ITEM 1. BUSINESS
THE COMPANY
Magma Copper Company ("Magma" or the "Company") is a fully-integrated producer of electrolytic copper and ranks among the largest U.S. copper producers. Magma's principal products are high quality copper cathode and copper rod, the latter being the basic feedstock of the copper wire and cable industry. Magma's operations also produce gold and silver-bearing residues, molybdenum disulfide and sulfuric acid as by-products. Excluding custom processing, in 1994 Magma produced 595 million pounds of saleable copper in concentrates and electrowon, and 4.9 million pounds of molybdenum contained in molybdenum disulfide. Magma also produced residues containing 3.3 million ounces of silver and 77 thousand ounces of gold including gold and silver in raw materials purchased from others in 1994.
The Company produces copper cathode both by traditional mining/ concentrating/smelting/refining methods and by leaching/solvent extraction-electrowinning ("SX-EW") methods. The Company owns and operates underground copper mines at San Manuel and Superior, an open-pit copper mine at Pinto Valley and in situ leaching operations at San Manuel and Pinto Valley. In addition, the Company operates a gold leaching facility and is constructing a major copper operation at its Robinson mining district. The Company also owns and operates an open-pit copper mine in Peru at its 98.43% owned Magma Tintaya S.A. subsidiary.
Through its wholly-owned subsidiary, Magma Metals Company, Magma operates the largest and most modern copper smelting and refining complex in the United States. The smelter has a treatment capacity of 1.3 million tons of copper concentrate per year, approximately 25% of total U.S. smelting capacity. In addition to smelting and refining copper concentrate from its own mines, the Company smelts and refines a substantial amount of copper concentrate on a toll or purchase basis. The profits from processing third party concentrate effectively reduce the Company's overall cost of producing copper from its own mines.
The Company was originally incorporated in the State of Maine in 1910, and was reincorporated in the State of Delaware in 1969. From 1968 until March 1987, the Company was a wholly-owned subsidiary of Newmont Mining Corporation ("Newmont"), a publicly traded natural resource company. In March 1987, Newmont distributed 80% of Magma's outstanding common stock to Newmont's shareholders, deposited 5% of such stock in a trust for issuance from time to time to Magma employees and retained common and preferred stock interests in the Company. The Company remained under the influence of Newmont until November 1988, when Magma undertook a recapitalization in which it purchased all of the equity interest held by Newmont.
The Company's principal office is in Tucson, Arizona. Its mailing address is 7400 North Oracle Road, Suite 200, Tucson, Arizona 85704 and its telephone number is (520) 575-5600.
RECENT DEVELOPMENTS
Tintaya Acquisition. On October 6, 1994, the government of Peru declared the consortium of Magma Copper Company and its wholly-owned subsidiary, Global Magma, Ltd., the winning bidder in the privatization of Empresa Minera Especial Tintaya, S.A. ("Tintaya"), which owns one of the largest operating mining projects in Peru. Closing of the purchase occurred on November 29, 1994. At closing, Magma (together with its wholly-owned subsidiary) purchased 98.43% of Tintaya, with Tintaya's employees subscribing to purchase the remaining 1.57% interest in accordance with an agreement with the Peruvian government. Magma paid $243 million for its interest in Tintaya and is required to make an additional $85 million in capital expenditures at this project over the next 5 years.
Tintaya is a low-cost, open-pit copper mine and concentrator operation. It has a large area of established ore reserves and has excellent exploration potential. Magma has already identified what it believes to be several highly prospective mineralized areas and is conducting a major exploration program to prove up additional reserves. In 1993 and 1994 Tintaya produced 110 million pounds of copper in concentrate per year at a cost of about $0.60 per pound of refined copper from an ore reserve of 58 million tonnes of 1.78 percent sulfide copper ore, or approximately two billion pounds of recoverable copper. Over the next two years, Magma plans to increase production to 140 million pounds per year at an estimated $0.55 per pound net cash operating cost. Magma is studying the feasibility of developing a leaching SX-EW operation that could produce 70 million pounds of copper cathode per year from an oxide mineralized resource of 21.7 million tonnes of 1.57 percent oxide copper. Based on the feasibility study, the SX-EW operation may reduce net cash operating costs from Tintaya to below $0.50 per pound and could expand the total annual production rate from the Tintaya property to over 200 million pounds per year in 1997.
Prior to its investment in Tintaya, the Company made an extensive evaluation of the company, its operations and reserves, the legal, political and business climates in Peru and other factors. In this connection, investments in foreign companies often involve added risks of political instability, the possibility of adverse economic or tax reforms, inflationary conditions, the potential for restrictions on the repatriation of funds, and currency risks. As part of its investment in Tintaya, the Company and the government of Peru entered into a judicial stability agreement and the Company assumed an existing tax stability agreement between the government and Tintaya. These agreements between Magma or Tintaya and the Republic of Peru constitute sovereign commitments which provide, among other things, availability of foreign currency, remittance abroad of profits and capital, the right to use or sell any product derived from the Tintaya properties, tax and other non-discrimination stability and dividend withholding tax stability. Although these agreements do not eliminate all risk associated with its investment in Tintaya, the Company believes that they will minimize a number of the risks typically associated with an investment in a foreign property.
Robinson Permitting and Construction. Construction on the Robinson Mine near Ely, Nevada, started on October 12, 1994. The Bureau of Land Management issued the Final Environmental Impact Statement, Record of Decision, and approved the Plan of Operation on September 9, 1994. On October 11, a 30 day appeal period expired and the approval of the Plan of Operation went into full effect. The project is expected to have an initial capital cost of $300 million and is expected to begin production in the first quarter of 1996.
Based upon drill and assay results, the Company believes that Robinson has 252 million tons of proven/probable sulfide ore reserves with an average grade of .551% copper and with.0102 ounces of gold per ton and 53 million tons of gold reserves with an average grade of .0086 ounces of gold per ton. Robinson is expected to produce approximately 146 million pounds of copper annually for 15 years through traditional mining/concentrating/smelting/refining methods, 101,000 ounces of gold and 363,000 ounces of silver annually from sulfide copper ore and 16,000 ounces of gold annually from leaching operations during this time period. A metallurgical test program is currently under way to evaluate the feasibility of processing Keystone dump material which contains in excess of 69 million tons at a grade of .30% copper.
Smelter Expansion Completed. A smelter expansion was completed in the first quarter of 1994 resulting in increased production, lower costs and improved environmental performance. Smelter production is at levels above the 720 million pounds of copper (in anode form) originally anticipated when the project was first undertaken. This increase in capacity should allow the Company to maintain its custom smelting business even with the expected increase of Magma source copper when the Robinson Mining District begins production.
Lower Kalamazoo Development. Development of the Lower Kalamazoo ore- body at San Manuel is continuing with production expected to begin in 1997. Through December 1994, $61 million has been expended on this project. When developed, this orebody is expected to produce 2.1 billion pounds of copper and will extend the current mining operations at San Manuel an additional 12 years.
Improved Operating Performance. Magma has increased copper production from its own properties by approximately 48% from 402 million pounds in 1988 to 595 million pounds in 1994. Production from the leaching, solvent extraction and electrowinning operations increased by 87% from 86 million pounds in 1988 to 161 million pounds in 1994. Net cash operating costs of copper sold have decreased from $.78 per pound ($.96 per pound adjusted for inflation) in 1988 to $.58 per pound in 1994. Net cash operating costs per pound represent (a) production costs of Magma source copper sold (excluding depreciation, depletion and amortization) reduced by credits for by-products and profits from custom processing divided by (b) total pounds sold from Magma sources. The Company attributes the increase in production and productivity and reduction in operating costs primarily to improved labor relations and the use of innovative operating technology.
Revolving Credit Facility. On May 20, 1994, the Company renegotiated its revolving credit agreement (the "Revolver"), increasing the amount available from $200 million to $300 million. The Revolver, which expires May 19, 1998, is provided by a consortium of eleven banks and is available for general corporate purposes. Amounts outstanding under the Revolver may bear interest at the London InterBank Offered Rate (LIBOR), the Certificate of Deposit or the prime rate, as defined, plus a margin which may vary depending on the credit rating of the Company. Currently, borrowings would bear interest at the rate of LIBOR plus 0.7%. At December 31, 1994, there were no amounts outstanding under the Revolving Credit Facility.
Under the terms of the Revolver, the Company must: (i) maintain a consolidated net worth of not less than the sum of $450 million plus 50% of consolidated net income for each fiscal year beginning with fiscal 1994 and (ii) not permit the ratio of its consolidated debt to total capitalization (debt and equity) to exceed 60%.
COPPER PRICE INFORMATION
Copper is an internationally traded commodity. The copper prices established on the two major metals exchanges - The Commodity Exchange, Inc. ("Comex") in New York and the London Metal Exchange ("LME") - - broadly reflect the worldwide balance of copper supply and demand. The profitability of the Company's operations is largely dependent upon the worldwide market price for copper. A $0.01 per pound change in the average price realized for the Company's 1994 output would have affected pre-tax income by an estimated $6.0 million. Copper prices have historically been subject to wide fluctuations and are affected by numerous factors beyond the control of the Company, including international economic and political conditions, levels of supply and demand, the availability and cost of copper substitutes, inventory levels maintained by copper producers and others and, to a lesser degree, inventory carrying costs (primarily interest charges) and international exchange rates.
The following table of pertinent copper industry data contains Comex high, low and average copper prices per pound and illustrates the historic volatility of copper prices. Price data are given for the Comex standard-grade copper contract for the years 1985-1989. Thereafter, prices are given for contracts for delivery of high-grade copper cathode, which replaced the standard-grade contract effective January 1, 1990.
The Company's average realized price per pound of copper was $.98 in 1994, $.94 in 1993 and $1.00 in 1992. The Company's realized price per pound includes a premium of several cents over the market price for copper cathode to reflect net delivery and financing costs. The Company's price for copper rod commands a premium over its price for copper cathode to reflect the value added by additional processing.
The Company has instituted a copper price protection program to ensure, regardless of the copper price, adequate cash flow for the completion of several major capital projects which are important to its future. These projects, Tintaya, Kalamazoo and Robinson, have or will increase Magma's production and ore reserves and reduce overall cost per pound. The program includes hedging using either the purchase of copper price put options or forward sales of copper at a fixed price depending on copper market conditions including price and volatility. As a result of the copper price protection program, Magma's average copper price realized was nine cents per pound greater (94 cents versus 85 cents) than the average Comex price for 1993 and was nine cents per pound lower (98 cents versus $1.07) than the market price in 1994. With the recent purchase of Tintaya, and construction of the Kalamazoo and Robinson mines, the copper price protection program was extended into early 1997. In contrast to 1994, which included a significant amount of forward sales entered into at the end of 1993, the program for 1995 and 1996 consists almost entirely of copper price put options which lock in a copper price floor and operating cash flow while retaining the upside potential of higher copper prices. As a result of this program, which creates a copper price floor of 87 cents and 93 cents for 1995 and 1996 respectively, Magma will be able to complete its current strategic growth opportunities with moderate outside financing and maintain its strong financial position and flexibility.
COMPETITION
The Company does not believe that it or any other copper producer can individually exercise a material influence on the markets in which the Company operates. The price of copper depends largely upon industrial consumption and other market conditions beyond the Company's control. Many foreign and domestic copper producers benefit from higher grade ore bodies than those owned by the Company. Further, most foreign producers benefit from lower labor rates than those of United States producers. Because of their need for foreign exchange and the political impact layoffs might have, some foreign producers have, in the past, maintained production levels without regard to the condition of the world copper market or the profitability of their mining operations.
The Company's custom smelting and refining operations compete with other smelting and refining operations, primarily Japanese based companies, for the treatment of copper concentrates. At present, certain foreign governments impose a tariff on refined copper that protects smelting and refining margins by increasing the price of finished cathode to domestic consumers. As part of the General Agreement on Tariffs and Trade, otherwise known as the GATT agreement, the Japanese government has agreed to lower the tariff on refined copper from eight percent to three percent ad valorem over a five year period from 1995-2000. The level of foreign tariffs should impact the Company's ability to successfully bid for the treatment of foreign concentrates.
The Company and other copper producers also compete with manufacturers of other materials, including aluminum, stainless steel, plastics and fiber optic cables. Should copper prices increase sharply, substitution of these alternative materials for copper may occur.
PRODUCTS AND SALES
Products. Magma's principal products are high quality copper cathode and copper rod, the latter of which is the basic feedstock of the copper wire and cable industry. Approximately 56% of the copper sold by the Company in 1994 was sold as copper cathode, 39% was sold in the form of continuous cast rod, and the remaining 5% was sold in other forms. Copper revenue in 1994 increased by 11% to $787.8 million, compared to $710.5 million in 1993, due to a $.04 increase in Magma's average realized price per pound, as well as an increase in sales volume.
In addition to smelting and refining copper concentrate production from its own mines, the Company processes a substantial amount of copper concentrate on a toll or purchase basis. The profits from processing third party concentrate effectively reduce the Company's overall cost of producing copper from its own mines. The total quantities of copper produced by the Company, copper smelted and refined on a custom basis and copper sold by the Company from its own mines during each year in the five-year period ended December 31, 1994 were as follows (in millions of pounds):
Magma's operations also produce gold and silver-bearing residues and molybdenum disulfide as by-products. Revenue from gold sales in 1994, including gold contained in raw materials purchased from others, was $29.5 million on sales of 77 thousand ounces. Revenue from silver sales in 1994, including silver in raw materials purchased from others, was $17.0 million on sales of 3.3 million ounces. Revenue from sales of molybdenum disulfide in 1994 was $22.5 million on sales of 4.9 million pounds molybdenum contained. The Company uses sulfuric acid produced in the smelting process in its copper leaching operations and sells excess acid to third parties.
Sales. The Company's sales strategy includes (i) expanding sales to North American consumers, while preserving a core of long-term customer relationships in Asia, (ii) custom smelting and refining of third party concentrate to supplement feedstock to its smelter from Magma's own mines, and (iii) maintaining an optimal mix of copper rod and copper cathode sales.
The Company's export sales have declined in recent years primarily due to increasing U.S. consumption and the recession in Japan. The Company is maintaining its presence in the Asian markets by supplying cathode to major fabricators on an annual and spot basis. The Company's export sales as a percent of total revenues were 21%, 25% and 29% for the years ended December 31, 1994, 1993 and 1992, respectively.
Customers. During 1994, the Company's copper was sold to approximately sixty-three (63) customers. Sales of copper to the Company's largest customer, a merchant trader, accounted for 22% of total revenues during the year. Because copper is an internationally traded commodity, the Company does not believe that the loss of any one customer would have a material adverse effect on the results of its operations.
OPERATIONS
Overview. The Company conducts its copper mining, smelting and refining operations in Arizona and Peru (acquired in November 1994). Its mining operations are conducted through its San Manuel, Pinto Valley, Superior and Tintaya Mining Divisions. Magma Metals Company, a wholly-owned subsidiary, operates the smelting and refining complex and rod plant and conducts the Company's commercial activities. The Company has two subsidiaries which conduct railroad operations in support of its copper mining operations. The Company also operates a gold leaching facility and is constructing a major copper operation at its Robinson Mining District near Ely, Nevada. The Company currently has two subsidiaries that are conducting exploration activities in Mexico and Chile. A detailed description of the Company's mining properties is included in Item 2
ITEM 2. PROPERTIES
Overview. The Company owns or has interests in approximately 32,500 acres of land in southeastern Arizona, where it currently conducts all of its U.S. copper operations. It also owns 12,500 acres of land at its Robinson Mining District near Ely, Nevada, where it conducts a gold leaching operation and is developing a major copper project scheduled to be in production during the first quarter of 1996. The Company's mineral interests are held in fee or are derived from patented and unpatented mining claims and mineral leases. The Company also owns water rights, rights-of-way and interest in other leases.
