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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
(Mark One)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF
THE SECURITIES EXCHANGE ACT OF 1934 [FEE REQUIRED]
FOR THE FISCAL YEAR ENDED DECEMBER 31, 1994
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF
THE SECURITIES EXCHANGE ACT OF 1934 [NO FEE REQUIRED]
FOR THE TRANSITION PERIOD FROM TO
COMMISSION FILE NUMBER 1-9184
NEWMONT GOLD COMPANY
(Exact name of registrant as specified in its charter)
DELAWARE 13-2526632
(State or other jurisdiction of (I.R.S. employer
incorporation or organization) identification no.)
1700 LINCOLN STREET
DENVER, COLORADO 80203
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (303) 863-7414
Securities registered pursuant to Section 12(b) of the Act:
NAME OF EACH EXCHANGE
TITLE OF EACH CLASS ON WHICH REGISTERED
COMMON STOCK, $0.01 PAR VALUE NEW YORK STOCK EXCHANGE
PARIS BOURSE
Securities registered pursuant to Section 12(g) of the Act: NONE
INDICATE BY CHECK MARK WHETHER THE REGISTRANT (1) HAS FILED ALL REPORTS REQUIRED
TO BE FILED BY SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934 DURING
THE PRECEDING 12 MONTHS (OR FOR SUCH SHORTER PERIOD THAT THE REGISTRANT WAS
REQUIRED TO FILE SUCH REPORTS), AND (2) HAS BEEN SUBJECT TO SUCH FILING
REQUIREMENTS FOR THE PAST 90 DAYS. YES /X/ NO / /
INDICATE BY CHECK MARK IF DISCLOSURE OF DELINQUENT FILERS PURSUANT TO ITEM 405
OF REGULATION S-K IS NOT CONTAINED HEREIN, AND WILL NOT BE CONTAINED, TO THE
BEST OF REGISTRANT'S KNOWLEDGE, IN DEFINITIVE PROXY OR INFORMATION STATEMENTS
INCORPORATED BY REFERENCE IN PART III OF THIS FORM 10-K OR ANY AMENDMENT TO THIS
FORM 10-K. / /
THE AGGREGATE MARKET VALUE OF THE VOTING STOCK HELD BY NON-AFFILIATES OF THE
REGISTRANT (BASED ON THE CLOSING SALE PRICE OF THE SHARES ON THE NEW YORK STOCK
EXCHANGE) AT MARCH 9, 1995 WAS APPROXIMATELY $394,232,000.
THE NUMBER OF SHARES OF REGISTRANT'S COMMON STOCK OUTSTANDING AT MARCH 9, 1995
WAS 96,472,588.
DOCUMENTS INCORPORATED BY REFERENCE
PORTIONS OF REGISTRANT'S DEFINITIVE PROXY STATEMENT TO BE FILED PURSUANT TO
REGULATION 14A PROMULGATED UNDER THE SECURITIES EXCHANGE ACT OF 1934 FOR THE
ANNUAL MEETING OF STOCKHOLDERS TO BE HELD ON MAY 4, 1995 (PART III).
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PART I
ITEMS 1 AND 2. BUSINESS AND PROPERTIES
INTRODUCTION
Newmont Gold Company ("NGC") is a worldwide company engaged in gold
production, exploration for gold and acquisition of gold properties. NGC was
incorporated in Delaware in 1965 under the name of Carlin Gold Mining Company as
a wholly-owned subsidiary of Newmont Mining Corporation ("NMC"). Following two
public offerings of NGC's shares, one in June 1986, and the second in April
1987, and consummation of the transaction with NMC described below, NMC now owns
89.2% of the common stock, 100% of the preferred stock and options to purchase
additional shares of the common stock of NGC. NGC and its subsidiaries
collectively are referred to herein as the "Company."
In a transaction (the "Transaction") effective January 1, 1994, NGC
acquired all of NMC's assets (other than 85,850,101 shares of NGC's common stock
owned by NMC), and assumed all liabilities of NMC (except for NMC's obligations
with respect to NMC's outstanding $5.50 convertible preferred stock (the "NMC
Preferred Stock") and employee stock options of NMC (the "NMC Options")
exercisable for the common stock of NMC). In addition, NGC issued to NMC (i)
2,875,000 shares of $5.50 convertible preferred stock of NGC (the "NGC Preferred
Stock"), with terms identical to the NMC Preferred Stock, except that it is
convertible into shares of common stock of NGC and (ii) options to purchase
shares of common stock of NGC (the "NGC Options") in the same number and with
the same exercise prices (after adjusting for a stock split effected in
connection with the Transaction) as the NMC Options. As a result of the
Transaction, all operating activities are conducted by NGC and its subsidiaries
and NMC has no business other than the ownership of the common stock of NGC, the
NGC Preferred Stock and the NGC Options and its obligations with respect to the
NMC Preferred Stock and the NMC Options.
All of the Company's consolidated sales and operating profit in 1994, 1993
and 1992 related to its gold mining activities in the United States. A
substantial amount of the Company's consolidated identifiable assets also
related to these activities. Gold sales accounted for all of the Company's
consolidated sales revenues from continuing operations in 1994, 1993 and 1992.
OPERATIONS AND PRODUCTION
OVERVIEW
In 1994, the Company produced approximately 1.56 million ounces of gold
from the Carlin Trend in Nevada. The Company also produces gold through a
38%-owned venture in Peru, which commenced operations in August 1993. The
Company additionally has a 50%-owned joint venture in Uzbekistan, which is
scheduled to commence gold production in mid-1995, and an 80%-owned venture in
Indonesia, which is scheduled to commence gold production in early 1996.
CARLIN, NEVADA
Production
The Company's North American operations are located on the geographical
feature known as the Carlin Trend, near Carlin, Nevada. See map on page 3
herein. The Carlin Trend is the largest gold district discovered in North
America this century. At the end of 1994, the Company had 18,544,000 ounces of
gold in proven and probable ore reserves on the Carlin Trend.
From the Carlin Trend, production was 1,555,300 ounces in 1994 compared
with 1,674,200(1) ounces in 1993 and 1,598,900(1) ounces in 1992. Gold
production at the Company's Nevada operations is expected to be approximately
1.6 million ounces in 1995.
---------------
(1) On a pro-forma basis giving effect to the Transaction.
<PAGE> 3
In 1994, ore was produced from six open-pit deposits (Genesis, Post,
Carlin, Gold Quarry, Tusc and Rain) and from two underground mines (Carlin East
and Rain). The Rain open-pit mine was decommissioned in late 1994 when its ore
reserves accessible from open-pit mining were depleted. The Tusc mine, a
satellite deposit to the Company's largest mine, Gold Quarry, opened in May
1994. Two additional open-pit mines, Lantern and North Star, will be mined in
1995.
The Carlin East underground mine, located under the original Carlin pit,
and the Rain underground mine commenced production in late 1994. An additional
underground mine, Carlin Main, is being developed beneath the original Carlin
pit and is scheduled to commence production in early 1995. Another underground
mine, Deep Star, is scheduled to open in late 1995. The four underground mines
are expected to produce in excess of 100,000 ounces in 1995.
The Post mine is being mined by Barrick Goldstrike Mines, Inc. ("Barrick")
under a joint mining agreement executed in December 1992 by the Company and
Barrick for the exploitation of the shared Post deposit and other related
matters. The lower and deep zones of this ore body contain approximately 9.5
million ounces of proven and probable reserves of gold, of which the Company
owns 5.1 million ounces and Barrick the remaining 4.37 million ounces. The
parties share the cost of mining the ore body in proportion to their interests
in the contained gold. The Company will benefit from lower costs of mining than
if it had separately mined its portion of the Post ore body. See Item
7 -- "Management's Discussion and Analysis of Results of Operations and
Financial Condition."
MINE PRODUCTION
DRY SHORT TONS
(000S)
<TABLE>
<CAPTION>
1994 1993
---------------------------------------------- ------------------------------------------------------
MILL LEACH MILL LEACH
DEPOSIT ORE ORE OVERBURDEN TOTAL ORE ORE OVERBURDEN TOTAL
-------------------- ------ ------ ---------- ---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Genesis............. 3,354 10,591 44,198 58,143 2,336 12,704 50,413 65,453
Carlin.............. 120 961 1,852 2,933 64 2,789 3,929 6,782
Post................ 404 3,942 43,186 47,532 420 1,066 15,188 16,674
Gold Quarry/Tusc.... 9,618 35,339 58,034 102,991 11,005 36,760 56,283 104,048
Rain................ 318 1,233 930 2,481 1,049 2,951 7,758 11,758
------ ------ ------- ------- ------ ------ -------- -------
Total...... 13,814 52,066 148,200 214,080 14,874 56,270 133,571 204,715
====== ====== ======= ======= ====== ====== ======== =======
</TABLE>
The Company owns in fee or controls through long-term mining leases and
unpatented mining claims all of the minerals and surface area within the
boundaries of the present and projected mining areas of the Nevada deposits.
Such long-term leases extend for at least the anticipated mine life of those
deposits. With respect to Gold Quarry, the Company owns a 10% undivided interest
in the minerals in a majority of the present and projected mining areas, and
with respect to the remaining 90% has agreed to pay a royalty to third party
lessors that is equivalent to approximately 18% of production therefrom. The
Company's royalty commitments to other parties with respect to other portions of
the Gold Quarry property and certain of its other properties are much less
significant. See Item 7 -- "Management's Discussion and Analysis of Results of
Operations and Financial Condition."
The U.S. Congress is considering various proposed amendments, including
proposals supported by the Clinton Administration, to the General Mining Law of
1872, which governs mining claims and related activities on federal public
lands. Among other things, these proposals would impose royalties on gold
production from claims on federal lands. Approximately 92% of the Company's
proven and probable ore reserves in Nevada are located on private land and,
therefore, not potentially subject to such government proposals to impose a
royalty on gold production from federal lands.
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[INSERT NEW NEVADA MAP -- FULL PAGE]
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Refractory Ore Treatment Plant
In September 1994, the Company completed construction of a refractory ore
treatment plant, known as Mill No. 6, to oxidize refractory ores. Partial
operation was achieved in October, but because of a crack in a weld of a riding
ring of the double rotator mill and a fire in the electrostatic precipitator,
final start-up was delayed until the end of December 1994. Full capacity is
expected to be achieved by mid-1995. Ore processed through the plant in 1995 is
expected to produce in excess of 400,000 ounces of gold. For a discussion of the
financing of the refractory ore treatment plant, see Note 7 to Item
8 -- "Financial Statements and Supplementary Data."
The facility will enable the Company to oxidize and treat high-grade
refractory ores that contain both sulfides and active carbon. Approximately 60%
of the Company's reserves on the Carlin Trend are refractory and the balance are
oxide. Oxide ore is amenable to gold extraction through the use of conventional
size-reduction processes, such as crushing and grinding, and the dissolution of
the gold in such ore using cyanidation treatment techniques common to the
industry. Refractory ore contains minerals which require an additional treatment
process, which is normally not necessary with oxide ore, to optimize the
recovery of gold.
Other Mill and Leaching Facilities
The Company has five other mills (two of which are currently active), in
addition to the refractory ore treatment plant. Each of the mills involve
crushing, grinding and cyanide leaching treatment processes, with gold recovery
onto activated carbon.
Mill No. 1, which was commissioned in 1965 and has treated ore from the
Carlin, Genesis and Post mines, was closed in the Fall of 1994. Mill No. 2 was
commissioned in 1985 and is located adjacent to the Gold Quarry open pit mine.
Portions of Mill No. 2 were incorporated into the refractory ore treatment plant
in May 1994. Mill No. 3 was commissioned in 1988 and treated material from the
Rain mine. This mill was decommissioned in late 1994 when the Rain mine ore
reserves accessible from open-pit mining were depleted. Mill No. 4 was
commissioned in 1989 and is located approximately one mile northeast of the Post
deposit. Mill No. 5 was commissioned in 1988 and is located adjacent to the
refractory ore treatment plant.
Processing at the Carlin leaching operations includes crushing ore at
crushing plants, heap leaching ore on leach pads using cyanidation and gold
recovery onto activated carbon through carbon adsorption.
MILL AND LEACH PRODUCTION
<TABLE>
<CAPTION>
1994 1993
--------------------------------- ---------------------------------
GRADE GRADE
DRY SHORT (OUNCES OUNCES DRY SHORT (OUNCES OUNCES
TONS PER PRODUCED(1) TONS PER PRODUCED(1)
(000S) TON) (000S) (000S) TON) (000S)
--------- ------- ----------- --------- ------- -----------
<S> <C> <C> <C> <C> <C> <C>
Mill No. 1........................ 188 0.135 24.3 960 0.094 82.5
Mill No. 2........................ 1,034 0.081 85.1 3,368 0.090 239.2
Mill No. 3........................ 859 0.079 59.1 903 0.101 77.0
Mill No. 4........................ 2,736 0.129 292.3 2,692 0.111 252.5
Mill No. 5........................ 6,264 0.077 396.1 6,419 0.081 412.3
Mill No. 6........................ 701 0.081 44.6 -- -- --
------ ----- ------ -------
Total.................... 11,782 0.091 901.5 14,342 0.091 1,063.5
====== ===== ====== =======
Leach Operations.................. 52,381 0.021 653.8 58,945 0.019 610.7(2)
====== ===== ====== =======
</TABLE>
---------------
(1) The average mill recovery rates were 80.7% and 82.5% in 1994 and 1993,
respectively. Leach recovery from tons placed fluctuates from year-to-year
due to ore grade, differing solution application rates and cycle times, as
well as varying quantities of unleached material placed on pads.
(2) On a pro-forma basis giving effect to the Transaction.
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Bioleaching
As an extension of its current leaching operations, field tests have
confirmed the commercial viability of a patented bioleaching process to recover
gold from low-grade sulfidic materials that previously could not be treated
economically. The Company's patented process has proved economic on low-grade
sulfidic material that is mined as a consequence of mining for higher-grade
sulfidic material or oxidized ores. In the bioleaching process, high-density
cultures of naturally occurring bacteria are added to low-grade ore as it is
placed on leach pads. The bacteria break down the sulfide crystal structure in
the ore, allowing the gold subsequently to be dissolved and recovered through
normal heap leaching processes. In January 1995, the Company began a one million
ton demonstration test of the bioleaching process at a cost of $11.5 million.
The test is expected to result in recovery of approximately 20,000 ounces of
gold in 1995. As a result of the commercialization of the bioleaching process,
2.0 million ounces of low-grade refractory material was added to the reserve
category at the end of 1994.
The Company has an agreement with Barrick which could allow the Company the
opportunity to treat and recover gold from Barrick's low-grade refractory
material. If the patented bioleaching process has commercial applicability to
Barrick's material, the Company could construct and operate a facility for such
treatment in return for a 50% share of the profits, after recovery of capital.
Other Facilities
The gold-bearing activated carbon from the Company's Carlin milling and
leaching plants is processed at a central carbon processing plant and at a
refinery, located near the carbon processing plant.
An analytical laboratory and administration offices are located in the
vicinity of Mills Nos. 5 and 6. The Company also has an advanced metallurgical
research laboratory in Salt Lake City, Utah.
Electrical power for the Company's Nevada operations is provided by public
utilities.
Refining
The Company currently has refining arrangements with four foreign refiners
to further refine dore bars produced at the Company's refinery located on its
Nevada properties. Under the terms of the agreements with these refiners, the
gold is toll refined and returned to the Company's account for sale to third
parties. Management believes that because of the availability of alternative
refiners, each able to supply all services needed by the Company, no adverse
effect would result if the Company lost the services of any of its current
refiners.
Exploration
The Company conducts extensive exploration along the Carlin Trend. The
Company owns or otherwise controls the mineral interests on approximately 630
square miles of property along the Carlin Trend. In 1994, a total of 775 holes,
totalling 519,288 feet, were drilled by the Company on the Carlin Trend in
connection with reserve development and exploration activities. This compares
with approximately 1,067 holes, totalling 649,100 feet, drilled in 1993.
Exploration by underground methods continues to facilitate the definitive
location of deeper deposits of gold ore.
In 1994, approximately $24 million was spent by the Company on reserve
development and exploration on the Carlin Trend. For 1995, reserve development
and exploration expenditures by the Company on the Carlin Trend are expected to
be approximately the same as 1994.
PERU
Production
The Company also produces gold through Minera Yanacocha S.A. in Peru, which
is 38% owned by the Company; 32.3% by Compania de Minas Buenaventura, S.A.
("Buenaventura"), a Peruvian mining company; 24.7% by an affiliate of Bureau de
Recherches Geologiques et Minieres, the geological and mining bureau of
5
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the French government ("BRGM"); and 5% by International Finance Corporation,
which provided financing for the project. In September 1994, BRGM announced its
intention to transfer its interest in Minera Yanacocha to an entity controlled
by an Australian company, Normandy Poseidon. The Company and Buenaventura filed
suit in Peru to seek enforcement of a provision in the bylaws of Minera
Yanacocha giving shareholders preemptive rights on the sale of any other
shareholder's interest. Recently, an appellate court in Peru issued a
preliminary ruling in favor of the Company and Buenaventura against BRGM.
Pending further action in the case, the court has suspended the right of BRGM's
affiliate as a shareholder of Minera Yanacocha.
Minera Yanacocha has mining rights with respect to a 63,000 acre land
position, which includes the Carachugo and Maqui Maqui deposits and other
numerous prospects, located in northwest Peru. The project's mining rights were
acquired through an assignment of a government concession held by a related
entity. The assignment has a term of 20 years, renewable at the option of Minera
Yanacocha for another 20 years.
The Company manages the project. Production commenced in August 1993 at the
Carachugo deposit and in October 1994 at the Maqui Maqui deposit, which is
located three miles north of the Carachugo deposit. Contract mining is employed
at Minera Yanacocha and power for the project is provided by diesel generators
owned by Minera Yanacocha.
During 1994, its first full year of operation, Minera Yanacocha produced
approximately 304,600 ounces of gold. Production from the Carachugo mine in 1994
was 274,900 ounces, compared to the 81,500 ounces produced during the five
months of 1993 in which it was in production. Production from the Maqui Maqui
mine was 29,700 ounces during the three months of 1994 in which it was in
production. The two mines together are expected to produce approximately 450,000
ounces in 1995.
Minera Yanacocha's operations are accessible by road and are located
approximately 375 miles north of Lima and 28 miles by road north of the city of
Cajamarca. Both the Carachugo and Maqui Maqui deposits are open-pit mines which
are mined by contractors. The ore is not crushed, but transported directly to
two leach pads where the ore is treated with a cyanide solution. The leach
solution is then run through a processing plant and the gold and silver
extracted utilizing conventional gold recovery methods. The dore bars produced
are transported from the processing plant by a contractor and refined at
refineries in England and Switzerland under contract until August 1, 1995.
Total proven and probable reserves for Minera Yanacocha as of December 31,
1994 were 3,970,000 ounces compared with approximately 3,780,000 ounces as of
December 31, 1993.
Exploration
Exploration continues to be conducted at the numerous prospects owned by
the Minera Yanacocha venture. Approximately $4.2 million was spent on
exploration in 1994, with approximately 112 holes drilled. A $9 million
exploration program is currently underway in 1995.
A second Peruvian joint venture in Northern Peru was formed as of November
1993 between the Company and Buenaventura. The joint venture, which is 65% owned
by the Company, has staked claims on 500,000 acres of prospective ground along
North and South extensions of the volcanic belt hosting the Yanacocha deposits.
In addition, the Company is active in the southern part of Peru. Initial
exploration work is underway in these prospective areas and three targets have
been outlined and will be drilled in 1995.
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[INSERT NEW PERU MAP]
UZBEKISTAN
In Uzbekistan, one of the Central Asian republics of the former Soviet
Union, the Company has a 50% interest in a joint venture ("Zarafshan-Newmont")
with the Uzbekistan State Committee for Geology and Navoi Mining and
Metallurgical Combine, state entities of the Republic of Uzbekistan, to produce
gold by leaching existing stockpiles of low-grade oxide ore from the Muruntau
mine. Uzbekistan was the second largest gold producer among the republics of the
former Soviet Union, accounting for approximately 30% of the former Soviet
Union's gold production. These state entities of the Uzbekistan government have
guaranteed to Zarafshan-Newmont 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. The project's gold will be sold in international markets for U.S. dollars.
A subsidiary of the Company is managing Zarafshan-Newmont. Production is
expected to commence in mid-1995 at an annual rate of approximately 450,000
ounces, or 225,000 ounces attributable to the Company's interest. The project
facilities will include twenty crushers in four stages. Crushed material will be
transported to lined leach pads where the ore will be treated by conventional
gold recovery methods. The resulting dore will be transported to the adjacent
Muruntau gold refinery (operated by Navoi Mining and Metallurgical Combine)
where, pursuant to a refining agreement, the dore will be refined for export.
The project has access to air, rail and road transport and as a result there are
no significant logistical difficulties for transportation of refined gold,
materials and equipment. Power for the project is provided by a contractual
arrangement with Navoi Mining and Metallurgical Combine which has its own
power-generating facilities.
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The costs for the project are estimated at approximately $220 million, half
of which is attributable to the Company. Zarafshan-Newmont completed a $105
million credit facility for the project in November 1993 and is seeking an
additional $30 million facility. See Note 7 to Item 8 -- "Financial Statements
and Supplementary Data." The Company provided to its joint venture partners such
partners' share of the equity capital required for the project in exchange for a
portion of the existing stockpiles.
[INSERT UZBEKISTAN MAP]
INDONESIA
The Company has two projects in Indonesia, Minahasa and Batu Hijau, both of
which are 80% owned by the Company. The remaining 20% of each project is owned
by P.T. Tanjung Serapung and P.T. Pukuafu Indah, respectively. Both projects
hold mineral rights pursuant to contracts of work with the Republic of
Indonesia. Such contracts provide for an eight-year term for exploration and
feasibility analysis and a 30-year term for mining.
The more advanced of these projects is Minahasa, a multi-deposit project on
the island of Sulawesi. It is approximately 1,500 miles northeast of Jakarta.
The Minahasa project will mine and process ore from three hydrothermal
deposits -- Mesel, Leons and Nibong -- which at the end of 1994 contained
approximately 2.1 million ounces of proven and probable reserves (in which the
Company has an equity interest of approximately 1.7 million ounces). These
deposits contain both oxidized and refractory gold mineralization. In July 1994,
a $130 million construction project was approved to mine and process the ore
from these deposits.
Site preparation began in November 1994 and pre-production mining is
planned to be initiated in April 1995. The project facilities will include a dry
grinding mill, a small fluidized bed roaster facility and a
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conventional carbon-in-pulp gold recovery plant. Infrastructure improvements
such as a deep-water port, electrical power plant, water supply system and a
camp for workers will also be constructed. Production is scheduled to commence
in early 1996 at an annual rate of 140,000 ounces at a cash operating cost of
$200 per ounce. The Minahasa project is expected to produce 1.8 million ounces
of gold at an average cash operating cost over the 13-year mine life of $150 per
ounce. The Minahasa project is in close proximity to the coast and does not
present any significant logistical difficulties for transportation of materials
and equipment.
