<PAGE>
 
==============================================================================

                      SECURITIES AND EXCHANGE COMMISSION
                            WASHINGTON, D.C.  20549

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

                                   FORM 10-K


[X]       ANNUAL REPORT PURSUANT TO SECTION 13 or 15(d) OF THE SECURITIES
          EXCHANGE ACT OF 1934
          For the fiscal year ended December 31, 1998
                                   OR
[_]       TRANSITION REPORT PURSUANT TO SECTION 13 or 15(d) OF THE SECURITIES
          EXCHANGE ACT OF 1934
          For the transition period from ____ to ____

                          Commission File No. 0-23042

                                MK GOLD COMPANY

               (Exact name of registrant as specified in charter)

        Delaware                                               82-0487047
-------------------------------                          ----------------------
(State or other jurisdiction of                            (I. R. S. Employer
incorporation or organization)                             Identification No.)

                       60 East South Temple, Suite 2100
                          Salt Lake City, Utah 84111
                                (801) 297-6900
         (Address of principal executive offices and telephone number)

        Securities registered pursuant to Section 12(b) of the Act: None

          Securities registered pursuant to Section 12(g) of the Act:

                    Common Stock, par value $.01 per share
                    --------------------------------------
                               (Title of Class)


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

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

As of March 18, 1999, the aggregate market value of the Registrant's voting
common stock held by nonaffiliates of the Registrant based upon the last sale
price reported for such date on the OTC Bulletin Board was approximately
$4,430,970.


The number of shares of the Registrant's Common Stock outstanding as of March
18, 1999 was 19,261,929.

                      DOCUMENTS INCORPORATED BY REFERENCE


Certain portions of the Registrant's definitive proxy statement pursuant to
Regulation 14A of the Securities Exchange Act of 1934 in connection with the
1999 Annual Meeting of Stockholders of the Registrant is incorporated by
reference into Part III of this Form 10-K.

================================================================================
<PAGE>
 
                                MK GOLD COMPANY
                          ANNUAL REPORT ON FORM 10-K
                     FOR THE YEAR ENDED DECEMBER 31, 1998


 
                               TABLE OF CONTENTS
<TABLE>
<CAPTION> 
                                    PART I                                         
                                                                                                         PAGE
<S>                                                                                                      <C> 
Items 1. and 2. Business and Properties                                                                   I-1
 
Item  3.        Legal Proceedings                                                                         I-6
 
Item  4.        Submission of Matters to a Vote of Security Holders                                       I-6
 
Item 10.        Executive Officers of the Registrant                                                      I-6
 
                                    PART II
 
Item  5.        Market for the Registrant's Common Stock and Related Stockholder Matters                 II-1
 
Item  6.        Selected Financial Data                                                                  II-1
 
Item  7.        Management's Discussion and Analysis of Financial Condition and Results of Operations    II-3
 
Item  8.        Financial Statements and Supplementary Data                                              II-9
 
Item  9.        Changes in and Disagreements with Accountants on Accounting and Financial Disclosure    II-28
 
                                   PART III
 
Item 10.        Directors and Executive Officers of the Registrant                                      III-1
 
Item 11.        Executive Compensation                                                                  III-1
 
Item 12.        Security Ownership of Certain Beneficial Owners and Management                          III-1
 
Item 13.        Certain Relationships and Related Transactions                                          III-1
 
                                    PART IV
 
Item 14.        Exhibits, Financial Statement Schedules and Reports on Form 8-K                          IV-1
 
                Signatures                                                                               IV-2
 </TABLE>
<PAGE>
 
     This report contains certain forward-looking statements that involve risks
and uncertainties, including statements regarding the Company's plans,
objectives, goals, strategies and financial performance. The Company's actual
results could differ materially from the results anticipated in these forward-
looking statements as a result of certain factors set forth under "Management's
Discussion and Analysis of Financial Condition and Results of Operations--
Cautionary Statement for Forward-Looking Information" and elsewhere in this
report.

                                     PART I

ITEMS 1. AND 2.  BUSINESS AND PROPERTIES

                                 Introduction

     MK Gold Company ("MK Gold" or the "Company") was originally incorporated in
Delaware in 1990.  The Company's principal executive offices are located at
Eagle Gate Tower, 60 East South Temple, Suite 2100, Salt Lake City, Utah, 84111.
The Company was a wholly owned subsidiary of Morrison Knudsen Corporation ("MK")
until December 14, 1993 when 9 million shares of the Company's stock were sold
in a public offering and 9 million shares were retained by MK. During January
1994, an underwriters' option was exercised and an additional 1,350,000 shares
of stock were sold to the public. On June 6, 1995, MK sold its 9 million shares
of the Company's stock to Leucadia National Corporation, a New York corporation
("Leucadia").

     The Company is engaged in the business of mining gold and exploring for and
acquiring gold and other metal properties. The Company currently holds a joint
venture interest in one producing gold mining project, provides contract mining
services to that project, and holds a joint venture interest in a gold project
that is currently in the process of mine closure and reclamation. See Items 1
and 2 - "Business and Properties--Properties and Operations."

     On January 30, 1997, the Board of Directors elected to change the fiscal
year end of the Company to December 31. In March 1997, the Company filed a
Transition Report on Form 10-K for the nine months ended December 31, 1996.
Accordingly, references in this report to "transition 1996" refer to the nine
month period ended December 31, 1996.

                           Properties and Operations

Castle Mountain

     The Company holds a 25% interest in the Castle Mountain Venture, a
California general partnership (the "CMV"). Viceroy Resource Corp. ("Viceroy")
holds the remaining 75% interest in the CMV. The CMV is governed by a management
committee composed of two members appointed by the Company and three members
appointed by Viceroy. Viceroy serves as the manager of the Castle Mountain Mine
which is operated by the CMV.

     The Castle Mountain Mine is located in San Bernardino County, California,
approximately 70 miles south of Las Vegas, Nevada. Mining operations at the
Castle Mountain Mine commenced in June 1991, followed by commercial production
in April 1992. Operations are expected to continue through 2001, with gold
production extending into 2002. In 1999, the mining operations are expected to
have an average waste to ore ratio of approximately 2.66:1 and are expected to
produce approximately 17.5 million tons of ore and waste. Ore is subjected to a
combination of milling and heap leaching.

     All surface and mineral rights on all Castle Mountain Mine claims are owned
by Viceroy for the benefit of the CMV. The CMV controls a central 4.5 square
mile block containing three patented lode claims, four patented placer claims,
191 unpatented lode claims, 35 unpatented placer claims and numerous millsite
claims. The CMV also controls a surrounding 50 square mile property block
covering the majority of the Castle Mountains.

     Contract Mining.  Pursuant to a Contract Mining Agreement with the CMV, the
Company performs mining services at the Castle Mountain Mine (i.e., all work
necessary to bring the ore to the crusher, including removal of overburden and
waste materials, drilling and blasting, and hauling). The Contract Mining
Agreement is subject to periodic price adjustments.

                                      I-1
<PAGE>
 
     Total tons mined at the CMV during 1998 decreased to 17 million tons from
17.9 million tons in 1997. This decrease in production was caused by mining
schedule changes early in 1998 and a wall failure at the CMV's Oro Belle Hart
Tunnel ("OBHT") pit in July 1998. Production in the OBHT pit decreased while the
slide area was remediated. Production at the CMV's Jumbo pit was increased to
offset decreased production in the OBHT pit. The price received by the Company
for contract mining services performed during 1998 was $0.77 per ton while costs
amounted to $.70 per ton. Additionally, the Company recorded $612,000 of net
income from non-mining earth work at the CMV during 1998.

     The Company's cost containment efforts at the CMV continued during 1998 and
included the use of subcontractors for drilling and blasting, the implementation
of an improved maintenance program and the retirement of high cost equipment.

     CMV Operations.  In 1998, MK Gold's 25% share of cash flow used in CMV
operations, after capital expenditures, was $(1.3) million.  CMV gold production
was 89,136 ounces with cash costs at $323 per ounce. The Company's 25% share of
production in 1998 was 22,284 ounces as compared to 30,601 for the year ended
December 31, 1997. Gold Production and ore tonnage losses occurred as a result
of a three week primary crusher failure.

     Several mining claims controlled by the CMV are subject to production-based
net smelter return royalty payments and other royalty payments. Under the terms
of the royalty agreements, the CMV is required to make annual rental or advance
royalty payments. Royalty payments made by the CMV for 1998 totaled $262,000,
including the Company's attributable share of $66,000.

     Based upon a $300 per ounce gold price, the estimated reserves and
stockpiles as of December 31, 1998 at the Castle Mountain Mine contain 357,929
ounces. The Company's attributable share is 89,842 ounces. After recovery
losses, but including residual heap leach production, the Company's share is
expected to be 70,691 ounces. Cash operating costs are expected to be $343 per
ounce in 1999, a 6.2% increase from 1998. Ore grade processed is expected to
increase from .027 ounces per ton in 1998 to .029 ounces per ton in 1999, an
increase of 7.4%. Higher grade ore mined in 1999 is expected to be stockpiled
for mill processing in the year 2000. Budgets are being reviewed and operating
strategies examined to improve 1999's performance. After 1999, the Company
anticipates that operating costs will decrease and ore grades will increase
until ore reserves are exhausted. Closure and reclamation is expected to begin
in 2001 and will take approximately three years.

     The tables below present the reserve and operating data for the CMV at
December 31, 1998.


                         PROVEN AND PROBABLE RESERVES*

<TABLE>
<CAPTION>
 
     <S>                                             <C>
     Total ore tons................................   9,752,479
     Waste to ore ratio............................      1.64:1
     Average ore grade (oz./ton)...................      0.0367
     Cutoff grade (oz./ton)........................        .013
 
     Total contained ounces including stockpiles...     357,929
     MK Gold share (25%) contained.................      89,482
     MK Gold share (25%) recoverable...............      70,691
-------------------
</TABLE>

*Reserves were calculated by Viceroy Resource Corp.  Reserves represent mineable
and diluted tons and do not reflect losses in the recovery process. The
estimates of reserves at December 31, 1998 are based on an assumed gold price of
$300 per ounce and include previously mined ore in stockpiles near the primary
crusher.  The reserves were calculated with cut high grade assay values.
Reserve estimates were determined by use of mapping, drilling, metallurgical
testing and other standard evaluation methods generally applied by the mining
industry, including computer block modeling.

                                      I-2
<PAGE>
 

                                OPERATING DATA
                        (000's except grade and ounces)
                                 (100% Basis)
<TABLE>
<CAPTION>
                                                                    Year Ended           Year Ended           Year Ended
                                                                   December 31,         December 31,         December 31,
                                                                       1998                 1997                 1996
                                                                ------------------   ------------------   ------------------
<S>                                                             <C>                  <C>                  <C>
Tons mined                                                                 17,032               17,864               14,911
Tons ore mined                                                              3,843                3,572                3,673
Ore tons to pad*                                                            3,891                4,103                4,123
Tons to mill                                                                   58                  412                  407
Avg. grade crushed (opt)                                                    0.027                0.038                0.038
Overall gold recovery                                                        84.8                 78.5                 78.0
Avg. mill head grade (opt)                                                   .108                 .138                 .122
Mill recovery**                                                              45.0%                49.7%                43.3%
 
Ounces of gold produced
Mill**                                                                      2,817               28,264               21,427
Leach                                                                      86,319               94,139              100,765
Total gold production                                                      89,136              122,403              122,192
Ounces of silver produced                                                  32,731               51,901               71,088
 
Cost per ounce
Cash cost per ounce                                                       $   323             $    278             $    275
Non-cash cost per ounce                                                        45                  104                   92
Total cost per ounce                                                      $   368             $    382             $    367
</TABLE>
______________________

*Includes previously mined ore from stockpiles.
**Based on gold extracted during milling.  Does not reflect gold leached from
milled material after stacked on pad.

American Girl - Oro Cruz

     The Company holds a 53% interest in the American Girl Mining Joint Venture,
a California general partnership (the "AGMJV").  Hecla Mining Company ("Hecla")
owns the remaining 47% interest. The AGMJV is governed by a management committee
composed of two members appointed by the Company and two members appointed by
Hecla. The Company serves as the manager of the AGMJV for a monthly fee of 2% of
the cash operating costs and capital expenditures, excluding royalty payments.
Management fees paid to the Company were less than $.1 million for 1998.

     Prior to September 1996, the AGMJV operated the American Girl Mine and the
Oro Cruz Mine. These adjacent projects are located in Imperial County,
California, approximately 15 miles northwest of Yuma, Arizona. Full scale open
pit and underground mining operations at the AGMJV were suspended in September
1996, crushing and milling operations ceased in October 1996 and reclamation
activities of the surface and underground operations were initiated.

