<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarter ended September 30, 1996
[_] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from _____ to _____
Commission File Number: 1-13096
SANTA FE PACIFIC GOLD CORPORATION
(Exact name of registrant as specified in its charter)
Delaware 85-0307713
(State of Incorporation) (I.R.S. Employer Identification No.)
6200 Uptown Boulevard NE, Suite 400
Albuquerque, New Mexico 87110
(Address of principal executive offices)
(Zip Code)
(505) 880-5300
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
Yes X No
----- -----
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.
Class Shares Outstanding at September 30, 1996
- ---------------------------- ----------------------------------------
Common Stock, $.01 par value 131,466,221
<PAGE>
SANTA FE PACIFIC GOLD CORPORATION
FORM 10-Q
For The Quarter Ended September 30, 1996
INDEX
<TABLE>
<CAPTION>
<C> <S> <C>
Part I. Financial Information
Item 1.
-------
Financial Statements:
Consolidated Statement of Operations
for the three-month and nine-month periods ended September 30, 1996 and 1995.. 1
Consolidated Balance Sheet
at September 30, 1996 and December 31, 1995................................... 2
Consolidated Statement of Cash Flows
for the nine-month periods ended September 30, 1996 and 1995.................. 3
Notes to Consolidated Financial Information................................... 4
Supplemental Information...................................................... 5
Standardized Unit Production Cost Information................................. 6
Item 2.
-------
Management's Discussion and Analysis of Financial Condition and
Results of Operations......................................................... 7
Part II. Other Information
Item 1. Legal Proceedings.................................................... 13
Item 6. Exhibits and Reports on Form 8-K..................................... 15
Signatures.............................................................................. 16
Exhibits Index.......................................................................... E-1
</TABLE>
<PAGE>
PART I - FINANCIAL INFORMATION
ITEM I - FINANCIAL STATEMENTS
SANTA FE PACIFIC GOLD CORPORATION AND CONSOLIDATED SUBSIDIARIES
CONSOLIDATED STATEMENT OF OPERATIONS
(In thousands, except per share amounts)
(Unaudited)
<TABLE>
<CAPTION>
Three Months Nine Months
Ended September 30, Ended September 30,
--------------------- ---------------------
1996 1995 1996 1995
--------- --------- --------- ---------
<S> <C> <C> <C> <C>
Operating Revenue
Gold sales $ 76,126 $ 86,059 $ 238,253 $ 254,685
Royalty and other revenue 1,246 1,926 3,672 3,379
--------- --------- --------- ---------
Total Operating Revenue 77,372 87,985 241,925 258,064
--------- --------- --------- ---------
Costs and Expenses
Operating expenses 42,491 41,837 129,999 121,284
Depreciation, depletion and amortization 14,687 16,704 46,979 49,870
Exploration and development 7,704 10,450 23,257 24,246
General and administrative 4,233 3,479 12,436 11,752
--------- --------- --------- ---------
Total Costs and Expenses 69,115 72,470 212,671 207,152
--------- --------- --------- ---------
Operating Income 8,257 15,515 29,254 50,912
Other Income, Net 223 1,380 2,311 2,340
Interest Expense, Net 3,549 3,694 9,628 7,114
--------- --------- --------- ---------
Income Before Income Taxes 4,931 13,201 21,937 46,138
Income Taxes 1,429 4,488 6,363 13,869
--------- --------- --------- ---------
Net Income $ 3,502 $ 8,713 $ 15,574 $ 32,269
========= ========= ========= =========
Net Income Per Share of Common Stock $ 0.03 $ 0.07 $ 0.12 $ 0.25
========= ========= ========= =========
Weighted Average Number of Common Shares 131,469 131,449 131,464 131,387
========= ========= ========= =========
</TABLE>
See Notes to Consolidated Financial Information
1
<PAGE>
SANTA FE PACIFIC GOLD CORPORATION AND CONSOLIDATED SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
(In thousands)
<TABLE>
<CAPTION>
September 30, December 31,
1996 1995
------------- ------------
(Unaudited)
<S> <C> <C>
ASSETS
------
Current Assets
Cash and cash equivalents $ 38,790 $ 35,852
Accounts receivable 860 839
Inventories 42,716 36,538
Current portion of deferred mining costs 100,465 105,004
Other current assets 5,363 5,470
------------- ------------
Total Current Assets 188,194 183,703
------------- ------------
Other Assets
Deferred mining costs 148,042 73,988
Other assets 6,049 5,919
------------- ------------
Total Other Assets 154,091 79,907
------------- ------------
Property, Plant and Equipment 1,184,738 1,001,855
Less accumulated depreciation, depletion
and amortization 298,430 247,297
------------- ------------
Net Property, Plant and Equipment 886,308 754,558
------------- ------------
Total Assets $ 1,228,593 $ 1,018,168
============= ============
LIABILITIES AND SHAREHOLDERS' EQUITY
------------------------------------
Current Liabilities
Accounts payable $ 26,040 $ 26,557
Accrued liabilities 29,460 26,453
Current portion of deferred income taxes 27,577 25,193
------------- ------------
Total Current Liabilities 83,077 78,203
Long-Term Debt 394,866 199,861
Other Long-Term Liabilities 67,630 66,496
Deferred Income Taxes 118,545 118,551
------------- ------------
Total Liabilities 664,118 463,111
Shareholders' Equity
Common stock, $0.01 par value, 500 million
shares authorized; 131.5 million shares
issued and outstanding 1,315 1,314
Paid-in capital 327,279 326,777
Retained income 235,881 226,966
------------- ------------
Total Shareholders' Equity 564,475 555,057
------------- ------------
Total Liabilities and Shareholders' Equity $ 1,228,593 $ 1,018,168
============= ============
</TABLE>
See Notes to Consolidated Financial Information
2
<PAGE>
SANTA FE PACIFIC GOLD CORPORATION AND CONSOLIDATED SUBSIDIARIES
CONSOLIDATED STATEMENT OF CASH FLOWS
(In thousands)
(Unaudited)
<TABLE>
<CAPTION>
Nine Months
Ended September 30,
------------------------
1996 1995
---------- ----------
<S> <C> <C>
Operating Activities
Net Income $ 15,574 $ 32,269
Adjustments to reconcile net income to
cash flow from operations:
Depreciation, depletion and amortization 47,321 50,535
Deferred income taxes 3,534 2,565
Changes in:
Accounts receivable (21) 531
Inventories (5,541) (3,996)
Current portion of deferred mining costs 3,527 (9,777)
Other current assets 108 917
Accounts payable (516) (2,467)
Accrued liabilities 3,007 (5,958)
Other, net 2,627 6,355
---------- ----------
Net Cash Provided By Operating Activities 69,620 70,974
---------- ----------
Investing Activities
Capital expenditures (191,346) (106,673)
Deferred mining costs (64,693) (35,448)
Proceeds from sale of property 1,240 3,442
---------- ----------
Net Cash Used For Investing Activities (254,799) (138,679)
---------- ----------
Financing Activities
Proceeds from borrowings 195,000 40,000
Principal Payments on borrowings - (130,000)
Proceeds from sale of debentures - 199,856
Cash dividends paid to shareholders (6,573) (6,568)
Other, net (310) (4,569)
---------- ----------
Net Cash Provided By Financing Activities 188,117 98,719
---------- ----------
Increase in Cash and Cash Equivalents 2,938 31,014
Cash and Cash Equivalents, Beginning of Period 35,852 34,159
---------- ----------
Cash and Cash Equivalents, End of Period $ 38,790 $ 65,173
========== ==========
Supplemental Disclosure of Cash Flow Information
Cash paid during the period for:
Interest, net of amounts capitalized $ 3,795 $ 3,867
Income taxes $ 1,000 $ 8,923
</TABLE>
See Notes to Consolidated Financial Information
3
<PAGE>
SANTA FE PACIFIC GOLD CORPORATION AND CONSOLIDATED SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL INFORMATION
(Unaudited)
(a) The consolidated financial information should be read in conjunction with
the Annual Report on Form 10-K of Santa Fe Pacific Gold Corporation
("Registrant" or "Company") for the year ended December 31, 1995, including
the financial statements and notes included therein.
