UNITED STATES

                       SECURITIES AND EXCHANGE COMMISSION

                             Washington, D.C. 20549





                                    FORM 10-Q


(x)      Quarterly report pursuant to section 13 or 15(d) of the Securities 
         Exchange Act of 1934.



                For the Quarterly Period Ended September 30, 1998



( )      Transition report pursuant to section 13 or 15(d) of the Securities 
         Exchange Act of 1934.



               For the transition period from _______ to ________



                          Commission File Number 1-8736



                            HOMESTAKE MINING COMPANY


                             A Delaware Corporation

                   IRS Employer Identification No. 94-2934609



                              650 California Street

                      San Francisco, California 94108-2788

                            Telephone: (415) 981-8150

                            http://www.homestake.com



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   ______



The number of shares of common  stock  outstanding  as of  November  6, 1998 was
211,220,538.



<PAGE>
                    HOMESTAKE MINING COMPANY AND SUBSIDIARIES


PART 1 - FINANCIAL INFORMATION

Item 1. Financial Statements

A.   Condensed Consolidated Balance Sheets (unaudited)
     (In thousands, except per share amount)
<TABLE>
<CAPTION>
                                                                                 September 30,               December 31,
                                                                                     1998                       1997
                                                                              -----------------          -----------------
<S>                                                                            <C>                       <C>             
ASSETS
Current assets
     Cash and equivalents                                                      $       151,311           $        124,083
     Short-term investments                                                            157,952                    141,221
     Receivables                                                                        36,900                     43,529
     Inventories:
         Finished products                                                              18,556                     33,019
         Ore and in process                                                             33,207                     37,811
         Supplies                                                                       26,961                     33,095
     Deferred income and mining taxes                                                   11,201                     19,372
     Other                                                                               5,353                     13,154
                                                                              -----------------          -----------------
         Total current assets                                                          441,441                    445,284
                                                                              -----------------          -----------------

Property, plant and equipment - at cost                                              2,193,753                  2,222,465
     Accumulated depreciation, depletion and amortization                           (1,430,163)                (1,201,318)
                                                                              -----------------          -----------------
         Property, plant and equipment - net                                           763,590                  1,021,147
                                                                              -----------------          -----------------

Investments and other assets
     Noncurrent investments                                                             23,260                     41,094
     Other assets                                                                       87,637                    102,009
                                                                              -----------------          -----------------
         Total investments and other assets                                            110,897                    143,103
                                                                              -----------------          -----------------
Total Assets                                                                   $     1,315,928           $      1,609,534
                                                                              =================          =================

LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities
     Accounts payable                                                          $        43,819           $         59,930
     Accrued liabilities:
         Payroll and other compensation                                                 28,717                     23,898
         Unrealized loss on foreign currency exchange contracts                         36,032                     20,416
         Reclamation and closure costs                                                  12,045                     11,818
         Other                                                                          33,936                     12,509
     Income and other taxes payable                                                      2,639                        277
                                                                              -----------------          -----------------
         Total current liabilities                                                     157,188                    128,848
                                                                              -----------------          -----------------

Long-term liabilities
     Long-term debt                                                                    354,451                    374,593
     Other long-term obligations                                                       180,852                    152,610
                                                                              -----------------          -----------------
         Total long-term liabilities                                                   535,303                    527,203
                                                                              -----------------          -----------------

Deferred income and mining taxes                                                       113,012                    161,862

Minority interests in consolidated subsidiaries                                        103,830                    108,116

Shareholders' equity
     Capital stock, $1 par value per share:
         Preferred - 10,000 shares  authorized;  no shares  outstanding 
         Common - 250,000 shares authorized; shares outstanding:
            1998 - 211,204; 1997 - 210,696                                             211,204                    210,696
     Other shareholders' equity                                                        195,391                    472,809
                                                                              -----------------          -----------------
         Total shareholders' equity                                                    406,595                    683,505
                                                                              -----------------          -----------------
Total Liabilities and Shareholders' Equity                                     $     1,315,928           $      1,609,534
                                                                              =================          =================
</TABLE>

See notes to condensed consolidated financial statements.

                                       2
<PAGE>
                    HOMESTAKE MINING COMPANY AND SUBSIDIARIES



B.    Condensed Statements of Consolidated Operations (unaudited)
      (In thousands, except per share amounts)
<TABLE>
<CAPTION>

                                                               Three Months Ended                       Nine Months Ended
                                                                  September 30,                           September 30,
                                                               1998              1997                  1998              1997
                                                         --------------    --------------        --------------    --------------

<S>                                                       <C>               <C>                   <C>               <C>         
Revenues
      Gold and ore sales                                  $    187,361      $    203,996          $    592,387      $    646,214
      Sulfur and oil sales                                       5,123             6,332                16,921            20,126
      Interest income                                            4,891             4,067                14,368            13,173
      Gain on termination of Santa Fe merger                         -                 -                     -            62,925
      Other income                                             (13,946)            3,342               (28,745)           18,697
                                                         --------------    --------------        --------------    --------------
                                                               183,429           217,737               594,931           761,135
                                                         --------------    --------------        --------------    --------------
Costs and Expenses
      Production costs                                         127,909           142,949               406,215           462,670
      Depreciation, depletion and amortization                  33,617            41,141               107,109           114,731
      Administrative and general expense                        12,328            12,516                36,165            34,337
      Exploration expense                                       16,387            20,182                38,193            50,255
      Interest expense                                           5,485             4,497                15,813            14,778
      Write-downs and other unusual charges                    187,884           183,646               199,668           248,761
      Business combination and integration costs                     -                 -                20,710                 -
      Other expense                                              2,078             1,453                 2,876             4,880
                                                         --------------    --------------        --------------    --------------
                                                               385,688           406,384               826,749           930,412
                                                         --------------    --------------        --------------    --------------

Loss Before Taxes and Minority Interests                      (202,259)         (188,647)             (231,818)         (169,277)
Income and Mining Taxes                                         15,340            34,390                12,998             3,343
Minority Interests                                               4,693            (1,304)                 (923)           (6,228)
                                                         --------------    --------------        --------------    --------------

Net Loss                                                  $   (182,226)     $   (155,561)         $   (219,743)     $   (172,162)
                                                         ==============    ==============        ==============    ==============



Net Loss Per Share                                        $      (0.86)     $      (0.74)         $      (1.04)     $      (0.82)
                                                         ==============    ==============        ==============    ==============


Average Shares Used in the Computation                         211,184           210,549               210,968           210,532
                                                         ==============    ==============        ==============    ==============

Dividends Paid Per Common Share                           $          -     $           -          $       0.05      $       0.10
                                                         ==============    ==============        ==============    ==============


See notes to condensed consolidated financial statements.

</TABLE>


                                       3
<PAGE>
                    HOMESTAKE MINING COMPANY AND SUBSIDIARIES



C.   Condensed Statements of Consolidated Cash Flows (unaudited)
     (In thousands)
<TABLE>
<CAPTION>

                                                                                     Nine Months Ended September 30,
                                                                                       1998                        1997
                                                                              -----------------           ------------------
<S>                                                                            <C>                          <C>             
Cash Flows from Operations
     Net loss                                                                  $      (219,743)             $      (172,162)
     Reconciliation to net cash provided by operations:
       Depreciation, depletion and amortization                                        107,109                      114,731
       Write-downs                                                                     190,789                      248,761
       Deferred taxes, minority interests and other                                    (32,684)                     (25,800)
       Gains on asset disposals                                                         (3,264)                     (25,752)
       Effect of changes in working capital items                                       62,928                      (27,036)
                                                                              -----------------           ------------------
Net cash provided by operations                                                        105,135                      112,742
                                                                              -----------------           ------------------

Investment Activities
     Capital additions                                                                 (54,313)                    (166,637)
     Proceeds from asset sales                                                          15,877                       25,215
     Increase in short-term investments                                                (23,169)                     (38,724)
     Other                                                                                (539)                      14,900
                                                                              -----------------           ------------------
Net cash used in investment activities                                                 (62,144)                    (165,246)
                                                                              -----------------           ------------------

Financing Activities
     Borrowings                                                                         97,676                       79,617
     Debt repayments                                                                  (105,236)                     (31,396)
     Dividends paid - Homestake                                                         (7,339)                     (14,670)
                    - Plutonic                                                          (3,554)                      (9,768)
                    - Prime minority interests                                          (1,040)                      (1,085)
     Common shares issued                                                                1,956                          862
     Other                                                                               1,774                        2,653
                                                                              -----------------           ------------------
Net cash provided by (used in) financing activities                                    (15,763)                      26,213
                                                                              -----------------           ------------------

Net Increase (Decrease) in Cash and Equivalents                                         27,228                      (26,291)

Cash and Equivalents, January 1                                                        124,083                      104,657
                                                                              -----------------           ------------------

Cash and Equivalents, September 30                                             $       151,311              $        78,366
                                                                              =================           ==================

</TABLE>


See notes to condensed consolidated financial statements.


                                       4

<PAGE>
                   Homestake Mining Company and Subsidiaries


Notes to Condensed Consolidated Financial Statements (unaudited)



1.       The condensed  consolidated financial statements included herein should
         be read in conjunction with the financial statements and notes thereto,
         which include information as to significant  accounting  policies,  for
         the year ended December 31, 1997. Year end financial statements for the
         Company,  restated to include Plutonic on a pooling-of-interests  basis
         (see  note 2  below),  were  filed  with the  Securities  and  Exchange
         Commission on Form 8-K dated June 22, 1998.

         The  information  furnished  in this report  reflects  all  adjustments
         which, in the opinion of management, are necessary for a fair statement
         of the results for the interim periods.  Except as described in notes 2
         through  6, such  adjustments  consist  of items of a normal  recurring
         nature.  Results of operations for interim  periods are not necessarily
         indicative of results for the full year.

         All  dollar  amounts  are in United  States  dollars  unless  otherwise
         indicated.

2.       On  April  30,  1998  Homestake  acquired  Plutonic  Resources  Limited
         ("Plutonic"),   a  publicly-traded  Australian  gold  producer,  by  an
         exchange  of common  stock for  common  stock.  Homestake  issued  64.4
         million  common  shares to acquire  Plutonic,  including  63.9  million
         shares in exchange for all of the Plutonic  fully paid ordinary  shares
         outstanding  based on an exchange ratio of 0.34 Homestake common shares
         for each Plutonic fully paid ordinary share, and 0.5 million  Homestake
         common  shares  for  the  Plutonic   partly-paid   shares  and  options
         outstanding.

         The business  combination  with Plutonic was accounted for as a pooling
         of  interests  and,  accordingly,  Homestake's  consolidated  financial
         statements have been restated to include Plutonic for all periods prior
         to May 1,  1998.  Combined  and  separate  preacquisition  results  for
         Homestake  and  Plutonic  for the three months ended March 31, 1998 and
         for the three and nine months ended  September  30, 1997 are as follows
         (in thousands):
<TABLE>
<CAPTION>

                                                Homestake         Plutonic
                                                Historical        Historical(a)     Adjustments (b)    Combined
                                              ---------------------------------------------------------------------

<S>                                              <C>               <C>               <C>               <C>
Three months ended March 31, 1998
     Revenues                                    $ 174,343         $ 43,624           $ (1,750)        $ 216,217
     Net loss                                       (4,611)            (76)             (1,899)           (6,586)

Three months ended September 30, 1997
     Revenues                                    $ 158,224         $ 70,433          $ (10,920)        $ 217,737
     Net income (loss)                            (163,682)          16,543             (8,422)         (155,561)

Nine months ended September 30, 1997
     Revenues                                    $ 577,070         $191,468           $ (7,403)        $ 761,135
     Net loss                                     (130,044)         (17,998)           (24,120)         (172,162)

<FN>
a)       The Plutonic  historical  results of  operations  have been adjusted to
         reflect  i)  presentation  of  Plutonic's   results  of  operations  in
         accordance with United States generally accepted accounting  principles
         and the format  and  classifications  utilized  by  Homestake,  and ii)
         translation  into U.S. dollars using the average exchange rate for each
         period.