     The reclamation costs at the AGMJV are significantly below budget. Gold
recovery from the leach pads has exceeded projections and proceeds from the
disposal of idle equipment have been greater than originally estimated. As a
result of these positive variances, the Company reduced its mine closure and
reclamation reserve and recognized $2.3 million of income relating to operations
at the AGMJV during the fourth quarter of 1997. The reclamation efforts at the
AGMJV continued during 1998, and it is expected that full mine reclamation will
be completed by the end of 1999.

                                      I-3
<PAGE>
 
                                 Exploration

     The Company is continuing to search for profitable investment
opportunities. The Company has grassroots exploration programs in Nevada, Mexico
and Brazil. During 1998, these programs resulted in the acquisition of claims or
other interests in 10 properties in connection with new or existing exploration
projects of the Company, including three properties in Nevada, six in Mexico and
one in Brazil. During 1998, the Company also examined properties in Australia,
Spain, Bolivia, Chile, Canada, Peru and the western United States. The Company 
continues to evaluate Exploration projects on a worldwide basis. Each of the
Company's active exploration projects is described below.

Diamond Valley Project

     The Company's Diamond Valley Project is a joint venture with Phelps Dodge
Exploration Company to explore, develop and produce precious and other metals
from the Diamond Valley property in Elko County, Nevada. During 1999, the
Company will commence an exploration program on the property consisting of
sampling, geophysics and drilling.

Bottom Line Project

     The Company's Bottom Line Project is located in Humbolt and Lander County,
Nevada, 15 miles west of Battle Mountain. It consists of 150 unpatented lode
claims covering approximately 3,000 acres. The property was acquired in 1998.
The 1999 exploration program for the Bottom Line project will include mapping,
sampling and geophysical surveys.

California Mountain Project

     The Company's California Mountain Project is located in Elko County, Nevada
and consists of 122 unpatented lode claims covering over 2,400 acres. The
exploration program for 1999 will include sampling, geophysics and drilling.

Red Rock Project

     The Company's Red Rock Project is located in Elko County, Nevada,
approximately 25 miles southeast of Carlin, Nevada. The Red Rock Project
consists of 913 unpatented lode claims covering approximately 21,000 acres.

     During 1997, the Company conducted exploratory drilling at the Red Rock
Project. The results of this drilling were sufficient to justify additional
exploratory work. During 1998, the Company conducted geologic mapping, sampling,
geophysical surveys and additional drilling. Exploration efforts at the Red Rock
Project will continue during 1999.

RBX Project

     The Company's RBX Project is located in Lander County, Nevada,
approximately 50 miles southwest of Battle Mountain, Nevada. The RBX Project
consists of 88 unpatented lode claims covering approximately 1,760 acres.

     Initial rock chip and soil sampling at the RBX Project were sufficient to
justify a geophysical survey, which was conducted in June 1998. An exploratory
drilling program on targets generated from this survey was completed in 1998.
Drilling results are being evaluated to determine the nature of 1999 exploration
activities for the RBX Project.

Lodi Project

     The Company's Lodi Project is located at the north end of the Lodi Valley,
approximately 15 miles northeast of Gabbs, Nevada. The Lodi Project consists of
46 unpatented lode claims covering approximately 920 acres.


     In 1997, the Company drilled five exploratory holes at the Lodi Project.
Assay results for gold were low, but sufficiently anomalous to justify
additional drilling. In June 1998, an additional five exploratory holes were

                                      I-4
<PAGE>
 
drilled, showing a significant increase in gold and previously unrecognized
mineral zoning. The Company will conduct additional sampling during 1999 to
determine whether further drilling is warranted.

Dawn Project

     The Company's Dawn Project is located in the Simon Mining District in
Mineral County, Nevada, approximately 20 miles south of Gabbs, Nevada. The Dawn
Project consists of 54 unpatented lode claims over approximately 1,000 acres.

     During 1998, the Company conducted geologic mapping and rock and soil
sampling. A nine-hole drilling program was completed in the fourth quarter of
1998. Results of the 1998 program are being evaluated.

Furnas Project

     In 1998, the Company purchased an option to acquire the mineral rights to a
silver-zinc property located in the State of  Sao Paulo, Brazil. The Company
completed a drill program at the Furnas Project in October 1998. Results of the
drilling program did not indicate economic mineralization. The Company has
discontinued exploration activity at this project.

Zacatecas Project

     The Company's conducts its exploration activities in Mexico through its
wholly-owned subsidiary, MK Gold de Mexico. MK Gold de Mexico has an option to
acquire mineral rights to six properties in Zacatecas, Mexico. The 1999
exploration program will include mapping, sampling and drilling, if justified.

                                  Competition

     The Company competes with other companies and individuals to acquire metal
mining projects and to recruit and retain qualified employees. Many of these
companies are substantially larger and have greater financial resources than the
Company.  As a result of strong competition for a limited number of project
opportunities, it may be difficult for the Company to acquire metals projects on
favorable terms.

                                 Industry Segment Data

     Industry segment data for the Company is provided in Note 7 to the
Company's Consolidated Financial Statements, included in Part II of this report.

                                 Environmental Matters

     The Company is committed to fulfilling its requirements under various
federal, state, and local laws and regulations governing protection of the
environment. In 1997, the Company received the California Mining Association's
"Excellence in Reclamation" award for work performed at the AGMJV during 1996.
Environmental laws are continually changing and, as a general matter, are
becoming more restrictive. The Company's policy is to conduct its business in a
manner that safeguards public health and mitigates the environmental effects of
its mining operations. To comply with these federal, state and local laws, the
Company has made, and in the future may be required to make, capital and
operating expenditures. However, the Company does not anticipate that it will be
required to make any extraordinary capital or operating expenditures for
environmental compliance during the remainder of its current fiscal year or the
succeeding fiscal year.

                                 Employees

     At December 31, 1998 the Company employed 90 people, including 5 in the
gold mining segment, 75 in mining services, and 10 at the home office.  The
Company has made, and barring exploration or acquisition success, it anticipates
that it will continue to make reductions in the number of employees of the
Company.  In addition to its geology staff, the Company uses contract
professionals to conduct exploration throughout the world.

                                      I-5
<PAGE>
 
ITEM 3.  LEGAL PROCEEDINGS

     As previously reported by the Company, the Company has filed a complaint
against Morrison Knudsen Corporation ("MK"), seeking a declaration that MK's
agreement not to compete with the Company is valid, binding and enforceable.  A
trial date is currently scheduled for August 16, 1999.

     On February 11, 1999, MK filed a separate complaint against the Company in
the U.S. District Court for the District of Idaho (Civil No. CV 99-0064-SBLW).
The complaint alleges that the Company has breached an agreement with MK
relating to the use of the name "MK Gold Company." MK is seeking an injunction
preventing the Company from using the name "MK Gold Company." The Company has 
filed a motion to dismiss MK's complaint. Alternatively, the Company has 
requested a stay of the proceeding, or to have venue transferred to the U.S. 
District Court for the District of Utah.

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

     On November 24, 1998, the Company held a special meeting of stockholders in
Salt Lake City, Utah. The only item of consideration was the approval of a
proposed amendment to the Company's Certificate of Incorporation to effect a
one-for-three reverse split of the Company's Common Stock. The reverse split was
proposed as a means to regain compliance with the listing requirements of the
Nasdaq Stock Market.

     The proposed amendment received 17,735,741 shares voting in favor of the
amendment, 296,156 shares voting against the amendment, and 83,400 shares
abstaining. The Board of Directors of the Company reserved the right to abandon
the amendment if they determined that the reverse split was not in the best
interests of the stockholders. On December 18, 1998, the Company announced that
the Board of Directors had abandoned the amendment and the reverse split. See
Item 5. "Market for the Company's Common Stock and Related Stockholder Matters."


ITEM 10.  EXECUTIVE OFFICERS OF THE REGISTRANT

     Following is a schedule of names and certain information regarding all of
the executive officers of the Company, as of March 19, 1999:

<TABLE> 
Name                     Age       Position
----                     ---       --------
<S>                      <C>      <C>   
G. Frank Joklik           70       Chairman of the Board
                             
Donald L. Babinchak       63       President and Chief Executive Officer
                             
James G. Baughman         42       Exploration Manager
                             
John C. Farmer            49       Chief Financial Officer, Secretary
                             
Larry L. Lackey           63       Chief Geologist
                             
Thomas G. White           55       Manager of Operations
 
</TABLE>

     G. Frank Joklik became Chairman of the Board of the Company on June 30,
1998, and has been a director since June 6, 1995. Mr. Joklik served as
President and Chief Executive Officer of the Company from November 1, 1995
through June 30, 1998. Concurrent with his appointment as Chairman of the Board,
Mr. Joklik took a leave of absence from his position as President and Chief
Executive Officer of the Company in order to fulfill his responsibilities to the
Salt Lake Organizing Committee for the 2002 Olympic Winter Games. Prior to
joining the Company, Mr. Joklik was the President and Chief Executive Officer of
Kennecott Corporation.

     Donald L. Babinchak has served as interim President and Chief Executive
Officer of the Company since June 30, 1998. Mr. Babinchak has also served as the
Director of Human Resources of the Company since March 25, 1996.  Mr. Babinchak
was formerly Vice President of Human Resources and Administration of Kennecott
Corporation.

                                      I-6
<PAGE>
 
     James G. Baughman has been the Company's Exploration Manager since
September 15, 1996 and an officer of the Company since March 21, 1997.  Prior to
joining MK Gold, Mr. Baughman was a field and staff geologist for a number of
companies at locations in the lower United States, Alaska, Mongolia and South
America.

     John C. Farmer was appointed Chief Financial Officer of the Company on June
30, 1998. Mr. Farmer has also served as the Company's Controller, Treasurer and
Secretary since April 25, 1996.  Mr. Farmer was formerly the Chief Financial
Officer of Dyno Nobel Inc.

     Larry L. Lackey has been Chief Geologist for MK Gold since August 23, 1995.
He was formerly Regional Vice President-Central America and the Caribbean for
Independence Mining Company, Inc.

     Thomas G. White has been the Manager of Operations for MK Gold since
October 8, 1993.  Prior to joining MK Gold, Mr. White served as a Mining
Executive for the gold operations of Homestake Mining Co., located in San
Francisco, California (1975 to 1992).

                                      I-7
<PAGE>
 
                                    PART II


ITEM 5.    MARKET FOR THE COMPANY'S COMMON STOCK AND RELATED
           STOCKHOLDER MATTERS

     Until January 6, 1999, the Company's Common Stock was traded on the NASDAQ
National Market System under the symbol "MKAU". On January 6, 1999, the
Company's Common Stock was delisted from trading on the Nasdaq National Market
System for failure to meet the minimum bid price requirement and the minimum
market value of public float requirement of the Nasdaq Stock Market. The
Company's Common Stock is currently traded on the NASD OTC Bulletin Board under
the symbol "MKAU".

     The following table sets forth the high and low sales prices for the
Company's Common Stock as reported by the NASDAQ National Market System by
quarter for the years ended December 31, 1998 and December 31, 1997.

<TABLE>
<CAPTION>
                                                    Year Ended
        Quarter                  --------------------------------------------------
         Ended                      December 31, 1998          December 31, 1997
         -----                   -----------------------    -----------------------
                                  High             Low       High             Low
                                 -------         -------    -------         -------
          <S>                    <C>             <C>        <C>              <C>
          3/31                   $1.5310          $.8750     $2.313          $1.375
          6/30                    1.2500           .8125      2.063           1.500
          9/30                     .8125           .5625      2.000           1.313
         12/31                     .8125           .4375      1.875            .938
       </TABLE>

     As of March 18, 1999, the number of registered holders of the Company's
Common Stock was approximately 169 (not including beneficial owners of the
Company's Common Stock held in the name of a broker, dealer, bank, voting
trustee or other nominee).

     The Company does not intend to pay any cash dividends with respect to its
Common Stock in the foreseeable future. The Company did not pay any dividends
during 1998 or the two preceding fiscal years.

ITEM 6.  SELECTED FINANCIAL DATA

     The following selected financial data have been summarized from the
Company's consolidated financial statements and are qualified in their entirety
by reference to, and should be read in conjunction with, such consolidated
financial statements and "Management's Discussion and Analysis of Financial
Condition and Results of Operations," below.

