<PAGE> 1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
FORM 10-Q
(Mark One)
(X) QUARTERLY REPORT PURSUANT TO SECTION 13 or 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended MARCH 31, 1994
or
( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
-------------- --------------
Commission File Number: 1-9184
NEWMONT GOLD COMPANY
(Exact name of registrant as specified in its charter)
<TABLE>
<S> <C>
Delaware 13-2526632
------------------------------- ------------------------------------
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
1700 Lincoln Street, Denver, Colorado 80203
- - ---------------------------------------- ----------
(Address of principal executive offices) (Zip Code)
</TABLE>
303-863-7414
(Registrant's telephone number, including area code)
--------------------------------------------------------------------------
(Former name, former address and former fiscal year, if changed since last
report)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. (X) Yes ( ) No
There were 96,286,342 shares of common stock outstanding on April 29, 1994.
Exhibit index is on page 19.
There are 22 pages included in this report.
<PAGE> 2
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
NEWMONT GOLD COMPANY AND SUBSIDIARIES
Statements of Consolidated Income
(In thousands, except per share)
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended
March 31,
---------------------
1994 1993
--------- ---------
<S> <C> <C>
Sales and other income
Sales $ 149,769 $ 127,901
Interest from parent - 1,327
Dividends, interest and other 1,838 18
--------- ---------
151,607 129,246
--------- ---------
Costs and expenses
Costs applicable to sales (82,927) (75,039)
Depreciation, depletion and amortization (22,906) (27,475)
Exploration (11,554) (416)
General and administrative (8,896) (3,117)
Interest, net of capitalized interest of
$4,749 in 1994 (165) -
Other (1,935) -
--------- ---------
(128,383) (106,047)
--------- ---------
Equity in income of affiliated companies 1,460 -
--------- ---------
Pretax income before cumulative effect of
change in accounting principle 24,684 23,199
Income tax provision (965) (3,804)
--------- ---------
Income before cumulative effect of change
in accounting principle 23,719 19,395
Cumulative effect of change in accounting
principle - 2,665
--------- ---------
Net income 23,719 22,060
Preferred stock dividends (3,953) -
--------- ---------
Net income applicable to common shares $ 19,766 $ 22,060
========= =========
Income per common share:
Income before cumulative effect of
change in accounting principle $ 0.20 $ 0.18
Cumulative effect of change in accounting
principle - 0.02
--------- ---------
Net income per common share $ 0.20 $ 0.20
========= =========
Weighted average number of shares of common
stock and common stock equivalents
outstanding 96,598 104,875
Cash dividends declared per common share $ 0.12 $ -
</TABLE>
2
<PAGE> 3
NEWMONT GOLD COMPANY AND SUBSIDIARIES
Consolidated Balance Sheets
(In thousands)
(Unaudited)
<TABLE>
<CAPTION>
March 31, December 31,
1994 1993
------------ ------------
<S> <C> <C>
Assets
Cash and cash equivalents $ 37,476 $ 389
Short-term investments 19,008 -
Advances to parent - 159,573
Inventories 113,475 118,891
Other 20,915 15,948
---------- ----------
Current assets 190,874 294,801
Property, plant and mine development, net 865,891 695,460
Other 171,498 31,609
---------- ----------
Total assets $1,228,263 $1,021,870
========== ==========
Liabilities
Short-term debt $ 15,739 $ -
Accounts payable 18,676 15,062
Accrued income taxes 11,328 -
Other accrued liabilities 71,063 45,195
---------- ----------
Current liabilities 116,806 60,257
Long-term debt 219,500 -
Reclamation liabilities 70,265 15,142
Other long-term liabilities 90,438 22,453
---------- ----------
Total liabilities 497,009 97,852
---------- ----------
Contingencies
Stockholders' Equity
Preferred stock 14,375 -
Common stock 1,049 1,049
Capital in excess of par value 207,578 206,260
Retained earnings 583,918 716,709
Treasury stock (75,666) -
---------- ----------
Total stockholders' equity 731,254 924,018
---------- ----------
Total liabilities and stockholders'
equity $1,228,263 $1,021,870
========== ==========
</TABLE>
3
<PAGE> 4
NEWMONT GOLD COMPANY AND SUBSIDIARIES
Statements of Consolidated Cash Flows
(In thousands)
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended
March 31,
----------------------
1994 1993
-------- --------
<S> <C> <C>
Operating activities:
Net income $ 23,719 $ 22,060
