<PAGE> 1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
FORM 10-Q
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED JUNE 30, 1995
or
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
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Commission File Number: 1-9184
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NEWMONT GOLD COMPANY
- ----------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
Delaware 13-2526632
- ------------------------------- ------------------------------------
(State or other jurisdiction (I.R.S. Employer Identification No.)
incorporation or organization)
1700 Lincoln Street, Denver, Colorado 80203
- ----------------------------------------- ----------
(Address of principal executive offices) (Zip Code)
303-863-7414
----------------------------------------------------
(Registrant's telephone number, including area code)
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(Former name, address and fiscal year, if changed since last report)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act
of 1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days. [X] Yes [ ] No
There were 96,592,220 shares of common stock outstanding on July 25, 1995.
Exhibit index is on page 19.
There are 23 pages included in this report.
<PAGE> 2
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
NEWMONT GOLD COMPANY AND SUBSIDIARIES
Statements of Consolidated Income
(In thousands, except per share)
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended
June 30,
-----------------------
1995 1994
--------- ---------
<S> <C> <C>
Sales and other income
Sales $ 145,061 $ 139,337
Dividends, interest and other 14,641 1,789
Gain on disposition of investment 113,188 -
--------- ---------
272,890 141,126
--------- ---------
Costs and expenses
Costs applicable to sales 89,653 72,849
Depreciation, depletion and amortization 23,807 21,186
Exploration 13,712 16,648
General and administrative 11,776 12,501
Interest, net of capitalized interest
of $3,268 in 1995 and $5,531 in 1994 8,730 433
Other 24,582 28,910
--------- ---------
172,260 152,527
--------- ---------
Equity in income of affiliated companies 7,787 3,641
--------- ---------
Pretax income (loss) 108,417 (7,760)
Income tax (provision) benefit (32,961) 26,697
--------- ---------
Net income 75,456 18,937
Preferred stock dividends 3,953 3,953
--------- ---------
Net income applicable to common shares $ 71,503 $ 14,984
========= =========
Net income per common share $ 0.74 $ 0.16
========= =========
Weighted average number of shares of common
stock and common stock equivalents outstanding 96,697 96,439
Cash dividends declared per common share $ 0.12 $ 0.12
</TABLE>
<PAGE> 3
NEWMONT GOLD COMPANY AND SUBSIDIARIES
Statements of Consolidated Income
(In thousands, except per share)
(Unaudited)
<TABLE>
<CAPTION>
Six Months Ended
June 30,
-----------------------
1995 1994
--------- ---------
<S> <C> <C>
Sales and other income
Sales $ 279,520 $ 289,106
Dividends, interest and other 31,923 3,628
Gain on disposition of investment 113,188 -
--------- ---------
424,631 292,734
--------- ---------
Costs and expenses
Costs applicable to sales 172,838 155,776
Depreciation, depletion and amortization 48,526 44,092
Exploration 22,164 28,203
General and administrative 23,677 21,397
Interest, net of capitalized interest
of $6,077 in 1995 and $10,281 in 1994 17,446 598
Other 26,624 30,845
--------- ---------
311,275 280,911
--------- ---------
Equity in income of affiliated companies 13,932 5,101
--------- ---------
Pretax income 127,288 16,924
Income tax (provision) benefit (34,834) 25,732
--------- ---------
Net income 92,454 42,656
Preferred stock dividends 7,906 7,906
--------- ---------
Net income applicable to common shares $ 84,548 $ 34,750
========= =========
Net income per common share $ 0.88 $ 0.36
========= =========
Weighted average number of shares of common
stock and common stock equivalents outstanding 96,611 96,471
Cash dividends declared per common share $ 0.24 $ 0.24
</TABLE>
<PAGE> 4
NEWMONT GOLD COMPANY AND SUBSIDIARIES
Consolidated Balance Sheets
(In thousands)
(Unaudited)
<TABLE>
<CAPTION>
June 30, December 31,
1995 1994
---------- ------------
<S> <C> <C>
Assets
Cash and cash equivalents $ 163,665 $ 160,637
Short-term investments 12,298 13,438
Accounts receivable 26,008 37,597
Inventories 151,820 130,931
Other 16,942 27,531
---------- ----------
Current assets 370,733 370,134
Property, plant and mine development, net 1,184,104 1,119,286
Other 194,085 167,237
---------- ----------
Total assets $1,748,922 $1,656,657
========== ==========
Liabilities
Short-term debt $ 15,739 $ 15,739
Current portion of long-term debt 11,516 -
Accounts payable 29,938 32,723
