Directors and persons whom Goldsmith is entitled to recommend as
directors would constitute at least a majority of all directors of Newmont
Mining. The Goldsmith/Rothschild Restricted Group is obligated with respect to
the election of directors of Newmont Mining to vote the Voting Securities held
by the Goldsmith/Rothschild Restricted Group for the nominees recommended by the
Board of Directors. On all other matters the Goldsmith/Rothschild Restricted
Group may vote such Voting Securities as it determines in its sole discretion.
The Goldsmith/Rothschild Restricted Group is prohibited from soliciting or
participating in any solicitation of proxies with respect to the election of
directors of Newmont Mining in opposition to the nominees recommended by the
Board of Directors.
The Goldsmith/Rothschild Standstill Agreement provides certain registration
rights to the Goldsmith/Rothschild Restricted Group in connection with a bona
fide public offering by the Goldsmith/Rothschild Restricted Group. The
Registration Statement filed by Newmont Mining in July 1993 with respect to the
offering of certain shares of NMC Common Stock owned by certain entities within
the Goldsmith/Rothschild Restricted Group was filed as a result of the exercise
by the Goldsmith/Rothschild Group of such registration rights. Pursuant to the
terms of the Goldsmith/Rothschild Standstill Agreement, the Goldsmith/Rothschild
Group may not request another registration of shares of NMC Common Stock for a
period of 365 days after the effective date of the Registration Statement (July
7, 1993), subject to certain limited exceptions.
37
<PAGE> 41
Subject to certain exceptions and, except as otherwise provided in the
Goldsmith/Rothschild Standstill Agreement, no member of the Goldsmith/Rothschild
Restricted Group may assign, sell or otherwise transfer any Voting Securities if
such member or any of its affiliates knows or, after reasonable inquiry, should
have known, that the transferee will beneficially own, after giving effect to
such transfer, more than an aggregate of 9.9% of the Voting Power of all
Outstanding Voting Securities, unless such transferee agrees to be bound by the
provisions of the Goldsmith/Rothschild Standstill Agreement.
The Goldsmith/Rothschild Standstill Agreement will terminate on the earlier
of November 1, 1997, or the date of the occurrence of certain specified events,
including (i) the failure of the stockholders of Newmont Mining to elect any
qualified, acceptable director properly recommended by Goldsmith or the
requisite number of Independent Directors, (ii) the removal of any director
recommended by Goldsmith from the Board of Directors except for cause, (iii) the
failure of the Board of Directors to replace a director recommended by Goldsmith
with a qualified, acceptable person recommended by Goldsmith, (iv) the issuance
by Newmont Mining of any new class of securities having the right to vote,
separately as a class, for directors, or to approve, separately as a class,
mergers or any other major transactions involving Newmont Mining unless the
issuance and specific terms of such new class of securities has been approved in
advance by the affirmative vote of a majority of the outstanding stock of
Newmont Mining entitled to vote thereon at an annual meeting or special meeting
called for the purpose of acting thereon, (v) upon notice by Goldsmith that he
has determined to terminate the Goldsmith/Rothschild Standstill Agreement
effective on a date stated in such notice given within ninety days after the
execution or approval by Newmont Mining of (a) the disposition of its interest
in the Company which would result in Newmont Mining holding less than 51% of the
outstanding common stock of the Company, (b) the sale, lease or exchange of all
or substantially all of the property or assets of the Company or (c) any plan of
reorganization or liquidation of Newmont Mining, in each case, without the prior
approval of a majority of the holders of the Outstanding Voting Securities, (vi)
upon notice by Goldsmith that he has determined to terminate the
Goldsmith/Rothschild Standstill Agreement effective on a date stated in such
notice at any time during which the Goldsmith/Rothschild Restricted Group holds
more than 50% of the Voting Power of all Outstanding Voting Securities acquired
as a result of a tender offer or (vii) the earlier of the final adjournment of
the first annual meeting of the stockholders of Newmont Mining or the creation
of a Board of Directors of Newmont Mining of which a majority of the directors
are nominees of the Goldsmith/Rothschild Restricted Group, in either such case
after the Goldsmith/Rothschild Restricted Group beneficially owns more than 50%
of the Voting Power of all Outstanding Voting Securities acquired as a result of
a tender offer.
In accordance with the provisions of the Goldsmith/Rothschild Standstill
Agreement, three designees of Goldsmith have been nominated and elected as
members of the Board of Directors of Newmont Mining. As of July 31, 1993, the
Goldsmith/Rothschild Restricted Group owned 6.44% of the Voting Power of all
Outstanding Voting Securities. As long as the Goldsmith/Rothschild Restricted
Group owns less than 9.9% of the Voting Power of all Outstanding Voting
Securities, Goldsmith will no longer have the right under the
Goldsmith/Rothschild Standstill Agreement to designate any directors for Newmont
Mining's Board of Directors.
SOROS RESTRICTED GROUP. According to a Schedule 13D dated April 23, 1993
(as amended by Amendment 1 thereto dated May 10, 1993, the "Soros Schedule 13D")
and Statements of Changes in Beneficial Ownership on Form 4, dated January 7,
1994, filed by Mr. George Soros ("Soros") with the Commission under the Exchange
Act, as of December 21, 1993, Quota Fund N.V. ("Quota"), Quantum Fund N.V.
("Quantum") and Quasar International Partners C.V. ("Quasar") beneficially owned
in the aggregate 8,461,450 shares of NMC Common Stock, or approximately 12.3% of
the outstanding NMC Common Stock. The shares of NMC Common Stock were acquired
by Quota, Quantum and Quasar at the direction of Soros Fund Management ("SFM"),
an investment advisory firm whose sole proprietor is Soros. SFM acts as the
principal investment manager or asset manager to Quota, Quantum and Quasar. The
sole power to direct the disposition of the shares of NMC Common Stock currently
owned by Quota, Quantum and Quasar is held by SFM. In addition, the authority to
vote such shares of NMC Common Stock is shared by SFM with Quota, Quantum and
Quasar, acting through their respective corporate officers, but, according to
the Soros Schedule 13D, SFM anticipates that, if exercised, such voting power
would be exercised in
38
<PAGE> 42
accordance with recommendations given by SFM. SFM shares the power to direct the
disposition of 8,200 shares of the Company's convertible preferred stock, par
value $5.50 per share, held by Quasar with D. Nolan Management Company, Inc.
("Nolan"). The authority to vote these securities is shared by SFM and Nolan
with Quasar, acting through the corporate officers of Quasar's managing general
partner, but SFM anticipates that, if exercised, such voting power would be
exercised in accordance with recommendations given by Nolan or SFM. According to
the Soros Schedule 13D, Soros , as sole proprietor of SFM, may be deemed to be
the beneficial owner of the shares of NMC Common Stock beneficially owned by
Quota, Quantum and Quasar.
According to the Soros Schedule 13D and Statements of Changes in Beneficial
Ownership on Form 4 filed with the Commission on January 10, 1994 by Duquesne
Capital Management Incorporated ("Duquesne") and Mr. Stanley S. Druckenmiller
("Druckenmiller"), chief executive officer and principal stockholder of
Duquesne, as of December 9, 1993, certain clients of Duquesne, for which
Duquesne has investment discretion, beneficially owned 459,650 shares of NMC
Common Stock, or approximately 0.7% of the outstanding NMC Common Stock and
Druckenmiller's spouse had an interest in 17,704 shares of NMC Common Stock, or
approximately 0.03% of the outstanding NMC Common Stock, for an aggregate number
of 477,354 shares of NMC Common Stock, or approximately 0.7% of the outstanding
NMC Common Stock, for which Druckenmiller may be deemed to have a beneficial
ownership interest. According to the Soros Schedule 13D, Druckenmiller and
Duquesne may be deemed to be beneficial owners of the shares of NMC Common Stock
beneficially owned by the clients of Duquesne.
SOROS STANDSTILL AGREEMENT. In connection with the acquisitions of the
shares of NMC Common Stock described above, Newmont Mining entered into an
agreement dated as of May 10, 1993 (the "Soros Standstill Agreement") with
Soros, SFM, Druckenmiller, Duquesne, Quantum, Quasar and Quota (collectively,
with certain other entities, the "Soros Restricted Group") relating to permitted
stockholdings and certain other matters.
The following is a summary of provisions of the Soros Standstill Agreement.
This summary contains all material provisions, but does not purport to be
complete and is qualified in its entirety by reference to the Soros Standstill
Agreement, a copy of which was filed as an exhibit to the Registration
Statement.
Under the Soros Standstill Agreement, members of the Soros Restricted Group
are prohibited, with certain exceptions, from acquiring, prior to November 1,
1997, beneficial ownership of any Outstanding Voting Securities (as defined
therein) of Newmont Mining if, after such acquisition, the Soros Restricted
Group would beneficially own in the aggregate more than 13.5% of the Voting
Power (as defined therein) of all Outstanding Voting Securities, without
obtaining the prior consent of a majority of the Board of Directors of Newmont
Mining, including a majority of the directors who are not nominees of Goldsmith.
Members of the Soros Restricted Group (other than any Fund, as defined
therein) may acquire beneficial ownership of any Outstanding Voting Securities
from the Goldsmith/Rothschild Restricted Group so long as the aggregate
percentage of the acquired Outstanding Voting Securities reduces the percentage
limitation set forth in the Goldsmith/Rothschild Standstill Agreement (currently
36.4%) by an amount equal to the aggregate percentage of Outstanding Voting
Securities so transferred to the Soros Restricted Group and members of the
Goldsmith/Rothschild Group may acquire beneficial ownership of any Outstanding
Voting Securities from the Soros Restricted Group so long as the aggregate
percentage of the acquired Outstanding Voting Securities reduces the percentage
limitation set forth in the Soros Standstill Agreement (currently 13.5%) by an
amount equal to the aggregate percentage of Outstanding Voting Securities so
transferred to the Goldsmith/Rothschild Group.
Subject to certain exceptions and, except as otherwise provided in the
Soros Standstill Agreement, no member of the Soros Restricted Group may assign,
sell or otherwise transfer any Voting Securities if such member or any of its
affiliates knows or, after reasonable inquiry, should have known, that the
transferee will beneficially own, after giving effect to such transfer, more
than an aggregate of 9.9% of the Voting Power of all Outstanding Voting
Securities, unless such transferee agrees to be bound by the provisions of the
Soros Standstill Agreement.
39
<PAGE> 43
The Soros Restricted Group is obligated with respect to the election of
directors of Newmont Mining to vote, upon the request of Newmont Mining, the
Voting Securities held by the Soros Restricted Group for the nominees
recommended by the Board of Directors. On all other matters the Soros Restricted
Group may vote such Voting Securities as it determines in its sole discretion.
The Soros Standstill Agreement will terminate on the earlier of November 1,
1997, or the date of the occurrence of certain specified events, including (i)
the issuance by Newmont Mining of any new class of securities having the right
to vote, separately as a class, for directors, or to approve, separately as a
class, mergers or any other major transactions involving Newmont Mining unless
the issuance and specific terms of such new class of securities has been
approved in advance by the affirmative vote of a majority of the outstanding
stock of Newmont Mining entitled to vote thereon at an annual or special meeting
called for the purpose of acting thereon or (ii) upon notice by SFM that it has
determined to terminate the Soros Standstill Agreement effective on a date
stated in such notice given within ninety days after the execution or approval
by Newmont Mining of (a) the disposition of its interest in the Company which
would result in Newmont Mining holding less than 51% of the outstanding NGC
Common Stock, (b) the sale, lease or exchange of all or substantially all of the
property or assets of the Company or (c) any plan of reorganization or
liquidation of Newmont Mining, in each case, without the prior approval of a
majority of the holders of the Outstanding Voting Securities.
