1 ================================================================================ UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 ------------- FORM 10-K/A (Amendment No. 3) [X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE FISCAL YEAR ENDED DECEMBER 31, 1995 COMMISSION FILE NO.1-9666 OR [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE TRANSITION PERIOD FROM TO ---------- ---------- BATTLE MOUNTAIN GOLD COMPANY (EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER) NEVADA 76-0151431 (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) 333 CLAY STREET, 42ND FLOOR, HOUSTON, TEXAS 77002 (Address of principal executive offices) (Zip Code) REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: (713) 650-6400 SECURITIES REGISTERED PURSUANT TO SECTION 12(B) OF THE ACT: Name of each Exchange Title of each class on which registered ------------------- ------------------- Common Stock New York Stock Exchange $3.25 Convertible Preferred Stock New York Stock Exchange Rights to Purchase Preferred Stock New York Stock Exchange SECURITIES REGISTERED PURSUANT TO SECTION 12(G) OF THE ACT: NONE Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. YES X NO --- --- Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. [x] The number of outstanding shares of the registrant's common stock as of October 10, 1996 is 108,507,678. In addition, as of such date there were outstanding 121,344,106 exchangeable shares of Battle Mountain Canada Ltd., which are exchangeable into an equal number of shares of the registrant's common stock, entitle their holders to dividend and other rights economically equivalent to those of the registrant's common stock and, through a voting trust, to vote at meetings of stockholders of the registrant. The aggregate market value of the voting stock held by non-affiliates of the registrant was approximately $1.8 billion as of October 10, 1996, based on the closing sales price of the registrant's common stock as reported on the New York Stock Exchange Composite Tape on such date and the sum of the number of shares of the registrant's common stock outstanding and the number of shares of the registrant's common stock into which the outstanding exchangeable shares were exchangeable as of such date. For purposes of the foregoing sentence only, all directors and officers of the registrant are assumed to be affiliates. DOCUMENTS INCORPORATED BY REFERENCE: LIST HEREUNDER THE FOLLOWING DOCUMENTS IF INCORPORATED BY REFERENCE AND THE PART OF THE FORM 10-K INTO WHICH THE DOCUMENT IS INCORPORATED: NONE. ================================================================================ 2 The information appearing in Part II, Item 8 and Part IV of Battle Mountain Gold Company's Annual Report on Form 10-K for the fiscal year ended December 31, 1995 is hereby amended to read in its entirety as set forth below. The two primary revisions to the Form 10-K are as follows: (1) The inclusion of Price Waterhouse LLP's reports on the Company's consolidated financial statements as of December 31, 1994 and for the two years then ended in place of the corresponding report issued on those years by the Company's predecessor accountants, Arthur Andersen LLP. Recently, the Company requested Price Waterhouse LLP to perform a reaudit of its 1993 and 1994 financial statements in order to streamline its prospective filings under the Securities Act of 1933, as amended. (2) The addition of a subsequent events footnote (Note 17) highlighting the Company's recent merger with Hemlo Gold Mines Inc. ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA Index to Consolidated Financial Statements Page ---- I. BATTLE MOUNTAIN GOLD COMPANY Report of Independent Accountants.................................... 2 Consolidated Statement of Income..................................... 3 Consolidated Balance Sheet........................................... 4 Consolidated Statement of Shareholders' Equity....................... 5 Consolidated Statement of Cash Flows................................. 6 Notes to Consolidated Financial Statements........................... 7 Supplemental Financial Information................................... 28 (Unaudited) II. LIHIR GOLD LIMITED (A DEVELOPMENT STAGE COMPANY) Report of Independent Accountants.................................... 29 Profit and Loss Accounts............................................. 30 Balance Sheet........................................................ 31 Statement of Cash Flows.............................................. 32 Notes to Financial Statements........................................ 33 3 Report of Independent Accountants October 10, 1996 To the Board of Directors and Shareholders of Battle Mountain Gold Company In our opinion, the consolidated financial statements of Battle Mountain Gold Company listed in the index appearing under Item 14(a)(1) and (2) on page 45 present fairly, in all material respects, the financial position of Battle Mountain Gold Company and its subsidiaries at December 31, 1995 and 1994, and the results of their operations and their cash flows for each of the three years in the period ended December 31, 1995, in conformity with generally accepted accounting principles. These financial statements are the responsibility of the Company's management; our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits of these statements in accordance with generally accepted auditing standards which require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for the opinion expressed above. Price Waterhouse LLP Houston, Texas 2 4 BATTLE MOUNTAIN GOLD COMPANY CONSOLIDATED STATEMENT OF INCOME YEAR ENDED DECEMBER 31, ------------------------------------------- 1995 1994 1993 -------- -------- -------- (Expressed in thousands except per share amounts) GROSS REVENUE $299,295 $242,984 $207,251 Less: freight, allowances and royalties 15,035 13,314 13,836 -------- -------- -------- NET REVENUE 284,260 229,670 193,415 COSTS AND EXPENSES Mining costs 43,963 30,404 35,906 Milling and other plant costs 117,409 98,566 97,163 Depreciation, depletion and amortization 70,752 51,247 41,389 Exploration, evaluation and other lease costs 18,032 14,542 9,474 Asset write-downs 2,222 - - General and administrative expenses 13,161 12,376 12,901 Taxes, other than income 2,737 2,593 2,316 -------- -------- -------- Total costs and expenses 268,276 209,728 199,149 -------- -------- -------- OPERATING INCOME(LOSS) 15,984 19,942 (5,734) Interest income 3,125 4,149 2,689 Interest (expense) (14,099) (13,722) (13,103) Interest capitalized 6,675 6,353 6,655 Other income (expense), net 6,912 (244) 5,708 -------- -------- -------- INCOME (LOSS) BEFORE INCOME TAXES AND MINORITY INTEREST 18,597 16,478 (3,785) Income tax (benefit) expense (2,804) 2,519 (4,089) Minority interest in net (income) loss (6,156) (4,387) (4,709) -------- -------- -------- NET INCOME (LOSS) 15,245 9,572 (4,405) Preferred dividends 7,475 7,475 3,738 -------- -------- -------- NET INCOME (LOSS) TO COMMON SHARES $ 7,770 $ 2,097 $ (8,143) ======== ======== ======== NET INCOME (LOSS) PER SHARE: $ .09 $ .02 $ (.10) DIVIDENDS PER COMMON SHARE $ .05 $ .05 $ .05 AVERAGE COMMON SHARES OUTSTANDING FOR INCOME PER SHARE PURPOSES 86,327 86,071 80,132 The accompanying notes are an integral part of these financial statements. 3 5 BATTLE MOUNTAIN GOLD COMPANY CONSOLIDATED BALANCE SHEET DECEMBER 31, ------------------------------ 1995 1994 ---------- --------- ASSETS (Expressed in thousands) Current assets: Cash and cash equivalents $ 46,071 $ 76,464 Accounts receivable 26,320 22,810 Inventories 4,158 5,048 Materials and supplies, at average cost 26,563 27,730 Other current assets 12,846 7,014 ---------- --------- Total Current assets 115,958 139,066 Investments 230,652 4,092 Property, plant and equipment, net 524,148 360,270 Other assets 30,259 12,463 ---------- --------- Total assets $ 737,139 $ 679,769 ========== ========= LIABILITIES AND SHAREHOLDERS' EQUITY Current liabilities: Short term borrowings $ 2,571 $ - Current maturities of long-term debt 13,427 13,427 Accounts payable 13,251 14,527 Payroll and related benefits accrued 5,039 4,226 Accrued interest 7,198 6,714 Other current liabilities 5,448 3,425 ---------- --------- Total current liabilities 46,934 42,319 ---------- --------- Long-term debt 169,175 165,602 Other liabilities 38,199 32,043 ---------- --------- Total liabilities 254,308 239,964 ---------- --------- Minority interest 111,773 64,171 ---------- --------- Commitments and Contingencies (Note 14) - - Shareholders' equity: Preferred stock, $1.00 par value: Authorized - 20,000,000 shares; issued and outstanding, 1995 and 1994 - 2,299,980 shares 110,578 110,578 Common stock, $.10 par value: Authorized - 200,000,000 shares; issued and outstanding, 1995 - 81,133,540 shares and 1994 - 80,934,793 shares 8,113 8,094 Additional paid-in capital 199,533 206,735 Retained earnings 53,971 50,327 Cumulative foreign currency translation adjustment (1,137) (100) ---------- --------- Total shareholders' equity 371,058 375,634 ---------- --------- Total liabilities and shareholders' equity $ 737,139 $ 679,769 ========== ========= The accompanying notes are an integral part of these financial statements. 4 6 BATTLE MOUNTAIN GOLD COMPANY CONSOLIDATED STATEMENT OF SHAREHOLDERS' EQUITY YEAR ENDED DECEMBER 31, ------------------------------------------------------------------------------------------- 1995 1994 1993 --------------------------- -------------------------- --------------------------- (Expressed in thousands) -------------------------- Preferred Common Preferred Common Preferred Common Shares Shares Amount Shares Shares Amount Shares Shares Amount ----- ------ -------- ----- ------ -------- ----- ------ -------- PREFERRED STOCK, $1.00 par value; Authorized 20,000,000 shares; $50.00 liquidation preference per share: Balance January 1 2,300 - $110,578 2,300 - $110,579 - - $ - Shares issued - - - - - - 2,300 - 110,579 Shares converted to Common - - - - - (1) - - - ----- ------ -------- ----- ------ -------- ----- ------ -------- Balance December 31 2,300 - 110,578 2,300 - 110,578 2,300 - 110,579 ----- ------ -------- ----- ------ -------- ----- ------ -------- COMMON STOCK, $.10 par value; Authorized 200,000,000 shares: Balance January 1 - 80,935 8,094 - 80,266 8,027 - 80,016 8,002 Shares issued - 199 19 - 669 67 - 250 25 ----- ------ -------- ----- ------ -------- ----- ------ -------- Balance December 31 - 81,134 8,113 - 80,935 8,094 - 80,266 8,027 ----- ------ -------- ----- ------ -------- ----- ------ -------- ADDITIONAL PAID-IN CAPITAL: Balance January 1 - - 206,735 - - 202,011 - - 202,417 Shares issued - - 1,705 - - 5,933 - - 1,732 Exercise of Niugini Mining - - (2,208) - - (1,209) - - - options Niugini Mining equity offering - - - - - - - - (2,138) LGL equity offering - - (6,699) - - - - - - ----- ------ -------- ----- ------ -------- ----- ------ -------- Balance December 31 - - 199,533 - - 206,735 - - 202,011 ----- ------ -------- ----- ------ -------- ----- ------ -------- RETAINED EARNINGS: Balance January 1 - - 50,327 - - 52,260 - - 62,410 Net income (loss) - - 15,245 - - 9,572 - - (4,405) Common stock dividends - - (4,126) - - (4,030) - - (2,007) Preferred stock dividends - - (7,475) - - (7,475) - - (3,738) ----- ------ -------- ----- ------ -------- ----- ------ -------- Balance December 31 - - 53,971 - - 50,327 - - 52,260 ----- ------ -------- ----- ------ -------- ----- ------ -------- CUMULATIVE FOREIGN CURRENCY TRANSLATION ADJUSTMENT - - (1,137) - - (100) - - (3,317) ----- ------ -------- ----- ------ -------- ----- ------ -------- TOTAL SHAREHOLDERS' EQUITY 2,300 81,134 $371,058 2,300 80,935 $375,634 2,300 80,266 $369,560 ===== ====== ======== ===== ====== ======== ===== ====== ======== The accompanying notes are an integral part of these financial statements. 5 7 BATTLE MOUNTAIN GOLD COMPANY CONSOLIDATED STATEMENT OF CASH FLOWS YEAR ENDED DECEMBER 31, ----------------------------------------- 1995 1994 1993 ---------- ---------- ----------- (Expressed in thousands) CASH FLOWS FROM OPERATING ACTIVITIES: Net income (loss) $ 15,245 $ 9,572 $ (4,405) ---------- ---------- ----------- Adjustments to reconcile net income (loss) to cash flows from operating activities: Depreciation, depletion and amortization 70,752 51,247 41,389 Exploration and evaluation costs 11,740 10,312 6,621 Unproven leases abandoned 279 59 146 Gain (loss) from sales of assets (5,153) 243 (6,429) Asset write-downs 2,222 - - Increase in accrued reclamation costs 143 1,341 1,517 Loss (gain) on foreign currency transactions 439 2,075 (228) (Increase) decrease in accounts and notes receivable (3,212) 14,542 (13,337) Decrease (increase) in inventories 841 (4,469) 6,857 Decrease (increase) in materials and supplies 1,167 (4,555) (1,762) (Increase) in other current assets (5,832) (3,065) (2,091) (Increase) in non-current portion of deferred mining costs (2,312) (6,566) - Increase (decrease) in accounts payable and other current 3,356 3,212 (5,058) liabilities Deferred income tax (benefit) expense (4,968) 3,581 - Minority interest 6,156 4,387 4,709 Other net changes (278) 1,203 2,136 ---------- ---------- ----------- TOTAL ADJUSTMENTS 75,340 73,547 34,470 ---------- ---------- ----------- NET CASH FLOWS FROM OPERATING ACTIVITIES 90,585 83,119 30,065 --------- --------- --------- CASH FLOWS FROM INVESTING ACTIVITIES: Proceeds from sales of assets 5,636 257 10,729 Acquisition of minority interest - (5,200) - Capital expenditures (120,010) (85,335) (64,665) Exploration and evaluation expenditures (12,229) (10,301) (6,621) (Increase) decrease in restricted cash (4,964) - (53) Other, net (1,112) (193) 329 ---------- ---------- ----------- NET CASH FLOWS USED IN INVESTING ACTIVITIES (132,679) (100,772) (60,281) ---------- ---------- ----------- CASH FLOWS FROM FINANCING ACTIVITIES: Cash proceeds from stock issuances 19,350 6,397 130,934 Cash proceeds from borrowings 64,964 - 36,891 Cash dividend payments (11,524) (11,505) (7,743) Debt repayments (59,322) (13,558) (59,869) Other, net (88) (104) - ---------- ---------- ----------- NET CASH FLOWS FROM (USED IN) FINANCING ACTIVITIES 13,380 (18,770) 100,213 ---------- ---------- ----------- EFFECT OF EXCHANGE RATE CHANGES ON CASH (1,679) (2,451) (36) ---------- ---------- ----------- NET (DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS (30,393) (38,874) 69,961 CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR 76,464 115,338 45,377 ---------- ---------- ----------- CASH AND CASH EQUIVALENTS AT END OF YEAR $ 46,071 $ 76,464 $ 115,338 ========== ========== =========== The accompanying notes are an integral part of these financial statements. 