Other accrued liabilities 123,629 104,753
---------- ----------
Current liabilities 180,822 153,215
Long-term debt 597,118 593,634
Reclamation and remediation liabilities 67,627 66,760
Other long-term liabilities 85,348 90,097
---------- ----------
Total liabilities 930,915 903,706
---------- ----------
Contingencies
Stockholders' Equity
Preferred stock 14,375 14,375
Common stock 1,049 1,049
Capital in excess of par value 215,587 212,898
Retained earnings 660,139 598,755
Treasury stock (73,143) (74,126)
---------- ----------
Total stockholders' equity 818,007 752,951
---------- ----------
Total liabilities and
stockholders' equity $1,748,922 $1,656,657
========== ==========
</TABLE>
<PAGE> 5
NEWMONT GOLD COMPANY AND SUBSIDIARIES
Statements of Consolidated Cash Flows
(In thousands)
(Unaudited)
<TABLE>
<CAPTION>
Six Months Ended
June 30,
-----------------------
1995 1994
--------- ---------
<S> <C> <C>
Operating activities:
Net income $ 92,454 $ 42,656
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation, depletion and amortization 48,526 44,092
Undistributed earnings of affiliates (1,469) (5,066)
Deferred taxes 4,755 (28,284)
Gain on investment (113,188) -
Write-off of exploration property 18,783 -
Other 1,287 74
--------- --------
51,148 53,472
(Increase) decrease in operating assets:
Accounts receivable 11,580 21,622
Inventories (24,556) (4,682)
Other assets 7,876 4,364
Increase (decrease) in operating liabilities:
Accounts payable and accrued expenses 19,925 (2,882)
Accrued income taxes 18,085 (9,904)
Other liabilities (3,882) 550
--------- ---------
Net cash provided by operating activities 80,176 62,540
--------- ---------
Investing activities:
Additions to property, plant and mine development (155,253) (198,225
Proceeds from sale of investment 116,354 -
Net cash acquired from parent - 69,361
Investment in joint venture (19,273) (3,823)
Other (6,001) 4,580
--------- ---------
Net cash used in investing activities (64,173) (128,107)
--------- ---------
Financing activities:
Proceeds from long-term borrowings 15,000 122,500
Proceeds from issuance of common stock 3,094 4,021
Dividends paid on preferred stock (7,906) (7,204)
Dividends paid on common stock (23,163) (23,094)
--------- ---------
Net cash provided by (used in) financing activities (12,975) 96,223
--------- ---------
Net increase in cash and cash equivalent 3,028 30,656
Cash and cash equivalents at beginning of period 160,637 389
--------- ---------
Cash and cash equivalents at end of period $ 163,665 $ 31,045
========= =========
</TABLE>
<PAGE> 6
NEWMONT GOLD COMPANY AND SUBSIDIARIES
Statements of Consolidated Cash Flows
(In thousands)
(Unaudited)
<TABLE>
<CAPTION>
Six Months Ended
June 30,
-----------------------
1995 1994
--------- ---------
<S> <C> <C>
Supplemental information:
Interest paid, net of amounts capitalized of
$6,077 in 1995 and $10,281 in 1994 $ 5,329 $ (937)
Income taxes paid (refunded) $ 1,185 $(12,057)
</TABLE>
<PAGE> 7
NEWMONT GOLD COMPANY AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(Unaudited)
(1) Basis of Preparation of Financial Statements
These unaudited interim financial statements of Newmont Gold Company and
subsidiaries (collectively, the "Company") have been prepared in accordance
with the rules and regulations of the Securities and Exchange Commission.
Such rules and regulations allow the omission of certain information and
footnote disclosures normally included in financial statements prepared in
accordance with generally accepted accounting principles, so long as the
statements are not misleading.
In the opinion of management, these financial statements reflect all
adjustments which are necessary to a fair statement of the results for the
periods presented. All adjustments were of a normal recurring nature except
for the following: (1) in the quarter and six months ended June 30, 1995, a
write-down of the carrying value of an exploration property for $18.8 million
and an additional provision for reclamation on such property of $4.5 million
as discussed in Note 4 herein; (2) in the quarter and six months ended June
30, 1994, a charge of $27.1 million related to environmental obligations
associated with former mining activities, including a valuation allowance for
insurance receivables of $20.0 million and a provision for estimated
environmental costs of $7.1 million; and (3) during the quarter and six
months ended June 30, 1994, an income tax benefit of $16.2 million resulting
from the resolution of certain tax issues associated with prior years. These
interim financial statements should be read in conjunction with the annual
financial statements of the Company included in its 1994 annual report on
Form 10-K.