SECTION 16(A) REPORTING
Section 16(a) of the Exchange Act requires the Company's directors and
executive officers to file reports of ownership and changes in ownership on
Forms 3, 4 and 5 with the Commission. All Section 16(a) filing requirements
applicable to the Company's directors and executive officers were complied with
except that one purchase of 2,000 shares of NGC Common Stock by Pierre Haas, a
director, was reported on Form 5, which Form 5 was filed in lieu of a Form 4
which should have been filed approximately one month earlier.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The Company hereby incorporates by reference in this Proxy Statement the
following documents which have been filed by the Company with the Commission:
(i) the Company's Annual Report on Form 10-K for the year ended
December 31, 1992; and
(ii) the Company's Quarterly Reports on Form 10-Q for the quarters
ended March 31, June 30 and September 30, 1993.
The Company also incorporates by reference in this Proxy Statement the
following documents which have been filed by Newmont Mining with the Commission:
(i) Newmont Mining's Annual Report on Form 10-K for the year ended
December 31, 1992; and
(ii) Newmont Mining's Quarterly Reports on Form 10-Q for the quarters
ended March 31, June 30 and September 30, 1993.
All documents subsequently filed by the Company or Newmont Mining pursuant to
Sections 13(a), 13(c), 14 or 15(d) of the Exchange Act prior to the date of the
Special Meeting shall be deemed to be incorporated herein by reference and to be
a part of this Proxy Statement from the date of the filing of such documents.
Any statement contained in a document incorporated or deemed to be incorporated
by reference herein shall be deemed to be modified or superseded for purposes of
this Proxy Statement to the extent that a statement contained herein or in any
other subsequently filed document which also is or is deemed to be incorporated
by reference herein modifies or supersedes such statement. Any statement so
modified or superseded shall not be deemed, except as so modified or superseded,
to constitute a part of this Proxy Statement. The Company will furnish, without
charge, a copy of any or all documents referred to above which have been or may
be incorporated by reference in this Proxy Statement, other than exhibits, to
each person to whom a copy of this Proxy Statement has been delivered, upon such
person's oral or written request. Written or telephone requests should be
directed to the Office of the Secretary, Newmont Gold Company, 1700 Lincoln
Street, Denver, Colorado 80203, Telephone (303) 863-7414.
40
<PAGE> 44
APPENDIX I
NEWMONT MINING CORPORATION AND SUBSIDIARIES
EXCLUDING NEWMONT GOLD COMPANY
INDEX TO COMBINED FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Report of Independent Public Accountants............................................. I-2
Combined Balance Sheets.............................................................. I-3
Statements of Combined Operations.................................................... I-4
Statements of Combined Cash Flows.................................................... I-5
Notes to Combined Financial Statements............................................... I-6
Report of Independent Public Accountants on Schedules................................ I-23
Schedule V -- Property, Plant and Mine Development................................... I-24
Schedule VI -- Accumulated Depreciation, Depletion and Amortization of Property,
Plant and Mine Development.......................................... I-25
Schedule IX -- Short-Term Borrowings................................................. I-26
Schedule X -- Supplementary Statement of Operations Information...................... I-27
</TABLE>
<PAGE> 45
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To Newmont Mining Corporation:
We have audited the accompanying combined balance sheets of Newmont Mining
Corporation (a Delaware corporation) and subsidiaries excluding Newmont Gold
Company (see Note 1) as of December 31, 1992 and 1991, and the related
statements of combined operations, and combined cash flows for each of the two
years in the period ended December 31, 1992. These financial statements are the
responsibility of Newmont'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 combined financial statements referred to above present
fairly, in all material respects, the financial position of Newmont Mining
Corporation and subsidiaries excluding Newmont Gold Company as of December 31,
1992 and 1991, and the results of their operations and their cash flows for each
of the two years in the period ended December 31, 1992 in conformity with
generally accepted accounting principles.
As discussed in Note 7 to the combined financial statements, effective
January 1, 1992, the method of accounting for postretirement benefits other than
pensions was changed.
/s/ ARTHUR ANDERSEN & CO.
ARTHUR ANDERSEN & CO.
Denver, Colorado,
January 19, 1994
I-2
<PAGE> 46
NEWMONT MINING CORPORATION AND SUBSIDIARIES
EXCLUDING NEWMONT GOLD COMPANY
COMBINED BALANCE SHEETS
<TABLE>
<CAPTION>
AT AT DECEMBER 31,
SEPTEMBER 30, -----------------------
1993 1992 1991
------------- --------- ---------
(UNAUDITED)
(IN THOUSANDS)
<S> <C> <C> <C>
Assets
Cash and cash equivalents......................... $ 169,775 $ 290,473 $ 17,625
Short-term investments............................ 18,600 18,015 16,205
Other current assets.............................. 11,744 11,077 7,988
------------- --------- ---------
Current assets................................. 200,119 319,565 41,818
Asset held for sale............................... -- 37,371 37,371
Property, plant and mine development, net......... 74,917 66,928 23,640
Other assets...................................... 116,425 83,813 61,643
------------- --------- ---------
Total assets.............................. $ 391,461 $ 507,677 $ 164,472
------------- --------- ---------
------------- --------- ---------
Liabilities and Combined Deficit
Short-term debt................................... $ 15,739 $ 10,941 $ 10,913
Current portion of long-term debt................. 22,614 88,689 112,197
Advances from related party....................... 180,839 198,050 163,074
Other current liabilities......................... 50,752 62,040 52,837
Deferred revenue.................................. 5,436 23,508 8,889
------------- --------- ---------
Current liabilities............................ 275,380 383,228 347,910
Long-term debt.................................... 192,000 177,000 112,198
Reclamation liabilities........................... 42,193 40,577 41,658
Other long-term liabilities....................... 83,377 64,520 52,143
Deferred income taxes............................. -- 44,052 71,066
------------- --------- ---------
Total liabilities.............................. 592,950 709,377 624,975
Combined deficit.................................. (201,489) (201,700) (460,503)
------------- --------- ---------
Total liabilities and combined deficit.... $ 391,461 $ 507,677 $ 164,472
------------- --------- ---------
------------- --------- ---------
</TABLE>
The accompanying notes are an integral part of these combined financial
statements.
I-3
<PAGE> 47
NEWMONT MINING CORPORATION AND SUBSIDIARIES
EXCLUDING NEWMONT GOLD COMPANY
STATEMENTS OF COMBINED OPERATIONS
<TABLE>
<CAPTION>
NINE MONTHS ENDED YEARS ENDED
SEPTEMBER 30, DECEMBER 31,
--------------------------- ----------------------
1993 1992 1992 1991
----------- ----------- -------- ---------
(UNAUDITED)
(IN THOUSANDS)
<S> <C> <C> <C> <C>
Sales and other income
Sales..................................... $ 25,721 $ 54,285 $ 66,764 $ 50,021
Dividends, interest and other............. 14,709 14,729 18,241 24,822
Gain on disposition of securities......... 29,607 -- -- 36,107
----------- ----------- -------- ---------
70,037 69,014 85,005 110,950
----------- ----------- -------- ---------
Costs and expenses
Costs applicable to sales................. (6,304) (6,592) (8,676) (2,310)
Depreciation, depletion and
amortization........................... (2,230) (1,656) (2,015) (1,715)
Exploration and research.................. (31,610) (26,502) (37,335) (36,023)
General and administrative................ (17,730) (15,247) (22,048) (16,585)
Third party interest...................... (15,845) (11,984) (16,960) (13,021)
Capitalized interest...................... 5,537 1,181 2,405 --
Related party interest.................... (3,928) (5,699) (7,382) (7,302)
Other..................................... (8,568) 256 (20) (46,229)
----------- ----------- -------- ---------
(80,678) (66,243) (92,031) (123,185)
Equity in income (loss) of affiliated
companies................................. 74 (703) (2,821) --
Minority interest in loss of subsidiaries... 277 -- 439 --
----------- ----------- -------- ---------
Income (loss) before income taxes and
cumulative effect of changes in accounting
principles................................ (10,290) 2,068 (9,408) (12,235)
Income tax benefit (provision).............. 7,929 20,372 20,634 (6,934)
----------- ----------- -------- ---------
Income (loss) before cumulative effect of
changes in accounting principles.......... (2,361) 22,440 11,226 (19,169)
Cumulative effect of changes in accounting
principles, net of income tax benefit of
$5,962 in 1992 periods.................... 35,805 (5,216) (5,216) --
----------- ----------- -------- ---------
Net income (loss)........................... 33,444 17,224 6,010 (19,169)
Preferred stock dividends................... (11,913) -- (1,747) --
----------- ----------- -------- ---------
Income (loss) after preferred dividends..... $ 21,531 $ 17,224 $ 4,263 $ (19,169)
----------- ----------- -------- ---------
----------- ----------- -------- ---------
</TABLE>
The accompanying notes are an integral part of these combined financial
statements.
I-4
<PAGE> 48
NEWMONT MINING CORPORATION AND SUBSIDIARIES
EXCLUDING NEWMONT GOLD COMPANY
STATEMENTS OF COMBINED CASH FLOWS
<TABLE>
<CAPTION>
NINE MONTHS ENDED YEARS ENDED
SEPTEMBER 30, DECEMBER 31,
------------------------- --------------------
1993 1992 1992 1991
----------- ----------- -------- ---------
(UNAUDITED)
(IN THOUSANDS)
<S> <C> <C> <C> <C>
Operating activities
Net income (loss)............................... $ 33,444 $ 17,224 $ 6,010 $ (19,169)
----------- ----------- -------- ---------
Adjustments to reconcile net income (loss) to
net cash used in operating activities:
Depreciation, depletion and amortization... 2,230 1,656 2,015 1,715
Deferred taxes............................. (55,259) (31,280) (25,640) 5,341
Gain on disposition of securities.......... (29,607) -- -- (36,107)
Debt repayment at less than monetized
amount.................................. (18,072) (19,506) (26,039) (20,944)
Increase in operating assets............... (13,941) (9,800) (23,845) (853)
Increase (decrease) in operating
liabilities............................. 10,363 496 5,700 (12,683)
Other operating............................ 243 43 37 (220)
----------- ----------- -------- ---------
Total adjustments.......................... (104,043) (58,391) (67,772) (63,751)
----------- ----------- -------- ---------
Net cash used in operating activities............. (70,599) (41,167) (61,762) (82,920)
----------- ----------- -------- ---------
Investing activities
Net proceeds from sales of securities and
short-term investments....................... 75,546 7,560 18,264 16,897
Purchase of short-term investments.............. (8,928) (8,835) (19,664) (13,861)
Additions to property, plant and mine
development.................................. (10,218) (23,159) (45,304) --
Other........................................... (8,691) (522) 2,984 12,922
----------- ----------- -------- ---------
Net cash provided by (used in) investing
activities...................................... 47,709 (24,956) (43,720) 15,958
----------- ----------- -------- ---------
Financing activities
Short-term borrowings........................... 4,798 28 28 2,618
Advances from (repayments to) related party..... (17,211) 59,730 34,976 81,539
Proceeds from long-term borrowings.............. 15,000 177,000 177,000 --
Repayments of long-term borrowings.............. (66,075) (64,641) (86,157) (91,314)
Proceeds from exercise of stock options......... 9,399 13,409 13,488 3,185
Proceeds from issuance of preferred stock....... -- -- 279,811 --
Dividends paid on common equity................. (30,719) (30,594) (40,816) (40,621)
Dividends paid on preferred stock............... (13,000) -- -- --
----------- ----------- -------- ---------
Net cash provided by (used in) financing
activities...................................... (97,808) 154,932 378,330 (44,593)
----------- ----------- -------- ---------
Net increase (decrease) in cash and cash
equivalents..................................... (120,698) 88,809 272,848 (111,555)
Cash and cash equivalents at beginning of
period.......................................... 290,473 17,625 17,625 129,180
----------- ----------- -------- ---------
Cash and cash equivalents at end of period........ $ 169,775 $ 106,434 $290,473 $ 17,625
----------- ----------- -------- ---------
----------- ----------- -------- ---------
</TABLE>
The accompanying notes are an integral part of these combined financial
statements.
