<PAGE>
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, 1996
or
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
-------------- ------------
Commission File Number: 1-9184
--------
NEWMONT GOLD COMPANY
- -------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
Delaware 13-2526632
- ------------------------------- ----------------------------------
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
1700 Lincoln Street, Denver, Colorado 80203
- ---------------------------------------------------------------------
(Address of principal executive offices) (Zip Code)
(303) 863-7414
----------------------------------------------------
(Registrant's telephone number, including area code)
- --------------------------------------------------------------------------
(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 109,903,952 shares of common stock outstanding on July 26, 1996.
Exhibit index is on page 18.
There are 22 pages included in this report.
<PAGE>
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,
-----------------------
1996 1995
--------- ---------
<S> <C> <C>
Sales and other income
Sales $ 181,216 $ 145,061
Dividends, interest and other 6,240 14,641
Gain on disposition of investment - 113,188
--------- ---------
187,456 272,890
--------- ---------
Costs and expenses
Costs applicable to sales 113,399 89,653
Depreciation, depletion and amortization 29,569 23,807
Exploration and research 12,548 13,712
General and administrative 11,981 11,776
Interest, net of capitalized interest
of $2,106 in 1996 and $3,268 in 1995 10,310 8,730
Other 3,324 24,582
--------- ---------
181,131 172,260
--------- ---------
Equity in income of affiliated companies 11,405 7,787
--------- ---------
Pre-tax income 17,370 108,417
Income tax benefit (provision) 4,201 (32,961)
--------- ---------
Net income 21,571 75,456
Preferred stock dividends - 3,953
--------- ---------
Net income applicable to common shares $ 21,571 $ 71,503
========= =========
Net income per common share $ 0.20 $ 0.74
========= =========
Weighted average number of shares of
common stock and common stock
equivalents outstanding 110,274 96,697
Cash dividends declared per common share $ 0.12 $ 0.12
</TABLE>
2
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NEWMONT GOLD COMPANY AND SUBSIDIARIES
Statements of Consolidated Income
(In thousands, except per share)
(Unaudited)
<TABLE>
<CAPTION>
Six Months Ended
June 30,
-----------------------
1996 1995
--------- ---------
<S> <C> <C>
Sales and other income
Sales $ 335,921 $ 279,520
Dividends, interest and other 13,261 31,923
Gain on disposition of investment - 113,188
--------- ---------
349,182 424,631
--------- ---------
Costs and expenses
Costs applicable to sales 211,497 172,838
Depreciation, depletion and amortization 58,056 48,526
Exploration and research 22,899 22,164
General and administrative 23,812 23,677
Interest, net of capitalized interest
of $4,231 in 1996 and $6,077 in 1995 20,267 17,446
Other 7,053 26,624
--------- ---------
343,584 311,275
--------- ---------
Equity in income of affiliated companies 22,577 13,932
--------- ---------
Pre-tax income 28,175 127,288
Income tax benefit (provision) 5,184 (34,834)
--------- ---------
Net income 33,359 92,454
Preferred stock dividends - 7,906
--------- ---------
Net income applicable to common shares $ 33,359 $ 84,584
========= =========
Net income per common share $ 0.31 $ 0.88
========= =========
Weighted average number of shares of
common stock and common stock
equivalents outstanding 109,452 96,611
Cash dividends declared per common share $ 0.24 $ 0.24
</TABLE>
3
<PAGE>
NEWMONT GOLD COMPANY AND SUBSIDIARIES
Consolidated Balance Sheets
(In thousands)
(Unaudited)
<TABLE>
<CAPTION>
June 30, December 31,
1996 1995
---------- ------------
<S> <C> <C>
Assets
Cash and cash equivalents $ 214,735 $ 59,142
Short-term investments 11,216 11,820
Accounts receivable 25,500 24,458
Inventories 193,173 173,984
Other current assets 45,977 20,128
---------- ----------
Current assets 490,601 289,532
Property, plant and mine
development, net 1,324,214 1,255,278
Other long-term assets 244,829 228,960
---------- ----------
Total assets $2,059,644 $1,773,770
========== ==========
Liabilities