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation, depletion and amortization 22,906 27,475
Undistributed earnings of affiliates (1,460) -
Deferred taxes (8,220) (6,145)
-------- --------
36,945 43,390
(Increase) decrease in operating assets:
Inventories 8,577 (11,205)
Other assets (376) 652
Increase (decrease) in operating liabilities:
Accounts payable and accrued expenses (8,880) (11,010)
Accrued income taxes 9,185 7,284
Other liabilities 1,584 93
Other operating 173 428
--------- --------
Net cash provided by operating activities 47,208 29,632
--------- --------
Investing activities:
Net cash acquired from parent 69,575 -
(Advances to) repayments from parent (13,553) 22,650
Additions to property, plant and mine
development (94,805) (52,695)
Proceeds from maturities of short-term
investments 6,462 -
Purchase of short-term investments (6,666) -
Other (492) 175
--------- --------
Net cash used in investing activities (39,479) (29,870)
--------- --------
Financing activities:
Proceeds from long-term borrowings 27,500 -
Proceeds from issuance of common stock 1,858 -
--------- --------
Net cash used in financing activities 29,358 -
--------- --------
Net increase (decrease) in cash and cash
equivalents 37,087 (238)
Cash and cash equivalents at beginning of period 389 551
--------- --------
Cash and cash equivalents at end of period $ 37,476 $ 313
========= ========
Supplemental information:
Interest paid, net of amount capitalized of
$4,749 in 1994 $ (2,860) $ -
Income tax paid $ - $ -
</TABLE>
4
<PAGE> 5
NEWMONT GOLD COMPANY AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(Unaudited)
(1) Basis of Preparation of Financial Statements
These unaudited interim financial statements of Newmont Gold Company
and subsidiaries (collectively the "Company") have been prepared in accordance
with the rules and regulations of the Securities and Exchange Commission. 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 a benefit to income in the first quarter of 1993 of $2.7 million for the
cumulative effect of a change in accounting principle for income taxes
effective January 1, 1993 discussed in Item 8, Note 5 of the Company's Form
10-K for the year ended December 31, 1993. These interim financial statements
should be read in conjunction with those annual financial statements.
Certain prior year amounts have been reclassified to conform to the
current year presentation.
(2) Acquisition of Newmont Mining Corporation's Operations
Effective January 1, 1994, the Company acquired all of the operations
of its parent, Newmont Mining Corporation ("NMC"). The tax-free transaction
included the following: (a) the transfer by NMC to the Company of 8,649,899
shares of the 94,500,000 shares of common stock of the Company held by NMC; (b)
the transfer by NMC of all of its other assets to the Company; (c) the
assumption by the Company of all the liabilities (contingent or otherwise) of
NMC, but not NMC's obligations with respect to its $5.50 convertible preferred
stock (the "NMC Preferred Stock"), (except for accrued and unpaid dividends as
of December 31, 1993) and its employee stock options exercisable for NMC's
common stock; (d) the issuance by the Company to NMC of 2,875,000 shares of
$5.50 convertible preferred stock with a par value of $5.00 per share, and
having terms identical to the NMC Preferred Stock (except that upon conversion,
NMC will be entitled to receive shares of the Company's common stock instead of
NMC's common stock); and (e) the issuance by the Company to NMC of 2,012,746
stock options exercisable for the Company's common stock having terms identical
to NMC's employee stock options (except upon exercise, the Company's common
stock is issued instead of NMC's common stock). As a result of the
transaction, NMC's only assets are (i) the remaining shares of
5
<PAGE> 6
common stock of the Company held by it, which approximates 89.2% of the
Company's common stock outstanding after the transaction, (ii) the 2,875,000
shares of the Company's $5.50 convertible preferred stock issued to it and
(iii) the Company's stock options issued to it.
The Company accounted for the transaction as a transfer of assets and
liabilities between entities under common control. As a result, the
transferred assets and liabilities were recorded by the Company at NMC's
historical cost with the difference charged to retained earnings. The
8,649,899 shares of common stock transferred were recorded as treasury stock at
the book value of those shares on December 31, 1993. The Company's convertible
preferred stock was recorded at its par value.