I-5
<PAGE> 49
NEWMONT MINING CORPORATION AND SUBSIDIARIES
EXCLUDING NEWMONT GOLD COMPANY
NOTES TO COMBINED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 1992 AND 1991
(IN THOUSANDS OF DOLLARS UNLESS OTHERWISE INDICATED
AND EXCEPT PER SHARE AMOUNTS)
(1) BASIS OF PRESENTATION
These combined historical financial statements were prepared from the
consolidated financial statements of Newmont Mining Corporation and its
subsidiaries ("Newmont Mining Corporation") by excluding from such statements
the financial results and accounts of Newmont Gold Company and its subsidiary
("NGC"). Such "entity" is referred to hereinafter as "Newmont Mining." These
statements were prepared to reflect the assets, liabilities and related
operations of Newmont Mining Corporation that are to be transferred to NGC, its
90.1% owned subsidiary. Adjustments have also been made to recognize certain
transactions between Newmont Mining Corporation and NGC that previously were
eliminated in Newmont Mining Corporation's historical consolidated financial
statements.
The combined deficit represents the difference between the combined assets
and liabilities of Newmont Mining. Included in Newmont Mining's combined deficit
are the impacts of preferred stock and the exercise of employee stock options.
As NGC will issue preferred stock and stock options with identical terms to
those outstanding on Newmont Mining as a part of the transaction described
elsewhere in this document, a discussion of such equity instruments is included
within these footnotes.
As the combined deficit reflected in the accompanying financial statements
does not represent shareholder equity of any particular corporate enterprise, no
earnings or dividends per share information has been presented.
Unaudited footnote disclosures related to the nine months ended September
30, 1993 and 1992 are included in Note 13.
(2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
PRINCIPLES OF COMBINATION
These combined financial statements include the accounts of Newmont Mining
and its 50% or more owned subsidiaries but exclude NGC. All significant
intercompany balances and transactions have been eliminated.
CASH AND CASH EQUIVALENTS
Cash and cash equivalents consist of all cash balances and highly liquid
investments with an original maturity of three months or less. Excess cash
balances are primarily concentrated in U.S. Treasury bills with lesser amounts
invested in high quality commercial paper and time deposits with high
credit-worthy financial institutions.
INVESTMENTS
Short-term investments are carried at cost, which approximates market, and
include Eurodollar government and corporate obligations rated AA or higher. At
December 31, 1992 and December 31, 1991, approximately $12 million of such
investments secured letters-of-credit.
Investments in companies in which Newmont Mining's ownership is between 20%
and 50% are accounted for by the equity method of accounting.
Investments in companies owned less than 20% are recorded at the lower of
cost or net realizable value.
I-6
<PAGE> 50
NEWMONT MINING CORPORATION AND SUBSIDIARIES
EXCLUDING NEWMONT GOLD COMPANY
NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
PROPERTY, PLANT AND MINE DEVELOPMENT
Expenditures for property and equipment are capitalized and depreciated
using the straight-line method at rates sufficient to depreciate such costs over
the estimated lives of such items, which range from two to twenty years.
Generally, mineral exploration costs are expensed as incurred. When it has
been determined that a mineral property has proven and probable reserves, the
costs of subsequent reserve definition and the costs incurred to develop such
property, including costs to remove overburden to initially expose the ore body,
are capitalized and charged to operations on a units-of-production method over
the estimated life of the ore body.
Significant property payments related to exploration properties are
capitalized. If an ore body is discovered, such costs are amortized on a
units-of-production method. If no ore body is discovered, such costs are
expensed in the period that it is determined the property has no future value.
Interest expense allocable to the cost of developing mining properties and
to constructing new facilities is capitalized until operations commence and
depreciated on the same basis as the property or facility.
Gains or losses from normal sales or retirements of assets are included in
income or expense.
DEFERRED INCOME TAXES
Deferred income taxes are recorded for timing differences in the
recognition of revenues and expenses for income tax and financial statement
purposes in accordance with Accounting Principles Board Opinion No. 11,
"Accounting for Income Taxes" ("APB 11"). Effective January 1, 1993, Statement
of Financial Accounting Standards No. 109 was implemented for accounting for
income taxes. See Note 13.
HEDGING ACTIVITIES
Newmont Mining entered into gold loans, options contracts and forward sales
contracts to hedge the effect of price changes on the gold NGC produced. Gains
and losses realized on such instruments, as well as any cost or revenue
associated therewith, has been recognized in sales when the related production
is delivered.
(3) PROPERTY, PLANT AND MINE DEVELOPMENT
<TABLE>
<CAPTION>
AT DECEMBER 31,
-------------------
1992 1991
------- -------
<S> <C> <C>
Land and mining claims................................... $36,341 $17,537
Buildings and equipment.................................. 19,389 21,273
Mine development......................................... 33,327 8,361
------- -------
89,057 47,171
Less accumulated depreciation, depletion and
amortization........................................... (22,129) (23,531)
------- -------
$66,928 $23,640
------- -------
------- -------
</TABLE>
(4) INCOME TAXES
Newmont Mining Corporation files a consolidated tax return which includes
the operations of NGC. Subject to a tax sharing arrangement between Newmont
Mining Corporation and NGC, the tax provision for NGC is calculated as if NGC
was a separate taxpayer. Due to this, certain tax attributes related to NGC may
I-7
<PAGE> 51
NEWMONT MINING CORPORATION AND SUBSIDIARIES
EXCLUDING NEWMONT GOLD COMPANY
NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
not be able to be utilized by NGC on a separate taxpayer basis, but can be
utilized on Newmont Mining Corporation's consolidated tax return.
The tax provisions (benefits) and related disclosures for these statements
were calculated by subtracting NGC's separate taxpayer amounts in its historical
financial statements from the consolidated amounts in Newmont Mining
Corporation's historical financial statements. Although the resulting amounts
are not necessarily indicative of what would result if the combined assets and
liabilities were considered as a separate taxpayer, management does believe they
are representative of what the impact of the combined assets and liabilities
would be in a consolidated tax return with NGC.
Pre-tax financial statement losses from continuing operations before the
cumulative effect of a change in accounting principle consist of:
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
------------------------
1992 1991
-------- --------
<S> <C> <C>
Domestic............................................... $ 7,167 $ 3,250
Foreign................................................ (16,575) (15,485)
-------- --------
$ (9,408) $(12,235)
-------- --------
-------- --------
</TABLE>
The provisions (benefits) for income taxes from continuing operations
before the cumulative effect of a change in accounting principle consist of:
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
------------------------
1992 1991
-------- --------
<S> <C> <C>
Current:
Domestic............................................. $ (1,418) $ 1,129
Foreign.............................................. 462 464
-------- --------
(956) 1,593
-------- --------
Deferred:
Domestic............................................. (19,678) 5,341
Foreign.............................................. -- --
-------- --------
(19,678) 5,341
-------- --------
$(20,634) $ 6,934
-------- --------
-------- --------
</TABLE>
The deferred income tax provisions (benefits) from continuing operations
before the cumulative effect of a change in accounting principle consist of:
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
-------------------------
1992 1991
-------- --------
<S> <C> <C>
Excess depreciation deducted (not deducted) in tax
returns............................................. $(13,569) $ 15,086
Net gains recognized in tax return, recognized
previously for financial statement purposes......... -- (10,035)
Relocation costs not deducted in tax returns.......... 863 922
Excess mine development and exploration costs not
deducted in tax returns............................. (11,418) (403)
Costs capitalized to inventory........................ 2,736 464
Other................................................. 1,710 (693)
-------- --------
$(19,678) $ 5,341
-------- --------
-------- --------
</TABLE>
I-8
<PAGE> 52
NEWMONT MINING CORPORATION AND SUBSIDIARIES
EXCLUDING NEWMONT GOLD COMPANY
NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
The provisions (benefits) for income taxes on income from continuing
operations before the cumulative effect of a change in accounting principle
differ from the amounts computed by applying the U.S. corporate income tax
statutory rate for the following reasons:
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
------------------------
1992 1991
-------- -------
<S> <C> <C>
U.S. corporate income tax benefit at statutory rate.... $ (3,199) $(4,160)
Percentage depletion................................... (8,214) (26)
Non-taxable portion of dividends received from domestic
corporations......................................... (384) (3,031)
Undistributed income of, losses of and dividends
received from subsidiaries and affiliates............ (6,400) 16,485
Other.................................................. (2,437) (2,334)
-------- -------
$(20,634) $ 6,934
-------- -------
-------- -------
</TABLE>
Included in other long-term liabilities at December 31, 1992 and 1991 is
$23.1 million of taxes payable.
In 1991, approximately $35 million of previously provided deferred taxes
were credited to retained earnings. These deferred taxes related to a former
subsidiary whose stock was distributed to shareholders in a prior year. At that
time the distribution reduced retained earnings.
(5) DEBT
LONG-TERM DEBT
Long-term debt consists of:
<TABLE>
<CAPTION>
AT DECEMBER 31,
----------------------
1992 1991
-------- ---------
<S> <C> <C>
8 5/8% notes.......................................... $150,000 $ --
Medium-term notes..................................... 27,000 --
Gold loan............................................. 88,689 224,395
-------- ---------
265,689 224,395
Less current maturities............................... (88,689) (112,197)
-------- ---------
$177,000 $ 112,198
-------- ---------
-------- ---------
</TABLE>
8 5/8% NOTES
In April 1992, Newmont Mining issued unsecured notes with a principal
amount of $150 million due April 1, 2002 bearing an annual interest rate of
8 5/8%. Interest is payable semi-annually commencing October 1992 and the notes
are not redeemable prior to maturity. Using interest rates prevailing on similar
instruments at December 31, 1992, this debt is estimated to have a fair value of
$157.7 million at December 31, 1992.
MEDIUM-TERM NOTES
Beginning in May 1992, Newmont Mining began issuing notes under its $150
million medium-term notes program. Notes totalling $27 million with a weighted
average interest rate of 7.9% and maturing on various dates ranging from
mid-1999 to late 2004 had been issued as of December 31, 1992 under the
medium-term notes program. Using interest rates prevailing on similar
instruments at December 31, 1992, this debt is estimated to have a fair value of
$27.2 million at December 31, 1992.
I-9
<PAGE> 53
NEWMONT MINING CORPORATION AND SUBSIDIARIES
EXCLUDING NEWMONT GOLD COMPANY
NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
GOLD LOAN
In 1988, Newmont Mining entered into a loan agreement with a group of
lenders under which one million ounces of gold were borrowed and monetized for
$448.8 million. The borrowings are repayable in 16 equal quarterly installments
of gold ounces which commenced in March 1990. The final quarterly installment
payment is due in December 1993.
In April 1992, Newmont Mining entered into forward contracts to acquire the
gold necessary to satisfy the final six quarterly installments due on the loan.
The loan is recorded at the forward contract amounts, or approximately $355 per
ounce at December 31, 1992, and the difference between this and the monetized
value of $449 per ounce is reflected as deferred revenue of $23.5 million. The
market price for gold on the London Bullion Market on December 31, 1992 was $333
per ounce.
Sales revenues of $26.0 million and $20.9 million were recognized in 1992
and 1991, respectively, as the monetized amount of the repaid ounces was less
than that at which the ounces were originally recorded.
