NEWMONT GOLD CO
8-K, 1997-03-19
GOLD AND SILVER ORES
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<PAGE>   1
 
                              NEWMONT GOLD COMPANY
<PAGE>   2
 
================================================================================
 
                                 UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549
 
                            ------------------------
 
                                    FORM 8-K
                                 CURRENT REPORT
 
                     PURSUANT TO SECTION 13 OR 15(D) OF THE
                        SECURITIES EXCHANGE ACT OF 1934
 
               DATE OF REPORT (DATE OF EARLIEST EVENT REPORTED):
 
                                 MARCH 19, 1997
 
                            NEWMONT GOLD CORPORATION
 
<TABLE>
<S>                       <C>                       <C>
        DELAWARE                   1-9184                  13-2526632
    (STATE OR OTHER       (COMMISSION FILE NUMBER)       (IRS EMPLOYER
      JURISDICTION OF                                IDENTIFICATION NUMBER)
      INCORPORATION)
</TABLE>
 
                     1700 LINCOLN STREET, DENVER, CO 80203
              (ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) (ZIP CODE)
 
              REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE:
 
                                 (303) 863-7414
 
================================================================================
<PAGE>   3
 
ITEM 5.  OTHER EVENTS.
 
     In connection with the filing by Newmont Mining Corporation ("Newmont
Mining") of Amendment No. 1 to its Registration Statement on Form S-4 (No.
333-19335), Newmont Gold Company ("Newmont Gold") is filing as Exhibits herewith
a copy of its consolidated financial statements for the year ended December 31,
1996, together with the report thereon of Arthur Andersen LLP, independent
auditors, (which is attached as Exhibit 99.1 and is incorporated herein by
reference) and a copy of its Management's Discussion and Analysis of Results of
Operations and Financial Condition for the three year period ended December 31,
1996 (which is attached as Exhibit 99.2 and is incorporated herein by
reference).
 
ITEM 7.  FINANCIAL STATEMENTS AND EXHIBITS
 
     (a) None.
 
     (b) None.
 
     (c) Exhibits.
 
         23.1  Consent of Arthur Andersen LLP.
 
         99.1  Newmont Gold's consolidated financial statements for the year
               ended December 31, 1996, together with the report thereon of
               Arthur Andersen LLP, independent auditors.
 
         99.2  Newmont Gold Management's Discussion and Analysis of Results of
               Operations and Financial Condition for the three year period
               ended December 31, 1996.
<PAGE>   4
 
                                   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 hereunto duly authorized.
 
                                          NEWMONT GOLD COMPANY
 
                                          By:     /s/ TIMOTHY J. SCHMITT
                                            ------------------------------------
                                            Timothy J. Schmitt
                                            Vice President, Secretary
                                            and Assistant General Counsel
 
Date: March 19, 1997
<PAGE>   5
 
                                 EXHIBIT INDEX
 
<TABLE>
<S>           <C>
Exhibit 23.1  Consent of Arthur Andersen LLP.
Exhibit 99.1  Newmont Gold's consolidated financial statements for the
              year ended December 31, 1996, together with the report
              thereon of Arthur Andersen LLP, independent auditors.
Exhibit 99.2  Newmont Gold Management's Discussion and Analysis of Results
              of Operations and Financial Condition for the three-year
              period ended December 31, 1996.
</TABLE>

<PAGE>   1
                                                                   EXHIBIT 23.1


                CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS


     As independent public accountants, we hereby consent to the incorporation
of our report included in this Current Report on Form 8-K dated March 19, 1997
into Newmont Gold Company's previously filed S-8 Registration Statement
No. 333-10765, S-3 Registration Statement No. 33-54245 and S-8 Registration
Statement No. 33-62471.


                                       /s/ ARTHUR ANDERSEN LLP
                                       ---------------------------
                                           ARTHUR ANDERSEN LLP

Denver, Colorado
March 19, 1997.

<PAGE>   1
 
                                                                    EXHIBIT 99.1
 
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, 1996
and 1995, 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, 1996. 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, 1996 and 1995, and the results of their
operations and their cash flows for each of the three years in the period ended
December 31, 1996 in conformity with generally accepted accounting principles.
 
                                            /s/ ARTHUR ANDERSEN LLP
                                            ARTHUR ANDERSEN LLP
 
Denver, Colorado,
January 28, 1997,
except for Note 17
as to which the date is
March 10, 1997.
 
                                        1
<PAGE>   2
 
                     NEWMONT GOLD COMPANY AND SUBSIDIARIES
 
                       STATEMENTS OF CONSOLIDATED INCOME
                        (IN THOUSANDS, EXCEPT PER SHARE)
 
<TABLE>
<CAPTION>
                                                                 YEARS ENDED DECEMBER 31,
                                                             --------------------------------
                                                               1996        1995        1994
                                                             --------    --------    --------
<S>                                                          <C>         <C>         <C>
Sales and other income
  Sales....................................................  $768,455    $636,219    $597,370
  Dividends, interest and other............................    26,471      42,157      22,316
  Gain on disposition of investment........................        --     113,188          --
                                                             --------    --------    --------
                                                              794,926     791,564     619,686
                                                             --------    --------    --------
Costs and expenses
  Costs applicable to sales................................   476,090     370,617     326,385
  Depreciation, depletion and amortization.................   124,841     106,835      91,115
  Exploration and research.................................    58,709      57,291      69,151
  General and administrative...............................    48,093      43,219      38,518
  Interest, net of amounts capitalized.....................    43,987      36,415       9,823
  Write-off of exploration properties......................        --      52,537          --
  Other....................................................    13,855      11,681      46,029
                                                             --------    --------    --------
                                                              765,575     678,595     581,021
                                                             --------    --------    --------
Income before equity income and income taxes...............    29,351     112,969      38,665
Equity in income of affiliated companies...................    45,221      28,895      15,395
                                                             --------    --------    --------
Pre-tax income.............................................    74,572     141,864      54,060
Income tax benefit (provision).............................    19,400     (16,992)     29,334
                                                             --------    --------    --------
Net income.................................................    93,972     124,872      83,394
Preferred stock dividends..................................        --      11,157      15,813
                                                             --------    --------    --------
Net income applicable to common shares.....................  $ 93,972    $113,715    $ 67,581
                                                             ========    ========    ========
Net income per common share................................  $   0.86    $   1.17    $   0.70
                                                             ========    ========    ========
Average shares outstanding.................................   109,766      97,375      96,472
                                                             ========    ========    ========
</TABLE>
 
        The accompanying notes are an integral part of these statements.
 
                                        2
<PAGE>   3
 
                     NEWMONT GOLD COMPANY AND SUBSIDIARIES
 
                          CONSOLIDATED BALANCE SHEETS
                        (IN THOUSANDS, EXCEPT PER SHARE)
 
<TABLE>
<CAPTION>
                                                                  AT DECEMBER 31,
                                                              ------------------------
                                                                 1996          1995
                                                              ----------    ----------
<S>                                                           <C>           <C>
ASSETS
 
Cash and cash equivalents...................................  $  185,681    $   59,142
Short-term investments......................................      12,724        11,820
Accounts receivable.........................................      28,692        24,458
Inventories.................................................     188,345       173,984
Other current assets........................................      40,440        20,128
                                                              ----------    ----------
  Current assets............................................     455,882       289,532
Property, plant and mine development, net...................   1,301,952     1,255,278
Other long-term assets......................................     323,240       228,960
                                                              ----------    ----------
          Total assets......................................  $2,081,074    $1,773,770
                                                              ==========    ==========
 
LIABILITIES
 
Short-term debt.............................................  $   45,981    $   29,179
Current portion of long-term debt...........................      19,250         4,375
Accounts payable............................................      48,099        38,570
Other accrued liabilities...................................     110,764       122,312
                                                              ----------    ----------
  Current liabilities.......................................     224,094       194,436
Long-term debt..............................................     585,009       604,259
Reclamation and remediation liabilities.....................      60,672        64,795
Other long-term liabilities.................................      79,244        85,352
                                                              ----------    ----------
          Total liabilities.................................     949,019       948,842
                                                              ----------    ----------
Commitments and contingencies
 
STOCKHOLDERS' EQUITY
 
Common stock -- $0.01 par value; 250,000 shares authorized;
  110,186 and 104,875 shares issued, respectively...........       1,102         1,049
Capital in excess of par value..............................     425,704       160,081
Retained earnings...........................................     707,517       666,161
Treasury stock, at cost; 257 and 268 shares, respectively...      (2,268)       (2,363)
                                                              ----------    ----------
          Total stockholders' equity........................   1,132,055       824,928
                                                              ----------    ----------
          Total liabilities and stockholders' equity........  $2,081,074    $1,773,770
                                                              ==========    ==========
</TABLE>
 
        The accompanying notes are an integral part of these statements.
 
                                        3
<PAGE>   4
 
                     NEWMONT GOLD COMPANY AND SUBSIDIARIES
 
                       STATEMENTS OF CONSOLIDATED CHANGES
                            IN STOCKHOLDERS' EQUITY
                        (IN THOUSANDS, EXCEPT PER SHARE)
 
<TABLE>
<CAPTION>
                                                                                       CAPITAL IN                TREASURY STOCK
                                                 PREFERRED STOCK      COMMON STOCK     EXCESS OF                     AT COST
                                                -----------------   ----------------      PAR       RETAINED    -----------------
                                                SHARES    AMOUNT    SHARES    AMOUNT     VALUE      EARNINGS    SHARES    AMOUNT
                                                ------   --------   -------   ------   ----------   ---------   ------   --------
<S>                                             <C>      <C>        <C>       <C>      <C>          <C>         <C>      <C>
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)
  Common stock issued from treasury primarily
    for stock options exercised...............      --         --        --      --        6,949           --     (247)     2,173
  Preferred stock redemption and conversion,
    net of costs..............................  (2,875)   (14,375)       --      --      (59,766)          --   (7,899)    69,590
  Net income..................................      --         --        --      --           --      124,872       --         --
  Common stock dividends -- $0.48 per share...      --         --        --      --           --      (46,808)      --         --
  Preferred stock dividends -- $3.88 per
    share.....................................      --         --        --      --           --      (11,157)      --         --
  Other.......................................      --         --        --      --           --          499       --         --
                                                ------   --------   -------   ------    --------    ---------   ------   --------
Balance at December 31, 1995..................      --         --   104,875   1,049      160,081      666,161      268     (2,363)
  Common stock issuance.......................      --         --     4,651      47      241,209           --       --         --
  Common stock issued primarily for stock
    options exercised.........................      --         --       660       6       24,919           --      (13)       112
  Net income..................................      --         --        --      --           --       93,972       --         --
  Common stock dividends -- $0.48 per share...      --         --        --      --           --      (52,727)      --         --
  Other.......................................      --         --        --      --         (505)         111        2        (17)
                                                ------   --------   -------   ------    --------    ---------   ------   --------
Balance at December 31, 1996..................      --   $     --   110,186   $1,102    $425,704    $ 707,517      257   $ (2,268)
                                                ======   ========   =======   ======    ========    =========   ======   ========
</TABLE>
 
        The accompanying notes are an integral part of these statements.
 
                                        4
<PAGE>   5
 
                     NEWMONT GOLD COMPANY AND SUBSIDIARIES
 
                     STATEMENTS OF CONSOLIDATED CASH FLOWS
                                 (IN THOUSANDS)
 
<TABLE>
<CAPTION>
                                                               YEARS ENDED DECEMBER 31,
                                                          -----------------------------------
                                                            1996         1995         1994
                                                          ---------    ---------    ---------
<S>                                                       <C>          <C>          <C>
Operating Activities
  Net income............................................  $  93,972    $ 124,872    $  83,394
  Adjustments to reconcile net income to net cash
     provided by operating activities:
     Depreciation, depletion and amortization...........    124,841      106,835       91,115
     Undistributed earnings of affiliates...............    (13,134)      (3,603)     (14,553)
     Deferred taxes.....................................    (15,840)     (16,300)     (28,052)
     Gain on sale of investment.........................         --     (113,188)          --
     Write-off of exploration properties................         --       52,591           --
     Other..............................................      1,644        1,128       (1,950)
     (Increase) decrease in operating assets:
       Accounts receivable..............................     (4,113)      13,815        9,970
       Inventories......................................    (45,960)     (55,669)     (13,336)
       Other assets.....................................    (15,202)       8,816        1,609
     Increase (decrease) in operating liabilities:
       Accounts payable and accrued expenses............     14,412       43,552       24,868
       Other liabilities................................       (246)      (5,683)      (3,378)
                                                          ---------    ---------    ---------
Net cash provided by operating activities...............    140,374      157,166      149,687
                                                          ---------    ---------    ---------
Investing Activities
  Additions to property, plant and mine development.....   (231,174)    (309,269)    (402,030)
  Proceeds from sale of investment......................         --      116,357           --
  Net cash acquired from parent.........................         --           --       69,361
  Advances to joint venture.............................     (3,684)     (30,543)     (14,675)
  Other.................................................     (4,126)      (8,345)      16,503
                                                          ---------    ---------    ---------
Net cash used in investing activities...................   (238,984)    (231,800)    (330,841)
                                                          ---------    ---------    ---------
Financing Activities
  Short-term borrowings.................................     16,802       13,440           --
  Proceeds from long-term borrowings....................         --       15,000      528,634
  Repayments of long-term borrowings....................     (4,375)          --     (127,000)
  Proceeds from issuance of common stock................    265,449        8,034        8,718
  Dividends paid on common stock........................    (52,727)     (46,808)     (46,225)
  Dividends paid on preferred stock.....................         --      (11,860)     (15,110)
  Preferred stock redemption and conversion costs.......         --       (4,442)          --
  Debt issuance costs...................................         --         (225)      (6,641)
  Other.................................................         --           --         (974)
                                                          ---------    ---------    ---------
Net cash provided by (used in) financing activities.....    225,149      (26,861)     341,402
                                                          ---------    ---------    ---------
Net increase (decrease) in cash and cash equivalents....    126,539     (101,495)     160,248
Cash and cash equivalents at beginning of year..........     59,142      160,637          389
                                                          ---------    ---------    ---------
Cash and cash equivalents at end of year................  $ 185,681    $  59,142    $ 160,637
                                                          =========    =========    =========
</TABLE>
 
See Note 14 for supplemental cash flow information.
 