                                       5

<PAGE>


                   Homestake Mining Company and Subsidiaries



b)       In combining the historical results of Homestake and Plutonic,  certain
         adjustments  were made to conform  Plutonic's  accounting  policies  to
         Homestake's  accounting  policies.  The effect of these  adjustments on
         combined net income (loss) is as follows (in thousands):
</FN>
</TABLE>

<TABLE>
<CAPTION>
                                Three months ended         Three months ended       Nine months ended
                                    March 31,                 September 30,           September 30,
   Increase (Decrease)                 1998                       1997                    1997
                               ----------------------------------------------------------------------

<S>                                  <C>                        <C>                   <C>      
   Revenue recognition               $ (1,293)                  $ (2,067)             $ (3,915)
   Reclamation expense                    474                        469                 1,179
   Depreciation, depletion
        and amortization                1,141                      1,741                 5,945
   Income taxes                        (1,009)                     4,145                13,081
                               ----------------------------------------------------------------------
                                     $ (1,899)                  $ (8,422)             $(24,120)
                               ======================================================================

</TABLE>



3.       Other income for the three and nine month periods ended September 30 is
         as follows (in millions):
<TABLE>
<CAPTION>

                                           Three Months Ended               Nine Months Ended
                                              September 30,                   September 30,
                                       ----------------------------    ----------------------------
                                           1998           1997             1998           1997
                                       -------------   ------------    --------------  ------------

<S>                                            <C>            <C>               <C>          <C>  
Gains on asset disposals                       $1.5           $7.9              $3.3         $25.8
Gain on sales of Rabbi
     Trust investments                          0.4            -                 4.7           -
Royalty income                                  0.6            0.6               1.8           1.8
Foreign currency contract
     losses                                   (16.8)          (4.2)            (39.2)         (8.0)
Foreign currency exchange
     losses on intercompany
     advances                                  (2.5)          (1.7)             (6.0)         (4.5)
Other foreign currency
     gains (losses)                             1.1            -                 1.6          (0.3)
Other                                           1.8            0.7               5.1           3.9
                                       -------------   ------------    --------------  ------------
                                             ($13.9)          $3.3            ($28.7)        $18.7
                                       =============   ============    ==============  ============
</TABLE>



                                       6

<PAGE>


                   Homestake Mining Company and Subsidiaries


4.       During the three and nine month periods ended  September 30, 1998,  the
         Company  recorded  write-downs and other unusual charges as follows (in
         millions):

<TABLE>
<CAPTION>

                                               Three Months Ended           Nine Months Ended
                                              September 30, 1998          September 30, 1998
                                           -------------------------    ------------------------
                                             Pretax      After-tax       Pretax      After-tax
                                           -----------   -----------    ----------   -----------
<S>                                            <C>           <C>           <C>           <C>
Homestake mine fixed asset
     write-down and remediaton (a)             $111.1        $111.1        $111.1        $111.1
Mt Charlotte mine write-down
     and closure cost (b)                        38.4          26.4          38.4          26.4
Lachlan mineral property  and
     securities write-down (c)                   19.9          12.3          19.9          12.3
Writedown of marketable
     securities (d)                               7.4           6.9           7.4           6.9
Homestake mine restructuring (e)                   -             -            8.9           5.9
Plutonic write-down (f)                            -             -            2.9           2.6
Other miscellaneous charges
     and adjustments (g)                         11.1           9.2          11.1           9.2
                                           -----------    ----------   -----------   -----------
                                               $187.9        $165.9        $199.7        $174.4
                                           ===========   ===========    ==========   ===========

<FN>
a)   Charge for  carrying  value  adjustments  and  additional  remediation  and
     related  reclamation  costs at the  Homestake  mine in South  Dakota.  This
     operation  is  continuing  to implement a revised  operating  plan with the
     objective of reducing cash costs to $280 per ounce by the end of 1999.  Due
     to  continuing  low gold prices,  the Company will use a gold price of $325
     per ounce for  determining  its gold reserves at the end of 1998.  Based on
     estimated  future  cash flows,  the Company  does not expect to recover its
     remaining  investment in property,  plant and  equipment at this mine.  The
     total amount of the write-down  was $76.1 million  ($76.1 million  pretax),
     thereby  reducing the carrying value of the mine to zero. In addition,  the
     Company has recorded a provision for estimated  additional  remediation and
     related reclamation costs of $35 million ($35 million pretax).

b)   Based on estimated  future cash flows, the Company recorded a write-down of
     property,  severance and other charges at the Mt Charlotte  mine in Western
     Australia.  Homestake and its joint venture partner Normandy Mining Limited
     are  implementing a revised  operating plan at the Mt Charlotte mine due to
     the downturn in economic  performance  and an  accelerated  level of ground
     movement.  Mining will be  restricted  to low-risk  areas of the mine until
     approximately  the fourth quarter of 1999.  Performance of the mine will be
     monitored during this time to determine whether the operation will continue
     beyond that point.

c)   Write-down of mineral  properties and marketable  securities of Homestake's
     81%-owned  Lachlan Resources NL, which was acquired as part of the Plutonic
     Resources transaction in April 1998.

d)   Write-down of marketable securities.

e)   Charge  associated  with the temporary  suspension  of  operations  and the
     reduction of 450 employees at the Homestake mine.

f)   Write-down of Plutonic exploration properties.

g)   Other miscellaneous charges.

</FN>
</TABLE>

                                       7

<PAGE>


                   Homestake Mining Company and Subsidiaries



               During the three and nine month periods ended September 30, 1997,
         the Company recorded write-downs and other unusual charges as follows
         (in millions):
<TABLE>
<CAPTION>

                                                  Three Months Ended             Nine Months Ended
                                                  September 30, 1997            September 30, 1997
                                                 Pretax      After-tax          Pretax     After-tax
                                               -----------   -----------      -----------  -----------

<S>                                                <C>           <C>              <C>          <C>    
    Main Pass 299 sulfur mine                      $107.8        $ 84.9           $107.8       $ 84.9
Reduction in carrying values of
    resource assets                                  24.3          18.2             69.3         50.1
Increase in estimated accrual for
    future reclamation expenditures                  29.1          21.5             29.1         21.5
Write-down of noncurrent investments                 16.5          14.7             31.0         29.2
Other charges                                         5.9           5.8             11.5          9.4
                                                -----------   -----------      -----------  -----------
                                                   $183.6        $145.1           $248.7       $195.1
                                               ===========   ===========      ===========  ===========
</TABLE>

5.       In March  1997,  Santa  Fe  Pacific  Gold  Corporation  terminated  its
         previously announced merger agreement with Homestake and paid Homestake
         a $65  million  termination  fee. As a result,  the Company  recorded a
         pretax  gain  of  $62.9  million  ($47.2  million  after  tax),  net of
         merger-related expenses of $2.1 million incurred in 1997.

6.       In February  1997,  Homestake sold its interests in the George Lake and
         Back  River  joint  ventures  in  Canada to Kit  Resources  Corporation
         ("Kit") for $9.3  million in cash and 3.6 million  shares of Kit common
         stock. As a result of this  transaction,  the Company recorded a pretax
         gain of $13.5  million ($8.1 million after tax) in the first quarter of
         1997, which is included in other income.

7.       In  July   1998,   the   Company   entered   into  a  new   United
         States/Canadian/Australian  cross-border  credit facility  providing a
         total  availability  of $430  million.  The new facility  replaced the
         Company's  $275 million  cross-border  credit  facility and Plutonic's
         A$400  million   syndicated  credit  facility,   both  of  which  were
         cancelled.  Borrowings  by Plutonic  and  Homestake  Gold of Australia
         ("HGAL") under the prior credit  facilities  were repaid using the new
         facility. Amounts outstanding at September 30, 1998 include borrowings
         of $94.6  million  by  Plutonic  and $44.9  million by HGAL under this
         credit facility.  The new facility is available  through July 14, 2003
         and provides for borrowings in United States,  Canadian, or Australian
         dollars,  or gold, or a combination of these.  Under the new facility,
         the Company  pays a  commitment  fee  ranging  from 0.15% to 0.35% per
         annum,  depending  upon rating  agencies'  ratings  for the  Company's
         senior debt, on the unused  portion of this  facility.  The new credit
         agreement requires a minimum consolidated net worth, as defined in the
         agreement  (primarily  shareholders'  equity  plus the  amount  of all
         noncash  write-downs  made after December 31, 1997),  of $500 million.
         Interest on the HGAL and Plutonic  Australian  dollar borrowings under
         the new facility is payable  quarterly and is based on the  Australian
         Bank Bill Swap Rate plus a margin of up to 1.125%.  At  September  30,
         1998 the interest rate was 6.22%.

8.       Under the Company's foreign currency  protection  program,  the Company
         has entered into a series of foreign  currency  option  contracts which
         establish  trading  ranges within which the United States dollar may be
         exchanged  for  foreign  currencies  by  setting  minimum  and  maximum
         exchange rates.


                                       8

<PAGE>


                   Homestake Mining Company and Subsidiaries



        At  September  30,  1998 the  Company  had  forward  currency  contracts
outstanding as follows (dollar amounts in thousands):
<TABLE>
<CAPTION>

                                                   Weighted-Average Exchange
                   Amount Covered                    Rates to U.S. Dollars              Expiration
Currency             (U.S. Dollars)            Put Options        Call Options             Dates
------------------------------------------------------------------------------------------------------
<S>                          <C>                  <C>                 <C>                  <C> 
Canadian                     $ 49,380             0.72                0.75                 1998
Canadian                      135,200             0.70                0.73                 1999
Canadian                       89,420             0.69                0.72                 2000
Canadian                       43,010             0.67                0.70                 2001
Australian                     24,950             0.72                0.75                 1998
Australian                     92,000             0.66                0.69                 1999
Australian                     68,620             0.64                0.67                 2000
Australian                     23,000             0.60                0.63                 2001
                     -----------------
                            $ 525,580
                     =================
</TABLE>

9.       Homestake's  gold hedging policy  provides for the use of forward sales
         contracts for up to 30% of expected  annual gold production for each of
         the  following  ten  year's at prices  in  excess of  certain  targeted
         prices, and the use of combinations of put and call option contracts to
         establish  minimum floor prices while allowing  participation in future
         increases in the price of gold.