The second Indonesian project, Batu Hijau, is located on the island of
Sumbawa, 950 miles east of Jakarta. Batu Hijau is a large porphyry copper/gold
deposit that was discovered in 1990. Batu Hijau is located 10 miles from the
island's coast, and has access to natural harbors which can be developed for
transportation of materials, equipment and concentrate product. By year-end, a
total of 122 holes had been drilled in this deposit to an average depth of 1,341
feet. A second phase feasibility study will be required before a final decision
is made whether to proceed with development. Batu Hijau is considered to have
significant potential, although there can be no assurance that such potential
could or will be realized.
Exploration work continued through 1994 in areas surrounding the Minahasa
and Batu Hijau projects. Such work will continue in 1995 as part of the
Company's ongoing exploration program in Indonesia.
[INSERT INDONESIAN MAP]
EXPLORATION
The Company conducts its worldwide exploration activities through various
affiliates. One of these affiliates was responsible for the discovery in 1961 of
the Carlin Trend in Nevada and one discovered the existence of gold at the
Yanacocha deposit in Peru in the 1980s. In 1994, exploration expense was $69.2
million compared with $52.7 million(1) in 1993. The Company's 1995 budget for
exploration will be lower than 1994 as the Company focuses more on previously
identified prospects.
---------------
(1) On a pro-forma basis giving effect to the Transaction.
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In addition to the exploratory projects specifically discussed above, the
Company is in the preliminary stages of exploration in other areas of the United
States and other parts of the world. During 1994, on-the-ground evaluations were
conducted in 30 countries and acquisition opportunities were monitored in dozens
of others.
In Mexico, the Company is involved in two ventures that are undergoing
prefeasability studies -- La Herradura, a 45,000 acre site just south of the
U.S. border in Northern Mexico, and Mezcala in southern Mexico. The Company has
a 44% interest in La Herradura and can earn a 44% interest in the Mezcala
project by investing $15 million over the next two years. The balance of both
ventures would be held by Servicios Industriales Penoles, S.A. de C.V., a
leading Mexican mining company that would be the operator.
Exploration is continuing in Canada, where the Company has completed a
drilling program with its partner, Westmin Resources, on four targets in
northeastern Yukon. The Company can earn a 65% interest in the project by
investing C$10.5 million (approximately $7.5 million at current exchange rates),
of which C$3 million has been invested in the past two years.
In addition to its activities in Peru, the Company is exploring other
projects in South America, including early-stage drilling projects in Ecuador.
The Company is also monitoring prospects in Argentina, Bolivia, Brazil and
Venezuela.
In Asia, the Company has a 93% interest in a joint venture for exploration
in Laos. The joint venture agreement covers approximately 2,500 square miles of
land which has advanced to drill testing. Although grassroots programs in
Thailand have been scaled back, the Company continues to pursue exploration in
the Asia/Pacific region, including opportunities in the Philippines and China.
Drilling is scheduled to begin in 1995 in Burkina Faso in Western Africa.
The Company can earn a 45% interest in a 1,350 square mile concession in which
Randgold and Exploration Company Limited of South Africa would be the operator.
In the United States, exploration continues at various locations. The
Grassy Mountain deposit in Oregon, which was classified as a reserve since its
acquisition in 1992, was reclassified at the end of 1994 as mineralized
material. Further evaluations are being conducted to define the economic
potential of the ore body, including consideration of an underground mine.
Exploration activities in Idaho at the Musgrove Creek deposit also are
continuing, although with mixed results. North of the Carlin Trend, drilling in
1994 on 5 of 17 targets on the 100 square mile Ivanhoe property was
disappointing. Future activity in the area will focus on the smaller Hollister
deposit. In 1995, exploration also will continue in several western states,
including Wyoming and Alaska.
There can be no assurances that any of the Company's exploration activities
will result in any new joint ventures or other projects or that such new joint
ventures or projects would result in profitable operations.
The Company's exploration team has a staff of approximately 200 geologists,
geochemists or geophysicists. State-of-the-art technology, including airborne
geophysical data acquisition systems, satellite location devices and
field-portable imaging systems, also aids in the location of prospective
targets.
MARKETING
The Company's gold sales generally are made at the monthly average market
price prevailing during the month before the gold is delivered plus a "contango"
which is essentially an interest factor, from the end of the month until the
date of delivery. Since the end of 1993 the Company has not engaged in any
hedging transactions on current production and none of the Company's production
was hedged. However, in 1994, 625,000 ounces of the first five years of
production from the Minahasa project has been sold on a forward basis averaging
$454 per ounce with a 40% participation in prices above that level.
See Note 13 to Item 8 -- "Financial Statements and Supplementary Data" for
information regarding major customers and export sales.
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GENERAL
Certain of the Company's projects are located in foreign countries. Such
projects may be affected adversely by exchange controls, currency fluctuations,
ownership limitations, expropriation, taxation and laws or policies of
particular countries, as well as the laws and policies of the United States
affecting foreign trade, investment and taxation.
The Company does not hold material patents or other material licenses,
franchises or concessions in connection with its business.
Capital expenditures incurred by the Company for continuing operations were
approximately $402 million, $235 million(1) and $213 million(1) in 1994, 1993
and 1992, respectively. The Company has an established program for the
maintenance and repair of its equipment and facilities. Management believes that
the Company's facilities are generally in a state of good repair. The Company
has a continuous program of capital investment that includes, as necessary or
advisable, the replacement, modernization or expansion of its equipment and
facilities. For a discussion of anticipated future capital expenditures, see
Item 7 -- "Management's Discussion and Analysis of Results of Operations and
Financial Condition."
There were 2,835 persons employed by the Company at December 31, 1994.
GOLD MARKET
Gold has two main categories of use -- product fabrication and bullion
investment. Fabricated gold has a wide variety of end uses. Purchasers of
official coins and high-carat jewelry frequently are motivated by investment
considerations, so that net private bullion purchases alone do not necessarily
represent the total investment activity in physical gold.
The profitability of the Company's current operations is significantly
affected by the market price of gold. Market gold prices can fluctuate widely
and are affected by numerous factors beyond the Company's control, including
industrial and jewelry demand, expectations with respect to the rate of
inflation, the strength of the U.S. dollar (the currency in which the price of
gold is generally quoted) and of other currencies, interest rates, central bank
sales, forward sales by producers, global or regional political or economic
events and production costs in major gold-producing regions such as South Africa
and the former Soviet Union. In addition, the price of gold sometimes is subject
to rapid short-term changes because of speculative activities.
The demand for and supply of gold affect gold prices, but not necessarily
in the same manner as supply and demand may affect the prices of other
commodities. The supply of gold consists of a combination of new mine production
and existing stocks of bullion and fabricated gold held by governments, public
and private financial institutions, industrial organizations and private
individuals. As the amounts produced in any single year constitute a very small
portion of the total potential supply of gold, normal variations in current
production do not necessarily have a significant impact on the supply of gold or
on its price.
If the Company's revenue from gold sales falls for a substantial period
below its cost of production at any or all of its operations, the Company could
determine that it is not economically feasible to continue commercial production
at any or all of its operations. The Company's costs of production (which are
equal to its costs applicable to sales on its income statement) for its Nevada
operations were $210 per ounce of gold sold in 1994, $199 in 1993 and $198 in
1992.
---------------
(1) On a pro-forma basis giving effect to the Transaction.
11
<PAGE> 13
The gold market generally is characterized by volatile prices and strong
competition. The volatility of gold prices is illustrated in the following table
of annual high, low and average gold fixing prices per ounce on the London
Bullion Market:
<TABLE>
<CAPTION>
YEAR HIGH LOW AVERAGE
----------------------------------------------------------- ----- ----- -------
<S> <C> <C> <C>
1985....................................................... $341 $284 $ 317
1986....................................................... 438 326 368
1987....................................................... 500 390 446
1988....................................................... 484 395 437
1989....................................................... 416 356 381
1990....................................................... 424 346 383
1991....................................................... 403 344 362
1992....................................................... 360 330 344
1993....................................................... 406 326 360
1994....................................................... 395 378 384
1995 (through March 9)..................................... 384 372 378
</TABLE>
---------------
Source of Data: Metals Week
On March 9, 1995, the afternoon fixing for gold on the London Bullion
Market was $381 and the spot market price of gold on the New York Commodity
Exchange was $381. Gold prices on both the London Bullion Market and the New
York Commodity Exchange are regularly published in most major financial
publications and many nationally recognized newspapers.
PROVEN AND PROBABLE ORE RESERVES
The Company's proven and probable reserves were approximately 26,107,000
ounces and 25,977,000 ounces(1) of gold at December 31, 1994 and December 31,
1993, respectively.
The Company's estimate of its proven and probable ore reserves at December
31, 1994 and 1993 is set forth in the table below. The proven and probable
reserves were determined by the use of mapping, drilling, sampling, assaying and
evaluation methods generally applied in the mining industry. Calculations with
respect to the estimates as of December 31, 1994 and 1993, are based on a gold
price of $400 per ounce. The Company's management believes that if its reserve
estimates were to be based on gold prices as low as $300 per ounce with current
operating costs, 1994 year-end reserves would decrease by approximately 17%.
Conversely, if its reserve estimates were to be based on a gold price of $500
per ounce with current operating costs, 1994 year-end reserves would increase by
approximately 20%. These reserves represent the total quantity of ore to be
extracted from the deposits or stockpiles, allowing for mining efficiencies and
ore dilution. The contained ounces are prior to any losses during metallurgical
treatment.
---------------
(1) On a pro-forma basis giving effect to the Transaction.
12
<PAGE> 14
<TABLE>
<CAPTION>
DECEMBER 31, 1994 DECEMBER 31, 1993
----------------------------------------- -----------------------------------------
DRY SHORT GRADE CONTAINED EQUITY DRY SHORT GRADE CONTAINED EQUITY
DEPOSITS WITH PROVEN PERCENT TONS (OUNCES OUNCES OUNCES TONS (OUNCES OUNCES OUNCES
AND PROBABLE RESERVES(1) EQUITY (000S) PER TON) (000S) (000S) (000S) PER TON) (000S) (000S)
-------------------------------- ------- --------- -------- --------- ------ --------- -------- --------- ------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Carlin, Nevada
Gold Quarry/Mac/Tusc.......... 100% 162,222 0.045 7,286 7,286 164,244 0.042 6,822 6,822
Carlin/Pete/Lantern........... 100% 15,113 0.045 686 686 8,492 0.028 240 240
Genesis/North Star/Deep
Star........................ 100% 54,079 0.043 2,306 2,306 66,724 0.043 2,879 2,879
Post/Goldbug/Barrel........... 100% 27,957 0.184 5,147 5,147 30,812 0.169 5,217 5,217
Capstone/Bootstrap/Tara....... 100% 28,041 0.040 1,127 1,127 28,089 0.040 1,130 1,130
Rain/SMZ/Emigrant Springs..... 100% 4,982 0.040 199 199 5,843 0.038 222 222
Stockpiles and in process..... 100% 37,558 0.048 1,793 1,793 30,781 0.041 1,259 1,259
------- ------ ------ ------- ------ ------
Total Carlin(2)(3).......... 329,952 0.056 18,544 18,544 334,985 0.053 17,769 17,769
------- ------ ------ ------- ------ ------
Minera Yanacocha, Peru
Carachugo..................... 38% 45,264 0.027 1,209 460 37,663 0.033 1,231 468
Maqui Maqui................... 38% 56,612 0.047 2,680 1,018 44,930 0.056 2,497 949
Stockpiles and in process..... 38% 1,846 0.044 81 31 2,073 0.025 52 19
------- ------ ------ ------- ------ ------
Total Yanacocha(4).......... 103,722 0.038 3,970 1,509 84,666 0.045 3,780 1,436
------- ------ ------ ------- ------ ------
Zarafshan-Newmont,
Uzbekistan(5)................. 50% 242,508 0.036 8,674 4,337 242,508 0.036 8,674 4,337
------- ------ ------ ------- ------ ------
Minahasa, Indonesia
Mesel/Leons/Nibong............ 80% 9,668 0.207 2,006 1,605 8,380 0.215 1,799 1,439
Other......................... 80% 858 0.164 141 112 -- -- -- --
------- ------ ------ ------- ------ ------
Total Minahasa(6)........... 10,526 0.204 2,147 1,717 8,380 0.215 1,799 1,439
------- ------ ------ ------- ------ ------
Grassy Mountain, Oregon(7)...... 100% -- -- -- -- 15,984 0.062 996 996
------- ------ ------ ------- ------ ------
Total....................... 686,708 0.049 33,335 26,107 686,523 0.048 33,018 25,977
======= ====== ====== ======= ====== ======
</TABLE>
---------------
(1) The term "reserve" means that part of a mineral deposit which can be
reasonably assumed to be economically and legally extracted or produced at
the time of the reserve determination.
The term "economically," as used in the definition of reserve, implies that
profitable extraction or production under defined investment assumptions has
been established or analytically demonstrated. The assumptions made must be
reasonable, including assumptions concerning the prices and costs that will
prevail during the life of the project.
The term "legally," as used in the definition of reserve, does not imply
that all permits needed for mining and processing have been obtained or that
other legal issues have been completely resolved. However, for a reserve to
exist, there should not be any significant uncertainty concerning issuance
of these permits or resolution of legal issues.
The term "proven reserves" means reserves for which (a) quantity is computed
from dimensions revealed in outcrops, trenches, workings or drill holes; (b)
grade and/or quality are computed from the result of detailed sampling; and
(c) the sites for inspection, sampling and measurements are spaced so
closely and the geologic character is sufficiently defined that size, shape,
depth and mineral content of reserves are well established.
The term "probable reserves" means reserves for which quantity and grade are
computed from information similar to that used for proven reserves but the
sites for sampling are farther apart or are otherwise less adequately
spaced. The degree of assurance, although lower than that for proven
reserves, is high enough to assume continuity between points of observation.
(2) Calculated using cutoff grades for 1994 and 1993 as follows: oxide leach
material not less than 0.006 ounce per ton; refractory leach material (for
the Gold Quarry, Mac and Tusc deposits only) not less than 0.03 ounce per
ton; refractory mill material not less than 0.07 ounce per ton; oxide mill
material varies. Ore reserves were calculated using different recoveries
depending on each deposit's metallurgical properties and process. The
average oxide mill recoveries utilized were as follows (1993 values in
parenthesis): Mill No. 1 -- N/A (85%); Mill No. 2 -- N/A (85%); Mill No.
3 -- 85% (86%); Mill No. 4 -- 81% (82%); Mill No. 5 -- 85% (85%). The
average refractory mill recoveries utilized were: Mill No. 1 -- N/A (85%);
Mill No. 6 -- 88% (88%). The average leach recoveries utilized for oxide
material were as follows: North Area Leach Facility -- 64% (65%); South Area
Leach Facility -- 69% (70%); Rain Area Leach Facility -- 56% (56%). The
following average leach recovery was utilized for refractory bioleach
material in the Gold Quarry, Mac and Tusc deposits: 60% (engineered
estimate).
The term "cut-off grade" means the lowest grade of mineralized rock that can
be included in the reserve in a given deposit. Cut-off grades vary between
deposits depending upon prevailing economic conditions, mineability of the
deposit, amenability of the ore to gold extraction, and milling or leaching
facilities available.
(3) Approximately 60% of these reserves are refractory in nature. Refractory ore
is not amenable to the normal cyanidation recovery processes currently used
by the Company. Such ore must be oxidized before it is subjected to the
normal recovery processes. Refractory reserves of mill-grade material
contain at least 0.07 ounces per ton. Refractory reserves of leach-grade
material (Gold Quarry, Mac and Tusc deposits only) contain at least 0.03
ounces per ton.
13
<PAGE> 15
(4) Calculated by the Company using a cutoff grade not less than 0.010 ounces
per ton. Reserves are contained in two main deposits, Carachugo and Maqui
Maqui. Material is being leached. Assumed leach recovery is 60% to 83%,
depending on each deposit's metallurgical properties. All ore is oxidized.
(5) Material available to Zarafshan-Newmont for processing from designated
stockpiles or from other specified sources. All ore is oxidized. Tonnage and
gold content of material available to Zarafshan-Newmont for processing, from
the designated stockpiles or from other specified sources, are guaranteed by
state entities of Uzbekistan. Material will be crushed and leached. The
feasibility study prepared by Zarafshan-Newmont used a 50% to 65% leach
recovery rate, depending on material type.
(6) Calculated by the Company using a cutoff grade of 0.058 ounces per ton and
mill recovery rates of 80% to 89% depending on material type. Substantially
all the ore is refractory.
(7) As published by the previous owner. Evaluations completed by the Company
demonstrated that the geologic model used by the previous owner was
inadequate for mine development and that pending completion of additional
evaluations, the deposit should no longer be classified as a reserve.
ENVIRONMENTAL MATTERS
GENERAL
The Company's U.S. gold mining and processing operations are subject to
extensive federal, state and local governmental regulations for the protection
of the environment, including those relating to the protection of air and water
quality and mine reclamation, and for the promotion of mine and occupational
safety. Management does not believe that compliance with such regulations will
have a material adverse effect on its competitive position. At this time the
Company does not expect any material impact on future recurring operating costs
of compliance with currently enacted environmental regulations. Ongoing costs to
comply with environmental obligations have not been significant to the Company's
total costs of operations. Since the Company is not able to pass on any net
increases in costs to its customers, any such increases could have an effect on
future profitability of the Company depending upon the price of gold. Amendments
to current laws and regulations governing operations and activities of mining
companies or the stringent implementation thereof could have a material adverse
impact on the Company in terms of increased capital and operating expenditures.
It is estimated that with respect to the Company's U.S. operations,
compliance with federal, state and local regulations relating to the discharge
of material into the environment, or otherwise relating to the protection of the
environment, required capital expenditures of approximately $94 million in 1994,
primarily as part of the construction of the Company's refractory ore treatment
plant and will require approximately $25 to $30 million of such capital
expenditures in 1995. Thereafter, annual capital expenditures for such
compliance measures are expected to be less than $20 million.
The Company's operations outside of the United States are also subject to
governmental regulations for the protection of the environment. Management
believes that these regulations have not had, and will not have, a materially
adverse effect on the Company's operations or its competitive position. The
adoption of new laws or regulations, or amendments to current laws or
regulations, regarding the operations and activities of mining companies could
have a material adverse impact on the Company's capital and operating
expenditures. It is estimated that compliance with regulations for the
protection of the environment will require capital expenditures of approximately
$2 million in 1995 in connection with the Zarafshan-Newmont joint venture and
approximately $5 million in 1995 in connection with the Minahasa project in
Indonesia.
The Company is involved in an ongoing action involving a mining property
located in Colorado which is jointly owned by Resurrection Mining Company (a
subsidiary acquired from NMC in the Transaction) and an unrelated third party
which operates the property. For additional information on these matters, see
Item 3 -- "Legal Proceedings" and Notes 12 and 15 to Item 8 -- "Financial
Statements and Supplementary Data."
NEVADA OPERATIONS
The Company's Nevada gold mining and processing operations generate solid
waste which is subject to regulation under the federal Resource Conservation and
Recovery Act ("RCRA") and similar laws of the State of Nevada. Solid waste that
is considered "hazardous" is subject to extensive regulation by the U.S.
14
<PAGE> 16
Environmental Protection Agency (the "EPA") and the State of Nevada under
Subtitle C of RCRA, while non-hazardous solid waste is governed by a less
stringent program under Subtitle D of RCRA and solid waste management
regulations of the State of Nevada.
In 1986, the EPA determined that the regulation of "extraction" and
"beneficiation" wastes from mining operations under Subtitle C of RCRA was not
warranted and these wastes have been exempted from RCRA pursuant to the Bevill
Amendment. However, the EPA began to develop specific regulations for such
wastes under Subtitle D. The Company is participating in that process.
Currently, there is not a sufficient basis to predict the potential impact of
such regulations on the Company.
Wastes from the "processing" of ores and minerals (including refining
wastes) at the Company's Nevada operations is subject to regulation under
Subtitle C of RCRA. The Company recycles substantially all of the potentially
hazardous secondary materials generated during refining operations in compliance
with Subtitle C. Such compliance has not had, and is not expected to have, any
material impact on the Company's operations.
The Company's Nevada operations are subject to stringent state permitting
regulations for protection of surface and groundwater, as well as wildlife.
These regulations may require additional capital and operating expenditures for
expansion of current operations and development of new projects and may increase
closure and reclamation costs for pits, tailing impoundment and leaching
facilities.
Mining operations have the potential to produce fugitive dust emissions
which are subject to regulation under the laws of the State of Nevada. The EPA's
current regulations under the federal Clean Air Act exclude fugitive dust from
surface mines in determining whether new or expanded sources need permits for
construction under the regulations for prevention of significant deterioration
of air quality. The 1990 amendments to the federal Clean Air Act could
ultimately increase the Company's compliance costs for air pollution permitting
and/or control, but the impact on the Company's mining operations is so
dependent on future regulations and other contingencies that it cannot
reasonably be predicted at this time.
ITEM 3. LEGAL PROCEEDINGS
In December 1983, the State of Colorado filed a lawsuit in the U.S.
District Court for the District of Colorado under the Comprehensive
Environmental Response Compensation and Liability Act of 1980 (CERCLA), 42
U.S.C. 9601 et seq., seeking clean-up and damages for alleged injury to natural
resources due to releases of hazardous substances into the environment. This
case, State of Colorado v. ASARCO, Inc., et al. (Civil Action No. 83-C-2388),
was consolidated with another action, United States of America v. Apache Energy
& Minerals, et al. (Civil Action No. 86-C-1676), which was filed August 6, 1986.
Both cases involve allegations of environmental impairment in the vicinity of
Leadville, Colorado, including the area of the operations and property of the
Res-ASARCO Joint Venture which owns the Black Cloud Mine, the Yak Tunnel, and
adjacent property, and seek remedial actions and damages from a number of
defendants, including NMC and NGC's wholly owned subsidiary, Resurrection Mining
Company ("Resurrection"), which is a partner with ASARCO in the Res-ASARCO Joint
Venture. In connection with the Transaction, NGC assumed, among other things,
all liabilities of NMC relating to this lawsuit. In August, 1994, the Court
entered a Partial Consent Decree between and among the United States, NMC,
Resurrection and certain defendants. The Partial Consent Decree obligates
Resurrection to pay for and perform the cleanup of sources of contamination in
various areas, pursuant to the Superfund administrative process. The precise
cleanup remedy is subject to further investigation and study, EPA selection in
accordance with Superfund and public comment. At this time, the precise remedy
and cost have not been fixed. The proposed settlement also requires Resurrection
to reimburse the governments for their past response costs. Further,
Resurrection's cleanup and reimbursement obligations are subject to certain
sharing percentages with at least one other defendant. The Partial Consent
Decree does not resolve certain other potential liabilities, including liability
for any natural resource damage and any groundwater or surface water
contamination. See Note 15 to Item 8 -- "Financial Statements and Supplementary
Data."
