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SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-K

x            ANNUAL REPORT PURSUANT TO SECTION 13 or 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

                For the fiscal year ended December 31, 2002

OR

o            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 0-23042

MK GOLD COMPANY

(Exact name of registrant as specified in charter)

60 East South Temple, Suite 2100
Salt Lake City, Utah 84111
(801) 297-6900

(Address of principal executive offices and telephone number)

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

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

Common Stock, par value $.01 per share

(Title of Class)

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

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

Indicate by check mark whether the registrant is an accelerated filer (as defined in Exchange Act Rule 12b-2). Yes o No x

As of June 28, 2002, the aggregate market value of the registrant’s voting and non-voting common stock held by non-affiliates of the registrant based upon the average bid and asked prices reported for such date on the OTC Bulletin Board was approximately $4,291,280.

The number of shares of the registrant’s common stock outstanding as of March 21, 2003 was 37,395,649.

DOCUMENTS INCORPORATED BY REFERENCE

None.

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MK GOLD COMPANY
ANNUAL REPORT ON FORM 10-K
FOR THE YEAR ENDED DECEMBER 31, 2002

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This report contains forward-looking statements that involve risks and uncertainties, including statements regarding our plans, objectives, goals, strategies and financial performance. Our actual results could differ materially from the results anticipated in these forward-looking statements as a result of factors set forth under “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Cautionary Statement for Forward-Looking Information” and elsewhere in this report. Unless the context otherwise requires, “MK Gold,” “we,” “our” and “us” refer to MK Gold Company.

PART I

ITEMS 1. AND 2.  BUSINESS AND PROPERTIES

General

We are in the business of exploring for, acquiring, developing and mining mineral properties. Our primary focus is the development of the Las Cruces copper deposit located in Spain. We are also a joint venture partner in the Castle Mountain gold mine in California, which is currently in the reclamation phase. We are involved in exploration programs in Nevada, Spain and Peru.

The Las Cruces project is a high-grade copper deposit that is currently undergoing permitting. Las Cruces will be an open pit mine with a hydrometallurgical process plant producing cathode copper. We received a positive Declaration of Environmental Impact from the Regional Government of Andalusia, Spain in May 2002, indicating the government’s environmental approval of the project. The positive declaration is required for the issuance of the mining concession and water permits. We expect to receive the mining concession and initial water permits by mid 2003.

The permitting process and development of the Las Cruces project must be completed before production of refined copper can begin. Although we believe we will obtain the necessary permits for mining at the Las Cruces project, we cannot be certain when we will actually receive them or if we will receive them at all. Subject to adequate funding, we expect to begin final design, construction and mine development in 2004 and copper production in 2006. We have experienced delays in developing the Las Cruces project, and we may experience further delays. These delays may affect the timing of development of the project. These delays also could increase the costs of developing the project, affect the economic viability of the project, or prohibit us from completing development of the project.

Mining and ore crushing operations at the Castle Mountain Mine ended in May 2001 and reclamation activities began in June 2001. Our contract mining operations, which consisted of mining services for the Castle Mountain Venture, also ended in May 2001. Based on our current operations, expected overhead expenses and exploration costs, we will not have positive cash flow from operations before production of refined copper begins at the Las Cruces project.

MK Gold was incorporated in Delaware in 1990. Our principal executive offices are located at Eagle Gate Tower, 60 East South Temple, Suite 2100, Salt Lake City, Utah 84111. Approximately 72.8% of our outstanding stock is owned by Leucadia National Corporation, a New York Stock Exchange-listed company.

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Las Cruces Project

On September 1, 1999, we acquired the entire share capital and subordinated debt of Riomin Exploraciones, S.A., from Rio Tinto plc. After this acquisition, we changed the name of Riomin Exploraciones, S.A., to Cobre Las Cruces, S.A. Cobre Las Cruces has permits to investigate four contiguous areas in southwestern Spain, one of which contains the Las Cruces copper deposit. Las Cruces is 20 kilometers northwest of Seville, in an area having a well-developed infrastructure that will support the project’s needs for water, power and transportation.