         In 1997, Homestake entered into a series of U.S. dollar denominated put
         and call  options  which  provide  a floor  price of $325 per ounce for
         900,000 ounces of 1998 production while allowing for full participation
         in any  increase in the price of gold above $336 per ounce.  Gold sales
         for the three and nine months ended  September 30, 1998 include 225,000
         and 675,000 ounces, respectively, at an average price of $325 per ounce
         under this program. At September 30, 1998 the Company owned put options
         for 225,000  ounces of gold  exercisable  during the fourth  quarter of
         1998 at a price of $325 per ounce.  The Company  also had written  call
         options  outstanding for 225,000 ounces of gold exercisable  during the
         fourth  quarter  of 1998 at a price of $325 per ounce  and  owned  call
         options for 225,000 ounces of gold  exercisable  during 1998 at a price
         of $336 per ounce.

         At September  30, 1998 the Company also owned U.S.  dollar  denominated
         put  options  for 30,000  ounces of gold  exercisable  during 2000 at a
         price of $350 per ounce and had written U.S.  dollar  denominated  call
         options  outstanding for 15,000 ounces of gold exercisable  during 2000
         at an  average  price of $395 per  ounce.  At  September  30,  1998 the
         Company  also owned  Australian  dollar  denominated  put  options  for
         240,000  ounces of gold  exercisable  in 1999 and 2000 (120,000  ounces
         each  year) at an  average  price of $313  (A$523)  per  ounce  and had
         written  Australian dollar  denominated call options for 240,000 ounces
         of gold  exercisable in 1999 and 2000 (120,000  ounces each year) at an
         average price of $322 (A$528) per ounce.

         During the three and nine month periods ended  September 30, 1998,  the
         Company  delivered or  financially  settled 30,000 and 90,000 ounces of
         its North  American gold  production at average prices of $401 and $399
         per ounce,  respectively,  under U.S. dollar denominated  forward sales
         contracts.  During the three and nine month periods ended September 30,
         1997 the Company  delivered or  financially  settled  30,000 and 90,000
         ounces of its North American gold  production at average prices of $387
         and $383 per ounce, respectively, under U.S. dollar denominated forward
         sales contracts.

         During the three and nine month  periods  ended  September 30, 1998 the
         Company  delivered or financially  settled 30,000 and 208,000 ounces of
         its Australian  gold  production  into  Australian  dollar  denominated
         forward gold contracts at average prices of

                                       9

<PAGE>


                   Homestake Mining Company and Subsidiaries


         $315 and $336 per ounce, respectively.  During the three and nine month
         periods  ended  September  30, 1997 the Company  delivered  119,800 and
         384,950 ounces of its Australian gold production into Australian dollar
         denominated  forward gold  contracts at average prices of $415 and $425
         per ounce,  respectively.  During June 1998, the Company closed out and
         financially    settled   one   million   ounces   of   its   Australian
         dollar-denominated  forward  gold  contracts.  The  gain of $5  million
         realized on this  arrangement  was  deferred  and is being  recorded in
         income as the originally designated production is sold.

         At September 30, 1998 the Company's gold forward sales commitments were
         as follows:
<TABLE>
<CAPTION>
                            US $ Denominated                          Australian $ Denominated
                  --------------------------------------        --------------------------------------
                                      Average Price of                             Average Price of
                    Forward Sales      Forward Sales              Forward Sales      Forward Sales
    Year             (ounces)           (per ounce)                (ounces)        (US$ per ounce)*
-------------     --------------------------------------        --------------------------------------
    <S>                  <C>                <C>                        <C>              <C> 
    1998                  30,000           $405                         30,000           $315
    1999                 109,900            415                          -                 -
    2000                  85,100            430                         24,800            315
    2001                  95,000            441                        144,800            332
    2002                  95,000            457                         24,800            315
   Thereafter             75,000            481                         75,600            315
                  ---------------                               ---------------
                         490,000                                       300,000
                  ===============                               ===============

<FN>
  * Exchange rate of A$1 = US$0.5985.
</FN>
</TABLE>


         In February 1998, Prime Resources Group Inc.  ("Prime"),  a 50.6%-owned
         subsidiary  of the Company,  adopted a gold and silver  hedging  policy
         which provides for the use of forward sales  contracts for up to 40% of
         each of the  following  five  year's  expected  annual  gold and silver
         production at prices in excess of certain targeted prices. At September
         30, 1998 Prime had sold  forward  approximately  7.2 million  ounces of
         silver for delivery during 1999 through 2001 at an average price of 
         $6.28 per ounce.

10.      Effective  January 1, 1998 the Company  adopted  Statement of Financial
         Accounting  Standards  No. 130 ("SFAS 130"),  "Reporting  Comprehensive
         Income." SFAS 130  establishes  standards for the reporting and display
         of comprehensive income. The purpose of reporting  comprehensive income
         is to present a measure of all  changes in  shareholders'  equity  that
         result from  recognized  transactions  and other economic events of the
         period,  other than transactions with shareholders in their capacity as
         shareholders.  SFAS 130 requires that the  components of  comprehensive
         income  be  displayed  in  annual  financial  statements  with the same
         prominence as other  financial  statements and that the total amount of
         comprehensive income be reported in interim periods.


                                       10

<PAGE>


                   Homestake Mining Company and Subsidiaries


         Homestake's  comprehensive  income  (loss) for the three and nine 
         months ended  September 30, 1998 and 1997 was as follows (in
         thousands):
<TABLE>
<CAPTION>

                                                      Three months ended             Nine months ended
                                                        September 30,                   September 30,
                                                  1998             1997            1998            1997
                                             ----------------------------------------------------------------
<S>                                               <C>              <C>             <C>             <C>       
Net Loss                                          $(182,226)       $(155,561)      $(219,743)      $(172,162)
Other Comprehensive Income (Loss)
   Currency translation adjustments                  (9,483)         (13,918)        (36,169)        (52,301)
   Unrealized losses on securities                    3,633           28,519             185          12,950
                                             ----------------------------------------------------------------
Comprehensive Loss                                $(188,076)       $(140,960)      $(255,727)      $(211,513)
                                             ================================================================

</TABLE>

         In February 1998,  the Financial  Accounting  Standards  Board ("FASB")
         issued  Statement  of  Financial  Accounting  Standards  No. 132 ("SFAS
         132"),  "Employers' Disclosures about Pensions and Other Postretirement
         Benefits." SFAS 132 revises  employers'  disclosures  about pension and
         other postretirement  benefit plans. It does not change the measurement
         or recognition  of those plans.  SFAS 132  standardizes  the disclosure
         requirements  for  pensions  and other  postretirement  benefits to the
         extent practicable,  requires additional  information on changes in the
         benefit obligations and fair values of plan assets that will facilitate
         financial analysis,  and eliminates certain disclosures.  SFAS 132 will
         be effective for the Company's financial  statements for the year ended
         December 31, 1998.

         In June 1998, FASB issued Statement of Financial  Accounting  Standards
         No.  133 ("SFAS  133"),  "Accounting  for  Derivative  Instruments  and
         Hedging   Activities."  SFAS  133  requires  that  all  derivatives  be
         recognized  as assets or  liabilities  and be  measured  at fair value.
         Gains  or  losses  resulting  from  changes  in  the  values  of  those
         derivatives  would  be  accounted  for  depending  on  the  use  of the
         derivatives  and whether they qualify for hedge  accounting as either a
         fair value  hedge or a cash flow  hedge.  The key  criterion  for hedge
         accounting is that the hedging relationship must be highly effective in
         achieving offsetting changes in fair value or cash flows of the hedging
         instruments  and the hedged  items.  SFAS 133 is  effective  for fiscal
         years beginning after June 15, 1999 but earlier  adoption is permitted.
         The Company  believes that under SFAS 133,  changes in unrealized gains
         and losses on Homestake's  foreign currency  contracts will qualify for
         deferral  accounting  and be  recorded in Other  Comprehensive  Income.
         However,  there  are many  complexities  to this new  standard  and the
         Company  currently is evaluating  the impact that SFAS 133 will have on
         reported  operating  results  and  financial  position  and has not yet
         determined that impact or when it will adopt SFAS 133.

11.      On September 11, 1998 Prime and Homestake  announced  that,  subject to
         requisite  shareholder  approvals,  they had reached an agreement  (the
         "Arrangement")  for Homestake's  acquisition of the 49.4% of Prime held
         by the public.  Under the terms of the Arrangement,  Prime shareholders
         will have the choice of receiving 0.74 Homestake  common shares or 0.74
         Homestake Canada Inc. ("HCI")  exchangeable shares for each Prime share
         held by them. Each HCI exchangeable share would be exchangeable for one
         Homestake  common  share at any time at the option of the  holder,  and
         will have dividend and voting rights essentially equivalent to those of
         one Homestake common share.

         The transaction is to be structured as an arrangement under the British
         Columbia  Companies  Act.  Completion of the  Arrangement is subject to
         approval  by  the  British   Columbia   Supreme   Court  and  by  Prime
         shareholders,  and the  Homestake  shareholders  must  vote to  adopt a
         Restated   Certificate  of  Incorporation  that,  among  other  things,
         authorizes  the  Homestake   capital  stock  necessary  to  effect  the
         Arrangement.  A total of 75% of all  Prime  shares  represented  at its
         shareholders'  meeting,  including  the Prime shares owned by HCI, must
         approve the transaction.  In addition, the Arrangement must be approved
         by two-thirds of the Prime


                                       11

<PAGE>


                   Homestake Mining Company and Subsidiaries


         shares present and voting on the Arrangement, excluding shares voted by
         HCI and certain  affiliates.  Both Prime and Homestake  have  scheduled
         Special Meetings of Stockholders for December 1, 1998.

         The Arrangement would result in the issuance of a total of 27.8 million
         Homestake common and HCI  exchangeable  shares in exchange for the 37.6
         million Prime shares held by the minority shareholders of Prime.


12.      The Comprehensive  Environmental  Response,  Compensation and Liability
         Act  ("CERCLA")  imposes  heavy  liabilities  on persons who  discharge
         hazardous  substances.  The  Environmental  Protection  Agency  ("EPA")
         publishes a National  Priorities  List  ("NPL") of known or  threatened
         releases of such substances.

         Grants:  Homestake's former uranium millsite near Grants, New Mexico is
         listed on the NPL. The EPA  asserted  that  leachate  from the tailings
         contaminated   a  shallow   aquifer   used  by   adjacent   residential
         subdivisions. Homestake paid the costs of extending the municipal water
         supply to the affected homes and continues to operate a water injection
         and collection  system that has  significantly  improved the quality of
         the aquifer.  The Company has  decommissioned and disposed of the mills
         and has covered the tailings impoundments at the site. The total future
         cost  for   reclamation,   remediation,   monitoring  and   maintaining
         compliance at the Grants site is estimated to be $17.5 million.

         Title X of the  Energy  Policy Act of 1992 (the  "Act") and  subsequent
         amendments  to the Act  authorized  appropriations  of $335  million to
         cover the Federal  Government's  share of certain costs of reclamation,
         decommissioning  and remedial action for by-product material (primarily
         tailings)  generated  by certain  licensees  as an  incident of uranium
         sales to the Federal Government. Reimbursement is subject to compliance
         with regulations of the Department of Energy ("DOE"), which were issued
         in 1994.  Pursuant to the Act, the DOE is responsible for 51.2% of past
         and future  costs of  reclaiming  the Grants  site in  accordance  with
         Nuclear Regulatory Commission license  requirements.  Through September
         30,  1998,  Homestake  had  received  $26 million  from the DOE and the
         accompanying balance sheet at September 30, 1998 includes an additional
         receivable  of  $6.3  million  for  the  DOE's  share  of   reclamation
         expenditures  made by Homestake through 1997.  Homestake  believes that
         its share of the  estimated  remaining  cost of  reclaiming  the Grants
         facility is fully provided in the financial statements at September 30,
         1998.