The following pro forma condensed consolidated statement of income
from continuing operations for the three months ended March 31, 1993 gives
effect to the transaction as if it had occurred January 1, 1993. The statement
includes the historical amounts for the Company, adjusted to reflect the
historical amounts of NMC excluding its interest in the Company and the
elimination of intercompany interest amounts.
6
<PAGE> 7
PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF INCOME
(In thousands, except per share)
<TABLE>
<CAPTION>
Three Months Ended March 31, 1993
-----------------------------------------------
Historical Pro Forma Adjustments Pro Forma
---------- ---------------------- ---------
(A) (B),(C)
-------- -----------
<S> <C> <C> <C> <C>
Sales and other income
Sales $ 127,901 $ 8,277 $ 136,178
Dividends, interest and other 18 6,660 6,678
Interest from parent 1,327 $(1,327)(B) -
--------- -------- ------- ---------
129,246 14,937 (1,327) 142,856
--------- -------- ------- ---------
Costs and expenses
Costs applicable to sales (75,039) (364) (75,403)
Depreciation, depletion and
amortization (27,475) (703) (28,178)
Exploration (416) (9,562) (9,978)
General and administrative (3,117) (5,728) (8,845)
Interest expense, net - (3,900) (3,900)
Related party interest - (1,327) 1,327 (B) -
Other - (437) (437)
--------- -------- ------- ---------
(106,047) (22,021) 1,327 (126,741)
--------- -------- ------- ---------
Income (loss) before income taxes 23,199 (7,084) 16,115
Income tax benefit (provision) (3,804) 2,425 (1,379)
--------- -------- ---------
Income (loss) from continuing
operations 19,395 (4,659) 14,736
Preferred stock dividends - (4,051) (4,051)
--------- -------- ------- ---------
Income (loss) from continuing operations
applicable to common shares $ 19,395 $ (8,710) $ - $ 10,685
========= ======== ======= =========
Income per share from continuing
operations $ 0.18 $ 0.11
========= =========
Weighted average shares outstanding 104,875 (8,586)(C) 96,289
========= ======= =========
</TABLE>
(A) Reflects the combined operations of NMC excluding its interest in the
Company, before the cumulative effect of change in accounting principle.
(B) Eliminates intercompany interest between the Company and NMC.
(C) Reflects the 8,650 shares of the Company's common stock transferred to the
Company by NMC, adjusted for 64 common stock equivalent shares resulting
from the options exercisable for the Company's common stock.
7
<PAGE> 8
(3) Inventories
<TABLE>
<CAPTION>
March 31, December 31,
1994 1993
------------- ------------
(In thousands)
<S> <C> <C>
Current:
Ore and in-process $ 56,283 $ 55,761
Precious metals 28,494 37,486
Materials and supplies 26,317 25,644
Other 2,381 -
-------- --------
$113,475 $118,891
======== ========
Non-current:
Ore in stockpiles $ 40,400 $ 16,400
======== ========
</TABLE>
(4) Other Liabilities
<TABLE>
<CAPTION>
March 31, December 31,
1994 1993
------------- ------------
(In thousands)
<S> <C> <C>
Current:
Plant and equipment $ 20,232 $ 20,340
Payroll and related
benefits 9,480 13,382
Interest 6,773 -
Royalties 3,674 5,170
Reclamation 8,399 -
Other 22,505 6,303
-------- --------
$ 71,063 $ 45,195
======== ========
Non-current:
Postretirement benefits $ 31,676 $ 10,868
Income taxes 36,808 7,229
Other 21,954 4,356
-------- --------
$ 90,438 $ 22,453
======== ========
</TABLE>
(5) Debt
LONG-TERM DEBT
As a result of the transaction with NMC discussed in Note 2, the
Company assumed the following long-term debt (in thousands):
<TABLE>
<CAPTION>
Balance Outstanding
at March 31, 1994
-------------------
<S> <C>
8 5/8% notes $150,000
Medium-term notes 42,000
Project financing loan 27,500
--------
$219,500
========
</TABLE>
8
<PAGE> 9
8 5/8% Notes
Unsecured notes with a principal amount of $150 million due April 1,
2002 and bearing an annual interest rate of 8 5/8% were outstanding at March
31, 1994. Interest is payable semi-annually in April and October and the notes
are not redeemable prior to maturity.