Short-term debt $ 37,111 $ 29,179
Current portion of long-term debt 14,000 4,375
Accounts payable 39,516 38,570
Other accrued liabilities 121,144 122,312
---------- ----------
Current liabilities 211,771 194,436
Long-term debt 594,634 604,259
Reclamation and remediation
liabilities 65,741 64,795
Other long-term liabilities 86,556 85,352
---------- ----------
Total liabilities 958,702 948,842
---------- ----------
Contingencies
Stockholders' Equity
Common stock 1,102 1,049
Capital in excess of par value 428,917 160,081
Retained earnings 673,173 666,161
Treasury stock (2,250) (2,363)
---------- ----------
Total stockholders' equity 1,100,942 824,928
---------- ----------
Total liabilities and
stockholders' equity 2,059,644 $1,773,770
========== ==========
</TABLE>
4
<PAGE>
NEWMONT GOLD COMPANY AND SUBSIDIARIES
Statements of Consolidated Cash Flows
(In thousands)
(Unaudited)
<TABLE>
<CAPTION>
Six Months Ended
June 30,
---------------------
1996 1995
--------- ---------
<S> <C> <C>
Operating activities:
Net income $ 33,359 $ 92,454
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation, depletion and
amortization 58,056 48,526
Distributions less than earnings of
affiliates (1,092) (1,469)
Deferred taxes (1,494) 4,755
Gain on disposition of investment - (113,188)
Write-off of exploration property - 18,783
Other - 1,287
--------- ---------
88,829 51,148
(Increase) decrease in operating assets:
Accounts receivable (2,507) 11,580
Inventories (30,587) (24,556)
Other assets (22,337) 7,956
Increase in operating liabilities:
Accounts payable and accrued
expenses 12,106 19,925
Accrued income taxes 2,150 18,085
Other operating 1,419 (3,882)
--------- ---------
Net cash provided by operating activities 49,073 80,256
--------- ---------
Investing activities:
Additions to property, plant and mine
development (140,290) (155,253)
Non-capital investment in joint venture (3,218) (19,273)
Proceeds from sale of investment - 116,354
Other 1,511 (6,001)
--------- ---------
Net cash used in investing activities (141,997) (64,173)
--------- ---------
Financing activities:
Proceeds from short-term borrowings 7,932 -
Proceeds from long-term borrowings - 15,000
Proceeds from issuance of common stock 266,932 3,094
Dividends paid on common stock (26,347) (23,163)
Dividends paid on preferred stock - (7,906)
Debt issuance costs - (80)
--------- --------
Net cash provided by (used in) financing
activities 248,517 (13,055)
--------- --------
Net increase in cash and cash equivalents 155,593 3,028
Cash and cash equivalents at beginning of
period 59,142 160,637
--------- ---------
Cash and cash equivalents at end of period $ 214,735 $ 163,665
========= =========
Supplemental information:
Interest paid, net of amounts capitalized
of $4,231 in 1996 and $6,077 in 1995 $ 18,226 $ 5,329
Income taxes paid $ 2,000 $ 1,185
</TABLE>
5
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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
("NGC") 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 for a fair statement of the results for the
periods presented. All adjustments were of a normal recurring nature except
that included in the quarter and six months ended June 30, 1995 are 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.
These interim financial statements should be read in conjunction with the
annual financial statements of the Company included in its 1995 Annual Report
on Form 10-K.
Newmont Mining Corporation ("NMC") owns approximately 91% of NGC's
common stock. All of NMC's operations are held through NGC.
Certain prior year amounts have been reclassified to conform with
the current year presentation.
(2) Inventories
<TABLE>
<CAPTION>
June 30, December 31,
1996 1995
------------- ------------
(In thousands)
<S> <C> <C>
Current:
Ore and in-process $106,815 $101,684
Precious metals 38,095 29,691
Materials and supplies 46,364 40,651
Other 1,899 1,958
-------- --------
$193,173 $173,984
======== ========
Non-current:
Ore in stockpiles (included
in other assets) $ 67,028 $ 53,167
======== ========
</TABLE>
6
<PAGE>
(3) Investment in Minera Yanacocha
Included in other long-term assets is the Company's 38% equity
investment in Minera Yanacocha, S.A. ("Minera Yanacocha"), a Peruvian entity.