         In 1983,  the state of New Mexico made a claim  against  Homestake  for
         unspecified   natural  resource  damages   resulting  from  the  Grants
         tailings. New Mexico has taken no action to enforce its claim.

         Whitewood  Creek:  Whitewood  Creek was a site where  mining  companies
         operating  in the Black  Hills of South  Dakota,  including  Homestake,
         placed mine tailings beginning in the nineteenth century. Some tailings
         placed in  Whitewood  Creek  eventually  flowed into the Belle  Fourche
         River,  the Cheyenne  River and Lake Oahe.  Placement of mine  tailings
         into  Whitewood  Creek was authorized by the laws of the United States,
         the Dakota territory and the State of South Dakota, and Whitewood Creek
         was later  specifically  designated  by the State of South  Dakota as a
         disposal  stream for mine  tailings  and for the disposal of raw sewage
         and  other   municipal   waste.   In   response  to  changes  in  legal
         requirements,  Homestake  ceased the  placement of mine  tailings  into
         Whitewood  Creek in 1977 and for more than 20 years the Homestake  mine
         has impounded all mine tailings that are not redeposited in the mine.

                                       12

<PAGE>


                   Homestake Mining Company and Subsidiaries


         Deposits  of  tailings  along an  18-mile  stretch of  Whitewood  Creek
         formerly  constituted  a  site  on  the  NPL.  The  EPA  asserted  that
         discharges  of  tailings  by  mining  companies,  including  Homestake,
         contaminated the soil and streambed.  Homestake signed a Consent Decree
         with the EPA and carried out remedial work at  Homestake's  expense and
         also  reimbursed  the EPA for its oversight  cost. The site was deleted
         from the NPL on August 13, 1996. In the deletion notice, the EPA stated
         that  "EPA,  in  consultation  with the  State of  South  Dakota,  have
         determined  that the Site poses no significant  threat to public health
         or the environment."

         In  September,  1997 the State of South Dakota filed an action  against
         Homestake,  alleging  that  Homestake's  disposal  of mine  tailings in
         Whitewood Creek resulted in injuries to natural  resources in Whitewood
         Creek,  the  Belle  Fourche  River,  the  Cheyenne  River and Lake Oahe
         (collectively  the "NRD Site").  The complaint also contained a pendent
         state law claim,  alleging  that the  tailings  constitute a continuing
         public  nuisance.  The  complaint  asks for  abatement of the nuisance,
         damages in an unascertained  amount,  litigation costs and interest. In
         November  1997,  the United States  government  and the Cheyenne  River
         Sioux Tribe (the "federal  trustees")  filed a similar action  alleging
         injuries to natural  resources and seeking  response costs,  damages in
         unspecified amounts, litigation costs and attorneys fees.

         In its  answers,  Homestake  denies that there has been any  continuing
         damage to natural resources or nuisance as a result of the placement of
         tailings  in  Whitewood  Creek.  Among other  defenses,  it is also the
         position of Homestake  that as a result of the State of South  Dakota's
         ownership of Whitewood  Creek and  designation of Whitewood Creek as an
         authorized  disposal site under state and federal authority,  the State
         of South Dakota and the federal government are responsible for all past
         and future damages and any  continuing  nuisance  resulting  therefrom.
         Homestake has also counterclaimed against the State of South Dakota and
         the  federal  trustees   seeking  cost  recoupment,   contribution  and
         indemnity.

         In the  opinion of  Homestake,  there is no basis for the claims by the
         State of South Dakota or by the federal trustees.  Homestake is also of
         the opinion that Homestake has valid defenses and counterclaims against
         the State of South Dakota and the federal  trustees,  and  cross-claims
         for  recovery,  contribution  and indemnity  against  other  government
         entities  and  other  persons  who  participated  in  ownership  and/or
         operation of Whitewood  Creek as a waste  disposal site or who disposed
         of waste in the NRD Site.

         Homestake,  the State of South  Dakota  and the  Federal  Trustees  are
         engaged in settlement  discussions  with respect to these  actions.  If
         settlement is not  achieved,  Homestake  intends to  vigorously  defend
         these actions and to seek cost  recoupment,  contribution and indemnity
         from the State of South  Dakota and the federal  trustees  for past and
         future   expenditures.   Homestake   also  expects  to  seek  recovery,
         contribution  and indemnity  from other  government  entities and other
         persons who  participated  in ownership  and/or  operation of Whitewood
         Creek  as a waste  disposal  site or who  disposed  of waste in the NRD
         Site.

         Homestake does not believe that resolution of these matters will have a
         material  effect on the business or  financial  condition or results of
         operations of Homestake.


                                       13

<PAGE>


                   Homestake Mining Company and Subsidiaries


Item 2 - Management's Discussion and Analysis of Financial Condition and Results
         of Operations


(Unless  specifically  stated otherwise,  the following  information  relates to
amounts included in the consolidated  financial statements without reduction for
minority  interests.  Information for prior periods has been restated to include
Plutonic  which was  acquired  on April 30,  1998.  Homestake  reports per ounce
production  costs  in  accordance  with  the  "Gold  Institute  Production  Cost
Standard.")

On April 30, 1998 Homestake acquired Plutonic Resources Limited ("Plutonic"), an
Australian gold producer,  by issuing 64.4 million shares with a market value of
approximately $770 million. Homestake issued 63.9 million shares in exchange for
all Plutonic fully paid ordinary shares  outstanding  based on an exchange ratio
of 0.34 Homestake common shares for each Plutonic fully paid ordinary share, and
0.5 million  Homestake  common  shares for the  Plutonic  partly paid shares and
options outstanding.  The business combination was accounted for as a pooling of
interests, and accordingly, the Company's consolidated financial statements have
been restated to include Plutonic for all periods prior to May 1, 1998.


                              RESULTS OF OPERATIONS

         Homestake  recorded a net loss of $182.2  million or 86 cents per share
in the third  quarter of 1998,  compared  to a net loss of $155.6  million or 74
cents per share in the third  quarter of 1997.  The 1998 third  quarter  results
include  nonrecurring  charges of $165.9 million  ($187.9  million pretax) or 78
cents per share  resulting from the review of carrying  values of certain assets
in the  persistent  low  gold  price  environment  and the  impact  of  specific
operational  issues  during  the third  quarter.  The  comparable  1997  quarter
included  after-tax  nonrecurring  charges  of $145.1  million  ($183.6  million
pretax) or 69 cents per share.  Excluding  the  effects of  nonrecurring  items,
Homestake recorded a net loss of $16.3 million or 8 cents per share in the third
quarter of 1998, compared to a net loss of $10.5 million or 5 cents per share in
1997.

Details  of the  $165.9  million  ($187.9  million  before  taxes  and  minority
interests)  1998 third  quarter  write-downs  and other  unusual  charges are as
follows:

o      $111.1  million  ($111.1  million  pretax)  charge  for  carrying  value
       adjustments and additional  remediation and related reclamation costs at
       the  Homestake  mine in South  Dakota.  This  operation is continuing to
       implement a revised  operating  plan with the objective of reducing cash
       costs to $280 per ounce by the end of 1999.  Due to continuing  low gold
       prices,  the  Company  will  use a gold  price  of $325  per  ounce  for
       determining  its gold  reserves at the end of 1998.  Based on  estimated
       future cash flows,  the Company does not expect to recover its remaining
       investment  in property,  plant and  equipment  at this mine.  The total
       amount of the  write-down  was $76.1  million  ($76.1  million  pretax),
       thereby  reducing the carrying  value of the Homestake  mine to zero. In
       addition,  the Company has recorded a provision for estimated additional
       remediation  and related  reclamation  costs of $35 million ($35 million
       pretax).

o      $26.4 million  ($38.4 million  pretax)  charge based on estimated  future
       cash flows for property write-down, severance and other charges at the Mt
       Charlotte  mine in Western  Australia.  Homestake  and its joint  venture
       partner Normandy Mining Limited are implementing a revised operating plan
       at the Mt Charlotte mine due to the downturn in economic  performance and
       an  accelerated  level of ground  movement.  Mining will be restricted to
       low-risk  areas of the mine until  approximately  the  fourth  quarter of
       1999.  Performance  of the mine  will be  monitored  during  this time to
       determine whether the operation will continue beyond that point.

o      $12.3  million  ($19.9  million  before  taxes  and  minority  interests)
       write-down of mineral  properties  and marketable  securities  related to
       Homestake's 81%-owned Lachlan Resources NL, which was acquired as part of
       the Plutonic Resources transaction in April 1998.


                                       14

<PAGE>


                   Homestake Mining Company and Subsidiaries


o      $16.1  million  ($18.5  million  before  taxes  and  minority  interests)
       write-down of marketable  securities and other miscellaneous  charges and
       adjustments.

       During the three months ended  September 30, 1997,  the Company  recorded
write-downs  and unusual  charges of $145.1 million  ($183.6  million pretax) as
follows:

o       $84.9  million  ($107.8   million  pretax)   write-down  of  Homestake's
        investment in the Main Pass 299 sulfur mine.

o       $18.2 million ($24.3 million pretax) reduction in the carrying values of
        resource assets.

o       $21.5 million ($29.1 million pretax)  increase in the estimated  accrual
        for future reclamation expenditures.

o       $14.7  million  ($16.5  million  pretax)  write-down  of certain  mining
        investments.

o       $5.8 million ($5.9 million pretax) in other charges,  primarily  foreign
        exchange losses on intercompany redeemable preferred stock.

       During the third  quarter of 1998 the Company also  recognized a net loss
on its foreign currency protection program of $7.2 million ($16.8 million before
taxes  and  minority  interests)  or  4  cents  per  share,   primarily  noncash
mark-to-market  adjustments,  due to the continued decline of the Australian and
Canadian dollars in relation to the United States dollar.  During the 1997 third
quarter,  Homestake  recorded a loss of $2.6 million ($4.2 million  before taxes
and minority  interests) or 1 cent per share on its foreign currency  protection
program.  Excluding  the  effects  of  nonrecurring  items and the losses on the
foreign  currency  protection  program,  Homestake  recorded  a net loss of $9.1
million,  or 4 cents per share in the third  quarter of 1998  compared  to a net
loss of $7.9  million  or 4 cents  per  share  in the  third  quarter  of  1997,
reflecting  significantly lower gold prices,  mostly offset by reduced operating
costs.

       Gold  production in the third quarter of 1998 was 630,700 ounces compared
to  642,000  ounces  produced  during  the  corresponding  period in 1997.  This
reduction  primarily is due to lower  production  from the  Homestake and the Mt
Charlotte mines,  partially offset by production from the new Ruby Hill mine and
by an increase in production  at the Eskay Creek mine.  During the third quarter
of 1998,  sales of equivalent  ounces of gold  increased to 636,600  ounces from
623,200 ounces in the third quarter of 1997. However, gold and ore sales revenue
decreased 8% to $187.4 million in the three months ended September 30, 1998 from
$204  million in the  corresponding  prior  year  period due to a decline in the
average realized price of gold. The Company's average realized price declined to
$307 per  equivalent  ounce of gold in the third  quarter  of 1998 from $341 per
equivalent ounce realized in the comparative 1997 period.