On November 29, 1994, the Company acquired through privatization from the government of Peru, Empresa Minera Especial Tintaya, S.A. Tintaya owns a 39,600 acre area of established ore reserves with excellent exploration potential and operates a low-cost, open-pit copper mine and concentrator operation.
The Company's ore reserves are estimated by its engineering staff utilizing standard techniques and standard modeling software, typically with the assistance of independent mining consultants. These estimates are based on expectations of geological, geomechanical, metallurgical and other conditions, which may vary from those acctually encountered, with the result that the tonnage and grade of ore recovered and rates of production may be more or less than anticipated. Further, market price fluctuations in copper, changes in operating and capital costs, orebody definition, drilling and testing, and other factors affect ore reserves. In addition, the Company is subject to the normal risks encountered in the mining industry, such as unusual or unexpected geological formations, cave-ins, flooding, fires and environmental issues.
The Company's mining operations are conducted by several divisions described below and in Item 1 - Business.
SAN MANUEL MINING DIVISION
The San Manuel Mining Division, near San Manuel, Arizona, 45 miles northeast of Tucson, Arizona, is accessed by State Highway 77. Sulfide ore is mined from the San Manuel orebody through underground block caving while oxide ore is leached through heap leaching and in situ leaching. Cathode copper is produced from leach solutions at the SX-EW plant using a solvent extraction-electrowinning process. The Division utilizes a concentrator to produce concentrate from sulfide ore which is further processed at the Company's smelting and refining complex.
Investment in the Division's property, including plant and equipment, totaled $230 million as of December 31, 1994. Electricity is provided by the Arizona Public Service Company.
The San Manuel Mining Division ore reserves are contained on land held by the Company under patented mining claims and mineral leases from the State of Arizona. Approximately 2% of the sulfide ore deposit lies on land leased from the State and is subject to production royalties. Mineral leases will expire in the years 2003 through 2007, but the Company has a preferential right to renew these leases for a term of twenty (20) years. Currently there is no active production from state-leased land. Mining on leased land is scheduled to resume in 1996. The Company owns or controls through lease agreements, easements, and rights-of-way, surface use of surrounding land in support of the mining operations.
Extraction of sulfide ore from the San Manuel underground mine began in 1956, and the mine now ranks as one of the world's largest underground copper mines in terms of production.
The San Manuel and Kalamazoo orebodies are two faulted segments of what was once a single, cylindrical-shaped shell of disseminated copper mineralization about 7,700 feet long and 2,500 to 5,000 feet in diameter. The shell varies in thickness from 100 to 1,000 feet and wraps around a central low-grade core.
Ore reserves in the San Manuel orebody consist of both copper sulfide and oxide ores with oxide ores confined to the upper reaches of the orebody. Some chalcocite enrichment is present in minor amounts. Much of the upper part of the orebody has been oxidized in varying degrees, mainly to chrysocolla. The sulfide ore in both the Kalamazoo and San Manuel orebodies consists essentially of disseminated chalcopyrite in quartz monzonite and monzonite porphyry. The Lower Kalamazoo deposit is discussed in Item 7 under Development Opportunities.
PINTO VALLEY MINING DIVISION
The Pinto Valley Mining Division had its beginning in the early 1900's. The division started as Miami Copper Company in 1909. In 1960, the Tennessee Corporation took over Miami Copper Company and, in 1963, Cities Service Company acquired the Tennessee Corporation. In late 1982, Occidental acquired Cities Service Company. By early 1983, Occidental concluded a sale of the Miami operations to Newmont Mining Corporation which contributed those assets to its new, wholly-owned subsidiary, Pinto Valley Copper Corporation. In late 1986, Newmont merged Pinto Valley Copper Corporation into Magma Copper Company and Pinto Valley Copper Corporation became the Pinto Valley Mining Division of Magma Copper Company.
Investment in the Division's property, including plant and equipment, totaled $85 million as of December 31, 1994. Electricity is provided by Salt River Project.
Mining is conducted through two units: the Pinto Valley Unit and the Miami Unit. The Pinto Valley Unit mines copper sulfide ore from its open-pit mine for both concentrating/smelting/refining and leaching/SX-EW production methods, while the Miami Unit conducts in situ leaching of the area of rubble above a closed underground mine and hydraulic mining/leaching of concentrator tailings.
Pinto Valley Unit
The Pinto Valley mine is about six miles west of the town of Miami in Gila County, Arizona. Substantially all the operations take place on land owned by Magma. The land consists of patented mining claims, unpatented mining claims and fee lands.
The Pinto Valley deposit is an orebody containing chalcopyrite, pyrite and minor molybdenite as the only significant primary sulfide minerals. These minerals occur in veins and microfractures, and less abundantly as disseminated grains. As presently defined, the deposit is bounded by post mineralization faults. On the south is the South Hill fault, on the east is the Jewel Hill fault, and on the west is the Gold Gulch fault. Ore reserves are estimated using standard techniques and standard modeling software.
Mining and Concentrating of Copper Sulfide Ore. Sulfide ore from the open-pit mine is processed at the Pinto Valley Unit's concentrator, which produces copper concentrate containing approximately 28% copper and a molybdenum disulfide by-product. The concentration process used is similar to that used in the San Manuel Mining Division's concentrator. The copper concentrate produced in the concentrator is trucked to San Manuel for smelting and refining.
Dump Leaching of Copper Sulfide Ore. Low-grade copper-bearing waste material which has been stripped from the open-pit mine and is classified as leachable is transported to large sulfide ore dumps. The dumps are sprayed with water and sulfuric acid which dissolve contained copper and produce a pregnant leach solution. The pregnant leach solution is fed into the SX-EW plant located near the dumps. The SX-EW plant has the capacity to produce approximately 20 million pounds of copper cathode per year. Essentially all of the sulfuric acid used in the Pinto Valley Unit's dump leaching operation is produced by the Company.
Miami Unit
The Miami Unit is immediately north of the town of Miami. All operations take place on Magma-owned land.
In Situ Leaching. The Miami Unit's underground mine ceased operation in 1959 upon the depletion of all the copper ore that could be economically mined using block caving methods. However, the area of rubble created by the block caving has been used for in situ leaching of mixed oxide/sulfide ore since 1941. The geographic area of the leaching operations was expanded in 1986 and the sulfuric acid content of the leach solution was increased. The copper bearing leach solution is processed in the SX-EW plant near the underground mine. The plant has the capacity to produce 28 million pounds of copper cathode per year.
Miami No. 2 Tailings Project. Mill tailings associated with the old Miami underground mine are reclaimed using hydraulic mining methods to produce a slurry of tailings and water. Sulfuric acid is added to the slurry to dissolve the copper contained therein and the resulting pregnant leach solution is processed through the Miami Unit's SX-EW plant. The remaining tailings are transported for disposal through an overland pipeline to an abandoned pit. Production from the project is expected to continue through 2000.
SUPERIOR MINING DIVISION
The Superior Mining Division is an underground operation near Superior, Arizona, approximately 65 miles east of Phoenix via U.S. Highway 60. Milling operations are conducted at the concentrator, north of Superior. Ore is hoisted from mine working levels to the 500 foot level and then carried by underground railroad to the concentrator at Superior.
The Superior Mining Division owns patented mining claims, unpatented mining claims, and fee lands in the Superior area. Mine production is currently from orebodies on patented mining claims. Exploration activities are being conducted on patented and unpatented mining claims and under state prospecting permits held by the Division.
The Magma Mine at Superior was in continuous operation by Magma or its former parent from 1912 to 1982, when it was closed due to low productivity and depressed copper prices. The current operation was reopened in late 1990.
The mine currently produces copper sulfide ore from underground using the undercut and fill mining method at a rate of 1,500 tons per day. The No. 9 shaft facilities, originally commissioned in 1972, were dewatered and rehabilitated when the mine was reactivated in 1990. Since reactivation a ramp system has been installed and utilizes mechanized mining equipment.
The flotation concentrator was erected in 1928. Additions and modifications were made during the expansions of 1940 and 1970. When reactivated in 1990, all pumping and piping was downsized in accordance with the new mine plan. The crusher, ball mills, filter plant, and certain ancillary equipment have been rehabilitated since startup.
Investment in the underground development, surface facilities, and concentrator complex totaled $35 million as of December 31, 1994. Electric power is supplied to the operation by Salt River Project.
The Superior Division is currently engaged in a feasibility study on sulfide replacement ores in the vicinity of the No. 9 shaft which, if successful, could extend mine life two years. The results of this study are anticipated by mid-year 1995. Other studies on high grade copper veins could support production beyond the two year time frame.
Ore in the Magma Mine is composed of the copper minerals chalcopyrite and bornite, associated with the gangue minerals hematite, quartz and calcite. Copper is the primary metal in the ore with silver and gold occurring as by-products. Orebodies occur as massive replacement of limestone by hematite, chalcopyrite and bornite and as vein-type orebodies, which have been significant producers in the district in the past.
Current ore reserves occur in orebodies in several favorable horizons within the limestone sequence and in vein structures. Ore reserves are estimated using standard techniques and standard modeling software.
ROBINSON MINING LIMITED PARTNERSHIP
The Robinson Mining Limited Partnership, formerly the Kennecott Nevada Mines Division, was acquired by Magma from the Kennecott Corporation and Alta Gold through a series of transactions in 1990 and 1991. Investment in this project totaled $119 million as of December 31, 1994. The Robinson Mining District consists of 12,500 acres and is 8 miles west of Ely, Nevada along State Highway 50. The patented mining claims and other real property comprising this project are owned by the Robinson Mining Limited Partnership of which Magma's wholly-owned subsidiary, Magma Nevada Mining Company, is the general partner and Magma Limited Partner Company, also a wholly-owned subsidiary, is the limited partner.
In June of 1993, the Bureau of Land Management (BLM) required the preparation of an Environmental Impact Statement (EIS) as a precursor to the final permitting of the Robinson Project. The EIS was completed September 9, 1994 with a supportive Record of Decision by the BLM. Final approval of the EIS and the ability to initiate construction under a mining plan of operations was received October 11, 1994. Construction contracts were awarded and work activities commenced at the site effective October 12, 1994. In addition, major equipment orders were released for fabrication on October 12, 1994. As of December 31, 1994, contracts and equipment totaling $228.1 million have been issued. Electricity is provided by Mt. Wheeler Power Company under a 10 year contract.
Based on present estimates, copper ore production is scheduled to commence early in the first quarter of 1996 at an average daily throughput rate of 46,000 tons. The current capital estimate for the development of the mine and construction of a sulfide processing facility is $300 million. The property is expected to produce an average of 274,000 tons of concentrate per year, containing 146 million pounds of copper, 101,000 ounces of gold and 363,000 ounces of silver from sulfide copper ore over a fifteen year mine life. In addition to the copper sulfide operations, it is projected that an average of 16,000 ounces of gold in the form of dore will be produced annually over the life of the mine by heap leaching.
The Cretaceous porphyry system was emplaced into Paleozoic sedimentary formations and faulted extensively. The various ore bodies, Liberty, Veteran, Tripp, Ruth, Kimberly and Wedge, represent the fault slices of the porphyry system.
MAGMA TINTAYA S.A.
In November 1994, the Company acquired through privatization from the government of Peru, Empresa Minera Especial Tintaya, S.A. Empresa Minera Asociada Tintaya S.A., was incorporated as a 100% state-owned company in May, 1980, with a subsequent change of name to Empresa Minera Especial Tintaya S.A. in August, 1981. Tintaya was established to produce copper concentrates through the development and exploitation of ore deposits located in the province of Espinar, Cuzco. Tintaya began its mining activity on April 1, 1985. Production was initiated after an open-pit and concentrator were developed on the site in the early 1980's with the assistance of Canadian expertise, technology and equipment. After the acquisition of 98.43% of its shares for $243.2 million on November 29, 1994, Empresa Minera Especial Tintaya S.A. became Magma Tintaya S.A.
The Tintaya concession (the "Concession"), granted from the Republic of Peru, is 16 km from the town of Yauri. The Concession is within the "Tintaya Bamba Copper Belt" of southeastern Peru which extends in a northwest-southeast direction over a distance of 200-250 km between the cities of Arequipa and Cuzco. The Copper Belt is a metallogenic region related to plate tectonic movements that created the Andes mountains. The belt contains a variety of non-ferrous metals including copper, lead, zinc, gold and silver. Mineral occurrences are primarily copper or copper-gold skarn deposits, hosted chiefly by the middle Cretaceous Ferrobamba Limestone and adjacent Upper Cretaceous to early Tertiary granodiorite and monzonite intrusive rocks related to the Abancay batholith. Although Tintaya currently operates the only active copper mining operation in the area, there are several concessions owned by private companies who may exploit additional non-ferrous metal prospects.
The Concession is linked by the national road network to Cuzco (260 km) and to the port of Matarani through Arequipa (370 km). Concentrate is transported by road to either the Southern Peru Copper Corporation Smelter at Ilo (595 kilometers) or to the port of Matarani. From Matarani, the concentrates are shipped to overseas destinations including the Company's San Manuel, Arizona smelting and refining complex.
Electric Power is supplied by Electro Sur Este S.A., a regional state power company whose main power plant is the Macchu Picchu Hydro-electric Power Station on the Urubamba River. In addition, Tintaya owns a diesel- electric plant to provide backup power in the event of an emergency. The plant is fully automated, and starts immediately in the event of a power outage from Tintaya's main energy source. Operations water supply is available from the nearby Salado River. Tintaya currently owns water rights granted from the Republic of Peru, not only for current operations, but also for planned expansions through the year 2004.
Total proven and probable reserves include 58 million metric tons of sulfide milling ore at 1.78% copper from which 1.9 billion pounds of copper will be recovered over the currently projected life of the mine. In addition, there are 21.7 million metric tons of oxide material at 1.57% copper for which copper recovery and economic feasibility will be determined in 1995. The sulfide reserves and oxide resource occur in the operating mine area (Tajo Abierto, Chabuca Sur, and Chabuca Este). Exploration potential occurs adjacent to and below present reserves as well as Coroccohuayco and Chabuca Norte (both advanced exploration projects) and several locations throughout the Concession (grass roots projects). The Tintaya concession also includes a concentrator and a stockpile of oxide mineralized resource. With less than 10% of the 39,600 acres of land encompassed within the Concession drilled to date, the Concession holds a great deal of potential for further exploration opportunities. Ore reserves are estimated using standard techniques and standard modeling software by Division geology and engineering staff.
FLORENCE PROJECT
The Florence project consists of 10,000 private and state-leased acres west of State Highway 79, north of Florence, Arizona. Magma's project team completed a pre-feasibility study and has recommended in situ mining followed by solvent extraction and electrowinning as the preferred methods of development for this resource. A feasibility study begun in 1994 will provide the detailed mine design, environmental permitting and facility engineering necessary to advance the project to the construction stage. The advancement of this project is part of Magma's long-term strategy to increase copper production through the application of its SX-EW leaching technologies.
MINERALIZED ROCK
Magma also owns various other properties containing mineralized rock that it believes could be brought into production should market conditions warrant. Capital commitments, a favorable copper price, and in some instances planning or technical innovations would be required before operations could commence at these properties. These deposits are estimated to contain the following mineralizations as of January 1, 1995.
ITEM 3.
ITEM 3. LEGAL PROCEEDINGS
The Company is involved in legal proceedings of a character normally incidental to its business, including claims and pending actions against the Company seeking damages in large amounts or clarifications of legal rights. In many cases, insurance or other indemnification protection afforded to the Company relates to such claims. Although there can be no assurance in this regard, the Company does not believe that adverse decisions in any pending or threatened proceedings, or any amounts which it may be required to pay by reason thereof, would have a material adverse effect on the financial condition or results of operations of the Company.