6 8 BATTLE MOUNTAIN GOLD COMPANY Notes to Consolidated Financial Statements Note 1. Summary of Significant Accounting Policies Principles of Consolidation - The accompanying consolidated financial statements include the accounts of the Battle Mountain Gold Company ("BMG") and its wholly-owned and majority-owned subsidiaries (the "Company"). The accounts of Niugini Mining Limited, a Papua New Guinea precious metals exploration, development and production company ("Niugini Mining"), have been consolidated with the Company's from January 1, 1989 (See Note 10). The accounts of Empresa Minera Inti Raymi S.A., a Bolivian gold mining company ("Inti Raymi"), have been consolidated with the Company's from April 1, 1990 (See Note 10). All significant intercompany transactions have been eliminated in consolidation. Certain prior- period items have been reclassified in the consolidated financial statements in order to conform with current year presentation. Inventories - Inventories, consisting of gold, silver and copper, are reported at the lower of cost or market, using the first-in, first-out method. Property, Plant and Equipment - Property, plant and equipment are stated at cost. Expenditures for development of new mines and major development expenditures at existing mines, which are expected to benefit future periods, are capitalized and amortized, generally, on the units of production method. Exploration and development costs expended to maintain production at operating mines are charged to expense as incurred. In certain cases, mining costs associated with waste rock removal are deferred as development costs and charged to operations on the basis of the average stripping ratio over the life of the mine. Other property, plant and equipment includes capitalized lease costs and mine development costs for projects in progress. Capitalized exploration costs are evaluated on an annual basis and costs attributable to unproductive projects are charged directly to abandonment expense. Generally, depreciation, depletion and amortization of mining properties and related assets are determined using the units of production method based upon estimated recoverable ore reserve tonnages or reserve ounces at the beginning of each quarter. However, assets having an estimated life of less than the estimated life of the mineral deposits are depreciated on the straight-line method based on the expected life of the asset. Write-downs and write-offs of depreciable properties are included in accumulated depreciation, depletion and amortization. Effective December 31, 1995, the Company adopted SFAS 121, "Impairment of Long-lived Assets". There was no effect on the carrying value of the Company's assets as a result of this adoption. Exploration and Evaluation Expenditures- With the exception of lease acquisition costs incurred to acquire mineral rights, the Company charges all exploration and predevelopment evaluation 7 9 expenditures to expense as incurred prior to delineation of economic mineralization. Exploration costs incurred subsequent to delineation of economic mineralization are capitalized. Capitalization of Operating Results During Mine Development - During the start-up period for each developing mine, operating costs may exceed revenues earned from the sale of precious metals produced. In these instances, all costs incurred during this pre-commercial production period, net of revenues earned, are capitalized as property costs. Capitalization of Interest - Interest expense incurred attributable to pre-commercial production stage projects is capitalized until those projects commence commercial production. Reclamation and Closure Costs - Reserves for estimated future reclamation and closure costs of the Company's operating sites are accrued on a units of production basis over the estimated lives of the respective mines. These costs are charged to milling and other plant costs as accrued (See Note 14). Revenue Recognition - Revenue is recognized when the dore (a combination of gold and silver) or concentrates are delivered against sales agreements or contracts and risk of loss passes to the buyer. Currency Translation - Foreign currency financial statements are translated into U.S. dollars using current exchange rates and translation gains and losses are accumulated in the balance sheet caption "Cumulative foreign currency translation adjustment," a separate component of shareholders' equity. Effective January 1, 1994, Niugini Mining changed its functional currency from the Papua New Guinea kina to U.S. dollars for financial reporting purposes. Income (Loss) Per Share - Income (loss) per share is computed by dividing net income (loss) attributable to common shareholders by the weighted average number of common shares outstanding for the year, adjusted for common stock equivalents, if dilutive. The effects of common stock equivalents are not included in the computation of income per share for 1993 because of their antidilutive effect. Fully diluted earnings per share are not presented for any year because the effect of other dilutive securities would be antidilutive. Statement of Cash Flows - At December 31, 1995, cash and cash equivalents included $29.4 million and $10.6 million attributable to Niugini Mining and Inti Raymi, respectively. Cash and cash equivalents at December 31, 1994, included $39.9 million and $15.4 million held by Niugini Mining and Inti Raymi, respectively. At December 31, 1995 and December 31, 1994, other assets included $5.8 million and $.9 million, respectively, of restricted cash held by Niugini Mining. For purposes of the Consolidated Statement of Cash Flows, the Company considers all highly liquid instruments purchased with a maturity of three months or less to be cash equivalents. 8 10 During the year ended December 31, 1995, the Company paid foreign withholding taxes of $2.2 million. During the year ended December 31, 1994, the Company received a U.S. income tax refund of $4.3 million and paid foreign withholding taxes of .9 million. During the year ended December 31, 1993, the Company paid $.7 million in U.S. income taxes. The Company paid $10.1 million, $6.4 million and $6.8 million in interest, net of amounts capitalized, during 1995, 1994 and 1993, respectively. During 1995, the Company's investing activities included the exchange of Niugini Mining's interest in the Lihir Joint Venture for the common stock of Lihir Gold Limited ("LGL"). During 1994, the Company's investing activities included the issuance of 435,897 shares of BMG's common stock (market value of $4.25 million) and payment of $4.25 million cash for the purchase of an additional 3 percent interest in the Crown Jewel Project. During 1993, the Company's investing activities did not include any significant non-cash transactions. Issuance of Stock by Subsidiaries - The issuance of stock by subsidiaries is accounted for as a capital transaction in the Consolidated Financial Statements. Forward Sales Contracts, Options and Interest Rate Caps - The Company may enter into fixed forward and spot deferred sales contracts for the sale of its metals as a hedge against changes in prices. Gains, losses or expenses related to these transactions are netted against revenue when the hedged production is sold. The Company may also purchase put options for the sale of its produced metals. The premiums paid for the acquisition of put options are netted against revenue in the period of expiry. Spot deferred sales contracts allow the Company to defer the delivery of gold under the contract to a later date at the original contract price plus the prevailing premium at the time of the deferral, as long as certain conditions are satisfied. Although spot deferred sales contracts could limit amounts realizable during a period of rising prices, the Company may "roll forward" its spot deferred contracts to future periods in order to realize current market price increases, while maintaining future downside protection. Premiums paid for purchased interest rate caps are amortized as interest expense over the terms of the interest rate cap agreement. Unamortized premiums are included in other assets in the Consolidated Balance Sheet. Amounts earned under cap agreements are accrued as a reduction of interest expense. Estimates, risks and uncertainties - The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of certain assets and liabilities and disclosures of contingent assets and liabilities at the date of the financial statements and the related reported amounts of revenues and expenses during the reporting period. Actual results could differ from these estimates. Management believes that the estimates are reasonable. 9 11 Realization of the Company's assets is subject to various risks including permitting of the Company's new mines, reserves estimation, gold prices and environmental factors. Note 2. Investments The Company's long-term investments as of December 31 include the following: 1995 1994 --------- -------- (expressed in thousands) Lihir Gold Limited $ 225,150 $ - Other joint ventures 325 91 Cash surrender value of life insurance, net 4,549 3,600 Other 628 401 --------- -------- $ 230,652 $ 4,092 ========= ======== Lihir Gold Limited ("LGL"), which is a company created specifically for the development, financing, operating and ownership of the Lihir project in Papua New Guinea, completed an initial public offering of common stock on October 6, 1995. LGL was formed and initially owned by the prior participants in the Lihir Joint Venture which included a 30 percent ownership by Niugini Mining, a 40 percent ownership by a subsidiary of RTZ Corporation, plc and a 30 percent ownership by an entity of the PNG government. As a result of the initial public offering, Niugini Mining now owns a 17.15 percent interest in LGL and BMG's attributable interest is 8.7 percent. Niugini Mining's interest in LGL is accounted for using the equity method of accounting, effective from October 1995, while the Company's investment in the Lihir Joint Venture was previously recorded in property, plant and equipment. The initial public offering by LGL was the final transaction in a series of planned transactions which restructured and reduced BMG's participation in the Lihir project. The Company recorded the effects of this series of transactions in the fourth quarter of 1995. An increase in Niugini Mining's shareholders' equity of approximately $57 million related to the issuance of the common stock by LGL at a value in excess of Niugini Mining's carrying value per share in LGL was recorded. This increase was recorded as a credit to additional paid-in capital consistent with the Company's accounting policy with regard to transactions of this nature. An offsetting increase in the carrying value of Niugini Mining's investment in LGL was recorded. The Company attributed $28 million of this increase to minority interest in its consolidated financial statements; the remainder was credited to additional paid-in capital. As a result of these transactions, the Company also amortized approximately $35 million of its investment in Niugini Mining attributable to the investment in LGL. This amortization was recorded as a charge to additional paid-in capital. The net result of these transactions in the Company's consolidated financial statements was an increase in the carrying value of the LGL investment of approximately $22 million, an increase in minority interest of approximately $28 million and a net decrease in additional paid-in capital of approximately $6 million. 10 12 Interest costs amounting to $7.8 million in 1995 and $6 million per year in 1994 and 1993 each were capitalized in connection with the Company's investment in the Lihir project. Note 3. Property, plant and equipment Property, plant and equipment as of December 31 consists of the following: 1995 1994 -------- --------- (expressed in thousands) Leasehold and mine development $ 96,624 $132,803 Mining, milling and other equipment 336,839 314,231 Other 184,470 322,508 -------- --------- 617,933 769,542 Accumulated depreciation, depletion and amortization (257,663) (245,394) -------- --------- $360,270 $ 524,148 ======== ========= Note 4. Asset Write-downs In June 1995, the Company decommissioned and dismantled the milling facility formerly used at the depleted Fortitude mine in Nevada. Accordingly the remaining net carrying value of this mill and related facilities of approximately $2.2 million was charged to operations. In addition, $.9 million was charged to milling and other plant costs, representing the carrying value of spare parts rendered obsolete by the decommissioning of the milling facility. The Company did not recognize any charges for asset write-downs during 1994 or 1993. Note 5. Debt The Company had the following long-term debt outstanding as of December 31: 1995 1994 ----------- ---------- (expressed in thousands) Convertible subordinated debentures, due 2005, 6% $ 99,980 $ 100,000 Revolving credit facility, due 2000, variable rate 17,000 - Inti Raymi Kori Kollo project financing: IFC loan, variable rate 22,500 27,500 IFC convertible loan, variable rate with 11% minimum 5,000 5,000 OPIC loan, variable rate 25,800 31,500 Restructured OPIC loans, 10.5% 2,644 3,231 CAF loan, variable rate 9,643 11,786 Other 35 12 ----------- ---------- Total 182,602 179,029 Less current portion of long-term debt 13,427 13,427 ----------- ---------- Total long-term debt $ 169,175 $ 165,602 =========== ========== 11 13 The convertible subordinated debentures are convertible into shares of the Company's common stock at a conversion price of $20 5/8 per share, subject to anti-dilution adjustment in certain circumstances. There are 4.8 million shares of the Company's common stock reserved for issuance upon conversion of the debentures. The debentures are now redeemable at the Company's option at any time at par value plus accrued interest. There are no sinking fund requirements. Interest is payable annually. Proceeds from the issuance were added to working capital and used for general corporate purposes, including mineral acquisitions and development of properties. On November 6, 1995, the Company entered into a new committed non-reducing revolving credit agreement with a syndicate of six banks, led by Citibank N.A. as agent. In connection with the new revolving credit agreement the Company terminated its previous existing committed revolving credit agreement. The new facility, which has a termination date of November 6, 2000, provides for unsecured borrowings of up to $75 million. Interest rates under the facility are based on the facility agent's base rate, LIBOR, applicable certificate of deposit rates or gold funding rates plus an applicable margin which is subject to adjustment in case of certain changes in BMG's credit rating and certain financial ratios. Additionally, interest charges increase when outstanding borrowings under this facility exceed $25 million and, again, when such borrowings exceed $50 million. Other costs associated with the new facility include commitment fees of one-eighth percent per annum on the unused portion of the facility and facility fees of one-eighth percent per annum on the average daily commitment, in each case subject to adjustment in case of certain changes in credit rating or ratios. The revolving credit agreement imposes certain financial covenants upon the Company which include covenants relating to leverage, net worth, contained production, mineral reserves and working capital, as well as certain restrictions on liens, investments, additional debt, lease obligations, and the acquisition or disposition of assets. In addition, the agreement sets forth restrictions limiting the amount of dividends that BMG may pay based on $20 million plus 50% of consolidated net income since December 31, 1994, plus 50% of proceeds received from the sale of BMG's capital stock on a cumulative basis from the date of the agreement. The weighted average interest rate for borrowings under this facility for the year ended December 31, 1995, was 6.7 percent. No borrowings were outstanding under the previous facility in 1994. Interest charges applicable to the previous facility for the year ended December 31, 1993, were based on a weighted average interest rate ranging from 3.9 percent to 6.0 percent. During 1992, Inti Raymi, established separate but coordinated term credit facilities with the Overseas Private Investment Corporation ("OPIC"), International Finance Corporation ("IFC") and Corporacion Andina de Fomento ("CAF") for the development of its Kori Kollo expansion project in Bolivia. Each loan is secured by a lien on the project and is to be repaid in semi-annual installments which commenced in December 1993 and will continue through June 2000, with certain provisions for accelerated repayment in the event of substantial Kori Kollo reserve losses or significantly improved gold market conditions. Through certain ratio tests, each loan may restrict payments of intercompany debt and dividends by Inti Raymi to the owners of shares of its capital stock. Additional covenants exist which limit fixed asset purchases, additional debt and liens, and require compliance with applicable environmental laws. During 12 14 1993, the project met the prerequisite physical and financial completion tests as set forth in the facility agreements and in April 1994 achieved project completion status. The OPIC and IFC loan agreements require that the current mining plan indicate that production from the Kori Kollo mine extends at least three years beyond the final scheduled principal payment ("Reserve Life Provision"). Failure to meet this Reserve Life Provision results in the suspension of all debt repayments from Inti Raymi to its shareholders and all Inti Raymi dividend payments until such time as compliance with the Reserve Life Provision is achieved by either a prepayment of a sufficient portion of the debt or an increase in the Kori Kollo mine ore reserves. The IFC and CAF loan agreements contain provisions which entitle their respective agencies to receive principal prepayments proportionate to those received by OPIC. In the third quarter of 1994, the Company completed a rescheduling of the life of mine production and observed that the new schedule was not in compliance with the Reserve Life Provision due to more rapid mining and production than originally planned. The then-current plan indicated that production would extend approximately 2.8 years beyond the date of the final scheduled principal payment. To allow continuing payments of dividends and the repayment of intercompany debts, Inti Raymi obtained a temporary waiver, permitting noncompliance with the Reserve Life Provision until June 30, 1996. Inti Raymi has recently announced reserve additions which the lenders have approved as sufficient to satisfy the Reserve Life Provision well in advance of the scheduled expiration of the temporary waiver. The OPIC facility provided for borrowings of $40 million. Interest rates under the variable rate facility are based on LIBOR plus 2 percent. Additionally, $4.1 million of previously existing OPIC loans to Inti Raymi were restructured as loan obligations under the terms of the agreement, with the exception that they are subject to their originally agreed interest rates. Weighted average interest rates for borrowings under this facility for the years ended December 31, 1995, 1994 and 1993, were 8.5 percent, 6.7 percent and 5.6 percent, respectively. Under the IFC commitment, borrowings of $40 million were made. The interest rate for the non-convertible portion of the loan is based on LIBOR plus 2.375 percent, but Inti Raymi has the right to request an interest rate cap or collar, or may elect at any time to pay a fixed rate of interest. Of the total IFC borrowings, $5 million represents a convertible loan due on March 1, 2002, carrying a fixed annual interest rate of 11 percent with an additional interest rate provision which varies with the price of gold. Weighted average interest rates for borrowings under this facility for the years ended December 31, 1995, 1994 and 1993 were 8.6 percent, 6.9 percent and 6.0 percent, respectively, for the non-convertible portion of the loan and 12.8 percent, 13.7 percent and 12 percent, respectively, for the convertible portion of the loan. The loan may be converted, at IFC's option, into an equity interest of up to a 3.98 percent in Inti Raymi. Upon the conversion of the convertible loan into equity, the Company and Inti Raymi's minority owner would have their interests in the capital stock of Inti Raymi diluted proportionately. Each share of Inti Raymi common stock issued by Inti Raymi as a result of such conversion will have an associated put option which, if exercised by IFC, would require BMG and Inti Raymi's minority shareholder to purchase such share at its fair market value as determined at the time the put is exercised. 13 15 The CAF facility provided for borrowings of $15 million. Interest rates under the facility are based on LIBOR. These funds were obtained from several sources. CAF charged a supervision and oversight fee and a commitment fee in addition to fees charged by the participants in the funding. Weighted average interest rates for borrowings under this facility for the years ended December 31, 1995, 1994 and 1993, were 7.3 percent, 5.5 percent and 4.7 percent, respectively. The Company has a $15 million uncommitted revolving credit facility with the Union Bank of Switzerland. Interest rates under the facility are variable, based on either the bank's base rate or a negotiated rate. There are no additional costs or financial restrictions under this facility. No loans were outstanding under this revolving credit facility as of December 31, 1995 and 1994; however, letters of credit amounting to $2.2 million and $4.8 million had been issued against this facility as of December 31, 1995 and 1994, respectively. The weighted average interest rate for borrowings under this facility for the year ended December 31, 1995, was 6.7 percent. There were no interest charges for the year ended December 31, 1994, since the Company did not borrow against this facility in 1994. Interest charges for the year ended December 31, 1993, were based on weighted average interest rates of 3.5 to 4.3 percent. Scheduled maturities of the Company's long-term debt for each of the next five years are $13.4 million for 1996 through 1999 and $6.9 million in 2000. In addition, all borrowings then outstanding under the new revolving credit facility are due and payable on November 6, 2000. BMG has effective a registration statement under the Securities Act of 1933, as amended, for what is commonly referred to as a "universal shelf" filing covering up to $200 million of its debt securities, preferred stock, depositary shares, common shares and warrants which may be offered from time to time. Note 6. Shareholders' Equity Reference is made to Note 5 for information regarding the number of shares of common stock reserved for issuance for the conversion of the Company's outstanding convertible subordinated debentures. The Company's Board of Directors is authorized to divide the preferred stock into series. With respect to each series the Board may determine the dividend rights, dividend rates, conversion rights and voting rights (which may be greater or less than the voting rights of the common stock). The Board may also determine the redemption rights and terms, liquidation preferences, sinking fund rights and terms, the number of shares constituting the series and the designation of each series. Pursuant to their authority to divide the preferred stock into series, the Board of Directors in 1988 designated 2,000,000 shares of preferred stock as "Series A Junior Participating Preferred Stock" for possible issuance upon the exercise of stock rights as described below. 14 16 Stock Rights - Since November 21, 1988, when the Company's Board of Directors declared a dividend of one right for each outstanding share of the Company's common stock, each share of the Company's outstanding common stock carries with it such right. Each right entitles the holder to purchase from the Company one one-hundredth of a share of Series A Junior Participating Preferred Stock, par value $1.00 per share, for an exercise price of $60, subject to adjustment. The rights expire on November 10, 1998. They will not be exercisable nor transferable apart from the common stock until such time as a person or group acquires 20 percent of the Company's common stock or initiates a tender offer that will result in ownership of 30 percent of the Company's common stock. In the event that the Company is merged, and its common stock is exchanged or converted, the rights will entitle the holders to buy shares of the acquirer's common stock at a 50 percent discount. Under certain other circumstances, the rights can become rights to purchase the Company's common stock at a 50 percent discount. The rights may be redeemed by the Company for one cent per right at any time until 10 days following the first public announcement of a 20 percent acquisition of beneficial ownership of the Company's common stock. Convertible Preferred Stock - On May 20, 1993, the Company received $111 million in net proceeds from the issuance of 2.3 million shares of its convertible preferred stock with a liquidation preference of $50 per share plus any accrued and unpaid dividends. Each share of preferred stock will pay an annual cumulative dividend of $3.25 and is convertible at any time at the option of the holder into 4.762 shares of the Company's common stock. The preferred stock is redeemable at the option of the Company solely for shares of the Company's common stock beginning May 15, 1996. There are approximately 11 million shares of the Company's common stock reserved for issuance upon conversion of the preferred stock. Note 7. Federal and Foreign Income Tax Federal and foreign income tax (benefit) expense consisted of the following at December 31: 1995 1994 1993 ---------- ----------- --------- (expressed in thousands) Current United States $ - $ (2,288) $ (5,117) Foreign 2,164 1,226 1,028 ---------- ----------- --------- Total current 2,164 (1,062) (4,089) ---------- ----------- --------- Deferred United States (10,171) - - Foreign 5,203 3,581 - ---------- ----------- --------- Total deferred (4,968) 3,581 - ---------- ----------- --------- $ (2,804) $ 2,519 $ (4,089) ========== =========== ========= Consolidated income before income taxes includes income from foreign operations of $36.1 million, $32.7 million and $13.8 million in 1995, 1994 and 1993, respectively. 15 17 The Company's net deferred tax position at December 31, is comprised of the following: 1995 1994 --------- --------- (expressed in thousands) Deferred tax assets $ 74,415 $ 55,275 Deferred tax liabilities (72,035) (57,822) Valuation allowance (993) (1,034) --------- --------- Net deferred tax asset (liability) $ 1,387 $ (3,581) ========= ========= Temporary differences and carryforwards which gave rise to significant portions of deferred tax assets and liabilities at December 31 are as follows: 1995 1994 ---------- ---------- (expressed in thousands) Net operating loss carryforwards $ 25,131 $ 24,975 Alternative minimum tax credit carryforward 4,552 4,552 Employee compensation and benefits accrued 5,480 5,052 Foreign tax credit carryforwards 11,859 - Property, plant and equipment (21,319) (22,126) Undistributed earnings of foreign subsidiaries (23,493) (17,556) Other, net 170 2,556 Valuation allowance (993) (1,034) ---------- ---------- Net deferred tax asset (liability) $ 1,387 $ (3,581) ========== ========= A reconciliation of income tax at the U.S. statutory rate to income tax (benefit) expense as of December 31 follows: 1995 1994 1993 -------- ------- --------- (expressed in thousands) Income tax based on statutory rate of 35% $ 4,354 $ 4,232 $ (2,973) Increases (reductions) resulting from: Foreign withholding tax, net - 4,377 - Change in filing position regarding foreign tax credits (7,125) - - Undistributed (income) losses of foreign subsidiaries not subject to income tax (630) 302 (1,030) Change in valuation allowance (41) (7,327) 722 Other, net 638 935 (808) -------- ------- --------- Income tax (benefit) expense $ (2,804) $ 2,519 $ (4,089) ======== ======= ========= The Omnibus Budget Reconciliation Act of 1993, enacted on August 10, 1993, retroactively increased the federal statutory income tax from 34 percent to 35 percent for periods beginning on or after January 1, 1994. The effect of the rate change was not significant to the Company's net deferred income tax position. U.S. taxes have been provided on the undistributed earnings of subsidiaries and joint ventures with the exception of Niugini Mining which is in a cumulative loss position. 16 18 The Company and its domestic subsidiaries file a consolidated U.S. federal income tax return. Such returns have been closed through the year 1991. At December 31, 1995, the Company had approximately $71.8 million of regular net operating losses and $9.3 million of alternative minimum tax net operating loss carryforwards expiring beginning in 2007, available to offset future U.S. federal income tax and approximately $4.6 million of alternative minimum tax credits available on an indefinite carryforward basis. Changes in the ownership of a company can result in an annual limitation under IRC section 382 on the amount of the tax net operating loss carryforwards which can be utilized in any one year. The annual limitation is based on the value of the company as of the ownership change date multiplied by the federal long-term tax exempt rate. It is not anticipated that the section 382 limitation will significantly restrict the future utilization of BMG's net operating loss carryforwards. Note 8. Major Customers and Export Gross Revenues All sales of the Company's products are made to precious metals smelters, refiners or traders. Accordingly, the precious metals industry has substantial influence over the market for the Company's products. During 1995, gross revenues from five separate buyers accounted for $83.2 million, $72.9 million, $35.6 million, $25.2 million and $22.5 million of total gross revenues, respectively, representing 80.0 percent of total gross revenues. International gross revenues for 1995 were $299.3 million, of which $58.1 million were from export of U.S. product. In 1994, gross revenues from four separate buyers of $69.0 million, $64.8 million, $36.8 million and $17.1 million, respectively, accounted for 77.3 percent of total gross revenues. Of the Company's $243.0 million international gross revenues in 1994, $46.6 million were from export of U.S. product. For 1993, 80.1 percent of the Company's total gross revenues were distributed among six separate buyers who accounted for $55.3 million, $36.2 million, $25.3 million, $17.4 million, $17.0 million and $14.8 million in gross revenues, respectively. International gross revenues of $207.2 million in 1993 included $47.9 million from export of U.S. product. Alternate buyers are available to replace the loss of any of the Company's principal customers. 