10-K 1 1994 FORM 10-K UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-K (Mark One) [ 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, 1994 OR [ ] 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 1-8736 HOMESTAKE MINING COMPANY (Exact name of registrant as specified in its charter) Delaware 94-2934609 (State of Incorporation) (I.R.S. Employer Identification No.) 650 California Street San Francisco, California 94108-2788 (Address of principal executive office) (Zip Code) (415) 981-8150 (Registrant's telephone number, including area code) Securities registered pursuant to Section 12(b) of the Act: Name of each exchange on Title of each class which registered Common Stock, $1.00 par value New York Stock Exchange, Inc. Rights to Purchase Series A Participating Cumulative Preferred Stock New York Stock Exchange, Inc. Securities registered pursuant to Section 12(g) of the Act: Not Applicable 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. [ ] The aggregate market value of the voting stock held by non-affiliates of the registrant was approximately $2,203,000,000 as of March 13, 1995. The number of shares of common stock outstanding as of March 13, 1995 was 137,857,427. Documents Incorporated by Reference: Specified sections of Homestake Mining Company's 1994 Annual Report to Shareholders, as described herein, are incorporated by reference in Parts I and II of this Form 10-K. Specified sections of the definitive Proxy Statement for the 1995 Annual Meeting of Shareholders, which will be filed with the Securities and Exchange Commission within 120 days after December 31, 1994, are incorporated by reference in Part III of this Form 10-K. HOMESTAKE MINING COMPANY AND SUBSIDIARIES PART I ITEM - 1 BUSINESS INTRODUCTION Homestake is a Delaware corporation organized in 1983 as the parent holding company to a California corporation organized in 1877. In this report, the terms "Homestake" and "Company" refer to Homestake Mining Company and its Subsidiaries. Homestake is engaged in gold mining and related activities, including exploration, extraction, processing, refining and reclamation. Gold bullion, the Company's principal product, is produced in the United States, Canada, Australia, and Chile. The results of the Company's operations are affected significantly by the market price of gold. Gold prices are influenced by numerous factors over which the Company has no control, including expectations with respect to the rate of inflation, the relative strength of the U.S. dollar and certain other currencies, interest rates, global or regional political or economic crises, demand for gold for jewelry and industrial products, and sales by holders and producers of gold in response to these factors. The supply of gold consists of a combination of new mine production and sales from existing stocks of bullion and fabricated gold held by governments, public and private financial institutions, and individuals. The Company's general policy is to sell its production at current prices and not enter into arrangements which establish a price for the sale of its future gold production. As a result, the Company's profitability is fully exposed to fluctuations in the current price of gold in world markets. However, in certain limited circumstances, the Company will enter into forward sales commitments for small portions of its gold production. During the fourth quarter of 1994, the Company sold for future delivery 183,200 ounces of gold it expects to produce at the Nickel Plate mine during 1995 and 1996. These forward sales represent less than 5% of the gold that Homestake expects to produce over the next two years. The average price to be received is approximately $412 per ounce, which should cover the mine's relatively high cash costs during its two-year remaining life. The forward sales should also allow for recovery of the Company's remaining investment in the mine and provide for estimated reclamation costs. Homestake also owns a 16.7% co-tenancy interest in the Main Pass 299 offshore sulphur and oil deposit in the Gulf of Mexico. Dollar amounts in this report are in U.S. dollars unless otherwise indicated. See Note 24 to the consolidated statements on pages 46 and 47 of the Company's 1994 Annual Report to Shareholders for geographic and segment information. Such information is hereby incorporated by reference. SIGNIFICANT 1994 DEVELOPMENTS During 1994, gold prices continued to increase. Homestake's average realized price was $384 per ounce in 1994 compared to $359 per ounce in 1993 and $348 per ounce in 1992. In May, the Company sold its 44% interest in the Dee mine to Rayrock Mines, Inc. (Rayrock) for $16.5 million. Rayrock assumed responsibility for and indemnified Homestake against all related environmental and reclamation matters. The Company recorded a $15.7 million pretax gain on this sale. 2 In June, Prime Resources Group Inc. (Prime) completed the sale of five million common shares to the public. Net proceeds of approximately $31.9 million were used to fund a portion of the construction and development costs of the Eskay Creek mine. This transaction resulted in a reduction of the Company's interest in Prime from 54.2% to 50.6%. The Company recorded a gain of $11.2 million on the transaction in recognition of the net increase in the book value of the Company's investment in Prime. Construction of the Eskay Creek gold/silver mine was substantially completed in 1994 and ore shipments to third-party smelters began in January 1995. Proven and probable ore reserves totaled 2.3 million contained ounces of gold and 101.8 million contained ounces of silver at December 31, 1994. Through Prime, the Company has a 50.6% interest in these reserves. At the Kalgoorlie operations approximately $13 million was spent in 1994 and a further $39 million of expenditures are planned during 1995 on an expansion program at the Fimiston mill. During 1994, exploration expenses totaling $6.5 million were made on a delineation drilling program at the new mineralized zone (Ruby Hill) near Eureka, Nevada. In October 1994, following completion of this program, the Company announced its decision to proceed with a $4 million feasibility study on the West Archimedes oxide zone. In addition, exploration expenses of $5 million are planned for this project in 1995. 1995 DEVELOPMENTS In February 1995, the Company sold its 28% equity interest in the Torres silver mining complex in Mexico for $6 million. GLOSSARY OF TERMS See pages 28-30 GLOSSARY and INFORMATION ON RESERVES, for definitions of terms used in the following discussion. GOLD OPERATIONS UNITED STATES Homestake conducts operations at the Homestake mine in the Black Hills of South Dakota and at the McLaughlin mine in northern California. Homestake also owns a 25% interest in the Round Mountain mine in central Nevada and owns or has an interest in three smaller mines in Nevada: the Santa Fe mine (100%), the Marigold mine (33.3%) and the Pinson mine (26.3%). The Company has exploration offices in Reno, Nevada and Lead, South Dakota. Homestake Mine The 118-year old Homestake gold mine is located in Lawrence County in and near Lead, South Dakota. Homestake owns 100% of the operation. The Homestake mine properties cover approximately 11,700 acres of which approximately 8,200 acres are owned in fee and the remainder are held as unpatented mining claims. Paved public roads provide access to the operation. The Homestake mine is comprised of underground and open-pit (the Open Cut) mining operations, an ore processing plant, a waste-water treatment plant and tailings disposal facilities. The underground mine is serviced by two 5,000-foot vertical shafts from the surface connecting with internal shafts which provide hoisting and services to the 8,000-foot level. Ore from underground is hoisted to the surface, crushed and transported to 3 the nearby processing plant. Open Cut ore is crushed and transported more than a mile to the processing plant by an enclosed conveyor. The 7,400 tons- per-day (TPD) processing plant recovers gold through a combination of gravity, carbon-in-pulp (CIP) and vat leaching processes. Recycled process water is pumped through a carbon-in-leach (CIL) circuit, also contributing to production. The refinery produces fine gold bullion. Process tails are used for underground fill or are deposited in a tailings impoundment facility three miles from the plant. The capacity of the tailings impoundment will be adequate through the year 2000, at which time a new lift will be required. The facilities and equipment at this operation have been upgraded over the years for technological advances and generally are in good operating condition. Untreated water for use in the mine's facilities is obtained from local watersheds under Homestake mine water rights and potable water is purchased from the Lead/Deadwood sanitation district. Electric power is purchased by contract from Black Hills Corporation and is supplemented by Homestake owned hydroelectric facilities. During 1994, the main ventilation raise for the underground mine collapsed and access to the higher-grade mining areas in the lower mine was restricted. A 14-foot borehole, which was being drilled between the 5,900 and 6,800-foot levels to replace the raise, was completed in March 1995. In addition, a second bulk air cooling chamber has been constructed on the 6,650-foot level to provide further cooling capability for expanded mining operations in the lower levels. Expansion of the Open Cut, which began in 1989, is largely complete with work continuing on residential and public facilities around the pit. The highway overpass leading to the main Open Cut waste dump was closed during the second half of 1994 while stabilization and additional arch support work was completed to the highway tunnel below. Detailed monitoring of the tunnel liner will continue. During the next few years, as mining progresses in the lower levels of the Homestake mine, the remaining higher-grade ore deposits will become narrower and less continuous and therefore more difficult to mine. The Company has developed various alternatives to help minimize the effect that this may have on future costs. During 1995, a large tonnage, lower-grade stope in the upper levels of the mine will be bulk-mined. In addition, narrow vein mining is being tested in other portions of the mine. These trials will help determine the future underground mine operating strategy. Hourly employees at the Homestake mine are represented by the United Steel Workers of America. The current three-year contract expires on June 3, 1995. In March 1995, a new labor contract was ratified covering the period June 4, 1995 through May 31, 1998. The Homestake mine has received no notices of violation and is under no regulatory orders of any kind mandating specific environmental expenditures. Reclamation projects and the upgrading of environmental practices and facilities are ongoing. No royalties are payable on production from the Homestake mine. The State of South Dakota currently imposes a severance tax of 10% of net profits from the sale of gold produced in the state, plus $4 per ounce of gold sold when the price of gold is $499 per ounce or less, increasing by $1 per ounce for each $100 increment or part thereof in excess of $499 per ounce. 4 Geology The Homestake mine is the largest known iron formation hosted gold deposit. In its 118-year life, the mine has produced in excess of 38 million ounces of gold from more than 155 million tons of ore. The Homestake gold deposit is Proterozoic in age (approximately 1.9 billion years). Mineralization is generally stratabound within the Homestake Formation, which is a quartz-veined, sulfide-rich sedimentary sequence that has been complexly deformed by tight folding, faulting and shearing. Ten southeast-plunging fold structures, locally called ledges, have produced gold ore over a vertical extent of more than 8,000 feet. Year-end Proven and Probable Ore Reserves
1994 1993 ------ ------ Underground Tons of ore (000s) 15,595 15,014 Ounces of gold per ton .228 .230 Contained ounces of gold (000s) 3,559 3,448 Open Cut Tons of ore (000s) 4,787 5,388 Ounces of gold per ton .121 .130 Contained ounces of gold (000s) 579 700 Total Tons of ore (000s) 20,382 20,402 Ounces of gold per ton .203 .203 Contained ounces of gold (000s) 4,138 4,148 Operating Data 1994 1993 ----- ----- Production Statistics: Tons of ore mined (000s): Underground 1,331 1,471 Open Cut 1,092 1,048 Ore grade (oz. gold/ton): Underground .224 .235 Open Cut .100 .111 Open Cut stripping ratio (waste:ore) 10.1:1 8.4:1 Tons of ore milled (000s) 2,590 2,695 Mill feed ore grade (oz. gold/ton) .160 .174 Mill recovery (%) 95 96 Gold recovered (000 ozs.) 394 448 Cost per Ounce of Gold: Cash operating cost $ 292 $ 268 Noncash cost 31 20 ----- ----- Total production cost $ 323 $ 288
5 McLaughlin Mine The McLaughlin gold mine is located at the junction of Lake, Napa and Yolo Counties in northern California. The McLaughlin mine has been in operation since 1985 and is 100% owned by Homestake. The McLaughlin mine properties cover approximately 17,200 acres. Approximately 15,400 acres, which encompass all of the minable reserves, are owned and approximately 845 acres are leased. The Company holds 52 unpatented mining claims covering the remaining acreage. Access to the property is by paved road. Ore is mined by open-pit methods using a fleet of 85-ton haul trucks and two hydraulic shovels. Ore is crushed and transported by slurry pipelines five miles to the processing site. The processing plant consists of two parallel circuits. The primary circuit utilizes pressure oxidation (autoclaves) to treat higher-grade sulfide ores, followed by neutralization and cyanide leaching. The second circuit uses conventional crushing and grinding, and sulfide flotation. Concentrates produced from flotation are added to the sulfide ores prior to treatment through the autoclaves. Flotation tailings go directly to cyanide leach. Conventional CIP cyanidation with pressure stripping and electrowinning is used to recover gold and silver. Total mill capacity through both circuits is approximately 6,000 TPD. Tailings are deposited in a 28 million ton capacity tailings impoundment that will be adequate through 1999, at which time a new lift is scheduled to be added to the existing dam. The new lift will increase the impoundment's capacity to allow for the treatment of all known remaining reserves. Facilities are modern and in good operating condition. The majority of process water is recycled from the tailings pond. Fresh water make-up is obtained from the Company's reservoir in Yolo County, which has approximately four years of storage capacity. Electric power is purchased under interruptible tariff from Pacific Gas and Electric Company. Cash costs per ounce increased in 1994 primarily due to a decrease in ore grades. Gold production had been expected to increase in 1995 as the higher-grade zones at the bottom of the South Pit are reached. However, heavy rainfall in northern California in the first quarter of 1995 has caused flooding and other related operating problems at the McLaughlin mine. As a result, gold production at McLaughlin in the first quarter of 1995 probably will be about 27% below the first quarter of 1994. Depending upon the amount of any additional rainfall, more normal levels of gold production at the mine may not resume before June. In mid-1996 mining in the South Pit will cease and gold production levels are expected to decline significantly with production principally derived from processing lower-grade stockpiles. Processing is expected to continue for approximately seven years. An underground exploration program completed in 1994 resulted in a minor addition to pit reserves. During 1994, the mine operated in compliance with environmental permits. McLaughlin mine royalties are equivalent to approximately 2% of revenues. Geology The McLaughlin ore body is a structurally-controlled siliceous vein network, overlain by hotspring terraces (sinter). The mineralization is the product of 0.5 to 1.0 million year old geothermal activity, induced by regional volcanism. Precious metals were transported in hot spring fluids and coprecipitated with quartz, chalcedony and opal in open fractures along and adjacent to a northeast-dipping structure, known as the Stony Creek fault. The ore body is wedge-shaped and extends to depths of over 1,000 feet along a strike-length of more than a mile. 6 Year-end Proven and Probable Reserves
1994 1993 ----- ----- Open Pit Tons of ore (000s) 5,040 7,176 Ounces of gold per ton .101 .101 Contained ounces of gold (000s) 508 727 Stockpiled* Tons of ore (000s) 17,024 14,866 Ounces of gold per ton .068 .075 Contained ounces of gold (000s) 1,157 1,112 Total Tons of ore (000s) 22,064 22,042 Ounces of gold per ton .075 .083 Contained ounces of gold (000s) 1,665 1,839 * The cost of mining substantially all the low-grade ore in the stockpiles has been expensed. Operating Data 1994 1993 ----- ----- Production Statistics: Tons of ore mined (000s) 2,667 2,043 Stripping ratio (waste:ore) 5.6:1 6.5:1 Tons of ore milled (000s) 2,244 2,164 Mill feed ore grade (oz. gold/ton) .126 .154 Mill recovery (%) 87 92 Gold recovered (000 ozs.) 250 305 Cost per Ounce of Gold: Cash operating cost $ 252 $ 196 Noncash cost 78 107 ----- ------ Total production cost $ 330 $ 303
Round Mountain Mine The Round Mountain gold mine is an open-pit gold mine located in Nye County, Nevada, about 60 miles north of Tonopah. Homestake owns a 25% undivided interest in the mine. Echo Bay Mines Ltd. owns a 50% undivided interest and is the operator. The remaining 25% interest is owned by Case, Pomeroy & Company, Inc. The mine has been in operation since 1977. The Round Mountain properties cover a total of 28,362 acres of private property and public domain land, some of which are under patent application and the remainder of which are subject to unpatented mining claims. Of the total reserves, 83% are located on the privately-owned land. Paved public roads provide access to the operations. 7 Ore from the mine is leached using two methods. The higher-grade ore is processed on reusable heap-leach pads and the lower-grade ore is leached on a dedicated pad. During 1994, total ore processed averaged 73,000 TPD. The reusable heap-leach pads processed 19,000 TPD and the balance was processed on a dedicated pad. The average ore and waste mining rate was 161,000 TPD. The reusable pad processing facilities consist of a gyratory crusher, an intermediate ore storage and reclaim system, secondary and tertiary cone crushers and screens, and a conveyor system used to transport ore to two asphalt leach pads. The reusable pads have a total capacity of approximately four million tons. A separate 11.4 million square foot dedicated heap-leach pad to process uncrushed run-of-mine ore has a total capacity of 89 million tons. Facilities are in good condition. Water is supplied from wells on the property and power is purchased under contract from Sierra Pacific Power Company. Homestake's share of total 1994 gold production from the Round Mountain mine was 105,877 ounces compared to 93,674 ounces in 1993. Gold recoveries on the reusable pads have improved as a result of placing higher-grade ores and fewer total tons on the pads, which has allowed longer leaching times. Larger quantities of lower-grade ore are being processed on the dedicated pad due to a reduced ore grade cut-off threshold. Gold production in 1994 and 1993 also benefited from a very high-grade vein ore occurrence from which 8,263 ounces of gold (Homestake's share) were recovered through gravity separation in 1994 (1993: 13,344 ounces). A small amount of high-grade vein material will be processed in 1995. Round Mountain ore reserves increased by 676,000 ounces (100% basis) in 1994 primarily due to exploration drilling which extended pit limits, and the inclusion of previously leached material following favorable processing tests. Engineering and permitting for the construction of an 8,000-TPD gravity mill to process higher-grade sulfide ores is planned for 1995. Estimated capital costs are $58 million (100% basis). Completion of mill construction is estimated in 1997. During 1994, the mine operated in compliance with its permits. All Round Mountain mine production is subject to royalties determined by a complex royalty formula based on the price of gold. The royalties range from approximately 3.5% of gold revenues at prices of $320 per ounce of gold or less to approximately 6.4% at prices of $440 per ounce of gold or more. During 1994, the royalty averaged 5.3% of revenues. Geology The Round Mountain ore body straddles the margin of a volcanic caldera complex. Gold bearing hydrothermal fluids were transported along major structural conduits created by the volcano's collapse and associated faulting. These ascending fluids deposited gold in permeable zones along a broad northwest trend. Primary gold mineralization at Round Mountain occurs as electrum, a natural gold/silver alloy, in association with quartz, adularia and pyrite. Narrow fractures in shear zones host the higher-grade mineralization while porous sites within the volcanic rocks host the disseminated mineralization. Economic gold mineralization is found in both the volcanic and surrounding sedimentary rocks as well as overlying alluvial placers. The oblong open-pit mine is well over a mile at its longest dimension and currently more than 1,000 feet from the highest working level to the bottom of the pit. 8 Homestake has a 25% share of the following amounts: Year-end Proven and Probable Ore Reserves (100% Basis)
1994 1993 ------- ------- Tons of ore (000s) 348,910 302,426 Ounces of gold per ton .022 .024 Contained ounces of gold (000s) 7,799 7,123 Operating Data (100% Basis) 1994 1993 ------ ------ Production Statistics: Tons of ore mined (000s) 26,242 25,929 Stripping ratio (waste:ore) 1.2:1 1.2:1 Tons of ore crushed (000s) 6,629 10,130 Tons of ore processed (000s) 25,965 24,443 Weighted average ore grade placed on pads (oz. gold/ton) .020 .022 Leach recovery - reusable pads (%) 79 69 Gold recovered (000 ozs.) 424 375 Homestake's Cost per Ounce of Gold Cash operating cost $ 187 $ 230 Noncash cost 59 63 ----- ----- Total production cost $ 246 $ 293
Santa Fe Mine The Santa Fe gold mine is located in Mineral County, Nevada, approximately 40 miles east of Hawthorne. Homestake owns 100% of this operation. The mine commenced operations in 1988. The Santa Fe mine property is comprised of 190 unpatented lode claims, 69 unpatented millsite claims and 24 patented claims on Bureau of Land Management land covering approximately 3,600 acres. The mining and processing facilities occupy 900 acres. Access to the property is by paved road. Mining operations at the Santa Fe mine ceased in late 1993 as ore reserves were depleted. During 1994, production continued with the leaching of all four crushed and run-of-mine ore heaps. In 1995, the operations will enter a reclamation phase. During this period, some gold production will be derived from rinsing and neutralization of the heaps, a process in which any residual cyanide is destroyed. Revenues received from gold production during the first eight months of 1994 were applied toward remaining reclamation expenditures. Based on current estimates, a full provision for reclamation is included in the December 31, 1994 financial statements. The mine and its facilities are fully depreciated. The carbon absorption capacity of the processing facility was doubled in 1994 in anticipation of rinsing the heaps. Water for the property is obtained from alluvial wells located two miles from the minesite. Power is purchased from Sierra Pacific Power Company. During 1994, the mine operated in compliance with its environmental permits. The Company has received a notice of noncompliance with respect to a wildlife mortality and the matter currently is under investigation. 9 The mine is subject to three separate net smelter royalties aggregating 3.5% to 15% depending upon the grade of ore and the price of gold. Operating Data
1994 1993 ------ ------ Production Statistics: Tons of ore mined (000s) - 2,043 Stripping ratio (waste:ore) - 1.5:1 Tons of ore crushed (000s) - 2,288 Ore grade put on pads (oz. gold/ton) - .034 Leach recovery (%) - 61 Gold recovered (000 ozs.) 22 54 Cost per Ounce of Gold: Cash operating cost $ 175 $ 269 Noncash cost 171 89 ----- ----- Total production cost $346 $ 358