We purchased Cobre Las Cruces from Rio Tinto for $42 million in cash. As part of the purchase consideration, Rio Tinto will be entitled to receive a 1.5% royalty on any copper sales from the Las Cruces project at a price exceeding $0.80 per pound. We obtained funding for the acquisition of Cobre Las Cruces through borrowings of $20 million under our credit facility with Leucadia, the sale of 18.1 million shares of our common stock to Leucadia for $15.8 million and $6.2 million from our working capital.

Project Feasibility. Bechtel International, Inc., an international engineering and construction company, completed an independent feasibility study for the Las Cruces project in 2001. The feasibility study incorporated results of an environmental impact study completed by FRASA Ingenieros Consultores, a team of national and international environmental engineering experts based in Madrid.

Based on the feasibility study, we forecast that the Las Cruces project will be a low cost producer, with an operating cash cost per pound of copper estimated to average $0.33. Based on an assumed copper price of $0.80 per pound, we believe the Las Cruces project will have the potential for strong margins and after-tax internal rate of return, assuming that we fund 70% of the project’s capital expenditures through debt financing. As of March 21, 2003, the spot price for copper was approximately $0.76 per pound. However, based on historical fluctuations in copper prices, which have ranged from a high of $1.60 in 1989 to a low of $0.59 in 2001, we believe $0.80 per pound is a reasonable price for purposes of estimating the internal rate of return of the project.

In addition to assumptions regarding copper prices, our analysis of the economic viability of the Las Cruces project is based on estimates regarding the total costs to bring the Las Cruces project into commercial production. These estimates are based largely on the feasibility study, which was completed in 2001. Since that time, we have obtained additional information regarding the expected development costs through the permitting process as well as additional internal analysis. We have identified factors that would increase both expected development costs and operating costs. However, we have also identified potential ways to reduce certain costs contemplated by the feasibility study. It is difficult to predict whether the net effect of the cost increases and potential cost savings will have a significant effect on the expected total costs of development of the Las Cruces project. One key factor affecting development costs, for example, is the exchange rate of the euro relative to the U.S. dollar. The exchange rate fluctuates and we cannot predict what the exchange rates will be over the course of development of the project. We do know, however, that the exchange rate for one U.S. dollar has decreased from approximately 1.138 euros, at the time the feasibility study was completed, to its current level of approximately 0.95 euro. If this trend continues, our actual development costs will likely be higher than our estimates based on the feasibility study.

Our forecasts regarding the Las Cruces project are also subject to a number of other risks and uncertainties. Actual results could differ materially from our forecasts as a result of our need for financing, potential delays in development of the Las Cruces project, the imprecision of estimates, the uncertainty of government subsidies, uncertainties associated with closure guarantees or other requirements that may be imposed by the Spanish government, volatility of copper prices, fluctuations in the value of the euro relative to the U.S. dollar and other factors, including those set forth under “Management’s Discussion and Analysis of Financial Condition and Results of Operations – Cautionary Statement for Forward Looking Information” and elsewhere in this report.

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Permitting, Subsidies and Development Activities. In June and July 2001, we submitted subsidy applications to central and regional governments in Spain. Upon their review of the applications, these governments recommended subsidies of up to 53 million euros, or approximately $56 million as of March 21, 2003, subject to final consideration following European Commission review. Because the recommendation exceeded 50 million euros, it required the approval of the European Commission. The European Commission has reviewed the recommended subsidies and considers them to be compatible with the European Commission Treaty. However, we have not received official notice from the central and regional governments indicating the amount of subsidies, if any, that will be granted.

We submitted initial water permit applications in December 2000 to the regional water authority of the Spanish central government. In March 2001, we submitted to the government of Andalusia a mining concession application accompanied by environmental impact and project feasibility studies. We submitted additional water permit applications in April and May 2001, including a permit application for effluent discharge. We have had frequent and responsive interaction with local, regional and central governments in Spain to resolve technical issues and to facilitate the permitting process.