Summarized financial information of Minera Yanacocha is as follows:
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
June 30, June 30,
------------------ ------------------
1996 1995 1996 1995
-------- -------- -------- --------
(In thousands)
<S> <C> <C> <C> <C>
Sales $ 83,097 $ 51,150 $154,676 $ 97,305
Costs applicable to sales
and depreciation, depletion
and amortization $ 29,430 $ 17,244 $ 57,145 $ 35,826
Exploration $ 6,385 $ 3,123 $ 8,133 $ 5,389
Other, including Peruvian
income tax provision $ 15,112 $ 10,357 $ 28,568 $ 18,580
Net income $ 32,170 $ 20,426 $ 60,830 $ 37,510
</TABLE>
<TABLE>
<CAPTION>
At June 30, At December 31,
1996 1995
----------- ---------------
(In thousands)
<S> <C> <C>
Current assets $ 70,209 $ 71,705
Non-current assets 85,793 88,114
-------- --------
Total assets $156,002 $159,819
======== ========
Current liabilities $ 46,254 $ 49,977
Non-current liabilities 42,407 48,335
-------- --------
Total liabilities $ 88,661 $ 98,312
======== ========
</TABLE>
In September 1994, an affiliate of Bureau de Recherches Geologiques et
Miniees, the geological and mining bureau of the French government ("BRGM"),
announced its intention to transfer its 24.7% interest in Minera Yanacocha
to another entity. The Company and Compania de Minas Buenaventura, S.A.
("Buenaventura"), 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, both of
whom elected to exercise their preemptive rights to acquire their
proportionate share of the 24.7% interest. In accordance with the court
ruling, Minera Yanacocha canceled the BRGM shares and issued shares
representing interests in Minera Yanacocha of 13.35% to the Company and
11.35% to Buenaventura. The Company deposited $48.6 million, together with
the additional shares, 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 set off against the deposit, and accordingly, these amounts
have been netted. The trial hearing in the case occurred in July, 1996 and
a final ruling has not yet been issued. 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 interest, which may be more or less than the amount
deposited. The Company intends to fund the purchase of the additional
7
<PAGE>
interest with its available cash or borrowings under credit facilities. As
a result of the preliminary ruling of the court and the Company's exercise of
its preemptive right, the Company currently owns 51.35% of Minera Yanacocha.
This additional interest of 13.35% will not be reflected in the Company's
financial statements until a final determination is made by the Peruvian
courts.
(4) Stockholders' Equity
In January 1996, NMC issued 4.65 million shares of common stock for
$51.87 per share under an existing shelf registration statement filed with
the Securities and Exchange Commission. Proceeds of the issue netted $241.3
million which were used to purchase an equal number of shares of common stock
of NGC directly from NGC.
(5) Contingencies
Environmental Obligations
Estimated future reclamation and mine closure costs are based
principally on legal and regulatory requirements. Such costs are accrued and
charged over the expected operating lives of the Company's mines using a
unit-of-production method. At June 30, 1996 and December 31, 1995, $19.8
million and $19.0 million, respectively, were accrued for reclamation costs
relating to currently producing mineral properties.
In addition, the Company is involved in several matters concerning
environmental obligations associated with former mining activities. Based
upon the Company's best estimate of its liability for these matters, $55.9
million and $55.8 million were accrued for such liabilities at June 30, 1996
and December 31, 1995, respectively. These amounts are included in other
current liabilities and reclamation liabilities. Depending upon the ultimate
resolution of these matters, the Company believes that it is reasonably
possible that the liability for these matters could be as much as 100%
greater or 5% lower than the amount accrued at June 30, 1996.
A discussion of the environmental obligations associated with former
mining activities as of June 30, 1996 follows.
Idarado Mining Company ("Idarado") - 80.1% owned by NGC
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. The Company expects to
complete most of the remediation work at this property by the end of 1996.
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
8
<PAGE>
obtained a $16.3 million letter of credit to secure their obligations under
the consent decree.
Resurrection Mining Company ("Resurrection") - 100% owned by NGC
In 1983, the State of Colorado filed a lawsuit under the Superfund Act
which involves a Resurrection Mining Company and Asarco Incorporated
("Asarco") joint venture mining operation near Leadville, Colorado. This
action was subsequently consolidated with a lawsuit filed by the U.S.