Newmont Mining Corporation ("NMC") owns approximately 89% of the
Company's common stock and 100% of the Company's preferred stock and,
effective January 1, 1994, all of NMC's operations are held through the
Company.
Certain prior year amounts have been reclassified to conform with
the current year presentation.
<PAGE> 8
(2) Inventories
<TABLE>
<CAPTION>
June 30, December 31,
1995 1994
------------- ------------
(In thousands)
<S> <C> <C>
Current:
Ore and in-process $ 81,627 $ 62,196
Precious metals 32,143 34,536
Materials and supplies 35,917 31,533
Other 2,133 2,666
-------- --------
$151,820 $130,931
======== ========
Non-current:
Ore in stockpiles (included
in other assets) $ 44,121 $ 33,051
======== ========
</TABLE>
(3) Sale of Interest in Southern Peru Copper Corporation
On April 5, 1995, the Company sold its 10.7% interest in Southern Peru
Copper Corporation for $116.4 million, which resulted in a pre-tax gain of
$113.2 million, or approximately $72 million, or $0.75 per share on an after-
tax basis.
(4) Write-down of Exploration Property
During the second quarter of 1995, the Company determined that it would
no longer pursue exploration or development of the Ivanhoe property, which
was acquired in 1992. Therefore the entire capitalized value of the property
of $18.8 million was written-off. In addition, the Company increased the
reclamation reserve for the property by $4.5 million. Reclamation of the
property is expected to take at least three years. In total, the charges
resulted in an after-tax charge of approximately $15.1 million, or $0.16 per
share.
(5) Contingencies
Environmental Obligations
The Company is involved in several matters concerning environmental
obligations primarily associated with former mining activities. Based upon
the Company's best estimate of its liability for these matters, $67.4 million
and $65.7 million were accrued for such liabilities at June 30, 1995 and
December 31, 1994, respectively. In addition, $17.5 million and $18.4
million were accrued at June 30, 1995 and December 31, 1994, respectively,
for reclamation costs relating to currently producing mineral properties.
These amounts are included in other current liabilities and reclamation
liabilities. Depending upon the ultimate resolution of the matters related
to former mining activities, 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 June 30, 1995.
<PAGE> 9
A discussion of the environmental obligations and related insurance
receivables associated with former mining activities as of June 30, 1995
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 and 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
remaining cost of this work is included in the accrued liability for
environmental matters, as previously discussed. If the remediation work does
not meet certain measurement criteria specified in the consent decree, the
State and the 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 as 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 the remedial action which will be required under
Phase II. Moreover, in addition to such action, the government agencies may
seek to recover for damages to natural resources.
<PAGE> 10
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 accrued liability for environmental matters, as previously discussed.
Dawn Mining Company ("Dawn") - 51% owned
Dawn leased a currently inactive open-pit uranium mine on the Spokane
Indian Reservation in the State of Washington. 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 terminated. As a result, Dawn was required to
file a formal mine 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 accrued liability for environmental matters, as previously
discussed.
The Department of Interior previously notified Dawn that when the lease
was terminated, it would seek to hold Dawn and NMC (as Dawn's then 51% owner)
liable for any costs incurred as a result of Dawn's failure to comply with
the lease and applicable regulations. The Company would vigorously contest
any such claims. The Company cannot reasonably predict the likelihood or
outcome of any future action against Dawn or the Company arising from this
matter.
Dawn has received a license for a mill closure plan which could
potentially generate the necessary funds to reclaim the mine and the mill.
The license, however, is currently being challenged by third parties.
Insurance Receivables
Included in accounts receivable at December 31, 1994 was a net $16.7
million from insurance companies 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.
Prior to 1993, three of the insurance companies commenced actions
against NMC seeking judgments that they had no liability. In the fall of
1993, NMC instituted a comprehensive lawsuit against its carriers.
In the first quarter of 1995 settlement in the insurance litigation was
reached enabling the Company to realize the receivable outstanding at
December 31, 1994. 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 sought $500 million of
compensatory damages jointly and severally against all defendants, $63
<PAGE> 11
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 was also requested.
In May 1995, NMC filed a motion to dismiss the complaint on the ground
that the Ohio federal court lacks personal jurisdiction over NMC. In lieu of
responding to the motion, plaintiffs voluntarily dismissed the complaint as
against NMC without prejudice in June 1995.