In May 2002, the Department of Environment of the Regional Government of Andalusia, Spain issued a positive Declaration of Environmental Impact for the Las Cruces project. Receipt of the positive declaration is a key milestone in the project’s permitting process and indicates the government’s environmental approval of the project. The positive declaration is also a prerequisite for the regional government to issue a mining concession and allows the regional water authority to finalize the processing of the water permit applications. The mining concession will give us the mining rights and access to all the necessary utilities required to develop the project. In connection with its review of the mining concession application, the Regional Government of Andalusia requested us to undertake a program of additional geotechnical studies to supplement the information contained in the feasibility study. We have completed these studies. This work has delayed the granting of the mining concession. Nevertheless, we expect the mining concession and initial water permits to be granted by mid 2003. While we believe that we will receive these permits, we could encounter unexpected difficulties or further delays. Therefore, we cannot assure you that we will receive them on a timely basis or at all.

We need to purchase 1,174 hectares, or approximately 4.5 square miles, of land and associated rights-of-way to complete the final processing of some of our additional water permit applications. If negotiations with landowners are unsuccessful, we will initiate proceedings to cause the regional government to expropriate that land. Expropriation is commonly used in Spain, in accordance with government laws. Land acquisition activities are expected to begin once the mining concession and initial water permits are granted. Construction and mine development can begin before all land acquisition is finalized.

Orebody and Reserves. The Las Cruces orebody is hosted by a series of Paleozoic-age sedimentary and volcanic rocks that underlie 15 meters of Tertiary-age sandstones and conglomerates. A layer of Tertiary-age calcareous clay marl, up to 150 meters in depth, overlies the sandstone and conglomerates. The orebody, which has no surface expression, has been delineated by 280 drill holes. The orebody is estimated to be 30 meters thick on average, increasing to 100 meters in some areas, and is approximately 1,000 meters in length. A gold bearing gossan exists above the copper mineralization but has not been evaluated.

The Las Cruces ore reserve consists principally of pyrite enriched with chalcocite, covellite and lesser amounts of chalcopyrite and tetrahedrite. The underlying primary mineralization is of lower grade and consists of pyrite, chalcopyrite, sphalerite and galena. Chalcocite is an ore mineral with a relatively high copper content. Covellite, chalcopyrite and tetrahedrite also contain copper, but at lower concentrations than chalcocite. Pyrite, sphalerite and galena do not contain significant levels of copper.

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The table below presents the reserve data for the Las Cruces project as of February 28, 2003.

PROVEN AND PROBABLE RESERVES (1)

______________

   (1)    Reserves are defined as those parts of a mineral deposit that can be economically and legally extracted or produced at the time of determination and are customarily stated in terms of “ore” when dealing with metals. Probable reserves are computed from information similar to that used for proven reserves, but the sites for inspection, sampling and measurement are between 50 and 300 feet apart. The degree of assurance, although lower than that for proven reserves, is high enough to assume continuity. Reserves were calculated by Independent Mining Consultants, Inc., a mining consulting company. Reserves represent mineable and diluted metric tons and do not reflect losses in the recovery process. The estimates of reserves at February 28, 2003 are based on an assumed copper price of $0.80 per pound. Reserve estimates were determined by use of mapping, drilling, metallurgical testing and other standard evaluation methods generally applied by the mining industry, including computer block modeling. If we had used the three-year historic average copper price of $0.76 per pound, there would not have been a material effect on reserves.

Mining and Plant Design. The Las Cruces deposit will be mined using open pit methods. The ore will be drilled, blasted and loaded by front-end loaders into haul trucks. The trucks will haul the ore to the primary crusher located near the processing plant. Trucks will haul the Paleozoic rock waste to a surface storage facility where it will be covered by the impervious marl overburden. During the development phase, 48 million metric tons of overburden will be mined. In the later years of the project, partial backfilling of the pit with marl will occur.