17 19 Note 9. Other Income (Expense), Net Included in other income (expense), net, are certain non-operating revenues, net of related expenses, consisting of: 1995 1994 1993 --------- --------- ---------- (expressed in thousands) Foreign currency exchange gains (losses) $ (431) $ (2,075) $ 228 Gain on sale of investments - 725 2,697 Gain on sale of property, plant and equipment 5,542 - 3,730 Royalty income 1,331 820 - Other 470 286 (947) --------- --------- ---------- $ 6,912 $ (244) $ 5,708 ========= ========= ========== Note 10. Acquisitions Niugini Mining - In the aggregate, since January 1, 1989, the Company has paid $204.1 million for 59.3 million shares of the common stock of Niugini Mining representing a 50.5 percent ownership interest as of December 31, 1995. In December 1993, Niugini Mining issued 5.8 million of its common shares at A$5.00 per share in a public offering which provided net proceeds of approximately $19.1 million U.S. equivalent. As a result of this stock offering, BMG's ownership interest in Niugini Mining decreased from 56.5 percent to 52.6 percent. In December 1993, the Company recorded a $2.1 million adjustment to reduce the carrying value of its investment in Niugini Mining to reflect the reduction in ownership interest. In 1995 and 1994, BMG's ownership interest was diluted to 50.6 percent and 51.4 percent, respectively, due to employee stock options that were exercised during the year. In May 1995 and June 1994 the Company recorded adjustments of $2.2 million and $1.2 million, respectively, to reduce the carrying value of its investment in Niugini Mining to reflect these reductions in ownership interest. In December 1995, the Company paid approximately $17 million to purchase 11.9 million additional shares of Niugini Mining through exercise of its share of options issued to Niugini Mining's shareholders in May 1995. At December 31, 1995, the carrying value attributed to the Company's proportionate share of Niugini Mining's investment in LGL exceeded its proportionate share of Niugini Mining's historical cost basis in LGL by $102 million. Such excess will be amortized against the Company's share of the earnings of LGL based on the estimated recoverable reserves attributable to the Lihir project upon commencement of production (See Note 2). Inti Raymi - On March 8, 1994, the Company purchased an additional 3 percent of Inti Raymi's outstanding stock for $5.2 million from Zeland Mines, S.A. to increase the Company's ownership interest to 88 percent. As of December 31, 1995, the Company had invested an aggregate of $41.1 million in cash and 9 million of its common shares (valued at approximately $76.3 million) to acquire its 88 percent equity interest in Inti Raymi. At December 31, 1995, the carrying value, net of accumulated amortization, attributed to the Company's share of the Kori Kollo and Llallagua gold deposits exceeded its proportionate 18 20 share of Inti Raymi's historical cost basis in the deposits by $82.8 million. This excess has been capitalized to property and is being amortized by the units of production method based on the deposits' estimated recoverable reserves. Amortization of the excess cost amounted to $10.8 million, $11.1 million and $8.6 million in 1995, 1994 and 1993, respectively. Interest costs amounting to $.7 in 1995, $.4 million in 1994 and $.6 million in 1993 were capitalized in connection with the Kori Kollo project. Note 11. Common Stock and Stock Options Stock Options - Under the Company's 1994 Long-term Incentive Plan and a predecessor stock option plan, 5,980,000 shares of the Company's Common Stock were reserved for issuance as of December 31, 1995. Of this number 3,240,582 shares and 3,641,173 shares, respectively, were available for future grants of stock options, restricted stock, performance shares or other stock awards at December 31, 1995 and 1994, respectively. Non-employee directors of the Company are granted non-qualified stock options under a separate stock option plan for outside directors. Under this plan, a total of 250,000 shares of the Company's common stock are reserved for issuance, of which 150,000 shares and 160,500 shares are available for future grants at December 31, 1995 and 1994, respectively. Options granted under the above plans are exercisable under the terms of the respective option agreements at the market price of the common stock at the date of grant, subject to anti-dilution adjustments in certain circumstances. Payment of the exercise price may be made in cash or in shares of common stock previously owned by the optionee, valued at current market value. Under a deferred income stock option plan for officers and directors, each participant may elect to receive a non-qualified stock option in lieu of a portion of his compensation. A maximum of 2,000,000 shares of common stock is issuable under the plan, of which 1,729,328 shares and 1,751,391 shares are available for future grants at December 31, 1995 and 1994, respectively. Options granted pursuant to the plan become exercisable at the beginning of the calendar year immediately following the year in which the option was granted. They expire no later than 10 years after the date of grant. The amount of deferred compensation is accrued as compensation expense during the period earned. 19 21 Additional information for 1995 related to the Company's stock option plans follows: Number of Shares Option Price Under Option Range Per Share ----------------- --------------- Outstanding at December 31, 1994 2,175,648 $ 4.83 to $ 20.75 Granted 496,950 $ 9.25 to $ 11.38 Exercised (94,363) $ 6.00 to $ 11.19 Expired (63,796) $ 6.88 to $ 11.38 --------- Outstanding at December 31, 1995 2,514,439 $ 4.83 to $ 20.75 ========= Exercisable at December 31, 1995 1,760,174 $ 4.83 to $ 20.75 ========= At December 31, 1995, expiration dates for the outstanding options ranged from July 1, 1996, to August 24, 2005. The weighted average exercise price per share was $9.51. Note 12. Benefits Plans Pension Plans - Substantially all U.S. employees of the Company are covered by non-contributory pension plans. The U.S. plans provide benefits based on participants' years of service and compensation or defined amounts for each year of service. The Company makes annual contributions to the U.S. plans that comply with the minimum funding provisions of the Employee Retirement Income Security Act ("ERISA"). During 1993, the plans for BMG's Australian employees were changed from non-contributory defined benefit plans to defined contribution plans. Pension costs are generally accrued and charged to expense currently. Net periodic pension cost included the following components: 1995 1994 1993 ----------- --------- ---------- (expressed in thousands) Service cost - benefits earned during the year $ 518 $ 599 $ 648 Interest cost on projected benefit obligations 1,618 1,499 1,611 Expected return on plan assets (1,888) (2,060) (1,773) Net amortization and deferral 246 258 (88) ----------- ---------- ---------- Net periodic pension cost $ 494 $ 296 $ 398 =========== ========== ========== At December 31, 1995, 1994 and 1993, the projected long-term rate of return on plan assets was 9 percent. Actual return on the plans' assets was $6.4 million for the year ended December 31, 1995, $1.4 million for the year ended December 31, 1994, and $.3 million for the year ended December 31, 1993. 20 22 The following sets forth the plans' funded status and related amounts as of December 31: 1995 1994 --------- --------- (Expressed in thousands) Actuarial present value of benefit obligations: Vested benefit obligation $ 20,282 $ 17,148 ========= ========= Accumulated benefit obligation $ 21,712 $ 18,163 ========= ========= Projected benefit obligation $ 23,386 $ 19,299 Plan assets at fair value 26,724 21,498 --------- --------- Plan assets in excess of projected benefit obligation 3,338 2,199 Unrecognized net gain and effects of changes in actuarial assumptions (3,953) (2,585) Unrecognized net asset at transition (796) (914) Prior service cost not yet recognized in net periodic pension cost 2,879 3,262 --------- --------- Prepaid pension cost $ 1,468 $ 1,962 ========= ========= Plan assets include equity securities, common trust funds and various debt securities. Weighted average rate assumptions used in determining estimated benefit obligations were as follows: 1995 1994 ---- ---- Discount Rate 7.5% 8.5% Rate of increase in compensation levels 8.8% 6.0% Contribution Plans - The Company has defined contribution plans available for all full-time U.S. salaried employees and all full-time U.S. hourly employees. The plans provide for savings contributions by employees from 1 to 16 percent of their compensation, subject to ERISA limitations. The Company matches 50 to 100 percent of employee contributions with BMG's common stock, subject to a limit of 6 percent of an employee's compensation during each plan year. The Company has defined contribution plans available for all BMG's Australian salaried and hourly employees. The Company's contributions to the salaried plan are determined in accordance with the trust deed. The Company's contributions to the hourly plan are determined in accordance with the union award. All Company contributions to the plans are expensed and funded currently. The cost of such Company contributions to the U.S. plans was $.4 million, $.3 million and $.5 million in 1995, 1994 and 1993, respectively. The cost attributable to the Australian plans was $.8 million, $.7 million and $.6 million in 1995, 1994 and 1993, respectively. Postretirement Health Care and Life Insurance Benefits - Substantially all of the Company's U.S. employees may become eligible for certain unfunded health care and life insurance benefits when they reach retirement age while working for the Company. 21 23 Net periodic postretirement benefit cost included the following components: 1995 1994 1993 -------- -------- -------- (expressed in thousands) Service cost $ 275 $ 460 $ 367 Interest cost on accumulated benefit obligation 502 554 644 Amortization of (gain)loss (108) - - -------- -------- -------- Net periodic postretirement benefit cost $ 669 $ 1,014 $ 1,011 ======== ======== ======== The following table presents the plans' status at December 31: 1995 1994 ---------- -------- (expressed in thousands) Accumulated postretirement benefit obligation: Retirees $ 4,863 $ 3,940 Fully eligible active plan participants 591 720 Other active plan participants 2,133 2,299 ---------- -------- 7,587 6,959 Unrecognized net gain (loss) 1,215 1,510 ---------- -------- Accrued postretirement benefit cost $ 8,802 $ 8,469 ========== ======== The discount rate used in determining the accumulated postretirement benefit obligation was 7.5 percent for 1995 and 8.5 percent for 1994. For 1995 and 1994, the assumed annual rate of increase in the per capita cost of covered health care benefits was 9 and 12 percent, respectively. For 1995 calculations, a gradual decrease in the rate is assumed through the year 2000 when the rate is estimated to reach 6 percent and remain at that level thereafter. For 1994 calculations, a gradual decrease in the rate is assumed through the year 1999 when the rate is estimated to reach 6 percent and remain at that level thereafter. A one percent increase in the assumed health care cost trend rates would increase the accumulated postretirement benefit obligation as of December 31, 1995, by approximately $1.1 million, and would increase the total of the service and interest cost components of net periodic postretirement health care cost for 1995 by approximately $.1 million. Postemployment Benefits - Effective January 1, 1994, the Company adopted SFAS No. 112, "Employers' Accounting for Postemployment Benefits". This standard requires that the expected cost of these benefits must be charged to expense during the periods that employees vest in these benefits. The Company had previously recognized these costs as an expense when paid. Adoption of the standard did not have a material effect on the Company's financial position or on its results of operations. Postemployment benefit costs recognized under this standard do not differ significantly from those that would have been reported under the previous method. 22 24 Note 13. Geographic Segment Information The following table sets forth certain financial information relating to international and domestic operations: Year Ended December 31, ------------------------------------------------ 1995 1994 1993 ------------ ---------- ----------- (expressed in thousands) Gross revenues: United States $ 58,058 $ 46,562 $ 47,915 Austral Pacific 73,326 40,314 57,060 South America 167,911 156,108 102,276 ------------ ---------- ----------- $ 299,295 $ 242,984 $ 207,251 ============ ========== =========== Operating Income (Loss): United States $ (13,098) $ (10,673) $ (19,239) Austral Pacific 1,051 (2,976) 7,046 South America 29,065 34,861 7,434 Other International (1,034) (1,270) (975) ------------ ---------- ----------- 15,984 19,942 (5,734) Interest and Other income (expense), net 2,613 (3,464) 1,949 ------------ ---------- ----------- Income (Loss) Before Income Taxes and Minority Interest $ 18,597 $ 16,478 $ (3,785) ============ ========== =========== Identifiable Assets: United States $ 109,618 $ 114,789 $ 132,669 Austral Pacific 295,423 228,989 216,200 South America 331,035 335,683 318,959 Other International 1,063 308 324 ------------ ---------- ----------- $ 737,139 $ 679,769 $ 668,152 ============ ========== =========== Note 14. Commitments and Contingencies Total operating lease rental expenses (exclusive of mineral leases) were $3.4 million, $2.2 million and $1.4 million for 1995, 1994 and 1993, respectively. Aggregate minimum rentals (exclusive of mineral leases) subsequent to December 31, 1995, under non-cancelable leases for the years ending December 31, 1996 to 2000, are estimated to be $3.1 million, $2.4 million, $1.8 million, $1.0 million and $.6 million, respectively. Lease commitments beyond the year 2000 total $1.8 million. Pursuant to pricing provisions as set out in dore customer contracts, as of December 31, 1995, the Company had committed to sell 14,300 ounces of gold contained in dore valued at approximately $5.6 million at prices determined during various pricing periods in 1995, none of which exceeds 45 days. The average price of gold sold under this commitment is approximately $389 per ounce. 