Newmont Mining pays interest in gold ounces at the lenders' gold base rate
plus 0.5%. Interest is calculated on current market prices for gold. The gold
interest rates averaged 1.4% and 2.0% in 1992 and 1991, respectively, and were
1.6% and 1.4% at December 31, 1992 and 1991, respectively. The effective
interest rates based upon the monetized value of the gold loan averaged 1.3% and
1.6% in 1992 and 1991, respectively, and was 1.1% at December 31, 1992 and 1991.
Newmont Mining paid a $1.8 million fee to the lenders upon origination of the
loan which is being amortized over the life of the agreement.
REVOLVING CREDIT FACILITY
Newmont Mining has a revolving credit facility which expires in April 1997
under which it may borrow up to $280 million. No amounts were drawn down under
the facility as of December 31, 1992. Interest rates are variable at the
lenders' base rate plus 0.3% until May 1995 and 0.425% thereafter. Newmont
Mining has the option to fix the rate for up to six months. No borrowings were
outstanding during 1992 under this facility, or in 1991 under Newmont Mining's
previous revolving credit facility. There is an annual facility fee for the
current facility of 0.2% on the lenders' total commitment.
DOLLAR/GOLD DEBT SWAPS
During 1989 and 1990, Newmont Mining entered into dollar/gold debt swaps
for a total notional principal amount of $150 million and 383,400 ounces of
gold. Upon termination of a swap, Newmont Mining was required to deliver the
number of gold ounces involved in return for payment by the counterparty of the
notional principal amount involved. The effect of a swap was to convert dollar
denominated debt into gold denominated debt which, on average, had a
significantly lower interest rate than dollar denominated debt. In early 1991,
Newmont Mining terminated a $50 million swap covering 127,700 ounces of gold and
recognized $5.2 million of revenue. In 1992, Newmont Mining terminated its
remaining $100 million of swaps covering 255,800 ounces of gold and recognized
$19.7 million of revenue. At December 31, 1991, there was $8.9 million of
deferred revenue as a result of the swaps.
EXCHANGEABLE DEBENTURES
In 1991, Newmont Mining retired all of its 7% exchangeable debentures, due
2001, pursuant to the terms thereof by exchanging its entire investment in E.I.
duPont de Nemours and Company common stock. A gain of $36.1 million was
recognized on the disposal of the duPont stock.
I-10
<PAGE> 54
NEWMONT MINING CORPORATION AND SUBSIDIARIES
EXCLUDING NEWMONT GOLD COMPANY
NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
COVENANTS
Newmont Mining's revolving credit facility contains covenants which limit
consolidated indebtedness, as defined, to $750 million and which, as of December
31, 1992, limit the payment of future dividends to common and preferred
stockholders to $129 million.
SHORT-TERM DEBT
All short-term debt at December 31, 1992 and 1991 consisted of bank debt.
At December 31, 1992, Newmont Mining had unsecured demand bank lines of
credit aggregating $11 million, of which $10.9 million was outstanding at
December 31, 1992 and 1991. These facilities bear interest at customary
short-term rates for borrowers with similar credit ratings. The interest rates
on this short-term bank debt averaged 6.1% and 8.5% in 1992 and 1991,
respectively, and were 6.0% and 6.5% at December 31, 1992 and 1991,
respectively.
(6) COMBINED DEFICIT
As discussed in Note 1, the combined deficit represents the difference
between the assets and liabilities of Newmont Mining and includes transactions
related to Newmont Mining's preferred and common stocks. The following is a
reconciliation of the deficit balance between periods:
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
-------------------------
1992 1991
--------- ---------
<S> <C> <C>
Balance, beginning of year........................... $(460,503) $(443,657)
Net income (loss).................................... 6,010 (19,169)
Preferred stock issued............................... 279,811 --
Stock options exercised.............................. 13,478 3,185
Reversal of deferred taxes related to prior year
subsidiary stock distribution...................... -- 34,927
Dividends on common equity........................... (40,816) (40,621)
Dividends accrued on preferred stock................. (1,747) --
Minimum pension liability adjustment................. (2,668) --
Other................................................ 4,735 4,832
--------- ---------
Balance, end of year................................. $(201,700) $(460,503)
--------- ---------
--------- ---------
</TABLE>
PREFERRED STOCK
In November and December 1992, Newmont Mining issued 2.875 million shares
of five dollar par value Convertible Preferred Stock at a price of one hundred
dollars per share, which netted approximately $280 million after offering
expenses. The $5.50 annual dividend per share is cumulative from the original
issue date and is payable quarterly commencing March 15, 1993. An aggregate of
$1.7 million of such dividends had accrued as of December 31, 1992. The shares
are convertible at any time at the option of the holder into shares of common
stock of Newmont Mining at a conversion price of $45.425 for each share of
common 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 Newmont Mining, at a beginning
redemption price of $103.85 per share. Such redemption price then declines $0.55
per share annually until it reaches $100.00 per share on November 15, 2002,
which is also the liquidation preference per share. The Convertible Preferred
Stock does not have voting rights.
I-11
<PAGE> 55
NEWMONT MINING CORPORATION AND SUBSIDIARIES
EXCLUDING NEWMONT GOLD COMPANY
NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
STOCK OPTION PLANS
Under Newmont Mining's stock option plans, options to purchase shares of
Newmont Mining are granted to key employees at the fair market value of such
shares on the date of grant. The options under these plans are subject to
certain restrictions, vest over a two year period and are exercisable over a
period not exceeding ten years. For certain key executives, options have been
granted that, although the exercise price is generally equal to the fair market
value on the date of grant, cannot be exercised when vested until the market
price of Newmont Mining's common stock is a defined amount above the option
exercise price. In addition, the same executives have been granted options whose
exercise prices are in excess of the fair market value on the date of grant.
Generally, these key executive options vest over a five year period and are
exercisable over a ten year period. At December 31, 1992, 1,487,595 shares were
available for future grants under Newmont Mining's stock option plans.
The following table summarizes annual stock option activity for the two
years ended December 31, 1992:
<TABLE>
<CAPTION>
1992 1991
---------------------------- ----------------------------
NUMBER OF OPTION PRICE NUMBER OF OPTION PRICE
SHARES PER SHARE SHARES PER SHARE
--------- -------------- --------- --------------
<S> <C> <C> <C> <C>
Outstanding at beginning of year..... 1,371,605 $33.94 - 48.25 1,207,127 $33.94 - 48.25
Granted.............................. 881,750 $36.88 - 70.00 340,625 $39.19 - 39.50
Exercised............................ (358,717) $33.94 - 48.25 (98,349) $33.94 - 37.19
Canceled............................. (68,254) $35.25 - 48.25 (77,798) $33.94 - 48.25
--------- ---------
Outstanding at end of year........... 1,826,384 $33.94 - 70.00 1,371,605 $33.94 - 48.25
--------- ---------
--------- ---------
</TABLE>
Of the options granted in 1992 and outstanding at year-end 1992, 760,000
shares are for key executive options previously discussed. At December 31, 1992,
684,013 options were exercisable.
(7) EMPLOYEE BENEFIT PLANS
PENSION BENEFITS
Newmont Mining has a qualified non-contributory defined benefit pension
plan which covers salaried employees. Employees vest in the plan after five
years of service. In addition, Newmont Mining has a non-qualified supplemental
pension plan for salaried employees whose benefits under the qualified plan are
limited by federal legislation. Pension costs are determined annually by
independent actuaries and pension contributions to the qualified plan are made
based on funding standards established by ERISA. Newmont Mining maintains a
trust for the purpose of funding the supplemental pension plan as well as death
benefits for officers of Newmont Mining. This trust is funded at the discretion
of Newmont Mining and had a balance of $4.8 million (which approximated market)
and $7.0 million at December 31, 1992 and 1991, respectively. Although the
trust's assets can be used to pay benefits for the supplemental pension plan,
they cannot be used in determining the net pension liability for the
supplemental pension plan. The plans' benefit formulas are based on an
employee's years of credited service and such employee's last five years average
pay. The qualifying plan's assets consist of stocks, bonds and cash.
I-12
<PAGE> 56
NEWMONT MINING CORPORATION AND SUBSIDIARIES
EXCLUDING NEWMONT GOLD COMPANY
NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
The components of pension expense for these two plans, in the aggregate,
consist of:
<TABLE>
<CAPTION>
YEARS ENDED
DECEMBER 31,
-------------------
1992 1991
------- -------
<S> <C> <C>
Service cost............................................. $ 2,280 $ 2,062
Interest cost on projected benefit obligation............ 4,481 4,080
Return on assets......................................... (4,726) (4,253)
Amortization of unrecognized prior service cost and net
accumulated losses less amortization of net transition
asset.................................................. 161 (75)
------- -------
Pension expense................................ $ 2,196 $ 1,814
------- -------
------- -------
</TABLE>
The following tables set forth the funded status of the plans and the
amounts recognized in the combined balance sheets at December 31, 1992 and 1991,
respectively:
<TABLE>
<CAPTION>
AT DECEMBER 31, 1992
-----------------------------
QUALIFIED SUPPLEMENTAL
PENSION PLAN PENSION PLAN
------------ ------------
<S> <C> <C>
Actuarial present value of benefit obligations:
Accumulated benefit obligation --
Vested benefits............................... $(43,500) $(8,895)
Non-vested benefits........................... (2,500) (100)
------------ ------------
(46,000) (8,995)
Effect of future salary increases................ (6,215) (500)
------------ ------------
Projected benefit obligation....................... (52,215) (9,495)
Plan assets at fair value.......................... 59,342 --
------------ ------------
Plan assets greater (less) than projected
benefit obligation............................... 7,127 (9,495)
Unrecognized prior service cost.................... 23 --
Unrecognized net (gain) loss....................... (2,027) 4,542
Unrecognized net transition (asset) liability...... (3,611) 3,491
Adjustment required to recognize minimum
liability........................................ -- (7,533)
------------ ------------
Net pension asset (liability)............ $ 1,512 $(8,995)
------------ ------------
------------ ------------
</TABLE>
I-13
<PAGE> 57
NEWMONT MINING CORPORATION AND SUBSIDIARIES
EXCLUDING NEWMONT GOLD COMPANY
NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
<TABLE>
<CAPTION>
AT DECEMBER 31, 1991
------------------------------
QUALIFIED SUPPLEMENTAL
PENSION PLAN PENSION PLAN
------------ -------------
<S> <C> <C>
Actuarial present value of benefit obligations:
Accumulated benefit obligation --
Vested benefits............................... $(42,400) $(6,112)
Non-vested benefits........................... (850) (100)
------------ -------------
(43,250) (6,212)
Effect of future salary increases................ (4,799) (330)
------------ -------------
Projected benefit obligation....................... (48,049) (6,542)
Plan assets at fair value.......................... 53,560 --
------------ -------------
Plan assets greater (less) than projected
benefit obligation............................... 5,511 (6,542)
Unrecognized prior service cost.................... 25 --
Unrecognized net (gain) loss....................... (3,044) 168
Unrecognized net transition (asset) liability...... (4,076) 3,879
Adjustment required to recognize minimum
liability........................................ -- (3,717)
------------ -------------
Net pension liability.................... $ (1,584) $(6,212)
------------ -------------
------------ -------------
</TABLE>
In accordance with the provisions of Statement of Financial Accounting
Standards No. 87, an adjustment was required to reflect a minimum liability for
the supplemental pension plan in 1991 and 1992. Such adjustment resulted in
recording an intangible asset and, to the extent the minimum liability
adjustment exceeded the unrecognized net transition liability, an increase in
the combined deficit net of related deferred income tax benefits.
In measuring the projected benefit obligation for the plans, the following
assumptions were used:
<TABLE>
<CAPTION>
AT DECEMBER 31,
---------------
1992 1991
---- ----
<S> <C> <C>
Weighted-average discount rate............................... 7.75% 7.75%
Rate of increase in future compensation...................... 4.0% 4.0%
</TABLE>
The weighted-average expected long-term rate of return on plan assets was
assumed to be 9.25% for 1992 and 9.5% for 1991.