         Third  quarter  1998 gold  production  in the United  States  decreased
slightly to 168,200  ounces from 170,300  ounces during the  corresponding  1997
period.  The decrease  primarily is due to reduced  operations  at the Homestake
mine,  partially offset by production from the new Ruby Hill mine. The Ruby Hill
mine, which commenced commercial  production effective January 1, 1998, produced
27,800 ounces in the third quarter of 1998 at a cash cost of $120 per ounce. The
mine  continues  to exceed  plan due to higher ore  grades  and higher  recovery
rates. At the Homestake  mine, gold production  during the third quarter of 1998
declined  by 34% to 64,500  ounces  compared to 97,000  ounces  during the third
quarter of 1997. The mine is still implementing a new underground mine plan with
the objective of producing between 150,000 to 180,000 ounces of gold per year at
a cash cost of $280 per ounce.  The new mine plan will require an additional $30
million capital investment. The decision to proceed with the capital expenditure
program  will  be made  during  the  first  half of  1999  based  on the  mine's
performance  during the remainder of 1998 and the first part of 1999.  Mining at
the Open Cut was completed in September and residual  stockpiled material is now
being processed.  Cash costs decreased to $256 per ounce during the three months
ended September 30, 1998 from $307 per ounce during the 1997 prior-year  period,
primarily due to lower production from the higher cost underground operation and
an increase in the rate of processing the lower-cost Open Cut ore.


                                       15

<PAGE>
                   Homestake Mining Company and Subsidiaries


         The McLaughlin mine continues to process residual ore stockpiles.  Gold
production  increased  to 32,900  ounces in the 1998 third  quarter  from 31,200
ounces in the third quarter of the prior year due to increased mill  throughput.
A new ore stacking  system  commissioned  in late 1997 has improved ore handling
efficiencies,  resulting in lower unit  operating and  maintenance  costs.  Cash
costs have been  reduced  by 10% to $220 per ounce in the third  quarter of 1998
from  $243  per  ounce  in the  third  quarter  of  1997.  Homestake's  share of
production at the Round Mountain mine increased by 3,200 ounces during the third
quarter of 1998 to 34,600  ounces  from  31,400  ounces in the third  quarter of
1997.  The  higher  production  primarily  is due to  production  from the 8,000
tons-per-day  mill which was  commissioned in late 1997. The new mill, which was
constructed to process  higher-grade  ores,  produced 6,500 ounces  (Homestake's
share)  during the  quarter.  Cash costs  declined to $200 per ounce in the 1998
third  quarter from $237 per ounce in the  corresponding  quarter of 1997 due to
cost savings  associated  with the revised pit design  implemented in late 1997.
The new pit design  incorporates a lower  stripping  ratio that has reduced unit
costs and capital requirements and is expected to substantially improve earnings
and cash flows over the life of the operation.

         Total  foreign  gold  production  during  the  third  quarter  of  1998
decreased  slightly to 462,500 ounces from 471,700 ounces in the 1997 prior year
period. The decrease in production primarily is due to a significant decrease in
production from the Mt Charlotte mine at the Kalgoorlie operations in Australia,
partially offset by an increase in production at the Eskay Creek mine in Canada.
Production at the Eskay Creek mine increased to 121,900 gold  equivalent  ounces
during the third  quarter of 1998 from  105,400  gold  equivalent  ounces in the
corresponding period of 1997. The increase in production is due to higher output
from the mine, a lower  silver-to-gold  equivalency  ratio, and the operation of
the new  gravity/flotation  mill which was  commissioned  in December 1997. Cash
costs (including  third-party  smelter costs) decreased to $138 per ounce in the
third  quarter  of 1998  from  $163  per  ounce  in  last  year's  quarter.  The
substantial  reduction in unit costs is attributable to the lower silver-to-gold
equivalency  ratio,  improved  economics with the new mill, and a decline in the
Canadian/U.S. dollar exchange rate.

         Homestake's  share of production at the Williams mine was 48,600 ounces
of gold in the third  quarter  of 1998  compared  to 51,200  ounces in the prior
year's  quarter.  The reduced  production was due to an expected  decline in ore
grade, partially offset by increased throughput.  Cash costs were $211 per ounce
during the third quarter of 1998 compared to $218 per ounce in the third quarter
of 1997, primarily  reflecting the lower Canadian/U.S.  dollar exchange rate and
reduced  development  expenditures,  partially offset by the impact of the lower
production.  Homestake's share of production at the David Bell mine increased to
21,900  ounces at a cash cost of $176 per ounce  compared to 17,700  ounces at a
cash cost of $241 per ounce in the third quarter of 1997, primarily due to a 22%
increase in ore grade. During the third quarter, Homestake and its joint venture
partner,  Teck Corporation,  decided to suspend operation of the David Bell mill
and  process  ore from both the  Williams  and David Bell mines at the  Williams
milling  facility.  Homestake  expects to achieve  significant  cost  savings by
increasing  the  capacity  and  utilization  of the lower  cost  Williams  mill.
Engineering for the Williams mill upgrade is underway and decommissioning of the
David Bell mill is expected in the third quarter of 1999.

         Production  from the Snip mine was 28,300 ounces at a cash cost of $173
per ounce for the three  months  ended  September  30,  1998  compared to 31,200
ounces  at a cash  cost of $210 per  ounce in the  third  quarter  of 1997.  The
decline in production was expected and is attributable  to lower  throughput and
grade as the operation approaches the end of its economic life. The operation is
expected to complete mining and begin  decommissioning  of the facility by about
April 30, 1999.

         Homestake's  share  of  production  from  the  combined  operations  at
Kalgoorlie in Western  Australia  declined to 92,500 ounces in the third quarter
of 1998 from 102,500  ounces  during the similar  period in 1997.  In June 1998,
structural  cracks were detected in the SAG mill ring gear of the Fimiston mill.
Rotation speed for the SAG mill has been reduced to minimize stress. A temporary
replacement gear is being fabricated which will be available in January 1999. As
a result,  Homestake expects to maintain current rates of production through the
end of 1998.


                                       16

<PAGE>
                   Homestake Mining Company and Subsidiaries


Under  applicable  insurance  policies,  KCGM  is in the  process  of  preparing
property damage and business interruption insurance claims.

         On September 15, 1998 Homestake and its joint venture partner, Normandy
Mining  Limited,  announced a revised  operating  plan at their jointly owned Mt
Charlotte mine. The mine has experienced a downturn in economic  performance and
an increased  level of ground  movement.  The Company's  primary concern is that
appropriate safety levels be maintained.  The new plan provides for a restricted
level of mining activity in low-risk areas of the mine until  approximately  the
fourth  quarter of 1999.  Performance of the mine will be monitored to determine
whether the  operation  will  continue  beyond that  period.  Cash costs for the
combined  Kalgoorlie  operation decreased to $215 per ounce in the third quarter
of 1998 from $242 per ounce during the comparable  period in 1997 reflecting the
weaker Australian dollar in relation to the U.S. dollar, partially offset by the
lower production at the Mt Charlotte mine.

         Gold  production at the Plutonic  mine  decreased to 67,100 ounces at a
cash cost of $201 per  ounce in the third  quarter  of 1998  compared  to 72,400
ounces at a cash cost of $220 per ounce in the prior year's third quarter.  Mill
feed was 5% below levels achieved during the corresponding period in 1997 due to
downtime  associated  with  commissioning  a new gas-fired  plant that generates
power for the  operation.  The ore grade was  slightly  below the  corresponding
period in 1997 due to  processing  additional  low-grade  stockpile  material to
compensate for lower than expected underground production. The reduction in cash
costs per ounce is  attributable  to the decline in the  Australian/U.S.  dollar
exchange rate. An intensive in-fill drilling and access  development  program is
being conducted to provide adequate  information for development of higher-grade
ore lodes in the new Zone 124 area of the  mine.  The  program  is  expected  to
continue  through  1999, at which time the operation is expected to stabilize at
an  average  production  rate of about  260,000  ounces  per  year.  Development
drilling also continued from surface at Area 4, and  preliminary  design work is
underway for the proposed Area 4 open pit.

         The  Darlot/Centenary  mine  also  has  been  conducting  an  intensive
drilling  and  development  program  during  the  third  quarter  of 1998.  Gold
production  increased  to 22,700  ounces  from  18,200  ounces  during the third
quarter  of  1997.  The  improved   performance  is  attributable  to  increased
throughput  and  grade  from  underground  orebodies  within  extensions  of the
original Darlot ore zones and initial mining in the new Centenary orebody.  Cash
costs  decreased  to $200 per ounce in the third  quarter  of 1998 from $292 per
ounce in the third  quarter of 1997 due to a 12%  increase  in ore grade and the
decline  in the  Australian/U.S.  dollar  exchange  rate.  Production  from  the
higher-grade  Centenary  ore body is  expected to  increase  through  1999 while
in-fill drilling and ore block development  continues.  During the third quarter
of 1998,  development was initiated on a second decline to the Centenary orebody
to be used for haulage and additional ventilation.

         In the third quarter of 1998,  the Lawlers mine produced  28,300 ounces
at $162 per ounce of gold compared to 32,400 ounces at $219 per ounce during the
third quarter of 1997. The decrease in production is due to a return to expected
ore grades compared to unusually high grades mined in the Genesis pit during the
third  quarter of 1997,  partially  offset by an increase  in tonnage  processed
during the third  quarter of 1998.  A second  decline  from the New  Holland pit
recently was  commenced to access lower ore zones and a third decline is planned
from the Genesis pit in early 1999.

         At  the  80%-owned  Mt  Morgans  mine,  stockpiled  ore  was  processed
throughout  the third  quarter  of 1998.  Homestake's  share of gold  production
totaled 11,900 ounces during the quarter  compared to 19,100 in 1997. Cash costs
during the third quarter  decreased to $253 per ounce from $326 per ounce during
the  corresponding  period in 1997.  The cost  reduction  is  attributable  to a
smaller workforce and reduced mining and maintenance expenses. Production is now
expected to continue through November 1998.


                                       17

<PAGE>
                   Homestake Mining Company and Subsidiaries


         Homestake's  share of gold  production  at the  66.7%  owned  Peak Hill
operation  was 5,700 ounces  compared to 8,000 ounces  during the  corresponding
period in 1997.  Mining  activity  has ceased and the  operation  is  processing
remaining low-grade stockpiled material.  Cash costs increased to $261 per ounce
from $244 per ounce during the third  quarter of 1997 due to the lower grades of
ore processed.  Recent treatment trials on stockpiles  previously  classified as
sub-economic  value have  demonstrated  the grades are  economic at current gold
prices.  Consequently,  production  from Peak Hill is now  expected  to continue
until September 1999.

         During the third quarter of 1998,  the La Falda mine in Chile  produced
10,700 gold ounces,  equal to production levels during the corresponding  period
in 1997. Cash costs, however,  declined to $203 per ounce from $231 per ounce in
the third quarter of 1997.  The reduced costs are attributable to higher ore
grades.

         The Company's  consolidated total cash costs per ounce decreased by 17%
in the third  quarter of 1998 to $195 per ounce  from $236 per ounce  during the
third quarter of 1997. Approximately half of this decline is attributable to the
lower Australian and Canadian dollar exchange rates.