        The accompanying notes are an integral part of these statements.
 
                                        5
<PAGE>   6
 
                     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 ("NGC") 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. At December 31,
1996, Newmont Mining Corporation ("NMC") owned approximately 91% of the Company.
The functional currency for all subsidiaries is the U.S. dollar.
 
NATURE OF OPERATIONS
 
     The Company is a worldwide company engaged in gold production, exploration
for gold and acquisition of gold properties. Substantially all of the Company's
consolidated sales and operating profit in 1995 and 1994 related to its gold
mining activities in the United States. In 1996, the Company's consolidated
sales resulted from operations in the United States, Uzbekistan and Indonesia.
See geographic information in Note 15. Although most of the Company's
consolidated identifiable assets relate to domestic activities, 19% of its
assets as of December 31, 1996 related to foreign operations. The Minahasa
project in Indonesia began production in early 1996, operations commenced in
Uzbekistan in 1995 and the Company has a nonconsolidated equity interest in a
property in Peru that went into production in 1993. The Company carries
political risk insurance on its investments in all three countries. The Company
also conducts exploration for gold deposits worldwide.
 
     Gold mining requires the use of specialized facilities and technology. The
Company relies heavily on such facilities to maintain its production levels.
 
     Also, 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.
 
CASH AND CASH EQUIVALENTS
 
     Cash and cash equivalents consist of all cash balances and highly liquid
investments with an original maturity of three months or less. Because of the
short maturity of these investments, the carrying amounts approximate their fair
value. Excess cash balances are primarily invested in United States Treasury
bills, with lesser amounts invested in high-quality commercial paper and time
deposits.
 
INVESTMENTS
 
     Short-term investments are carried at cost, which approximates market, and
include Eurodollar government and corporate obligations rated AA or higher. At
December 31, 1996 and 1995, $8.7 million and $7.9 million, respectively, of such
investments secured letters of credit.
 
                                        6
<PAGE>   7
 
                     NEWMONT GOLD COMPANY AND SUBSIDIARIES
 
           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
 
     Investments in companies in which the Company's ownership is 20% to 50% are
accounted for by the equity method of accounting and are included in other
long-term assets. Included in such investments is the Company's 38% equity
investment in Minera Yanacocha S.A. (See Note 17). Summarized financial
information for Minera Yanacocha S.A. follows (in millions):
 
<TABLE>
<CAPTION>
                                                           FOR THE YEARS ENDED DECEMBER 31,
                                                           --------------------------------
                                                             1996        1995        1994
                                                           --------    --------    --------
<S>                                                        <C>         <C>         <C>
Sales....................................................    $313.9      $212.5      $116.6
Costs applicable to sales and depreciation, depletion and
  amortization...........................................    $ 89.2      $ 66.7      $ 42.2
Exploration..............................................    $ 17.5      $ 11.4      $  4.1
Other, including Peruvian income tax provision...........    $ 82.5      $ 53.6      $ 29.1
Net income...............................................    $124.7      $ 80.8      $ 41.2
Dividends applicable to NGC's 38% interest...............    $ 29.6      $ 23.2          --
</TABLE>
 
<TABLE>
<CAPTION>
                                                              AT DECEMBER 31,
                                                              ----------------
                                                               1996      1995
                                                              ------    ------
<S>                                                           <C>       <C>
Current assets..............................................  $ 85.2    $ 71.7
Noncurrent assets...........................................   108.2      88.1
                                                              ------    ------
          Total assets......................................  $193.4    $159.8
                                                              ======    ======
Current liabilities.........................................  $ 45.4    $ 50.0
Noncurrent liabilities......................................    39.8      48.3
                                                              ------    ------
          Total liabilities.................................  $ 85.2    $ 98.3
                                                              ======    ======
          Total equity......................................  $108.2    $ 61.5
                                                              ======    ======
</TABLE>
 
     As a result of the contemplated ownership structure discussed in Note 16,
the Batu Hijau project in Indonesia is being accounted for as an equity
investment effective July 1996. The Company's investment at December 31, 1996
was $46.6 million.
 
     Investments in companies owned less than 20% are recorded at the lower of
cost or net realizable value. Income from such investments is recorded when
dividends are paid. The Company held no such investments at December 31, 1996 or
1995.
 
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. Productive lives range from 2 to
21 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 costs to further delineate the ore
body and remove overburden to initially expose the ore body, are capitalized.
Such costs, and
 
                                        7
<PAGE>   8
 
                     NEWMONT GOLD COMPANY AND SUBSIDIARIES
 
           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
 
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.
 
     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.
 
REVENUE RECOGNITION
 
     Gold sales are recognized when gold is produced.
 
MINING COSTS
 
     In general, mining costs are charged to operations as incurred. However,
certain of the Company's deposits have diverse grade and waste-to-ore ratios
over the mine's life. Mining costs for these deposits, to the extent they do not
relate to current gold production, are capitalized and then charged to
operations when the applicable gold is produced.
 
RECLAMATION AND REMEDIATION COSTS
 
     Estimated future reclamation and remediation costs are based principally on
legal and regulatory requirements. Such costs related to active mines are
accrued and charged over the expected operating lives of the mines using a
unit-of-production method. Future reclamation and remediation costs for inactive
mines are accrued based upon management's best estimate at the end of each
period of the undiscounted costs expected to be incurred at a site. Such cost
estimates include where applicable, ongoing care, maintenance and monitoring
costs. Changes in estimates are charged to earnings in the period an estimate is
revised.
 
INCOME TAXES
 
     The Company accounts for income taxes using 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 as of the end of the year, as measured by the statutory
tax rates in effect as enacted. The Company 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 year.
 
     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.
 
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 gold is produced.
 
                                        8
<PAGE>   9
 
                     NEWMONT GOLD COMPANY AND SUBSIDIARIES
 
           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
 
EARNINGS PER COMMON SHARE
 
     The treasury stock method is used in computing earnings per common and
common equivalent share. Earnings per common and common equivalent share are
based on the sum of the weighted average number of common shares outstanding
during each period and the assumed exercise of stock options having exercise
prices less than the average market prices of the common stock. The convertible
preferred shares outstanding until conversion, as discussed in Note 8, were not
common stock equivalents as they were anti-dilutive.
 
USE OF ESTIMATES
 
     The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions. These estimates and assumptions affect the reported amounts of
assets and liabilities and disclosure of contingent assets and liabilities at
the date of the financial statements, as well as the reported amounts of
revenues and expenses during the reporting period. Actual amounts could differ
from those estimates.
 
RECLASSIFICATIONS
 
     Certain amounts in prior years have been reclassified to conform to the
1996 presentation.
 
(2) ACQUISITION OF NMC'S OPERATIONS
 
     Effective January 1, 1994, NGC acquired all of the operations of NMC. The
transaction included the following: (i) the transfer by NMC to NGC of 8,649,899
shares of the 94,500,000 shares of common stock of NGC then held by NMC; (ii)
the transfer by NMC of all of its other assets to NGC; (iii) the assumption by
NGC of all the liabilities (contingent or otherwise) of NMC (including NGC's
$159.6 million of advances to NMC as of December 31, 1993), but not NMC's
obligations with respect to its then $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; (iv)
the issuance by NGC 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 was entitled to receive shares
of NGC's common stock instead of NMC's common stock); and (v) the issuance by
NGC to NMC of stock options exercisable for shares of NGC's common stock having
terms identical to NMC's employee stock options (except upon exercise, NGC's
common stock is issued instead of NMC's common stock).
 
     NGC 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 NGC at NMC's historical cost with the difference
charged to retained earnings. The 8,649,899 shares of common stock of NGC
transferred by NMC to NGC were recorded as treasury stock at the book value of
those shares on December 31, 1993. NGC's convertible preferred stock was
recorded at its par value.
 
     The terms of the transaction intended that the preferred stock and stock
options issued by NGC to NMC be exercised to the extent NMC preferred stock and
outstanding NMC stock options are exercised and NGC grants to NMC additional
stock options to the extent additional stock options are granted by NMC. As a
result of the transaction and giving effect to the subsequent conversion of
preferred stock and issuance of common stock (see Note 8), stock option
exercises by NMC and additional stock option grants by NGC, NMC's only assets at
December 31, 1996 are (i) 99,522,308 shares of common stock of NGC which
approximates 90.5% of the NGC's common stock outstanding and (ii) stock options
to purchase 2,450,351 shares of NGC.
 
                                        9
<PAGE>   10
 
                     NEWMONT GOLD COMPANY AND SUBSIDIARIES
 
           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
 
(3) INVENTORIES
 
<TABLE>
<CAPTION>
                                                                AT DECEMBER 31,
                                                              --------------------
                                                                1996        1995
                                                              --------    --------
                                                                 (IN THOUSANDS)
<S>                                                           <C>         <C>
Current:
  Ore and in-process inventories............................  $ 95,922    $101,684
  Precious metals...........................................    33,304      29,691
  Materials and supplies....................................    57,413      40,651
  Other.....................................................     1,706       1,958
                                                              --------    --------
                                                              $188,345    $173,984
                                                              --------    --------
Non-current:
  Ore-in-stockpiles (included in other long-term assets)....  $ 85,652    $ 53,167
                                                              ========    ========
</TABLE>
 
(4) PROPERTY, PLANT AND MINE DEVELOPMENT
 
<TABLE>
<CAPTION>
                                                                  AT DECEMBER 31,
                                                              ------------------------
                                                                 1996          1995
                                                              ----------    ----------
                                                                   (IN THOUSANDS)
<S>                                                           <C>           <C>
Land and mining claims......................................  $   71,432    $   56,846
Buildings and equipment.....................................   1,472,090     1,387,586
Mine development............................................     254,297       246,043
Construction-in-progress....................................      58,829       137,436
                                                              ----------    ----------
                                                               1,856,648     1,827,911
Accumulated depreciation, depletion and amortization........    (747,320)     (695,501)
Capitalized mining costs....................................     192,624       122,868
                                                              ----------    ----------
                                                              $1,301,952    $1,255,278
                                                              ==========    ==========
</TABLE>
 
(5) OTHER ACCRUED LIABILITIES
 
<TABLE>
<CAPTION>
                                                                AT DECEMBER 31,
                                                              --------------------
                                                                1996        1995
                                                              --------    --------
                                                                 (IN THOUSANDS)
<S>                                                           <C>         <C>
Interest....................................................  $ 26,927    $ 33,696
Contingent dividends received (see Note 17).................    18,556       8,143
Payroll and related benefits................................    17,497      18,443
Reclamation and remediation.................................    10,000      10,000
Plant and equipment.........................................     4,981      17,926
Other.......................................................    32,803      34,104
                                                              --------    --------
                                                              $110,764    $122,312
                                                              ========    ========
</TABLE>
 
                                       10
<PAGE>   11
 
                     NEWMONT GOLD COMPANY AND SUBSIDIARIES
 
           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
 
(6) INCOME TAXES
 
     Components of the Company's consolidated deferred income tax liabilities
and assets are as follows (in thousands):
 
<TABLE>
<CAPTION>
                                                                AT DECEMBER 31,
                                                              --------------------
                                                                1996        1995
                                                              --------    --------
<S>                                                           <C>         <C>
Deferred tax liabilities:
  Accelerated tax depreciation..............................  $(60,016)   $(63,219)
  Capitalized mining costs..................................   (24,719)     (3,843)
  Capitalized interest......................................    (8,951)     (8,158)
  Depletion of the cost of land and mining claims...........    (2,474)     (2,872)
  Net undistributed earnings from equity investment.........    (2,108)     (1,357)
  Other.....................................................      (487)       (923)
                                                              --------    --------
          Deferred tax liabilities..........................   (98,755)    (80,372)
                                                              --------    --------
Deferred tax assets:
  Exploration costs.........................................    61,405      69,746
  Remediation and reclamation costs.........................    33,391      31,842
  Alternative minimum tax credit carryforward...............    23,166       7,769
  Sale/leaseback transaction, net...........................    12,512       9,638
  Foreign tax credit carryforward...........................    12,461       1,262
  Retiree benefit costs.....................................    11,277       9,933
  Capitalized inventory costs...............................     9,937      10,622
  Deferred gain on interest rate hedges.....................     2,940       3,240
  Mine development costs....................................     2,759         199
  Relocation/reorganization costs...........................     2,491       2,610
  Other.....................................................     3,857       2,911
                                                              --------    --------
          Deferred tax assets...............................   176,196     149,772
                                                              --------    --------
  Valuation allowance for deferred tax assets...............   (14,000)     (9,800)
                                                              --------    --------
  Net deferred tax assets...................................  $ 63,441    $ 59,600
                                                              ========    ========
</TABLE>
 
     As of December 31, 1996, the Company had approximately $23.2 million of
nonexpiring alternative minimum tax credit carryforwards and approximately $12.5
million of foreign tax credit carryforwards. Of these foreign tax credit
carryforwards, $1.3 million expire in 2000 and $11.2 million expire in 2001.
 
     Based primarily upon estimates of future operations, the Company, more
likely than not, will utilize $162.2 million of the $176.2 million of deferred
income tax assets at December 31, 1996. This estimate reflects a valuation
allowance of $14.0 million, which is an increase of $4.2 million from December
31, 1995's valuation allowance.
 
     The Company, however, gives no assurance that it will generate sufficient
taxable income to fully realize the $162.2 million of deferred income tax assets
at December 31, 1996. 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.
 