Marigold Mine The Marigold gold mine is located approximately 40 miles southeast of Winnemucca, Nevada. Homestake owns an undivided 33.3% interest in the Marigold property. Rayrock owns the remaining interest and is the operator. The mine has operated since 1989. The property consists of approximately 3,920 acres held by unpatented mining claims and 14,920 acres of leasehold lands held under leases which remain in effect as long as the mine continues production. Access to the property is by two miles of gravel road. Mining is conducted by conventional open-pit methods. In 1994, ore was produced from four open-pit mines. Milling operations ceased in early 1995 with the depletion of the ore reserves in the 8-South pit which had provided most of the mill-grade ore. The other three pits produce mostly lower-grade ore which is processed by heap leaching. Mill-grade ore from the these pits will be stockpiled and periodically processed through the mill to maximize gold recovery. The mill has a capacity of 1,900 TPD. In 1995, 79% of total gold production will be derived from heap leaching compared to only 28% in 1994. Total material movement is approximately 45,000 TPD. Mine facilities are in good condition. Water is supplied from on-site wells and power is purchased from Sierra Pacific Power Company. The 1994 exploration program concentrated on detailed ore delineation in the three known pit areas for reserve modeling, pit design and long-range production scheduling purposes, and for reserve expansion on the property. During 1994, the mine operated in compliance with all of its permits. Production royalties were paid to two owners of the leasehold lands in amounts of 5% of net smelter returns and 3.5% of net profits interest. Homestake's share of production from the Marigold mine was 28,328 ounces of gold in 1994 compared to 30,165 ounces in 1993. 10 Geology Gold resources at the Marigold mine are distributed within even known mineralized zones. Ore bodies are associated with broad zones of silicification and local decalcification largely within the Permian Antler formation and the underlying Ordovician Valmy formation. Both stratigraphy and structure control the location and geometry of the zones of mineralization. The ore bodies are sediment-hosted, disseminated deposits of micron-size gold, and are entirely oxidized. Homestake has a 33.3% share of the following amounts: Year-end Proven and Probable Ore Reserves (100% Basis)
1994 1993 ------ ------ Tons of ore (000s) 14,070 15,749 Ounces of gold per ton .033 .034 Contained ounces of gold (000s) 459 536 Operating Data (100% Basis) 1994 1993 ------ ------ Production Statistics: Tons of ore mined 2,247 2,243 Stripping ratio (waste:ore) 3.3:1 2:1 Tons of ore milled (000s) 678 689 Ore grade milled (oz. gold/ton) .097 .108 Mill recovery (%) 92 91 Tons of ore leached (000s) 1,616 1,505 Ore grade leached (oz. gold/ton) .018 .021 Gold recovered (000 ozs.) 85 90 Homestake's Cost per Ounce of Gold: Cash operating cost $ 226 $ 207 Noncash cost 62 95 ----- ----- Total production cost $ 288 $ 302
Pinson Mine The Pinson gold mine is located approximately 30 miles northeast of Winnemucca, Nevada. Homestake owns an undivided 26.3% interest in the Pinson property. Rayrock owns a 26.5% interest and is the operator. The mine has operated since 1981. The Pinson property consists of approximately 22,826 acres of which 11,583 acres are held under leases which remain in effect as long as the mine continues production. The remaining land is comprised of 7,780 acres of unpatented mining claims and 3,463 acres of primarily fee lands. Access to the property is by paved road. Several open pits are mined simultaneously using conventional open-pit mining methods. Ore is processed by both heap leaching and conventional milling methods. Total material movement is between 25,000 to 30,000 TPD. The mill has a capacity of 1,500 TPD. The process uses both CIP and CIL circuits due to the mildly refractory nature of a portion of the ore. Low-grade ore is treated by heap leaching. In 1994, 83% of total gold production was from ore milled. Mine facilities are in good condition. Water is obtained from wells on the property and power is purchased from Sierra Pacific Power Company. 11 The 1994 exploration program delineated some ore extensions in current mining areas but did not identify significant new reserves on the property. Production royalties of 2.2% of net smelter returns are payable on the principal producing areas of the mine. Overall, the underlying property ownership is complex, requiring special arrangements with respect to the commingling of ore from various locations. During 1994, the mine operated in compliance with all its environmental permits. Homestake's share of production from the Pinson mine was 11,817 ounces of gold in 1994 compared to 13,353 ounces in 1993. Geology The Pinson deposit includes six or more zones of gold mineralization largely hosted by carbonate rocks and calcareous siltstones of the Ordovician Conus formation. Ore bodies consist of diffuse disseminations of micron-size gold peripheral to faults cutting favorable stratigraphy. High-grade stringer zones have been identified deep in the system and are the subject of continuing investigation. Homestake has a 26.3% share of the following amounts: Year-end Proven and Probable Ore Reserves (100% Basis)
1994 1993 ----- ----- Tons of ore (000s) 4,743 4,771 Ounces of gold per ton .072 .068 Contained ounces of gold (000s) 343 323 Operating Data (100% Basis) 1994 1993 ----- ----- Production Statistics: Tons of ore mined (000s) 968 882 Stripping ratio (waste:ore) 6.6:1 7:1 Tons of ore milled (000s) 562 552 Ore grade milled (oz. gold/ton) .078 .093 Mill recovery (%) 83 85 Tons of ore leached (000s) 379 415 Ore grade leached (oz. gold/ton) .029 .031 Gold recovered (000 ozs.) 45 51 Homestake's Cost per Ounce of Gold: Cash operating cost $ 332 $ 267 Noncash cost 44 41 ----- ----- Total production cost $ 376 $ 308
12 Dee Mine In May 1994, the Company sold its interest in the Dee gold mine in Nevada to Rayrock for $16.5 million. Rayrock assumed responsibility for and indemnified Homestake against all environmental and reclamation matters. The Company recorded a $15.7 million pretax gain on this sale. Prior to the sale, the Company's share of gold production for 1994 totaled 1,984 ounces compared to 11,340 ounces during 1993. CANADA Homestake has a 50% interest in the Williams and David Bell mines in the Hemlo mining district in Ontario and a 25% net profits interest in the Quarter Claim (adjacent to the David Bell mine). Homestake also owns and operates the Nickel Plate mine in south central British Columbia and has a 50.6% interest in Prime. Prime owns the Eskay Creek mine and has a 40% interest in the Snip mine, both of which are located in northwestern British Columbia. The Company conducts exploration and investigates mineral acquisition and development opportunities throughout Canada. Canadian activities are managed from an office in Vancouver, British Columbia. Eskay Creek Mine Prime owns 100% of the Eskay Creek gold/silver mine. Through its interest in Prime, the Company has a 50.6% interest in the mine. Prime has contracted with Homestake to provide all necessary professional, managerial, and administrative services in connection with further exploration, development and operation of the Eskay Creek mine. The Eskay Creek property consists of five mining leases and various other mineral and surface rights comprising approximately 3,477 acres located 51 miles north of Stewart, British Columbia. The leases have remaining terms of approximately 26 to 30 years, subject to renewal rights. Access from the main highway to the mine is by 38 miles of single-lane gravel road. A feasibility study conducted in January 1994 determined that the most economical way of processing the ore was by direct shipment and sale of ore to smelters. A Mine Development Certificate was received from the Province of British Columbia on March 31, 1994. Construction of surface facilities commenced immediately and was completed in late October. Rehabilitation of the main access ramp and underground ventilation and electrical services was undertaken prior to the commencement of mining in December 1994. Shipments of ore commenced in January 1995. Underground mining utilizes a drift-and-fill method. Ore is processed through a crushing and blending facility located at the minesite. There are no tailings produced at the minesite. Some of the mine waste-rock is potentially acid-generating and is disposed of under water in a nearby barren lake. Workers are on a two-week work schedule followed by two weeks off. Two long-term sale contracts have been signed with smelters in Japan and Quebec. These contracts provide for a combined minimum delivery of 100,000 tons in the first year, with options to increase deliveries to 130,000 tons in the second year and beyond, subject to smelter approvals. A long-term truck hauling contract currently is being negotiated for the movement of ore 164 miles to Stewart for shipment to Japan and 224 miles to Kitwanga, British Columbia for shipment to Quebec. A dedicated ship-loading facility at Stewart has been upgraded to handle ore shipments. In addition, a new load-out facility has been constructed at the railhead in Kitwanga. Prime has also entered into a rail contract with Canadian National Railway to transport ore to Quebec. 13 During 1994, Prime entered into agreements with Adrian Resources Ltd. and the Tagish Group and acquired 100% of mineral claims which cover a small portion of the Eskay Creek ore body. This acquisition settled all known Eskay Creek mine title disputes. In 1995, the mine is expected to produce 100,000 tons of ore containing approximately 170,000 ounces of gold and 7.3 million ounces of silver. Based on existing reserves, the mine has a projected life of eight to ten years. Power is produced on-site by diesel generation. See page 34 for a discussion of environmental matters. The mine is subject to an effective 1% net smelter royalty, with the exception of a small portion of the ore body, which is subject to an effective 2% net smelter royalty. Geology The Eskay Creek ore body is a precious metal-enriched volcanogenic massive sulfide deposit that occurs in association with volcanics of the Jurassic-aged (190+ million years) Hazelton Group. Eskay Creek mineralization is generally stratabound and occurs in a contact mudstone and breccia sandwiched between a rhyolite flow-dome complex and overlain by volcanic rocks in the west limb of a north-plunging fold. Sphalerite, pyrite, galena and tetrahedrite are the most abundant ore minerals. Native gold occurs as mostly microscopic particles located between sulfide grains or in fractures within sulfide grains, some locked in pyrite. Gold also occurs in volcanic rocks beneath the contact mudstone with visible gold, coarse grained sphalerite, pyrite and galena disseminated in quartz veins or stockwork. Year-end Proven and Probable Ore Reserves (100% Basis)
1994 ------ Tons of ore (000s) 1,190 Ounces of gold per ton 1.91 Contained ounces of gold (000s) 2,274 Ounces of silver per ton 85.5 Contained ounces of silver (000s) 101,800
Williams Mine The Williams gold mine is located in the Hemlo Gold Camp 217 miles east of Thunder Bay, Ontario adjacent to the Trans Canada Highway. The mine is operated by Williams Operating Corporation (WOC). Homestake and Teck Corporation (Teck) each own a 50% interest in WOC. The mine commenced operations in 1985. The property consists of 11 patented mining claims covering approximately 400 acres and one Crown mining lease. WOC operates the Williams mine with its own personnel. Homestake and Teck are required to provide funds equally to WOC for all costs incurred to operate the mine. Homestake and Teck have mutual rights of first refusal over each other's interest in the Williams mine and shares of WOC. 14 The Williams mine is an underground operation which is accessible by a 4,300-foot shaft. Mining is carried out by the longhole, open-stope method with cemented rock fill. In addition, 300-400 TPD of low-grade ore is recovered from a nearby open pit. Waste rock from the open pit is used for backfill in the underground operations. Cyanidation and the CIP process are used to recover gold. The mine has a 7,000 TPD capacity mill which operated at 6,954 TPD during 1994. The Williams and David Bell mines share one tailings basin facility located approximately two miles from the mill. This facility was expanded during 1994. Water from the tailings basin is treated during the summer months in an effluent treatment plant prior to discharge. The mines continue to reclaim mill process water separately. The mine's facilities and equipment are modern and in good condition. Following the installation of new crushing and ventilation systems in 1994, mining between the 9,065 and 9,240-foot levels commenced. In addition, exploration drifting and diamond drilling were carried out on the 9,175 and 9,450-foot levels and part of the open pit was redesigned and expanded to maximize ore extraction. Approximately two-thirds of the ore mined in 1994 was replaced by additions to ore reserves. During the next few years, production at the mine is expected to be slightly lower as the grades of ore mined more closely approximate the remaining life-of-mine ore grades. Water for the property is supplied from Cedar Creek and power is purchased from Ontario Hydro via long-term contracts. Propane for heating mine air and surface facilities is also purchased on long-term contracts. A new glycol heat recovery system was installed during 1994 which will reduce propane consumption. All environmental discharges during 1994 were in compliance with permit levels. The mine has submitted a reclamation and closure plan to the Government of Ontario for review. The 11 patented mining claims are subject to three net smelter royalties totaling a net effective rate of 2.08% and the Crown mining lease is subject to a net smelter royalty of 0.75%. Homestake's share of production was 222,660 ounces in 1994 compared to 246,126 ounces in 1993. Geology The Hemlo Gold Camp occurs within the east-west striking Heron Bay belt of metamorphosed Archean aged rocks (3.5 billion years). The steeply dipping ore bodies lie along the contact between overlying metasedimentary rocks and underlying volcanic rocks. Gold mineralization is hosted mainly by a fine grained feldspar porphyry unit associated with pyrite, barite and molybdenum. Homestake has a 50% share of the following amounts: Year-end Proven and Probable Ore Reserves (100% Basis)
1994 1993 ------ ------ Tons of ore (000s) 34,050 34,905 Ounces of gold per ton .166 .170 Contained ounces of gold (000s) 5,669 5,934 15 Operating Data (100% Basis) 1994 1993 ------ ------ Production Statistics: Tons of ore milled (000s) 2,538 2,557 Mill feed ore grade (oz. gold/ton) .184 .202 Mill recovery (%) 95 95 Gold recovered (000s ozs.) 445 492 Homestake's Cost per Ounce of Gold: Cash operating cost $ 204 $ 199 Noncash cost 42 48 ----- ----- Total production cost $ 246 $ 247
David Bell Mine The David Bell gold mine is located in the Hemlo Gold Camp. The mine is operated by the Teck-Corona Operating Corporation (TCOC). Homestake and Teck each own a 50% interest in TCOC. The mine commenced operations in 1985. The mine is located on the same ore body as the Williams mine. The property consists of approximately 650 acres held under two freehold patents. TCOC operates the David Bell mine with its own personnel. Homestake and Teck are required to provide funds equally to TCOC for all costs incurred to operate the mine. Homestake and Teck have mutual rights of first refusal over each other's interest in the David Bell mine and shares of TCOC. The David Bell mine is an underground operation which is accessible by a 3,819-foot shaft. Production is from stopes using longhole mining methods with a mixture of cement, tailings, sand and waste rock produced underground as backfill. The mill operated at 1,402 TPD in 1994. Cyanidation and the CIP process are used to recover gold. The facilities and equipment are modern and in good condition. Mine development in 1994 included development of the new C-zone by a contractor and improvements to the mine ventilation network. The average width of ore at the David Bell mine is decreasing. In an effort to minimize the costs associated with this decrease, stoping of narrow width ore by longitudinal longhole retreat continued during the year. Gold production decreased slightly, reflecting lower ore grades and recoveries and reduced mill throughput associated with ore shortages from the underground due to narrower ore widths. During the next few years, production at the mine is expected to be slightly lower as the grades of ore mined more closely approximate the remaining life-of-mine ore grades. In-mine exploration potential is limited due to property boundary limits. Homestake and Teck each have a 50% interest in efforts to explore and develop mineral properties within approximately two miles of the David Bell property. The current collective bargaining agreement with the United Steel Workers of America is in effect until October 31, 1995. Water and power supplies are the same as those at the Williams mine. During 1994, all environmental discharges were in compliance with permit levels. The mine has submitted a reclamation and closure plan to the Government of Ontario for review. The property is subject to a 3% net smelter royalty. Homestake's share of production at the David Bell mine was 96,109 ounces in 1994 compared with 107,594 ounces in 1993. 16 Geology See "Williams Mine - Geology." Homestake has a 50% share of the following amounts: Year-end Proven and Probable Ore Reserves (100% Basis)
1994 1993 ----- ----- Tons of ore (000s) 5,463 6,450 Ounces of gold per ton .317 .316 Contained ounces of gold (000s) 1,731 2,041 Operating Data (100% Basis) 1994 1993 ----- ----- Production Statistics: Tons of ore milled (000s) 512 542 Mill feed ore grade (oz. gold/ton) .399 .416 Mill recovery (%) 94 95 Gold recovered (000 ozs.) 192 215 Homestake's Cost per Ounce of Gold: Cash operating cost $ 168 $ 154 Noncash cost 43 52 ----- ----- Total production cost $ 211 $ 206
Quarter Claim The Quarter Claim constitutes approximately one-fourth of a mining claim, which was originally part of the David Bell property and was optioned to, and subsequently acquired by, Hemlo Gold Mines Inc. (Hemlo Gold) in 1982. Hemlo Gold developed a shaft and reserved hoisting and milling capacity of 500 TPD at its mill to process any ore found on the Quarter Claim. Homestake has a 25% net profits interest in all ore recovered from the Quarter Claim. In calculating the net profits interest, no allowance is made by Hemlo Gold for capital costs unless that capital is specifically required for the Quarter Claim. Homestake's share of production at the Quarter Claim was 7,745 ounces in 1994 compared with 11,094 ounces in 1993. 17 Geology See "Williams Mine - Geology." Homestake has a 25% share of the following amounts: Year-end Proven and Probable Ore Reserves (100% Basis)
1994 1993 ----- ----- Tons of ore (000s) 1,185 1,380 Ounces of gold per ton .254 .256 Contained ounces of gold (000s) 300 354 Operating Data (100% Basis) 1994 1993 ----- ----- Production Statistics: Tons of ore milled (000s) 114 181 Mill feed ore grade (oz. gold/ton) .281 .255 Mill recovery (%) 97 96 Gold recovered (000 ozs.) 31 44 Homestake's Cost per Ounce of Gold: Cash operating cost $ 177 $ 144
Nickel Plate Mine The Nickel Plate gold mine is located near Hedley, British Columbia and is owned 100% by Homestake. The mine was an underground gold mine prior to 1930 and from 1934 to 1955. Current operations began in 1987. The property is comprised of 111 Crown-granted claims, six reverted Crown- granted claims, two mining leases, 25 mineral claims and certain surface rights, covering approximately 8,015 acres. A paved road from Penticton, British Columbia, approximately 30 miles from the mine, provides access to the site. Mining is carried out by conventional open-pit methods. Ore is processed in a 4,000-TPD mill. Mill processing comprises crushing, grinding, cyanidation and Merrill Crowe gold recovery. Tailings effluent is treated to destroy residual cyanide before deposition in a closed circuit effluent discharge impoundment basin. The facilities and equipment are modern and in good condition. The majority of the mine's process water is obtained from solutions recycled from the tailings impoundment basin. Fresh water make-up is supplied from a local creek during spring run-off and stored in a process water pond. Power is supplied by West Kootenay Power under an annually renewable contract. Mining at the Nickel Plate mine will be reduced substantially in early 1995. A milling rate of 4,000 TPD is planned through the end of 1996 at which time the ore reserve is expected to be depleted. During the fourth quarter of 1994, the Nickel Plate ore reserve was reduced by 8% reflecting mining experience in the Stage IV pit. The potential for additional ore reserves from exploration drilling is very limited. See page 34 for discussion of environmental matters. The mine has submitted a revised reclamation and closure plan to the regulatory agencies for review. 18 Geology The Nickel Plate ore body is situated within the rocks of the Jurassic aged Hedley Formation consisting of thinly bedded calcareous siltstones and layered to massive limestone units dipping northwest at 20 to 30 degrees. The formation is intruded by Early Jurassic, coarse- grained porphyritic diorite. A large hydrothermal system was associated with the diorite intrusions. Gold bearing sulfides (pyrrhotite, pyrite and chalcopyrite) were emplaced during the latest phase of this hydrothermal process. Higher grades are associated with the contacts of the diorite dikes and sills and the Hedley formation and are confined to the skarn zone. Year-end Proven and Probable Ore Reserves
1994 1993 ----- ----- Tons of ore (000s) 2,889 4,823 Ounces of gold per ton .077 .077 Contained ounces of gold (000s) 223 370 Operating Data 1994 1993 ------ ------ Production Statistics: Tons of ore milled (000s) 1,438 1,412 Mill feed ore grade (oz. gold/ton) .070 .061 Mill recovery (%) 81 85 Gold recovered (000 ozs.) 82 74 Cost per Ounce of Gold: Cash operating cost $ 351 $ 312 Noncash cost 54 24 ----- ----- Total production cost $ 405 $ 336
Snip Mine The Snip gold mine is located at the junction of Bronson Creek and the Iskut River, 56 air miles north of Stewart, in northwestern British Columbia. The mine is 40% owned by Prime. Cominco Ltd. (Cominco) owns the remaining interest and is the operator. Cominco receives a management fee for its services as operator equivalent to 5% of cash expenditures made at the property. The mine commenced operations in January 1991. The property consists of a mining lease issued to Cominco for a term of 30 years, together with three mineral claims also recorded in the name of Cominco, covering approximately 3,637 acres. The mine is serviced by aircraft which utilize the mine's 4,500-foot long landing strip. In addition, a hovercraft transports mine concentrates, fuel and other supplies along the Iskut and Stikine rivers between the mine and Wrangell, Alaska from late March to early November each year. During the winter months, the only access is by aircraft due to ice accumulations on the rivers. The Snip mine is an underground operation serviced by three adits and a haulageway at the 400-foot level. Mining is carried out through a combination of shrinkage, conventional and mechanized cut and fill. Backfill is either underground waste rock or mill tailings which are pumped to the mine and mixed with cement. The mill can treat 500 TPD. Approximately 92% of the gold contained in the ore is recovered. A gravity circuit recovers about 36% of the gold and the remaining gold is recovered in flotation concentrates containing approximately ten ounces of gold per ton. The concentrates are sold to a third-party facility located near Stewart for final gold recovery. Mill tailings are deposited in a pond close to the mine and reclaimed water is pumped back to the mill 19 for reuse. The facilities and equipment are modern and in good condition. Workers are on a four-week work schedule followed by two weeks off. Water is supplied from Bronson Creek and power is produced on-site by diesel generators. During 1994, all environmental discharges were within permit levels. There has been recent controversy regarding the environmental impact of the mine's hovercraft operations on fish in the Iskut river. The Company has agreed to further studies despite prior investigations indicating little environmental impact. Homestake's share of gold production in 1994 was 51,592 compared to 59,790 ounces in 1993. Geology The main ore body at the Snip mine is called the Twin Zone, a 1.5 to 50 feet thick quartz-carbonate-sulfide-filled shear structure within a Triassic sedimentary unit. Gold primarily occurs as finely disseminated grains along pyrite grain boundaries. Other sulfides within the Twin Zone include pyrrhotite, chalcopyrite and sphalerite, with trace arsenopyrite. The vein structure has been traced over a strike length of 3,300 feet and has a known vertical extent to 1,650 feet. Prime has a 40% share of the following amounts: Year-end Proven and Probable Ore Reserves (100% Basis)
1994 1993 ----- ------ Tons of ore (000s) 553 722 Ounces of gold per ton .797 .788 Contained ounces of gold (000s) 441 569 Operating Data (100% Basis) 1994 1993 ------ ------ Production Statistics: Tons of ore milled (000s) 190 188 Mill feed ore grade (oz. gold/ton) .743 .865 Mill recovery (%) 92 92 Gold recovered (000 ozs.)* 129 149 Homestake's Cost per Ounce of Gold:* Cash operating cost $ 171 $ 152 Noncash cost 59 83 ----- ----- Total production cost $ 230 $ 235 * Includes recoverable gold contained in dore bars and in concentrates.