Environmental Protection Agency ("EPA") in 1986, with the EPA taking the lead
role. The proceedings seek to compel the defendants to remediate the impacts
of pre- existing, historic mining activities that date back to the late
1800's which the government agencies claim are causing substantial
environmental problems in the area. The lawsuits have named NMC,
Resurrection, the joint venture and Asarco as defendants in the proceedings.
The EPA is also proceeding against other companies with interests in the
area.
The EPA divided the remedial work into two phases. Phase I addresses
the Yak Tunnel, a drainage and access tunnel owned by the joint venture.
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 environmental monitoring and operating and
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 approved remedial actions for selected
components of Resurrection's portion of the site, which were initiated in
1995. However, the selection of the final remedy for the site has not been
completed by the EPA. 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. The government agencies may also seek to recover for damages
to natural resources.
Although the actual 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 by NGC
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. The Department of Interior has
commenced an Environmental Impact Study to analyze Dawn's proposed plan and
to consider alternate reclamation plans for the mine. Dawn cannot predict at
this time what type of mine reclamation plan may be selected by the
9
<PAGE>
Department of Interior. Dawn does not have sufficient funds to pay for the
reclamation plan it proposed, for any alternate plan, or 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. If asserted, the Company will
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.
(6) Supplementary Data
The ratio of earnings to fixed charges for the six months ended June 30,
1996 was 1.9. The Company guarantees certain third party debt which had
total interest obligations of $0.6 million for the six months ended June 30,
1996. The Company has not been required to pay any interest on these
obligations in the past, nor does the Company 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.
(7) Subsequent Event
On July 2, 1996, the Company and Sumitomo Corporation of Tokyo
("Sumitomo") completed a definitive joint venture agreement to develop and
operate the Batu Hijau copper/gold deposit in Indonesia. Under the terms of
the agreement the Company will retain a 45% interest in the project and
Sumitomo will have a 35% interest. The remaining 20% is held by an
Indonesian Company. Through June 30, 1996, the Company had invested
approximately $88.1 million in exploring and developing Batu Hijau.
The estimated cost for development of an open pit mine, mill, and
infrastructure including employee housing, a port, electrical generation
facilities and capitalized interest could approach $2.0 billion. Batu Hijau
contains an estimated 11.2 billion pounds of copper and 14.7 million ounces
of gold. Production is expected to begin around the turn of the century,
with a projected mine life in excess of 20 years.
Following the partners' decision to proceed with the project, which is
conditional on certain Indonesian government approvals, Sumitomo will make an
initial investment in the project equal to its pro rata share of the
Company's investment to date. It will make an additional payment to the
project of approximately $100 million, applied toward the Company's share of
future project development and construction costs, and will fund its own pro
rata equity share. Sumitomo also will provide or arrange for 60% of the
project's financing requirements up to $800 million.
10
<PAGE>
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 ("NGC") and its subsidiaries (collectively, the "Company") for
the quarters and six month periods ended June 30, 1996 and 1995 and changes
in its financial condition from December 31, 1995 to June 30, 1996. Newmont
Mining Corporation ("NMC") owns approximately 91% of NGC's common stock. All
of NMC's operations are held through NGC. This discussion should be read in
conjunction with the Management's Discussion and Analysis included in the
Company's 1995 annual report on Form 10-K.
RESULTS OF OPERATIONS
The Company earned $21.6 million, or $0.20 per share, and $33.4 million,
or $0.31 per share, in the quarter and six months ended June 30, 1996,
respectively, compared with $18.6 million, or $0.15 per share, and $35.6
million, or $0.29 per share before considering certain gains and charges in
the respective 1995 periods. The 1995 periods included a gain of $113.2
million, or $72.0 million after-tax ($0.75 per share), on the sale of the
NGC's interest in Southern Peru Copper Corporation and 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. This
resulted in total net income of $75.5 million, or $0.74 per share, and $92.5
million, or $0.88 per share in the 1995 second quarter and first six months,
respectively. The Company's total equity production rose to 549,800 ounces in
the second quarter of 1996 from 422,600 ounces in the second quarter of 1995
at a weighted average cash cost of production per ounce of $221 and $222 for
the same respective periods. During the first six months of 1996 the
Company's total equity production rose to 1,002,500 ounces from 823,800
ounces in the first six months of 1995 at a weighted average cash cost of
production per ounce of $225 and $220, respectively.