                                       11
<PAGE>   12
 
                     NEWMONT GOLD COMPANY AND SUBSIDIARIES
 
           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
 
     The Company's pre-tax financial statement income (loss) consists of (in
thousands):
 
<TABLE>
<CAPTION>
                                                         YEARS ENDED DECEMBER 31,
                                                      -------------------------------
                                                       1996        1995        1994
                                                      -------    --------    --------
<S>                                                   <C>        <C>         <C>
Domestic............................................  $28,013    $136,387    $ 68,880
Foreign.............................................   46,559       5,477     (14,820)
                                                      -------    --------    --------
                                                      $74,572    $141,864    $ 54,060
                                                      =======    ========    ========
</TABLE>
 
     The Company's benefit (provision) for income taxes consists of (in
thousands):
 
<TABLE>
<CAPTION>
                                                          YEARS ENDED DECEMBER 31,
                                                       ------------------------------
                                                        1996        1995       1994
                                                       -------    --------    -------
<S>                                                    <C>        <C>         <C>
Current:
  Domestic...........................................  $ 7,565    $(30,815)   $(3,660)
  Foreign............................................   (4,005)     (2,477)      (586)
                                                       -------    --------    -------
                                                         3,560     (33,292)    (4,246)
                                                       -------    --------    -------
Deferred:
  Domestic...........................................   17,465      16,300     33,580
  Foreign............................................   (1,625)         --         --
                                                       -------    --------    -------
                                                        15,840      16,300     33,580
                                                       -------    --------    -------
                                                       $19,400    $(16,992)   $29,334
                                                       =======    ========    =======
</TABLE>
 
     The Company's resulting benefit (provision) for income taxes differ from
the amounts computed by applying the United States corporate income tax
statutory rate for the following reasons (in thousands):
 
<TABLE>
<CAPTION>
                                                         YEARS ENDED DECEMBER 31,
                                                     --------------------------------
                                                       1996        1995        1994
                                                     --------    --------    --------
<S>                                                  <C>         <C>         <C>
U.S. corporate income tax at statutory rate........  $(26,100)   $(49,652)   $(18,921)
Percentage depletion...............................    24,933      26,999      27,437
Resolution of tax issues associated with prior
  years............................................     6,000          --      16,250
Foreign tax credits................................    13,057       8,658       4,421
Foreign losses (earnings)..........................     1,705      (1,715)         --
State taxes........................................        --      (1,300)       (500)
Non-taxable portion of dividends received from
  domestic corporations............................        --         700         564
Other..............................................      (195)       (682)         83
                                                     --------    --------    --------
                                                     $ 19,400    $(16,992)   $ 29,334
                                                     ========    ========    ========
</TABLE>
 
                                       12
<PAGE>   13
 
                     NEWMONT GOLD COMPANY AND SUBSIDIARIES
 
           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
 
(7) DEBT
 
LONG-TERM DEBT
 
     Long-term debt consists of (in thousands):
 
<TABLE>
<CAPTION>
                                                                AT DECEMBER 31,
                                                              --------------------
                                                                1996        1995
                                                              --------    --------
<S>                                                           <C>         <C>
Sale-leaseback of refractory ore treatment plant............  $349,134    $349,134
8 5/8% notes................................................   150,000     150,000
Medium-term notes...........................................    42,000      42,000
Project financing...........................................    63,125      67,500
                                                              --------    --------
                                                               604,259     608,634
Current maturities..........................................   (19,250)     (4,375)
                                                              --------    --------
                                                              $585,009    $604,259
                                                              ========    ========
</TABLE>
 
     Scheduled minimum long-term debt repayments are $19.3 million in 1997,
$25.0 million in 1998, $33.5 million in 1999, $14.4 million in 2000, $11.9
million in 2001 and $500.2 million thereafter. Actual payments may be greater in
any one year due to actual operating cash flows realized. The Company is in
compliance with all covenants associated with its debt.
 
  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 was 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, 1996 and 1995
were $638.2 million and $667.9 million, respectively. Payments began in January
1996 and are $29.7 million annually through 2000. 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. The interest rate on
this sale-leaseback transaction is 6.36%. Because of the uniqueness of this
transaction, the Company determined that it is not practicable to estimate the
fair value of this debt.
 
     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 million which is being recognized as a
reduction of interest expense over the term of the lease. As a result of this
gain, the effective interest rate on this sale and leaseback transaction is
6.15%.
 
  8 5/8% Notes
 
     Unsecured notes with a principal amount of $150 million due April 1, 2002
bearing an annual interest rate of 8 5/8% were outstanding at December 31, 1996
and 1995. 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, 1996 and 1995, this debt was estimated to have a
fair value of $165.7 million and $169.5 million, respectively.
 
  Medium-Term Notes
 
     Notes totalling $42 million, with a weighted average interest rate of 7.7%,
maturing on various dates ranging from mid-1999 to late 2004, were outstanding
as of December 31, 1996 and 1995. Interest is payable semi-annually in March and
September and the notes are not redeemable prior to maturity. Using the interest
 
                                       13
<PAGE>   14
 
                     NEWMONT GOLD COMPANY AND SUBSIDIARIES
 
           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
 
rates prevailing on similar instruments at December 31, 1996 and 1995, this debt
was estimated to have a fair value of $44.4 million and $44.9 million,
respectively.
 
  Project Financing Facility
 
     The Company, through a wholly-owned subsidiary, is a 50% participant in
Zarafshan-Newmont Joint Venture ("Zarafshan-Newmont") in the Republic of
Uzbekistan. The other 50% participants are two entities of the Uzbekistan
government.
 
     As of December 31, 1996, Zarafshan-Newmont had $126.25 million outstanding
on a project financing loan secured by the assets of the project. The loan is to
be repaid in semi-annual installments until 2001. Starting in 1997, the average
interest rate is between 3.9 and 4.25 percentage points over the three-month
London Interbank Offered Rate. The carrying amount of the loan is estimated to
approximate its fair market value. The weighted average interest rates for 1996
and 1995 were 8.2% and 8.4%, respectively, and the interest rates at December
31, 1996 and 1995 were 9.4% and 8.2%, respectively.
 
     Until defined completion tests have been satisfied, the Company has
guaranteed the payment of certain amounts due under the loan which totaled
$58.75 million at December 31, 1996. The 50% Uzbek partner has guaranteed the
repayment of the remaining amount due under the loan until such completion tests
have been satisfied. After satisfaction of the completion tests, the loan
becomes non-recourse to the Zarafshan-Newmont partners. The lenders have agreed
to extend the date by which the completion tests must be met to October 1998.
 
  Revolving Credit Facility
 
     The Company has a $400 million revolving credit facility with a consortium
of banks that expires in April 1998. No amounts were outstanding under the
facility as of December 31, 1996 and 1995. 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 currently 0.15% of the lenders' total commitment.
 
     The credit agreement contains covenants that limit consolidated
indebtedness, as defined, to 67% of total capitalization; require minimum net
worth, as defined, of $300 million and $275 million in 1996 and 1995,
respectively, which then increases to $325 million in 1997; and require an
interest coverage ratio, as defined, of not less than 2.5 to 1.
 
  Short-Term Debt
 
     All short-term debt at December 31, 1996 and 1995 consisted of bank debt.
The Company had unsecured demand bank lines of credit aggregating $70 million
and $39 million at December 31, 1996 and 1995, respectively, of which $46.0
million and $29.2 million were outstanding at the same respective periods. These
facilities bear interest at customary short-term rates for borrowers with
similar credit ratings. The carrying value of this debt is assumed to
approximate its fair value. The weighted average interest rates for 1996 and
1995 were 6.9% and 8.8%, respectively, and the interest rates at December 31,
1996 and 1995 were 8.25% and 8.5%, respectively.
 
  Capitalized Interest
 
     Capitalized interest was $5.4 million, $11.6 million and $19.7 million in
1996, 1995 and 1994, respectively.
 
                                       14
<PAGE>   15
 
                     NEWMONT GOLD COMPANY AND SUBSIDIARIES
 
           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
 
(8)  STOCKHOLDERS' EQUITY
 
COMMON STOCK OFFERING
 
     In January 1996, NMC issued 4.65 million shares of common stock for $51.87
per share under an existing "shelf" registration statement with the Securities
and Exchange Commission. Proceeds of the issue netted $241.3 million and were
used to purchase an equal number of shares of common stock of NGC. Such proceeds
were used by NGC to fund its operations. This transaction increased NMC's
ownership of NGC to 90.5%.
 
  Stock Options
 
     As part of the transaction with NMC discussed in Note 2, NGC issued options
to NMC to purchase shares of NGC's common stock. NGC issued options in the same
number and with the same exercise prices as all of the NMC employee stock
options then outstanding. Additional options have been and will continue to be
issued by NGC to NMC to match the terms of additional NMC employee stock options
granted. NMC has exercised and will continue to exercise the stock options
issued to it by NGC 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, 1992 Key Employees Stock Plan and 1996 Employees Stock Plan
(collectively, the "plans"). NMC continues to grant NMC options to eligible
participants under its 1987 Key Employees Stock Option Plan, 1992 Key Employees
Stock Plan and 1996 Employees Stock Plan.
 
     Under NMC's stock option plans, options to purchase shares of NMC are
granted to key employees generally at the fair market value of such shares on
the date of grant. NMC options under these plans generally vest over a two year
period and are exercisable over a period not exceeding ten years. At December
31, 1996, 2,831,003 shares were available for future grants under NMC's 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 otherwise vested unless the market
price of NMC's common stock is a defined amount above the NMC option exercise
price. In addition, the same executives were granted NMC options in 1994, 1993
and 1992 having exercise prices 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, 1996,
605,989 of these NMC options were outstanding.
 
     The following table summarizes annual total stock option activity for each
of the three years ended December 31:
 
<TABLE>
<CAPTION>
                                            1996                    1995                    1994
                                    ---------------------   ---------------------   ---------------------
                                                WEIGHTED-               WEIGHTED-               WEIGHTED-
                                                 AVERAGE                 AVERAGE                 AVERAGE
                                     NUMBER     EXERCISE     NUMBER     EXERCISE     NUMBER     EXERCISE
                                    OF SHARES     PRICE     OF SHARES     PRICE     OF SHARES     PRICE
                                    ---------   ---------   ---------   ---------   ---------   ---------
<S>                                 <C>         <C>         <C>         <C>         <C>         <C>
Outstanding at beginning of
  year............................  2,350,587      $40      2,177,546      $39             --      $--
Granted...........................    869,909      $55        534,035      $41      2,486,117      $41
Exercised.........................   (660,136)     $37       (232,109)     $34       (229,831)     $31
Forfeited.........................   (110,009)     $46       (128,885)     $41        (78,740)     $41
                                    ---------               ---------               ---------
Outstanding at end of year........  2,450,351      $46      2,350,587      $40      2,177,546      $39
                                    =========               =========               =========
Options exercisable at year end...  1,205,399               1,287,688               1,007,998
Weighted-average fair value of
  options granted during the
  year............................  $   20.83               $   16.14                      Not calculated
</TABLE>
 
                                       15
<PAGE>   16
 
                     NEWMONT GOLD COMPANY AND SUBSIDIARIES
 
           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
 
     The following table summarizes information about stock options outstanding
at December 31, 1996 with exercise prices equal to the fair market value on the
date of grant and no restrictions on exercisability after vesting:
 
<TABLE>
<CAPTION>
                                 OPTIONS OUTSTANDING                       OPTIONS EXERCISABLE
                  -------------------------------------------------   ------------------------------
                                WEIGHTED-AVERAGE
   RANGE OF         NUMBER         REMAINING       WEIGHTED-AVERAGE     NUMBER      WEIGHTED-AVERAGE
EXERCISE PRICES   OUTSTANDING   CONTRACTUAL LIFE    EXERCISE PRICE    EXERCISABLE    EXERCISE PRICE
- ---------------   -----------   ----------------   ----------------   -----------   ----------------
<C>               <C>           <C>                <C>                <C>           <C>
  $27 to $35          91,553       4.3 years             $31             91,553           $31
  $35 to $43         817,699       7.9 years             $40            555,298           $40
  $43 to $51         533,790       9.4 years             $51             90,351           $46
  $51 to $59         401,320       9.3 years             $58                 --           $--
                   ---------                                            -------
  $27 to $59       1,844,362       8.5 years             $47            737,202           $40
                   =========                                            =======
</TABLE>
 
     Information about all other stock options outstanding at December 31, 1996
is summarized below:
 
<TABLE>
<CAPTION>
                                                                OPTIONS OUTSTANDING              OPTIONS EXERCISABLE
                                                       -------------------------------------   -----------------------
                                                                      WEIGHTED-
                                                                       AVERAGE     WEIGHTED-                 WEIGHTED-
                                           RANGE OF                   REMAINING     AVERAGE                   AVERAGE
                                           EXERCISE      NUMBER      CONTRACTUAL   EXERCISE      NUMBER      EXERCISE
             TYPE OF OPTION                 PRICES     OUTSTANDING      LIFE         PRICE     EXERCISABLE     PRICE
             --------------               ----------   -----------   -----------   ---------   -----------   ---------
<S>                                       <C>          <C>           <C>           <C>         <C>           <C>
Options with exercise prices in excess
  of the fair market value on the date
  of the grant..........................  $40 to $56     355,581      6.2 years       $49        286,687        $47
Options that cannot be exercised until
  the market price of NMC's stock
  exceeds a fixed amount above the
  exercise price........................  $30 to $41     250,408      6.7 years       $37        181,510        $37
</TABLE>
 
     The Company applies APB Opinion 25 and related interpretations in
accounting for its stock options. Accordingly, no compensation cost has been
recognized for its stock options. Had compensation cost for the options been
determined based upon their fair value at their grant dates in 1995 and 1996,
consistent with the methodology prescribed by Statement of Financial Accounting
Standards No. 123, "Accounting for Stock Based Compensation," the Company's net
income (in thousands) and earnings per share would have been the pro forma
amounts indicated below:
 
<TABLE>
<CAPTION>
                                                             YEARS ENDED
                                                            DECEMBER 31,
                                                         -------------------
                                                          1996        1995
                                                         -------    --------
<S>                                       <C>            <C>        <C>
                                          As
Net income..............................  reported...    $93,972    $124,872
                                          Pro forma      $89,570    $124,000
Earnings per share......................  As reported    $  0.86    $   1.17
                                          Pro forma      $  0.82    $   1.16
</TABLE>
 
     For purposes of determining the pro forma amounts, the fair value of each
option grant was estimated on the date of the grant using the Black-Scholes
option-pricing model with the following assumptions for 1996 and 1995,
respectively: weighted-average risk-free interest rates of 6.1% and 5.8%,
dividend yield of 1% for both years, expected lives of 5 years for both periods
and volatility of 35% and 39%, respectively.
 
     Compensation costs included in the pro forma amounts above only reflect
fair values associated with options granted after January 1, 1995. These amounts
may not be indicative of future amounts that will apply to all future
outstanding nonvested awards or future grants.
 