On March 6, 1995, a class action complaint was filed in the U.S. District
Court for the Southern District of Ohio against NMC, Cyprus Foote Mineral
Company and others. The complaint alleges that the named plaintiffs (Sue Ann
Malernee and seven other individuals) and the putative class members have been
exposed
15
<PAGE> 17
to certain allegedly radioactive or otherwise hazardous waste materials produced
at a ferroalloy production plant in Guernsey County, Ohio. That plant was owned
until 1987 by Foote Mineral Company, a former subsidiary of NMC and predecessor
to defendant Cyprus Foote. The complaint seeks recovery of response costs and
establishment of a medical monitoring fund under CERCLA, 42 U.S.C. 9601 et seq.
It also seeks compensatory damages under various tort law theories for, inter
alia, diminution in property values, increased risk of physical injury and
emotional distress. The amount of such damages are alleged to be $500 million.
Punitive damages are sought against NMC in the amount of approximately $63
million. Injunctive relief requiring defendants to remove the allegedly
hazardous materials from the property of the plaintiffs is also requested. NGC
and NMC are investigating this newly-filed action, and intend to vigorously
contest all alleged liability in this matter.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No matters were submitted to a vote of security holders, through the
solicitation of proxies or otherwise, during the quarter ended December 31,
1994.
ITEM 4A. EXECUTIVE OFFICERS OF THE REGISTRANT
NGC's executive officers as of March 9, 1995 were:
<TABLE>
<CAPTION>
NAME AGE OFFICE
------------------------ --- -----------------------------------------------
<S> <C> <C>
Ronald C. Cambre 56 Chairman, President and Chief Executive Officer
Graham M. Clark, Jr. 49 Senior Vice President and General Counsel
Lawrence T. Kurlander 55 Senior Vice President, Administration
Wayne W. Murdy 50 Senior Vice President and Chief Financial
Officer
David A. Baker 40 Vice President, Environmental Affairs
Kenneth A. Brunk 49 Vice President, Business Development
Marcel F. DeGuire 45 Vice President, Project Development and
Regional Director, Commonwealth of
Independent States
Mary E. Donnelly 43 Vice President, Government Relations
John A. S. Dow 49 Vice President and Regional Director, Indonesia
and Southeast Asia
Gary E. Farmar 41 Vice President and Controller
Eric Hamer 52 Vice President, Indonesian Projects
Leonard Harris 67 Vice President and Regional Director, South
America
Donald G. Karras 41 Vice President, Taxes
Leendert G. Krol 55 Vice President, Exploration
Michael G. Moran 53 Vice President, Engineering Services
Jack H. Morris 55 Vice President, Corporate Relations
W. James Mullin 49 Vice President and Regional Director, Nevada
Operations
Jean-Michael Rendu 51 Vice President, Technical Services
Timothy J. Schmitt 52 Vice President, Secretary and Assistant General
Counsel
Patricia A. Flanagan 36 Treasurer and Assistant Secretary
</TABLE>
There are no family relationships by blood, marriage or adoption among any
of the above executive officers of NGC. All executive officers are elected
annually by the Board of Directors or until their respective successors are
chosen and qualify. There is no arrangement or understanding between any of the
above executive officers and any other person pursuant to which he or she was
selected as an officer.
16
<PAGE> 18
Mr. Cambre was elected Chairman of NGC on November 16, 1994 (effective
January 1, 1995), President on June 1, 1994 and Chief Executive Officer on
September 23, 1993 (effective November 1, 1993). He served as Vice Chairman of
NGC from November 1, 1993 through December 31, 1994. Previously, he served as
Vice President and Senior Technical Advisor to the office of the Chairman of
Freeport-McMoRan Inc., a natural resources company, since 1988. He is also
Chairman, President and Chief Executive Officer of NMC.
Mr. Clark was elected a Senior Vice President of NGC on September 11, 1991.
He was designated General Counsel on October 26, 1988 (effective May 1, 1989)
and elected a Vice President on December 17, 1986. Prior to his designation as
General Counsel, Mr. Clark was Vice President and Western Regional Counsel of
NGC. He is also Senior Vice President and General Counsel of NMC.
Mr. Kurlander was elected Senior Vice President, Administration of NGC on
March 16, 1994 (effective April 1, 1994). Previously, he served as Senior Vice
President, Public Affairs and Government Affairs, for Nabisco International Inc.
of RJR Nabisco, Inc., a consumer products company, since 1992. Prior to that he
managed worldwide communications, state government affairs and worldwide
security functions for American Express Company, a financial services company.
He is also Senior Vice President, Administration of NMC.
Mr. Murdy was elected Senior Vice President and Chief Financial Officer of
NGC on December 16, 1992 (effective December 31, 1992). Previously, he served as
Senior Vice President and Chief Financial Officer of Apache Corporation, an oil
and gas exploration and production company, since May 1991. Prior to that he had
been Chief Financial Officer of Apache Corporation since December 1987 and a
Vice President since February 1987. He is also Senior Vice President and Chief
Financial Officer of NMC.
Mr. Baker was elected Vice President, Environmental Affairs of NGC on April
24, 1991 (effective March 11, 1991). Previously, he held various environmental
positions with NGC and NMC.
Mr. Brunk was elected Vice President, Business Development of NGC on May
14, 1994. He served as Vice President, Project Development of NMC from April 24,
1991 (effective March 11, 1991) through May 13, 1994. Previously, he was Vice
President of NGC since December 16, 1987 serving in various senior capacities in
operations and administration.
Mr. DeGuire was elected a Vice President of NGC on May 14, 1994. He was
designated Vice President, Project Development and Regional Director,
Commonwealth of Independent States, in 1995. Previously, he served as Vice
President, Project Development and Metallurgical Research since May 14, 1994.
Prior to that he held various senior metallurgical research and environmental
positions with NGC and NMC for more than five years.
Ms. Donnelly was elected Vice President, Government Relations of NGC on
June 12, 1990. Prior to that date, she held various other government relations
positions with NGC and NMC.
Mr. Dow was elected a Vice President of NGC on May 18, 1994 and
subsequently was designated Regional Director, Indonesia and Southeast Asia.
Previously, he held various senior exploration positions with NMC and its
subsidiaries for more than five years.
Mr. Farmar was elected a Vice President of NGC on December 16, 1992 and
Controller on October 30, 1991. He had served as Assistant Controller from
January 28, 1989 through October 29, 1991. Previously, he served as Controller
of Petro-Lewis Corporation, an independent oil and gas producer. He is also Vice
President and Controller of NMC.
Mr. Hamer was designated Vice President, Indonesian Projects, of NGC on
January 1, 1994. Previously, he served as Vice President, Project Development
from January 1, 1993 through December 31, 1993. He also served as Vice President
and General Manager from October 30, 1991 to December 31, 1992 and as Vice
President and Resident Manager since March 11, 1991 and as Vice President,
Operations from October 31, 1988 to March 10, 1991.
Mr. Harris was elected a Vice President of NGC on May 18, 1994 and
subsequently was designated Regional Director South America. Previously, he held
various senior metallurgical and operations positions with NGC and NMC for more
than five years.
17
<PAGE> 19
Mr. Karras has served as Vice President, Taxes of NGC since November 9,
1992. Previously, he served as Director of Taxes of Kennecott Corporation, a
natural resources company, for four years. He is also Vice President, Taxes of
NMC.
Mr. Krol has served as Vice President, Exploration of NGC since September
14, 1994. Previously, he had served as Director of Foreign Exploration of NGC
since May 1992. Prior to that he served as Director of Metallurgical Services of
NGC since 1990.
Mr. Moran was elected Vice President, Engineering Services of NGC on
December 15, 1993 (effective January 17, 1994. Previously, he was employed by
BHP Minerals International Inc., a natural resources company, for more than five
years where he was responsible for the development and management of major
construction projects.
Mr. Morris was elected Vice President, Corporate Relations of NGC on March
16, 1994 (effective April 1, 1994). Previously, he served as Director of
Investor Relations and Corporate Communications for Inland Steel Industries from
1990 to 1993.
Mr. Mullin was designated Vice President and Regional Director, Nevada
Operations on May 14, 1994. Previously, he served as Vice President and General
Manager of NGC since December 15, 1993. He also served as Acting General Manager
of NGC from January 1, 1993 to December 14, 1993. Prior to that he held various
senior operating positions with NGC.
Mr. Rendu was designated Vice President, Technical Services, on January 19,
1995. Previously, he served as Vice President, Information Systems since
November 26, 1991 and Vice President, Mine Engineering since March 11, 1991
having previously served as Vice President, Technical and Scientific Systems
since October 31, 1988.
Mr. Schmitt was elected a Vice President of NGC on December 17, 1986 and
was elected Secretary on May 25, 1988. He was designated Assistant General
Counsel on October 30, 1991. He served as Controller from March 31, 1983 through
October 29, 1991. He is also Vice President, Secretary and Assistant General
Counsel of NMC.
Ms. Flanagan was elected Treasurer of NGC on December 16, 1992. Previously,
she served as an Assistant Treasurer from November 1, 1988 through December 15,
1992. She was appointed Assistant Secretary on June 24, 1992. She is also
Treasurer and Assistant Secretary of NMC.
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
NGC's common stock is traded on the New York Stock Exchange. NGC's stock
prices in 1994 and 1993 were:
<TABLE>
<CAPTION>
1994 1993
------------- -------------
HIGH LOW HIGH LOW
--- --- --- ---
<S> <C> <C> <C> <C>
First quarter................................................. $50 $43 7/8 $36 $29 5/8
Second quarter................................................ $46 1/4 $37 1/4 $43 1/4 $32 1/8
Third quarter................................................. $45 3/8 $37 1/4 $47 1/8 $35 7/8
Fourth quarter................................................ $43 7/8 $33 3/8 $46 3/8 $37 5/8
</TABLE>
On March 9, 1995, the approximate number of holders of record of NGC's
common stock was 2,122.
A dividend of $0.12 per share of common stock outstanding was declared in
each quarter of 1994, or a total of $0.48 per share. An annual dividend of $0.05
per share ($5,244,000 in the aggregate) was declared on October 25, 1993. The
determination of the amount of future dividends, however, will be made by NGC'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.
18
<PAGE> 20
ITEM 6. SELECTED FINANCIAL DATA
<TABLE>
<CAPTION>
FOR THE YEARS ENDED DECEMBER 31,
-----------------------------------------------------------------
1994 1993 1992 1991 1990
---------- ---------- -------- -------- --------
(IN THOUSANDS, EXCEPT PER SHARE)
<S> <C> <C> <C> <C> <C>
Sales........................... $ 597,370 $ 601,601 $546,432 $572,750 $643,288
========= ========= ======== ======== ========
Income before cumulative effect
of changes in accounting
principles.................... $ 83,394 $ 113,116 $ 87,414 $125,902 $141,731
Cumulative effects of changes in
accounting principles......... -- 2,665 (6,356) -- --
---------- ---------- -------- -------- --------
Net income...................... $ 83,394 $ 115,781 $ 81,058 $125,902 $141,731
========= ========= ======== ======== ========
Earnings per share:
Income before cumulative
effect of changes in
accounting principles...... $ 0.70 $ 1.08 $ 0.83 $ 1.20 $ 1.35
Cumulative effects of changes
in accounting principles... -- 0.02 (0.06) -- --
---------- ---------- -------- -------- --------
Net income.................... $ 0.70 $ 1.10 $ 0.77 $ 1.20 $ 1.35
========= ========= ======== ======== ========
Dividends declared per common
share...................... $ 0.48 $ 0.05 $ 0.05 $ 0.05 $ 0.05
========= ========= ======== ======== ========
AT DECEMBER 31,
Total assets.................... $1,656,657(1) $1,021,870 $905,331 $816,659 $706,921
Long-term debt.................. $ 593,634(1) $ -- $ -- $ -- $ --
Stockholders' equity............ $ 752,951(1) $ 924,018 $810,447 $734,633 $613,975
</TABLE>
---------------
(1) As discussed in Note 2 of Item 8 -- "Financial Statements and Supplementary
Data," effective January 1, 1994, Newmont Gold Company acquired essentially
all of the assets and liabilities of its parent, Newmont Mining Corporation.
This transaction contributed to the increase in total assets and long-term
debt and decrease in stockholders' equity at December 31, 1994 compared to
December 31, 1993.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND
FINANCIAL CONDITION
Effective January 1, 1994, the Company acquired essentially all of the
assets and assumed essentially all of the liabilities of its parent company,
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 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 of the Company
was accounted for at historical cost as a transaction between entities under
common control and the difference was charged to retained earnings. This
transaction is further discussed in Note 2 to Item 8 -- "Financial Statements
and Supplementary Data."
The Company's acquisition of NMC's international projects with 8.2 million
contained ounces of gold reserves, worldwide exploration prospects and other
corporate activities resulted in increased exploration, general and
administrative expense and increased debt levels in 1994 compared to 1993 and
1992. In addition, the issuance of the $5.50 convertible preferred stock
resulted in $15.8 million of annual dividend requirements. The Company also
increased its common stock dividends from $0.05 per share to $0.48 per share
annually, resulting in $46.2 million of annual dividends in 1994 compared to
$5.2 million in 1993.
19
<PAGE> 21
RESULTS OF OPERATIONS
Before the cumulative effect of changes in accounting principles, the
Company earned $83.4 million, or $0.70 per share, $113.1 million, or $1.08 per
share, and $87.4 million, or $0.83 per share, in 1994, 1993 and 1992,
respectively. The Company earned $90.2 million, or $0.94 per share, on a pro
forma basis in 1993 assuming the transaction with NMC had been consummated at
the beginning of 1993 (See Note 2 of Item 8 -- "Financial Statements and
Supplementary Data.") The results for 1994 reflect an anticipated decline in
production from the Carlin Trend area of Nevada and $36.1 million in charges
related to environmental obligations, which were partially offset by a full year
of equity income from the Company's 38% interest in Minera Yanacocha, S.A.
("Minera Yanacocha"), a Peruvian entity, and a $16.2 million benefit for the
resolution of certain tax issues associated with prior years. Included in the
1993 pro forma earnings is a $19.3 million, or $0.20 per share, after-tax ($29.6
million before-tax) gain relating to the sale of NMC's interest in Newcrest
Mining Limited for $67.0 million. The Company recognized the cumulative effect
of a change in accounting principle in 1993 and 1992. In 1993, the Company
adopted Statement of Financial Accounting Standards No. 109, "Accounting for
Income Taxes," which resulted in a cumulative benefit of $2.7 million, or $0.02
per share. Further information about this change in accounting for income taxes
can be found in Note 6 to Item 8 -- "Financial Statements and Supplementary
Data." In 1992, the Company adopted Statement of Financial Accounting Standards
No. 106, "Employer's Accounting for Postretirement Benefits Other Than
Pensions," which resulted in a cumulative charge of $6.4 million, or $0.06 per
share. Further information about this accounting change is included in Note 11
to Item 8 -- "Financial Statements and Supplementary Data."
Changes in sales between 1994, 1993 and 1992 are a function of the average
price received for gold each year and gold production levels from the Company's
mining operations which have been concentrated on the Carlin Trend. The average
gold price per ounce received by the Company was $384, $361 and $344 in 1994,
1993 and 1992, respectively. The Company produced 1,555,300 ounces of gold in
1994, 1,666,400 ounces in 1993 and 1,587,900 ounces in 1992. The effects on
sales revenues of the changes in the average annual gold price received and
annual production levels between years are reflected in the following table (in
thousands):
<TABLE>
<CAPTION>
1994 VS. 1993 1993 VS. 1992
------------- -------------
<S> <C> <C>
Increase (decrease) in sales revenue were due to:
Gold price............................................... $ 35,878 $28,155
Production............................................... (40,109) 27,014
--------- -------
Total............................................ $ (4,231) $55,169
========= =======
</TABLE>
In 1993, on a pro forma basis, the Company produced 1,674,200 ounces at an
average gold price of $376. Comparing actual 1994 with pro forma 1993 results in
a $13.2 million increase in sales revenue being attributable to higher gold
prices realized and a $44.7 million decrease in sales revenue being attributable
to decreased production. Higher prices were realized in 1993 on a pro forma
basis compared to 1993 actual results due to a hedging program NMC had in place.
No production in 1994 was hedged. In 1994, the Company entered into several
hedging transactions that begin in January 1996 and continue through December
2000 for future production from its Minahasa property in Indonesia. These
transactions consist of forward sales of 125,000 ounces per year at an average
price of $454 an ounce, plus the Company will receive 40% of the difference in
the market price above the forward sale price. The Company may enter into
additional hedging transactions in the future.
The anticipated decline in the Company's production was the result of the
shutdown of three mills, the largest of which was closed to accommodate the
start-up of the new refractory ore treatment plant. This plant was expected to
reach full capacity in 1994, but because of a crack that occurred in a weld of a
riding ring of the double rotator mill and an electrostatic precipitator fire,
the plant has been able to operate at only partial capacity. The Company expects
the plant to reach full capacity by mid-1995. The Company has targeted 1995
Carlin production at approximately 1.6 million ounces and expects to maintain
this level of production until the deeper and higher grade portions of the Post
deposit are mined which is expected in 1997.
20
<PAGE> 22
The Company expects that Carlin production will be augmented in 1995 with
production from the Zarafshan-Newmont Joint Venture ("Zarafshan-Newmont"), which
is a 50%-50% joint venture between the Company and two Uzbekistan governmental
entities. Zarafshan-Newmont will leach low grade oxide ore to produce gold from
existing stockpiles from the Muruntau mine in Uzbekistan. This project, which is
expected to cost approximately $220 million, is anticipated to commence
production in mid-1995 at an annual rate of 450,000 ounces, or 225,000 ounces
attributable to the Company's interest. Operating costs, excluding depreciation,
depletion and amortization ("DD&A"), are anticipated to be about $150 per ounce.
The Company also expects that its production will be further augmented
beginning in early 1996 with production from the Minahasa project, located in
Indonesia. Construction of the project commenced in the third quarter of 1994
and is expected to cost $130 million. Production is expected to begin at initial
total annual rates of 140,000 ounces. Initial operating costs, excluding DD&A,
are anticipated to be $200 per ounce. The Company has an 80% interest in this
project and is the operator.
In addition to these two projects, the Company has a 38% interest in Minera
Yanacocha, a Peruvian entity which a subsidiary of the Company manages and which
is accounted for as an equity investment. Minera Yanacocha produced 304,600
ounces, or 115,700 ounces attributable to the Company's interest in 1994 at
operating costs, excluding DD&A, of $137 per ounce of gold produced. Production
commenced in August 1993 when this interest was owned by NMC. In 1993, Minera
Yanacocha produced 81,500 ounces, or approximately 31,000 ounces attributable to
the Company's interest on a pro forma basis at operating costs, excluding DD&A,
of $151 per ounce. Production is expected to increase to 450,000 ounces, or
171,000 ounces attributable to the Company's interest in 1995 as a second
deposit is mined for the full year. Operating costs per ounce are expected to
increase slightly in 1995 primarily due to mining lower grade and harder to
process ore. Nevertheless, the Company's equity income is expected to increase
in 1995 due to Minera Yanacocha's rising production.
As with sales revenues, costs applicable to sales and DD&A for the last
three years are almost entirely attributable to the Company's Carlin operations.
Costs applicable to sales consist primarily of production costs and royalties,
and on a per ounce of production basis were as follows for the last three years:
<TABLE>
<CAPTION>
1994 1993 1992
---- ---- ----
<S> <C> <C> <C>
Production costs.............................................. $179 $165 $162
Royalties..................................................... 25 28 29
Other......................................................... 6 6 7
---- ---- ----
Total............................................... $210 $199 $198
==== ==== ====
</TABLE>
Production costs consist principally of charges for mining ore and waste
associated with current period
production and processing ore through milling and leaching facilities. Total
production costs increased slightly in 1994 to $277.8 million from $275.0
million in 1993, despite lower gold production which resulted in a $14 increase
in per ounce costs. This increase is the result of higher milling and leaching
costs incurred during 1994, as the refractory ore treatment plant began
operations at less than full capacity, as well as processing ore that is mined
from deeper areas of the open-pit mines, which is more difficult to process.
However, these cost increases were substantially offset by lower mining costs
which resulted from a decrease in tons mined. The 1993 production costs
increased over 1992 costs of $256.9 million due primarily to increased tons
mined and processed. Tons mined, excluding tons attributable to capitalized
mining costs discussed below, were 171 million, 190 million and 147 million in
1994, 1993 and 1992, respectively.
In addition to the production costs expensed, the Company is capitalizing a
portion of mining costs associated with its Post deposit. This deposit is being
mined under a joint mining agreement signed in December 1992 between the Company
and Barrick Goldstrike Mines, Inc. ("Barrick"). Under the agreement, Barrick,
which has a separate and distinct interest in the same ore body, mines the
deposit and charges the Company on a basis that will result in both companies
ultimately bearing the same cost per contained ounce of gold mined. Since a
significant portion of the Company's contained ounces in this deep deposit are
not expected to be mined for at least two years, the mining costs are being
capitalized and will be matched
21
<PAGE> 23
against the revenue from the ounces when they are produced. The Company incurred
$33.2 million, $23.6 million and $5.2 million of such costs in 1994, 1993 and
1992, respectively. These capitalized costs are expected to increase in 1995 due
to elevated mining rates for this deposit and capitalized costs for other
deposits the Company will begin mining that have diverse waste-to-ore ratios.
Royalty costs were $38.7 million in 1994, $47.6 million in 1993 and $46.6
million in 1992. The decrease between 1994 and 1993 is due to lower production
from royalty burdened ore, which reduced royalty costs by $11.8 million,
partially offset by an increase in the average gold price which increased
royalties by $2.9 million. The increase in royalty costs in 1993 from 1992 was
not significant. Royalty costs are expected to increase in 1995 due to
processing more royalty burdened ore.
Costs applicable to sales per ounce remained fairly constant between 1992
and 1993, but increased in 1994 due to treating more difficult to process ores.
These per ounce costs for Carlin production are expected to increase in the
early part of 1995, then decline as the refractory ore treatment plant, which
treats higher grade ores, achieves full operation, resulting in a slightly
higher per ounce cost for 1995 over 1994. On a consolidated basis, the Company's
costs applicable to sales per ounce should be favorably impacted as production
from Zarafshan-Newmont begins.
DD&A was $91.1 million, $107.2 million and $96.7 million in 1994, 1993 and
1992, respectively. The decrease between 1994 and 1993 is primarily due to lower
depreciation attributable to the Company's mills associated with its Carlin
operations, as three were shutdown during the year. The increase between 1993
and 1992 was primarily due to a higher level of property, plant and equipment in
service. With the refractory ore treatment plant reaching full capacity, DD&A is
expected to increase in 1995.