Medium-term Notes
Notes totalling $42 million with a weighted average interest rate of
7.7% maturing on various dates ranging from mid-1999 to late 2004 were
outstanding as of March 31, 1994.
Project Financing Facility
The Company, through a wholly-owned subsidiary, is a 50% participant
in a joint venture in the Republic of Uzbekistan. The other 50% participants
are two entities of the Uzbekistan government. The joint venture was
established to construct and operate a leaching facility to produce gold from
low-grade ore. The project is expected to cost approximately $150 million.
The joint venture has secured $105 million of project financing for
the project from a consortium of banks. The loan is payable out of the
proceeds of the project, beginning the earlier of six months after completion
or July 20, 1996 in semi-annual installments over three years. The average
interest rate on the loan is 2.25 percentage points over the London Interbank
Borrowing Rate prior to completion of the project and 3.75 percentage points
over the London Interbank Borrowing Rate after completion of the project. The
joint venture had made draws of $55 million under the facility as of March 31,
1994.
The Company has guaranteed one-half of the payment of any amounts due
under the loan until the requirements of a specified completion test have been
satisfied, at which time the loan will become non-recourse debt. Such
completion test must be satisfied no later than October 1996. The Company has
obtained political risk insurance coverage for its investment and loan
guarantee in Uzbekistan.
Revolving Credit Facility
The Company assumed NMC's $280 million revolving credit facility. The
facility expires in April 1997. No amounts were drawn down under the facility
as of March 31, 1994. Interest rates are variable at the lenders' base rate
plus 0.3% until May 1995 and 0.425% thereafter. The Company has the option to
fix the rate for up to six months. There is an annual facility fee of 0.2% on
the lenders' total commitment.
The revolving credit facility contains covenants limiting consolidated
indebtedness, as defined, to $750 million and requiring a minimum net worth.
The minimum net worth requirement was $225 million in 1993 and increases $25
million annually. Also,
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<PAGE> 10
the payment of future dividends to common and preferred stockholders was
limited to $180.9 million as of March 31, 1994.
SHORT-TERM DEBT
All short-term debt at March 31, 1994 consisted of bank debt which was
assumed in the transaction with NMC.
The Company currently has unsecured demand bank lines of credit
aggregating $16 million, of which $15.7 million was outstanding at March 31,
1994. These facilities bear interest at customary short-term rates for
borrowers with similar credit ratings.
(6) Contingencies
As a result of the transaction with NMC discussed in Note 2, the
Company assumed several environmental obligations primarily associated with
former mining activities. Based upon the Company's best estimate of its
liability for these matters, $61.6 million was accrued at March 31, 1994,
excluding $17.1 million also accrued for reclamation costs relating to
currently producing mineral properties. The amounts are included in
reclamation liabilities and other current liabilities. Depending upon the
ultimate resolution of these matters, the Company believes that it is
reasonably possible that the liability for these matters could be as much as
60% greater or 20% lower than the amount accrued at March 31, 1994.
The Company has recorded long-term receivables from third parties,
primarily insurance companies, of $39.2 million at March 31, 1994 for both a
portion of the costs previously expended and for the future liabilities
estimated in connection with these matters. These amounts are considerably
less than what the Company has or will claim from the insurance carriers.
Substantially all of this amount is contested by the insurance companies
involved. The Company 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 judgement
actions seeking to avoid coverage. The Company has commenced litigation
seeking coverage from certain carriers. Although the Company 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 reasonably probable
amount the Company expects to receive based upon its discussions with counsel.
The following is a discussion of the environmental obligations as of
March 31, 1994.
Idarado Mining Company ("Idarado") - 80.1% owned
In July 1992, NMC and Idarado signed a consent decree with the State
of Colorado ("State") which was agreed to by the U.S.
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District Court of Colorado 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 to provide habitat
enhancement work. In addition, Idarado agreed in the consent decree to
undertake specified reclamation and remediation work related to its former
mining activities in the Telluride/Ouray area of Colorado. The Company'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 and the Company have obtained a $16.3 million letter
of credit to secure their obligations under the consent decree.