AUSTRALIA Homestake owns 81.5% of the shares of Homestake Gold of Australia Limited (HGAL). HGAL is a gold mining and exploration company whose principal asset is a 50% ownership in Australia's largest gold mining operation, the consolidated surface and underground gold operations at Kalgoorlie, Western Australia. HGAL explores for gold in Australia and has offices in Perth and Kalgoorlie, Western Australia. 20 Kalgoorlie Operations The Kalgoorlie operations are located 340 miles northeast of Perth, Western Australia on 164 state leases and licenses covering a total of 47 square miles. The mineral leases are renewable on an annual basis for a fee to the state. Homestake acquired its interest in the original Kalgoorlie Mining Associates joint venture in 1976. Mining operations in the Kalgoorlie region date back to 1893. Access to the operations is by paved road. HGAL owns a 50% interest in three joint ventures in the Kalgoorlie district: the Fimiston/Paringa Venture (FPV), the Mt Percy Venture and the Kalgoorlie Mining Associates Venture. Gold Mines of Kalgoorlie Limited and its affiliates (GMK) own the other 50% interest. HGAL and GMK formed Kalgoorlie Consolidated Gold Mines Pty Ltd (KCGM), a jointly-owned and controlled company, to manage all the operations on a consolidated basis under the direction of a Management Committee. Mines operated by KCGM include the Super Pit open-pit gold mine and the Mt. Charlotte underground gold mine. Ore treatment is carried out at the Croesus, Fimiston, Mt Percy and Oroya mills and the Gidji roaster. HGAL pays 50% of the costs and is entitled to receive 50% of the production from all operations, except for the FPV area of the Super Pit where HGAL pays 50% of venture costs but may not receive 50% of the production. GMK is entitled to receive more than 50% of gold production from the FPV area under certain circumstances out of the first 35.8 million tons of ore mined by open-pit methods from the FPV area of the Super Pit. The disproportionate quantity of gold to be received by GMK depends upon capital and production costs, gold prices and volumes mined from the FPV area. In 1994, HGAL paid to GMK 15,781 ounces under the disproportionate sharing arrangement. Through the end of 1994, approximately 15.9 million tons of ore have been mined from the FPV area of the Super Pit. The operations' facilities and equipment generally are in good condition. Contractors are employed to conduct surface mining operations, ore and concentrate haulage and some specialized services. Fresh water is supplied under allocation from the state water system and is piped 350 miles from Perth. Salt water is taken from bores and underground mines. Power is purchased under a number of agreements with the state power authority. In 1994, the Gidji roaster performed well within SO2 emission limits established by the Western Australian government. Intercept drainage channels were constructed to isolate the Oroya tailings dam from the nearby salt water drainage channel. A safety exclusion zone (SEZ) surrounding the Super Pit has been established and progressive acquisition of properties within this area is taking place. The SEZ, combined with measures to reduce noise and dust, has resulted in a significant improvement in the environment of residents living close to the mining operations. Revision of the Super Pit ore resource using computer-aided modelling techniques, in addition to a review of Mt. Charlotte reserves, expanded year- end proven and probable reserves by 7% during 1994. The Company's share of this increase was approximately 0.3 million ounces. No royalties are payable on production. Super Pit This large open pit is located along the "Golden Mile" ore bodies previously mined from underground. In 1994, 59.7 million tons of material were mined containing 12.4 million tons of ore, compared to 59 million tons containing 10 million tons in 1993. HGAL's share of Super Pit gold production was 289,625 ounces in 1994 and 256,094 ounces in 1993. 21 Mt. Charlotte This underground mine uses bulk mining methods and large conventional diesel powered loaders and trucks to produce ore at the rate of 1.6 million tons per year. The main production level is 3,200 feet below surface. Long- hole stoping mining techniques are employed. Ore is crushed underground with primary crushers before being hoisted to secondary crushers at the surface. In 1994 and 1993, 1.7 million tons of ore were mined from Mt. Charlotte. HGAL's share of gold production was 61,021 ounces in 1994 and 70,981 ounces in 1993. Mt Percy The Mt Percy open cuts were mined to their planned economic depth in July 1992, at which time mining ceased. Through May 1994, the mill continued to process previously stockpiled low-grade material blended with non-refractory ore from the Super Pit and Mt. Charlotte. HGAL's share of gold production was 1,353 ounces in 1994 and 5,457 ounces in 1993. Mills Fimiston - a 14,550 TPD mill with CIP leaching and refractory sulfide flotation circuits that processes ore from the Super Pit. Approximately $15 million (100% basis) was spent in 1994 and a further $39 million of expenditures are planned during 1995 on an expansion program at the Fimiston mill. This program, which will be completed in 1995, will increase the mill's capacity to 28,000 TPD, including a 5,000 TPD free-milling sulfide circuit to treat Mt. Charlotte ore. The increase in capacity will improve the mill's efficiency and will also replace the capacity of the Oroya mill which is being dismantled in 1995 to allow for an expansion of the Super Pit. Oroya - a 7,700 TPD mill with CIP, refractory and non-refractory sulfide flotation circuits that processes ore from Mt. Charlotte and the Super Pit. Croesus - a 3,000 TPD mill with CIP and refractory sulfide flotation circuits that processes ore from the Super Pit. Mt Percy - a 2,500 TPD mill with a CIP circuit that processes ore from Mt Percy, the Super Pit and Mt. Charlotte. Gidji - a roaster complex situated 12 miles north of Kalgoorlie which comprises two converters and a CIP circuit to process all the concentrates. The combined mills processed 10.7 million tons of ore in 1994 and 1993. Cash operating costs were higher in 1994 primarily as a result of unfavorable foreign exchange rates. A moderate decline in costs was achieved on an Australian currency basis. HGAL's share of 1994 gold production from the consolidated Kalgoorlie operations was 352,081 ounces compared with 332,636 ounces in 1993. 22 Geology The ore deposits mined in the Kalgoorlie Goldfields occur within an intensely mineralized shear zone system in dolerite host rocks, within the Norseman-Wiluna Greenstone Belt which is part of the Yilgarn Block of Western Australia. The rocks are of Archaen age. The favorable structural metamorphic and lithologic setting in conjunction with hydrothermal activity controlled gold mineralization. In excess of 38 million ounces of gold have been produced at depths of up to 4,000 feet from high-grade lodes and adjacent disseminated mineralization in the Golden Mile Dolerite, and from the large stockwork mineralization which characterizes the Mt. Charlotte and Reward (underground) ore bodies. HGAL has a 50% share (subject to the disproportionate allocation discussed above) of the following amounts: Year-end Proven and Probable Ore Reserves (100% Basis)
1994 1993 ------- ------- Tons of ore (000s) 158,790 146,895 Ounces of gold per ton .073 .074 Contained ounces of gold (000s) 11,519 10,813 Operating Data (100% Basis) 1994 1993 ------ ------ Production Statistics: Super Pit Tons of ore mined (000s) 12,372 9,976 Stripping ratio 3.8:1 4.9:1 Tons of ore milled (000s) 8,963 8,502 Mill feed ore grade (oz. gold/ton) .077 .072 Mill recovery (%) 88 86 Gold recovered (000s) 611 512 Mt Percy Tons of ore milled (000s) 94 465 Mill feed ore grade (oz. gold/ton) .029 .027 Mill recovery (%) 86 88 Gold recovered (000s) 3 11 Mt. Charlotte Tons of ore mined (000s) 1,680 1,697 Tons of ore milled (000s) 1,682 1,706 Mill feed ore grade (oz. gold/ton) .085 .096 Mill recovery (%) 87 86 Gold recovered (000s) 122 142 Combined Production Statistics: Tons of ore mined (000s) 14,052 11,673 Tons of ore milled (000s) 10,740 10,677 Mill feed ore grade (oz. gold/ton) .078 .074 Mill recovery (%) 88 86 Gold recovered (000 ozs.) 736 665 23 Homestake's Consolidated Cost Per Ounce of Gold: Cash operating cost $ 259 $ 230 Noncash cost 39 40 ----- ----- Total production cost $ 298 $ 270
Super Pit mining during the last five years has produced approximately 20% more ore than predicted by the ore reserve model. Fortnum Fortnum is an open-pit gold mine located 485 miles northeast of Perth, Western Australia which had been on care and maintenance. On February 17, 1994 HGAL sold its interest in Fortnum to Perilya Mines NL. A gain of approximately $1.3 million was recorded on this sale. CHILE Homestake leases and operates the El Hueso gold mine and also conducts exploration throughout Chile. Homestake's office is in Santiago, Chile. El Hueso is an open-pit gold mine in the Maricunga District of Chile on property leased through June 1998 from Codelco, a government agency. The mine is located about 600 miles north of Santiago at an elevation of approximately 12,500 feet. The lease includes the right to use the existing plant. The land included in the original lease term has no applicable royalties. Operations commenced in 1987 and Homestake assumed control of the operation in 1988. Access to the mine is by 14 miles of dirt road. In 1991, additional land was contracted from Codelco and incorporated into the existing lease. This new land was subject to a net profits royalty of 50% on the first 50,000 ounces of production, which was achieved during 1993, and is now subject to a 30% net profits royalty. Ores from the mine are leached by two different methods of production. Higher-grade ore is crushed in three stages and then heap leached. Low-grade run-of-mine ore is heap leached without crushing. Gold-bearing solutions from both ores are treated by zinc precipitation to produce dore bars. The facilities are in good condition. Water and power are purchased from Codelco. Active mining operations at the El Hueso mine and the neighboring leases ceased in February 1995. Leaching of the piles will continue through to the end of the year at which time the operation will enter a reclamation phase. During this period some gold production will be derived from rinsing the heaps, a process in which residual cyanide is destroyed. Based on current estimates, full provision for mine closure, after considering the additional revenues to be received from gold produced during the reclamation phase, is included in the December 31, 1994 financial statements. In January 1994, additional new land was leased from Codelco and exploration activities on this land are ongoing. The Company plans to spend approximately $1 million in 1995 on an exploration prospect on this land, which, if successful, could require use of the El Hueso facilities. These new lands are subject to a 30% net profits royalty. 24 Geology The El Hueso ore body is hosted by Lower Tertiary volcanic rocks and decalcified Jurassic sandstones and limestones in the Potrerillos porphyry copper district. Gold mineralization occurs in vertical "feeder" structures and disseminated stratabound deposits associated with quartz, alunite, cervantite, scorodite, jarosite, goethite and stibnite. Year-end Proven and Probable Ore Reserves
1994 1993 ----- ----- Tons of ore (000s) 136 3,151 Ounces of gold per ton .039 .039 Contained ounces of gold (000s) 5 122 Operating Data 1994 1993 ----- ----- Production Statistics: Tons of ore mined (000s) 2,895 3,132 Stripping ratio (waste:ore) 3.8:1 2.5:1 Tons high-grade ore leached (000s) 1,720 1,964 Leach feed ore grade (oz. gold/ton) .035 .040 Recovery (%) 80 82 Tons low-grade ore leached (000s) 1,001 1,031 Leach feed ore grade (oz. gold/ton) .014 .015 Recovery (%) 47 47 Gold recovered - all ores (000 ozs.) 56 72 Cost per Ounce of Gold: Cash operating cost $ 403 $ 299 Noncash cost 13 30 ----- ----- Total production cost $ 416 $ 329
MEXICO Following a reorganization of its Mexican interests during 1994, Homestake owned an approximate 28% equity interest in Compania Minera Las Torres, S.A. De C.V. (Torres). Torres' primary asset is the Torres silver mining complex located near Guanajuato, about 250 miles northwest of Mexico City. Torres also owns the Encantada lead/silver mine located in the state of Coahuila, 50 miles south of Big Bend, Texas. Both of these operations are operated by Industrias Penoles, S.A. de C.V. The Torres silver mining complex covers approximately 18,000 acres and consists of several small separate silver/gold mines and a centrally located 2,500-TPD concentrator. Homestake's share of gold production from Torres totaled 12,884 ounces in 1994 compared to 12,844 ounces in 1993. Homestake received dividends from Torres of $1.6 million and $0.8 million in 1994 and 1993, respectively. In February 1995, the Company sold its 28% interest in Torres for $6 million. SULPHUR Homestake owns an undivided 16.7% interest in the Main Pass 299 sulphur deposit, which at December 31, 1994 contained proven recoverable reserves of approximately 70 million long tons of sulphur. Freeport McMoRan Resource Partners, Limited Partnership (FRP) owns a 58.3% interest in the deposit and is the operator under a joint operating agreement. IMC Fertilizer Inc. owns the remaining 25%. 25 The sulphur deposit is located in the Gulf of Mexico in waters approximately 210 feet deep, 36 miles east of Venice, Louisiana. The deposit is approximately 1,500 feet below the sea floor. The federal sulphur lease under which the deposit is held requires a royalty of 12.5% of the wellhead value. The operating agreement provides that each participant pays its share of capital and operating costs, and has the right to take its share of production in kind in proportion to its undivided interest. The sulphur deposit is being mined using the Frasch process, a method of extraction which injects steam to liquify the sulphur, which is then pumped to surface. Based on current reserve estimates, projected costs and prices, annual production is expected to average two million long tons over a remaining reserve life in excess of 30 years. Fabrication and installation of production facilities began in 1990. Initial sulphur production commenced in 1992. Initial production was lower than anticipated because the production of overlying oil and gas reserves slowed the heating of the sulphur dome to required production temperatures. Full sulphur production levels of 5,500 TPD were reached in December 1993. Sulphur production averaged 6,200 TPD by the end of 1994. Homestake's 16.7% share of development expenditures through 1994 was approximately $123 million. FRP filters, blends, markets and delivers Homestake's share of sulphur production under an agreement having an initial term of ten years from commencement of production in 1992. Homestake can terminate the agreement by giving FRP two-years notice. During 1994, the sulphur market strengthened from a 20-year low which had lowered average realized prices to approximately $45 per ton at the end of 1993. With a modest increase in prices, Homestake expects its sulphur operations to break even or provide a small profit during 1995. Homestake was recently notified by Freeport that sulphur reserves at December 31, 1994 have been increased by approximately 6.4 million tons (100% basis). This increase includes 1.8 million tons added as a result of development drilling and 4.6 million tons added as a result of utilizing a lower porosity assumption based on experience to date. During sulphur exploration, oil and gas were discovered overlying the sulphur deposit. In 1990, the participants acquired the oil and gas rights from Chevron USA, Inc., for a total of $150 million, including reimbursement of certain costs incurred in partial development of the reserves. Homestake's 16.7% share of the oil and gas purchase and development costs through 1994 was approximately $55 million. The federal oil and gas lease requires a 16.7% royalty payment based on wellhead value. In addition, Chevron retained the right to share in the proceeds of future production should the price or volume realized exceed those which were used by the parties as the basis for determining the purchase price. Oil and gas production peaked during 1992 and is expected to decline over the next five years. Oil production (100% basis) totaled 5.2 million barrels in 1994 compared to 7.1 million barrels in 1993. In the fourth quarter of 1993, Homestake recorded a $16 million pretax write-down of its investment in the oil and gas assets due to a decline in oil prices. This write-down was based on Main Pass 299's realized price of $10.32 per barrel at December 31, 1993. The remaining carrying value of Homestake's investment in the Main Pass 299 oil and gas property is $11.6 million at December 31, 1994. Homestake's share of remaining recoverable oil reserves at December 31, 1994 is estimated to be 2.1 million barrels after adjusting for the federal royalty. 26 Homestake has a 16.7% share of the following amounts: Year-end Proven and Recoverable Reserves (100% Basis)
1994 1993 ------ ------ Tons of sulphur (000s) 70,321 66,205 Barrels of oil (000s) 15,521 20,751 Production Statistics (100% Basis) 1994 1993 ----- ------ Tons of sulphur (000s) 2,259 696 Barrels of oil (000s) 5,240 7,080 Homestake's Per Unit Data 1994 1993 ----- ------ Average Sales Realizations: Per ton of Sulphur $ 53 $ 59 Per barrel of oil 13 14 Costs Sulphur cash costs per ton $ 49 $ 131 Sulphur noncash costs per ton 11 11 ----- ------ Total production cost $ 60 $ 142 Oil cash costs per barrel $ 4 $ 4 Oil noncash costs per barrel 6 9 ----- ----- Total production cost $ 10 $ 13
MINERAL EXPLORATION As part of the corporate restructuring in 1992, Homestake reorganized its exploration activities. The Company moved away from a grassroots approach organized around district offices towards a more consolidated and centralized system which allows it to focus on large, high-quality, low-cost opportunities. United States exploration expenses totaled $11.8 million in 1994 and $11.1 million in 1993. Domestic exploration expenses in 1995 are expected to be approximately $11 million. Discovery of a new mineralized zone (Ruby Hill) near Eureka, Nevada, was announced in November 1993. In 1994, exploration expenses totaling $6.5 million formed part of a delineation drilling program which commenced in April. In October 1994, following completion of this program, the Company announced its decision to proceed with a feasibility study on the West Archimedes oxide zone. This $4 million study will examine the economics of a portion of the preliminary geological resource estimate of 1.6 million ounces of gold. Advanced metallurgical studies will also commence in early 1995. In addition, exploration expenses of $5 million are planned for the Ruby Hill project in 1995. Through subsidiaries, Homestake also explores for gold and evaluates gold acquisition opportunities internationally, primarily in Australia, Canada and Chile. International exploration expenses totaled $9.5 million in 1994 and $6.4 million in 1993. 27 In May 1994, the Company signed a Letter of Intent Agreement with L.B. Mining Co. for the exploration, development and operation of gold properties in the Guariche District of Bolivar State, Venezuela. This agreement was terminated in November 1994 due to disappointing exploration results. Additionally, the Company entered into an agreement with Corporacion Venezolana de Guayana for exploration and development of the El Foco mining property in Bolivar State, Venezuela. Exploration expenses related to the Venezuelan projects totaled $2.3 million in 1994. During 1994, the Company made a discovery near its El Hueso operation which, if follow-up work is successful, could result in the reopening of that mine. Homestake plans to spend approximately $1 million on exploration of this prospect located on its Agua de la Falda lease. Total exploration expenses of $21.3 million in 1994 compares to $17.5 million in 1993. In addition, expenses related to the exploration at Homestake's operating mines totaled $8.4 million in 1994. These expenses are included in the individual mine property operating expenses and cost per ounce calculations. GLOSSARY AND INFORMATION ON RESERVES GLOSSARY The following terms used in the preceding discussion mean: "Cash operating cost" includes all mining, in-mine exploration, processing and other plant costs, all royalties, state and local taxes (other than income), refining and marketing expenses, on-site general and administrative costs, and other direct costs, but excludes depreciation, depletion and amortization, corporate general and administrative expense, mineral exploration expense, Canadian provincial mining taxes, financing costs and long-term reclamation accruals. "Noncash cost" includes depreciation, depletion and amortization of capital assets as well as accruals for the costs of reclamation, long-term monitoring and care that are usually incurred at the end of mine life. "Total production cost" includes all cash operating costs and noncash costs. "In-situ tons" refers to reserves still in the ground. This differs from previously mined stockpiled reserves that are being stored for future processing. "Mineral deposit" is a mineralized body which has been delineated by appropriate drilling and/or underground sampling. Under SEC standards, a mineral deposit does not qualify as a reserve unless the recoveries from the deposit are expected to be sufficient to recover total cash and noncash costs for the mine and related facilities. "Run-of-mine ore" is mined ore which has not been subjected to any pretreatment, such as washing, sorting or crushing, prior to processing. "Stripping ratio" is the ratio of the number of tons of waste to the number of tons of ore extracted at an open-pit mine. "Tonnage" and "grade" refer, respectively, to the quantity of reserves and the amount of gold (or other products) contained in such reserves and include estimates for mining dilution but not for other processing losses. "Tons" means short tons (2,000 lbs.) unless otherwise specified. 28 INFORMATION ON RESERVES Gold The proven and probable gold ore reserves stated in this report reflect estimated quantities and grades of gold in in-situ deposits and in stockpiles of mined material that Homestake believes can be recovered and sold at prices sufficient to recover the estimated future cash cost of production and remaining investment. The estimates of cash costs of production are based on current and projected costs. Prices are based on estimated future gold prices. The Company used a spot price of $360 per ounce of gold in its mine- by-mine evaluation of mining properties and investments at December 31, 1994. Silver The proven and probable silver ore reserves have been calculated on the same basis as gold ore reserves. Sulphur Homestake's proved sulphur reserves represent the quantity of sulphur in the Main Pass 299 deposit for which geological, engineering and marketing data give reasonable assurance of recovery and sale under projected economic and operating conditions at prices sufficient to cover the estimated future cash cost of production and remaining investment. Oil Homestake's proved oil reserves at Main Pass 299 are the estimated quantity of crude oil and condensate which geological and engineering data give reasonable assurance of recovery and sale under projected operating conditions at prices sufficient to cover the estimated future cash cost of production and remaining investment. The estimate is based on limited reservoir and engineering data. Calculation of Reserves Gold reserves are calculated for each of Homestake's properties by Homestake based upon factors relevant to each deposit. Gold ore reserves for those properties not operated by Homestake are based on reserve information provided to Homestake by the operator. Homestake has reviewed but has not independently confirmed the information provided by these operators. The sulphur and oil reserves at Main Pass 299 are based on information provided by the operator. Homestake reviewed the initial reserve data with independent consultants. Homestake has reviewed subsequent adjustments to these reserves but has not independently confirmed the reserve adjustments provided by the operator. Other Information Ore reserves are reported as general indicators of the life of mineral deposits. Changes in reserves generally reflect (i) efforts to develop additional reserves; (ii) depletion of existing reserves through production; (iii) actual mining experience; and (iv) price forecasts. Grades of ore actually fed to process from time to time may be different from stated reserve grades because of geologic variation in different areas mined, mining dilution, losses in processing and other factors. Recovery rates vary with the metallurgical characteristics and grade of ore fed to process. 29 Neither reserves nor projections of future operations should be interpreted as assurances of the economic life of mineral deposits or of the profitability of future operations. ENVIRONMENTAL MATTERS General Homestake has made significant capital expenditures to minimize the effects of its operations on the environment. Capital expenditures primarily are for the purchase or development of environmental monitoring equipment and containment of waste. In 1994, these expenditures totaled approximately $6 million compared to $2 million in 1993. Homestake estimates that during 1995, capital expenditures for such purposes will be approximately $3 million and that during the five years ending December 31, 1999, such capital expenditures will be approximately $6 million. Homestake also incurs significant operating costs in order to comply with regulatory requirements. Operating costs include current reclamation costs, accruals for future reclamation expenditures and air, water and other environmental monitoring costs. Such additional costs totaled approximately $16 million in 1994, compared with approximately $10 million in 1993, not including related depreciation expense of $6 million and $7 million, respectively. Homestake estimates that environmental and related operating and depreciation costs in 1995 will approximate the 1994 amounts. The above amounts exclude expenditures related to the Company's discontinued uranium operations. Under applicable law and the terms of permits under which Homestake operates, Homestake is required to reclaim land disturbed by its operations. Homestake charges reclamation costs incurred in connection with its exploration activities as expenses in the year in which incurred. For mining operations, Homestake makes periodic accruals for costs of reclamation. In the mining industry, most reclamation work takes place generally after mining and related operations terminate. However, Homestake has adopted a policy of conducting reclamation during operations where practical and therefore, an increasing amount of reclamation is being conducted simultaneously with mining. At December 31, 1994 and 1993, Homestake had accrued a total of $49.2 million and $36.2 million, respectively, for future reclamation and related costs. Homestake believes that the cost of compliance with environmental requirements will continue to increase. Such costs have not and will not increase productive capacity, efficiency or revenues. Increased costs cannot be passed on to Homestake's customers. Homestake's operations are conducted under permits issued by regulatory agencies. Many permits require periodic renewal or review of their conditions. Homestake cannot predict whether it will be able to renew such permits or whether material changes in permit conditions will be imposed. RCRA The United States Environmental Protection Agency (EPA), has not yet issued final regulations for management of mining wastes under the Resource Conservation and Recovery Act (RCRA). The ultimate effects and costs of compliance with RCRA cannot be estimated at this time. CERCLA The United States Comprehensive Environmental Response, Compensation and Liability Act of 1980 (CERCLA), requires EPA to list known or threatened releases of hazardous substances, pollutants or contaminants. In 1983, EPA began publishing the National Priorities List (NPL). The listing of a site does not constitute a determination that any remedial action is required, nor that any person is liable for any remedial 30 action or environmental damage. CERCLA imposes heavy liabilities on any person who is responsible for an actual or threatened release of any hazardous substance, including liability for oversight costs incurred by EPA. Congressional hearings for CERCLA reauthorization occurred in 1994. CERCLA reauthorization was not enacted in 1994 but is expected to occur in 1995. Whitewood Creek Deposits of mine rock tailings on lands along a 21-mile stretch of Whitewood Creek in western South Dakota constitute a site on the NPL. EPA asserts that discharges of tailings by mining companies, including Homestake, beginning in the nineteenth century, have contaminated the soil and stream bed. In August 1990, Homestake signed a Consent Decree with EPA in United States of America v. Homestake Mining Company of California, (U.S. District Court, W.D., S.D., Civil Action 90-5101). The consent decree required Homestake to carry out remedial work at Homestake's expense and to reimburse EPA for oversight costs. The decree also provided for the three counties in which the property is located to enact institutional controls which would limit the future use of the properties included within the area of the site. Remedial field work was completed in 1993. Institutional control ordinances prepared with the assistance of the Company have been adopted in all three of the affected counties. Homestake and EPA are involved in negotiations to terminate the consent decree. The Record of Decision also requires the Company to continue to perform long-term monitoring of the site. Homestake expects to demonstrate by 1996 that the site does not present any risk to the environment or to public health or safety. Homestake has requested deletion of the site from the NPL and EPA has notified Homestake of their intention to move forward with the deletion. The Company expects the site to be deleted in 1995. The Company has paid all oversight costs billed to date. In connection with the program to implement institutional controls, the Company decided to offer to purchase all properties along Whitewood Creek that were affected by the institutional controls. Approximately $0.2 million has been spent to acquire property at the site from two separate landowners. Negotiations are continuing to acquire more of the site. The Company estimates that the total cost for purchasing all of the affected property would be approximately $3 million. These costs will be expensed if and when incurred. In 1983, the State of South Dakota filed claims against Homestake for natural resources damages resulting from the release of tailings into the Whitewood Creek Site. The State has taken no action to pursue the claims. Grants Tailings Homestake's closed uranium mill site near Grants, New Mexico is listed on the National Priorities List (NPL). EPA asserted that leachate from the tailings contaminated a shallow aquifer used by adjacent residential subdivisions. Homestake paid the cost of extending the municipal water supply to the affected homes. Homestake has operated a water injection and collection system that has significantly improved the quality of the aquifer to a point where contaminants are below natural background levels off the millsite. The estimated costs of continued compliance are included in the accrued reclamation liability. Homestake has settled with EPA concerning their oversight cost for this site and no additional oversight costs are accruing. The consent decree has been terminated. Under a 1987 EPA Administrative Order on Consent (AOC), Homestake studied radon levels in houses in the subdivisions near the Grants mill. Based on the study, EPA concluded that the Homestake mill and tailings facilities are not contributing significantly to radon concentrations in the subdivisions. The Nuclear Regulatory Commission and the State of New Mexico have concurred with EPA's decision to take no further action in this regard. The AOC has been terminated. 