                                     II-1
<PAGE>
 
                                 MKGOLD COMPANY


                       SELECTED FIVE-YEAR FINANCIAL DATA
  (in thousands, except share and ounce amounts, per share and per ounce data)


<TABLE>
<CAPTION>
                                                          Year Ended                   Nine Months Ended         Fiscal Year Ended
                                             ------------------------------------   -----------------------   --------------------
                                             December     December     December     December     December       March        March
                                              31, 1998     31, 1997     31, 1996     31, 1996     31, 1995     31, 1996    31, 1995
                                             ---------    ---------    ---------    ---------    ---------    ---------   ---------
<S>                                          <C>          <C>          <C>          <C>          <C>          <C>          <C>
OPERATING DATA
Revenue:
     Product sales                           $   9,017    $  16,656    $  20,929    $  14,284    $  19,399    $  26,044   $  29,636
     Mining services                            11,065       11,233        8,927        7,065        6,477        8,339       9,436
                                             ---------    ---------    ---------    ---------    ---------    ---------   ---------

Total revenue                                   20,082       27,889       29,856       21,349       25,876       34,383      39,072
Gross profit (loss):
     Product sales                                 400          127       (2,033)        (271)        (277)      (2,039)      2,643
     Mining services                             1,730        1,307        1,095          757        1,292        1,630       2,953
                                             ---------    ---------    ---------    ---------    ---------    ---------   ---------

Total gross profit (loss)                        2,130        1,434         (938)         486        1,015         (409)      5,596
Exploration costs                               (3,068)      (2,306)      (2,161)      (1,455)      (1,028)      (1,734)     (1,214)
General and administrative expenses             (1,661)      (1,650)      (2,829)      (1,683)      (2,655)      (3,801)     (2,656)
Provision for mine closure and reclamation           -        2,330       (2,100)      (2,100)           -            -           -
Equity in loss of unconsolidated
 affiliates                                          -            -          (58)           -       (1,480)      (1,538)       (629)

Provision for impairment of long-lived
 assets                                              -       (1,800)     (27,935)           -       (5,946)     (33,881)
                                             ---------    ---------    ---------    ---------    ---------    ---------   ---------


INCOME (LOSS) FROM OPERATIONS                $  (2,599)   $  (1,992)   $ (36,021)   $  (4,752)   $ (10,094)   $ (41,363)  $   1,097
                                             =========    =========    =========    =========    =========    =========   =========

NET INCOME (LOSS) PER COMMON SHARE           $   (0.07)   $   (0.05)   $   (2.06)   $   (0.24)   $   (0.41)   $   (2.24)   $   0.04

BALANCE SHEET DATA (At end of period)
Total assets                                 $  24,848    $  28,617    $  32,978    $  32,978    $  67,568    $  39,206   $  96,566
Long-term debt                                    None         None         None         None         None         None          16
Stockholders' equity                            18,171       19,552       20,444       20,444       60,364       24,999      68,288
OTHER FINANCIAL DATA:
Depreciation, depletion, and amortization:
     Product Sales                                 947        2,403        4,686        3,070        6,130        7,549       8,433
     Mining services                                86           66          165           83          801        1,133       1,107
Capital expenditures                               233        1,230        2,147        1,194        7,280        6,717       3,010
Payments of long-term debt                           -            -            -            -       20,024       20,024       7,330
OTHER DATA
Gold ounces sold                                25,091       42,600       43,800       29,300       48,805       61,525      73,810
Gold ounces produced                            25,292       34,426       54,294       38,249       46,185       61,881      74,473
Gold ounces in inventory, at end of year         7,273        7,072       16,282       16,282        6,240        7,418      10,326
Average gold price realized (per ounce)      $     311    $     351    $     406    $     404    $     397    $     400   $     401
Average spot gold price (per ounce)                295          333          386          385          386          389         383
Average costs per ounce (a)(b):
     Mine production costs                         320          270          312          282          289          295         230
     Royalties                                       3            8           12           10           17           18          18
                                             ---------    ---------    ---------    ---------    ---------    ---------   ---------
     Production costs                              323          278          324          292          306          313         248
     Depreciation, depletion and
      amortization                                  41          101           86           81          132          122         128

     Reclamation                                     4            3            3            4            2            4           2
                                             ---------    ---------    ---------    ---------    ---------    ---------   ---------

Full costs                                   $     368    $     382    $     413    $     377    $     440    $     439   $     378
</TABLE>


(a)     Production costs include costs and operating expenses for mining,
        milling, processing, project-site administration and royalties, but
        exclude exploration costs and interest expense.  Full costs include all
        production costs, plus depreciation, depletion and amortization relating
        to each operating mine, divided by total ounces of gold produced.  Per
        ounce costs are normalized for fluctuations in waste stripping costs
        between the actual waste to ore ratio and the mine life average waste to
        ore ratio.  Data on average costs per ounce may not correspond to
        expense reported in the financial statements in any given year because
        of the timing and methods of recognizing costs of production.
        Production costs represent costs incurred in the year in which gold
        ounces are produced.  In contrast, costs of sales are recognized when
        gold ounces are delivered.  Gold ounces delivered in one year may have
        been produced in that year or may have been drawn from inventory at the
        beginning of the year.  Hence, costs associated with gold ounces sold in
        one year may be reflective of average production costs in a  previous
        year.

(b)    Average cost per ounce for the years ended December 31, 1998 and 1997 and
       nine months ended December 31, 1996 includes only the cost for the Castle
       Mountain Venture.


                                     II-2
<PAGE>
 
ITEM 7.  MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
         RESULTS OF OPERATIONS

     The following discussion and analysis should be read in conjunction with
the Selected Five-Year Financial Data and the Consolidated Financial Statements
and related notes thereto which appear elsewhere in this report. Undivided
interests in joint ventures are reported using pro rata consolidation, whereby
the Company consolidates its proportionate share of assets, liabilities,
revenues and expenses.

     This section contains certain forward-looking statements that involve risks
and uncertainties, including statements regarding the Company's plans,
objectives, goals, strategies and financial performance. The Company's actual
results could differ materially from the results anticipated in these forward-
looking statements as a result of factors set forth under "Cautionary Statement
for Forward-Looking Information" below and elsewhere in this report.

RESULTS OF OPERATIONS

TWELVE MONTHS ENDED DECEMBER 31, 1998 COMPARED TO TWELVE MONTHS ENDED DECEMBER
31, 1997

                                Gold Production

     The Company's attributable share of gold production decreased 27% to 25,292
ounces in 1998 from 34,426 ounces in 1997. Production at the Castle Mountain
Mine decreased 27% to 22,284 ounces during 1998 compared to 30,601 ounces in
1997. The decrease is due to lower ore grades and reduced production resulting
from a wall failure in July 1998 followed by a crusher failure in August. The
wall failure occurred in the OBHT pit and negatively impacted production through
November. The crusher failure impacted production for six weeks. Gold production
from the AGMJV was 3,008 ounces in 1998 compared to 3,825 ounces in 1997. Gold
production at the AGMJV resulted from the continued rinsing of the leach pad
during reclamation.

                                    Revenue

     Product sales revenue decreased $7.6 million or 46% to $9.1 million for
1998 compared to $16.7 million for 1997 as a result of decreased gold production
at the Company's mining ventures and reduced gold prices. The average price
realized per ounce of gold decreased to $311 during 1998 compared to $351 in
1997. The decrease in gold production is attributable to the lower grades and
production problems experienced at the CMV, as well as the closure of the AGMJV.
Gold production at the AGMJV is attributable to the continued rinsing of the
leach pads during reclamation and mine closure activities.

     Revenue derived from mining services is primarily dependent upon the
quantities of materials mined during the period. Revenue from mining services
decreased 1% to $11.1 million in 1998 from $11.2 million in 1997. The decrease
was due to lower production volumes experienced as a result of a wall failure at
the CMV. See Items 1 and 2 - "Business and Properties-Properties and
Operations."

                                Hedging Activity

     For 1998, the average gold price realized per ounce for the 25,091 ounces
sold was $311 per ounce compared to an average spot price of $295 per ounce.
During 1998, 13,000 ounces of the total gold sold were delivered under the
Company's hedging program at an average price of $317 per ounce. For 1997, the
average price realized for the 42,600 ounces sold was $351 per ounce compared
with the average spot price of $333 per ounce. During 1997, 19,600 ounces were
delivered under the Company's hedging program at an average price of $366 per
ounce. At December 31, 1998, the Company had no forward sales contracts.

                                  Gross Profit

     Gross profit from product sales was negatively impacted by an 11% decline
in gold prices during 1998. Offsetting the decline in product sales was a
decrease in production costs as well as income generated during the AGMJV
closure and reclamation activities. Gross margin increased from $.2 million in
1997 to $.4 million in 1998. As a percentage of sales, gross profit was 5% in
1998 compared to 1.2% in 1997.


                                     II-3
<PAGE>
 
     Gross profit from mining services increased 32% to $1.7 million in 1998
from $1.3 million in 1997. The increase was attributable to higher margin work
performed in an effort to remediate the wall failure experienced at the CMV. As
a percentage of mining revenue, gross profit was 11.8% in 1998 compared to 8.8%
in 1997.

                               Exploration Costs

     Exploration costs increased 33% to $3.1 million compared to $2.3 million in
1997. In 1998, the Company added an exploration program in Mexico to its
existing exploration programs in Nevada and Brazil. The Company acquired claims
or other interests in properties in Nevada, Mexico and Brazil. The 1998
exploration efforts included drilling properties in Nevada and Brazil. The
Company also examined properties in Australia, Spain, Bolivia, Chile, Canada,
Peru as well as the western United States. See Items 1 and 2 - "Business and
Properties-Properties and Operations."

                      General and Administrative Expenses

     General and administrative expenses for 1998 remained at a level comparable
to 1997, increasing only $.01 million or .7%.

                                Interest Expense

     Interest expense decreased 40% to $.08 million in 1998 from $.14 million in
1997. Interest expense was primarily the cost of the commitment fee on the
Company's standby credit facility.

                                  Income Taxes

     During 1998, the Company determined that it would not be able to fully
utilize its tax asset. As a result, it reduced its tax asset to an amount that
would more likely than not be realized through future taxable income.
Accordingly, the Company's deferred tax asset was reduced by $.16 million. See
Note 8 to the Company's Consolidated Financial Statements.

TWELVE MONTHS ENDED DECEMBER 31, 1997 COMPARED TO TWELVE MONTHS ENDED DECEMBER
31, 1996

                                Gold Production

     The Company's attributable share of gold production decreased 37% to 34,426
ounces in 1997 from 54,294 ounces in 1996.  Production at the Castle Mountain
Mine increased to 30,601 ounces during 1997, as compared to 30,548 ounces during
1996. The Company's share of gold production from the AGMJV was 3,825 ounces
during 1997, as compared to 23,746 ounces during 1996, an 84% decrease, due to
the suspension of mining operations during the fourth quarter of 1996.

                                    Revenue

     Product sales revenue decreased $4.2 million or 20% to $16.7 million for
1997, down from $20.9 million for 1996 as a result of decreased gold production
at the Company's mining ventures and reduced gold prices. The average price
realized per ounce of gold decreased to $351 during 1997, compared to $406 in
1996. The decrease in gold production was attributable to the suspension of
mining operations at the AGMJV. Gold production at the AGMJV during 1997 was the
result of continued leaching and rinsing of the leach pads during reclamation
and mine closure activities.

     Revenue derived from mining services is primarily dependent upon the
quantities of materials mined during the period. Revenue from mining services
increased 26% to $11.2 million in 1997 from $8.9 million in 1996. During the
first half of 1996, mining activity was reduced during a contract dispute
between the Company and Viceroy.

                                Hedging Activity

     For 1997, the average gold price realized per ounce for the 42,600 ounces
of gold sold was $351 compared to an average spot price of $333 per ounce.
During 1997, 19,600 ounces of the total gold sold were 


                                     II-4
<PAGE>
 
delivered under the Company's hedging program at an average price of $366 per
ounce. For 1996, the average gold price realized per ounce for the 43,800 ounces
of gold sold was $406 compared to an average spot price of $386 per ounce.
During 1996, 36,800 ounces of gold were delivered under the hedging program at
an average price of $407 per ounce. At December 31, 1997, for the year ended
December 31, 1998, the Company had sold forward 4,000 ounces of gold at an
average price of $338 per ounce.

                                  Gross Profit

     Gross profit from product sales for 1997 was negatively impacted by a 22%
decline in gold prices during the year. Offsetting the impact of reduced gold
prices was an improvement in production costs, the closure of mining operations
at the AGMJV, and a reduction in contract mining costs at the CMV. Accordingly,
gross profit from product sales increased to $.2 million for 1997 from a
negative $2 million in 1996. As a percentage of total product sales, gross
profit was 1.2% in 1997 compared to a negative 7.8% in 1996. The full cost per
ounce of gold produced decreased to $382 per ounce in 1997 from $413 per ounce
in 1996.