The Company is involved in legal proceedings pending in the Superior Court of Maricopa County, Arizona to adjudicate water rights of the Gila River system and source (the "Adjudication"). The Company's right to use groundwater at its facilities is potentially at issue in this case. These proceedings commenced in the 1970's and to date, over 62,000 claims have been filed. Among the claimants to the largest amounts of surface water are the United States, on behalf of itself and various Indian tribes, the State of Arizona, various municipal water providers, agricultural irrigation districts, and the Company. The Gila River Indian Community has asserted claims against the Company for damages attributable to groundwater withdrawals at San Manuel, but these claims have been stayed pending the outcome of the Adjudication. The Company has filed a claim challenging the Court's jurisdiction to adjudicate the Company's groundwater rights or alternatively seeking to confirm its groundwater rights. In 1994, the Superior Court set forth criteria for determining what groundwater would be included in the Adjudication. That decision is being reviewed by the Arizona Supreme Court. Its opinion on this issue is likely to be rendered in early 1996.
On February 4, 1994, two individuals served the Company in a purported class action lawsuit in federal district court against the Company and two other mining companies on behalf of a putative property owner class and a putative medical monitoring class that live adjacent to Pinal Creek and/or the Miami Wash downstream from mining properties currently operating by the Company and another mining company. The case is pending in the Federal District Court of Arizona. The complaint seeks response costs under the federal Comprehensive Environmental Response, Compensation and Liability Act ("CERCLA") for alleged contamination of plaintiffs' drinking and domestic use water because of groundwater contamination attributed to releases of hazardous substances from the defendants' property. The complaint also seeks common law damages for alleged loss of property value and increased risk of adverse health effects, medical monitoring costs, and punitive damages. The Company is vigorously defending this lawsuit.
As a condition of the purchase of the Florence property from Conoco Oil Company, the Company was required to intervene in litigation instituted in October 1925 by the Gila River Indian Community, and captioned United States v. Gila Valley Irrigation District, et al., filed in the Tucson Division of the United States District Court for the District of Arizona, (a/k/a "Globe Equity No. 59"). In that action, the Gila River Indian Community seeks to alter the administration of water rights above the Ashurst-Hayden Diversion Dam, near Florence, on the Gila River. The Florence property is below Ashurst-Hayden and some of the property is served by irrigation water from Ashurst-Hayden. In November 1994 various issues involving water quality and administration of the decree but not directly involving the Florence property were presented to the court. A ruling is expected on these issues in 1995.
The Company is currently involved in investigations by the Arizona State Mine Inspector's office and the Federal Mine Safety and Health Administration involving an accident occurring August 10, 1993, at the Company's Superior Mining Division, in which four miners were fatally injured ("the Accident"). The Accident occurred when several tons of ore spilled into the manway compartment of the transfer raise in which the four victims were working. In the fourth quarter of 1994, the Company reached a tentative settlement with the principal agencies involved. As is customary in these circumstances, the proposed settlement covered all civil and any potential criminal claims and was circulated among various interested parties, including the United States Attorney.
Following this action, in the first quarter of 1995, the United States Attorney's office for the District of Arizona served a grand jury subpoena upon the Company seeking information pertaining to this Accident. The United States Attorney's office also notified the Company that it is a subject and potential target of that investigation. The Company is in the process of responding to the subpoena and is otherwise cooperating with the government in this matter. Although it does not now know what action, if any, the United States Attorney ultimately will take, other than to investigate this incident, the Company does not believe that it was criminally culpable in connection with the Accident.
See Item 1: Business-Environmental Regulations for information relating to certain other legal proceedings pertaining to the Company.
ITEM 4.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No issues were submitted for a vote of stockholders during the fourth quarter of 1994.
PART II
ITEM 5.
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON STOCK AND RELATED STOCKHOLDER MATTERS
The Company's Common Stock (trading symbol MCU) is traded on the New York Stock Exchange ("NYSE"). The following table sets forth the high and low last sale prices of the Common Stock, as reported by the NYSE.
On March 1, 1995, the closing sale price for the Company's Common Stock, as reported by the NYSE, was $15 1/4 per share. On March 1, 1995, there were approximately 4,719 stockholders of record of the Common Stock. This figure does not reflect beneficial ownership of shares held in nominee names.
At a Special Meeting of Stockholders on October 30, 1992, the stockholders of the Company approved an amendment to the Restated Certificate of Incorporation of the Company that reclassified and converted each outstanding share of Class A Common Stock and Class B Common Stock into one share of a single, new class of Common Stock. The new class of common stock created by the amendment possesses one vote on all matters properly coming before the stockholders, including elections of the Board of Directors, is not subject to any transfer restrictions, and possesses no veto power over the issuance of any other class of stock.
In December 1992, the Company offered to exchange 15.446825 shares of its Common Stock for each share of its Series B Preferred Stock. On December 29, 1992, each share of Series B Preferred Stock was exchanged, resulting in an issuance of 14,133,047 shares of Common Stock. Prior to the exchange, each share of Series B Preferred Stock was convertible into 14.285714 shares of Common Stock.
In recent years, the Company has not declared or paid cash dividends on its Common Stock and has retained all profits to fund capital projects and other expenses. The Company's dividend policy is reviewed from time to time by its Board of Directors. Future dividend decisions will take into account then current business results, cash requirements and the financial condition of the Company. The indentures which govern the Company's 12% and 11 1/2% Notes limit the amount the Company can pay as dividends, or use to make distributions on or repurchase its capital stock. Further, covenants in the Company's revolving credit facility require that the Company and its subsidiaries maintain a minimum consolidated net worth and establish a maximum ratio of debt to capitalization that may indirectly limit the Company's ability to pay dividends.
Seven-year warrants (the "Common Stock Warrants") covering 4,112,765 shares of Common Stock were distributed by the Company on December 29, 1988 as dividends to Common Stockholders of record on December 12, 1988. Each Common Stock Warrant entitles the holder thereof to purchase one share of Common Stock at an exercise price of $8.50 per share. The Common Stock Warrants have traded on the NYSE since February 10, 1992. Prior to that time, they were traded on the AMEX. During 1994 and 1993, the sales price for the Common Stock Warrants ranged from $3 7/8 to $11 5/8. On March 1, 1995, the closing sale price of the Common Stock Warrants was $7 1/4. Additionally, seven year warrants to purchase 1,000,000 shares of Common Stock, exercisable at $8.50 per share, were issued with the Series B Preferred Stock on November 30, 1988. These warrants are not listed or traded on an exchange. All warrants are exercisable through November 30, 1995.
In July 1993, the Company issued $100 million, or 2.0 million shares, of 5 5/8 percent Cumulative Convertible Preferred Stock, Series D, with a liquidation preference of $50.00 per share and a conversion rate of 3.448 (equivalent to a conversion price of $14.50 per share). Additionally, in December 1993, the Company issued $100 million, or 2.0 million shares, of 6 percent Cumulative Convertible Preferred Stock, Series E, with a liquidation preference of $50.00 per share and a conversion rate of 3.5945 (equivalent to a conversion price of $13.91 per share). Dividends are paid quarterly on both series of preferred stock issued in 1993. Dividends on the preferred stock are senior in right of any dividends which may be declared on the Common Stock.
ITEM 6.
ITEM 6. SELECTED FINANCIAL DATA (Dollar amounts in millions, except per share amounts)
The following selected financial data for each of the five years in the period ended December 31, 1994 are derived from the Consolidated Financial Statements audited by Arthur Andersen LLP, independent public accountants. The report of Arthur Andersen LLP with respect to the financial position of the Company and its subsidiaries as of December 31, 1994 and 1993, and the results of the Company's operations and cash flows for each of the years ended December 31, 1994, 1993 and 1992, appear elsewhere in this document. The selected financial data should be read in conjunction with the Management's Discussion and Analysis of Financial Condition and Results of Operations at Item 7
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
In recent years the Company's operations have been characterized by increased production, lower costs and improved productivity. Magma's operations set a record for production of copper in 1994, producing 889 million pounds compared to 846 million pounds in 1993. Net cash operating costs declined by 8 cents per pound of copper in 1994, from an average cost of 66 cents in 1993 to 58 cents in 1994. Productivity improved 6% in 1994 as a result of increased employee involvement. The Company also increased its ore reserves from 7.8 billion pounds of recoverable copper in 1993 to 9.7 billion pounds in 1994 through the development of existing properties and the acquisition of new properties.
On October 6, 1994, the government of Peru declared the consortium of Magma Copper Company and its wholly-owned subsidiary, Global Magma, Ltd., the winning bidder in the privatization of Empresa Minera Especial Tintaya S.A., which owns one of the largest operating mining projects in Peru. Closing of the purchase occurred on November 29, 1994. At closing, Magma (together with its wholly-owned subsidiary) purchased 98.43% of Tintaya, with Tintaya's employees subscribing to purchase the remaining 1.57% interest in accordance with an agreement with the Peruvian government. Magma paid $243 million for its interest in Tintaya and is required to make an additional $85 million in capital expenditures at this project over the next 5 years.
Tintaya is a low-cost, open-pit copper mine and concentrator operation. It has a large area of established ore reserves and has excellent exploration potential. Magma has already identified several highly prospective mineralized areas and is conducting a major exploration program to prove up additional reserves. In 1993 and 1994 Tintaya produced 110 million pounds of copper in concentrate per year at a cost of about $0.60 per pound of refined copper from an ore reserve of 58 million tonnes of 1.78 percent sulfide copper ore, or approximately two billion pounds of recoverable copper. Over the next two years, Magma plans to increase production to 140 million pounds per year at a net cash operating cost estimated at $0.55 per pound. Magma is studying the feasibility of a leaching SX-EW operation that could produce 70 million pounds of copper cathode per year from an oxide mineralized resource of 21.7 million tonnes of 1.57 percent oxide copper. The SX-EW operation may reduce net cash operating costs from Tintaya to below $0.50 per pound and could expand the total annual production rate from the Tintaya property to over 200 million pounds per year in 1997.
In addition, the Company obtained final approval to begin development of its Robinson mine located near Ely, Nevada, and is continuing development of its Lower Kalamazoo orebody. These mining operations are expected to commence production in 1996 and 1997, respectively. The Company also completed an expansion of its smelting and refining operations during 1994, resulting in increased production, lower costs and improved environmental performance.
The following sets forth more detailed information regarding the Company's operations and capital projects.
RESULTS OF OPERATIONS FOR THE YEARS ENDED DECEMBER 31, 1994, 1993 AND 1992
Magma achieved record net income in 1994 of $87.4 million, or $1.38 per share, compared to $21.9 million, or $0.40 per share in 1993. The rise in earnings was attributed to further reductions in net cash operating costs, increased pounds of copper sold and an increase in Magma's realized price per pound of copper sold. Net cash operating costs declined by 8 cents per pound of copper in 1994, from an average cost of 66 cents in 1993 to 58 cents in 1994. Sales of Magma source copper increased by over 7 percent, or 39 million pounds in 1994, from 558 million pounds in 1993 to 597 million pounds in 1994. Magma also benefited from an increase in realized price of copper sold, which increased by 4 cents per pound from 94 cents in 1993 to 98 cents in 1994. Earnings for 1993 were negatively impacted by heavy rains and flooding that occurred during the first quarter of 1993, which reduced after-tax earnings by $15.5 million, or 30 cents per share, and increased costs by 3 cents per pound.
Comparing 1993 to 1992, net income, before restructuring expenses, an accounting change and the effects of first quarter rains and flooding, was $39.8 million, or $.76 per share, for 1993, compared to $58.3 million, or $1.25 per share, for 1992. Earnings for 1993 were lower due primarily to a decline in the average copper price realized by Magma from $1.00 per pound in 1992 to $.94 per pound in 1993. After restructuring expenses, an accounting change and the effects of first quarter rains and flooding, Magma reported net income for 1993 of $21.9 million, or $.40 per share. Magma's first quarter 1993 results were restated to recognize a $0.9 million after-tax charge for the adoption of Statement of Financial Accounting Standards No. 112, "Accounting for Postemployment Benefits" (SFAS 112).
After deducting dividends on the 5 5/8% Series D Preferred Stock and 6% Series E Preferred Stock issued in July and December 1993, respectively, earnings available to stockholders were $75.8 million ($1.54 per share) in 1994, compared to $19.4 million ($.40 per share) in 1993 and $42.7 million ($1.28 per share) in 1992.
Total Sales. Total 1994 sales were $889.6 million, a 12% increase from 1993 sales of $792.4 million. The increase in sales was primarily a result of higher copper prices and increased volume. Total sales for 1993 were 3% below 1992 sales of $819.5 million due to lower copper prices which were partly offset by increased volume.
Copper Prices and Sales. Copper prices have historically been subject to wide fluctuations and are dependent to a significant extent on factors outside the control of the Company. The Company's average realized price per pound of copper was $.98 in 1994, $.94 in 1993 and $1.00 in 1992.
In light of the historic volatility of the price of copper and the Company's need to ensure sustained levels of cash flow to support operations and facilitate capital projects, the Company has maintained a copper price protection program during the past two years. The program includes hedging through the use of put options, futures, swap contracts and forward sales of copper at a fixed price. The approach used by the Company at any given time has been dependent on market conditions, including the price and volatility of these alternatives. As a result of this program, Magma's average price per pound of copper sold was nine cents per pound greater than the average Comex price in 1993 ($.94 versus $.85) and nine cents per pound lower than the average price per pound in 1994 ($.98 versus $1.07). For information relating to the Company's price protection program for 1995 and 1996, which features the use of put options, thereby preserving the benefit of higher copper prices, see "Capital Resources and Liquidity" below.
The Company's realized price per pound also includes a premium of several cents over the market price for copper cathode to reflect net delivery and financing costs. The Company's price for copper rod commands a premium over its price for copper cathode to reflect the value added by additional processing.
The Company sold 774.3 million pounds of copper in 1994, compared to 764.4 million pounds in 1993 and 725.4 million pounds in 1992. Sales of copper from Magma sources was negatively impacted in 1993 as the result of Arizona's abnormally high rainfall earlier in the year. The following table sets forth the volume of copper sold in relation to its sources:
Other Metal Sales and Treatment Tolls Earned. Sales of other metals and metal by-products, sulfuric acid and treatment tolls earned in 1994 were $101.8 million, as compared to $81.9 million in 1993 and $83.3 million in 1992. The increase for 1994 was attributable to higher prices for gold, silver, molybdenum and sulfuric acid along with increased volume of material smelted and refined for third parties on a toll basis. The decrease from 1992 to 1993 was primarily attributable to lower gold sales from the Company's Robinson Mining District and the closure of its McCabe Mining Division, together with a weak market for acid sales. These decreases were largely offset by higher purchased by-products that were contained in custom concentrates processed by Magma and an increase in the volume of toll material processed.
Cost of Sales. Cost of products sold during 1994 increased to $654.5 million, or 2%, from $639.4 million in 1993. This increase was due to greater sales volume of copper sold and a higher unit cost of scrap and copper concentrates purchased from third parties. This cost increase was mostly offset by reduced unit production costs.
Cost of products sold during 1993 of $639.4 million was up 1% from $630.4 million in 1992. Lower unit costs of Magma source copper contributed to lower cost of products sold by $21 million in addition to lower volume sold of $6 million. Higher sales volume of copper purchased or tolled from third parties increased cost of sales by $28 million. Storm damage resulting from Arizona's abnormally high rainfall in 1993 caused a $14 million increase in cost of sales. However, cost of sales of other metals decreased by $6 million.
Other. Depreciation, depletion and amortization expense totaled $75.1 million in 1994 compared to $65.4 million in 1993. The increases were largely due to increased production, the addition of Tintaya and depreciation on the expansion of the smelting and refining complex and computer system conversion that were put into service in early 1994.
The increase in selling, general and administrative expense for 1994 was due to the higher cost of insurance coverage. The increase for 1993 was a result of higher legal and consulting fees primarily relating to business development activities and special projects.
The increase in exploration, research and development expenses in 1994 and 1993 was due to the Company's emphasis on increasing ore reserves in the U.S. and other countries.