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, the other joint venturer. The
governments have made NMC, 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
NMC 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.
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.
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, the Company cannot yet determine the full extent or cost of
remedial action which will be
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required under Phase II. Moreover, in addition to costs of remedial action,
the 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 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 the
Company's exposure for such costs for Phase I and Phase II cannot be presently
determined, the Company'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. As a result, Dawn was
required to file a formal reclamation plan. 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 March 31, 1994,
Dawn was in the process of revising its proposed mill closure plan so as to
meet these State concerns. The Company'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 NMC (as Dawn's then 51%
owner) liable for any costs incurred as a result of Dawn's failure to comply
with the lease and applicable regulations. The Company would vigorously
contest any such claims. The Company cannot reasonably predict the likelihood
or outcome of any future action against Dawn or the Company arising from this
matter.
(7) Supplementary Data
The ratio of earnings to fixed charges for the quarter ended March 31,
1994 was 4.7. The Company guarantees certain third party debt which had total
interest obligations of $0.2 million for the quarter ended March 31, 1994. The
Company has not been required to pay any interest on these obligations in the
past, nor does it expect to have to pay any amounts with respect to such debt
in the future. Therefore, such amounts have not been included in the ratio of
earnings to fixed charges.
12
<PAGE> 13
Item 2. Management's Discussion and Analysis of Results of Operations and
Financial Condition
As discussed in Note 2 of Item 1, effective January 1, 1994, the
Company acquired essentially all of the assets and assumed essentially all of
the liabilities of its parent, Newmont Mining Corporation ("NMC"). The
transaction resulted in, among other things, the Company receiving 8,649,899
shares of its common stock held by NMC and the Company issuing 2,875,000 shares
of $5.50 convertible preferred stock to NMC with identical terms to NMC's
outstanding $5.50 convertible preferred stock, except that the Company's
preferred stock is convertible into shares of the Company instead of NMC. NMC
retained approximately 89% of the outstanding common stock of the Company. The
transfer of the assets and liabilities to the Company was accounted for at
historical cost due to the transaction being between entities under common
control.
In that the Company was NMC's only significant producing operating
entity, the transaction had little impact on current period gold mining
operations. However, the Company's acquisition of NMC's 8.2 million contained
ounces of worldwide gold reserves and worldwide exploration prospects did
result in increased exploration and general and administrative expense and
increased debt levels in the quarter ended March 31, 1994 compared to the same
period of 1993.
The following discussion summarizes the Company's results of
operations for the quarters ended March 31, 1994 and 1993 and changes in its
financial condition from December 31, 1993 to March 31, 1994 and the impacts of
the transaction with NMC on both. This discussion should be read in
conjunction with the Management's Discussion and Analysis included in the
Company's 1993 annual report on Form 10-K.
RESULTS OF OPERATIONS
The Company earned $23.7 million, or $0.20 per share, in the first
quarter of 1994 compared with $22.1 million, or $0.20 per share in the first
quarter of 1993. The 1994 results were impacted by $4.0 million of preferred
stock dividends resulting from the $5.50 convertible preferred stock issued to
NMC discussed above. The 1993 results included income of $2.7 million, or
$0.02 per share, resulting from the cumulative effect of a change in accounting
principle for income taxes. On a pro forma basis (see Note 2 in Item 1),
income before the cumulative effect of a change in accounting principle for the
first quarter of 1993 was $14.7 million, or $0.11 per share. The increase in
1994 income before the cumulative effect of a change in accounting principle is
almost entirely attributable to increased gold price realizations.
During the first quarter of 1994, the Company sold 389,700 ounces of
gold at an average price of $384 per ounce compared to 388,200 ounces at an
average price of $330 per ounce in the first quarter of 1993. Thus of the
$21.9 million increase in sales revenues between years, approximately $21.4
million was attributable to the increase in realized price, with the balance
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<PAGE> 14
attributable to increased production. Pro forma sales revenues for the 1993
first quarter were $8.3 million greater than historical primarily due to a
higher average price being recognized on production as a result of a hedging
program NMC had in place in 1993. No production is currently hedged.