31 Effective March 1990, EPA promulgated National Emissions Standards for radionuclides emissions under Section 112 of the Clean Air Act. The regulations generally require closure and compliance by uranium mill tailings facilities on or before December 1991, or two years after cessation of operations, whichever is later. Homestake closed its Grants uranium processing facility in 1990. EPA, several environmental groups and a number of mining companies, including the Company, entered into an agreement which provided that EPA's regulations governing radionuclide emissions from uranium mill tailings disposal sites that are licensed by the Nuclear Regulatory Commission (NRC) would be rescinded and the NRC would regulate radionuclide emissions in connection with its regulation of the decommissioning of the uranium mill tailings facilities. Under NRC regulations, the decommissioning would be affected in accordance with the provisions of the facility's license. The facility license sets the closure of the two tailings impoundments for 1996 and 2001, subject to extension under certain circumstances. The NRC and EPA signed a Memorandum of Understanding in 1993 which has established NRC as the enforcement agency. Mill decommissioning was completed in 1994 and reclamation of the Grants large tailings site is scheduled for completion in 1996. During 1994, the Company incurred approximately $14 million of expenditures at the Grant's facility and an additional $15 million is planned to be expended during 1995. Title X of the Energy Policy Act of 1992 provides for reimbursement by the United States Department of Energy (DOE) for certain costs of reclamation, decommissioning and remedial action for byproduct material (primarily tailings) generated as an incident of uranium sales to the United States. Reimbursement is subject to compliance with the regulations issued by the DOE and appropriation by Congress from a fund established under the Energy Policy Act. Congress has appropriated $83 million for disbursement in fiscal years 1994 and 1995. The Company and the DOE have agreed that approximately 51% of the tailings at Grants were generated as an incident of uranium sales to the United States. Homestake has submitted an initial reimbursement claim for $14.2 million for the 1975 to 1993 time period and has received $4.3 million to date. A claim for approximately $7 million will be submitted in 1995 for 1994 expenditures. Homestake believes that its reclamation reserves for uranium operations and amounts expected to be received under the Energy Policy Act are sufficient to provide for all reclamation costs for the Grants site. In 1983, the State of New Mexico filed claims against Homestake for natural resource damages resulting from the Grants site. The State has taken no action to pursue the claims. Other Uranium In 1994, the Company (along with a number of other companies and government agencies) received notice from EPA that it may be a potentially responsible party with respect to the cleanup of the Colorado School of Mines Research Institute (CSMRI) site near Denver, Colorado. The Company sent ore samples, principally uranium ore, to the CSMRI site for testing at various times over a period in excess of 25 years. EPA has conducted certain remedial actions at the CSMRI site at a cost in excess of $1 million and proposes to conduct additional remediation and disposal activities, the cost of which is not yet determinable. The Company demonstrated to the EPA's satisfaction that Homestake is a de minimus contributor and has settled the claim such that the Company has no liability as long as the clean-up costs are less than $20 million. Lead Prior to May 1986, Homestake Lead Company of Missouri (HLCM), a wholly- owned subsidiary of the Company, was a joint venturer and partner with subsidiaries of AMAX, Inc. (AMAX) in the production of lead and lead concentrates in Missouri. In May 1986, HLCM acquired AMAX's interest in the Missouri facilities and operations and agreed to assume certain limited liabilities of AMAX in connection with the Missouri facilities. In November 1986, HLCM entered into a partnership, The Doe Run Company (Doe Run), with subsidiaries of Fluor Corporation (Fluor), under which HLCM and the Fluor subsidiaries combined their existing United States lead businesses. Under the Doe Run partnership agreement, HLCM contributed to Doe Run certain liabilities 32 of HLCM arising out of the lead business, including most obligations HLCM had to AMAX arising in connection with HLCM's acquisition of AMAX's interest in the Missouri facilities. In May 1990, HLCM sold its interest in Doe Run to Fluor under an agreement which provided that Fluor would indemnify HLCM against all liabilities assumed by Doe Run to the extent that Doe Run was unable to discharge those liabilities. In June 1991, HLCM and AMAX were notified of a potential claim by the Jackson County, Mississippi Port Authority for contamination of soil and water alleged to have resulted from storage and shipment of lead dross at the Port of Pascagoula prior to the formation of Doe Run; since that time, a number of other lead producers and former lead producers have also been so notified. In July 1991, HLCM tendered the claim to Fluor and Doe Run. They rejected the tender and HLCM filed suit in the Superior Court of Orange County, California for breach of contract and declaratory relief (Superior Court, Dept. 20, No. 673777). Subsequent to the filing of that action, HLCM tendered two additional potential claims arising out of the pre-1986 lead business to Fluor and Doe Run. Doe Run and Fluor rejected both tenders. During the pendency of the action, Fluor and Doe Run joined AMAX in the litigation. AMAX took the position that HLCM was obligated to indemnify AMAX for off-site environmental liability associated with lead dross and smelter byproducts, but not for off-site environmental liability associated with lead metal or lead concentrates. AMAX also took the position that the transfer to Doe Run of obligations owed by HLCM to AMAX arising in connection with HLCM's acquisition of AMAX's interest in the Missouri facilities was not binding on AMAX and did not relieve HLCM of its obligations to AMAX. In settlement of the matter in respect of AMAX, HLCM agreed to indemnify AMAX in respect of future off-site environmental liability arising in respect of lead dross and other smelter byproducts. AMAX has acknowledged that it is responsible for its proportionate share of off-site environmental liability associated with lead metal and lead concentrate, and AMAX has acknowledged the effectiveness of HLCM's transfer to Doe Run of obligations HLCM had to AMAX arising in connection with HLCM's acquisition of AMAX's interest in the Missouri facilities. HLCM and Fluor also agreed to dismiss Fluor out of the litigation on the basis of a stipulation by Fluor acknowledging its responsibility with respect to obligations of Doe Run to HLCM should Doe Run be unable to satisfy its obligations. In December 1993, trial was held with respect to HLCM's claims against Doe Run and in January 1994, the court ruled against HLCM and in favor of Doe Run. That ruling is being appealed. The State of Mississippi Department of Environmental Quality, under the Mississippi version of CERCLA, is reviewing the Port of Pascagoula site. The Port of Pascagoula is considered the prime PRP (Potentially Responsible Party) at this site, but the Port has also made claims for reimbursement against customers whose material was stored at and shipped through the site. Homestake and other companies are working with the Port of Pascagoula and the State of Mississippi to address the potential lead contamination. The State currently is reviewing analytical data from the site. As a result of subsequent investigations conducted by the Company and others, the Company believes that most of the material at the Pascagoula site, and the material primarily responsible for the contamination, is lead concentrate. Based on review of shipping records to date, less than half of the lead concentrate shipped through the Port of Pascagoula was produced and sold for the account of the Company. 33 Foreign Operations The Nickel Plate mine had been placed on a Pollution Concern List by the Ministry of Environment, Lands and Parks due to tailings dam seepage and elevated levels of sulfates and nitrates in run-off water from the waste dumps. During 1993, significant work was undertaken to modify and further improve the tailings dam seepage handling system to limit effluent bypassing the system. Additional reclamation undertaken in 1994 includes the rehabilitation of waste dumps and a small pit that was mined out in 1992. On February 22, 1994 the mine was removed from the Pollution Concern List. During 1993, the Eskay Creek mine was placed on a Pollution Concern List by the Ministry of Environment, Lands and Parks due to acid drainage from rock storage areas. In early 1993, a lime treatment plant was installed to treat the acidic water and the project was removed from the Pollution Concern List on February 22, 1994. Homestake believes that its foreign operations comply with applicable laws, regulations and permit conditions and has no knowledge of any significant environmental liability or contingent liability resulting from its foreign operations. Homestake expects that environmental constraints in foreign countries will become increasingly strict. CUSTOMERS Sales of $129 million, $118 million and $100 million to three customers in 1994 were in excess of 10% of Homestake's consolidated revenues. Homestake believes that the loss of any of these customers would not have a material adverse impact on Homestake because of the active worldwide market for gold. CREDIT FACILITIES See note 14 to the consolidated financial statements on page 41 of the 1994 Annual Report to Shareholders for details of the Company's credit facilities. Such information is hereby incorporated by reference. EMPLOYEES The number of full-time employees at December 31, 1994 of Homestake and its subsidiaries was: Homestake mine* 996 McLaughlin mine 343 El Hueso mine* 181 Nickel Plate mine 164 United States corporate staff and other 75 Eskay Creek mine 71 Canada exploration and corporate staff 33 HGAL exploration and corporate staff 28 United States exploration 27 Santa Fe mine 16 Uranium 12 Chile exploration and corporate staff 10 ----- Total 1,956 34 The number of full-time employees at December 31, 1994 in jointly-owned operations in which Homestake participates was: Kalgoorlie Consolidated Gold Mines Pty Ltd* 1,128 Williams Operating Corporation 603 Round Mountain mine 536 Teck-Corona Operating Corporation* 232 Rayrock managed operations (Marigold and Pinson mines) 212 Snip mine 138 Main Pass 299 150 ----- Total 2,999 * Operations where a portion of the employees are represented by a labor union. EXECUTIVE OFFICERS OF THE REGISTRANT The executive officers of the Company, their ages at December 31, 1994, their business experience and principal occupations during the past five years and their business backgrounds are: Harry M. Conger - Chairman of the Board and Chief Executive Officer since December 1982, age 64. He has been Chief Executive Officer since December 1978 and was President from 1977 to 1986. He is a mining engineer with over 39 years of professional experience. Jack E. Thompson - President and Chief Operating Officer since August 1994, age 44. Since August 1994, he has also been Chairman of Prime. He was Executive Vice President, Canada of the Company and President of Prime from 1992 through August 1994. He also was President of North American Metals Corp. from 1988 until 1993. He is a mining engineer with over 24 years of experience in mining and mine management. Gene G. Elam - Vice President, Finance and Chief Financial Officer since September 1990, age 55. Before joining Homestake, he was Senior Vice President, Administrative Services of Pacific Gas and Electric Company from April 1989 through August 1990 and was Vice President and Controller from January 1987 through March 1989. He was President and Chief Executive Officer of The Pacific Lumber Company from 1982 to 1986, President in 1980 and 1981, and Chief Financial Officer from 1972 until 1980. He is a certified public accountant with over 33 years of experience in accounting and finance. Lee A. Graber - Vice President, Corporate Development since 1983, age 46. From 1980 to 1983, he was Manager, Corporate Development and Planning. He has over 23 years of experience in finance and corporate development. Wayne Kirk - Vice President, General Counsel and Secretary since September 1992, age 51. He was a partner in Thelen, Marrin, Johnson & Bridges from 1976 to 1992. He has practiced law for more than 25 years. Gillyeard J. Leathley - Vice President, Canadian Operations since September 1992, age 57. Before joining Homestake, he was Senior Vice President, Operations for International Corona Corporation from 1986 to September 1992. He has over 37 years of experience in mining and mine management. 35 Ronald D. Parker - Vice President Canada and President, Homestake Canada Inc. since August 1994, age 44. He also has been President and Chief Executive Officer of Prime since August 1994. He was the Resident General Manager of the McLaughlin mine from 1988 until August 1994. He is an engineer with over 23 years of experience in mining and mine management. Anthony H. Ransom - Vice President, Exploration since September 1992, age 48. Before joining Homestake, he was Vice President, Exploration for International Corona Corporation from 1991 to September 1992. Prior to 1991 he was Director, Western Exploration for International Corona Corporation and prior to 1988 was President of Pamorex Minerals Inc., a gold mining and exploration company. He is a geologist with more than 27 years of professional experience. Allen S. Winters - Vice President, Mine Operations since 1987, age 54. From 1978 to 1987, and from July 1992 until December 31, 1994, he was Resident General Manager of the Homestake Mine. He is a mining engineer with more than 35 years of experience. Jan P. Berger - Treasurer since August 1992, age 39. He has been with Homestake since 1989, first as senior analyst in the finance group and from 1991 to 1992 was Manager, Internal Audit. Prior to joining Homestake, he was an analyst for Bechtel Financing Services Inc. Before Bechtel, he worked as an engineering and exploration geologist in the consulting and petroleum industries. He has over 13 years of experience in exploration and finance. David W. Peat - Controller since September 1992, age 42. Prior to joining Homestake, he was Vice President, Controller for International Corona Corporation. Prior to 1987 he served as Assistant Corporate Controller for Sherritt Gordon Mines Limited. He is a chartered accountant with over 18 years of accounting and finance experience. No officer is related to any other officer by blood, marriage or adoption. Officers are elected to serve until the next annual meeting of the Board of Directors at which officers are elected or until their successors are chosen. No arrangement or understanding exists between any officer and any other person under which any officer was elected. ITEM 2 - PROPERTIES See Item 1 - Business. ITEM 3 - LEGAL PROCEEDINGS Certain environmental proceedings in which the Company is or may become a party are discussed on pages 30 through 34 under the caption "Environmental Matters." On October 13, 1993, Goldstake Explorations (S.D.) Inc. filed an action in the Federal District Court of Colorado against Homestake Mining Company of California ("Homestake California") and its wholly owned subsidiary, Whitewood Development Corporation ("Whitewood"), Goldstake Explorations (S.D.) Inc. v. Homestake Mining Company of California et al., No. 93-M-2149. The complaint alleged that Homestake California and Whitewood fraudulently induced Goldstake to enter into a joint venture agreement in 1988 between Goldstake and Whitewood with respect to the mining of mine tailings in Whitewood Creek, near the Company's mine in South Dakota. The complaint alleged that Homestake California and Whitewood misrepresented their intent to mine the tailings in order to prevent Goldstake from mining the tailings. The 36 complaint also alleged that Whitewood breached the joint venture agreement and duties owed to Goldstake under the joint venture agreement in various respects, that Homestake California induced those breaches, and that Homestake California and Whitewood engaged in acts of misrepresentation during the conduct of the joint venture's activities. Goldstake claimed unspecified compensatory and punitive damages. The litigation was stayed in order for the matter to be arbitrated. During the second quarter of 1994, Goldstake amended its claim to allege actual damages of $137.5 million. The arbitration hearing was held in January 1995. At the arbitration, Goldstake claimed damages of approximately $79 million. On March 27, 1995 the arbitrators entered their decision under which Homestake California and Whitewood are to pay Goldstake $0.5 million within 30 days and promptly apply for all necessary permits to construct and operate a mine and processing facility. If all permits have not been obtained by December 31, 1995, Homestake California and Whitewood are to pay Goldstake an additional $0.5 million. If all permits have not been obtained by December 31, 1996, Homestake California and Whitewood are to pay Goldstake an additional $0.5 million. The Company and its subsidiaries are defendants in various other legal actions in the ordinary course of business. In the opinion of management, such matters will be resolved without material affect on the Company's financial condition. ITEM 4 - SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS None PART II ITEM 5 - MARKET FOR THE REGISTRANT'S COMMON STOCK AND RELATED STOCKHOLDER MATTERS a. The common stock of Homestake Mining Company is registered and traded principally on the New York Stock Exchange under the symbol "HM". It is also listed and traded in Switzerland on the Basel, Geneva and Zurich stock exchanges under the same symbol. b. The number of holders of common stock of record as of March 13, 1995 was 25,463. c. Information about the range of sales prices for the common stock and the frequency and amount of dividends declared during the past two years appears in the tables on page 50 in the Registrant's 1994 Annual Report to Shareholders. The tables setting forth sales prices and dividends are hereby incorporated by reference. Information about certain restrictive covenants under the Company's line of credit appears on page 41 in Note 14 entitled "Long-term Debt" in the Notes to Consolidated Financial Statements in the Company's 1994 Annual Report to Shareholders. Such information is hereby incorporated by reference. d. Reference is hereby made to the Note 20 entitled "Shareholders' Equity" on pages 44 and 45 in the Notes to Consolidated Financial Statements in the Company's 1994 Annual Report to Shareholders. Such information is hereby incorporated by reference. ITEM 6 - SELECTED FINANCIAL DATA A summary of selected consolidated financial data of the Company and its subsidiaries for the seven-year period ended December 31, 1994 appears on pages 48 and 49 in the 1994 Annual Report to Shareholders. The summary of selected consolidated financial data is hereby incorporated by reference. 37 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 covering the three-year period ended December 31, 1994 appears on pages 25 through 30 in the 1994 Annual Report to Shareholders and is hereby incorporated by reference. ITEM 8 - FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA The 1994 Annual Report to Shareholders includes the Company's consolidated balance sheets as of December 31, 1994 and 1993 and related statements of consolidated operations, consolidated shareholders' equity and consolidated cash flows for each of the three years in the period ended December 31, 1994 and the independent auditors' report thereon, and certain supplementary financial information. The following are hereby incorporated by reference from the 1994 Annual Report to Shareholders at the pages indicated: Report of Independent Auditors (page 31) Statements of Consolidated Operations (page 32) Consolidated Balance Sheets (page 33) Statements of Consolidated Shareholders' Equity (page 34) Statements of Consolidated Cash Flows (page 35) Notes to Consolidated Financial Statements (pages 36-47) Quarterly Selected Data (page 50) ITEM 9 - CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE On March 3, 1993, pursuant to the recommendation of the Audit Committee, the Company terminated Deloitte & Touche LLP as independent auditors for the Company and its subsidiaries upon completion of their 1992 audit engagement. Deloitte & Touche LLP's reports on the consolidated financial statements of the Company for 1991 and 1992 did not contain an adverse opinion or a disclaimer of opinion and the reports were not qualified or modified as to uncertainty, audit scope, or accounting principles. During 1992 and the interim period through the date of termination, there were no disagreements with Deloitte & Touche LLP on any matter of accounting principles or practices, financial statement disclosure, or auditing scope or procedure, which, if not resolved to the satisfaction of Deloitte & Touche LLP would have caused Deloitte & Touche LLP to make a reference to the subject matter of the disagreement in connection with its report. During 1992 and the interim period through the date of termination, there did not occur any kind of event listed in paragraphs (a)(1)(v)(A) through (D) of Regulation S-K, Item 304. Effective March 3, 1993, pursuant to the recommendation of the Audit Committee, the Company engaged Coopers & Lybrand LLP as independent auditors to audit the Company's financial statements for 1993. During 1992 and the interim period through the date of termination, neither the Company nor any person acting on behalf of the Company consulted Coopers & Lybrand LLP regarding (i) either: the application of accounting principles to a specified transaction, either completed or proposed; or the type of audit opinion that might be rendered on the Company's financial statements; or (ii) any matter that was either the subject of a disagreement (as defined in paragraph (a)(1)(iv) of Regulation S-K, Item 304 and the related instructions) or a reportable event (as described in paragraph (a)(1)(v) of Regulation S-K, Item 304). 38 PART III ITEMS 10, 11, 12 AND 13 In accordance with General Instruction G(3), Items 10, 11, 12 and 13 (with the exception of certain information pertaining to executive officers, which is included in Part I hereof) have been omitted from this report since a definitive proxy statement is being filed with the Securities and Exchange Commission and furnished to shareholders pursuant to Regulation 14A. The information contained in the proxy statement relating to directors, executive compensation, security ownership and certain relationships (other than the performance graph and Compensation Committee report contained therein) is hereby incorporated by reference. PART IV ITEM 14 - EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORMS 8-K (a)1. Financial Statements: Refer to Part II, Item 8. 2. Financial Statement Schedules: Schedules for the years ended December 31, 1994, 1993, and 1992 - II Valuation and Qualifying Accounts Report of Independent Auditors Schedules not listed are omitted because they are not required or because the required information is included elsewhere in this report. 3. Exhibits 3.1 Restated Certificate of Incorporation of Homestake Mining Company (incorporated by reference to Exhibit 3.1 to the Registrant's Registration Statement on Form S-4 filed on June 10, 1992 (the "S-4 Registration Statement")). 3.2 Amendment to Restated Certificate of Incorporation of Homestake Mining Company dated June 3, 1991 (incorporated by reference to Exhibit 3.2 to the S-4 Registration Statement). 3.3 Certificate of Correction of the Restated Certificate of Incorporation of Homestake Mining Company dated February 10, 1992 (incorporated by reference to Exhibit 3.3 to the S-4 Registration Statement). 3.4 Bylaws (as amended) of Homestake Mining Company (incorporated by reference to Exhibit 3.5 to the S-4 Registration Statement). 3.5 Rights Agreement dated October 16, 1987 (incorporated by reference to Exhibit 10 to the Registrant's Report on Form 8-A dated October 16, 1987). 4.1 Indenture dated as of January 23, 1993 between Homestake Mining Company, Issuer and The Chase Manhattan Bank, N.A., Trustee, with respect to US $150,000,000 principal amount of 5 1/2% Convertible Subordinated Notes due January 23, 2000 (incorporated by reference to Exhibit 4.2 to the Registrant's Form 8-K Report dated as of June 23, 1993). 39 4.2 Registrant hereby agrees to furnish to the Commission, upon request, a copy of the instruments which define the rights of the holders of long-term debt of the Company. None of such instruments not included as exhibits herein collectively represents long-term debt in excess of 10% of the consolidated total assets of the Registrant. 10.1 Amended and restated credit agreement dated as of September 30, 1994 between the Registrant, the Lenders, Bank of Nova Scotia and Canadian Imperial Bank of Commerce as managing agents and Canadian Imperial Bank of Commerce as administrative agent (incorporated by reference to Exhibit 10.1 to the Registrant's Form 8-K dated March 20, 1995). * 10.2 Retirement plan for outside directors of the Registrant dated as of July 21, 1994 (incorporated by reference to Exhibit 10.2 to the Registrant's Form 8-K dated March 20, 1995). 10.3 Lease agreement dated June 17, 1988 between the Registrant's wholly-owned subsidiary, Minera Homestake Chile, S.A. and CODELCO-Chile (incorporated by reference to Exhibit 10(f) to the Registrant's Form 10-K for the year ended December 31, 1989). 10.4 Amendment dated September 4, 1991 to the lease agreement dated June 17, 1988 between the Registrant's wholly-owned subsidiary, Minera Homestake Chile, S.A. and CODELCO-Chile (incorporated by reference to Exhibit 10(a) to the Registrant's Form 10-K for the year ended December 31, 1989). 10.5 Agreement dated October 9, 1991 between the Registrant and Chevron Minerals Ltd. (incorporated by reference to Exhibit 10(b) to the Registrant's Form 10-K for the year ended December 31, 1991). 10.6 Guarantee dated December 18, 1991 between the Registrant and Chevron Minerals Ltd. (incorporated by reference to Exhibit 10(c) to the Registrant's Form 10-K for the year ended December 31, 1991). 10.7 Agreement dated May 4, 1990 for the sale of the Registrant's 42.5% partnership interest in The Doe Run Company (incorporated by reference to Exhibit 28(a) to the Registrant's Form 8-K dated May 18, 1990). 10.8 Purchase and sale agreement dated January 15, 1989 between the Registrant's subsidiary Homestake Gold of Australia Limited and North Kalgoorlie Mines Limited (and Group Companies) and Kalgoorlie Lake View Pty. Ltd. (incorporated by reference to Exhibit 10(g) to the Registrant's Form 10-K for the year ended December 31, 1989). 10.9 Joint Operating Agreement dated May 1, 1988 between Freeport- McMoRan Resources Partners, IMC Fertilizer, Inc. and Felmont Oil Corporation (a subsidiary of Registrant) relating to the Main Pass Block 299 sulphur project (incorporated by reference to Exhibit 10.16 to the Registrant's Form 10-K for the year ended December 31, 1992). 10.10 Amendment No. 1 dated July 1, 1993 to Joint Operating Agreement between Freeport McMoRan Resources Partners, IMC Fertilizer, Inc. and Homestake Sulphur Company (incorporated by reference to Exhibit 10.8 to the Registrant's Form 10-K for the year ended December 31, 1993). 10.11 Amendment No. 2 dated November 30, 1993 to Joint Operating Agreement between Freeport McMoRan Resources Partners, IMC Fertilizer, Inc. and Homestake Sulphur Company (incorporated by reference to Exhibit 10.9 to the Registrant's Form 10-K for the year ended December 31, 1993). 10.12 Amended and Restated Project Agreement (David Bell Mine) dated as of April 1, 1986 among Teck Corporation, International Corona Resources Ltd. (a subsidiary of International Corona Corporation, now Homestake Canada Inc. and a subsidiary of Registrant), Teck- Hemlo Inc., Corona-Hemlo Inc. (a subsidiary of International Corona Corporation, now Homestake Canada Inc. and a subsidiary of Registrant) (incorporated by reference to Exhibit 10.17 to the Registrant's Form 10-K for the year ended December 31, 1992). 40 10.13 Amended and Restated Operating Agreement (David Bell Mine) among Teck Corporation, International Corona Resources Ltd. (a subsidiary of International Corona Corporation, now Homestake Canada Inc. and a subsidiary of Registrant), Teck Mining Group Limited, Teck-Corona Operating Corporation, Teck-Hemlo Inc. and Corona-Hemlo Inc. (a subsidiary of International Corona Corporation, now Homestake Canada Inc. and a subsidiary of Registrant) (incorporated by reference to Exhibit 10.18 to the Registrant's Form 10-K for the year ended December 31, 1992). 10.14 Project Agreement (Williams Mine) dated August 11, 1989 among Teck Corporation, Corona Corporation (now Homestake Canada Inc. and a subsidiary of Registrant) and Williams Operating Corporation (incorporated by reference to Exhibit 10.19 to the Registrant's Form 10-K for the year ended December 31, 1992). 10.15 Operating Agreement (Williams Mine) dated August 11, 1989 among Teck Corporation, Corona Corporation (now Homestake Canada Inc. and a subsidiary of Registrant), Teck Mining Group Limited and Williams Operating Corporation (incorporated by reference to Exhibit 10.20 to the Registrant's Form 10-K for the year ended December 31, 1992). 10.16 Shareholders' Agreement dated August 11, 1989 among Corona Corporation (now Homestake Canada Inc. and a subsidiary of Registrant), Teck Corporation and Williams Operating Corporation (incorporated by reference to Exhibit 10.21 to the Registrant's Form 10-K for the year ended December 31, 1992). 10.17 Agreement dated January 25, 1983 between Noranda Exploration Company Limited, Teck Corporation and International Corona Resources Limited (a subsidiary of International Corona Corporation, now Homestake Canada Inc. and a subsidiary of Registrant), relating to development of the Quarter Claim mine (incorporated by reference to Exhibit 10.22 to the Registrant's Form 10-K for the year ended December 31, 1992). * 10.18 1986 Deferred Income Plan of Homestake Mining Company (incorporated by reference to Exhibit 10(a) to the Registrant's Form 10-K for the year ended December 31, 1990). * 10.19 First Amendment to the 1986 Deferred Income Plan of Homestake Mining Company (incorporated by reference to Exhibit 10(b) to the Registrant's Form 10-K for the year ended December 31, 1990). * 10.20 Agreement dated July 16, 1982, as amended November 3, 1987 and February 23, 1990, between the Registrant and H. M. Conger (incorporated by reference to Exhibit 10(a) to the Registrant's Form 10-K for the year ended December 31, 1989). * 10.21 Description of Change of Control Severance Plan applicable to certain officers of Registrant (incorporated by reference to Exhibit 10.27 to the Registrant's Form 10-K for the year ended December 31, 1992). * 10.22 Executive Supplemental Retirement Plan of Homestake Mining Company, amended and restated effective January 1, 1990 (incorporated by reference to Exhibit 10(d) to the Registrant's Form 10-K for the year ended December 31, 1989). * 10.23 Supplemental Retirement Plan of Homestake Mining Company, amended and restated effective as of January 1, 1990 (incorporated by reference to Exhibit 10(e) to the Registrant's Form 10-K for the year ended December 31, 1989). * 10.24 Share Incentive Plan effective July 1, 1988 of International Corona Corporation (now Homestake Canada Inc. and subsidiary of Registrant), as amended October 22, 1991 (incorporated by reference to Exhibit 10.32 to the Registrant's Form 10-K for the year ended December 31, 1992). 10.25 Shareholder Agreement dated January 1, 1989 among Homestake Mining Company, Case, Pomeroy & Company, Inc. and Hadley Case (incorporated by reference to Exhibit 10(a) to the Registrant's Form 10-K for the year ended December 31, 1988). 10.26 Amendment dated March 27, 1992 to Shareholder Agreement dated January 1, 1989 among Homestake Mining Company, Case, Pomeroy & Company, Inc., and Hadley Case (incorporated by reference to Exhibit 10.14 to the S-4 Registration Statement). 41 * 10.27 Consulting Agreement dated July 24, 1992, between Stuart T. Peeler and the Registrant (incorporated by reference to Exhibit 10.36 to the Registrant's Form 10-K for the year ended December 31, 1992). * 10.28 Consulting agreement dated March 1, 1993 between William A. Humphrey and the Registrant (incorporated by reference to Exhibit 10.27 to the Registrant's Form 10-K for the year ended December 31, 1993). * 10.29 Employees Non-Qualified Stock Option Plan--1978 (incorporated by reference to Exhibit 10(a) to the Registrant's Form 10-K for the year ended December 31, 1984, Commission File Number 1-1235 and to Post Effective Amendment No. 3 to the Registrant's Registration Statement on Form S-8 dated March 11, 1988). * 10.30 1981 Incentive Stock Option Plan (incorporated by reference to Exhibit 10(b) to the Registrant's Form 10-K for the year ended December 31, 1984, Commission File Number 1-1235 and to Post Effective Amendment No. 3 to the Registrant's Registration Statement on Form S-8 dated March 11, 1988). * 10.31 Long Term Incentive Plan of 1983 of Homestake Mining Company (incorporated by reference to Exhibit 10(g) to the Registrant's Registration Statement on Form S-14 dated May 16, 1984). * 10.32 Employees' Stock Option and Share Rights Plan--1988 (incorporated by reference to Exhibit 10(n) to the Registrant's Form 10-K for the year ended December 31, 1987). 11 Computation of Earnings Per Share. 13 Specified sections of the 1994 Annual Report to Shareholders. 22 Subsidiaries of the Registrant. 24 Consent of Coopers & Lybrand LLP, Independent Auditors. 27 Financial Data Schedule. * Compensatory plan or management contract. (b) Reports Filed on Form 8-K No reports on Form 8-K were filed during the fourth quarter of 1994. 42 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. HOMESTAKE MINING COMPANY Date March 23, 1995 By /s/ H.M. Conger --------------- ----------------- H. M. Conger Chairman of the Board and Chief Executive Officer Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated. Signature Capacity Date --------- -------- ---- /s/ G. G. Elam Vice President, Finance March 23, 1995 -------------- and Chief Financial G. G. Elam Officer (Principal Financial Officer) /s/ D. W. Peat Controller (Principal March 23, 1995 -------------- Accounting Officer) D. W. Peat (Signatures continued on following page.) 43
Signature Capacity Date --------- -------- ------------- /s/ Harry M. Conger Chairman of the Board, ------------------- Chief Executive Officer Harry M. Conger and Director March 23, 1995 /s/ M. Norman Anderson Director March 23, 1995 ---------------------- M. Norman Anderson Director March 23, 1995 --------------- Hadley Case /s/ Robert H. Clark, Jr. Director March 23, 1995 ----------------------- Robert H. Clark, Jr. /s/ G. Robert Durham Director March 23, 1995 -------------------- G. Robert Durham /s/ Douglas W. Fuerstenau Director March 23, 1995 ------------------------- Douglas W. Fuerstenau /s/ Henry G. Grundstedt Director March 23, 1995 ----------------------- Henry G. Grundstedt /s/ William A. Humphrey Director March 23, 1995 ----------------------- William A. Humphrey /s/ Robert K. Jaedicke Director March 23, 1995 ---------------------- Robert K. Jaedicke /s/ John Neerhout, Jr. Director March 23, 1995 --------------------- John Neerhout, Jr. /s/ Stuart T. Peeler Director March 23, 1995 -------------------- Stuart T. Peeler /s/ Glen L. Ryland Director March 23, 1995 ------------------ Glen L. Ryland /s/ Berne A. Schepman Director March 23, 1995 --------------------- Berne A. Schepman /s/ Jack E. Thompson President, Chief March 23, 1995 -------------------- Operating Officer Jack E. Thompson and Director
44 HOMESTAKE MINING COMPANY AND SUBSIDIARIES SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS FOR THE YEARS ENDED DECEMBER 31, 1994, 1993 AND 1992 (In thousands)
---------------------------------------------------------------------- COLUMN A COLUMN B COLUMN C COLUMN D COLUMN E BALANCE BALANCE AT AT BEGINNING END OF DESCRIPTION OF PERIOD ADDITIONS DEDUCTIONS PERIOD ---------------------------------------------------------------------- DEFERRED TAX ASSET VALUATION ALLOWANCES (1) Year ended December 31, 1994 $52,066 $10,210 $12,437(2) $49,839 Year ended December 31, 1993 $ 0 $52,066(3) $ 0 $52,066 Year ended December 31, 1992 Not applicable (1) For further information see Note 7, Income Taxes, in the Notes to the Financial Statements included in the 1994 Annual Report to Shareholders. (2) Deductions in 1994 relate to the reversals of Canadian and Australian tax loss carry-forwards. (3) Additions in 1993 relate to the implementation of SFAS 109, "Accounting for Income Taxes."