23 25 All of the Company's mining and processing operations are subject to reclamation and closure requirements. The Company monitors such requirements and periodically revises its cost estimates to meet the legal and regulatory requirements of the various jurisdictions in which it conducts its business. Where possible, plans for ongoing operations and future mine development are implemented in a manner that contributes to the fulfillment of reclamation and closure obligations in a cost effective manner through the conduct of ongoing operating activities. Costs estimated to be incurred in future periods which cannot be addressed in this manner are charged to operations through provisions based on the units of production method such that the estimated cost of ultimate reclamation is fully provided for by the time mineral reserves are depleted. The timing of actual cash expenditures for reclamation may be accelerated or deferred depending on cost and other determinations which may make such decisions prudent in the circumstances. The Company believes that these policies and practices adequately address its reclamation obligations and provide a systematic and rational method of charging such costs to operations consistent with industry practice. Accruals amounting to an aggregate of $8.0 million at December 31, 1995, are included as long-term liabilities in the Company's Consolidated Balance Sheet. At the Battle Mountain Complex, aggregate reclamation expenditures estimated to be spent in future periods are expected to amount to approximately $7.8 million. Actual expenditures made to date have equaled the total amount accrued to date, therefore there is no net accrued liability at December 31, 1995 for this location. Estimated ultimate reclamation obligations and related accrued liability balances at December 31, 1995, respectively, for each of the Company's other operating mines is as follows: San Luis $3.3 million and $1.7 million, Pajingo $2.6 million and $1.5 million, Kori Kollo $10.0 million and $1.9 million and Red Dome $3.7 million and $2.9 million. Reclamation expenditures for the San Cristobal mine are not expected to be material. Note 15. Forward Sales and Hedging The Company has only limited involvement with derivative financial instruments and does not use them for trading purposes. Derivative instruments are used to manage well-defined interest rate, foreign currency exchange rate and commodity price risks. Interest rate cap agreements are used to reduce the potential impact of increases in interest rates on floating-rate long-term debt. At December 31, 1995, Inti Raymi was party to three interest rate cap agreements which were effective June 1, 1994, each with a term of three years. The agreements entitle Inti Raymi to receive from counterparties on a quarterly basis the amounts, if any, by which Inti Raymi's interest payments on a portion of its LIBOR based floating-rate Kori Kollo project financing exceed various fixed rates over the term of the caps. The fixed rates in the cap agreements gradually escalate from 5.4 percent in 1995 to 7.2 percent in 1997. Inti Raymi has hedged 50 percent of its net interest rate exposure currently related to the Kori Kollo LIBOR based project financing. The hedge increases to 100 percent of its exposure by June 1996. Inti Raymi has not hedged any of its exposure subsequent to December 1997. The net unamortized cost of the premiums paid for these caps amounting to $.5 million at December 31, 1995, has been included in other assets. Since the interest rate caps were put in place, the Company has amortized approximately $.2 million of such premiums and has received approximately $.2 million in settlement of expiring caps. 24 26 The Company uses fixed forward sales contracts, spot deferred sales contracts and put options to hedge anticipated sales of gold, silver and copper. The following table summarizes the Company's forward sales contracts at December 31, 1995: Average Price Amount Per Unit Period ------ ------------------ -------------------- BMG Forward sales contracts Gold 129,977 oz US$397 Jan 96 - Oct 96 Niugini Mining Forward sales contracts Gold 91,529 oz A$536 Jan 96 - Dec 96 28,679 oz US$386 Jan 96 Silver 12,568 oz US$5.87 Jan 96 Copper 2,000 tonnes US$2,654 Jan 95 - Feb 96 Inti Raymi Forward sales contracts Gold 83,500 oz US$396 Jan 96 - Jun 96 Purchased put options Gold 42,000 oz US$385 Jan 96 - Apr 96 Deferred costs associated with Inti Raymi's forward sales contracts amounted to $1.3 million and $1.5 million at December 31, 1995 and 1994, respectively. Deferred costs associated with put options amounted to $.2 million at December 31, 1995. The Company did not own any put options at December 31, 1994. At December 31, 1995, the aggregate amount by which the net market value of the Company's open forward sales contracts is greater than the spot price of $387 per ounce of gold, $5.19 per ounce of silver, and $2,815 per tonne of copper, before consideration of the deferred costs referred to above, is $2.6 million, of which $.4 million is attributable to minority interests. Australian dollar contracts were converted to U.S. dollars at the December 1995 month end exchange rate of US$.74 to A$1. The Company is exposed to credit-related losses in the event of nonperformance by the counterparties to its interest rate caps and forward sales contracts, but does not expect any counterparties to fail to meet their obligations. The Company does not obtain collateral or other security to support financial instruments subject to credit risk but monitors the credit standing of counterparties. Note 16. Fair Value of Financial Instruments SFAS No. 107, "Disclosures about Fair Value of Financial Instruments," defines the fair value of a financial instrument as the amount at which the instrument could be exchanged in a 25 27 current transaction between willing parties. The following table presents the carrying amounts and estimated fair values of the Company's financial instruments at December 31: 1995 1994 ------------------------------ ------------------------------- Carrying Fair Carrying Fair Amount Value Amount Value -------- ----- -------- ----- (expressed in thousands) Financial Assets Interest rate caps $ 490 $ 23 $ 685 $ 1,677 Financial Liabilities Debt $ 182,603 $ 157,108 $ 179,029 $ 158,662 The carrying amounts of the interest rate caps and debt shown in the table are included in the Consolidated Balance Sheet under Other Assets and Long-Term Debt, respectively. The following methods and assumptions were used to estimate the fair value of each class of financial instruments: Cash, cash equivalents, trade receivables, and trade payables - The carrying amounts approximate fair value because of the short maturity of those instruments. Other assets - The amounts reported relate to the interest rate cap agreements described in Note 15 . The carrying amount comprises the unamortized premiums paid for the contracts. The fair value is estimated using option pricing models. Debt - The fair value of the Company's convertible subordinated debentures is based on the quoted market price of the debentures at the reporting date. Due to the generally variable interest rate features of the OPIC, IFC and CAF loans, the Company believes the carrying amounts approximate the fair value of this debt at the reporting date. The Company has issued corporate guarantees totaling $4.5 million to ensure that the reclamation of the Battle Mountain Complex mines will be performed as specified in the operating permits issued by the State of Nevada. In addition, the Company has a letter of credit outstanding for $2.2 million as collateral for surety bonds provided as security for various reclamation obligations. The Company believes the carrying value of these financial instruments approximates their fair market value. 26 28 Note 17. Subsequent Event On July 19, 1996, the Company combined with Hemlo Gold Mines Inc. (Hemlo) in a transaction accounted for as a pooling of interests. The expected unaudited pro forma combined condensed balance sheet of the Company and Hemlo as of December 31, 1995 giving effect to the transaction is as follows (in millions): Assets $ 1,145 ========== Liabilities 392 Shareholders' equity 753 ---------- Total liabilities and shareholders' equity $ 1,145 ========== 27 29 SUPPLEMENTAL FINANCIAL INFORMATION (UNAUDITED) QUARTERLY RESULTS Earnings Dividends per Dividends Net Operating Net (Loss) Per Common per Sales Income Income Common Share Share Preferred Share ---------- --------- --------- ------------ ------------- --------------- (expressed in thousands except per share amounts) 1995 ---- First Quarter $ 54,082 $ 3,420 $ 2,482 $ .01 $ .025 $ .8125 Second Quarter 81,263 6,607 7,630 .06 - .8125 Third Quarter 65,485 2,713 2,753 .01 .025 .8125 Fourth Quarter 83,430 3,244 2,380 .01 - .8125 ---------- --------- --------- ----- ------- --------- $ 284,260 $ 15,984 $ 15,245 $ .09 $ .050 $ 3.2500 ========== ========= ========= ===== ======= ========= 1994 ---- First Quarter $ 50,917 $ 7,182 $ 2,848 $ .01 $ .025 $ .8125 Second Quarter 57,036 6,028 3,084 .01 - .8125 Third Quarter 55,827 1,856 1,451 (.01) .025 .8125 Fourth Quarter 65,890 4,876 2,189 .01 - .8125 ---------- --------- --------- ----- ------- --------- $ 229,670 $ 19,942 $ 9,572 $ .02 $ .050 $ 3.2500 ========== ========= ========= ===== ======= ========= 28 30 LIHIR GOLD LIMITED (A DEVELOPMENT STAGE COMPANY) REPORT OF INDEPENDENT ACCOUNTANTS The Board of Directors Lihir Gold Limited Port Moresby Papua New Guinea We have audited the financial statements of Lihir Gold Limited for the year ended 31 December 1995 as set out on pages 30 to 44. The Company's Directors are responsible for the preparation and presentation of the financial statements and the information they contain. We have conducted an independent audit of these financial statements in order to express an opinion on them to the members of the Company. Our audit has been conducted in accordance with International Standards on Auditing which are substantially similar to U.S. standards, to provide reasonable assurance as to whether the financial statements are free of material misstatement. Our procedures included examination, on a test basis, of evidence supporting the amounts and other disclosures in the financial statements, and the evaluation of accounting policies and significant accounting estimates. These procedures have been undertaken to form an opinion as to whether, in all material respects, the financial statements are presented fairly in accordance with Accounting Standards adopted for use in Papua New Guinea and Papua New Guinea statutory requirements so as to present a view which is consistent with our understanding of the Company's financial position and the results of its operations. The audit opinion expressed in the Report has been formed on the above basis. As described in Note 20 to the financial statements, the Company's accounting policies vary in certain important respects from the accounting principles generally accepted in the United States. Note 20 reconciles these differences. AUDIT OPINION In our opinion: (a) the financial statements of Lihir Gold Limited are properly drawn up: (i) so as to give a true and fair view of the state of affairs of the Company at 31 December 1995 and of the results and cash flows of the Company for the year ended on that date; and (ii) in accordance with the provisions of the Companies Act (Chapter 146); and (iii) in accordance with applicable Accounting Standards; (b) the accounting and other records (including registers) examined by us have been properly kept in accordance with the Companies Act. COOPERS & LYBRAND By R. Hubbard Registered under the Accountants Registration Act (Chapter 89) PORT MORESBY, PAPUA NEW GUINEA On 27th day of June 1996 29 31 LIHIR GOLD LIMITED (A DEVELOPMENT STAGE COMPANY) PROFIT AND LOSS ACCOUNTS FOR THE YEAR ENDED 31 DECEMBER 1995, 1994 AND 1993 US $ 000 NOTE 1995 1994 1993 (NOTE 1(a)) (NOTE 1(1)) (NOTE 1(a)) Operating profit before income tax 5 - - - Income tax attributable to operating profit - - - - --------------------------------------------------------------------------------------------------------------- Operating profit after income tax - - - Retained profits at the beginning of the financial period - - - - --------------------------------------------------------------------------------------------------------------- Retained profits at end of the financial period - - - =============================================================================================================== The accompanying notes form part of these financial accounts 30 32 LIHIR GOLD LIMITED (A DEVELOPMENT STAGE COMPANY) BALANCE SHEET AS AT 31 DECEMBER 1995 AND 1994 US $ 000 NOTE 1995 1994 (NOTE 1(a)) (NOTE 1(1)) CURRENT ASSETS Cash 8 363,099 - Receivables 9 420 - - ----------------------------------------------------------------------------- TOTAL CURRENT ASSETS 363,519 - - ----------------------------------------------------------------------------- NON-CURRENT ASSETS Development properties 10 268,235 151,624 - ----------------------------------------------------------------------------- TOTAL NON-CURRENT ASSETS 268,235 151,624 - ----------------------------------------------------------------------------- TOTAL ASSETS 631,754 151,624 - ----------------------------------------------------------------------------- CURRENT LIABILITIES Creditors and borrowings 11 10,054 - Employee benefits 218 - Retention 168 - - ----------------------------------------------------------------------------- TOTAL CURRENT LIABILITIES 10,440 - - ----------------------------------------------------------------------------- COMMITMENTS AND CONTINGENCIES 14,15 - ----------------------------------------------------------------------------- NET ASSETS 621,314 151,624 ============================================================================= SHAREHOLDERS' EQUITY Ordinary Shares, par value PGK $0.10: Issued and outstanding: 900,000,000 Shares in 1995 and none in 1994 12 68,085 - Reserves 13 553,229 - Joint venture contributions - 151,624 - ----------------------------------------------------------------------------- TOTAL SHAREHOLDERS' EQUITY 621,314 151,624 ============================================================================= The accompanying notes form part of these financial accounts 31 33 LIHIR GOLD LIMITED (A DEVELOPMENT STAGE COMPANY) STATEMENT OF CASH FLOWS FOR THE YEARS ENDING 31 DECEMBER 1995, 1994 AND 1993 US $ 000 1995 1994 1993 (NOTE 1(a)) (NOTE 1 (1)) (NOTE 1 (a)) BALANCE AT BEGINNING OF PERIOD - - - CASH FLOWS FROM FINANCING ACTIVITIES Proceeds from issue of shares 431,754 - - Joint venture contributions 37,936 12,812 - - ---------------------------------------------------------------------------------- 469,690 12,812 - - ---------------------------------------------------------------------------------- CASH FLOWS FROM INVESTING ACTIVITIES Development properties (123,877) (12,812) - Interest received 7,266 - - Increase in current assets (420) - - Increase in current liabilities 10,440 (12,812) - - ---------------------------------------------------------------------------------- (106,591) - - - ---------------------------------------------------------------------------------- NET INCREASE IN CASH HELD 363,099 - - - ---------------------------------------------------------------------------------- BALANCE AT END OF PERIOD 363,099 - - ================================================================================== The accompanying notes form part of these financial statements 32 34 LIHIR GOLD LIMITED (A DEVELOPMENT STAGE COMPANY) NOTES TO AND FORMING PART OF THE ACCOUNTS FOR THE YEAR ENDED 31 DECEMBER, 1995 NOTE 1: STATEMENT OF ACCOUNTING POLICIES The financial statements have been prepared in accordance with applicable International Accounting Standards (IAS). The financial statements have also been prepared on the basis of historical costs and do not take into account changing money values. Cost is based on the fair values of the consideration given in exchange for assets. The accounting policies have been consistently applied, unless otherwise stated. The following is a summary of the significant accounting policies adopted by the Company in the preparation of the financial statements. (a) UNITING OF INTERESTS The transfer of the Lihir Project to the Company has been accounted for as a uniting of interests of the Company with the respective interests of each participant in the Lihir Project. A uniting of interests is accounted for by using the pooling of interests method in accordance with IAS 22. Accordingly, the assets and liabilities identified with the Lihir Project have been transferred to the Company at historical cost and the Company's financial statements have been restated to reflect the Lihir Project accounts for all periods prior to the uniting of interests. The substance of a uniting of interests is that no acquisition has occurred and there has been a continuation of the mutual sharing of risks and benefits that existed prior to the business combination. Use of the pooling of interests method recognises this by accounting for the combined enterprises as though the separate businesses were continuing as before, though now jointly owned and managed. (b) EXPLORATION AND EVALUATION EXPENDITURE Exploration and evaluation expenditure is accumulated separately for each area of interest. Exploration expenditure is fully written off in the financial year in which it is incurred, unless recoupment from revenue to be derived from the relevant area of interest/mineral resource, or from the sale of that area of interest, is reasonably assured. Evaluation expenditure is capitalised, to the extent to which its recoupment out of revenue to be derived from the relevant area of interest/mineral resource, or from sale of that area of interest, is reasonably assured. Exploration or evaluation expenditure written off, or provided against, is reinstated when recoupment out of revenue to be derived from the relevant area of interest/mineral resource or from sale of that area of interest, is reasonably assured. (c) DEVELOPMENT PROPERTIES Development expenditure is accumulated separately for each area of interest in which economically recoverable mineral reserves have been identified and are reasonably assured. Once a development decision has been taken, all past and future exploration and evaluation expenditure in respect of the area of interest is aggregated with the costs of development and classified under non-current assets as "Development Properties". All expenditure incurred prior to the commencement of commercial levels of production from each development property is carried forward to the extent to which recoupment out of revenue to be derived from the sale of production from the relevant development property, or from sale of that property, is reasonably assured. 