RETIREE BENEFITS OTHER THAN PENSIONS
Newmont Mining provides defined medical benefits to qualifying 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 Newmont Mining if they are at least 55 years old and the
combination of their age and years of service with Newmont Mining equals 75 or
more.
The defined medical benefits cover most of the reasonable and customary
charges for hospital, surgical, diagnostic, 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.
Newmont Mining 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 be accrued during an employee's service to Newmont Mining. Previously,
Newmont Mining recorded the expense when benefit payments were made for
retirees.
I-14
<PAGE> 58
NEWMONT MINING CORPORATION AND SUBSIDIARIES
EXCLUDING NEWMONT GOLD COMPANY
NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
The actuarially determined accumulated postretirement benefit obligation
("APBO") calculated in accordance with SFAS 106 at January 1, 1992 was $11.2
million. This amount was expensed, net of related income tax benefits of $6.0
million, as a cumulative effect of a change in accounting principle.
The components of expense for postretirement benefits other than pensions
for 1992, exclusive of the cumulative effect of adopting SFAS 106 as of January
1, 1992, are shown in the table below:
<TABLE>
<CAPTION>
1992
------
<S> <C>
Service cost................................................ $ 264
Interest cost............................................... 799
------
Expense for postretirement benefits other than pensions..... $1,063
------
------
</TABLE>
In 1991, the annual amount expensed for these benefits under Newmont
Mining's prior accounting policy was insignificant.
The following table sets forth the components of the liability for Newmont
Mining's plans and the amounts carried on the combined balance sheet as of
December 31, 1992:
<TABLE>
<S> <C>
Actuarial present value of accumulated benefit obligation:
Retirees........................................................ $ (9,481)
Other fully eligible plan participants.......................... (433)
Other active plan participants.................................. (1,150)
--------
Accrued liability for postretirement benefits other than
pensions..................................................... $(11,064)
--------
--------
</TABLE>
At December 31, 1992, $3.6 million of assets, with a market value of
approximately the same amount, were designated in a trust to pay postretirement
benefits other than pensions. Since these assets could be used to pay other
employee benefits, they cannot be used for the postretirement benefit
calculations. There is no formal funding policy for these postretirement
benefits.
A weighted-average discount rate of 7.75% was used in calculating the APBO.
The assumed health care cost trend rates to measure the expected cost of
benefits start at a 12% annual increase for coverage before the age of 65 and a
11% 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 the aggregate of service and interest costs by
approximately 4% and the APBO by approximately 20%.
SEVERANCE BENEFITS
Newmont Mining has a Severance Pay Plan for salaried employees who are
involuntarily terminated. In addition, Newmont Mining has employment agreements
with certain key executives pursuant to which Newmont Mining would be liable for
certain supplemental severance payments in the event of a diminution in the
executive's duties or termination of employment, as defined. The potential
obligations arising from the employment agreements have been pre-funded through
a trust. The trust balance of approximately $12.4 million, with a similar market
value, and $12.9 million at December 31, 1992 and December 31, 1991,
respectively, is included in other assets.
I-15
<PAGE> 59
NEWMONT MINING CORPORATION AND SUBSIDIARIES
EXCLUDING NEWMONT GOLD COMPANY
NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
(8) OTHER EXPENSE
Newmont Mining is involved in several matters concerning environmental
obligations primarily associated with former mining activities, as discussed in
Note 12. Included in other expense for the year ended December 31, 1991 is a
provision of $36 million related to these matters.
In 1991, there was a charge of $6 million primarily associated with delays
in subleasing Newmont Mining's former office space in New York City.
(9) ASSET HELD FOR SALE
Newmont Mining sold its investment in Newcrest Mining Limited ("NML") in
1993 (see Note 13) and such investment was reflected as an asset held for sale
in the December 31, 1992 and 1991 combined balance sheets. The quoted market
value of Newmont Mining's investment in NML at December 31, 1992 was $47.6
million.
(10) TRANSACTIONS WITH NEWMONT GOLD COMPANY
NGC's treasury and cash management functions are centralized at Newmont
Mining. Newmont Mining invests cash balances in less than 90 day money market
instruments. NGC is credited with the average rate of earnings received by
Newmont Mining on invested funds. During 1992 and 1991, such rates were 3.3% and
5.8%, respectively.
Newmont Mining and NGC are also parties to a management services agreement
whereby NGC agrees to provide Newmont Mining general executive, administrative
and other services. Pursuant to this agreement, Newmont Mining was charged $19.6
million and $15.3 million in 1992 and 1991, respectively.
(11) SUPPLEMENTAL CASH FLOW INFORMATION
Net cash provided by operating activities includes the following cash
payments:
<TABLE>
<CAPTION>
YEARS ENDED
DECEMBER 31,
------------------
1992 1991
------ -------
<S> <C> <C>
Income taxes.............................................. $ -- $30,783
Interest, net of amounts capitalized...................... $9,636 $14,344
</TABLE>
Excluded from the statements of combined cash flows are the effects of
certain non-cash transactions. As discussed in Note 5, during 1991 holders of
Newmont Mining's $77.6 million 7% exchangeable debentures exchanged such
debentures for duPont shares, held by Newmont Mining as an investment, that had
a book value of $40 million.
(12) COMMITMENTS AND CONTINGENCIES
ENVIRONMENTAL OBLIGATIONS
Newmont Mining is involved in several matters concerning environmental
obligations primarily associated with former mining activities. Based upon
Newmont Mining's best estimate of its gross liability for these matters, $68.5
million and $74.2 million were accrued at December 31, 1992 and 1991,
respectively, and such amounts were reduced by $21.3 million and $23.0 million,
respectively, for amounts expected to be recovered from third parties. The net
amounts are included in reclamation liabilities and other current liabilities on
the balance sheets for the respective periods. Depending upon the ultimate
resolution of these matters, Newmont Mining believes that it is reasonably
possible that the gross liability for these matters could be as much as 50%
greater or 20% lower than the gross amount accrued at December 31, 1992.
In addition to the amounts expected to be recovered from third parties
reducing the gross liabilities at December 31, 1992 and 1991, Newmont Mining has
recorded long-term receivables from third parties,
I-16
<PAGE> 60
NEWMONT MINING CORPORATION AND SUBSIDIARIES
EXCLUDING NEWMONT GOLD COMPANY
NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
primarily insurance companies, of $19.8 million and $11.5 million at December
31, 1992 and 1991, respectively, for a portion of the costs previously expended
in connection with these matters. These amounts are considerably less than what
Newmont Mining is actually claiming from the insurance carriers. Newmont Mining
is negotiating with some of its insurance carriers for past and future costs
relating to certain of these matters. The insurance carriers have reserved their
rights or disclaimed liability under their respective policies, and certain
carriers have commenced declaratory judgment actions seeking to avoid coverage.
Although Newmont Mining cannot reasonably predict the outcome of these actions,
it is nevertheless management's opinion that a substantial recovery of claimed
costs will be made from the insurance carriers. The total receivables recognized
represent the minimum probable amount Newmont Mining expects to receive based
upon its discussions with counsel and settlement offers from the insurance
companies. See Note 8 for certain charges taken related to these matters. A
discussion of the proceedings follows as of December 31, 1992.
IDARADO MINING COMPANY ("IDARADO") -- 80.1% OWNED
In July 1992, Newmont Mining and Idarado signed a consent decree with the
State of Colorado ("State") which was agreed to by the district court to settle
a lawsuit brought by the State under the Comprehensive Environmental Response,
Compensation, and Liability Act ("CERCLA"), generally referred to as the
"Superfund Act." Idarado paid $5.35 million pursuant to this consent decree in
August 1992 to settle natural resources damages, past and future response costs
and for habitat enhancement work. In addition, 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. Idarado's best estimate of
the cost of this work is included in the gross liability, as previously
discussed. If the reclamation and remediation work does not meet certain
measurement criteria specified in the consent decree, the State and Court
reserve the right to require Idarado to perform other reclamation and
remediation work. Idarado has been required to provide surety, which it was in
the process of obtaining in the form of a letter of credit at December 31, 1992,
for $16.3 million for this obligation.
RESURRECTION MINING COMPANY ("RESURRECTION") -- 100% OWNED
In 1983, the State of Colorado ("State") filed a lawsuit under the
Superfund Act which involves a joint venture mining operation near Leadville,
Colorado in which Resurrection is a joint venturer. This action was subsequently
consolidated with a lawsuit filed by the United States Environmental Protection
Agency ("EPA") in 1986. The EPA is taking the lead role on cleanup issues and
the matters are now proceeding principally through the administrative processes
of CERCLA, rather than through the court action. The proceedings seek to compel
the defendants to remediate the impacts of pre-existing mining activities which
the governments claim are causing substantial environmental problems in the
area. The mining operations of the joint venture are operated by ASARCO
Incorporated ("ASARCO"). The governments have made Newmont Mining, Resurrection,
the joint venture and ASARCO defendants in the proceedings. They are also
proceeding against other companies with interests in the area.
The EPA divided the remedial work into two phases. Phase I addresses a
drainage and access tunnel owned by the joint venture -- the Yak Tunnel. Phase
II addresses the remainder of the site.
In 1988 and 1989, the EPA issued administrative orders with respect to
Phase I work for the Yak Tunnel. The joint venture, ASARCO, Resurrection and
Newmont Mining have collectively implemented those orders by constructing a
water treatment plant which was placed in operation in early 1992. The joint
venture is in negotiations regarding remaining remedial work for Phase I, which
primarily consists of monitoring and environmental maintenance activities.
The EPA has not yet completed work to define a remedy for Phase II and thus
has not published a current estimate of the costs of such remedial action.
Accordingly, Newmont Mining cannot yet determine the full extent or cost of
remedial action which will be required under Phase II. Moreover, in addition to
costs of
I-17
<PAGE> 61
NEWMONT MINING CORPORATION AND SUBSIDIARIES
EXCLUDING NEWMONT GOLD COMPANY
NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
remedial action, the governments will seek to recover future response costs to
be incurred at the site and may seek to recover for damages to natural
resources. The case currently involves other solvent defendant corporations. The
allocation of costs and damages incurred or to be incurred at the site among
those defendants, if any such allocation is to be made, cannot be determined at
this time.
Although the ultimate amount of total costs and Resurrection's and Newmont
Mining's exposure for such costs for Phase I and Phase II cannot be presently
determined, Newmont Mining's best estimate of its potential exposure for these
costs is included in the gross liability for these matters, previously
discussed.
DAWN MINING COMPANY ("DAWN") -- 51% OWNED
Dawn leased a currently inactive open-pit uranium mine on the Spokane
Indian Reservation in the State of Washington ("State"). The mine is subject to
regulation by agencies of the United States Department of Interior, the Bureau
of Indian Affairs and the Bureau of Land Management, as well as the EPA. Dawn
also owns a nearby uranium millsite facility.
In 1991, Dawn's lease was formally terminated and, as a result, Dawn filed
a formal reclamation plan, as required. Dawn does not have sufficient funds to
pay for such a reclamation plan or to pay for the closure of its mill. Dawn
proposed to the State a mill closure plan which could potentially generate the
necessary funds to reclaim the mine and the mill. The State notified Dawn that
the proposed plan was not the State's preferred alternative and was not
consistent with certain policy considerations of the State. At December 31,
1992, Dawn was in the process of revising its proposed mill closure plan so as
to meet these State concerns. Newmont Mining's best estimate for the future
costs related to these matters is included in the gross liability for
environmental matters, previously discussed.