REPORT OF INDEPENDENT ACCOUNTANTS The Shareholders and Board of Directors Homestake Mining Company We have audited the consolidated financial statements of Homestake Mining Company and subsidiaries as of December 31, 1994 and 1993, and for each of the three years in the period ended December 31, 1994, which financial statements are included on pages 32 through 47 of the 1994 Annual Report to Shareholders of Homestake Mining Company and incorporated by reference herein. We have also audited the financial statements schedules listed in Item 14(a)(2) of this Form 10-K. These financial statements and financial statement schedules are the responsibility of the company's management. Our responsibility is to express an opinion on these financial statements and financial statement schedules based on our audits. We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and the significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the financial statements referred to above present fairly, in all material respects, the consolidated financial position of Homestake Mining Company and subsidiaries as of December 31, 1994 and 1993, and the consolidated results of their operations and their cash flows for each of the three years in the period ended December 31, 1994, in conformity with generally accepted accounting principles. In addition, in our opinion, the financial statement schedules referred to above, when considered in relation to the basic financial statements taken as a whole, present fairly, in all material respects, the information required to be included therein. /s/ Coopers & Lybrand L.L.P. --------------------------- San Francisco, California February 8, 1995 EXHIBIT INDEX
EXHIBIT METHOD OF FILING ------- ---------------- 11 Computation of Earnings Per Share Filed herewith electronically 13 1994 Annual Report to Shareholders Filed herewith electronically 22 Subsidiaries to Registrant Filed herewith electronically 24 Consent of Coopers & Lybrand LLP, Independent Auditors Filed herewith electronically 27 Financial Data Schedule Filed herewith electronically
EX-11 2 COMPUTATION OF EARNINGS PER SHARE EXHIBIT 11 HOMESTAKE MINING COMPANY AND SUBSIDIARIES COMPUTATION OF EARNINGS PER SHARE (In thousands, except per share amounts)
____________________________________________________________________________ 1994 1993 1992 ---------------------------------------------------------------------------- PRIMARY: Earnings: Net income (loss) $78,016 $52,494 $(175,836) Less dividends on: HCI first preferred series X shares (118) HCI series 1 second preference shares (885) (971) -------------------------------------- Net income (loss) applicable to primary earnings per share calculation $78,016 $51,609 $(176,925) ====================================== Weighted average number of shares outstanding 137,733 137,046 135,221 ====================================== Net income (loss) per share - primary $ 0.57 $ 0.38 $ (1.31) ====================================== FULLY DILUTED: Earnings: Net income (loss) $ 78,016 $52,494 $(175,836) Less dividends on: HCI first preferred series X shares (118) HCI series 1 second preference shares (885) (971) Add: Interest relating to 5.5% convertible subordinated notes, net of tax 6,517 3,447 Amortization of issuance costs relating to 5.5% convertible subordinated notes, net of tax 443 234 -------------------------------------- Net income (loss) applicable to fully diluted earnings per share calculation $84,979 $55,290 $(176,925) ====================================== Weighted average number of shares outstanding: Common shares 137,733 137,046 135,221 Additional average shares outstanding assuming conversion of 5.5% convertible subordinated notes 6,505 3,397 ------------------------------------- 144,238 140,443 135,221 ===================================== Net income (loss) per share - fully diluted (a) $0.59 $0.39 $(1.31) ===================================== (a) This calculation is submitted in accordance with Regulation S-K item 601(b)(11) although it is contrary to paragraph 40 of APB Opinion No. 15 because it produced an anti-dilutive result.
EX-13 3 1994 ANNUAL REPORT TO SHAREHOLDERS EXHIBIT 13 Index to Exhibit 13: Selected information from the 1994 Annual Report to Shareholders is incorporated by reference in the Form 10-K and such information is herewith transmitted electronically as Exhibit 13. Such selected information is listed below. Noted page references correspond to pagination in the 1994 Annual Report to Shareholders.
Annual Report Page Management's Discussion and Analysis 25-30 Report of Independent Auditors 31 Management's Responsibility for Financial Reporting 31 Consolidated Financial Statements 32-35 Notes to Consolidated Financial Statements 36-47 Seven-Year Selected Financial Data 48-49 Quarterly Selected Data 50 Common Stock Price Range 50 Appendix 1: Description of Bar Charts in Management' s Discussion and Analysis
MANAGEMENT'S DISCUSSION & ANALYSIS Homestake Mining Company and Subsidiaries (Unless specifically stated otherwise, all comments, production statistics, etc. relate to amounts in the consolidated financial statements, including the Company's interest in mining partnerships accounted for using the equity method, without reduction for minority interest.) RESULTS OF OPERATIONS Homestake recorded net income of $78 million or $0.57 per share in 1994 compared to net income of $52.5 million or $0.38 per share in 1993 and a net loss of $175.8 million or $1.31 per share in 1992. The improved 1994 results reflect after-tax gains of $12.6 million from the sale of the Company's interest in the Dee mine in Nevada and $11.2 million from dilution of the Company's interest in Prime Resources Group Inc. (Prime) following Prime's sale of additional shares to the public, as well as higher gold prices. The current year's results also include a $7.8 million income tax benefit resulting from a reorganization of Canadian exploration assets. The 1993 results included a pretax write-down of oil and gas assets of $16 million compared to pretax write-downs of mining properties and investments of $130.3 million in 1992. The 1993 and 1992 results also included restructuring and business combination expenses of $8.2 million and $48.4 million, respectively. See notes 5 and 6 to the consolidated financial statements for details of the write-downs and the restructuring and business combination expenses. (See Appendix 1: Description of Bar Chart A "Net Income.") In May 1994, the Company sold its 44% interest in the Dee mine to Rayrock Mines, Inc. (Rayrock) for $16.5 million. Rayrock assumed responsibility for, and indemnified Homestake against, all related environmental and reclamation matters. During the second quarter of 1994, Prime completed the sale of five million common shares to the public. Net proceeds of $31.9 million were used to fund a portion of the construction and development costs at the Eskay Creek mine in British Columbia, Canada. As a result, Homestake's interest in Prime was reduced from 54.2% to 50.6% and a gain of $11.2 million was recorded in recognition of the net increase in the book value of the Company's interest in Prime. Eskay Creek Mine: Construction and development of the Eskay Creek gold/silver mine was substantially completed by December 1994 and ore shipments to third- party smelters began in January 1995. The mine is expected to produce 100,000 tons of ore in 1995 containing approximately 170,000 payable ounces of gold and 7.3 million payable ounces of silver or 270,000 payable ounces of gold and gold equivalent. The Company estimates that the Eskay Creek mine's average cash cost per ounce, including the costs of third-party smelters, will approximate $185 per equivalent ounce during 1995. Proven and probable ore reserves at the Eskay Creek mine at December 31, 1994 totaled 1.2 million tons containing 2.3 million ounces of gold and 102 million ounces of silver, sufficient for eight to ten years of production. Through Prime, the Company has a 50.6% economic interest in these reserves. Gold Operations: The results of the Company's operations are affected significantly by the market price of gold. Gold prices are influenced by numerous factors over which the Company has no control, including expectations with respect to the rate of inflation, the relative strength of the U.S. dollar and certain other currencies, interest rates, global or regional political or economic crises, demand for gold for jewelry and industrial products, and sales by holders and producers of gold in response to these factors. The supply of gold consists of a combination of new mine production and sales from existing stocks of bullion and fabricated gold held by governments, public and private financial institutions, and individuals. (See Appendix 1: Description of Bar Chart B "Gold Production.") The Company's general policy is to sell its production at current prices. However, in certain limited circumstances, the Company will enter into forward sales commitments for small portions of its gold production. During the fourth quarter of 1994, the Company sold for future delivery 183,200 ounces of gold it expects to produce at the Nickel Plate mine during 1995 and 1996. These forward sales represent less than 5% of the gold that 25 Homestake expects to produce over the next two years. The average price to be received is approximately $412 per ounce, which should cover the mine's relatively high cash costs during its two-year remaining life. The forward sales should also allow for recovery of the Company's remaining investment in the mine and provide for estimated reclamation costs. A significant portion of the Company's operating expenses are incurred in Australian and Canadian currencies. The Company's profitability is impacted by fluctuations in these currencies' exchange rates relative to the U.S. dollar. In 1992, the Company implemented a foreign currency protection program to minimize the effects of these fluctuations. Under the program, the Company enters into foreign currency option contracts which establish minimum and maximum exchange rate ranges within which the U.S. dollar may be exchanged for Australian and Canadian dollars. See note 23 to the consolidated financial statements for additional information regarding this program. Gold revenues of $632.0 million in 1994 compare to gold revenues of $688.1 million and $639.3 million in 1993 and 1992, respectively. The decline in 1994 revenues from the prior year reflects lower gold sales volumes, partially offset by higher realized gold prices. The lower 1994 gold sales volumes are due to lower gold production and a 3,600 ounce increase in gold inventories during 1994 versus a 65,400 ounce decrease in gold inventories in 1993. The increase in 1993 revenues from 1992 is due to higher gold sales volumes and higher realized gold prices. During 1994, the Company sold 1,692,800 ounces of gold at an average realized price of $384 per ounce compared to 1,983,300 ounces sold at an average realized price of $359 during 1993 and 1,945,500 ounces sold at an average realized price of $348 during 1992. (See Appendix 1: Description of Bar Chart C "Gold Revenues.") Total gold production of 1,696,400 ounces during 1994 compares to 1,917,900 ounces during 1993 and 1,911,600 ounces during 1992. The 1994 decline in production in part reflects the absence of production following the sale of the Dee mine effective March 31, 1994, the 1993 sales of the Mineral Hill and Golden Bear mines, and the completion of mining operations in 1993 at the Santa Fe mine. After adjusting for the foregoing, production from the Company's remaining operations decreased by 8% in 1994 compared to 1993, principally due to lower production at the Homestake and McLaughlin mines. The 1993 increase in production primarily reflects a 51,000 ounce increase in production at the Homestake mine and the inclusion of 40% (1992 - 22%) of the Snip mine's production following the consolidation of Prime effective December 31, 1992, partially offset by the absence of production from the operations sold in 1993. In 1994, the Company's overall cash cost per ounce increased to $254 from $231 in 1993 and $248 in 1992. The increase in costs per ounce primarily was due to the Homestake and McLaughlin mines. The effect on total cash costs of a strengthening Australian dollar was largely offset by a weakening of the Canadian dollar. The Company's overall noncash cost per ounce was $47 in 1994 compared to $51 and $55 in 1993 and 1992, respectively. The decline in noncash costs per ounce primarily reflects lower depreciation charges as a result of the write-downs of mining properties in 1992 and ore reserve expansions at several of the Company's operations. (See Appendix 1: Description of Bar Chart D "Cash Costs Per Ounce.") Production of 393,900 ounces at the Homestake mine in South Dakota in 1994 compares to 447,600 ounces in 1993 and 396,600 ounces in 1992. The production decline during 1994 primarily was due to lower grades resulting from an extended pre-stripping and development program in the Open Cut and the collapse of a ventilation raise in the underground operations during the second quarter which limited access to the deeper higher-grade mining areas. A new ventilation shaft was completed in March 1995. Production in 1994 also was impacted adversely by flooding following a severe storm in October. The lower production resulted in an increase in cash costs to $292 per ounce during 1994 from $268 per ounce during 1993. Several operating improvements were made at the 26 Homestake mine during 1993, including a grade-control program to better identify ore and reduce dilution and an improved safety program. These improvements reduced 1993 cash costs from $316 per ounce experienced in 1992. During the next few years, as mining progresses in the lower levels of the Homestake mine, the remaining higher-grade ore deposits will become narrower and less continuous and therefore more difficult to mine. The Company has developed various alternatives to help minimize the effect that this may have on future costs. During 1995, a large tonnage, lower-grade stope in the upper levels of the mine will be bulk-mined. In addition, narrow vein mining is being tested in other portions of the mine. These trials will help determine the future underground mine operating strategy. In-mine exploration replaced underground ore reserves mined during 1994. Production at the McLaughlin mine in California decreased to 250,500 ounces in 1994 from 305,300 ounces in 1993 and 291,100 ounces in 1992. Production in 1994 was derived from the South Pit following completion of mining in the North Pit in 1993. The grade of ore mined in the South Pit during 1994 was lower than the grade of ore mined in the North Pit during 1993 and 1992. The lower grade of ore, together with costs associated with an underground exploration program, increased cash costs to $252 per ounce in 1994 from $196 and $204 in 1993 and 1992, respectively. Gold production is expected to increase in 1995 as the higher-grade zones at the bottom of the South Pit are reached. However, during the second quarter of 1996, mining in the South Pit will cease and gold production levels are expected to decline significantly with production principally derived from processing lower-grade stockpiles. The Company's share of gold production from the Round Mountain mine in Nevada increased to 105,900 ounces during 1994 from 93,700 ounces during 1993 and 92,600 ounces in 1992. The loading of fewer tons at a higher grade on the reusable pads has allowed for longer leach times, thereby improving gold recoveries from 69% in 1993 to 79% in 1994. In addition, larger quantities of lower-grade ore are being placed on the dedicated pad. The higher production levels resulted in a decrease in cash costs per ounce to $187 in 1994 from $230 in 1993 and $233 in 1992. Production during the last few years includes ounces recovered from a very high-grade vein of gold. Homestake's share of gold from this vein during 1994, 1993 and 1992 was 8,300 ounces, 13,300 ounces and 13,000 ounces, respectively. Only 1,600 ounces are expected to be recovered from the high-grade vein during 1995. The Company's share of Round Mountain ore reserves increased by 169,000 ounces in 1994 primarily due to exploration drilling which extended pit limits, and the inclusion of previously leached material following favorable processing tests. Mining at the Santa Fe mine in Nevada ceased in November 1993 as ore reserves were depleted. Re-leaching of ore on existing pads continued during 1994 resulting in production of 22,400 ounces compared to 54,000 ounces and 60,900 ounces during 1993 and 1992, respectively. The Company's share of gold production from the Williams mine amounted to 222,700 ounces at an average cash cost of $204 per ounce during 1994 compared to 246,100 ounces at a cost of $199 per ounce during 1993 and 248,500 ounces at a cost of $186 per ounce in 1992. The increase in costs per ounce during the current year is due to processing lower-grade ore, partially offset by a weakening in the Canadian dollar in relation to the United States dollar. In December 1994, a system was installed to capture heat from exhaust air and mine water. The heat is used to warm fresh air entering the mine. Annual savings from this process could exceed $0.3 million. The Company's share of gold production from the David Bell mine amounted to 96,100 ounces at an average cash cost of $168 per ounce in 1994 compared to 107,600 ounces at a cost of $154 per ounce during 1993 and 105,300 ounces at a cost of $156 per ounce during 1992. The increase in cash costs per ounce during the current year is due to processing lower-grade ore, partially offset by a weakening in the Canadian dollar in relation to the United States dollar. Mining activity in 1994 included a major underground development program to prepare the C-zone mining block. The C-zone, which is scheduled to commence production in June 1995, will provide a third production block and thereby increase mining flexibility. During the next few years, production at the Williams and David Bell mines is expected to be slightly lower as the grades of ore mines more closely approximate the average remaining life-of-mine ore grades. Production of 82,100 ounces at the Nickel Plate mine in Canada during 1994 compares to 73,900 ounces in 1993 and 84,700 ounces in 1992. The increase in 1994 production primarily is due to the processing of higher- grade ore from the Stage IV pit expansion program which commenced in late 1992. Cash costs increased to $351 per ounce in 1994 compared to $312 per ounce in 1993 and $295 per ounce in 1992. The increase in cash costs per ounce during 1994 is due to higher milling costs reflecting the refractory nature of a portion of the ore which required increased reagent use, and an increase in the rate of mining. Mining at the Nickel Plate mine will be reduced substantially in early 1995. A milling rate of 4,000 tons per day is planned through the end of 1996 at which time the ore reserve is expected to be depleted. 27 During the fourth quarter of 1994, the Nickel Plate ore reserve was reduced by 8% reflecting lower than anticipated grades from the Stage IV pit expansion. The Company's share of production at the Snip mine in Canada in 1994 was 51,600 ounces contained in concentrate and gold dore, with an average cash cost of $171 per ounce, compared to 59,800 contained ounces at a cost of $152 per ounce in 1993 and 30,600 contained ounces at a cost of $145 per ounce in 1992. The decrease in production and resulting increase in cash costs per contained ounce during the current year was due to lower grade. The increase in the Company's share of production in 1993 was due to the consolidation of Prime effective December 31, 1992. Homestake Gold of Australia's (HGAL) share of production from its Kalgoorlie operations in Western Australia increased to 352,100 ounces during 1994 from 332,600 ounces in 1993 and 341,800 ounces in 1992. The 1994 increase in production is due to an increase in tons mined, higher grades and improved recoveries from the Super Pit, partially offset by a decrease in production at Mt. Charlotte and the payment of 15,800 ounces to HGAL s joint venture partner under the disproportionate sharing arrangement. No ounces were paid to the joint venture partner under this arrangement in 1993 or 1992. The lower Mt. Charlotte production was due to lower tonnage and grades resulting from underground operational difficulties which hampered the movement of ore. These difficulties were rectified during the year. Cash costs at the Kalgoorlie operations increased to $259 per ounce in 1994 from $230 per ounce in 1993 and $255 per ounce in 1992. The increase in costs per ounce during 1994 and decrease in costs per ounce in 1993 primarily are due to fluctuations in the Australian dollar in relation to the United States dollar. Cash costs per ounce measured in Australian dollars have shown little change since 1992. The El Hueso mine in Chile produced 56,400 ounces at an average cash cost of $403 per ounce in 1994 compared to 71,700 ounces at a cost of $299 per ounce in 1993 and 70,400 ounces at a cost of $285 per ounce in 1992. Mining operations at the El Hueso mine ceased in the first quarter of 1995. Leaching operations will continue through the end of the year. In 1995, the Company plans to spend approximately $1 million on exploration at a nearby prospect which, if successful, could result in the reopening of the El Hueso operations. Main Pass 299: Homestake has a 16.7% interest in the Main Pass 299 sulphur mine in the Gulf of Mexico. Oil and gas operations commenced in 1991 and sulphur start-up operations began in the second quarter of 1992. Full design production levels of 5,500 tons of sulphur per day were reached in December 1993. During 1994, sulphur production levels continued to increase and averaged 6,200 tons per day by year end. The Company's share of sulphur revenues from Main Pass 299 was $16.9 million in 1994 compared to $2 million in 1993 reflecting the higher sulphur production levels. The Company's average realized price per ton of sulphur was $53 in 1994 compared to $59 per ton in 1993. Oil revenues of $10 million in 1994 compare to $14.2 million in 1993 and $22.1 million in 1992. Oil production peaked in 1992 and is expected to continue to decline over the next five years. Operating losses of $0.2 million were recorded by the Company from Main Pass 299 operations during 1994 compared to losses of $9.9 million in 1993 and operating income of $4 million in 1992. The 1994 improvement in Main Pass operations reflects rising sulphur production levels and increased operating efficiencies, partially offset by lower oil production and prices. The lower 1993 earnings reflect the commencement of sulphur operations and lower oil production and prices. In addition, at December 31, 1993 the Company recorded a pretax write-down of oil and gas assets of $16 million based on a decline in the market price of oil. Other Revenues: Interest income of $9.8 million in 1994 compares to $4.8 million in 1993 and $9.9 million in 1992. The increase in interest income in 1994 reflects higher cash and equivalents and short-term investment balances and a rise in interest rates during the year. The decrease in interest income in 1993 from 1992 primarily is due to lower cash and equivalents and short- term investment balances and lower interest rates during 1993. The gain on sale of stock by subsidiary of $11.2 million represents the gain recorded on the dilution of the Company's ownership interest in Prime. Other income of $25.6 million in 1994 includes a pretax gain of $15.7 million on the sale of the Company s interest in the Dee mine. Depreciation, Depletion and Amortization: Depreciation, depletion and amortization declined to $76.2 million in 1994 compared to $103.4 million and $117.5 million in 1993 and 1992, respectively. The changes primarily were due to lower 1994 production and the write-downs of oil and gas assets in 1993 and mining properties in 1992. 