         For the nine months ended  September 30, 1998,  the Company  recorded a
net loss of $219.7  million or $1.04 per share  compared to a net loss of $172.2
million or 82 cents per share in 1997. The 1998  year-to-date  net loss includes
nonrecurring  charges  totaling $192.1 million or 91 cents per share  including;
$17.7  million  ($20.7  million  pretax)  or 8  cents  per  share  for  business
combination and integration  costs related to the acquisition of Plutonic,  $5.9
million ($8.9 million pretax) or 3 cents per share in restructuring costs at the
Homestake  mine,  $2.6 million  ($2.9  million  pretax) or 2 cents per share for
write-downs  of  exploration  properties,  and $165.9  million  ($187.9  million
pretax)  or 78 cents per share for the  third-quarter  write-downs  and  unusual
charges  detailed  above.  The net loss for the nine months ended  September 30,
1997 included net  nonrecurring  expenses  amounting to $139.8  million  ($172.3
million pretax) or 67 cents per share including;  a gain of $47.2 million ($62.9
million  pretax) or 22 cents per share from the breakup fee upon  termination of
Homestake's  merger agreement with Santa Fe Pacific Gold Corporation,  a gain of
$8.1 million ($13.5 million  pretax) or 4 cents per share from the sale of joint
venture  interests  in two  Canadian  mining  properties,  a loss of $50 million
($65.1  million  pretax)  or  24  cents  per  share  primarily  related  to  the
write-downs at the Mt Morgans mine and the Meekatharra exploration property, and
the third quarter 1997  write-downs and unusual chares of $145.1 million ($183.6
million) or 69 cents per share as detailed above.

         Year-to-date  revenues from gold and ore sales totaled  $592.4  million
during  the  first  nine  months  of 1998  compared  to  $646.2  million  in the
comparable  period of 1997,  reflecting  significantly  lower  average  realized
prices,  partially offset by an increase in sales volumes. During the first nine
months of 1998,  1,969,100  equivalent  ounces  of gold were sold at an  average
realized  price of $313 per  ounce  compared  to sales of  1,855,100  equivalent
ounces of gold sold at an average  realized  price of $357 per ounce in the same
period of 1997.  The increased  sales volumes are due to increases in production
volumes and a reduction in finished goods inventories.

         The Company's  share of revenues  from the Main Pass 299  operations in
the Gulf of Mexico  declined to $5.1  million in the third  quarter of 1998 from
$6.3  million  in the third  quarter of 1997,  and  operating  losses  were $1.2
million  during the third  quarter of 1998 compared to losses of $0.4 million in
the prior  year  third  quarter.  Sulfur  sales in the third  quarter of 1998 of
73,500 long tons  approximated  sales of 73,800 long tons for the same period of
the prior year as lower  production  in the current year was  supplemented  with
sales from inventories.  However,  the average realized sulfur price declined to
$58 per ton  during the 1998 third  quarter  compared  to $60 per ton during the
third quarter of the previous year. Oil sales also declined due to a 30% decline
in  production  and  a  37%  decline  in  the  average  oil  price  per  barrel.
Year-to-date 1998 revenues from the Main Pass 299 operations  decreased to $16.9
million   compared  to  year-to-date   1997  revenues  of  $20.1  million,   and
year-to-date  1998 operating losses were $2.9 million compared to losses of $1.5
million for the year-to-date 1997 period. The 1998 results primarily

                                       18

<PAGE>
                   Homestake Mining Company and Subsidiaries


reflect  lower oil prices and sales  volumes,  partially  offset by lower sulfur
depreciation  charges  following the September 30, 1997 write-down of the sulfur
assets.

         In late  September  1998,  all Main Pass 299  drilling  and  production
operations were shut down in response to significant  adverse weather conditions
caused  by  hurricane  Georges.  After  three  days of  shutdown,  the  operator
restarted  production,  which  involved  re-heating  the  portion  of the sulfur
deposit being produced prior to the shutdown.  Nine previously  producing sulfur
wells will require re-drilling. As a result, production levels will decrease and
unit production  costs will increase for the fourth quarter of 1998 and possibly
the first half of 1999 compared with the first nine months of 1998.

         Homestake's  gold hedging policy  provides for the use of forward sales
contracts  for up to 30% of  expected  annual  gold  production  for each of the
following ten year's at prices in excess of certain targeted prices, and the use
of  combinations  of put and call option  contracts to establish  minimum  floor
prices while allowing participation in future increases in the price of gold.

         In 1997, Homestake entered into a series of U.S. dollar denominated put
and call  options  which  provide a floor  price of $325 per  ounce for  900,000
ounces of 1998 production while allowing for full  participation in any increase
in the price of gold  above  $336 per  ounce.  Gold sales for the three and nine
months  ended   September   30,  1998  include   225,000  and  675,000   ounces,
respectively,  at an  average  price of $325 per ounce  under this  program.  At
September  30,  1998 the Company  owned put  options for 225,000  ounces of gold
exercisable  during the fourth quarter of 1998 at a price of $325 per ounce. The
Company  also had written call options  outstanding  for 225,000  ounces of gold
exercisable  during the fourth  quarter of 1998 at a price of $325 per ounce and
owned call options for 225,000 ounces of gold exercisable during 1998 at a price
of $336 per ounce.

         At September  30, 1998 the Company also owned U.S.  dollar  denominated
put options for 30,000 ounces of gold exercisable during 2000 at a price of $350
per ounce and had written U.S. dollar  denominated call options  outstanding for
15,000  ounces of gold  exercisable  during 2000 at an average price of $395 per
ounce.  At  September  30,  1998  the  Company  also  owned  Australian   dollar
denominated put options for 240,000 ounces of gold  exercisable in 1999 and 2000
(120,000 ounces each year) at an average price of $313 (A$523) per ounce and had
written  Australian  dollar  denominated call options for 240,000 ounces of gold
exercisable  in 1999 and 2000 (120,000  ounces each year) at an average price of
$322 (A$528) per ounce.

         During the three and nine month periods ended  September 30, 1998,  the
Company  delivered or financially  settled 30,000 and 90,000 ounces of its North
American  gold  production  at  average  prices  of $401  and  $399  per  ounce,
respectively,  under U.S. dollar denominated forward sales contracts. During the
three and nine month periods ended  September 30, 1997 the Company  delivered or
financially  settled  30,000  and  90,000  ounces  of its  North  American  gold
production  at average  prices of $387 and $383 per ounce,  respectively,  under
U.S.  dollar  denominated  forward  sales  contracts.  At September 30, 1998 the
Company  had  committed  490,000  ounces  of  its  future  North  American  gold
production  for sale through the year 2003 at an average price of $440 per ounce
under forward sales contracts.

         During the three and nine month  periods  ended  September 30, 1998 the
Company  delivered  or  financially  settled  30,000 and  208,000  ounces of its
Australian  gold  production into  Australian  dollar  denominated  forward gold
contracts at average prices of $315 and $336 per ounce, respectively. During the
three and nine month  periods  ended  September  30, 1997 the Company  delivered
119,800 and 384,950 ounces of its Australian  gold  production  into  Australian
dollar denominated forward gold contracts at average prices of $415 and $425 per
ounce,  respectively.  During June 1998, the Company closed out and  financially
settled one million  ounces of its  Australian  dollar-denominated  forward gold
contracts.  The gain of $5 million realized on this arrangement was deferred and
is being recorded in income as the originally  designated production is sold. At
September 30, 1998 the Company had remaining commitments


                                       19

<PAGE>


                   Homestake Mining Company and Subsidiaries


for 300,000  ounces of its future  Australian  dollar  denominated  forward gold
contracts at an average price of $323 (A$540) per ounce.

         The Company's hedging  activities  increased  revenues by approximately
$12 million and $39 million in the three and nine month periods ended  September
30, 1998, respectively,  and by approximately $13 million and $42 million in the
three and nine  month  periods  ended  September  30,  1997,  respectively.  The
estimated  liquidation value of the Company's gold hedging position at September
30, 1998 was approximately $57.4 million.

         In February 1998,  Prime adopted a gold and silver hedging policy which
provides  for the use of forward  sales  contracts  for up to 40% of each of the
following five year's  expected  annual gold and silver  production at prices in
excess of certain targeted prices.  At September 30, 1998 Prime had sold forward
approximately  7.2 million  ounces of silver during the period 1999 through 2001
at an average price of $6.28 per ounce. The estimated  liquidation  value of the
Company's silver hedging position at September 30, 1998 was  approximately  $5.3
million.

         A significant  portion of the Company's  operating expenses is incurred
in Australian and Canadian currencies.  The Company's  profitability is impacted
by  fluctuations  in these  currencies'  exchange  rates  relative to the United
States dollar.  Under the Company's  foreign currency  protection  program,  the
Company has entered into a series of foreign  currency  option  contracts  which
establish  trading ranges within which the United States dollar may be exchanged
for  Australian  and Canadian  dollars.  At September 30, 1998 the Company had a
recorded  net  unrealized  loss of $36  million  on open  contracts  under  this
program.

Other  income for the nine months  ended  September  30, 1998  includes  foreign
currency  exchange  losses of $43.6  million  and gains on sales of Rabbi  Trust
investments of $4.7 million.  Other income in 1997 includes a $13.5 million gain
on sale of the George Lake/Back River joint venture  interests,  a $10.4 million
gain on  cancellation  of an  option to  acquire  19.9% of Great  Central  Mines
Limited, and net foreign currency exchange losses of $12.8 million.

Depreciation,  depletion and amortization  expense decreased to $33.6 million in
the third  quarter  of 1998  compared  to $41.1  million  during  the 1997 third
quarter reflecting lower gold production along with reduced depreciation charges
following the asset write-downs recorded during 1997.

Exploration  expense for the three and nine month  periods  ended  September 30,
1998 was  $16.4  million  and $38.2  million,  respectively,  compared  to $20.2
million and $50.3 million of the  respective  three and nine month periods ended
September  30,  1997.  The Company  expects to spend  approximately  $58 million
during  1998 on  exploration  projects,  of which 50% is expected to be spent in
Australia and 30% in North America.  Homestake plans to continue to focus on its
best prospects,  particularly  the Australian  properties  recently  acquired by
Homestake through its acquisition of Plutonic and the immediate  vicinity of the
Eskay Creek mine.

Income and mining tax expense:  During the nine month period ended September 30,
1998 the Company  recorded a $13  million  benefit  compared  to a $3.3  million
benefit recorded during the nine month period ended September 30, 1997. Included
in the 1998  benefit was $14.6  million  relating to a reduction in prior years'
income tax  accruals  for  certain  contingencies  that now have been  resolved.
During the first nine months of 1998,  the  consolidated  effective tax rate was
5.6%,  reflecting the geographic mix of pretax income and losses.  Excluding the
above  noted tax  benefit,  benefits  related to losses  incurred  in the United
States and Australia were more than offset by tax expense  recorded with respect
to the Canadian earnings, no tax benefit being recorded on acquisition costs and
other nondeductible  expenses, and an increase in valuation allowances on United
States deferred tax assets. Based on current projections of United States source
income,  Homestake  does not expect to realize a benefit  from these  future tax
deductions. The Company's consolidated effective income and mining tax rate will
fluctuate depending on the geographical mix of pretax income.


                                       20

<PAGE>
                   Homestake Mining Company and Subsidiaries


Minority interests in the income of consolidated  subsidiaries  decreased during
the first nine months of 1998 to $0.9 million from $6.2 million during the first
nine  months  of  1997.  The  decrease  in  minority   interests   primarily  is
attributable to the write-down of mineral  properties and marketable  securities
of Lachlan Resources NL.