Exploration expenses of $69.2 million for 1994 reflect the worldwide focus
of the Company's exploration program which is the result of the transaction with
NMC previously mentioned. Exploration expenses of $10.1 million and $14.7
million in 1993 and 1992, respectively, reflect only the Company's exploration
efforts on the Carlin Trend in Nevada. On a pro forma basis, exploration expense
for 1993 was $52.7 million. The increase in 1994 over the 1993 pro forma amount
reflects an increase in exploration efforts in primarily Indonesia and South
America. Exploration expense is expected to decline in 1995.
In 1992, the Grassy Mountain project in Oregon was acquired for $30.0
million. The Company had included in its reserve figures 996,000 contained
ounces of reserves related to this project. Work was halted on this project for
most of 1994 when a referendum was placed on the Oregon ballot which, if passed,
would have effectively prevented open-pit mining in the state. The referendum
was defeated in November 1994 and the Company resumed studies to determine how
the deposit can be economically mined. As a result of additional work, the
current interpretation of the ore body is that gold is in high grade pods rather
than disseminated. This type of ore body, if confirmed, would likely result in
an underground project. However, given the state of the study at year end 1994,
the ore body no longer meets the standard to be classified as a proven and
probable reserve. At December 31, 1994, $33.8 million of costs were capitalized
on the Company's balance sheet related to this project. In addition, at the end
of 1994, the Company had $19.0 million of costs capitalized related to the
Ivanhoe Joint Venture exploration property, on which exploration results have
thus far been disappointing.
General and administrative expense ("G&A") was $41.9 million in 1994
compared to $11.3 million in 1993 and $13.3 million in 1992. The significant
increase in 1994 over the prior years reflects the effects of the transaction
with NMC previously mentioned. On a pro forma basis, G&A for 1993 was $35.8
million. The increase for 1994 over the 1993 pro forma amount reflects the
increased international focus of the Company's operations in that the Company
provides extensive management oversight and technical expertise to its overseas
operations. The 1994 level of G&A expense is expected to continue in 1995.
As a result of the transaction with NMC previously mentioned, the Company
assumed NMC's indebtedness which resulted in interest expense of $29.5 million
for 1994. Of this amount, $19.7 million was capitalized as a result of major
construction projects at the Carlin operations, primarily the refractory ore
treatment plant, as well as the processing plant in Uzbekistan and mine
development in Indonesia. The 1993 pro forma interest expense was $20.9 million
with capitalized interest of $8.5 million. The increase in the 1994
22
<PAGE> 24
interest expense over the 1993 pro forma amount is the result of higher debt
balances in 1994. Interest expense is expected to increase in 1995 due to higher
average debt balances, and capitalized interest is expected to decrease due to
the completion of the refractory ore treatment plant which occurred at the end
of 1994 and the completion of the Zarafshan-Newmont project which is expected to
occur by mid-1995.
Dividends, interest and other income was $22.3 million for 1994 and
insignificant in 1993 and 1992. On a pro forma basis, 1993 dividends, interest
and other was $20.0 million. The 1994 amount reflects $9.2 million for business
interruption insurance recorded for the delayed start-up of the refractory ore
treatment plant, offset by lower interest income due to lower cash balances
throughout 1994 and lower dividends from investments in 1994 compared to 1993 on
a pro forma basis.
Other expenses were $42.7 million, $4.0 million and $3.9 million in 1994,
1993 and 1992, respectively, and $14.2 million on a pro forma basis in 1993.
Other expenses in 1994 reflect a charge of $36.1 million related to
environmental obligations associated with former mining activities discussed in
Note 15 to Item 8 -- "Financial Statements and Supplementary Data." Included in
this amount is a valuation allowance of $20.0 million that was made against
receivables from insurance companies for recoveries related to such
environmental obligations. The Company recorded the valuation allowance after
discussions with new lead counsel regarding its review of the litigation with
the insurance companies and due to the absence of expected settlement
discussions. The valuation allowance resulted in a net receivable balance from
insurance companies of approximately $17 million at December 31, 1994.
Subsequent to December 31, 1994, settlement in the insurance litigation was
reached enabling the Company to realize the receivable. Settlement discussions
continue with respect to some of the litigation. The Company intends to
vigorously pursue its claims under the remaining litigation and believes that it
is reasonably possible that additional amounts will be recovered. Since the
actual cash payments for the environmental obligations are expected to occur
over a number of years, such cash requirements for environmental obligations are
not expected to have a significant negative impact on the Company's liquidity.
The Company made payments of $14.5 million in 1994 and expects to pay
approximately $16 million of such costs in 1995. For these liabilities, $64.3
million had been accrued at December 31, 1994. Because of the uncertain nature
of these liabilities, the Company estimates that it is reasonably possible that
the ultimate liability may be as much as 65% greater or 15% lower than the
amount accrued at December 31, 1994. Absent concurrent insurance recoveries,
on-going cash payments will be funded out of operating cash flows and/or
borrowings. The Company continuously monitors and reviews its environmental
obligations, and although the Company believes that it has adequately accrued
for such costs, as additional facts become known, additional provisions may be
required.
In 1994, the Company recognized an income tax benefit of $16.2 million
resulting from the resolution of certain tax issues associated with prior years.
This, in addition to the benefits of percentage depletion on significantly lower
pre-tax financial income, contributed to an overall effective tax rate benefit
for 1994 compared to effective tax rate charges recognized in 1993 and 1992.
General inflation over the past three years has not had a material effect
on the Company's cost of doing business and is not expected to have a material
effect in the foreseeable future. Changes in the price received for gold will
impact the Company's revenue stream, as previously discussed.
LIQUIDITY AND CAPITAL RESOURCES
During 1994, the Company's cash outlays included $402.0 million for capital
expenditures, of which $178.0 was for the refractory ore treatment plant, $62.6
million was for the Zarafshan-Newmont project and $24.6 million was for the
Minahasa project. In addition, $62.3 million in common and preferred stock
dividends were paid. These outlays were funded through $401.6 million of net
borrowings (of which $349.1 million was from the sale and leaseback of the
refractory ore treatment plant), $143.0 million of cash provided by operating
activities and $69.4 million of cash acquired in the transaction with NMC
previously discussed.
Approximately $300 million is expected to be spent on capital projects in
1995. Carlin Trend expenditures of $170 million will represent increases in
capitalized mining costs and underground development. Capital funds of $25
million and $90 million will also be required for the completion of the
Zarafshan-Newmont and Minahasa projects, respectively.
23
<PAGE> 25
Cash on hand at December 31, 1994 of $160.6 million, operating cash flow,
unused bank credit lines of $400 million and expected additional borrowings by
Zarafshan-Newmont ($15 million to the Company's share) will be used to fund the
Company's capital investment programs and pay other operating expenses. The
Company and NMC have also filed shelf registration statements with the
Securities and Exchange Commission covering the issuance of $150 million in
non-convertible debt securities and $300 million in equity securities,
respectively. There are no present plans to issue these securities. The Company
expects to fund maturities of its debt through operating cash flow and/or by
refinancing the debt as it becomes due.
Of the Company's $402.0 million in capital expenditures in 1994, it is
estimated that approximately $94 million was required to comply with
environmental regulations. The Company estimates that in 1995 approximately $25
million to $30 million will be spent for capital expenditures to comply with
environmental regulations. A significant portion of these 1994 expenditures are
related to the refractory ore treatment plant. After 1995, environmental capital
expenditures are not expected to be more than approximately $20 million,
annually. The ongoing costs to comply with environmental regulations are not a
significant portion of the Company's operating costs. The Company provides for
future reclamation and mine closure costs on a unit-of-production basis. The
annual accrual for costs associated with current operations has not been
significant. The Company reviews the adequacy of its reclamation and closure
reserves in light of current laws and regulations and makes provisions as
necessary. In addition, periodic internal environmental audits are conducted to
evaluate environmental compliance. Cash flow from the Company's operations and
salvage values are expected to provide funding for reclamation and closure
costs. The Company believes that its current operations are in compliance with
applicable laws and regulations designed to protect the public health and
environment.
Accounts receivable increased by $30.2 million between the December 31,
1993 pro forma balance and December 31, 1994 primarily as a result of
reclassifying $16.7 million from non-current other assets for insurance
recoveries related to environmental obligations associated with former mining
activities and recording a receivable for business interruption insurance
related to start-up problems of the refractory ore treatment plant, as discussed
in "Results of Operations." Collections on both receivables were made in early
1995. Other current assets increased between the December 31, 1993 pro forma
balance and December 31, 1994 by $16.7 million due primarily to increases in
prepaid taxes.
Accounts payable increased between the December 31, 1993 pro forma balance
and December 31, 1994 by $14.8 million primarily due to timing of vendor
payments. Other accrued liabilities increased over the same time period due
primarily to a $16.5 million increase in accruals for exploration and capital
projects in Indonesia and an increase of $8.8 million for expenditures for
remediation work related to former mining activities.
The variance in balance sheet line items not already discussed herein are
primarily attributable to the transaction with NMC discussed in "Results of
Operations." See Notes 2 and 14 in Item 8 -- "Financial Statements and
Supplementary Data" for the impacts on the Company's balance sheet resulting
from the transaction.
24
<PAGE> 26
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To Newmont Gold Company:
We have audited the accompanying consolidated balance sheets of Newmont
Gold Company (a Delaware corporation) and subsidiaries as of December 31, 1994
and 1993, and the related statements of consolidated income, changes in
stockholders' equity and cash flows for each of the three years in the period
ended December 31, 1994. These financial statements are the responsibility of
the Company's management. Our responsibility is to express an opinion on these
financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of Newmont Gold Company and
subsidiaries as of December 31, 1994 and 1993, and the results of their
operations and their cash flows for each of the three years in the period ended
December 31, 1994 in conformity with generally accepted accounting principles.
As discussed in Note 6 to the consolidated financial statements, effective
January 1, 1993, the Company changed its method of accounting for income taxes.
In addition, as discussed in Note 11 to the consolidated financial statements,
effective January 1, 1992, the Company changed its method of accounting for
postretirement benefits other than pensions.
/s/ ARTHUR ANDERSEN LLP
ARTHUR ANDERSEN LLP
Denver, Colorado,
March 14, 1995.
25
<PAGE> 27
NEWMONT GOLD COMPANY AND SUBSIDIARIES
STATEMENTS OF CONSOLIDATED INCOME
(IN THOUSANDS, EXCEPT PER SHARE)
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
----------------------------------
1994 1993 1992
-------- -------- --------
<S> <C> <C> <C>
Sales and other income
Sales.................................................... $597,370 $601,601 $546,432
Dividends, interest and other............................ 22,316 333 220
Interest from parent..................................... -- 5,326 7,382
-------- -------- --------
619,686 607,260 554,034
-------- -------- --------
Costs and expenses
Costs applicable to sales................................ 326,385 332,270 314,581
Depreciation, depletion and amortization................. 91,115 107,169 96,745
Exploration.............................................. 69,151 10,061 14,658
General and administrative............................... 41,892 11,272 13,345
Interest, net of amounts capitalized..................... 9,823 -- --
Other.................................................... 42,655 3,980 3,879
-------- -------- --------
581,021 464,752 443,208
-------- -------- --------
Equity in income of affiliated companies................... 15,395 -- --
-------- -------- --------
Pretax income before cumulative effect of changes in
accounting principles.................................... 54,060 142,508 110,826
Income tax benefit (provision)............................. 29,334 (29,392) (23,412)
-------- -------- --------
Income before cumulative effect of changes in
accounting principles.................................... 83,394 113,116 87,414
Cumulative effect of changes in accounting principles...... -- 2,665 (6,356)
-------- -------- --------
Net income................................................. 83,394 115,781 81,058
Preferred stock dividends.................................. 15,813 -- --
-------- -------- --------
Net income applicable to common shares..................... $ 67,581 $115,781 $ 81,058
======== ======== ========
Income (loss) per common share:
Before cumulative effect of changes in accounting
principles............................................ $ 0.70 $ 1.08 $ 0.83
Cumulative effect of changes in accounting principles.... -- 0.02 (0.06)
-------- -------- --------
Net income per common share.............................. $ 0.70 $ 1.10 $ 0.77
======== ======== ========
</TABLE>
The accompanying notes are an integral part of these statements.
26
<PAGE> 28
NEWMONT GOLD COMPANY AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS, EXCEPT PER SHARE)
<TABLE>
<CAPTION>
AT DECEMBER 31,
-------------------------
1994 1993
---------- ----------
<S> <C> <C>
ASSETS
Cash and cash equivalents........................................... $ 160,637 $ 389
Short-term investments.............................................. 13,438 --
Accounts receivable................................................. 37,597 2,186
Advances to parent.................................................. -- 159,573
Inventories......................................................... 130,931 118,891
Other............................................................... 27,531 13,762
---------- ----------
Current assets.................................................... 370,134 294,801
Property, plant and mine development, net........................... 1,119,286 695,460
Other............................................................... 167,237 31,609
---------- ----------
Total assets.............................................. $1,656,657 $1,021,870
========== ==========
LIABILITIES
Short-term debt..................................................... $ 15,739 $ --
Accounts payable.................................................... 32,723 15,062
Other accrued liabilities........................................... 104,753 45,195
---------- ----------
Current liabilities............................................... 153,215 60,257
Long-term debt...................................................... 593,634 --
Reclamation and remediation liabilities............................. 66,760 15,142
Other long-term liabilities......................................... 90,097 22,453
---------- ----------
Total liabilities......................................... 903,706 97,852
---------- ----------
Commitments and contingencies
STOCKHOLDERS' EQUITY
Preferred stock -- $5.00 par value; 5,000 shares authorized; 2,875
shares issued of $5.50 convertible (aggregate liquidation
preference $287,500).............................................. 14,375 --
Common stock -- $0.01 par value; 250,000 shares authorized; 104,875
shares issued..................................................... 1,049 1,049
Capital in excess of par value...................................... 212,898 206,260
Retained earnings................................................... 598,755 716,709
Treasury stock, at cost; 8,414 shares............................... (74,126) --
---------- ----------
Total stockholders' equity................................ 752,951 924,018
---------- ----------
Total liabilities and stockholders' equity................ $1,656,657 $1,021,870
========== ==========
</TABLE>
The accompanying notes are an integral part of these statements.
27
<PAGE> 29
NEWMONT GOLD COMPANY AND SUBSIDIARIES
STATEMENTS OF CONSOLIDATED CHANGES
IN STOCKHOLDERS' EQUITY
(IN THOUSANDS, EXCEPT PER SHARE)
<TABLE>
<CAPTION>
TREASURY STOCK
PREFERRED STOCK COMMON STOCK CAPITAL IN AT COST
----------------- ----------------- EXCESS OF RETAINED ------------------
SHARES AMOUNT SHARES AMOUNT PAR VALUE EARNINGS SHARES AMOUNT
------ ------- ------- ------ ----------- -------- ------ --------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Balance at December 31, 1991......... -- $ -- 104,875 $1,049 $ 203,226 $530,358 -- $ --
Net income......................... -- -- -- -- -- 81,058 -- --
Common stock dividend -- $0.05 per
share............................ -- -- -- -- -- (5,244) -- --
----- ------- ------- ------ --------- -------- ----- --------
Balance at December 31, 1992......... -- -- 104,875 1,049 203,226 606,172 -- --
Net income......................... -- -- -- -- -- 115,781 -- --
Common stock dividend -- $0.05 per
share............................ -- -- -- -- -- (5,244) -- --
Other.............................. -- -- -- -- 3,034 -- -- --
----- ------- ------- ------ --------- -------- ----- --------
Balance at December 31, 1993......... -- -- 104,875 1,049 206,260 716,709 -- --
Transaction with parent (Note 2)... 2,875 14,375 -- -- -- (140,944) 8,650 (76,206)
Common stock issued from treasury
for stock options exercised...... -- -- -- -- 6,638 -- (236 ) 2,080
Net income......................... -- -- -- -- -- 83,394 -- --
Common stock dividends -- $0.48 per
share............................ -- -- -- -- -- (46,225) -- --
Preferred stock dividends -- $5.50
per share........................ -- -- -- -- -- (15,813) -- --
Other.............................. -- -- -- -- -- 1,634 -- --
----- ------- ------- ------ --------- -------- ----- --------
Balance at December 31, 1994......... 2,875 $14,375 104,875 $1,049 $ 212,898 $598,755 8,414 $(74,126)
===== ======= ======= ====== ========= ======== ===== ========
</TABLE>
The accompanying notes are an integral part of these statements.
28
<PAGE> 30
NEWMONT GOLD COMPANY AND SUBSIDIARIES
STATEMENTS OF CONSOLIDATED CASH FLOWS
(IN THOUSANDS)
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
-----------------------------------
1994 1993 1992
--------- --------- ---------
<S> <C> <C> <C>
Operating Activities
Net income.............................................. $ 83,394 $ 115,781 $ 81,058
Adjustments to reconcile net income to net cash provided
by operating activities:
Depreciation, depletion and amortization............. 91,115 107,169 96,745
Undistributed earnings of affiliates................. (14,553) -- --
Deferred taxes....................................... (28,052) (16,068) (4,965)
--------- --------- ---------
131,904 206,882 172,838
(Increase) decrease in operating assets:
Accounts receivable................................ 9,970 (1,542) 373
Inventories........................................ (13,336) (42,832) 16,278
Other assets....................................... (5,032) (6,129) (2,437)
Increase (decrease) in operating liabilities:
Accounts payable and accrued expenses.............. 24,868 (7,617) 8,673
Other liabilities.................................. (3,378) 8,391 (503)
Other operating...................................... (1,950) 354 3,474
--------- --------- ---------
Net cash provided by operating activities................. 143,046 157,507 198,696
--------- --------- ---------
Investing Activities
Net cash acquired from parent........................... 69,361 -- --
(Advances to) repayments from parent.................... -- 38,477 (34,976)
Additions to property, plant and mine development....... (402,030) (200,340) (167,397)
Other................................................... 1,828 6,404 8,232
--------- --------- ---------
Net cash used in investing activities..................... (330,841) (155,459) (194,141)
--------- --------- ---------
Financing Activities
Proceeds from long-term borrowings...................... 528,634 -- --
Repayments of long-term borrowings...................... (127,000) -- --
Proceeds from issuance of common stock.................. 8,718 -- --
Dividends paid on common stock.......................... (46,225) (5,244) (5,244)
Dividends paid on preferred stock....................... (15,110) -- --
Other................................................... (974) 3,034 --
--------- --------- ---------
Net cash provided by (used in) financing activities....... 348,043 (2,210) (5,244)
--------- --------- ---------
Net increase (decrease) in cash and cash equivalents...... 160,248 (162) (689)
Cash and cash equivalents at beginning of year............ 389 551 1,240
--------- --------- ---------
Cash and cash equivalents at end of year.................. $ 160,637 $ 389 $ 551
========= ========= =========
</TABLE>
See Note 14 for supplemental cash flow information.
The accompanying notes are an integral part of these statements.
29
<PAGE> 31
NEWMONT GOLD COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
PRINCIPLES OF CONSOLIDATION
The consolidated financial statements include the accounts of Newmont Gold
Company and its more than 50% owned subsidiaries (collectively, the "Company").
The Company also includes its pro-rata share of assets, liabilities and
operations for joint ventures in which it has an interest. All significant
intercompany balances and transactions have been eliminated. Newmont Mining
Corporation ("NMC") owns approximately 89% of the Company.
CASH AND CASH EQUIVALENTS
Cash and cash equivalents consist of all cash balances and highly liquid
investments with a maturity of three months or less. Excess cash balances are
primarily invested in U.S. Treasury bills with lesser amounts invested in high
quality commercial paper and time deposits.
INVESTMENTS
Effective January 1, 1994, the Company adopted Statement of Financial
Accounting Standards No. 115, "Accounting for Certain Investments in Debt and
Equity Securities." There was no impact on the Company's financial position as
the related investments are considered to be classified as held to maturity.
Short-term investments are carried at cost, which approximates market, and
include Eurodollar government and corporate obligations rated AA or higher. At
December 31, 1994, approximately $6.9 million of such investments were secured
by letters of credit.
Investments in companies in which the Company's ownership is 20% to 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 and income from such investments is recorded when
dividends are paid.
INVENTORIES
Ore and in-process inventories and materials and supplies are stated at the
lower of average cost or net realizable value. Precious metals are stated at
market value.
Non-current inventories are stated at the lower of average cost or net
realizable value and represent ore-in-stockpiles from which no material is
expected to be processed for more than one year after the balance sheet date.
PROPERTY, PLANT AND MINE DEVELOPMENT
Expenditures for new facilities or expenditures which extend the useful
lives of existing facilities are capitalized and depreciated using the
straight-line method at rates sufficient to depreciate such costs over the
estimated productive lives of such facilities, which range from two to
twenty-one years.
Mineral exploration costs are expensed as incurred. When it has been
determined that a mineral property can be economically developed, the costs
incurred to develop such property, including the costs to further delineate the
ore body and remove overburden to initially expose the ore body, are
capitalized. Such costs and estimated future development costs are amortized
using a unit-of-production method over the estimated life of the ore body.
On-going development expenditures to maintain production are generally charged
to operations as incurred.
30
<PAGE> 32
NEWMONT GOLD COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Significant payments related to the acquisition of exploration interests
are capitalized. If a mineable ore body is discovered, such costs are amortized
using a unit-of-production method. If no mineable ore body is discovered, such
costs are expensed in the period in which it is determined the property has no
future economic value.
Interest expense allocable to the cost of developing mining properties and
to constructing new facilities is capitalized until operations commence.
Gains or losses from normal sales or retirements of assets are included in
other income or expense.
MINING COSTS
In general, mining costs are charged to operations as incurred. Due to the
diverse waste-to-ore ratios encountered in mining certain of the Company's
deposits, mining costs for the deposits, to the extent they do not relate to
current production, are capitalized and then charged to operations when the
applicable gold is produced.
RECLAMATION AND MINE CLOSURE COSTS
Estimated future reclamation and mine closure costs are based principally
on legal and regulatory requirements and are accrued and charged over the
expected operating lives of the Company's mines using a unit-of-production
method.
INCOME TAXES
The Company's taxable income is included in NMC's consolidated U.S. federal
income tax return. Pursuant to a tax-sharing agreement with NMC, the Company
calculated its provision for income taxes as if the Company filed separate U.S.
federal and state corporate income tax returns, with certain adjustments.
Effective January 1, 1994, pursuant to a revised tax-sharing agreement with NMC,
the Company succeeds to and assumes all corporate income tax attributes and
liabilities of NMC as of January 1, 1994.
Prior to 1993, the Company recorded deferred income taxes under Accounting
Principles Board Opinion No. 11, "Accounting for Income Taxes" ("APB 11"). Under
the deferred method of APB 11, the Company recognized certain revenues and
expenses for financial reporting purposes at different times than it recognized
such amounts for income tax purposes, generating a deferred income tax charge or
benefit for the year.