Additional Interest in Minera Yanacocha
In September 1994, an affiliate of Bureau de Recherches Geologiques et
Minieres, the geological and mining bureau of the French government ("BRGM"),
announced its intention to transfer its 24.7% interest in Minera Yanacocha,
S.A. to another entity. The Company and Compania de Minas Buenaventura, S.A.
("Buenaventura"), then 38.0% and 32.3% owners of Minera Yanacocha,
respectively, filed suit in Peru to seek enforcement of a provision in the
bylaws of Minera Yanacocha, giving shareholders preemptive rights on the sale
or transfer of any shareholder's interest. In February 1995, an appellate
court in Peru issued a preliminary ruling in favor of the Company and
Buenaventura. The Company elected to exercise its preemptive rights to
acquire its proportionate share of the additional interest and in accordance
with the court ruling deposited $48.6 million with a Peruvian bank, pending
the final resolution of the case. The Company borrowed the $48.6 million
from the same Peruvian bank with the right of setoff against the deposit.
Part of the final resolution of the case, if resolved in the Company's favor,
will determine how much the Company must pay for the additional interest,
which may be more or less than the amount deposited. The Company intends to
fund the purchase of the additional interest with its available cash or
credit facilities. As a result of the preliminary ruling of the court and
the Company's exercise of its preemptive right, the Company presently owns
51% of Minera Yanacocha. This additional interest will not be reflected in
the financial statements until a final determination is made by the Peruvian
courts.
(6) Supplementary Data
The ratio of earnings to fixed charges for the six months ended June 30,
1995 was 6.0. The Company guarantees certain third party debt which had
total interest obligations of $0.7 million for the six months ended June 30,
1995. The Company has not been required to pay any interest on these
obligations in the past, nor does it expect to have to pay any amounts with
respect to such debt in the future. Therefore, such amounts have not been
included in the ratio of earnings to fixed charges.
<PAGE> 12
Item 2. Management's Discussion and Analysis of Results of Operations and
Financial Condition
The following discussion summarizes the results of operations of Newmont
Gold Company ("Newmont") and its subsidiaries (collectively, the "Company")
for the quarters and six month periods ended June 30, 1995 and 1994 and
changes in its financial condition from December 31, 1994 to June 30, 1995.
Newmont Mining Corporation ("NMC") owns approximately 89% of the Company's
common stock and 100% of the Company's preferred stock and, effective January
1, 1994, all of NMC's operations are held through the Company. This
discussion should be read in conjunction with the Management's Discussion and
Analysis included in the Company's 1994 annual report on Form 10-K.
RESULTS OF OPERATIONS
The Company earned $75.5 million ($0.74 per share) and $92.5 million
($0.88 per share) in the quarter and six months ended June 30, 1995,
respectively, compared with $18.9 million ($0.16 per share) and $42.7 million
($0.36 per share) in the respective 1994 periods. The 1995 periods include
a gain of $113.2 million, or $72.0 million after-tax ($0.75 per share), on
the sale of the Company's interest in Southern Peru Copper Corporation (see
Note 3 in Item 1). The 1995 periods also include a charge of $23.3 million,
or $15.1 million after-tax ($0.16 per share), for the write-off and
reclamation accrual associated with the Ivanhoe exploration property (see
Note 4 in Item 1). The 1994 periods include a tax benefit of $16.2 million
($0.17 per share) resulting from the resolution of certain tax issues
associated with prior years and a charge of $27.1 million, or $17.6 million
after-tax ($0.18 per share), for environmental obligations associated with
former mining activities.
During the second quarter of 1995, consolidated gold sales were 372,800
ounces at an average price of $389 per ounce, compared to 365,000 ounces at
an average price of $382 per ounce in the second quarter of 1994. During the
first six months of 1995, consolidated gold sales were 727,700 ounces at an
average price of $384 per ounce compared to 754,700 ounces at an average
price of $383 per ounce in the first six months of 1994. Production for all
periods is attributable entirely to the Carlin, Nevada operations. For the
second quarter comparison, the 7,800 ounce increase in production increased
sales revenue by $3.0 million and the $7 increase in the per ounce sales
price increased sales revenue by $2.7 million. For the six-month comparison,
the 27,000 ounce decline in production decreased sales revenue by $10.4
million and the $1 increase in the per ounce sales price increased sales
revenue by $0.8 million.
The increase in production for the second quarter of 1995 as compared to
the second quarter of 1994 was primarily due to production from the
refractory ore treatment plant (despite operation at less-than-full capacity)
more than offsetting the 1994 production from three mills that have
subsequently been closed. The decrease in production for the first six
months of 1995 as compared to the first six months of 1994 was due to 19%
fewer tons milled because of the closure of the three mills, and 15% fewer
tons placed on leach pads due to lower availability of oxide leach ore.
