SANTA FE PACIFIC GOLD CORP, 10-K405, 1997-03-19

SANTA FE PACIFIC GOLD CORP
10-K405, 1997-03-19
GOLD AND SILVER ORES

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SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

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FORM 10-K

/X/ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE
ACT OF 1934 [FEE REQUIRED]

FOR THE FISCAL YEAR ENDED DECEMBER 31, 1996

/ / TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES
EXCHANGE
ACT OF 1934 [NO FEE REQUIRED]

For the transition period from to

COMMISSION FILE NUMBER 1-13096

SANTA FE PACIFIC GOLD CORPORATION
(Exact name of registrant as specified in its charter)

<TABLE>
<S> <C>
DELAWARE 85-0307713
(State of Incorporation) (I.R.S. Employer Identification No.)

6200 UPTOWN BOULEVARD NE, SUITE 400 87110
ALBUQUERQUE, NEW MEXICO (Zip Code)
(Address of principal executive offices)
</TABLE>

Registrant's telephone number, including area code (505) 880-5300

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SECURITIES REGISTERED PURSUANT TO SECTION 12(B) OF THE ACT:

<TABLE>
<CAPTION>
TITLE OF EACH CLASS NAME OF EACH EXCHANGE ON WHICH REGISTERED
<S> <C>
Common Stock, par value $0.01 (and accompanying
Preferred Stock Purchase Rights) New York Stock Exchange
</TABLE>

SECURITIES REGISTERED PURSUANT TO SECTION 12(G) OF THE ACT: NONE

Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes _X_ No ____

Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. /X/

The aggregate market value of voting stock held by non-affiliates as of
March 17, 1997, was approximately $2,351,471,300.

Number of shares of Common Stock outstanding on March 17, 1997: 131,550,842.

Documents from which parts thereof have been incorporated by reference and
the part of the Form 10-K into which such information is incorporated:

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<S> <C>
DOCUMENT INCORPORATED BY REFERENCE INTO
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none
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TABLE OF CONTENTS

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PAGE
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<S> <C>
PART I
Items 1 and 2. Business and Properties.................................................................. 1
Item 3. Legal Proceedings............................................................................... 34
Item 4. Submission of Matters to a Vote of Security Holders............................................. 35

PART II
Item 5. Market for Registrant's Common Equity and Related Stockholder Matters........................... 36
Item 6. Selected Financial Data......................................................................... 37
Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations........... 39
Item 8. Financial Statements and Supplementary Data..................................................... 46
Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure............ 70

PART III
Item 10. Directors and Executive Officers of the Registrant............................................. 70
Item 11. Executive Compensation......................................................................... 73
Item 12. Security Ownership of Certain Beneficial Owners and Management................................. 83
Item 13. Certain Relationships and Related Transactions................................................. 84

PART IV
Item 14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K............................... 85

SIGNATURES................................................................................................ 86

EXHIBITS.................................................................................................. 87
</TABLE>
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THE PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995. This document
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, legislative,
regulatory and permitting matters and the continued completion of project
construction on schedule.

PART I

SEE "GLOSSARY OF CERTAIN MINING TERMS" ON PAGES 32-33 FOR DEFINITIONS OF
CERTAIN TERMS USED HEREIN.

ITEMS 1 AND 2. BUSINESS AND PROPERTIES

GENERAL

Santa Fe Pacific Gold Corporation ("Company") is engaged in the mining and
processing of gold ores and the exploration and development of gold properties.
It is one of the largest gold mining enterprises in North America, as measured
by reserves and gold production, with a total of 18.1 million ounces of proven
and probable gold reserves as of December 31, 1996, and total 1996 gold
production of 852,000 ounces. The Company's Twin Creeks Mine, which the Company
estimates to be the third largest primary gold mine in North America, and its
Lone Tree Complex are located in northern Nevada; its Mesquite Mine is located
in southern California. The Company also explores and evaluates precious metals
properties and prospects elsewhere in North America, South America, Central
Asia, West Africa and the Southwestern Pacific region.

Selected operating data for the years 1996, 1995 and 1994 are shown below:

<TABLE>
<CAPTION>
1996 1995 1994
--------- --------- ---------
<S> <C> <C> <C>
OPERATING DATA:
Total ounces of gold produced (000) (1)................................ 852 846 936
Total ounces of gold sold (000)........................................ 820 852 930
Reserves (contained ounces of gold at end of year) (000)............... 18,123 17,870 15,363
Average realized price per ounce....................................... $ 411 $ 406 $ 398
Average spot price per ounce(2)........................................ $ 388 $ 384 $ 384
Cash costs of production per ounce..................................... $ 215 $ 194 $ 182
Noncash costs of production per ounce.................................. 82 82 84
--------- --------- ---------
Total costs of production per ounce.................................... $ 297 $ 276 $ 266
--------- --------- ---------
--------- --------- ---------
</TABLE>

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(1) The decrease in ounces produced in 1995, compared to 1994, primarily
resulted from anticipated lower production at the Twin Creeks Mine.

(2) Represents the average of the afternoon fixing prices for gold on the London
Bullion Market ("London P. M. Fix").

HISTORY

The Company was incorporated in Delaware in 1983 and, until 1994, was a
wholly-owned subsidiary of Santa Fe Pacific Corporation ("SFP") or its
predecessor corporations. During 1994, the Company completed an initial public
offering of 14.6% of its common stock ("Offering"), and on September 30, 1994,
SFP distributed its remaining ownership in the Company to SFP shareholders.

Prior to 1984, the Company's revenue and income were primarily derived from
rents and royalties from leasing its mineral rights holdings in New Mexico and
Arizona. In late 1984, the Company began active mining operations when it opened
the Lee Ranch Mine in northwestern New Mexico and began the surface mining and
sale of coal. In 1987, the Company acquired its first aggregates quarries from
an SFP affiliate. By 1992, the Company operated six aggregates quarries in five
states in the West and Southwest.

1
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In 1987, the Company's mineral rights holdings in Nevada yielded the
Company's first production of gold and silver from the Trinity joint venture
silver mine in Pershing County, in which the Company participated with U.S.
Borax and Chemical Company for three years until mining ceased and reclamation
began. In 1987, the Company also entered into a joint venture gold mine
("Marigold Joint Venture"). In 1992, the Company conveyed its interest in the
Marigold Joint Venture in exchange for the mineral rights and reserves that now
make up the southern extension of the Lone Tree Mine and additional exploration
mineral rights.

In 1987 and 1989, the Company announced the discoveries of gold that led to
the development and construction of the Rabbit Creek Mine and the Lone Tree
Mine, respectively. Gold production commenced at the Rabbit Creek Mine in August
1990, and at the Lone Tree Mine in August 1991.

On June 25, 1993, as a result of a strategic business decision to become
solely engaged in gold mining activities, the Company completed an asset
exchange ("Exchange") with Hanson Natural Resources Company ("HNRC"), an
affiliate of Hanson plc. In the Exchange, HNRC's gold assets, which included the
Chimney Creek Mine in Nevada, the Mesquite Mine in California, two advanced
exploration projects in Nevada and Montana and other gold prospects in North
America and Chile, were exchanged for essentially all of the Company's coal and
aggregates assets. Following the Exchange, the Company consolidated the
operations of the Rabbit Creek Mine with those of the Chimney Creek Mine,
forming the Twin Creeks Mine. See Note 14 to the Consolidated Financial
Statements of the Company included elsewhere in this document for a description
of certain contingent obligations of the Company with respect to certain of the
coal properties transferred to HNRC in the Exchange.

In the interest of providing the best value opportunity to its shareholders,
the Company's Board of Directors invited Newmont and Homestake to make
presentations on March 8, 1997. After discussions with both companies, the
Company's Board of Directors determined that the merger proposal with Newmont
included a superior exchange ratio and offered a compelling fit, substantial and
improved synergies and significant long-range potential for the Company's
shareholders. On March 10, 1997, the merger agreement with Homestake was
terminated and the Company entered into a merger agreement with Newmont. Under
the Newmont agreement, each share of Company common stock will be exchanged for
0.43 share of Newmont common stock. The Newmont merger is subject to the
approval of both the Company shareholders and Newmont shareholders, as well as
other customary conditions. The merger, which is expected to be tax-free to
Company shareholders and to be accounted for as a pooling of interests, is
expected to close during the second quarter of 1997.

COMPETITION

The Company competes worldwide with other mining companies and private
individuals in connection with the acquisition of unpatented mining claims,
mining concessions, and mineral leases on gold prospects and in connection with
the recruitment and retention of qualified employees. Given the commodity status
of gold in the worldwide market, competition in the sale of gold is not
significant for the Company or other gold producers.

2
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REFINING, MARKETING AND PRICE-PROTECTION ACTIVITIES

Gold has two main categories of use: fabrication and bullion investment.
Fabricated gold has a wide variety of uses including jewelry (the largest
fabrication use for gold), electronics, dentistry, decorations, medals,
medallions and official coins. Certain purchasers of official gold coins and of
high-carat jewelry may be motivated by investment, so that the net private gold
bullion purchases alone do not necessarily represent the total investment
activity in gold. Central banks buy, sell and hold gold bullion as part of their
national economic strategies.

Gold bullion is fungible and is actively traded in several markets
throughout the world. As a result, the market price for gold bullion produced by
the Company is readily ascertainable and the Company has several available
markets for its gold production. The Company's gold dore derived from its
operations is currently refined into gold bullion by Johnson Matthey in Salt
Lake City, Utah, and by Metalor Refining Corporation of North Attleborough,
Massachusetts, at refineries operated by those entities at various locations.
The Company has the option to sell its gold at market prices to these refiners
or to request that its gold be toll-refined and returned to the Company's
account at any of the several major gold depositories. A number of refineries
are capable of refining the Company's dore. Gold bullion can be sold to a large
number of buyers. Consequently, the Company does not believe that the loss of
any single outlet would deny the Company a market for its product.

The Company's profitability is significantly affected by changes in the
market price of gold. Gold prices can fluctuate widely and are affected by
numerous industry factors, such as demand for precious metals, forward selling
by producers, central bank sales and purchases of gold, and production and cost
levels in major gold-producing regions such as South Africa, the United States,
Australia, Canada and the countries of the former Soviet Union. Moreover, gold
prices are also affected by macro-economic factors such as expectations for
inflation, interest rates, currency exchange rates, and global or regional
political and economic situations. If gold prices should decline below the
Company's cash costs of production and remain at such levels for any sustained
period, the Company could determine that it is not economically feasible to
continue commercial production at any or all of its gold mines.

The volatility of gold prices is illustrated in the following table which
sets forth the annual high, low and average of the London P.M. Fix.

<TABLE>
<CAPTION>
PRICE PER OUNCE
-----------------------------------
YEAR HIGH LOW AVERAGE
- --------------------------------------------------------------------------------- ----- --- -----------
<S> <C> <C> <C>
1987............................................................................. 500 390 446
1988............................................................................. 484 395 437
1989............................................................................. 416 356 381
1990............................................................................. 424 346 383
1991............................................................................. 403 344 362
1992............................................................................. 360 330 344
1993............................................................................. 406 326 360
1994............................................................................. 396 370 384
1995............................................................................. 396 372 384
1996............................................................................. 415 367 388
</TABLE>

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Source of Data: METALS WEEK

The London P. M. Fix on March 17, 1997 was $351.40 per ounce.

The Company uses a variety of commodity instruments to minimize the effect
of declines in the market price for gold on its results of operations for a
period of time. The use of such instruments, however, may prevent the Company
from fully participating in subsequent increases in the market price for gold.

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Commodity instruments used by the Company may include gold borrowings, fixed
forward sales contracts, forward sales contracts made on a spot deferred basis
("spot deferred contracts") and purchased put and written call options contracts
in combination. Under normal circumstances, counterparties under spot deferred
contracts allow the Company to defer delivery of gold to a later date, if
necessary, at the original contract price plus the prevailing interest-like
premium.

The Company's price-protection policy allows the sale of increasing
quantities of gold in the forward market as the market price for gold increases
above historical averages and restricts such sales as the market price for gold
decreases relative to such averages. This policy also prohibits speculative
trading of commodity instruments, requires the use of creditworthy
counterparties and limits the Company's maximum spot deferred position.
Authority to enter into commodity instruments is vested in a limited number of
officers of the Company. Additionally, monthly summaries of commodity instrument
activity are provided to the Company's Board of Directors.

At December 31, 1996, the Company had spot deferred contracts for
approximately 1.7 million ounces of gold relating to production during the
period January 1997 - September 1998 at sales prices ranging from $386 - $438
per ounce or a weighted average price of $416 per ounce. The Company also had
purchased put options on 1.2 million ounces at an exercise price of $375 per
ounce and written call options on 0.4 million ounces at an exercise price of
$464 per ounce. The put and call options expire on a monthly basis throughout
1997. If the options are in the money at the date of expiration, the Company may
convert the options into spot deferred contracts for delivery at some date in
the future, receive or pay cash for the difference between the option exercise
and market prices on that date or deliver gold against the contracts and receive
the option exercise price per ounce.

RESERVES

A multi-disciplinary team of Company geologists, engineers, and
geostatisticians uses methods generally applied within the mining industry to
estimate the Company's proven and probable gold reserves. Due to the nature of
the mineral deposits, all reserves are calculated from drill-hole assay results.
Representative samples are collected from the drilling, including a significant
amount of core drilling in deposits where reverse-circulation drilling samples
could be contaminated or diluted. Assay results are analyzed to detect potential
bias, and check assays are completed on all ore-grade intercepts as a quality-
control procedure. Computer-generated ore deposit models are compared against
the results obtained from manual methods and, as mining progresses, against
actual mining results. Pit outlines generated from the models are based upon
estimated mining and processing costs and processing recoveries and are tested
against mining and processing experience to yield estimates of reserves
determined by optimum economic mining limits.

Reserves reported by the Company are audited and verified annually by an
independent engineering firm which reviews the methods used to estimate the
reserves. The audit of the Company's reserves as of December 31, 1996, concurred
that the Company's reserves models are prepared according to accepted
engineering practice and that the reserves satisfy the requirements for
classification as proven and probable gold reserves.

4
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The following table lists the Company's reserves as of December 31 for the
years from 1991 through 1996 as well as the tons of ore identified by the
Company and the average gold grade of such ore, both as of December 31, 1996:

RESERVES (1)
(IN THOUSANDS, EXCEPT AVERAGE GOLD GRADE)

<TABLE>
<CAPTION>
AS OF DECEMBER 31,
------------------------------------------------------------------------------------------------
1995 1994 1993 1992 1991
--------- --------- --------- --------- ---------
1996(2)
-----------------------------------------
AVERAGE
TONS OF GOLD GRADE CONTAINED
ORE (OUNCE PER TON) OUNCES
CONTAINED OUNCES
--------- ----------------- ----------- -----------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Twin Creeks Mine (3).............. 150,649 0.073 11,044 10,467 10,013 8,523 3,255 3,457
Lone TreeComplex
Lone Tree Mine.................. 52,193 0.082 4,267 4,679 4,051 4,028 3,136 2,118
Trenton Canyon Mine............. 26,149 0.028 742 590 -- -- -- --
Mule Canyon Mine................ 8,918 0.111 988 1,002 -- -- -- --
Mesquite Mine (4)................. 46,050 0.018 832 1,132 1,299 1,570 -- --
Rosebud Mine (5).................. 638 0.392 250 -- -- -- -- --
Marigold Joint Venture (6)........ -- -- -- -- -- -- -- 206
--------- ----------- --------- --------- --------- --------- ---------
Total......................... 284,597 0.064 18,123 17,870 15,363 14,121 6,391 5,781
--------- ----------- --------- --------- --------- --------- ---------
--------- ----------- --------- --------- --------- --------- ---------
</TABLE>

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(1) Throughout this document the term reserves when used in conjunction with the
Company includes both proven and probable reserves. The term "reserves"
means that part of a mineral deposit which can be reasonably assumed to be
economically and legally extracted or produced at the time of the reserves
determination. The term "economically," as used in the definition of
reserves, implies that profitable extraction or production under defined
investment assumptions has been established or analytically demonstrated.
The assumptions made must be reasonable, including assumptions concerning
the prices and costs that will prevail during the life of the project. The
term "legally," as used in the definition of reserves, does not imply that
all permits needed for mining and processing have been obtained or that
other legal issues have been completely resolved.

The term "proven reserves" means reserves for which (a) quantity is computed
from dimensions revealed in outcrops, trenches, workings or drill holes;
grade and/or quality are computed from the results of detailed sampling; and
(b) the sites for inspection, sampling and measurement are spaced so closely
and the geologic character is so well defined that size, shape, depth and
mineral content of reserves are well established.

The term "probable reserves" means reserves for which quantity and grade
and/or quality are computed from information similar to that used for proven
reserves, but the sites for inspection, sampling and measurement are farther
apart or are otherwise less adequately spaced. The degree of assurance,
although lower than that for proven reserves, is high enough to assume
continuity between points of observation.

The term "contained ounces" means that the reserves are estimated to
encompass a stated number of ounces of gold in place. The number of ounces
ultimately recovered and available for sale depends upon mining efficiency
and processing efficiency.

(2) Audited and verified by Independent Mining Consultants, Inc. (IMC).

(3) For all dates prior to December 31, 1993, reserves for the Twin Creeks Mine
include only reserves at the Rabbit Creek Mine. The information listed for
December 31, 1993, and thereafter includes

5
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reserves located at both the Rabbit Creek Mine and the Chimney Creek Mine.
The Chimney Creek Mine was acquired by the Company from HNRC pursuant to the
Exchange in June 1993.

(4) Reserves information is not shown for the Mesquite Mine for dates prior to
December 31, 1993, because the Mesquite Mine was not acquired by the Company
until the Exchange in June 1993.

(5) The Rosebud Mine is a development-phase underground mine in which the
Company has a 50% interest. Reserves shown represent the Company's 50%
share. (See "Development Projects.")

(6) In March 1992, the Company exchanged its 30% interest in the Marigold Joint
Venture for the mineral rights and reserves that now make up the southern
extension of the Lone Tree Mine and additional exploration mineral rights.
Data for the Marigold Joint Venture include only the Company's 30% share.

The Company estimates that approximately 84% of the gold contained in the
reserves as of December 31, 1996, is recoverable.

The reserves listed as of December 31, 1996, have been calculated assuming a
realizable price for gold of $400 per ounce. However, there can be no assurance
that this price will be realized during any period. In 1996, the Company
realized an average price of approximately $411 per ounce and expects to realize
an average price of approximately $415 per ounce in 1997.

The Company believes that the costs of recovery for a substantial portion of
its reserves are significantly below the gold prices used to estimate the
reserves. Even at substantially lower gold prices, the Company believes that its
operating margin would be positive for most of its reserves. The Company further
believes that if its reserves estimates were based on a gold price of $350 per
ounce, with current operating costs, reserves as of December 31, 1996, would
decrease by approximately 14.5%. If the reserves estimates were based on a gold
price of $450 per ounce, with current operating costs, reserves as of December
31, 1996, would increase by approximately 7.6%.

6
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MINERALIZED MATERIAL

The following table reflects the Company's gold mineralized material as of
December 31, 1996, which is not included in the Company's reserves. No assurance
can be given that the mineralized material identified in the table will
ultimately result in additions to the Company's reserves.

MEASURED AND INDICATED MINERALIZED MATERIAL(1)
AS OF DECEMBER 31, 1996 AND 1995
(IN THOUSANDS, EXCEPT AVERAGE GOLD GRADE)

<TABLE>
<CAPTION>
1996 1995
---------------------------- ----------------------------
AVERAGE GOLD AVERAGE GOLD
GRADE GRADE
TONS (OUNCE PER TON) TONS (OUNCE PER TON)
--------- ----------------- --------- -----------------
<S> <C> <C> <C> <C>
Twin Creeks Mine
Oxide Material........................................... 19,500 0.028 24,000 0.025
Subgrade Refractory Material............................. 114,000 0.053 116,000 0.054
Section 8 Pit............................................ 21,300 0.030 21,000 0.030
--------- ---------
Total Twin Creeks Mine................................... 154,800 0.046 161,000 0.047
--------- ---------
Lone Tree Complex
Lone Tree Mine........................................... 17,300 0.044 15,000 0.034
Mule Canyon Mine......................................... 7,000 0.063 8,000 0.085
Trenton Canyon Mine...................................... 11,000 0.026 10,000 0.021
--------- ---------
Total Lone Tree Complex.................................. 35,300 0.042 33,000 0.042
--------- ---------
Mesquite Mine.............................................. 110,100 0.018 54,000 0.021
Rosebud Mine (SFPG's 50% share)............................ 200 0.286 -- --
Elkhorn.................................................... 12,000 0.100 12,000 0.100
Gurupi, Brasil (SFPG's 50% share).......................... 35,400 0.034 -- --
Golden Eagle (SFPG's 75% share)............................ 9,100 0.082 -- --
--------- ---------
TOTAL.................................................... 356,900 0.039 260,000 0.043
--------- ---------
--------- ---------
</TABLE>

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(1) "Mineralized Material" is gold-bearing material that has been physically
delineated by one or more of a number of methods including drilling,
underground work, surface trenching and other types of sampling. This
material has been found to contain a sufficient amount of mineralization of
an average grade of metal or metals to have economic potential that warrants
further exploration evaluation. While this material is not currently or may
never be classified as reserves, it is reported as mineralized material only
if the potential exists for reclassification into the reserves category.
This material has established geologic continuity, but cannot be classified
in the reserves category until final technical, economic and legal factors
have been determined and the project containing the material has been
approved for development.

MINING AND PROCESSING METHODS

Mining and processing methods used by the Company include open-pit mining,
heap leaching, oxide milling and refractory milling. Although each of the
Company's mines uses slightly different methods depending upon the unique
requirements of each deposit, the following is a general description of the
methods used at the Company's mines.

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OPEN-PIT MINING

At each of its mines, the Company conducts open-pit mining utilizing
conventional, industry-employed methods and equipment. Mine plans are designed
to remove overburden to expose sufficient ore to meet processing requirements.
Material is drilled and blasted in 20-foot benches in ore and 20- to 50-foot
benches in overburden. The blasted material is then loaded onto off-road haul
trucks using front-end loaders, hydraulic shovels and electric shovels.
Overburden is transported outside the pits and placed on piles, or used to
backfill pits where operationally feasible.

Ore is transported by haul trucks from the pit and stacked from the trucks
directly onto heap-leach pads. Mill-grade ore is taken by truck to the mill area
where it is placed on a stockpile, or put directly into a crusher feed bin at
the mill. Where both oxide and refractory ores are present, each type is
segregated and handled through separate processing circuits.

The Company processes oxide ores through one of two processes depending upon
the grade of the ore. Higher-grade oxide ore (generally 0.05 ounce per ton and
greater) is typically processed by milling, and low-grade oxide ore is typically
processed by heap leaching. High-grade refractory ore (generally 0.065 ounce per
ton and greater) is pre-treated by a pressure oxidation circuit followed by
conventional oxide milling. Some low-grade refractory ore is also heap leached.

HEAP LEACHING

In run-of-mine conventional heap leaching, the ore is hauled from the pit to
the heap-leach pads where it is stacked. The stacked ore is then cross-ripped to
increase solution percolation, and a weak cyanide solution is applied to the top
surface of the heaps using drip and sprinkler irrigation techniques. This
solution percolates down through the ore where the cyanide leaches the gold from
the rock, collects on the lined pads and holds the gold in solution as it flows
to a central collection location. All leaching occurs in a closed system on
lined pads designed to meet applicable environmental-protection standards. The
system is designed to recover all cyanide and prevent its escape or infiltration
into the ground.

The gold-bearing solutions are collected and pumped from heap-leach pads to
the mill facilities for recovery. The gold is recovered through carbon
adsorption followed by conventional pressure stripping of the carbon using a
high-temperature caustic solution, which is then pumped to electro-winning cells
or to a zinc-precipitation circuit. Gold is electro-plated onto woven stainless
steel wire wool cathodes. The resultant electro-won material is removed from the
cathodes, fluxed, smelted and poured into dore bars or buttons for shipment to a
third-party refinery. Zinc precipitate is treated in a similar manner.

OXIDE MILLING

In oxide milling, ore is trucked to stockpiles from which it is fed into a
semi-autogenous-grinding ("SAG") mill with water. In a SAG mill, steel balls and
the ore itself are used to grind the ore down to 0.5 mm to 1.0 mm diameter. The
slurry discharge from the SAG mill is separated by hydro-cyclones into a
fine-particle slurry which is sent to the cyanide leaching circuit, and into a
coarse-particle slurry which is fed into a ball mill for further grinding. The
fine-particle slurry passes into a standard thickening process and finally into
either a carbon-in-leach ("CIL") or carbon-in-pulp ("CIP") cyanide leaching
circuit, depending on the specific mill. The leaching circuit consists of
several large tanks with agitators. Cyanide is added to the milled slurry in a
controlled-pH solution, and the leaching of the microscopic gold from the rock
into the solution begins. Granular carbon is added to the tanks to adsorb the
gold from the solution. The agitators keep the slurry, cyanide and carbon well
mixed so that all particles can be leached. The slurry passes from tank to tank
through screens that retain the carbon in the tank so that it can be moved in
the opposite direction of the slurry flow. The gold-loaded carbon is then pumped
into special vessels where the gold is recovered by pumping a hot cyanide and
caustic solution under pressure through the carbon. The gold-bearing solution is
pumped to electro-winning cells or a zinc-precipitation circuit where gold is
removed from the solution. The gold is then recovered in the same manner as in
heap leaching. Mill

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tailings are deposited into tailings impoundments which are designed,
constructed and operated to meet rigorous environmental-protection laws and
regulations.

REFRACTORY MILLING

Some of the ores mined by the Company are refractory ores containing gold
locked in sulfide minerals, which reduce or eliminate the effectiveness of
cyanide leaching and substantially reduce gold recovery from such ores. To
increase gold recovery, an additional processing step is inserted between the
grinding and leaching circuits in the mill to oxidize the sulfide minerals. The
refractory ores are ground in the conventional SAG and ball mill grinding
circuit, and fed through a thickener to reduce the amount of water in the
slurry. This ore in slurry form is passed through successive stages of heating,
each stage raising the temperature and increasing the pressure on the slurry.
The slurry then enters the autoclave, which is a horizontal, cylindrical, carbon
steel, lead- and brick-lined unit which oxidizes the ore by the action of heat,
pressure and elevated oxygen. Oxygen is added, and the slurry remains in the
autoclave until the sulfides in the ore are oxidized and the fine gold is
exposed and ready for cyanidation. The slurry is then pumped through a set of
coolers to reduce the temperature. This cooled, acidic slurry is neutralized and
sent to the mill's conventional CIL cyanide leaching circuit where the remainder
of the process is identical to oxide milling.

OPERATING PROPERTIES

TWIN CREEKS MINE

GENERAL

The Twin Creeks Mine, which the Company believes is North America's third
largest primary gold mine, is located approximately 45 miles northeast of
Winnemucca, Nevada, and is accessed by a paved public road, an improved road and
two improved Company-owned roads. The net book value of the Twin Creeks Mine's
property, plant and equipment was $545.7 million at December 31, 1996.

RESERVES

The table below sets forth the reserves located at the Twin Creeks Mine, all
of which reserves are located within the Mine Area.

TWIN CREEKS MINE
RESERVES
AUDITED AND VERIFIED BY IMC
(DECEMBER 31, 1996)

<TABLE>
<CAPTION>
CONTAINED
AVERAGE GOLD OUNCES (1)
TONS (IN GRADE (OUNCE (IN
THOUSANDS) PER TON) THOUSANDS)
------------- ------------- -------------
<S> <C> <C> <C>
Oxide Mill Ore............................................. 23,859 0.095 2,266
Oxide Run-of-Mine Heap Leach Ore........................... 60,665 0.022 1,323
Refractory Mill Ore........................................ 66,125 0.113 7,455
------------- ------
Total.................................................... 150,649 0.073 11,044
------------- ------
------------- ------
</TABLE>

- ------------------------

(1) Includes 8.6 million ounces on private mineral rights and patented mining
claims and 2.4 million ounces on unpatented mining claims with first-half
final certificates. The Company estimates that approximately 86% of the gold
contained in the reserves as of December 31, 1996, is recoverable.

9
<PAGE>
HISTORY

The Company began initial exploration of the Rabbit Creek Mine, which was
located just south of the Chimney Creek Mine, in 1986 and made its initial
discovery of gold in 1987. Gold was discovered at the Chimney Creek Mine by Gold
Fields Mining Company, a division of HNRC ("Gold Fields"), in 1985. The
combination of the Rabbit Creek Mine and Chimney Creek Mine following the
Exchange enabled the Company to realize operating efficiencies, including
elimination of planned personnel additions, an increase in the rate of
production through economies of scale, a decrease in mining costs by reducing
haulage distances and a decrease in overhead through the elimination of
duplicate personnel.

GEOLOGY

Gold mineralization at the Twin Creeks Mine occurs at the north end of the
Rabbit Trend, a nearly 60-mile long, north-south zone containing numerous
sediment-hosted Carlin-type deposits and other occurrences of gold
mineralization. The deposits at the Twin Creeks Mine lie in the Getchell mining
district which occupies the eastern flank of the Osgood Mountains. The deposits
occur in a complexly folded and faulted sequence of sedimentary rocks with minor
amounts of interlayered basalt. The deposits are overlain by zero to 700 feet of
alluvium. Gold mineralization is controlled by both stratigraphy and structure.

Gold occurs at the Twin Creeks Mine in both refractory and oxide ores.
Refractory ores contain variable amounts of pyrite, realgar, orpiment, stibnite
and organic carbon. In oxide ores, the refractory minerals and carbonaceous
matter are absent, and gold is associated with antimony-rich limonite.

MINERAL RIGHTS (AS OF DECEMBER 31, 1996)

MINING AND PROCESSING

Mining at the Twin Creeks Mine is conducted in two open pits utilizing
conventional open-pit mining methods. During 1996, the Company mined 106.8
million tons of overburden, 18.2 million tons of oxide run-of-mine heap-leach
ore, 2.6 million tons of oxide mill ore and 0.6 million tons of refractory mill
ore (which was stockpiled) and produced 459,084 ounces of gold.

The current equipment fleet consists of large electric and hydraulic shovels
coupled with 190- and 240-ton haul trucks working on 40-foot overburden benches
and 20-foot ore benches. The mining fleet is supported with a full set of
ancillary equipment. The equipment fleet is in good condition.