(b) In the opinion of the Company's management, the unaudited consolidated
financial information for the three-month and nine-month periods ended
September 30, 1996 and 1995, reflects all adjustments necessary for the
respective periods. All such adjustments are of a normal and recurring
nature.
(c) The consolidated statements of operations for the three-month and nine-month
periods ended September 30, 1996, are not necessarily indicative of the
results of operations to be expected for the full year.
(d) On May 23, 1996, the Board of Directors declared a dividend of $0.05 per
share of common stock to shareholders of record as of the close of business
on June 3, 1996, the effect of which resulted in total dividend payments of
$6.6 million on June 28, 1996.
(e) Certain reclassifications have been made to prior year amounts in order to
conform with the current year presentation.
4
<PAGE>
SANTA FE PACIFIC GOLD CORPORATION AND CONSOLIDATED SUBSIDIARIES
SUPPLEMENTAL INFORMATION
================================================================================
<TABLE>
<CAPTION>
Three Months Nine Months
Ended September 30, Ended September 30,
---------------------- -------------------
1996 1995 1996 1995
---------------------- -------------------
<S> <C> <C> <C> <C>
TWIN CREEKS MINE
Gold production (ounces):
Mill 43,984 43,630 126,958 133,022
Heap leach 69,393 51,827 182,013 190,219
- -------------------------------------------------------------------------------------------------
Total gold production 113,377 95,457 308,971 323,241
=================================================================================================
Total tons mined (millions) 31.4 35.4 100.1 94.7
- -------------------------------------------------------------------------------------------------
Mill tons processed (thousands) 581 591 1,709 1,827
Average mill grade (ounce/ton) 0.092 0.084 0.088 0.082
Mill recovery 82.5% 88.2% 84.1% 88.8%
- -------------------------------------------------------------------------------------------------
Heap leach tons processed (thousands) 5,209 5,232 15,331 11,760
Average heap leach grade (ounce/ton) 0.022 0.018 0.022 0.020
- -------------------------------------------------------------------------------------------------
Cash costs of production per ounce (1)(2) $ 198 $ 199 $ 197 $ 174
Noncash costs of production per ounce (2) 71 77 73 74
- -------------------------------------------------------------------------------------------------
Total costs of production per ounce $ 269 $ 276 $ 270 $ 248
=================================================================================================
LONE TREE MINE
Gold production (ounces):
Mill 36,185 36,851 102,306 109,059
Heap leach 10,348 21,842 39,330 65,636
- -------------------------------------------------------------------------------------------------
Total gold production 46,533 58,693 141,636 174,695
=================================================================================================
Total tons mined (millions) 11.8 10.0 35.5 29.8
- -------------------------------------------------------------------------------------------------
Mill tons processed (thousands) 272 257 789 764
Average mill grade (ounce/ton) 0.148 0.161 0.144 0.158
Mill recovery 90.1% 88.6% 90.1% 90.5%
- -------------------------------------------------------------------------------------------------
Heap leach tons processed (thousands) 1,092 418 3,559 2,259
Average heap leach grade (ounce/ton) 0.027 0.045 0.024 0.040
- -------------------------------------------------------------------------------------------------
Cash costs of production per ounce (1)(2) $ 265 $ 210 $ 256 $ 209
Noncash costs of production per ounce (2) 71 76 70 73
- -------------------------------------------------------------------------------------------------
Total costs of production per ounce $ 336 $ 286 $ 326 $ 282
=================================================================================================
MESQUITE MINE
Gold production (ounces) 44,798 44,364 143,845 133,869
=================================================================================================
Total tons mined (millions) 11.0 9.0 30.4 27.6
- -------------------------------------------------------------------------------------------------
Heap leach tons processed (thousands) 3,833 3,674 11,708 10,449
Average heap leach grade (ounce/ton) 0.020 0.021 0.024 0.021
- -------------------------------------------------------------------------------------------------
Cash costs of production per ounce (1)(2) $ 244 $ 209 $ 245 $ 210
Noncash costs of production per ounce (2) 115 111 117 110
- -------------------------------------------------------------------------------------------------
Total costs of production per ounce $ 359 $ 320 $ 362 $ 320
=================================================================================================
TOTAL
Ounces of gold produced 204,708 198,514 594,452 631,805
Ounces of gold sold 184,495 210,950 579,695 630,700
Average realized price per ounce $ 413 $ 408 $ 411 $ 404
Average costs of production per ounce:
Cash costs of production per ounce (1)(2) $ 223 $ 204 $ 223 $ 191
Noncash costs of production per ounce (2) 81 85 83 82
- -------------------------------------------------------------------------------------------------
Total costs of production per ounce $ 304 $ 289 $ 306 $ 273
=================================================================================================
</TABLE>
(1) Cash costs of production include cash costs of processing, general and
administrative expenses at the mine site (including overhead, taxes other
than income, royalties and credits for silver by-products) and the
applicable portion of deferred mining cash costs that benefit current
production.