The ore will be crushed and ground using conventional technology consisting of a three stage crushing plant followed by a single stage ball mill. The ball mill will be variable speed to allow the treatment of ores of varying grade and hardness. A ferric leach process will dissolve more than 90% of the copper contained in the ground ore slurry, using a combination of atmospheric leaching and leaching under low pressure and temperature in autoclaves. The dissolved copper will be recovered by solvent extraction and electrowinning, known as SXEW, to produce high purity copper cathodes. We expect the copper cathodes will be sold, after qualification, under the London Metal Exchange Grade A quality designation to end users in Europe.

The plant design will allow for the production of up to 72,000 metric tons per year of cathode copper. The plant will be able to process 3,500 metric tons of ore per day at an average copper recovery of 89%. We expect that ore grades during the first six years will average 6.5% copper, about 9% above the reserve average, which is 5.94%.

Tailings from the process will be filtered, producing a nearly dry material that will be progressively encapsulated in the impervious marl. Tailings are the materials that remain after all metals considered economic have been removed from ore during processing. Dry tailings encapsulation eliminates the need for conventional tailings dams with their associated risk of failure.

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Bechtel provided the process engineering design and produced the feasibility study incorporating the work done by other contractors. Dynatec Corporation, a metallurgical testing and engineering company, conducted the process test work, including several pilot plant runs, to develop the metallurgical flowsheet, or design. AGRA Earth & Environmental Limited, a geotechnical and environmental services company, performed the tailings studies and engineering. Steffen, Robertson and Kirsten, a geotechnical and environmental services company, performed the mine geotechnical design work.

Since our acquisition of the Las Cruces project, we have focused our efforts primarily on developing the project into a low cost, environmentally responsible copper mine. We have given environmental considerations high priority in project design and development at the Las Cruces project. Waste dumps will be continually contoured and reclaimed to enhance the appearance of the Las Cruces project. Protection of the area’s water resources affected by the mine has been carefully studied and planned. Water Management Consultants, a hydrological engineering and design company, developed the water management plan, including the extraction system for dewatering the overlying sand aquifer and re-injection into the aquifer. Water needed to process the ore will be pumped 15 kilometers from a sewage processing plant and treated before use.

Financing. Funding for the development and advancement of the Las Cruces project has principally come from our operating cash flows, cash reserves and credit facility with Leucadia. Our current cash resources will not be sufficient to cover all projected expenses necessary to bring the Las Cruces project into commercial production. We estimate that the total capital costs to bring the Las Cruces project into commercial production are approximately $290 million, including working capital, land purchases and contingencies, but excluding interest and other financing costs. As described above under “Project Feasibility,” our estimated capital costs are subject to a number of uncertainties and our actual capital costs could be higher than our estimates.

We are exploring various financing alternatives for projected costs and expenses associated with the Las Cruces project. In addition, we will need to repay our credit facility. We will not be able to fund the project and repay the credit facility solely from debt financing. We will need to raise a significant amount of the funds from equity investors, which we are considering doing through a subscription rights offering to our existing stockholders. Although we believe that a rights offering is a viable option, we cannot assure you that we will actually commence a rights offering or that, if commenced, such a rights offering will be successful. If we commence a rights offering, we do not expect to do so until the mining concession and initial water permits have been obtained for the Las Cruces project.

We are also considering other sources of financing, including product off-take agreements, which are a type of product sales agreement, supplier financing and equipment leasing. We plan to secure debt financing for approximately 70% of the project’s capital requirements. We expect debt financing to be primarily funded through a syndicated project financing facility using a lead international bank experienced in mining project financing. While we believe that we will be able to obtain financing for the Las Cruces project, we cannot assure you that we will be able to obtain financing on favorable terms or at all. If we are unable to obtain financing when needed, the development of the Las Cruces project could be delayed significantly. Any significant delay could increase the costs of developing the Las Cruces project or prohibit us from completing development of the project.

Castle Mountain

We hold a 25% interest in the Castle Mountain Venture, a California general partnership. Viceroy Resource Corporation holds the remaining 75% interest in the venture. Viceroy serves as the manager of the Castle Mountain Mine, which is the mining project controlled by the Castle Mountain Venture. The mine is located in San Bernardino County, California, approximately 70 miles south of Las Vegas, Nevada.