During the second half of 1995, production at the Carlin operation is
expected to benefit from increased production from the refractory ore
treatment plant; however, because of the start-up problems being experienced
at the facility, continuous operations at full capacity are not expected to
occur much before the end of the year. Nevertheless, due to the flexibility
of its large operations, the Company still expects to produce approximately
1.6 million ounces from Carlin in 1995. In addition, production from the
<PAGE> 13
Zarafshan-Newmont Joint Venture is expected to begin in the third quarter of
1995.
The Company's equity income from its 38% interest in Minera Yanacocha
S.A. ("Minera Yanacocha") increased to $8.0 million in the 1995 second
quarter from $4.5 million in the 1994 second quarter and to $15.1 million in
the 1995 first six months from $6.5 million in the 1994 first six months.
Minera Yanacocha produced 131,100 ounces, or 49,800 ounces attributable to
the Company's interest, in the 1995 second quarter compared to 69,200 ounces,
or 26,300 ounces attributable to the Company's interest, in the 1994 second
quarter. Operating costs, excluding depreciation, depletion and amortization
("DD&A"), were $106 per ounce in the 1995 second quarter compared to $126 per
ounce in the 1994 second quarter. Minera Yanacocha produced 253,000 ounces,
or 96,100 ounces attributable to the Company's interest, in the first six
months of 1995 compared to 114,800 ounces, or 43,600 ounces attributable to
the Company's interest, in the first six months of 1994. Operating costs,
excluding DD&A, were $115 per ounce in the 1995 first six months compared to
$135 per ounce in the 1994 first six months. The increases in production are
primarily due to a second mine coming into production in late 1994.
Dividends, interest and other income in the 1995 second quarter and
first six months includes $11.2 million and $23.0 million, respectively, for
business interruption insurance recorded for the start-up problems with the
refractory ore treatment plant. Interest income for the 1995 second quarter
and first six months is $3.1 million and $5.1 million, respectively, compared
to $0.4 million and $1.3 million for the respective 1994 periods. This
increase is due to higher cash balances in the 1995 periods. In addition,
dividends from the Company's investment in Southern Peru Copper Corporation
received prior to the sale were $2.2 million higher during the first six
months of 1995 compared to the first six months of 1994. In April 1995, the
Company sold its 10.7% interest in Southern Peru Copper Corporation for
$116.4 million, which resulted in a pre-tax gain of $113.2 million, as
previously discussed.
Costs applicable to sales increased $16.8 million and $17.1 million in
the 1995 second quarter and the first six months, respectively, when compared
to the same periods in 1994. On a per-ounce-of-gold-sold basis, costs
applicable to sales were also higher in the 1995 periods compared to the 1994
periods. The following table summarizes the significant components of these
costs per ounce of gold sold:
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
June 30, June 30,
------------------ -------------------
1995 1994 1995 1994
---- ---- ---- ----
<S> <C> <C> <C> <C>
Production costs $203 $172 $198 $177
Royalties 31 21 33 23
Other 6 6 6 6
---- ---- ---- ----
$240 $199 $237 $206
==== ==== ==== ====
</TABLE>
<PAGE> 14
Of the increase in the aggregate amounts, $13.1 million and $10.5
million relate to higher Carlin production costs in the 1995 second quarter
and first six months, respectively. Approximately 50% of the higher
production costs between the second quarters and almost all the higher
production costs between the first six months are due to increased milling
costs primarily associated with the start-up operations of the refractory ore
treatment plant. Even though the refractory ore treatment plant only
operated at partial capacity during the first six months of 1995, as
previously mentioned, its costs still exceeded those for Mills 1, 2 and 3
which operated in 1994 but were shut down between May and November of 1994.
Higher mining costs accounted for approximately 30% of the higher production
costs for the 1995 second quarter compared to the 1994 second quarter due to
increased costs associated with underground mining as well as higher
dewatering costs associated with the Post mine.
The increase in production costs on a per-ounce-of-gold-sold basis in
the 1995 second quarter was the result of the higher costs discussed in the
above paragraph. Per ounce production costs are expected to decline during
the second half of the year as the refractory ore treatment plant is expected
to operate at a higher capacity and as the lower-cost Zarafshan-Newmont Joint
Venture will begin operations.