(2) Certain reclassifications have been made to prior year amounts for cash and
noncash costs of production per ounce in order to conform with the current
year presentation.
5
<PAGE>
SANTA FE PACIFIC GOLD CORPORATION AND CONSOLIDATED SUBSIDIARIES
STANDARDIZED UNIT PRODUCTION COST INFORMATION (1)
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------
Three Months Nine Months
Ended September 30, Ended September 30,
------------------- -------------------
1996 1995 1996 1995
------------------------------------------
<S> <C> <C> <C> <C>
TWIN CREEKS MINE
Cash costs of production per ounce components:
Direct mining and processing costs $ 316 $ 356 $ 343 $ 283
Deferred mining adjustment (2) (124) (163) (153) (114)
Other 1 - - (1)
- -------------------------------------------------------------------------------------------
Cash operating costs 193 193 190 168
Production taxes 5 6 7 6
- -------------------------------------------------------------------------------------------
Cash costs of production per ounce 198 199 197 174
Depreciation, depletion and amortization 68 76 70 73
Reclamation & mine closure 3 1 3 1
- -------------------------------------------------------------------------------------------
Total costs of production per ounce $ 269 $ 276 $ 270 $ 248
- -------------------------------------------------------------------------------------------
LONE TREE MINE
Cash costs of production per ounce components:
Direct mining and processing costs $ 401 $ 221 $ 363 $ 222
Deferred mining adjustment (2) (135) (19) (110) (17)
Other 2 1 2 1
- -------------------------------------------------------------------------------------------
Cash operating costs 268 203 255 206
Production taxes (3) 7 1 3
- -------------------------------------------------------------------------------------------
Cash costs of production per ounce 265 210 256 209
Depreciation, depletion and amortization 69 74 69 72
Reclamation & mine closure 2 2 1 1
- -------------------------------------------------------------------------------------------
Total costs of production per ounce $ 336 $ 286 $ 326 $ 282
- -------------------------------------------------------------------------------------------
MESQUITE MINE
Cash costs of production per ounce components:
Direct mining and processing costs $ 245 $ 239 $ 228 $ 243
Deferred mining adjustment (2) (6) (38) 12 (40)
Other - 1 - (1)
- -------------------------------------------------------------------------------------------
Cash operating costs 239 202 240 202
Production taxes 5 7 5 8
- -------------------------------------------------------------------------------------------
Cash costs of production per ounce 244 209 245 210
Depreciation, depletion and amortization 112 100 113 99
Reclamation & mine closure 3 11 4 11
- -------------------------------------------------------------------------------------------
Total costs of production per ounce $ 359 $ 320 $ 362 $ 320
- -------------------------------------------------------------------------------------------
TOTAL
Cash costs of production per ounce components:
Direct mining and processing costs $ 320 $ 295 $ 320 $ 258
Deferred mining adjustment (2) (101) (97) (103) (72)
Other 1 - 1 -
- -------------------------------------------------------------------------------------------
Cash operating costs 220 198 218 186
Production taxes 3 6 5 5
- -------------------------------------------------------------------------------------------
Cash costs of production per ounce 223 204 223 191
Depreciation, depletion and amortization 78 81 80 78
Reclamation & mine closure 3 4 3 4
- -------------------------------------------------------------------------------------------
Total costs of production per ounce $ 304 $ 289 $ 306 $ 273
- -------------------------------------------------------------------------------------------
</TABLE>
(1) Represents per ounce production cost information in the format developed by
The Gold Institute. The total costs of production per ounce differs from
operating expenses and depreciation, depletion and amortization on the
Consolidated Statement Of Operations due to differences between ounces sold
and ounces produced during the respective periods.
(2) Current mining costs which benefit future production.
6
<PAGE>
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations
The following discussion should be read in conjunction with the Company's
Consolidated Financial Statements and Notes thereto included elsewhere herein.
Certain statements in this Report constitute "forward-looking statements"
within the meaning of the Private Securities Litigation Reform Act of 1995. Such
forward-looking statements involve known and unknown risks, uncertainties and
other factors which may cause the actual results, performance or achievements of
the Company to be materially different from any future results, performance or
achievements expressed or implied by such forward-looking statements. Such
factors include, among other things, uncertainty as to the Company's future
profitability; gold price volatility; mining and processing costs; ore grade and
recovery rates; exploration results; competition in the Company's line of
business; the Company's ability to successfully operate its mining projects and
the risks associated with such projects, including, without limitation,
uncertainty as to regulatory and permitting matters; the continued completion of
project construction on schedule and within estimated costs, costs and
availability of necessary supplies, equipment and materials; the functioning of
facilities; the performance of personnel; and factors beyond the control of the
Company.
Recent Developments and Outlook
Expansion and Development Projects
Twin Creeks Mine. In late 1994, the Company commenced implementation of a
project to expand the operations at the Twin Creeks Mine to include mining and
processing of refractory sulfide ores ("Twin Creeks Sulfide Project"). The cost
of the Twin Creeks Sulfide Project is estimated at approximately $250 million
which will be spent over a four-year period, and as of September 30, 1996,
$167.1 million had been spent. Plans include a multi-phase project with two
autoclaves. Delivery of the first 4,000 ton-per-day autoclave was made in May
1996. Phase I (Sage Mill) is on schedule and is approximately 90% complete. The
carbon-in-leach circuit was commissioned in September 1996 and the oxide circuit
of the new mill is scheduled to start-up in the fourth quarter of 1996. Sulfide
production from the Phase I autoclave circuit is expected in early 1997. Phase
II start-up of the second 4,000 ton-per-day autoclave is expected in the first
quarter of 1998, a year ahead of the original project schedule. Approval of the
required plan of operations and completion of the related Environmental Impact
Statement ("EIS") is anticipated in early 1997.
Lone Tree Mine. During 1995, the Company began engineering and design work
on a flotation mill for the processing of lower-grade refractory ores at the
Lone Tree Mine ("Lone Tree Flotation Project"). The gold recovery rates for such
ores using heap-leaching techniques were estimated at approximately 25%. The
Company has developed a proprietary flotation technique which is expected to
improve recovery rates of the lower-grade refractory ores to 80%-90%. Project
engineering for the Lone Tree Flotation project was completed in September 1995.