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The gold reserves at the Castle Mountain Mine were exhausted in May 2001. At that time, mining operations ceased and closure and reclamation began. We expect residual gold production to continue into 2004 as a result of continued heap leaching, a process that uses a weak cyanide solution to extract the gold from the ore.

The Castle Mountain Venture is setting aside a cash reserve to fund the projected closure and reclamation costs. Our share of the cash reserve was $2.0 million at December 31, 2002.

Contract Mining. Under a contract mining agreement with the Castle Mountain Venture, we performed mining services at the Castle Mountain Mine until May 2001. These services included all work necessary to bring the ore to the crusher, including removal of overburden and waste materials, drilling and blasting, and hauling.

Castle Mountain Venture Operations. In 2002, our 25% share of cash flow from Castle Mountain Venture operations was $3.8 million. The venture’s gold production was 56,662 ounces with cash costs of $108 per ounce. Our 25% share of production in 2002 was 14,029 ounces as compared to 19,167 ounces for the year ended December 31, 2001.

Several mining claims controlled by the Castle Mountain Venture are subject to production-based net smelter return royalty payments and other royalty payments. Under the royalty agreements, the venture is required to make annual production or minimum royalty payments to third parties. Royalty payments made by the venture for 2002 totaled $0.7 million, including our attributable share of $0.2 million.

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The following table contains operating data for the Castle Mountain Venture for the years ended December 31, 2002, 2001 and 2000. The data are for the venture as a whole, of which our attributable share is 25%.

OPERATING DATA
(in thousands, except grade and ounces)

______________

(1)       These data include ore that has been previously mined and stockpiled.

(2)       These data include gold that is extracted during milling, but not gold that is leached from milled material after the material is stacked on the leach pad.

(3)       Production for 2002 was the result of continued leaching from the leach pad.

Exploration

We are continuing to search for profitable investment opportunities. We have grassroots, or early stage, exploration programs in Nevada and Spain. In addition, we conducted field examinations on 68 properties during 2002, primarily in North and South America.

Mining exploration is highly speculative in nature, involves many risks and frequently is nonproductive. We cannot assure you that our mineral exploration efforts will be successful. Once mineralization is discovered, it may take a number of years from the initial phases of drilling until production is possible, during which time the economic feasibility of production may change. Substantial expenditures are required to establish ore reserves through drilling, to determine metallurgical processes to extract the metals from the ore and, in the case of new properties, to construct mining and processing facilities. As a result of these uncertainties, we cannot assure you that our exploration programs will result in the discovery of economic ore reserves or the development of mining projects.

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In connection with our purchase of Cobre Las Cruces, we entered into a farm-in agreement, which is a type of joint venture agreement, with Riomin Iberica S.A., which is a member of the Rio Tinto Group. Riomin Iberica holds a package of exploration permits west of the Las Cruces project. Under the agreement, we must incur $0.5 million in exploration related expenses by February 24, 2004. As of December 31, 2002, we had incurred $0.3 million of these expenses. We may, at our option, spend an additional $1.0 million by February 24, 2006 to earn a 51% interest in the joint venture. Otherwise, we will not earn any ownership interest in the venture. The package, including permits granted and under application, covered 497 square kilometers as of March 2003. Field work in 2002 included mapping, soil geochemistry and gravity surveys.

In July 2000, we became a limited partner in Peru Exploration Venture LLLP. The general partner is Bear Creek Mining Company. The principal objective of the partnership is to acquire precious and base metal properties in Peru. Our commitment to the partnership is $1.0 million over a two-year period, which we fully funded as of December 31, 2001.

On May 29, 2002, the partnership entered into a letter agreement with EVEolution Ventures, Inc., a Canadian capital pool company listed on the TSX Venture Exchange, pursuant to which EVEolution Ventures will acquire all outstanding limited partnership interests and all outstanding shares of Bear Creek Mining Company in exchange for shares in EVEolution. If this transaction is completed, EVEolution will be a publicly traded mineral exploration company and we will be a minority shareholder of EVEolution.