Ore is processed at the Twin Creeks Mine through oxide milling or heap
leaching, depending upon the grade of the ore. Higher-grade (generally 0.05
ounce per ton and greater) oxide ore has been processed through one of two
separate oxide milling facilities through November 1996 when processing of oxide
ore through the new Sage Mill commenced. The south mill has a nominal capacity
of 3,000 tons per day and historically has had a recovery rate of approximately
91% of the gold contained in the ore processed. Gold is recovered through
conventional pressure stripping of the carbon and electro-winning. The north
mill has a nominal capacity of 2,500 tons per day and historically has had a
recovery rate of approximately 94% of

10
<PAGE>
the gold contained in the ore processed. Run-of-mine heap leaching is used to
recover gold from low-grade ores (generally less than 0.05 ounce per ton).
Leaching cycles at the Twin Creeks Mine are typically 180 days and achieve
approximately 65% gold recovery. During 1996, the Twin Creeks Mine processed an
average of 6,380 tons of mill ore per day, excluding the new Sage Mill which is
part of the Twin Creeks Sulfide Project discussed below.

Mining and processing operations at the Twin Creeks Mine are conducted over
two 10-hour shifts on a seven-days-per-week schedule.

In late 1994, the Company commenced implementation of a project ("Twin
Creeks Sulfide Project") to expand the operations at the Twin Creeks Mine to
include mining and processing of sulfide refractory ores that contain
approximately 68% of the reserves at the Twin Creeks Mine. The Company currently
estimates that it will obtain a weighted average gold recovery from sulfide ore
types at the Twin Creeks Mine of approximately 90% and that the refractory
ore-processing plant to be constructed at the Twin Creeks Mine will be capable
of processing ore at milling cash costs of approximately $17 per ton. The
capital investment required for the Twin Creeks Sulfide Project is estimated to
be approximately $250 million and as of December 31, 1996, $191 million had been
spent. Plans include a two-phase project with two autoclaves. Phase I of the
Twin Creeks Sulfide Project was approximately 98% complete at the end of 1996.
Processing of oxide ore commenced in November 1996 and through December 1996 was
operating at a rate of approximately 9,500 tons per day. The first of the two
autoclaves was scheduled for start-up in the first quarter of 1997.
Commissioning of the autoclave began in March 1997, when some over heating of
the shell within the vapor zone areas occurred. Repairs to or replacement of
some of the brick lining inside the autoclave will be required, which could
delay commissioning into the second quarter of 1997.

In December 1994, approximately three million tons of overburden material
from a portion of the west wall of the main pit at the Twin Creeks Mine slid
into the pit, covering ore that was scheduled to be mined in 1995. There were no
injuries or equipment damage, and reserves as of December 31, 1994, were not
affected by the slide. However, approximately 80,000 ounces of gold production
planned for 1995 were postponed to future years. The overburden material was
removed in 1995, and 1996 production was not affected.

Water for operations at the Twin Creeks Mine is obtained from area wells,
in-pit wells and pit-dewatering operations. Water from the pit sumps and wells
currently is being pumped at a rate of approximately 6,700 gallons per minute,
and is either consumed in processing and mining or is required by permit
conditions to be treated and released at drinking water standards prescribed
under the Clean Water Act. The pumping rate is expected to ultimately peak at
approximately 12,000 gallons per minute within three years. The Company has
State of Nevada water appropriations totaling 13,800 gallons per minute which
the Company believes to be sufficient to permit necessary dewatering for the
life of the Twin Creeks Mine given the present reserves. The most recent
appropriations received for dewatering require the Company to return most of the
water removed to the subsurface by reinfiltration or reinjection. Water removed
from the pits is treated to standards required by the State of Nevada and
returned into the ground via infiltration. A water treatment plant and the
reinfiltration ponds were constructed in 1995 at a cost of approximately $6
million.

Electric power is supplied by Sierra Pacific Power Company.

11
<PAGE>
SELECTED OPERATING DATA:

<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
----------------------------------
1996 1995 1994
---------- ---------- ----------
<S> <C> <C> <C>
TWIN CREEKS MINE
Gold production (ounces):
Mill................................................... 197,737 185,355 211,233
Heap leach............................................. 261,347 239,112 290,658
---------- ---------- ----------
Total gold production.................................... 459,084 424,467 501,891
---------- ---------- ----------
---------- ---------- ----------
Total tons mined (millions).............................. 128.2 129.7 97.7
Mill tons processed (thousands).......................... 2,768 2,401 2,212
Average mill grade (ounce/ton)........................... 0.085 0.087 0.105
Mill recovery............................................ 84.2% 88.6% 91.0%
Heap leach tons processed (thousands).................... 18,238 17,022 16,770
Average heap leach grade (ounce/ton)..................... 0.022 0.020 0.026
Cash costs of production per ounce....................... $ 188 $ 180 $ 172
Noncash costs of production per ounce.................... 72 74 85
---------- ---------- ----------
Total costs of production per ounce...................... $ 260 $ 254 $ 257
---------- ---------- ----------
---------- ---------- ----------
</TABLE>

DEVELOPMENT DRILLING

The development drilling program conducted at the Twin Creeks Mine during
1996 resulted in the addition of approximately 577,000 ounces of reserves, net
of 1996 production. The Company plans to continue to conduct development
drilling on Section 30, the area south of the main pit, and on certain
underground targets in 1997.

ENVIRONMENTAL PROTECTION AND PERMITTING

Because the Chimney Creek Mine portion of the Twin Creeks Mine is located on
federal land administered by the Federal Bureau of Land Management ("BLM"), BLM
approval was required for the Twin Creeks Sulfide Project. The Company submitted
a plan of operations for the Twin Creeks Sulfide Project to the BLM and entered
into a memorandum of agreement for the preparation of an environmental impact
statement ("EIS"). The process of gathering baseline data and initiating the
scoping work for an EIS began in July 1993, and was completed in 1995. BLM
approval was received on January 22, 1997. The Company has received the
additional required federal and state permits necessary for the Twin Creeks
Sulfide Project.

Four separate notices of appeal have been filed in connection with the Twin
Creeks EIS. The appellants are Getchell Gold Corporation, Great Basin Mine
Watch, an environmental group, The Duck Valley Shoshone Tribe and Laser, Inc.,
which is an organization related to organized labor. Only the Duck Valley
Shoshone Tribe has filed a statement of reasons. The Company does not believe
that the Duck Valley Shoshone Tribe appeal has any merit. The other appellants
have not yet filed statements of reasons and accordingly the relief they seek is
not yet known. Based on their written comments to the EIS, however, the Company
believes their arguments will lack merit. Moreover, if the issues in each appeal
are the same as those raised in the respective appellants written comments to
the EIS, an unfavorable outcome to the Great Basin Mine Watch appeal or the
Laser, Inc. appeal, could result in additional conditions on operations which
may have a material adverse effect on the Company's financial condition or the
results of operations.

12
<PAGE>
LONE TREE COMPLEX

GENERAL

The Lone Tree Complex consists of the Lone Tree Mine, the Trenton Canyon
Mine and the Mule Canyon Mine. The Lone Tree Mine is located approximately 34
miles southeast of Winnemucca, Nevada, one-half mile south of Interstate 80, to
which it is connected by an improved, Company-owned road. The Trenton Canyon
Mine is located approximately 13 miles south of Valmy, Nevada, and approximately
11 miles south of the Lone Tree Mine, and is accessed by an improved,
Company-owned road connected to Interstate 80. The Mule Canyon Mine is located
approximately 14 miles east of Battle Mountain, Nevada, and approximately 50
miles from the Lone Tree Mine, and is accessed by an improved county road which
connects to Interstate 80.

The net book value of the Lone Tree Complex's property, plant and equipment
was $250.7 million as of December 31, 1996.

RESERVES

The table below sets forth the reserves located at the Lone Tree Complex,
all of which reserves are located within the Mine Area.

LONE TREE COMPLEX
RESERVES
AUDITED AND VERIFIED BY IMC
(DECEMBER 31, 1996)

<TABLE>
<CAPTION>
TONS AVERAGE
(IN GOLD GRADE CONTAINED OUNCES
THOUSANDS) (OUNCE PER TON) (IN THOUSANDS)
------------- ----------------- ----------------
<S> <C> <C> <C>
LONE TREE MINE:
Oxide Mill Ore.................................................. 835 0.234 195
Oxide Run-of-Mine Heap Leach Ore................................ 10,194 0.043 436
Refractory Run-of-Mine Heap Leach Ore........................... 4,255 0.025 106
Refractory Mill Ore............................................. 36,909 0.096 3,530
------ ----- -----
Total........................................................... 52,193 0.082 4,267(1)
------ ----- -----
------ ----- -----
TRENTON CANYON MINE:
Oxide Run-of-Mine Heap Leach Ore................................ 26,149 0.028 742(2)
MULE CANYON MINE:
Oxide Mill Ore.................................................. 242 0.129 31
Oxide Run-of-Mine Heap Leach Ore................................ 1,261 0.032 41
Refractory Flotation Ore........................................ 4,828 0.076 365
Refractory Mill Ore............................................. 2,587 0.213 551
------ ----- -----
Total........................................................... 8,918 0.112 988(3)
------ ----- -----
------ ----- -----
TOTAL LONE TREE COMPLEX........................................... 87,260 0.069 5,997
------ ----- -----
------ ----- -----
</TABLE>

- ------------------------

(1) Includes 2.9 million ounces on private mineral rights and 1.4 million ounces
on unpatented mining claims, all of which have first-half final
certificates. The Company estimates that approximately 84% of the gold
contained in the reserves as of December 31, 1996, is recoverable.

(2) Includes 307,000 ounces on private mineral rights and 435,000 ounces on
unpatented mining claims, none of which has a first-half final certificate.
The Company estimates that approximately 72% of the gold contained in the
reserves as of December 31, 1996, is recoverable.

13
<PAGE>
(3) Includes 163,000 ounces on private mineral rights and 825,000 ounces on
unpatented mining claims with first-half final certificates. The Company
estimates that approximately 88% of the gold contained in the reserves as of
December 31, 1996, is recoverable

HISTORY

LONE TREE MINE: The Company began exploration in the vicinity of the Lone
Tree Mine in 1987 because of its proximity to several other successful
gold-producing mines and the presence of favorable geology. The Company
discovered the Lone Tree Mine deposit in 1989, and poured the first gold at the
mine in August 1991. Prior to February 1994, mining activities at the Lone Tree
Mine focused on oxide ores. In 1995 the Company completed the final phases of an
expansion program which significantly increased gold production from refractory
mill ores at the mine.

TRENTON CANYON MINE: The Trenton Canyon Mine arose from three exploration
projects. The North Peak deposit was discovered in 1988, as part of a joint
venture with Bow Valley Mining, whose interest was purchased by the Company in
1994. The Valmy deposit was found in 1989, just north of and contiguous with
Hecla Mining Company's ("Hecla") Trout Creek deposit and was acquired from Hecla
in 1992. The Trenton Canyon deposit was discovered through grass-roots
exploration by Company geologists in 1991, and contains the majority of the
reserves on the project.

MULE CANYON MINE: The Mule Canyon Mine is located in the Northern Shoshone
range, and consists of six areas of known mineralization: the North, Main, West,
South, Ashcraft and Section 9 deposits. The deposit was discovered in 1986 as a
result of a Gold Fields grass-roots exploration program and was acquired by the
Company in the Exchange in June 1993. Development commenced in 1995 and
continues at present.

GEOLOGY

LONE TREE MINE: The deposit at the Lone Tree Mine is a sediment-hosted gold
deposit which occurs in silicified and brecciated siltstone, sandstone and
argillite within a steeply-dipping structure and which consists of several
parallel to sub-parallel shear zones. Gold mineralization is controlled
primarily by structures with gold occupying fractures. Some stratigraphic
control exists, especially where the rock units are brittle and easily
fractured.

Gold occurs in both refractory and oxide ores at the Lone Tree Mine. In the
refractory ore, the gold is predominantly associated with pyrite, and to a
lesser extent, with arsenopyrite. In the oxide ore, the arsenopyrite and pyrite
are absent, and gold is associated with limonite.

TRENTON CANYON MINE: Gold mineralization at the Trenton Canyon Mine occurs
at the south end of the 60-mile long Rabbit Trend, and occurs in three separate
deposits in close proximity. The deposits lie in the Battle Mountain mining
district, a prolific district with a long history of base metals and precious
metals mining. The deposits occur in a structurally deformed sedimentary
sequence, which is cut by intrusive rocks, and locally overlain by younger
volcanic rocks and minor alluvium. Mineralization at all three deposits occurs
at or near the surface, and is almost completely structurally controlled, and
has some minor, secondary stratigraphic controls.

Gold occurs at the Trenton Canyon Mine as predominantly oxide ore associated
with quartz, sericite, clays and iron oxide. Sulfide mineralization occurs at
depth, but to date has not been a primary focus of the project. Sulfide
mineralization is characterized by pyrite and rare other sulfides, and
carbonaceous material.

MULE CANYON MINE: The deposits occur along a northwest volcanic trend
called the Mid-Miocene Rift that hosts several currently active gold districts.
Mineralization is localized along north to northwest

14
<PAGE>
trending high-angle faults within basaltic-andesite flows and dikes.
Trace-element geochemistry at the Mule Canyon Mine is typical of an upper-level
hot-springs precious metals system.

Gold mineralization occurs at the Mule Canyon Mine as a combination of
refractory sulfide and oxide ore. The dominant sulfides in the ore are pyrite,
marcasite and arsenopyrite. Precious metal mineralization at the Mule Canyon
Mine includes electrum, gold-bearing arsenopyrite, silver-bearing tetrahedrite,
pyrargyrite, argentite, acanthite, aguilarite, naumannite, and polybasite.
Oxidized mineralization is generally restricted to the top 15 to 75 feet of the
deposits. No significant enrichment of gold or silver exists at the
oxidized-unoxidized boundary.

MINERAL RIGHTS (AS OF DECEMBER 31, 1996)

<TABLE>
<CAPTION>
INSIDE MINE OUTSIDE MINE
NATURE OF OWNERSHIP AREA AREA TOTAL
- ---------------------------------------------------------------------------- ----------- ------------- ---------
(ACRES)
<S> <C> <C> <C>
LONE TREE MINE:
Owned by Company.......................................................... 2,640 6,960 9,600
Unpatented mining claims owned by Company with first-half final
certificates............................................................ 99 -- 99
Unpatented mining claims owned by Company without first-half final
certificates............................................................ 1,880 5,760 7,640
Owned by private owner and controlled by Company as lessee................ -- 1,360 1,360
----------- ------ ---------
Total................................................................... 4,619 14,080 18,699
----------- ------ ---------
----------- ------ ---------
TRENTON CANYON MINE:
Owned by Company.......................................................... 5,640
Unpatented mining claims owned by Company without first-half final
certificates............................................................ 4,480
Owned by private owner and controlled by Company as lessee................ 1,280
-----------
Total................................................................... 11,400
-----------
-----------
MULE CANYON MINE:
Owned by Company.......................................................... 11,180
Unpatented mining claims owned by Company with first-half final
certificates............................................................ 368
Unpatented mining claims owned by Company without first half-final
certificates............................................................ 14,453
Owned by private owner and controlled by Company as lessee................ 5,769
-----------
Total................................................................... 31,770
-----------
-----------
</TABLE>

MINING AND PROCESSING--LONE TREE COMPLEX

During 1996, the Company mined 41.5 million tons of overburden, 4.9 million
tons of run-of-mine heap leach ore, 0.3 million tons of oxide mill ore, 0.7
million tons of refractory mill ore and 0.9 million tons of flotation feed ore
(which was stockpiled) at the Lone Tree Complex and produced 205,738 ounces of
gold.

MINING AND PROCESSING--LONE TREE MINE

Mining at the Lone Tree Mine is conducted in two open pits utilizing
conventional open-pit mining methods. The current equipment fleet consists of
large hydraulic shovels and backhoes coupled with 150-ton haul trucks, working
on 20-foot benches. The mining fleet is supported with a full set of ancillary
equipment. The equipment fleet is generally in good condition.

15
<PAGE>
Oxide milling at the Lone Tree Mine consists of a standard SAG mill and ball
mill grinding circuit, followed by a CIL cyanide leaching circuit with a nominal
capacity of 2,500 tons per day. Gold is recovered from the loaded carbon through
a conventional pressure-stripping and electro-winning process. Refractory ores
pass through an autoclave pressure-oxidation circuit after the grinding process
and before the CIL cyanide leaching circuit. Heap leaching at the Lone Tree Mine
is now conducted as run-of-mine heap leaching. Run-of-mine leaching cycles are
typically 13 months and yield 40% to 70% of the contained gold. Heap leaching
produced all of the gold at the Lone Tree Mine through mid-October 1993, and
will continue to contribute a portion of the gold produced at the Lone Tree Mine
throughout its life. The oxide circuit of the mill commenced operation in the
fourth quarter of 1993. The refractory circuit of the mill commenced operation
in February 1994 and has operated at or above design capacity since then.

Mining operations at the Lone Tree Mine are conducted on a six-days-per-week
schedule, over two 10-hour shifts each working day. Processing operations at the
Lone Tree Mine are conducted on a seven-days-per-week schedule, over two 12-hour
shifts each working day.

Following successful test work and feasibility studies, the Company entered
into the detailed engineering and design phase of adding a flotation mill for
the processing of lower grade sulfide ores at the Lone Tree Mine. Construction
activity began on the flotation mill during the first half of 1996 and it is
expected to be in production by the second quarter of 1997. The Company plans to
process a portion of the Lone Tree Mine gold concentrates through the existing
Lone Tree Mine autoclave, and the remaining portion through the Twin Creeks Mine
autoclave, which is scheduled for start-up in the first quarter of 1997.

Operations at the Lone Tree Mine consume up to 2,000 gallons of water per
minute from the mine's pit-dewatering program.

Electric power is supplied by Sierra Pacific Power Company.

MINING AND PROCESSING--TRENTON CANYON MINE

Mining at the Trenton Canyon Mine is conducted in an open pit at the North
Peak deposit and ore is placed on heap leach pads located at the Trenton Canyon
Mine. Loaded carbon from the carbon adsorption plant is transported to the Lone
Tree Mine for pressure-stripping, carbon regeneration and gold recovery.

The Lone Tree Mine provides equipment maintenance, sample assaying,
processing and administrative support. Electric power and water are also
supplied from Lone Tree Mine through 12 miles of powerline and a 10-inch steel
waterline.

The current mining fleet consists of three used 85-ton haul trucks and a
used loader transferred from the Twin Creeks Mine. This fleet will be
supplemented with additional mining equipment currently in use at the Lone Tree
Mine.

Mining in the higher-grade Trenton Canyon pits is planned to begin in 1998
after the completion of an EIS and receipt of related permits required for
federal lands.

MINING AND PROCESSING--MULE CANYON MINE

Gold mineralization occurs in both refractory sulfide and oxide ores. The
Mule Canyon Mine will include mining operations and run-of-mine heap-leach
processing facilities. The high-grade refractory sulfides and oxide ores will be
shipped to one of the Company's existing operations for processing. The property
is operated as a satellite of the Lone Tree Mine, which provides sample assaying
and administrative support

Mining is conducted using conventional open-pit methods with used 85-ton
haul trucks and a used loader transferred from the Twin Creeks Mine. The fleet
will be supplemented with a hydraulic backhoe in 1997. Mine production rates are
expected to average approximately 11 million tons per year.

16
<PAGE>
Electric power is supplied by Sierra Pacific Power Company. Water is
supplied from pit dewatering or from wells on the property.

Construction of the Mule Canyon Mine was initiated in early 1996 and will
continue into 1997. Capital expenditures for the development of the Mule Canyon
Mine are expected to be approximately $35 million and at December 31, 1996,
approximately $18 million had been spent. Mining operations began on October 29,
1996, after the completion of an EIS and approval of the plan of operations.
Shipments of Mule Canyon ore to the Lone Tree Mine commenced in early November
1996 and gold production began in late November 1996. The Mule Canyon Mine is
expected to produce approximately 100,000 ounces of gold in 1997. Mule Canyon
ore is expected to be processed at both the Lone Tree Mine and the Twin Creeks
Mine, upon commissioning of the Twin Creeks Mine autoclave.

SELECTED OPERATING DATA:

<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-------------------------------
1996 1995 1994
--------- --------- ---------
<S> <C> <C> <C>
LONE TREE COMPLEX
Gold production (ounces):
Mill....................................................... 154,792 142,861 149,874
Heap leach................................................. 50,946 85,107 77,037
--------- --------- ---------
Total gold production........................................ 205,738 227,968 226,911
--------- --------- ---------
--------- --------- ---------
Total tons mined (millions).................................. 48.3 40.1 38.4
Mill tons processed (thousands).............................. 1,082 1,026 950
Average mill grade (ounce/ton)............................... 0.154 0.154 0.177
Mill recovery................................................ 89.9% 90.3% 89.2%
Heap leach tons processed (thousands)........................ 4,716 2,833 3,554
Average heap leach grade (ounce/ton)......................... 0.026 0.040 0.032
Cash costs of production per ounce........................... $ 248 $ 214 $ 209
Noncash costs of production per ounce........................ 71 75 70
--------- --------- ---------
Total costs of production per ounce.......................... $ 319 $ 289 $ 279
--------- --------- ---------
--------- --------- ---------
</TABLE>

DEVELOPMENT DRILLING

Development drilling conducted during 1996 at the Lone Tree Complex resulted
in an increase of 152,000 contained ounces of gold reserves at the Trenton
Canyon Mine. Further development drilling is planned for 1997 in the Lone Tree
Complex mine areas.

ENVIRONMENTAL PROTECTION AND PERMITTING--LONE TREE MINE

All requisite permits are in place for the Company's active mining
operations within the Mine Area at the Lone Tree Mine and all permits have been
acquired for the operation of the refractory mill. Because Section 14 is located
on federal land, BLM approval was required to begin mining on this section. BLM
approval was received on October 15, 1996, at which time mining on Section 14
commenced.

Two separate appeals of the Lone Tree Mine Plan of Operations approval have
been filed with the Department of the Interior Board of Land Appeals. One was
filed jointly by the Sierra Club and Great Basin Mine Watch, both environmental
organizations. The other was filed by Laser, Inc., which is an organization
related to a labor union. The appeals primarily seek to impose additional
mitigation and other conditions on the aproval of the Lone Tree Mine expansion.
The Company has intervened in both appeals and is vigorously opposing both
appellants' positions. The Company does not believe that either appeal has
merit. An unfavorable outcome of the appeals, however, could result in
additional conditions

17
<PAGE>
on operations which may have a material adverse effect on the Company's
financial condition and the results of operations.

Because of its geologic setting, the Lone Tree Mine will require the removal
of increasingly large volumes of water to maintain a relatively dry, mineable
pit as the pit deepens. The Nevada State Engineer requires mines to obtain
permits to pump water for dewatering. The Company has appropriations from the
Nevada State Engineer to pump approximately 41,000 gallons of water per minute
from the wells on the mine site and to discharge this water into the Humboldt
River. It is expected that higher pumping rates, up to 75,000 gallons per
minute, will be required as the mine approaches its ultimate depth. Applications
for an appropriation for pumping an additional 34,000 gallons per minute have
been filed to ensure that mining operations can continue as higher volumes of
water must be removed. All protests have been resolved and the applications are
ready for action by the Nevada State Engineer. Although the Company anticipates
that it will be successful in obtaining the necessary water appropriation and
other permits, there is no assurance that such appropriation and permits will be
obtained. Failure to obtain any necessary appropriation could result in a
curtailment of gold production, reduction of reserves, or both. The Company's
ability to recover up to 50% of its reserves at the Lone Tree Mine could be
adversely affected by the failure of the Company to obtain the requested
dewatering appropriation.

The Company holds a required National Pollution Discharge Elimination System
("NPDES") permit to discharge mine water from the Lone Tree Mine into surface
waters of the United States. The permit specifies maximum concentration levels
of various elements, even though all chemical constituents of mine water are
naturally occurring. During 1995, samples of discharge mine water from the Lone
Tree Mine exceeded permit levels for the element arsenic. The Company notified
the regulatory agency with jurisdiction over the NPDES permit and has
constructed a water treatment plant to remove arsenic. The Lone Tree Mine is
currently in compliance with the arsenic effluent limitation.

ENVIRONMENTAL PROTECTION AND PERMITTING--TRENTON CANYON MINE

Approximately 59% of the reserves at the Trenton Canyon Mine are located on
federal land administered by the BLM. Therefore, BLM approval is required for
construction and mining activities on the portion of the Trenton Canyon Mine
located on federal land. BLM approval is contingent upon completion of an EIS,
which completion and approval are anticipated in early 1998 (although no
assurance can be given that required approvals will be obtained as anticipated
or with conditions acceptable to the Company). Required State of Nevada permits
have been obtained to allow mining on private lands.

ENVIRONMENTAL PROTECTION AND PERMITTING--MULE CANYON MINE

Approximately 84% of the reserves at the Mule Canyon Mine are located on
federal land administered by the BLM. Therefore, BLM approval was required for
construction and mining activities on the portion of the Mule Canyon Mine
located on federal land. BLM approval of the plan of operations, following the
completion of the EIS, was received on October 29, 1996. In March 1996 the BLM
issued approval to Lander County for the right-of-way to the road which is
utilized for hauling ore to the Twin Creeks Mine.

Two separate appeals of the Mule Canyon Mine Plan of Operations have been
filed with the Department of the Interior Board of Land Appeals. One was filed
by an individual resident of Battle Mountain Nevada and related exclusively to
the ore haulage route. The other was filed by the Northern Nevada Building
Trades Council, an organization related to a Labor Union. The Building Trades
Council appeal seeks to impose additional conditions on the approval of the Mule
Canyon Mine Plan of Operations. The Company has intervened in both appeals and
is vigorously opposing both appellants' positions. The Company does not believe
that either appeal has merit. An unfavorable outcome of the Building Trade
Council appeal, however, could result in additional conditions on operations
which may have a material adverse effect on the Company's financial condition
and the results of operations.

18
<PAGE>
MESQUITE MINE

GENERAL

The Mesquite Mine is located in Imperial County in southern California,
approximately 35 miles northeast of Brawley, and is accessed by a paved
Company-owned road which connects to a paved state highway. The net book value
of the Mesquite Mine's property, plant and equipment was $59.3 million at
December 31, 1996.

RESERVES

The table below sets forth the reserves located at the Mesquite Mine, all of
which reserves are located within the Mine Area.

MESQUITE MINE
RESERVES
AUDITED AND VERIFIED BY IMC
(DECEMBER 31, 1996)

<TABLE>
<CAPTION>
TONS AVERAGE CONTAINED
(IN GOLD GRADE OUNCES(1)
THOUSANDS) (OUNCE PER TON) (IN THOUSANDS)
------------- ----------------- -----------------
<S> <C> <C> <C>
High-Grade Oxide Run-of-Mine Heap Leach Ore....................... 18,151 0.026 476
Low-Grade Oxide Run-of-Mine Heap Leach Ore........................ 25,465 0.011 272
Refractory Run-of-Mine Heap Leach Ore............................. 2,434 0.034 84
------ ----- ---
Total......................................................... 46,050 0.018 832
------ ----- ---
------ ----- ---
</TABLE>

- ------------------------

(1) Includes 763,000 ounces on private mineral rights, 40,000 ounces on
unpatented mining claims with first-half final certificates and 29,000
ounces on unpatented mining claims without first-half final certificates.
The Company estimates that approximately 62% of the gold contained in the
reserves as of December 31, 1996, is recoverable.

HISTORY

Gold Fields commenced drilling operations at the Mesquite Mine in September
1981. Gold was first poured at the mine in February 1986. HNRC acquired the
Mesquite Mine in 1989 and operated the Mesquite Mine from August 1989 until the
effective date of the Exchange in June 1993.

GEOLOGY

The deposits at the Mesquite Mine lie on the southwestern flank of the
Chocolate Mountains in highly metamorphosed rocks which have an extremely
complex structural history. Faulting had a strong control on the mineralization.
Gold mineralization occurs in structurally-prepared metamorphosed rock in the
Mine Area. Gold in the oxide-ore zones occurs as disseminated pyrite which has
oxidized to limonite and microscopic fracture coatings.

19
<PAGE>
MINERAL RIGHTS (AS OF DECEMBER 31, 1996)

MINING AND PROCESSING

Mining at the Mesquite Mine is conducted in two open pits utilizing
conventional open-pit mining methods. During 1996, the Company mined 25.9
million tons of overburden, 13.9 million tons of oxide heap-leach ore and 1.6
million tons of refractory heap leach ore at the Mesquite Mine and produced
186,797 ounces of gold.

The current equipment fleet consists of large hydraulic shovels and
front-end loaders coupled with 85-and 150-ton haul trucks working on 20-foot
benches. The mining fleet is supported with a full set of ancillary equipment.
The equipment fleet is in good condition; with recent addtions of eight 150-ton
haul trucks and two 24- cubic yard shovels.

Heap-leaching cycles at the Mesquite Mine are typically 75 to 120 days and
achieve gold recoveries which have historically approximated 78%. Since
September 1996 all ore is shipped directly to the pads without crushing.
Metallurgical testing of run-of-mine ore shows an expected gold recovery of from
60% to 70% depending on ore grade. Gold is recovered from the pregnant solution
from both heap-leaching processes by means of carbon adsorption, pressure
stripping and electro-winning.

Mining and processing operations at the Mesquite Mine are on a
seven-days-per-week schedule. Mining operations are conducted over two 10-hour
shifts each working day, and processing operations are conducted over two
12-hour shifts each working day.

The Company currently plans to process run-of-mine heap leach ore through
1999 at a rate of approximately 15.0 million tons per year. Facilities are in
place to accomplish these goals with the exception of an additional leach pad,
which is planned for 1997. Production at the Mesquite Mine is estimated to vary
between 150,000 and 175,000 ounces of gold per year for 1997 through 1999 and
approximately 40% of that amount in 2000. Production is expected to continue
through 2002 at substantially reduced levels. The Mesquite Mine is currently
running near capacity.

Operations at the Mesquite Mine draw water from three wells located on
Company-owned land approximately four miles south of the processing facility.
The Company has received appropriate permits for water usage of up to 2,493
gallons per minute, with current water usage of approximately 680 gallons per
minute. Potable water is provided by an on-site, reverse-osmosis plant owned and
operated by the Company. Electric power is supplied by the Imperial Irrigation
District.

20
<PAGE>
SELECTED OPERATING DATA:

<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
----------------------------------
1996 1995 1994
---------- ---------- ----------
<S> <C> <C> <C>
MESQUITE MINE
Total gold production (ounces)........................... 186,797 193,361 207,508
Total tons mined (millions).............................. 41.4 37.5 35.8
Heap leach tons processed (thousands).................... 15,528 13,767 10,770
Average heap leach grade (ounce/ton)..................... 0.022 0.022 0.030
Cash costs of production per ounce....................... $ 246 $ 201 $ 177
Noncash costs of production per ounce.................... 117 106 95
---------- ---------- ----------
Total costs of production per ounce...................... $ 363 $ 307 $ 272
---------- ---------- ----------
---------- ---------- ----------
</TABLE>

DEVELOPMENT DRILLING

The Mesquite Mine is a mature property, having undergone several years of
exploration. Development drilling is scheduled to continue through 1997.