         The following chart details  Homestake's gold production and total cash
costs per ounce by location,  and consolidated  revenue and production costs per
ounce.
<TABLE>
<CAPTION>

                                   Production
                              (Ounces in thousands)

                                                      Three Months Ended                    Nine Months Ended
                                                        September 30,                         September 30,
Mine (Percentage interest)                              1998              1997                1998              1997
                                                -------------------------------      --------------------------------

<S>                                                     <C>               <C>                <C>               <C>  
Homestake (100)                                         64.5              97.0               210.9             301.3
Ruby Hill (100)                                         27.8                 -                88.8                 -
McLaughlin (100)                                        32.9              31.2                97.8              93.7
Round Mountain (25)                                     34.6              31.4               104.1              92.0
Pinson (50)                                              3.2               6.3                14.1              18.9
Marigold (33)                                            5.2               4.4                17.4              18.7
                                                -------------     -------------      --------------     -------------
    Total United States                                168.2             170.3               533.1             524.6

Eskay Creek (100) (1)                                  121.9             105.4               393.0             300.9
Williams (50)                                           48.6              51.2               144.2             145.4
David Bell (50)                                         21.9              17.7                63.0              61.5
Quarter Claim (25)                                       2.9               2.9                 8.5               8.5
Snip (100) (2)                                          28.3              31.2                78.8              90.7
                                                -------------     -------------      --------------     -------------
     Total Canada                                      223.6             208.4               687.5             607.0

Kalgoorlie (50)                                         92.5             102.5               291.4             317.8
Plutonic (100)                                          67.1              72.4               179.1             207.4
Darlot/Centenary (100)                                  22.7              18.2                53.0              47.7
Lawlers (100)                                           28.3              32.4                90.7              60.6
Mt Morgans (80)                                         11.9              19.1                46.5              55.7
Peak Hill (67)                                           5.7               8.0                18.3              26.4
                                                -------------     -------------      --------------     -------------
     Total Australia                                   228.2             252.6               679.0             715.6

Agua de la Falda, Chile (100)                           10.7              10.7                34.4              19.0

                                                -------------     -------------      --------------------------------
Total Production (3)                                   630.7             642.0             1,934.0           1,879.2
Less Minority Interests                                (79.5)            (72.6)             (250.0)           (202.7)
                                                -------------     -------------      --------------     -------------
Homestake's Share                                      551.2             569.4             1,684.0           1,676.5
                                                =============     =============      ==============     =============

</TABLE>



                                       21

<PAGE>
                   Homestake Mining Company and Subsidiaries

<TABLE>
<CAPTION>

                                Total Cash Costs
                               (Dollars per ounce)

                                                         Three Months Ended                    Nine Months Ended
                                                            September 30,                         September 30,
Mine (Percentage interest)                              1998              1997                1998              1997
                                                -------------------------------      --------------------------------
<S>                                                     <C>               <C>                 <C>               <C> 
United States
     Homestake (100)                                    $256              $307                $252              $318
     Ruby Hill (100)                                     120                 -                 125                 -
     McLaughlin (100)                                    220               243                 217               247
     Round Mountain (25)                                 200               237                 200               225
     Pinson (50)                                         607               344                 425               343
     Marigold (33)                                       282               316                 262               260

Canada
     Eskay Creek (100) (4)                               138               163                 130               162
     Williams (50)                                       211               218                 221               240
     David Bell (50)                                     176               241                 195               214
     Quarter Claim (25)                                  162               172                 167               173
     Snip (100) (4)                                      173               210                 199               210

Australia
     Kalgoorlie (50)                                     215               242                 232               265
     Plutonic (100)                                      201               220                 235               235
     Darlot/Centenary (100)                              200               292                 264               310
     Lawlers (100)                                       162               219                 185               228
     Mt Morgans (80)                                     253               326                 234               366
     Peak Hill (67)                                      261               244                 273               245

Chile
     Agua de la Falda (100)                              203               231                 202               219
                                                -------------     -------------      --------------     -------------

Weighted Average                                        $195              $236                $203              $249
                                                =============     =============      ==============     =============

<CAPTION>

                                                         Three Months Ended                    Nine Months Ended
                                                             September 30,                         September 30,
Per Ounce of Gold                                       1998              1997                1998              1997
                                                -------------------------------      --------------------------------

<S>                                                     <C>               <C>                 <C>               <C> 
Revenue                                                 $307              $341                $313              $357
                                                ===============================      ================================

Per Ounce Costs
Cash Operating Costs (5)                                $191              $233                $199              $246
Other Cash Costs (6)                                       4                 3                   4                 3
                                                -------------------------------      --------------------------------
     Total Cash Costs                                    195               236                 203               249
Noncash Costs  (7)                                        53                61                  55                60
                                                ===============================      ================================
     Total Production Costs                             $248              $297                $258              $309
                                                ===============================      ================================



                                       22

<PAGE>


                   Homestake Mining Company and Subsidiaries

<FN>
(1)  Ounces produced are expressed on a gold equivalent basis and include 70,900
     (63,100  in 1997)  ounces of gold and 2.8  million  (3.1  million  in 1997)
     ounces of silver contained in ore and concentrates  sold to smelters in the
     third quarter, and 214,300 (174,000 in 1997) ounces of gold and 9.1 million
     (9.1  million in 1997) ounces of silver  contained in ore and  concentrates
     sold to smelters in the year-to-date period.

(2)  Includes ounces of gold contained in dore and concentrates.

(3)  Includes 12,500 ounces of gold produced at the Bellevue  project in Western
     Australia and 500 ounces produced at the El Hueso mine in Chile during the 
     1997 year-to-date period.

(4)  For  comparison  purposes,  total  cash costs per ounce  include  estimated
     third-party  costs  incurred  by  smelter  owners  and  others  to  produce
     marketable gold and silver.

(5)  Cash operating costs are costs directly related to the physical  activities
     of producing  gold;  includes  mining,  milling,  third-party  smelting and
     in-mine drilling expenditures that are related to production.

(6)  Other cash costs are costs that are not directly related to, but may result
     from, gold production;  includes  production taxes and royalties.

(7)  Noncash  costs are costs that  typically are accounted for ratably over the
     life of an operation; includes depreciation,  depletion, accruals for final
     reclamation.  Noncash  costs do not include  amortization  of  additions to
     property   resulting  from  SFAS  109  deferred  tax  purchase   accounting
     adjustments,  as these additions did not involve any economic  resources of
     the Company.
</FN>
</TABLE>


                                       23

<PAGE>


                  Homestake Mining Companies and Subsidiaries


                         LIQUIDITY AND CAPITAL RESOURCES

         Cash provided by operations  totaled  $105.1  million  during the first
nine months of 1998 compared to $112.7  million  during the first nine months of
1997. Cash provided by operations during the 1997 nine-month period includes the
termination  fee received from Santa Fe upon  termination of Homestake's  merger
agreement with Santa Fe,  partially offset by $62 million in payments for income
and mining taxes,  primarily  payments made in the first quarter of 1997 related
to Prime's  1996 taxable  income.  Payments for income and mining taxes of $18.8
million (net) were made during the first nine months of 1998. Working capital at
September 30, 1998 amounted to $284 million,  including $309 million in cash and
equivalents and short-term investments.

         Capital  additions  of $54.3  million for the first nine months of 1998
compare  to  additions  of $166.6  million  for the first  nine  months of 1997.
Capital  additions during 1998 include $11.2 million and $8.3 million  primarily
for underground  development  work at the Plutonic and  Darlot/Centenary  mines,
respectively, $7 million primarily for development at the Kalgoorlie operations,
and $6.5  million  primarily  for new shops and  other  facilities  at the Round
Mountain  mine.  The balance of 1998 capital  expenditures  primarily  relate to
productivity  improvement projects and sustaining capital at the Company's other
operating   mines.   Capital   additions  in  1997  include  $50.7  million  for
construction and development work at the Ruby Hill mine, $37.5 million primarily
for  underground  development  and a new gas-fired power station at the Plutonic
mine,  $12.5  million at the Round  Mountain  mine  primarily  for a new mill to
process the higher-grade  sulfide ore, $12.5 million for development work at the
Darlot/Centenary  mine,  $10.2  million  primarily  for a tailings  dam lift and
improvements  in the  underground  operations at the Homestake  mine,  and $11.7
million at the Kalgoorlie  operations primarily for a decline from surface and a
ventilation raise at the Mt Charlotte mine.

         In   July   1998,    the   Company    entered   into   a   new   United
States/Canadian/Australian   cross-border  credit  facility  providing  a  total
availability  of $430  million.  The new facility  replaced the  Company's  $275
million  cross-border  credit facility and Plutonic's  A$400 million  syndicated
credit facility,  both of which were cancelled.  Borrowings by Plutonic and HGAL
under the prior credit facilities were repaid using the new facility. Borrowings
outstanding  at  September  30,  1998  include  borrowings  of $94.6  million by
Plutonic and $44.9 million by HGAL under this credit facility.  The new facility
is available through July 14, 2003 and provides for borrowings in United States,
Canadian,  or Australian  dollars, or gold, or a combination of these. Under the
new facility,  the Company pays a commitment fee ranging from 0.15% to 0.35% per
annum, depending upon rating agencies' ratings for the Company's senior debt, on
the unused portion of this facility. The new credit agreement requires a minimum
consolidated  net worth,  as defined in the agreement  (primarily  shareholders'
equity plus the amount of all noncash write-downs made after December 31, 1997),
of $500 million.  Interest on the HGAL and Plutonic Australian dollar borrowings
under the new facility is payable  quarterly and is based on the Australian Bank
Bill Swap Rate plus a margin of up to 1.125%. At September 30, 1998 the interest
rate was 6.22%.

         In March 1997, the Company reduced its annual dividend rate to 10 cents
per share from 20 cents per share.  In May 1998,  the Company paid a semi-annual
dividend of 5 cents per share and in  September  1998,  the  Company  declared a
semi-annual  dividend  of 5  cents  per  share  payable  November  18,  1998  to
shareholders of record at the close of business on October 30, 1998.

         In April  1997,  the Company  filed with the  Securities  and  Exchange
Commission a shelf  registration  statement for the  potential  sale of up to 20
million  shares of common stock.  The proceeds  from any such offering  would be
available  for  general   corporate   purposes,   which  could  include  capital
expenditures,  repayment  of  debt,  and  future  acquisitions,  which  have the
potential to add to the Company's gold reserves and future gold production.


                                       24

<PAGE>


                   Homestake Mining Company and Subsidiaries


         In February 1998,  the Financial  Accounting  Standards  Board ("FASB")
issued  Statement  of  Financial  Accounting  Standards  No. 132  ("SFAS  132"),
"Employers' Disclosures about Pensions and Other Postretirement  Benefits." SFAS
132  revises  employers'  disclosures  about  pension  and other  postretirement
benefit plans. It does not change the measurement or recognition of those plans.
SFAS 132  standardizes  the  disclosure  requirements  for  pensions  and  other
postretirement   benefits  to  the  extent   practicable,   requires  additional
information on changes in the benefit obligations and fair values of plan assets
that will facilitate  financial  analysis,  and eliminates certain  disclosures.
SFAS 132 will be effective for the Company's  financial  statements for the year
ended December 31, 1998.