The Department of Interior previously notified Dawn that when the lease was
terminated, it would seek to hold Dawn and Newmont Mining (as Dawn's 51% owner)
liable for any costs incurred as a result of Dawn's failure to comply with the
lease and applicable regulations. Newmont Mining would vigorously contest any
such claims. Newmont Mining cannot reasonably predict the likelihood or outcome
of any future action against Dawn or Newmont Mining arising from this matter.
OTHER COMMITMENTS AND CONTINGENCIES
Newmont Mining guarantees $35.7 million of Magma Copper Company's (a former
subsidiary) Pollution Control Revenue Bonds due 2009. It is expected that
Newmont Mining will be required to remain liable on this guarantee so long as
the bonds relating thereto are outstanding.
On January 13 and 19, 1994, respectively, two identical actions both of
which purport to be stockholder derivative actions, were commenced in the Court
of Chancery for the State of Delaware, by alleged stockholders of NGC. The
defendants in the actions are Newmont Mining and the members of NGC's Board of
Directors. The complaint seeks relief for alleged breaches of fiduciary duties
by the defendants in connection with (i) a series of loans from NGC to Newmont
Mining which the plaintiffs claim were made at rates that did not approximate
negotiated, arm's-length rates, thereby wasting NGC's assets, and (ii) the
proposed transaction of Newmont Mining and NGC described elsewhere in the Proxy
Statement, which the plaintiffs claim will not benefit NGC and will waste its
corporate assets. The plaintiffs are seeking to enjoin the proposed transaction,
to require Newmont Mining to repay all outstanding loans from NGC, and to
require the individual defendants to account for any money damages suffered by
NGC as a result of the loan transactions. On January 18, 1994, the plaintiff in
the first filed action filed a motion for a preliminary injunction seeking (a)
to require the directors of NGC to demand from Newmont Mining immediate
repayment of all loans NGC has extended to Newmont Mining and (b) to require NGC
to withhold from Newmont Mining its pro rata share of any dividend paid on NGC
Common Stock as a setoff of the obligations Newmont Mining owes to NGC. No date
has been set for a hearing on the motion. Management of Newmont
I-18
<PAGE> 62
NEWMONT MINING CORPORATION AND SUBSIDIARIES
EXCLUDING NEWMONT GOLD COMPANY
NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
Mining believes that the claims are without merit and is informed that the
defendants intend to defend against them vigorously.
Newmont Mining is involved from time to time in legal proceedings of a
character 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.
(13) INTERIM FINANCIAL STATEMENTS (UNAUDITED)
BASIS OF PREPARATION
The interim financial statements for the nine months ended September 30,
1993 and 1992 have been prepared in accordance with the rules and regulations of
the Securities and Exchange Commission for interim period financial statements.
Such rules and regulations allow the omission of certain information and
footnote disclosures normally included in financial statements prepared in
accordance with generally accepted accounting principles, so long as the
statements are not misleading.
In the opinion of management, these financial statements reflect all
adjustments which are necessary to a fair statement of the results for the
periods presented. All adjustments were of a normal recurring nature except for
the following: (a) a benefit to income of $35.8 million recognized in the first
quarter of 1993 for the cumulative effect of a change in accounting principle
effective January 1, 1993 to account for income taxes as discussed below, and
(b) a net of tax charge of $5.2 million to income recognized in the first
quarter of 1992 for the cumulative effect of a change in accounting principle
effective January 1, 1992 for postretirement benefits other than pensions
discussed in Note 7.
SALE OF INVESTMENT IN NEWCREST MINING LIMITED
On May 6, 1993, Newmont Mining sold its 14% interest in Newcrest Mining
Limited in Australia for $67 million after fees and expenses. A pre-tax gain of
$29.6 million ($19.3 million after tax) was recognized during the second quarter
of 1993.
CHANGE IN ACCOUNTING FOR INCOME TAXES
Effective January 1, 1993, Statement of Financial Accounting Standards No.
109, "Accounting for Income Taxes" ("SFAS 109") was adopted. SFAS 109 requires
that income taxes be accounted for under the liability method rather than the
deferred method previously required by Accounting Principles Board Opinion No.
11, "Accounting for Income Taxes" ("APB 11"). Similar to the income tax amounts
in Note 4, the amounts disclosed herein resulting from adopting SFAS 109 were
calculated by subtracting the amounts in NGC's separate financial statements
from the consolidated amounts in Newmont Mining Corporation's historical
financial statements. Although the resulting amounts are not necessarily
indicative of what would result if the combined assets and liabilities were
considered as a separate taxpayer, management does believe they are
representative of what the impact of the combined assets and liabilities would
be in a consolidated tax return with NGC. The cumulative effect of this change
in accounting for income taxes, attributable to fiscal years prior to 1993, was
a benefit to earnings of $35.8 million.
Under SFAS 109, a deferred tax liability or asset is created when temporary
differences arise between the financial reporting basis and the tax basis of
liabilities and assets, as measured by the statutory tax rates in effect when
such differences are expected to reverse. In addition, deferred tax assets may
result where there is the reasonable expectation to utilize existing tax net
operating losses or tax credit carryforwards. A valuation allowance must be
established against any portion of a deferred tax asset for which it is more
likely than not
I-19
<PAGE> 63
NEWMONT MINING CORPORATION AND SUBSIDIARIES
EXCLUDING NEWMONT GOLD COMPANY
NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
the related tax benefit will not be realized. Components of the deferred tax
(liabilities) and assets relating to the initial adoption of SFAS 109 were as
follows:
<TABLE>
<CAPTION>
JANUARY 1,
1993
----------
<S> <C>
Deferred Tax Liabilities:
Accelerated tax depreciation deducted in excess of book
depreciation................................................. $ (271)
Alternative minimum tax credits attributable to NGC, utilized by
Newmont Mining............................................... (43,642)
Excess of book carrying values of assets held for sale over
corresponding tax bases...................................... (12,415)
Depletion of the cost of land and mining claims for tax in
excess of book amortization.................................. (472)
Other........................................................... (2,458)
----------
Gross deferred tax liabilities.......................... (59,258)
----------
Deferred Tax Assets:
Investments in subsidiaries not consolidated for tax purposes... 23,391
Reclamation costs not deducted in tax return.................... 15,991
Exploration costs not deducted in tax return.................... 7,913
Employee health care costs not deducted in tax return........... 4,585
Other........................................................... 3,731
----------
Gross deferred tax assets............................... 55,611
Valuation allowance for deferred tax assets..................... (4,600)
----------
Net deferred tax assets......................................... 51,011
----------
Net deferred tax liability...................................... $ (8,247)
----------
----------
</TABLE>
Based upon estimates of future operations and tax planning strategies
(which included NGC's operations on a consolidated basis), Newmont Mining
determined that it was more likely than not it could utilize $51.0 million of
the $55.6 million of gross deferred tax assets established upon adoption of SFAS
109, reflecting an initial valuation allowance of $4.6 million. Including $59.2
million of gross deferred tax liabilities, Newmont Mining's net deferred tax
liability at January 1, 1993 totaled $8.2 million.
Newmont Mining generated additional net deferred tax benefits of $19.5
million during the nine month period ended September 30, 1993, resulting in a
net deferred tax asset at September 30, 1993 of $11.3 million. The valuation
allowance for deferred tax assets did not change significantly from January 1,
1993.
Although Newmont Mining believes that it is more likely than not that its
resulting net deferred tax assets could be realized (which assumes NGC's
operations are included in a consolidated tax return), no assurance can be given
that sufficient taxable income could be generated to fully utilize such assets.
Future levels of taxable income would be dependent, in part, upon gold prices,
general economic conditions, tax law legislation and other factors beyond
Newmont Mining's control.
The interim provision (benefit) for income taxes under SFAS 109, similar to
APB 11, is based upon Newmont Mining's estimate of its current and deferred tax
provisions (benefits) for the year.
On August 10, 1993, the Revenue Reconciliation Act of 1993 was signed into
law retroactive to January 1, 1993, changing the corporate federal statutory tax
rate from 34% to 35%.
I-20
<PAGE> 64
NEWMONT MINING CORPORATION AND SUBSIDIARIES
EXCLUDING NEWMONT GOLD COMPANY
NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
The provisions (benefits) for income taxes consist of:
<TABLE>
<CAPTION>
NINE MONTHS ENDED
SEPTEMBER 30,
-----------------------
1993 1992
---------- --------
(SFAS 109) (APB 11)
---------- --------
<S> <C> <C>
Current:
Domestic............................................ $ 11,190 $ 4,484
Foreign............................................. 426 462
---------- --------
11,616 4,946
---------- --------
Deferred:
Domestic............................................ (19,545) (25,318)
Foreign............................................. -- --
---------- --------
(19,545) (25,318)
---------- --------
Total tax benefit........................... $ (7,929) $(20,372)
---------- --------
---------- --------
</TABLE>
The provisions (benefits) for income taxes differ from the amounts computed
by applying the U.S. statutory rates of 35% and 34% for 1993 and 1992,
respectively, for the following reasons:
<TABLE>
<CAPTION>
NINE MONTHS ENDED
SEPTEMBER 30,
-----------------------
1993 1992
---------- --------
(SFAS 109) (APB 11)
---------- --------
<S> <C> <C>
U.S. corporate income tax provision (benefit)
at statutory rate................................... $ (3,602) $ 703
Percentage depletion.................................. (4,893) (7,203)
Undistributed income of, losses of and dividends
received from subsidiaries and affiliates........... (1,326) (8,740)
Other................................................. 1,892 (5,132)
---------- --------
Total tax benefit........................... $ (7,929) $(20,372)
---------- --------
---------- --------
</TABLE>
ISSUANCE OF INDEBTEDNESS
During the nine-month period ended September 30, 1993, Newmont Mining
issued under its medium-term note program an additional note with a face value
of $15 million and an interest rate of 7.4% that matures in 2004. At September
30, 1993, notes totaling $42 million were outstanding under the medium-term note
program.
ENVIRONMENTAL CONTINGENCIES
As discussed in Note 12, Newmont Mining is involved in several matters
concerning environmental obligations primarily associated with former mining
activities. Based upon Newmont Mining's best estimate of its gross liability for
these matters, $69.0 million was accrued at September 30, 1993 and such amount
was reduced by $21.9 million for amounts expected to be recovered from third
parties. The net amount is included in reclamation liabilities and other current
liabilities on the balance sheet. Depending upon the ultimate resolution of
these matters, Newmont Mining believes that it is reasonably possible that the
gross liability for these matters could be as much as 50% greater or 20% lower
than the gross amount accrued at September 30, 1993.
I-21
<PAGE> 65
NEWMONT MINING CORPORATION AND SUBSIDIARIES
EXCLUDING NEWMONT GOLD COMPANY
NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
In addition to the $21.9 million expected to be recovered from third
parties, Newmont Mining has recorded long-term receivables from third parties,
primarily insurance companies, of $20.2 million at September 30, 1993 for costs
previously expended in connection with these matters. See Note 12 for a further
discussion of these receivables.
In October 1993, Resurrection paid $4.4 million for its share of past
response costs through January 1991 for the United States and through January
1992 for the State of Colorado.
During the second quarter of 1993, Idarado obtained a $16.3 million letter
of credit to secure its obligations under the consent decree specifying its
cleanup obligation.
Also during the second quarter of 1993, Dawn submitted to the State of
Washington a revised mill closure plan. Dawn has not yet received a response to
this plan.
I-22
<PAGE> 66
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS ON SCHEDULES
To Newmont Mining Corporation:
We have audited in accordance with generally accepted auditing standards,
the combined financial statements of Newmont Mining Corporation and subsidiaries
excluding Newmont Gold Company included in this Proxy Statement, and have issued
our report thereon dated January 19, 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 Newmont's management and are
presented for purposes of complying with the Securities and Exchange
Commission's rules and are not part of the basic combined financial statements.
These schedules have been subjected to the auditing procedures applied in the
audits of the basic combined 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 combined financial statements taken as a whole.