                                       16
<PAGE>   17
 
                     NEWMONT GOLD COMPANY AND SUBSIDIARIES
 
           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
 
PREFERRED STOCK
 
     Effective January 1, 1994, as a result of the transaction discussed in Note
2, NGC issued to NMC 2.875 million shares of $5.00 par value convertible
preferred stock at a value of $100 per share. As discussed in Note 2, the terms
of the preferred stock mirrored the terms of the NMC preferred stock (except
that upon conversion, NMC was entitled to receive shares of NGC's common stock
instead of NMC's common stock). Through NGC's preferred stock, NGC facilitated
NMC's compliance of its continuing obligations on the NMC preferred stock.
Dividends paid by the Company to NMC for the NGC preferred stock were in turn
paid by NMC to the holders of the NMC preferred stock. The NGC annual preferred
stock dividend was $5.50 per share which was cumulative from January 1, 1994 and
was payable quarterly.
 
     NMC called all of the outstanding 2.875 million shares of $5.50 convertible
preferred stock, $5.00 par value, for redemption on December 14, 1995 at a
redemption price of $105.21 per share. NGC, exercising its redemption right
under its preferred stock, called all of its 2.875 million shares of $5.00 par
value convertible preferred stock for redemption on the same date and at the
same price. For both companies, each share of preferred stock was convertible at
the option of the shareholder into shares of common stock at a conversion price
of $36.395 per share of common stock (equivalent to a conversion rate of 2.7476
shares of common stock for each whole share of convertible preferred stock).
Essentially all of the NMC preferred stock was converted prior to the redemption
date. As a result, NMC converted the same number of NGC preferred shares as
those of converted NMC preferred shares. This ensured that NMC's holding of
outstanding shares of NGC's common stock was equal to the outstanding shares of
NMC stock. In total, 7.9 million shares of NGC common stock were issued to NMC.
 
(9) EMPLOYEE BENEFIT PLANS
 
PENSION BENEFITS
 
     The Company has two qualified non-contributory defined benefit pension
plans, one which covers salaried employees and the other which covers
substantially all hourly employees. The Company also has a non-qualified
supplemental pension plan for salaried employees whose benefits under the
qualified plan are limited by federal legislation. The vesting 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 plans) or a flat dollar amount adjusted by a
service-weighted multiplier (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 components of pension expense for these three plans, in the aggregate,
consist of (in thousands):
 
<TABLE>
<CAPTION>
                                             YEARS ENDED DECEMBER 31,
                                          ------------------------------
                                            1996       1995       1994
                                          --------    -------    -------
<S>                                       <C>         <C>        <C>
Service cost............................  $  4,351    $ 2,651    $ 3,070
Interest cost on projected benefit
  obligation............................     5,317      4,755      4,633
Return on assets........................   (10,754)    (5,938)    (5,370)
Net amortization and deferral...........     4,812        176        211
                                          --------    -------    -------
Pension expense.........................  $  3,726    $ 1,644    $ 2,544
                                          ========    =======    =======
</TABLE>
 
                                       17
<PAGE>   18
 
                     NEWMONT GOLD COMPANY AND SUBSIDIARIES
 
           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
 
     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, 1996 and 1995, respectively (in thousands):
 
<TABLE>
<CAPTION>
                                                 AT DECEMBER 31, 1996
                                          -----------------------------------
                                           SALARY     HOURLY     SUPPLEMENTAL
                                          PENSION     PENSION       SALARY
                                            PLAN       PLAN      PENSION PLAN
                                          --------    -------    ------------
<S>                                       <C>         <C>        <C>
Actuarial present value of benefit
  obligations:
  Accumulated benefit obligation-
     Vested benefits....................  $(56,997)   $(7,737)     $  (590)
     Non-vested benefits................    (2,420)    (1,293)         (53)
                                          --------    -------      -------
                                           (59,417)    (9,030)        (643)
  Effect of future salary
     increases/service-weighted benefit
     multiplier.........................    (9,020)      (654)        (157)
                                          --------    -------      -------
Projected benefit obligation............   (68,437)    (9,684)        (800)
Plan assets at fair value...............    76,979      8,870           --
                                          --------    -------      -------
Plan assets greater (less) than
  projected benefit obligation..........     8,542       (814)        (800)
Unrecognized prior service cost.........      (505)     1,220          523
Unrecognized net (gain) loss............    (4,306)      (492)       3,493
Unrecognized net transition (asset)
  liability.............................    (1,750)       (66)       1,939
Adjustment required to recognize minimum
  liability.............................        --         --       (5,798)
                                          --------    -------      -------
Net pension asset (liability)...........  $  1,981    $  (152)     $  (643)
                                          ========    =======      =======
</TABLE>
 
<TABLE>
<CAPTION>
                                                 AT DECEMBER 31, 1995
                                          -----------------------------------
                                           SALARY     HOURLY     SUPPLEMENTAL
                                          PENSION     PENSION       SALARY
                                            PLAN       PLAN      PENSION PLAN
                                          --------    -------    ------------
<S>                                       <C>         <C>        <C>
Actuarial present value of benefit
  obligations:
  Accumulated benefit obligation --
     Vested benefits....................  $(56,420)   $(6,637)     $  (430)
     Non-vested benefits................    (2,102)    (1,381)         (20)
                                          --------    -------      -------
                                           (58,522)    (8,018)        (450)
  Effect of future salary increases.....    (7,631)        --          (43)
                                          --------    -------      -------
Projected benefit obligation............   (66,153)    (8,018)        (493)
Plan assets at fair value...............    68,331      6,918           --
                                          --------    -------      -------
Plan assets greater (less) than
  projected benefit obligation..........     2,178     (1,100)        (493)
Unrecognized prior service cost.........      (548)       130          567
Unrecognized net loss...................     2,752        871        3,549
Unrecognized net transition (asset)
  liability.............................    (2,215)       (72)       2,327
Adjustment required to recognize minimum
  liability.............................        --         --       (6,400)
                                          --------    -------      -------
Net pension asset (liability)...........  $  2,167    $  (171)     $  (450)
                                          ========    =======      =======
</TABLE>
 
     In October 1996, an amendment was made to increase the benefit multiplier
of the benefits under the Hourly Pension Plan. The effect of this amendment was
to increase the accumulated benefit obligation by
 
                                       18
<PAGE>   19
 
                     NEWMONT GOLD COMPANY AND SUBSIDIARIES
 
           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
 
approximately $0.5 million, the projected benefit obligation and prior service
cost by $1.2 million and to increase the annual pension cost by $0.3 million.
 
     In accordance with the provisions of Statement of Financial Accounting
Standards No. 87, "Employers' Accounting for Pensions," an adjustment was
required to reflect a minimum liability for the supplemental pension plan in
1996, 1995 and 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 $2.2 million, $2.3 million and $2.8
million in stockholders' equity, which is net of related deferred income tax
benefits, for 1996, 1995 and 1994, respectively.
 
     In measuring the projected benefit obligation for the plans, the following
actuarial assumptions were used:
 
<TABLE>
<CAPTION>
                                                              AT DECEMBER 31,
                                                              ----------------
                                                               1996      1995
                                                              ------    ------
<S>                                                           <C>       <C>
Weighted average discount rate..............................    7.5%      7.0%
Rate of increase in future compensation (applicable only to
  salaried plans)...........................................    4.0%      4.0%
</TABLE>
 
     The weighted average expected long-term rate of return on plan assets was
assumed to be 8.75% for 1996, 9.00% for 1995 and 8.25% for 1994.
 
     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, which approximated
market value, of $2 million, at both December 31, 1996 and December 31, 1995.
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.
 
RETIREE BENEFITS OTHER THAN PENSIONS
 
     The Company provides defined medical benefits to qualified retirees who
were salaried employees and to their eligible dependents, and it provides
defined life insurance benefits to qualified 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 accounts for these postretirement benefits other than pensions
under Statement of Financial Accounting Standards No. 106, "Employers'
Accounting for Postretirement Benefits Other Than Pensions" ("SFAS 106"). The
statement requires that postretirement benefits other than pensions be accrued
during an employee's service to the Company.
 
                                       19
<PAGE>   20
 
                     NEWMONT GOLD COMPANY AND SUBSIDIARIES
 
           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
 
     The components of expense for postretirement benefits other than pensions
are shown in the table below (in thousands):
 
<TABLE>
<CAPTION>
                                                            YEARS ENDED DECEMBER 31,
                                                           --------------------------
                                                            1996      1995      1994
                                                           ------    ------    ------
<S>                                                        <C>       <C>       <C>
Service cost.............................................  $2,199    $1,570    $1,846
Interest cost............................................   1,747     1,904     1,642
Amortization of net gain.................................     (64)      (80)       --
                                                           ------    ------    ------
Expense for postretirement benefits other than
  pensions...............................................  $3,882    $3,394    $3,488
                                                           ======    ======    ======
</TABLE>
 
     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>
                                                                 YEARS ENDED
                                                                 DECEMBER 31,
                                                              ------------------
                                                               1996       1995
                                                              -------    -------
<S>                                                           <C>        <C>
Actuarial present value of accumulated benefit obligation
  ("APBO"):
  Retirees and eligible dependents..........................  $11,290    $12,510
  Other fully eligible plan participants....................    1,874      1,974
  Other active plan participants............................   13,541     13,076
                                                              -------    -------
          Total APBO........................................   26,705     27,560
  Unrecognized net gain.....................................    4,776        820
                                                              -------    -------
Accrued liability for postretirement benefits other than
  pensions..................................................  $31,481    $28,380
                                                              =======    =======
</TABLE>
 
     At December 31, 1996 and 1995, $2.6 million of assets, with a market value
of approximately the same amount, was 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 7.5% and 7.0% were used in calculating
the APBO at December 31, 1996 and 1995, respectively. The assumed health care
cost trend rates to measure the expected cost of benefits at December 31, 1996
start at an 8% annual increase for coverage before the age of 65 and a 7% annual
increase for coverage after the age of 64. The assumed health care cost trend
rates to measure the expected cost of benefits at December 31, 1995 start at a
9% annual increase for coverage before the age of 65 and an 8% annual increase
for coverage after the age of 64. These rates were assumed to decrease one
percentage point each year until a 5% annual rate of increase was reached, at
which point a 5% annual rate of increase was assumed thereafter. The effect of a
one percentage point annual increase in the assumed cost trend rates would
increase the aggregate of service and interest costs by approximately 19% in
1996 and the APBO at December 31, 1996 by approximately 15%. The effect of a one
percentage point annual increase in the assumed cost trend rates would increase
the aggregate of service and interest costs in 1995 by approximately 23% and the
APBO at December 31, 1995 by approximately 19%.
 
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.
 
                                       20
<PAGE>   21
 
                     NEWMONT GOLD COMPANY AND SUBSIDIARIES
 
           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
 
     Upon the employee meeting eligibility requirements, the Company 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 $4.6 million, $3.7
million and $3.3 million in 1996, 1995 and 1994, respectively.
 
(10) WRITE-OFF OF EXPLORATION PROPERTIES
 
     In 1995, the Company recorded write-offs of two exploration properties
totaling $52.5 million. The Ivanhoe property was purchased in June 1992. Over
the next three years, extensive drilling, environmental studies and mine models
were developed to determine the economics of extracting gold from the property.
A feasibility report was issued in June 1995 that reflected high levels of
environmental and mining costs that resulted in financial returns much lower
than the Company's threshold for development. Accordingly, the decision was made
not to develop the property and $18.8 million of capitalized costs associated
with the property were written off in June 1995. An additional charge of $4.6
million was taken as other expense for estimated costs to reclaim areas
disturbed by previous mining and exploration activity on the property.
 
     The Grassy Mountain property was purchased in September 1992. At the time
of the purchase, certain reliance was placed upon geological models prepared by
the seller. Work performed by the Company in 1993 demonstrated that the gold was
not distributed as modeled by the seller. In 1994, the Company created new
detailed models of the deposit based on its revised geologic interpretation.
These models resulted in fewer high grade ounces, which led to the
reclassification of 996,000 ounces of reserves to mineralized material at the
end of 1994. However, additional drilling and modeling was required to determine
whether there was an impairment of the asset based on the work performed through
that date. Based on economic information at that time and the use of
undiscounted cash flows, no write-down was considered necessary as of December
31, 1994. Throughout 1995, further refinement of geological and economic models
continued with open-pit, underground and price hedging scenarios all resulting
in deposit sizes and economic returns smaller than the Company's threshold for
development. Based on these results, capitalized costs of $33.8 million relating
to the Grassy Mountain property were written off in December 1995.
 
(11) GAIN ON SALE OF INVESTMENTS
 
     In May 1995, the Company sold its 10.7% interest in Southern Peru Copper
Corporation for $116.4 million, which resulted in a gain of $113.2 million.
 
(12) DIVIDEND, INTEREST AND OTHER INCOME
 
     Included in dividends, interest and other income are $3.1 million, $28.3
million and $9.2 million for 1996, 1995 and 1994, respectively, for business
interruption insurance that was received for problems associated with the
refractory ore treatment plant at the Carlin, Nevada operations.
 
(13) MAJOR CUSTOMERS
 
     The Company is not economically dependent on a limited number of customers
for the sale of its product because gold commodity markets are well-established
worldwide. In 1996, sales to three customers accounted for $213.3 million,
$108.5 million and $107.2 million of total sales, each of which represented more
than 10% of total sales and together accounted for 56% of the annual sales.
During 1995, four such customers accounted for $109 million, $85.7 million,
$82.2 million and $73.1 million of total sales, or 55% of the annual sales. In
1994, sales to three such major customers accounted for $125.2 million, $99.6
million and $88.5 million, or 52% of total sales.
 