     Gross profit from mining services increased 19% to $1.3 million in 1997
from $1.1 million in 1996. The increase was attributable to higher volumes of
material mined. During the first quarter of 1996, mining activity was reduced as
a result of a contract dispute. The settlement of the dispute resulted in a new
Contract Mining Agreement which provided for increased production volumes at a
reduced price. As a percentage of mining service revenue gross profit was 8.8%
in 1997 compared to 11.6% in 1996.

                               Exploration Costs

     Exploration costs increased 7% to $2.3 million in 1997 compared to $2.2
million in 1996.  In 1997, the Company had exploration programs in Brazil and
Nevada which resulted in the acquisition of claims or other interests in some
properties in Nevada.  The Company also examined properties in Canada, Peru,
Bolivia, Chile, Australia, and the western United States.

                      General and Administrative Expenses

     General and administrative expenses decreased 42% to $1.7 million in 1997
from $2.8 million in 1996.  During 1996, the Company incurred significant legal
expenses associated with its contract dispute with Viceroy.  In addition, the
Company incurred expenses associated with the relocation of its corporate office
to Salt Lake City, Utah.  Since its relocation in 1996, the Company has reduced
administrative staff.

                      Equity in Unconsolidated Affiliates

     Equity in unconsolidated affiliates represents the Company's investment in
Arlo Resources, Ltd. stock.  The Company sold its investment in Arlo on
September 10, 1996 pursuant to which the Company received approximately $1.2
million.  Prior to the sale of Arlo in 1996, the Company's investment in Arlo
was written down by $0.4 million to $1.2 million.

                                Interest Expense

     Interest expense increased 99% to $.14 million in 1997 from $.07 million in
1996. Interest was primarily the cost of the commitment fee on the Company's
standby credit facility.

                                  Income Taxes

     During 1997, the Company determined that the ability of the Company to
utilize its tax asset was uncertain.  As a result it reduced its tax asset to an
amount that would more likely than not be realized through future taxable
income.  Accordingly, the Company's deferred tax asset was reduced by $0.6
million. See Note 8 to the Company's Consolidated Financial Statements.


                                     II-5
<PAGE>
 
LIQUIDITY AND CAPITAL RESOURCES

     The Company's principal sources of funds are its available resources of
cash and cash equivalents and cash generated from mining operations and contract
mining services. In addition, the Company maintains a $20 million credit
facility with Leucadia. At December 31, 1998, the Company had cash and cash
equivalents of $15.7 million and gold bullion of $2.1 million, representing a
decrease in cash and cash equivalents and gold bullion of $2.4 million from
December 31, 1997.

     In September 1993, the Company entered into a $20.0 million credit facility
(the "Credit Facility") with Canadian Imperial Bank of Commerce ("CIBC"). In
connection with the acquisition by Leucadia of MK's 46.4% interest in the
Company in June 1995, Leucadia purchased, at par, all of CIBC's interest as
lender under the Credit Facility and released MK from its guarantee obligations
under the Credit Facility. During the 1996 fiscal year, the Company repaid all
amounts due under the revolving credit facility with Leucadia. In March 1998,
the Company renegotiated the Credit Facility and entered into a new credit
agreement with Leucadia. Pursuant to the new credit agreement, the Credit
Facility will expire on September 15, 2000, unless terminated earlier. The
Credit Facility may be terminated by Leucadia on December 15 of any year,
provided Leucadia notifies the Company of such termination prior to September 15
of such year.

     Net cash used by operating activities was a $3.5 million for 1998 compared
to net cash provided by operations of $5.0 million for 1997. Although the
Company expects that its cash and cash equivalents will be sufficient to cover
operating expenses for several years, the cash generated by the Company's
operations is not sufficient to cover the Company's projected operating
expenses, general and administrative expenses and exploration costs.
Accordingly, the Company's cash and cash equivalents are being depleted under
current operating conditions. Further, the significant decline in gold prices
has had an adverse impact on the amount of cash provided by operating
activities. The Company's cash operating costs per ounce of gold produced in
1998 exceeded the average gold price during the year. Although cash operating
costs are expected to improve in 1999, depressed gold prices will continue to
limit the amount of cash provided by operating activities. Therefore, unless
gold prices increase or the Company is able to significantly reduce its costs of
production, it is likely that the Company's cash and cash equivalents will
continue to be depleted.

     The Company's current sources of funds available to fund new mining
projects are limited. Accordingly, the ability of the Company to commence new
mining projects may be dependent upon the Company's ability to obtain additional
sources of funds to finance any such mining projects. While the Company believes
that it may be able to obtain financing for new mining projects through project
financing or otherwise, no assurances can be given that such financing will be
available or that the Company would be able to obtain such financing on
favorable terms.

     Additions to property, plant and equipment totaled $.2 million for 1998,
$1.2 million for 1997 and $1.2 million for the nine-month transition period
ended December 31, 1996. For all periods presented, additions to property, plant
and equipment consisted of (i) mine development expenditures; (ii) construction
expenditures for buildings, machinery, plant and equipment; and (iii)
expenditures for mobile mining service equipment.

     Upon completion of production at a mine, the Company must make expenditures
for reclamation and closure of the mine. The Company provides for future
reclamation and mine closure liabilities on a units-of-production basis. At
December 31, 1998, $1.8 million was accrued for such costs. In addition to the
accruals, the Company and its joint venture partner are depositing cash in a
separate fund to cover future reclamation costs at the CMV properties. The
Company reviews the adequacy of its reclamation and mine closure liabilities in
light of current laws and regulations and adjusts its liabilities as necessary.

     In October 1998, the Company announced a share repurchase program. The
Board of Directors of the Company authorized the repurchase of up to 2 million
shares. As of March 15, 1999, 173,700 shares had been repurchased by the Company
under the repurchase program.


                                     II-6
<PAGE>
 
The Year 2000 Issue

     The Company has performed an analysis and has implemented procedures to
address year 2000 issues. The Company is converting its financial systems to
year 2000 compliant systems, with project completion scheduled for March 31,
1999. The Company does not anticipate a significant cost to modify its systems
to accommodate the impact of the upcoming change in the century. Although the
Company is working cooperatively with certain third parties, the Company cannot
give any assurances that the systems of other parties will be year 2000
compliant on a timely basis. In the most reasonably likely worst-case scenario
involving the failure of the Company's systems and applications or those
operated by others, the Company's business, financial condition and results of
operations would be materially adversely affected. However, an estimate of the
dollar amount of such an adverse effect cannot be practically determined at this
time.

Cautionary Statement for Forward Looking Information

     Certain information set forth in this Annual Report on Form 10-K contains
"forward-looking statements" within the meaning of federal securities laws.
Forward-looking statements include statements concerning plans, objectives,
goals, strategies, future events, future revenues or performance, capital
expenditures, exploration efforts, financing needs, plans or intentions relating
to acquisitions by the Company and other information that is not historical
information. When used in this report, the words "estimates," "expects,"
"anticipates," "forecasts," "plans," "intends," "believes" and variations of
such words or similar expressions are intended to identify forward-looking
statements. Additional forward-looking statements may be made by the Company
from time to time. All such subsequent forward-looking statements, whether
written or oral and whether made by or on behalf of the Company, are also
expressly qualified by these cautionary statements.

     The Company's forward-looking statements are based upon the Company's
current expectations and various assumptions. The Company's expectations,
beliefs and projections are expressed in good faith and are believed by the
Company to have a reasonable basis, including without limitation, management's
examination of historical operating trends, data contained in the Company's
records and other data available from third parties, but there can be no
assurance that management's expectations, beliefs and projections will result or
be achieved or accomplished. The Company's forward-looking statements apply only
as of the date made.  The Company undertakes no obligation to publicly update or
revise forward-looking statements which may be made to reflect events or
circumstances after the date made or to reflect the occurrence of unanticipated
events.

     There are a number of risks and uncertainties that could cause actual
results to differ materially from those set forth in, contemplated by or
underlying the forward-looking statements contained in this report. In addition
to the other factors and matters discussed elsewhere in this report, the
following factors are among the factors that could cause actual results to
differ materially from the forward-looking statements. Any forward-looking
statements made by or on behalf of the Company should be considered in light of
these factors.

 Volatility of Gold Prices

     A significant portion of the Company's revenues are derived from the sale
of gold and the Company's results of operations are directly affected by the
price of gold. Gold prices fluctuate widely and are affected by numerous factors
beyond the Company's control, including expectations regarding inflation, global
and regional demand and political and economic conditions and production costs
in major gold-producing regions. Gold prices are also affected by worldwide
production levels. In addition, the price of gold has on occasion been subject
to very rapid short-term changes because of speculative activities. The Company
seeks to mitigate this risk, in part, through periodic forward sales of a
portion of its gold production at fixed future prices. Hedging transactions
result in a reduction in possible revenue if the hedged price is less than the
market price at the time of settlement. Additional risks associated with hedging
activities could result from the inability of the Company to deliver gold from
production in settlement of forward sales contracts or to extend delivery dates
under such contracts, at a time when spot market prices are higher than the
forward sales contract delivery price.

 Imprecision of Reserve Estimates

     The ore reserve figures presented in this report for the CMV are estimates,
and no assurance can be given that the indicated levels of gold recovery will be
realized. Gold reserve estimates are expressions of judgment based on knowledge,
experience and industry practices. Valid estimates made at a given time may


                                     II-7
<PAGE>
 
significantly change when new information becomes available. While the Company
believes that the reserve estimates presented in this report are well
established, reserve estimates are necessarily imprecise and depend to some
extent on statistical inferences, which may prove unreliable. The reserve
estimates have been determined based on assumed gold prices, cut-off grades and
operating costs that may prove to be inaccurate. Fluctuations in the market
price of gold may render uneconomic the mining of ore reserves containing
relatively lower grades of mineralization.

 Risks of Exploration and Development Stage Projects

     There are a number of uncertainties inherent in any gold exploration and
development program, including the location of economic ore bodies, the
development of appropriate metallurgical processes, the receipt of necessary
governmental permits and the construction of mining and processing facilities.
Substantial expenditures may be required to pursue such exploration and
development activities. Assuming discovery of an economic ore body and,
depending on the type of mining operation involved, several years may elapse
from the initial stages of development until commercial production is commenced.
New mining operations frequently experience unexpected problems during the
exploration and development stages and during the initial production phase. In
addition, preliminary reserve estimates may prove inaccurate. Accordingly, there
can be no assurance that the Company's current exploration and development
programs will result in any new commercial mining operations or yield new
reserves to replace and expand current reserves.

 Political Risks of Development in Foreign Countries

     The Company is currently conducting exploration activities in certain
foreign countries, including Brazil and Mexico. Foreign operations may be
subject to uncertain political and economic environments, foreign currency
controls and fluctuations, as well as risks of war and civil disturbances. Other
events may limit or disrupt a project, restrict the movement of funds, result in
the deprivation of contract rights, the taking of property by nationalization or
expropriation without fair compensation, increases in foreign taxation or limits
on repatriations of earnings. Furthermore, it is particularly important that the
Company maintain good relationships with the governments in the countries in
which it operates.

 Environmental and Other Laws and Regulations

     The Company's activities are subject to extensive federal, state and local
laws and regulations controlling not only the exploration and mining of mineral
properties, but also the actual or potential effects of such activities upon the
environment. To the extent the Company undertakes new mining activities in
foreign countries, the Company also will be subject to such laws and regulations
in these jurisdictions. Compliance with any such laws and regulations may
necessitate significant capital outlays, may materially affect the economics of
a given project, may cause material changes or delays in the Company's intended
activities or may cause the Company to discontinue operations at a given
project. New or different standards imposed by any governmental authority in the
future may adversely affect the Company's activities.

 Mining Risks and Insurance

     The business of mining is generally subject to certain types of risks and
hazards, including environmental hazards, industrial accidents, unusual or
unexpected rock formations, cave-ins, flooding, bullion losses and periodic
interruptions due to inclement or hazardous weather conditions. Such risks could
result in damage to, or destruction of, mineral properties or production
facilities, personal injury, environmental damage, delays in mining, monetary
losses and possible legal liability. No assurance can be given that insurance to
cover these risks will be available to the Company at economically feasible
premiums. Insurance against environmental risks (including potential for
pollution or other hazards as a result of the disposal of waste products
occurring from production) is not generally available to the Company or to other
companies within the industry.