28 Administrative and General: Administrative and general expense decreased to $38.2 million in 1994 from $40.6 million in 1993 and $48.5 million in 1992. The decline in administrative and general expense reflects continued cost constraints and the impact of the 1992 and 1993 restructuring programs. (See Appendix 1: Description of Bar Chart E "Administrative And General Expense.") Exploration: Exploration expense of $21.3 million in 1994 compares to $17.5 million and $27.8 million in 1993 and 1992, respectively. The increase in exploration expense in 1994 from 1993 reflects increased activity at the Ruby Hill advanced exploration project, partially offset by the cessation of the North Homestake mine project in early 1994. The decrease in exploration expense in 1993 from 1992 primarily reflects the Company's efforts in concentrating on fewer, higher quality projects. (See Appendix 1: Description of Bar Chart F "Exploration Expense.") Interest Expense: Interest expense of $10.1 million in 1994 compares to $9.1 million in 1993 and $13.4 million in 1992. Capitalized interest related to the development of certain assets amounted to $0.7 million in 1994, compared to $0.1 million and $3.5 million in 1993 and 1992, respectively. The increase in interest expense in 1994 from 1993 reflects a full year's interest on the Company's convertible subordinated notes which were issued in June 1993, partially offset by the repayment of $8.3 million of Australian finance lease debt in February 1994. Interest expense declined in 1993 from 1992 primarily as a result of the repayment of $87 million of debt in the second half of 1992. The average rate of interest on the Company's long-term debt was 5.5% at December 31, 1994 compared to 5.1% and 4.5% at December 31, 1993 and 1992, respectively. Income Taxes: In 1994, the Company benefited from reversals of tax valuation allowances principally in foreign jurisdictions. These items were fully utilized in 1994 and, as a result, the Company will be subject to a higher effective tax rate in 1995. In 1993, the Company adopted Statement of Financial Accounting Standards No. (SFAS) 109, "Accounting for Income Taxes." In adopting SFAS 109, the Company provided a full valuation reserve on a significant portion of its deferred tax assets. The effect on net income of the adoption of SFAS 109 was not material and did not result in the recording of a cumulative effect for adopting this accounting principle. LIQUIDITY AND CAPITAL RESOURCES Homestake's cash and equivalents and short-term investments increased by $70.5 million to $205.2 million at December 31, 1994 as a result of strong cash flows from the Company's operations. In addition, cash provided by financing activities before dividend payments in 1994 amounted to $28.9 million and $24.5 million was realized on the sale of assets. During 1993, net debt repayments amounted to $48 million and a further $15.8 million were used to redeem preferred shares which had been issued by Homestake Canada Inc. (See Appendix 1: Description of Bar Chart G "Cash and Equivalents and Short- Term Investments.") 29 Additions to property, plant and equipment totaled $88.7 million in 1994 compared to $57.8 million and $63.5 million in 1993 and 1992, respectively. Capital additions in 1994 include $42 million at the Eskay Creek mine, $20 million at the Homestake mine primarily for Open Cut expansion and $13 million at the Kalgoorlie operations for mill expansions and modifications. Additions in 1993 included $19 million at the Nickel Plate mine for a pit expansion and $12 million at the Homestake mine for the Open Cut expansion and additions in 1992 included $14 million at the Kalgoorlie operations, primarily for Super Pit development. The remaining expenditures during these years primarily were for replacement capital to maintain existing production capacity. (See Appendix 1: Description of Bar Chart H "Cash Provided By Operations.") In addition to replacement capital at existing operations, expenditures of $39 million are planned for 1995 at the Kalgoorlie operations to complete the expansion of the Fimiston mill, which will increase ore processing efficiency and capability, and replace the capacity of the Oroya mill which will be dismantled to allow for an expansion of the Super Pit. Additions of $25 million are planned at the Homestake mine primarily for pre-stripping and development at the Open Cut and continuing modernization projects. During 1994, the Company issued 293,000 shares for proceeds of $5.3 million from the exercise of stock options. Through a series of transactions from 1989 to 1994, the Company acquired 50.6% of Prime's common shares. For further details, see note 3 to the consolidated financial statements. In February 1994, HGAL repaid the remaining $8.3 million of its Australian finance lease debt. In June 1993, the Company sold $150 million of 5.5% convertible subordinated notes maturing in the year 2000. The notes are convertible into the Company's shares at a price of $23.06 per common share and are redeemable by the Company at any time on or after June 23, 1996. Proceeds from the notes were used to retire existing gold loans and other long-term debt. In 1993, the Company entered into a $150 million revolving credit facility. This facility provides for borrowings denominated in U.S. dollars, Canadian dollars, ounces of gold or any combination of these. The credit agreement includes a minimum consolidated net worth requirement of $500 million. In October 1994, the Company amended this facility which resulted in a reduction of commitment and borrowing fees, a one-year extension of the facility to 1999 and the elimination of a number of financial covenants. No amounts have been borrowed under this facility. The Company has no required debt repayments until the convertible notes mature in the year 2000. The Company incurred $14.2 million of reclamation-related expenditures during 1994 at its discontinued uranium facility at Grants, New Mexico. In accordance with the Energy Policy Act of 1992, the United States Department of Energy (DOE) is responsible for funding 51% of all past and future reclamation expenditures at this facility. The total cost for reclamation of the Grants site is estimated to be $59.2 million, of which $40.1 million had been expended by December 31, 1994. The Company's share of the cost of reclaiming the Grants facility is fully provided in the financial statements at December 31, 1994. The Company received $4.3 million in 1994 from the DOE. The accompanying balance sheet as of December 31, 1994 includes a receivable of $9.8 million for unreimbursed claims filed with the DOE pertaining to the DOE's share of reclamation expenditures made by the Company through 1993. For discussion of certain environmental matters, see note 22 to the consolidated financial statements. In May 1994, the Company increased its regular quarterly dividend from $0.025 to $0.05. Total common share dividends paid by Homestake were $24.1 million in 1994 compared to $13.7 million in 1993 and $23.6 million in 1992. Future results will be impacted by such factors as the market price of gold, the Company's ability to expand its ore reserves and the fluctuations of foreign currency exchange rates. The Company believes that the combination of cash, investments, available lines of credit and future cash flows from operations will be sufficient to meet normal operating requirements and anticipated dividends. 30 REPORT OF INDEPENDENT AUDITORS The Shareholders and Board of Directors of Homestake Mining Company: We have audited the consolidated balance sheets of Homestake Mining Company and Subsidiaries as of December 31, 1994 and 1993, and the related statements of consolidated operations, shareholders' equity and cash flows for each of the three years in the period ended December 31, 1994. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on the financial statements based on our audits. We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of Homestake Mining Company and Subsidiaries at December 31, 1994 and 1993, and the results of their operations and their cash flows for each of the three years in the period ended December 31, 1994 in conformity with generally accepted accounting principles. /s/ Coopers & Lybrand LLP -------------------------- San Francisco, California February 8, 1995 MANAGEMENT'S RESPONSIBILITY FOR FINANCIAL REPORTING The accompanying consolidated financial statements of Homestake Mining Company and Subsidiaries are prepared by the Company's management in conformity with generally accepted accounting principles. Management is responsible for the fairness of the financial statements, which include estimates based on judgments. The Company maintains accounting and other control systems which management believes provide reasonable assurance that financial records are reliable for the purposes of preparing financial statements and that assets are properly safeguarded and accounted for. Underlying the concept of reasonable assurance is the premise that the cost of controls should not be disproportionate to the benefits expected to be derived from such controls. The Company's internal control structure is reviewed by its internal auditors and by the independent auditors in connection with their audit of the Company's consolidated financial statements. The external auditors conduct an independent audit of the consolidated financial statements in accordance with generally accepted auditing standards in order to express their opinion on these financial statements. These standards require that the external auditors plan and perform the audit to obtain reasonable assurance that the financial statements are free of material misstatement. The Audit Committee of the Board of Directors, composed entirely of outside directors, meets periodically with management, internal auditors and the external auditors to discuss the annual audit, internal control, internal auditing and financial reporting matters. The external auditors and the internal auditors have direct access to the Audit Committee. /s/ Harry M. Conger ------------------- Harry M. Conger Chairman of the Board and Chief Executive Officer /s/ Gene G. Elam ------------------- Gene G. Elam Vice President, Finance and Chief Financial Officer February 8, 1995 31 STATEMENTS OF CONSOLIDATED OPERATIONS Homestake Mining Company and Subsidiaries For the years ended December 31, 1994, 1993 and 1992 (In thousands, except per share amounts)
1994 1993 1992 --------------------------------------------- Revenues Product sales $656,056 $703,505 $659,646 Interest income 9,762 4,832 9,892 Equity earnings 2,857 795 2,474 Gain on issuance of stock by subsidiary 11,224 Other income 25,588 13,096 11,508 ---------------------------------------------- 705,487 722,228 683,520 ---------------------------------------------- Costs and Expenses Production costs 447,129 454,623 470,374 Depreciation, depletion and amortization 76,171 103,377 117,483 Administrative and general expense 38,159 40,553 48,514 Exploration expense 21,347 17,457 27,798 Interest expense 10,124 9,147 13,420 Other expense 6,744 4,492 5,694 Write-downs of mining properties and investments 16,032 130,290 Restructuring and business combination expenses 8,151 48,442 --------------------------------------------- 599,674 653,832 862,015 --------------------------------------------- Income (Loss) Before Taxes and Minority Interest 105,813 68,396 (178,495) Income and Mining Taxes (18,880) (12,775) 2,889 Minority Interest (8,917) (3,127) (230) --------------------------------------------- Net Income (Loss) $78,016 $52,494 $(175,836) --------------------------------------------- Net Income (Loss) Per Share $0.57 $0.38 $(1.31) --------------------------------------------- Average Shares Used in the Computation 137,733 137,046 135,221 ---------------------------------------------
See notes to consolidated financial statements. 32 CONSOLIDATED BALANCE SHEETS Homestake Mining Company and Subsidiaries December 31, 1994 and 1993 (In thousands, except per share amount)
1994 1993 -------------------------- ASSETS Current Assets Cash and equivalents $ 105,701 $ 134,719 Short-term investments 99,479 Receivables 58,994 28,649 Inventories 71,715 66,539 Other 6,910 8,303 -------------------------- Total current assets 342,799 238,210 -------------------------- Property, Plant and Equipment - net 808,221 830,228 -------------------------- Investments and Other Assets Noncurrent investments 15,774 20,632 Other assets 35,174 32,180 -------------------------- Total investments and other assets 50,948 52,812 -------------------------- Total Assets $1,201,968 $1,121,250 ========================== LIABILITIES AND SHAREHOLDERS' EQUITY Current Liabilities Accounts payable $ 35,674 $ 33,002 Accrued liabilities 54,138 57,747 Income and other taxes payable 7,083 9,816 Current portion of long-term debt 3,785 -------------------------- Total current liabilities 96,895 104,350 -------------------------- Long-term Liabilities Long-term debt 185,000 189,191 Other long-term obligations 110,719 93,674 -------------------------- Total long-term liabilities 295,719 282,865 -------------------------- Deferred Income Taxes 136,274 164,030 -------------------------- Minority Interest in Consolidated Subsidiaries 84,310 54,761 -------------------------- Shareholders' Equity Capital stock, $1 par value per share: Preferred - 10,000 shares authorized; no shares outstanding Common - 250,000 shares authorized; shares outstanding: 1994 - 137,785; 1993 - 137,494 137,785 137,494 Additional paid-in capital 339,785 334,737 Retained earnings 106,405 52,495 Accumulated currency translation adjustments 8,869 (5,620) Other (4,074) (3,862) -------------------------- Total shareholders' equity 588,770 515,244 -------------------------- Total Liabilities and Shareholders' Equity $1,201,968 $1,121,250 ==========================
Commitments and Contingencies - see notes 22 and 23. See notes to consolidated financial statements. 33 STATEMENTS OF CONSOLIDATED SHAREHOLDERS' EQUITY Homestake Mining Company and Subsidiaries For the years ended December 31, 1994, 1993 and 1992 (In thousands)
Additional Common Paid-in Retained Stock Capital Earnings ---------------------------------- BALANCES, DECEMBER 31, 1991 $132,325 $325,629 $215,886 Net loss (175,836) Common share dividends (23,624) Preference share dividends (1,834) Redemption of HCI preference shares for common stock 4,271 (4,271) Exercise of stock options 16 86 Stock issued to employee savings plan 45 560 Currency translation adjustments Other 115 684 ----------------------------------- BALANCES, DECEMBER 31, 1992 136,772 322,688 14,592 Net income 52,494 Common share dividends (13,706) Preference share dividends (885) Sale of Homestake stock held by Prime 1,155 Exercise of stock options 686 10,397 Stock issued to employee savings plan 36 492 Currency translation adjustments Other 5 ------------------------------------ BALANCES, DECEMBER 31, 1993 137,494 334,737 52,495 Net income 78,016 Common share dividends (24,106) Exercise of stock options 291 5,048 Currency translation adjustments Unrealized loss on investments Other ------------------------------------ BALANCES, DECEMBER 31, 1994 $137,785 $339,785 $106,405 ==================================== (Table continued) Accumulated Currency Translation Adjustments Other Total ------------------------------------- BALANCES, DECEMBER 31, 1991 $7,970 $(6,168) $675,642 Net loss (175,836) Common share dividends (23,624) Preference share dividends (1,834) Redemption of HCI preference shares for common stock Exercise of stock options 102 Stock issued to employee savings plan 605 Currency translation adjustments (6,837) (6,837) Other (3,579) (2,780) ------------------------------------- BALANCES, DECEMBER 31, 1992 1,133 (9,747) 465,438 Net income 52,494 Common share dividends (13,706) Preference share dividends (885) Sale of Homestake stock held by Prime 4,258 5,413 Exercise of stock options 11,083 Stock issued to employee savings plan 528 Currency translation adjustments (6,753) (6,753) Other 1,627 1,632 -------------------------------------- BALANCES, DECEMBER 31, 1993 (5,620) (3,862) 515,244 Net income 78,016 Common share dividends (24,106) Exercise of stock options 5,339 Currency translation adjustments 14,489 14,489 Unrealized loss on investments (382) (382) Other 170 170 -------------------------------------- BALANCES, DECEMBER 31, 1994 $8,869 $(4,074) $588,770 ======================================
See notes to consolidated financial statements. 34 STATEMENTS OF CONSOLIDATED CASH FLOWS Homestake Mining Company and Subsidiaries For the years ended December 31, 1994, 1993 and 1992 (In thousands)
1994 1993 1992 -------------------------------- CASH FLOWS FROM OPERATIONS Net income (loss) $78,016 $52,494 $(175,836) Reconciliation to net cash provided by operations: Depreciation, depletion and amortization 76,171 103,377 117,483 Write-downs of mining properties and investments 16,032 130,290 Gain on issuance of stock by subsidiary (11,224) Gain on disposals of assets (19,521) (7,974) (12,456) Deferred income taxes (3,665) 2,583 (11,121) Reclamation - net 3,986 (8,459) (4,160) Minority interest 8,917 3,127 230 Other noncash items - net 27,222 17,435 9,573 Effect of changes in operating working capital items: Receivables (8,824) (18,993) 12,096 Inventories (14,045) 10,357 12,933 Accounts payable 2,484 (4,009) (10,424) Accrued liabilities and taxes payable (6,938) 4,877 8,408 Other 1,138 (765) (3,521) --------------------------------- Net cash provided by operations 133,717 170,082 73,495 --------------------------------- INVESTMENT ACTIVITIES Decrease (increase) in short-term investments (99,479) 16,739 115,334 Additions to property, plant and equipment (88,654) (57,825) (63,453) Proceeds from sales of assets 24,542 9,649 11,858 Other (8,033) 1,060 7,260 --------------------------------- Net cash provided by (used in) investment activities (171,624) (30,377) 70,999 --------------------------------- FINANCING ACTIVITIES Borrowings 146,074 115,239 Debt repayments (8,352) (194,037) (215,251) Dividends paid on common shares (24,106) (13,706) (23,624) Dividends paid on preference shares (885) (1,834) Common shares issued 5,339 11,611 321 Stock issued by subsidiary 31,870 Redemption of HCI preference shares (15,810) (4,727) Sale of Homestake stock held by Prime 6,361 Other 1,452 326 --------------------------------- Net cash provided by (used in) financing activities 4,751 (58,940) (129,550) --------------------------------- Effect of Exchange Rate Changes on Cash 4,138 (254) 3,882 --------------------------------- Net Increase (Decrease) in Cash and Equivalents (29,018) 80,511 18,826 Cash and Equivalents, January 1 134,719 54,208 35,382 --------------------------------- Cash and Equivalents, December 31 $105,701 $134,719 $54,208 =================================
See notes to consolidated financial statements. 35 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Homestake Mining Company and Subsidiaries (All tabular amounts in thousands) Note 1: SIGNIFICANT ACCOUNTING POLICIES The consolidated financial statements include Homestake Mining Company (the Company or Homestake) and its majority-owned subsidiaries and their undivided interests in joint ventures after elimination of intercompany amounts. At December 31, 1994 the Company owned 81.5% of Homestake Gold of Australia Limited (HGAL) and 50.6% of Prime Resources Group Inc. (Prime) with the remaining interests reflected as minority interest in the consolidated financial statements. Undivided interests in gold mining operations (the Round Mountain mine in the United States; HGAL's interest in the gold mining operations in Kalgoorlie, Western Australia; Homestake Canada Inc.'s (HCI) interests in the Williams and David Bell mines in Canada; and Prime's interests in the Eskay Creek and Snip mines in Canada) and in the sulphur and oil recovery operations at Main Pass 299 in the Gulf of Mexico are reported using pro rata consolidation whereby the Company reports its proportionate share of assets, liabilities, income and expenses. Investments in gold mining venture partnerships over which the Company exercises significant influence, principally the Pinson and Marigold mines in Nevada (in which the Company has ownership interests of 26% and 33%, respectively), are reported using the equity method. Cash and equivalents include all highly-liquid investments with a maturity of three months or less at the date of purchase. The Company minimizes its credit risk by placing its cash and equivalents with major international banks and financial institutions located principally in the United States, Canada and Australia. The Company believes that no concentration of credit risk exists with respect to cash and equivalents. Short-term investments consist principally of highly-liquid U.S. and foreign government and corporate securities with original maturities in excess of three months. Effective January 1, 1994 the Company adopted Statement of Financial Accounting Standards No. (SFAS) 115, "Accounting for Certain Investments in Debt and Equity Securities." In accordance with this statement, the Company classifies all short-term investments as available-for-sale securities and, accordingly, includes all unrealized gains and losses on these investments as a separate component of shareholders' equity, except that declines in market value judged to be other than temporary are recognized in determining net income or loss. The effect on net income of adoption of SFAS 115 was not material and did not result in the recording of a cumulative effect on adoption. Inventories, including finished products, ore in-process, stockpiled ore, ore in-transit and supplies, are stated at the lower of cost or net realizable value. The cost of gold produced by United States operations is determined principally by the last-in, first-out method (LIFO). The cost of other inventories is determined primarily by averaging methods. Exploration costs, including those incurred through joint ventures, are expensed as incurred. All costs related to property acquisitions are capitalized. Preoperating and development costs relating to new mines and major programs at existing mines are capitalized. Ordinary mine development costs to maintain production are expensed as incurred. Depreciation, depletion and amortization of mining properties, mine development costs and major plant facilities is computed principally by the units-of-production method based on estimated proven and probable ore reserves. Proven and probable ore reserves reflect estimated quantities of economically recoverable reserves which can be recovered in the future from known mineral deposits. Such estimates are based on current and projected costs and prices. Other equipment and plant facilities are depreciated by straight-line or accelerated methods principally over estimated useful lives of three to ten years. Property evaluation: Recoverability of investments in operating mines is evaluated periodically. Estimated future net cash flows from each mine are calculated using estimates of proven and probable ore reserves, estimated future prices (considering historical and current prices, price trends and related factors) and operating capital and reclamation costs on an undiscounted basis. Reductions in the carrying value of each mine are recorded to the extent the remaining investment exceeds the estimate of future net cash flows. Recoverability of the carrying values of non-operating properties is evaluated periodically based upon estimated future net cash flows from each property determined as described above using estimates of contained mineralization, which represent estimated mineralization expected to be classified as proven and probable reserves, based on geological delineation to date, upon completion of a feasibility study. In addition, estimated future net cash flows may be reduced by a discount factor after considering the uncertainties inherent in developing non-operating properties for which a feasibility study has not been completed, the length of time before mining operations may begin, and the expected complexity 36 of each individual mining plan. The discount factor is based principally upon the Company's composite United States borrowing rate as well as other factors affecting the risk of developing such properties. Reductions in the carrying value of each property are recorded to the extent that the Company's carrying value in each property exceeds its estimate of future net cash flows. Undeveloped properties upon which the Company has not performed sufficient exploration work to determine whether significant mineralization exists are carried at original acquisition cost. Reclamation costs and related accrued liabilities, which are based on the Company's interpretation of current environmental and regulatory requirements, are accrued and expensed, principally by the units-of- production method based on estimated proven and probable ore reserves. Noncurrent investments, which include mining securities, are carried at the lower of cost or market. Realized gains and losses are included in determining net income or loss. Unrealized losses are reported as a reduction in shareholders' equity, except that declines in market value judged to be other than temporary are recognized in determining net income or loss. Product sales are recognized when title passes at the shipment or delivery point. 