                                       21
<PAGE>   22
 
                     NEWMONT GOLD COMPANY AND SUBSIDIARIES
 
           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
 
(14) SUPPLEMENTAL CASH FLOW INFORMATION
 
     Net cash provided by operating activities includes the following cash
payments (in thousands):
 
<TABLE>
<CAPTION>
                                                           YEAR ENDED DECEMBER 31,
                                                        -----------------------------
                                                         1996       1995       1994
                                                        -------    -------    -------
<S>                                                     <C>        <C>        <C>
Income taxes, net of refunds..........................  $(4,477)   $18,992    $21,375
Interest, net of amounts capitalized..................  $43,021    $12,197    $ 6,975
</TABLE>
 
     Excluded from the statements of consolidated cash flows are the effects of
certain non-cash transactions. In July 1996, NGC began accounting for the Batu
Hijau project as an equity investment (See Note 16). The adjustments that were
made to the Company's balance sheet are as follows (in thousands):
 
<TABLE>
<CAPTION>
                                                              INCREASE (DECREASE)
                                                              -------------------
<S>                                                           <C>
Assets
  Other current assets......................................       $   (849)
  Property, plant and mine development, net.................        (43,936)
  Other long-term assets....................................         44,603
                                                                   --------
          Total assets......................................       $   (182)
                                                                   ========
Liabilities
  Accounts payable..........................................       $   (182)
                                                                   --------
          Total liabilities.................................       $   (182)
                                                                   ========
</TABLE>
 
     In 1996, the Company retired mostly fully depreciated property, plant and
equipment with an original cost of $77.0 million, which is not reflected in the
statements of consolidated cash flows.
 
     In 1996 and 1994, the Company recognized income tax benefits of $6.0
million and $16.2 million, respectively, resulting from the resolution of
certain tax issues associated with prior years.
 
     In 1995, as discussed in Note 8, NGC called for redemption of all of its
2.875 million shares of convertible preferred stock. Substantially all of the
convertible preferred stock was converted into common stock of NGC. This
transaction resulted in a non-cash decrease to preferred stock offset by a
non-cash decrease to treasury stock and a non-cash increase to capital in excess
of par value.
 
                                       22
<PAGE>   23
 
                     NEWMONT GOLD COMPANY AND SUBSIDIARIES
 
           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
 
     The following reflects the non-cash 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 current assets......................................      2,311
                                                              ---------
     Current assets.........................................    (65,837)
  Property, plant and mine development, net.................     99,070
  Other long-term assets....................................    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>
 
(15) GEOGRAPHIC INFORMATION
 
     The Company operates predominantly in a single industry as a worldwide
company engaged in gold production, exploration for gold and acquisition of gold
properties. The Company has consolidated operations in the United States,
Indonesia and Uzbekistan. In computing earnings from operations, no allocations
of general corporate expenses, exploration and research, interest or income
taxes have been made.
 
     Identifiable assets by country represent those assets related to the
operations in those countries. Information by geographic location for the year
ended December 31, 1996 is as follows (in thousands):
 
<TABLE>
<CAPTION>
                                                                         INDONESIA
                                            UNITED STATES   UZBEKISTAN   AND OTHER   CONSOLIDATED
                                            -------------   ----------   ---------   ------------
<S>                                         <C>             <C>          <C>         <C>
Sales.....................................   $  657,882      $ 62,609    $ 47,964     $  768,455
Earnings from Operations..................   $  144,134      $ 14,423    $ 14,231     $  172,788
Exploration and Research..................   $   35,238      $  1,184    $ 22,287     $   58,709
Identifiable Assets.......................   $1,221,552      $226,721    $172,035     $1,620,308
</TABLE>
 
     Included in the United States sales are $647.2 million of export sales. In
1995 and 1994, export sales from the United States were $629.1 million and
$497.2 million, respectively.
 
                                       23
<PAGE>   24
 
                     NEWMONT GOLD COMPANY AND SUBSIDIARIES
 
           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
 
     Prior to 1996, substantially all operations were in the United States.
 
     The above geographic information does not include NGC's equity investment
in Minera Yanacocha in Peru. NGC's equity in Minera Yanacocha's 1996 sales,
earnings from operations and exploration was $119.3 million, $76.9 million and
$6.6 million, respectively. NGC's equity in Minera Yanacocha's total assets at
December 31, 1996 was $73.5 million. See Notes 1 and 17.
 
(16) 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.
 
     Estimated future reclamation and remediation costs are based principally on
legal and regulatory requirements. At December 31, 1996 and 1995, $20.8 million
and $19.0 million, respectively, were accrued for reclamation and remediation
costs relating to currently producing mineral properties.
 
     In addition, the Company is involved in several matters concerning
environmental obligations associated with former mining activities. Generally,
these matters concern developing and implementing remediation plans at the
various sites involved. The Company believes that the related environmental
obligations associated with these sites are similar in nature with respect to
the development of remediation plans, their risk profile and the compliance
required to meet general environmental standards. Based upon the Company's best
estimate of its liability for these matters, $49.8 million and $55.8 million
were accrued for such obligations at December 31, 1996 and 1995, respectively.
These amounts are included in other current liabilities and reclamation and
remediation 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 40% lower than the amount
accrued at December 31, 1996. The amounts accrued for these matters are reviewed
periodically based upon facts and circumstances available at the time. Changes
in estimates are charged to other expense in the period estimates are revised.
Charges related to these matters were $6.6 million, $3.0 million and $16.1
million in the years ended December 31, 1996, 1995 and 1994, respectively.
 
     Details about certain of the more significant sites involved are discussed
below.
 
  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 at
its former mining site in the Telluride/Ouray area of Colorado. The Company
expects to complete the remediation work at this property by the end of 1997. If
the remediation work does not meet specific technical 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.
 
                                       24
<PAGE>   25
 
                     NEWMONT GOLD COMPANY AND SUBSIDIARIES
 
           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
 
  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 mid-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
EPA has not yet selected the final remedy for the site. 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.
 
  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 closure and reclamation plan. The Department of Interior has
commenced an Environmental Impact Study to analyze Dawn's proposed plan and to
consider alternate closure and reclamation plans for the mine. Dawn cannot
predict at this time what type of mine reclamation plan may be selected by the
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 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 would generate
funds to close and reclaim both the mine and the mill. The license is being
challenged by third parties.
 
  Insurance Receivables
 
     The Company carried insurance policies for which it filed claims for the
costs of certain of its remediation activities. The Company recorded receivables
for claims under such policies when management believed the
 
                                       25
<PAGE>   26
 
                     NEWMONT GOLD COMPANY AND SUBSIDIARIES
 
           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
 
likelihood of recovery was probable. 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.
 
     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, which
was recorded as other expense, resulting in a net balance of $16.7 million
outstanding at December 31, 1994.
 
     In the first quarter of 1995, settlement in certain of the insurance
litigation was reached enabling the Company to realize the receivable
outstanding at December 31, 1994. Settlement discussions continue with respect
to additional insurance litigation. Trial of this litigation has been scheduled
for late 1997. The Company intends to vigorously pursue its claims with respect
to the remaining litigation and believes that it is reasonably possible that
additional amounts will be recovered, although no such amounts are accrued.
 
BATU HIJAU
 
     In July 1996, the Company and Sumitomo Corporation ("Sumitomo") entered
into a definitive partnership agreement to develop and operate the Batu Hijau
copper/gold deposit in Indonesia. The estimated cost for development of the open
pit mine, mill, and infrastructure including employee housing, a port,
electrical generation facilities, interest during construction, cost escalations
and working capital is expected to approximate $1.9 billion. Batu Hijau contains
proven and probable reserves of 12.1 million ounces (5.4 million equity ounces)
of gold and 10.6 billion pounds (4.8 billion equity pounds) of copper.
Production is expected to begin around the turn of the century, with a projected
mine life in excess of 20 years.
 
     Under the terms of the agreement with Sumitomo, the Company will contribute
its interest in the company that owns the project and Sumitomo will contribute
an agreed upon amount of cash, expected to be approximately $235 million. After
the contributions are made, the Company will retain a 45% interest in the
company that owns the project and Sumitomo will have a 35% interest. The
remaining 20% will be held by an unrelated Indonesian company. The parties'
obligations to make their contributions to the partnership are subject to the
receipt of certain approvals from the Indonesian government. Until such
approvals are received, Sumitomo has agreed to fund up to $100 million of costs
through non-interest bearing loans ($20.2 million of which were outstanding at
December 31, 1996), which the Company has effectively guaranteed. Effectively,
any amounts outstanding under such loans will go towards meeting Sumitomo's cash
contribution of the previously mentioned $235 million. If such approvals are not
received by March 31, 1997, either party has the right to terminate the
agreement and the loans would become due. After the Sumitomo contributions are
made, additional contributions required by the parties will be contributed
56.25% by the Company and 43.75% by Sumitomo. Project financing for development
of the property is expected to be approximately $1 billion and will be
guaranteed by the Company and Sumitomo, 56.25% and 43.75%, respectively, until
project completion tests are met. The source of the Company's future
contributions will be operating cash flow, bank credit lines or other third
party financing as needed.
 
     As a result of the contemplated ownership structure, the Company is
accounting for its investment in Batu Hijau as an equity investment effective
July 1996. The Company's investment at December 31, 1996, which is included in
other long-term assets, was $46.6 million.
 
     In anticipation of Indonesian government approvals related to the Batu
Hijau project, the entity owning the project has entered into a construction
contract for approximately $1 billion.
 
                                       26
<PAGE>   27
 
                     NEWMONT GOLD COMPANY AND SUBSIDIARIES
 
           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
 
GUARANTEE OF THIRD PARTY INDEBTEDNESS
 
     The Company guaranteed a former NMC subsidiary's $35.7 million Pollution
Control Revenue Bonds, due 2009. NMC's former subsidiary is BHP Copper Inc.,
formerly known as Magma Copper Company. It is expected that the Company will be
required to remain liable on this guarantee as long as the bonds remain
outstanding, however, the Company has not been required to pay any of these
amounts, nor does it expect to have to pay any in the future.
 
GOLD PRICE HEDGING CONTRACTS
 
     The Company has entered into hedging transactions, that began maturing in
January 1996 and continue through December 2000, for production from its
Minahasa property, located in Indonesia. These transactions consist of forward
sales of 125,000 ounces of gold per year at an average price of $454 an ounce,
plus 40% of the amount by which the market price exceeds the forward sales
price. No production was hedged in 1995 or 1994.
 
OTHER COMMITMENTS AND CONTINGENCIES
 
     Under a 1992 agreement with Barrick Goldstrike Mines, Inc. ("Barrick"),
Barrick is mining the Company's Carlin, Nevada 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 deposit. The Company incurred $63.7 million, $62.5
million and $39.0 million of such mining and dewatering costs in 1996, 1995 and
1994, respectively, and NGC expects to incur approximately $15 million of such
costs in 1997.
 
     The Company has minimum royalty obligations on one of its producing mines
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. Although the minimum
royalty requirement may not be met in any certain year, the Company expects the
mine's gold production over its life will meet the minimum royalty requirements.
 
     At December 31, 1996, there were $100.2 million of outstanding letters of
credit that were primarily for bonding reclamation plans and electric supply and
reinsurance agreements. The Company has provided investment collateral for $8.7
million of these letters of credit. The remaining $91.5 million represents
unsecured letters of credit. The letters of credit reflect fair value as a
condition of their underlying purpose and are subject to fees competitively
determined in the market place.
 
     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.
 
(17) SUBSEQUENT EVENTS
 
PROPOSED MERGER WITH SANTA FE PACIFIC GOLD CORPORATION
 
     In March 1997, NMC announced it had entered into a merger agreement with
Santa Fe Pacific Gold Corporation ("Santa Fe") under which each outstanding
share of Santa Fe common stock would be exchanged for 0.43 of a share of NMC
common stock. A condition of the merger is that it would be accounted for as a
pooling of interests by NMC. The merger is also subject to the approval of the
shareholders of both companies and other customary conditions. It is expected to
be consummated during the second quarter of
 
                                       27
<PAGE>   28
 
                     NEWMONT GOLD COMPANY AND SUBSIDIARIES
 
           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
 
1997. If NMC is successful in acquiring Santa Fe, Santa Fe would become a
wholly-owned subsidiary of NGC. NGC would issue shares of common stock to NMC
equal to the number of common shares NMC issues to acquire Santa Fe (estimated
to be approximately 56.5 million). Santa Fe reported 1996 sales of $337.2
million and net income of $21.1 million with total assets at December 31, 1996
of $1.3 billion, long-term debt of $454.9 million and net worth of $570.0
million as of the same date.
 
ADDITIONAL INTEREST IN MINERA YANACOCHA
 
     In November 1993, the French government announced its intention to
privatize the mining assets of Bureau de Recherches Geologiques et Minieres, the
geological and mining bureau of the French government ("BRGM"). In September
1994, 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"), 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 proposed
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 for its additional
interest, 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 in the accompanying balance sheet.
Through December 31, 1996, the Company had received $18.6 million of dividends
on the additional shares. In September 1996, a court ruling provided that the
Company and Buenaventura had the right to acquire the 24.7% interest for a
purchase price of $109.3 million, $59.1 million attributable to the 13.35%
interest of the Company. As established by such ruling, the preemptive rights
were triggered in November 1993 and thus the valuation of the shares held in
escrow were calculated as of such date. BRGM and other defendants filed an
appeal to the Superior Court of Lima challenging the court's determination that
the preemptive rights were triggered and the date and amount of the valuation.
In February 1997, the Superior Court upheld the decision of the trial court.
Therefore, beginning in 1997, the Company will consider the additional interest
to have been acquired and will consolidate Minera Yanacocha in its financial
statements to reflect the increase in its ownership from 38% to 51.35%. BRGM and
other defendants have filed a request for review of the resolution by the
Superior Court of Peru. Peruvian counsel has advised the Company that decisions
of the Superior Court can be modified by the Supreme Court only in very limited
instances and that it is not likely that any further review will be granted.
 
     The following pro forma income statement assumes the acquisition of the
additional interest occurred on January 1, 1996 and the pro forma balance sheet
assumes the acquisition occurred on December 31, 1996. The pro forma financial
statements are presented for illustrative purposes only and are not necessarily
indicative of the consolidated financial position or results of operations which
would have been realized had the acquisition of the additional interest been
considered to occur as of the dates for which the pro forma financial statements
are presented. The pro forma financial statements also are not necessarily
indicative of the consolidated position or results of operations in the future.
 