For the 1995 second quarter and first six months, royalty costs on an
aggregate basis were $11.5 million and $24.2 million, respectively. This
compares to royalty costs in the 1994 second quarter and first six months of
$7.7 million and $17.2 million, respectively. The increase in royalty costs
on an aggregate and per ounce basis is due to the production of a higher
proportion of royalty-burdened ore in 1995 compared to 1994, which is
expected to continue throughout the year. For the year, per ounce royalty
costs are expected to be 15% to 20% higher than the $25 per ounce experienced
during 1994.
In addition to expensed production costs, the Company capitalized $12.9
million and $22.8 million of mining costs, during the 1995 second quarter and
first six months, respectively. These costs are associated with deposits
having diverse waste-to-ore ratios, where such ratios are quite high early in
the mine's life. Capitalized costs in the 1994 second quarter and first six
months were $10.7 million and $17.7 million, respectively. The current year
increases are attributable to more tons being mined, and it is anticipated
that the current higher levels will be maintained throughout the year.
DD&A increased $2.6 million and $4.4 million in the 1995 second quarter
and first six months, respectively, compared to the same respective periods
in 1994. Depreciation of the refractory ore treatment plant increased DD&A
expense in the 1995 periods by $4.2 million and $8.5 million for the second
quarter and first six months, respectively. There was no comparable
depreciation in the 1994 periods. The increase in both 1995 periods was
partially offset primarily by lower amortization of deferred mine development
costs due to lower estimated future costs.
Exploration expense in the second quarter and first six months of 1995
decreased $2.9 million and $6.0 million, respectively, compared to the same
periods of 1994, in accordance with the Company's plans to decrease
exploration spending in 1995 as the Company focuses on resource development.
During the first quarter of 1995, studies on the Batu Hijau project in
Indonesia confirmed that this large porphyry copper/gold deposit could be
economically developed. Therefore, costs incurred on this project are now
<PAGE> 15
being capitalized and totaled $4.4 million and $9.4 million in the second
quarter and first six months of 1995, respectively.
General and administrative expenses were lower in the 1995 second
quarter compared to the 1994 second quarter, yet higher by $2.3 million in
the 1995 first six months than in 1994 first six months. The decrease
between the second quarters is due to the timing of expenditures. The
increase for the first six months is reflective of the increased
international focus of the Company's operations and representative of the
increase expected for the year.
Net interest expense increased $8.3 million and $16.8 million in the
1995 second quarter and first six months, respectively, compared with the
same respective periods in 1994. Interest expense increased from $6.0
million in the 1994 second quarter to $12.0 million in the 1995 second
quarter and from $10.9 million in the 1994 first six months to $23.5 million
in the 1995 first six months primarily due to interest expense associated
with the sale-leaseback transaction of the refractory ore treatment plant
completed in September 1994. With the completion of the refractory ore
treatment plant in late 1994 and, consequently, the decrease in capital
expenditures eligible for interest capitalization, capitalized interest in
the 1995 second quarter was $3.3 million compared to $5.5 million in the 1994
second quarter and $6.1 million in the 1995 first six months compared to
$10.3 million in the 1994 first six months.
Other expense includes the charges previously discussed for the Ivanhoe
property in the 1995 periods and for the environmental obligations in the
1994 periods. In the 1995 second quarter, the Company wrote off its
investment in the Ivanhoe exploration property that was acquired in 1992 and
added to its reclamation reserve to reclaim areas disturbed by previous
mining and exploration activity on the property, resulting in a pre-tax
charge of $23.3 million. This charge was determined to be necessary after
evaluation of the property identified most of the mineralization to be low
grade and, therefore, not meeting the Company's criteria for development. In
the 1994 second quarter, a valuation allowance of $20.0 million was made
against long-term receivables from insurance companies for recoveries related
to environmental obligations associated with former mining activities and a
provision of $7.1 million was made for additional estimated environmental
related costs associated with the same former mining activities.
During the second quarter of 1995, the Company recognized $41.2 million
of taxes related to the sale of its investment in Southern Peru Copper
Corporation. This charge was offset by a deferred tax benefit of
approximately $8.1 million related to the previously mentioned $23.3 million
charge associated with the Ivanhoe property. In the second quarter of 1994,
as previously discussed, the Company recognized a $16.2 million income tax
benefit as a result of the resolution of certain tax issues associated with
prior years. This, combined with a deferred tax benefit of approximately
$9.5 million associated with a $27.1 million charge for environmental
obligations, resulted in the tax benefit for the second quarter and first six
months of 1994. In addition, both years' effective tax rates benefitted from
the estimated annual amount of percentage depletion being a high proportion
of the estimated annual pre-tax financial income.