Effective January 1, 1993, the Company adopted Statement of Financial
Accounting Standards No. 109, "Accounting for Income Taxes" ("SFAS 109"). Under
the liability method of SFAS 109, the Company recognizes certain temporary
differences between the financial reporting basis of the Company's liabilities
and assets and the related income tax basis for such liabilities and assets.
This generates a net deferred income tax liability or net deferred income
tax asset for the Company for the year, as measured by the statutory tax rates
in effect as enacted. The Company then derives its deferred income tax charge or
benefit by recording the change in the net deferred income tax liability or net
deferred income tax asset balance for the Company for the year.
GOLD HEDGING ACTIVITIES
The Company may enter into gold loans, options contracts and forward sales
contracts to hedge the effect of price changes on the gold it produces. Gains
and losses realized on such instruments, as well as any cost or revenue
associated therewith, are recognized in sales when the related production is
delivered.
31
<PAGE> 33
NEWMONT GOLD COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
EARNINGS PER COMMON SHARE
For periods prior to 1994, net income per share was computed by dividing
net income by the weighted average number of common shares assumed to be
outstanding during each period. There were no common share equivalents for these
periods.
As a result of the issuance of stock options in 1994 arising from the
transaction with NMC, discussed in Note 2, earnings per common and common
equivalent share for 1994 are based on the sum of the weighted average number of
common shares outstanding during the period, and the assumed exercise of stock
options having exercise prices less than the average market prices of the common
stock during the period using the treasury stock method. The convertible
preferred shares issued in connection with the transaction with NMC are not
common stock equivalents and were anti-dilutive for 1994. The weighted average
number of shares used in the earnings per share calculations were 96.5 million
in 1994, and 104.9 million in 1993 and 1992.
RECLASSIFICATIONS
Certain amounts in prior years have been reclassified to conform to the
1994 presentation.
(2) ACQUISITION OF NMC'S OPERATIONS
Effective January 1, 1994, the Company acquired all of the operations of
NMC. The 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 (including the Company's $159.6 million of advances to NMC as
of December 31, 1993), but not NMC's obligations with respect to its $5.50
convertible preferred stock (the "NMC Preferred Stock") (except for accrued and
unpaid dividends as of December 31, 1993) and its employee stock options
exercisable for NMC's common stock; (d) the issuance by the Company to NMC of
2,875,000 shares of $5.50 convertible preferred stock with a par value of $5.00
per share, and having terms identical to the NMC Preferred Stock (except that
upon conversion, NMC will be entitled to receive shares of the Company's common
stock instead of NMC's common stock); and (e) the issuance by the Company to NMC
of stock options exercisable for shares of 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). It is intended
that the preferred stock and stock options issued by the Company to NMC will be
exercised if and to the extent NMC Preferred Stock and outstanding NMC stock
options are exercised and that the Company would grant to NMC additional stock
options if and to the extent additional stock options were granted by NMC. As a
result of the transaction (and giving effect to subsequent stock option
exercises by NMC and additional stock option grants by the Company), NMC's only
assets at December 31, 1994 are (i) 86,079,932 shares of common stock of the
Company which approximates 89.2% of the Company's common stock outstanding, (ii)
2,875,000 shares of the Company's $5.50 convertible preferred stock and (iii)
stock options to purchase 2,177,546 shares of the Company. (If the preferred
stock were converted and stock options were exercised, NMC's percentage interest
in the Company would increase to 90.3%.)
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 of the Company transferred by NMC to the Company 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 income statement for 1993
gives effect to the transaction as if it had occurred January 1, 1993 and the
pro forma condensed consolidated balance sheet reflects the transaction as if it
had occurred December 31, 1993. These statements include the historical amounts
for the
32
<PAGE> 34
NEWMONT GOLD COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Company, adjusted to reflect the historical amounts of NMC excluding its
interest in the Company and the elimination of intercompany interest amounts.
These pro forma financial statements are presented for illustrative purposes
only, and are not necessarily indicative of the Company's future operating
results or financial condition.
PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF INCOME
(IN THOUSANDS, EXCEPT PER SHARE)
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, 1993
------------------------------------------------
PRO FORMA
HISTORICAL ADJUSTMENTS PRO FORMA
---------- ------------------- ---------
(A) (B),(C)
-------- -------
<S> <C> <C> <C> <C>
Sales and other income
Sales........................................... $601,601 $ 27,208 $628,809
Interest from parent............................ 5,326 $(5,326)(B) --
Dividends, interest and other................... 333 19,643 19,976
Gain on sale of affiliate shares................ -- 29,607 29,607
-------- -------- ------- --------
607,260 76,458 (5,326) 678,392
-------- -------- ------- --------
Costs and expenses
Costs applicable to sales....................... 332,270 1,271 333,541
Depreciation, depletion and amortization........ 107,169 2,831 110,000
Exploration..................................... 10,061 42,633 52,694
General and administrative...................... 11,272 24,577 35,849
Third party interest, net of amounts
capitalized.................................. -- 12,393 12,393
Related party interest.......................... -- 5,326 (5,326)(B) --
Other........................................... 3,980 10,250 14,230
-------- -------- ------- --------
464,752 99,281 (5,326) 558,707
-------- -------- ------- --------
Equity in income of affiliated companies.......... -- 5,001 5,001
-------- -------- ------- --------
Income (loss) before income taxes................. 142,508 (17,822) 124,686
Income tax benefit (provision).................... (29,392) 10,827 (18,565)
-------- -------- ------- --------
Income (loss) from continuing operations.......... 113,116 (6,995) 106,121
Preferred stock dividends......................... -- 15,910 15,910
-------- -------- ------- --------
Income (loss) from continuing operations
applicable to common shares..................... $113,116 $(22,905) $ -- $ 90,211
======== ======== ======= ========
Income per share from continuing operations....... $ 1.08 $ 0.94
======== ========
Weighted average shares outstanding............... 104,875 (8,474)(C) 96,401
======== ======= ========
</TABLE>
---------------
(A) Reflects the combined operations of NMC excluding its interest in the
Company, before the cumulative effect of a change in accounting principle.
(B) Eliminates intercompany interest between the Company and NMC.
(C) Reflects the 8,650 shares of the Company's common stock transferred to the
Company by NMC, adjusted for 176 common stock equivalent shares resulting
from the options exercisable for the Company's common stock.
33
<PAGE> 35
NEWMONT GOLD COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET
(IN THOUSANDS, EXCEPT PER SHARE)
<TABLE>
<CAPTION>
AT DECEMBER 31, 1993
-----------------------------------------------------
PRO FORMA
HISTORICAL ADJUSTMENTS PRO FORMA
---------- ------------------------ ---------
(A) (B),(C),(D)
--------- -----------
<S> <C> <C> <C> <C>
Assets
Cash and short-term investments.......... $ 389 $ 88,070 $ 88,459
Advances to parent....................... 159,573 $(159,573)(B) --
Inventories.............................. 118,891 3,355 122,246
Other.................................... 15,948 2,311 18,259
---------- --------- --------- ----------
Current assets........................ 294,801 93,736 (159,573) 228,964
Property, plant and mine development,
net................................... 695,460 99,070 794,530
Other.................................... 31,609 131,307 162,916
---------- --------- --------- ----------
Total assets..................... $1,021,870 $ 324,113 $(159,573) $1,186,410
========== ========= ========= ==========
Liabilities and stockholders' equity
Advances from related party.............. $ -- $ 159,573 $(159,573)(B) $ --
Other.................................... 60,257 49,777 110,034
---------- --------- --------- ----------
Current liabilities................... 60,257 209,350 (159,573) 110,034
Long-term debt........................... -- 192,000 192,000
Other.................................... 37,595 125,538 163,133
---------- --------- --------- ----------
Total liabilities................ 97,852 526,888 (159,573) 465,167
Stockholders' equity
Preferred stock -- Pro forma $5.00 par
value; 5,000 shares authorized; 2,875
shares issued of $5.50 convertible.... -- 14,375(C) 14,375
Common stock -- $0.01 par value; 250,000
shares authorized; 104,875 shares
issued................................ 1,049 1,049
Treasury stock -- Pro forma 8,650
shares................................ -- (76,206)(D) (76,206)
Capital in excess of par value........... 206,260 206,260
Retained earnings........................ 716,709 (202,775) (14,375)(C) 575,765
76,206(D)
---------- --------- --------- ----------
Total stockholders' equity....... 924,018 (202,775) -- 721,243
---------- --------- --------- ----------
Total liabilities and
stockholders' equity........... $1,021,870 $ 324,113 $(159,573) $1,186,410
========== ========= ========= ==========
</TABLE>
---------------
(A) Reflects the transfer at historical cost of NMC's combined assets and
liabilities excluding its interest in the Company at December 31, 1993.
(B) Eliminates intercompany advances between the Company and NMC.
(C) Reflects the issuance at par value of 2,875 shares of the Company's $5.50
convertible preferred stock, $5.00 per share par value, to NMC.
(D) Reflects the transfer at a net book value of $8.81 per share at December 31,
1993 of 8,650 shares of the Company's common stock from NMC to the Company.
The number of shares to be transferred was determined by taking the average
closing market price of the Company's common stock ten trading days before
the public announcement of the transaction and dividing it into the agreed
to value of the Company's common stock of $374 million.
34
<PAGE> 36
NEWMONT GOLD COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(3) INVENTORIES
<TABLE>
<CAPTION>
AT DECEMBER 31,
-----------------------
1994 1993
-------- --------
(IN THOUSANDS)
<S> <C> <C>
Current:
Ore and in-process inventories............................ $ 62,196 $ 55,761
Precious metals........................................... 34,536 37,486
Materials and supplies.................................... 31,533 25,644
Other..................................................... 2,666 --
-------- --------
$130,931 $118,891
======== ========
Non-current:
Ore-in-stockpiles (included in other assets).............. $ 33,051 $ 16,400
======== ========
</TABLE>
(4) PROPERTY, PLANT AND MINE DEVELOPMENT
<TABLE>
<CAPTION>
AT DECEMBER 31,
-------------------------
1994 1993
---------- ----------
(IN THOUSANDS)
<S> <C> <C>
Land and mining claims...................................... $ 70,884 $ 31,251
Buildings and equipment..................................... 1,212,738 764,042
Mine development............................................ 231,468 156,615
Construction-in-progress.................................... 145,608 213,573
---------- ----------
1,660,698 1,165,481
Accumulated depreciation, depletion and amortization........ (603,350) (498,774)
Capitalized mining costs.................................... 61,938 28,753
---------- ----------
$1,119,286 $ 695,460
========== ==========
</TABLE>
(5) OTHER ACCRUED LIABILITIES
<TABLE>
<CAPTION>
AT DECEMBER 31,
-----------------------
1994 1993
-------- -------
(IN THOUSANDS)
<S> <C> <C>
Plant and equipment......................................... $ 33,819 $20,340
Payroll and related benefits................................ 17,006 13,382
Reclamation and remediation................................. 15,900 --
Royalties................................................... 4,912 5,170
Other....................................................... 33,116 6,303
-------- -------
$104,753 $45,195
======== =======
</TABLE>
(6) INCOME TAXES
SFAS 109 requires that, effective January 1, 1993, the Company account for
income taxes under the liability method, rather than the deferred method
required previously under APB 11. The cumulative effect of this change in
accounting for income taxes was to increase the Company's 1993 earnings $2.7
million, or $0.02 per share, attributable to fiscal years prior to 1993.
35
<PAGE> 37
NEWMONT GOLD COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Under SFAS 109, the Company must establish deferred income tax liabilities
and deferred income tax assets when temporary differences arise between the
financial reporting basis and the income tax basis of the Company's liabilities
and assets, as measured by the statutory rates in effect as enacted.
The Company's deferred income tax assets include certain future tax
benefits such as net operating losses or tax credit carryforwards. The Company
must record a valuation allowance against any portion of those deferred income
tax assets which it believes it will more likely than not fail to realize.
As discussed in Note 2, effective January 1, 1994, the Company acquired
essentially all of the assets and assumed essentially all of the liabilities of
NMC. The Company's deferred income tax liabilities and assets at December 31,
1994, reflect the impact of this transaction. Worldwide components of the
Company's resulting deferred income tax (liabilities) and assets are as follows
(in thousands):
<TABLE>
<CAPTION>
AT DECEMBER 31,
---------------------
1994 1993
-------- --------
<S> <C> <C>
Deferred tax liabilities:
Accelerated tax depreciation................................. $(45,165) $(40,194)
Capitalized interest......................................... (9,892) --
Mine development costs....................................... (8,444) (11,738)
Depletion of the cost of land and mining claims.............. (3,589) (3,266)
Other........................................................ (722) (283)
-------- --------
Gross deferred tax liabilities....................... (67,812) (55,481)
-------- --------
Deferred tax assets:
Investment in subsidiaries and affiliates not consolidated
for tax purposes.......................................... 47,603 --
Exploration costs............................................ 19,956 6,476
Alternative minimum tax credit carryforward.................. 19,616 46,103
Reclamation costs............................................ 11,353 5,300
Retiree benefit costs........................................ 8,857 2,800
Gain on interest rate hedges................................. 3,798 --
Relocation/reorganization costs.............................. 3,407 1,191
Capitalized inventory costs.................................. 3,270 6,471
Other........................................................ 2,147 --
-------- --------
Gross deferred tax assets............................ 120,007 68,341
-------- --------
Valuation allowance for deferred tax assets.................. (8,857) (2,800)
-------- --------
Net deferred tax asset......................................... $ 43,338 $ 10,060
======== ========
</TABLE>
Based upon its estimate of future operations and tax planning strategies,
the Company believes that it more likely than not will utilize $111.2 million of
the $120.0 million of gross deferred tax assets at December 31, 1994, reflecting
a valuation allowance of $8.8 million and a net increase of $6.1 million from
December 31, 1993's valuation allowance.
The Company gives no outright assurance that it will generate sufficient
taxable income to fully realize the $111.2 million of gross deferred tax assets
at December 31, 1994. Rather the Company's future levels of taxable income will
depend, in part, upon gold prices, general economic conditions and other factors
beyond the Company's control.
36
<PAGE> 38
NEWMONT GOLD COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
The Company's pre-tax financial statement income (loss) before the
cumulative effect of changes in accounting principles consists of (in
thousands):
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
----------------------------------
1994 1993 1992
-------- -------- --------
<S> <C> <C> <C>
Domestic........................................... $ 68,880 $142,508 $110,826
Foreign............................................ (14,820) -- --
-------- -------- --------
$ 54,060 $142,508 $110,826
======== ======== ========
</TABLE>
The Company's provisions (benefits) for income taxes before the cumulative
effect of changes in accounting principles consist of (in thousands):
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
---------------------------------
1994 1993 1992
-------- -------- -------
(APB
(SFAS 109) 11)
--------------------- -------
<S> <C> <C> <C>
Current:
Domestic.......................................... $ 3,660 $ 41,495 $28,377
Foreign........................................... 586 -- --
-------- -------- -------
4,246 41,495 28,377
-------- -------- -------
Deferred:
Domestic.......................................... (33,580) (13,482) (4,965)
Foreign........................................... -- -- --
Adjustment in net deferred tax liabilities for
change in tax rates............................ -- 1,379 --
-------- -------- -------
(33,580) (12,103) (4,965)
-------- -------- -------
$(29,334) $ 29,392 $23,412
======== ======== =======
</TABLE>
In accordance with APB 11, the Company's deferred income tax benefits for
1992, before the cumulative effect of a change in accounting principle,
consisted of (in thousands):
<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 31,
1992
------------
<S> <C>
Accelerated tax depreciation............................................ $ (1,468)
Mine development and exploration costs.................................. (2,197)
Capitalized inventory costs............................................. (600)
Other................................................................... (700)
--------
$ (4,965)
========
</TABLE>
On August 10, 1993, President Clinton signed into law the Revenue
Reconciliation Act of 1993, raising the U.S. federal corporate income tax rate
from 34% to 35% (retroactive to January 1, 1993). The Company's resulting
provisions (benefits) for income taxes before the cumulative effect of changes
in accounting
37
<PAGE> 39
NEWMONT GOLD COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
principles differ from the amounts computed by applying the U.S. corporate
income tax statutory rate for the following reasons (in thousands):
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
----------------------------------
1994 1993 1992
-------- -------- --------
(SFAS 109) (APB 11)
--------------------- --------
<S> <C> <C> <C>
U.S. corporate income tax at statutory rate........ $ 18,921 $ 49,878 $ 37,681
Percentage depletion............................... (27,437) (22,118) (14,463)
Resolution of tax issues associated with prior
years............................................ (16,250) -- --
Foreign tax credits................................ (4,421) -- --
Non-taxable portion of dividends received from
domestic corporations............................ (564) -- --
Other.............................................. 417 1,632 194
-------- -------- --------
$(29,334) $ 29,392 $ 23,412
======== ======== ========
</TABLE>
The Company's prepaid income taxes were $9.1 million and $5.7 million at
December 31, 1994 and 1993, respectively. The Company's other long-term
liabilities included $23.7 million and $7.2 million of taxes payable at December
31, 1994 and 1993, respectively.
(7) DEBT
LONG-TERM DEBT
Long-term debt obligations of the Company were as follows (in thousands):
<TABLE>
<CAPTION>
AT DECEMBER 31, 1994
--------------------
<S> <C>
Sale-leaseback of refractory ore treatment plant.................. $349,134
8 5/8% notes...................................................... 150,000
Medium-term notes................................................. 42,000
Project financing................................................. 52,500
--------
$593,634
========
</TABLE>
No long-term debt was outstanding at December 31, 1993. Long-term
indebtedness was assumed by the Company in 1994 as a result of the transaction
with NMC discussed in Note 2. Scheduled minimum long-term debt repayments are
zero in 1995, $14.0 million in 1996, $19.3 million in 1997, $25.0 million in
1998 and $17.9 million in 1999. Actual payments may be greater due to actual
operating cash flows realized.
Sale-leaseback of the Refractory Ore Treatment Plant
In September 1994, the Company entered into a sale and leaseback agreement
for its refractory ore treatment plant located in Carlin, Nevada for $349.1
million. The transaction has been accounted for as debt for financial statement
purposes, with the cost of the refractory ore treatment plant recognized as an
asset and depreciated. The lease is for 21 years and the aggregate future
minimum lease payments, which include interest, as of December 31, 1994 were
$667.9 million. These payments begin in January 1996 and are $29.7 million
annually in 1996 through 1999. Principal payments are included in these amounts
beginning in 1998. The lease has purchase options during and at the end of the
lease at predetermined prices.
In connection with this transaction, the Company entered into certain
interest rate contracts to hedge the interest cost of the financing. These
contracts were settled for a gain of $11.0 million which will be recognized as a
reduction of interest expense over the term of the lease. As a result of this
gain, the effective interest rate is 6.15%.
38
<PAGE> 40
NEWMONT GOLD COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
8 5/8% Notes
Unsecured notes with a principal amount of $150.0 million due April 1, 2002
and bearing an annual interest rate of 8 5/8% were outstanding at December 31,
1994. Interest is payable semi-annually in April and October and the notes are
not redeemable prior to maturity. Using interest rates prevailing on similar
instruments at December 31, 1994, this debt is estimated to have a fair value of
$151.5 million.
Medium-term Notes
Notes totalling $42.0 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 December 31, 1994. Using interest rates prevailing on similar
instruments at December 31, 1994, this debt is estimated to have a fair value of
$40.4 million.
Project Financing Facility
The Company, through a wholly-owned subsidiary, is a 50% participant in the
Zarafshan-Newmont Joint Venture ("Zarafshan-Newmont") in the Republic of
Uzbekistan. The other 50% participants are two entities of the Uzbekistan
government. Zarafshan-Newmont was established to construct and operate a
leaching facility to produce gold from low-grade ore previously mined and
stockpiled at the Muruntau Mine in the Republic of Uzbekistan.
Zarafshan-Newmont has secured $105.0 million of project financing from a
consortium of banks. The loan is payable out of the proceeds of the project,
beginning the earlier of three months after the first interest payment date
after project completion tests are satisfied 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 three month London Interbank Offered Rate prior to
satisfaction of project completion tests and 3.75 percentage points over the
three month London Interbank Offered Rate after satisfaction of project
completion tests. The weighted average interest rate for 1994 was 6.9% and the
interest rate at December 31, 1994 was 7.8%. The full amount under the facility
had been drawn down as of December 31, 1994. The Company expects that the
facility will be amended to allow Zarafshan-Newmont to draw down an additional
$30 million under the facility in 1995.
The Company has guaranteed one-half of the payment of any amounts due under
such loan until the requirements of the project completion tests have been
satisfied, at which time the loan will become non-recourse debt. Such completion
tests must be satisfied no later than October 1996. The Company has obtained
political risk insurance coverage for its investment and loan guarantee.
Revolving Credit Facility
The Company has a $400.0 million revolving credit facility with a
consortium of banks. The facility expires in April 1998. No amounts were
outstanding under the facility as of December 31, 1994. Interest rates are
variable and adjust subject to changes in the Company's long-term debt ratings
and to usage of the facility in terms of borrowings as a percentage of
commitments. Currently, the Company's interest rate is the lenders' base rate
plus 0.25%. The Company has the option to fix the rate for up to six months.
There is an annual facility fee which will also adjust subject to the Company's
debt ratings. This fee is presently 0.15% of the lenders' total commitment.
The revolving credit facility contains certain covenants that limit
consolidated indebtedness, as defined, to 67% of total capitalization; require
minimum net worth, as defined, of $250.0 million in 1994, which then increases
$25.0 million annually through 1997; and require an interest coverage ratio, as
defined, of not less than 2.5 to 1.
39
<PAGE> 41
NEWMONT GOLD COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
SHORT-TERM DEBT
All short-term debt at December 31, 1994 consisted of bank debt. The
Company currently has unsecured demand bank lines of credit aggregating $16.0
million, of which $15.7 million was outstanding at December 31, 1994. These
facilities bear interest at customary short-term rates for borrowers with
similar credit ratings. The interest rate on this short-term debt had a weighted
average of 6.5% in 1994 and was 8.5% at December 31, 1994.
CAPITALIZED INTEREST
Capitalized interest was $19.7 million in 1994. No interest was capitalized
in 1993 or 1992.
(8) RELATED PARTY TRANSACTIONS
Prior to the transaction discussed in Note 2, which was effective January
1, 1994, the Company engaged in various transactions with NMC and other
companies then affiliated with NMC in the ordinary course of its business. Such
transactions included, among other things, advances or borrowings.
Prior to January 1, 1994, the Company and NMC were parties to a management
services agreement whereby the Company agreed to provide NMC general executive,
administrative and other services. Pursuant to this agreement, the Company
charged NMC $21.8 million and $19.6 million in 1993 and 1992, respectively.
Advances to parent at December 31, 1993 reflect NMC effectively investing
the Company's cash in less than 90 day money market instruments. The Company was
credited with the average rate of earnings NMC received on its invested funds.
During 1993 and 1992, the Company was credited with interest at average rates of
2.9% and 3.3%, respectively. As the advances earned market interest investment
rates, the Company estimated that the recorded amounts approximated fair value
at December 31, 1993 and 1992.