 Competition

     There is significant competition for the acquisition of properties
producing or capable of producing gold and other metals. The Company may be at a
competitive disadvantage in acquiring additional mining properties since it must
compete with other individuals and companies, many of which may have greater
financial resources and larger technical staffs than the Company. As a result of
this competition, the Company may be unable to acquire attractive mining
properties on terms it considers acceptable. The number of persons 


                                     II-8
<PAGE>
 
skilled in the operation and development of mining properties is also limited
and significant competition exists for such individuals. As a result of this
competition, the Company may find it difficult to attract skilled individuals to
conduct mining operations.

ITEM 7A.  QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

     Not applicable.

ITEM 8.  FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

QUARTERLY FINANCIAL DATA (Unaudited)
(Thousands of dollars except share data)

     Selected quarterly financial data for the years ended December 31, 1998 and
1997 is presented below.

<TABLE>
<CAPTION>
1998 Quarters                                    1st                 2nd                3rd                4th
<S>                                           <C>                 <C>                <C>                <C>
Revenue                                       $4,634              $5,905             $3,029             $6,514
Gross profit                                     230                 671                446                783
Net loss                                        (475)               (202)              (381)              (223)
Loss per share                                 (0.02)              (0.01)             (0.02)             (0.02)
 
1997 Quarters                                    1st                 2nd                3rd                4th
<S>                                           <C>                <C>                <C>                <C>
Revenue                                       $8,884              $6,068             $4,612             $8,325
Gross profit (loss)                              990                 565                325               (446)
Net income (loss)                                175                 (53)              (514)              (610)
Income (loss) per share                         0.01               (0.00)             (0.03)             (0.03)
</TABLE>


                                     II-9
<PAGE>
 
                         INDEPENDENT AUDITORS' REPORT


To the Stockholders and Board of Directors
of MK Gold Company

     We have audited the accompanying consolidated balance sheets of MK Gold
Company as of December 31, 1998 and December 31, 1997, and the related
consolidated statements of operations, stockholders' equity, and cash flows for
the years ended December 31, 1998 and 1997 and the nine months ended December
31, 1996. Our audits also included the financial statement schedule listed in
Item 14(a)(2).  These consolidated financial statements and financial statement
schedule are the responsibility of the Company's management.  Our responsibility
is to express an opinion on these consolidated financial statements and
financial statement schedule 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 consolidated financial statements are
free of material misstatement.  An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the consolidated 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, such consolidated financial statements present fairly, in
all material respects, the financial position of MK Gold Company at December 31,
1998 and December 31, 1997, and the results of its operations and its cash
flows for the years ended December 31, 1998 and 1997 and the nine months ended
December 31, 1996 in conformity with generally accepted accounting principles.
Also, in our opinion, such financial statement schedule, when considered in
relation to the basic consolidated financial statements taken as a whole,
presents fairly, in all material respects, the information set forth therein.


DELOITTE & TOUCHE LLP

Salt Lake City, Utah
February 12, 1999


                                     II-10
<PAGE>
 
MK GOLD COMPANY
 
CONSOLIDATED STATEMENTS OF OPERATIONS
(Thousands of dollars except share data)
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
                                                                                                              Nine Months
                                                       Year Ended                 Year Ended                    Ended
                                                       December 31,               December 31,               December 31,
                                                          1998                        1997                       1996
                                                      -------------               ------------               ------------
<S>                                                   <C>                         <C>                        <C>
REVENUE:

  Product sales                                         $     9,017                $    16,656                $    14,284
  Mining services                                            11,065                     11,233                      7,065
                                                        -----------                -----------                -----------

           Total revenue                                     20,082                     27,889                     21,349
                                                        -----------                -----------                -----------

COSTS AND OPERATING EXPENSES:
  Product sales                                               8,617                     16,529                     14,555
  Mining services                                             9,335                      9,926                      6,308
                                                        -----------                -----------                -----------

           Total costs and operating expenses                17,952                     26,455                     20,863
                                                        -----------                -----------                -----------

GROSS PROFIT                                                  2,130                      1,434                        486

EXPLORATION COSTS                                            (3,068)                    (2,306)                    (1,455)
GENERAL AND ADMINISTRATIVE EXPENSES                          (1,661)                    (1,650)                    (1,683)
PROVISION FOR MINE CLOSURE AND RECLAMATION                        -                      2,330                     (2,100)
PROVISION FOR IMPAIRMENT OF LONG-LIVED ASSETS                     -                     (1,800)                         -
                                                        -----------                -----------                -----------

LOSS FROM OPERATIONS                                         (2,599)                    (1,992)                    (4,752)

Gain on sale of assets                                          455                        141                          -
Investment income and dividends, net                          1,104                      1,013                        572
Interest expense                                                (81)                      (137)                       (69)
                                                        -----------                -----------                -----------

Loss before income taxes                                     (1,121)                      (975)                    (4,249)
Income tax provision                                           (160)                       (27)                      (332)
                                                        -----------                -----------                -----------

NET LOSS                                                $   (1,281)                $   (1,002)                $   (4,581)
                                                        ===========                ===========                ===========

Basic and diluted loss per common share                 $     (0.07)               $     (0.05)               $     (0.24)
Basic and diluted weighted average shares used
  to compute loss per common share                       19,406,679                 19,464,466                 19,397,800


</TABLE>
See notes to consolidated financial statements.


                                     II-11
<PAGE>
 
MK GOLD COMPANY
 
CONSOLIDATED BALANCE SHEETS
(Thousands of dollars except share data)
-------------------------------------------------------------------------------
<TABLE>
<CAPTION>
                                                                        December     December
 ASSETS                                                                 31, 1998     31, 1997
                                                                        --------     --------
<S>                                                                     <C>          <C>
CURRENT ASSETS:
  Cash and cash equivalents                                             $ 15,687     $ 18,189
  Receivables                                                              2,428        1,637
  Other receivables                                                            -          918
  Refundable income taxes                                                      -          594
  Inventories                                                              3,408        3,100
  Deferred income taxes                                                      123          175
  Other                                                                      283          191
                                                                        --------     --------

           Total current assets                                           21,929       24,804

  Property, plant and mine development, net                                1,189        1,971
  Deferred income taxes                                                      304          412
  Restricted cash                                                          1,426        1,430
                                                                        --------     --------

TOTAL ASSETS                                                            $ 24,848     $ 28,617
                                                                        ========     ========

LIABILITIES AND STOCKHOLDERS' EQUITY

CURRENT LIABILITIES:
  Accounts payable                                                      $  1,749     $  1,838
  Current portion of mine closure liabilities                              1,105        1,934
  Other accrued liabilities                                                  293          669
                                                                        --------     --------

           Total current liabilities                                       3,147        4,441

  Mine closure and reclamation liabilities                                   666          569
  Deferred revenue                                                         2,864        4,055
                                                                        --------     --------

           Total liabilities                                               6,677        9,065
                                                                        --------     --------

COMMITMENTS AND CONTINGENCIES

STOCKHOLDERS' EQUITY:
  Common stock, par value $.01; 19,464,466 shares issued
     and 19,261,929 shares outstanding at December 31, 1998;
     19,464,466 shares issued and outstanding at December 31, 1997           195          195
  Capital in excess of par value                                          67,146       67,272
  Accumulated deficit                                                    (49,168)     (47,887)
  Treasury stock                                                              (2)           -
  Deferred compensation                                                        -          (28)
                                                                        --------     --------

           Total stockholders' equity                                     18,171       19,552
                                                                        --------     --------

TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY                              $ 24,848     $ 28,617
                                                                        ========     ========
</TABLE>

See notes to consolidated financial statements.

                                     II-12
<PAGE>
 
MK GOLD COMPANY
 
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
(Thousands of dollars except share data)
-------------------------------------------------------------------------------
<TABLE> 
<CAPTION> 
                                                                                                  Net
                                                                                              Unrealized 
                                    Shares of                                                  Gain on                             
                                     Common               Capital in    Accum-                Securities   Deferred                
                                      Stock      Common   Excess of     ulated     Treasury   Available    Compen-    Comprehensive
                                   Outstanding   Stock    Par Value    (Deficit)    Stock      for Sale     sation    Income (Loss)
                                   -----------   ------   ----------   ---------   --------   ----------   --------   -------------
<S>                                <C>           <C>      <C>          <C>         <C>        <C>          <C>        <C> 
April 1, 1996                       19,397,800     $194      $67,105    $(42,304)                   $ 57       $(53)
Comprehensive Loss:                                                                                                      $(4,581)
Net loss                                                                  (4,581)                        
Other comprehensive loss,
  consisting of the
  reclassification
  adjustment for realized
  gains of securities
  available for sale 
  included in net loss                                                                               (57)                    (57)

Other comprehensive loss                                                                                                 $(4,638)

Deferred compensation                                            109                                            (26)
                                   -----------   ------      -------    --------              ----------   --------    ---------
                                                                                                         
December 31, 1996                   19,397,800      194       67,214     (46,885)                               (79)
                                                                                                         
Net loss                                                                  (1,002)                        
Deferred compensation                                                                                            51
Shares issued                           66,666        1           58                                     
                                   -----------   ------      -------    --------              ----------   --------
                                                                                                         
December 31, 1997                   19,464,466      195       67,272     (47,887)                      -        (28)
                                                                                                         
Net loss                                                                  (1,281)                        
Deferred compensation                                                                                    
Shares redeemed - treasury stock      (202,537)                 (126)                    (2)             
                                   -----------   ------      -------    --------   --------   ----------   --------
                                                                                                         
December 31, 1998                   19,261,929     $195      $67,146    $(49,168)       $(2)           -          -
                                   ===========   ======      =======    ========   ========   ==========   ========
</TABLE>

See notes to consolidated financial statements.


                                     II-13
<PAGE>
 
MK GOLD COMPANY
 
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Thousands of dollars)
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>

                                                                                                        Nine Months
                                                                         Year Ended     Year Ended         Ended
                                                                         December 31    December 31     December 31,
                                                                            1998           1997             1996
                                                                         -----------    -----------     ------------
<S>                                                                      <C>            <C>             <C>
OPERATING ACTIVITIES:
  Net loss                                                                $(1,281)         $(1,002)       $  (4,581)
  Adjustment to reconcile net loss to net cash
     provided (used) by operating activities:
    Deferred compensation                                                      28               51               83
    Deferred taxes                                                            160              628            2,344
    Provision for impairment of long-lived assets                               -            1,800                -
    Depreciation, depletion, and amortization                               1,068            2,510            3,168
    Gain on sale of assets                                                   (455)            (141)               -
    Changes in operating assets and liabilities:
      Receivables                                                            (791)            (623)             640
      Income taxes payable/refundable                                         594            1,752           (3,154)
      Inventories                                                            (308)           5,485           (1,589)
      Other current assets                                                    (92)             (34)             307
      Restricted cash                                                           4             (220)            (474)
      Deferred revenue                                                     (1,191)          (1,479)          (1,875)
      Mine closure and reclamation liabilities                               (732)          (3,094)           1,914
      Accounts payable and other accrued liabilities                         (465)            (585)            (701)
                                                                          -------          -------        ---------

           Net cash provided (used) by operating activities                (3,461)           5,048           (3,918)
                                                                          -------          -------        ---------
INVESTING ACTIVITIES:
  Additions to property, plant, and mine development                         (233)          (1,230)          (1,194)
  Proceeds from disposition of property and plant                           1,320              387               14
  Proceeds from sale of unconsolidated affiliate                                -                -            1,197
  Proceeds from sale of securities available for sale                           -                -            1,893
                                                                          -------          -------        ---------
           Net cash provided (used) by investing activities                 1,087             (843)           1,910
                                                                          -------          -------        ---------
</TABLE>
                                                                     (Continued)

                                     II-14
<PAGE>
 
MK GOLD COMPANY
 
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Thousands of dollars)
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>

                                                                              Year            Year          Nine Months
                                                                              Ended           Ended            Ended
                                                                             December        December         December
                                                                             31, 1998        31, 1997         31, 1996
                                                                             --------        --------       -----------

<S>                                                                          <C>             <C>            <C>
FINANCING ACTIVITIES:
  Issuance of common stock                                                           -               59               -
  Purchase of treasury stock                                                       (128)             -                -
                                                                              ---------       ---------        ---------

           Net cash provided (used) by financing activities                        (128)             59               -
                                                                              ---------       ---------        ---------

INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS                                 (2,502)          4,264           (2,008)
                                                                                 
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD                                 18,189          13,925           15,933
                                                                              ---------       ---------        ---------
CASH AND CASH EQUIVALENTS AT END OF PERIOD                                      $15,687         $18,189          $13,925
                                                                              =========       =========        =========

SUPPLEMENTAL DISCLOSURES OF
  CASH FLOW INFORMATION:
  Interest paid                                                                 $    99         $   137          $   695
  Income taxes paid (refund), net                                               $  (584)        $(2,557)         $(1,123)
</TABLE>

See notes to consolidated financial statements.