The Company expects to cease operating its original Mill No. 1
facility at its Carlin, Nevada operations during the second quarter of 1994.
This mill has for many years processed refractory ores. Beginning in the third
quarter 1994, all refractory will now be processed by the Company's new
refractory ore treatment plant. Mill No. 1 produced only 6,000 ounces in the
first quarter of 1994, so its shutdown will not have a material impact on the
Company's production. The Company still expects to produce approximately 1.6
million ounces in 1994.
The Company's costs applicable to sales increased in aggregate and on
a per ounce of gold sold basis in the first quarter of 1994 compared to the
first quarter of 1993. The following table summarizes the significant
components of these costs per ounce of gold sold:
<TABLE>
<CAPTION>
Three Months Ended
March 31,
------------------
1994 1993
---- ----
<S> <C> <C>
Production costs $182 $158
Royalties 24 31
Other 6 4
---- ----
$212 $193
==== ====
</TABLE>
In the aggregate, production costs increased approximately $9.5
million in the first quarter of 1994 from the first quarter of 1993, in
addition to increasing $24 per ounce of production. These increases are a
result of processing higher cost ore and are in line with the Company's
expectations of higher costs being incurred in 1994. Contributing to the lower
costs in the 1993 period was the processing of ore previously mined for the
Company at no cost by Barrick Goldstrike Mines, Inc. The production cost
increases were partially offset by a decrease in royalties of approximately
$2.5 million, or $7 per ounce of gold sold. The decreases were due to treating
less royalty-burdened ore in the 1994 first quarter than the 1993 first
quarter.
During the 1994 first quarter the Company capitalized $6.7 million, or
$17 per ounce of production, of mining costs associated with the Post deposit.
This compares to $4.5 million, or $12 per ounce of production, in the 1993
first quarter. The increases are attributable to more tons mined in the 1994
first quarter. These per ounce costs, in conjunction with the per ounce costs
applicable to sales, resulted in total cash costs per ounce of production of
$229 in the first quarter of 1994 compared to $205 in the first quarter of
1993.
14
<PAGE> 15
Depreciation, depletion and amortization decreased $4.6 million in the
1994 first quarter. Approximately $1.8 million of this decrease was due to
lower estimated future depletable dewatering costs in the 1994 first quarter
than in the 1993 first quarter. Such estimated costs in the first quarter of
1994 are comparable with the estimated costs used during the last three
quarters of 1993. Another $1.5 million of the decrease was due to a change in
estimated useful lives of certain depreciable assets effective July 1, 1993.
The remaining first quarter decrease is primarily due to facilities that became
either fully depreciated or placed on stand-by status during 1993 and thus no
comparable depreciation was taken in 1994.
Exploration expense increased significantly during the 1994 first
quarter, and this was directly attributable to the Company's acquisition of
NMC's worldwide exploration projects. In addition, the Company's exploration
efforts were hampered by weather problems during the first quarter of 1993. As
reflected in the 1993 pro forma income statement in Note 2 of Item 1, pro forma
exploration expense for the first quarter of 1993 would have been approximately
$10 million. Exploration expense levels are expected to further increase over
the balance of 1994.
General and administrative expense ("G&A") also increased
significantly as a result of the Company's acquisition of NMC's operations.
Previously, the Company allocated G&A to NMC pursuant to a management services
agreement between the two entities. As a result of the transaction with NMC,
that agreement was cancelled and no G&A is now allocated to NMC. As reflected
in the pro forma income statement in Note 2 of Item 1, the pro forma G&A for
the first quarter of 1993 is comparable to that incurred in the first quarter
of 1994. However, due to the Company's expanding international projects, G&A
is expected to increase over the balance of the year.
As a result of the Company assuming NMC's indebtedness, it incurred
interest costs of approximately $4.9 million during the first quarter of 1994.
Almost all of this interest was capitalized as a result of major construction
projects in Nevada, primarily the $300 million refractory ore treatment plant,
and a $150 million leaching operation in Uzbekistan, in which the Company is a
50% participant. The refractory ore treatment plant is expected to be
completed in mid-summer 1994, and the Uzbekistan project is expected to be
completed in early 1995.