                                       28
<PAGE>   29
 
                   NEWMONT GOLD COMPANY AND MINERA YANACOCHA
 
              PRO FORMA CONSOLIDATED INCOME STATEMENT -- UNAUDITED
                        (IN THOUSANDS, EXCEPT PER SHARE)
                      FOR THE YEAR ENDED DECEMBER 31, 1996
 
<TABLE>
<CAPTION>
                                                NEWMONT     MINERA      PRO FORMA       PRO FORMA
                                                  GOLD     YANACOCHA   ADJUSTMENTS     CONSOLIDATED
                                                --------   ---------   -----------     ------------
<S>                                             <C>        <C>         <C>             <C>
Sales and other income
  Sales.......................................  $768,455   $313,870                     $1,082,325
  Dividends, interest and other...............    26,471      2,336                         28,807
                                                --------   --------     ---------       ----------
                                                 794,926    316,206                      1,111,132
                                                --------   --------     ---------       ----------
Costs and expenses
  Costs applicable to sales...................   476,090     89,206     $  (2,172)(A)
                                                                           (1,624)(B)      561,500
  Depreciation, depletion and amortization....   124,841     24,595        12,289(C)       161,725
  Exploration and research....................    58,709     17,482                         76,191
  General and administrative..................    48,093         --         1,624(B)
                                                                             (617)(D)       49,100
  Interest, net...............................    43,987      5,447                         49,434
  Other.......................................    13,855         --                         13,855
                                                --------   --------     ---------       ----------
                                                 765,575    136,730         9,500          911,805
Equity in income of affiliated companies......    45,221         --       (47,381)(E)       (4,949)
                                                                             (617)(D)
                                                                           (2,172)(A)
                                                --------   --------     ---------       ----------
Pretax income.................................    74,572    179,476       (59,670)         194,378
Income tax (provision) benefit................    19,400    (54,784)         (599)(F)      (35,983)
Minority interest in income of Minera
  Yanacocha...................................        --         --       (60,663)(G)      (60,663)
                                                --------   --------     ---------       ----------
Net income....................................  $ 93,972   $124,692     $(120,932)      $   97,732
                                                ========   ========     =========       ==========
Income per common share.......................  $   0.86                                $     0.89
                                                ========                                ==========
Weighted average number of shares of common
  stock and common stock equivalents
  outstanding.................................   109,766                                   109,766
                                                ========                                ==========
</TABLE>
 
- ---------------
 
(A) To eliminate royalties paid by Minera Yanacocha to an equity affiliate of
    the Company.
 
(B) To eliminate management fees paid by Minera Yanacocha to a subsidiary of the
    Company.
 
(C) Estimated additional amortization of excess purchase price over book value
    of net assets acquired.
 
(D) Reclassification of the Company's share (38%) of management fees charged to
    Minera Yanacocha.
 
(E) Elimination of equity income recognized for Minera Yanacocha to reflect
    consolidation.
 
(F) Additional adjustment to taxes required for consolidation of Minera
    Yanacocha.
 
(G) Minority interest (48.65%) in income of Minera Yanacocha.
 
                                       29
<PAGE>   30
 
                   NEWMONT GOLD COMPANY AND MINERA YANACOCHA
 
               PRO FORMA CONSOLIDATED BALANCE SHEET -- UNAUDITED
                        (IN THOUSANDS, EXCEPT PER SHARE)
                               DECEMBER 31, 1996
 
<TABLE>
<CAPTION>
                                                 NEWMONT      MINERA      PRO FORMA       PRO FORMA
                                                   GOLD      YANACOCHA   ADJUSTMENTS     CONSOLIDATED
                                                ----------   ---------   -----------     ------------
<S>                                             <C>          <C>         <C>             <C>
Assets
  Cash and cash equivalents...................  $  185,681   $ 40,705                     $  226,386
  Inventories.................................     188,345     15,661                        204,006
  Other.......................................      81,856     28,848                        110,704
                                                ----------   --------     --------        ----------
     Current assets...........................     455,882     85,214                        541,096
  Property, plant and mine development, net...   1,301,952    106,308     $ 53,368(A)
                                                                           (14,445)(B)     1,447,183
  Other long-term assets......................     323,240      1,887      (41,115)(C)
                                                                            (2,843)(A)       281,169
                                                ----------   --------     --------        ----------
     Total assets.............................  $2,081,074   $193,409     $ (5,035)       $2,269,448
                                                ==========   ========     ========        ==========
Liabilities
  Short-term debt and current portion of
     long-term debt...........................  $   65,231   $ 14,256                     $   79,487
  Other current liabilities...................     158,863     31,190     $ 50,525(A)        240,578
                                                ----------   --------     --------        ----------
     Current liabilities......................     224,094     45,446       50,525           320,065
  Long-term debt..............................     585,009     24,244                        609,253
  Other long-term liabilities.................     139,916     15,520                        155,436
                                                ----------   --------     --------        ----------
     Total liabilities........................     949,019     85,210       50,525         1,084,754
                                                ----------   --------     --------        ----------
Minority interest in Minera Yanacocha.........          --         --       52,639(D)         52,639
                                                ----------   --------     --------        ----------
Stockholders' Equity..........................   1,132,055    108,199      (14,445)(B)
                                                                           (41,115)(C)
                                                                           (52,639)(D)     1,132,055
                                                ----------   --------     --------        ----------
     Total liabilities and stockholders'
       equity.................................  $2,081,074   $193,409     $ (5,035)       $2,269,448
                                                ==========   ========     ========        ==========
</TABLE>
 
- ---------------
 
(A) To record acquisition of additional 13.35% interest.
 
(B) Elimination of 13.35% of Minera Yanacocha's net book value.
 
(C) Elimination of the Company's investment in Minera Yanacocha to reflect
    consolidation.
 
(D) To reflect minority interest in Minera Yanacocha.
 
                                       30
<PAGE>   31
 
(18) UNAUDITED SUPPLEMENTARY DATA
 
QUARTERLY DATA
 
     The following is a summary of selected quarterly financial information
(amounts in millions except per share amounts):
 
<TABLE>
<CAPTION>
                                                                        1996
                                         ------------------------------------------------------------------
                                                         THREE MONTHS ENDED
                                         ---------------------------------------------------    YEAR ENDED
                                         MARCH 31,   JUNE 30,   SEPTEMBER 30,   DECEMBER 31,   DECEMBER 31,
                                         ---------   --------   -------------   ------------   ------------
<S>                                      <C>         <C>        <C>             <C>            <C>
Sales..................................   $ 154.7    $ 181.2       $ 226.0         $206.6         $768.5
Gross profit(1)........................   $  28.1    $  38.2       $  58.5         $ 42.7         $167.5
Net income.............................   $  11.8    $  21.6       $  39.1         $ 21.5         $ 94.0
Net income per common share............   $  0.11    $  0.20       $  0.35         $ 0.20         $ 0.86
Weighted average shares
  outstanding(2).......................     108.8      110.3         110.2          110.1          109.8
Dividends declared per common share....   $  0.12    $  0.12       $  0.12         $ 0.12         $ 0.48
Closing price of common stock..........   $56.125    $50.375       $47.375         $43.75         $43.75
</TABLE>
 
<TABLE>
<CAPTION>
                                                                        1995
                                         ------------------------------------------------------------------
                                                         THREE MONTHS ENDED
                                         ---------------------------------------------------    YEAR ENDED
                                         MARCH 31,   JUNE 30,   SEPTEMBER 30,   DECEMBER 31,   DECEMBER 31,
                                         ---------   --------   -------------   ------------   ------------
<S>                                      <C>         <C>        <C>             <C>            <C>
Sales..................................   $ 134.5    $ 145.1       $ 172.3         $184.4         $636.2
Gross profit(1)........................   $  26.6    $  31.6       $  52.1         $ 48.6         $158.8
Net income.............................   $  17.0    $  75.5(3)    $  27.9         $  4.6(4)      $124.9(3,4)
Preferred stock dividends..............   $   4.0    $   4.0       $   4.0         $ (0.7)(5)     $ 11.2(5)
Net income applicable to common
  stock................................   $  13.0    $  71.5(3)    $  23.9         $  5.3(4)      $113.7(3,4)
Net income per common share............   $  0.14    $  0.74(3)    $  0.25         $ 0.05(4)      $ 1.17(3,4)
Weighted average shares outstanding....      96.5       96.7          96.8           99.6(5)        97.4(5)
Dividends declared per common share....   $  0.12    $  0.12       $  0.12         $ 0.12         $ 0.48
Closing price of common stock..........   $41.375    $ 40.25       $ 40.50         $43.75         $43.75
</TABLE>
 
- ---------------------
 
(1) Sales less costs applicable to sales and depreciation, depletion and
    amortization.
 
(2) In January 1996, 4.65 million shares of common stock were issued to NMC
    coincident with NMC's offering a like amount of shares under an existing
    shelf registration statement (see Note 8).
 
(3) Includes an after-tax gain of $72 million, or $0.75 per share for the
    quarter and $0.74 per share for the year, from the sale of the Company's
    interest in Southern Peru Copper Corporation and an after-tax charge of
    $15.1 million, or $0.16 per share, for the write-off of the investment and
    additional reclamation provision of the Ivanhoe exploration property (see
    Notes 10 and 11).
 
(4) Includes an after-tax charge of $22 million, or $0.22 per share, for the
    quarter and $0.23 per share for the year, for the write-off of the
    investment in the Grassy Mountain property (see Note 10).
 
(5) Substantially all of the convertible preferred stock was converted into
    common stock in December 1995 (see Note 8).
 
RATIO OF EARNINGS TO FIXED CHARGES
 
     As a result of the transaction with NMC discussed in Note 2, the Company's
capital structure became 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 became essentially that of NMC's, management believes that
NMC's historical consolidated ratio of earnings to fixed charges for the two
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 1992. The Company
had no significant fixed charges in 1992 or 1993.
 
     The ratio of earnings to fixed charges for the Company was 2.1, 3.6 and 1.7
for the years ended December 31, 1996, 1995 and 1994, respectively. The ratio of
earnings to fixed charges for NMC was 6.3 and 6.5 for the years ended December
31, 1993 and 1992, respectively.
 
                                       31

<PAGE>   1
 
                                                                    EXHIBIT 99.2
 
  MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND FINANCIAL
                                   CONDITION
 
     The following discussion and analysis provides information which management
believes is relevant to an assessment and understanding of Newmont Gold Company
("NGC") and its subsidiaries' (collectively, the "Company") consolidated results
of operations and financial condition. The discussion should be read in
conjunction with the consolidated financial statements and notes thereto.
Newmont Mining Corporation ("NMC") owns approximately 91% of NGC's common stock.
All of NMC's operations are held through NGC.
 
     The discussion and analysis, as well as the notes to such financial
statements, contain "forward-looking statements" within the meaning of Section
27A of the Securities Exchange Act of 1934, as amended. Such forward looking
statements are subject to risks, uncertainties and other factors that could
cause actual results to differ materially, as discussed in "Forward-Looking
Statements" below.
 
SUMMARY
 
     Over the past two years, the Company's earnings per share, on a comparable
basis, have increased on average approximately 10% annually. The Company earned
$94.0 million ($0.86 per share) in 1996, compared with $90.0 million ($0.81 per
share) in 1995, before considering certain gains and charges, and $83.4 million
($0.70 per share) in 1994. Additionally in 1995, there was a gain on the sale of
an investment and the write-off of two exploration properties. The Company sold
its 10.7% interest in Southern Peru Copper Corporation ("SPCC") for $116.4
million, resulting in a pre-tax gain of $113.2 million, or $72 million after-tax
($0.74 per share). The write-off of the Grassy Mountain and Ivanhoe exploration
properties resulted in a pre-tax charge of $57.1 million, or $37.1 million
after-tax ($0.38 per share). Including these items, net income in 1995 was
$124.9 million ($1.17 per share).
 
     The Company's total equity gold production increased 23% in 1996 to
2,284,200 ounces from 1,862,800 ounces in 1995. Equity production in 1995
increased 11% from 1994's equity production of 1,671,000 ounces. Weighted
average total cash costs per ounce of equity production were $220, $210 and $202
for 1996, 1995 and 1994, respectively.
 
RESULTS OF OPERATIONS
 
     Consolidated sales revenues have increased primarily from gold production
of 1,970,200 ounces, 1,653,000 ounces and 1,555,300 ounces in 1996, 1995 and
1994, respectively. (Such production does not include the Company's share of
gold production from Minera Yanacocha S.A. ("Minera Yanacocha") which was
accounted for on the equity method during these periods but commencing in 1997
will be consolidated in the Company's financial, statements as discussed below.)
The average annual gold price per ounce received on such production was $390,
$385 and $384 in 1996, 1995 and 1994, respectively.
 
     The profitability of the Company's operations is significantly affected by
the market price of gold. Gold prices can fluctuate widely and are affected by
numerous factors beyond the Company's control. During the beginning of 1997, the
market price of gold declined from 1996 levels. The Company has forward sales
contracts that began in January 1996 and continue through December 2000 for
production from its Minahasa property, located in Indonesia. These contracts
provide for forward sales of 125,000 ounces per year at an average price of $454
an ounce, plus 40% of the amount by which the market price exceeds the forward
sales price. No production was hedged in 1995 or 1994.
 
                                        1
<PAGE>   2
 
     The effects of the changes in the average annual gold price received and
annual consolidated production levels on sales revenues between years are
reflected in the following table (in thousands):
 
<TABLE>
<CAPTION>
                                          1996 VS. 1995    1995 VS. 1994
                                          -------------    -------------
<S>                                       <C>              <C>
Increase in sales revenues due to:
  Gold price............................    $ 10,154          $ 1,339
  Production............................     122,082           37,510
                                            --------          -------
          Total.........................    $132,236          $38,849
                                            ========          =======
</TABLE>
 
     The Company's North American operations are located on the geological
feature known as the Carlin Trend, hereafter, referred to as "Carlin." Carlin
gold production has increased approximately 5% in each of the last two years,
from 1,555,300 ounces in 1994 to 1,634,500 in 1995 to 1,700,000 ounces in 1996.
Improved operating rates at the refractory ore treatment plant in conjunction
with increased amounts of high grade underground ore processed were the primary
reasons for the increase in gold production between 1995 and 1996. The
refractory ore treatment plant, which began operations in mid-1994, operated at
reduced rates in 1994 and 1995 due primarily to a crack in a weld of a riding
ring in the double rotator mill in August 1994 and a fire in an electrostatic
precipitator in November 1994. As the plant operated at steadily increasing
rates during 1995 and production from high grade underground ores increased,
production also increased from 1994 to 1995.
 