Interest expense in 1994 was $25.0 million, as compared to $35.0 million in 1993 and $45.3 million in 1992. These decreases reflect the capitalization of interest in connection with the Company's major capital projects.
Interest income was $10.7 million in 1994 as compared to $8.7 million in 1993 and $9.5 million in 1992. The increase in 1994 was largely the result of higher interest rates while the decrease in 1993 was the result of lower interest rates. The decrease in other income for both 1994 and 1993 reflects decreasing townsite sales. During 1994 the Company completed its program of selling townsite homes.
In the fourth quarter of 1993, the Company recorded a $2.0 million charge for restructuring expenses related to workforce reductions as a part of a major cost reduction program.
Preferred stock dividends were $11.6 million in 1994 compared to $2.5 million in 1993 and $12.6 million in 1992. In July 1993 the Company issued $100.0 million Series D Preferred Stock and in December 1993 it issued $100.0 million of Series E Preferred Stock. These securities pay quarterly dividends at the annual rate of 5 5/8% and 6%, respectively. The decrease in 1993 was the result of the 1992 conversion into Common Stock of the Company's Series B Preferred Stock.
Effects of Inflation. Generally, production costs of the Company's domestic operations, other than labor and energy costs, are not materially affected by inflation. Recent low levels of inflation have not had a material effect on the Company's operating costs.
Peru has experienced high levels of inflation in recent years. The inflation rate in Peru, as measured by the Lima consumer price index, fell from 7,650% in 1990 to 139.2% in 1991, 56.7% in 1992, 39.5% in 1993 and 13.0% in 1994. Although the Peruvian Government's stabilization plan has significantly reduced inflation, there can be no assurance that domestic inflation will not increase from its current level. However, nearly all of Tintaya's sales and approximately 40% of its purchases have historically been denominated in U.S. dollars and are not affected by local inflation.
DEVELOPMENT PROJECTS, CAPITAL RESOURCES & LIQUIDITY
Development Projects. Over the past several years, the Company has made an exerted effort to expand and improve its smelting and refining complex and to increase its ore reserves and production from Company sources. The following sets forth a summary description of the Company's more significant projects.
Smelting and Refining Complex. During the past year, the Company completed an expansion and modernization of its smelting and refining complex at a total capital cost of $85 million. The expansion of the smelter should enable the Company to maintain its custom smelting and refining for third parties even after its Robinson project begins copper production.
Robinson. Construction on Magma's new Robinson mine started on October 12, 1994 following final regulatory approval. The current project will include a concentrator and open-pit mine and is expected to have a capital cost of $300 million. Production is expected to begin in the first quarter of 1996.
Based upon drill and assay results, the Company believes that Robinson has 252 million tons of proven/probable sulfide ore reserves with an average grade of .551% copper and with .0102 ounces of gold per ton, and 53 million tons of gold reserves with an average grade of .0086 ounces of gold per ton. Robinson is expected to produce an average of approximately 146 million pounds of copper annually for 15 years through traditional mining/concentrating/smelting/ refining methods, with 101,000 ounces of gold and 363,000 ounces of silver as by-products. In addition, this minesite is expected to produce an additional 16,000 ounces of gold annually from leaching operations during this time period.
A metallurgical test program is currently under way to evaluate the feasibility of processing Keystone dump material which contains in excess of 69 million tons at a grade of .30% copper.
Lower Kalamazoo. The Company's Kalamazoo orebody, which is near its San Manuel underground mine, is comprised of two levels, an upper level which has been in production since 1990 and contains approximately 38 million tons of proven/probable ore reserves and a lower level which is being developed and contains approximately 203 million tons of proven/probable ore reserves. Based on the current mine plan, the Lower Kalamazoo project is scheduled to produce 2.1 billion pounds of copper during the period from 1997 to 2009.
Tintaya. In addition to its existing reserve base, the Tintaya property bears significant exploration potential. Tintaya has implemented a program to delineate, measure, and determine the feasibility of this potential to support expanded, low cost production.
Tintaya plans to spend $10 million over the next two years on sulfide exploration and development, primarily focused on demonstrating additional sulfide ore in and around the current open pit. Approximately 11,000 meters of core drilling is planned in this effort. In addition, Tintaya plans to reassess existing drill samples for gold, create a block model for gold, and generate a high quality gold reserve estimate for the property.
The currently delineated sulfide pit is expected to generate 21.7 million metric tons of oxidized skarn containing 1.57% copper during stripping. Approximately half this amount has already been mined and stockpiled. This mineralized material is not declared as a reserve at this time because a feasibility study and mine plan have not yet been completed. Tintaya intends to begin a feasibility study on the oxide material by the end of 1995, designed to demonstrate the feasibility of producing 70 million pounds of SX-EW cathode per annum by leaching this material.
Florence. In July 1992, Magma completed the acquisition of a large copper deposit near Florence, Arizona. Magma's project team completed a pre-feasibility study and has recommended in situ mining followed by solvent extraction and electrowinning as the preferred methods of development for this resource. A feasibility study which began in 1994 will provide the detailed mine design, environmental permitting and facility engineering necessary to advance the project to the construction stage. This project is part of Magma's long-term strategy to increase copper production through the application of its SX-EW leaching technologies. Because evaluation of the Florence property is still in the early stages, the Company has not yet made any determination of the cost to develop the property.
Capital Resources and Liquidity. During 1994, the Company funded its development projects through internally generated cash flow and existing cash balances. In this regard, the Company's 1994 cash flow available for capital expenditures (net income plus depreciation, depletion and amortization) was $162.5 million, as compared to $90.2 million in 1993. The increase was attributable to increased production, decreased costs and higher copper prices in 1994. In addition, 1993 cash flow was adversely affected by storm damage from Arizona's abnormally high rainfall which occurred early in the year.
During 1994, the Company spent $243 million in direct acquisition costs for the Tintaya mine and $149 million for other capital expenditures. These capital expenditures included $19 million for upgrading its smelting and refining complex, $32 million on the development of its Lower Kalamazoo orebody and $29 million on development of its Robinson Mining District.
Reflecting these expenditures, the Company's cash and marketable securities were $88 million at December 31, 1994, compared to $339 million at December 31, 1993. Working capital, including cash and marketable securities, was $115 million on December 31, 1994, compared to $360 million at December 31, 1993.
The Company anticipates spending on the order of $700 million over the next three years on its currently identified development projects, of which $435 million is planned for 1995, $160 million for 1996 and the balance for 1997. Capital expenditures for 1995 on these projects include $212 million on the development of the Robinson Mining District, $38 million on continued development of the Lower Kalamazoo orebody, $30 million for upgrading mining equipment at Tintaya and $25 million for in situ expansion at San Manuel. All of these projects will be completed or substantially be completed by the end of 1997.
During 1994, the Company generated $162.5 million in cash flow available for capital expenditures based upon production from Company sources totaling 595 million pounds of copper and an average realized price of $.98 per pound. With the acquisition of the Tintaya property, which will more than offset closure of its open-pit mine at San Manuel, the Company anticipates that production from Company sources will increase in 1995. During the first quarter of 1995, copper price levels have exceeded those achieved in 1994. With the anticipated increase in production and assuming recent price and operating cost levels continue, the Company expects that its cash flow available to support capital expenditures, together with its existing cash balances ($88 million at December 31, 1994), will fund the capital expenditures planned for 1995 through 1997. To protect against fluctuations in copper prices, the Company has entered into put options and forward commitments more fully described below. The Company believes that even if prices were to fall to the levels covered by this price protection program, it would still be able to fund a substantial portion of these expenditures during this period from cash balances and operating cash flow, with the remainder to be funded by its existing credit facilities, or alternative sources of borrowings that the Company may seek.
In light of the historic volatility of copper prices, the Company uses a combination of put options, futures, swap contracts and forward commitments to assure cash flow from operations to facilitate its capital spending program. For 1995, the Company purchased put option contracts covering 529 million pounds of production at a London Metals Exchange ("LME") based strike price of $.85 per pound. In addition, the Company purchased put options covering 121 million pounds at an LME based strike price of $.95 per pound. The Company also entered into Commodity Exchange Inc. ("Comex") based swap contracts covering 51 million pounds of production at an average price of $1.03 per pound. When combined with the amortization of the option premiums, the above contracts create a floor price for the Company's production of approximately $.87 per pound for 1995. For 1996, the Company purchased put options covering 676 million pounds of production, creating a minimum realized price of approximately $.93 per pound. For 1997, the Company has purchased put options covering 66 million pounds of first quarter production, creating a minimum realized price of approximately $.92 per pound. In addition, the Company increased its revolving line of credit from $200 million to $300 million in 1994.
The decision to complete ongoing projects or to undertake new projects is subject to a variety of factors, which may include (depending on the project), the price of copper, the completion of favorable feasibility studies and permitting. There can be no assurance that the Company will undertake all of these opportunities or that, if undertaken, they will prove successful. If the Company is unable to replace its reserves from the mine development projects being evaluated, or with other reserves identified or acquired in the future, the Company's dependency upon third party sources to supply copper concentrate to its smelting and refining operations would increase.
Environmental Matters. The Company maintains and funds an ongoing environmental auditing and compliance program. The program includes mine reclamation and remediation, as well as technological improvements and upgrades to its operating facilities.
The Company is participating in a remediation and assessment of ground water quality at Pinal Creek near Miami, Arizona as part of the Arizona Department of Environmental Quality's Process Water Quality Assurance Revolving Fund Program. The Company and other companies sharing voluntary responsibility for ground water clean up and a remedial investigation have sued certain other mining companies with existing or prior operations in the area to obtain reimbursement for all or part of the costs that have been and will be incurred at the site. Some of these defendants have counterclaimed against the Company asserting indemnification for the costs and any liabilities relating to this project. Although the Company's costs of remediation have not been material on a yearly basis, the Company cannot estimate the duration over which such activities may have to take place, or whether the cost of the remedial activities will increase as permanent cleanup activities are approved and implemented. Although there can be no assurance in this regard, the Company does not believe it will incur any material liability or costs in relation to this matter.
ITEM 8.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
MAGMA COPPER COMPANY AND CONSOLIDATED SUBSIDIARIES
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
Page
Report of Independent Public Accountants . . . . . . . . . . . . . . 47 Consolidated Financial Statements: Consolidated Balance Sheets-December 31, 1994 and 1993 . . . . . 48 Consolidated Statements of Operations-for each of the years ended December 31, 1994, 1993 and 1992. . . . . . . 50 Consolidated Statements of Changes in Stockholders' Equity-for each of the years ended December 31, 1994, 1993 and 1992. . . . . . . . . . . . . . . . . . . . . . . . . . 51 Consolidated Statements of Cash Flows-for each of the years ended December 31, 1994, 1993 and 1992 . . . . . . . . 55 Notes to Consolidated Financial Statements. . . . . . . . . . . 57 Consolidated Financial Statement Schedules at and for the years ended December 31, 1994, 1993 and 1992: Report of Independent Public Accountants. . . . . . . . . . 78 Schedule II-Valuation and Qualifying Accounts . . . . . . . 79
All other schedules are omitted as the information required is immaterial or inapplicable or because the required information is included in the Consolidated Financial Statements or notes thereto.
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To Magma Copper Company:
We have audited the accompanying consolidated balance sheets of Magma Copper Company (a Delaware corporation) and subsidiaries as of December 31, 1994 and 1993, and the related consolidated statements of operations, changes in stockholders' equity and cash flows for each of the three years in the period ended December 31, 1994. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of Magma Copper Company and subsidiaries as of December 31, 1994 and 1993, and the results of their operations and their cash flows for each of the three years in the period ended December 31, 1994 in conformity with generally accepted accounting principles.
As explained in Note L and Note K to the financial statements, effective January 1, 1993, and January 1,1994, the Company changed its methods of accounting for postemployment benefits and investments in debt and equity securities, respectively.
ARTHUR ANDERSEN LLP
Tucson, Arizona, January 27, 1995.
MAGMA COPPER COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE A - NATURE OF OPERATIONS
Magma Copper Company and its subsidiaries ("Magma" or the "Company") are in the business of mining and concentrating nonferrous copper ore, and smelting and refining its production as well as that of third parties. The Company's primary product is electrolytic copper, most of which is sold as either cathode or continuous-cast copper rod. By-products derived from the treatment processes are sold to third parties.
The Company produces copper by both the traditional method (mining/concentrating/smelting/refining) and by the leaching/solvent extraction-electrowinning ("SX-EW") method. The Company owns and operates underground sulfide and open-pit oxide and sulfide mines at San Manuel, Miami and Superior, Arizona, Ely, Nevada (under construction) and southern Peru (Tintaya). In addition to processing the Company's mined material, the San Manuel smelter, refinery and rod casting facilities process third party material on a custom basis, including tolled and purchased concentrates.
NOTE B - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
1. Principles of Consolidation
The consolidated financial statements include the accounts of the Company, its wholly-owned subsidiaries, as well as its majority-owned subsidiary. The wholly-owned subsidiaries include: Magma Gold Ltd., Magma Nevada Mining Company, Magma Arizona Railroad Company, San Manuel Arizona Railroad Company, Magma Metals Company, Magma Limited Partner Co., Magma Mexico Exploration Corporation, Magma Copper Chile, Inc., Magma Consulting Inc. and Global Magma, Ltd. The Company's majority-owned subsidiary, Magma Tintaya S.A., was acquired on November 29, 1994 as a stock purchase with 98.43% ownership. Operating results for the month of December, 1994 are included in the consolidated financial statements. All significant intercompany accounts and transactions have been eliminated in consolidation.
2. Property, Plant and Mine Development
Property, plant and mine development is stated at original historical cost less accumulated depreciation, depletion and amortization, except for certain assets which were restated in connection with a quasi- reorganization recorded on December 31, 1991. Expenditures for property, plant and equipment are capitalized. Maintenance and repairs are expensed as incurred. Mine development expenditures incurred substantially in advance of production or to develop new mines are capitalized. Expenditures for mineral exploration or evaluations directed towards the discovery of mineral resources are expensed as incurred, as are expenditures for mine development costs which maintain current production levels. The amount expensed for exploration, research and development was $13.5 million, $9.4 million and $2.6 million in 1994, 1993 and 1992, respectively.
Investments in property, plant and equipment are depleted or depreciated over the estimated productive lives of the assets, using the straight-line method. Deferred mine development costs are charged to operations on the units-of-production method based on the estimated pounds of copper ore to be recovered.
Included in "equipment and buildings" in the accompanying consolidated balance sheets is $134,747,000 and $109,646,000 of construction-in-progress at December 31, 1994 and 1993, respectively. Included in "deferred mine development costs" is $53,476,000 and $21,353,000 of mine development-in- progress at December 31, 1994 and 1993, respectively. The accumulated amortization of deferred mine development costs was $18,863,000 and $9,263,000 at December 31, 1994 and 1993, respectively. The accumulated depletion of mining claims and land was $1,470,000 and $1,137,000 at December 31, 1994 and 1993, respectively.
3. Inventories
Inventories of metals and materials and supplies are stated at the lower of moving-average cost or estimated market value.
Inventories included in current assets were (in thousands):
December 31, ------------------------- 1994 1993 -------- -------- Metals in process $ 70,817 $ 37,454 Finished goods 25,369 16,222 ------- ------- Subtotal-metals 96,186 53,676 Materials and supplies 40,814 25,045 ------- ------- Total $137,000 $ 78,721 ======= =======
4. Income Taxes
Deferred income taxes result from temporary differences in the recognition of accounting transactions for tax and financial reporting purposes. The principal temporary differences relate to depreciation and amortization of mine development costs and certain financial reserves not deductible for tax purposes until paid.
5. Method of Recording Sales and Treatment Toll Revenue
Revenue from sales of copper and acid is recorded when ownership of the products is legally transferred to the customer. Certain copper sales are provisionally priced and later adjusted in the month the sales prices are contractually finalized. Revenue from by-products is recognized on a production basis. Treatment toll revenue earned for the smelting of concentrates is recorded in the month that the copper concentrates are smelted. Treatment toll revenue earned for refining copper and rod conversion is recorded in the period that the copper becomes returnable to the customer.