Construction of the flotation plant, which began in the first quarter of 1996,
is approximately 43% complete. Oxide surge tanks were commissioned in September
1996 resulting in additional processing capacity in the existing Lone Tree
process plant and steel erection for both the flotation and grinding buildings
was near completion at the end of the third quarter of 1996. The mill is
expected to begin production by the second quarter of 1997, and is expected to
produce approximately 50,000 ounces of gold in 1997 and approximately 85,000 to
90,000 ounces of gold per year thereafter until 2009.
7
<PAGE>
Trenton Canyon Project. In May 1995, the Company commenced development of
the Trenton Canyon Project, which has proven and probable reserves of 590,000
contained ounces of gold. Construction commenced in the fourth quarter of 1995.
Loading of ore onto the Trenton Canyon leach pads commenced in October 1996. The
process plant is expected to be commissioned in November 1996 and the first gold
production is expected in December 1996.
Mule Canyon Project. In July 1995, the Company announced its decision to
proceed with construction of the Mule Canyon Project. In November 1995, the
Company announced a reconfiguration of processing options which significantly
reduced the anticipated capital expenditures for the project. The Mule Canyon
Project has proven and probable reserves of 1.0 million contained ounces of
gold.
Approximately 84% of the reserves at the Mule Canyon Project are located on
federal land administered by the United States Bureau of Land Management
("BLM"). BLM approval was required for construction and mining activities on
that portion of the Mule Canyon Project and was contingent upon completion of an
EIS and issuance of a Record of Decision by the BLM. Approval of the Plan of
Operations from the BLM and completion of the EIS occurred in October 1996.
Mining activity began immediately and shipment of high grade sulfide ore from
Mule Canyon to the Lone Tree Mine for processing is expected to commence in late
1996. Additional shipments of ore are expected to go to the Lone Tree Mine or
the Twin Creeks Mine in the first quarter of 1997 when the autoclave circuit is
expected to start-up.
Rosebud Project. During the third quarter of 1996, Santa Fe Pacific Gold
and Hecla Mining Company ("Hecla") signed a definitive agreement to form a 50/50
joint venture to develop the Rosebud Project, 50 miles west of Winnemucca,
Nevada. The project is an underground mineable, high-grade oxide gold deposit
for which Hecla has reported reserves of 540,000 ounces of gold (1.2 million
tons at 0.45 ounce of gold per ton of ore) and 2.75 ounces of silver per ton.
Construction at Rosebud has commenced. The project is expected to produce
approximately 100,000 ounces of gold annually, with initial production starting
in mid 1997, with cash costs of less than $200 per ounce. The Company's share of
annual production is expected to be approximately 50,000 ounces of gold. Capital
for the project is expected to be approximately $20 to $25 million. Under the
terms of the agreement, the Company will fund project development costs of $12.5
million as well as spend an additional $3.0 million to modify its own processing
facilities. The Company will also contribute an exploration property near
Rosebud and will fund the first $1.0 million in exploration expenditures and 67%
of future exploration expenditures.
Exploration and Development
Twin Creeks Mine. Efforts to expand gold resources at the Twin Creeks Mine
during the year have focused on three areas: the Galena Vein, Zone 40 and
Section 30 South Mega Pit.
The Galena Vein underground target is relatively high-grade (0.25-0.40 opt)
mineralization within a NE/SW trending fault zone in the greenstones immediately
beneath the currently producing Vista deposit.
8
<PAGE>
The Zone 40 target is a fold-controlled zone of high-grade (approximately
0.5 opt) refractory mineralization at the bottom of the Mega Pit.
Work in the Section 30 South Mega Pit area has indicated that mill-grade
oxide mineralization has been found in both limbs of a large fold.
Mineralization, as currently planned, has been extended over 1,500 feet south of
the limit of the Mega Pit and is still open to the south.
Trenton Canyon. Drilling during 1996 at Trenton Canyon has focused on
filling in certain areas, extending mineralization in others and exploring new
targets in the area. A new zone of shallow oxide mineralization has been
encountered in the Valmy deposit area. A second target, referred to as the
Hollywood zone, is on a ridge northeast of the Trenton Canyon deposit where
seven drill holes have intercepted a high-angle zone of near-surface oxide
mineralization with grades between 0.03 and 0.13 opt in intercepts 40 to 105
feet thick. Significant additional reserves at Trenton Canyon are anticipated at
year-end and drilling will continue aggressively in 1997.
Central Asia. In its 7.5 million-acre license area in northeastern
Kazakstan, the Company continues to explore actively with encouraging results in
several separate project areas. During 1996, almost 20,000 feet of core drilling
and over 60,000 feet of reverse circulation drilling have occurred on many of
these projects including Suzdal 10, Jaima, Maily and Mirage. The exploration
strategy in Kazakstan is to focus on shallow oxide deposits that are amenable to
heap leach processing and that would require relatively low capital investment.
The Company's Solton Sary project is a 50/50 joint venture with Kyrgyzaltyn
in the Kyrgyz Republic. Mineralization at Solton Sary is associated with a large
shear zone. The primary target exhibits areas of disseminated mineralization of
approximately 0.04 opt intersected by higher-grade quartz veins along five miles
of strike length.
Golden Eagle. Drilling in late 1995 and early 1996 at the Golden Eagle
Project in Washington confirmed and expanded the volume of mineralization
present at the site. The Company owns approximately 75% of this property and
Hecla Mining Company owns the remaining 25%. The Company also continues to hold
an option to acquire a 75% interest in Hecla's remaining properties in the
Republic district. Economic and technical analyses indicate that either gold
price improvement or reduction in operating or capital costs is required to
warrant a positive development decision.
Gurupi, Brazil. The Company entered into a joint venture with TVX Gold Inc
("TVX") in 1995 which allows the Company to earn a 50% interest in the Gurupi
Project, in Maranhao, Brazil, by spending $3.8 million on land and exploration.
The Company has satisfied the exploration obligation, and TVX is now funding 50%
of the exploration expenditures on this project. The joint venture acquired
additional rights to explore for and develop gold deposits on approximately
340,000 acres of land controlled by RTZ Mineracao Limitada and Odebrecht
Mineracao Limitada. This land is adjacent to and on trend with acreage
controlled by the joint venture. Exploration work to date has been focused on
the Mandiocal, Ignacio and Montes Aureos target areas where new parallel
vertical zones of mineralization, grading approximately 0.03 opt, have been
intersected.
9
<PAGE>
Results of Operations
Third Quarter of 1996 Compared to Third Quarter of 1995
Net income was $3.5 million ($0.03 per share) for the third quarter of 1996
compared to $8.7 million ($0.07 per share) for the third quarter of 1995.