                                     II-15
<PAGE>
 
MK GOLD COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Thousands of dollars except share data)
--------------------------------------------------------------------------------


1. ORGANIZATION, OPERATIONS, AND BASIS OF ACCOUNTING

     MK Gold (the "Company") is engaged in the business of mining gold and
exploring for and acquiring gold and other metal properties. The Company owns a
53% undivided interest in the American Girl Mining Joint Venture ("AGMJV"). The
Company also owns a 25% undivided interest in the Castle Mountain Venture
("CMV"), and performs mining services under a contract mining agreement with the
CMV.

     Principles of Consolidation - The Company owns an undivided interest in
each asset and pursuant to its agreements, is severally liable for its share of
each liability of the AGMJV and the CMV. The consolidated financial statements
include the accounts of the Company and reflect the Company's pro rata share of
each of the joint venture's assets, liabilities, revenues and expenses, after
elimination of intercompany accounts. The Company does not recognize losses from
joint ventures in excess of its pro-rata share unless the other venturer's
ability to absorb such losses is uncertain and the Company determines that
underwriting the other venturer's share of losses is in the best long-term
interest of the Company.

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

     Cash Equivalents - Cash equivalents consist of investments in short-term
commercial paper, having an original maturity of three months or less, and
mutual funds.

     Restricted Cash - CMV is funding its future reclamation liabilities by
establishing a separate bank account for the funds and charging each partner for
its proportionate share. The funding amount is based on the estimated ultimate
liability and is funded over the remaining life of the mine. AGMJV has funded a
restricted cash account which will be utilized for reclamation of the AGMJV mine
property.

     Investment Securities - The Company's investment securities are classified
as available for sale. Available for sale securities are reported at fair value
with unrealized gains and losses recorded as other comprehensive income (loss),
a separate component of stockholders' equity. Held to maturity securities are
recorded at amortized cost.

     Inventories - Gold bullion, ore and in-process inventories and materials
and supplies are stated at the lower of average cost or net realizable value.

     Property, Plant and Mine Development - Depreciation, depletion and
amortization of mining properties, mine development costs and major plant
facilities is computed principally by the units-of-production method based on
estimated proven and probable ore reserves. Proven and probable ore reserves
reflect estimated quantities of economically recoverable reserves which can be
recovered in the future from known mineral deposits. Such estimates are based on
current and projected costs and prices.  

                                     II-16
<PAGE>
 
Mining equipment and other plant facilities are depreciated using straight-line
or accelerated methods principally over estimated useful lives of 3 to 10 years.

     Generally, mineral exploration costs are expensed as incurred. When it has
been determined that a mineral property has proven and probable reserves, the
cost of subsequent reserve definition and expansion and the costs incurred to
develop such property are capitalized as mine development costs and charged to
operations on a units-of-production method based on proven and probable ore
reserves. Carry forward mine development costs include costs incurred for shaft
sinking, permanent excavations, roads, tunnels and advance removal of overburden
and waste rock. Costs relating to stockpiled ore are initially deferred as mine
development costs and expensed in future periods when the ore is processed.
Major mine development expenditures at operating properties and at new mining
properties not yet producing are capitalized.

     Property Evaluation - Recoverability of investments in operating mines is
evaluated periodically.  Estimated future net cash flows from each mine are
calculated using estimates of proven and probable ore reserves, estimated future
gold prices (considering historical and current prices, price trends and related
factors) and operating capital and reclamation costs on an undiscounted basis.
Impairment is measured based on discounted future net cash flows.

     Deferred Stripping Costs - The costs of waste stripping in excess of the
expected mine life average stripping ratio are deferred and charged to
production on a units-of-production method when the actual ratio of waste mined
to ore processed is less than the mine life average.

     Mine Closure, Reclamation, and Environmental Remediation of Mined Areas -
The Company is subject to federal, state and local environmental laws and
regulations. The Company has put in place ongoing pollution control and
monitoring programs at the mine sites, and posted surety bonds as required for
compliance with state and local environmental obligations including reclamation.
Estimated future reclamation and mine closure costs are based principally on
legal and regulatory requirements and are accrued and charged over the expected
operating lives of the Company's mines on a units-of-production method.  Ongoing
reclamation activities are expensed in the period incurred.  Provision (benefit)
for mine closure and reclamation liabilities charged to operations totaled
($798) for the year ended December 31, 1998, $(2,212) for the year ended
December 31, 1997 and $2,450 for the nine months ended December 31, 1996 (see
Note 2).

     Income Taxes - The Company utilizes an asset and liability approach for
financial accounting and reporting for income taxes. Deferred income taxes are
provided for temporary differences in the basis of assets and liabilities as
reported for financial statement purposes and income tax purposes.

     Revenue Recognition - Revenue from product sales is recognized when the
gold is delivered to customers. Mining services revenue is recognized using the
units of delivery method based on quantities of materials moved. The revenue
recognized for each unit of material moved is determined on an individual pit
basis. The effect of changes in estimated total contract revenues, costs or
units of material to be moved for each pit is reflected in the accounting period
in which the change becomes known and over the remaining units to be mined in
each pit.  Differences between customer billings and earned revenue using this
method are recorded as deferred revenue.

     Deferred Revenue - Amounts received in advance of recognition of revenue
are recorded as deferred revenue. At December 31, 1998, deferred revenue of
$2,864 consists of cash received in December 1995 in the settlement of a lawsuit
with the CMV partner. Such amount is being recognized as revenue over the life
of the operating contract.

     Hedging Activities - The Company enters into option contracts and forward
sales contracts to establish a minimum price on certain ounces of gold it
produces. Gains and losses realized on such 

                                     II-17
<PAGE>
 
instruments, as well as any cost or revenue associated therewith, are recognized
as sales when the related production is delivered to customers. The Company did
not have any gold hedging positions outstanding at December 31, 1998.

     Earnings Per Share - Effective December 31, 1997, the Company adopted
Statement of Financial Accounting Standards ("SFAS") No. 128, "Earnings Per
Share", and retroactively restated its earnings per share for the nine months
ended December 31, 1996 to conform with the statement.  Accordingly, net loss
per common share is computed by both the basic method, which uses the weighted
average number of the Company's common shares outstanding, and the diluted
method, which includes the dilutive common shares from stock options and
warrants, as calculated using the treasury stock method. For the periods
presented, the outstanding stock options were antidulitive. Since there is no
difference between the Company's basic and diluted earnings per share, dual
presentation was accomplished in one line on the income statement for all
periods presented.

     Comprehensive Income (Loss) - Effective January 1, 1998, the Company
adopted SFAS No. 130, "Reporting Comprehensive Income", and reclassified
comprehensive income (loss) for 1996 to conform with SFAS No. 130. This
statement requires the Company to display an amount representing total
comprehensive income (loss) for each applicable period. Other comprehensive
income (loss) consists entirely of realized gain on available for sale
securities. The Company had no components of other comprehensive income (loss)
during any of the periods ended December 31, 1998 and 1997 and is, therefore,
not required to report comprehensive income (loss) in those periods.

     Segment Reporting - Effective January 1, 1998, the Company adopted SFAS No.
131, "Disclosure About Segments of an Enterprise and Related Information". SFAS
No. 131 establishes standards for the way that public business enterprises
report information about operating segments in annual financial statements and
requires that those enterprises report selected information about operating
segments in interim financial reports issued to shareholders. It also
establishes standards for related disclosure about products and services,
geographic areas, and major customers. The Company has appropriately identified
and disclosed all operating segments in accordance with SFAS 131 (see Note 7).

     New Accounting Standard - In June 1998, the FASB issued SFAS No. 133, 
"Accounting for Derivative Instruments and Hedging Activities", which supersedes
SFAS No. 80, "Accounting for Future Contacts", SFAS No. 105, "Disclosure of 
Information About Financial Instruments with Off-Balance-Sheet Risk and 
Financial Instruments with Concentration of Credit Risk", and SFAS No. 119, 
"Disclosures About Derivative Financial Instruments and Fair Value of Financial 
Instruments", and also amends certain aspects of other SFASs previously issued. 
This statement establishes accounting and reporting standards for derivative 
instruments and hedging activities. It requires that an entity recognize all 
derivatives as either assets or liabilities in the statement of financial 
position and measure those instruments as fair value. SFAS No. 133 is effective 
for all fiscal quarters of fiscal years beginning after June 15, 1999. Company 
management is currently evaluating the effects of this change in its accounting 
for derivatives and hedging activities.

     Reclassifications - Certain prior year amounts have been reclassified to
conform with the current year's presentation.

     Change in Fiscal Year - The Company changed its fiscal year end from March
31 to December 31 effective December 31, 1996.

2. PROVISION FOR MINE CLOSURE AND RECLAMATION

     After completing a thorough evaluation of shut-down and alternative
operating strategies for operations at the AGMJV, the Company determined that no
practical mining and processing methods could be developed which would justify
continued operations. On September 5, 1996, the Company, therefore, announced
that it was suspending operations at the AGMJV.

     As part of the suspension plan, the Company and its joint venture partner,
Hecla Mining Company, agreed to a modified program and budget for the remainder
of the year which called for a suspension of full scale open pit and underground
mining effective September 1996. Crushing and milling operations ceased in
October 1996.  Reclamation activities of the surface and underground operations
began in September 1996. It is expected that full mine reclamation will be
completed by the end of 1999.

     Cost estimates and budgets for the suspension of operation, closure and
reclamation were developed. In 1996, the Company recorded a charge for its share
of the expected closure and reclamation costs of $2,100.

                                     II-18
<PAGE>
 
     During 1997, the Company continued its closure and reclamation efforts.
Actual gold recovery has exceeded the initial estimates. The amount realized
from the sale of idled equipment has also exceeded the initial estimates while
closure costs have been below estimates. As a result of these favorable
developments, the Company has revised its cost estimate for the closure and
reclamation at the AGMJV. Accordingly, the Company recognized $2,330 of income
in 1997.

3. PROVISION FOR IMPAIRMENT OF LONG-LIVED ASSETS

     During 1997, gold prices suffered a dramatic decline. The Company reviewed
its operations in light of the current gold market conditions and determined
that it would not be able to recover its investment in the CMV. The Company
recorded an impairment of $1,800 relating to its investment in the CMV.

4. CASTLE MOUNTAIN JOINT VENTURE

     The Company's 25% undivided interest in the Castle Mountain Venture, which
operates a gold mine in San Bernardino County, California has been
proportionately reflected in the accompanying consolidated financial statements.
The following financial statements of CMV are reported on a 100% basis and do
not reflect the provision for impairment of long-lived assets as recorded on the
records of the Company.
<TABLE>
<CAPTION>
                                                                                  December             December
Financial Position                                                                31, 1998             31, 1997
                                                                                 ---------            ---------
<S>                                                                              <C>                  <C> 
Current assets                                                                   $  17,277            $  17,013
Property, plant and mine development, net                                           47,858               61,190
Current liabilities                                                                 (4,098)              (3,806)
Long-term liabilities                                                               (1,365)              (1,787)
Reclamation liabilities                                                             (2,664)              (2,275)
                                                                                 ---------            ---------
 
Net assets                                                                       $  57,008            $  70,335
                                                                                 =========            =========
</TABLE>

<TABLE>
<CAPTION>
                                                                      Year                   Year                Nine Months
                                                                      Ended                  Ended                  Ended
                                                                     December               December               December
Results of Operations                                                31, 1998                31, 1997              31, 1996
                                                                     --------               ---------            -----------
<S>                                                                 <C>                     <C>                  <C>
Product sales                                                       $  26,473               $  40,641             $  33,780
Gross profit (loss)                                                   (15,403)                (11,253)               (3,899)
Loss before income taxes                                              (15,682)                (13,061)               (5,453)
</TABLE> 
<TABLE> 
<CAPTION> 
                                                                      Year                   Year                Nine Months
                                                                      Ended                  Ended                  Ended
                                                                     December               December               December
Cash Flows                                                           31, 1998                31, 1997              31, 1996
                                                                     --------               ---------            -----------
<S>                                                                 <C>                     <C>                  <C>
Net cash provided (used) by operating activities                    $  (4,806)              $   7,367             $   7,509
Net cash provided (used) by investing activities                         (348)                 (4,105)               (1,736)
Net cash provided (used) by financing activities                        2,359                   1,010                (1,365)
                                                                    ---------               ---------             ---------

Net increase (decrease) in cash                                     $  (2,795)              $   4,272             $   4,408
                                                                    =========               =========             =========
</TABLE>

                                     II-19
<PAGE>
 
5. INVENTORIES

    The components of inventory are shown below:
<TABLE>
<CAPTION>
                                                                             December         December
                                                                             31, 1998         31, 1997
                                                                            ---------        ---------
<S>                                                                        <C>              <C>
    Gold bullion                                                            $   2,101        $   2,031
    Ore and in-process                                                            658              395
    Materials and supplies                                                        649              674
                                                                            ---------        ---------
                                                                            $   3,408        $   3,100
                                                                            =========        =========
</TABLE>

6. PROPERTY, PLANT AND MINE DEVELOPMENT                   
                                                          
    The components of property, plant and mine development are shown below: 
<TABLE>
<CAPTION>
                                                                                      December          December
                                                                                      31, 1998          31, 1997
                                                                                      --------          --------
    <S>                                                                              <C>              <C>
    Mining properties, net of impairment allowance
     of $4,048 and $5,337 at December 31, 1998 and 1997, respectively                $   8,489         $   7,200
    Mine development, net of impairment allowance
     of $2,699 and $3,558 at December 31, 1998 and 1997, respectively                   10,341             9,188

    Plant and equipment                                                                 11,937            13,509
                                                                                     ---------         ---------
                                                                                        30,767            29,897
    Less accumulated depreciation, depletion and amortization                          (29,578)          (27,926)
                                                                                     ---------         ---------
    Property, plant and mine development, net                                        $   1,189         $   1,971
                                                                                     =========         =========
</TABLE>


    Maintenance and repair expenses charged to operations were $6,205, $7,698,
and $8,474, for the years ended December 31, 1998, December 31, 1997, and the
nine months ended December 31, 1996, respectively.