6. Capitalized Interest
The Company capitalizes interest allocable to the construction of major new facilities and deferred mine development until operations commence. The Company capitalized $17,714,000 and $7,786,000 of interest in 1994 and 1993, respectively. No interest was capitalized in 1992.
7. Earnings Per Share
Primary earnings per share is computed by dividing net income, less dividends on preferred stock, by the weighted average number of common shares outstanding and common shares payable as preferred stock dividends. The weighted average number of primary common stock and common stock equivalents outstanding during 1994, 1993 and 1992 were 49,167,000, 48,174,000 and 33,444,000, respectively.
Earnings per share assuming full dilution is computed by dividing net income by the weighted average number of common shares outstanding, including the potential dilutive effect of the Series D and Series E Preferred Stock. For purposes of the computation, all the preferred stock is included based on the weighted average converted shares outstanding. The weighted average number of common stock and common stock equivalents outstanding for 1994 and 1992, assuming full dilution, was 63,387,000 and 46,605,000, respectively. For 1993 preferred stock was antidilutive.
8. Stock Option and Stock Award Plans
The 1987 Stock Option and Stock Award Plan ("the 1987 Plan") was established by contributing 5% of Magma's then outstanding stock (1,903,630 shares of Class B Common Stock) to a trust. The trust holds the shares until used for direct grants or grants of stock options to key members of Magma's management as directed by a committee ("the Committee") of directors appointed by the Board of Directors. During 1989, the Committee authorized the purchase by the trust of 54,300 shares of Class B Common Stock from the open market for $390,000.
The Company's shareholders approved the adoption of the Magma Copper Company 1989 Stock Option and Stock Award Plan ("the 1989 Plan") on June 1, 1989. The 1989 Plan is administered by the Committee. Under the 1989 Plan, the Committee has authority to determine the key employees to whom and the time incentive awards in the form of stock options, stock appreciation rights, restricted stock awards and performance units may be granted.
Subject to certain exceptions set forth in the 1989 Plan, the aggregate numbers of shares of the Company's Common Stock that may be the subject of awards under the Plan is 2,000,000.
The Company's shareholders approved adoption of the Magma Copper Company 1993 Stock Option and Stock Award Plan ("the 1993 Plan") on May 13, 1993. The 1993 Plan is administered by the Committee. Under the 1993 Plan, the Committee has authority to determine the key employees to whom and the time incentive awards in the form of stock options, stock appreciation rights, restricted stock awards, phantom stock rights, performance units and performance shares may be granted.
Subject to certain exceptions set forth in the 1993 Plan, the aggregate number of shares of the Company's common stock that may be the subject of awards under the Plan is 2,250,000.
Options under the 1987 Plan primarily become exercisable over a three- year vesting period, subject to certain restrictions, at the rate of one- third per year. The options under the 1989 Plan become exercisable over a three or four-year vesting period. Options granted under the 1993 Plan become exercisable over a three-year vesting period.
The following table summarizes the activity related to stock options under the plans:
Stock grants represent compensation to management for future periods and are treated as a capital contribution to Magma as they vest.
Grants under the 1987 Plan vest over various terms. Most grants vest over a three or four-year period.
Compensation expense under the 1987 Plan in the form of stock grants earned for 1994, 1993 and 1992 was approximately $200,000, $500,000 and $500,000, respectively.
Grants under the 1989 Plan primarily vest over a four-year period at 20% in each of the first two years and at 30% in the last two years or 25% per year over a four-year period. Compensation expense related to the 1989 Plan was approximately $34,000, $100,000 and $100,000 in 1994, 1993 and 1992, respectively.
The following table summarizes the activity under the stock grant plans:
Under the Company's 1989 Stock Option Plan for Non-Employee Directors, options awarded for 1994, 1993 and 1992 were 4,848, 6,359 and 6,164, respectively. Under this plan, the directors forego cash compensation in exchange for discounted options. The average exercise price was $7.84, $5.97 and $6.17 per share for 1994, 1993 and 1992, respectively.
At a meeting held on May 14, 1992, the Company's shareholders approved the adoption of the 1992 Restricted Stock Plan for Non-Employee Directors; 8,000 grants of stock were awarded in 1992, 1993 and 1994, respectively.
9. Stock Warrants
The Company has warrants outstanding covering the purchase of 4,966,000 shares exercisable at $8.50 per share. The warrants are exercisable through November 30, 1995.
10. Cash, Cash Equivalents and Marketable Securities
For purposes of the consolidated balance sheets and the consolidated statements of cash flows, the Company considers all highly liquid investments, purchased with a maturity of three months or less, to be cash equivalents. Marketable securities are highly liquid investments, primarily in United States treasury notes, purchased with maturities greater than three months. These securities are considered available for sale and are carried at market.
11. Short-Term Borrowings
Average amounts outstanding for short-term borrowings during the years ended 1994 and 1993 were $9.3 million and $8.5 million at a weighted average interest rate of 9.5% and 10.8%, respectively.
12. Restatements and Reclassifications
Certain amounts for 1993 and 1992 have been reclassified to conform with 1994 reporting classifications.
NOTE C - MAJOR CUSTOMERS, EXPORT SALES AND SALES COMMITMENTS
During 1994, the Company's copper was sold to approximately sixty-three (63) customers. Sales of copper to the Company's largest customer, a merchant trader, accounted for 22% of total revenue during the year. Because copper is an internationally traded commodity, the Company does not believe that the loss of any one customer would have a material adverse effect on the results of its operations.
The Company's export sales have declined in recent years primarily due to increasing U.S. consumption and the recession in Japan. The Company is maintaining its presence in the Asian markets by supplying cathode to major fabricators on an annual and spot basis. Export sales as a percent of total revenues were 21%, 25% and 29% for the years ended December 31, 1994, 1993 and 1992, respectively.
The Company has instituted a copper price protection program to insure, regardless of the copper price, adequate cash flow for the completion of several major capital projects which are important to its future. These projects, Tintaya, Kalamazoo and Robinson, have or will increase Magma's production and ore reserves and reduce overall cost per pound. The program includes hedging using either the purchase of copper price put options or forward sales of copper at a fixed price depending on copper market conditions including price and volatility. As a result of the copper price protection program, Magma's average copper price realized was nine cents per pound greater (94 cents versus 85 cents) than the average Comex price for 1993 and was nine cents per pound lower (98 cents versus $1.07) than the market price in 1994. With the recent purchase of Tintaya, and construction of Kalamazoo and Robinson in progress, the copper price protection program was extended into early 1997. In contrast to 1994, which included a significant amount of forward sales entered into at the end of 1993, the program for 1995 and 1996 consists almost entirely of copper price put options which lock in a copper price floor and operating cash flow while retaining the upside potential of higher copper prices. As a result of this program which creates a copper price floor of 87 cents and 93 cents for 1995 and 1996 respectively, Magma will be able to complete its current strategic growth opportunities with moderate outside financing and maintain its strong financial position and flexibility.
NOTE D - INCOME TAXES
During the fourth quarter of 1991, Magma adopted Statement of Financial Accounting Standards No. 109 "Accounting for Income Taxes" (SFAS 109) and retroactively restated its financial statements from January 1, 1987. SFAS 109 requires an asset and liability approach for financial accounting and reporting for income tax purposes. This statement recognizes (a) the amount of taxes payable or refundable for the current year and (b) deferred tax liabilities and assets for the future tax consequences of events that have been recognized in the financial statements or tax returns.
In August 1993 the Revenue Reconciliation Act of 1993 (the "Act") was enacted by Congress. Under the Act, and effective as of January 1, 1993, the top marginal corporate tax rate was increased from 34% to 35%. Under SFAS 109 the cumulative impact of a change in tax rate is recognized as an element of tax expense for the period of enactment. During the three month period ended September 30, 1993, the Company recorded a one time charge to tax expense of $2.8 million to reflect the impact of the change in statutory rate.
In calculating income taxes, the Company has benefited from deductions for percentage depletion. In general, the Company's cumulative percentage depletion deductions exceed cost basis of depletable properties, resulting in current percentage depletion being treated as a permanent difference. The effect of this permanent difference causes the effective tax rate to be generally lower than the statutory tax rate.
During 1994 the Company's effective tax rate by quarter was as follows: first quarter 27%, second quarter 27%, third quarter 22%, fourth quarter 13%. The aggregate effective tax rate for 1994 totaled 20%. During the third and fourth quarters of 1994 the Company experienced a substantial decrease in effective tax rate as deductions for percentage depletion sheltered a greater proportion of book income realized after forward sales.
The components of the income tax provision consist of the following (in thousands):
The provision for income taxes differs from the amounts computed by applying the federal statutory rate as follows (in thousands):
The components of the net deferred tax liability are as follows (in thousands):
At December 31, 1994, Magma has for federal income tax purposes approximately $63 million of regular tax net operating loss carryforwards which expire, if unused, in the years 2004 through 2006. Under the federal alternative minimum tax system, Magma has no net operating loss carryforwards. As a result of shorter carryforward periods and other statutory differences, Magma has no net operating loss carryforwards for state income tax purposes.
Magma also has alternative minimum tax credits aggregating approximately $75 million which carryforward indefinitely for federal income tax purposes. These credits can be used in the future to the extent that Magma's regular tax liability exceeds its liability calculated under the alternative minimum tax system.
The Company's deferred tax liability at December 31, 1994 includes deferred taxes related to its foreign subsidiary. Foreign income taxes have been provided to the extent the book basis of the foreign subsidiary's assets exceed their tax basis. Currently management does not have specific plans for reinvestment of foreign earnings nor do they plan to postpone remittance indefinitely. Accordingly, U.S. taxes net of anticipated foreign tax credits have also been provided for on the basis difference.
NOTE E - PENSION AND RETIREMENT PLANS
The Company and its subsidiaries have defined benefit pension and retirement plans covering substantially all employees (the "Plans"). Plans covering salaried employees provide pension benefits based on the employee's compensation during the ten years before retirement. Plans covering hourly employees provide pension benefits based on stated amounts, for each year of service, and provide for supplemental benefits for employees who retire with 30 years of service before age 65.
The Company's funding policy is to contribute annually the minimum amount that can be deducted for federal income tax purposes. Total pension and retirement plan costs were $1,740,000, $2,257,000 and $1,422,000 in 1994, 1993 and 1992, respectively.
The net periodic pension cost for 1994, 1993 and 1992 included the following components (in thousands):
On December 31, 1994 and 1993, the Plans' assets were invested in fixed income instruments and equity securities.
The following tables set forth the Plans' funded status and amounts recognized in the Company's consolidated balance sheets at December 31, 1994 and 1993 (in thousands):
During 1990, an amendment changed the benefit formula and the definition of compensation used to compute the salaried employees' benefit. These changes resulted in an increase in the projected obligation of $3,100,000 which is accounted for as prior service cost and amortized over 13.9 years.
The Company provides executives with excess benefit and supplemental benefit pension plans. Plan costs for 1994 including interest and amortization of the transition obligation was $1,316,000. The projected benefit obligation of these plans at December 31, 1994 was $5,884,000. Funding is on a current basis and there are no plan assets.
The Company also sponsors postretirement medical and life insurance benefit plans. The postretirement medical and life insurance plans cover salaried and hourly employees with at least ten years of service prior to retirement. The medical plan provides benefits for hospital coverage and surgical fees up to a lifetime limit of $80,000. The life insurance plan provides benefits to hourly employees of $4,000 and to salaried employees based on their preretirement compensation.
The Company funds the postretirement benefit costs on a current basis and there are no plan assets.
The net periodic postretirement benefit costs for 1994, 1993 and 1992 included the following components (in thousands):
The following table sets forth postretirement amounts recognized in the Company's consolidated balance sheets at December 31, 1994 and 1993 (in thousands):
The 1994 plan accounting assumes a health care cost trend rate for pre-age 65 benefits of 13% and post-age 65 benefits of 10%. These rates were assumed to decrease one percentage point each year to 5.5% and remain at that level thereafter. The assumed discount rate and rate of increase in compensation levels was 8.5% and 5.0%, respectively. The effect of a one percentage point increase in the assumed health care cost trend rates for each future year would increase the accumulated postretirement benefit obligation as of December 31, 1994 by $4,232,000. The effect of this change on the aggregate of the service and interest cost components of the net periodic postretirement benefit costs would have been an increase of $254,000 for 1994.
NOTE F - LONG-TERM DEBT
Long-term debt consists of the following (in thousands):
At December 31, 1994, aggregate debt maturities are as follows for the years ending December 31 (in thousands):
1. 12% Senior Subordinated Notes
In December 1991, the Company sold $200,000,000 of 12% Senior Subordinated Notes ("12% Notes") due December 15, 2001. Interest on the 12% Notes is payable on June 15 and December 15 of each year.
The 12% Notes are redeemable at the option of the Company, at any time or from time to time, on and after December 15, 1996 in whole or in part. Redemption of the 12% Notes is at 106% of the principal amount thereof for the twelve month period beginning on December 15, 1996, at 103% of the principal amount thereof for the twelve month period beginning on December 15, 1997, and thereafter at 100% of the principal amount thereof. The indenture pursuant to which the 12% Notes were issued contains, among other restrictions, limitations on the incurrence of additional debt, payment of cash dividends, distributions on and repurchases of the Company's capital stock and loans or contributions to the capital of or investment in Designated Subsidiaries, as defined by the Indenture.
2. 11 1/2% Senior Subordinated Notes
In January 1992, the Company issued $125,000,000 of 11 1/2% Senior Subordinated Notes ("11 1/2% Notes") due January 15, 2002. Interest on the 11 1/2% Notes is payable January 15 and July 15 of each year.
The 11 1/2% Notes are redeemable at the option of the Company, at any time or from time to time, on and after January 15, 1995 in whole or in part. Redemption of the 11 1/2% Notes is at 108% of the principal amount thereof for the twelve month period beginning on January 15, 1995, at 106% of the principal amount thereof for the twelve month period beginning January 15, 1996, at 104% of the principal amount thereof for the twelve month period beginning January 15, 1997, at 102% of the principal amount thereof for the twelve month period beginning January 15, 1998, and thereafter at 100% of the principal amount thereof. The indenture pursuant to which the 11 1/2% Notes were issued contains restrictions which are similar in nature to the 12% Senior Subordinated Notes.
3. Industrial Development Authority Bonds
At December 31, 1994, Industrial Development Authority ("IDA") bonds outstanding totaled $49,700,000. These bonds have been issued through the Pinal County IDA, the locale of the Company's smelting and refining facility. The interest rates on these bonds are based on the minimum rate determined by the remarketing agent necessary to sell the bonds. The effective interest rate on the bonds was approximately 2.8% for 1994, 2.3% for 1993 and 4% for 1992.
Principal at December 31, 1994 is repayable as follows (in thousands):
In December 1992, the Company refinanced maturing bonds totaling $14,081,639 with a new $14,000,000 IDA bond issuance due December 1, 2011. The proceeds of the original bond issues were used to provide funds to finance certain pollution control facilities and retrofit the Company's smelter.
4. Promissory Note
In July 1992, the Company purchased a major Arizona copper deposit. In conjunction with this purchase, the Company signed an $8,000,000, 9.75% Promissory Note ("Promissory Note") due in eight annual installments of $1,000,000 commencing January 1993. The Promissory Note may be prepaid at any time without penalty. The Promissory Note contains no significant covenants; however, it is secured by a deed of trust on the property purchased.
5. Non-Interest Bearing Junior Subordinated Notes
From March 1989 through March 1992, the Company issued non-interest- bearing junior subordinated notes (the "Zero-Interest-Notes") in lieu of quarterly cash dividends to holders of the Series B Preferred Stock (see Note G-Preferred Stock). The Zero-Interest-Notes were retired on or about May 4, 1994.