Operating income for the third quarter of 1996 was $8.2 million, a decrease of
$7.3 million from the $15.5 million of operating income in the third quarter of
1995. The decrease was primarily attributable to a decline in operating income
from gold operations of $8.6 million, a decrease in royalty and other revenue of
$0.7 million and an increase in general and administrative expenditures of $0.7
million, offset by a decrease in exploration and development expenditures of
$2.7 million.
Operating revenue for the third quarter of 1996 was $77.4 million, a
decrease of $10.6 million from the $88.0 million of operating revenue in the
third quarter of 1995. Lower sales volumes and lower royalty and other revenue
caused $10.8 million and $0.7 million of the decrease, respectively, which was
partially offset by a $0.9 million increase in revenue resulting from an
increase in the average realized gold price per ounce. Gold sales totaled
184,495 ounces during the third quarter of 1996, 26,455 ounces less than the
210,950 ounces sold during the third quarter of 1995. The decrease was primarily
a result of lower production at the Lone Tree Mine and lower gold sales from the
Twin Creeks Mine where an in-process inventory build-up occurred in the new Sage
Mill carbon circuits resulting in production which was not available for sale.
Lower production at the Lone Tree Mine was primarily attributable to the delay
in receipt of the Plan of Operations for Section 14, resulting in lower average
ore grades to the heap leach and mill circuits. The Company's average realized
gold prices per ounce for the third quarter of 1996 and 1995 were $413 and $408,
respectively.
Total costs and expenses in the third quarter of 1996 decreased to $69.1
million from $72.5 million in the third quarter of 1995. Operating expenses for
the third quarter of 1996 increased from the third quarter in 1995 by $0.7
million and depreciation, depletion and amortization decreased by $2.0 million.
The increase in operating expenses was primarily attributable to the increase in
the mining ratio at the Mesquite Mine which resulted in the acceleration of the
charge-out of deferred mining costs, as well as higher expenses at the Lone Tree
Mine due to an increased use of reagents that resulted from a higher sulfide
content ore being placed on the heap leach pads. Average cash costs of
production in the third quarter of 1996 were $223 per ounce compared to $204 for
the third quarter of 1995. Average noncash costs of production (depreciation,
depletion and amortization) decreased from $85 per ounce to $81 per ounce for
the third quarter of 1995 and 1996, respectively.
Exploration and development expenses for the third quarter of 1996 totaled
$7.7 million compared with $10.4 million in the third quarter of 1995. Domestic
exploration spending decreased by $2.2 million and foreign exploration spending
decreased by $0.5 million. Foreign exploration accounted for approximately 56%
of total exploration and development spending for the third quarter of 1996
compared to 46% for the third quarter of 1995.
Other Income, Net, decreased to $0.2 million from $1.4 million in the third
quarter of 1995 primarily as a result of a decrease in interest income from
lower cash and short-term investment balances. Interest Expense, Net, decreased
to $3.5 million from $3.7 million in the third quarter of 1995, principally due
to an increase in capitalized interest in 1996 compared to the third quarter of
1995.
10
<PAGE>
The Company's effective tax rate in the third quarter of 1996 was 29%
compared to 34% in the same period in 1995. The third quarter 1995 rate was
impacted by a nine-month retroactive rate adjustment which was primarily caused
by an increase in 1995 foreign exploration activities. No such adjustment
occurred in 1996.
First Nine Months of 1996 Compared to First Nine Months of 1995
Net income was $15.6 million ($0.12 per share) for the first nine months of
1996 compared to $32.3 million ($0.25 per share) for the first nine months of
1995. Operating income for the first nine months of 1996 was $29.2 million, a
decrease of $21.6 million from the $50.9 million of operating income in the
first nine months of 1995. The decrease was primarily attributable to a decline
in operating income from gold operations of $22.3 million and an increase in
general and administrative expenditures of $0.7 million, offset by a $1.0
million decrease in exploration and development expenditures and an increase in
royalty and other revenue of $0.3 million.
Operating revenue for the first nine months of 1996 was $241.9 million, a
decrease of $16.2 million from the $258.1 million in the comparable period of
1995. Lower sales volumes caused $20.6 million of the decrease, but were
partially offset by higher royalty and other revenue of $0.3 million and a $4.1
million increase in revenue resulting from an increase in the average realized
gold price per ounce. Gold sales totaled 579,695 ounces during the first nine
months of 1996, 51,005 ounces less than the 630,700 ounces sold during the same
period in 1995. The decrease was primarily a result of lower production caused
by the mining of lower-grade ore and the resulting lower gold recoveries at the
Lone Tree Mine caused by the delay in receipt of the Plan of Operations for
Section 14, as well as the impact on production of mining higher sulfide content
ore at both the Lone Tree Mine and Twin Creeks Mine. In addition, lower sales at
the Twin Creeks Mine resulted from a combination of lower production and a
build-up of in-process inventory at the new Sage Mill carbon circuits. The
Company's average realized gold prices per ounce for the first nine months of
1996 and 1995 were $411 and $404, respectively.
Total costs and expenses in the first nine months of 1996 increased to
$212.7 million from $207.2 million in the first nine months of 1995. Operating
expenses for the first nine months of 1996 increased from the first nine months
in 1995 by $8.7 million and depreciation, depletion and amortization decreased
by $2.9 million. The increase in operating expenses was primarily attributable
to the increase in the mining ratio at the Mesquite Mine which resulted in the
acceleration of the charge-out of deferred mining costs, as well as higher
expenses at the Lone Tree Mine due to an increased use of reagents that resulted
from a higher sulfide content ore being placed on the heap leach pads. Average
cash costs of production in the first nine months of 1996 were $223 per ounce
compared to $191 for the same period in 1995. Average noncash costs of
production (depreciation, depletion and amortization) increased from $82 per
ounce to $83 per ounce for the first nine months of 1995 and 1996, respectively.
Exploration and development expenses for the first nine months of 1996
totaled $23.2 million compared with $24.2 million in the same period in 1995.
Domestic exploration spending decreased by $1.9 million, foreign exploration
spending increased by $0.4 million, and development spending increased by $0.5
million. Foreign exploration accounted for approximately 54% of total
exploration and development spending for the first nine months of 1996 and
approximately 50% for the same period in 1995.
11
<PAGE>
Other Income, Net, was consistent with that of the same period in 1995.
Interest Expense, Net, increased to $9.6 million from $7.1 million in the same
period of 1995, principally due to the interest associated with the $200.0
million of 8.375% senior debentures issued in July 1995, offset somewhat by an
increase in capitalized interest in 1996 compared to the same period of 1995.