                                     II-20
<PAGE>
 
7. INDUSTRY SEGMENT INFORMATION

     The Company is not economically dependent on a limited number of customers
for the sale of its gold because gold commodity markets are well-developed
worldwide.  The Company operated primarily in two industry segments, product
sales and mining services in the United States.  The majority of the mining
service revenues are derived from one customer (CMV).

<TABLE>
<CAPTION>
                                                               Year                  Year               Nine Months
                                                               Ended                 Ended                 Ended
                                                            December 31,          December 31,          December 31,
                                                               1998                  1997                  1996
                                                            ------------          ------------          ------------
<S>                                                         <C>                   <C>                   <C>
Revenue:
  Product sales                                                 $ 9,053               $16,728               $14,604
  Mining services                                                14,753                14,911                 9,421
  Corporate and eliminations                                     (3,724)               (3,750)               (2,676)
                                                                -------               -------               -------

Total revenue                                                   $20,082               $27,889               $21,349
                                                                =======               =======               =======

Gross profit:
  Product sales                                                 $   436               $   199               $  (271)
  Mining services                                                 1,730                 1,307                   757
  Corporate and eliminations                                        (36)                  (72)                    -
                                                                -------               -------               -------

Total gross profit                                              $ 2,130               $ 1,434               $   486
                                                                =======               =======               =======

Identifiable assets:
  Product sales                                                 $10,064               $10,656               $ 9,841
  Mining services                                                 2,515                 2,243                 1,641
  Corporate and eliminations                                     12,269                17,058                21,496
                                                                -------               -------               -------

Total assets                                                    $24,848               $29,957               $32,978
                                                                =======               =======               =======

Depreciation, depletion and amortization:
  Product sales                                                 $   947               $ 2,403               $ 3,070
  Mining services                                                    86                    66                    83
  Corporate and eliminations                                         35                    41                    15
                                                                -------               -------               -------

Total depreciation, depletion and amortization                  $ 1,068               $ 2,510               $ 3,168
                                                                =======               =======               =======

Capital expenditures:
  Product sales                                                 $    87               $ 1,026               $ 1,156
  Mining services                                                   108                   152                     -
  Corporate and eliminations                                         38                    52                    38
                                                                -------               -------               -------

Total capital expenditures                                      $   233               $ 1,230               $ 1,194
                                                                =======               =======               =======
</TABLE>

                                     II-21
<PAGE>
 
8. INCOME TAXES

     The provision (benefit) for income taxes consists of:


<TABLE>
<CAPTION>
                                                           Year                Year            Nine Months
                                                           Ended              Ended               Ended
                                                          December           December            December
                                                          31, 1998           31, 1997            31, 1996
                                                          --------           --------          -----------
<S>                                                       <C>                <C>               <C>
Currently payable (refundable):
  U.S. federal                                             $      -           $    (601)          $ (1,625)
  State                                                           -                  -                (387)
                                                           ---------          ---------           ---------

  Total currently payable (refundable)                            -                (601)             (2,012)
                                                           ---------          ---------           ---------

Deferred:
  U.S. federal                                                   148                504               1,894
  State                                                           12                124                 450
                                                           ---------          ---------           ---------

  Total deferred                                                 160                628               2,344
                                                           ---------          ---------           ---------

Total                                                      $     160          $      27           $     332
                                                           =========          =========           =========
</TABLE>

   The deferred income tax provision (benefit) consists of:


<TABLE>
<CAPTION>
                                                              Year               Year                 Nine Months
                                                              Ended              Ended                   Ended
                                                             December           December                December
                                                             31, 1998           31, 1997                31, 1996
                                                             ---------          --------              -----------
<S>                                                          <C>                <C>                   <C>
Depreciation, depletion and amortization                     $     354          $   2,517              $ (1,735)
Reclamation and other liabilities                                  324                629                   (778)
Deferred revenue                                                   638                687                    381
Inventory valuation                                                874               (159)                   498
Other                                                             (511)               754                    354
AMT credit                                                           -                594                    698
Basis difference in affiliate                                        -                  -                   (145)
Asset impairment                                                   838                961                  4,322
Net operating loss                                              (3,935)            (5,648)                (3,189)
Valuation allowance                                              1,578                293                  1,938
                                                             ---------          ---------              ---------

Deferred income taxes                                        $     160          $     628              $   2,344
                                                             =========          =========              =========
</TABLE>

                                     II-22
<PAGE>
 
     Deferred tax assets and liabilities consist of the following:

<TABLE>
<CAPTION>
                                       December 31, 1998                           December 31, 1997
                            ------------------------------------         -------------------------------------
                              Assets     Liabilities      Total           Assets     Liabilities       Total
<S>                         <C>          <C>            <C>              <C>         <C>              <C>
Depreciation, depletion
  and amortization          $  5,513       $(5,163)     $    350         $  5,850      $(5,146)       $    704
Reclamation and other
  liabilities                    431                         431              755                          755
Deferred revenue               1,711                       1,711            2,349                        2,349
Inventory valuation             (533)                       (533)             341                          341
Other                            660          (143)          517              329         (323)              6
AMT credit                       122                         122              122                          122
Basis difference in
  affiliate                    1,133                       1,133            1,133                        1,133
Impairment of long-
  lived assets                 6,970                       6,970            7,808                        7,808
Net operating losses          12,772                      12,772            8,837                        8,837
Valuation allowance          (23,046)                    (23,046)         (21,468)                     (21,468)
                            --------       -------      --------         --------      -------        --------
                            $  5,733       $(5,306)     $    427         $  6,056      $(5,469)       $    587
                            ========       =======      ========         ========      =======        ========
</TABLE>

     A valuation allowance is provided to reduce the deferred tax assets to a
level which, more likely than not, will be realized.  The net deferred tax
assets reflect management's estimate of the amount which will be realized from
future taxable income of the character necessary to recognize such asset.

     The provision for income taxes differs from the amounts computed by
applying the U.S. corporate income tax statutory rate of 35% for the following
reasons:


<TABLE>
<CAPTION>
                                                      Year           Year       Nine Monthss
                                                     Ended          Ended          Ended
                                                    December       December       December
                                                    31, 1998       31, 1997       31, 1996
                                                    --------       --------       --------
<S>                                                 <C>            <C>          <C>
U.S. corporate income tax benefit at 
  statutory rate                                    $ (380)        $(331)         $(1,553)
Percentage depletion in excess of basis                                              (106)
Valuation reserve                                    1,578           293            1,938
State income taxes, net of federal tax benefit         (56)          (49)            (228)
Other, net                                            (982)          114              281
                                                    ------         -----          -------
Income tax expense                                  $  160         $  27          $   332
                                                    ======         =====          =======
</TABLE>

9. LONG-TERM DEBT

     At December 31, 1998 and December 31, 1997, the Company had a $20,000
credit facility (the "Credit Facility") with Leucadia National Corporation
("Leucadia"). As of December 31, 1998 and December 31, 1997, the Company had no
amounts borrowed under this credit facility.

                                     II-23
<PAGE>
 
10. BENEFIT PLANS

     The Company maintains a 401(k) Savings Plan (the "Plan") for all full-time
active employees and matches 50% of employee contributions to the Plan up to 5%
of eligible pay.  Cost of the Plan was $90, $93, and $307 for the years ended
December 31, 1998 and December 31, 1997 and the nine months ended December 31,
1996, respectively.

11. COMMITMENTS AND CONTINGENCIES

     Environmental - The Company's mining operations and exploration activities
are subject to various federal, state and local laws and regulations governing
protection of the environment. These laws are continually changing and, as a
general matter, are becoming more restrictive. The Company's policy is to
conduct its business in a manner that safeguards public health and mitigates the
environmental effects of its mining operations. To comply with these federal,
state and local laws, the Company has made and in the future may be required to
make capital and operating expenditures. However, the Company currently has no
significant environmental activities under development and does not anticipate
incurring any unforeseen capital or operating expenditures for environmental
compliance during the remainder of its current fiscal year or the succeeding
fiscal year.

     Surety bonds and letters of credit totaling $3,812 (the Company's share is
$1,459) have been provided as required by various governmental agencies for
environmental protection, including reclamation bonds at the American Girl Mine
and Castle Mountain Mine.

     Product Sales Commitments - The Company sells gold at spot and under gold
hedge contracts. Precious metal hedge contracts include forward sales contracts
and put and call options. Realization under these contracts is dependent upon
the counterparties performing in accordance with the terms of the contracts. The
Company does not anticipate nonperformance by the counterparties. Hedging takes
the form of selling forward and creating collars. A collar includes buying put
options and selling call options. A put option gives the buyer the right, but
not the obligation, to sell gold to the put seller at a predetermined price on
or before a predetermined date. A call option gives the buyer the right, but not
the obligation, to buy gold from the call seller at a predetermined price on or
before a predetermined date. The risks associated with hedging are generally
twofold. First, that production may not be available to deliver gold against the
hedged position; and second, that the call options limit the amount of upside
potential if the price of gold increased above the option strike price. Under
the Company's hedging policies and production levels it is unlikely that the
Company would not have gold to deliver against hedged positions.

     These hedging arrangements allow the Company to selectively extend maturity
dates, thereby postponing delivery against sales commitments.  This flexibility
allows the Company to sell gold into the spot market when conditions are
favorable, while at the same time retaining the benefits of the contango, or
premium that is paid for gold when delivered in settlement of forward sales
contracts at maturity. At December 31, 1998, the Company had no future sales
commitments.

     Legal Proceedings - As previously reported by the Company, the Company has
filed a complaint against Morrison Knudsen Corporation ("MK"), seeking a
declaration that MK's agreement not to compete with the Company is valid,
binding and enforceable. A trial date is currently scheduled for August 16,
1999.

     On February 11, 1999, MK filed a separate complaint against the Company in
the U.S. District Court for the District of Idaho (Civil No. CV 99-0064-SBLW).
The complaint alleges that the Company has breached an agreement with MK
relating to the use of the name "MK Gold Company." MK is seeking an injunction
preventing the Company from using the name "MK Gold Company." The Company has 
filed a motion to dismiss MK's complaint. Alternatively, the Company has 
requested a stay of the proceeding, or to have venue transferred to the U.S. 
District Court for the District of Utah.

                                     II-24
<PAGE>
 
     Other - CMV and AGMJV are committed to pay royalties to landowners
generally based on a percent of refined gold bullion. Effective net smelter
return royalties paid as a percent of the realized gold price were 1.4% for the
year ended December 31, 1998, 2.1% for the year ended December 31, 1997, and
4.1% for the nine months ended December 31, 1996.

12. RELATED PARTY TRANSACTIONS

     The Company's joint venture partner, Viceroy Gold Corporation ("VGC"), is
the manager of CMV and, as such, is entitled to receive a management fee of 1%
of capital expenditures and 2% of allowable costs as defined in the Castle
Mountain Venture Agreement. Management fees charged by VGC attributable to the
Company amounted to $140 for the year ended December 31, 1998, $167 for the year
ended December 31,1997, and $142 for the nine months ended December 31, 1996.