LIQUIDITY AND CAPITAL RESOURCES
During the first six months of 1995, the Company's cash outlays included
$155.3 million of capital expenditures, $19.3 million to carry the partners'
share of the costs in the Zarafshan-Newmont Joint Venture and $31.1 million
<PAGE> 16
in dividends. Of the capital expenditures, approximately $74.8 million was
spent on projects at the Carlin operations which were primarily associated
with the refractory ore treatment plant, capitalized mining costs, leach pad
construction and underground development. In addition, $37.9 million was
spent on mine site development for the Minahasa project in Indonesia and
$23.4 million on the Zarafshan-Newmont Joint Venture project. Cash flow from
operating activities was $80.2 million. During the second quarter, the
Company sold its investment in Southern Peru Copper Corporation for $116.4
million. In addition, during the second quarter the Zarafshan-Newmont Joint
Venture obtained an additional $30.0 million of project financing, $15
million of which is attributable to the Company.
Cash requirements during 1995 are expected to continue to exceed
operating cash flow. The $163.7 million of cash and cash equivalents at June
30, 1995, as well as funds available under credit facilities, will adequately
cover any short-fall in operating cash flow for the remainder of the year.
As discussed in Note 5, the Company exercised its preemptive right for
an additional interest in Minera Yanacocha, subject to a final determination
by the Peruvian courts. If successful, the Company intends to fund this
purchase with available cash or credit facilities.
The decrease in accounts receivable during the first six months of 1995
is due to the receipt of insurance monies related to the start-up problems of
the refractory ore treatment plant and to the settlement of litigation of
environmental obligations associated with former mining activities.
The increase in both current and long-term inventories in the first six
months of 1995 is primarily due to a $20.3 million increase in ore at the
Carlin, Nevada site because of the stockpiling of mill and leach refractory
ore. In addition, the Company purchased additional ore for processing by the
Zarafshan-Newmont Joint Venture to finance the other partners' equity
contributions to the joint venture. This increased ore inventory $7.5
million.
Other current assets decreased between December 31, 1994 and June 30,
1995 due primarily to the utilization of prepaid taxes, whereas other current
accrued liabilities increased in this time period due to accruals of current
year income tax expense. In addition, an increase in other accrued
liabilities related to operating activities was more than offset by a
decrease in accrued liabilities related to property, plant and equipment.
<PAGE> 17
PART II - OTHER INFORMATION
Item 4. Submission of Matters to a Vote of Security Holders
Registrant's annual meeting of stockholders was held on May 4, 1995.
All eleven directors nominated to serve as directors of Registrant were
elected. The vote was as follows:
<TABLE>
<CAPTION>
Broker
Nominee For Withheld Abstentions Non-Votes
- -------------------- ---------- -------- ----------- ---------
<S> <C> <C> <C> <C>
R. I. J. Agnew 93,753,934 378,168 0 0
J. P. Bolduc 93,946,754 185,348 0 0
R. C. Cambre 93,959,684 172,418 0 0
J. P. Flannery 93,959,834 172,268 0 0
T. A. Holmes 93,958,334 173,768 0 0
R. A. Plumbridge 93,753,934 378,168 0 0
R. H. Quenon 93,957,504 174,598 0 0
M. A. Qureshi 93,958,234 173,868 0 0
M. K. Reilly 93,937,790 194,312 0 0
J. V. Taranik 93,957,494 174,608 0 0
W. I. M. Turner, Jr. 93,959,234 172,868 0 0
</TABLE>
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits:
11 - Statement re Computation of Per Share Earnings.
12 - Statement re Computation of Ratio of Earnings to Fixed Charges.
27 - Financial Data Schedule
(b) Reports on Form 8-K:
No reports were filed on Form 8-K during the quarter ended June 30,
1995.