The Company's effective tax rate in the first nine months of 1996 was 29%,
which was comparable with the effective tax rate in the same period in 1995.
Financial Condition
Liquidity and Capital Resources
For the nine months ended September 30, 1996, the Company's cash flow
provided by operating activities was $69.6 million. Cash flow was also provided
through the sale of property and from borrowing proceeds of $1.2 million and
$195.0 million, respectively. These cash flows were used for capital
expenditures of $191.3 million, deferred mining costs of $64.7 million, cash
dividends of $6.6 million, and other miscellaneous items of $0.3 million.
Existing cash balances increased by $2.9 million during the nine months ended
September 30, 1996.
Capital expenditures for the nine months ended September 30, 1996, included
$21.2 million, $9.9 million and $3.1 million for the ongoing capital
requirements and development drilling at the Twin Creeks Mine, the Lone Tree
Mine and the Mesquite Mine, respectively; $105.4 million for the Twin Creeks
Sulfide Project; $13.3 million for the Lone Tree Flotation Project; $11.4
million for other corporate capital requirements, primarily related to
management information systems; and $8.0 million and $10.8 million for the
development of the Trenton Canyon Project and the Mule Canyon Project,
respectively. Ongoing capital requirements at existing mines included facility
expansions as well as mining and support equipment additions and replacements.
Interest capitalized during the first nine months of 1996 was $8.2 million and
related to capital facilities being constructed at the Twin Creeks Mine and the
Lone Tree Mine as well as the Trenton Canyon Project and the Mule Canyon
Project.
At September 30, 1996, the Company had forward contracts on a spot deferred
basis totaling 1,901,524 ounces of gold at a weighted average price of $414 per
ounce. The Company also had outstanding written call options on 175,000 ounces
for 1996 and 400,000 ounces for 1997 at weighted average prices of $428 and $464
per ounce, respectively, as well as outstanding purchased put options on 225,000
ounces for 1996 and 1,200,000 ounces for 1997 at a weighted average price of
$375 per ounce. The call options for 1996 expire at rates of between 55,000 and
60,000 ounces per month, and the put options for 1996 expire at a rate of 75,000
ounces per month. The call options and put options for 1997 expire at rates of
approximately 33,333 and 100,000 ounces per month, respectively.
As a result of increased indebtedness related to additional borrowings
under the Credit Facility, the Company's debt-to-total-capitalization ratio was
41.2% at September 30, 1996, compared to 26.5% at December 31, 1995. The
Company's current ratio (the ratio of current assets to current liabilities) was
2.3:1 at September 30, 1996, which is comparable to that at December 31, 1995.
Book value per share increased from $4.22 at December 31, 1995, to $4.29 at
September 30, 1996.
12
<PAGE>
PART II - OTHER INFORMATION
Item 1. Legal Proceedings
Mining Claim Patent Litigation
On July 19, 1994, the Company filed two separate actions in the United
States District Court for the District of Nevada against the United States
Department of the Interior ("Interior") and the Secretary of the Interior
("Secretary") in connection with the issuance to the Company of first-half final
certificates and patents under the General Mining Law of 1872 ("Mining Law") for
unpatented mining claims held by the Company.
The two suits, Santa Fe Pacific Gold Corporation and Hospah Coal Company v.
Bruce Babbitt, the United States Department of the Interior and the United
States Bureau of Land Management, Case No. CV-N-94-476-HDM, and Santa Fe Pacific
Gold Corporation v. Bruce Babbitt, the United States Department of the Interior,
and the United States Bureau of Land Management, Case No. CV-N-94-477-ECR, seek
the issuance of first-half final certificates for patent applications for which
Interior and the Secretary had not issued first-half final certificates and the
completion of the patenting process on unpatented mining claims for which a
first-half final certificate had been issued involving unpatented mining claims
held by the Company at the Twin Creeks Mine, the Lone Tree Mine, and the Mule
Canyon Project. Even though the Mining Law confers upon the Company the full
right to possess and mine gold and other locatable minerals from an unpatented
mining claim, the Mining Law also entitles a mining claimant to purchase
ownership of the fee title to the unpatented mining claim from the United States
government, and it is the right to acquire fee title by patent that the Company
seeks to enforce in these lawsuits.
The actions are equitable in nature and necessary, in the Company's
opinion, to cause the issuance of first-half final certificates and patents for
unpatented mining claims in a period of time consistent with historical practice
under the Mining Law. The Company believes the Secretary and Interior have
departed from historical practice in delaying the processing of the Company's
patent applications.
The Secretary and Interior filed answers in these actions generally denying
that the Company is entitled to the relief sought. The Secretary and Interior
have not raised substantive defenses in any of the actions.
On a motion for summary judgment by the Company in one of the Nevada
actions, the judge denied the motion without prejudice and allowed the company
to proceed with discovery. However, the judge indicated that he would reconsider
the Company's motion for summary judgment if first-half final certificates were
not issued by April 1, 1995. Subsequently, the first-half final certificates
involved in the case were issued. Nevertheless, Interior and the Secretary have
moved to dismiss the Company's action on the basis of the holding of another
judge in the United States District Court for the District of Nevada. On March
18, 1996, the District Court judge denied the Secretary's and Interior's motion.
The Company has been granted permission to file another motion for summary
judgment in its favor and that motion is still pending.
The second action has been transferred to the judge hearing, but has not
been consolidated with, the action described above. The Secretary and Interior
have resisted disclosing information and allowing
13
<PAGE>
depositions of certain government witnesses. The Company has made two motions to
compel disclosure of this information, both of which have been granted by the
magistrate judge. The Secretary and Interior appealed those decisions to the
District Court judge who denied the appeal. Discovery can now be completed and,
thereafter, a trial date will be set.
On May 13, 1996, the Secretary issued patents to the Company for the mining
claims covered by two of the thirteen patent applications at the Twin Creeks
Mine which were the subjects of the two lawsuits and thereby conveyed title to
approximately 373 acres. On June 3, 1996, the Secretary issued patents to the
Company for the mining claims covered by another of the thirteen patent
applications at the Twin Creeks Mine which were the subjects of the two lawsuits
and thereby conveyed title to approximately 331 acres. The remaining ten patent
applications at the Twin Creeks Mine encompass approximately 356 acres of
unpatented lode mining claims and approximately 1,193 acres of unpatented mill
site claims.