ENVIRONMENTAL PROTECTION AND PERMITTING

The Mesquite Mine has instituted several environmental-protection
innovations, including dust abatement at the coarse-ore stockpile using a dust
cap, pond covers for heap-leaching solutions, desert tortoise protection and
drip irrigation of leach pads. The Company believes that it has complied with
all desert tortoise mitigation requirements imposed by the BLM and the United
States Fish and Wildlife Service ("USFWS"). However, the Company is currently in
negotiations with the BLM regarding whether and to what extent additional desert
tortoise mitigation might be required to continue mining activities under the
Company's existing, approved plans of operations. The Company believes no
further mitigation requirements are necessary beyond those acquired from HNRC in
the Exchange, a position the BLM has not accepted. On the basis of the BLM's
stated position in the negotiations, the Company believes the negotiations with
the BLM will be resolved in a manner that will not have a material adverse
effect on the operation of the Mesquite Mine. (See "Regulations and
Environmental--Protection Matters".)

LANDFILL

HNRC is in the process of obtaining appropriate permits for a proposed
landfill on land partially within the Mine Area at the Mesquite Mine, a project
which was contemplated at the time of the Exchange. The landfill is not expected
to affect the Company's operation of the Mesquite Mine. Although the operations
will be separate, the landfill may use mine overburden, clay and heap leach
residues to cover the material in the landfill. The Landfill Facilities and
Mineral Lease Agreement, between the Company and HNRC, allows for uninterrupted
mining operations with no interferences or encumbrances by HNRC that could
preclude successful extraction and processing of all reserves.

DEVELOPMENT PROJECTS

ROSEBUD MINE

GENERAL

The Rosebud Mine is an underground, high-grade free-milling sulfide gold
deposit which is held in a 50/50 limited liability company with Hecla, the
designated operator. The Rosebud Mine is located approximately 55 miles west of
Winnemucca, Nevada and is accessed by an improved county road and by
approximately 8 miles of road owned and maintained by the limited liability
company. Construction of the surface facilities and infrastructure commenced in
August 1996. The limited liability company plans to

21
<PAGE>
transport ore from the Rosebud Mine by truck to the Twin Creeks Mine for
processing, subject to receiving approval of required permit modifications. The
Company will fund $12.5 million for mine development and will also fund certain
modifications to the Twin Creeks Mine south mill facility. Completion of
development and commencement of commercial ore production is expected in the
second quarter of 1997 at an annual rate of 100,000 ounces, 50,000 ounces of
which represent the Company's share of production.

RESERVES

The table below sets forth the Company's 50% share of reserves located at
the Rosebud Mine:

ROSEBUD MINE
RESERVES
AUDITED AND VERIFIED BY IMC
(DECEMBER 31, 1996)

<TABLE>
<CAPTION>
AVERAGE CONTAINED
TONS GOLD GRADE OUNCES
(IN THOUSANDS) (OUNCE PER TON) (IN THOUSANDS)
----------------- ----------------- -----------------
<S> <C> <C> <C>
Oxide Mill Ore................................ 638 0.392 250
--- ----- ---
--- ----- ---
</TABLE>

HISTORY

Mining has been intermittent in the Rosebud district since the discovery of
gold and silver in 1906. From 1908 to 1947, several mines in the district
produced minor amounts of gold and silver. In the mid-1980s, Equinox Resources,
Ltd. ("Equinox") of Vancouver, British Columbia and LAC Minerals (USA), Inc.
("LAC") staked claims throughout the Rosebud district and began surface
exploration. Equinox and LAC continued exploration activities through a joint
venture formed in 1990, which brought the project to a pre-feasibility stage. In
1993, Equinox purchased LAC's interest in the joint venture.

In February 1993, an environmental assessment for underground exploration
and test work was accepted by the BLM and Equinox collaborated with Hecla to
design and develop an initial access decline into the Rosebud ore body. Hecla
acquired Equinox in 1994 and became the sole owner of the property. In May 1996,
Hecla agreed to enter into a 50/50 limited liability company with the Company
for the development of the Rosebud Mine. The limited liability company agreement
was finalized in September 1996.

GEOLOGY

The Rosebud deposit is a volcanic-hosted, epithermal gold-silver deposit
situated in the north-trending Kamma Mountains of northwestern Nevada. The
deposit occurs along the ring-fracture margin of an interpreted resurgent
intrusive dome. Gold and silver mineralization is strongly controlled by both
stratigraphy and structure; occuring as disseminated and stockworked zones in
specific volcanic flow units, and localized along low-angle east-west fractures
and high-angle northeast fractures.

Gold and silver mineralization at the Rosebud deposit occurs as free-milling
sulfide and are strongly associated with quartz, calcite, clays and
iron-sulfide, predominantly marcasite. Major ore minerals include electrum,
pyrargyrite, naumannite, argentite and native silver. The silver-to-gold ratio
of the deposit is approximately 7:1.

22
<PAGE>
MINERAL RIGHTS (HELD BY THE LIMITED LIABILITY COMPANY AS OF DECEMBER 31,
1996)

<TABLE>
<CAPTION>
NATURE OF OWNERSHIP ACRES
- ------------------------------------------------------------------------------------- ---------
<S> <C>
Patented mining claims owned......................................................... 60
Unpatented mining claims owned....................................................... 14,480
Unpatented mining claims controlled.................................................. 960
Controlled by the limited liability company as lessee................................ 1,723
---------
Total.............................................................................. 17,223
---------
---------
</TABLE>

MINING AND PROCESSING

The Rosebud Mine will be a conventional, mechanized underground mining
operation. Mine access is via two declines. Mining will use a drift and fill
method for nearly 80% of the production and the more efficient rib-pillar or
blasthole stoping method will be used in the larger mineralized zones. Equipment
includes 3.5 and 6 cubic yard units, 16- and 20-ton trucks, and a complete fleet
of modern underground support vehicles. The mine has complete maintenance
facilities and a backfill plant capable of supporting the planned mining rate of
750 tons per day. Mined ore will be stockpiled at the mine site and shipped to
the Twin Creeks Mine for processing by contract haulers.

DEVELOPMENT DRILLING

The limited liability company plans an aggressive exploration and
development drilling program on the Rosebud Mine property during 1997.

ENVIRONMENTAL PROTECTION AND PERMITTING

Hecla began permitting work related to the Rosebud Mine during 1994 and
completed such work during 1996. All local permits for mine construction and
operation have been obtained. Transportation of the ore from the Rosebud Mine to
the Twin Creeks Mine for processing requires a modification to the BLM plan of
operations and the completion of an environmental assessment. The request for
modification of the plan of operations was submitted on October 15, 1996, and
the BLM has initiated its review process. Certain modifications to the Twin
Creeks Mine south mill facility will be required for the processing of ore from
the Rosebud Mine. Such plant modifications will require air quality permit
modifications and water pollution control permit modifications. Requests for
approval of such permit modifications have been submitted and approval is
anticipated late in the first quarter of 1997.

EXPLORATION AND DEVELOPMENT

The Company usually conducts the exploration and development of mineral
rights under its control directly, but also enters into joint venture
arrangements for such purposes with other companies. The Company is engaged in
exploration projects in the United States, Canada, Mexico, Brazil, Chile,
Kazakstan, the Kyrgyz Republic, Ghana, Burkina Faso and Australia. Approximately
43% of the Company's exploration expenses occurred at projects in the United
States during 1996.

The Company maintains an exploration team of approximately 240 individuals,
including geologists, land professionals and support staff, many of whom were
involved in the discovery of the gold deposits at the Company's mines and at its
development projects. The Company spent $32.9 million on exploration and $9.7
million on development drilling in 1996.

23
<PAGE>
UNITED STATES EXPLORATION

GENERAL

The focus of the Company's domestic exploration program is north-central
Nevada, specifically the Carlin Trend, the Battle Mountain-Eureka Trend and the
Rabbit Trend, each of which hosts large Carlin-type deposits that are amenable
to open-pit mining. Exploration for other deposit types is also conducted if
they are considered capable of hosting large, economic gold deposits. The
Company believes that exploration and development activities at its existing
mines, development projects, and advanced exploration projects represent the
most likely source of increases in the Company's reserves over the short-term.

The Company's private mineral rights holdings in north-central Nevada
provide a long-term exploration position in these major gold trends. These
private mineral rights holdings, which lie in a checkerboard pattern, allow the
Company to observe and benefit from the exploration activities of others on the
intervening lands.

The Company participates in joint venture agreements with industry partners
to conduct exploration on its mineral rights holdings. The Company typically has
approximately 10 such joint venture agreements in effect at any given time,
under which the Company's joint venture partners in the aggregate typically
spend between $1 million and $3 million per year to explore the related
properties. During 1996, the Company participated in 12 joint venture agreements
pursuant to which $2.2 million was spent by partners. Joint venture agreements
benefit the Company by obtaining outside funds for exploration of the Company's
mineral rights and by giving the Company access to holdings of outside parties
without the risk and cost of outright acquisition. The Company may be either the
designated operator or an equity participant in a project under the terms of an
individual joint venture agreement.

DOMESTIC EXPLORATION

ELKHORN, MONTANA. The Elkhorn project was acquired by the Company in the
Exchange. The project is located approximately 30 miles south of Helena,
Montana, on the western slope of the Elkhorn Mountains adjacent to the abandoned
town of Elkhorn, in Jefferson County, Montana. Gold-bearing mineralization was
discovered at the Elkhorn project by Gold Fields in 1984. As of December 31,
1996, drilling performed by the Company has indicated approximately 12 million
tons of gold mineralization at an average grade of 0.10 ounce per ton. Work
conducted to date indicates that mineralized material is present in at least
five separate areas at the Elkhorn project. This mineralization is mostly
sulfide in character, but does not appear to be refractory. The Company is
assessing appropriate alternatives for the Elkhorn project including joint
venture, trade or sale. As of December 31, 1996, the carrying value of the
Elkhorn property was $11.4 million.

GOLDEN EAGLE, WASHINGTON. The Company entered into the Golden Eagle joint
venture with Hecla in August 1995. The Golden Eagle project includes all lands
controlled by Hecla in the Republic district in northeastern Washington which
total approximately 5,318 acres of mostly private land. The Company owns a 75%
interest in the core properties and has an option to acquire a 75% interest in
the remaining property by completing a feasibility study within 6 years. As of
December 31, 1996, 9.1 million tons of mineralized material at an average grade
of 0.082 had been identified. Economic and technical analyses indicate that
either gold price improvement or reduction in operating or capital costs are
required to warrant a positive development decision. As of December 31, 1996,
the carrying value of the Golden Eagle property was $2.5 million.

FOREIGN EXPLORATION

The Company believes that a number of areas outside the United States until
recently have not been open to large-scale exploration for gold using modern
exploration techniques for political or other reasons and thus may present
attractive opportunities for such exploration. Foreign mineral exploration
involves all

24
<PAGE>
of the risks associated with domestic exploration plus additional risks
associated with foreign political and economic factors. The Company monitors
political and economic developments in the countries where it is planning
exploration and attempts to conduct exploration in the most stable and favorable
countries. However, there can be no assurance that any of the foreign prospects
will result in a viable gold-producing operation, that any of the mineralization
identified to date will ultimately result in an increase in the Company's
reserves or that exploration or future mining operations, if any, will not be
adversely affected by foreign political or economic events.

In connection with its foreign exploration program, the Company has acquired
control, in its own name or through joint venture agreements, of approximately
12,500,000 acres of mineral rights in nine foreign countries, including
approximately 7,500,000 acres in Kazakstan, approximately 1,247,000 acres in the
Kyrgyz Republic, approximately 1,858,000 acres in Ghana, approximately 969,000
acres in Burkina Faso, approximately 459,000 acres in Brazil, approximately
256,000 acres in Australia, approximately 121,000 acres in Mexico, approximately
81,000 acres in Chile and approximately 9,000 acres in Canada.

GURUPI PROJECT, BRAZIL. In February 1995, the Company entered into a joint
venture with TVX Gold, Inc. for the exploration and potential development of the
Gurupi Project in the state of Maranhao, Brazil. The Company has a 50% interest
in the project, subject to certain payments to land holders. Exploration
activities were conducted during 1995 and 1996 and as of December 31, 1996, 35.4
million tons of mineralized material at an average grade of 0.034 ounce per ton
had been identified. The Company plans to continue the aggressive drilling
program and to initiate a feasibility study in 1997.

SHARALTYN PROJECT, KAZAKSTAN. In April 1995, the Company was issued an
exploration and mining license for the Sharaltyn Joint Venture by the Republic
of Kazakstan. Initially the project was held in a joint venture, between the
Company and two state-owned entities and in which the Company had a 50%
interest, initially controlling an area of 7.5 million acres in northeast
Kazakstan. On February 10, 1997, the Company entered into an agreement to
acquire the carried 50% interest in the joint venture for $3.05 million. The
acquisition will become final upon registration with the Republic of Kazakstan's
ministry of Justice, which is anticipated in March 1997. Drilling during 1996
has produced encouraging results, including a large area of gold mineralization
at the Jaima II prospect and an apparent shallow dipping oxide zone in the
Dymovsky prospect. Further drilling is planned for 1997.

SOLTON SARY JOINT VENTURE, KYRGYZ REPUBLIC. In February 1996, the Company
entered into a joint venture agreement with Kyrgyzaltyn, a state-owned mining
company of the Kyrgyz Republic, for the exploration and potential development of
the Solton Sary project in north-central Kyrgyzstan. The Company can earn a 50%
interest in the project by spending $2.5 million in exploration expenses over
four years. The Company will receive 50% of the cash flow from the first mine
developed until Kyrgyzaltyn recovers its contribution which has been established
at approximately $10 million. After Kyrgyzaltyn recovers its contribution, the
Company will receive 90% of the cash flow from any mine which might be developed
until it has recovered its capital investment. Cash flow will be divided equally
subsequent to investment recovery by the Company. Drilling was conducted in 1996
in two profiles with encouraging results. Further drilling is planned for 1997.

DOMESTIC MINERAL RIGHTS

The Company controls over 6.4 million acres of private mineral rights in the
states of Arizona, California, Colorado, Kansas, Montana, Nevada, New Mexico and
Utah, of which over 1.5 million acres are in north-central Nevada, an area of
extensive gold mining activity. The Company also controls approximately 180,000
acres of mineral rights through unpatented mining claims on lands owned by the
United States.

25
<PAGE>
CONTROLLED MINERAL RIGHTS

Approximately 1,259,421 acres of the private mineral rights controlled by
the Company involve land on which the surface estate has been severed from the
mineral estate and parties unrelated to the Company own the surface estate. In
addition, lands where the Company owns both the mineral estate and the surface
estate account for approximately 245,158 acres of the private mineral rights
controlled by the Company.

The Company controls mineral rights with respect to approximately 4,785,028
acres owned by other private entities, by state or tribal governments and by
persons who have located unpatented mining claims on lands owned by the United
States through a variety of mineral leases and licenses. Such mineral leases and
licenses permit the Company to conduct exploration, development and mining for a
specified term and typically require the payment of rent and royalties to the
lessor.

Included in the mineral rights the Company controls as lessee under mineral
leases are approximately 3,270,449 acres owned by Santa Fe Pacific Railroad
Company, a wholly-owned subsidiary of SFP ("SFP Railroad") and leased to the
Company under two minerals leases ("Minerals Leases"). Under the Minerals
Leases, the Company controls the hard-rock minerals in all of SFP Railroad's
holdings which are located in Arizona, New Mexico, Nevada and Utah consisting of
approximately 3,119,215 acres of severed mineral estates and 151,234 acres of
surface and mineral estates. The Minerals Leases each have a term through
December 31, 2086, and for so long thereafter as minerals are being produced in
commercial quantities from any part of the leased premises. Each of the Minerals
Leases obligates the Company to pay a production royalty of 2 % net smelter
returns on the minerals produced by the Company from the leased premises and to
administer all deeds, leases, contracts, licenses, subleases and other
arrangements with third parties with respect to the leased premises in return
for which the Company may receive the benefit of one-half of the revenues
received from such third parties. SFP Railroad has entered into an installment
sales agreement covering approximately 151,000 acres of surface and mineral
estates in Arizona. Consummation of the sales would terminate the Company's
ability to lease the mineral rights sold.

The Company also controls lands under an agreement with Catellus Development
Corporation, a former affiliate of the Company ("Catellus"), and another
agreement with The Atchison, Topeka and Santa Fe Railway Company, a wholly-owned
subsidiary of SFP ("Santa Fe Railway"), with respect to certain lands in
California and Utah and with Nevada Land & Resources Company ("NL&RC"), a
successor to Santa Fe Railway with respect to certain lands in Nevada. Under
these agreements, the Company has the exclusive right to conduct exploration
activities and to acquire mineral leases at its option on approximately 409,369
acres of private mineral rights in California, Nevada and Utah. The agreement
with Catellus covers approximately 23,428 acres in California and expires on
December 31, 2014. The agreement with Santa Fe Railway covers approximately
1,133 acres in California and 32,242 acres in Utah, and has an initial term
through December 31, 2015, after which the Company may elect up to two
extensions of 25 years each. The agreement with NL&RC covers approximately
349,788 acres in Nevada. These agreements each contain a mechanism for
extinguishing the agreement as to lands which the owner wishes to sell to a bona
fide purchaser and which the Company elects not to acquire by exercising a right
of first refusal. The Company has not yet exercised its right to purchase lands
under these provisions.

Unpatented mining claims that are owned and have been located by the Company
(or located by others and acquired by the Company) under the federal General
Mining Law of 1872 ("Mining Law") on lands owned by the United States account
for approximately 180,000 acres of the federal mineral rights controlled by the
Company. The Company is involved in two actions in which it is seeking to compel
the issuance of first-half final certificates and patents. (See "Item 3. Legal
Proceedings".)

Under the complex body of federal and state statutory and decisional law
applicable to unpatented mining claims, requirements for the location of a valid
unpatented mining claim depend on the type of claim being staked, but generally
include discovery of valuable minerals, erecting a monument and posting

26
<PAGE>
thereon a location notice, marking the boundaries of the unpatented mining claim
and filing a certificate of location with the county in which the claim is
located. If the statutes and regulations for the location of an unpatented
mining claim are complied with, the claimant obtains a valid possessory right to
the contained minerals. To preserve an otherwise valid unpatented mining claim,
a claimant also must make certain additional filings with the county and the BLM
and pay an annual fee required by the United States. Failure to pay the fee or
make the required filings may render the unpatented mining claim void or
voidable.

Because unpatented mining claims are self-initiated and self-maintained,
they possess some unique vulnerabilities not associated with other types of
property interests. It is impossible to ascertain the validity of unpatented
mining claims from public real property records, and therefore it can be
difficult or impossible to confirm that all of the requisite steps have been
followed for location and maintenance of an unpatented mining claim.

COMMITTED MINERAL RIGHTS

As an adjunct to its principal business of exploring for and producing gold,
the Company leases portions of its domestic mineral rights holdings to unrelated
parties. The leased portions are generally areas which are not considered to be
attractive sites for exploration by the Company's geologists or are attractive
for minerals other than gold. However, there may be leases on some sites which
predate the Company's acquisition of the mineral rights involved. While the
leases remain in effect, the Company cannot explore or develop the mineral
rights subject to each lease but retains an economic interest in the form of
rents and royalties from the leases.

The Company's 1996 revenue for rentals and royalties totaled $6.0 million,
of which $4.6 million represented royalties on gold produced by Newmont Gold
Company, a subsidiary of Newmont, from the Gold Quarry Mine, located in Carlin,
Nevada, the largest gold mine in North America. As of December 31, 1996, the
Company was lessor of approximately 70,000 acres of mineral rights,
approximately 57,000 acres of which the Company held by virtue of mineral leases
from SFP Railroad, Catellus, Santa Fe Railway or NL&RC and subleased to third
parties.

ACCESS TO MINERAL RIGHTS

Many of the private mineral rights controlled by the Company are arranged in
a checkerboard pattern of surveyed sections due to their origin in railroad land
grants to the Company's predecessors in title. The preponderance of the severed
mineral estates controlled by the Company do not have public or negotiated
access, which the Company would need to conduct exploration, development or
mining on the mineral rights under the severed mineral estates. Where existing
public or negotiated private access routes do not cross or touch individual
sections, access is not assured for the personnel and equipment necessary for
exploration and mining activities. The Company has been successful in obtaining
necessary access for most of its activities and has not to date suffered
exclusion from any area of perceived high gold potential. At each of its mines
the Company has rights to use and occupy the surface both inside and outside the
Mine Area sufficient for the Company to conduct the operations on the mineral
rights controlled by the Company. Federal agencies regulate the access to
unpatented mining claims not located on established access routes. The Company
has succeeded in obtaining necessary access to all of its material projects from
these agencies. However, there is no assurance that the Company will be able to
negotiate satisfactory access to all of its mineral rights.

REGULATIONS AND ENVIRONMENTAL-PROTECTION MATTERS

GENERAL

The Company is subject to extensive federal, state and local government laws
and regulations governing, among other things, mining and exploration
operations, discharge of materials into the

27
<PAGE>
environment, disturbance of land, reclamation of disturbed lands, threatened or
endangered species and other environmental matters. Generally, compliance with
these laws and regulations requires the Company to obtain permits issued by
federal, state and local regulatory agencies. Certain permits require periodic
renewal or review of their conditions. The Company cannot predict whether it
will be able to renew such permits or whether material changes in permit
conditions will be imposed. Non-renewal of permits or the imposition of
additional conditions could have a material adverse effect on the Company's
financial condition or results of operations. The Company must also comply with
mining, environmental-protection and other laws of the foreign countries in
which it is currently conducting exploration activities to the extent such laws
have been developed.

The Company believes that, except as described herein, it is in compliance
in all material respects with current applicable federal, state and local laws
and regulations. However, compliance with existing and future laws and
regulations may require additional environmental-protection measures and
expenditures which cannot be estimated at this time. Compliance requirements for
new mines and mills may require substantial additional environmental-protection
measures and expenditures that could materially affect proposed permitting and
construction schedules for such facilities. Under certain circumstances,
facility construction, modification or expansion may be delayed pending
regulatory approval. The cost of complying with existing and future laws and
regulations may render currently operating or future properties less profitable
and could adversely affect the level of the Company's reserves.

POSSIBLE REFORM OF THE MINING LAW

Reform of the General Mining Law of 1872 ("Mining Law") has been an issue of
intense debate in recent sessions of Congress, but despite the efforts of the
U.S. hardrock mining industry, including those of the Company, the hoped-for
reform of the Mining Law did not happen in 1996. While possible revision of the
Mining Law could occur in the 105th Congress, the Company cannot predict when or
if it will occur, or whether legislation that is enacted will exempt or
otherwise "grandfather" existing mining operations or unpatented mining claims
for which first-half final certificates have been obtained from the imposition
of any or all of the revisions. Thus, because of the uncertainty surrounding
passage of needed legislative reform, the Company cannot predict the actual
effect which such legislation may have on the Company's results of operations or
financial condition, or on its ability to conduct exploration and mine
development activities on federal lands of the U.S. on a timely basis.
Currently, approximately 71% of the Company's reserves as of December 31, 1996,
are located on private mineral rights, approximately 25% are on unpatented
mining claims on federal lands with first-half final certificates, and
approximately 4% are on unpatented mining claims on federal lands without first
half final certificates.

ENVIRONMENTAL-PROTECTION LAWS

The Company is required to comply with federal environmental-protection laws
and with implementing regulations adopted by the Environmental Protection Agency
("EPA"), the USFS, the BLM, the USFWS, the United States Army Corps of Engineers
and other agencies. In each state in which the Company operates, various
federal, state and local agencies enforce extensive laws and regulations which
address the environmental impacts of mining and mineral processing, including
the potential for contamination of soil, water and air from various discharges
or wastes generated in the normal course of mining activities. In particular,
the Clean Air Act, the Clean Water Act, the Endangered Species Act, and the
National Environmental Policy Act, among other laws and regulations, require
analyses and/or impose effluent standards, new source performance standards, air
quality and emission standards and other design or operational requirements upon
various aspects of gold exploration, development, mining and processing.

CLEAN AIR ACT The principal areas of concern to the Company under the Clean
Air Act are dust and particulate emissions from mining and processing, and
exhaust emissions from mining and processing equipment and furnaces. At a
minimum, the federal program added by the 1990 amendments to the Clean

28
<PAGE>
Air Act will require additional operating permits at certain existing facilities
and may require additional facility monitoring and additional air pollution
control equipment.

CLEAN WATER ACT The Clean Water Act is one of the principal federal
environmental-protection laws affecting mining operations. The Clean Water Act
sets effluent limitations on waste water discharges and establishes the NPDES,
which permits limited discharges from point sources, including certain mine
facilities, into waters of the United States. Permits with strict effluent
limitations are often issued for discharges from mine dewatering,
ore-processing, maintenance and heap leaching operations, tailings ponds, and
acid mine drainage. Clean Water Act permits are also required for the dredging
and filling or excavation of all waters of the United States and wetlands (which
are broadly defined under federal law) and for certain stormwater discharges
where runoff comes into contact with overburden. The Company has obtained the
required NPDES, dredge, fill and stormwater permits for its mines and has either
received or applied for the required excavation permits.

ENDANGERED SPECIES ACT The Mesquite Mine in California is directly affected
by the Endangered Species Act through the listing of the desert tortoise as a
threatened species. However, the Company believes that listing will not have a
material adverse effect on the operation of the Mesquite Mine. The operating
permits for the Mesquite Mine impose a life-of-mine limit on the number of
desert tortoises the Company may "take" at the Mesquite Mine. The Endangered
Species Act defines "take" to mean harass, harm, pursue, hunt, shoot, wound,
trap, capture or collect or to attempt to do any of the foregoing. The maximum
number of "takes" allocated to the Company is 37. As of December 31, 1996, 21
takes had occurred, all in the form of relocating desert tortoises to an
appropriate site away from the mining operations. Mortalities of desert
tortoises are limited to five, and none has occurred. Exceeding the limits for
takes or mortalities would subject the Company to a reconsultation with the
USFWS under Section 7 of the Endangered Species Act. This process could
potentially delay operations at the Mesquite Mine, require additional desert
tortoise mitigation efforts such as monetary contributions or land exchanges, or
result in premature closure of the Mesquite Mine. Company personnel have
received training to avoid takes and mortalities and other efforts have been
made to protect the habitat of the desert tortoise at the Mesquite Mine, such as
speed limits on the mine roads, fencing to deny desert tortoises access to the
Mine Area, and undisturbed habitat donated to the BLM by the Company.

NATIONAL ENVIRONMENTAL POLICY ACT The National Environmental Policy Act
("NEPA") requires all agencies to consider the impact on the human environment
of major federal actions within the meaning of NEPA. The Company's exploration
and mining activities often involve federal lands or federal permits or both,
which in turn, may trigger what are deemed under NEPA to be major federal
actions. NEPA requires that major federal actions be reviewed in an EIS prepared
by or under the direction of a federal agency, if the major federal actions have
the potential to affect significantly the quality of the human environment.
Preparation of an EIS can delay the federal action being reviewed and the
Company's activity which depends on that action. The Company has no control over
the EIS preparation or review, and delays resulting from EIS preparation or
review are uncertain risks to the completion of any activity subject to the EIS
requirement.

ENVIRONMENTAL-PROTECTION LAW COMPLIANCE The Company has developed and
implemented an environmental-protection compliance system consisting of
compliance manuals and training programs for each mine which detail, in a
checklist format, permit, monitoring and reporting requirements applicable to
day-to-day operations. Monthly compliance reports are reviewed by management of
the Company and action is taken where appropriate. The Company conducts internal
environmental-protection audits on at least an annual basis for all mines. The
audit team is augmented by representatives of third-party consultants who not
only act as team members but also provide an external evaluation of audit
procedures.

29
<PAGE>
It is also the Company's policy, prior to acquisitions, to conduct
environmental risk assessments to evaluate potential environmental liabilities
that may be associated with such acquisitions. These assessments are distributed
to appropriate department managers to be used in final acquisition decisions and
risk analyses.

The Company believes that, except as described herein, it complies in all
material respects with applicable environmental-protection laws and regulations.
The Company has received what it believes to be minor citations for violations
with respect to its operations and mineral rights holdings. Each of those
citations has been resolved to the satisfaction of the applicable regulatory
authorities. As of December 31, 1996 there were no outstanding citations. The
Company's compliance program involves designing and constructing all facilities
to meet standards required by applicable environmental-protection laws and
regulations, and a significant but not readily quantifiable portion of the
capital cost of each facility is devoted to compliance features. The Company is
not aware of any conditions on its properties which are likely to require
remedial expenditures for compliance which are likely to be material to the
financial condition or results of operations of the Company.

PERMITTING AND RECLAMATION

The Trenton Canyon Mine, and all future exploration and development projects
require or will require a variety of governmental permits. Although the Company
believes the permits for these projects can be obtained in a timely manner, the
applicable permitting procedures are complex, time-consuming and subject to
potential regulatory delay, including delays resulting from various applicable
public comment and protest procedures or litigation. The Company does not
believe that existing permitting requirements or other environmental-protection
laws and regulations will have a material adverse effect on its financial
condition or results of operations. However, the Company cannot be certain that
future changes in laws and regulations would not result in significant
additional expense, capital expenditures, restrictions or delays associated with
the development and operation of the Company's properties. In addition, the
Company cannot predict whether it will be able to renew its existing permits or
whether material changes in existing permit conditions will be imposed.
Non-renewal of existing permits or the imposition of additional conditions could
have a material adverse effect on the Company's financial condition or results
of operations.

The State of Nevada adopted the Mined Land Reclamation Act in 1989 that
established design, operation, monitoring and closure requirements for all
mining facilities. The act has increased the cost of designing, operating,
monitoring and closing new mining facilities and could affect the cost of
operating, monitoring and closing existing mining facilities. The State of
Nevada has also adopted reclamation regulations pursuant to which reclamation
plans have been prepared and financial assurances established for existing
facilities. New facilities are also required to provide a reclamation plan and
financial assurance to ensure that the reclamation plan is implemented upon
completion of operations. The Company has received approved reclamation plans
for the Twin Creeks Mine, the Lone Tree Mine, Trenton Canyon Mine, and the Mule
Canyon Mine, as existing mining facilities. Reclamation plans and permits are
also required for exploration projects that will result in more than five acres
of surface disturbance.