33 35 No amortisation is provided in respect of development properties until they are reclassified as "Mine Properties", following the commencement of commercial production. (d) MINE PROPERTIES Mine properties represent the accumulation of all exploration, evaluation, and development expenditure incurred by or on behalf of the Company in relation to areas of interest in which mining of a mineral resource has commenced. When further development expenditure is incurred in respect of a mine property after the commencement of production, such expenditure is carried forward as part of the cost of that mine property, only when substantial future economic benefits are thereby established, otherwise such expenditure is classified as part of the cost of production. Amortisation of costs is provided on the unit-of-production method, separate calculations being made for each mineral resource. The unit-of-production basis results in an amortisation charge proportional to the depletion of estimated recoverable gold ounces contained in Ore Reserves (comprising both Proved and Probable Ore Reserves). (e) CAPITALISATION OF FINANCING COSTS Interest, other financing costs and foreign exchange differences are classified as part of development and mine properties where they relate to funds raised for developing those properties. Interest earned on the temporary investment of borrowed funds and funds received in connection with the sale of equity securities prior to the expenditure being made is deducted from interest paid on the borrowed funds in arriving at the amounts so capitalised. (f) MINE BUILDINGS, MACHINERY AND EQUIPMENT The cost of each item of buildings, machinery and equipment is depreciated over the expected useful life adopting the unit-of-production method. Each item's economic life has due regard to both physical life limitations and to present assessments of economically recoverable reserves of the mine property and to possible future variations in those assessments. Estimates of remaining useful lives are made on a regular basis for all assets, with annual reassessments for major items. The total net carrying values of mine building, machinery and equipment at each mine property are reviewed regularly and, to the extent to which these values exceed their recoverable amounts, that excess is fully provided against in the financial year in which this is determined. Major spares purchased specifically for particular plant are included in the cost of plant and are depreciated over the expected useful life of the item of plant. (g) REMAINING MINE LIVES In estimating the remaining life of the mine at each mine property for the purpose of amortisation/depreciation calculations, due regard is given, not only to the volume of remaining recoverable mineral reserves, but also to limitations which could arise from the potential for changes in technology, demand, product substitution and other issues which are inherently difficult to estimate over a lengthy time frame. (h) RESTORATION, REHABILITATION AND ENVIRONMENTAL EXPENDITURE Restoration, rehabilitation and environmental expenditure to be incurred during the production phase of operations is accrued when the need for such expenditure is established, and then written off as part of the cost of production of the mine property concerned. Significant restoration, rehabilitation and environmental expenditure to be incurred subsequent to the cessation of production at each mine property is accrued, in proportion to production, when the amount of expenditure can be reasonably estimated. 34 36 (i) INVENTORIES Inventories of broken ore, concentrate and metal are physically measured or estimated and valued at the lower of cost and net realisable value. Cost comprises direct material, labour and transportation expenditure in getting such inventories to their existing location and condition, together with an appropriate portion of fixed and variable overhead expenditure, based on weighted average costs incurred during the period in which such inventories are produced. Net realisable value is the amount estimated to be obtained from sale of the item of inventory in the normal course of business, less any anticipated costs to be incurred prior to its sale. Inventories of consumable supplies and spare parts expected to be used in production are valued at weighted average cost. (j) REVENUE RECOGNITION Sales are recognised as revenue only when there has been a passing of risk to the customer, and: * the product is in a form suitable for delivery and no further processing is required by, or on behalf of, the Company; * the quantity and quality (grade) of the product can be determined with reasonable accuracy; * the product has been despatched to the customer and is no longer under the physical control of the Company (or property in the product has earlier passed to the customer); and * the selling price can be measured reliably. Sales revenue represents the gross proceeds receivable from the customer. Revenue received from sale/disposal of product, materials or services during the exploration, expenditure or development phases of operations is offset against expenditure in respect of the area of interest/mineral resource concerned. (k) EMPLOYEE ENTITLEMENTS (i) Wages and Salaries A liability for wages and salaries is recognised, and measured as the amount unpaid at balance date at current pay rates in respect of employees' services up to that date. (ii) Annual and Long Service Leave A liability for annual and long service leave is recognised, and measured as the present value of expected future payments to be made in respect of services provided by employees up to balance date. In assessing expected future payments regard is had to expected future wage and salary levels and experience of employee departures and periods of service. (l) FOREIGN CURRENCY TRANSLATION As the Company's turnover is denominated in US dollars and the majority of its fixed asset purchases and costs are in US dollars or currencies related to US dollars, the Company's Directors have adopted the US dollar as the Company's functional and management reporting currency. The Company's Kina figures are translated from US dollars at the rate prevailing at 31 December 1995 of PGK 1.00 = USD0.75. Movements in the share capital account are accounted for as a capital reserve. 35 37 Specific Commitment Currency hedging could be undertaken to avoid or minimise possible adverse financial effects of movements in exchange rates. Gains or costs arising upon entry into a hedging transaction intended to hedge the purchase or sale of goods or services, together with subsequent exchange gains or losses resulting from those transactions up to the date of purchase or sale, are deferred and included in the measurement of the purchase or sale. In the case of hedges of monetary items, exchange gains or losses are brought to account in the financial year in which the exchange rate changes. Gains or costs arising at the time of entering into such hedging transactions are brought to account in the profit and loss account over the lives of the hedges. (m) GOLD HEDGING CONTRACTS Unrealised gains and losses on gold hedging contracts covering expected future gold production, are not recognised as revenue until delivery of gold against the contract occurs. Any instruments entered into which are not for the purpose of hedging future sales revenues are recorded at their market value at the year end. Gains and losses on these instruments are brought to account each year in the profit and loss account. (n) INCOME TAX Tax effect accounting procedures are followed whereby the income tax expense in the profit and loss account is matched with the accounting profit (after allowing for permanent differences). The future tax benefit relating to tax losses is not carried forward as an asset unless the benefit is assured beyond any reasonable doubt. Income tax on net cumulative timing differences is set aside to the deferred income tax and future income tax benefit accounts at the rates which are expected to apply when those timing differences reverse. (o) LEASES Leases of fixed assets where substantially all the risks and benefits incidental to the ownership of the asset, but not the legal ownership transferred to the Company, are classified as finance leases. Finance leases are capitalised, recording an asset and liability equal to the present value of the minimum lease payments, including any guaranteed residual values. Leased assets are amortised over their estimated useful lives. Lease payments are allocated between the reduction of the lease liability and the lease interest expense for the period. Lease payments for operating leases, where substantially all the risks and benefits remain with the lessor, are charged as expenses in the periods in which they are incurred. (p) CASH For the purpose of the statement of cash flows, cash includes: (i) cash on hand and in at call deposits with banks or financial institutions, net of bank overdrafts; and (ii) investments in money market instruments with less than 90 days to maturity. (q) GEOGRAPHIC AREA The Company operates in Papua New Guinea. (r) COMPARATIVE FIGURES Comparative figures have been included in accordance with International Accounting Standards for the pooling of interests. (s) ROUNDING OF AMOUNTS The financial statements and directors' report have been rounded to the nearest thousand dollars. 36 38 NOTE 2: SPECIAL MINING LEASE The Special Mining Lease was issued on 17 March, 1995 and has a term of 40 years. Under the Mining Act it may be renewed for subsequent 20 year periods at the discretion of the PNG Government. NOTE 3: REQUIREMENTS REGARDING CASH RESERVES The PNG Central Banking (Foreign Exchange and Gold) Regulations generally require PNG companies to hold all cash reserves in Kina. Prior approval of the PNG Central Bank is required to convert funds from Kina into other currencies. Under the Mining Development Contract, however, the Company has permission to retain funds in foreign currencies to meet its obligations. NOTE 4: DIVIDEND RESTRICTIONS The Loan Agreement prohibits the payment of dividends by the Company prior to Completion (as defined in the Loan Agreement) and permits the payment of dividends thereafter only on the quarterly payment dates under the Loan Agreement and only if certain conditions are met, including a condition that after payment of such dividends and all other payments required under the Loan Agreement the company has a specified minimum cash balance in an offshore account and a Debt Cover ratio (as defined in the Loan Agreement) of not less than 1.25:1. NOTE 5: OPERATING PROFIT US$ 000 1995 1994 1993 Operating Profit before income tax expense has been determined after: - - - (i) Charging as expenses: - - - (ii) Crediting as Income: - - - It is noted that all items of income and expenditure relate to the development properties and as such have been capitalised. 37 39 NOTE 6: REMUNERATION AND RETIREMENT BENEFITS (a) Directors' and Executive Officers Remuneration (US$000s) US$000 1995 1994 1993 Income received or due and receivable by all directors including insurance premiums to indemnify liability whilst acting as a director & executive officer: 921 685 - Executive directors & executive officers: 847 685 - The names of Company directors who have held office during the financial year are: GARNAUT, Ross G. TELFER, Ian LEPANI, Charles W. THOMAS, Gavin LESLIE, Jonathan CA VICKERMAN, Andrew LOUDON, A. Geoffrey FORBES, Jeffrey I. (Alternate for JCA Leslie) O'REILLY, John F. KULALA, John (Alternate for CW Lepani) SOIPANG, Mark LUTYENS, Charles (Retired) TAUVASA, Joseph J. TAYLOR, Meg (b) Retirement and superannuation payments US$000 1995 1994 1993 Amounts paid directly on retirement from office or to prescribed superannuation funds for the provision of retirement benefits for: Principal executive officer - - - Directors - - - NOTE 7: AUDITORS' REMUNERATION Amounts received or due and receivable by US$000 1995 1994 1993 Company auditors for: - auditing the accounts 30 7 - - other services 747 5 - 38 40 NOTE 8: CASH US$000 1995 1994 1993 CASH AT BANK 1,372 - - At call deposits with financial institutions 149,012 - - Treasury bills and commercial paper 212,715 - - - -------------------------------------------------------------------------------------- 363,099 - - ====================================================================================== NOTE 9: RECEIVABLES US$000 1995 1994 1993 CURRENT Prepayments 41 - - Amounts receivable from: - - other related bodies corporate 379 - - - ------------------------------------------------------------------------------------- 420 - - ===================================================================================== NOTE 10: OTHER ASSETS US$000 1995 1994 1993 NON-CURRENT DEVELOPMENT PROPERTIES - - Exploration and evaluation phase 146,005 146,005 - - - Development phase 115,005 5,619 - - - Interest received (7,266) - - - - Borrowing costs 10,054 - - - - Foreign currency translation 4,437 - - - ------------------------------------------------------------------------------------- Total development properties 268,235 151,624 - ===================================================================================== 39 41 NOTE 11: CREDITORS AND BORROWINGS US$000 1995 1994 1993 Current Creditors and borrowing Trade creditors and accruals 9,492 - - Amounts payable to related bodies 562 - - - -------------------------------------------------------------------------------------- 10,054 - - ====================================================================================== NOTE 12: SHARE CAPITAL US$000 1995 1994 1993 (a) AUTHORIZED CAPITAL 2 billion Ordinary Shares of K0.10 each 148,000 - - - -------------------------------------------------------------------------------------- (b) ISSUED AND OUTSTANDING CAPITAL 900,000,000 Ordinary Shares of K0.10 68,085 - - each, fully paid ====================================================================================== (c) On 17 March, 1995 the Company issued 100 shares at K1.00 which were subsequently split into 1000 shares of K0.10 each on 4 August 1995. (d) On 13 October, 1995 the company issued 866,475,701 Ordinary Shares and on 19 October 33,523,299 a total of Ordinary Shares of K0.10 at a premium as follows: NO. OF SHARES PREMIUM PER SHARE (US$) Shares issued to sponsors 514,461,874* 0.2928 (K0.3904) Global Offering 385,537,126 1.09157 (K1.45543) * The shares issued to the sponsors are held in escrow for a period of two years commencing 13 October, 1995. (e) SHARE OPTIONS The Company granted to the Sponsors 7,200,000 share options at a price 15% above the final institutional price in consideration for their agreement to underwrite the over-allotment options under the Companies Global Offering. The option is valid for a period of five years from 13 October 1995 and if exercised during the escrow period the shares would be subject to the escrow conditions. 