/s/ ARTHUR ANDERSEN & CO.
ARTHUR ANDERSEN & CO.
Denver, Colorado,
January 19, 1994
I-23
<PAGE> 67
SCHEDULE V
NEWMONT MINING CORPORATION AND SUBSIDIARIES
EXCLUDING NEWMONT GOLD COMPANY
PROPERTY, PLANT AND MINE DEVELOPMENT
FOR THE YEARS ENDED DECEMBER 31, 1992 AND 1991
(IN THOUSANDS)
<TABLE>
<CAPTION>
OTHER
BALANCE AT CHANGES - BALANCE
BEGINNING ADDITIONS ADDITIONS AT END
DESCRIPTION OF PERIOD AT COST RETIREMENTS (DEDUCTIONS) OF PERIOD
- ------------------------------------ ---------- --------- ----------- ------------ ---------
<S> <C> <C> <C> <C> <C>
1992
Land and mining claims............ $ 17,537 $18,857 $ -- $ (53) $ 36,341
Buildings and equipment........... 21,273 1,630 (3,514) -- 19,389
Mine development costs............ 8,361 25,427 -- (461) 33,327
Construction in progress.......... -- -- -- -- --
---------- --------- ----------- ------------ ---------
$ 47,171 $45,914 $(3,514) $ (514) $ 89,057
---------- --------- ----------- ------------ ---------
---------- --------- ----------- ------------ ---------
1991
Land and mining claims............ $ 17,071 $ 518 $ -- $ (52) $ 17,537
Buildings and equipment........... 24,803 1,586 (144) (4,972)(A) 21,273
Mine development costs............ 7,899 462 -- -- 8,361
Construction in progress.......... 130 -- -- (130) --
---------- --------- ----------- ------------ ---------
$ 49,903 $ 2,566 $ (144) $ (5,154) $ 47,171
---------- --------- ----------- ------------ ---------
---------- --------- ----------- ------------ ---------
</TABLE>
- ---------------
(A) Transfer of certain equipment to Newmont Gold Company.
I-24
<PAGE> 68
SCHEDULE VI
NEWMONT MINING CORPORATION AND SUBSIDIARIES
EXCLUDING NEWMONT GOLD COMPANY
ACCUMULATED DEPRECIATION, DEPLETION AND AMORTIZATION
OF PROPERTY, PLANT AND MINE DEVELOPMENT
FOR THE YEARS ENDED DECEMBER 31, 1992 AND 1991
(IN THOUSANDS)
<TABLE>
<CAPTION>
ADDITIONS OTHER
BALANCE AT CHARGED TO CHANGES - BALANCE
BEGINNING COSTS AND ADDITIONS AT END
DESCRIPTION OF PERIOD EXPENSES RETIREMENTS (DEDUCTIONS) OF PERIOD
- ----------------------------------- ---------- ---------- ----------- ------------ ---------
<S> <C> <C> <C> <C> <C>
1992
Land and mining claims........... $ 4,417 $ -- $ -- $ (167) $ 4,250
Buildings and equipment.......... 16,777 1,400 (3,498) (704)(A) 13,975
Mine development costs........... 2,337 782 -- 785(A) 3,904
---------- ---------- ----------- ------------ ---------
$ 23,531 $2,182 $(3,498) $ (86) $ 22,129
---------- ---------- ----------- ------------ ---------
---------- ---------- ----------- ------------ ---------
1991
Land and mining claims........... $ 4,619 $ -- $ -- $ (202) $ 4,417
Buildings and equipment.......... 15,827 1,917 (47) (920)(B) 16,777
Mine development costs........... 2,337 -- -- -- 2,337
---------- ---------- ----------- ------------ ---------
$ 22,783 $1,917 $ (47) $ (1,122) $ 23,531
---------- ---------- ----------- ------------ ---------
---------- ---------- ----------- ------------ ---------
</TABLE>
- ---------------
(A) Reclassification of $785 between buildings and equipment and mine
development costs.
(B) Accumulated depreciation on certain equipment transferred to Newmont Gold
Company.
I-25
<PAGE> 69
SCHEDULE IX
NEWMONT MINING CORPORATION AND SUBSIDIARIES
EXCLUDING NEWMONT GOLD COMPANY
SHORT-TERM BORROWINGS
FOR THE YEARS ENDED DECEMBER 31, 1992 AND 1991
(DOLLAR AMOUNTS IN THOUSANDS)
<TABLE>
<CAPTION>
MAXIMUM AVERAGE WEIGHTED
WEIGHTED AMOUNT AMOUNT AMOUNT
BALANCE AT AVERAGE OUTSTANDING OUTSTANDING OUTSTANDING
CATEGORY OF AGGREGATE END OF INTEREST DURING DURING DURING
SHORT-TERM BORROWINGS PERIOD RATE PERIOD PERIOD(1) PERIOD(2)
- ----------------------------------- ---------- -------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C>
1992
Bank loan, due on demand......... $ 10,941 6.0% $10,941 $10,939 6.1%
1991
Bank loan, due on demand......... $ 10,913 6.5% $10,913 $ 9,879 8.5%
</TABLE>
- ---------------
(1) The sum of the amounts outstanding at each period (day or month-end) divided
by the total number of periods during the year.
(2) The total interest expense applicable to the amounts outstanding at each
period (day or month-end) divided by the average balance owing for those
periods.
I-26
<PAGE> 70
SCHEDULE X
NEWMONT MINING CORPORATION AND SUBSIDIARIES
EXCLUDING NEWMONT GOLD COMPANY
SUPPLEMENTARY STATEMENT OF OPERATIONS INFORMATION*
FOR THE YEARS ENDED DECEMBER 31, 1992 AND 1991
(IN THOUSANDS)
<TABLE>
<CAPTION>
CHARGED TO
INCOME
---------------
ITEM 1992 1991
---------------------------------------------------- ---- ------
<S> <C> <C>
Maintenance and repairs............................. $485 $1,015
---- ------
---- ------
Taxes, other than payroll and income taxes.......... $949 $1,584
---- ------
---- ------
Amortization of debt issuance costs................. $749 $ 791
---- ------
---- ------
</TABLE>
- ---------------
* Excludes amortization of mine development costs which are included in Schedule
VI.
I-27
<PAGE> 71
EXHIBIT A
LETTER AGREEMENT BETWEEN
NEWMONT MINING CORPORATION AND NEWMONT GOLD COMPANY
NEWMONT MINING CORPORATION
ONE NORWEST CENTER
1700 LINCOLN STREET
DENVER, COLORADO 80203
(303) 863-7414
December 15, 1993
Newmont Gold Company
1700 Lincoln Street
Denver, Colorado 80203
Attention: Special Committee
Gentlemen:
Reference is made to the letter agreement dated December 7, 1993 between
Newmont Mining Corporation ("Seller") and Newmont Gold Company ("Purchaser")
pursuant to which Seller and Purchaser agreed on the principal terms on which
Seller and Purchaser would be willing to consummate a transaction (the
"Transaction") involving the transfer of all the assets and liabilities (subject
to certain exceptions) of Seller to Purchaser.
Seller and Purchaser hereby agree as follows:
1. On the Closing Date (as defined below), Seller shall transfer to
Purchaser all of the assets, properties and rights of every type and
description, real, personal and mixed, tangible and intangible, owned by
Seller as of the Closing Date (including 8,649,899 shares (the "Transferred
NGC Shares") of the Common Stock, par value $0.01 per share, of Purchaser
owned by Seller but excluding 85,850,101 shares of the Common Stock, par
value $0.01 per share, of Purchaser owned by the Seller) (collectively, the
"Assets").
2. In consideration of the transfer by Seller of the Assets, on and as
of the Closing Date Purchaser shall:
(a) assume all of the debts, liabilities, obligations, duties,
contracts, agreements, promissory notes, guarantees, letters of credit
and reimbursement obligations, leases, licenses and other commitments
and indebtedness of, and claims, lawsuits and other proceedings against,
Seller of whatever nature, whether arising before, on or after the
Closing Date (and whether arising out of events or circumstances
existing or arising before, on or after the Closing Date), and whether
primary or secondary, direct or indirect, known or unknown, fixed,
absolute or contingent, accrued or unaccrued, executory or otherwise,
other than (i) the $5.50 Convertible Preferred Stock (the "NMC Preferred
Stock") of Seller and (ii) options (the "NMC Options") to purchase
common stock, par value $1.60 per share, of Seller (the "NMC Common
Stock") (such liabilities, subject to such exclusions, the
"Liabilities");
(b) issue to Seller 2,875,000 shares of $5.50 Convertible Preferred
Stock (the "NGC Preferred Stock") of Purchaser with the same terms,
rights and other conditions as the NMC Preferred Stock except that the
NGC Preferred Stock will be convertible into shares of common stock, par
value $0.01 per share, of Purchaser ("NGC Common Stock") at a conversion
price of $45.425 divided by the quotient of (i) the number of shares of
NGC Common Stock held by Seller on the Closing Date
<PAGE> 72
(excluding the Transferred NGC shares) over (ii) the number of shares of
NMC Common Stock outstanding on such date; and
(c) issue to Seller options (the "New NGC Options") to purchase
shares of NGC Common Stock in amounts and having exercise prices and
other terms that are identical to the outstanding NMC Options after
giving effect to the NMC stock split to be effected in connection with
the Transactions.
3. The date on which the transfer of the Assets from Seller to
Purchaser, and the assumption of the liabilities of Seller by Purchaser,
shall take place is referred to herein as the "Closing Date". The Closing
Date shall be on or about the first business day following approval of the
Transaction by the stockholders of Purchaser. The parties agree that for
accounting purposes the effective date of the Transaction will be January
1, 1994. On the Closing Date, the Seller shall execute and deliver to
Purchaser a Bill of Sale substantially in the form attached hereto as
Exhibit A, and shall deliver to Purchaser a certificate representing the
Transferred NGC Shares. On the Closing Date, Purchaser shall (a) execute
and deliver to Seller (i) an Assignment and Assumption of Liabilities
Agreement substantially in the form attached hereto as Exhibit B and (ii)
an instrument evidencing the New NGC Options, and (b) shall deliver to
Seller a certificate representing the NGC Preferred Stock.
4. (a) The Seller covenants and agrees between the date of this
Agreement and the Closing Date it will not take any action which would
materially reduce the valuation of its assets on the date hereof other than
in the ordinary course of business.
(b) The Seller covenants and agrees that from and after the Closing
Date it will not conduct any business other than its ownership of NGC
Common Stock, NGC Preferred Stock and New NGC Options.
5. Purchaser hereby assumes and agrees to timely pay, perform and
discharge, and hereby agrees to indemnify Seller and its directors,
officers, employees and agents (each an "Indemnified Person," and
collectively the "Indemnified Persons") against, and hold each of them
harmless from (a) all damages, losses, claims, obligations, liabilities,
costs and expenses (including reasonable attorneys' fees and expenses)
(each a "Loss," and collectively the "Losses") suffered or paid, directly
or indirectly, by any such Indemnified Person which constitute the
Liabilities or arising out of the ownership of any of the Assets; (b) all
costs and expenses of maintaining Seller as a public corporation including,
without limitation, all indemnification obligations of Seller of the
Indemnified Persons and any other person; and (c) all costs and expenses
(including, without limitation, accounting, legal and investment banking
fees) incurred by Seller in connection with the Transaction and such costs
and expenses incurred after the Closing Date. The provisions of this
Section 5 do not cover any liabilities of Seller with respect to (a) the
NMC Preferred Stock, (b) the NMC Options or (c) dividends, if any, declared
and paid by Seller on the NMC Common Stock from and after the Closing Date.
A-2
<PAGE> 73
If the foregoing terms meet with your approval, please sign and return to
us a copy of this letter.