The New Mexico Mining Act is a reclamation statute applicable to most
existing hard-rock and precious metals mines, as well as to future exploration
and mining projects, in New Mexico. The act applies to certain closed uranium
mines, including several located on lands in which the Company owns the mineral
rights or other real property interests. The act requires, among other things,
closure and reclamation of all mines and exploration projects to which it
applies. The closure and reclamation obligations associated with mining
operations are imposed upon the operator or owner of the mining operation. The
act is subject to interpretation as to whether the underlying mineral owner has
any potential obligation to comply with the act where the minerals were leased
to an operator and a royalty on production was retained. The Company or its
predecessors in interest leased their mineral rights in uranium to several
operators beginning in the 1950s, and production of uranium occurred on several
of the

30
<PAGE>
tracts. Although past reclamation efforts have been undertaken on many of those
closed uranium mines, it is presently unclear whether any further reclamation
activities will be required at the closed uranium mines pursuant to the act and
implementing regulations. The relevant lease agreements generally allocated to
the operator the obligation to conduct operations in accordance with applicable
mining laws and to indemnify the lessor for any expenses, claims, demands or
liabilities resulting from operations conducted on the properties prior to
termination of the leases. Thus, if the Company were subject to liability under
the act for any reclamation expenses or liabilities for unreclaimed uranium
properties, the Company believes it would likely, in most instances, have
contractual claims against the operator. Whether or not the Company were to
succeed in its contractual claims against operators, the Company does not
believe the potential liability for reclamation under the act would have a
material adverse effect on the Company's financial condition or results of
operations.

EMPLOYEES

As of December 31, 1996, the Company employed approximately 2,000 people,
none of whom was represented by a union or other collective bargaining agent.
Employees conduct most of the functions of the Company, although consultants and
contractors in the fields of geology, engineering, hydrology, drilling, law,
insurance, human resources planning and legislative liaison provide significant
services necessary for the functioning of the Company. The Company believes its
employee relations are satisfactory.

31
<PAGE>
GLOSSARY OF CERTAIN MINING TERMS

ADVANCED EXPLORATION PROJECT: a gold prospect that has yielded sufficient
indications of gold mineralization after initial drilling to justify more
definitive drilling, metallurgical test work and engineering and economic
studies to quantify project economics

AGGLOMERATION: the process used to improve the solution percolation of
fine-or clay-type ores being treated in heap leaching. By mixing the ore with
lime, cement and/or liquid, the fine particles adhere to larger particles,
thereby distributing the fine particles more uniformly through the leached
material to enhance percolation of leach solution in the heap leach.

AUTOCLAVE: a multi-compartment, mechanically-agitated pressure vessel used
to oxidize the sulfide minerals contained in gold ores. Gold ore slurry is
introduced into the autoclave under high pressure and temperature and chemically
reacts with oxygen being sparged into the vessel, thus oxidizing the sulfide to
sulfate and preparing the contained gold to be leached with cyanide in
subsequent steps. Autoclaves for gold processing typically operate at pressures
ranging from 230 to 450 pounds per square inch, and at temperatures ranging from
180 DEG. C to 250 DEG. C.

BALL MILL: a large rotating cylinder used for grinding ore with metal balls
as the grinding medium

BENCH: the horizontal floor along which mining progresses in a pit. As the
pit progresses to lower levels, safety benches are left in the walls to catch
any rock falling from above.

CARBON-IN-LEACH (CIL): a process similar to carbon-in-pulp (CIP) except
that the ore slurries are not leached with cyanide prior to carbon loading.
Instead, the leaching and carbon loading occur simultaneously.

CARBON-IN-PULP (CIP): a common process used to extract gold from cyanide
leach slurries. The process consists of carbon granules suspended in the slurry
and flowing counter-current to the process slurry in multiple-staged agitated
tanks. The process slurry, which has been leached with cyanide prior to the CIP
process, contains solubilized gold. The solubilized gold adsorbs onto the carbon
granules which are subsequently separated from the slurry by screening. The gold
is then recovered from the carbon by further processing.

CARLIN-TYPE DEPOSIT: gold mineralization disseminated throughout the host
rock in microscopic particles which must be identified by chemical analysis

DEVELOPMENT: activities related to a mineral deposit commencing at the
point commercial reserves can reasonably be estimated to exist and generally
continuing until commercial production begins

DORE: unrefined gold consisting of 60% to 90% gold which will be further
refined to almost pure gold by a smelter or refinery

DRIFT AND FILL: an underground mining method which involves excavating a
stope, then filling it with backfill material to provide support

ELECTRO-WINNING: the process of removal of gold from solution by the action
of electric currents

EXPLORATION: activities associated with ascertaining the existence,
location, extent or quality of a mineral deposit

FABRICATED GOLD: gold on which work has been performed to turn it into some
product, such as jewelry, which differs from a pure investment product, such as
a gold bullion bar

FIRE ASSAY: a standard method of determining the ore grade by heating a
sample of ore in a small cup made of bone ash which absorbs any base metals,
leaving the gold behind as a small button. Gold content as a percentage equals
the weight of the gold button divided by the weight of the original ore sample.

FIRST-HALF FINAL CERTIFICATE: a certificate issued by the BLM when the
mining claim purchase price has been paid and the BLM has determined that the
proper proofs of patent application have been filed. The

32
<PAGE>
issuance of the first-half final certificate (i) confirms equitable title is
vested in the applicant, subject to the confirmation of a discovery of a
valuable mineral deposit by a mineral examiner; (ii) certifies that the
applicant has satisfactorily complied with all of the "paperwork" requirements
of the Mining Law (title, proofs, posting requirements, purchase money); (iii)
eliminates the need for performance of assessment work and the related filings
required by the county and BLM; (iv) segregates the land from all further entry
under the public land and mineral laws as of the date of acceptance of the
purchase money; and (v) establishes the date upon which discovery of a valuable
mineral deposit must be demonstrated.

FLOTATION: a process by which valuable minerals selectively attach to air
bubbles in a chemical solution and are thus concentrated and separated from the
valueless rock or mineral material in the ore

MINE AREA: that portion of the land area encompassing the Twin Creeks Mine,
the Lone Tree Complex or the Mesquite Mine on which the respective mining
operations are conducted and reserves associated with that mine are located

MINERALIZATION: the presence of a target mineral in a mass of host rock

NET SMELTER RETURNS: the value received for a mineral after refining, less
the cost of transporting the mineral to the refinery and the cost of refining

ORE: a mixture of valuable and worthless minerals from which at least one
of the minerals can be mined and processed at an economic profit

ORE GRADE: the average amount of gold, expressed in ounces, contained in a
short ton (2,000 pounds Avoirdupois) of gold-bearing ore

OUNCES: Troy ounces of 31.103 grams or 1.097 Avoirdupois ounces

OVERBURDEN: the alluvium and rock that must be removed in order to expose
an ore deposit

OXIDE ORE: gold ore that has been subjected to oxidation through natural
weathering and surface water percolation to the extent that the minerals are
readily treatable by standard processes

PRESSURE OXIDATION: the process that occurs in the autoclave, wherein the
sulfide minerals are oxidized to sulfate compounds under high pressure and
temperature

RECLAMATION: the process of restoring mined land to a condition established
by applicable law; reclamation standards vary widely, but usually address ground
and surface water, topsoil, final slope gradients, overburden and revegetation

REFRACTORY ORE: an ore which requires additional steps in the milling
process to oxidize the ore, usually involving heat and/or pressure, in order to
recover the gold contained in the ore

REVERSE-CIRCULATION DRILLING: a process that uses a drill with a dual-wall
pipe through which compressed air travels down the outside channel, returning
the bit-cut chips up the interior channel for sampling

SEMI-AUTOGENOUS-GRINDING (SAG) MILL: a piece of machinery used to crush and
grind ore with a rotating cylindrical drum containing steel impact balls. The
ore is fed continuously into the mill along with water, and, as the mill
rotates, the ore and steel balls are lifted up the side of the drum and fall
back to the bottom of the drum. This lifting and falling action causes impact of
the ore and steel balls onto ore, thus breaking and grinding ore into finer
particle sizes.

STOPE: the working area in an underground mine from which ore is extracted

SULFIDE ORE: ore characterized by the inclusion of metal in the crystal
structure of a sulfide mineral, which is often refractory

TAILINGS: finely ground rock from which valuable minerals have been
extracted by milling

TRANSITION ORE: refractory ore that is partially oxidized

TREND: the arrangement of a group of ore deposits occurring in a linear
pattern

33
<PAGE>
ITEM 3. LEGAL PROCEEDINGS

On July 19, 1994, the Company filed three separate actions in two United
States District Courts 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 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 was granted permission to file another motion for summary judgment
in its favor and that motion has been decided adversely to the Company.

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 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.

Settlement negotiations with the Secretary and Interior have been initiated
by the Company.

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.

34
<PAGE>
On December 6, 1996, a Company stockholder filed a shareholder's class
action complaint (MCKEWON V. BATCHELDER, C.A. No. 15406) against the Company and
the Company's Board of Directors (collectively, "Defendants") in the Court of
Chancery of the State of Delaware ("Court of Chancery"). The same day, two other
Company stockholders filed two separate, but similar, class action complaints
against the Company and the Company's Board of Directors in the Court of
Chancery, and on December 9, 1996, three more Company stockholders (collectively
with the three previously mentioned stockholder, the "Plaintiffs") filed three
additional separate, but similar, class action complaints against the Company
and the Company's Board of Directors in the Court of Chancery (STEINER V. JAMES,
C.A. No. 15407; ARTHUR V. BATCHELDER, C.A. No. 15409; FIELDEN V. JAMES, C.A. No.
15411; BRONZAFT V. JAMES, C. A. No. 15412; and BURT V. JAMES, C.A. No. 15413).
To date, the Defendants have been served only with the MCKEWON complaint.

On January 6, 1997, the Defendants moved to dismiss the MCKEWON complaint
and also moved to stay discovery pending resolution of the motion to dismiss. On
January 7, 1997, the Plaintiffs informed the Defendants that there was no need
to comply with the Plaintiffs' First Request For Production Of Documents filed
on December 31, 1996. On January 22, 1997, the Court of Chancery entered an
order consolidating the six actions into one action captioned IN RE SANTA FE
PACIFIC GOLD CORPORATION SHAREHOLDERS LITIGATION, Cons. C.A. No. 15406. The
Order of Consolidation states that papers need only be filed in Civil Action No.
15406 (MCKEWON) and that the Plaintiffs shall file a consolidated amended
complaint as soon as practicable.

The MCKEWON complaint alleges, among other things, that the members of the
Company's Board of Directors breached their fiduciary duties to the Company
stockholders by failing to fully consider the Newmont proposal made on December
5, 1996, The other complaints filed on December 6, 1996 and December 9, 1996,
make similar allegations. The FIELDEN and BURT complaints also allege that the
members of the Company's Board of Directors approved the Homestake transaction
to ensure that certain of the Defendants would retain their positions. The
MCKEWON action seeks, among other things, to have the Court order the Defendants
to take various actions to cooperate with any entity or person interested in
proposing a transaction with the Company and to act to maximize shareholder
value, and seeks unspecified damages.

The Company intends to defend against the Plaintiffs' allegations.

The Company is not a party to any 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.

ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

None.

35
<PAGE>
PART II

ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS

The common stock of the Company, par value $0.01 ("Common Stock"), is listed
on the New York Stock Exchange and first became available for public trading
upon effectiveness of the initial public offering of the Common Stock on June
16, 1994. The high and low sales prices for the Common Stock on the New York
Stock Exchange were as follows:

<TABLE>
<CAPTION>
1996 1995
-------------------- --------------------
HIGH LOW HIGH LOW
--------- --------- --------- ---------
<S> <C> <C> <C> <C>
First Quarter.............................................................. $ 18 1/4 $ 12 1/8 $ 12 7/8 $ 9
Second Quarter............................................................. $ 17 1/8 $ 13 1/8 $14 $ 11 5/8
Third Quarter.............................................................. $15 $ 12 1/4 $ 13 3/4 $ 11 7/8
Fourth Quarter............................................................. $17 $ 10 3/4 $ 13 1/8 $ 9 3/4
</TABLE>

The Company paid a dividend of $0.05 per share of Common Stock in June 1996
and 1995. The Company's dividend policy is reviewed periodically by the Board of
Directors. Declaration and payment of cash dividends will depend upon the
assessment of the Board of Directors of the Company's financial condition,
earnings and funds from operations, the level of its capital and exploration
expenditures, its future business prospects and such other matters as the Board
of Directors deems relevant. Accordingly, there can be no assurance that
dividends will actually be paid in future periods.

On January 26, 1995, the Board of Directors of the Company declared a
dividend distribution of one preferred stock purchase right ("Right" or
"Rights") to stockholders of record as of February 13, 1995, for each
outstanding share of Common Stock. Each Right will entitle the holder thereof,
upon the occurrence of certain events, to purchase one one-hundredth of a share
of Series A Junior Participating Preferred Stock, par value $0.01, at a price of
$50, subject to adjustment ("Purchase Price"). Until the occurrence of certain
specified events, the Rights will be evidenced only by the Common Stock
certificates (and the Summary of Stockholder Rights Plan distributed to
stockholders) and will not be transferable separately from the Common Stock. The
terms and provisions of the Rights are set forth in the Rights Agreement entered
into between the Company and Harris Trust and Savings Bank, as Rights Agent,
which agreement is incorporated as an Exhibit hereto by reference.

In the event that any person (other than the Company, its affiliates or any
person receiving newly-issued shares of Common Stock directly from the Company)
acquires, or obtains the right to acquire, beneficial ownership of 15% or more
of the then outstanding Common Stock ("Acquiring Person"), each holder of a
Right (other than such Acquiring Person) will thereafter have the right to
receive, upon exercise at the then current Purchase Price, Common Stock having a
value equal to two times the Purchase Price. In the event that the Company is
merged into another corporation or 50% or more of the Company's assets or
earning power are sold, each holder of a Right will thereafter have the right to
receive, upon exercise at the then current Purchase Price, common stock of the
acquiring or surviving corporation having a value equal to two times the
Purchase Price. The Rights may be redeemed by the Company for $0.01 per Right,
payable in cash, stock or other consideration, at any time prior to the date
that a person becomes an Acquiring Person. The Rights are subject to exchange in
certain events. The Rights, if not previously exercised, redeemed or exchanged,
will expire on February 13, 2005.

Since the Rights Agreement has been amended to provide that Newmont is not
an Acquiring Person, a distribution of Rights certificates under the Rights plan
is not contemplated at this time.

As of March 17, 1997, there were approximately 48,000 holders of record of
the Company's Common Stock.

36
<PAGE>
ITEM 6. SELECTED FINANCIAL DATA

SELECTED FINANCIAL AND OPERATING DATA
(IN THOUSANDS, EXCEPT PER SHARE AND PER OUNCE DATA)

<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31 1996 1995 1994 1993 1992
- ------------------------------------------- ------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA(1)
Gold sales................................. $ 337,211 $ 345,421 $ 370,175 $ 228,744 $ 116,400
Total operating revenue.................... 343,189 350,374 375,604 233,688 118,653
Operating expenses......................... 180,847 166,989 169,655 104,372 46,266
Depreciation, depletion and amortization... 64,834 67,451 75,726 43,150 18,142
Exploration and development(2)............. 32,907 35,229 32,377 23,664 20,030
General and administrative expenses........ 16,420 16,636 14,365 10,948 6,447
Operating income........................... 42,814 64,069 83,481 51,554 27,768
Interest expense........................... 14,632 10,684 8,765 11,754 15,723
Income from continuing operations (net of
income taxes)............................ 21,068 39,812 56,701 27,668 14,678
Income from continuing operations per
common share(3).......................... 0.16 0.30 0.46 0.25 0.13
Net income(4).............................. 21,068 39,812 56,701 169,660 47,392
Income per common share(3)................. 0.16 0.30 0.46 1.51 0.42
CASH FLOW DATA(1)
Net cash provided by operating
activities............................... $ 65,207 $ 105,016 $ 134,654 $ 69,149 $ 24,327
Net cash used for investing activities(5).. 307,770 201,902 94,975 101,812 64,499
Net cash provided by (used for) financing
activities(6)............................ 248,083 98,579 (11,580) 24,197 (24,952)
Cash dividends per common share(8)......... 0.05 0.05 N/A N/A N/A
BALANCE SHEET DATA at year end
Cash and cash equivalents.................. $ 41,372 $ 35,852 $ 34,159 $ 26,060 $ 37,193
Property, plant and equipment, net(5)...... 927,441 754,558 679,037 687,686 237,511
Total assets............................... 1,300,029 1,018,168 857,639 832,552 476,344
Gold loans(7).............................. -- -- -- 149,296 162,204
Long-term debt(7).......................... 454,866 199,861 90,000 200,000 144,420
Shareholders' equity(9).................... 570,038 555,057 521,505 228,129 75,799
OPERATING DATA(1)
Total ounces produced...................... 852 846 936 611 296
Total ounces sold.......................... 820 852 930 591 295
Average realized price (per ounce)......... $ 411 $ 406 $ 398 $ 387 $ 394
Average spot price(10) (per ounce)......... $ 388 $ 384 $ 384 $ 360 $ 344
Cash costs of production (per ounce)(11)... $ 215 $ 194 $ 182 $ 166 $ 162
Noncash costs of production (per
ounce)(11)............................... 82 82 84 77 60
Total costs of production (per ounce)...... $ 297 $ 276 $ 266 $ 243 $ 222
</TABLE>

- ------------------------

1 Reflects acquisition of the Chimney Creek Mine and the Mesquite Mine in an
asset exchange as of June 25, 1993 and the commencement of refractory ore
processing at the Lone Tree Mine in February 1994.

2 Excludes development expenditures which have been capitalized.

37
<PAGE>
3 Per share data for the years 1992 and 1993 are based on 112.2 million
shares, which represented shares previously owned by SFP, after giving
effect to a 1.122 million-for-1 stock split, which was declared on February
22, 1994.

4 Net income in 1993 includes $142.0 million ($1.26 per share) from
discontinued operations, including a $117.2 million ($1.04 per share)
noncash gain on an asset exchange; 1992 net income includes $34.4 million
($0.31 per share) from discontinued operations, $0.3 million gain on early
retirement of debt and $2.0 million expense for the cumulative effect of a
change in accounting for postretirement benefits.

5 Increase in 1993 attributable to assets acquired in an asset exchange;
increases in 1995 and 1996 primarily related to capital expansion projects
at the Twin Creeks Mine and the Lone Tree Complex as well as increases in
deferred mining costs due to the timing of mining activities in relation to
the production of gold.

6 Net cash used in 1992 related primarily to net principal payments on
borrowings and gold loans and dividends paid to SFP, whereas 1993 net cash
provided is related primarily to the net $54 million borrowings to finance
the Lone Tree sulfide expansion project. Net cash used in 1994 is
attributable to principal payments on borrowings and gold loans and
dividends to SFP, partially offset by net proceeds from the Company's
initial public offering. 1995 and 1996 net cash provided primarily
attributable to the Company's issuance of $200 million of 8.375% senior
debentures in July 1995 and $255,000 proceeds from borrowings in 1996, which
were used for various capital expansion projects at the Twin Creeks Mine and
the Lone Tree Complex.

7 Gold loans represent the gold bullion portion of bank project financings for
the Twin Creeks Mine in 1989 and 1990 and the Lone Tree Mine in 1991. In
1994, project financings were repaid and long-term debt was reduced with a
portion of net proceeds from the initial public offerings. Increase in long-
term debt in 1993 is primarily attributable to borrowings to finance the
Lone Tree Mine sulfide expansion project. In July 1995, the Company issued
$200 million of 8.375% senior debentures, a portion of the proceeds from
which were used to repay bank credit facility debt. During 1996, additional
borrowings were used for various capital expansion projects at the Twin
Creeks Mine and the Lone Tree Complex.

8 Cash dividends per share exclude dividends paid to SFP during the years 1992
through 1994. The Company was a subsidiary of SFP through September 1994.

9 Increase in 1993 attributable to the $117.2 million after-tax, noncash gain
relating to an asset exchange; and increase in 1994 to net proceeds received
from the initial public offering.

10 Represents the average of the afternoon fixing prices for gold on the London
Bullion Market ("London P.M. Fix") for the year.

11 Represents per ounce production cost information in the format developed by
the Gold Institute. Amounts for 1992 through 1995 have been restated to
reflect the Gold Institute format. 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. Noncash costs of production include
depreciation, depletion and amortization and final reclamation accruals.
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 produced and ounces sold during
the respective periods.

38
<PAGE>
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS

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 as
well as the data set forth in "Selected Financial and Operating Data."

RECENT DEVELOPMENTS AND OUTLOOK

MERGER AGREEMENT

In the interest of providing the best value opportunity to its shareholders,
the Company's Board of Directors invited Newmont and Homestake to make
presentations on March 8, 1997. After discussions with both companies, the
Company's Board of Directors determined that the merger proposal with Newmont
included a superior exchange ratio (0.43) and offered a compelling fit,
substantial and improved synergies and significant long-range potential for the
Company's shareholders. On March 10, 1997, the merger agreement with Homestake
was terminated and the Company entered into a merger agreement with Newmont.
Under the Newmont agreement, each share of Company common stock will be
exchanged for 0.43 share of Newmont common stock. The Newmont merger is subject
to the approval of both the Company shareholders and Newmont shareholders, as
well as other customary conditions. The merger, which is expected to be tax-free
to Company shareholders and to be accounted for as a pooling of interests, is
expected to close during the second quarter of 1997.

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, which represent approximately 68% of the
11.0 million contained ounces of reserves at the Twin Creeks Mine ("Twin Creeks
Sulfide Project"). The cost of the Twin Creeks Sulfide Project is estimated at
approximately $250 million which is being spent over a four-year period, and as
of December 31, 1996, $191.0 million had been spent. Plans include a two-phase
project with two autoclaves. The required plan of operations was approved by the
BLM on January 22, 1997. The first of the two autoclaves was scheduled for
start-up in the first quarter of 1997. Commissioning of the autoclave began in
March 1997, when some over heating of the shell within the vapor zone areas
occurred. Repairs to or replacement of some of the brick lining inside the
autoclave will be required, which could delay commissioning into the second
quarter of 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. 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%. Construction of the flotation mill
began during the first half of 1996. The cost of the

39
<PAGE>
flotation mill is approximately $40 million and as of December 31, 1996,
approximately $27 million had been spent. The mill is expected to begin
production by the second quarter of 1997.

In the Company's proprietary flotation process, sulfide mineralization, with
which gold is associated, is concentrated and separated from other material
present in the ore. The resulting concentrates contain higher percentages of
gold in substantially smaller volumes of material, which can then be
economically processed for gold recovery. Current plans include processing a
portion of these concentrates through the existing Lone Tree Mine autoclave, and
the remainder through the Twin Creeks Sulfide Project autoclave.

TRENTON CANYON MINE. In May 1995, the Company commenced development of the
Trenton Canyon Mine, which is located 11 miles south of the Lone Tree Mine and
which had proven and probable reserves of 590,000 contained ounces of gold at
December 31, 1995. As of December 31, 1996, reserves at the Trenton Canyon Mine
were increased to 742,000 contained ounces of gold. Construction commenced in
the fourth quarter of 1995, the Company began placing ore onto the leach pads in
October 1996 and gold production commenced in December 1996. Gold-loaded carbon
is transported to the Lone Tree Mine for final processing. Capital expenditures
for the Trenton Canyon Mine as of December 31, 1996, were approximately $27
million.

MULE CANYON MINE. Construction of the Mule Canyon Mine was initiated in
early 1996 and will continue into 1997. Capital expenditures for the development
of the Mule Canyon Mine are expected to be approximately $35 million and at
December 31, 1996, approximately $18 million had been spent. Mining operations
began on October 29, 1996, after the approval of the plan of operations,
following completion of an EIS. Shipments of Mule Canyon ore to the Lone Tree
Mine commenced in early November 1996 and gold production began in late November
1996 The Mule Canyon Mine is expected to produce approximately 100,000 ounces of
gold in 1997. Mule Canyon ore is expected to be processed at both the Lone Tree
Mine and the Twin Creeks Mine, upon commissioning of the Twin Creeks Mine
autoclave.

ROSEBUD MINE. In May 1996, the Company agreed to enter into a 50/50 limited
liability company with Hecla Mining Company ("Hecla") for the joint development
of the Rosebud Mine. The agreement was finalized in September 1996. The Rosebud
Mine is an underground, high-grade oxide gold deposit located approximately 55
miles west of Winnemucca, Nevada. Construction of the surface facilities and
infrastructure commenced in August 1996. The limited liability company plans to
transport ore from the Rosebud Mine to the Twin Creeks Mine for processing,
subject to approval of required permit modifications. The Company will fund
$12.5 million for mine development as well as certain modifications to the Twin
Creeks Mine south mill facility. Completion of development and commencement of
commercial production is expected in the second quarter of 1997.

GOLD PRICES AND PRICE-PROTECTION

40
<PAGE>
The Company's average realized price per ounce has exceeded the average
annual London P.M. Fix for each of the last five years as summarized below:

<TABLE>
<CAPTION>
COMPANY'S AVERAGE AVERAGE ANNUAL
YEAR REALIZED PRICE LONDON P.M. FIX
- ---------------------------------------------------------- --------------------- -----------------
<S> <C> <C>
1992...................................................... $ 394 $ 344
1993...................................................... 387 360
1994...................................................... 398 384
1995...................................................... 406 384
1996...................................................... 411 388
</TABLE>

Commodity instruments used by the Company may include gold borrowings, fixed
forward sales contracts, forward sales contracts made on a spot deferred basis
("spot deferred contracts") and purchased put and written call options contracts
in combination. Under normal circumstances, counterparties under spot deferred
contracts allow the Company to defer delivery of gold to a later date, if
necessary, at the original contract price plus the prevailing interest-like
premium.

COSTS OF PRODUCTION

In 1996 and 1995, the Company's average cash costs of production per ounce
were $215 and $194, respectively. These costs compare with 1995 average cash
costs of production per ounce for the industry in the United States and
worldwide of $224 and $257, respectively, based on the most recently available
published industry data. The Company anticipates that its average cash costs of
production from its current mines will continue to increase in 1997 and
thereafter as greater proportions of gold production are expected to be derived
from refractory sulfide ore rather than the more easily processed oxide ore that
has previously been the predominant type of ore processed by the Company. As of
December 31, 1996, approximately 66% of the Company's reserves are refractory
mill ore. The Company will seek to reduce the effects of cost increases through
further improvements in its equipment, technology, and the efficiency of its
gold production activities. There can be no assurance, however, that the Company
will continue to be able to meet its objective of maintaining lower than
industry average gold production costs. Certain mining costs and depreciation,
depletion and amortization costs are charged to production over the life of a
mine, on the basis of its reserves. Because the determination of reserves
includes an assumption about the price of gold, significant changes in gold
prices will affect the Company's stated reserves and production costs by
increasing or decreasing the life of each mine and, therefore, the rate at which
these costs are charged to production.

41
<PAGE>
LAWS AND REGULATIONS

The Company's mining operations and exploration activities in the United
States are subject to extensive federal, state and local laws and regulations
governing exploration, development, production, exports, taxes, labor standards,
occupational health, waste disposal, protection and remediation of the
environment, reclamation, mine safety, toxic substances and other matters.
Compliance with such laws and regulations has increased the costs of
exploration, planning, designing, drilling, developing, constructing, operating
and closing the Company's mines and other facilities. It is possible that the
costs and delays associated with compliance with such laws and regulations could
become such that the Company would not proceed with the development or operation
of a mine.

The Company has expended significant financial and managerial resources to
comply with environmental-protection regulations and permitting requirements and
anticipates that it will continue to do so in the future. Although the Company
believes that its operations and facilities comply in all material respects with
applicable environmental-protection regulations, there can be no assurance that
additional significant costs will not be incurred to comply with current and
future environmental-protection laws, regulations and enforcement policies
thereunder. Additionally, claims for damages to property and persons resulting
from the Company's operations could result in substantial costs in the future.

Reform of the General Mining Law of 1872 ("Mining Law") has been an issue of
substantial debate in the Congress in recent years. Because of the uncertainty
surrounding passage of reform legislation, the Company cannot predict the actual
effect that any such legislation may have on the Company's results of operations
or financial condition, or on its ability to conduct exploration and mine
development activities on a timely basis on federal lands. Approximately 71% of
the Company's reserves at December 31, 1996, were located on private mineral
rights, approximately 25% on federal land controlled by the Company through
unpatented mining claims with first-half final certificates and approximately 4%
on unpatented mining claims without first-half final certificates.

Certain appeals have been filed with the Department of Interior Board of
Land Appeals in conjunction with the Twin Creeks EIS, the Lone Tree Mine Plan of
Operations and the Mule Canyon Mine Plan of Operations. These appeals seek to
impose mitigation and other conditions on the mine operations. The Company has
intervened and does not believe that such appeals have merit. An unfavorable
outcome of such appeals, however, could result in additional conditions on
operations which may have a material adverse effect on the Company's financial
position or results of operations.

RESULTS OF OPERATIONS

1996 COMPARED TO 1995

Net income was $21.1 million ($0.16 per share) in 1996 compared to $39.8
million ($0.30 per share) in 1995. The decrease in net income of $18.7 million
resulted from lower operating income of $21.3 million, higher interest expense
of $3.9 million, lower other income, net of $1.6 million, partially offset by
lower income taxes of $8.1 million. Lower operating income resulted primarily
from higher costs of sales and from merger and restructuring expenses incurred
during 1996.

Operating revenue was $343.2 million in 1996, $7.2 million lower than 1995.
Lower operating revenue resulted from lower sales volumes, which reduced
operating revenue by $12.9 million, partially offset by higher average realized
prices per ounce in 1996 , which increased operating revenue by $4.7 million,
and higher royalty and other revenue of $1.0 million. Gold sales totalled
820,000 ounces in 1996, 32,000 ounces less than the 852,000 sold in 1995. The
decrease in ounces sold resulted from lower production volumes from the Lone
Tree Complex and from the timing of gold sales from the Twin Creeks Mine, where
1996 production exceeded 1995 production by 35,000 ounces. Lower production from
the Lone Tree Complex was due to a delay in receiving the approval of the plan
of operations for mining in the Lone Tree Mine Section 14, which resulted in
lower average ore grades to the heap leach circuits during 1996. Lower gold

42
<PAGE>
sales at the Twin Creeks Mine resulted from an in-process inventory increase
related to the start-up of the oxide circuit of the new Sage Mill.

Total costs and expenses were $300.4 million, $14.1 million higher than the
$286.3 million reported in 1995. Higher costs and expenses include higher
operating expenses of $13.8 million, merger and restructuring expenses of $5.4
million, partially offset by lower exploration and development expenses of $2.3
million, lower depreciation, depletion and amortization of $2.6 million and
lower general and administrative expenses of $0.2 million. Higher operating
expenses resulted from higher cash costs of production. Average cash costs of
production increased to $215 per ounce in 1996 from $194 per ounce in 1995
primarily as a result of an increased use of reagents and consumables at the
Lone Tree Complex resulting from a higher sulfide content ore placed on the heap
leach pads and higher mining costs at the Mesquite Mine due to the higher mining
ratio in 1996 compared to 1995, which resulted in the acceleration of the
charge-out of deferred mining costs. Merger and restructuring expenses in 1996
resulted from costs associated with the proposed merger with Homestake and from
severance costs associated with management's decision to restructure the
Company's operations, whether or not a merger occurs.