Other Legal Proceedings
The Company is not a party to any other litigation or administrative
proceeding that the Company believes would have a material adverse effect on its
results of operations or financial condition and is not aware of any threat of
such litigation or proceeding.
14
<PAGE>
Item 6. Exhibits and Reports on Form 8-K
(a) See attached Exhibit Index on page E-1.
(b) No reports on Form 8-K were filed during the quarter for which this
report is filed.
15
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities and Exchange Act of 1934,
the Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
SANTA FE PACIFIC GOLD CORPORATION
(Registrant)
/s/ David A. Smith
-------------------------------------------
David A. Smith
Vice President and Chief Financial Officer
(principal financial officer)
/s/ Linda K. Wheeler
-------------------------------------------
Linda K. Wheeler
Controller
(principal accounting officer)
Albuquerque, New Mexico
November 13, 1996
16
<PAGE>
<TABLE>
<CAPTION>
EXHIBITS INDEX
<C> <S>
27.1 Financial Data Schedule for the nine-month period ended September 30,
1996.
99.1 Press release dated August 26, 1996 by Santa Fe Pacific Gold Corporation
announcing that Kendall W. Sageser, Senior Vice President, Exploration,
leaves the Company.
99.2 Press release dated October 16, 1996 by Santa Fe Pacific Gold Corporation
announcing the Lone Tree Mine receipt of Bureau of Land Management
approval of the Plan of Operations for mine expansion and immediate
extension of mining in Section 14.
99.3 Press release dated October 17, 1996 by Santa Fe Pacific Gold Corporation
announcing Ronald L. Parratt named Vice President, Exploration.
99.4 Press release dated October 21, 1996 by Santa Fe Pacific Gold Corporation
announcing that the Lone Tree Complex began placing ore onto the heap
leach pads at Trenton Canyon.
99.5 Press release dated October 30, 1996 by Santa Fe Pacific Gold Corporation
announcing the Mule Canyon Mine receipt of approval from the federal
Bureau of Land Management to begin mining operations.
</TABLE>
E-1
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> SEP-30-1996
<CASH> 38,790
<SECURITIES> 0
<RECEIVABLES> 860
<ALLOWANCES> 0
<INVENTORY> 42,716
<CURRENT-ASSETS> 188,194
<PP&E> 1,184,738
<DEPRECIATION> 298,430
<TOTAL-ASSETS> 1,228,593
<CURRENT-LIABILITIES> 83,077
<BONDS> 394,866
<COMMON> 1,315
0
0
<OTHER-SE> 563,160
<TOTAL-LIABILITY-AND-EQUITY> 1,228,593
<SALES> 238,253
<TOTAL-REVENUES> 241,925
<CGS> 176,978
<TOTAL-COSTS> 212,671
<OTHER-EXPENSES> 35,693
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 9,628
<INCOME-PRETAX> 21,937
<INCOME-TAX> 6,363
<INCOME-CONTINUING> 15,574
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 15,574
<EPS-PRIMARY> 0.12
<EPS-DILUTED> 0
</TABLE>
<PAGE>
EXHIBIT 99.1
FOR IMMEDIATE RELEASE: August 26, 1996
CONTACT: Gina Wilson
(505) 880-5361
SAGESER LEAVES SANTA FE PACIFIC GOLD
ALBUQUERQUE, NEW MEXICO - SANTA FE PACIFIC GOLD CORPORATION (NYSE:GLD) announced
that Kendall W. Sageser, Senior Vice President, Exploration, is leaving the
Company, effective immediately, to pursue other opportunities. Ronald L.
Parratt, Director of Exploration - The Americas, will be assuming responsibility
for Santa Fe Pacific Gold's worldwide exploration activities until further
notice.
Santa Fe Pacific Gold is one of the largest gold mining companies in North
America with mines in Nevada and California and exploration offices and projects
throughout the world. The Company's shares are traded on the New York Stock
Exchange under the symbol GLD.
<PAGE>
EXHIBIT 99.2
FOR IMMEDIATE RELEASE: October 16, 1996
CONTACT: Wendy Yang
(505) 880-5321
THE LONE TREE MINE RECEIVES APPROVAL FOR MINE PLAN EXPANSION
AND BEGINS MINING IN SECTION 14
ALBUQUERQUE, NEW MEXICO - SANTA FE PACIFIC GOLD CORPORATION (NYSE:GLD) announced
that it has received Bureau of Land Management (BLM) approval of the Plan of
Operations for the expansion of the Lone Tree Mine, southeast of Winnemucca,
Nevada, allowing the immediate extension of the pit into Section 14. Mining in
Section 14 is expected to contribute an incremental 10,000 ounces of gold
production in this quarter that would not have been available without the
approval. Including the new production from Section 14, Lone Tree is expected to
produce 185,000 to 195,000 ounces of gold at a cash cost of $255 to $265 per
ounce in 1996.
Patrick M. James, Chairman, President and CEO of Santa Fe Pacific Gold, said,
"The receipt of approval has been long awaited for the mining of oxide ores from
Section 14. The pit expansion increases mining efficiency, allowing Lone Tree
flexibility with access to all areas of the mine. This is one more important
step in our aggressive growth of operations this year to produce one million
ounces of gold in 1997 and one and a quarter million ounces in 1998."
A Record of Decision and Plan of Operations approval were received from the BLM
on October 15, 1996, following the public availability of the final
Environmental Impact Statement for Lone Tree. The approved mine plan extends
mine life to at least 2006 and includes the expansion of open pit mining to
extend the current pit into Sections 12 and 14. Under the plan, ore from the pit
expansion will be processed using the existing mill and heap leach pads.
The Private Securities Litigation Reform Act of 1995: This news release contains
forward-looking information. Any such information involves a degree of risk and
uncertainty, including, but not limited to, gold prices, ore grade, mining and
processing conditions and costs, and regulatory and permitting matters.
Santa Fe Pacific Gold is one of the largest gold mining companies in North
America with mines in Nevada and California and exploration offices and projects
throughout the world. The Company's shares are traded on the New York Stock
Exchange under the symbol GLD.
<PAGE>
EXHIBIT 99.3
FOR IMMEDIATE RELEASE: October 17, 1996
CONTACTS: Wendy Yang, (505) 880-5321
Stephanie Burrows, (505) 880-5337
RONALD L. PARRATT NAMED VP, EXPLORATION
ALBUQUERQUE, NEW MEXICO - SANTA FE PACIFIC GOLD CORPORATION (NYSE:GLD) announced
the promotion of Ronald L. Parratt to the position of Vice President,
Exploration, effective October 15, 1996. Parratt, 48, is responsible for all
aspects of the Company's worldwide exploration programs.