The Company's equity income is a result of its 38% interest in Minera
Yanacocha S.A., which produced approximately 46,000 ounces of gold in the first
quarter of 1994 (approximately 17,500 ounces attributable to the Company's
interest) and is expected to produce approximately 220,000 ounces for the year
(approximately 84,000 ounces attributable to the Company's interest). Minera
Yanacocha commenced gold production from a leaching operation in August of
1993.
The effective tax rate was approximately 4% in the first quarter of
1994 compared to approximately 16% in the first quarter
15
<PAGE> 16
of 1993. The low 1994 rate is a result of the estimated amount of percentage
depletion for the year being a high proportion of estimated pretax financial
income for the year.
LIQUIDITY AND CAPITAL RESOURCES
During the first quarter of 1994, the Company's capital expenditures
were $94.8 million and cash flow from operating activities was $47.2 million.
Additional cash sources during the quarter were $27.5 million of project
financing debt related to construction of the Uzbekistan leaching project and
approximately $70 million of cash acquired from NMC in the transaction
previously discussed. Of the first quarter 1994 capital expenditures,
approximately $12.8 million was spent on the Uzbekistan project and
approximately $42.0 million was spent on the refractory ore treatment plant at
the Company's Carlin, Nevada operations.
As stated in the Management's Discussion and Analysis in the Company's
1993 annual report on Form 10-K, available cash balances and cash flow from
operating activities will not be sufficient to cover an expected $400 million
in capital expenditures in 1994. In addition to the project financing for the
Uzbekistan project, which will provide an additional $25 million for the
Company's share of its capital costs, the Company has a $280 million revolving
credit facility and expects to have $150 million available under a medium-term
note program. The Company believes these facilities provide adequate liquidity
to finance the Company's capital investment programs. However, the Company
continuously monitors capital markets and may utilize alternative sources of
funds available to it. The Company expects to fund maturities of its debt
through operating cash flow and/or by refinancing the debt as it becomes due.
The Company declared common stock dividends of $0.12 per share, or
approximately $11.5 million in total, and accrued preferred stock dividends of
$4.0 million in the first quarter of 1994. Such dividends will be paid in the
second quarter of 1994.
All significant changes in the Company's balance sheet accounts
between December 31, 1993 and March 31, 1994 are attributable to the
acquisition of NMC's assets and the assumption of NMC's liabilities. Primarily
due to the historical cost of the liabilities assumed being greater than the
assets acquired, the Company's retained earnings were reduced by a net of
approximately $141 million as a result of the transaction.
16
<PAGE> 17
PART II - OTHER INFORMATION
Item 4. Submission of Matters to a Vote of Security Holders
A Special Meeting of stockholders of registrant was held on March 17,
1994.
The stockholders approved a proposed transaction between registrant
and its 90.1% stockholder, Newmont Mining Corporation ("Newmont Mining"), for
the transfer to registrant of all of the assets of Newmont Mining, other than
85,850,101 shares of registrant's common stock, owned by Newmont Mining, in
exchange for (i) the assumption by registrant of all liabilities of Newmont
Mining, but not Newmont Mining's obligations with respect to the $5.50
Convertible Preferred Stock of Newmont Mining and employee stock options of
Newmont Mining (the "NMC Options"), (ii) the issuance by registrant to Newmont
Mining of preferred stock of registrant, and (iii) the issuance by registrant
to Newmont Mining of options exercisable for registrant's common stock on the
same terms as the NMC Options. The vote was as follows:
<TABLE>
<S> <C>
For 98,851,143
Against 757,821
Abstentions 364,886
Broker non-votes -0-
----------
99,973,850
==========
</TABLE>
The stockholders approved an amendment to the Certificate of
Incorporation to authorize 5,000,000 shares of preferred stock, par value $5.00
per share. The vote was as follows:
<TABLE>
<S> <C>
For 85,377,679
Against 14,098,294
Abstentions 497,877
Broker non-votes -0-
----------
99,973,850
==========
</TABLE>
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits:
11 - Statement re Computation of Per Share Earnings.
12 - Statement re Computation of Ratio of Earnings
to Fixed Charges.
(b) Reports on Form 8-K:
No reports were filed on Form 8-K during the quarter ended March
31, 1994.