Exploration and development expenses for 1996 totalled $32.9 million,
compared to $35.2 million in 1995. Approximately 57% and 51% of exploration
expenses related to foreign exploration projects in 1996 and 1995, respectively.

Interest expense increased $3.9 million due to interest associated with the
$200.0 million Senior Debentures (described below) issued in July 1995 and
increased borrowings on the Company's credit facility, partially offset by an
increase in capitalized interest in 1996 compared to 1995. Increased borrowings
were used to fund capital expansion programs.

The Company's effective tax rate was approximately 29% in both 1996 and
1995. Lower income taxes in 1996 resulted from lower income before taxes in 1996
compared to 1995.

1995 COMPARED TO 1994

Net income was $39.8 million ($0.30 per share) in 1995 compared to $56.7
million ($0.46 per share) in 1994. The weighted average number of shares
outstanding increased to 131.4 million in 1995 from 122.7 million in 1994 as a
result of the initial public offerings in June 1994. The decrease in net income
of $16.9 million resulted from lower operating income of $19.4 million and
higher interest expense of $1.9 million, partially offset by lower income taxes
of $3.1 million and $1.3 million higher other income, net. Lower operating
income resulted from lower sales volumes and higher cost of sales, partially
offset by higher average realized prices.

Operating revenue was $25.2 million lower in 1995 than in 1994. Lower sales
volumes resulted in approximately $31.1 million lower gold sales revenue,
however, higher average realized prices per ounce resulted in approximately $6.3
million higher gold sales revenue in 1995 compared to 1994. Gold sales totalled
852,000 ounces in 1995, 78,000 ounces less than the 930,000 ounces sold in 1994.
This decrease in ounces sold resulted from lower production volumes from the
Twin Creeks Mine and from the Mesquite Mine. Lower production from the Twin
Creeks Mine resulted from the pit wall slide that occurred in December 1994.
Lower production from the Mesquite Mine resulted primarily from lower average
ore grades.

Total costs and expenses decreased from $292.1 million in 1994 to $286.3
million in 1995. Operating expenses decreased $2.7 million and depreciation,
depletion and amortization decreased $8.3 million, due to lower sales volumes,
partially offset by higher costs of production per ounce. Average cash costs of
production increased from $182 per ounce in 1994 to $194 per ounce in 1995
primarily as a result of lower production volumes.

Exploration and development expenses for 1995 totaled $35.2 million, $2.9
million higher than the amount expended in 1994, reflecting the Company's
increased foreign exploration activity. Approximately 51% and 25% of exploration
and development expenses related to foreign projects in 1995 and 1994,
respectively.

43
<PAGE>
In 1995, general and administrative expenses of $16.6 million were $2.3
million higher than in 1994, primarily as a result of higher legal and
consulting fees related to foreign activities and other expenses related to the
Company's status as an independent and public entity.

Other income, net increased $1.3 million in 1995 compared to 1994 due to
higher interest income, related to higher cash balances resulting from the
issuance of the Senior Debentures (described below), and to increased surplus
property sales.

Interest expense increased to $10.7 million in 1995 from $8.8 million in
1994, principally due to higher outstanding indebtedness and higher interest
rates during the second half of 1995 resulting from the $200.0 million of Senior
Debentures (described below) issued by the Company in July 1995.

Income taxes decreased from $20.0 million in 1994 to $16.8 million in 1995
primarily as a result of decreased pre-tax income. The Company's effective tax
rate increased from 26.1% in 1994 to 29.7% in 1995 as a result of lower
depletion deductions related to lower gold sales and to increased foreign
exploration expenses which are not currently deductible for federal income tax
purposes.

FINANCIAL CONDITION

LIQUIDITY AND CAPITAL RESOURCES

During the year ended December 31, 1996, the Company's cash flows provided
by operating activities were $65.2 million. These cash flows and approximately
$255 million in borrowings from the Credit Facility (described below) were used
for capital expenditures of $257.2 million, deferred mining costs of $52.4
million and dividend payments of $6.6 million. The increase in deferred mining
costs in 1996 was due to the timing of mining activities in relation to the
production of gold.

Capital expenditures during 1996 included $129.4 million for the Twin Creeks
Sulfide Project, $25.8 million for the Lone Tree Mine flotation project, $16.8
for the Mule Canyon Mine, $13.1 million for the Rosebud Mine, $11.0 million for
the Trenton Canyon Mine, $9.7 million for development drilling, $11.2 million
for capitalized interest, $8.5 million for exploration and information systems
capital and $31.7 million for dewatering and other ongoing mine capital
requirements.

During the year ended December 31, 1995, the Company's cash flows provided
by operating activities were $105.0 million. These cash flows, together with
approximately $200 million in proceeds from the Senior Debentures (described
below), were used for capital expenditures of $162.5 million, deferred mining
costs of $42.9 million, loan repayments net of borrowings of $90.0 million and
dividend payments of $6.6 million. Capital expenditures during 1995 included
ongoing capital requirements of $46.4 million, $11.8 million and $4.5 million at
the Twin Creeks Mine, the Lone Tree Mine and the Mesquite Mine, respectively,
$53.3 million for the Twin Creeks Sulfide Project, $19.3 million for the Trenton
Canyon Project and Mule Canyon Project, $10.0 million for development drilling
at existing mines and $14.7 million for other corporate capital requirements,
primarily related to information systems.

For the year ended December 31, 1994, the Company's cash flows provided by
operating activities were $134.7 million. These cash flows were used for capital
expenditures of $77.2 million, deferred mining costs of $17.7 million, loan
repayments net of borrowings of $20.2 million and dividends of $13.5 million to
the Company's former parent, Santa Fe Pacific Corporation ("SFP"), prior to the
initial public offerings in June 1994. Net proceeds from the initial public
offerings were $250.5 million and were used to repay all outstanding
indebtedness under project financings ($60.0 million of borrowings and $133.4
million of principal payments on gold loans), to pay SFP $20.0 million for
liabilities related to the asset exchange and to reduce borrowings under the
October 1, 1993 credit agreement ("Credit Agreement") by $35.0 million. Capital
expenditures during 1994 included $11.8 million for the Lone Tree Mine expansion
and mill facility, $9.6 million for the Twin Creeks Sulfide Project, $10.7
million for development drilling at its existing mines, $8.9 million for the
Mule Canyon and Trenton Canyon projects and $23.6 million,

44
<PAGE>
$4.7 million and $3.9 million for ongoing capital requirements at the Twin
Creeks Mine, the Lone Tree Mine and the Mesquite Mine, respectively.

The Company's estimate of 1997 capital expenditures is approximately $152
million. Capital requirements at the Twin Creeks Mine (including the Twin Creeks
Sulfide Project), the Lone Tree Complex (including the flotation mill), the
Mesquite Mine, and the Rosebud Mine are expected to total approximately $86
million, $41 million, $18 million and $3 million, respectively. Also included in
the 1997 capital budget is approximately $4 million related to exploration
capital requirements.

On October 1, 1993, the Company entered into a $190.0 million unsecured,
revolving credit facility, which was replaced on March 30, 1995, with a $400.0
million unsecured, five-year revolving credit facility involving several
commercial banks ("Credit Facility"). Interest rates under the Credit Facility
vary depending on the interest options chosen by the Company as well as other
factors, but are generally tied to margins over interest rate alternatives
(LIBOR, CD or gold funding rates). The Company is also required to pay a
facility fee which ranges from 0.145% to 0.3750 per annum on the aggregate
amount of the commitments. As of December 31, 1996, indebtedness of $255.0
million was outstanding under the Credit Facility. The lenders' commitments
under the Credit Facility terminate on April 26, 2001, at which time any
outstanding indebtedness must be repaid.

The Credit Facility, as amended, contains certain financial covenants which
include limitations on the incurrence of additional debt, the maintenance of a
minimum tangible net worth and the maintenance of a minimum ratio of operating
cash flow to consolidated debt. The Company currently believes that it will be
able to comply with the covenants contained in the Credit Facility. At December
31, 1996, the Company was in compliance with the terms of all debt covenants.

In conjunction with the termination of the Homestake merger agreement, the
Company paid to Homestake a $65.0 million termination fee. As a result of this
payment, certain covenants under the Credit Facility were amended and the
Company's ability to pay annual dividends was restricted to $1.5 million.

The Company is in the process of arranging a $50,000,000 revolving credit
facility with Morgan Guaranty Trust Company of New York and The Chase Manhattan
Bank to provide borrowing capacity in addition to the Company's existing
$400,000,000 revolving credit facility. The $50,000,000 credit facility is
expected to be in place on or around March 31, 1997.

On July 5, 1995, the Company issued $200.0 million of 8.375% senior
debentures maturing July 1, 2005 ("Senior Debentures"). The Senior Debentures
are not redeemable prior to maturity. A portion of the net proceeds obtained
from the issuance of the Senior Debentures was used to repay $130.0 million of
outstanding debt under the Credit Facility. The remaining proceeds have been
used for capital expenditures and general corporate purposes. Interest payments
on the Senior Debentures will be $16.8 million annually through 2004 and $8.4
million in 2005.

The Internal Revenue Service has examined Federal income tax returns through
1992, and all years prior to 1986 are closed. Issues relating to the years 1986
to 1992 are being contested through various stages of administrative appeal. In
addition, the Company has various state income tax returns in the process of
examination or administrative appeal. Management believes that adequate
provision has been made for any adjustment which might be assessed for open
years through 1996.

45
<PAGE>
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

REPORT OF MANAGEMENT

To the Shareholders of Santa Fe Pacific Gold Corporation:

The accompanying consolidated financial statements of Santa Fe Pacific Gold
Corporation and its wholly-owned subsidiaries ("Company") were prepared by
management, who is responsible for their integrity and objectivity. They were
prepared in accordance with generally accepted accounting principles and
properly include amounts that are based on management's best judgments and
estimates. Other financial information included in this annual report is
consistent with that in the consolidated financial statements.

The Company maintains a system of internal accounting controls, supported by
adequate documentation, to provide reasonable assurance that assets are
safeguarded and that the books and records reflect the authorized transactions
of the Company. Limitations exist in any system of internal accounting control
based upon the recognition that the cost of the system should not exceed the
benefit derived. The Company believes its system of internal accounting control
appropriately balances the cost/benefit relationship.

Independent accountants and the internal auditor provide an objective
assessment of the degree to which management meets its responsibility for
fairness of financial reporting. They regularly evaluate the system of internal
accounting control and perform such tests and other procedures as they deem
necessary to express an opinion on the fairness of the consolidated financial
statements.

The Board of Directors pursues its responsibility for the Company's
financial statements through its Audit Committee which is composed solely of
directors who are not officers or employees of the Company. The Audit Committee
meets regularly with management, the independent accountants, and the internal
auditor. The independent accountants and the internal auditor have direct access
to the Audit Committee, with and without the presence of management
representatives, to discuss the scope and results of their audit work and their
comments on the adequacy of internal accounting controls and the quality of
financial reporting.

<TABLE>
<S> <C>
Patrick M. James David A. Smith
Chairman, President and Vice President and
Chief Executive Officer Chief Financial Officer
</TABLE>

46
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS

To the Board of Directors and Shareholders
of Santa Fe Pacific Gold Corporation:

In our opinion, the accompanying consolidated balance sheet and the related
consolidated statements of operations, of cash flows and of shareholders' equity
present fairly, in all material respects, the financial position of Santa Fe
Pacific Gold Corporation and its subsidiaries at 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. 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 of these
statements in accordance with generally accepted auditing standards which
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, assessing the accounting principles
used and significant estimates made by management, and evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for the opinion expressed above.

Price Waterhouse LLP
Phoenix, Arizona
February 1, 1997, except for the fifth paragraph
of Note 1, which is as of March 10, 1997

47
<PAGE>
SANTA FE PACIFIC GOLD CORPORATION AND CONSOLIDATED SUBSIDIARIES
CONSOLIDATED STATEMENT OF OPERATIONS
(IN THOUSANDS, EXCEPT PER SHARE DATA)

<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
----------------------------------
1996 1995 1994
---------- ---------- ----------

<S> <C> <C> <C>
Operating Revenue:

Gold sales................................................................. $ 337,211 $ 345,421 $ 370,175

Royalty and other revenue.................................................. 5,978 4,953 5,429
---------- ---------- ----------

Total Operating Revenue.................................................. 343,189 350,374 375,604
---------- ---------- ----------

Costs and Expenses:

Operating expenses......................................................... 180,847 166,989 169,655

Depreciation, depletion and amortization................................... 64,834 67,451 75,726

Exploration and development................................................ 32,907 35,229 32,377

General and administrative expenses, including depreciation and
amortization of $1,494, $1,010 and $816, respectively.................... 16,420 16,636 14,365

Merger and restructuring expenses.......................................... 5,367 -- --
---------- ---------- ----------

Total Costs and Expenses................................................. 300,375 286,305 292,123
---------- ---------- ----------

Operating Income............................................................. 42,814 64,069 83,481

Other Income, Net............................................................ 1,643 3,259 1,980

Interest Expense............................................................. 14,632 10,684 8,765
---------- ---------- ----------

Income Before Income Taxes................................................... 29,825 56,644 76,696

Income Taxes................................................................. 8,757 16,832 19,995
---------- ---------- ----------

Net Income................................................................... $ 21,068 $ 39,812 $ 56,701
---------- ---------- ----------
---------- ---------- ----------

Income Per Common Share...................................................... $ 0.16 $ 0.30 $ 0.46

Weighted Average Number of Common Shares..................................... 131,464 131,403 122,668
</TABLE>

The accompanying notes are an integral part of these financial statements.

48
<PAGE>
SANTA FE PACIFIC GOLD CORPORATION AND CONSOLIDATED SUBSIDIARIES

CONSOLIDATED BALANCE SHEET

(IN THOUSANDS)

<TABLE>
<CAPTION>
DECEMBER 31,
------------------------------
1996 1995
-------------- --------------
<S> <C> <C>
ASSETS
Current Assets:
Cash and cash equivalents....................... $ 41,372 $ 35,852
Accounts receivable............................. 971 839
Inventories..................................... 46,867 36,538
Deferred mining costs........................... 126,999 105,004
Other current assets............................ 3,393 5,470
-------------- --------------
Total Current Assets.......................... 219,602 183,703
-------------- --------------
Other Assets:
Deferred mining costs........................... 133,515 73,988
Other assets.................................... 19,471 5,919
-------------- --------------
Total Other Assets............................ 152,986 79,907
-------------- --------------
Property, Plant and Equipment..................... 1,243,816 1,001,855
Less accumulated depreciation, depletion and
amortization.................................... 316,375 247,297
-------------- --------------
Net Property, Plant and Equipment............... 927,441 754,558
-------------- --------------
Total Assets...................................... $ 1,300,029 $ 1,018,168
-------------- --------------
-------------- --------------

LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities:
Accounts payable................................ $ 24,036 $ 26,557
Accrued liabilities............................. 30,129 26,453
Deferred income taxes........................... 34,749 25,193
-------------- --------------
Total Current Liabilities..................... 88,914 78,203
Long-Term Debt.................................... 454,866 199,861
Other Long-Term Liabilities....................... 65,611 66,496
Deferred Income Taxes............................. 120,600 118,551
-------------- --------------
Total Liabilities................................. 729,991 463,111
-------------- --------------
Commitments and Contingencies (see Note 14)
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................................. 327,181 326,777
Retained income................................. 241,542 226,966
-------------- --------------
Total Shareholders' Equity........................ 570,038 555,057
-------------- --------------
Total Liabilities and Shareholders' Equity........ $ 1,300,029 $ 1,018,168
-------------- --------------
-------------- --------------
</TABLE>

The accompanying notes are an integral part of these financial statements.

49
<PAGE>
SANTA FE PACIFIC GOLD CORPORATION AND CONSOLIDATED SUBSIDIARIES

CONSOLIDATED STATEMENT OF CASH FLOWS

(IN THOUSANDS)

<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-------------------------------------
1996 1995 1994
----------- ----------- -----------
<S> <C> <C> <C>
OPERATING ACTIVITIES
Net income................................................................. $ 21,068 $ 39,812 $ 56,701
Adjustments to reconcile net income to net cash provided by operating
activities:
Depreciation, depletion and amortization................................. 66,328 68,461 76,542
Deferred income taxes.................................................... 4,539 7,249 (4,111)
Changes in:
Accounts receivable.................................................... (132) 828 5,719
Inventories............................................................ (8,128) (2,105) (6,045)
Deferred mining costs.................................................. (19,466) (19,490) (4,332)
Other current assets................................................... 2,077 (3,702) 1,807
Accounts payable....................................................... (2,521) 10,126 (4,106)
Accrued liabilities.................................................... 3,676 (4,629) 7,426
Other, net............................................................... (2,234) 8,466 (14,947)
----------- ----------- -----------
Net Cash Provided By Operating Activities.......................... 65,207 105,016 114,654
----------- ----------- -----------
INVESTING ACTIVITIES
Capital expenditures..................................................... (257,166) (162,465) (77,242)
Deferred mining costs.................................................... (52,395) (42,879) (17,733)
Proceeds from sale of property........................................... 1,791 3,442 --
----------- ----------- -----------
Net Cash Used For Investing Activities............................. (307,770) (201,902) (94,975)
----------- ----------- -----------
FINANCING ACTIVITIES
Proceeds from borrowings................................................. 255,000 40,000 5,000
Proceeds from sale of debentures......................................... -- 199,856 --
Proceeds from issuance of common stock................................... -- -- 250,531
Principal payments on borrowings......................................... -- (130,000) (115,000)
Principal payments on gold loans......................................... -- -- (138,595)
Cash dividends paid to Santa Fe Pacific Corporation...................... -- -- (13,516)
Cash dividends paid to shareholders...................................... (6,573) (6,568) --
Other, net............................................................... (344) (4,709) --
----------- ----------- -----------
Net Cash Provided By (Used For) Financing Activities............... 248,083 98,579 (11,580)
----------- ----------- -----------
INCREASE IN CASH AND CASH EQUIVALENTS...................................... 5,520 1,693 8,099
Cash and Cash Equivalents, Beginning of Year............................... 35,852 34,159 26,060
----------- ----------- -----------
Cash and Cash Equivalents, End of Year..................................... $ 41,372 $ 35,852 $ 34,159
----------- ----------- -----------
----------- ----------- -----------
SUPPLEMENTAL INFORMATION
Cash paid (received) during the year for:
Interest, net of amounts capitalized..................................... $ 12,623 $ 11,428 $ 8,749
Income taxes............................................................. (5,231) 13,554 21,142
</TABLE>

The accompanying notes are an integral part these financial statements.

50
<PAGE>
SANTA FE PACIFIC GOLD CORPORATION AND CONSOLIDATED SUBSIDIARIES
CONSOLIDATED STATEMENT OF SHAREHOLDERS' EQUITY
(IN THOUSANDS)

<TABLE>
<CAPTION>
TOTAL
COMMON PAID-IN RETAINED SHAREHOLDERS'
STOCK CAPITAL INCOME EQUITY
----------- ---------- ---------- -------------

<S> <C> <C> <C> <C>
BALANCE AT DECEMBER 31, 1993.................................... $ 1,122 $ 76,625 $ 150,382 $ 228,129

Net Income...................................................... -- -- 56,701 56,701

Cash Dividends Paid............................................. -- -- (13,516) (13,516)

Issuance of Common Stock 192 250,339 -- 250,531

Other........................................................... -- (663) 323 (340)
----------- ---------- ---------- -------------

BALANCE AT DECEMBER 31, 1994.................................... 1,314 326,301 193,890 521,505

Net Income...................................................... -- -- 39,812 39,812

Cash Dividends Paid............................................. -- -- (6,568) (6,568)

Other........................................................... -- 476 (168) 308
----------- ---------- ---------- -------------

BALANCE AT DECEMBER 31, 1995.................................... 1,314 326,777 226,966 555,057

Net Income...................................................... -- -- 21,068 21,068

Cash Dividends Paid............................................. -- -- (6,573) (6,573)

Other........................................................... 1 404 81 486
----------- ---------- ---------- -------------

BALANCE AT DECEMBER 31, 1996.................................... $ 1,315 $ 327,181 $ 241,542 $ 570,038
----------- ---------- ---------- -------------
----------- ---------- ---------- -------------
</TABLE>

The accompanying notes are an integral part of these financial statements.

51
<PAGE>
SANTA FE PACIFIC GOLD CORPORATION AND CONSOLIDATED SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 1--THE COMPANY

Santa Fe Pacific Gold Corporation and its wholly-owned subsidiaries
("Company") engages in the mining and processing of gold in the United States
and controls mineral properties, and conducts exploration and development of
gold properties worldwide. Exploration expenses related to foreign projects
represented approximately 57%, 51%, and 25% of total exploration and development
expenses in 1996, 1995, and 1994, respectively, and were incurred primarily in
North and South America, Central Asia and West Africa.

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. During 1996, four customers accounted for $48.8 million, $43.6
million, $36.4 million and $33.9 million of gold sales, respectively, each of
which represented more than 10% of gold sales and together accounted for
approximately 48% of total gold sales. In 1995, sales to four customers
accounted for $76.6 million, $67.9 million, $46.4 million and $40.5 million,
respectively, or approximately 67% of total gold sales. In 1994, sales to three
customers accounted for $65.0 million, $49.9 million and $47.5 million,
respectively, or approximately 44% of total gold sales. There were no export
sales during 1996, 1995 or 1994.

Prior to June 23, 1994, the Company was a wholly-owned subsidiary of Santa
Fe Pacific Corporation ("SFP"). On June 23, 1994, the Company completed an
initial public offering of 19.2 million shares (14.6%) of its common stock
("Offering") resulting in net proceeds of $250.5 million, after commissions and
related expenses. The net proceeds from the Offering were used primarily to
repay all outstanding indebtedness under bank project financings, for the
repayment of other indebtedness, and for working capital which included the
repayment of $20.0 million to SFP arising from liabilities related to
discontinued operations. On September 30, 1994, SFP distributed all of the
outstanding shares of common stock of the Company held by SFP to holders of
SFP's common stock prior to the distribution ("Spin-Off").

On December 8, 1996, the Company entered into a definitive merger agreement
with Homestake Mining Company ("Homestake") and a subsidiary of Homestake, under
which the subsidiary of Homestake will merge with and into the Company and each
outstanding share of Company common stock will be converted into the right to
receive 1.115 Homestake common shares, subject to, among other things,
shareholder and regulatory approvals. On January 7, 1997, Newmont Mining
Corporation ("Newmont") announced an offer, subject to certain conditions, to
exchange 0.40 of a share of Newmont common stock for each outstanding share of
Company common stock. On January 13, 1997, the Company announced that it planned
to meet with Newmont to discuss its proposal for a business combination so that
any future actions are consistent with and advance the best interests of the
Company's stockholders. The Company has held and may in the future hold
discussions with Homestake regarding the Homestake merger agreement and with
Newmont regarding its proposal. No assurances can be given that any particular
course of action will result from these communications. Merger and restructuring
expenses in 1996 includes $3.0 million relating to professional fees and other
costs associated with the Homestake merger agreement.

The Company's Board of Directors invited Newmont and Homestake to make
presentations to them on March 8, 1997. After discussions with both companies,
the Company's Board of Directors determined that the merger proposal with
Newmont included a superior exchange ratio and offered a compelling fit,
substantial and improved synergies and significant long-range potential for the
Company's shareholders. On March 10, 1997, the merger agreement with Homestake
was terminated and the Company entered into a merger agreement with Newmont.
Under the Newmont agreement, each share of Company common stock will be
exchanged for 0.43 share of Newmont common stock. The Newmont merger is subject
to the

52
<PAGE>
SANTA FE PACIFIC GOLD CORPORATION AND CONSOLIDATED SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

NOTE 1--THE COMPANY (CONTINUED)
approval of both the Company shareholders and Newmont shareholders, as well as
other customary conditions. The merger, which is expected to be tax-free to
Company shareholders and to be accounted for as a pooling of interests, is
expected to close during the second quarter of 1997. In conjunction with the
termination of the Homestake merger agreement, the Company paid to Homestake a
termination fee of $65.0 million. As a result of this payment, certain covenants
under the Credit Facility were amended and the Company's ability to pay annual
dividends was restricted to $1.5 million.

NOTE 2--SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

PRINCIPLES OF CONSOLIDATION

The accompanying consolidated financial statements include the accounts of
Santa Fe Pacific Gold Corporation and its wholly-owned subsidiaries. Interests
in mining joint ventures are reported using the proportional consolidation
method. All significant intercompany balances and transactions have been
eliminated.

ESTIMATES

The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.

The Company estimates its proven and probable gold reserves on an annual
basis using an assumed gold price per ounce ($400 per ounce at December 31, 1996
and 1995.) An independent engineering firm is then engaged to verify the
Company's reserves estimates. Although a significant decrease in estimated
reserves is not anticipated, such a decrease could impact the Company's ability
to recover the recorded amounts of inventories, deferred mining costs and
property, plant and equipment.

STATEMENT OF CASH FLOWS

The Company considers all highly liquid investments with a maturity of three
months or less when purchased to be cash equivalents.

DEFERRED MINING COSTS

Cash and noncash mining costs are deferred and charged to operating expenses
when the related gold is sold based on the estimated mining ratio for the life
of each mine. The estimated mining ratio represents total tons of material
estimated to be mined to total ounces of gold estimated to be recovered.
Deferred mining costs are classified as either current or long-term assets
depending on the period in which such costs are expected to be charged to
operating expenses.

INVENTORIES

Inventories are valued at the lower of average cost or market.

53
<PAGE>
SANTA FE PACIFIC GOLD CORPORATION AND CONSOLIDATED SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

NOTE 2--SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
PROPERTY, PLANT AND EQUIPMENT

Property, plant and equipment are stated at cost and include interest
capitalized during construction of $11.2 million, $2.6 million and $0.4 million
in 1996, 1995 and 1994, respectively. Additions and replacements are capitalized
while expenditures for maintenance and repairs are charged to operating
expenses. Mobile equipment and heap-leach pads are depreciated on a
straight-line basis over estimated useful lives ranging from two to eight years.
All other equipment and facilities are depreciated using the units-of-production
method based on estimated ounces of gold to be recovered from proven and
probable ore reserves or total tons to be mined. Depletion of operating mineral
properties is computed using the units-of-production method based on estimated
ounces of gold to be recovered from proven and probable ore reserves. Gain or
loss is recognized with respect to property sold or retired.

EXPLORATION AND DEVELOPMENT COSTS

Exploration and development costs incurred prior to the determination of the
feasibility of mining operations are charged to expense as incurred. Development
expenditures incurred subsequent to such determination and to increase
production or extend the life of existing mines are capitalized and amortized on
a units-of-production basis. Ongoing development costs at producing properties
to maintain production are generally charged to expense as incurred.

ASSET IMPAIRMENT

The Company evaluates its long-lived assets for impairment when events or
changes in circumstances indicate that the related carrying amount may not be
recoverable. If the sum of estimated future cash flows on an undiscounted basis
is less than the carrying amount of the related asset, an asset impairment is
considered to exist. The related impairment loss is measured by comparing
estimated future cash flows on a discounted basis to the carrying amount of the
asset. Changes in significant assumptions underlying future cash flow estimates
may have a material effect on the Company's financial position and results of
operations.

MINE RECLAMATION

Estimated costs of final reclamation are accrued on a units-of-production
basis over the expected life of each mine based on current environmental and
regulatory requirements. Ongoing reclamation expenditures are expensed as
incurred.

REVENUE RECOGNITION

Revenue is recognized when gold is shipped to customers.

PRICE-PROTECTION PROGRAM

In an effort to minimize exposure to fluctuations in the market price of
gold, the Company may utilize a variety of commodity instruments including gold
borrowings, forward sales contracts and purchased put and written call options.
The Company does not acquire, hold or issue commodity instruments for trading or
speculative purposes.

54
<PAGE>
SANTA FE PACIFIC GOLD CORPORATION AND CONSOLIDATED SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

NOTE 2--SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Proceeds from the sale of borrowed gold are recorded as gold loans at the
average price realized. As gold is delivered from production in repayment of the
borrowed gold, gold sales revenue is recognized at the average price realized
and the gold loan balance is reduced. If gold borrowings are repaid in advance
of the original repayment schedule, the resulting gain or loss is deferred and
recognized in gold sales revenue over the original repayment schedule. Accrued
liabilities at December 31, 1996 and 1995 includes $1.5 million of deferred
revenue relating to the repayment of gold loans in 1994 in advance of the
original repayment schedule. Other long-term liabilities includes deferred
revenue of $3.6 million and $5.2 million at December 31, 1996 and 1995,
respectively, relating to such repayments.

Forward sales contracts enable the Company to deliver a specified number of
ounces of gold to a counterparty at a specified price and date. Under normal
circumstances, counterparties under spot deferred contracts allow the Company to
defer delivery of gold to a later date, if necessary, at the original contract
price plus the prevailing interest-like premium. Revenue relating to deliveries
under forward sales contracts is recognized in gold sales at the applicable
contract price when the gold is delivered to the counterparty. Forward sales
contracts are not reflected in the consolidated balance sheet; however, the
Company evaluates its outstanding commitments under such contracts for lower of
cost or market considerations.

The Company purchased put options to establish a floor under a portion of
its anticipated future production. The Company simultaneously wrote call options
on a portion of the same production, thereby establishing a range around a
portion of its future production at no net cost. If the market price for gold
falls within the range established by the options at the applicable expiration
date, the options for that period will expire unexercised with no effect on the
Company. If the options are in the money at the expiration date, the Company
will either convert the options into spot deferred contracts for delivery at
some date in the future; receive or pay cash for the difference between the
option and the market prices on that date; or deliver gold against the
contracts. If the Company elects to close out the options for cash, the related
gain or loss will be deferred and recognized in gold sales revenue during the
applicable future production period.

INCOME TAXES

The Company follows the liability method of accounting for income taxes
whereby deferred income taxes are recognized for the tax consequences of
temporary differences by applying enacted statutory tax rates applicable to
future years to differences between the financial statement amounts and the tax
bases of certain assets and liabilities.

EMPLOYEE BENEFIT PLANS

Pension costs are determined using the projected unit credit actuarial
method. Pension plans are funded through annual contributions. In addition, the
Company provides medical and life insurance benefits for certain retired
employees and accrues the cost of such benefits over the period in which
employees become eligible for the benefits. The costs of the post-retirement
medical and life insurance benefits are paid at the time the services are
provided. Medical benefits are provided under the Company's self-insured program
while life insurance benefits are covered by an insurance program provided and
administered by an independent insurance carrier.