Exploration, mine development and metallurgical research costs incurred for
and charged to the Company by a company which was an affiliate of NMC prior to
January 1, 1994, amounted to $19.4 million and $21.6 million in 1993 and 1992,
respectively.
(9) STOCKHOLDERS' EQUITY
PREFERRED STOCK
Effective January 1, 1994, as a result of the transaction discussed in Note
2, the Company issued to NMC 2.875 million shares of $5.00 par value Convertible
Preferred Stock at a value of $100 per share.
The $5.50 annual dividend per share is cumulative from January 1, 1994 and
is payable quarterly commencing June 15, 1994. The shares are convertible at any
time at the option of the holder into shares of common stock of the Company at a
conversion price of $36.395 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 the Company, at a beginning redemption price of $103.85 per share.
Such redemption price then declines $0.55 per share annually until it reaches
$100 per share on November 15, 2002, which is also the liquidation preference
per share. The Convertible Preferred Stock, except in limited circumstances,
does not have voting rights.
As discussed in Note 2, the terms of the Preferred Stock mirror the NMC
Preferred Stock. Through the Preferred Stock, the Company facilitates compliance
by NMC with its continuing obligations under the NMC Preferred Stock. Dividends
paid by the Company to NMC on account of the Preferred Stock are in turn paid by
NMC to the holders of the NMC Preferred Stock. The Company will only exercise
its redemption right under the Preferred Stock if and to the extent the
corresponding right is exercised by NMC. In addition, NMC intends to convert its
shares of the Company's Preferred Stock only if and to the extent the NMC
40
<PAGE> 42
8
NEWMONT GOLD COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Preferred Stock is converted. This will insure that the number of outstanding
shares of the Company's Common Stock held by NMC will equal the number of
outstanding shares of NMC Common Stock.
(10) STOCK OPTIONS
As part of the transaction with NMC discussed in Note 2, the Company issued
options to NMC to purchase shares of the Company's Common Stock. The Company
issued options in the same number and with the same exercise prices as all of
the NMC options (the "NMC Options") then outstanding. Additional options have
been and will continue to be issued by the Company to NMC to match the terms of
additional NMC Options granted. NMC has exercised and will continue to exercise
the stock options issued to it by the Company if and to the extent the
corresponding NMC stock options have been or will be exercised.
Substantially all of the NMC Options have been granted to participants
under NMC's 1982 Key Employees Stock Option Plan, 1987 Key Employees Stock
Option Plan and 1992 Key Employees Stock Plan (collectively, the "plans"). NMC
continues to grant NMC Options to eligible participants under its 1987 Key
Employees Stock Option Plan and 1992 Key Employees Stock Plan.
Under NMC's stock option plans, NMC Options to purchase shares of NMC are
granted to key employees at the fair market value of such shares on the date of
grant. NMC Options under these plans are subject to certain restrictions,
generally vest over a two year period and are exercisable over a period not
exceeding ten years. At December 31, 1994, 996,053 shares were available for
future grants under NMC's stock option plans.
In 1994, 1993 and 1992, certain key executives were granted NMC Options
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
NMC's common stock is a defined amount above the option exercise price. In
addition, the same executives were granted NMC Options in 1994, 1993 and 1992
whose exercise prices are in excess of the fair market value on the date of
grant. Generally, these key executive NMC Options vest over a period of one to
five years and are exercisable over a ten year period. At December 31, 1994,
846,909 of these NMC Options were outstanding.
The following table summarizes annual stock option activity for the year
ended December 31, 1994:
<TABLE>
<CAPTION>
NUMBER OPTION PRICE
OF SHARES PER SHARE
--------- ---------------
<S> <C> <C>
Outstanding at beginning of year.......................... -- $ -- - --
Issued.................................................... 2,486,117 $ 27.20 - 56.09
Exercised................................................. (229,831) $ 27.20 - 38.97
Canceled.................................................. (78,740) $ 29.17 - 45.83
---------
Outstanding at end of year................................ 2,177,546 $ 27.20 - 56.09
=========
</TABLE>
At December 31, 1994, 1,007,998 options were exercisable.
(11) EMPLOYEE BENEFIT PLANS
PENSION BENEFITS
Prior to January 1, 1994, the Company had one qualified non-contributory
defined benefit pension plan which covered substantially all hourly employees.
As a result of the transaction with NMC discussed in Note 2, the Company now has
two qualified non-contributory defined benefit pension plans, one which covers
salaried employees and the other which covers substantially all hourly
employees. In addition, as a result of the transaction with NMC discussed in
Note 2, the Company has a non-qualified supplemental pension plan for salaried
employees whose benefits under the qualified plan are limited by federal
legislation. The vesting
41
<PAGE> 43
NEWMONT GOLD COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
period is five years of service for each plan. The plans' benefit formulas are
based on an employee's years of credited service and either such employee's last
five years average pay (salaried plan) or a flat dollar amount (hourly plan).
Pension costs are determined annually by independent actuaries and pension
contributions to the qualified plans are made based on funding standards
established under the Employee Retirement Income Security Act of 1974 ("ERISA").
The Company maintains a trust for the purpose of funding the supplemental
pension plan as well as death benefits for officers of the Company. This trust
is funded at the discretion of the Company and had a balance of $1.9 million
(which approximated market) at December 31, 1994. 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 qualified plans' assets consist of stocks, bonds and cash.
The components of pension expense, in the aggregate, consist of (in
thousands):
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
---------------------------
1994 1993 1992
------- ----- -----
<S> <C> <C> <C>
Service cost............................................. $ 3,070 $ 589 $ 529
Interest cost on projected benefit obligation............ 4,633 323 260
Return on assets......................................... (5,370) (340) (323)
Amortization of unrecognized prior service cost and net
accumulated losses less amortization of net transition
asset.................................................. 211 6 6
------- ----- -----
Pension expense.......................................... $ 2,544 $ 578 $ 472
======= ===== =====
</TABLE>
The following tables set forth the funded status of the Company's pension
plans and the amounts recognized in the Company's consolidated balance sheets at
December 31, 1994 and 1993, respectively (in thousands):
<TABLE>
<CAPTION>
AT DECEMBER 31, 1994
-------------------------------------
SALARY HOURLY SUPPLEMENTAL
PENSION PENSION PENSION
PLAN PLAN PLAN
-------- ------- ------------
<S> <C> <C> <C>
Actuarial present value of benefit obligations:
Accumulated benefit obligation --
Vested benefits.............................. $(46,831) $(4,094) $ (945)
Non-vested benefits.......................... (1,650) (1,167) (26)
-------- ------- --------
(48,481) (5,261) (971)
Effect of future salary increases............... (3,399) -- (10)
-------- ------- --------
Projected benefit obligation...................... (51,880) (5,261) (981)
Plan assets at fair value......................... 60,221 5,044 --
-------- ------- --------
Plan assets greater (less) than
projected benefit obligation.................... 8,341 (217) (981)
Unrecognized prior service cost................... (590) 141 610
Unrecognized net (gain) loss...................... (2,558) (419) 4,285
Unrecognized net transition (asset) liability..... (2,680) (78) 2,715
Adjustment required to recognize minimum
liability....................................... -- -- (7,600)
-------- ------- --------
Net pension asset (liability)..................... $ 2,513 $ (573) $ (971)
======== ======= ========
</TABLE>
42
<PAGE> 44
NEWMONT GOLD COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
<TABLE>
<CAPTION>
AT DECEMBER 31, 1993
--------------------
HOURLY
PENSION
PLAN
--------------------
<S> <C>
Actuarial present value of benefit obligations:
Accumulated benefit obligation --
Vested benefits................................................ $ (3,577)
Non-vested benefits............................................ (1,670)
--------
Accumulated and projected benefit obligation........................ (5,247)
Plan assets at fair value........................................... 4,570
--------
Plan assets less than projected benefit obligation.................. (677)
Unrecognized prior service cost..................................... 153
Unrecognized net loss............................................... 221
Unrecognized net transition asset................................... (84)
--------
Net pension liability............................................... $ (387)
========
</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 1994. Such adjustment resulted in recording an
intangible asset and, to the extent the minimum liability adjustment exceeded
the unrecognized net transition liability, a reduction of $2.8 million in
stockholders' equity, which was net of related deferred income tax benefits for
1994.
In measuring the projected benefit obligation for the plans, the following
actuarial assumptions were used:
<TABLE>
<CAPTION>
AT DECEMBER 31,
-------------
1994 1993
---- ----
<S> <C> <C>
Weighted average discount rate....................................... 8.5% 7.5%
Rate of increase in future compensation (applicable only to salaried
plans)............................................................. 4.0% N/A
</TABLE>
The weighted average expected long-term rate of return on plan assets was
assumed to be 8.25% for 1994, 8.25% for 1993 and 9.25% for 1992.
RETIREE BENEFITS OTHER THAN PENSIONS
The Company provides defined medical benefits to qualified retirees who
were salaried employees and their eligible dependents, and it provides defined
life insurance benefits to qualifying retirees who were salaried employees. In
general, participants become eligible for these benefits upon retirement
directly from the Company if they are at least 55 years old and the combination
of their age and years of service with the Company equals 75 or more.
The defined medical benefits cover most of the reasonable and customary
charges for hospital, surgical, diagnostic and physician services and
prescription drugs. Life insurance benefits are based on a percentage of final
base annual salary and decline over time after retirement commences.
The Company adopted Statement of Financial Accounting Standards No. 106,
"Employers' Accounting for Postretirement Benefits Other Than Pensions" ("SFAS
106"), effective January 1, 1992. The statement requires that postretirement
benefits other than pensions be accrued during an employee's service to the
Company. Previously, the Company recorded the expense when benefit payments were
made for retirees.
The actuarially-determined accumulated postretirement benefit obligation
("APBO") calculated in accordance with SFAS 106 at January 1, 1992 was $7.2
million. The Company expensed $6.4 million of this amount as a cumulative effect
of a change in accounting principle. The remainder of approximately $0.8
43
<PAGE> 45
NEWMONT GOLD COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
million was charged to NMC pursuant to the then effective management services
agreement with NMC. Effective January 1, 1994 with the transaction discussed in
Note 2, NMC's actuarially-determined APBO of $11.6 million was transferred to
the Company.
The components of expense for postretirement benefits other than pensions
for 1994, 1993 and 1992 are shown in the table below (in thousands):
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
----------------------------
1994 1993 1992
------ ------ ------
<S> <C> <C> <C>
Service cost............................................. $1,846 $1,279 $1,146
Interest cost............................................ 1,642 705 560
------ ------ ------
Expense for postretirement benefits other than
pensions............................................... $3,488 $1,984 $1,706
====== ====== ======
</TABLE>
The Company charged NMC $0.2 million in 1993 and 1992 for NMC's share of
these costs in accordance with the provisions of the then effective management
services agreement.
The following table sets forth the components of the liability for the
Company's plans for postretirement benefits other than pensions recognized in
its balance sheet (in thousands):
<TABLE>
<CAPTION>
AT DECEMBER 31,
-------------------
1994 1993
------- -------
<S> <C> <C>
Actuarial present value of accumulated benefit obligation:
Retirees....................................................... $10,296 $ 1,182
Other fully eligible plan participants......................... 1,556 1,570
Other active plan participants................................. 9,659 8,738
------- -------
Total APBO.................................................. 21,511 11,490
Unrecognized net gain (loss)................................... 4,072 (622)
------- -------
Accrued liability for postretirement benefits other than
pensions....................................................... $25,583 $10,868
======= =======
</TABLE>
At December 31, 1994, $3.0 million of assets, which were transferred in the
transaction with NMC discussed in Note 2, with market values of approximately
the same amounts, 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. The
Company has no formal policy for funding postretirement benefit obligations.
Weighted average discount rates of 8.5% and 7.5% were used in calculating
the APBO at December 31, 1994 and 1993, respectively. The assumed health care
cost trend rates to measure the expected cost of benefits at December 31, 1994
start at a 10% annual increase for coverage before the age of 65 and a 9% 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 and the APBO for 1994 by
approximately 22%.
SAVINGS PLAN
The Company has two qualified defined contribution savings plans, one which
covers salaried employees and the other which covers substantially all hourly
employees. In addition, the Company has a non-qualified supplemental savings
plan for salaried employees whose benefits under the qualified plan are limited
by federal regulations.
44
<PAGE> 46
NEWMONT GOLD COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
After six months or one year of service for the salaried and hourly plans,
respectively, the Company generally matches 100% of employee contributions of up
to 6% and 4% of base salary for the salaried and hourly plans, respectively.
The Company's matching contributions to such plans were $3.3 million, $2.0
million and $1.9 million in 1994, 1993 and 1992, respectively.
(12) OTHER EXPENSES
The Company is involved in several matters concerning environmental
obligations primarily associated with former mining activities, as discussed in
Note 15. Included in other expenses for the year ended December 31, 1994 is a
charge of $36.1 million related to these matters.
Costs related to the transaction with NMC discussed in Note 2 of $0.6
million and $3.5 million were expensed in 1994 and 1993, respectively. Also
during 1994, the Company incurred $4.1 million of costs associated with
defeating a referendum placed on the Oregon ballot which would have effectively
prevented open pit mining.
The Company expensed $0.7 million, $0.5 million and $3.8 million in 1994,
1993 and 1992, respectively, when it wrote down the carrying value of certain
assets.
(13) MAJOR CUSTOMERS AND EXPORT SALES
The Company is not economically dependent on a limited number of customers
for the sale of its product, primarily gold, because gold commodity markets are
well-established worldwide. During 1994, there were three customers which
accounted for $125.2 million, $99.6 million and $88.5 million of total sales,
each of which represented more than 10% of total sales and together accounted
for 52% of annual sales. In 1993, sales to three such major customers accounted
for $104.9 million, $97.3 million and $78.3 million, or 47% of total sales. In
1992, sales to two such major customers accounted for $124.9 million and $65.2
million, or 35% of total sales.
Export sales were $497.2 million, $269.1 million and $242.5 million for
1994, 1993 and 1992, respectively.
(14) SUPPLEMENTAL CASH FLOW INFORMATION
Net cash provided by operating activities includes the following cash
payments (in thousands):
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
-------------------------------
1994 1993 1992
------- ------- -------
<S> <C> <C> <C>
Income taxes.......................................... $22,202 $42,511 $32,279
Interest, net of amounts capitalized.................. $ 6,975 $ -- $ --
</TABLE>
45
<PAGE> 47
NEWMONT GOLD COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Excluded from the statements of consolidated cash flows are the effects of
certain non-cash transactions. The following reflects the adjustments made to
the Company's balance sheet effective as of January 1, 1994 for the transaction
with NMC discussed in Note 2 (in thousands):
<TABLE>
<S> <C>
Assets
Cash and cash equivalents.............................................. $ 69,361
Short-term investments................................................. 18,709
Advances to parent..................................................... (159,573)
Inventories............................................................ 3,355
Other.................................................................. 2,311
---------
Current assets...................................................... (65,837)
Property, plant and mine development, net.............................. 99,070
Other.................................................................. 131,307
---------
Total assets................................................... $ 164,540
=========
Liabilities
Short-term debt........................................................ $ 15,739
Accounts payable....................................................... 2,876
Accrued income taxes................................................... 2,143
Other accrued liabilities.............................................. 29,019
---------
Current liabilities................................................. 49,777
Long-term debt......................................................... 192,000
Reclamation liabilities................................................ 55,952
Other long-term liabilities............................................ 69,586
---------
Total liabilities.............................................. 367,315
Stockholders' Equity
Preferred stock........................................................ 14,375
Retained earnings...................................................... (140,944)
Treasury stock......................................................... (76,206)
---------
Total stockholders' equity..................................... (202,775)
---------
Total liabilities and stockholders' equity..................... $ 164,540
=========
</TABLE>
Other non-cash transactions include the recognition in 1994 of an income
tax benefit of $16.2 million resulting from the resolution of certain tax issues
associated with prior years and in 1992 the exchange of $10.6 million of
employee housing property for $7.7 million of notes receivable and $2.9 million
in cash.
(15) COMMITMENTS AND CONTINGENCIES
ENVIRONMENTAL OBLIGATIONS
The Company's mining and exploration activities are subject to various
federal and state laws and regulations governing the protection of the
environment. These laws and regulations are continually changing and are
generally becoming more restrictive. The Company conducts its operations so as
to protect the public health and environment and believes its operations are in
compliance with all applicable laws and regulations. The Company has made, and
expects to make in the future, expenditures to comply with such laws and
regulations. The Company cannot predict such future expenditures.
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, $64.3 million was accrued at December 31, 1994, excluding $18.4
46
<PAGE> 48
NEWMONT GOLD COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
million also accrued for reclamation costs relating to currently producing
mineral properties. The amounts are included in reclamation liabilities and
other current liabilities. The $64.3 million at December 31, 1994 includes
charges of $16.1 million taken in 1994 as a result of the Company revising its
estimate of the costs associated with these matters. 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 65% greater or 15%
lower than the amount accrued at December 31, 1994.
A discussion of the environmental obligations and related insurance
receivables associated with former mining activities as of December 31, 1994
follows.
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. 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 settled natural resources damages, past and future
response costs and provided habitat enhancement work. In addition, Idarado
agreed in the consent decree to undertake specified 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 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 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 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 U. S. Environmental Protection Agency
("EPA") in 1986. The EPA is taking the lead role on cleanup issues. The
proceedings sought to compel the defendants to remediate the impacts of
pre-existing mining activities which the government agencies 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 lawsuits
have named 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.
The parties have entered into a consent decree with respect to Phase II
which apportions liabilities and responsibilities for the site among the various
parties. The EPA has not yet completed work to define the remedies for Phase II.
Accordingly, the Company cannot yet determine the full extent or cost of its
share of remedial action which will be required under Phase II. Moreover, in
addition to such remedial action, the government agencies may seek to recover
for damages to natural resources.
Although the ultimate amount of Resurrection's and the Company's share of
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, as previously discussed.
47
<PAGE> 49
NEWMONT GOLD COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
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. The mine is subject to regulation
by agencies of the U. S. 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. The
Company's best estimate for the future costs related to these matters is
included in the gross liability for environmental matters, as previously
discussed. Dawn has developed and has received a license for a mill closure plan
which could potentially generate the necessary funds to reclaim the mine and the
mill. The plan, however, is currently being challenged administratively by third
parties.
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.
Insurance Receivables
Included in accounts receivable at December 31, 1994 was a net $16.7
million attributable to insurance carriers for both a portion of the costs
previously expended and for estimated future costs associated with environmental
obligations covered by insurance policies associated with former mining
activities. The amount is net of a $20.0 million valuation allowance established
in 1994.
Prior to 1993, three of the insurance companies commenced actions against
the Company seeking judgments that they had no liability. In the fall of 1993,
the Company instituted a comprehensive lawsuit against its carriers. In
addition, in 1993, the Company designated new lead counsel for all the insurance
recovery actions.
Based on the views of prior lead counsel, the Company had believed that
significant progress in certain settlement discussions would have been achieved
by mid-summer 1994, but that expectation was not realized. The absence of such
anticipated progress in settlement discussions, as well as the Company's
discussions with new lead counsel for the insurance recovery actions regarding
its review of such actions, caused the Company in the second quarter of 1994 to
provide a $20.0 million valuation allowance on its insurance receivables
resulting in the net balance outstanding at December 31, 1994. Subsequent to
December 31, 1994, settlement in the insurance litigation was reached enabling
the Company to realize the December 31, 1994 receivable. Settlement discussions
continue with respect to some of the litigation. The Company will continue to
vigorously pursue recovery in the remaining litigation and believes that it is
reasonably possible that additional amounts will be recovered.
CLASS ACTION COMPLAINT
In March 1995, a class action complaint was filed against NMC and others in
which the plaintiffs allege exposure to certain allegedly radioactive or
otherwise hazardous waste materials produced at a ferroalloy production plant in
Guernsey County, Ohio. This plant was owned until 1987 by Foote Mineral Company,
a former subsidiary of NMC. The complaint seeks $500 million of compensatory
damages jointly and severally against all defendants, $63 million in punitive
damages against NMC, the recovery of response costs and the establishment of a
medical monitoring fund under CERCLA. Injunctive relief requiring defendants to
remove the allegedly hazardous materials from the property of the plaintiffs is
also requested.
48
<PAGE> 50
NEWMONT GOLD COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
The Company is investigating this recently filed action and intends to
vigorously contest all alleged liability in this matter.
GUARANTEE OF THIRD PARTY INDEBTEDNESS
As a result of the transaction with NMC discussed in Note 2, the Company
assumed NMC's guarantee of $35.7 million of Magma Copper Company's (a former NMC
subsidiary) Pollution Control Revenue Bonds due 2009. It is expected the Company
will be required to remain liable on this guarantee so long as the bonds
relating thereto are outstanding.
GOLD PRICE HEDGING CONTRACTS
In 1994, the Company entered into several hedging transactions that begin
in January 1996 and continue through December 2000 for future production from
its Indonesian property, Minahasa. These transactions consist of forward sales
of 125,000 ounces per year at an average floor price of $454 per ounce, plus the
Company will receive 40% of the difference in the market price above the forward
sale price. The Company may enter into additional hedging transactions in the
future. No production through 1994 had been hedged.
GUARANTEE OF PROJECT FINANCING INDEBTEDNESS
The Company has a 38% interest in Minera Yanacocha S.A. ("Yanacocha"), a
Peruvian gold operation which commenced operations in 1993. During 1994,
Yanacocha secured project financing of $23.5 million from a consortium of banks.
The Company agreed to guarantee approximately $8.9 million of this amount until
the earlier of the repayment of all amounts due pursuant to the project
financing or the satisfaction of a project completion test. Yanacocha expects
that the project completion test will be satisfied in mid-1995.
OTHER COMMITMENTS AND CONTINGENCIES
In December 1992, the Company entered an agreement with Barrick Goldstrike
Mines, Inc. ("Barrick") which provides for Barrick to mine the Company's Post
deposit which extends beyond the Company's property boundaries onto Barrick's
property. The Company and Barrick share the costs so that each ounce of gold
mined bears the same mining cost. The Company is obligated to pay Barrick for
such costs as Barrick mines the deposit. In addition, the Company is obligated
to share dewatering costs which are associated with the Post deposit. The
Company incurred $39.0 million and $26.6 million of such mining and dewatering
costs in 1994 and 1993, respectively, and expects to incur $50 million to $60
million annually for the next two years.
The Company has minimum royalty obligations on one of its producing mines
of 80,000 ounces of gold in 1995, 55,000 ounces of gold in 1996 and no more than
40,000 ounces of gold per year thereafter for the life of the mine. The amount
to be paid to meet the royalty obligations is based upon a defined average
market gold price. Any amounts paid due to the minimum royalty obligation not
being met in any year are recoverable in future years when the minimum royalty
obligation is exceeded. The Company expects the mine's production will meet the
minimum royalty requirements.
