FILED BY HOMESTAKE MINING
COMPANY PURSUANT TO RULE 425
UNDER THE SECURITIES ACT OF 1933
SUBJECT COMPANY: HOMESTAKE
MINING COMPANY
COMMISSION FILE NO: 1-8736
[Barrick Logo] [Homestake Logo] Press Release.
FOR IMMEDIATE RELEASE
All amounts in United States dollars
BARRICK AND HOMESTAKE ANNOUNCE MERGER PLAN US$2.3 BILLION SHARE EXCHANGE TO
CREATE INDUSTRY LEADER
TORONTO, JUNE 25, 2001 . . . Barrick Gold Corporation and Homestake Mining
Company today announced plans to merge, creating a new leader in the gold
industry - both in quality and scale. The combined company is expected to have
a market capitalization of US$9 billion, double that of the nearest
competitor. It will be the second largest gold producer with the lowest cash
costs of any major producer and have approximately US$900 million in cash. The
merged company's earnings and cash flow are expected to be the highest in the
industry.
"This strategic merger combines the operational, financial and human
resources of two great companies to create the preeminent global gold mining
company," said Randall Oliphant, President and Chief Executive Officer of
Barrick. "We are establishing a platform to build on, with strengths that
better position us to generate profitable growth."
"We are teaming up with the financially strongest partner," said Jack
Thompson, Chairman and Chief Executive Officer of Homestake. "This merger is
the next natural step in a process that has seen Homestake transform itself
from a high-cost, U.S. asset-based company, to a low-cost, global producer
over the last decade."
PREMIUM OFFERED
Under the merger agreement, Barrick is offering to exchange 0.53 of a
Barrick share for each of Homestake's 263.3 million outstanding shares, which
represents a value of US$8.71 for each Homestake share. This is a premium of
31
Barrick Gold Corporation Page 2 of 4
per cent based on the June 22, 2001 closing price of US$6.65 for Homestake
shares on the New York Stock Exchange and a premium of 27 per cent based on
the US$6.87 average closing price of Homestake's shares over the last 10
trading days. Following the merger, holders of exchangeable shares of
Homestake Canada will be entitled to exchange their shares into Barrick common
shares based on the same ratio.
The Boards of Directors of both companies have unanimously approved the
transaction. Barrick has signed commitment agreements with certain
shareholders and directors of Homestake, who hold approximately 12% of
Homestake's outstanding shares and have agreed to vote in favor of the merger.
The transaction is intended to be tax-free for U.S. income tax purposes
and is subject to regulatory and Homestake shareholder approvals. No approval
by Barrick shareholders is required. The transaction is planned to be treated
as a pooling of interests under U.S. Generally Accepted Accounting Principles
(GAAP) and is expected to close in the fourth quarter of 2001.
Since the transaction will further increase Barrick's United States
shareholder base, and in order to bring the company in line with its peer
group, Barrick will adopt U.S. GAAP as its primary basis of communicating
financial results upon completion of the merger.
COMPLEMENTARY ASSETS
"Homestake's high-quality, low-cost assets are very complementary to
Barrick's. Our production profile is enhanced by Homestake's annual production
of approximately 2 million ounces at similar low costs," said Randall
Oliphant. "In addition to becoming the largest producer in Canada and the
United States, we will be the second-largest producer in Australia."
"This transaction opens a new chapter in Homestake's 125-year history,"
said Jack Thompson, who becomes a member of the Board of Directors of the
merged company. "Our great legacy will be carried on in a combined company
that will reinforce Homestake's long-held tradition of operating excellence,
technical innovation and financial strength."
LEADER IN QUALITY AND SCALE
In terms of financial strength, the merged company is expected to have:
o Industry-high earnings and cash flows; backed by
Barrick Gold Corporation Page 3 of 4
o The industry's only A-rated balance sheet; and
o A Premium Gold Sales Program that offers protection during periods
of low gold prices, while maintaining complete flexibility to
participate in higher prices.
With the inclusion of Homestake's 2-million-ounce hedge
position, the merged entity will have a combined gold forward
sale position totaling 18 million ounces, at an average annual
minimum price of US$345 per ounce. This is roughly three years
of production and 22 per cent of reserves, providing floor
price protection on approximately two-thirds of production
through 2003 and a declining portion thereafter. The combined
position provides a comfortable level of gold price protection
for the merged entity, and is in line with the historic
parameters of Barrick's program.
Based on 2000 pro forma results, the combined company had:
o Production totaling 6 million ounces of gold at cash costs of US$156
per ounce, the lowest of any major gold producer; with a
o Reserve base of 79 million ounces, among the least sensitive to
lower gold prices in the industry.
FINANCIALLY ACCRETIVE
The merger is expected to create annual cost-saving synergies of
approximately US$55 million (after-tax) beginning in 2002. The majority of
these savings will be realized in the tax, exploration and administrative
areas. "With the operating and financial synergies for shareholders, this
transaction is expected to be financially accretive for both Barrick and
Homestake," said Randall Oliphant. A joint integration team has been formed to
maximize synergies and to ensure efficient integration of the newly merged
company.