During the second quarter of 1996, consolidated gold sales (excluding
the Company's equity interest in Minera Yanacocha's production) were 462,900
ounces at an average price of $391 per ounce, compared to 372,800 ounces at
an average price of $389 per ounce in the second quarter of 1995. During the
first six months of 1996, consolidated gold sales were 847,900 ounces at an
average price of $396 per ounce compared to 727,700 ounces at an average
price of $384 per ounce in the first six months of 1995.
The 90,100 ounce increase in sales during the second quarter of 1996
compared to the second quarter of 1995 contributed $35.0 million to the
increase in sales revenue, while the $2 increase in the average per ounce
gold price over the same periods resulted in the balance of the increase.
The 120,200 ounce increase in sales during the first six months of 1996
compared to the same period of 1995 contributed $46.2 million to the increase
in sales revenue, while the $12 increase in the average per ounce gold price
over the same periods resulted in $10.2 million of the increase.
The higher sales in the 1996 periods is partially due to the Company's
share of production of the Zarafshan-Newmont Joint Venture ("Zarafshan-
Newmont") of 42,200 and 67,800 ounces during the second quarter and first six
months of 1996, respectively. Zarafshan-Newmont commenced operations in the
latter half of 1995. The Carlin operation also showed an increase in
production of 26,700 ounces and 31,200 ounces for the second quarter and
first six months of 1996, respectively, resulting in total production of
399,500 ounces and 758,900 ounces, respectively. The increased production at
11
<PAGE>
Carlin is primarily due to the mining of high grade underground ore and
increased throughput at the refractory ore treatment plant. The Company
expects Carlin production in 1996 to approximate 1995's production of 1.6
million ounces. Additionally, the Minahasa operation in Indonesia produced
26,900 ounces in the second quarter of 1996, its first quarter of operations.
Of these ounces, 5,700 were produced before commercial operations commenced,
and the revenue from these ounces was credited against the capitalized costs
of the project. All of Minahasa's 1996 production has been sold at $454 per
ounce as a result of Minahasa having entered into forward sales contracts in
1994.
The Company's equity income from its 38% interest in Minera Yanacocha
S.A. increased to $13.0 million in the second quarter of 1996 from $7.8
million in the second quarter of 1995 and to $24.6 million in the first six
months of 1996 from $15.1 million in the first six months of 1995. Minera
Yanacocha produced 213,700 ounces, or 81,200 ounces attributable to the
Company's interest, in the second quarter of 1996 compared to 131,100 ounces,
or 49,800 ounces attributable to the Company's interest, in the second
quarter of 1995. Total cash costs were $109 per ounce in the second quarter
of 1996 compared to $104 per ounce in the second quarter of 1995. Minera
Yanacocha produced 391,900 ounces, or 148,900 ounces attributable to the
Company's interest, in the first six months of 1996 compared to 253,000
ounces, or 96,100 ounces attributable to the Company's interest, in the first
six months of 1995. Total cash costs were $111 per ounce in the first six
months of 1996 compared to $113 per ounce in the first six months of 1995.
The increases in production are primarily due to a third mine coming into
production in early 1996, and the processing of higher grade ore in 1996
compared to 1995. Production in 1996 is expected to approach 750,000 ounces,
or 285,000 ounces attributable to the Company's share.
Costs applicable to sales increased $23.7 million and $38.7 million in
the second quarter and first six months of 1996, respectively, when compared
to the same periods in 1995. Of these amounts $12.8 million and $18.6
million relate to the Company's share of costs attributable to Zarafshan-
Newmont and Minahasa during the second quarter and first six months of 1996,
respectively. In addition, $10.9 million and $20.1 million relate to Carlin
operations for the second quarter and six months of 1996, respectively.