     Carlin's ore production is shifting from open-pit oxide ore to refractory
ore coming from both open-pits and underground operations. The refractory ore
treatment plant, which processes most of the refractory ore, is expected to
account for approximately 40% of Carlin's gold production in 1997, up from
approximately 30% in 1996 and 20% in 1995. Carlin's production is expected to
continue to increase approximately 5% annually in 1997 and 1998 with the mining
of higher grade ores from the Post deposit. This deposit is mined by Barrick
Goldstrike Mines, Inc. ("Barrick") under a joint mining agreement, as discussed
below.
 
     The Company's international operations include the Zarafshan-Newmont Joint
Venture ("Zarafshan-Newmont"), a 50%-50% joint venture between a subsidiary of
the Company and two Uzbekistan governmental entities. Zarafshan-Newmont, which
began production in September 1995, produces gold by crushing and leaching low
grade oxide ore from existing stockpiles at the government owned Muruntau mine
in Uzbekistan. Production was 326,500 ounces (163,200 equity ounces) for 1996
and 37,000 ounces (18,500 equity ounces) for 1995. Although problems were
encountered in the startup of the leach facility in 1995, gradual improvements
were made throughout 1996. In 1997, production is expected to be approximately
400,000 ounces with 50% attributable to the Company's interest.
 
     In Indonesia, the Company began production in 1996 at NGC's 80% owned
Minahasa ("Minahasa") property. Revenue production was 107,000 ounces. In
addition, 5,700 ounces were produced before commercial operations commenced, and
the revenue from these ounces was credited against the capitalized costs of the
project. Although the Company has an 80% interest in this project, it is
entitled to 100% of the gold production until its investment has been recovered,
since it funded 100% of the construction costs. Production is expected to reach
approximately 150,000 ounces in 1997, with higher levels expected in future
years.
 
     The Company has also had a 38% interest in Minera Yanacocha, a Peruvian
entity which is managed by a subsidiary of the Company. Minera Yanacocha has
increased its production 166% over the past two years. Production totaled
811,400 ounces (308,300 equity ounces), 552,000 ounces (209,800 equity ounces)
and 304,600 ounces (115,700 equity ounces) in 1996, 1995 and 1994, respectively,
at total cash costs of $107, $119, and $135 per ounce produced, respectively.
The increased production in 1996 was primarily due to production beginning at a
third mine. In 1995, production began at a second mine, resulting in increased
production levels over 1994. Production is expected to increase at least 5% in
1997 and future production levels are expected to be consistent with those of
1997. Total cash costs are expected to increase slightly in 1997 and 1998, due
primarily to higher mining costs.
 
     As discussed in Note 17 of Item 8 -- "Financial Statements and
Supplementary Data," in February 1997 the Peruvian Superior Court upheld the
decision of a Peruvian trial court which ruled that NGC had the right
 
                                        2
<PAGE>   3
 
to exercise its preemptive right increasing its interest in Minera Yanacocha
from 38% to 51.35% at a purchase price of $59.1 million. The court ruled that
the preemptive right was triggered in November 1993. Due to the dispute over the
exercise of the preemptive right, the Company had continued to account for the
interest in Minera Yanacocha on an equity basis at 38%. As a result of the
Superior Court's decision, the additional 13.35% interest will be accounted for
as having been acquired in 1997 and the 51.35% interest will be consolidated in
the Company's financial results, net of the amortization of the purchase price
of the incremental interest over its net book value. BRGM and other defendants
have filed a request for review of the Superior Court decision by the Supreme
Court of Peru. Peruvian counsel have advised the Company that decisions of the
Superior Court can be modified by the Supreme Court only in very limited
circumstances and that it is not likely that further review will be granted. See
the previously mentioned Note 17 in Item 8 for pro forma statements reflecting
the additional interest.
 
     The Company has targeted total equity gold production of approximately 2.6
million ounces for 1997.
 
     Costs applicable to sales were $476.1 million, $370.6 million and $326.4
million in 1996, 1995 and 1994, respectively. In 1996, $415.3 million relates to
the Carlin operations, $36.9 million relates to the Company's share of costs at
Zarafshan-Newmont and $23.9 million relates to Minahasa. Of the 1995 amount,
$4.1 million of the costs relate to the Company's share of costs attributable to
Zarafshan-Newmont. All other costs applicable to sales for 1995 and 1994 were
attributable to the Carlin operations.
 
     The Company's costs applicable to consolidated sales on a per ounce of gold
sold basis were as follows for 1996, 1995 and 1994:
 
<TABLE>
<CAPTION>
                                                              FOR THE YEARS ENDED DECEMBER 31,
                                          ------------------------------------------------------------------------
                                                                   ZARAFSHAN-
                                                 CARLIN             NEWMONT       MINAHASA        CONSOLIDATED
                                          --------------------    ------------    --------    --------------------
                                          1996    1995    1994    1996    1995      1994      1996    1995    1994
                                          ----    ----    ----    ----    ----    --------    ----    ----    ----
<S>                                       <C>     <C>     <C>     <C>     <C>     <C>         <C>     <C>     <C>
Cash operating costs....................  $222    $189    $178    $225    $218      $217      $222    $189    $178
Royalties...............................    20      31      25       0       0         7        17      31      25
Other cash costs........................     1       3       5       0       0         0         1       3       5
                                          ----    ----    ----    ----    ----      ----      ----    ----    ----
        Total cash costs................   243     223     208     225     218       224       240     223     208
Other...................................     1       1       2       1       1         2         1       1       2
                                          ----    ----    ----    ----    ----      ----      ----    ----    ----
        Total costs applicable to
          sales.........................  $244    $224    $210    $226    $219      $226      $241    $224    $210
                                          ====    ====    ====    ====    ====      ====      ====    ====    ====
</TABLE>
 
     The above consolidated amounts do not take into account NGC's interest in
Minera Yanacocha because it was accounted for on the equity basis. If NGC's
equity interest in Minera Yanacocha were included with the consolidated amounts,
the weighted-average total cash costs per ounce of equity production would have
been $220, $210 and $202 in 1996, 1995 and 1994, respectively.
 
     Cash operating costs consist principally of charges for mining ore and
waste associated with current period gold production and processing ore through
milling and leaching facilities. Total Carlin cash operating costs were $376.8
million in 1996, $308.4 million in 1995, and $277.3 million in 1994. The
increases in aggregate and per ounce costs between 1996 and 1995 were primarily
attributable to higher mining and milling costs. Approximately half of the
increase is attributable to increased mining costs which resulted from more
underground mining and higher waste-to-ore ratios at the open-pit mines in 1996.
Another quarter of the increase was due to higher milling costs primarily
associated with the refractory ore treatment plant. High maintenance costs were
incurred at the plant in 1996 as certain components corroded more quickly than
anticipated. In 1997, it is planned that these components will be replaced using
materials which are expected to significantly increase their operating lives.
The remainder of the 1996 increase was attributable to various other factors.
The increases in costs between 1995 and 1994 were primarily attributable to
increased milling costs associated with the refractory ore treatment plant
during its first full year of operation and increased underground mining costs.
Per ounce cash operating costs at Carlin are expected to decrease in 1997 and
1998 when the production of higher grade ore from the Post deposit enters the
production stream.
 
     The Company's share of cash operating costs at Zarafshan-Newmont increased
to $36.9 million from $4.1 million in 1995 due to a full year of operation in
1996. Per ounce cash costs increased slightly from 1995
 
                                        3
<PAGE>   4
 
to 1996 primarily due to a reduction in the estimated ultimate gold recovery
rate in 1996. Per ounce cash operating costs are expected to slightly decrease
in 1997 as greater efficiencies and higher production levels are achieved, but
may increase in 1998 as lower ore grades are expected to be encountered.
 
     Per ounce cash operating costs at Minahasa in 1997 are expected to be
approximately the same as those in 1996. In the years thereafter, per ounce
costs are expected to decline as higher grade ores enter the production stream.
 
     In addition to the cash operating costs expensed, the Company is
capitalizing a portion of mining costs associated with tons mined from deposits
having diverse grade and waste-to-ore ratios over a mine's life. In 1996 and
1995, such costs were capitalized for certain deposits at Carlin ($63.7 million
and $56.2 million, respectively) and at Minahasa ($6.1 million and $1.2 million,
respectively), whereas in 1994, these costs only related to the Carlin
operations ($33.2 million). The Carlin costs substantially relate to the Post
deposit. As previously mentioned, this deposit is being mined by Barrick under a
1992 joint mining agreement. Under such 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. Some of the Company's contained
ounces in this deep deposit are expected to be processed in 1997, at which time
such mining costs will be matched against the revenues from the ounces that are
produced.
 
     Capitalized mining costs increased in 1996 and 1995 due to elevated mining
rates for the Post deposit, as well as commencement of production at Minahasa in
1996. Such capitalized mining costs are expected to decrease in 1997 from the
1996 amount as a higher proportion of Post ore relative to waste material is
mined.
 
     Royalty costs, which are a function of the amount of royalty ore processed,
were $34.4 million, $51.6 million and $38.7 million in 1996, 1995 and 1994,
respectively. In 1995, greater amounts of royalty-burdened ore were processed
than in 1996 and 1994. Including the effect of royalties at Minera Yanacocha,
royalty costs are expected to decrease from 1996 to 1997 by approximately 35%
due to a significant reduction in the amount of royalty-burdened ore processed
from open-pit mines at Carlin.
 
     On a consolidated basis, the Company's costs applicable to sales per ounce
are expected to significantly decrease in 1997 with the lower cost per ounce
production at Carlin and Zarafshan-Newmont and the consolidation of the low-cost
Minera Yanacocha operations. In total, costs applicable to sales will increase
in 1997 as a result of the consolidation of Minera Yanacocha.
 
     Depreciation, depletion and amortization ("DD&A") was $124.8 million,
$106.8 million and $91.1 million in 1996, 1995 and 1994, respectively. The
increase in 1996 over 1995 is primarily due to additional assets placed in
service at Carlin, a full year of Zarafshan-Newmont operations and the startup
of Minahasa operations. The increase in 1995 over 1994 is primarily due to new
facilities and equipment at the Carlin operations, including the refractory ore
treatment plant. Including the consolidation of Minera Yanacocha, DD&A is
expected to increase to between $165 million and $175 million in 1997 due to a
full year of operation at Minahasa and the additional assets placed in service
in 1996 at all operations.
 
     Exploration and research expenses were $58.7 million, $57.3 million and
$69.2 million in 1996, 1995 and 1994, respectively. The decrease in exploration
and research expenses in 1995 compared to the 1994 amount was due to the
Company's planned decrease in exploration spending and increased focus on
resource development, for which costs are capitalized. The Company intends to
replace and increase its reserve base primarily through exploration. At December
31, 1996, the Company's proven and probable gold reserves were 37.1 million
equity ounces, compared to 28.8 million equity ounces at December 31, 1995.
Exploration and research expenses in 1997 are expected to increase to between
$70 million and $75 million with the consolidation of Minera Yanacocha.
 
     As discussed in Note 16 of Item 8 -- "Financial Statements and
Supplementary Data", in July 1996, the Company and Sumitomo Corporation
("Sumitomo") entered into an agreement to develop and operate the Batu Hijau
project in Indonesia. As a result of the contemplated ownership structure, the
Company began accounting for its investment in Batu Hijau as an equity
investment in July 1996. In 1995 and for the first six months of 1996,
development costs for this large copper/gold porphyry deposit were capitalized.
The
 
                                        4
<PAGE>   5
 
Company's cash expenditures totaled $15.1 million and $27.7 million for 1996 and
1995, respectively. In addition, in 1996 Sumitomo advanced $20.2 million for
project development. In 1994, the Company incurred $16.8 million of exploration
and research expenses for this project.
 
     General and administrative expense ("G&A") was $48.1 million, $43.2 million
and $38.5 million in 1996, 1995 and 1994, respectively. The increases are
primarily related to the additional staffing required for the increased
international focus of the Company's operations. The Company provides extensive
management oversight and technical expertise to its overseas operations. G&A
expenses are not expected to increase significantly in 1997 over the 1996
levels.
 
     Interest expense before capitalized interest was $49.4 million, $48.0
million and $29.5 million in 1996, 1995 and 1994, respectively. The increase in
1995 from 1994 is associated with higher debt balances, primarily due to the
sale-leaseback financing of the refractory ore treatment plant which was
completed in September 1994. Net interest expense will increase in 1997 with the
consolidation of Minera Yanacocha and its planned $100 million financing. See
"Liquidity and Capital Resources."
 
     In 1995, the Company recorded write-offs of two exploration properties
totaling $52.5 million. The Ivanhoe property was purchased in June 1992. Over
the next three years, extensive drilling, environmental studies and mine models
were developed to determine the economics of extracting gold from the property.
A feasibility report was issued in June 1995 that reflected high levels of
environmental and mining costs that resulted in financial returns much lower
than the Company's threshold for development. Accordingly, the decision was made
not to develop the property and $18.8 million of capitalized costs associated
with the property were written off in June 1995. At that same time, an
additional charge of $4.6 million was taken as other expense for estimated costs
to reclaim areas disturbed by previous mining and exploration activity on the
property.
 
     The Grassy Mountain property was purchased in September 1992. At the time
of the purchase, certain reliance was placed upon geological models prepared by
the seller. Work performed by the Company in 1993 demonstrated that the gold was
not distributed as modeled by the seller. In 1994, the Company created new
detailed models of the deposit based on its revised geologic interpretation.
These models resulted in fewer high grade ounces, which led to the
reclassification of 996,000 ounces of reserves to mineralized material at the
end of 1994. However, additional drilling and modeling was required to determine
whether there was an impairment of the asset based on the work performed through
that date. Based on economic information at that time and the use of
undiscounted cash flows, no write-down was considered necessary as of December
31, 1994. Throughout 1995, further refinement of geological and economic models
continued with open-pit, underground and price hedging scenarios all resulting
in deposit sizes and economic returns smaller than the Company's threshold for
development. Based on these results, capitalized costs of $33.8 million relating
to the Grassy Mountain property were written off in December 1995.
 