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. Changes in deferred tax assets and liabilities include the impact of any tax rate changes enacted during the year. Mining taxes represent Canadian taxes levied on mining operations. Foreign currency: Substantially all assets and liabilities of foreign subsidiaries are translated at exchange rates in effect at the end of each period. Income and expenses are translated at the average exchange rate for the year. Accumulated currency translation adjustments are included as a separate component of shareholders' equity. Foreign currency transaction gains and losses are included in the determination of net income or loss. Pension plans and other postretirement benefits: Pension costs related to United States employees 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 active employees become eligible for the benefits. The costs of the postretirement medical and life insurance benefits are paid at the time the services are provided. Net income (loss) per share is computed by dividing net income less preference share dividends by the weighted average number of common shares and common share equivalents outstanding during the year. Fully diluted net income (loss) per share is not presented since the exercise of stock options would not result in a material dilution of earnings per share and the conversion of the 5.5% convertible subordinated notes would produce an anti-dilutive result. Reclassifications: Certain amounts for 1993 and 1992 have been reclassified to conform to the 1994 presentation. Note 2: HOMESTAKE CANADA INC. On July 22, 1992 Homestake acquired all of the common shares and first preference shares of International Corona Corporation (Corona), a publicly traded Canadian gold producer. In December 1992, Corona's name was changed to Homestake Canada Inc. Homestake issued 0.35 of a Homestake common share for each HCI common share, 0.54 of a Homestake common share and $0.42 cash for each HCI Series A first preference share and 1.08 Homestake common shares for each HCI Series C first preference share. Homestake issued a total of 37.2 million Homestake common shares and paid approximately $0.5 million in cash in acquiring 100% of HCI's common and first preference shares. This business combination was accounted for as a pooling of interests. Note 3: PRIME RESOURCES GROUP INC. In June 1994, Prime sold five million common shares at approximately $6.70 per share to the public. Net proceeds of approximately $31.9 million from this issue were used to fund a portion of the construction and development costs of the Eskay Creek gold mine in Canada. This transaction resulted in a reduction of the Company's interest in Prime from 54.2% to 50.6%. The Company recorded a gain of $11.2 million on the transaction in recognition 37 of the net increase in the book value of the Company's investment in Prime. Deferred income taxes were not provided on this gain since the Company's tax basis in Prime substantially exceeds its carrying value. In December 1993, Prime acquired effectively all of the stock of Stikine Resources Ltd. (Stikine) through a share exchange. This transaction was accounted for as a corporate reorganization of companies under common control. Prime and Stikine each had a 50% interest in the Eskay Creek mine. Following this transaction, the Company owned 54.2% of the outstanding shares of Prime. Homestake's effective ownership in Prime and Stikine prior to this transaction was 54.3% and 54.1%, respectively. In December 1992, HCI acquired two million common shares of Prime for $3.2 million in cash, representing 4.4% of Prime's shares then outstanding. As a result of this transaction, Homestake owned in excess of 50% of Prime's common shares and included Prime in its consolidated financial statements effective December 31, 1992. On June 30, 1992 HCI purchased 419,475 Stikine common shares from the minority shareholders of Stikine in exchange for 419,475 HCI Series 1 second preference shares (Series 1 shares). As a result, HCI increased its investment in the Eskay Creek mine by approximately $24.9 million and the Company's ownership of Stikine increased above 50%. Stikine has been included in the consolidated financial statements as of that date. In July 1993, all of the Series 1 shares were redeemed at par for cash of $54.61 per share, plus unpaid dividends. Note 4: SALES OF MINING OPERATIONS Dee mine: In May 1994, the Company sold its 44% interest in the Dee gold mine in Nevada to Rayrock Mines, Inc. (Rayrock) for $16.5 million. Rayrock assumed responsibility for and indemnified Homestake against all related environmental and reclamation matters. This sale resulted in a pretax gain of $15.7 million, which is included in other income. NAM: In July 1993, the Company sold its 83% interest in North American Metals Corp. (NAM), the owner and operator of the Golden Bear mine in Canada, for approximately $1 million plus a retained royalty interest. The Company recorded a $0.5 million pretax gain and a $12.9 million tax benefit on this transaction. Mineral Hill mine: In November 1993, the Company sold its 50% interest in the Mineral Hill gold mine in Montana for $4 million in cash and 140,000 common shares of TVX Gold Inc. (TVX). The Company retained a royalty interest on certain exploration lands and received an indemnification from TVX for all past, present and future reclamation requirements. This sale resulted in a pretax gain of $3.6 million, which was included in other income in 1993. Note 5: WRITE-DOWNS OF MINING PROPERTIES AND INVESTMENTS As discussed in note 1, the Company performs periodic property evaluations to assess the recoverability of its mining properties and investments. In 1993 and 1992, the Company determined that based upon its estimates of proven and probable reserves, sales prices and operating costs at certain locations, it would not fully recover its investment in certain assets and, accordingly, recorded write-downs as a result of these evaluations totaling $16 million and $130.3 million in 1993 and 1992, respectively. In 1993, the Company recorded a $16 million write-down of its investment in the oil and gas assets at the Main Pass 299 sulphur mine due to a decline in oil prices. In 1992, based on Homestake's assessment of the then recoverable value of its investment in the Eskay Creek property, the Company recorded a $70 million write-down of its investments in Prime and Stikine, the holders of the Eskay Creek property. The write-down was recorded at the time of the acquisition of HCI to reflect Homestake's estimates of capital costs and future gold prices. Other write-downs in 1992 included property write-downs of $44.3 million and $12.5 million in the United States and Canada, respectively, and a $3.5 million reduction of the carrying value of certain Latin American mining securities. Note 6: RESTRUCTURING AND BUSINESS COMBINATION EXPENSES In 1993, the Company recorded restructuring and business combination expenses totaling $8.2 million primarily related to a second early retirement and work force reduction program at the Homestake mine in South Dakota and the reorganization of HGAL, including the relocation of HGAL's principal office. In 1992, concurrent with the business combination with HCI, the Company recorded a charge of $48.4 million for the corporate restructuring of its North American operations. The restructuring included the consolidation 38 of many administrative and exploration activities, the closure of several existing offices and the initiation of an early retirement and work force reduction program at the Homestake mine. Note 7: INCOME TAXES Effective January 1, 1993 the Company adopted SFAS 109, "Accounting for Income Taxes." The adoption of this standard changed the criteria for recognition and measurement of deferred tax assets and certain other requirements of SFAS 96. The standard was adopted on a prospective basis and amounts presented for prior years were not restated. The effect on net income of adoption of SFAS 109 was not material and did not result in the recording of a cumulative effect on adoption. The provision (credit) for income and mining taxes consists of the following:
1994 1993 1992 ------------------------------- Current Income taxes Federal $ 7,560 $(2,465) $ (513) State 1,258 105 305 Canadian 2,258 1,177 1,936 Other foreign 206 1,013 185 ------------------------------- 11,282 (170) 1,913 Canadian mining taxes 9,741 10,287 6,319 ------------------------------- Total current taxes 21,023 10,117 8,232 ------------------------------- Deferred Income taxes Federal 6,867 3,639 (11,040) State (1,086) 95 (601) Canadian (13,796) 2,203 (3,364) Other foreign 4,438 (262) ------------------------------- (3,577) 5,937 (15,267) Canadian mining taxes 1,434 (3,279) 4,146 ------------------------------- Total deferred taxes (2,143) 2,658 (11,121) ------------------------------- Total income and mining taxes (benefit) $18,880 $12,775 $ (2,889) ==============================
The provision for income taxes is based on pretax income (loss) before minority interest as follows:
1994 1993 1992 ---------------------------------- United States $ 28,415 $ 6,222 $ (86,278) Canada 49,690 41,434 (91,989) Other foreign 27,708 20,740 (228) ---------------------------------- $105,813 $68,396 $(178,495) ==================================
Deferred tax liabilities and assets on the balance sheet as of December 31, 1994 and 1993 relate to the following:
1994 1993 ---------------------------- Deferred tax liabilities Depreciation and other resource property differences United States $ 73,826 $ 65,194 Canada - Federal 46,671 56,289 Canada - Provincial 74,653 84,032 Australia 5,214 5,373 ---------------------------- 200,364 210,888 Inventory 2,854 Other 11,946 22,397 ---------------------------- Gross deferred tax liabilities 215,164 233,285 ---------------------------- Deferred tax assets Tax loss carry-forwards United States 3,958 Canada - Federal 17,793 17,387 Canada - Provincial 4,836 5,655 Australia 2,972 5,682 Chile 16,363 15,564 --------------------------- 45,922 44,288 Reclamation costs United States 9,957 13,630 Other 4,071 1,949 --------------------------- 14,028 15,579 Employee benefit costs 28,120 23,699 Alternative minimum tax credit carry-forwards 16,476 12,423 Other resource property - Australia 4,193 2,778 Deductible mining taxes 3,080 Foreign tax credit carry-forwards 2,831 2,442 Reorganization costs 1,649 2,103 Lease obligations not currently deductible 2,683 Other 12,430 15,326 --------------------------- Gross deferred tax assets 128,729 121,321 Deferred tax asset valuation allowances (49,839) (52,066) --------------------------- Net deferred tax assets 78,890 69,255 --------------------------- Net deferred tax liability $136,274 $164,030 ===========================
Deferred tax assets and liabilities are classified in accordance with SFAS 109, which generally requires classification based on the related asset or liability creating the deferred tax. Deferred taxes not related to a specific asset or liability are classified based on the estimated period of reversal. The net change in the valuation allowance for deferred tax assets decreased by $2.2 million in 1994. The deferred tax valuation allowance of $49.8 million at 39 December 31, 1994 primarily is attributable to United States and Australian deferred tax assets. Net deferred tax assets at December 31, 1994 include $9.3 million of Canadian deferred tax assets, the realization of which is based on the Company s judgement regarding future income. Major items causing the Company's income tax provision (credit) to differ from the federal statutory rate of 35% in 1994 and 1993 and 34% in 1992 were as follows:
1994 1993 1992 ----------------------------- Income tax based on statutory rate $37,035 $23,938 $(60,689) Nondeductible write-downs 32,122 Percentage depletion (11,106) (14,401) (6,216) Earnings in foreign jurisdictions taxed at different rates (6,175) (1,440) (2,433) State income taxes, net of federal benefit 1,614 130 (245) Tax relating to reorganizations 7,682 4,387 6,596 Unrealized minimum tax credits 1,753 23,844 10,617 Nontaxable book income (4,784) Other nondeductible losses 9,401 3,757 3,539 Deferred tax assets not recognized in prior years (1) (27,697) (36,706) Foreign taxes withheld 2,089 2,669 Other - net (2,107) (411) 3,355 ------------------------------ Total income taxes 7,705 5,767 (13,354) Canadian mining taxes 11,175 7,008 10,465 ------------------------------ Total income and mining taxes (benefit) $18,880 $12,775 $(2,889) ============================== (1) The 1994 and 1993 amounts include (i) a reversal of prior year valuation allowances of $12.4 million and $0, respectively, and (ii) the realization of additional deferred tax assets that could not be recognized in prior years of $15.3 million and $36.7 million, respectively.
The Company's 1994 income tax expense includes a $3.6 million tax benefit relating to tax law changes enacted in 1994 and a $9.6 million tax benefit relating to a change in the Company's judgement concerning the realizability of deferred tax assets in future years. For income tax purposes, the Company has foreign tax losses and U.S. foreign tax credit carry-forwards of approximately $62 million and $2.7 million, respectively, which are due to expire at various times through the year 2001. Note 8: RECEIVABLES
December 31, 1994 1993 ----------------------- Trade $23,318 $ 4,059 Income taxes 3,049 14,966 Uranium receivables 17,616 21 Interest and other 15,011 9,603 ----------------------- $58,994 $28,649 =======================
Note 9: INVENTORIES
December 31, 1994 1993 ----------------------- Finished products $15,004 $ 9,548 Ore and in-process 26,889 22,465 Supplies 29,822 34,526 ----------------------- $71,715 $66,539 =======================
At December 31, 1994 and 1993, the cost of certain finished gold inventories in the United States stated on the LIFO cost basis aggregated $2.5 million and $0.4 million, respectively. Such inventories would have approximated $4.0 million and $1.4 million, respectively, if stated at the lower of market or current year average production costs. In 1993, 44,750 ounces of gold at an average cost of $175 per ounce were sold from the LIFO inventory, the effect of which increased pretax income by $5.2 million compared to the cost of such inventories based on 1993 average production cost. Ore stockpiles in the amount of $10.7 million that are not expected to be processed within the next 12 months are included in other assets (see note 12). Note 10: PROPERTY, PLANT AND EQUIPMENT
December 31, 1994 1993 -------------------------- Mining properties and development costs $ 714,479 $ 694,885 Plant and equipment 846,547 836,947 Land and royalty interests 3,843 3,955 Construction and mine development in progress 14,633 4,431 --------------------------- 1,579,502 1,540,218 Accumulated depreciation, depletion and amortization (771,281) (709,990) --------------------------- $ 808,221 $ 830,228 ===========================
40 Note 11: NONCURRENT INVESTMENTS
December 31, 1994 1993 ------------------------ Equity investments Pinson and Marigold mining partnerships $ 6,298 $ 8,363 Other equity investments 5,041 7,626 Other investments 4,435 4,643 ------------------------ $15,774 $20,632 ========================
Note 12: OTHER ASSETS
December 31, 1994 1993 ------------------------- Uranium receivables and other uranium assets $ 5,694 $13,567 Ore stockpiles 10,684 Other 18,796 18,613 ------------------------- $35,174 $32,180 =========================
Note 13: ACCRUED LIABILITIES
December 31, 1994 1993 ------------------------ Accrued payroll and other compensation $22,178 $19,053 Accrued reclamation costs 15,266 14,041 Other 16,694 24,653 ------------------------ $54,138 $57,747 ========================
Note 14: LONG-TERM DEBT
December 31, 1994 1993 ----------------------- Long-term debt Convertible subordinated notes (due 2000) $150,000 $150,000 Pollution control bonds Lawrence County, South Dakota (due 2003) 18,000 18,000 State of California (due 2004) 17,000 17,000 Australian finance lease debt 7,976 ------------------------ 185,000 192,976 Less current portion 3,785 ------------------------ $185,000 $189,191 ========================
Convertible subordinated notes: In June 1993, the Company sold $150 million principal amount of 5.5% convertible subordinated notes which mature on June 23, 2000. Interest on the notes is payable semi-annually in June and December. The notes are convertible into common shares of the Company at a price of $23.06 per common share and are redeemable by the Company at any time on or after June 23, 1996. Proceeds from the notes were used to retire existing gold loans and other long-term debt. Issuance costs of $3.9 million were capitalized and are being amortized over the life of the notes. Pollution control bonds: The Company pays interest monthly on the pollution control bonds based on variable short-term tax-exempt obligation rates. The rates at December 31, 1994 and 1993 were 5.7% and 3.1%, respectively. No principal payments are required until cancellation, redemption or maturity. Bondholders have the right to tender the bonds for payment at any time on seven-days notice. The Company has arrangements with underwriters to remarket any tendered bonds and also with a bank to provide liquidity and credit support to the Company and to purchase and hold for up to 15 months any tendered bonds that the underwriters are unable to remarket. The Company has certain rights with respect to bond redemption and changes in the interest rate terms. Australian finance lease debt: During 1994, the Company repaid the remaining balance of its Australian finance lease debt. Lines of credit: The Company has a U.S./Canadian cross-border credit facility providing a total availability of $150 million. The Company pays a commitment fee of 0.25% per annum on the unused portion of this facility. The credit facility is available through September 30, 1999 and provides for borrowings in U.S. dollars, Canadian dollars, gold loans or any combination of these. The credit agreement requires a minimum consolidated net worth of $500 million. In addition, Prime has a credit facility which provides a total availability of $7.1 million. No amounts have been borrowed under these agreements as of December 31, 1994. The Company has no required debt payments in the five years subsequent to December 31, 1994. 41 Note 15: OTHER INCOME
1994 1993 1992 ------------------------------- Gain on disposals of assets $19,521 $ 7,974 $12,456 Royalty income 3,061 4,284 3,309 Foreign currency contracts gains (losses) 4,569 (1,381) (469) Foreign currency transaction losses (6,617) (1,519) (5,500) Other 5,054 3,738 1,712 ------------------------------- $25,588 $13,096 $11,508 ===============================
Note 16: INTEREST EXPENSE Interest costs of $10.1 million, $9.1 million and $13.4 million were expensed in 1994, 1993 and 1992, respectively. During 1994, 1993 and 1992 interest costs of $0.7 million, $0.1 million and $3.5 million, respectively, related to construction and mine development in progress were capitalized. Note 17: OTHER LONG-TERM OBLIGATIONS
December 31, 1994 1993 ------------------------ Accrued reclamation costs (see notes 1, 13 and 22) $ 33,892 $22,138 Accrued pension and other postretirement benefit obligations (see note 18) 64,066 59,626 Other 12,761 11,910 ------------------------ $110,719 $93,674 ========================
Note 18: EMPLOYEE BENEFIT PLANTS Pension plans: The Company has pension plans covering substantially all United States employees. Plans covering salaried and other non-union employees provide pension benefits based on years of service and the employee's highest compensation during any 60 consecutive months prior to retirement. Plans covering union employees provide defined benefits for each year of service. Pension costs for 1994, 1993 and 1992 for the Company sponsored United States employee plans included the following components:
1994 1993 1992 ------------------------------ Service cost - benefits earned during the year $3,928 $ 3,513 $ 3,854 Interest cost on projected benefit obligations 13,497 12,957 11,993 Actual net return on assets (1,828) (17,198) (13,390) Net amortization (deferral) (11, 202) 4,821 1,555 ------------------------------- Net periodic pension cost 4,395 4,093 4,012 Early retirement program cost 4,062 5,000 ------------------------------- $4,395 $ 8,155 $ 9,012 ===============================
Assumptions used in determining net periodic pension cost for 1994, 1993 and 1992 include discount rates of 7%, 8% and 8%, respectively, and assumed rates of increase in compensation of 5%, 6% and 6%, respectively. The assumed long-term rate of return on assets was 8.5% for each year. Assumptions used in determining the projected benefit obligations as of December 31, 1994 and 1993 include discount rates of 8% and 7%, respectively, and an assumed rate of increase in compensation of 5%. The funded status and amounts recognized for pension plans in the consolidated balance sheets are as follows:
December 31, 1994 December 31, 1993 Plans Where Plans Where -------------------------------------------------- Accumulated Accumulated Assets Exceed Benefits Assets Exceed Benefits Accumulated Exceed Accumulated Exceed Benefits Assets Benefits Assets Actuarial present value of benefit obligations Vested benefits $(99,615) $(51,749) $(101,000) $(50,529) ================================================ Accumulated benefits $(108,838) $(57,761) $(111,454) $(56,815) ================================================ Projected benefits $(127,006) $(61,261) $(131,078) $(60,100) Plan assets at fair value (1) 117,966 37,687 124,095 41,049 ------------------------------------------------ Projected benefit obligation in excess of plan assets (9,040) (23,574) (6,983) (19,051) Unrecognized net loss 1,318 5,353 11 3,760 Unrecognized net transition obligation (asset) amortized over 15 years 77 (3,635) 93 (4,020) Unrecognized prior service cost (benefit) (608) 2,322 267 2,133 Additional minimum liability (612) (1,520) ----------------------------------------------- Pension liability recognized in the consolidated balance sheets $(8,253) $(20,146) $(6,612) $(18,698) =============================================== (1) Approximately 15% and 20% of the plan assets were invested in fixed- rate insurance contracts and the balance was invested in listed stocks and bonds in 1994 and 1993, respectively.
42 HGAL participates in several pension plans, primarily defined contribution plans, covering its employees and, through its 50% ownership interest in the consolidated Kalgoorlie operations, the employees of Kalgoorlie Consolidated Gold Mines. HGAL's share of contributions to these plans was $0.8 million in 1994 and 1993 and $1 million in 1992. Postretirement benefits other than pensions: The Company provides medical and life insurance benefits for certain retired employees, primarily retirees of the Homestake mine. Retirees are generally eligible for benefits upon retirement if they are at least age 55 and have completed five years of service. Spouses and dependent children are also covered until remarriage or upon being covered by another group plan. Net periodic postretirement benefit costs for 1994, 1993 and 1992 included the following components:
1994 1993 1992 --------------------------------- Service cost - benefits earned during the year $ 565 $ 717 $ 625 Interest cost on accumulated postretirement benefit obligation 2,860 3,575 2,475 Net amortization and deferral 60 369 --------------------------------- $3,485 $4,661 $3,100 =================================
In 1993 and 1992, the Company also recorded expenses of $0.9 million and $2 million, respectively, related to early retirement programs at the Homestake mine. The actuarial assumptions used in determining net periodic postretirement benefit costs include discount rates of 7% for 1994 and 8% for 1993, an initial health care cost trend rate of 12% grading down to an ultimate health care cost trend rate of 5% for 1994, and an initial health care cost trend rate of 12.5% grading down to an ultimate health care cost trend rate of 6% for 1993. Net periodic postretirement benefit cost assumptions for 1992 included a discount rate of 8% and increases in medical costs of 8%. The actuarial assumptions used in determining the Company's accumulated postretirement benefit obligation as of December 31, 1994 and 1993 include discount rates of 8% and 7%, respectively. A one percentage-point increase in the assumed health care cost trend rate would result in an increase of approximately $8 million in the accumulated postretirement benefit obligation and an increase of approximately $0.6 million in net periodic postretirement benefit costs. The following table sets forth amounts recorded in the Company's consolidated balance sheets at December 31, 1994 and 1993. The Company has not funded any of its estimated future obligation.