55
<PAGE>
SANTA FE PACIFIC GOLD CORPORATION AND CONSOLIDATED SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

NOTE 2--SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
STOCK COMPENSATION

The Company measures compensation cost relating to employee stock options
using the intrinsic value based method of accounting prescribed by APB Opinion
No. 25, "Accounting for Stock Issued to Employees."

ENVIRONMENTAL EXPENDITURES

Environmental expenditures are expensed or capitalized depending on their
future economic benefits. Liabilities for such expenditures are recorded when it
is probable that obligations have been incurred and the costs can be reasonably
estimated. The Company's estimates of these costs are based upon currently
available facts, existing technology, and presently enacted laws and
regulations. Costs of future expenditures for environmental remediation are not
discounted to their present value; such costs are based on management's current
estimate of amounts that are expected to be incurred when the remediation work
is performed within current laws and regulations. Where the available
information is sufficient to estimate the amount of liability, that estimate has
been used; where the information is only sufficient to establish a range of
probable liability and no point within the range is more likely than any other,
the lower end of the range has been used. The possibility of recovery of some of
these costs from insurance companies or other parties exists; however, the
Company does not recognize these recoveries in its financial statements until
they become probable. The Company's obligation for environmental remediation
costs is insignificant.

INCOME PER COMMON SHARE

Income per common share amounts are computed by dividing the net income for
the period by the weighted average number of common shares and common share
equivalents outstanding during the period. Common share equivalents include
shares issuable under stock option plans using the treasury stock method. Common
share equivalents are excluded from the computation if their effect is
anti-dilutive.

RECLASSIFICATIONS

Certain amounts have been reclassified in prior-year presentations to
conform to the current year presentation.

NOTE 3--INVENTORIES

Inventories as of December 31 consisted of the following:

<TABLE>
<CAPTION>
1996 1995
--------- ---------
(IN THOUSANDS)

<S> <C> <C>
In-process gold................................... $ 20,967 $ 11,867

Finished gold..................................... 2,767 4,826

Materials and supplies............................ 23,133 19,845
--------- ---------

Total........................................... $ 46,867 $ 36,538
--------- ---------
--------- ---------
</TABLE>

56
<PAGE>
SANTA FE PACIFIC GOLD CORPORATION AND CONSOLIDATED SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 4--PROPERTY, PLANT AND EQUIPMENT

Property, plant and equipment as of December 31 consisted of the following:

<TABLE>
<CAPTION>
1996 1995
------------ ------------
(IN THOUSANDS)
<S> <C> <C>
Mineral properties, including $422,033 and
$353,120 respectively, relating to operating
mines........................................... $ 461,009 $ 433,661
Equipment......................................... 463,359 428,920
Facilities........................................ 42,723 30,548
Land.............................................. 7,584 7,638
Construction in progress.......................... 269,141 101,088
------------ ------------
Total property, plant and equipment............. 1,243,816 1,001,855
Less accumulated depreciation, depletion and
amortization.................................... 316,375 247,297
------------ ------------
Net property, plant and equipment............... $ 927,441 $ 754,558
------------ ------------
------------ ------------
</TABLE>

NOTE 5--ACCRUED LIABILITIES

Accrued liabilities as of December 31 consisted of the following:

<TABLE>
<CAPTION>
1996 1995
--------- ---------
(IN THOUSANDS)
<S> <C> <C>
Employee benefits................................. $ 10,691 $ 7,925
Taxes other than income taxes..................... 4,380 3,912
Interest.......................................... 673 5
Construction costs................................ 6,675 8,028
Other............................................. 7,710 6,583
--------- ---------
Total........................................... $ 30,129 $ 26,453
--------- ---------
--------- ---------
</TABLE>

NOTE 6--LONG-TERM DEBT

Long-term debt as of December 31 consisted of the following:

<TABLE>
<CAPTION>
1996 1995
---------- ----------
(IN THOUSANDS)
<S> <C> <C>
Senior Debentures, 8.375%, maturing 2005, net..... $ 199,866 $ 199,861
Credit Facility, variable rate, maturing 2001..... 255,000 --
---------- ----------
Total........................................... $ 454,866 $ 199,861
---------- ----------
---------- ----------
</TABLE>

SENIOR DEBENTURES

On July 5, 1995, the Company issued $200.0 million of 8.375% Senior
Debentures ("Debentures") maturing on July 1, 2005. The Debentures were priced
at 99.928% to yield 8.386% and are not redeemable prior to maturity. The Company
used a portion of the net proceeds to repay the $130.0 million of debt
outstanding at June 30, 1995, under the Credit Facility. The remaining proceeds
were substantially used for capital expenditures and general corporate purposes.
The costs related to the issuance of the Debentures

57
<PAGE>
SANTA FE PACIFIC GOLD CORPORATION AND CONSOLIDATED SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

NOTE 6--LONG-TERM DEBT (CONTINUED)
were capitalized and are amortized to interest expense over the term of the
Debentures. The fair value of the Company's Debentures approximates their
carrying value.

CREDIT FACILITY

On October 1, 1993, the Company entered into a $190.0 million unsecured,
revolving credit facility which was replaced on March 30, 1995, with a $400.0
million unsecured, five-year revolving credit facility involving several
commercial banks ("Credit Facility"). Interest rates under the Credit Facility
vary depending on the interest options chosen by the Company as well as other
factors, but generally are tied to margins over the following interest rate
alternatives: LIBOR, CD, or gold funding. The interest rate on borrowings
outstanding at December 31, 1996, was 6.1%. The Company is also required to pay
a facility fee which ranges from 0.145% to 0.3750% per annum on the aggregate
amount of the commitments. The lenders' commitment under the Credit Facility
terminates on April 26, 2001, at which time any outstanding indebtedness must be
repaid. The fair value of amounts outstanding under the Credit Facility
approximates the related carrying value.

The Credit Facility, as amended, contains certain financial covenants which
include limitations on the incurrence of additional debt, the maintenance of a
minimum tangible net worth and the maintenance of a minimum ratio of operating
cash flow to consolidated debt. The Company currently believes that it will be
able to comply with the covenants contained in the Credit Facility and that its
ability to pay dividends will not be impeded. At December 31, 1996, the Company
was in compliance with the terms of all debt covenants.

NOTE 7--SHAREHOLDERS' EQUITY

The Company had 500.0 million authorized shares of common stock (par value
$0.01) of which 131.5 million and 131.4 million shares were outstanding at
December 31, 1996 and 1995, respectively. Also authorized are 50.0 million
shares of preferred stock with a par value of $0.01, none of which was
outstanding at December 31, 1996 or 1995.

The Board of Directors declared a dividend of $0.05 per common share in 1996
and 1995, which resulted in total dividend payments of $6.6 million in both
years.

In January 1995, the Company adopted a Stockholder Rights Plan, the rights
under which are represented by the Company's common stock certificates. These
rights become exercisable by the shareholder if a person or group acquires
beneficial ownership of 15% or more of the Company's common stock or publicly
announces its intention to commence a tender or exchange offer that would result
in a beneficial ownership of 15% or more. The Company may redeem the rights at
$0.01 each at any time before a buyer acquires 15% of the Company's voting
stock.

58
<PAGE>
SANTA FE PACIFIC GOLD CORPORATION AND CONSOLIDATED SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

NOTE 8--INCOME TAXES

The provision for income taxes for the years ended December 31 is as
follows:

<TABLE>
<CAPTION>
1996 1995 1994
--------- --------- ---------
(IN THOUSANDS)
<S> <C> <C> <C>
Current:
Federal......................................... $ 4,006 $ 9,036 $ 22,442
State........................................... 212 547 1,664
--------- --------- ---------
Total current................................. 4,218 9,583 24,106
--------- --------- ---------
Deferred:
Federal......................................... 7,167 7,991 (1,649)
State........................................... (2,628) (742) (2,462)
--------- --------- ---------
Total deferred................................ 4,539 7,249 (4,111)
--------- --------- ---------
Total....................................... $ 8,757 $ 16,832 $ 19,995
--------- --------- ---------
--------- --------- ---------
</TABLE>

Income taxes as reflected in the consolidated statement of operations differ
from amounts computed by applying the statutory federal corporate tax rate to
income before income taxes as follows:

<TABLE>
<CAPTION>
1996 1995 1994
--------- --------- ---------
(IN THOUSANDS)
<S> <C> <C> <C>
Income before income taxes........................ $ 29,825 $ 56,644 $ 76,696
--------- --------- ---------
--------- --------- ---------
Federal income tax at statutory rate.............. $ 10,439 $ 19,825 $ 26,844
Increase (decrease) resulting from:
Percentage depletion............................ (3,717) (3,961) (9,486)
Foreign losses.................................. 2,044 1,414 --
State income taxes, net of federal benefit...... (1,570) (127) (517)
Other........................................... 1,561 (319) 3,154
--------- --------- ---------
Total income tax.............................. $ 8,757 $ 16,832 $ 19,995
--------- --------- ---------
--------- --------- ---------
Effective tax rate................................ 29.36% 29.72% 26.07%
--------- --------- ---------
--------- --------- ---------
</TABLE>

59
<PAGE>
SANTA FE PACIFIC GOLD CORPORATION AND CONSOLIDATED SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

NOTE 8--INCOME TAXES (CONTINUED)
Principal temporary differences that gave rise to the net deferred tax
liability at December 31 were as follows:

<TABLE>
<CAPTION>
1996 1995
----------- -----------
(IN THOUSANDS)
<S> <C> <C>
Deferred Tax Assets:
Non-expiring AMT credit carryforwards........... $ 27,998 $ 30,238
Net operating loss carryovers................... 22,457 6,006
Employee benefits............................... 7,731 6,069
Exploration expenses............................ 6,173 5,534
Other........................................... 6,752 8,165
----------- -----------
Total......................................... 71,111 56,012
----------- -----------
Deferred Tax Liabilities:
Depreciation, depletion and amortization........ 149,335 140,949
Deferred mining costs........................... 69,430 51,302
Other........................................... 7,695 7,505
----------- -----------
Total......................................... 226,460 199,756
----------- -----------
Net Deferred Tax Liability........................ $ 155,349 $ 143,744
----------- -----------
----------- -----------
</TABLE>

At December 31, 1996, the Company had net operating loss carryforwards of
$64.2 million for regular tax purposes which begin to expire in 2010, and
minimum tax credit carryforwards of $28.0 million which are unlimited as to
expiration. Should the Company experience an ownership change as defined by
Section 382(g) of the Internal Revenue Code, the annual amount of net operating
loss carryforward utilization may be limited.

The Company was included in SFP's consolidated federal income tax returns
through September 30, 1994 ("Disaffiliation Date"), in accordance with an
Agreement for the Allocation of the Consolidated Federal Income Tax Liability
Among Members of the Santa Fe Pacific Corporation Affiliated Group ("Tax Sharing
Agreement") between SFP and its subsidiaries. Pursuant to the Tax Sharing
Agreement, the Company computed its income tax provision on a separate return
basis and paid to SFP amounts approximating the federal income tax liability it
would have paid if the Company was an independent consolidated group. The Tax
Sharing Agreement is applicable to all periods preceding the Disaffiliation
Date, therefore additional payments to SFP could be required for adjustments
which might be assessed if there is an audit which affects the computation of
amounts paid to SFP for open years between 1986 and the Disaffiliation Date.
Similar tax sharing agreements relating to certain state income or franchise tax
returns for which SFP files on a combined or consolidated basis are also in
effect. As a result of the Spin-Off, SFP and the Company have entered into an
Agreement Concerning Taxes which modifies or supplements certain provisions of
the Tax Sharing Agreement. The terms of the Agreement Concerning Taxes are not
expected to change the Company's determination of income tax assets or
liabilities prior to the Disaffiliation Date.

60
<PAGE>
SANTA FE PACIFIC GOLD CORPORATION AND CONSOLIDATED SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 9--OTHER INCOME, NET

Other income, net for the years ended December 31 consisted of the
following:

<TABLE>
<CAPTION>
1996 1995 1994
------- ------- -------
(IN THOUSANDS)
<S> <C> <C> <C>
Interest Income................................... $ 1,923 $ 2,246 $ 991
Other, Net........................................ (280) 1,013 989
------ ------ ------
Total........................................... $ 1,643 $ 3,259 $ 1,980
------ ------ ------
------ ------ ------
</TABLE>

NOTE 10--STOCK OPTION PLANS

LONG-TERM INCENTIVE STOCK PLAN

Effective May 25, 1995, the Company adopted a Long-Term Incentive Stock Plan
("Stock Plan") under which certain salaried employees of the Company may receive
awards in the form of restricted stock, stock options, stock appreciation rights
and other stock-based compensation. The Stock Plan will remain in effect for
five years and is anticipated to result in the cumulative issuance of less than
5% of the Company's total outstanding shares as of January 1, 1995.

Pursuant to the Stock Plan, stock options may be granted to any salaried
employee of the Company. Once granted, the options become exercisable during an
option period of three years with one-third of the total options vesting on or
after the first, second and third anniversary, respectively, of the grant date.
The exercise price is generally equal to the fair market price of the Company's
common stock on the date of the grant and the option exercise period may not
exceed ten years from the grant date. At December 31, 1996, stock options
covering 707,145 shares and 717,823 shares were outstanding at an exercise price
of $12.38 and $14.00, respectively, which represented the market value on the
date of grant.

Changes in 1996 and 1995 in stock options outstanding were as follows:

<TABLE>
<CAPTION>
1996 1995
----------------------------- -----------------------------
WTD-AVG WTD-AVG
SHARES EXERCISE PRICE SHARES EXERCISE PRICE
------------ --------------- ------------ ---------------
<S> <C> <C> <C> <C> <C>
Outstanding at beginning of year.................... 858,360 12.38 -- --
Granted........................................... 806,994 14.00 865,530 12.38
Exercised......................................... (14,018) 12.38 -- --
Expired or terminated............................. (226,368) -- (7,170) --
------------ ------------
Outstanding at end of year.......................... 1,424,968 13.20 858,360 12.38
------------ ------------
------------ ------------

Options exercisable at year-end..................... 268,372 --
Weighted average fair value of options granted
during the year.................................... $ 4,349,698 $ 3,981,438
</TABLE>

61
<PAGE>
SANTA FE PACIFIC GOLD CORPORATION AND CONSOLIDATED SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

NOTE 10--STOCK OPTION PLANS (CONTINUED)
The fair value of each option grant is estimated on the date of grant using the
Black-Scholes option-pricing model with the following assumptions:

<TABLE>
<CAPTION>
1996 1995
-------------- --------------
<S> <C> <C>
Expected dividend yield........................... 0.36% 0.40%
Expected stock price volatility................... 32.97% 32.24%
Risk-free interest rate........................... 6.27% 5.85%
Expected life of options.......................... 5 years 5 years
</TABLE>

If the Company had elected to recognize compensation costs based on the fair
value of the options at the grant date as prescribed by Statement of Financial
Accounting Standards No. 123, "Accounting for Stock-Based Compensation", net
income and income per common share would have been reduced to the pro forma
amounts indicated below (in thousands except per share amounts):

<TABLE>
<CAPTION>
1996 1995
-------------- --------------
<S> <C> <C>
Net Income--as reported (000)..................... $ 21,068 $ 39,812
Net Income--pro forma (000)....................... $ 19,610 $ 39,331
Income per common share--as reported.............. $ 0.16 $ 0.30
Income per common share--pro forma................ $ 0.15 $ 0.30
</TABLE>

Under the Stock Plan, restricted stock is used to implement the Bonus Stock
Program operated in conjunction with the Company's Incentive Compensation
Program. Eligible employees may elect to forgo up to 50% of their individual
annual cash incentive compensation in exchange for restricted stock equivalent
to 150% of the forgone cash award. Each eligible employee must make this
election prior to a specified date in the year in which the cash award would be
earned. The number of shares awarded is based on the fair market value of the
Company's stock on February 15 following the year in which the incentive
compensation is earned. Vesting occurs three years from the grant date.
Restricted stock consists of shares of common stock that are issued to the
grantee, but held by the Company during the restriction period and are subject
to forfeiture based on tenure requirements. Dividends and voting rights on these
securities accrue to the grantee, but the securities may not be sold, pledged,
assigned, transferred or encumbered during the period of restriction.

Changes in the number of restricted shares during 1996 and 1995 were as follows:

<TABLE>
<CAPTION>
1996 1995
-------------- -------
<S> <C> <C>
Outstanding at beginning of year.................. 92,919 --
Granted......................................... 24,407 92,919
Terminated...................................... (26,017) --
Issued.......................................... (5,792) --
------- ------
Outstanding at end of year........................ 85,517 92,919
------- ------
------- ------
</TABLE>

62
<PAGE>
SANTA FE PACIFIC GOLD CORPORATION AND CONSOLIDATED SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

NOTE 10--STOCK OPTION PLANS (CONTINUED)
PHANTOM STOCK PLAN

Effective July 1, 1993, the Company adopted the Phantom Stock Plan which
enables the administration committee under the Phantom Stock Plan ("Committee")
to grant Phantom Stock Options of Phantom Stock (as defined in the Phantom Stock
Plan) to those individuals that the Committee believes are responsible for the
Company's growth and profitability. Option awards, which vest one-third per
year, entitle the recipient to receive cash for the difference between the Share
Value (as defined in the Phantom Stock Plan) at the date of grant and the Share
Value at the date of exercise less applicable withholding taxes. The cost of the
Phantom Stock Plan is accrued over the vesting period.

At December 31, 1996 and 1995, 473,533 and 939,431 Phantom Stock Options,
respectively, were outstanding. The base price per share was between $10.56 and
$14.13 depending on the date of grant. Phantom Stock Plan expense was $3.7
million in 1996 and no expense was recorded in 1995. Accrued Liabilities at
December 31, 1996 and 1995 included $2.2 million and $1.4 million, respectively,
related to Phantom Stock Options.

DIRECTOR'S STOCK COMPENSATION PLAN

In May 1996, the stockholders approved the Directors' Stock Compensation
Plan ("Plan") under which each Eligible Director shall be granted a stock award
for each quarter. Each director shall be the full owner of shares of stock
granted and shall have all the rights of a stockholder. No more than 1,200
shares of stock may be awarded to a director under the Plan for any Plan year.
The Plan will terminate on March 31, 2001, and the number of shares of stock
which may be issued thereunder shall not exceed 200,000 shares in the aggregate.
During 1996, 7,200 shares were issued under the Plan, which resulted in
compensation expense of $0.1 million.

During 1996, a director of the Company who is Chairman of the Executive and
Policy Committee, received an option to acquire 50,000 shares of Common Stock
under the Plan at a price of $15.375 per share, which was equal to the average
of the high and low prices of a share of Common Stock on the New York Stock
Exchange on March 1, 1996. The option may be exercised as to 25,000 shares on or
after March 1, 1997, if the director continues as an Eligible Director until
that date; the remaining 25,000 shares may be exercised on or after March 1,
1998, if the director continues as an Eligible Director until that date.

NOTE 11--PENSION PLANS

Prior to the Spin-Off, all salaried employees of the Company were included
with employees of certain other SFP affiliates in a number of pension plans, the
most significant of which was the trusteed noncontributory Santa Fe Pacific
Corporation Retirement Plan ("SFP Plan"). On October 1, 1994, the Company
established a defined benefit pension plan, the trusteed noncontributory Santa
Fe Pacific Gold Corporation Retirement Plan ("Retirement Plan") for the benefit
of its salaried employees. The Retirement Plan provides benefits similar to
those provided under the SFP Plan. Initial funding for the Retirement Plan was
provided by a transfer of assets from the SFP Plan in an amount equivalent to
the Company's proportionate share of the accumulated benefit obligation for
persons covered as of the transfer date as well as an allocation of excess
assets in the SFP Plan.

The Retirement Plan complies with the Employee Retirement Income Security
Act of 1974 ("ERISA") requirements and covers substantially all officers and
salaried employees of the Company. Benefits payable under the Retirement Plan
are based on years of service and compensation during the

63
<PAGE>
SANTA FE PACIFIC GOLD CORPORATION AND CONSOLIDATED SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

NOTE 11--PENSION PLANS (CONTINUED)
sixty highest paid consecutive months of service during the ten years
immediately preceding retirement. The Company's funding policy is to contribute
annually not less than the ERISA minimum, and not more than the maximum amount
deductible for income tax purposes. Retirement Plan assets are invested in
common stock, U.S. government securities and money market mutual funds.

Plan assets and liabilities are measured at October 1. A reconciliation of
the funded status of the Retirement Plan with amounts recorded is as follows:

<TABLE>
<CAPTION>
1996 1995
-------------- --------------
(IN THOUSANDS)
<S> <C> <C>
Actuarial present value of projected benefit
obligation:
Vested employees................................ $ 9,211 $ 8,451
Non-vested employees............................ 2,074 1,599
------- -------
Accumulated benefit obligation.................. 11,285 10,050
Provision for future salary increases........... 3,369 2,945
------- -------
Total projected benefit obligation................ 14,654 12,995
Plan assets at fair value......................... 11,935 10,163
------- -------
Projected benefit obligation in excess of fair
value of plan assets............................ 2,719 2,832
Unrecognized net (loss) gain...................... 306 (167)
Unrecognized prior service credit................. 593 634
Unrecognized net transition asset................. 33 39
------- -------
Accrued pension liability......................... $ 3,651 $ 3,338
------- -------
------- -------
Major assumptions:
Discount rate................................... 7.50% 7.25%
Rate of increase in compensation levels......... 4.00% 4.00%
</TABLE>

<TABLE>
<CAPTION>
1996 1995
------- -------
(IN THOUSANDS)
<S> <C> <C>
Components of pension expense:
Service cost...................................... $ 1,171 $ 1,030
Interest cost..................................... 933 842
Return on plan assets............................. (1,122) (1,740)
Net amortization and deferral..................... 193 901
------ ------
Total............................................. $ 1,175 $ 1,033
------ ------
------ ------
Major assumptions:
Discount rate................................... 7.25% 8.75%
Rate of increase in compensation levels......... 4.00% 5.75%
Expected return on market value of plan
assets........................................ 9.50% 10.00%

Pension expense for 1994 was $1.0 million.
</TABLE>

64
<PAGE>
SANTA FE PACIFIC GOLD CORPORATION AND CONSOLIDATED SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

NOTE 12--OTHER POST-RETIREMENT BENEFITS

The Company provides health care and life insurance benefits for certain
retired employees. Covered employees become eligible for these benefits at
retirement after meeting minimum age and service requirements.

The retiree medical plan is contributory and provides benefits to retirees,
their covered dependents and beneficiaries. The plan also contains fixed
deductible, coinsurance and out-of-pocket limitations. The medical plan was
amended in 1992 to provide for the annual adjustment of retiree contributions.
The life insurance plan is noncontributory and covers retirees only.

As of June 1994, salaried employees who have rendered ten years of service
after attaining age 45 are eligible for both medical benefits and life insurance
coverage during retirement (collectively, the "Plans"). Prior to June 1994,
salaried employees who had attained age 55 and rendered ten years of service
were eligible for such benefits. This change in eligibility requirements
resulted in a $0.9 million pre-tax curtailment gain in 1994 relating to
employees who are not currently eligible for post-retirement medical benefits,
and a negative plan amendment due to a reduction in the accumulated
post-retirement benefit obligation related to remaining eligible active
employees.

The following table shows the reconciliation of the Plans' obligations to
amounts accrued at December 31, 1996 and 1995. The Company uses an October 1
measurement date to value the Plans' obligations.

<TABLE>
<CAPTION>
1996 1995
--------- ---------
(IN THOUSANDS)
<S> <C> <C>
Accumulated post-retirement benefit obligation:
Retirees and dependents...................................................................... $ 581 $ 496
Fully eligible active plan participants...................................................... 819 372
Other active plan participants............................................................... 2,908 2,888
--------- ---------
Subtotal................................................................................... 4,308 3,756
Unrecognized prior service credit.............................................................. 1,458 1,699
Unrecognized net gain.......................................................................... 1,811 1,588
--------- ---------
Accrued post-retirement liability.............................................................. $ 7,577 $ 7,043
--------- ---------
--------- ---------

Major assumptions:
Discount rate................................................................................ 7.50% 7.25%
Medical trend rate
i. First year............................................................................... 7.00% 8.00%
ii. Ultimate................................................................................ 4.25% 4.25%
iii. Year ultimate reached................................................................... 2000 2000
</TABLE>

The unrecognized prior service credit is amortized on a straight-line basis
over the average length of future service to full eligibility of the active
population.

The health care cost trend rate assumption has a significant effect on the
amounts reported. For example, increasing the assumed health care cost trend
rates by one percentage point in each year would increase the accumulated
post-retirement benefit obligation for the medical plan by $0.6 million and the
aggregate of the service and interest components of net periodic post-retirement
benefit cost recognized in 1996 by $0.2 million. Other Long-Term Liabilities at
December 31, 1996 and 1995, included $7.6 million and $7.0 million,
respectively, related to the Company's post-retirement obligations.

65
<PAGE>
SANTA FE PACIFIC GOLD CORPORATION AND CONSOLIDATED SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

NOTE 12--OTHER POST-RETIREMENT BENEFITS (CONTINUED)
Components of net periodic post-retirement benefit cost relating to the
medical plan and the life insurance plan were as follows:

<TABLE>
<CAPTION>
1996 1995 1994
------ ------ ------
(IN THOUSANDS)
<S> <C> <C> <C>
Service cost...................................... $ 646 $ 619 $ 722
Interest cost..................................... 270 261 355
Amortization of unrecognized prior service
credit.......................................... (235) (344) (160)
Other............................................. (119) -- (31)
----- ----- -----
Net periodic post-retirement benefits cost........ $ 562 $ 536 $ 886
----- ----- -----
----- ----- -----
</TABLE>

NOTE 13--RETIREMENT AND SAVINGS PLAN

On July 1, 1994, the Company established the Santa Fe Pacific Gold
Corporation Retirement and Savings Plan ("Retirement and Savings Plan") which
offers eligible employees an opportunity to make long-term investments on a
regular basis through salary contributions which are supplemented by employer
matching contributions. Substantially all salaried and hourly employees are
eligible to participate in the Retirement and Savings Plan upon completion of 30
days of service. Eligible employees may contribute up to 12% of their eligible
compensation on either a before-tax or after-tax basis. The Company makes
matching contributions equal to the first 4% of employee before-tax
contributions, up to a maximum contribution of $6,000 per year. An employer
retirement contribution equal to 2% of before-tax eligible compensation is also
provided for eligible hourly employees. Participants automatically vest in their
own before-tax contributions while Company matching contributions vest at a rate
of 20% per year of service. Vested accounts are distributable upon a
participant's disability, death, retirement or separation of service. Company
contributions to the Retirement and Saving Plan, as well as certain predecessor
plans in 1994, were $3.6 million, $3.1 million, $2.3 million, respectively, for
the years ended December 31, 1996, 1995, and 1994.

NOTE 14--COMMITMENTS AND CONTINGENCIES

PRICE-PROTECTION PROGRAM

66
<PAGE>
SANTA FE PACIFIC GOLD CORPORATION AND CONSOLIDATED SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 14--COMMITMENTS AND CONTINGENCIES (CONTINUED)

FINAL RECLAMATION

As of December 31, 1996, estimated final reclamation costs for the Company's
operating mines were $56.1 million, based on current environmental and
regulatory requirements. Other Long-Term Liabilities at December 31, 1996 and
1995, include $11.0 million and $8.7 million, respectively, related to final
reclamation costs.

SEVERANCE BENEFITS

The Company has a severance program for all full-time, salaried employees
who are terminated or constructively terminated by the Company or by an
acquiror, other than for cause, as defined in the program. The Company also has
severance agreements covering certain employees who are terminated within 24
months following a change in control. During December 1996, the Company began to
restructure its operations whether or not a merger occurs. As a result of that
decision, certain employees were terminated in December 1996 and became entitled
to receive severence benefits of $2.4 million, which are included in Merger and
restructuring expenses. The Company anticipates that additional expenses under
the severance program and severance agreements will be incurred during 1997.

LITIGATION

On December 6 and 9, 1996, a total of six Company stockholders filed class
action complaints against the Company and the Company's Board of Directors
(collectively, "Defendants"). To date, the Defendants have been served only with
the first complaint. The complaints allege, among other things, that members of
the Company's Board of Directors breached their fudiciary responsibilities to
the Company's stockholders by failing to consider fully the Newmont proposal to
acquire the Company and that the Company's Board of Directors approved the
Homestake merger transaction to ensure that certain of the Defendants would
retain their positions. The actions seek, among other things, to have the Court
of Chancery ("Court") order the Defendants to take various actions to cooperate
with any entity or person interested in

67
<PAGE>
SANTA FE PACIFIC GOLD CORPORATION AND CONSOLIDATED SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

NOTE 14--COMMITMENTS AND CONTINGENCIES (CONTINUED)
proposing a transaction with the Company and to act to maximize shareholder
value and seek unspecified damages. The Defendants moved to dismiss the first
complaint on January 6, 1997, and also moved to stay discovery pending
resolution of the motion to dismiss. On January 22, 1997, the Court entered an
order consolidating the six actions into one action. The Company intends to
defend against the allegations.

The Company is party to a number of other legal actions arising in the
ordinary course of business. Although the final outcome of these actions cannot
be predicted with certainty, it is the opinion of Company management that none
of these actions, when finally resolved, will have a material adverse effect on
the Company's financial position or results of operations.

ENVIRONMENTAL-PROTECTION REGULATION

The Company's business is subject to government regulations relating to the
mining and exploration of mineral properties, as well as the possible effects of
such activities upon the environment. These laws and regulations are continually
changing and are generally becoming more restrictive. The Company conducts its
operations in a manner to protect the public health and environment. The Company
has made, and expects to make in the future, expenditures to comply with such
laws and regulations. In light of frequent changes in such laws and regulations
and the inherent uncertainties in this area, the Company is unable to estimate
accurately the total amount of expenditures over the long term. There are
currently no actions against the Company for violations of
environmental-protection laws and regulations which would have a material
adverse effect on the Company's financial position or results of operations.

CONTINGENT LIABILITY

In a 1993 asset exchange transaction, a wholly-owned subsidiary of Santa Fe
Pacific Gold Corporation transferred a coal lease with Chaco Energy Company
("Chaco") to Hanson Natural Resources Company ("HNRC") with respect to which the
subsidiary had collected $484.0 million in advance royalty payments. The lease
provides for HNRC to collect another $390.0 million from 1994 through 2018 from
Chaco. In the event of a title failure as stated in the lease, this subsidiary
has a primary obligation to refund the advance royalty payments previously
collected and has a secondary obligation as assignor to HNRC to refund any of
the $390.0 million HNRC collects if HNRC fails to meet its refund obligation to
Chaco. The subsidiary has an indemnity agreement with HNRC for the latter
amounts. Santa Fe Pacific Gold Corporation has no direct liability to Chaco
under the coal lease. The subsidiary has title insurance on the leased coal
deposits in the amount of $240.0 million. Santa Fe Pacific Gold Corporation and
the subsidiary regard the circumstances entitling Chaco to a refund as remote.