The Company is from time to time involved in various legal proceedings of a
character normally incident to its business. It does not believe that adverse
decisions in any pending or threatened proceedings or any amounts which it may
be required to pay by reason thereof will have a material adverse effect on its
financial condition or results of operations.
49
<PAGE> 51
NEWMONT GOLD COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(16) UNAUDITED SUPPLEMENTARY DATA
The following is a summary of selected quarterly financial information
(amounts in millions except per share amounts):
<TABLE>
<CAPTION>
1994
------------------------------------------------------------------------
THREE MONTHS ENDED
-------------------------------------------------------- YEAR ENDED
MARCH 31, JUNE 30, SEPTEMBER 30, DECEMBER 31, DECEMBER 31,
--------- -------- ------------- ------------ ------------
<S> <C> <C> <C> <C> <C>
Sales............................. $ 149.8 $139.3 $ 150.1 $158.2 $597.4
Gross profit(1)................... $ 43.9 $ 45.3 $ 42.9 $ 47.8 $179.9
Net income........................ $ 23.7 $ 18.9(2) $ 22.4 $ 18.2 $ 83.4
Preferred stock dividends......... $ 3.9 $ 3.9 $ 3.9 $ 3.9 $ 15.8
Net income applicable to common
stock........................... $ 19.8 $ 15.0(2) $ 18.5 $ 14.3 $ 67.6
Net income per common share....... $ 0.20 $ 0.16(2) $ 0.19 $ 0.15 $ 0.70
Weighted average shares
outstanding..................... 96.6 96.4 96.5 96.5 96.5
Dividends declared per common
share........................... $ 0.12 $ 0.12 $ 0.12 $ 0.12 $ 0.48
</TABLE>
<TABLE>
<CAPTION>
1993
------------------------------------------------------------------------
THREE MONTHS ENDED
-------------------------------------------------------- YEAR ENDED
MARCH 31, JUNE 30, SEPTEMBER 30, DECEMBER 31, DECEMBER 31,
--------- -------- ------------- ------------ ------------
<S> <C> <C> <C> <C> <C>
Sales............................. $ 127.9 $150.1 $ 169.9 $153.7 $601.6
Gross profit(1)................... $ 25.4 $ 41.4 $ 55.9 $ 39.5 $162.2
Income before cumulative effect of
change in accounting
principal....................... $ 19.4 $ 28.1 $ 41.7 $ 23.9 $113.1
Cumulative effect of change in
accounting principle(3)......... $ 2.7 $ -- $ -- $ -- $ 2.7
Net income........................ $ 22.1 $ 28.1 $ 41.7 $ 23.9 $115.8
Income per common share:
Income before cumulative effect
of change in accounting
principle.................... $ 0.18 $ 0.27 $ 0.40 $ 0.23 $ 1.08
Cumulative effect of change in
accounting principle(3)...... $ 0.02 $ -- $ -- $ -- $ 0.02
Net income per common share..... $ 0.20 $ 0.27 $ 0.40 $ 0.23 $ 1.10
Weighted average shares
outstanding..................... 104.9 104.9 104.9 104.9 104.9
Dividends declared per common
share........................... $ -- $ -- $ -- $ 0.05 $ 0.05
</TABLE>
---------------
(1) Sales less costs applicable to sales and depreciation, depletion and
amortization.
(2) Includes a $17.6 million after-tax charge related to environmental
obligations associated with former mining activities and an income tax
benefit of $16.2 million resulting from the resolution of certain tax issues
associated with prior years, with a net effect charge of $0.01 per share.
(3) Cumulative effect of change in accounting for income taxes (see Note 6).
50
<PAGE> 52
NEWMONT GOLD COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
RATIO OF EARNINGS TO FIXED CHARGES
As a result of the transaction with NMC discussed in Note 2, the Company's
capital structure is essentially the same as NMC's. In that the Company's
financial results had been fully consolidated into NMC's and the Company's
capital structure is now essentially that of NMC's, management believes that
NMC's historical consolidated ratio of earnings to fixed charges for the four
years ended December 31, 1993 is more relevant than the Company's. They
represent essentially what the Company's ratios would have been had it acquired
NMC's assets and assumed its liabilities at the beginning of 1990. From 1990 to
1993, the Company had no significant fixed charges.
The ratio of earnings to fixed charges for the Company was 1.7 for the year
ended December 31, 1994. The ratio of earnings to fixed charges for NMC was 6.3,
6.5, 10.3, and 6.6 for the years ended December 31, 1993, 1992, 1991 and 1990,
respectively. The Company guarantees certain third party debt which had total
interest obligations of $1.0 million, $0.8 million, $3.3 million, $4.0 million
and $4.5 million for the years ended December 31, 1994, 1993, 1992, 1991 and
1990, respectively. The Company and NMC have not been required to pay any of
these amounts, nor does the Company expect to have to pay any amounts;
therefore, such amounts have not been included in the ratio of earnings to fixed
charges.
51
<PAGE> 53
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
There have been no disagreements with Arthur Andersen LLP, NGC's
independent public accountants, regarding any matter of accounting principles or
practices or financial statement disclosure.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
Information concerning NGC's directors will be contained in NGC's
definitive Proxy Statement to be filed pursuant to Regulation 14A promulgated
under the Securities Exchange Act of 1934 for the 1995 annual meeting of
stockholders and is incorporated herein by reference. Information concerning
NGC's executive officers is set forth under Part I of this report.
ITEM 11. EXECUTIVE COMPENSATION
Information concerning this item will be contained in NGC's definitive
Proxy Statement to be filed pursuant to Regulation 14A promulgated under the
Securities Exchange Act of 1934 for the 1995 annual meeting of stockholders and
is incorporated herein by reference.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
Information concerning this item will be contained in NGC's definitive
Proxy Statement to be filed pursuant to Regulation 14A promulgated under the
Securities Exchange Act of 1934 for the 1995 annual meeting of stockholders and
is incorporated herein by reference.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Information concerning this item will be contained in NGC's definitive
Proxy Statement to be filed pursuant to Regulation 14A promulgated under the
Securities Exchange Act of 1934 for the 1995 annual meeting of stockholders and
is incorporated herein by reference.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
(a) The following documents are filed as a part of this report:
1. Financial Statements
<TABLE>
<CAPTION>
10-K
PAGE
----
<S> <C>
Report of Independent Public Accountants.............................. 25
Statements of Consolidated Income..................................... 26
Consolidated Balance Sheets........................................... 27
Statements of Consolidated Changes in Stockholders' Equity............ 28
Statements of Consolidated Cash Flows................................. 29
Notes to Consolidated Financial Statements............................ 30
</TABLE>
52
<PAGE> 54
2. Financial Statement Schedules
All schedules have been omitted since they are either not required, are not
applicable, or the required information is shown in the financial statements or
related notes.
3. Exhibits
<TABLE>
<S> <C>
3(a). Restated Certificate of Incorporation dated May 2, 1986. Incorporated
by reference to Exhibit 3 to registrant's Registration Statement on
Form S-1, Amendment No. 2 (No. 33-5565).
3(b). Certificate of Amendment of Certificate of Incorporation dated April
15, 1987. Incorporated by reference to Exhibit 3(b) to registrant's
Registration Statement on Form S-1, Amendment No. 1 (33-12686).
3(c). Certificate of Amendment of Certificate of Incorporation dated March
18, 1994. Incorporated by reference to Exhibit 3(c) to registrant's
Annual Report on Form 10-K for the year ended December 31, 1993.
3(d). By-Laws as amended through May 8, 1986. Incorporated by reference to
Exhibit 3 to registrant's Registration Statement on Form S-1,
Amendment No. 2 (No. 33-5565).
4(a). Pass Through Trust Agreement dated as of July 15, 1994 between
registrant and The First National Bank of Chicago relating to the
Pass Through Certificates, Series 1994-A1. (The front cover of this
Exhibit indicates the material differences between such Exhibit and
the substantially similar (except for price-related information)
Pass-Through Agreement between registrant and The First National Bank
of Chicago relating to the Pass-Through Certificates, Series 1994-
A2.) Incorporated by reference to Exhibit 4.1 to registrant's
Quarterly Report on Form 10-Q for the quarter ended September 30,
1994.
4(b). Lease dated as of September 30, 1994 between registrant and Shawmut
Bank Connecticut, National Association relating to Trust No. 1 and a
75% undivided interest in registrant's refractory gold ore treatment
facility. (The front cover of this Exhibit indicates the material
differences between such Exhibit and a substantially similar
agreement (except for price-related information) entered into on the
same date relating to the remaining 25% undivided interest in the
facility.) Incorporated by reference to Exhibit 4.2 to registrant's
Quarterly Report on Form 10-Q for the quarter ended September 30,
1994.
4(c). Trust Indenture and Security Agreement dated as of July 15, 1994
between Shawmut Bank Connecticut, National Association and The First
National Bank of Chicago relating to Trust No. 1 and a 75% undivided
interest in registrant's refractory gold ore treatment facility. (The
front cover of this Exhibit indicates the material differences
between such Exhibit and a substantially similar agreement (except
for price-related information) entered into on the same date relating
to the remaining 25% undivided interest in the facility.)
Incorporated by reference to Exhibit 4.3 to registrant's Quarterly
Report on Form 10-Q for the quarter ended September 30, 1994.
4(d). In reliance upon Item 601(b)(4)(iii) of Regulation S-K, various
instruments defining the rights of holders of long-term debt of the
Company are not being filed herewith because the total of securities
authorized under each such instrument does not exceed 10% of the
total assets of registrant. Registrant hereby agrees to furnish a
copy of any such instrument to the Commission upon request.
10(a). Directors' Stock Award Plan.
10(b). Tax Sharing Agreement dated as of January 1, 1994 between registrant
and NMC.
</TABLE>
53
<PAGE> 55
<TABLE>
<S> <C>
10(c). Letter Agreement dated December 15, 1993, between registrant and NMC.
Incorporated by reference to Exhibit A to registrant's Proxy
Statement dated February 16, 1994.
10(d). Agreement dated October 15, 1993, effective November 1, 1993, among
registrant, NMC and Ronald C. Cambre. Incorporated by reference to
Exhibit 10 to registrant's Quarterly Report on Form 10-Q for the
quarter ended September 30, 1993.
10(e). Consultation Agreement dated as of October 31, 1993 among registrant,
NMC and Gordon R. Parker. Incorporated by reference to Exhibit 10(f)
of registrant's Annual Report or Form 10-K for the year ended
December 31, 1993.
10(f). Letter Agreement dated May 6, 1993 between registrant and Wayne W.
Murdy. Incorporated by reference to Exhibit 10 to registrant's
Quarterly Report on Form 10-Q for the quarter ended March 31, 1993.
11. Statement re Computation of Per Share Earnings.
12. Statement re Computation of Ratio of Earnings to Fixed Charges.
23. Consent of Independent Public Accountants.
24. Power of Attorney.
27. Financial Data Schedules.
</TABLE>
(b) Reports on Form 8-K
No reports on Form 8-K were filed by the registrant during the quarter ended
December 31, 1994.
54
<PAGE> 56
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.
NEWMONT GOLD COMPANY
By /s/ TIMOTHY J. SCHMITT
-----------------------------------
Timothy J. Schmitt
Vice President, Secretary and
Assistant General Counsel
March 30, 1995
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the date indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<S> <C> <C>
* Director
---------------------------------------------
Rudolph I. J. Agnew
* Director
---------------------------------------------
J. P. Bolduc
* Chairman, President and
--------------------------------------------- Chief Executive Officer
Ronald C. Cambre and Director
* Director
---------------------------------------------
Joseph P. Flannery
* Director
---------------------------------------------
Thomas A. Holmes
* Director
---------------------------------------------
Robin A. Plumbridge
* Director
---------------------------------------------
Robert H. Quenon
* Director March 30, 1995
---------------------------------------------
Moeen A. Qureshi
* Director
---------------------------------------------
Michael K. Reilly
* Director
---------------------------------------------
James V. Taranik
* Director
---------------------------------------------
William I. M. Turner, Jr.
* Senior Vice President and
--------------------------------------------- Chief Financial Officer
Wayne W. Murdy (Principal Financial
Officer)
* Vice President and
--------------------------------------------- Controller
Gary E. Farmar (Principal Accounting
Officer)
*By /s/ TIMOTHY J. SCHMITT
---------------------------------------------
Timothy J. Schmitt
as Attorney-in-fact
</TABLE>
<PAGE> 57
Appendix I
The following is a narrative description of certain maps in image form
which have been included in the paper version of the Form 10-K but which have
been excluded from the EDGAR version of the Form 10-K.
1. Map of Location of the Carlin Trend Operations in Nevada --
Page 3 of the Form 10-K.
On page 3 of the Form 10-K, the registrant has included a
map of Nevada with an enlargement of the geographical location
of its operations on the Carlin Trend discussed on pages 1
through 5 of the Form 10-K. The map also includes a chart
indicating the location of various deposits with proven and
probable reserves.
2. Map of Location of the Yanacocha Project in Peru -- Page 7 of the
Form 10-K.
On page 7 of the Form 10-K, the registrant has included a
map of the Country of Peru showing the geographical location of
the Yanacocha project discussed on pages 5 and 6 of the
Form 10-K. The map also includes a notation that Minera
Yanacocha S.A., the Peruvian corporation which owns the Yanacocha
project, is 38% owned by Newmont Gold.
3. Map of Location of the Zarafshan-Newmont Project in Uzbekistan --
Page 8 of the Form 10-K.
On page 8 of the Form 10-K, the registrant has included a
map of the Republic of Uzbekistan showing the geographical
location of the Zarafshan-Newmont project discussed on pages 7
and 8 of the Form 10-K. The map also includes a notation that the
Zarafshan-Newmont joint venture, which owns the project, is 50%
owned by Newmont Gold.
4. Map of Locations of the Minahasa Project and the Batu Hijau
Project in Indonesia -- Page 9 of the Form 10-K.
<PAGE> 58
On page 9 of the Form 10-K, the registrant has included a
map of the Republic of Indonesia showing the geographical location
of the Minahasa project and the Batu Hijau project, each of which
is discussed on pages 8 and 9 of the Form 10-K. The map also
includes a notation that each of the Indonesian companies that
own the Minahasa project and the Batu Hijau project is 80% owned
by Newmont Gold.
<PAGE> 59
EXHIBIT INDEX
<TABLE>
<CAPTION>
SEQUENTIALLY
NUMBERED
EXHIBITS ITEM PAGE
-----------------------------------------------------------------------------------------------
<S> <C> <C>
3(a). Restated Certificate of Incorporation dated May 2, 1986. Incorporated
by reference to Exhibit 3 to registrant's Registration Statement on
Form S-1, Amendment No. 2 (No. 33-5565).
3(b). Certificate of Amendment of Certificate of Incorporation dated April
15, 1987. Incorporated by reference to Exhibit 3(b) to registrant's
Registration Statement on Form S-1, Amendment No. 1 (33-12686).
3(c). Certificate of Amendment of Certificate of Incorporation dated March
18, 1994. Incorporated by reference to Exhibit 3(c) to registrant's
Annual Report on Form 10-K for the year ended December 31, 1993.
3(d). By-Laws as amended through May 8, 1986. Incorporated by reference to
Exhibit 3 to registrant's Registration Statement on Form S-1,
Amendment No. 2 (No. 33-5565).
4(a). Pass Through Trust Agreement dated as of July 15, 1994 between
registrant and The First National Bank of Chicago relating to the
Pass Through Certificates, Series 1994-A1. (The front cover of this
Exhibit indicates the material differences between such Exhibit and
the substantially similar (except for price-related information)
Pass-Through Agreement between registrant and The First National Bank
of Chicago relating to the Pass-Through Certificates, Series 1994-
A2.) Incorporated by reference to Exhibit 4.1 to registrant's
Quarterly Report on Form 10-Q for the quarter ended September 30,
1994.
4(b). Lease dated as of September 30, 1994 between registrant and Shawmut
Bank Connecticut, National Association relating to Trust No. 1 and a
75% undivided interest in registrant's refractory gold ore treatment
facility. (The front cover of this Exhibit indicates the material
differences between such Exhibit and a substantially similar
agreement (except for price-related information) entered into on the
same date relating to the remaining 25% undivided interest in the
facility.) Incorporated by reference to Exhibit 4.2 to registrant's
Quarterly Report on Form 10-Q for the quarter ended September 30,
1994.
4(c). Trust Indenture and Security Agreement dated as of July 15, 1994
between Shawmut Bank Connecticut, National Association and The First
National Bank of Chicago relating to Trust No. 1 and a 75% undivided
interest in registrant's refractory gold ore treatment facility. (The
front cover of this Exhibit indicates the material differences
between such Exhibit and a substantially similar agreement (except
for price-related information) entered into on the same date relating
to the remaining 25% undivided interest in the facility.)
Incorporated by reference to Exhibit 4.3 to registrant's Quarterly
Report on Form 10-Q for the quarter ended September 30, 1994.
4(d). In reliance upon Item 601(b)(4)(iii) of Regulation S-K, various
instruments defining the rights of holders of long-term debt of the
Company are not being filed herewith because the total of securities
authorized under each such instrument does not exceed 10% of the
total assets of registrant. Registrant hereby agrees to furnish a
copy of any such instrument to the Commission upon request.
10(a). Directors' Stock Award Plan.
10(b). Tax Sharing Agreement dated as of January 1, 1994 between registrant
and NMC.
</TABLE>
<PAGE> 60
<TABLE>
<CAPTION>
SEQUENTIALLY
NUMBERED
EXHIBITS ITEM PAGE
-----------------------------------------------------------------------------------------------
<S> <C> <C>
10(c). Letter Agreement dated December 15, 1993, between registrant and NMC.
Incorporated by reference to Exhibit A to registrant's Proxy
Statement dated February 16, 1994.
10(d). Agreement dated October 15, 1993, effective November 1, 1993, among
registrant, NMC and Ronald C. Cambre. Incorporated by reference to
Exhibit 10 to registrant's Quarterly Report on Form 10-Q for the
quarter ended September 30, 1993.
10(e). Consultation Agreement dated as of October 31, 1993 among registrant,
NMC and Gordon R. Parker. Incorporated by reference to Exhibit 10(f)
of registrant's Annual Report or Form 10-K for the year ended
December 31, 1993.
10(f). Letter Agreement dated May 6, 1993 between registrant and Wayne W.
Murdy. Incorporated by reference to Exhibit 10 to registrant's
Quarterly Report on Form 10-Q for the quarter ended March 31, 1993.
11. Statement re Computation of Per Share Earnings.
12. Statement re Computation of Ratio of Earnings to Fixed Charges.
23. Consent of Independent Public Accountants.
24. Power of Attorney.
27. Financial Data Schedules.
</TABLE>
<PAGE> 1
EXHIBIT 10(a)
NEWMONT GOLD COMPANY
DIRECTORS' STOCK AWARD PLAN
1. PURPOSE. The Directors' Stock Award Plan ("Plan") is intended to
(a) attract and retain highly qualified individuals to serve as directors of
Newmont Gold Company (the "Company"), (b) increase non-employee directors'
stock ownership in the Company and (c) align non-employee directors' financial
interests more closely with those of the stockholders of the Company.
2. PARTICIPANTS. Participants in the Plan shall consist of directors
of the Company who are not employees of the Company, Newmont Mining Corporation
or any of the Company's subsidiaries. The term "subsidiary" means a corporation
more than 50% of the voting stock of which is owned directly or indirectly by
the Company.
3. EFFECTIVENESS. The Plan shall become effective on November 16, 1994
(the "Effective Date").
4. SHARE AWARDS. On the Effective Date, each non-employee director of
the Company shall receive 625 shares of Common Stock of the Company (the
"Common Stock") for service as a director of the Company rendered and to be
rendered in 1994. On the date of the Annual Meeting of Stockholders of the
Company in each year, commencing in 1995, each non-employee director of the
Company who is elected or re-elected at such Annual Meeting shall receive 625
shares of Common Stock for service as a director of the Company previously
rendered and to be rendered during the year in which such Annual Meeting is
held. If a person who is not an employee of the Company is elected a director
of the Company (a) in 1994 but after the Effective Date or (b) in any year
subsequent to 1994 but after the Annual Meeting of Stockholders of the Company
held in such year, then, in either case, such person shall receive 625 shares
of Common Stock on the effective date of such person's election as a director
of the Company, for service as a director of the Company to be rendered during
1994 or the relevant year, as the case may be. A director may forego any award
under the Plan for any year by giving irrevocable written notice to such effect
to the Secretary of the Company on or before December 31 of the preceding year
or, in the case of awards to be made on the Effective Date, on or prior to the
Effective Date. A director shall not be required to make
<PAGE> 2
any payment for any shares of Common Stock issued under the Plan. Subject to
Section 7, a director participant in the Plan shall have full beneficial
ownership of, and rights and privileges of a shareholder as to, awarded shares,
including the right to vote and the right to receive dividends.
5. ADJUSTMENTS. If the outstanding Common Stock shall at any time be
changed or exchanged by declaration of a stock dividend, stock split,
combination or exchanges of shares, recapitalization, merger, consolidation or
other corporate reorganization in which the Company is the surviving
corporation, the number and class of shares thereafter to be issued under the
Plan shall be appropriately and equitably adjusted.
6. SHARES ISSUED UNDER PLAN. Common Stock issued under the Plan shall
be shares held in treasury (i.e., shares previously issued and outstanding
which have been reacquired by the Company and have not been cancelled).
7. TRANSFER RESTRICTIONS. The shares of Common Stock received by a
participant pursuant to the Plan may not be sold, transferred, pledged,
assigned or otherwise encumbered or disposed of by such participant until the
earliest of (a) the expiration of five years after the date of the receipt of
such shares by such participant, (b) the date such participant ceases to be a
director of the Company by reason of death or disability, or (c) the later of
(x) the date such participant ceases to be a director of the Company for any
reason other than death or disability or (y) the expiration of six months after
the date of the receipt of such shares by such participant; provided, however,
a participant (i) may assign shares of Common Stock received by such
participant to a personal holding company owned by such participant or by such
participant and members of such participant's immediate family (an "Eligible
Personal Holding Company") or (ii) may direct the Company, by written notice
delivered to the Secretary of the Company prior to the date of issuance of any
shares of Common Stock that such participant is entitled to receive pursuant to
the Plan, to issue such shares in the name of, and to deliver such shares to,
an Eligible Personal Holding Company of such participant, provided, that, in
the case of clause (i) or (ii), the foregoing restrictions on transfer shall
apply to such Eligible Personal Holding Company. Upon receiving an award of
shares of Common Stock pursuant to the Plan, a participant may be required to
represent in
-2-
<PAGE> 3
writing that such shares are being acquired for such participant's account for
investment and not with a view to, or for sale in connection with, the
distribution of any part thereof. In addition, the shares of Common Stock
received by a participant pursuant to the Plan have not been, and will not be,
registered under the Securities Act of 1933, as amended (the "Securities Act"),
and, therefore, may not be sold, transferred, pledged, assigned or otherwise
encumbered or disposed of except pursuant to an available exemption from the
registration requirements of the Securities Act. Certificates for shares
delivered under the Plan may include any legend which the Company deems
appropriate to reflect any or all of the foregoing restrictions on transfers.