Higher production, higher underground mining costs and higher milling costs
associated with the refractory ore treatment plant at Carlin were the major
reasons for the increase. Partially offsetting these were lower royalty
costs. On a per ounce of gold sold basis, costs applicable to sales were
higher in the 1996 periods compared to the 1995 periods. The following
tables summarize the significant components of these costs per ounce of gold
sold (in the 1995 periods there was only Carlin production):
<TABLE>
<CAPTION>
Three Months Ended June 30,
----------------------------------------------
Zarafshan-
Carlin Newmont Minahasa Consolidated
----------- --------- -------- ------------
1996 1995 1996 1996 1996 1995
---- ---- -------- -------- ---- ----
<S> <C> <C> <C> <C> <C> <C>
Cash operating costs $231 $203 $200 $195 $227 $203
Royalties 20 31 0 10 17 31
Other cash costs (1) 5 0 0 (1) 5
---- ---- ---- ---- ---- ----
Total cash costs 250 239 200 205 243 239
Other 2 1 1 2 2 1
---- ---- ---- ---- ---- ----
Total costs applicable
to sales $252 $240 $201 $207 $245 $240
==== ==== ==== ==== ==== ====
</TABLE>
12
<PAGE>
<TABLE>
<CAPTION>
Six Months Ended June 30,
----------------------------------------------
Zarafshan-
Carlin Newmont Minahasa Consolidated
----------- --------- -------- ------------
1996 1995 1996 1996 1996 1995
---- ---- -------- -------- ---- ----
<S> <C> <C> <C> <C> <C> <C>
Cash operating costs $228 $198 $209 $195 $226 $198
Royalties 24 33 0 10 22 33
Other cash costs 0 5 0 0 0 5
---- ---- ---- ---- ---- ----
Total cash costs 252 236 209 205 248 236
Other 2 2 1 2 2 2
---- ---- ---- ---- ---- ----
Total costs applicable
to sales $254 $238 $210 $207 $250 $238
==== ==== ==== ==== ==== ====
</TABLE>
The increase in Carlin production costs on a per-ounce-of-gold-sold
basis in the second quarter and first six months of 1996 was the result of
the higher costs discussed in the above paragraph. Consolidated per ounce
production costs are expected to decline during the second half of the year
due to higher throughput at Carlin's refractory ore treatment plant,
increased mining of higher grade underground ore at Carlin and an increase in
the lower cost production from Zarafshan-Newmont and Minahasa.
For the second quarter and first six months of 1996, royalty costs on an
aggregate basis were $8.2 million and $18.3 million, respectively. This
compares to royalty costs in the second quarter and first six months of 1995
of $11.5 million and $24.2 million, respectively. The decrease in royalty
costs on an aggregate and per ounce basis is due to lower production of
royalty-burdened ore at Carlin, which is expected to continue throughout the
year.
In addition to expensed production costs, the Company capitalized $18.7
million and $41.8 million of mining costs during the second quarter and first
six months of 1996, respectively. These costs are associated with deposits
having diverse grade and waste-to-ore ratios, the largest being the Post
deposit on the Carlin Trend. Capitalized costs in the second quarter and
first six months of 1995 were $12.9 million and $22.8 million, respectively.
The current year increases are attributable to more tons being mined at
deposits with these characteristics in the 1996 periods compared to the 1995
periods.
DD&A increased $5.8 million and $9.5 million in the second quarter and
first six months of 1996, respectively, compared to the respective periods in
1995. The increase is primarily due to depreciation related to the
facilities at Zarafshan-Newmont and Minahasa which were not in service during
the first six months of 1995.
The differences in exploration and general administrative expenses
between the 1996 and 1995 periods are not considered significant and the
amount of such expenses for all of 1996 are expected to be at approximately
the levels incurred in 1995.
Net interest expense increased $1.6 million and $2.8 million in the
second quarter and first six months of 1996, respectively, compared with the
same respective periods in 1995. Total interest expense was not
significantly different between the periods, however, capitalized interest in
the second quarter of 1996 decreased to $2.1 million compared to $3.3 million
in the second quarter of 1995 and decreased to $4.2 million in the first six
months of 1996 compared to $6.1 million in the first six months of 1995. The
decreases are the result of the start-up of the Zarafshan-Newmont operations,
13
<PAGE>
upon which interest was capitalized in the 1995 periods, which was partially
offset by an increase in capitalized interest related to development of the
Minahasa project.