40 42 NOTE 13: RESERVES US$000 1995 1994 1993 CAPITAL RESERVE Share premium reserve 553,229 - - Foreign currency translation reserve - - - - ------------------------------------------------------------------------------------------ 553,229 - - ========================================================================================== US$000 1995 1994 1993 MOVEMENTS DURING THE YEAR Share premium reserve Premium on shares issued 571,475 - - Less underwriters' fees (18,246) - - - ------------------------------------------------------------------------------------------ 553,229 - - ========================================================================================== NOTE 14: CAPITAL AND LEASING COMMITMENTS US$000 1995 1994 1993 (a) Operating Lease Commitments Non-cancellable operating leases for facilities and automobiles contracted for but not capitalised in the accounts Payable - 1995 - 834 - - 1996 944 775 - - 1997 302 159 - - 1998 - - - - 1999 - - - - 2000 - - - - ------------------------------------------------------------------------------------------ 1,246 1,768 - ========================================================================================== US$000 1995 1994 1993 (b) Capital Expenditure Commitments Capital expenditure commitments contracted for: Capital expenditure projects 228,231 - - - ------------------------------------------------------------------------------------------ Payable - not later than one year 195,755 - - - later than one year but not later than 2 years 32,476 - - - ------------------------------------------------------------------------------------------ 228,231 - - ========================================================================================== 41 43 NOTE 15: CONTINGENT LIABILITIES There are no material amounts of contingent liabilities, not provided for in the accounts. ENVIRONMENTAL CONTINGENT LIABILITY A contingent liability exists in the Company in relation to the restoration, monitoring and control of mine sites and in respect of possible but unidentified remediation requirements on certain such sites. The extent to which contingent liabilities may involve future costs is not possible to measure. NOTE 16: FINANCE FACILITIES LOAN FACILITIES US$000 1995 1994 1993 Loan facilities 310 - - Amount utilised - - - - ---------------------------------------------------------------------- Unused loan facilities 310 - - ====================================================================== The major facilities are summarised as follows: (a) $300,000,000 Limited Recourse Project Financing Facility with a syndicate of 25 banks, which expires on 11 August, 2005. Interest payments under the facility are based on LIBOR plus a margin which varies over time. Mandatory prepayments are required under the Loan Agreement in certain conditions. There are certain conditions precedent to first drawdown including hedging and political risk insurance cover still in place. The first drawdown is forecast for the fourth quarter 1996. The sponsors have guaranteed the facility until Completion. The Company has provided a range of covenants and warranties in relation to the facility. (b) $10,000,000 Subordinated Priority Loan Agreement with UBS Australia Ltd for the Purchase of Put Options which expires on 11 August 2005. Interest payments under the facility are based on LIBOR plus a margin which varies over time. The Company has provided a range of covenants and warranties in relation to the facility. NOTE 17: SCHEDULE OF DEBTS RECEIVABLE AND DEBTS PAYABLE US$000 1995 1994 1993 Debts receivable: - - not later than one year 420 - - ================================================================================= Debts payable: - - not later than one year 10,054 - - ================================================================================= 42 44 NOTE 18: EVENTS SUBSEQUENT TO BALANCE DATE LOAN FACILITY EUROPEAN INVESTMENT BANK ("EIB")/MINERAL RESOURCES DEVELOPMENT COMPANY PTY LTD ("MRDC") On 15 February 1996 the Company entered an Agreement with EIB and MRDC whereby the European Investment Bank will lend funds to MRDC who will on-lend those funds to the Company. The amount of the loan is 25 million European Currency Units (ECU's) currently equivalent to approximately US$32 million. The funds are provided to MRDC at a concessional rate of interest. The drawdown period is up to 3 years and 11 months from the date of the Agreement. The interest rate payable by the Company will be 2% above the cost of funds of EIB at the time of the drawdown. EIB's current cost of funds is approximately 50 points above the 90 day LIBOR rate. The Loan Principal is repayable by way of 16 semi-annual instalments commencing four years after loan signature. The payment of interest under the Loan will be deferred during the construction period and will be repaid when permitted under the Senior Debt Agreement. The Loan is unsecured. There are various conditions precedent to the loan being drawn by the Company including the signing of an onlending agreement between the Company and MRDC which is expected to be finalised shortly. NOTE 19: RELATED PARTY TRANSACTIONS Transactions between related parties are on normal commercial terms and conditions which are no more favourable than those available to other parties. MANAGEMENT AGREEMENT Lihir Management Company Pty Ltd (LMC), a wholly owned subsidiary of RTZ, manages the Company and the Lihir Project pursuant to the Management Agreement dated 17 March 1995. LMC receives a management fee for managing the project. There are four directors who are on the Board of the Company and LMC. US$000 1995 1994 1993 Related Companies RTZ supplies labour on a secondment basis and bears expenses on behalf of the project which are subsequently recharged to the project 1,127 640 - - ----------------------------------------------------------------------------- LMC management fee 875 123 - ============================================================================= 43 45 NOTE 20: RECONCILIATION TO US GAAP The Company's accounting policies vary in certain important respects from the accounting principles generally accepted in the United States ("US GAAP"). Such differences principally affect the measurement of mineral development costs and certain reclassification issues. Exploration costs For the purposes of US GAAP, the Company's policy is to expense exploration and evaluation costs when incurred. When a commercial mineral deposit has been identified and the decision has been made to formulate a mining plan, the costs of developing the mine are capitalized. The Company's management determined that a commercial mineral deposit existed in 1992 and for the purpose of US GAAP all expenditure incurred since this date has been capitalized. In accordance with the Company's mineral development properties accounting policy under IAS, exploration and development costs of $113.7 million incurred prior to the date that commercial feasibility was determined to exist have been capitalised as part of the mineral development property asset. Under US GAAP such costs would have been expensed. Reconciliation to generally accepted accounting principles in the United States 1995 1994 US $000 US $000 Shareholders' Equity in accordance with IAS GAAP 621,314 151,624 Plus: Interest received 7,266 - Less: General and administrative costs expensed (7,298) (1,400) Project financing (8,994) (1,900) Reversal of exploration and evaluation costs incurred prior to identification of commercial feasibility (113,700) (113,700) - ------------------------------------------------------------------------------------------- ACCUMULATED DEFICIT DURING THE DEVELOPMENT STAGE UNDER US GAAP (122,726) (117,000) - ------------------------------------------------------------------------------------------- SHAREHOLDERS' EQUITY UNDER US GAAP 498,588 34,624 =========================================================================================== Net Income/loss in accordance with IAS GAAP - - Plus: Interest received 7,266 - Less: General and administrative costs expensed (5,898) (300) Project financing (7,094) (1,800) - ------------------------------------------------------------------------------------------- NET LOSS UNDER US GAAP (5,726) (2,100) - ------------------------------------------------------------------------------------------- NET LOSS PER ORDINARY SHARE (0.006) - =========================================================================================== 44 46 PART IV ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K (a)(1) As to financial statements and supplementary information, reference is made to "Index to Consolidated Financial Statements" on page 1 of this Annual Report on Form 10-K/A. (a)(2) Financial Statement Schedules. Schedule I. Condensed Financial Information of Registrant . . . . . . . . . . . . . . . . . . . . . S-1 Other schedules of Battle Mountain Gold Company and subsidiaries are omitted because of the absence of the conditions under which they are required or because the required information is included in the financial statements or notes thereto. (a)(3) Exhibits: See attached exhibit index, page E-1, which also includes the management contracts or compensatory plans or arrangements required to be filed as exhibits to this Annual Report by Item 601(10)(iii) of Regulation S-K. (b) Reports on Form 8-K: None 45 47 SIGNATURES PURSUANT TO THE REQUIREMENTS OF SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934, THE REGISTRANT HAS DULY CAUSED THIS AMENDMENT TO BE SIGNED ON ITS BEHALF BY THE UNDERSIGNED, THEREUNTO DULY AUTHORIZED. BATTLE MOUNTAIN GOLD COMPANY By: /s/ R. Dennis O'Connell ----------------------------------------- R. Dennis O'Connell Executive Vice President, Finance and Corporate Development Date: October 17, 1996 46 48 BATTLE MOUNTAIN GOLD COMPANY SCHEDULE I - CONDENSED FINANCIAL INFORMATION OF REGISTRANT CONDENSED BALANCE SHEET December 31, ---------------------------------- 1995 1994 ---------- ---------- (expressed in thousands) Current Assets: Cash and cash equivalents $ 1,837 $ 19,315 Receivables: Subsidiaries* 36,283 31,339 Other 2,991 1,834 Materials and supplies, at average cost 1,562 2,165 Other current assets 7,582 5,343 ---------- ---------- TOTAL CURRENT ASSETS 50,255 59,996 Investments Subsidiaries* 373,506 374,724 Other 48,871 42,915 Net property, plant and equipment 38,360 34,296 Deferred tax benefit 10,928 - Other assets 1,989 1,960 ---------- ---------- TOTAL ASSETS $ 523,909 $ 513,891 ========== ========== LIABILITIES AND SHAREHOLDERS' EQUITY Current Liabilities: Accounts payable 1,299 2,290 Payroll and related benefits accrued 1,820 1,797 Accrued interest 6,082 6,000 Other current liabilities 2,117 1,253 ---------- ---------- TOTAL CURRENT LIABILITIES 11,318 11,340 Long-term debt 116,980 100,000 Deferred income tax 8,840 9,352 Other liabilities 15,713 17,565 ---------- ---------- TOTAL LIABILITIES 152,851 138,257 SHAREHOLDERS' EQUITY 371,058 375,634 ---------- ---------- TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $ 523,909 $ 513,891 ========== ========== * Eliminated in consolidation This condensed statement should be read in conjunction with the Consolidated Financial Statements and Notes thereto which are included in Item 8 herein. S-1 49 BATTLE MOUNTAIN GOLD COMPANY SCHEDULE I - CONDENSED FINANCIAL INFORMATION OF REGISTRANT CONDENSED STATEMENT OF INCOME Year Ended December 31, ----------------------- 1995 1994 1993 ---- ---- ---- (Expressed in thousands) GROSS REVENUE $30,081 $18,990 $21,854 Less: Freight, allowances & royalties 549 195 262 ------- ------- ------- NET REVENUE 29,532 18,795 21,592 ------- ------- ------- COSTS AND EXPENSES Mining costs 6,091 2,939 8,272 Milling and other plant costs 18,387 10,841 15,608 Depreciation, depletion and amortization 4,998 6,453 4,684 Exploration, evaluation and other lease costs 1,651 435 636 Asset write-downs 2,222 - - General and administrative expenses 7,634 7,512 6,801 Taxes, other than income 1,213 1,113 1,151 ------- ------- ------- Total costs and expenses 42,196 29,293 37,152 ------- ------- ------- OPERATING (LOSS) (12,664) (10,498) (15,560) Interest income from subsidiaries, net* 2,693 2,388 2,722 Other interest income, net 310 1,334 180 Other income (expense), net (254) (325) 86 ------- ------- ------- INCOME (LOSS) BEFORE INCOME TAXES AND EQUITY IN INCOME (LOSS) OF SUBSIDIARIES (9,915) (7,101) (12,572) Income tax (benefit) expense (2,804) 2,519 (4,274) ------- ------- ------- (LOSS) BEFORE EQUITY IN INCOME (LOSS) OF SUBSIDIARIES (7,111) (9,620) (8,298) Equity in income of subsidiaries 22,356 19,192 3,893 ------- ------- ------- NET INCOME (LOSS) 15,245 9,572 (4,405) Preferred dividends 7,475 7,475 3,738 ------- ------- ------- NET INCOME (LOSS) TO COMMON SHARES $ 7,770 $ 2,097 $(8,143) ======= ======= ======= * Eliminated in consolidation This condensed statement should be read in conjunction with the Consolidated Financial Statements and Notes thereto which are included in Item 8 herein. S-2 50 BATTLE MOUNTAIN GOLD COMPANY SCHEDULE I - CONDENSED FINANCIAL INFORMATION OF REGISTRANT CONDENSED STATEMENT OF CASH FLOWS YEAR ENDED DECEMBER 31, -------------------------------------- 1995 1994 1993 -------- ------- --------- (expressed in thousands) CASH FLOWS FROM OPERATING ACTIVITIES: NET INCOME (LOSS) $ 15,245 $ 9,572 $ (4,405) Adjustments to reconcile net income (loss) to cash flows from operating activities: Depreciation, depletion and amortization 4,998 6,453 4,684 Exploration and evaluation costs 1,081 435 636 Asset write-downs 2,222 - - Gain from sale of assets - - (741) (Increase) decrease in accrued reclamation (2,082) 170 582 Undistributed (income) losses of subsidiaries* 548 (10,071) (3,070) Deferred income tax benefit (4,967) 3,722 (878) Change in current accounts receivable and payable with subsidiaries* 8,818 4,299 1,044 Change in other current assets and liabilities (2,653) 5,483 (7,785) Other net changes 201 (356) 2,486 -------- -------- -------- Total Adjustments 8,166 10,135 (3,042) -------- -------- -------- NET CASH FLOWS FROM (USED IN) OPERATING ACTIVITIES 23,411 19,707 (7,447) -------- -------- -------- CASH FLOWS FROM INVESTING ACTIVITIES: Proceeds from sales of assets 582 - 2,878 Investment in subsidiaries* (28,906) (5,200) (12,358) Investment in Crown Jewel (4,785) (10,305) (7,595) Capital expenditures (12,884) (30,636) (3,839) Exploration and evaluation expenditures (1,081) (435) (636) Other, net 1,143 (1,573) 111 -------- -------- -------- NET CASH FLOWS USED IN INVESTING ACTIVITIES (45,931) (48,149) (21,439) -------- -------- -------- CASH FLOWS FROM FINANCING ACTIVITIES: Cash proceeds from stock issuances 606 691 111,840 Cash proceeds from borrowings 32,000 - 30,500 Cash dividend payments (11,524) (11,505) (7,743) Debt repayments (14,692) - (53,051) Other, net (1,348) (624) - -------- -------- -------- NET