NEWMONT MINING CORPORATION
By /s/ RONALD C. CAMBRE
------------------------------------
Name: Ronald C. Cambre
Title: Chief Executive Officer
The terms of this letter are
hereby accepted and agreed.
NEWMONT GOLD COMPANY
By /s/ ROBERT H. QUENON
-----------------------------------
Name: Robert H. Quenon
Title: Director
By /s/ JAMES V. TARANIK
-----------------------------------
Name: James V. Taranik
Title: Director
A-3
<PAGE> 74
EXHIBIT A
TO LETTER AGREEMENT
BILL OF SALE
KNOW ALL MEN BY THESE PRESENTS, that NEWMONT MINING CORPORATION, a Delaware
corporation (the "Transferor"), for value received, hereby transfers, assigns,
and sets over to NEWMONT GOLD COMPANY, a Delaware corporation (hereinafter, the
"Transferee"), and its successors and assigns, all of the Transferor's right,
title and interest in and to the assets, properties and rights of every type and
description, real, personal and mixed, tangible and intangible, owned by the
Transferor as of the date hereof (including 8,649,899 shares of Common Stock,
$0.01 par value per share, of the Transferee, owned by the Transferor but
excluding 85,850,101 shares of such Common Stock of the Transferee owned by the
Transferor), to have and to hold the same unto the Transferee, its successors
and assigns, to or for its or their use forever.
IN WITNESS WHEREOF, the Transferor has hereunto set its hand as of the
day of , 1994.
NEWMONT MINING CORPORATION
By
------------------------------------
Name:
Title:
<PAGE> 75
EXHIBIT B
TO LETTER AGREEMENT
ASSIGNMENT AND ASSUMPTION OF LIABILITIES AGREEMENT
KNOW ALL MEN BY THESE PRESENTS, that for good and valuable consideration,
the receipt of which is hereby acknowledged, NEWMONT GOLD COMPANY, a Delaware
corporation (the "Purchaser"), hereby assumes and agrees to perform all of the
debts, liabilities, obligations, duties, contracts, agreements, promissory
notes, guarantees, letter of credit and reimbursement obligations, leases,
licenses and other commitments of, and claims, lawsuits and other proceedings
against, NEWMONT MINING CORPORATION (the "Seller") of whatever nature, whether
arising before, on or after the date hereof (and whether arising out of events
or circumstances existing or arising before, on or after the date hereof), and
whether primary or secondary, direct or indirect, known or unknown, fixed,
absolute or contingent, accrued or unaccrued, executory or otherwise, other than
(i) liabilities for the $5.50 Convertible Preferred Stock of the Seller, (ii)
options exercisable for the Common Stock, par value $1.60 per share, of the
Seller (the "Common Stock") and (iii) dividends, if any, declared and paid by
Seller on the Common Stock from and after the date hereof (such liabilities,
subject to such exclusions, the "Liabilities").
IN WITNESS WHEREOF, the Purchaser has hereunto set its hand as of the
day of , 1994.
NEWMONT GOLD COMPANY
By
------------------------------------
Name:
Title:
NEWMONT MINING CORPORATION
By
------------------------------------
Name:
Title:
<PAGE> 76
EXHIBIT B
FAIRNESS OPINION OF DILLON, READ & CO. INC.
DILLON READ & CO. INC.
535 Madison Avenue
New York, New York 10022
212-906-7000
December 15, 1993
Board of Directors and the
Special Committee of the Board of Directors
Newmont Gold Company
1700 Lincoln Street
Denver, CO 80203
Gentlemen:
You have requested our opinion as to the fairness from a financial point of
view to the shareholders of Newmont Gold Company (the "Company"), other than
Newmont Mining Corporation ("Newmont Mining"), of the terms of the transaction
involving the transfer of all the assets and liabilities (subject to certain
exceptions) of Newmont Mining to the Company.
We understand that the transaction is to be effected through the transfer
of all of the assets and liabilities (contingent or otherwise) of Newmont Mining
to the Company, other than the outstanding Newmont Mining $5.50 Convertible
Preferred Stock, 85,850,101 shares of the Common Stock, par value $0.01 per
share, of the Company owned by Newmont Mining, and options outstanding with
respect to the Newmont Mining common stock (the "Transaction"). As part of the
assets transferred above, Newmont Mining will transfer 8,649,899 shares of the
Company Common Stock it currently holds to the Company, such shares having a
market value of $374 million (valued at the average closing price on the New
York Stock Exchange for the ten day period ended December 7, 1993 of $43.237 per
share) (together with the assets and liabilities mentioned above, the "Net
Assets"). In consideration for the transfer of the Net Assets, the Company shall
issue to Newmont Mining 2,875,000 shares of $5.50 convertible preferred stock of
the Company with the same terms, rights and other considerations as the Newmont
Mining $5.50 Convertible Preferred Stock and a series of options to purchase
shares of the Company's common stock in amounts and having exercise prices and
other terms that are identical to the outstanding Newmont Mining options. The
terms of the Transaction are set forth in a letter to be dated December 15, 1993
from Newmont Mining Corporation to Newmont Gold Company, a form of which was
previously delivered to us by Newmont Gold Company, which we have reviewed.
We have acted as financial advisor to the Special Committee of the Board of
Directors of the Company (the "Special Committee") in connection with the
proposed Transaction. In addition, we assisted the Special Committee in certain
of its negotiations with Newmont Mining.
In arriving at our opinion, we have reviewed, and relied upon with your
consent, certain publicly available information regarding the Company and
Newmont Mining, and certain financial analyses and forecasts and other
information furnished to us by the Company and Newmont Mining. We have held
discussions with the management of the Company and Newmont Mining regarding the
Company's and Newmont Mining's businesses, prospects and forecasts. We have also
obtained and relied upon, with your consent a report of The
<PAGE> 77
Winters Company, international mining consultants, regarding Newmont Mining's
gold projects. We have made a financial comparison of certain publicly available
information concerning other companies engaged in businesses we consider
comparable to the operations of the Company and Newmont Mining. We have reviewed
the consequences of the Transaction upon, among other things, the resultant
earnings and book value of the Company. We have also considered such other
financial, economic and market information which we deemed relevant. We have not
prepared or obtained any independent evaluation or appraisal of the Company's or
Newmont Mining's assets or liabilities (contingent or otherwise) and we have,
with your permission, relied upon and assumed the accuracy and completeness of
all the information furnished to us by the Company and Newmont Mining and have
not attempted an independent verification thereof. With respect to the
prospective financial information referred to above, we have assumed that it has
been prepared on the basis of the best currently available estimates and
judgment of the managements of the Company and Newmont Mining as to the future
performance of the businesses. This opinion has been prepared solely for the
Board of Directors and the Special Committee of the Board of Directors of
Newmont Gold and is limited to the matters addressed herein.
Based upon the foregoing and after considering factors we deem relevant, it
is our opinion that the terms of the Transaction are fair, from a financial
point of view, to the shareholders of the Company, other than Newmont Mining, as
of the date hereof.
Very truly yours,
/s/ Dillon, Read & Co. Inc.
DILLON, READ & CO. INC.
B-2
<PAGE> 78
EXHIBIT C
PROPOSED AMENDMENT TO THE CERTIFICATE
OF INCORPORATION OF NEWMONT GOLD COMPANY
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 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;
(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;
<PAGE> 79
(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 dividend 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 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 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,
C-2
<PAGE> 80
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 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
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<PAGE> 81
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 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 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.
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<PAGE> 82
APPENDIX II
The following is a narrative description of certain maps in image form
which have been included in the paper version of the Proxy Statement but which
have been excluded from the EDGAR version of the Proxy Statement:
1. Map of Location of the Yanacocha Project in Peru -- Page 14 of the Proxy
Statement.
On page 14 of the Proxy Statement, the Company has included a map of
the country of Peru showing the geographical location of the Yanacocha
project discussed on page 14 of the Proxy Statement. 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 Newmont
Mining.
2. Map of Location of the Zarafshan-Newmont Project in Uzbekistan -- Page
15 of the Proxy Statement.
On page 15 of the Proxy Statement, the Company has included a map of
the Republic of Uzbekistan showing the geographical location of the
Uzbekistan project discussed on page 15 of the Proxy Statement. The map
also includes a notation that the Zarafshan-Newmont joint venture, which
operates the Uzbekistan project, is 50% owned by Newmont Mining.
3. Map of Locations of the Minahasa Project and the Batu Hijau Project in
Indonesia -- Page 16 of the Proxy Statement.
On page 16 of the Proxy Statement, the Company 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 page 16 of the Proxy Statement. 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 Newmont Mining.
<PAGE> 83
PROXY
NEWMONT GOLD COMPANY
Proxy Solicited by the Board of Directors
for a Special Meeting of Stockholders
to be held on March 18, 1994
The undersigned hereby appoints T. PETER PHILIP, GRAHAM M. CLARK, JR.
and TIMOTHY J. SCHMITT, and each or any of them as proxies (together, the
"Proxies"), with full power of substitution and revocation, to represent the
undersigned and to vote all shares of the common stock of Newmont Gold Company
(the "Company") which the undersigned is entitled to vote at a Special Meeting
of Stockholders of the Company to be held on March 18, 1994 at 9:00 a.m.,
local time, at 1700 Lincoln Street, 41st Floor, Denver, Colorado, and any
adjournments thereof, upon the matters listed on the reverse side hereof.
The Proxies appointed hereby may act by a majority of said Proxies present at
the meeting (or if only one is present, by that one).
You are encouraged to specify your choices by marking the appropriate
box, SEE REVERSE SIDE, but you need not mark any box if you wish to vote in
accordance with the Company's Board of Directors' recommendations. The Proxies
cannot vote your shares unless you sign and return this card.
SEE REVERSE SIDE
[X] Please mark your votes as in this example.
This proxy when properly executed will be voted in the manner directed herein.
If no direction is made, this proxy will be voted FOR the transfer to the
Company of all of the assets of Newmont Mining Corporation ("Newmont Mining")
other than 85,850,101 shares of the Company's common stock, par value $0.01
per share ("NGC Common Stock"), owned by Newmont Mining, in exchange for (a)
the assumption by the Company of all liabilities (contingent or otherwise) of
Newmont Mining other than Newmont Mining's obligations with respect to the
$5.50 Convertible Preferred Stock of Newmont Mining and options exercisable for
the common stock, par value $1.60 per share, of Newmont Mining, (b) the
issuance by the Company to Newmont Mining of options to purchase shares of
NGC Common Stock and (c) the issuance by the Company to Newmont Mining of
$5.50 Convertible Preferred Stock, par value $5.00 per share, of the Company
(collectively, the "Transaction"), and FOR an amendment (the "Amendment") to the
Certificate of Incorporation of the Company to authorize the Company to issue
up to 5,000,000 shares of preferred stock, par value $5.00 per share. The
Company does not intend to proceed with any part of the Transaction, including
approving the Amendment, unless a majority of the Company's stockholders
approve of each measure described above to be voted upon at the Special
Meeting.
1. The Board of Directors unanimously recommends a vote FOR the Transaction.
FOR AGAINST ABSTAIN
[ ] [ ] [ ]
2. The Board of Directors unanimously recommends a vote FOR the Amendment.
FOR AGAINST ABSTAIN
[ ] [ ] [ ]
PLEASE MARK, SIGN, DATE AND RETURN THIS PROXY CARD PROMPTLY USING THE ENCLOSED
ENVELOPE.
Please sign exactly as name appears hereon. Joint owners should each sign. When
signing as attorney, executor, administrator, trustee or guardian, please give
full title as such. Each signer hereby revokes all previous signed proxies to
vote at the Special Meeting or any adjournment thereof.
- ---------------------------------------------------
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SIGNATURE(S) DATE