8. GOVERNMENT AND OTHER REGULATIONS. The obligation of the Company to
deliver shares of Common Stock under the Plan shall be subject to all
applicable laws, rules and regulations and such approvals by any governmental
agencies or regulatory authorities as may be required or be deemed necessary or
appropriate by counsel for the Company.
9. NO RIGHT TO CONTINUE AS DIRECTOR. Nothing contained in the Plan
shall be deemed to confer upon any person any right to continue as a director
of or to be associated in any other way with the Company.
10. GOVERNING LAW; AMENDMENTS. The Plan shall be construed in
accordance with the law of the State of Delaware and may be amended or
terminated at any time by action of the Board of Directors of the Company;
provided, however, that the Plan shall not be amended more than once every six
months, except to comport with changes in the Internal Revenue Code of 1986, as
amended, or the rules thereunder.
-3-
<PAGE> 1
EXHIBIT 10(b)
AGREEMENT FOR THE ALLOCATION OF UNITED STATES,
STATE AND FOREIGN CURRENT INCOME TAX LIABILITIES AND
BENEFITS BETWEEN NEWMONT MINING CORPORATION
AND NEWMONT GOLD COMPANY
AGREEMENT DATED AS OF JANUARY 1, 1994 BETWEEN NEWMONT MINING CORPORATION
("NEWMONT") AND NEWMONT GOLD COMPANY ("GOLD")
WITNESSETH:
WHEREAS, Newmont files consolidated United States (hereinafter
referred to as "U.S.") income tax returns under the provisions of the Internal
Revenue Code of 1986, as amended (the "Code"), and the applicable regulations
thereunder (the "Regulations");
WHEREAS, under the Code and Regulations each consolidated return must
include all corporations controlled by Newmont (the "Newmont Consolidated
Group");
WHEREAS, Newmont files various consolidated or combined state income
tax returns;
WHEREAS, Newmont and Gold have agreed as set forth herein respecting
the allocation and payment of current taxes payable and accounting therefore,
their respective participation and cooperation in coordinated tax planning and,
in other matters related to the consolidated tax returns of Newmont;
WHEREAS, the parties intend and agree that this Agreement For The
Allocation of Taxes (The "Agreement") supersedes any and all prior agreements
and amendments thereto and that this new Agreement governs the allocation of
taxes, interest and penalties for any and all taxable periods in the past,
present and future;
<PAGE> 2
WHEREAS, the parties intend that Newmont's allocations of consolidated
current U.S. and state income tax liabilities to Gold shall fairly preserve the
economic privileges and rights which would have accrued to Newmont and Gold
from the filing of separate returns; and
WHEREAS, the parties intend and agree that Gold will succeed to all of
the tax attributes of Newmont as of December 31, 1993 as a result of the
transfer by Newmont of all of its assets (except for the majority of its Gold
shares), and Gold will assume Newmont's liabilities including Newmont's
liabilities for taxes, interest and penalties attributable to taxable periods
ending on or before December 31, 1993,
NOW, THEREFORE, in consideration of the foregoing and mutual
agreements hereinafter contained, the parties agree as follows:
1. COMPUTATION OF GOLD'S TAX LIABILITY. The current tax liability of
Gold in respect of a consolidated U.S. or state income tax return that is filed
by Newmont shall be as follows:
1.1 SEPARATE RETURN BASIS. Gold shall be liable for (or entitled to)
an amount equal to its current tax liability (or refund) for the same year
determined on a separate return basis. In calculating its tax liability on a
separate return basis for any and all purposes under this Agreement, Gold shall
include therein the taxable income, loss, credits and other relevant items
attributable to other members of the Newmont consolidated group
2
<PAGE> 3
that are owned directly or indirectly by Gold. Gold and the members of the
Newmont consolidated group that are owned directly or indirectly by Gold are
sometimes referred to as the Gold Group.
1.1A EXCEPTION TO SEPARATE RETURN BASIS FOR CERTAIN TAX LIABILITIES OF
NEWMONT. For purposes of determining Gold's annual state and local income,
franchise or other forms of state and local tax liabilities (collectively
referred as "state tax" or "state taxes"), any and all state taxes that are
imposed on Newmont as a separate company or member of a consolidated, combined
or unitary group for state tax purposes shall be included in the state tax
liability of Gold. The same principles of this sub-paragraph (1.1A) shall apply
to any taxes imposed on Newmont by a taxing jurisdiction outside of the United
States.
1.2 SURTAX EXEMPTION. Gold shall be allowed an allocable portion of
(a) any surtax exemption and (b) the benefit of any graduated tax rates. Such
allocable portion shall be determined on a percentage basis as follows: the
numerator of the percentage shall be the taxable income of Gold; the
denominator shall be the combined taxable income of all members of the Newmont
Consolidated Group (hereinafter referred to as "members") included in such
return. For purposes of such calculation, members which have no taxable income,
or negative taxable income, shall be excluded.
1.3 INVESTMENT TAX CREDITS. Investment tax credits generated
3
<PAGE> 4
by Gold shall be allowed to Gold to the extent of the allowability of said
credits on a separate return basis.
Recapture shall be calculated on all premature retirements of
investment tax credit property on a separate company basis except that, in the
case of the retirement of investment tax credit property acquired in years for
which the investment tax credit is carried forward on a separate company basis,
the recapture shall reduce the investment tax credit carried forward on a
separate company basis.
For purpose of the used property limitation, Newmont shall have sole
discretion to determine the property on which the credit is claimed in order to
maximize the allowable credit and to attribute such benefit to the member which
acquired the property on which the credit is claimed.
1.4 CORPORATE ALTERNATIVE MINIMUM TAX ("AMT"). Any tax liability
caused by the AMT shall be determined on a separate company basis.
Gold shall pay to Newmont the greater of the regular corporate income
tax or the corporate AMT, both computed on a separate return basis.
1.5 FOREIGN TAX CREDIT. With respect to the benefits of taxes paid to
foreign countries or to possessions of the U.S.,
4
<PAGE> 5
Newmont shall have the sole right to elect whether a foreign tax credit shall
be claimed or deductions shall be taken with respect to such taxes on any
consolidated return. Any such election made by Newmont shall be binding on
Gold. If Newmont elects to claim a foreign tax credit, foreign taxes deemed
paid pursuant to the applicable provisions of the Code shall be included in
the affected computation.
2. COMPUTATION OF GOLD'S INCOME. Gold's taxable income shall be
determined on a separate return basis subject, however, to the following
principles and modifications.
2.1 DIVIDENDS RECEIVED DEDUCTION. In computing Gold's taxable income,
dividends received by Gold from other members of the Newmont Consolidated Group
shall qualify for the 100% dividend received deduction. The dividend received
deduction attributable to other sources shall be allowed consistent with the
Provisions of the Internal Revenue Code or applicable state code and the
regulations applicable to corporations filing separate returns.
2.2 DETERMINATION OF CAPITAL GAINS AND LOSSES. A determination of
short or long term capital gains or capital losses recognized by Gold shall be
made on a separate company basis. Any benefits derived on a consolidated basis
for such gains and losses through the use of an alternative tax calculation
will be given effect in determining the income and the tax liability of Gold.
5
<PAGE> 6
Any benefits derived from the carryforward or carryback of capital gains or
losses will be given effect in determining the income and the tax liability of
Gold in the year such benefit is availed of by the Newmont Consolidated Group.
2.3 ALLOWANCE OF OPERATING LOSSES AND CARRYBACKS AND CARRYFORWARDS
OF TAX ATTRIBUTES. Gold shall be allowed a deduction from taxable income for a
net operating loss determined on a separate return basis to the extent benefit
is obtained by the Newmont Consolidated Group. Such loss shall be given effect
in determining Gold's income and tax liability only to the extent that such
loss is availed of in reducing the consolidated tax liability of the Newmont
Consolidated Group and/or results in an actual refund of tax.
2.4 DEFERRED INTERCOMPANY TRANSACTIONS. In the event that gains or
losses that arise in connection with the transfer by Newmont to Gold of all of
its assets (except for the majority of its Gold shares) but which are initially
deferred for tax purposes, are subsequently triggered by virtue of a
restoration event under the applicable tax laws and regulations, Gold shall
include such triggered deferred gains and losses in its determination of its
separate company taxable income.
3. PAYMENT OF TAXES. Newmont shall have the responsibility and
authority to make tax payments due to the Internal Revenue
6
<PAGE> 7
Service ("IRS") and state taxing authorities, and to collect all refunds
distributed by the IRS or state taxing authorities.
3.1 ESTIMATED TAX PAYMENTS. Newmont shall determine the estimated
amount of tax payable by Gold to Newmont in accordance with the provisions of
this Agreement for the year to date and Gold shall pay over to Newmont the
amount so determined.
3.2 UNDERPAYMENT OR OVERPAYMENT OF ESTIMATED TAX. Upon the filing of
the consolidated tax returns of the Newmont Consolidated Group for each year,
Newmont shall compute the underpayment or overpayment of estimated taxes
remitted by Gold and shall bill or refund any difference, as appropriate. Any
interest or penalty due under U.S. or state tax laws shall be allocated to Gold
if it caused such interest or penalty to be due.
3.3 LIABILITY FOR TAX, INTEREST AND PENALTIES. While Gold has the
primary responsibility to pay to Newmont the amount of the taxes, interest and
penalties imposed on the Newmont Consolidated Group which are properly
attributable to Gold under the principles of this Tax Allocation Agreement, in
the event that Gold does not satisfy its obligations hereunder, Newmont can
seek payment of such obligations from any member of the Gold Group.
4. ADJUSTMENT OF TAXES ON EXAMINATION.
7
<PAGE> 8
4.1 ADDITIONAL TAX DUE OR REFUND OF TAX. Upon final settlement of
adjustments to the consolidated U.S. or state income tax returns proposed by
the IRS or state authorities, the tax liability of Gold for the year or years
under examination shall be redetermined pursuant to Section 1 of this Agreement
based upon adjustments made and agreed upon by Newmont in the settlement
agreement.
If the adjustments agreed upon by Newmont with the IRS or state
authority result in a refund of tax to Newmont, the tax liability of Gold for
the year or years under examination shall be redetermined pursuant to Section 1
of this Agreement with respect to the year or years to which such refund
relates, and shall be calculated at the rates used for the period or periods in
question by the IRS or state authority. Newmont shall refund any tax thereby
shown to be due Gold.
4.2 INTEREST FROM EXAMINATIONS. If the adjustments result in the
payment of interest to a tax authority, interest shall be allocated to Gold on
a pro rata basis consistent with the adjustments made as part of the
examination.
4.3 CONDUCT OF EXAMINATION. Newmont shall have sole responsibility for
conducting any agents' examinations for the Newmont Consolidated Group.
4.4 COOPERATION IN EXAMINATION. Gold will inform Newmont
8
<PAGE> 9
promptly of all questions raised by agents conducting an examination of its tax
returns and shall cooperate with Newmont's accountants, tax advisers and
counsel in working with the agents in response to proposed adjustments.
4.5 AGREEMENT AS TO SETTLEMENT. Any adjustment to Gold's tax liability
arising out of an examination shall be computed on the basis of agreements
reached between Newmont and the tax authority.
4.6 AUTHORITY TO SETTLE EXAMINATION. Gold waives any and all present
and future claims against Newmont relating to any compromise, arrangement or
other agreement between Newmont and the tax authority, including but not
limited to such as may be based on allegations that such compromise,
arrangement or agreement caused an overstatement of Gold's tax liability to
Newmont or that Gold could have reached a more favorable agreement with the
taxing authority on a separate company basis.
5. FURNISHING OF TAX INFORMATION TO NEWMONT. Gold shall deliver to
Newmont, at times reasonably determined by the Vice President, Taxes of
Newmont, all data required for preparation of Gold's income tax return and
estimated payments on a separate company basis. Such tax data shall have been
reviewed by the principal financial officer of Gold and shall be as full and
complete as would have been required to file Gold's income tax return (or to
pay estimated tax) on a separate company basis.
9
<PAGE> 10
6. MISCELLANEOUS PROVISIONS.
6.1 AUTHORITY TO CHANGE AGREEMENT. Gold hereby agrees that Newmont,
for so long as Newmont is the common parent, shall have the authority to make
any alterations in this Agreement to comply with any changes in the Code, the
Regulations or state provisions relating to consolidated income tax returns.
6.2 CONSENT TO REGULATIONS. At any time during a taxable year that
Gold has been a member of the Newmont Consolidated Group. Gold consents to all
regulations relating to the filing of a consolidated tax return.
6.3 NEW MEMBERS OF CONSOLIDATED GROUP. Any subsidiary of Gold which
becomes a controlled corporation required to join in the consolidated tax
returns with Newmont shall become a member of the Newmont Consolidated Group by
signing a master copy of this Agreement, which shall be maintained for such
purpose by Newmont.
6.4 TERM OF AGREEMENT. This Agreement shall remain in effect so long
as Gold is a member of the Newmont Consolidated Group.
6.5 SUBSEQUENT ALTERATIONS AND MODIFICATIONS. Subject to Section 6.1
above, all alterations and modifications of this Agreement must be in writing
and signed by all parties.
10
<PAGE> 11
6.6 ELECTIONS. Newmont, as the common parent, shall have the sole
authority to make any or all elections available under the Code, Regulations or
state provision.
6.7 INTERPRETATION. Newmont, as the common parent, shall have the sole
authority to interpret the provisions and the applications of this Agreement
so as to render it consistent with the Code, the Regulations and all other
state and local income tax law and regulations.
IN WITNESS THEREOF, Newmont and Gold have entered into this
Agreement as of January 1, 1994.
NEWMONT MINING CORPORATION
By /s/ RONALD C. CAMBRE
Ronald C. Cambre
Chairman, President and CEO
NEWMONT GOLD COMPANY
By /s/ GRAHAM M. CLARK, JR.
Graham M. Clark, Jr.
Senior Vice President and
General Counsel
11
<PAGE> 1
Exhibit 11
NEWMONT GOLD COMPANY AND SUBSIDIARIES
COMPUTATION OF PER SHARE EARNINGS
(In thousands, except per share)
PRIMARY EARNINGS PER SHARE CALCULATION
<TABLE>
<CAPTION>
Years Ended December 31,
-------------------------------
1994 1993 1992
--------- -------- --------
<S> <C> <C> <C>
INCOME DATA:
Income before cumulative
effect of changes in
accounting principles $ 83,394 $113,116 $ 87,414
Preferred stock dividends (15,813) - -
--------- -------- --------
Income before cumulative
effect of changes in
accounting principles
applicable to common
shares 67,581 113,116 87,414
Cumulative effect of
changes in accounting
principles - 2,665 (6,356)
--------- -------- --------
Net income applicable to
common shares $ 67,581 $115,781 $ 81,058
========= ======== ========
COMMON AND COMMON EQUIVALENT SHARES:
Weighted average common
shares 96,331 104,875 104,875
Equivalent common shares
from stock options 141 - -
--------- -------- --------
Common and common
equivalent shares 96,472 104,875 104,875
========= ======== =======
EARNINGS PER COMMON SHARE:
Income before cumulative
effect of changes in
accounting principles $ 0.70 $ 1.08 $ 0.83
Cumulative effect of
changes in accounting
principles - 0.02 (0.06)
--------- -------- -------
Net income per common and
common equivalent
shares $ 0.70 $ 1.10 $ 0.77
========= ======== =======
</TABLE>
Page 1 of 2
<PAGE> 2
Exhibit 11
NEWMONT GOLD COMPANY AND SUBSIDIARIES
COMPUTATION OF PER SHARE EARNINGS
(In thousands, except per share)
FULLY DILUTED EARNINGS PER SHARE CALCULATION
<TABLE>
<CAPTION>
Years Ended December 31,
--------------------------------
1994 1993 1992
-------- -------- --------
<S> <C> <C> <C>
INCOME DATA:
Income before cumulative
effect of changes in
accounting principles $ 83,394 $113,116 $ 87,414
Cumulative effect of
changes in accounting
principles - 2,665 (6,356)
-------- -------- --------
Net income applicable to
common shares $ 83,394 $115,781 $ 81,058
======== ======== ========
COMMON AND COMMON EQUIVALENT SHARES:
Weighted average common
shares 96,331 104,875 104,875
Equivalent common shares
from stock options 141 - -
Equivalent common shares
from conversion of
preferred stock 7,899 - -
-------- -------- --------
Common and common
equivalent shares 104,371 104,875 104,875
======== ======== ========
EARNINGS PER COMMON SHARE:
Income before cumulative
effect of changes in
accounting principles $ 0.80 $ 1.08 $ 0.83
Cumulative effect of
changes in accounting
principles - 0.02 (0.06)
-------- -------- --------
Net income per common
and common equivalent
shares $ 0.80 $ 1.10 $ 0.77
======== ======== ========
</TABLE>
Page 2 of 2
<PAGE> 1
Exhibit 12
COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES
(Amounts in thousands except ratios)
(Unaudited)
<TABLE>
<CAPTION>
Year Ended December 31,
-----------------------------------------------------------
1994 1993(1) 1992(1) 1991(1) 1990(1)
-------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
Earnings:
Income before income taxes and
cumulative effect of changes
in accounting principles $ 54,060 $113,234 $ 93,399 $122,218 $240,460
Adjustments:
Net interest expense (2) 9,823 12,393 14,555 13,021 42,373
Amortization of capitalized
interest 1,928 1,814 1,410 1,668 1,236
Portion of rental expense
representative of interest 825 800 1,088 1,572 2,017
Minority interest of majority-
owned subsidiaries that have
fixed charges - 11,113 7,580 12,455 14,021
Undistributed income of less
than 50% owned entities (16,089) (3,526) - - (7,460)
-------- -------- -------- -------- --------
$ 50,547 $135,828 $118,032 $150,934 $292,647
======== ======== ======== ======== ========
Fixed Charges:
Net interest expense (2) $ 9,823 $ 12,393 $ 14,555 $ 13,021 $ 42,373
Capitalized interest 19,618 8,480 2,405 - -
Portion of rental expense
representative of interest 825 800 1,088 1,572 2,017
------- -------- -------- -------- --------
$ 30,266 $ 21,673 $ 18,048 $ 14,593 $ 44,390
======== ======== ======== ======== ========
Ratio of Earnings to Fixed Charges 1.7 6.3 6.5 10.3 6.6
=== === ==== ==== ===
</TABLE>
(1) The computations for the years ended December 31, 1993, 1992, 1991 and 1990
are for Newmont Mining Corporation ("NMC"), Newmont Gold Company's ("NGC")
parent. Computations for these periods are presented for NMC because
management believes they are more relevant than NGC's historical computations
for the same periods due to the fact that effective January 1, 1994 NGC
acquired essentially all of NMC's assets and assumed essentially all of NMC's
liabilities. The computations are reflective of what they would have been for
NGC had this transaction occurred at the beginning of 1990. NGC was fully
consolidated into NMC in all periods. From 1990 to 1993, NGC had no
significant fixed charges.
(2) Includes interest expense of majority-owned subsidiaries and amortization
of debt issuance costs.
<PAGE> 1
Exhibit 23
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the incorporation of
our report included in this 1994 Form 10-K into Newmont Gold Company's
previously filed S-3 Registration Statement No. 33-54245.
/s/ ARTHUR ANDERSEN LLP
ARTHUR ANDERSEN LLP
Denver, Colorado,
March 27, 1995.
<PAGE> 1
Exhibit 24
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears
below constitutes and appoints Timothy J. Schmitt his true and lawful
attorney-in-fact and agent, with full power of substitution and revocation, in
his name and on his behalf, to do any and all acts and things and to execute any
and all instruments which he may deem necessary or advisable to enable Newmont
Gold Company to comply with the Securities Exchange Act of 1934, as amended (the
"Act"), and any rules, regulations or requirements of the Securities and
Exchange Commission in respect thereof, including power and authority to sign
his name in any and all capacities (including his capacity as a Director and/or
Officer of Newmont Gold Company) to the Annual Report on Form 10-K of Newmont
Gold Company for the fiscal year ended December 31, 1994 and the undersigned
hereby ratifies and confirms all that said attorney-in-fact and agent shall
lawfully do or cause to be done by virtue hereof.
IN WITNESS WHEREOF, the undersigned have subscribed these presents as of
the 15th day of March 1995.
Signature Title
--------- -----
/s/ RUDOLPH I. J. AGNEW Director
-----------------------------
Rudolph I. J. Agnew
/s/ J. P. BOLDUC Director
-----------------------------
J. P. Bolduc
/s/ RONALD C. CAMBRE Chairman, President and Chief
----------------------------- Executive Officer and Director
Ronald C. Cambre (Principal Executive Officer)
/s/ JOSEPH P. FLANNERY Director
-----------------------------
Joseph P. Flannery
/s/ THOMAS A. HOLMES Director
-----------------------------
Thomas A. Holmes
<PAGE> 2
/s/ ROBIN A. PLUMBRIDGE Director
-----------------------------
Robin A. Plumbridge
/s/ ROBERT H. QUENON Director
-----------------------------
Robert H. Quenon
/s/ MOEEN A. QURESHI Director
-----------------------------
Moeen A. Qureshi
/s/ MICHAEL K. REILLY Director
-----------------------------
Michael K. Reilly
/s/ JAMES V. TARANIK Director
-----------------------------
James V. Taranik
/s/ WILLIAM I. M. TURNER, JR. Director
-----------------------------
William I. M. Turner, Jr.
/s/ WAYNE W. MURDY Senior Vice President
----------------------------- and Chief Financial Officer
Wayne W. Murdy (Principal Financial Officer)
/s/ GARY E. FARMAR Vice President and Controller
----------------------------- (Principal Accounting
Gary E. Farmar Officer)
-2-
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
ART. 5 FDS FOR 1994 10-K
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1994
<PERIOD-END> DEC-31-1994
<CASH> 160,637
<SECURITIES> 13,438
<RECEIVABLES> 37,597
<ALLOWANCES> 0
<INVENTORY> 130,931
<CURRENT-ASSETS> 370,134
<PP&E> 1,722,636
<DEPRECIATION> 603,350
<TOTAL-ASSETS> 1,656,657
<CURRENT-LIABILITIES> 153,215
<BONDS> 593,634
<COMMON> 213,947
0
14,375
<OTHER-SE> 524,629
<TOTAL-LIABILITY-AND-EQUITY> 1,656,657
<SALES> 597,370
<TOTAL-REVENUES> 619,686
<CGS> 326,385
<TOTAL-COSTS> 417,500
<OTHER-EXPENSES> 153,698
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 9,823
<INCOME-PRETAX> 54,060
<INCOME-TAX> (29,334)
<INCOME-CONTINUING> 83,394
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 83,394
<EPS-PRIMARY> 0.70
<EPS-DILUTED> 0.80
</TABLE>