     Other expenses were $13.9 million, $11.7 million and $46.0 million for
1996, 1995 and 1994, respectively. These amounts reflect charges of $6.6
million, $3.0 million and $36.1 million in 1996, 1995 and 1994, respectively,
related to environmental obligations associated with former mining activities
discussed in Note 16 to Item 8 -- "Financial Statements and Supplementary Data."
The additional charges related to environmental obligations in all periods
reflect revisions of estimates of future costs to be incurred. Included in the
1994 amount is a valuation allowance of $20 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 its then new lead counsel regarding its review of the
litigation with the insurance companies and due to the absence of expected
settlement discussions. After recording the valuation allowance there remained a
net receivable balance from insurance companies of approximately $16.7 million
at December 31, 1994. Settlement of certain of the insurance litigation was
reached in 1995 enabling the Company to realize the receivable. Trial of the
remaining litigation is scheduled for late 1997. The Company intends to
vigorously pursue its claims with respect to the remaining litigation and
believes that it is reasonably possible that additional amounts will be
recovered, although no such amounts are accrued.
 
     Since the actual cash payments for the environmental obligations associated
with the Company's former mining activities are expected to occur over a number
of years, such cash requirements are not expected to
 
                                        5
<PAGE>   6
 
have a significant negative impact on the Company's liquidity. The Company made
such payments of $14.8 million, $20.0 million and $14.5 million in 1996, 1995
and 1994, respectively. The Company expects to pay approximately $10.0 million
of such costs in 1997. Total estimated future costs related to these
environmental liabilities of $50.2 million were accrued at December 31, 1996.
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 100%
greater or 40% lower than the amount accrued at December 31, 1996. Absent
concurrent insurance recoveries, or revenue generating operations associated
with closure, on-going cash expenditures will be funded out of operating cash
flow 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.
 
     Dividends, interest and other income was $26.5 million, $42.2 million and
$22.3 million for 1996, 1995 and 1994, respectively. The amounts include $3.1
million, $28.3 million and $9.2 million for 1996, 1995 and 1994, respectively,
for business interruption insurance recorded for certain problems associated
with the refractory ore treatment plant, as previously discussed. The remaining
variance between the years is due primarily to variances in interest income
which has increased over the three years due to higher cash balances. As
discussed in Note 8 of Item 8 -- "Financial Statements and Supplementary Data",
in January 1996, NMC issued 4.65 million shares of common stock resulting in
higher cash balances in 1996. Interest income is expected to be the primary
component of dividends, interest and other in 1997, and is expected to decrease
slightly from 1996.
 
     Income tax benefit (provision) was $19.4 million, ($17.0) million and $29.3
million for 1996, 1995 and 1994, respectively. Included in the 1996 income tax
benefit are foreign tax credits associated with Minera Yanacocha, which were
substantially higher in 1996 than 1995, as well as $6.0 million of benefits
resulting from resolution of certain tax issues from prior years. In 1995, the
Company recognized taxes of $41.2 million related to the sale of its investment
in SPCC. This charge was partially offset by a tax benefit of $20 million
related to the charges associated with the write-offs of the Ivanhoe and Grassy
Mountain properties. 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, as well as a tax benefit of $12.6 million recognized in
connection with the charge relating to environmental obligations. Tax benefits
from percentage depletion and foreign tax credits were realized in all three
years. At December 31, 1996, the Company had $63.4 million of net deferred tax
assets. Although it can give no assurances, the Company expects that projected
future operations will result in the utilization of these net deferred tax
assets.
 
     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 1996, the Company's cash outlays included $231.2 million in capital
expenditures and $52.7 million in dividends. Of the capital expenditures,
approximately $154.0 million was spent on projects at the Carlin operations
which were primarily associated with capitalized mining costs, underground
development, mining and processing equipment, and refractory leach pads. In
addition, $27.4 million was spent by the Company on mine site development for
the Minahasa project, $15.1 million on the Batu Hijau project before the
agreement was reached with Sumitomo, and $11.6 million was spent on the
construction of a new technical facility in Denver, Colorado. The balance of
capital expenditures related to various other projects. These expenditures were
funded by proceeds from issuances of common stock of $265.4 million and cash
flow from operating activities of $140.4 million. In addition, $16.8 million was
borrowed under short-term credit facilities to finance environmental reclamation
and remediation activities.
 
     Including Minera Yanacocha, approximately $300 million is expected to be
spent on capital projects in 1997. Carlin expenditures of approximately $145
million will be for capitalized mining costs, mine equipment, refractory leach
pads and underground development. Funds for capital expenditures of
approximately $8 million and $26 million will also be required for the
Zarafshan-Newmont and Minahasa projects,
 
                                        6
<PAGE>   7
 
respectively. Minera Yanacocha expenditures of approximately $110 million will
be primarily for the construction of a second processing facility and the
construction and expansion of leach pads.
 
     Of the Company's $231.2 million in capital expenditures in 1996, it is
estimated that approximately $12 million was required to comply with
environmental regulations. Including the effect of Minera Yanacocha, the Company
estimates that approximately $25 million of the capital expenditures in 1997
will be required to comply with environmental regulations. The ongoing costs to
comply with environmental regulations are not a significant portion of the
Company's cash operating costs.
 
     Also in 1997, the Company expects to spend approximately $20 million on
development of La Herradura, a 44% equity investment located in Mexico. The
property will be developed by Minera Penmont S.A. de C.V., which is owned
56%-44% between Industriales Penoles S.A. de C.V. ("Penoles") and a subsidiary
of the Company. The property is a low grade, open-pit deposit that is expected
to begin heap-leach production in mid-1998. Penoles, as managing partner, has
the responsibility for development and construction of this project. However,
the Company will continue to provide technical expertise on an ongoing basis.
 
     Additionally in 1997, the acquisition of the incremental interest in Minera
Yanacocha is expected to require the payment of approximately $59.1 million plus
additional costs required to complete the acquisition.
 
     As previously mentioned, in January 1996, NMC issued 4.65 million shares of
common stock for $51.87 per share under an existing "shelf" registration
statement with the Securities and Exchange Commission. Proceeds of the issue
netted $241.3 million and were used to purchase an equal number of shares of
common stock of NGC. This transaction increased NMC's ownership of NGC to 90.5%.
In addition, $24.2 million was received by NMC in 1996 from the exercise of NMC
employee stock options, which proceeds were in turn used by NMC to exercise
options of NGC.
 
     Cash on hand at December 31, 1996 of $185.7 million, operating cash flow
and short-term borrowings will be used to fund the Company's capital
expenditures and other cash requirements in 1997 (other than Minera Yanacocha).
The Company also has a $400 million unused revolving credit facility with a
consortium of banks. Additionally, in June 1994, NGC filed a "shelf"
registration statement with the Securities and Exchange Commission covering the
issuance of up to $150 million in non-convertible debt securities. There are no
present plans to use the revolving credit facility or issue any such securities.
In addition, Minera Yanacocha intends to raise $100 million of project financing
in 1997, to partially finance its 1997 capital spending program and for other
general corporate purposes.
 
     As discussed in Note 16 of Item 8 -- "Financial Statements and
Supplementary Data," in July 1996, the Company and Sumitomo entered into an
agreement to develop and operate the Batu Hijau project in Indonesia. The
estimated cost for development of the open-pit mine, mill and infrastructure
including employee housing, a port, electrical generation facilities, interest
during construction, cost escalations and working capital is expected to
approximate $1.9 billion. Batu Hijau contains proven and probable reserves of
12.1 million ounces (5.4 million equity ounces to the Company) of gold and 10.6
billion pounds (4.8 billion equity pounds to the Company) of copper. Production
is expected to begin around the turn of the century, with a projected mine life
in excess of 20 years.
 
     Under the partnership agreement between Sumitomo and the Company, the
Company will, at the outset, contribute to the partnership its interest in the
company that owns the project and retain a 45% interest. Sumitomo will
contribute, at the outset, approximately $165 million in cash and in the months
immediately following the date of the initial contributions, an estimated
additional $70 million in cash and receive a 35% interest. The remaining 20%
interest in the project is held by an Indonesian company that has no cash
requirements. The parties' obligations to make their initial contributions to
the partnership are subject to certain conditions, including receipt of certain
approvals from the Indonesian government. Until these conditions are satisfied,
Sumitomo has agreed to fund up to $100 million of project costs through
non-interest bearing loans which the Company has effectively guaranteed. Such
funding will be credited against Sumitomo's initial contribution. If the above
conditions are not satisfied by March 31, 1997, either party has the right to
terminate the agreement and the loans would become due. As a result of the
contemplated ownership structure, the Company is accounting for its investment
in Batu Hijau as an equity investment
 
                                        7
<PAGE>   8
 
effective July 1996. The Company's investment at December 31, 1996, which is
included in other long-term assets, was $46.6 million. At December 31, 1996,
Sumitomo had loaned $20.2 million to the company that owns the project.
 
     Project financing for the Batu Hijau project of approximately $1 billion is
being arranged. Such financing will be guaranteed until project completion by
the Company and Sumitomo, 56.25% and 43.75%, respectively. The Company and
Sumitomo are also expected to enter into certain support agreements related to
such debt. The Company expects to fund its share of remaining project costs
through operating cash flow, bank credit lines or other third party financing as
needed. Depending on financing arrangements, it is possible that no cash
requirements will be necessary from the Company until 1998. Total project costs
for 1997 are estimated to be approximately $400 million.
 
     Scheduled minimum long-term debt repayments are $19.3 million in 1997. The
Company expects to fund maturities of its debt through operating cash flow
and/or by refinancing the debt as it becomes due.
 
     For active mines, the Company provides for future reclamation and
remediation 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 remediation 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 remediation 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.
 
     Current and non-current inventories (non-current inventories are included
in other long-term assets) increased from December 31, 1995 to December 31, 1996
by $14.4 and $32.5 million, respectively. Of these increases, $23.4 million
relates to Zarafshan-Newmont's commencement of operations and the Company
acquiring ore stockpiles from its partners in 1996 to allow them to fund their
capital contributions to the venture. In addition, $16.3 million is related to
the commencement of operations at Minahasa.
 
PROPOSED MERGER WITH SANTA FE PACIFIC GOLD CORPORATION
 
     As discussed in Note 17 of Item 8 -- "Financial Statements and
Supplementary Data," NMC has entered into a merger agreement with Santa Fe
Pacific Gold Corporation ("Santa Fe") under which each share of Santa Fe common
stock will be exchanged for 0.43 of a share of NMC common stock. A condition of
the merger is that it be accounted for as a pooling of interests by NMC. The
merger is also subject to the approval of the shareholders of both companies and
other customary conditions. It is expected to be consummated during the second
quarter of 1997. If NMC is successful in acquiring Santa Fe, Santa Fe would
become a wholly-owned subsidiary of NGC. NGC would issue shares of common stock
to NMC equal to the number of shares NMC issues to acquire Santa Fe (estimated
to be approximately 56.5 million). Santa Fe reported 1996 sales of $337.2
million, gold production of 851,600 ounces, total cash costs of $215 per ounce
and net income of $21.1 million. Santa Fe also reported as of December 31, 1996
total assets of $1.3 billion, long-term debt of $454.9 million and net worth of
$570.0 million. Costs associated with this transaction, estimated to be
approximately $125 million, will be funded by the operating cash flow of each
company and/or third party financing sources as required.
 
FORWARD-LOOKING STATEMENTS
 
     The foregoing discussion and analysis, as well as certain of the notes to
the consolidated financial statements, contain "forward-looking statements"
within the meaning of Section 27A of the Securities Exchange Act of 1934, as
amended. Such statements include, but are not limited to, (i) estimates of
future gold production for specific operations and on a consolidated basis, (ii)
estimates of future production costs, exploration expenditures and other
expenses for specific operations and on a consolidated basis, (iii) estimates of
future capital expenditures and other cash needs for specific operations and on
a consolidated basis and expectations as to the funding thereof, (iv) statements
as to the projected development of certain ore deposits, including estimates of
development and other capital costs, financing plans with respect thereto and
expected
 
                                        8
<PAGE>   9
 
production commencement dates, and (v) estimates of future costs and other
liabilities for certain environmental matters. These forward-looking statements
are subject to risks, uncertainties and other factors that could cause actual
results to differ materially from the forward-looking statements.
 
     Future gold production could be affected by, among other things, the price
of gold, risks and hazards associated with mining operations, variances in ore
grade and metallurgical and other characteristics from assumptions contained in
mining plans, labor disputes and acts of God.
 
     Future production costs, exploration expenditures and other expenses could
be affected by a number of factors, including, but not limited to, unanticipated
geological configurations or other geological or grade problems, metallurgical
and other processing problems, the occurrence of inclement or hazardous weather
conditions or other unusual operating conditions, the failure of equipment,
processes or facilities to operate in accordance with specifications or
expectations, labor disputes, accidents and changes in U.S. or foreign laws or
regulations or the interpretation, enforcement or implementation thereof.
 
     The amount and timing of future capital expenditures could be influenced by
a number of factors, including the timing of receipt of necessary permits and
other governmental approvals, the failure of equipment, processes or facilities
to operate in accordance with specifications and expectations, labor disputes
and unanticipated changes in mine plans. The funding of such expenditures and
other cash needs will be affected by the level of cash flow generated by the
Company and the ability of the Company to otherwise finance such expenditures,
which in turn could be affected by general U.S. and international economic and
political conditions, political and economic conditions in the country in which
the expenditure is being made, as well as financial market conditions.
 
     The development of certain ore deposits could be affected by, among other
things, labor disputes, delays in the receipt of or failure to receive necessary
governmental permits or approvals, changes in U.S. or foreign laws or
regulations or the interpretation, enforcement or implementation thereof, the
failure of any of the Company's joint venture partners to perform as agreed,
unanticipated ground and water conditions, the failure of equipment, processes
or facilities to operate in accordance with specifications or expectations, or
delays in the receipt of or the ability to obtain any necessary financing.
 
     Future environmental costs and liabilities could be impacted by changes in
U.S. or foreign laws or regulations or the interpretation, enforcement or
implementation thereof unanticipated ground and water conditions, the failure of
equipment, processes or facilities to operate in accordance with specifications
or expectations, delays in receiving necessary permits and other factors beyond
the control of the Company.
 
     For a more detailed discussion of the foregoing risks and uncertainties as
well as other risks and uncertainties affecting the Company and its operations,
see Item 1 of the Company's Annual Report on Form 10-K for the fiscal year ended
December 31, 1996 to be filed with the Securities and Exchange Commission. Many
of these factors are beyond the Company's ability to control or predict. Readers
are cautioned not to put undue reliance on forward-looking statements.
 
                                        9


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