6. Capitalized Lease Obligations
The Company has capitalized lease obligations for heavy mining equipment and a computer system. These leases have maturities from 1995 through 1999 and implicit rates ranging from 7.0% to 9.2%.
7. Revolving Credit Facility
In May 1994, the Company entered into a four-year $300 million revolving credit agreement (the "Revolver"). The Revolver is provided by a consortium of eleven banks and is available for general corporate purposes. Amounts outstanding under the Revolver may bear interest at the London InterBank Offered Rate (LIBOR), the Certificate of Deposit or the prime rate, as defined, plus a margin which may vary depending on the credit rating of the Company. Currently, borrowings would bear interest at the rate of LIBOR plus 0.7%. An annual agency fee of $30,000 plus a commitment fee (which also varies depending on the credit rating of the Company) of 1/4% per annum on the unused portion of the Revolver is payable by the Company.
Under the terms of the Revolver, the Company must: (i) maintain a consolidated net worth of not less than the sum of $450 million plus 50% of consolidated net income for each fiscal year beginning with fiscal 1994 and (ii) not permit the ratio of its consolidated debt to total capitalization (debt and equity) to exceed 60%.
NOTE G - PREFERRED STOCK
The Company has 50,000,000 shares of authorized Preferred Stock. At December 31, 1994, 5,112,765 shares (none issued or outstanding) had been designated as Series C Convertible Preferred Stock ("Series C Preferred Stock"); 2,000,000 shares (issued and outstanding) had been designated as Series D Cumulative Convertible Preferred Stock ("Series D Preferred Stock"); 2,000,000 shares (issued and outstanding) had been designated as Series E Cumulative Convertible Preferred Stock, and 40,882,235 shares (none issued or outstanding) were undesignated. In 1988, 930,000 shares of the Series B Preferred Stock were issued in conjunction with a recapitalization of the Company. The Series C Preferred Stock was created for issuance upon conversion of the Series B Preferred Stock or exercise of outstanding warrants, if, for any reason, the Company were unable to issue Common Stock to satisfy applicable conversion or exercise requirements. No Series C Preferred Stock is outstanding and the Company is not presently aware of any reason that would require it to issue such stock or preclude it from issuing Common Stock.
In December 1992, the Company offered to exchange 15.446825 shares of its Common Stock for each share of its Series B Preferred Stock outstanding. On December 29, 1992, each share of Series B Preferred Stock was exchanged, resulting in an issuance of 14,133,047 shares of Common Stock.
Each share of Series B Preferred Stock was entitled to cumulative dividends in each of the first five years after issuance, paid quarterly, at the rate of one share of Class B Common Stock per annum and, if the market price of a share of Class B Common Stock at the time was less than $10 plus an additional amount (payable, at the Company s option, in cash or non-interest-bearing junior subordinated notes due five years from the issuance date of the first of such notes issued), not to exceed $.625 per quarter, equal to one quarter of the excess of $10 over the market value of a share of Class B Common Stock. After November 1993, each share of Series B Preferred Stock would have been entitled to receive dividends of $10 per annum in cash.
In July 1993, the Company issued $100 million, or 2.0 million shares of 5 5/8 % Cumulative Convertible Preferred Stock, Series D ("Series D Preferred Stock") and in December 1993, the Company issued $100 million, or 2.0 million shares of 6% Cumulative Convertible Preferred Stock, Series E ("Series E Preferred Stock"). Both the Series D Preferred Stock and Series E Preferred Stock have a liquidation preference of $50.00 per share and dividends are payable quarterly at the annual rate of 5 5/8% and 6%, respectively.
Each share of the Series D Preferred Stock and Series E Preferred Stock is convertible at any time at the option of the holder into shares of Common Stock of Magma Copper Company at a conversion rate of 3.448 and 3.5945 shares, (equivalent to a conversion price of $14.50 and $13.91 per share of Common Stock) respectively, subject to adjustment under certain conditions.
The Series D Preferred Stock and Series E Preferred Stock are not redeemable prior to July 20, 1996 and December 1, 1996, respectively. On and after the above dates, the Series D Preferred Stock and Series E Preferred Stock are redeemable at the option of the Company, in whole or in part, initially for $51.969 and $52.10 per share, respectively, and thereafter at prices declining ratably annually to $50 per share in 2003, plus, in each case, an amount equal to accrued and unpaid dividends to the redemption date.
During 1994, the Company paid cash dividends on its Series D Preferred Stock and Series E Preferred Stock totaling $5,622,000 and $6,000,000, respectively.
NOTE H - COMMON STOCK
At a Special Meeting of Stockholders on October 30, 1992, Magma's stockholders voted to amend the Company's Certificate of Incorporation to reclassify and convert all shares of Class A Common Stock and Class B Common Stock into a new, single class of Common Stock.
Each share of Common Stock created by the amendment possesses one vote on all matters properly coming before stockholders, including elections of the Board of Directors, and is not subject to any transfer restrictions, and possesses no veto power over the issuance of any other class of stock.
NOTE I - COMMITMENTS AND CONTINGENCIES
1. Legal Matters
The Company is involved in legal proceedings of a character normally incidental to its business, including substantial claims and pending actions against the Company seeking recovery of alleged damages or clarifications of legal rights, much of which is subject to insurance or indemnity coverage. The Company does not believe that adverse decisions in any pending or threatened proceedings, or any amounts which it may be required to pay by reason thereof, would have a material adverse effect on the financial condition or results of operations of the Company.
The Company is involved in legal proceedings (the "Adjudication") regarding the allocation of water rights of the Gila River system and source pending in the Superior Court of Maricopa County, Arizona. The Company's right to use surface and groundwater at its San Manuel, Pinto Valley and Superior operations and potentially at its Florence property, as well as the rights of all other claimants to use water from the Gila River system and source, is to be decided in this matter. Claims for damages for the Company's withdrawal of ground water have been asserted by Indian tribes, but have been stayed pending outcome of the Adjudication. A final resolution of this litigation may not be made for several years. Management believes that, despite this litigation, it will be able to obtain water necessary for its mining operations.
2. Labor Contracts
On October 21, 1991 the Company and its labor unions executed a 15 year collective bargaining agreement. The agreement prohibits strikes and lockouts for at least seven years. Hourly-rated employees have received and will receive annual wage increases of $.25 to $.35 per hour in each of the five years following 1991, some of which are dependent upon Magma's quarterly earnings performance during such periods. After the initial five-year period, the agreement will continue in effect for an additional 10 years on the same terms and conditions, unless either party proposes a modification of the economic terms. If the parties are unable to agree on the proposed modifications, they will be submitted to an arbitration panel which will establish major economic terms for a one-year period in accordance with certain specified criteria. If during any five-year period after the initial term there are two such arbitration proceedings, the agreement will terminate upon the anniversary date of the second arbitration award. Under the agreement, teams of management, union represented employees and their representatives are committed to work together to, among other things, increase productivity and reduce costs.
NOTE J - LEASE COMMITMENTS
The Company leases railcars, haul trucks, other heavy mining equipment and a computer system. Rent expense for the years ended December 31, 1994, 1993 and 1992 was $4,653,000, $4,464,000 and $4,833,000, respectively.
The following is a schedule of the future minimum lease payments for the years ending December 31, (in thousands):
NOTE K - DISCLOSURES ABOUT FAIR VALUE OF FINANCIAL INSTRUMENTS
The following methods and assumptions were used to estimate the fair value of each class of financial instruments for which it is practicable to estimate that value:
Cash. The carrying amount approximates fair value because of the short maturity of those instruments.
Marketable Securities. In the first quarter of 1994 the Company adopted SFAS 115, "Accounting for Certain Investments in Debt and Equity Securities".
Accordingly, certain of the Company's investments with an average maturity of less than one year have been classified as available-for-sale securities and are reported at their estimated fair value, based on quoted market prices for those or similar investments. The Company utilizes the specific identification method in computing realized gains and losses.
During the twelve month period ended December 31, 1994, the Company received $340.5 million in proceeds from available-for-sale securities, including realized gains of $0.7 million and realized losses of $3.4 million.
The change in unrealized holding losses, net of tax, for the twelve month period ended December 31, 1994 was $.1 million.
Long-Term Debt. The fair value of the Company's long-term debt is estimated based on the quoted market prices for the same or similar issues or on the current rates offered to the Company for debt of the same remaining maturities.
Price Protection Contracts. The Company enters into options, futures and swap contracts, as well as fixed price forward sales agreements as part of its ongoing price protection programs. For 1995, the Company purchased put option contracts covering 529 million pounds of production at a London Metals Exchange ("LME") based strike price of $.85 per pound. In addition, the Company purchased put options covering 121 million pounds at an LME based strike price of $.95 per pound. The Company also entered into Commodity Exchange Inc. ("Comex") based swap contracts covering 51 million pounds of production at an average price of $1.03 per pound. When combined with the amortization of the option premiums, the above contracts create a floor price for the Company's production of approximately $.87 per pound for 1995. For 1996, the Company purchased put options covering 676 million pounds of production, creating a minimum realized price of approximately $.93 per pound. For 1997, the Company has purchased put options covering 66 million pounds of first quarter production, creating a minimum realized price of approximately $.92 per pound.
Gold Swap Contracts. To protect a portion of the Robinson by-product credit, the Company entered into Comex based swap contracts covering 30,000 ounces of gold per year during 1996, 1997 and 1998 at an average price of $433, $460 and $490 per ounce, respectively. Through the execution of these contracts the Company will receive or pay the difference between the fixed prices and the average market prices at the time of the physical sales.
The estimated fair values of the Company's financial instruments as of December 31, 1994 are as follows (in thousands):
The fair value estimates are made at discrete points in time based on relevant market information and information about the financial instruments. These estimates may be subjective in nature and involve uncertainties and significant judgment and therefore cannot be determined with precision.
NOTE L - ADOPTION OF SFAS 112 - EMPLOYERS' ACCOUNTING FOR POSTEMPLOYMENT BENEFITS
At December 31, 1993, the Company adopted SFAS 112 - "Employers' Accounting for Postemployment Benefits". The Company elected to adopt this statement early and to record the entire cumulative adjustment in the year of adoption. Under SFAS 112, $.9 million (after tax) was charged to first quarter 1993 earnings.
NOTE M - STORM DAMAGE
The Company estimates that pre-tax earnings for 1993 were reduced by $21 million ($15.5 million after tax) as a result of storm damage. The largest cost was a writedown of inventory to net realizable value of $10 million caused by higher than normal production costs. Additionally, there was a $4 million loss of production and $4 million of one-time rain related repair costs. The Company's operating margin was reduced by $3 million as the Company was unable to mine from the higher-grade area of its open-pit mine at its Pinto Valley Mining Division. The Company is presently seeking a recovery from its property and casualty insurer for property damage and business interruption losses resulting from that storm damage.
NOTE N - Acquisition of Tintaya
On October 6, 1994, the government of Peru declared the consortium of Magma Copper Company and its subsidiary, Global Magma, Ltd. the winning bidder in the privatization of Empresa Minera Especial Tintaya S.A., ("Tintaya") which owns one of the largest operating mining projects in Peru. The consortium acquired 98.43% of the common stock of Tintaya on November 29, 1994 for $243 million and a commitment to spend an additional $85 million in capital expenditures over the next five years. The acquisition was accounted for by the purchase method with the results of operations of Tintaya included for the one month period ended December 31, 1994.
The following unaudited pro-forma combined financial data give effect to the acquisition as if it had occurred on the first day of each period. This pro-forma financial data is provided for comparative purposes only and does not purport to be indicative of the results which would have been obtained if the acquisition had been effected during the period presented. The pro-forma financial information is based on the purchase method of accounting and reflects adjustments to record the profits of acquired inventories, conversion from Peruvian GAAP to U.S. GAAP, depreciation, depletion and amortization of mine development costs on the adjusted asset basis and adjust income taxes for the pro-forma adjustments.
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To Magma Copper Company:
We have audited in accordance with generally accepted auditing standards, the consolidated financial statements of Magma Copper Company and subsidiaries included in this Form 10-K, and have issued our report thereon dated January 27, 1995. Our audits were made for the purpose of forming an opinion on the basic consolidated financial statements taken as a whole. The schedule listed in the index to consolidated financial statements of this Form 10-K is the responsibility of the Company's management and is presented for purposes of complying with the Securities and Exchange Commission's rules and is not part of the basic consolidated financial statements. This schedule has been subjected to the auditing procedures applied in the audit of the basic consolidated financial statements and, in our opinion, fairly states in all material respects, the financial data required to be set forth therein in relation to the basic consolidated financial statements taken as a whole.
ARTHUR ANDERSEN LLP
Tucson, Arizona, January 27, 1995.
ITEM 9.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
Not applicable.
PART III
Additional information required by Part III (Items 10, 11, 12 and 13) is incorporated by reference from the registrant's definitive proxy statement which will be filed with the Securities and Exchange Commission not later than 120 days after the end of the fiscal year covered by this Form 10-K, provided, however, that the "Compensation Committee Report on Executive Compensation" and the "Stock Performance Graph" contained in the Proxy Statement are not incorporated by reference herein.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
(a) 1. Consolidated Financial Statements: Index on page 45 of this Report.
2. Consolidated Financial Statement Schedules: Index on page 45 of this Report.
3. Exhibits. The exhibits as indexed on pages 81 through 89 of this Report are included as a part of this Form 10-K.
(b) Reports on Form 8-K:
The following reports on Form 8-K were filed by the registrant during the three months ended December 31, 1994:
The Company filed a report on Form 8-K, dated October 6, 1994, to announce that the government of Peru declared Magma and its subsidiary the winning bidder in the privatization of Empresa Mineral Especial Tintaya S.A., which owns one of the largest operating mining projects in Southern Peru. Magma also announced that construction began at its Robinson Mine on October 12, 1994, following final approval of the project by the Bureau of Land Management.
The Company filed a report on Form 8-K, dated November 29, 1994, to announce the closing of the purchase of Empresa Mineral Especial Tintaya S.A. ("Tintaya"). The Company also stated that it would file the required financial information for Tintaya (which was impracticable to provide at this time) under Form 8-K/A before February 13, 1995.
The Company filed a report on Form 8-K/A-1 (filed February 7, 1995) dated November 29, 1994 to provide required financial information for the Tintaya acquisition.
Exhibit Number Description
2.1 Stock Purchase Agreement (Incorporated by reference; previously filed as Exhibit 21. to the Registrant's Form 8-K dated November 29, 1994.)
3.1 Restated Certificate of Incorporation (Incorporated by reference; of Magma Copper Company, dated previously filed as Exhibit February 21, 1991 3.4 to the Registrant's annual report on Form 10-K for the fiscal year ended December 31, 1990.)
3.2 Certificate of Correction to Restated (Incorporated by reference; Certificate of Incorporation of previously filed as Exhibit Magma Copper Company dated 3.2 to the Registrant's February 27, 1992 annual report on Form 10-K for the fiscal year ended December 31, 1991.)
3.3 Certificate of Amendment to (Incorporated by reference; Restated Certification of previously filed as Exhibit Incorporation of Magma Copper 3.3 to the Registrant's Company dated October 30, 1992 1992 Form 10-K.)
3.4 By-laws of Magma Copper Company (Incorporated by reference; as amended to and including previously filed as Exhibit July 22, 1992 3.4 to the Registrant's 1992 Form 10-K.)
4.0 Specimen Common Stock Certificate (Incorporated by reference; previously filed as Exhibit 4.0 to the Registrant's 1992 Form 10-K.)
4.1 Specimen Warrant Certificate (Incorporated by reference; previously filed as Exhibit 4.1 to the Registrant's 1988 Warrants Registration Statement.)
4.2 Form of Warrant Agreement, dated (Incorporated by reference; as of December 15, 1988, between previously filed as Exhibit the Company and Manufacturers 4.2 to the Registrant's Hanover Trust Company, as warrant 1988 Warrants Registration agent Statement.)