CASH FLOWS FROM (USED IN) FINANCING ACTIVITIES 5,402 (11,438) 81,546 -------- -------- -------- NET (DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS (17,478) (39,880) 52,660 CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR 19,315 59,195 6,535 -------- -------- -------- CASH AND CASH EQUIVALENTS AT END OF YEAR $ 1,837 $ 19,315 $ 59,195 ======== ======== ======== SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION: Cash paid (received) during the year for: Interest, net of amount capitalized - - 4 Income taxes, net (2,200) (3,405) 892 * Eliminated in consolidation This condensed statement should be read in conjunction with the Consolidated Financial Statements and Notes thereto which are included in Item 8 herein. S-3 51 INDEX OF EXHIBITS Exhibit No. Document - ----------- -------- *3(a) -- Restated Articles of Incorporation of the Company, as amended and restated through May 11, 1988 (Exhibit 4(a) to the Company's Registration Statement on Form S-3 as filed with the Commission on January 14, 1994; Registration No. 33-51921). *3(b) -- Certificate of Resolution Establishing Designation, Preferences and Rights of $3.25 Convertible Preferred Stock (Exhibit 4(b) to the Company's Registration Statement on Form S-3 as filed with the Commission on January 14, 1994; Registration No. 33-51921). *3(c) -- Bylaws of the Company, as amended through March 1, 1994 (Exhibit 3(c) to the Company's Quarterly Report on Form 10-Q for the quarter ended September 30, 1995; File No. 1-9666). *4(a)(1) -- Rights Agreement, dated November 10, 1988, between the Company and NCNB Texas National Bank, as Rights Agent (Exhibit to the Company's Form 8 filed with the Commission on November 30, 1988, amending the Company's Current Report on Form 8-K dated November 21, 1988; File No. 1-9666). *4(a)(2) -- First Amendment to Rights Agreement, dated July 30, 1992, between the Company and the Bank of New York, as successor Rights Agent (Exhibit 4(a)(2) to the Company's Annual Report on Form 10- K for the year ended December 31, 1992; File No. 1-9666). *4(b) -- Specimen Stock Certificate for the Common Stock of the Company (Exhibit 4(b) to the Company's Annual Report on Form 10-K for the year ended December 1, 1988; File No. 1-9666). *4(c) -- Fiscal and Paying Agency Agreement, dated as of January 4, 1990, between the Company and Citibank, N.A., Fiscal Agent (Exhibit 4(c) to the Company's Annual Report on Form 10-K for the year ended December 31, 1989; File No. 1-9666). *4(d)(1) -- Credit Agreement, dated as of December 29, 1989, among the Company, the banks named therein and Citibank, N.A., as agent, as amended (Exhibit 4(a) to the Company's Quarterly Report on Form 10-Q for the quarter ended June 30, 1992; File No. 1-9666). E-1 52 *4(d)(2) -- Amendment to Credit Agreement, dated April 30, 1994, among the Company, the lenders parties thereto and Citibank, N.A., as agent (Exhibit 4 to the Company's Quarterly Report on Form 10-Q for the quarter ended June 30, 1994; File No. 1-9666). *4(d)(3) -- Amendment to Credit Agreement, dated May 12, 1995, among the Company, the lenders parties thereto and Citibank, N.A., as agent (Exhibit 4(a) to the Company's Quarterly Report on Form 10-Q for the quarter ended June 30, 1995; File No. 1-9666). *4(e)(1) -- Investment Agreement, dated May 22, 1992, between Empresa Minera Inti Raymi S.A. and International Finance Corporation (Exhibit 4(e) to the Company's Annual Report on Form 10-K for the year ended December 31, 1992; File No. 1-9666). *4(e)(2) -- Amendment to Investment Agreement and Waiver, effective as of December 31, 1994, between Empresa Minera Inti Raymi S.A. and International Finance Corporation (Exhibit 4(a) to the Company's Quarterly Report on Form 10-Q for the quarter ended March 31, 1995; File No. 1-9666). *4(f)(1) -- Finance Agreement, dated as of September 14, 1992, between Empresa Minera Inti Raymi S.A. and Overseas Private Investment Corporation (Exhibit 4(f) to the Company's Annual Report on Form 10-K for the year ended December 31, 1992; File No. 1-9666). *4(f)(2) -- First Amendment to Finance Agreement and Limited Waiver, effective as of December 31, 1994, between Empresa Minera Inti Raymi S.A. and Overseas Private Investment Corporation (Exhibit 4(f)(2) to the Company's Annual Report on Form 10-K for the year ended December 31, 1994; File No. 1-9666). *4(f)(3) -- Letter Agreement dated December 31, 1994, among Overseas Private Investment Corporation, Battle Mountain Gold Company, Kori Kollo Corporation and Zeland Mines, S.A. (Exhibit 4(c) to the Company's Quarterly Report on Form 10-Q for the quarter ended March 31, 1995, File No. 1-9666). *4(g)(1) -- Loan Agreement, dated June 29, 1992, between Empresa Minera Inti Raymi S.A. and Corporacion Andina de Fomento (English translation) (Exhibit 4(g) to the Company's Annual Report on Form 10-K for the year ended December 31, 1992; File No. 1-9666). E-2 53 *4(g)(2) -- Amendment to Loan Agreement, effective as of December 31, 1994, between Empresa Minera Inti Raymi S.A. and Corporacion Andina de Fomento (English translation) (Exhibit 4(b) to the Company's Quarterly Report on Form 10-Q for the quarter ended March 31, 1995; File No. 1-9666). ++4(h) -- Credit Agreement, dated as of November 6, 1995, among the Company, the banks named therein and Citibank, N.A., as agent. +*10(a)(1) -- Battle Mountain Gold Company 1988 Deferred Income Stock Option Plan, as amended through May 18, 1995 (Exhibit 10(a) to the Company's Quarterly Report on Form 10-Q for the quarter ended June 30, 1995; File No. 1-9666). +*10(a)(2) -- Specimen of Deferred Income Stock Option Agreement for officers of the Company, as amended and restated (Exhibit 10(a)(4) to the Company's Annual Report on Form 10-K for the year ended December 31, 1992; File No. 1-9666). +*10(b)(1) -- 1985 Stock Option Plan of the Company, as amended and restated effective April 7, 1993 (Exhibit 10(a) to the Company's Quarterly Report on Form 10-Q for the quarter ended June 30, 1993; File No. 1-9666). +*10(b)(2) -- First Amendment to 1985 Stock Option Plan of the Company, effective May 12, 1995 (Exhibit 10(b)(1) to the Company's Quarterly Report on Form 10-Q for the quarter ended June 30, 1995; File No. 1-9666). +*10(b)(3) -- Specimen of the Company's 1985 Stock Option Plan Non-Qualified Stock Option Agreement for executive officers of the Company (Exhibit 10(a)(1) to the Company's Quarterly Report on Form 10-Q for the quarter ended March 31, 1993; File No. 1-9666). +*10(b)(4) -- Specimen Amendment to the Company's 1985 Stock Option Plan Non-Qualified Stock Option Agreement for executive officers of the Company (Exhibit 10(b)(2) to the Company's Quarterly Report on Form 10-Q for the quarter ended June 30, 1995; File No. 1-9666). +*10(b)(5) -- Specimen of the Company's 1985 Stock Option Plan Incentive Stock Option Agreement for executive officers of the Company (Exhibit 10(a)(2) to the Company's Quarterly Report on Form 10-Q for the quarter ended March 31, 1993; File No. 1-9666). +*10(b)(6) -- Specimen Amendment to the Company's 1985 Stock Option Plan Incentive Stock Option Agreement for executive officers of the Company (Exhibit 10(b)(3) to the Company's Quarterly Report on Form 10-Q for the quarter ended June 30, 1995; File No. 1-9666). E-3 54 +*10(c)(1) -- Battle Mountain Gold Company 1986 Restricted Stock Plan, as amended and restated (Exhibit 4(d) to the Company's Quarterly Report on Form 10-Q for the quarter ended March 31, 1988; File No. 1-9666). +*10(c)(2) -- Specimen of Agreement under the Company's 1986 Restricted Stock Plan (Exhibit 10(c)(2) to the Company's Annual Report on Form 10-K for the year ended December 31, 1992; File No. 1-9666). +*10(d)(1) -- Battle Mountain Gold Company 1988 Long-Term Performance Unit Plan, as amended and restated effective July 1, 1992 (Exhibit 10(d)(1) to the Company's Annual Report on Form 10-K for the year ended December 31, 1992; File No. 1-9666). +*10(d)(2) -- Specimen of Agreement under the Company's 1988 Long-Term Performance Unit Plan (Exhibit 10(d)(2) to the Company's Annual Report on Form 10-K for the year ended December 31, 1992; File No. 1-9666). +*10(e)(1) -- Battle Mountain Gold Company Deferred Compensation Plan (Exhibit 10(b) to the Company's Quarterly Report on Form 10-Q for the quarter ended March 31, 1993; File No. 1-9666). +*10(e)(2) -- Specimen of the Company's Deferred Compensation Agreement for directors of the Company (Exhibit 10(d) to the Company's Annual Report on Form 10-K for the year ended December 31, 1986; File No. 0-13728). +*10(f)(1) -- Battle Mountain Gold Company Executive Supplemental Retirement Income Plan (Exhibit 10(f)(1) to the Company's Annual Report on Form 10-K for the year ended December 31, 1992; File No. 1- 9666). +_*10(f)(2) -- Specimen of the Company's Executive Supplemental Retirement Income Plan Agreement (Exhibit 10(f)(2) to the Company's Annual Report on Form 10-K for the year ended December 31, 1992; File No. 1-9666). +_*10(g)(1) -- Specimen of the Company's Severance Agreements with officers of the Company regarding certain benefits payable in the event of change of control of the Company (Exhibit 10(f) to the Company's Annual Report on Form 10-K for the year ended December 31, 1986; File No. 0-13728). +*10(g)(2) -- Severance Agreement, dated June 5, 1992, between the Company and R. Dennis O'Connell (Exhibit 10(g)(2) to the Company's Annual Report on Form 10-K for the year ended December 31, 1992; File No. 1-9666). +*10(h) -- Battle Mountain Gold Company Contribution Equalization Plan, as amended and restated effective as of November 10, 1988 (Exhibit 10(h) to the Company's Annual Report on Form 10-K for the year ended December 31, 1992; File No. 1-9666). E-4 55 +*10(i) -- Battle Mountain Gold Company Executive Productivity Bonus Plan, as amended and restated effective January 1, 1994 (Exhibit 10(i) to the Company's Annual Report on Form 10-K for the year ended December 31, 1993; File No. 1-9666). *10(j)(1) -- Battle Mountain Gold Company Non-Qualified Stock Option Plan for Outside Directors. (Exhibit 10(m) to the Company's Annual Report on Form 10-K for the year ended December 31, 1991; File No. 1-9666). *10(j)(2) -- Amendment to Battle Mountain Gold Company Non-Qualified Stock Option Plan for Outside Directors effective January 1, 1995 (Exhibit 10(j)(2) to the Company's Annual Report on Form 10-K for the year ended December 31, 1994; File No. 1-9666). *10(j)(3) -- Specimen of Director's Stock Option Agreement under the Company's Non-Qualified Stock Option Plan for Outside Directors (Exhibit 10(j)(2) to the Company's Annual Report on Form 10-K for the year ended December 31, 1992; File No. 1-9666). *10(k) -- Heads of Agreement, dated March 23, 1989, among the Company, Niugini Mining Limited and the individuals listed on the signature page thereto (Exhibit 10(k) to the Company's Annual Report on Form 10-K for the year ended December 31, 1988; File No. 1-9666). *10(l) -- Mining Lease, dated May 5, 1987, granted by the Queensland (Australia) Department of Mines to Pajingo Gold Mine Pty. Ltd. (Exhibit 28(a) to the Company's Current Report on Form 8-K dated February 14, 1990; File No. 1-9666). *10(m) -- Mining Lease, dated October 1, 1987, as amended, between Earth Sciences, Inc. and Battle Mountain Gold Company (Exhibit 28(b) to the Company's Current Report on Form 8-K dated February 14, 1990; File No. 1-9666). *10(n) -- Special Mining Lease No. 6, dated March 17, 1995, granted by the Independent State of Papua New Guinea to Kennecott Explorations (Australia) Ltd., Niugini Mining Limited and Mineral Resources Lihir Pty. Limited (Exhibit 10(a) to the Company's Quarterly Report on Form 10-Q for the quarter ended September 30, 1995, File No. 1-9666). +*10(o)(1) -- 1994 Long-Term Incentive Plan of Battle Mountain Gold Company, as effective April 21, 1994 (Exhibit 10(a)(1) to the Company's Quarterly Report on Form 10-Q for the quarter ended March 31, 1994; File No. 1-9666). E-5 56 +*10(o)(2) -- Specimen of the Company's 1994 Long-Term Incentive Plan Non-Qualified Stock Option Agreement (Exhibit 10(c)(1) to the Company's Quarterly Report on Form 10-Q for the quarter ended June 30, 1995; File No. 1-9666). +*10(o)(3) -- Specimen of the Company's 1994 Long-Term Incentive Plan Incentive Stock Option Agreement (Exhibit 10(c)(2) to the Company's Quarterly Report on Form 10-Q for the quarter ended June 30, 1995; File No. 1-9666). +*10(o)(4) -- Specimen of the Company's 1994 Long-Term Incentive Plan Restricted Stock Agreement (Exhibit 10(a)(4) to the Company's Quarterly Report on Form 10-Q for the quarter ended March 31, 1994; File No. 1-9666). +*10(o)(5) -- Specimen of the Company's 1994 Long-Term Incentive Plan Performance Unit Agreement (Exhibit 10(n)(5) to the Company's Annual Report on Form 10-K for the year ended December 31, 1994; File No. 1-9666). +*10(p)(1) -- Specimen Split-Dollar Agreement (Individual) (Exhibit 10(o)(1) to the Company's Annual Report on Form 10-K for the year ended December 31, 1994; File No. 1-9666). +*10(p)(2) -- Specimen Amendment to Split-Dollar Agreement (Individual) (Exhibit 10(o)(2) to the Company's Annual Report on Form 10-K for the year ended December 31, 1994; File No. 1-9666). +*10(p)(3) -- Specimen Split-Dollar Agreement (Trustee) (Exhibit 10(o)(3) to the Company's Annual Report on Form 10-K for the year ended December 31, 1994; File No. 1-9666). +*10(p)(4) -- Specimen Amendment to Split-Dollar Agreement (Trustee) (Exhibit 10(o)(4) to the Company's Annual Report on Form 10-K for the year ended December 31, 1994; File No. 1-9666). +*10(q)(1) -- Battle Mountain Gold Company Supplemental Executive Retirement Plan (Exhibit 10(d)(1) to the Company's Quarterly Report on Form 10-Q for the quarter ended June 30, 1995; File No. 1-9666). +*10(q)(2) -- Battle Mountain Gold Company Supplemental Executive Retirement Plan Trust Agreement (Exhibit 10(d)(2) to the Company's Quarterly Report on Form 10-Q for the quarter ended June 30, 1995; File No. 1-9666). +_*10(q)(3) -- Specimen of the Company's Supplemental Executive Retirement Plan Agreement (Exhibit 10(b) to the Company's Quarterly Report on Form 10-Q for the quarter ended September 30, 1995, File No. 1-9666). ++11 -- Computation of Earnings Per Common Share. E-6 57 ++12 -- Computation of Ratio of Earnings to Fixed Charges and Earnings to Combined Fixed Charges and Preferred Dividends. ++21 -- Subsidiaries of the Company. 23(a) -- Consent of Price Waterhouse LLP. 23(b) -- Consent of Coopers & Lybrand. ++24 -- Powers of Attorney ++27 -- Financial Data Schedule - ------------------------ * Incorporated by reference as indicated. ++ Previously filed. + Represent management contracts or compensatory plans or arrangements required to be filed as exhibits to this Annual Report by Item 601(10)(iii) of Regulation S-K. _ Pursuant to Instruction 2 accompanying paragraph (a) and the Instruction accompanying paragraph (b)(10)(iii)(B)(6) of Item 601 of Regulation S-K, the registrant has not filed each executive officer's individual Executive Supplemental Retirement Income Agreement with the Company as an exhibit hereto; the registrant has agreements substantially identical to Exhibit 10(q)(3) above with each of Karl E. Elers, Kenneth R. Werneburg, Joseph L. Mazur, R. Dennis O'Connell, Robert J. Quinn and Fred B. Reisbick. In addition, the registrant has not filed each executive officer's individual Severance Agreement with the Company as an exhibit hereto; the registrant has agreements substantially identical to Exhibit 10(g)(1) above with each of Messrs. Elers, Werneburg, Mazur, Quinn and Reisbick. E-7