         In June 1998, FASB issued Statement of Financial  Accounting  Standards
No. 133  ("SFAS  133"),  "Accounting  for  Derivative  Instruments  and  Hedging
Activities."  SFAS 133 requires that all  derivatives be recognized as assets or
liabilities  and be  measured  at fair  value.  Gains or losses  resulting  from
changes in the values of those  derivatives  would be accounted for depending on
the use of the  derivatives  and whether  they qualify for hedge  accounting  as
either a fair value  hedge or a cash flow  hedge.  The key  criterion  for hedge
accounting  is that  the  hedging  relationship  must  be  highly  effective  in
achieving  offsetting  changes  in fair  value  or  cash  flows  of the  hedging
instruments  and the  hedged  items.  SFAS 133 is  effective  for  fiscal  years
beginning  after June 15, 1999 but earlier  adoption is  permitted.  The Company
believes  that  under  SFAS 133,  changes  in  unrealized  gains  and  losses on
Homestake's  foreign currency contracts will qualify for deferral accounting and
be recorded in Other Comprehensive Income.  However, there are many complexities
to this new standard and the Company  currently  is  evaluating  the impact that
SFAS 133 will have on reported  operating results and financial position and has
not yet determined that impact or when it will adopt SFAS 133.

         Future  results will be impacted by such factors as the market price of
gold  and  silver,  the  Company's  ability  to  expand  its ore  reserves,  and
fluctuations of foreign  currency  exchange rates. The Company believes that the
combination  of cash,  short-term  investments,  available  lines of credit  and
future cash flows from  operations  will be sufficient to meet normal  operating
requirements, planned capital expenditures, and anticipated dividends.


Year 2000 Compliance

         The Company has  completed a review of its  computer-based  information
systems  and has  developed a plan to ensure all of these  systems  will be Year
2000 compliant. With the exception of the financial systems the Company acquired
as part of the recent acquisition of Plutonic,  Year 2000 compliant upgrades for
the Company's core financial  systems will be installed and tested by the end of
1998. The Plutonic financial systems,  and all other Company information systems
hardware and software will be brought into compliance by mid-1999.

         The  Company   currently   is  in  the  process  of   identifying   all
microprocessor-controlled  devices, including process-monitoring systems, in use
at its operating  locations to determine  whether they are Year 2000  compliant.
The identification  phase is due to be completed by April 1999. The Company will
upgrade  systems  and/or  develop  contingency  plans based on this  review.  In
addition,  the Company is monitoring similar Year 2000 related activities at its
joint  venture  operations  where it is not the  operator.  A Year 2000  related
microprocessor  problem  that is not  identified  or  remedied  at an  operating
location potentially could result in a short-term  production disruption at that
location.

         The Company's total expenditures for the above Year 2000 activities are
expected to be approximately  $1.5 million and should not adversely impact other
information   system   initiatives.   Year  2000   expenditures  to  date  total
approximately $750,000.

         The Company currently is surveying all major suppliers and customers to
assess their Year 2000  compliance  and,  where  practical,  will make  specific
contingency  plans based on the results of this survey.  The first phase of this
survey is scheduled to be completed by December



                                       25

<PAGE>


                   Homestake Mining Company and Subsidiaries



31, 1998. The greatest risk to the Company in this regard would be in the supply
of power and/or water to certain of its operating locations. A disruption in the
supply  of either  of these  utilities  could  significantly  hamper or  curtail
production at an operating location until the service was restored. A disruption
in the supply of other services or supplies at an operating location potentially
could result in a short-term production disruption at that location.

         The Company's  principal  customers are major  financial  institutions.
Because of government  mandated Year 2000 compliance  programs in this industry,
the Company  expects that their core  financial  operating  systems will be Year
2000  compliant,  and  that  there  will  be no  significant  disruption  in the
Company's ability to sell its gold production.

         Homestake  will  develop  contingency  plans  if  and  when  determined
necessary based on its compliance efforts.

         The foregoing Year 2000  disclosures  are based on Homestake's  current
expectations,  estimates and projections.  Because of uncertainties,  the actual
effects of the Year 2000 issues on Homestake may be different from the Company's
current  assessment.  Factors,  many of which are  outside  the  control  of the
Company,  that could affect Homestake's ability to be Year 2000 compliant by the
end of 1999 include the failure of customers,  suppliers,  governmental entities
and  others to  achieve  compliance,  and  Homestake's  inability  or failure to
identify all  critical  Year 2000 issues or to develop  appropriate  contingency
plans for all Year 2000 issues that ultimately may arise.


Prime Resources Group Inc.

         On September 11, 1998 Prime and Homestake  announced  that,  subject to
requisite   shareholder   approvals,   they  had  reached  an   agreement   (the
"Arrangement")  for  Homestake's  acquisition  of the 49.4% of Prime held by the
public.  Under the terms of the Arrangement,  Prime  shareholders  will have the
choice of receiving 0.74 Homestake  common shares or 0.74 Homestake  Canada Inc.
("HCI")  exchangeable  shares  for  each  Prime  share  held by  them.  Each HCI
exchangeable  share would be exchangeable  for one Homestake common share at any
time at the option of the  holder,  and will have  dividend  and  voting  rights
essentially equivalent to those of one Homestake common share.

         The transaction is to be structured as an arrangement under the British
Columbia Companies Act.  Completion of the Arrangement is subject to approval by
the British Columbia Supreme Court and by Prime shareholders,  and the Homestake
shareholders  must vote to adopt a Restated  Certificate of Incorporation  that,
among other things,  authorizes the Homestake  capital stock necessary to effect
the  Arrangement.  A  total  of 75%  of  all  Prime  shares  represented  at its
shareholders' meeting, including the Prime shares owned by HCI, must approve the
transaction.  In addition, the Arrangement must be approved by two-thirds of the
Prime shares present and voting on the  Arrangement,  excluding  shares voted by
HCI and certain  affiliates.  Both Prime and Homestake  have  scheduled  Special
Meetings of Stockholders for December 1, 1998.

         The Arrangement would result in the issuance of a total of 27.8 million
Homestake  common and HCI  exchangeable  shares in exchange for the 37.6 million
Prime shares held by the minority shareholders of Prime.






                                       26

<PAGE>


                   Homestake Mining Company and Subsidiaries


Part II - OTHER INFORMATION

Item 5. - Other Information

(b)      CAUTIONARY STATEMENT UNDER THE PRIVATE SECURITIES LITIGATION REFORM
         ACT OF 1995

         Certain statements  contained in this Form 10-Q that are not statements
         of historical facts are "forward looking statements" within the meaning
         of  the  Private  Securities   Litigation  Reform  Act  of  1995.  Such
         statements are based on beliefs of  management,  as well as assumptions
         made by and  information  currently  available to  management.  Forward
         looking  statements  include  those  preceded  by the words  "believe,"
         "estimate,"  "expect," "intend," "will," and similar  expressions,  and
         include  estimates  of future  production,  costs per  ounce,  dates of
         construction completion,  costs of capital projects and commencement of
         operations.   Forward   looking   statements   are  subject  to  risks,
         uncertainties  and other  factors  that could cause  actual  results to
         differ  materially from expected  results.  Some important  factors and
         assumptions  that could cause actual results to differ  materially from
         expected results are discussed below. Those listed are not exclusive.

         Estimates of future  production for  particular  properties and for the
         Company as a whole are  derived  from  annual mine plans that have been
         developed based on mining experience,  reserve  estimates,  assumptions
         regarding ground conditions and physical  characteristics  of ore (such
         as hardness  and  metallurgical  characteristics),  expected  rates and
         costs  of  production,   and  estimated  future  sales  prices.  Actual
         production  may vary for a  variety  of  reasons,  such as the  factors
         described  above,  ore  mined  varying  from  estimates  of  grade  and
         metallurgical and other  characteristics,  mining dilution,  actions by
         labor,  and government  imposed  restrictions.  Estimates of production
         from  properties  and  facilities  not yet in  production  are based on
         similar  factors but there is a greater  likelihood that actual results
         will vary from estimates due to a lack of actual experience.  Cash cost
         estimates  are based on such  things as past  experience,  reserve  and
         production estimates, anticipated mining conditions, estimated costs of
         materials,  supplies  and  utilities,  and  estimated  exchange  rates.
         Noncash cost  estimates  are based on total  capital  costs and reserve
         estimates,  change  based on actual  amounts  of  unamortized  capital,
         changes  in  reserve  estimates,  and  changes  in  estimates  of final
         reclamation.  Estimates of future  capital costs are based on a variety
         of factors and include past operating  experience,  estimated levels of
         future  production,  estimates by and  contract  terms with third party
         suppliers,  expectations  as  to  government  and  legal  requirements,
         feasibility reports by Company personnel and outside  consultants,  and
         other  factors.  Capital cost estimates for new projects are subject to
         greater  uncertainties  than  additional  capital  costs  for  existing
         operations.  Estimated time for completion of capital projects is based
         on such  factors as the  Company's  experience  in  completing  capital
         projects,   and   estimates   provided  by  and  contract   terms  with
         contractors,  engineers,  suppliers  and others  involved in design and
         construction of projects.  Estimates reflect  assumptions about factors
         beyond the Company's control, such as the time government agencies take
         in processing  applications,  issuing permits and otherwise  completing
         processes  required under applicable laws and regulations.  Actual time
         to completion can vary significantly from estimates.

         See the  Company's  Form 10-K  Report for the year ended  December  31,
         1997, Part IV, "RISK FACTORS" and "CAUTIONARY  STATEMENTS,"  for a more
         detailed  discussion  of  factors  that may impact on  expected  future
         results.


                                       27

<PAGE>
                   Homestake Mining Company and Subsidiaries


Item 6.

<TABLE>
<CAPTION>

(a)      Exhibits                                                                  Method of Filing


         <S>    <C>                                                                <C>                      
         10.2   First Amendment to the Credit Agreement                            Filed herewith
                                                                                   electronically

         10.3   Second Amendment to the Credit Agreement                           Filed herewith
                                                                                   electronically

         11     Computation of Earnings Per Share                                  Filed herewith
                                                                                   electronically

         27     Financial Data Schedule                                            Filed herewith
                                                                                   electronically

</TABLE>



(b)      Reports on Form 8-K


         The report on Form 8-K dated  October 2, 1998 was submitted in order to
         file press  releases  announcing the  following:  (a) revised  exchange
         ratio for the Homestake  acquisition of the minority interests in Prime
         Resources Inc. (b) reduction of operations at Mt Charlotte mine and (c)
         Homestake's  estimated  nonrecurring charges against 1998 third quarter
         operating results.  Also included in the October 2, 1998 filing was the
         Bylaws,  as amended through  September 25, 1998 and the announcement of
         Gerhard  Ammann  becoming  a new  member of the  Registrant's  Board of
         Directors.


                                       28

<PAGE>


                   Homestake Mining Company and Subsidiaries



                                   SIGNATURES





Pursuant  to the  requirements  of the  Securities  Exchange  Act of  1934,  the
registrant  has duly  caused  this  report  to be  signed  on its  behalf by the
undersigned, thereunto duly authorized.








                                              HOMESTAKE MINING COMPANY









Date:  November  13, 1998                   By /s/ David W. Peat
       ------------------                      -----------------
                                               David W. Peat
                                               Vice President and Controller
                                               (Chief Accounting Officer)



                                       29