Interest income for the second quarter and first six months of 1996 is
$3.6 million and $8.8 million, respectively, compared to $3.1 million and
$5.1 million for the respective 1995 periods. This increase is due to higher
cash balances in the 1996 periods. Additionally, 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.
The first six months of 1996 also includes $3.1 million of such insurance.
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.
The decreases in other expense of $21.3 million and $19.6 million for
the second quarter and first six months of 1996, respectively, compared to
the same respective periods of 1995, are primarily the result of the $23.3
million pre-tax charge taken in the second quarter of 1995. The charge was
taken for the write-off and estimated costs to reclaim areas disturbed by
previous mining and exploration activity on the Ivanhoe exploration property
in Nevada after an evaluation of the property determined it was not suitable
for development.
Both years' effective tax rates benefit from, and are very sensitive to,
the estimated amount of annual percentage depletion since it is a high
proportion of the estimated pre-tax financial income for each year. In
addition, 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.
LIQUIDITY AND CAPITAL RESOURCES
During the first six months of 1996 the Company generated $49.1 million
of cash flow from operating activities and received $266.9 million of
proceeds from the issuance of common stock including $241.3 million from the
stock offering as discussed in Note 4 of Item 1. A portion of these proceeds
were used to fund $140.3 million of capital expenditures. Of this amount
approximately $90.5 million was spent on projects at the Carlin operations
including capitalized mining costs, mine equipment, underground development
and improvements to the refractory ore treatment plant. In addition, $22.2
million and $16.1 million was spent in Indonesia for mine site development at
the Minahasa operation and development plans at the Batu Hijau project,
respectively. As a result of the joint venture agreement signed with
Sumitomo Corporation, discussed in Note 7 of Item 1, the Company expects to
have no funding requirements for the Batu Hijau project for the balance of
1996 and well into 1997. Depending on financing arrangements, it is possible
that the Company will have no cash requirements for this project until well
into 1998.
Although cash requirements during 1996 are expected to exceed operating
cashflow, the proceeds received from the common stock sale, previously
discussed, are expected to result in more than an adequate amount of funds to
cover the Company's cash requirements for the year.
14
<PAGE>
The increase in current inventories during the first six months of 1996
is primarily attributable to the start-up of operations at Zarafshan-Newmont
and Minahasa.
Other current assets increased $25.8 million during the first six months
of 1996. The increase is primarily the result of a reclassification of
advances to Zarafshan-Newmont of $10.2 million from long-term assets and the
prepayment of certain taxes of $10.2 million.
The $15.9 million increase in other long-term assets includes $13.7
million of additions to long-term inventories at Carlin due to the build up
of refractory ore stockpiles, $4.9 million of value added taxes related to
Indonesian investments and $3.2 million of increases in equity investments.
These increases were partially offset by the reclassification of advances to
Zarafshan-Newmont to other current assets, previously mentioned.
15
<PAGE>
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 2, 1996.
All twelve 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 106,160,043 212,295 0 0
J. P. Bolduc 106,368,311 4,027 0 0
R. C. Cambre 106,362,943 9,395 0 0
J. P. Flannery 106,370,920 1,418 0 0
L. I. Higdon 106,367,512 4,826 0 0
T. A. Holmes 106,371,063 1,275 0 0
R. A. Plumbridge 106,160,092 212,246 0 0
R. H. Quenon 106,369,992 2,346 0 0
M. A. Qureshi 106,369,212 3,126 0 0
M. K. Reilly 106,371,443 895 0 0
J. V. Taranik 106,369,743 2,595 0 0
W. I. M. Turner, Jr. 106,371,192 1,146 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,
1996.