Exhibit Number Description
4.3 Form of Note Indenture for 12% (Incorporated by reference; Senior Subordinated Notes due previously filed as Exhibit 2001, dated December 15, 1991 4 to the Registrant's Current Report on Form 8-K dated January 9, 1992.)
4.4 Specimen of 12% Note (Incorporated by reference; previously filed as Article Two of Exhibit 4 to the Registrant's Current Report on Form 8-K dated January 9, 1992.)
4.5 Form of 11.5% Note Indenture for (Incorporated by reference; 11.5% Senior Subordinated Notes previously filed as Exhibit due 2002, dated January 15, 1992 28B to the Registrant's Current Report on Form 8-K dated January 17, 1992.)
4.6 Specimen of 11.5% Note (Incorporated by reference; previously filed as Article Two of Exhibit 28B to the Registrant's Current Report on Form 8-K dated January 17, 1992.)
4.7 Certificate of Designation of (Incorporated by reference; Series B Preferred Stock previously filed as Exhibit 3.6 to the Registrant's Registration Statement on Form S-1, File No. 33-24960 (the "Copper Notes Registration Statement").)
4.8 Amendment to Certificate of (Incorporated by reference; Designation of Series B previously filed as Exhibit Preferred Stock 3.6 to the Registrant's Statement on Form S-1, File No. 33-26294 (the "1988 Warrants Registration Statement").)
4.9 Certificate of Decrease in (Incorporated by reference; the Number of Authorized Shares previously filed as Exhibit of Series B Preferred Stock 3.7 to the Registrant's 1992 Form 10-K.)
Exhibit Number Description
4.10 Certificate of Designations of (Incorporated by reference; Series D Preferred Stock previously filed as Exhibit 4.0 to the Registrant's Current Report on Form 8-K dated July 12, 1993.)
4.11 Specimen Series D Preferred (Incorporated by reference; Stock Certificate previously filed as Exhibit 4.0 to the Registrant's Form 8-A dated July 8, 1993.)
4.12 Certificate of Designations of (Incorporated by reference; Series E Preferred Stock previously filed as Exhibit 4.1 to the Registrant's Form 8-A dated November 17, 1993.)
4.13 Specimen Series E Preferred Stock (Incorporated by reference; Certificate previously filed as Exhibit 4.0 to the Registrant's Form 8-A dated November 17, 1993.)
10.0 Performance Rights Agreement, (Incorporated by reference; dated August 10, 1988, Between previously filed as Exhibit Donald J. Donahue and Magma 10.34 to the Registrant's Copper Company Copper Notes Registration Statement.)
10.1 Tax-Matters Agreement, dated (Incorporated by reference; as of March 6, 1987 between previously filed as 10I to Newmont Mining Corporation and the Registrant's Form 10.) Magma Copper Company
10.2 Tax Sharing Agreement between (Incorporated by reference; Newmont Mining Corporation and previously filed as Exhibit Magma Copper Company 10.15 to the Registrant's 1987 Form 10-K.)
10.3 Memorandum Agreement, dated (Incorporated by reference, July 1, 1989, between Magma previously filed as Exhibit Copper Company and the unions 40.0 to the Registrant's comprising the Magma Unity Council 1989 Form 10-K.)
Exhibit Number Description
10.4 Memorandum Agreement, dated (Incorporated by reference, November 1, 1991, between Magma previously filed as Exhibit Copper Company and the union 10.41 to the Registrant's comprising the Magma Unity 1991 Form 10-K.) Counsel
10.5 Reimbursement Agreement, dated (Incorporated by reference; as of December 1, 1984 between previously filed as Exhibit Magma Copper Company and National 10O to the Registrant's Westminister Bank PLC, New York Form 10.) Branch (Series 1984A Bonds)
10.6 Loan Agreement, dated as of (Incorporated by reference; December 1, 1984, between The previously filed as Exhibit Industrial Development Authority 10K to the Registrant's of the County of Pinal and Magma Form 10.) Copper Company Series 1984A Bonds)
10.7 Reimbursement Agreement, dated (Incorporated by reference; as of December 1, 1984, between previously filed as Exhibit Magma Copper Company and National 10L to the Registrant's Westminster Bank PLC, New York Form 10.) Branch (Series 1984 Bonds)
10.8 Loan Agreement, dated as of (Incorporated by reference; December 1, 1984, between The previously filed as Exhibit Industrial Development Authority 10M to the Registrant's of the County of Pinal and Magma Form 10.) Copper Company (Series 1984 Bonds)
10.9 Letter Agreement amending the (Incorporated by reference; Reimbursement Agreement and previously filed as Exhibit Guaranty, among the Company, 10.12 to the Registrant's Newmont and National Westminster 1988 Warrants Registration Bank PLC, dated November 30, 1988 Statement.)
10.10 Loan Agreement dated as of (Incorporated by reference; December 1, 1992, between the previously filed as Exhibit Industrial Development Authority 10.11 to the Registrant's of the County of Pinal and Magma 1992 Form 10-K.) Copper Company (Series 1992 Bonds)
10.11 Reimbursement Agreement, dated (Incorporated by reference; as of December 1, 1992, between previously filed as Exhibit Magma Copper Company and Banque 10.12 to the Registrant's Nationale de Paris 1992 Form 10-K.)
Exhibit Number Description
10.12 Trust Agreement, dated as of (Incorporated by reference; March 10, 1987, among Newmont previously filed as Exhibit Mining Corporation, First 10.23 to the Registrant's Interstate Bank of Arizona and 1987 Form 10-K.) Magma Copper Company
10.13 Amendment to Trust Agreement, (Incorporated by reference; dated December 27, 1988, between previously filed as Exhibit Newmont Mining Corporation, 27.0 to the Registrant's Magma Copper Company and First 1988 Form 10-K.) Interstate Bank of Arizona, N.A.
10.14 User License, dated as of (Incorporated by reference; August 28, 1984, between previously filed as Exhibit Southwire Company and Magma 10.26 to the Registrant's Copper Company 1987 Form 10-K.)
10.15 License Agreement, dated as of (Incorporated by reference; October 28, 1986, between previously filed as Exhibit Outokumpu Oy and Magma Copper 10.27 to the Registrant's Company 1987 Form 10-K.)
10.16 License Agreement, dated as of (Incorporated by reference; February 1, 1986, between Phelps previously filed as Exhibit Dodge Refining Corporation and 10.28 to the Registrant's Magma Copper Company 1987 Form 10-K.)
10.17 License Agreement, dated as of (Incorporated by reference; April 10, 1985, between MIM previously filed as Exhibit Technology Marketing Limited 10.30 to the Registrant's and Magma Copper Company 1987 Form 10-K.)
10.18 Purchase Agreement, dated (Incorporated by reference; November 20, 1988, between previously filed as Exhibit Magma Copper Company and 10.50 to the Registrant's Warburg, Pincus Capital Company, Copper Notes Registration L.P. Statement.)
10.19 Amendment to Purchase Agreement, (Incorporated by reference; dated November 30, 1988, between previously filed as Exhibit Magma Copper Company and Warburg, 10.27 to the Registrant's Pincus Capital Company, L.P. 1988 Warrants Registration Statement.)
Exhibit Number Description
10.20 Registration Rights Agreement, (Incorporated by reference; dated November 30, 1988, between previously filed as Exhibit Magma Copper Company and Warburg, 10.29 to the Registrant's Pincus Capital Company, L.P. 1988 Warrants Registration Statement.)
10.21 Revolving Credit Facility (Incorporated by reference; Agreement dated as of previously filed as Exhibit May 20, 1994 10 to the Registrant's Quarterly Report on Form 10-Q dated June 30,1994.)
10.22 Tax Stability Agreement (Incorporated by reference; previously filed as Exhibit 10.1 to the Registrant's Form 8-K/A-1 dated November 29, 1994.)
10.23 Judicial Stability Agreement (Incorporated by reference; with the Consortium Magma previously filed as Exhibit Copper Company - Global 10.2 to the Registrant's Magma Ltd. Form 8-K/A-1 dated November 29, 1994.)
10.24 Judicial Stability Agreement (Incorporated by reference; with Empresa Minera Especial previously filed as Exhibit Tintaya, S.A. 10.3 to the Registrant's Form 8-K/A-1 dated November 29, 1994.)
10.25 1987 Stock Option and Stock (Incorporated by reference; Award Plan previously filed as Exhibit 10B to the Registrant's Form 10.)
10.26 Amendments to 1987 Stock (Incorporated by reference; Option and Stock Award Plan previously filed as Exhibit 28.1 to the Registrant's Quarterly Report on Form 10-Q dated June 30, 1992.)
Exhibit Number Description
10.27 1989 Stock Option and Stock (Incorporated by reference; Award Plan previously filed as Exhibit 35.0 to the Registrant's annual report on Form 10-K for the fiscal year ended December 31, 1989 (the "1989 Form 10-K.")
10.28 Amendments to 1989 Stock (Incorporated by reference; Option and Stock Award previously filed as Exhibit Plan 28.2 to the Registrant's Quarterly Report on Form 10-Q dated June 30, 1992.)
10.29 1989 Stock Option Plan for (Incorporated by reference; Non-employee Directors previously filed as Exhibit 10.27 to the Registrant's 1991 Form 10-K.)
10.30 Amendment to 1989 Stock Option (Incorporated by reference; Plan for Non-Employee Directors previously filed as Exhibit 28 to the Registrant's Quarterly Report on Form 10-Q dated September 30, 1991.)
10.31 Excess Benefit Plan (Incorporated by reference; previously filed as Exhibit 10.28 to the Registrant's 1991 Form 10-K.)
10.32 Executive Supplemental Benefit (Incorporated by reference; Plan previously filed as Exhibit 10.29 to the Registrant's 1991 Form 10-K.)
10.33 Amended and Restated Special Filed herewith Executive Supplemental Benefit Plan
10.34 Special Executive Deferred (Incorporated by reference; Compensation Plan previously filed as Exhibit 10.31 to the Registrant's 1991 Form 10-K.)
Exhibit Number Description
10.35 First Amendment to Special (Incorporated by reference; Executive Deferred Compensation previously filed as Exhibit Plan 10.33 to the Registrant's 1992 Form 10-K.)
10.36 Second Amendment to Special (Incorporated by reference; Executive Deferred Compensation previously filed as Exhibit Plan 10.34 to the Registrant's 1992 Form 10-K.)
10.37 Third Amendment to Special Filed herewith Executive Deferred Compensation Plan
10.38 Fourth Amendment to Special Filed herewith Executive Deferred Compensation Plan
10.39 1992 Restricted Stock Plan for (Incorporated by reference; Non-Employee Directors previously filed as Exhibit 28.3 to the Registrant's Quarterly Report on Form 10-Q dated June 30, 1992.)
10.40 Amendment to 1987 Stock Plan (Incorporated by reference; for Non-Employee Directors previously filed as Exhibit 10.36 to the Registrant's 1992 Form 10-K.)
10.41 1993 Revised Incentive Compensation (Incorporated by reference; Plan Guidelines previously filed as Exhibit 10.36 to the Registrant's 1993 Form 10-K.)
10.42 Chief Executive Officer (Incorporated by reference; Supplemental Retirement Plan previously filed as Exhibit 10.38 to the Registrant's 1992 Form 10-K.)
10.43 Employment Agreement - (Generic (Incorporated by reference; Copy) previously filed as Exhibit 10.38 to the Registrant's 1993 Form 10-K.)
10.44 Third Amendment to Employment (Incorporated by reference; Agreement between J. B. Winter previously filed as Exhibit and Magma Copper Company 10.39 to the Registrant's 1993 Form 10-K.)
Exhibit Number Description
10.45 Retention and Severance Benefit (Incorporated by reference; Agreement between Magma Copper previously filed as Exhibit Company and J. B. Winter 10.40 to the Registrant's 1993 Form 10-K.)
10.46 Revised 1993 Long-Term Incentive (Incorporated by reference; Plan guidelines previously filed as Exhibit 10.41 to the Registrant's 1993 Form 10-K.)
10.47 1993 Stock Option and Stock (Incorporated by reference; Award Plan previously filed as Exhibit 4 to the Registrant's Form S-8 Registration Statement, File No. 33-64766.)
10.48 First amendment to the Magma (Incorporated by reference; Copper Company Executive previously filed as Exhibit Supplemental Benefit Plan 10.43 to the Registrant's 1993 Form 10-K.)
10.49 Second amendment to the Magma (Incorporated by reference; Copper Company Executive previously filed as Exhibit Supplemental Benefit Plan 10.44 to the Registrant's 1993 Form 10-K.)
11.0 Statement re: computation of Filed herewith per share earnings
21.0 Subsidiaries of Magma Copper Filed herewith Company
23.1 Consent of Independent Public Filed herewith Accountants (Price Waterhouse)
23.2 Consent of Independent Public Filed herewith Accountants (Arthur Anderson LLP)
27.0 Financial Data Schedule Filed herewith
99.0 Statement re: indemnification (Incorporated by reference; of directors, officers and previously filed as Exhibit controlling persons 28.0 to the Registrant's 1990 Form 10-K.)
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
MAGMA COPPER COMPANY
By:/s/ Donald J. Donahue (Donald J. Donahue) Chairman of the Board
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed by the following persons on behalf of the registrant in the capacities and on the dates indicated.
Signature Title Date
Chairman of the Board /s/ Donald J. Donahue and Director March 9,1995 (Donald J. Donahue)
President, Chief Executive Officer, Director /s/ J. Burgess Winter (Principal Executive Officer) March 9,1995 (J. Burgess Winter)
Vice President and /s/ Douglas J. Purdom Chief Financial Officer March 9,1995 (Douglas J. Purdom) (Principal Financial and Accounting Officer)
/s/ Christopher W. Brody Director March 9,1995 (Christopher W. Brody)
/s/ Judd R. Cool Director March 9,1995 (Judd R. Cool)
/s/ John W. Goth Director March 9,1995 (John W. Goth)
/s/ John R. Kennedy Director March 9,1995 (John R. Kennedy)
/s/ Thomas W. Rollins Director March 9,1995 (Thomas W. Rollins)
/s/ Henry B. Sargent Director March 9,1995 (Henry B. Sargent)
/s/ Simon D. Strauss Director March 9,1995 (Simon D. Strauss)
/s/ H. Wilson Sundt Director March 9,1995 (H. Wilson Sundt)
/s/ John L. Vogelstein Director March 9,1995 (John L. Vogelstein)
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
(a) 1. Consolidated Financial Statements: Index on page 45 of this Report.
2. Consolidated Financial Statement Schedules: Index on page 45 of this Report.
3. Exhibits. The exhibits as indexed on pages 81 through 89 of this Report are included as a part of this Form 10-K.
(b) Reports on Form 8-K:
The following reports on Form 8-K were filed by the registrant during the three months ended December 31, 1994:
The Company filed a report on Form 8-K, dated October 6, 1994, to announce that the government of Peru declared Magma and its subsidiary the winning bidder in the privatization of Empresa Mineral Especial Tintaya S.A., which owns one of the largest operating mining projects in Southern Peru. Magma also announced that construction began at its Robinson Mine on October 12, 1994, following final approval of the project by the Bureau of Land Management.
The Company filed a report on Form 8-K, dated November 29, 1994, to announce the closing of the purchase of Empresa Mineral Especial Tintaya S.A. ("Tintaya"). The Company also stated that it would file the required financial information for Tintaya (which was impracticable to provide at this time) under Form 8-K/A before February 13, 1995.
The Company filed a report on Form 8-K/A-1 (filed February 7, 1995) dated November 29, 1994 to provide required financial information for the Tintaya acquisition.
Exhibit Number Description
2.1 Stock Purchase Agreement (Incorporated by reference; previously filed as Exhibit 21. to the Registrant's Form 8-K dated November 29, 1994.)