Competition

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

There is a global market for gold and copper. We sell gold and, if we are able to bring the Las Cruces project into production, we expect to sell copper, at prevailing market prices. We do not believe that any single company or other institution has sufficient market power to significantly affect the price or supply of these metals.

Industry Segment Data

Industry segment data for us is provided in note 8 to our consolidated financial statements, included in Part II of this report.

Regulatory and Environmental Matters

General. All of our exploration, development and production activities in the United States, Spain and Peru are subject to regulation by governmental agencies under various environmental laws. These laws address emissions to the air, discharges to water, management of wastes, management of hazardous substances, protection of natural resources, antiquities and endangered species, and reclamation of lands disturbed by mining operations. We believe that we are in substantial compliance with applicable environmental regulations. Many of the regulations also require us to obtain permits for our activities. These permits normally are subject to public review processes resulting in public approval of the activity. While these laws and regulations govern how we conduct many aspects of our business, we do not believe that they have a material adverse effect on our results of operations or financial condition. We evaluate our projects in light of the cost and impact of environmental regulation on the proposed activity. We evaluate new laws and regulations as they develop to determine the impact on, and changes necessary to, our operations. It is possible that future changes in these laws or regulations could have a significant impact on some portion of our business, causing us to reevaluate those activities at that time.

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Our past and future activities may also cause us to be subject to liabilities under provisions of the Comprehensive Environmental Response, Compensation and Liability Act of 1980, as amended, or CERCLA, and analogous state law. These laws impose strict liability on various categories of potentially responsible parties, including current property owners, for releases or threatened releases of hazardous substances into the environment which require cleanup.

Generally, compliance with environmental laws and regulations requires us to obtain permits issued by regulatory agencies and to file various reports and keep records of our operations affecting the environment. Some permits require periodic renewal or review of their conditions. We cannot predict whether we will be able to renew these permits or whether material changes in permit conditions will be imposed. Non-renewal of permits or the imposition of additional conditions could have a material adverse effect on our financial condition, results of operations and liquidity.

We are committed to fulfilling our requirements under applicable environmental laws and regulations. These laws and regulations are continually changing and, as a general matter, are becoming more restrictive. Our policy is to conduct our business in a manner that safeguards public health and mitigates the environmental effects of our mining operations. To comply with these laws and regulations, we have made, and in the future may be required to make, capital and operating expenditures.

Reclamation. For regulatory purposes, reclamation does not mean restoring the land to its pre-mining state. Rather, it is returning the post-mining land to a state which has stability and utility comparable to pre-mining conditions. Reclamation concerns include stabilization and vegetation of disturbed lands, controlling drainage from portals and waste rock dumps, removal of roads and structures, neutralization or removal of process solutions and visual aesthetics.

Employees

At December 31, 2002 we employed 29 people, including one in our gold sales operations, 18 at the Las Cruces project and ten at our home office. In addition to our geology staff, we use contract professionals to conduct exploration throughout the world.

Available Information

We are subject to the informational requirements of the Securities Exchange Act of 1934. Accordingly, we file periodic reports, proxy statements and other information with the Securities and Exchange Commission. These reports, proxy statements and other information may be obtained by visiting the Public Reference Room of the Securities and Exchange Commission at 450 Fifth Street, NW, Washington, D.C. 20549 or by calling the Securities and Exchange Commission at 1-800-SEC-0330. In addition, the Securities and Exchange Commission maintains an Internet site (http://www.sec.gov) that contains reports, proxy and information statements and other information regarding issuers that file electronically.

You can access financial and other information on our website. The address is www.mkgold.com. We make available, free of charge, copies of our annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K and amendments to those reports filed or furnished pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of 1934 as soon as reasonably practicable after filing such material electronically or otherwise furnishing it to the Securities and Exchange Commission.