Santa Fe Pacific Gold Corporation has agreed with Chaco to maintain the
subsidiary's net worth at $108.0 million until July 1, 2025. As a result of this
restriction, $133.5 million of consolidated retained income as of December 31,
1996, is available for payment of cash dividends, subject to restrictions
contained in the Credit Facility.

68
<PAGE>
SANTA FE PACIFIC GOLD CORPORATION AND CONSOLIDATED SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

NOTE 14--COMMITMENTS AND CONTINGENCIES (CONTINUED)
TAX INDEMNIFICATION AGREEMENT

To protect SFP from federal and state income taxes, penalties, interest and
additions to tax that could be incurred by it if the Spin-Off were determined to
be a taxable event, the Company entered into an agreement with SFP under which
it will indemnify SFP with respect to tax liabilities resulting from actions
taken by the Company at any time during the one-year period commencing with the
close of the Spin-Off. Substantially all of the actions for which the Company
has indemnified SFP pursuant to this agreement were within the Company's
control. The Company believes it took no actions during such one-year period
that would have had such an effect.

LEASES

The Company leases certain mining equipment and facilities, vehicles, office
equipment, and other property. Future minimum lease payments for operating
leases for the years 1997 through 2001 are $2.0 million, $1.5 million, $1.3
million, $0.5 million and $0.1 million, respectively. Rental expense
attributable to continuing operations was $3.8 million, $3.7 million and $2.3
million in 1996, 1995, and 1994, respectively.

OTHER COMMITMENTS

As of December 31, 1996, the Company had outstanding commitments of $49.6
million for the purchase of mining equipment and facilities, all of which will
be paid during 1997. In addition, the Company has issued letters of credit
totaling $0.9 million which expire from September 1997 to February 1998.

Pursuant to a resolution of the Company's Board of Directors in December
1996, the Company will pay to a director of the Company, $1.05 million for
certain advisory services this director has provided and will provide to the
Company in connection with its consideration of strategic alternatives.

NOTE 15--SUMMARIZED QUARTERLY OPERATING RESULTS (UNAUDITED)

Quarterly earnings data for the years ended December 31, 1996 and 1995
follow:

<TABLE>
<CAPTION>
FIRST SECOND THIRD FOURTH
--------- --------- --------- ----------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C>
1996 Quarters
Total Operating Revenue............ $ 83,307 $ 81,246 $ 77,372 $ 101,264
Operating Income................... $ 11,645 $ 9,352 $ 8,257 $ 13,560
Net Income......................... $ 6,228 $ 5,844 $ 3,502 $ 5,494
Income Per Common Share............ $ 0.05 $ 0.04 $ 0.03 $ 0.04
1995 Quarters
Total Operating Revenue............ $ 84,712 $ 85,367 $ 87,985 $ 92,310
Operating Income................... $ 18,570 $ 16,827 $ 15,515 $ 13,157
Net Income......................... $ 12,310 $ 11,246 $ 8,713 $ 7,543
Income Per Common Share............ $ 0.09 $ 0.09 $ 0.07 $ 0.06
</TABLE>

69
<PAGE>
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE

None.

PART III

ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

CLASS I DIRECTORS
(TERMS TO EXPIRE AT 1999 ANNUAL MEETING)

DAVID H. BATCHELDER, 47, was elected a Director in 1996. Since March 1996,
Mr. Batchelder has been a managing member of Relational Investors LLC, the
General Partner of Relational Investors LP, an active investing limited
partnership. Since 1988, Mr. Batchelder has been Chief Executive Officer of
Batchelder & Partners, Inc., a financial advisory and investment banking firm
based in San Diego, California. From 1978 to 1987, Mr. Batchelder was an
employee of Mesa Petroleum Company, and he served as President and Chief
Operating Officer from January 1986 to February 1987. He is currently a director
of Morrison Knudsen Corporation and Chairman of MacFrugal's Bargains-Close-outs,
Inc. Mr. Batchelder serves on the Audit Committee and the Committee on
Directors.

ROBERT D. KREBS, 54, was elected a Director in 1991. Since September 1995,
Mr. Krebs has served as President and Chief Executive Officer, and since January
1997 as Chairman of Burlington Northern Santa Fe Corporation. From June 1988 to
September 1995, Mr. Krebs served as Chairman, President and Chief Executive
Officer of Santa Fe Pacific Corporation (until September 1994, the parent of the
Corporation). From July 1987 to June 1988, he served as President and Chief
Executive Officer of Santa Fe Pacific Corporation. Mr. Krebs is a director of
Burlington Northern Santa Fe Corporation, Burlington Northern Inc., Phelps Dodge
Corporation, Northern Trust Corporation, Santa Fe Pacific Pipelines, Inc. and
Burlington Northern Railroad Company. Mr. Krebs serves on the Compensation and
Benefits Committee and the Committee on Directors.

RICHARD J. STOEHR, 69, was elected a Director in 1994. Mr. Stoehr is
currently a consultant to various entities in the mining and minerals business
and was formerly Senior Vice President and a director of Homestake Mining
Company. Mr. Stoehr chairs the Committee on Directors and also serves on the
Audit Committee.

CLASS II DIRECTORS
(TERMS TO EXPIRE AT 1997 ANNUAL MEETING)

JAMES T. CURRY, 60, was elected a Director in 1994. In 1991, Mr. Curry
retired as Chief Executive Officer of the Minerals Division, and as a director,
of Broken Hill Proprietary Ltd. Mr. Curry is a director of SRI International.
Mr. Curry serves on the Executive and Policy Committee and the Audit Committee.

DONALD W. GENTRY, 54, was elected a Director in 1994. Dr. Gentry is
Professor of Mining Engineering at the Colorado School of Mines. In addition,
Dr. Gentry is a consultant in the areas of mine valuation, corporate planning,
investment decision analysis, and project financing. Dr. Gentry serves on the
Compensation and Benefits Committee and the Audit Committee.

GEORGE B. MUNROE, 75, was elected a Director in 1994. Mr. Munroe retired as
Chairman of the Board of Directors and Chief Executive Officer of Phelps Dodge
Corporation in February 1987. From December 1983 to April 1994, Mr. Munroe
served as a director of Santa Fe Pacific Corporation (until September 1994, the
parent of the Corporation). Mr. Munroe is a director of The New York Times
Company. Mr. Munroe chairs the Audit Committee and serves on the Executive and
Policy Committee.

CLASS III DIRECTORS
(TERMS TO EXPIRE AT 1998 ANNUAL MEETING)

PATRICK M. JAMES, 51, was elected a Director of the Company in 1984. Mr.
James has served as Chairman of the Board of Directors and Chief Executive
Officer of the Company since January 1, 1995,

70
<PAGE>
and has served as the Company's President since January 1994. From January 1991
until he assumed the presidency, he served as Executive Vice President and, from
January 1991 through December 1994, served as the Company's Chief Operating
Officer. He has been employed by the Company or its affiliates in various
capacities since 1979. Mr. James serves on the Executive and Policy Committee
and the Committee on Directors.

JEAN HEAD SISCO, 71, was elected a Director in 1994. Mrs. Sisco is a partner
in Sisco Associates, a management consulting firm. From 1975 to September 1995,
she served as a director of Santa Fe Pacific Corporation (until September 1994,
the parent of the Company). She is also a director of Chiquita Brands
International, K-Tron International, Inc., American Funds Tax Exempt Series I,
The Neiman Marcus Group, Inc., Textron Inc., and Washington Mutual Investors
Fund. Mrs. Sisco chairs the Compensation and Benefits Committee and serves on
the Committee on Directors.

PETER STEEN, 66, was elected a Director effective March 1, 1996. Mr Steen
has a long history in the management of mining companies having served as
President and Chief Executive Officer of Inspiration Consolidated Copper Company
(1978-1983), President and Chief Executive Officer of International Corona
Corporation (1986-1992), President and Chief Operating Officer of Homestake
Mining Company (1992-1994), President and Chief Executive Officer of Lac
Minerals Ltd. (1994), and most recently as Chairman of Eldorado Corporation Ltd.
Mr. Steen chairs the Executive and Policy Committee and serves on the
Compensation and Benefits Committee.

OTHER INFORMATION REGARDING THE BOARD OF DIRECTORS

BOARD OF DIRECTORS MEETINGS. The Board of Directors met nine times in 1996.
All members of the Board of Directors attended at least 75% of the meetings of
the Board of Directors and of its Committees on which they are members, except
for Mr. Curry who attended eight of the nine meetings of the Board of Directors,
six of the seven Executive and Policy Committee meetings and one of the three
Compensation and Benefits Committee meetings held while he was a member of the
Compensation and Benefits Committee through May 1996.

COMMITTEES OF THE BOARD OF DIRECTORS. The Board of Directors has
established an Executive and Policy Committee, a Compensation and Benefits
Committee, an Audit Committee, and a Committee on Directors.

The Executive and Policy Committee was formed as of March 1, 1996, to
perform the functions of the former Executive Committee and the Policy Committee
which were discontinued as of that date. The Executive Committee had not met in
1995. The Policy Committee had met four times in 1995. The Executive and Policy
Committee met seven times during 1996. The principal functions of the Executive
and Policy Committee are to meet on a regular basis to discuss major issues
affecting the Corporation, to make recommendations on such major issues to the
Board of Directors and the Chief Executive Officer, to facilitate communication
between the Board of Directors and the Chief Executive Officer, and to exercise
the powers of the Board of Directors in the management of the business and
affairs of the Company when the Board of Directors is not in session. Peter
Steen as Chairman, Patrick M. James, James T. Curry, and George B. Munroe
currently serve on the Executive and Policy Committee.

The Compensation and Benefits Committee met five times during 1996. The
principal functions of the Compensation and Benefits Committee are to administer
and make recommendations to the Board of Directors concerning executive and
employee benefits, compensation and retirement plans, management organization,
election of officers and membership of committees appointed under retirement
plans. No member of the Compensation and Benefits Committee is an employee of
the Company or its subsidiaries. Members of the Compensation and Benefits
Committee are not eligible to participate in any benefit plans of the
Corporation that they administer. Jean Head Sisco as Chairman, Donald W. Gentry,
Robert D. Krebs, and Peter Steen currently serve on the Compensation and
Benefits Committee.

71
<PAGE>
The Audit Committee met three times during 1996. The principal functions of
the Audit Committee include recommending to the Board of Directors the
engagement of independent accountants, overseeing the financial reporting
process, and overseeing the performance and reviewing the scope of the audit
function of the Company's independent accountants and internal auditor. The
Audit Committee also reviews, among other things, audit plans and procedures,
the Company's policies with respect to conflicts of interest and the prohibition
on the use of corporate funds or assets for improper purposes, changes in
accounting policies and the use of independent accountants for non-audit
services. No member of the Audit Committee is an employee of the Company or its
subsidiaries. George B. Munroe as Chairman, David H. Batchelder, James T. Curry,
Donald W. Gentry, and Richard J. Stoehr currently serve on the Audit Committee.

The Committee on Directors met three times during 1996. The principal
functions of the Committee on Directors are to consider and recommend to the
Board of Directors candidates to fill vacancies on the Board of Directors,
assignment of Directors to Committees of the Board of Directors, and certain
policies for the Board of Directors. The Committee on Directors also administers
the Company's Directors' Stock Compensation Plan described below. Richard J.
Stoehr as Chairman, David H. Batchelder, Jean Head Sisco, Patrick M. James and
Robert D. Krebs currently serve on the Committee on Directors. The Committee on
Directors will consider nominees for Directors recommended by stockholders. Any
such recommendation, together with the nominee's qualifications and consent to
being considered as a nominee, should be sent, in writing, to the Secretary of
the Company on or before December 1 of the year preceding the Annual Meeting of
Stockholders.

EXECUTIVE OFFICERS

Each executive officer of the Company is elected for an indefinite term and
serves until her or his successor is elected or appointed or until her or his
earlier death, resignation or removal. The current executive officers of the
Company, their ages and positions are as follows:

<TABLE>
<CAPTION>
NAME AGE POSITION
- ---------------------------------------------- --- -----------------------------------------------------------
<S> <C> <C>
Patrick M. James.............................. 51 Chairman, President and Chief Executive Officer
LeRoy E. Wilkes............................... 54 Executive Vice President and Chief Operating Officer
Bruce D. Hansen............................... 39 Senior Vice President--Corporate Development
David A. Smith................................ 52 Vice President and Chief Financial Officer
Ronald L. Parratt............................. 48 Vice President--Exploration
Linda K. Wheeler.............................. 43 Controller
Wayne Jarke................................... 47 General Counsel and Secretary
</TABLE>

The business background of each of the above executive officers is described
below.

Bruce D. Hansen began working for the Company in 1982. He has held the
positions of Mining Engineer, Manager of Business Development, Director of
Corporate Development, Vice President-- Finance and Development, and, since
April 1994, his current position of Senior Vice President--Corporate
Development. Prior to joining the Company, Mr. Hansen held engineering positions
with Consolidation Coal Company, Union Oil Company's Molycorp Division and
Phillips Coal Company.

Patrick M. James was elected Chairman and Chief Executive Officer of the
Company in October 1994, assuming those positions on January 1, 1995. He has
held the position of President of the Company since January 1994. From January
1991 through January 1994, he was the Executive Vice President and Chief
Operating Officer. He has been a director of the Company since 1984. He has been
with the Company since 1979, working in various positions including Manager of
Underground Mining, Manager of Mine Construction, and Vice
President--Operations. Prior to joining the Company, Mr. James worked in a
variety of engineering and management positions for Kerr-McGee Corporation,
Peter Kiewit Sons Company, and Gulf Mineral Resources Corporation.

72
<PAGE>
Wayne Jarke has been an employee and the General Counsel of the Company
since September 1990 and has been Secretary of the Company since July 1993. From
1975 to September 1990, Mr. Jarke provided legal services to the Company as a
lawyer employed by either Santa Fe Railway (1975-1978), Santa Fe Industries,
Inc. (1978-1985), or SFP (1985-1990). Since 1979, Mr. Jarke has been responsible
for managing the legal affairs of the Company and for directing the efforts of
staff and outside legal counsel.

Ronald L. Parratt joined the Company's predecessor in 1978 and has held the
position of Vice President--Exploration since October 15, 1996. His prior
positions with the Company included Director-- North America Exploration,
Director--U.S. Exploration, Director--Minerals Exploration Northwest Region,
Manager--Minerals Exploration Northwest Region and Senior Geologist. Prior to
his employment with the Company's predecessor, Mr. Parratt was employed as a
geologist by Stauffer Chemical Company.

David A. Smith began his employment with the Company as Vice President and
Chief Financial Officer in late April 1994. Prior to joining the Company, Mr.
Smith was employed by Catellus, a real estate development and management
corporation, during the period from 1989 to 1994 in the positions of Vice
President--Finance, Vice President and Chief Financial Officer, and finally as
Senior Vice President and Chief Financial Officer. Mr. Smith was employed by SFP
from 1984 to 1989, as Director of Finance, and as Assistant Vice
President--Finance. Prior to 1984, Mr. Smith was employed by Southern Pacific
Company.

Linda K. Wheeler has been employed by the Company since 1983 and was
appointed as Controller in May 1994. Prior to this appointment, she had been
Assistant Controller since May 1990 and previously had held other positions with
the Company related to accounting and taxation. Before joining the Company, Ms.
Wheeler had been employed with a predecessor to Santa Fe Energy Resources, Inc.,
in the field of taxation. Ms. Wheeler is a certified public accountant in the
State of New Mexico.

LeRoy E. Wilkes joined the Company in May 1995 and held the position of
Senior Vice President-- Operations until February 1996, when he became Executive
Vice President and Chief Operating Officer. Prior to joining the Company, Mr.
Wilkes was Executive Vice President for Washington Corporations from 1988 until
1995. Mr. Wilkes was employed as Vice President and General Manager for Ridgeway
Mining Company from 1986 to 1988 and in the positions of Director of Business
Development and General Manager for Anaconda Minerals Company from 1974 to 1982.
Prior to that he worked in supervisory positions for Columbia Cement Corporation
and Kennecott Copper Corporation.

ITEM 11. EXECUTIVE COMPENSATION

SUMMARY OF CASH AND CERTAIN OTHER COMPENSATION

SUMMARY COMPENSATION TABLE

The following table summarizes, for the years indicated, compensation
received by the Company Executive Officers for fiscal year ended December 31,
1996. Such officers served as Chief Executive Officer or were one of four most
highly compensated executive officers (other than the Chief Executive Officer)
for the fiscal year ended December 31, 1996.
<TABLE>
<CAPTION>
LONG TERM COMPENSATION
AWARDS
ANNUAL COMPENSATION --------------------------
----------------------------------------------------------- SECURITIES
OTHER ANNUAL RESTRICTED UNDERLYING
BONUS COMPENSATION STOCK OPTIONS/
NAME AND PRINCIPAL POSITION YEAR SALARY (1) (2) AWARDS(3) SARS(#)(4) PAYOUTS
- ------------------------------------ --------- --------- --------- ------------- ----------- --------------- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
Patrick M. James.................... 1996 $ 307,500 $ -- $ -- $ -- 70,420 $ 154,077
Chairman, President & Chief 1995 300,000 54,690 -- 82,041 75,840 --
Executive Officer 1994 202,627 106,801 25,036 160,202 -- --

ALL OTHER
COMPENSATION
NAME AND PRINCIPAL POSITION (5)
- ------------------------------------ -------------
<S> <C>
Patrick M. James.................... $ 25,963
Chairman, President & Chief 25,356
Executive Officer 7,327
</TABLE>

73
<PAGE>
<TABLE>
<CAPTION>
LONG TERM COMPENSATION
AWARDS
ANNUAL COMPENSATION --------------------------
----------------------------------------------------------- SECURITIES
OTHER ANNUAL RESTRICTED UNDERLYING
BONUS COMPENSATION STOCK OPTIONS/
NAME AND PRINCIPAL POSITION YEAR SALARY (1) (2) AWARDS(3) SARS(#)(4) PAYOUTS
- ------------------------------------ --------- --------- --------- ------------- ----------- --------------- ---------
LeRoy E. Wilkes..................... 1996 $ 204,167 $ -- $ -- $ -- 27,180 $ --
<S> <C> <C> <C> <C> <C> <C> <C>
Executive Vice President & 1995 141,667 16,084 -- 24,121 24,910 --
Chief Operating Officer 1994 -- -- -- -- -- --

David A. Smith...................... 1996 $ 159,671 $ -- $ -- $ -- 20,920 $ 28,966
Vice President & 1995 156,925 23,915 -- 35,871 22,970 --
Chief Financial Officer 1994 107,165 42,335 8,189 63,503 20,593 --

David K. Hogan...................... 1996 $ 162,025 $ -- $ -- $ -- 20,700 $ 170,502
Vice President--Engineering 1995 162,025 7,421 -- 11,130 20,230 --
& Development 1994 153,707 92,015 22,013 34,506 -- --

Wayne Jarke......................... 1996 $ 141,813 $ -- $ -- $ -- 12,180 $ --
General Counsel & 1995 143,625 16,371 -- 12,273 12,610 --
Secretary 1994 137,942 73,282 537,562 43,973 -- --

ALL OTHER
COMPENSATION
NAME AND PRINCIPAL POSITION (5)
- ------------------------------------ -------------
LeRoy E. Wilkes..................... $ 10,467
<S> <C>
Executive Vice President & 44,056
Chief Operating Officer --
David A. Smith...................... $ 7,416
Vice President & 22,156
Chief Financial Officer 17,481
David K. Hogan...................... $ 11,054
Vice President--Engineering 12,363
& Development 5,816
Wayne Jarke......................... $ 6,000
General Counsel & 7,275
Secretary 5,078
</TABLE>

- ------------------------

(1) For the years 1994 and 1995, the Company Executive Officers exchanged up to
50% of their annual incentive bonus for Restricted Stock awards pursuant to
the Company's Bonus Stock Program under the LTISP. Each award of Restricted
Stock was the number of shares having a market value (as defined in the
Bonus Stock Program) at the date of grant equal to 1.5 times the amount of
annual incentive bonus exchanged. For 1994, Mr. James exchanged $106,801 for
15,630 shares of Common Stock; Mr. Smith exchanged $42,335 for 6,195 shares;
Mr. Hogan exchanged $23,004 for 3,366 shares; and Mr. Jarke exchanged
$29,313 for 4,290 shares; all based on a market value of $10.25 per share on
the grant date, February 15, 1995. For 1995, Mr. James exchanged $54,690 for
5,027 shares; Mr. Wilkes exchanged $16,084 for 1,478 shares; Mr. Smith
exchanged $23,915 for 2,198 shares; Mr. Hogan exchanged $7,421 for 682
shares; and Mr. Jarke exchanged $8,186 for 752 shares; all based on a market
value of $16.32 per share on the grant date, February 15, 1996. The Company
Executive Officers have not exchanged any 1996 annual incentive bonus for
Restricted Stock awards in 1997. The amounts shown in this column for the
Company Executive Officers who participated in the Bonus Stock Program for
1994 and 1995 represent cash received.

(2) Net value of options for common stock of SFP, the former parent of the
Company, exercised during 1994. Includes tax adjustments for certain
relocation and club membership expense. Includes amounts deferred under
SFP's retirement and savings plan and supplemental retirement and savings
amounts deferred under SFP's retirement and savings plan and supplemental
retirement and savings plan maintained by SFP during 1994. Includes amounts
deferred under the Retirement and Savings Plan and the Supplemental
Retirement and Savings Plan during 1994.

(3) Amounts represent the value of the Restricted Stock shares granted on the
date of the award. On December 31, 1996, the Company Executive Officers held
the following numbers of shares of Restricted Stock which had the following
aggregate value on such date based on the NYSE closing price of Common Stock
on the last trading day of 1996 of $15.375 per share: Mr. James, 20,657
shares worth $317,601; Mr. Wilkes, 1,478 shares worth $22,724; Mr. Smith,
8,393 shares worth $129,042; Mr. Hogan, 4,048 shares worth $62,238; and Mr.
Jarke, 5,042 shares worth $77,521.

(4) Represents number of options granted under the Company's Phantom Stock Plan
in 1994 (in the case of Mr. Smith) and the LTISP in 1995 and 1996.

(5) Includes matching contributions made by SFP and earnings on contributions
pursuant to SFP's retirement and savings plan and supplemental retirement
and savings plan during 1994. Includes matching contributions made by the
Company and earnings on contributions pursuant to the Retirement and Savings
Plan and the Supplemental Retirement and Savings Plan during 1994, 1995 and
1996. Includes relocation payments to Mr. Smith in 1994.

74
<PAGE>
All Other Compensation for 1996, the last fiscal year, includes the amounts
shown in the following table for the Company Named Executive Officers.

<TABLE>
<CAPTION>
MR. JAMES MR. WILKES MR. SMITH MR. HOGAN MR. JARKE
----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C>
Matching contributions to the Retirement and Saving Plan......... $ 6,001 $ 5,995 $ 6,000 $ 6,000 $ 5,673
Matching contributions to the Supplemental Retirement and Savings 8,518 2,703 1,309 754 327
Plan...........................................................
Above-market earnings on contributions to the Supplemental 11,444 1,769 107 4,300 -0-
Retirement and Savings Plan....................................
----------- ----------- ----------- ----------- -----------
Total........................................................ $ 25,963 $ 10,467 $ 7,416 $ 11,054 $ 6,000
----------- ----------- ----------- ----------- -----------
----------- ----------- ----------- ----------- -----------
</TABLE>

OPTION/SAR GRANTS IN 1996

The Following table sets forth certain information with respect to options
to acquire Common Stock that were granted during 1996 to each Executive Officer
under the Company's stock option plans.

<TABLE>
<CAPTION>
POTENTIAL REALIZABLE
% OF TOTAL VALUE AT ASSUMED
NO. OF OPTIONS EXERCISE ANNUAL RATES OF STOCK
SECURITIES GRANTED TO OR PRICE APPRECIATION FOR
UNDERLYING EMPLOYEES BASE OPTION TERM
OPTIONS IN FISCAL PRICE EXPIRATION ----------------------
NAME GRANTED YEAR ($/SH) DATE 5% 10%
- --------------------------------------------------- ----------- ----------- ----------- ----------- --------- -----------
<S> <C> <C> <C> <C> <C> <C>
Patrick M. James................................... 70,420 8.7% $ 14.00 07/01/2006 $ 620,015 $ 1,571,239
LeRoy E. Wilkes.................................... 27,180 3.4% $ 14.00 07/01/2006 $ 239,307 $ 606,451
David A. Smith..................................... 20,920 2.6% $ 14.00 07/01/2006 $ 184,191 $ 466,775
David K. Hogan..................................... 20,700 2.6% $ 14.00 07/01/2006 $ 182,254 $ 461,867
Wayne Jarke........................................ 12,180 1.5% $ 14.00 07/01/2006 $ 107,239 $ 271,765
</TABLE>

OPTION/SAR EXERCISES AND FISCAL YEAR-END VALUES

The following table sets forth information with respect to the individuals
named in the Summary Compensation Table concerning unexercised options under the
LTISP and the Phantom Stock Plan held as of the end of 1996.

75
<PAGE>
AGGREGATED STOCK OPTION/SAR EXERCISES IN 1996 AND YEAR-END
OPTION/SAR VALUES

<TABLE>
<CAPTION>
NO. OF SECURITIES VALUE OF UNEXERCISED
UNDERLYING UNEXERCISED IN- THE-MONEY
NO. OF SHARES OPTIONS/SARS AT YEAR OPTIONS/SARS AT YEAR
ACQUIRED ON VALUE END END(5)
NAME EXERCISE REALIZED EXERCISEABLE/UNEXERCISEABLE EXERCISEABLE/UNEXERCISABLE
- ---------------------------------------- ----------------- --------- ----------------------- -----------------------
<S> <C> <C> <C> <C>
Patrick James........................... 0 154,077 0/70,420(4) 0/96,828
25,280/50,560(3) 75,713/151,427
14,561/0(1) 70,111/0
LeRoy E. Wilkes......................... 0 0 0/27,180(4) 0/37,372
8,304/16,606(3) 24,870/49,735
David A. Smith.......................... 0 28,966 0/20,920(4) 0/28,765
7,657/15,313(3) 22,933/45,862
6,864/6,865(2) 12,664/12,666
David K. Hogan.......................... 0 170,502 0/20,700(4) 0/28,462
6,744/13,486(3) 20,198/40,390
Wayne Jarke............................. 0 0 0/12,180(4) 0/16,748
4,204/8,406(3) 12,591/25,176
26,100/0(1) 125,671/0
</TABLE>

- ------------------------

(1) Dollar values are calculated by determining the difference between the fair
market value of the securities underlying the Phantom Stock Options at
year-end ($15.375) and the exercise or base price of the options ($10.56).

(2) Dollar values are calculated by determining the difference between the fair
market value of the securities underlying the Phantom Stock Options at year
end ($15.375) and the exercise or base price of the options ($13.53).

(3) Dollar values are calculated by determining the difference between the fair
market value of the securities underlying the options at year end ($15.375)
and the exercise or base price of the options ($12.38).

(4) Dollar values are calculated by determining the difference between the fair
market value of the securities underlying the options at year end ($15.375)
and the exercise or base price of the options ($14.00).

(5) Options are in-the-money if the fair market value of the underlying
securities exceeds the exercise or base price of the option.

RETIREMENT PLANS

The Company maintains a Retirement Plan and a Supplemental Retirement Plan.
The following table shows the estimated annual benefits to a covered participant
at normal retirement age (age 65) under the Retirement Plan, as supplemented by
the Supplemental Retirement Plan, for various levels of compensation and years
of service. Benefit figures shown are amounts payable based on a straight-line
annuity assuming retirement by the participant at the normal retirement age of
65 without a joint survivorship provision and are not subject to any offsets for
Social Security.

76
<PAGE>
PENSION PLAN TABLE

<TABLE>
<CAPTION>
ESTIMATED ANNUAL BENEFITS FOR YEARS OF SERVICE SHOWN
($)
-----------------------------------------------------
REMUNERATION (1) 15 20 25 30 35
- --------------------------------------------------- --------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C>
$125,000........................................... 27,363 36,484 45,604 54,725 63,846
150,000........................................... 33,363 44,484 55,604 66,725 77,846
175,000........................................... 39,363 52,484 65,604 78,725 91,846
200,000........................................... 45,363 60,484 75,604 90,725 105,846
225,000........................................... 51,363 68,484 85,604 102,725 119,846
250,000........................................... 57,363 76,484 95,604 114,725 133,846
300,000........................................... 69,363 92,484 115,604 138,725 161,846
400,000........................................... 93,363 124,484 155,604 186,725 217,846
450,000........................................... 105,363 140,484 175,604 210,725 245,846
500,000........................................... 117,363 156,484 195,604 234,725 273,846
</TABLE>

- ------------------------

(1) Compensation is equal to the highest yearly average compensation for any 60
consecutive months in the past 10 years. Compensation for purposes of the
Retirement Plan and the Supplemental Retirement Plan includes salary and
bonus as set forth in the Santa Fe Summary Compensation Table.

The 1996 compensation taken into account for purposes of determining the
aggregate pension benefit under both retirement plans was $307,500 for Mr.
James, $204,167 for Mr. Wilkes, $159,671 for Mr. Smith, $162,065 for Mr. Hogan
and $141,813 for Mr. Jarke. As of December 31, 1996, Messrs. James, Wilkes,
Smith, Hogan and Jarke had approximately 17, 2, 23, 6 and 21 years of benefit
services, respectively.

DIRECTORS' COMPENSATION

The Directors' Stock Compensation Plan was approved by the stockholders at
the 1996 Annual Meeting of Stockholders. The Company implemented a revised
compensation policy for Directors who are not employees of the Company or any of
its subsidiaries, effective as of April 1, 1996. Under the revised policy,
Directors who are not employees of the Company or any of its subsidiaries will
receive an annual retainer fee of $12,000, paid quarterly, plus a grant of 1,200
shares of Common Stock per year under the Directors' Stock Compensation Plan.
The grant of Common Stock is made at the rate of 300 shares at the end of each
calendar quarter beginning with the second quarter of 1996. Directors who are
not employees of the Company or its subsidiaries will also be paid an attendance
fee of $1,000 for each Board of Directors meeting and $800 for each Committee
meeting attended ($1,200 for a Committee Chairman), plus expenses for each
meeting.

Prior to April 1, 1996, Directors who were not employees of the Company or
its subsidiaries received an annual retainer fee of $20,000, an attendance fee
of $800 for each meeting of the Board of Directors and each Committee meeting
attended ($1,200 for the Committee Chairman), plus expenses for each Board of
Directors meeting or Committee meeting attended.