17
<PAGE> 18
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
NEWMONT GOLD COMPANY
(Registrant)
Date: May 9, 1994 /s/ WAYNE W. MURDY
------------------------------------
Wayne W. Murdy
Senior Vice President
and Chief Financial Officer
(Principal Financial Officer)
Date: May 9, 1994 /s/ GARY E. FARMAR
------------------------------------
Gary E. Farmar
Vice President and Controller
(Principal Accounting Officer)
18
<PAGE> 19
EXHIBIT INDEX
<TABLE>
<CAPTION>
Page
------
<S> <C>
Exhibit 11 - Statement re Computation of Per Share Earnings 20-21
Exhibit 12 - Statement re Computation of Ratio of Earnings 22
to Fixed Charges
</TABLE>
19
<PAGE> 1
EXHIBIT 11
Page 1 of 2
NEWMONT GOLD COMPANY AND SUBSIDIARIES
COMPUTATION OF PER SHARE EARNINGS
(In thousands, except per share)
PRIMARY EARNINGS PER SHARE CALCULATIONS
<TABLE>
<CAPTION>
Three Months Ended
March 31,
---------------------
1994 1993
--------- --------
<S> <C> <C>
INCOME DATA:
Income before cumulative effect of
change in accounting principle $ 23,719 $ 19,395
Preferred stock dividends (3,953) -
--------- --------
Income before cumulative effect of
change in accounting principle
applicable to common shares 19,766 19,395
Cumulative effect of change in
accounting principle - 2,665
--------- --------
Net income applicable to common
shares $ 19,766 $ 22,060
========= ========
COMMON AND COMMON EQUIVALENT SHARES:
Weighted average common shares 96,241 104,875
Equivalent common shares from
stock options 357 -
-------- --------
Common and common equivalent shares 96,598 104,875
======== ========
EARNINGS PER COMMON SHARE:
Income before cumulative effect of
change in accounting principle $ 0.20 $ 0.18
Cumulative effect of change in
accounting principle - 0.02
-------- --------
Net income per common and common
equivalent shares $ 0.20 $ 0.20
======== ========
</TABLE>
20
<PAGE> 2
EXHIBIT 11
Page 2 of 2
NEWMONT GOLD COMPANY AND SUBSIDIARIES
COMPUTATION OF PER SHARE EARNINGS
(In thousands, except per share)
FULLY DILUTED EARNINGS PER SHARE CALCULATIONS
<TABLE>
<CAPTION>
Three Months Ended
March 31,
----------------------
1994 1993
--------- --------
<S> <C> <C>
INCOME DATA:
Income before cumulative effect of change
in accounting principle $ 23,719 $ 19,395
Cumulative effect of change in
accounting principle - 2,665
--------- --------
Net income applicable to common
shares $ 23,719 $ 22,060
========= ========
COMMON AND COMMON EQUIVALENT SHARES:
Weighted average common shares 96,241 104,875
Equivalent common shares from
stock options 357 -
Equivalent common shares from
conversion of preferred stock 7,899 -
--------- --------
Common and common equivalent shares 104,497 104,875
========= ========
EARNINGS PER COMMON SHARE:
Income before cumulative effect of change
in accounting principle $ 0.23 $ 0.18
Cumulative effect of change in
accounting principle - 0.02
--------- --------
Net income per common and common
equivalent shares $ 0.23 $ 0.20
========= ========
</TABLE>
21
<PAGE> 1
EXHIBIT 12
NEWMONT GOLD COMPANY AND SUBSIDIARIES
COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES
(Amounts in thousands except ratios)
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended
March 31, 1994
------------------
<S> <C>
Earnings:
Income before income taxes $24,684
Adjustments:
Net interest expense (1) 165
Amortization of capitalized interest 484
Portion of rental expense representative
of interest 178
Undistributed income of less than 50%
owned entities (1,460)
-------
$24,051
=======
Fixed Charges:
Net interest expense (1) $ 165
Capitalized interest 4,750
Portion of rental expense representative
of interest 178
-------
$ 5,093
=======
Ratio of earnings to fixed charges 4.7
=======
</TABLE>
(1) Includes interest expense of majority-owned subsidiaries and amortization
of debt issuance costs.
22