3.1 Restated Certificate of Incorporation (Incorporated by reference; of Magma Copper Company, dated previously filed as Exhibit February 21, 1991 3.4 to the Registrant's annual report on Form 10-K for the fiscal year ended December 31, 1990.)
3.2 Certificate of Correction to Restated (Incorporated by reference; Certificate of Incorporation of previously filed as Exhibit Magma Copper Company dated 3.2 to the Registrant's February 27, 1992 annual report on Form 10-K for the fiscal year ended December 31, 1991.)
3.3 Certificate of Amendment to (Incorporated by reference; Restated Certification of previously filed as Exhibit Incorporation of Magma Copper 3.3 to the Registrant's Company dated October 30, 1992 1992 Form 10-K.)
3.4 By-laws of Magma Copper Company (Incorporated by reference; as amended to and including previously filed as Exhibit July 22, 1992 3.4 to the Registrant's 1992 Form 10-K.)
4.0 Specimen Common Stock Certificate (Incorporated by reference; previously filed as Exhibit 4.0 to the Registrant's 1992 Form 10-K.)
4.1 Specimen Warrant Certificate (Incorporated by reference; previously filed as Exhibit 4.1 to the Registrant's 1988 Warrants Registration Statement.)
4.2 Form of Warrant Agreement, dated (Incorporated by reference; as of December 15, 1988, between previously filed as Exhibit the Company and Manufacturers 4.2 to the Registrant's Hanover Trust Company, as warrant 1988 Warrants Registration agent Statement.)
Exhibit Number Description
4.3 Form of Note Indenture for 12% (Incorporated by reference; Senior Subordinated Notes due previously filed as Exhibit 2001, dated December 15, 1991 4 to the Registrant's Current Report on Form 8-K dated January 9, 1992.)
4.4 Specimen of 12% Note (Incorporated by reference; previously filed as Article Two of Exhibit 4 to the Registrant's Current Report on Form 8-K dated January 9, 1992.)
4.5 Form of 11.5% Note Indenture for (Incorporated by reference; 11.5% Senior Subordinated Notes previously filed as Exhibit due 2002, dated January 15, 1992 28B to the Registrant's Current Report on Form 8-K dated January 17, 1992.)
4.6 Specimen of 11.5% Note (Incorporated by reference; previously filed as Article Two of Exhibit 28B to the Registrant's Current Report on Form 8-K dated January 17, 1992.)
4.7 Certificate of Designation of (Incorporated by reference; Series B Preferred Stock previously filed as Exhibit 3.6 to the Registrant's Registration Statement on Form S-1, File No. 33-24960 (the "Copper Notes Registration Statement").)
4.8 Amendment to Certificate of (Incorporated by reference; Designation of Series B previously filed as Exhibit Preferred Stock 3.6 to the Registrant's Statement on Form S-1, File No. 33-26294 (the "1988 Warrants Registration Statement").)
4.9 Certificate of Decrease in (Incorporated by reference; the Number of Authorized Shares previously filed as Exhibit of Series B Preferred Stock 3.7 to the Registrant's 1992 Form 10-K.)
Exhibit Number Description
4.10 Certificate of Designations of (Incorporated by reference; Series D Preferred Stock previously filed as Exhibit 4.0 to the Registrant's Current Report on Form 8-K dated July 12, 1993.)
4.11 Specimen Series D Preferred (Incorporated by reference; Stock Certificate previously filed as Exhibit 4.0 to the Registrant's Form 8-A dated July 8, 1993.)
4.12 Certificate of Designations of (Incorporated by reference; Series E Preferred Stock previously filed as Exhibit 4.1 to the Registrant's Form 8-A dated November 17, 1993.)
4.13 Specimen Series E Preferred Stock (Incorporated by reference; Certificate previously filed as Exhibit 4.0 to the Registrant's Form 8-A dated November 17, 1993.)
10.0 Performance Rights Agreement, (Incorporated by reference; dated August 10, 1988, Between previously filed as Exhibit Donald J. Donahue and Magma 10.34 to the Registrant's Copper Company Copper Notes Registration Statement.)
10.1 Tax-Matters Agreement, dated (Incorporated by reference; as of March 6, 1987 between previously filed as 10I to Newmont Mining Corporation and the Registrant's Form 10.) Magma Copper Company
10.2 Tax Sharing Agreement between (Incorporated by reference; Newmont Mining Corporation and previously filed as Exhibit Magma Copper Company 10.15 to the Registrant's 1987 Form 10-K.)
10.3 Memorandum Agreement, dated (Incorporated by reference, July 1, 1989, between Magma previously filed as Exhibit Copper Company and the unions 40.0 to the Registrant's comprising the Magma Unity Council 1989 Form 10-K.)
Exhibit Number Description
10.4 Memorandum Agreement, dated (Incorporated by reference, November 1, 1991, between Magma previously filed as Exhibit Copper Company and the union 10.41 to the Registrant's comprising the Magma Unity 1991 Form 10-K.) Counsel
10.5 Reimbursement Agreement, dated (Incorporated by reference; as of December 1, 1984 between previously filed as Exhibit Magma Copper Company and National 10O to the Registrant's Westminister Bank PLC, New York Form 10.) Branch (Series 1984A Bonds)
10.6 Loan Agreement, dated as of (Incorporated by reference; December 1, 1984, between The previously filed as Exhibit Industrial Development Authority 10K to the Registrant's of the County of Pinal and Magma Form 10.) Copper Company Series 1984A Bonds)
10.7 Reimbursement Agreement, dated (Incorporated by reference; as of December 1, 1984, between previously filed as Exhibit Magma Copper Company and National 10L to the Registrant's Westminster Bank PLC, New York Form 10.) Branch (Series 1984 Bonds)
10.8 Loan Agreement, dated as of (Incorporated by reference; December 1, 1984, between The previously filed as Exhibit Industrial Development Authority 10M to the Registrant's of the County of Pinal and Magma Form 10.) Copper Company (Series 1984 Bonds)
10.9 Letter Agreement amending the (Incorporated by reference; Reimbursement Agreement and previously filed as Exhibit Guaranty, among the Company, 10.12 to the Registrant's Newmont and National Westminster 1988 Warrants Registration Bank PLC, dated November 30, 1988 Statement.)
10.10 Loan Agreement dated as of (Incorporated by reference; December 1, 1992, between the previously filed as Exhibit Industrial Development Authority 10.11 to the Registrant's of the County of Pinal and Magma 1992 Form 10-K.) Copper Company (Series 1992 Bonds)
10.11 Reimbursement Agreement, dated (Incorporated by reference; as of December 1, 1992, between previously filed as Exhibit Magma Copper Company and Banque 10.12 to the Registrant's Nationale de Paris 1992 Form 10-K.)
Exhibit Number Description
10.12 Trust Agreement, dated as of (Incorporated by reference; March 10, 1987, among Newmont previously filed as Exhibit Mining Corporation, First 10.23 to the Registrant's Interstate Bank of Arizona and 1987 Form 10-K.) Magma Copper Company
10.13 Amendment to Trust Agreement, (Incorporated by reference; dated December 27, 1988, between previously filed as Exhibit Newmont Mining Corporation, 27.0 to the Registrant's Magma Copper Company and First 1988 Form 10-K.) Interstate Bank of Arizona, N.A.
10.14 User License, dated as of (Incorporated by reference; August 28, 1984, between previously filed as Exhibit Southwire Company and Magma 10.26 to the Registrant's Copper Company 1987 Form 10-K.)
10.15 License Agreement, dated as of (Incorporated by reference; October 28, 1986, between previously filed as Exhibit Outokumpu Oy and Magma Copper 10.27 to the Registrant's Company 1987 Form 10-K.)
10.16 License Agreement, dated as of (Incorporated by reference; February 1, 1986, between Phelps previously filed as Exhibit Dodge Refining Corporation and 10.28 to the Registrant's Magma Copper Company 1987 Form 10-K.)
10.17 License Agreement, dated as of (Incorporated by reference; April 10, 1985, between MIM previously filed as Exhibit Technology Marketing Limited 10.30 to the Registrant's and Magma Copper Company 1987 Form 10-K.)
10.18 Purchase Agreement, dated (Incorporated by reference; November 20, 1988, between previously filed as Exhibit Magma Copper Company and 10.50 to the Registrant's Warburg, Pincus Capital Company, Copper Notes Registration L.P. Statement.)
10.19 Amendment to Purchase Agreement, (Incorporated by reference; dated November 30, 1988, between previously filed as Exhibit Magma Copper Company and Warburg, 10.27 to the Registrant's Pincus Capital Company, L.P. 1988 Warrants Registration Statement.)
Exhibit Number Description
10.20 Registration Rights Agreement, (Incorporated by reference; dated November 30, 1988, between previously filed as Exhibit Magma Copper Company and Warburg, 10.29 to the Registrant's Pincus Capital Company, L.P. 1988 Warrants Registration Statement.)
10.21 Revolving Credit Facility (Incorporated by reference; Agreement dated as of previously filed as Exhibit May 20, 1994 10 to the Registrant's Quarterly Report on Form 10-Q dated June 30,1994.)
10.22 Tax Stability Agreement (Incorporated by reference; previously filed as Exhibit 10.1 to the Registrant's Form 8-K/A-1 dated November 29, 1994.)
10.23 Judicial Stability Agreement (Incorporated by reference; with the Consortium Magma previously filed as Exhibit Copper Company - Global 10.2 to the Registrant's Magma Ltd. Form 8-K/A-1 dated November 29, 1994.)
10.24 Judicial Stability Agreement (Incorporated by reference; with Empresa Minera Especial previously filed as Exhibit Tintaya, S.A. 10.3 to the Registrant's Form 8-K/A-1 dated November 29, 1994.)
10.25 1987 Stock Option and Stock (Incorporated by reference; Award Plan previously filed as Exhibit 10B to the Registrant's Form 10.)
10.26 Amendments to 1987 Stock (Incorporated by reference; Option and Stock Award Plan previously filed as Exhibit 28.1 to the Registrant's Quarterly Report on Form 10-Q dated June 30, 1992.)
Exhibit Number Description
10.27 1989 Stock Option and Stock (Incorporated by reference; Award Plan previously filed as Exhibit 35.0 to the Registrant's annual report on Form 10-K for the fiscal year ended December 31, 1989 (the "1989 Form 10-K.")
10.28 Amendments to 1989 Stock (Incorporated by reference; Option and Stock Award previously filed as Exhibit Plan 28.2 to the Registrant's Quarterly Report on Form 10-Q dated June 30, 1992.)
10.29 1989 Stock Option Plan for (Incorporated by reference; Non-employee Directors previously filed as Exhibit 10.27 to the Registrant's 1991 Form 10-K.)
10.30 Amendment to 1989 Stock Option (Incorporated by reference; Plan for Non-Employee Directors previously filed as Exhibit 28 to the Registrant's Quarterly Report on Form 10-Q dated September 30, 1991.)
10.31 Excess Benefit Plan (Incorporated by reference; previously filed as Exhibit 10.28 to the Registrant's 1991 Form 10-K.)
10.32 Executive Supplemental Benefit (Incorporated by reference; Plan previously filed as Exhibit 10.29 to the Registrant's 1991 Form 10-K.)
10.33 Amended and Restated Special Filed herewith Executive Supplemental Benefit Plan
10.34 Special Executive Deferred (Incorporated by reference; Compensation Plan previously filed as Exhibit 10.31 to the Registrant's 1991 Form 10-K.)
Exhibit Number Description
10.35 First Amendment to Special (Incorporated by reference; Executive Deferred Compensation previously filed as Exhibit Plan 10.33 to the Registrant's 1992 Form 10-K.)
10.36 Second Amendment to Special (Incorporated by reference; Executive Deferred Compensation previously filed as Exhibit Plan 10.34 to the Registrant's 1992 Form 10-K.)
10.37 Third Amendment to Special Filed herewith Executive Deferred Compensation Plan
10.38 Fourth Amendment to Special Filed herewith Executive Deferred Compensation Plan
10.39 1992 Restricted Stock Plan for (Incorporated by reference; Non-Employee Directors previously filed as Exhibit 28.3 to the Registrant's Quarterly Report on Form 10-Q dated June 30, 1992.)
10.40 Amendment to 1987 Stock Plan (Incorporated by reference; for Non-Employee Directors previously filed as Exhibit 10.36 to the Registrant's 1992 Form 10-K.)
10.41 1993 Revised Incentive Compensation (Incorporated by reference; Plan Guidelines previously filed as Exhibit 10.36 to the Registrant's 1993 Form 10-K.)
10.42 Chief Executive Officer (Incorporated by reference; Supplemental Retirement Plan previously filed as Exhibit 10.38 to the Registrant's 1992 Form 10-K.)
10.43 Employment Agreement - (Generic (Incorporated by reference; Copy) previously filed as Exhibit 10.38 to the Registrant's 1993 Form 10-K.)
10.44 Third Amendment to Employment (Incorporated by reference; Agreement between J. B. Winter previously filed as Exhibit and Magma Copper Company 10.39 to the Registrant's 1993 Form 10-K.)
Exhibit Number Description
10.45 Retention and Severance Benefit (Incorporated by reference; Agreement between Magma Copper previously filed as Exhibit Company and J. B. Winter 10.40 to the Registrant's 1993 Form 10-K.)
10.46 Revised 1993 Long-Term Incentive (Incorporated by reference; Plan guidelines previously filed as Exhibit 10.41 to the Registrant's 1993 Form 10-K.)
10.47 1993 Stock Option and Stock (Incorporated by reference; Award Plan previously filed as Exhibit 4 to the Registrant's Form S-8 Registration Statement, File No. 33-64766.)
10.48 First amendment to the Magma (Incorporated by reference; Copper Company Executive previously filed as Exhibit Supplemental Benefit Plan 10.43 to the Registrant's 1993 Form 10-K.)
10.49 Second amendment to the Magma (Incorporated by reference; Copper Company Executive previously filed as Exhibit Supplemental Benefit Plan 10.44 to the Registrant's 1993 Form 10-K.)
11.0 Statement re: computation of Filed herewith per share earnings
21.0 Subsidiaries of Magma Copper Filed herewith Company
23.1 Consent of Independent Public Filed herewith Accountants (Price Waterhouse)
23.2 Consent of Independent Public Filed herewith Accountants (Arthur Anderson LLP)
27.0 Financial Data Schedule Filed herewith
99.0 Statement re: indemnification (Incorporated by reference; of directors, officers and previously filed as Exhibit controlling persons 28.0 to the Registrant's 1990 Form 10-K.)
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
MAGMA COPPER COMPANY
By:/s/ Donald J. Donahue (Donald J. Donahue) Chairman of the Board
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed by the following persons on behalf of the registrant in the capacities and on the dates indicated.
Signature Title Date
Chairman of the Board /s/ Donald J. Donahue and Director March 9,1995 (Donald J. Donahue)
President, Chief Executive Officer, Director /s/ J. Burgess Winter (Principal Executive Officer) March 9,1995 (J. Burgess Winter)
Vice President and /s/ Douglas J. Purdom Chief Financial Officer March 9,1995 (Douglas J. Purdom) (Principal Financial and Accounting Officer)
/s/ Christopher W. Brody Director March 9,1995 (Christopher W. Brody)
/s/ Judd R. Cool Director March 9,1995 (Judd R. Cool)
/s/ John W. Goth Director March 9,1995 (John W. Goth)
/s/ John R. Kennedy Director March 9,1995 (John R. Kennedy)
/s/ Thomas W. Rollins Director March 9,1995 (Thomas W. Rollins)
/s/ Henry B. Sargent Director March 9,1995 (Henry B. Sargent)
/s/ Simon D. Strauss Director March 9,1995 (Simon D. Strauss)
/s/ H. Wilson Sundt Director March 9,1995 (H. Wilson Sundt)
/s/ John L. Vogelstein Director March 9,1995 (John L. Vogelstein)