Parratt's previous position was Director of Exploration, The Americas. Parratt
joined a predecessor company as Senior Geologist in 1978 and, as Manager,
Minerals, he opened the Reno exploration office in 1980. In 1984, he became the
Manager, Mineral Exploration - Northwest Region. By 1991, he was promoted to
Director, U.S. Exploration. In 1994, he was named Director, North America
Exploration, responsible for directing the Company's gold exploration program in
the United States, Canada and Mexico.
Nevada Governor Bob Miller appointed Parratt to the Mineral Resources Commission
under the state Department of Business and Industry. He also serves on the
Dean's Advisory Board of the University of Nevada's Mackay School of Mines.
Parratt holds a bachelor's degree in geochemistry and a master's degree in
economic geology, both from Purdue University.
Santa Fe Pacific Gold is one of the largest gold mining companies in North
America with mines in Nevada and California and exploration offices and projects
throughout the world. The Company's shares are traded on the New York Stock
Exchange under the symbol GLD.
<PAGE>
EXHIBIT 99.4
FOR IMMEDIATE RELEASE: October 21, 1996
CONTACT: Wendy Yang
(505) 880-5321
TRENTON CANYON BEGINS LOADING HEAP LEACH ORE
ALBUQUERQUE, NEW MEXICO - SANTA FE PACIFIC GOLD CORPORATION (NYSE:GLD) announced
that the Lone Tree Complex began placing ore onto the heap leach pads at Trenton
Canyon on October 15, 1996. Trenton Canyon currently is mining material at a
rate of 30,000 tons per day at the North Peak deposit.
The leaching of the ore and completion of the carbon column recovery circuit is
scheduled for November 1996. The first gold production is expected in December
1996.
Trenton Canyon, located 11 miles south of the Lone Tree Mine near Valmy, Nevada,
is a conventional run-of-mine heap leach satellite operation of the Lone Tree
Complex. In addition to the North Peak deposit, two other deposits on private
and federal lands are proposed for open-pit development. Production from these
two other deposits requires approval of the Plan of Operations submitted to the
federal Bureau of Land Management in March 1996 and approval is expected in mid-
1998.
Patrick M. James, Chairman, President and Chief Executive Officer of Santa Fe
Pacific Gold, said, "Gold production at Trenton Canyon will begin slightly ahead
of the previously announced start-up in the first quarter 1997. The pieces are
falling into place for us to achieve our production growth targets in 1997 and
1998. Trenton Canyon is one piece of the total Lone Tree Complex, which includes
the Lone Tree Mine, Lone Tree Flotation Project and Mule Canyon."
Exploration at Trenton Canyon this year has consisted of drilling 140 holes to
better define certain areas of mineralization, extend mineralization and explore
new targets. A new zone of shallow oxide mineralization is being encountered in
the Valmy area. A second target, referred to as the Hollywood Zone, is also
under investigation and seven drill holes have intercepted a high-angle zone of
near surface oxide mineralization with grades between 0.03 and 0.13 ounce per
ton in intercepts 40 to 105 feet thick.
The Private Securities Litigation Reform Act of 1995: This news release contains
forward-looking information, which involves a degree of risk and uncertainty due
to various factors affecting the Company's business, including, but not limited
to, gold price volatility, ore grade and recovery rates, exploration results,
mining and processing conditions and costs, compliance with regulatory and
permitting requirements and the completion of project construction on schedule.
Santa Fe Pacific Gold is one of the largest gold mining companies in North
America with mines in Nevada and California and exploration offices and projects
throughout the world. The Company's shares are traded on the New York Stock
Exchange under the symbol GLD.
<PAGE>
EXHIBIT 99.5
FOR IMMEDIATE RELEASE: October 30, 1996
CONTACTS: Wendy Yang Stephanie Burrows
(505) 880-5321 (505) 880-5337
THE MULE CANYON MINE RECEIVES APPROVAL TO
BEGIN MINING OPERATIONS
ALBUQUERQUE, NEW MEXICO - SANTA FE PACIFIC GOLD CORPORATION (NYSE:GLD) announced
the commencement of mining operations on schedule at the new Mule Canyon
project, 14 miles east of Battle Mountain, Nevada, on October 29, 1996. Mining
activity began immediately with the receipt of federal Bureau of Land Management
(BLM) approval of the Plan of Operations for Mule Canyon. This approval follows
the public availability of the final Environmental Impact Statement.
Shipment of high grade sulfide ore from Mule Canyon to the Lone Tree Mine,
located approximately 50 miles away, is expected to begin by mid November 1996.
This ore will be combined with Lone Tree ore for processing through Lone Tree's
mill and autoclave, with the first gold production expected in December 1996.
Additional shipments of ore are expected to go to the Twin Creeks Mine beginning
in the first quarter of 1997 when the autoclave at the mine's new sulfide
processing mill is expected to start-up. By utilizing the Company's Nevada
infrastructure, the Company will maximize production and achieve optimal
processing rates.
Patrick M. James, Chairman, President and CEO said, "The start-up of Mule Canyon
represents another integral milestone in our achieving a dramatic increase in
production to over 1 million ounces in 1997 and 1.25 million ounces in 1998. It
also helps optimize and enhance the flexibility of the assets SFPG has in place
in Northern Nevada. We also expect to have Plan of Operations approval for the
Twin Creeks expansion by year-end 1996. We are in an excellent position to begin
producing at the million-ounce rate early in 1997."
Mule Canyon is part of the Lone Tree Complex, which includes the existing Lone
Tree Mine, Trenton Canyon and the new Lone Tree Flotation Project currently
under construction. This represents the second start-up of a new development
project this year; ore was placed on the heap leach pads at Trenton Canyon on
October 15, 1996. In addition, Santa Fe Pacific Gold recently received approval
of the Plan of Operations by the BLM for the expansion of Lone Tree Mine.
The Private Securities Litigation Reform Act of 1995. This press release
contains forward-looking information which involves a degree of risk and
uncertainty due to various factors affecting the Company's business, including,
but not limited to, gold price volatility, mining and processing costs and
conditions, ore grade and recovery rates, exploration results, regulatory and
permitting matters and the continued completion of project construction on
schedule.
-more-
<PAGE>
Santa Fe Pacific Gold is one of the largest gold mining companies in North
America with mines in Nevada and California and exploration offices and projects
throughout the world. The Company's shares are traded on the New York Stock
Exchange under the symbol GLD.
# # #