LEADING PRODUCER IN LOW-RISK LOCATIONS
The merger creates a company with low geo-political risk, with 54% of its
reserves in North America and Australia, 33% in South America, and 13% in
Tanzania.
Based in Toronto, the merged company's major properties will include:
Barrick's Goldstrike Property in Nevada, Pierina Mine in Peru and Bulyanhulu
Mine in Tanzania, and Homestake's Eskay Creek and Hemlo Mines in Canada and
Kalgoorlie Mine and Yilgarn Operations in Australia.
Barrick Gold Corporation Page 4 of 4
The combined company will also have an attractive pipeline of projects
that provide excellent leverage to a rising gold price. These include a
combined resource of 35 million ounces at Barrick's Pascua-Lama Project on the
Chile/Argentina border and the adjacent Veladero District, owned 60 per cent
by Homestake and 40 per cent by Barrick before the merger.
Homestake produced 2.2 million ounces of gold at a cash cost of US$174 an
ounce in 2000. At year-end 2000, the company had gold reserves of 20.8 million
ounces.
Barrick produced 3.7 million ounces of gold in 2000 at a cash cost of
US$145 an ounce. At year-end 2000, the company had gold reserves of 58.5
million ounces.
Barrick and Homestake will be hosting a joint conference call/webcast to
discuss the merger plan at 11:00 am EDT today. To join the call:
North American callers dial: 1-888-368-4536
Overseas callers dial: 416-641-6702
To join the webcast please visit www.barrick.com or www.homestake.com.
Barrick's shares trade under the ticker symbol ABX on the Toronto, New
York, London and Swiss Stock Exchanges and the Paris Bourse. Homestake's
shares trade on the New York and Swiss Stock Exchanges (HM) and the Australian
Stock Exchange (HSM). Homestake Canada Inc. exchangeable shares (HCX), which
are exchangeable into Homestake's common shares at any time, are listed on the
Toronto Stock Exchange.
Certain statements included herein, including those regarding production,
realized gold prices and costs, constitute "forward looking statements" within
the meaning of the United States Private Securities Litigation Reform Act of
1995. Such forward looking statements involve known and unknown risks,
uncertainties and other factors that may cause the actual results, performance
or achievements to be materially different from future results, performance or
achievements expressed or implied by those forward looking statements. These
risks, uncertainties and other factors include, but are not limited to,
political events, changes in the worldwide price of gold or certain other
commodities, currency fluctuations and other general economic conditions,
labour relations, timing of permits and other governmental approvals and
requirements, changes in expected operating conditions, lower than expected
ore grades, unexpected ground and mining conditions, availability and cost of
materials and equipment, and risks generally inherent in the exploration,
development and mining business. These factors are discussed in greater detail
in Barrick Gold Corporation's "Management's Discussion and Analysis of
Financial and Operating Results" and Annual Information Form for the year
ended December 31, 2000, on file with the U.S. Securities and Exchange
Commission and Canadian provincial securities regulatory authorities, and in
Homestake Mining Company's 10-K Report for the year ended December 31, 2000,
on file with the U.S. Securities and Exchange Commission.
Investor Contact:
Richard Young
Vice President,
Investor Relations
Tel (416) 307-7431
Fax (416) 861-0727
Media Contact:
Vincent Borg
Vice President,
Corporate
Communications
Tel (416) 307-7477
Fax (416) 861-1509
Internet:
http://www.barrick.com
Investor Contact
Homestake:
Igor Levental
Vice President,
Investor Relations
Tel (925) 817-1369
Fax (925) 746-0563
Internet:
http://www.homestake.com
Barrick Gold Corporation
Royal Bank Plaza
South Tower, Suite 2700
Toronto, Canada
M5J 2J3
FACT SHEET: Pro-Forma Combination
Homestake Barrick HM+ABX
Stand-Alone Stand-Alone Combined
SHARES OUTSTANDING (millions) 263.3 396.0 535.5
SHARE PRICE (June 22, 2001 close US$) $6.65 $16.43 $16.43
PREMIUM 30.9%
EFFECTIVE SHARE PRICE $8.71 $16.43 $16.43
EXCHANGE RATIO (Barrick per Homestake share) 0.530
MARKET CAPITALIZATION (US$millions) 1,751 6,506 8,799
MINEABLE RESERVES (millions of oz.) 20.8 58.5 79.3
CONTRIBUTION 26% 74% 100%
2000 PRO-FORMA:
PRODUCTION (thousands of oz.) 2,206 3,744 5,950
CONTRIBUTION 37% 63% 100%
TOTAL CASH COST 174 145 156
TOTAL PRODUCTION COST 239 204 217
(US$millions):
LONG TERM DEBT 225 676 901
CASH & Equivalents 193 623 816
NET DEBT 32 53 85
SHAREHOLDERS' EQUITY 609 3,023 3,632
% DEBT OF TOTAL CAPITALIZATION 27% 18% 20%
SHAREHOLDING 26% 74% 100%