<PAGE> 18
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
NEWMONT GOLD COMPANY
(Registrant)
Date: August 1, 1995 /s/ WAYNE W. MURDY
--------------------------------
Wayne W. Murdy
Senior Vice President and
Chief Financial Officer
(Principal Financial Officer)
Date: August 1, 1995 /s/ GARY E. FARMAR
--------------------------------
Gary E. Farmar
Vice President and Controller
(Principal Accounting Officer)
<PAGE> 19
EXHIBIT INDEX
<TABLE>
<CAPTION>
Page
----
<S> <C>
Exhibit 11 - Statement re Computation of Per Share Earnings
Exhibit 12 - Statement re Computation of Ratios of Earnings
to Fixed Charges
Exhibit 27 - Financial Data Schedule
</TABLE>
<PAGE> 1
EXHIBIT 11
Page 1 of 2
NEWMONT GOLD COMPANY AND SUBSIDIARIES
COMPUTATION OF PER SHARE EARNINGS
(In thousands, except per share)
PRIMARY EARNINGS PER SHARE CALCULATIONS
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
June 30, June 30,
---------------------- -----------------------
1995 1994 1995 1994
--------- -------- ---------- ---------
<S> <C> <C> <C> <C>
INCOME DATA:
Net income $ 75,456 $ 18,937 $ 92,454 $ 42,656
Preferred stock dividends (3,953) (3,953) (7,906) (7,906)
--------- -------- --------- --------
Net income applicable to
common shares $ 71,503 $ 14,984 $ 84,548 $ 34,750
========= ======== ========= ========
COMMON AND COMMON EQUIVALENT SHARES:
Weighted average common shares 96,519 96,310 96,497 96,274
Equivalent common shares from
stock options 178 129 114 197
--------- -------- -------- --------
Common and common equivalent shares 96,697 96,439 96,611 96,471
========= ======== ======== ========
EARNINGS PER COMMON SHARE:
Net income per common and common
equivalent shares $ 0.74 $ 0.16 $ 0.88 $ 0.36
========= ======== ======== ========
</TABLE>
<PAGE> 2
EXHIBIT 11
Page 2 of 2
NEWMONT GOLD COMPANY AND SUBSIDIARIES
COMPUTATION OF PER SHARE EARNINGS
(In thousands, except per share)
FULLY DILUTED EARNINGS PER SHARE CALCULATIONS
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
June 30, June 30,
---------------------- ----------------------
1995 1994 1995 1994
--------- -------- --------- ---------
<S> <C> <C> <C> <C>
INCOME DATA:
Net income applicable to
common shares $ 75,456 $ 18,937 $ 92,454 $ 42,656
========= ======== ========= ========
COMMON AND COMMON EQUIVALENT SHARES:
Weighted average common shares 96,519 96,310 96,497 96,274
Equivalent common shares from
stock options 178 129 153 197
Equivalent common shares from
conversion of preferred stock 7,899 7,899 7,899 7,899
--------- -------- --------- --------
Common and common equivalent shares 104,596 104,338 104,549 104,370
========= ======== ========= ========
EARNINGS PER COMMON SHARE:
Net income per common and common
equivalent shares $ 0.72 $ 0.18 $ 0.88 $ 0.41
========= ======== ========= ========
</TABLE>
<PAGE> 1
EXHIBIT 12
NEWMONT GOLD COMPANY AND SUBSIDIARIES
COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES
(Amounts in thousands except ratios)
(Unaudited)
<TABLE>
<CAPTION>
Six Months Ended
June 30, 1995
------------------
<S> <C>
Earnings:
Income before income taxes $ 127,288
Adjustments:
Net interest expense (1) 17,446
Amortization of capitalized interest 1,154
Portion of rental expense representative
of interest 713
Undistributed income of less than 50%
owned entities (1,469)
---------
$ 145,132
=========
Fixed Charges:
Net interest expense (1) $ 17,446
Capitalized interest 6,077
Portion of rental expense representative
of interest 713
---------
$ 24,236
=========
Ratio of earnings to fixed charges 6.0
=========
</TABLE>
(1) Includes interest expense of majority-owned subsidiaries and amortization
of debt issuance costs.
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
ART. 5 FOR 2ND QUARTER 10Q
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1994
<PERIOD-END> JUN-30-1995
<CASH> 163,665
<SECURITIES> 12,298
<RECEIVABLES> 26,008
<ALLOWANCES> 0
<INVENTORY> 151,820
<CURRENT-ASSETS> 370,733
<PP&E> 1,827,055
<DEPRECIATION> 642,951
<TOTAL-ASSETS> 1,748,922
<CURRENT-LIABILITIES> 180,822
<BONDS> 597,117
<COMMON> 143,493
0
14,375
<OTHER-SE> 662,918
<TOTAL-LIABILITY-AND-EQUITY> 1,748,922
<SALES> 279,520
<TOTAL-REVENUES> 424,631
<CGS> 172,838
<TOTAL-COSTS> 221,364
<OTHER-EXPENSES> 72,465
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 17,446
<INCOME-PRETAX> 127,288
<INCOME-TAX> 34,834
<INCOME-CONTINUING> 92,454
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 92,454
<EPS-PRIMARY> 0.88
<EPS-DILUTED> 0.88
</TABLE>