As an inducement to Peter Steen to become a member of the Board of Directors
and the Chairman of the Executive and Policy Committee, the Company has agreed
to pay him a fee as Chairman of the Executive and Policy Committee of $25,000 in
arrears for each three-month period of service in that position beginning March
1, 1996, which fee will be in lieu of attendance fees for that Committee. Under
the Directors' Stock Compensation Plan, Mr. Steen will also receive the stock
options described below in connection with the Directors' Stock Compensation
Plan.

As Chairman of the Executive and Policy Committee, Peter Steen received an
option to acquire 50,000 shares of Common Stock at a price of $15.375 per share,
which is equal to the average of the high and low prices of a share of Common
Stock on the New York Stock Exchange on March 1, 1996. The option may be
exercised as to 25,000 shares on or after March 1, 1997, if Mr. Steen continues
as an Eligible Director until that date; may

77
<PAGE>
be exercised as to the remaining 25,000 shares on or after March 1, 1998, if Mr.
Steen continues as an Eligible Director until that date; and is otherwise
subject to the Stock Plan.

Pursuant to a resolution of the Board of Directors on December 5, 1996, the
Company will pay to David H. Batchelder $1,050,000 for certain advisory services
Mr. Batchelder has provided and will provide to the Company in connection with
its consideration of strategic alternatives. Such amount is payable in quarterly
installments of $87,500, or as to remaining installments, upon termination of
Mr. Batchelder's assignment by the Board of Directors, if earlier.

DIRECTOR RETIREMENT POLICY

Effective March 1, 1995, the Board of Directors adopted a Director
Retirement Policy for the Company providing that no individual shall serve as a
Director beyond the annual meeting of stockholders on or following his or her
own 75th birthday and providing that a Director who is also an employee of the
Company shall retire as a Director effective as of termination of his or her
employment with the Company.

EMPLOYMENT CONTRACTS AND CHANGE IN CONTROL ARRANGEMENTS

SEVERANCE AGREEMENTS. The Company has in effect severance agreements
("Severance Agreements") with 27 current executive and key employees (including
each of the individuals named in the Summary Compensation Table). The Severance
Agreements are intended to encourage such employees to remain in the employ of
the Company. The Company's obligations under each Severance Agreement are
triggered if such person's employment is terminated within 24 months following a
change in control (as defined). Under each Severance Agreement, a terminated
person would receive a cash severance payment equal to (i) two (2) times the
higher of (a) the person's annual base salary as in effect immediately prior to
the date of termination or, (b) the highest annual base salary paid to the
person during the period of twenty-four (24) months prior to the change in
control (as defined) related to termination of the person's employment, plus
(ii) two (2) times the maximum incentive award payable to the person under any
annual bonus or incentive plan maintained by the Company, for the fiscal year
during which the date of termination occurs or, if higher, for the fiscal year
during which first occurs an event or circumstance constituting good reason (as
defined), assuming for purposes hereof that the person had been employed by the
Company for all of such year, that all performance objectives for such year had
been met at the maximum levels and that the person had been entitled to a full
award thereunder. The Severance Agreements also provide for the continuation of
health care and life insurance and also provide for certain other benefits such
as outplacement services and relocation benefits. Notwithstanding the forgoing,
the benefits payable under the Severance Agreements will be reduced to the
extent necessary to assure that the Company will not lose its ability to deduct
any such payments for federal income tax purposes by virtue of Section 280G of
the Code ("Parachute Payment Limit"). The Severance Agreements also provide that
such person may elect to receive severance benefits over an extended period of
time (without interest), rather than in a lump sum payment, in accordance with
the following options ("Extended Payments"): (i) in equal monthly installments
over a period not to exceed 36 months; (ii) if such person has reached age 55
and accrued 10 years of pension vesting service at the time of termination, over
a period of time ending on the earliest to occur of (A) the date such person
commences receiving benefits under the Company's qualified pension plan, (B)
attainment of age 65 and (C) attainment of age 62 and accrual of 30 years of
pension vesting service; and (iii) if such person has reached age 40 and the sum
of such person's age and number of years of pension vesting service equals or
exceeds 50 at the time of termination, over a period of time ending on the date
such person commences receiving benefits under the Company's qualified pension
plan. Any such person electing to receive Extended Payments will be entitled to
receive continued health and welfare coverage and will continue to accrue
service credit under the Company's Supplemental Retirement Plan so long as the
Extended Payments continue.

SEVERANCE PROGRAM. The Corporation has a severance program ("Severance
Program") for all full-time, salaried employees who are terminated or
constructively terminated by the Company or by an acquiring company, other than
for Cause (as defined in the Severance Program). However, following a change in
control (as defined in the Severance Agreements), an employee who has entered
into a Severance Agreement is not eligible to

78
<PAGE>
receive duplicate benefits under both a Severance Agreement and the Severance
Program. A participant in the Severance Program is generally entitled to an
amount of up to one year's pay based upon the participant's age, length of
service and current salary, or in certain circumstances, early retirement
supplemental payments, provided that the aggregate of such payments does not
exceed two years' salary for the year preceding the year in which termination
occurs. In addition, a participant is entitled to continuation of health and
life insurance benefits for two years or for the duration of severance payments,
whichever is longer. Each January 1, the term of the Severance Program is
automatically extended for an additional one-year period, unless by September 30
of the prior year the Company has given notice that the Severance Program will
not be so extended. Following a Change in Control the Severance Program may not
be modified or terminated for 24 months. The payments and benefits provided by
the Severance Program are subject to the Parachute Payment Limit.

COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION

Jean Head Sisco, Robert D. Krebs, Donald W. Gentry and James T. Curry serve
on the Compensation and Benefits Committee, with Jean Head Sisco serving as
Chairman. No member of this Committee is a current or former employee of the
Corporation.

COMPENSATION AND BENEFITS COMMITTEE REPORT ON EXECUTIVE COMPENSATION.

The Compensation and Benefits Committee ("Committee") of the Board of
Directors is composed entirely of outside directors, none of whom are employees
or former employees of the Company or its subsidiaries. The Committee is
responsible for the overall executive compensation strategy of the Company, the
ongoing monitoring of the strategy's implementation, and recommendations to the
Board of Directors to implement such strategies.

EXECUTIVE OFFICERS COMPENSATION POLICY. The Company's executive
compensation policy, as recommended by the Committee, has four overall
objectives: (1) to align the interests of the Company's executives with those of
the Company's stockholders; (2) to link compensation to the performance of the
Company, as well as to the individual contribution of each executive; (3) to
emphasize variable as opposed to fixed compensation; and (4) to compensate
executives at a level which is competitive in the marketplace so that the
Company can continue to attract, motivate, and retain executives with
outstanding abilities.

MANAGEMENT OF ANNUAL COMPENSATION. The Committee's executive compensation
strategy encompasses conservatively managing fixed compensation and emphasizing
variable, results-oriented compensation, while ensuring that it offers a
competitive total compensation package to executives. The Committee monitors
total remuneration data on an annual basis to ensure that the Company is
appropriately aligned with the market for executive talent. Base salaries for
all executives and for all other salaried employees are based upon salary ranges
which are conservatively established for each position. Salary ranges are
determined through annual competitive salary surveys. In addition, each
employee's salary is based on an annual assessment of his or her performance.

The Committee compares the compensation levels of the Company with those of
gold mining corporations of comparable size, revenues, and employee base. The
Hay Group databases of gold mining companies were the basis for comparing
compensation levels with respect to executives employed by the Company. Based
upon the study, it was determined that the Company is below the 50th percentile
of total compensation for all executive employees. For 1997, base executive
salaries and benefits have been set at conservative levels and total
compensation is tied directly to performance levels. Thus, executive
compensation will be largely variable and should fluctuate with the performance
of the Company and stockholder value.

PERFORMANCE-BASED EXECUTIVE COMPENSATION PLANS. The Committee seeks to tie
compensation to the Company's performance and individual performance through
incentive plans maintained by the Company. Executives of the Company participate
in the Santa Fe Pacific Gold Corporation Incentive Compensation Plan ("Incentive
Plan"). The Incentive Plan provides for the establishment of annual performance
goals which include performance goals for the Company and may include individual
productivity objectives. Under the Incentive Plan,

79
<PAGE>
the principal goals for executives are achievement of a targeted level of
operating income for the Company which is set at the beginning of each year
based upon an aggressive evaluation of the operating income estimated to the
attainable by the Company in that year, the growth in gold reserves and annual
gold production. Up to 10% of the total annual award may be based on individual
productivity objectives which are derived from the Company's key strategic
objectives during each calendar year. A participant's compensation depends on
the goals achieved, with the maximum eligibility award during 1997 being an
amount between 10 percent and 100 percent of a participant's salary.

An incentive and retention program ("Bonus Stock Program") implemented under
the Company's Long Term Incentive Stock Plan (described below) in connection
with the Incentive Plan provides each executive and other key employees the
opportunity to exchange up to 50 percent of the amount that would otherwise have
been payable in cash to such executive or employee as an annual incentive bonus
for an award of restricted Common Stock ("Restricted Stock"). The number of
shares of Restricted Stock subject to such an award will be the number of shares
having a market value at the date of grant equal to 1.5 times the bonus amount
forgone.

The Committee determined that providing participants with shares of
Restricted Stock having an initial 50% premium above the amount of cash that
would otherwise be payable to them is necessary and appropriate to encourage
stock ownership by executives and other key employees.

In general, shares of Restricted Stock awarded under the Bonus Stock Program
will vest on the third anniversary of the award, except that all such awarded
shares will become vested upon the occurrence of certain events (death of the
participant or a change in control of the Company ) and that a pro rata portion
of such shares may vest upon the occurrence of certain other events (such as
retirement or an involuntary termination of employment without cause).

The Committee approved the Bonus Stock Program to achieve two objectives.
First, the Committee believed that the amount of the Common Stock owned by
executives should be increased to align further the economic interests of
management with those of stockholders. Second, the Committee believed it was
necessary to enhance the retentive effort of the Company's compensation
practices through an award that provided an incentive to the executives to
enhance stockholder value and to remain in the Company's employ.

The Committee has undertaken to review the impact upon the Company of recent
federal tax law changes disallowing the deductibility of certain executive
compensation in excess of $1 million unless it is performance-based (as defined
in applicable federal tax regulations). The tax law changes apply to
compensation in excess of $1 million paid to the chief executive officer and the
other four highest compensated officers of publicly held corporations. In 1997,
it is expected that no officer of the Corporation will earn compensation in
excess of $1 million that is not performance-based.

LONG-TERM INCENTIVE PLANS. Annual incentive awards are made pursuant to the
Company's Long Term Incentive Stock Plan ("LTISP"). Each of the five named
executives of the Company received a grant during 1996 of non-qualified stock
options (as defined in the LTISP). Non-qualified stock options vest one-third
per year.

The purpose of the LTISP is to align the interests of the Company's salaried
employees with those of the stockholders of the Company by encouraging
significant stock ownership and superior performance by salaried employees by
allowing the Company to award several forms of incentive compensation to
employees. The LTISP is also intended to assist the Company in attracting and
retaining the services of qualified, capable salaried employees. Options,
Restricted Stock, Performance Shares, Performance Units and Stock Appreciation
Rights ("Awards") may be granted under the LTISP. The LTISP provides for
equitable adjustment of the number of shares subject to the Plan and to the
terms of any outstanding Awards in the event of a change in the capitalization
of the Company due to a stock split, stock dividend, recapitalization, merger or
similar event. Subject to adjustment, the maximum number of shares of Common
Stock with respect to which Options, Restricted Stock, Performance Shares and
Stock Appreciation Rights may be granted under the LTISP in any calendar year
shall not exceed one percent of the Company's outstanding Common Stock as of
January 1 of such calendar year, plus the number of shares of Common Stock which
became available for Awards in prior calendar

80
<PAGE>
years but which have not been awarded. All salaried employees of the Company are
eligible to participate in the LTISP, subject to the complete discretion of the
Committee. No person may receive any Award or combination of Awards in a share
equivalent amount of more than 200,000 shares during any calendar year. The
Committee administers the LTISP and has full discretion with respect to the
identity of grantees of various Awards and the amounts, exercise period, option
prices and restrictions applicable to Awards. The Committee may authorize the
Chairman of the Board of Directors or the Company's Chief Executive Officer to
allocate Awards among individual employees within the classes to which grants
are made, provided, however, that the Committee may not delegate its authority
with regard to awards to persons subject to Section 16 of the Securities
Exchange Act of 1934, nor may it delegate its authority in any manner which
would cause the LTISP to fail to comply with Rule 16b-3 or any successor federal
regulation concerning the treatment of Awards under Section 16 of the Securities
Exchange Act.

Non-Qualified Stock Options are non-statutory options and grants thereof may
be made to any salaried employee of the Corporation. Both the purchase price of
the Common Stock subject to such options and the exercise period of such options
will be determined in the discretion of the Committee, subject to the
limitations that the exercise price may not be less than 100% of the fair market
value of the Common Stock (defined in the LTISP as the mean between the highest
and lowest quoted sales price of the Common Stock on the New York Stock Exchange
Composite Transaction Report) on the grant date and the option exercise period
may not exceed ten years from the grant date. Restricted Stock consists of
Awards of shares of Common Stock that are subject to forfeiture based on tenure
requirements or failure to achieve designated Company or individual goals, or a
combination of tenure and performance requirements. Restricted Stock will also
be used under the LTISP to implement the Bonus Stock Program operated in
conjunction with the Corporation's goals designated by the Committee. All goals
which are performance-related shall be based on, singly or in combination,
criteria related to the maintenance of gold reserves, the cash costs of
production per ounce of gold or the meeting of certain gold production targets.
No Awards of Performance Units, Performance Shares or Stock Appreciation Rights
have been made under the LTISP, and the Committee does not intend to make any
such Awards during 1997.

If a Change in Control (as defined in the LTISP) occurs while any shares of
Restricted Stock remain subject to restrictions, then such restrictions and all
restricted periods and performance periods shall lapse, all defined goals shall
be deemed to have been met. If a Change in Control occurs while unexercised
Options remain outstanding under the LTISP, then all Options shall become
exercisable in full, whether or not otherwise exercisable.

No payment, benefit or acceleration of exercisability with respect to
Options will be made if such payment or acceleration, when aggregated with other
payments or benefits to the participant, would result in "excess parachute
payments" equal to or greater than three times the "base amount", as defined in
Section 280G of the Internal Revenue Code.

The Board of Directors may suspend, terminate, or amend the LTISP, provided
that any amendment (other than an adjustment as a result of a change in the
Company's capitalization) that would (i) increase the aggregate number of shares
which may be issued under the LTISP, (ii) materially increase the benefits
accruing to participants under the LTISP, or (iii) materially alter the
requirements for eligibility for participation in the LTISP will be subject to
approval by the Company's stockholders.

Unless previously terminated by the Board of Directors, the LTISP shall
terminate in May 2000.

The Company adopted the Phantom Stock Option Plan ("Phantom Stock Plan") as
of July 1, 1993. The Phantom Stock Plan allows the Phantom Stock Plan
administration committee to grant Phantom Stock Options (as defined in the
Phantom Stock Plan) which, when exercised, entitle the recipient to the cash
value of the difference between the share value of Phantom Stock as defined in
the Phantom Stock Plan at the date of grant and the share value of Phantom Stock
at the date of exercise. The Phantom Stock Plan administration committee, in its
discretion, may select those employees to whom awards will be granted, the form
and the amount of awards, and the terms and conditions of awards. Officers,
managers, and key employees who are responsible for the Company's growth and
profitability are eligible to receive awards under the Phantom Stock Plan.
Phantom Stock

81
<PAGE>
Options vest one-third per year. Upon exercise, the difference between the share
value of Phantom Stock at the date of grant and the share value of Phantom Stock
at the date of exercise will be paid in cash after withholding of all applicable
taxes. The share value of Phantom Stock on a given date is the mean between the
highest and lowest quoted sales price on the New York Stock Exchange Composite
Transaction Report of a share of Common Stock on that date. The Phantom Stock
Plan contains standard anti-dilution provisions. The expected cost of the
Phantom Stock Plan is estimated and accrued as an expense over the length of the
vesting period. All Phantom Stock Options become fully vested upon the
participant's death, or upon a Change in Control (as defined in the Phantom
Stock Plan). If the participant terminates employment on account of retirement
or disability or under the Company's Severance Program (as described below) the
participant will vest in any outstanding Phantom Stock Options on a pro-rata
basis. If a participant voluntarily terminates employment (for reasons other
than death, disability or retirement), or the participant's employment is
terminated by the Company for Cause (as defined in the Phantom Stock Plan), all
outstanding Phantom Stock Options which have not vested will be forfeited on the
participant's termination date. If a participant's employment terminates by
reason of early retirement or disability, or the participant's employment is
terminated by the Company for reasons other than Cause, the participant may
exercise any outstanding Phantom Stock Options for a period of three months
following the participant's termination of employment. In the event of the
participant's death, all outstanding Phantom Stock Plan options vest and are
exercisable for a period of 12 months. The five named executives of the Company
received Phantom Stock Option grants during 1993 or 1994 in the case of Mr.
Smith. No Phantom Stock Option grants were provided to the five named executives
during 1996.

The Company has also adopted ownership goals for the five named executives
of the Company and for certain senior managers of the Company that require
ownership of shares of Common Stock having a value equal to one to three times
an individual's base pay. Messrs. James and Mr. Wilkes have share ownership
goals of three times pay, and Messrs. Smith, Hogan, and Jarke have share
ownership goals of two times pay, to be achieved over a five-year period ending
in 1999.

THE 1996 COMPENSATION OF THE CHIEF EXECUTIVE OFFICER. The factors upon
which Mr. James' 1996 compensation was based are the same as described above for
all executive officers pursuant to the Company's executive compensation
strategy. Mr. James is eligible to participate in the same compensation plans
maintained by the Company that are available to other executive officers of the
Company as described above.

Compensation and Benefits Committee:
Jean Head Sisco, Chairman
Robert D. Krebs
Peter Steen
Donald W. Gentry

82
<PAGE>
PERFORMANCE GRAPH

The following graph depicts a comparison of cumulative total stockholder
returns for the period from June 16, 1994, the date on which the Common Stock
was registered under the Securities Exchange Act of 1934, through December 31,
1996, assuming reinvestment of dividends, for the Company, the Standard & Poor's
500 Stock Index ("S&P 500"), and the S&P Gold and Precious Metals Mining ("S&P
Gold"). The Company is included within both the S&P 500 and the S&P Gold
indices. The graph assumes that on June 16, 1994, $100 was invested in the
Common Stock, in the S&P 500 and in the Gold Group and assumes reinvestment of
the pre-tax value of all dividends.

COMPARISON OF 30-MONTH CUMULATIVE TOTAL RETURN
AMONG SANTA FE PACIFIC GOLD CORPORATION, THE S & P 500 INDEX
AND THE S & P GOLD PRECIOUS METALS MINING INDEX

EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC

<TABLE>
<CAPTION>
SANTA FE PACIFIC GOLD CORPORATION S&P 500 S&P GOLD & PRECIOUS METALS MINING
<S> <C> <C> <C>
06/16/1994 $100 $100 $100
12/94 93 102 90
12/95 87 141 102
12/96 111 173 101
</TABLE>

ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

As of December 31, 1996, no person is known to the Company to own
beneficially more than 5% of the outstanding Common Stock.

83
<PAGE>
SECURITY OWNERSHIP OF MANAGEMENT

The following table shows, as of February 28, 1997, the number of shares of
Company Common Stock deemed beneficially owned by each director and each of the
executive officers named in the Summary Compensation Table and by all present
directors and executive officers of the Company as a group.

<TABLE>
<CAPTION>
NUMBER OF OPTIONS TO
NAME OF BENEFICIAL OWNER SHARES(1)(2) ACQUIRE
- ----------------------------------------------------------------- ------------- ------------
<S> <C> <C>
David H. Batchelder.............................................. 5,900 0
James T. Curry................................................... 2,900 0
Donald W. Gentry................................................. 900 0
David K. Hogan (3)............................................... 12,049 40,930
Patrick M. James................................................. 64,452 146,260
Wayne Jarke...................................................... 7,401 24,790
Robert D. Krebs.................................................. 241,702 0
George B. Munroe................................................. 4,264(4) 0
Jean Head Sisco.................................................. 3,123 0
David A. Smith................................................... 16,340 43,890
Peter Steen...................................................... 900 50,000
Richard J. Stoehr................................................ 1,900 0
LeRoy E. Wilkes.................................................. 1,478 52,090
Directors and executive officers as a group (16 persons)......... 381,761 437,380
</TABLE>

- ------------------------

(1) Each person has, unless otherwise indicated in the following notes, sole
voting and investment power with respect to the indicated shares.

(2) Common Stock beneficially owned does not exceed one percent of the
outstanding Company Common Stock as of December 31, 1996.

(3) Mr. Hogan ceased to be a designated executive officer of the Company for
purposes of Section 16 of the Securities Exchange Act of 1934 by action of
the Company's Board of Directors taken on January 23, 1997.

(4) Includes 1,809 shares held by Mr. Munroe's spouse, of which Mr. Munroe
disclaims beneficial ownership.

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

See Notes 1, 8, 11 and 14 to the Consolidated Financial Statements of the
Company incorporated herein by reference for descriptions of certain
transactions between the Company and its former parent, SFP.

84
<PAGE>
PART IV

ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K

(a) The following documents are filed as a part of this report:

1. Consolidated Financial Statements:

<TABLE>
<CAPTION>
PAGE
---
<S> <C>
Report of Independent Accountants............................................. 47
Consolidated Statement of Operations for the years ended December 31, 1996,
1995 and 1994............................................................... 48
Consolidated Balance Sheet as of December 31, 1996 and 1995................... 49
Consolidated Statement of Cash Flows for the years ended December 31, 1996,
1995 and 1994............................................................... 50
Consolidated Statement of Shareholders' Equity for the years ended December
31, 1996, 1995 and 1994..................................................... 51
Notes to Consolidated Financial Statements.................................... 52
</TABLE>

2. Financial Statement Schedules:

No Financial Statement Schedules are applicable.

3. Exhibits:

See Index to Exhibits on page 87 of this Report for a statement of
the exhibits filed herewith.

(b) Reports on Form 8-K

Report on Form 8-K dated December 9, 1996.

85
<PAGE>
SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.

SANTA FE PACIFIC GOLD CORPORATION

By: /s/ PATRICK M. JAMES
-----------------------------------------
Patrick M. James
Chairman, President
and Chief Executive Officer

Date: March 19, 1997

Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons in the capacities and on
the dates indicated.

SIGNATURE TITLE DATE
- ------------------------------ -------------------------- -------------------

/S/ PATRICK M. JAMES Chairman, President and
- ------------------------------ Chief Executive Officer March 19, 1997
Patrick M. James and Director

/s/ DAVID A. SMITH
- ------------------------------ Vice President and Chief March 19, 1997
David A. Smith Financial Officer

/s/ LINDA K. WHEELER
- ------------------------------ Controller March 19, 1997
Linda K. Wheeler

/s/ DAVID H. BATCHELDER
- ------------------------------ Director March 19, 1997
David H. Batchelder

/s/ JAMES T. CURRY
- ------------------------------ Director March 19, 1997
James T. Curry

/s/ DONALD W. GENTRY
- ------------------------------ Director March 19, 1997
Donald W. Gentry

/s/ ROBERT D. KREBS
- ------------------------------ Director March 19, 1997
Robert D. Krebs

/s/ GEORGE B. MUNROE
- ------------------------------ Director March 19, 1997
George B. Munroe

/s/ JEAN HEAD SISCO
- ------------------------------ Director March 19, 1997
Jean Head Sisco

/s/ PETER STEEN
- ------------------------------ Director March 19, 1997
Peter Steen

/s/ RICHARD J. STOEHR
- ------------------------------ Director March 19, 1997
Richard J. Stoehr

86
<PAGE>
EXHIBIT INDEX

<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION
- ----------- -----------------------------------------------------------------------------------------------------
<S> <C>
3.1* Amended and Restated Certificate of Incorporation

3.2** Certificate of Designation, Preferences and Rights of Series A Junior Participating Preferred Stock

3.3* By-Laws

4.1*** Rights Agreement

4.2/ / Indenture Dated as of June 1, 1995 between Santa Fe Pacific Gold Corporation and Harris Trust and
Savings Bank, as Trustee

4.3**** Supplemental Indenture

4.4++ Amendment No. 2, dated as of March 10, 1997, to Rights Agreement

10.1(a)*+ Santa Fe Pacific Gold Corporation Phantom Stock Option Plan

10.1(b)*+ Form of Phantom Stock Option Award Agreement

10.2**+ Amended and Restated Santa Fe Pacific Gold Corporation and Subsidiaries' Incentive Compensation Plan

10.3**** Credit Facility

10.4+ Form of Severance Agreement

10.5+ Santa Fe Pacific Gold Corporation Severance Program

10.6* Asset Exchange Agreement and amendments

10.7* Exchange Closing Agreement

10.8* Mineral Lease and Landfill Facilities Lease Agreement

10.9*+ Santa Fe Pacific Gold Corporation Supplemental Retirement and Savings Plan

10.12* Exploration Agreement and Option to Lease

10.13**+ Santa Fe Pacific Gold Corporation Retirement Plan

10.14**+ Santa Fe Pacific Gold Corporation Supplemental Retirement Plan

10.15 TRIANGLE Agreement and Plan of Merger dated as of December 8, 1996, among Homestake Mining Company and Santa
Fe Pacific Gold Corporation

10.16++ Agreement and Plan of Merger dated March 10, 1997, by and among Santa Fe Pacific Gold Corporation,
Newmont Mining Corporation and Midtown Two Corp.

21.1 Subsidiaries of the Company

23.1 Consent of Independent Mining Consultants

23.2 Consent of Price Waterhouse LLP

27.1 Financial Data Schedule for the twelve-month period ended December 31, 1996
</TABLE>

- ------------------------

* Incorporated by reference to the Company's Registration Statement on Form
S-1 (File Number 33-7774) on April 15, 1994, as amended by Amendment No. 1
thereto filed on May 24, 1994.

** Incorporated by reference to the Company's Annual Report on Form 10-K for
the fiscal year ended December 31, 1994.

*** Incorporated by reference to the Company's Form 8-A on January 31, 1995.

87
<PAGE>
**** Incorporated by reference to the Company's Annual Report on Form 10-K for
the fiscal year ended December 31, 1995.

+ Compensatory plan or arrangement.

/ / Incorporated by reference to the Company's Form 8-K on June 21, 1995, in
conjunction with the Company's Registration Statement of Form S-3 (File
Number 33-92762) filed on May 26, 1995.

TRIANGLE
Incorporated by reference to the Company's Form 8-K on December 9, 1996.

++ Incorporated by reference to the Company's Form 8-K on March 10, 1997.

<PAGE>

SUBSIDIARIES OF SANTA FE PACIFIC GOLD CORPORATION

<TABLE>
NAME UNDER
WHICH IT
JURISDICTION OF DOES
NAME INCORPORATION BUSINESS NATURE OF OWNERSHIP
- ---- --------------- ---------- -------------------
<S> <C> <C> <C>
Hospah Coal Company Delaware Same Direct

San Juan Basin Coal Delaware Same Direct
Holding Company

Santa Fe Gold Corporation Delaware Same Direct

Santa Fe Mining, Inc. Delaware Same Direct

Santa Fe Pacific Illinois Same Direct
Capital, Inc.

Santa Fe Pacific Gold Delaware Same Direct
Kazakstan Corporation

Santa Fe Pacific Gold Delaware Same Direct
Kyrgyz Corporation

Santa Fe Pacific Gold Delaware Same Direct
South America, Inc.

Uranco Inc. Delaware Same Direct

Santa Fe Mining Australia Australia Same Direct (except for one
Pty Limited share held by J. Seeley)

Santa Fe do Brasil Brazil Same 99% Direct
Empreendimentos Ltda. 1% Indirect through Santa
Fe Pacific Gold South
America, Inc.

Mineracao Chega Tudo Brazil Same 50% Indirect through
Ltda. (limited liability Santa Fe do Brasil
partnership) Empreedimentos Ltda.
50% By Compania Nacional
de Mineracao

Santa Fe Canadian Canada Same Direct
Mining, Limited

Minera Santa Fe Pacific Chile Same 99% Direct
Chile Limitada (limited 1% Indirect through Santa
liability partnership) Fe Pacific Gold South
America, Inc.

Minera Santa Fe De Mexico City Same 99% Direct
Mexico, S.A. de C.V. Federal District 1% Indirect through Santa
Fe Pacific Gold South
America, Inc.
</TABLE>

<PAGE>

Independent Mining Consultants, Inc.
2700 E. Executive Drive, Suite 140
Tucson, AZ 85706

CONSENT AGREEMENT - INDEPENDENT MINING CONSULTANTS

We hereby consent to the use of our name and the reference to our reserve audit
report in the Santa Fe Pacific Gold Corporation Annual Report on Form 10-K filed
with the Securities and Exchange Commission to which this consent is an Exhibit.

INDEPENDENT MINING CONSULTANTS

Name: /s/ Herbert E. Welhener
-----------------------------------

Title: Vice President
----------------------------------

Date: March 17, 1997
-----------------------------------

<PAGE>

Price Waterhouse LLP
1850 North Central Avenue, Suite 700
Phoenix, Az 85004-4563

March 17, 1997

CONSENT OF INDEPENDENT ACCOUNTANTS

We hereby consent to the incorporation by reference in the Prospectus
constituting part of the Registration Statement on Form S-3 (No. 333-1356) and
in the Registration Statements on Form S-8 (Nos. 33-92844 and 33-06193) of Santa
Fe Pacific Gold Corporation of our report dated February 1, 1997, except for the
fifth paragraph of Note 1 which is as of March 10, 1997, appearing on page 47
of this Form 10-K.

/s/ Price Waterhouse LLP
- ------------------------

<PAGE>
<ARTICLE> 5
<MULTIPLIER> 1,000

<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> DEC-31-1996
<CASH> 41,372
<SECURITIES> 0
<RECEIVABLES> 971
<ALLOWANCES> 0
<INVENTORY> 46,867
<CURRENT-ASSETS> 219,602
<PP&E> 1,243,816
<DEPRECIATION> 316,375
<TOTAL-ASSETS> 1,300,029
<CURRENT-LIABILITIES> 88,914
<BONDS> 454,866
0
0
<COMMON> 1,315
<OTHER-SE> 568,723
<TOTAL-LIABILITY-AND-EQUITY> 1,300,029
<SALES> 337,211
<TOTAL-REVENUES> 343,189
<CGS> 245,681
<TOTAL-COSTS> 300,375
<OTHER-EXPENSES> 54,694
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 14,632
<INCOME-PRETAX> 29,825
<INCOME-TAX> 8,757
<INCOME-CONTINUING> 21,068
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 21,068
<EPS-PRIMARY> 0.16
<EPS-DILUTED> 0

</TABLE>