     The Company is the manager of the AGMJV and under the terms of the American
Girl Mining Joint Venture Agreement is entitled to receive a management fee of
2% of allowable costs as defined in the Agreement. Management fee revenue
recognized by the Company amounted to $24 for the year ended December 31, 1998,
$61 for the year ended December 31, 1997, and $139 for the nine months ended
December 31, 1996

     The Company performs contract mining services for the CMV. Mining services
revenue recognized by the Company was $14,753 for the year ended December 31,
1998, $14,911 for the year ended December 31, 1997, and $9,421 for the nine
months ended December 31, 1996.

13. STOCK PLANS

     Stock Option Plan for Non-Employee Directors - The Company has 180,000
authorized options in a non-employee director stock option plan. These options
are awarded at 50% of the fair market value of the stock on the date of the
award.  Compensation expense is then recognized equally over the three year
vesting period. As of December 31, 1998, 150,000 non-employee director stock
options have been granted and 30,000 non-employee director stock options are
available for grant.

     Stock Incentive Plan - The Company has a stock incentive plan which allows
for a maximum of 2,500,000 options to be awarded. Options granted under the
stock incentive plan have an exercise price equal to the fair market value of
the stock on the date of grant and expire 10 years after the date of grant. The
following table summarizes the stock plan activities for both the non-employee
director and stock incentive plans:

                                     II-25
<PAGE>
 
<TABLE>
<CAPTION>
                                                     Year                         Year                     Nine Months
                                              Ended December 31,           Ended December 31,           Ended December 31,
                                                     1998                         1997                         1996
                                           -------------------------   --------------------------   --------------------------
                                            Number         Price         Number         Price         Number         Price
                                              of           Range           of           Range           of           Range
                                            Shares       Per Share       Shares       Per Share       Shares       Per Share
<S>                                        <C>         <C>             <C>          <C>             <C>          <C>
Options:
Outstanding beginning of year              2,043,800   $1.47 - $1.72   1,945,000    $1.47 - $4.00     685,000    $1.81 - $5.38
Granted                                       75,000   $0.75             250,000    $1.50           1,680,000    $1.47 - $1.72
Canceled                                                                (151,200)   $4.00            (420,000)   $1.81 - $5.38
 
Outstanding end of year                    2,118,800   $0.75 - $1.72   2,043,800    $1.47 - $1.72   1,945,000    $1.47 - $4.00
Weighted average fair market                           $0.37                        $0.71                        $0.84
  value of options granted during year
</TABLE>

     The Company accounts for stock options granted using Accounting Principles
Board (APB) Opinion 25. Accordingly, no compensation cost has been recognized
for its fixed stock option plans.  Had compensation cost for the Company's
stock-based compensation plans been determined based on the fair value at the
grant dates for awards under those plans consistent with Statement of Financial
Accounting Standards (SFAS) No. 123, the Company's net loss and net loss per
common share would have changed to the pro forma amounts indicated below:



<TABLE>
<CAPTION>
                                                    Year Ended          Year Ended     Nine Months Ended
                                                   December 31,        December 31,       December 31,
                                                       1998                1997               1996
                                                   ------------        ------------    -----------------
<S>                                                <C>                 <C>             <C>
Net loss:
  As reported                                        $(1,281)            $(1,002)           $(4,581)
  Pro forma                                           (1,682)             (1,411)            (4,736)

Net loss per common share (basic and diluted):
  As reported                                        $ (0.07)            $ (0.05)           $ (0.24)
  Pro forma                                          $ (0.09)            $ (0.07)           $ (0.24)
</TABLE>
                                                                                
     The fair value of each option grant is estimated on the date of grant using
the Black-Scholes option-pricing model with the following weighted average
assumptions used: dividend yield of 0%; expected volatility of 20%; risk-free
interest rate of 6.34% and expected lives of 7 years subsequent to vesting date.

14. FAIR VALUE OF FINANCIAL INSTRUMENTS

     The Company had no forward contracts outstanding as of December 31, 1998.
As of December 31, 1997, the Company estimated the fair value of outstanding
forward contracts to be $194, but the carrying value had not been recorded by
the Company.

                                     II-26
<PAGE>
 
15. SELECTED COMPARABLE FINANCIAL DATA

     The following table provides selected comparable financial data for the
year ended December 31,1998 and year ended December 31, 1997:

<TABLE>
<CAPTION>
                                                         Year                   Year
                                                         Ended                  Ended
                                                   December 31, 1998      December 31, 1997
                                                   -----------------      -----------------
      <S>                                          <C>                    <C>
      Revenue                                           $20,082                $27,889
      Gross profit                                        2,130                  1,434
      Loss from operations                               (2,599)                (1,992)
      Income tax (provision)                               (160)                   (27)
      Net loss                                           (1,281)                (1,002)
      Net loss per common share                           (0.07)                 (0.05)
      </TABLE>


                                     *****

                                     II-27
<PAGE>

ITEM 9.  CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE.

     Not applicable.

                                     II-28
<PAGE>
 
                                   PART III

ITEM 10.  DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

     The information required by this item is included in the Company's
definitive proxy statement to be filed with the Commission pursuant to
Regulation 14A of the Securities Exchange Act of 1934 in connection with the
1999 annual meeting of stockholders of the Company (the "Proxy Statement") and
is incorporated herein by reference. In addition, reference is made to Item 10
in Part I of this Report.

ITEM 11.  EXECUTIVE COMPENSATION

     The information required by this item is included in the Proxy Statement
and is incorporated herein by reference.

ITEM 12.  SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

     The information required by this item is included in the Proxy Statement
and is incorporated herein by reference.

ITEM 13.  CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

     The information required by this item is included in the Proxy Statement
and is incorporated herein by reference.

                                     III-1
<PAGE>

                                 PART IV

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

<TABLE> 
<CAPTION> 
                                                                              PAGE
<S>                                                                           <C> 
(a)  Financial Statements, Schedules and Exhibits.

1.   Financial Statements included in Part II of this Form 10-K:
 
     Independent Auditors' Report                                             II-10
 
     Consolidated Statements of Operations for the years ended December
     31, 1998 and 1997 and the nine months ended December 31, 1996            II-11
 
     Consolidated Balance Sheets at December 31, 1998 and  1997               II-12
 
     Consolidated Statements of Stockholders' Equity for the years ended
     December 31, 1998 and 1997 and the nine months ended December 31, 1996   II-13
 
     Consolidated Statements of Cash Flows for the years ended December
     31, 1998 and 1997 and the nine months ended December 31, 1996            II-14
 
     Notes to Consolidated Financial Statements                               II-16

2.   Financial Statement Schedules as of December 31, 1998 included
     in Part IV of this Form 10-K:

     Valuation and Qualifying Accounts                                        IV-3

3.   Exhibits:

     The exhibits to this Form 10-K are listed in the Exhibit Index contained
     elsewhere in this Form 10-K.

(b)  Reports on Form 8-K.

     Not applicable.
</TABLE> 

                                     IV-1
<PAGE>
 
                                   SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, the Corporation has duly caused this report to be signed on its
behalf by the undersigned, thereunto duly authorized on March 19, 1999.


MK Gold Company


By   /s/ D.L. Babinchak
     -------------------------------------
     D. L. Babinchak
     President and Chief Executive Officer

Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been signed below on March 19, 1998 by the following persons on behalf of
the Corporation in the capacities indicated.


/s/ G.F. Joklik         Chairman of the Board
-------------------
G.F. Joklik


/s/ D.L. Babinchak      President, Chief Executive Officer and Director      
-------------------     (Principal Executive Officer)
D. L. Babinchak                                 
 

/s/ J.C. Farmer         Chief Financial Officer and Secretary
-------------------     (Principal Financial and Accounting Officer)
J.C. Farmer             

/s/ I.M. Cumming        Director
-------------------
I.M. Cumming

/s/ R.V. Hansberger     Director
-------------------
R.V. Hansberger

/s/ G.J. Humphrey       Director
-------------------
G.J. Humphrey

/s/ J.P. Miscoll        Director
-------------------
J.P. Miscoll

/s/ R.S. Shriver        Director
-------------------
R.S. Shriver

/s/ J.S. Steinberg      Director
-------------------
J.S. Steinberg

                                     IV-2
<PAGE>
 
                       VALUATION AND QUALIFYING ACCOUNTS
 
                 FOR THE YEAR ENDED DECEMBER 31, 1998 AND 1997
                  AND THE NINE MONTHS ENDED DECEMBER 31, 1996
                            (Thousands of dollars)
 
<TABLE> 
<CAPTION> 
                                                                     Additions
                                                        Balance at   Charged to                 Balance at
                                                        Beginning    Costs and                    End of
Description                                              of Year      Expenses     Deductions      Year
                                                        ----------   ----------    ----------   ----------
<S>                                                     <C>          <C>           <C>          <C> 
Provision for impairment of long-lived assets:
  December 31, 1996                                       $33,881         none      $22,419      $11,462
  December 31, 1997                                       $11,462      $ 1,800      $ 4,367      $ 8,895
  December 31, 1998                                       $ 8,895         none      $ 2,148      $ 6,747
 
Valuation for income taxes:
  December 31, 1996                                       $19,237      $11,938         none      $21,125
  December 31, 1997                                       $21,175      $   293         none      $21,468
  December 31, 1998                                       $21,468      $ 1,578         none      $23,046
</TABLE>

                                     IV-3
<PAGE>
 
                                 EXHIBIT INDEX

Exhibits marked with an asterisk are filed herewith, the remainder of the
exhibits have heretofore been filed with the Commission and are incorporated
herein by reference.

Exhibit
Number    Exhibits

3.1       Amended and Restated Certificate of Incorporation of the Company
          (filed as Exhibit 3.1 to the Registrant's Annual Report on Form 10-K
          for the fiscal year ended March 31, 1996, and incorporated herein by
          reference).

3.2       Amended and Restated Bylaws of the Company (filed as Exhibit 3.1 to
          the Registrant's Annual Report on Form 10-K for the fiscal year ended
          March 31, 1996, and incorporated herein by reference).

10.1      Form of Indemnification Agreement to be entered into with Officers and
          Directors of the Company (filed as Exhibit 10.1 to the Registrant's
          Annual Report on Form 10-K for the fiscal year ended March 31, 1995,
          and incorporated herein by reference).

10.2      Castle Mountain Venture Contract Mining Agreement (filed as Exhibit
          10.39 to the Registrant's Annual Report on Form 10-K for the fiscal
          year ended March 31, 1996, and incorporated herein by reference).

10.3      Castle Mountain Joint Venture Agreement (filed as Exhibit 10.3 to the
          Registrant's Form S-1 Registration Statement No. 33-70348 on October
          14, 1993, and incorporated herein by reference).

10.4      Settlement Agreement, dated December 19, 1995, between Viceroy Gold
          Corporation, the Company and the Castle Mountain Venture (filed as
          Exhibit 10.37 to the Registrant's Annual Report on Form 10-K for the
          fiscal year ended March 31, 1996, and incorporated herein by
          reference).

10.5      Amendment No. 2 to Castle Mountain Venture Agreement, dated December
          19, 1995, between the Company and Viceroy Gold Corporation (filed as
          Exhibit 10.38 to the Registrant's Annual Report on Form 10-K for the
          fiscal year ended March 31, 1996, and incorporated herein by
          reference).

10.6      American Girl Venture Agreement (filed as Exhibit 10.4 to the
          Registrant's Form S-1 Registration Statement No. 33-70348 on October
          14, 1993, and incorporated herein by reference).

10.7      Oro Cruz Memorandum of Understanding (Memorandum of Agreement), (filed
          as Exhibit 10.5 to the Registrant's Form S-1 Registration Statement
          No. 33-70348 on October 14, 1993, and incorporated herein by
          reference).

10.8      Agreement Not to Compete, Dated December 17, 1993, between the Company
          and Morrison Knudsen (filed as Exhibit 10.12 to the Registrant's Form
          S-1 Registration Statement No. 33-70348 on October 14, 1993, and
          incorporated herein by reference).

10.9      Registration Rights Agreement, Dated December 17, 1993, between the
          Company and Morrison Knudsen (filed as Exhibit 10.16 to the
          Registrant's Form S-1 Registration Statement No. 33-70348 on October
          14, 1993, and incorporated herein by reference).

10.10     Equipment Lease Agreement, Dated December 17, 1993, between the
          Company and Morrison Knudsen (filed as Exhibit 10.17 to the
          Registrant's Form S-1 Registration Statement No. 33-70348 on October
          14, 1993 and incorporated herein by reference).