16
<PAGE>
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 6, 1996 /s/ WAYNE W. MURDY
------------------------------
Wayne W. Murdy
Executive Vice President and
Chief Financial Officer
(Principal Financial Officer)
Date: August 6, 1996 /s/ GARY E. FARMAR
------------------------------
Gary E. Farmar
Vice President and Controller
(Principal Accounting Officer)
17
<PAGE>
EXHIBIT INDEX
-------------
Page
----
Exhibit 11 - Statement re Computation of Per Share Earnings 19-20
Exhibit 12 - Statement re Computation of Ratios of Earnings 21
to Fixed Charges
Exhibit 27 - Financial Data Schedule 22
18
<PAGE>
EXHIBIT 11
Page 1 of 2
NEWMONT GOLD COMPANY AND SUBSIDIARIES
COMPUTATION OF PER SHARE EARNINGS
(In thousands, except per share)
<TABLE>
<CAPTION>
PRIMARY EARNINGS PER SHARE CALCULATIONS
Three Months Ended Six Months Ended
June 30, June 30,
------------------ -----------------
1996 1995 1996 1995
-------- -------- ------- -------
<S> <C> <C> <C> <C>
INCOME DATA:
Net income $ 21,571 $ 75,456 $ 33,359 $ 92,454
Preferred stock dividends - (3,953) - (7,906)
-------- -------- -------- --------
Net income applicable to
common shares $ 21,571 $ 71,503 $ 33,359 $ 84,548
======== ======== ======== ========
COMMON AND COMMON EQUIVALENT SHARES:
Weighted average common shares 109,842 96,519 109,047 96,497
Equivalent common shares from
stock options 432 178 405 114
Common and common equivalent shares 110,274 96,697 109,452 96,611
======== ======== ======== ========
EARNINGS PER COMMON SHARE:
Net income per common and common
equivalent shares $ 0.20 $ 0.74 $ 0.31 $ 0.88
======== ======== ======== ========
</TABLE>
19
<PAGE>
EXHIBIT 11
Page 2 of 2
NEWMONT GOLD COMPANY AND SUBSIDIARIES
COMPUTATION OF PER SHARE EARNINGS
(In thousands, except per share)
<TABLE>
<CAPTION>
FULLY DILUTED EARNINGS PER SHARE CALCULATIONS
Three Months Ended Six Months Ended
June 30, June 30,
------------------ -------------------
1996 1995 1996 1995
-------- -------- -------- --------
<S> <C> <C> <C> <C>
INCOME DATA:
Net income applicable to
common shares $ 21,571 $ 75,456 $ 33,359 $ 92,454
======== ======== ======== ========
COMMON AND COMMON EQUIVALENT SHARES:
Weighted average common shares 109,842 96,519 109,047 96,497
Equivalent common shares from
stock options 432 178 405 153
Equivalent common shares from
conversion of preferred stock - 7,899 - 7,899
Common and common equivalent shares 110,274 104,596 109,452 104,549
======== ======== ======== ========
EARNINGS PER COMMON SHARE:
Net income per common and common
equivalent shares $ 0.20 $ 0.72 $ 0.31 $ 0.88
======== ======== ======== ========
</TABLE>
20
<PAGE>
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, 1996
----------------
<S> <C>
Earnings:
Income before income taxes $ 28,175
Adjustments:
Net interest expense (1) 20,267
Amortization of capitalized interest 1,186
Portion of rental expense representative
of interest 1,052
Undistributed income of less than 50%
owned entities (1,092)
--------
$ 49,588
========
Fixed Charges:
Net interest expense (1) $ 20,267
Capitalized interest 4,231
Portion of rental expense representative
of interest 1,052
--------
$ 25,550
========
Ratio of earnings to fixed charges 1.9
========
</TABLE>
(1) Includes interest expense of majority-owned subsidiaries
and amortization of debt issuance costs.
21
<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-31-1995
<PERIOD-END> JUN-30-1996
<CASH> 214,735
<SECURITIES> 11,216
<RECEIVABLES> 25,500
<ALLOWANCES> 0
<INVENTORY> 193,173
<CURRENT-ASSETS> 490,601
<PP&E> 2,021,808
<DEPRECIATION> 697,594
<TOTAL-ASSETS> 2,059,644
<CURRENT-LIABILITIES> 211,771
<BONDS> 594,634
0
0
<COMMON> 1,102
<OTHER-SE> 1,099,840
<TOTAL-LIABILITY-AND-EQUITY> 2,059,644
<SALES> 335,921
<TOTAL-REVENUES> 349,182
<CGS> 211,497
<TOTAL-COSTS> 269,553
<OTHER-EXPENSES> 53,764
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 20,267
<INCOME-PRETAX> 28,175
<INCOME-TAX> 5,184
<INCOME-CONTINUING> 33,359
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 33,359
<EPS-PRIMARY> 0.31
<EPS-DILUTED> 0.31
</TABLE>