1994 1993 --------------------------- Accumulated postretirement benefit obligation Retirees $ (30,000) $(36,000) Fully-eligible active plan participants (1,000) (1,000) Other active plan participants (9,000) (11,261) --------------------------- (40,000) (48,261) Unrecognized net loss 996 10,549 Unrecognized prior service cost 737 797 --------------------------- Accumulated postretirement benefit obligation liability recognized in the consolidated balance sheets $ (38,267) $(36,915) ===========================
Other plans: Substantially all full-time United States employees of the Company are eligible to participate in the Company's defined contribution savings plans. The Company's matching contribution was approximately $1.1 million in 1994 and 1993 and $1.7 million in 1992. Under the Company's stock option plans, options to buy 2.3 million common shares at an average price of $18.34 per share were outstanding at December 31, 1994, of which 1.5 million shares were exercisable. An additional 0.8 million and 1 million shares were available for future grants at December 31, 1994 and 1993, respectively. During 1993, the Company offered to convert all HCI options outstanding to Homestake options on the basis of 0.35 of a Homestake common share option for each HCI common share option at an exercise price equal to the exercise price of the HCI option divided by 0.35 and converted from Canadian dollars to U.S. dollars based on the July 22, 1992 exchange rate. All other terms and conditions of the HCI options remained unchanged. As a result, options covering 787,345 Homestake shares were substituted for HCI shares under the HCI options at prices ranging 43 from $17.70 to $42.77 per share. Certain of these converted options had share appreciation rights and at December 31, 1993 the Company recorded a charge of $0.2 million with respect to these rights. Stock option activity was as follows: (In thousands, except per share amounts)
1994 1993 1992 ------------------------------------------------- Average Average Average Price Price Price Per Per Per Number Share Number Share Number Share ------------------------------------------------- Balance at January 1 2,600 2,193 1,569 HCI converted 787 $29.04 Granted 268 $20.50 516 12.18 688 $14.20 Exercised (293) 15.98 (695) 15.88 (24) 5.75 Expired (274) 15.86 (201) 29.20 (40) 16.10 ------------------------------------------------ Balance at December 31 2,301 2,600 2,193 ================================================
Note 19: FAIR VALUE OF FINANCIAL INSTRUMENTS The carrying values and estimated fair values of the Company's financial instruments are as follows:
December 31, 1994 December 31, 1993 Carrying Estimated Carrying Estimated Asset/(Liability) Amount Fair Value Amount Fair Value ---------------------------------------------------------------------- Cash and equivalents and short-term investments $ 205,180 $ 205,180 $134,719 $134,719 Noncurrent marketable equity investments 4,435 5,109 4,643 5,319 Long-term debt (185,000) (182,188) (192,976) (224,471) Off-balance sheet financial instruments - Foreign currency options 651 651 (156) (156)
The following methods and assumptions were used to estimate the fair value of each class of financial instruments: Cash and equivalents and short-term investments: The carrying value of cash and equivalents approximates the fair value due to the short-term maturities of these instruments. The fair value of short-term investments was estimated based on quoted market prices. If a quoted market price was not available, the fair value was estimated using quoted market prices for similar securities. Noncurrent marketable equity investments: The fair value of noncurrent marketable equity investments was estimated based on quoted market prices. Long-term debt: With the exception of the convertible subordinated notes, the carrying amounts of the long-term debt items are reasonable estimates of their fair value. Interest rates on these debt instruments fluctuate at prevailing market rates. The fair value of the Company's convertible subordinated notes was estimated based on the quoted market price. Foreign currency options: The fair value of foreign currency options was estimated based on the quoted market prices. If a quoted market price was not available, the fair value was estimated using quoted market prices for similar options. The fair value estimates presented herein are based on pertinent information available to management as of December 31, 1994 and 1993. Although management is not aware of any factors which would affect the estimated fair value amounts significantly, such amounts have not been comprehensively revalued for purposes of these financial statements since the balance sheet dates, and estimates of fair value at dates subsequent to December 31, 1994 and 1993 may differ significantly from the amounts presented herein. Note 20: SHAREHOLDERS' EQUITY At December 31, 1994 and 1993 other equity includes deductions of $3.7 million and $3.9 million, respectively, for loans made to certain former HCI employees and directors for the purchase of common shares. The loans, which were used for the purchase of shares of HCI, are non-interest bearing, are secured by a pledge of the shares and are not required to be paid until the later of 1995 or until the pledged securities are equal to or greater than the value of the respective loans. Other equity at December 31, 1992 includes $4.2 million for common shares of Homestake owned by Prime. These Homestake shares were sold by Prime in 1993. Effective April 30, 1992 all 2.7 million HCI Series B first preference shares then outstanding were redeemed for 4.3 million common shares of the Company. Each share of common stock includes and trades with a right. Rights are not exercisable currently but become exercisable on the 10th business day after any person, entity or group ("the Acquiring Person") acquires 20% or more of the Company's common stock or announces a tender or exchange offer which would result in such entity acquiring 20% or more of the Company's common stock. When exercisable, each right entitles its holder to purchase from the Company one one-hundredth of a share of Series A Participating Cumulative Preferred Stock, par value $1 per share, at a share price of $75. If the Company is subsequently 44 involved in a merger or other business combination involving the Acquiring Person, each right will entitle its holder to purchase certain securities of the surviving company. Rights also provide for protection against self- dealing transactions by the Acquiring Person. The rights expire on November 2, 1997. Note 21: ADDITIONAL CASH FLOW INFORMATION Cash paid for interest and for income and mining taxes is as follows:
1994 1993 1992 ------------------------------ Interest, net of amounts capitalized $10,110 $ 8,600 $13,203 Income and mining taxes 10,670 18,170 7,328
Certain investing and financing activities of the Company affect financial position but do not affect cash flows. Significant noncash investing and financing activities were as follows: In 1992, HCI increased its equity interest in the Marigold mine venture to 33.3% as a result of a land exchange. See notes 2 and 3 for discussions of the noncash acquisitions of the interests in HCI, Prime and Stikine. In 1992, HCI redeemed its Series B first preference shares for common stock (see note 20). The impact on the balance sheet during 1992 as a result of the change in the accounting for the Company's investments in Prime and Stikine from the equity method to consolidation (see note 3) was as follows:
Increase/(Decrease) --------------------- Cash and equivalents $6,411 Working capital and other assets (2,624) Property, plant and equipment 194,807 Noncurrent investments (79,476) Long-term debt 12,287 Deferred income taxes 78,619 Minority interests 32,470 Shareholders' equity (4,258)
Note 22: CONTINGENCIES ENVIRONMENTAL CONTINGENCIES The Comprehensive Environmental Response, Compensation and Liability Act (CERCLA) imposes heavy liabilities on persons who discharge hazardous substances. The Environmental Protection Agency (EPA) publishes a National Priorities List (NPL) of known or threatened releases of such substances. Whitewood Creek: An 18-mile stretch of Whitewood Creek in the Black Hills of South Dakota is a site on the NPL. The EPA asserted that discharges of tailings by mining companies, including the Company, for more than 100 years, contaminated soil and water. In 1990, the Company signed a consent decree with the EPA requiring that the Company perform remedial work on the site and continue long-term monitoring. The on-site remedial work has been completed. The Company estimates that the remaining cost of actions required by the decree, including EPA oversight costs, will be less than $1 million. Grants: The tailings facility at the Company's discontinued uranium mill near Grants, New Mexico is a site on the NPL. The EPA asserted that leakage from the tailings contaminated a shallow aquifer that served nearby residential subdivisions. The Company paid the costs for installing a municipal water supply and continues to operate an injection and collection system that has significantly improved the quality of the aquifer to a point where contaminates are below natural background levels. The Company has decommissioned and disposed of the mills and has closed the tailings impoundments at the site. Title X of the Energy Policy Act of 1992 (the Act) authorized appropriations of $270 million to cover the Federal Government's share of certain costs of reclamation, decommissioning and remedial action for byproduct material (primarily tailings) generated by certain licensees as an incident of uranium sales to the Federal Government. Reimbursement is subject to compliance with regulations of the Department of Energy (DOE) which were issued in 1994. Pursuant to the Act, the Company may submit requests for reimbursement under the Act for 51.2% of the past and future costs of reclaiming the Grants site in accordance with the approved reclamation plan and Nuclear Commission license requirements. The Company estimates the total costs to reclaim the Grants facility, including costs incurred to date by the Company, will be $59.2 million. The DOE's share of these estimated costs will amount to approximately $30.2 million. To date, Congress has appropriated $83 million for disbursement in fiscal 45 years 1994 and 1995 to eligible licensees. In 1994, the Company submitted an initial claim of $14.1 million for the DOE's share of past costs incurred through December 31, 1993 and the Company expects to file additional claims on an annual basis for expenditures made in the prior year. The Company records a receivable and an increase in long-term accrued reclamation when claims are filed with the DOE. The accompanying balance sheet at December 31, 1994 includes a receivable of $9.8 million from the DOE for claims filed, net of $4.3 million reimbursements received through that date. A claim for approximately $7 million will be submitted in 1995 for 1994 expenditures. In 1983, the state of New Mexico made a claim against the Company for unspecified natural resource damages resulting from the Grants tailings. The state of South Dakota made a similar claim in 1983 as to the Whitewood Creek tailings. The Company denies all liability for damages at the two CERCLA sites. The two states have taken no action to enforce the 1983 claims. The Company believes that the ultimate resolution of the above matters will not have a material adverse impact on its financial condition or results of operations. OTHER CONTINGENCIES In addition to the above, the Company is party to legal actions and administrative proceedings and is subject to claims arising in the ordinary course of business. While the amounts claimed may be substantial and the ultimate liability cannot, at this time, be determined, the Company believes the disposition of these matters will not have a material adverse effect on its financial position or results of operations. Note 23: FOREIGN CURRENCY AND OTHER COMMITMENTS During 1992, the Company established a foreign currency protection program and entered into a series of foreign currency option contracts which established trading ranges within which the United States dollar may be exchanged for foreign currencies by setting minimum and maximum exchange rates. The Company does not require or place collateral for these contracts. However, the Company minimizes its credit risk by dealing with only major international banks and financial institutions. The contracts are marked to market at each balance sheet date. Unrealized gains (losses) on contracts outstanding at December 31, 1994 and 1993 totaled $0.7 million and $(0.2) million, respectively. Other income for the years ended December 31, 1994 and 1993 includes income (loss) of $4.6 million and $(1.4) million, respectively, related to the foreign currency protection program. At December 31, 1994 the Company had outstanding forward currency contracts as follows: (In thousands, except exchange rates)
Exchange Rates to U.S. $ Currency Amount Minimum Maximum Expiration Date --------------------------------------------------------------------- Canadian $112,700 $0.67 $0.78 1995-1997 Australian 66,600 0.70 0.76 1995 --------- $179,300 =========
In addition to amounts related to the foreign currency option contracts, the Company realized foreign currency transaction losses (see note 1) of $6.6 million in 1994, $1.5 million in 1993 and $5.5 million in 1992, which were recorded as a reduction to other income. In the fourth quarter of 1994, the Company entered into forward sales for 183,200 ounces of gold it expects to produce at the Nickel Plate mine during 1995 and 1996. The prices to be received range from $386 to $437 and average $412 per ounce. The purpose of the forward sales program is to allow for recovery of the Company's remaining investment in the mine and provide for estimated reclamation costs. The Company has entered into various commitments in the ordinary course of its business, which include commitments to perform assessment work and other obligations necessary to maintain or protect its interests in mining properties, financing and other obligations to joint venturers and partners under venture and partnership agreements, and commitments under federal and state environmental health and safety permits. Note 24: GEOGRAPHIC AND SEGMENT INFORMATION The Company primarily is engaged in gold mining and related activities. Interests in joint ventures are included in segment operations and identifiable assets. In determining operating earnings, which are defined as operating revenues less operating costs and expenses, the following items have been excluded: mineral exploration costs, corporate income and expenses, and income and mining taxes. Identifiable assets represent those assets used in a segment's operations. Corporate assets are principally cash and equivalents, short-term investments and assets related to operations not significant enough to require classification as a business segment. 46 Sales to individual customers exceeding 10% of the Company's consolidated revenues were as follows: in 1994 gold sales of $129 million, $118 million and $100 million to three customers; in 1993 gold sales of $175 million, $145 million and $105 million to three customers; and in 1992 gold sales of $92 million to one customer. The Company believes that the loss of any of these customers would not have a material adverse impact on the Company because of the active worldwide market for gold. GEOGRAPHIC INFORMATION
1994 1993 1992 ------------------------------------- Revenues United States (1,2) $ 346,629 $ 380,458 $ 354,018 Canada 192,363 194,755 178,401 Australia 143,944 121,025 124,799 Latin America 22,551 25,990 26,302 ------------------------------------ $ 705,487 $ 722,228 $ 683,520 ==================================== Operating Earnings (Loss)(3) United States (1) $ 72,379 $ 33,295 $ (11,666) Canada 55,804 70,788 40,603 Australia 29,026 29,660 10,284 Latin America (1,359) 2,272 (869) ------------------------------------ $ 155,850 $ 136,015 $ 38,352 ==================================== Exploration Expense United States $ 11,841 $ 11,128 $ 14,735 Canada 2,445 1,907 6,328 Australia 4,008 2,888 4,097 Latin America and other 3,053 1,534 2,638 ------------------------------------ $ 21,347 $ 17,457 $ 27,798 ==================================== Identifiable Assets as of December 31 United States $ 598,059 $ 550,645 $ 559,558 Canada 382,575 385,324 406,883 Australia 207,837 165,683 159,993 Latin America 13,497 19,598 18,735 ------------------------------------ $1,201,968 $1,121,250 $1,145,169 ==================================== (1) Includes a gain of $15.7 million in 1994 on the sale of the Company's interest in the Dee mine. (2) Includes a gain of $11.2 million in 1994 on the dilution of the Company's interest in Prime. (3) Includes write-downs of: $16 million and $28.5 million in 1993 and 1992, respectively, for the United States; $7.1 million in 1992 for Canada; and $3.5 million in 1992 for Latin America.
SEGMENT INFORMATION
1994 1993 1992 ----------------------------------- Revenues Gold $ 632,031 $ 688,080 $ 639,253 Sulphur 26,882 16,220 22,867 Interest and other (1,2) 46,574 17,928 21,400 ------------------------------------- $ 705,487 $ 722,228 $ 683,520 ===================================== Operating Earnings (Loss) Gold (1,3) $ 156,013 $ 161,947 $ 34,318 Sulphur (4) (163) (25,932) 4,034 ------------------------------------- Operating earnings 155,850 136,015 38,352 Exploration expense (21,347) (17,457) (27,798) Net corporate expense (2,5) (28,690) (50,162) (189,049) ------------------------------------- Income (Loss) Before Taxes and Minority Interest $ 105,813 $ 68,396 $ (178,495) ===================================== Depreciation, Depletion and Amortization Gold $ 66,857 $ 90,842 $ 103,569 Sulphur 7,861 10,629 13,133 Corporate 1,453 1,906 781 -------------------------------------- $ 76,171 $ 103,377 $ 117,483 ====================================== Exploration Expense Gold $ 21,318 $ 17,017 $ 27,726 Sulphur 29 440 72 -------------------------------------- $ 21,347 $ 17,457 $ 27,798 ====================================== Additions to Property, Plant and Equipment Gold $ 83,597 $ 54,219 $ 40,614 Sulphur 3,039 1,828 21,044 Corporate 2,018 1,778 1,795 -------------------------------------- $ 88,654 $ 57,825 $ 63,453 ====================================== Identifiable Assets as of December 31 Gold $ 796,016 $ 788,122 $ 863,017 Sulphur 143,742 142,220 160,616 Corporate: Cash and equivalents and short-term investments 205,180 134,719 71,064 Other 57,030 56,189 50,472 ------------------------------------- $1,201,968 $1,121,250 $1,145,169 ===================================== (1) Includes a gain of $15.7 million in 1994 on the sale of the Company's interest in the Dee mine. (2) Includes a gain of $11.2 million in 1994 on the dilution of the Company's interest in Prime. (3) Includes write-downs of mining properties and equity investments of $39.1 million in 1992. (4) Includes a write-down of the oil and gas property of $16 million in 1993. (5) Includes write-downs of non-operating mining properties and investments of $91.2 million in 1992 and restructuring and business combination expenses of $8.2 million in 1993 and $48.4 million in 1992.
47 SEVEN-YEAR SELECTED DATA (1) Homestake Mining Company and Subsidiaries (Dollar amounts in thousands, except per share and per ounce amounts)
1994 1993 1992 1991 --------------------------------------------- OPERATIONS Revenues $705,487 $722,228 $683,520 $671,600 Production costs 447,129 454,623 470,374 468,107 Depreciation, depletion and amortization 76,171 103,377 117,483 116,993 Exploration 21,347 17,457 27,798 47,440 Administrative and general 38,159 40,553 48,514 47,405 Interest and other 16,868 13,639 19,114 12,336 Write-downs and restructuring costs 24,183 178,732 185,987 Income and mining tax expense (credit) 18,880 12,775 (2,889) 5,582 Minority interest (credit) 8,917 3,127 230 (4,494) --------------------------------------------------- Income (loss) from continuing operations 78,016(2) 52,494(3) (175,836)(4,5) (207,756)(6) Income (loss) from discontinued operations (25,359) Extraordinary gain Cumulative effect (28,800)(7) ---------------------------------------------------- (2) (3) (4,5) (6,7) Net income (loss) $78,016 $52,494 $(175,836) $(261,915) PER SHARE Income (loss) from continuing operations $0.57(2) $0.38(3) $(1.31)(4,5) $(1.57)(6) Income (loss) from discontinued operations (0.19) Extraordinary gain Cumulative effect (0.22)(7) ----------------------------------------------------- Net income (loss) $0.57(2) $0.38(3) $(1.31)(4,5) $(1.98)(6,7) ----------------------------------------------------- Dividends paid (Homestake only) $0.175 $0.10 $0.20 $0.20 ----------------------------------------------------- TABLE CONTINUED 1990 1989 1988 ------------------------------------ OPERATIONS Revenues $793,660 $771,126 $520,708 Production costs 473,688 405,246 276,082 Depreciation, depletion and amortization 113,443 103,110 59,472 Exploration 50,695 49,394 47,952 Administrative and general 50,631 44,641 38,674 Interest and other 28,475 33,073 26,315 Write-downs and restructuring costs 32,600 44,963 28,163 Income and mining tax expense (credit) 40,267 56,195 25,702 Minority interest (credit) (350) (266) 1,036 ------------------------------------ Income (loss) from continuing operations 4,211(8) 34,770(9) 17,312(11) Income (loss) from discontinued operations 7,979 31,667 15,558 Extraordinary gain 3,678(10) Cumulative effect 3,125(12) ------------------------------------ (8) (9,10) (11,12) Net income (loss) $12,190 $70,115 $35,995 PER SHARE Income (loss) from continuing operations $0.02(8) $0.28(9) $0.14(11) Income (loss) from discontinued operations 0.06 0.25 0.13 Extraordinary gain 0.03(10) Cumulative effect 0.02(12) -------------------------------------- Net income (loss) $0.08(8) $0.56(9,10) $0.29(11,12) -------------------------------------- Dividends paid (Homestake only) $0.20 $0.20 $0.20 -------------------------------------- 1 Seven-year selected data reflects the 1992 combination of Homestake and HCI accounted for as a pooling of interests and treats base metals, oil and gas, uranium and HCI's non-gold operations as discontinued operations. 2 Includes a gain of $12.6 million ($15.7 million pretax) or $0.09 per share on the sale of the Company's interest in the Dee mine and a gain of $11.2 million (no tax expense) or $0.08 per share on dilution of the Company's interest in Prime. 3 Includes expense of $12.8 million ($16 million pretax) or $0.09 per share for the write-down of the Company's investment in the oil and gas assets at Main Pass 299 and expense of $6.8 million ($8.2 million pretax) or $0.05 per share for restructuring and business combination costs. 4 Includes expense of $117.7 million ($130.3 million pretax) or $0.87 per share for write-downs of certain mining properties and investments. 5 Includes expense of $32.3 million ($48.4 million pretax) or $0.24 per share for restructuring and business combination costs. 6 Includes expense of $165.5 million ($172.4 million pretax) or $1.25 per share for write-downs of certain mining properties and investments and expense of $7.8 million ($13.6 million pretax) or $0.06 per share for HCI's 1991 restructuring.
48 Homestake Mining Company and Subsidiaries (Dollar amounts in thousands, except per share and per ounce amounts)
1994 1993 1992 1991 --------------------------------------------------- FINANCIAL POSITION Cash and short-term investments $205,180 $134,719 $71,064 $164,353 Other current assets 137,619 103,491 108,288 137,217 Property, plant and equipment - net 808,221 830,228 911,588 844,909 Other long-term assets 50,948 52,812 54,229 206,352 --------------------------------------------------- Total assets $1,201,968 $1,121,250 $1,145,169 $1,352,831 =================================================== Current liabilities $96,895 $104,350 $155,894 $191,145 Long-term debt 185,000 189,191 205,174 279,190 Other long-term obligations 110,719 93,674 88,002 86,193 Deferred income taxes 136,274 164,030 162,587 100,797 Minority interest (13) 84,310 54,761 68,074 19,864 Shareholders' equity 588,770 515,244 465,438 675,642 --------------------------------------------------- Total liabilities and shareholders' equity $1,201,968 $1,121,250 $1,145,169 $1,352,831 =================================================== RATIOS Debt to Equity 31% 37% 53% 52% Return on Shareholders' Equity 14% 11% (31)% (30)% CAPITAL EXPENDITURES $88,654 $57,825 $63,453 $166,458 OPERATING STATISTICS Gold production (thousand ounces) 1,696 1,918 1,912 1,801 Cash cost per ounce $254 $231 $248 $269 Average gold price realized per ounce $384 $359 $348 $376 RESERVES Gold (million ounces) 17.9 18.4 17.3 18.5 Eskay Creek Silver (million ounces) 51.5 55.1 Sulphur (million long tons) 11.7 11.0 11.2 11.2 TABLE CONTINUED 1990 1989 1988 ------------------------------------- FINANCIAL POSITION Cash and short-term investments $332,690 $323,501 $295,538 Other current assets 295,843 209,998 172,936 Property, plant and equipment - net 902,161 947,494 692,020 Other long-term assets 381,121 267,504 213,321 ------------------------------------- Total assets $1,911,815 $1,748,497 $1,373,815 ===================================== Current liabilities $205,863 $145,325 $95,926 Long-term debt 408,902 440,888 283,600 Other long-term obligations 51,253 47,000 41,425 Deferred income taxes 108,681 114,828 61,663 Minority interest (13) 78,422 98,972 58,976 Shareholders' equity 1,058,694 901,484 832,225 ------------------------------------- Total liabilities and shareholders' equity $1,911,815 $1,748,497 $1,373,815 ===================================== RATIOS Debt to Equity 48% 51% 37% Return on Shareholders' Equity 1% 8% 4% CAPITAL EXPENDITURES $139,352 $266,279 $281,040 OPERATING STATISTICS Gold production (thousand ounces) 1,979 1,738 1,312 Cash cost per ounce $248 $247 $263 Average gold price realized per ounce $392 $394 $434 RESERVES Gold (million ounces) 19.6 20.6 14.3 Eskay Creek Silver (million ounces) Sulphur (million long tons) 11.2 7 Includes expense of $28.8 million (no tax benefit) or $0.22 per share for the cumulative effect of the change in accounting for postretirement benefits other than pensions. 8 Includes expense of $32.6 million (no tax benefit) or $0.25 per share for the write-down of the Company's investment in North American Metals Corp. 9 Includes expense of $30.7 million ($45 million pretax) or $0.24 per share for the write-downs of certain mining properties of HCI. 10 Includes an extraordinary gain of $3.7 million or $0.03 per share on the monetization of gold loans. 11 Includes expense of $28.2 million ($40 million pretax) or $0.23 per share for write-downs of certain mining properties of HCI. 12 Includes income of $3.1 million or $0.02 per share from the cumulative effect of the change in accounting for income taxes. 13 Includes redeemable preference shares of wholly-owned subsidiaries of $15.9 million, $4.9 million, $46.1 million, $50.4 million and $48.9 million at December 31, 1992, 1991, 1990, 1989 and 1988, respectively.
49 QUARTERLY SELECTED DATA Homestake Mining Company and Subsidiaries (In thousands, except per share amounts)
First Second Third Fourth Quarter Quarter Quarter Quarter Year --------------------------------------------------- 1994: Revenues $172,402 $202,079 $166,991 $164,015 $705,487 Net income 24,214 32,955(1) 10,849 9,998 78,016(1) Per common share: Net income 0.18 0.24(1) 0.08 0.07 0.57(1) Dividends paid 0.025 0.05 0.05 0.05 0.175 1993: Revenues $169,993 $187,091 $180,440 $184,704 $722,228 Net income 5,561 11,294(2) 22,739(2) 12,900(2,3) 52,494(2,3) Per common share: Net income 0.04 0.08(2) 0.16(2) 0.09(2,3) 0.38(2,3) Dividends paid 0.025 0.025 0.025 0.025 0.10 (1) Includes a gain of $12.6 million ($15.7 million pretax) or $0.09 per share on the sale of the Company's interest in the Dee mine and a gain of $11.2 million (no tax expense) or $0.08 per share on the dilution of the Company's interest in Prime. (2) Includes expense of $6.8 million ($8.2 million pretax) or $0.05 per share for restructuring and business combination costs, including expenses of $1.9 million or $0.01 per share, $4.8 million or $0.04 per share and $0.1 million in the second, third and fourth quarters, respectively. (3) Includes expense of $12.8 million ($16 million pretax) or $0.09 per share for the write-down of the Company's investment in the oil and gas assets at Main Pass 299.
COMMON STOCK PRICE RANGE Homestake Mining Company and Subsidiaries (Prices as quoted on the New York Stock Exchange)
First Second Third Fourth Quarter Quarter Quarter Quarter Year --------------------------------------------------- 1994: High $ 24.88 $ 22.63 $22.00 $ 20.75 $ 24.88 Low 18.88 17.38 17.50 16.13 16.13 1993: High $ 14.63 $ 19.63 $ 21.63 $ 22.88 $ 22.88 Low 9.63 13.38 15.25 16.25 9.63
50 APPENDIX 1: Description of Bar Charts in Management's Discussion and Analysis Bar Chart A: Chart depicting net income (dollars in millions) as follows: Year: 1992 1993 1994 Dollars: -$175.8 $52.5 $78.0 Bar Chart B: Chart depicting gold production (ounces in millions) as follows: Year: 1992 1993 1994 Ounces: Homestake's Interest: 1.75 1.77 1.61 Minority Interest: 0.06 0.09 0.09 Operations Sold: 0.10 0.06 - Total 1.91 1.92 1.70 Bar Chart C: Chart depicting gold revenues (dollars in millions) as follows: Year: 1992 1993 1994 Dollars: $639.3 $688.1 $632.0 Bar Chart D: Chart depicting cash costs per ounce (dollars per ounce) as follows: Year: 1992 1993 1994 Dollars: $248 $231 $254 Bar Chart E: Chart depicting administrative and general expense (dollars in millions) as follows: Year: 1992 1993 1994 Dollars: $48.5 $40.6 $38.2 Bar Chart F: Chart depicting exploration expense (dollars in millions) as follows: Year: 1992 1993 1994 Dollars: United States: $14.8 $11.1 $11.8 Canada: $6.3 $1.9 $2.4 Australia: $4.1 $2.9 $4.0 Latin America and Other: $2.6 $1.6 $3.1 Total $27.8 $17.5 $21.3 Bar Chart G: Chart depicting cash and equivalents and short-term investments (dollars in millions) as follows: Year: 1993 1994 Dollars: $134.7 $205.2 Bar Chart H: Chart depicting cash provided by operations (dollars in millions) as follows: Year: 1992 1993 1994 Dollars: $73.5 $170.1 $133.7 EX-22 4 SUBSIDIARIES OF THE REGISTRANT EXHIBIT 22 LIST OF SUBSIDIARIES Homestake Mining Company, a Delaware Corporation and its Subsidiaries Interest of Homestake Mining Company is 100% unless otherwise noted ( ) Denotes state, province or country of incorporation Homestake Mining Company (Delaware) Homestake Mining Company of California (California) Denay Creek Gold Mining Company (California) Homestake Canada Inc. (Ontario) 588982 Ontario Inc. (Ontario) 759290 Ontario Inc. (Ontario) 759291 Ontario Inc. (Ontario) 759292 Ontario Inc. (Ontario) Corona Gold Inc. (Nevada) Santa Fe Gold Inc. (Nevada) E & B Explorations Inc. (Delaware) Galveston Resources (Nevada), Inc. (Nevada) Homestake Mineral Development Company Ltd. (British Columbia) PRG Project Development Corp. (British Columbia) Pezamerica Resource Corporation (Arizona) Prime Resources Group Inc. (British Columbia) - 50.6% Teck-Corona Operating Company (Ontario) - 50% The Ventora Corporation (Arizona) Westcan Holdings Inc. (Nevada) Williams Operating Company (Ontario) - 50% Homestake de Argentina S.A. (Buenos Aires) Homestake Forest Products Company (California) Homestake Gold of Australia Limited (Western Australia) - 81.5% Homestake Australia Limited (Western Australia) - 81.5% Homestake Gold (Queensland) Pty. Ltd. (Australia) - 81.5% Homestake International Minerals Limited (California) Homestake Lead Company of Missouri (California) Homestake Nevada Corporation (California) Homestake Sulphur Company (Delaware) Black Hills Oil & Gas Company (California) Homestake Venezuela, S.A. (Venezuela) Minera Rio Carichapo, S.A. (Venezuela) Minera Rio Marwani, S.A. (Venezuela) La Jara Mesa Mining Company (New Mexico) Minera Homestake Chile S.A. (Chile) Whitewood Development Corporation (California) EX-24 5 CONSENT OF COOPERS & LYBRAND L.L.P. Exhibit 24 CONSENT OF INDEPENDENT ACCOUNTANTS We consent to the incorporation by reference in the following Registration Statements of Homestake Mining Company: Post- Effective Amendment No. 5 to No. 2-90903 on Form S-8 (originally filed on Form S-3); Post Effective Amendment No. 3 to No. 2-90905 on Form S-8 (originally filed on Form S-3); No. 33-26049 on Form S-8; No. 33-32174 on Form S-8; No. 2-66538 on Form S-8; Post- Effective Amendment No. 1 to No. 33-48526 on Form S-8 (originally filed on Form S-4) of our report dated February 8, 1995, appearing in and incorporated by reference in the Annual Report on Form 10-K of Homestake Mining Company for the year ended December 31, 1994. /s/ Coopers & Lybrand L.L.P. ---------------------------- March 23, 1995 Oakland, California EX-27 6 FINANCIAL DATA SCHEDULE
5 This schedule contains summary financial information extracted from the Consolidated Balance Sheet at December 31, 1994 and the related Statement of Consolidated Operations for the year ended December 31, 1994 and is qualified in its entirety by reference to such financial statements. 12-MOS DEC-31-1994 DEC-31-1994 105,701 99,479 58,994 0 71,715 342,799 1,579,502 771,281 1,201,968 96,895 185,000 137,785 0 0 450,985 1,201,968 656,056 705,487 523,300 561,459 28,091 0 10,124 105,813 18,880 78,016 0 0 0 78,016 0.57 0 Includes Production costs and Depreciation, depletion and amortization from Statement of Consolidated Operations. Includes Production costs and Depreciation, depletion and amortization and Administrative and general expense from Statement of Consolidated Operations. Includes Exploration expense and Other expense from Statement of Consolidated Operations.