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ITEM 3.          LEGAL PROCEEDINGS

We are subject to various litigation which arises in the course of our business. Based on discussions with counsel, we are of the opinion that such litigation will have no material adverse effect on our financial position, results of operations or liquidity.

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

Not applicable.

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PART II

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

Market Information

Our common stock is traded on the NASD OTC Bulletin Board under the symbol “MKAU.” Prior to January 1999, our common stock was traded on the Nasdaq National Market System.

The following table sets forth, for our common stock, by quarter, the high and low bid quotations per share as reported by the OTC Bulletin Board for the years ended December 31, 2002 and 2001 and the first quarter of 2003 (through March 21, 2003). The high and low bid quotations reflect inter-dealer prices, without retail mark-up, mark-down or commission and may not necessarily represent actual transactions.

Holders

As of March 21, 2003, the number of registered holders of our common stock was approximately 150 (not including beneficial owners of our common stock held in the name of a broker, dealer, bank, voting trustee or other nominee).

Dividends

We have never paid dividends, and we do not currently intend to pay any cash dividends with respect to our common stock in the future.

ITEM 6.          SELECTED FINANCIAL DATA

The following selected financial data have been summarized from our consolidated financial statements and are qualified in their entirety by reference to, and should be read together with, our consolidated financial statements and “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” below.

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MK GOLD COMPANY

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

______________

(a)       London PM Fix.

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

(c)       Average cost per ounce includes only the cost incurred by the Castle Mountain Venture.

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ITEM 7.          MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

You should read the following discussion and analysis together with our selected five-year financial data, our consolidated financial statements and the notes to our consolidated financial statements, which appear elsewhere in this report. We report undivided interests in joint ventures using pro rata consolidation, whereby we consolidate our proportionate share of assets, liabilities, revenues and expenses.

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

Critical Accounting Policies and Estimates

Our discussion and analysis of our financial condition and results of operations are based upon our consolidated financial statements. The preparation of these financial statements in accordance with accounting principles generally accepted in the United States requires us to make estimates about the effect of matters that are uncertain and to make difficult, subjective and complex judgments. These estimates and assumptions affect the reported amounts in the financial statements and disclosure of contingent assets and liabilities. On an on-going basis, we evaluate all of these estimates and judgments. Actual results could differ from these estimates. We believe that the following accounting policies are the most critical because they have the greatest impact on our financial condition and results of operations and require our management’s most difficult, subjective and complex judgments.

Proven and Probable Ore Reserves. Reserves are defined as those parts of a mineral deposit that can be economically and legally extracted or produced at the time of determination and are customarily stated in terms of “ore” when dealing with metals. Probable reserves are computed from information similar to that used for proven reserves, but the sites for inspection, sampling and measurement are between 50 and 300 feet apart. The degree of assurance, although lower than that for proven reserves, is high enough to assume continuity.

Reserves for our Las Cruces project were calculated by Independent Mining Consultants, a mining consulting company. The estimates were determined by use of mapping, drilling, metallurgical testing and other standard evaluation methods applied by the mining industry, including computer block modeling. The estimates are based on an assumed copper price of $0.80 per pound, and other estimates relating to mine development costs and operating costs. Based on historical fluctuations in copper prices, we believe $0.80 per pound is a reasonable estimate for purposes of determining reserves at the Las Cruces project. Further, a 12.5% decrease in the assumed copper price, to $0.70 per pound, would not have a material effect on the reserves. As of March 21, 2003, the spot price for copper was approximately $0.76 per pound.

Our reserve estimates could change as a result of changes in estimates relating to production costs or copper prices. Because the Las Cruces project has not commenced production, it is highly likely that the ore reserves for Las Cruces will require revision based on actual production experience.

Declines in the market price for copper, as well as increased production or capital costs or reduced recovery rates, may render ore reserves at the Las Cruces project uneconomic. If copper prices decline substantially below the levels set for calculation of reserves for an extended period, there could be material delays in developing the Las Cruces project. Reserves should not be interpreted as assurances of mine life

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or the profitability of future operations. No assurance can be given that the estimate of the amount of copper or the indicated level of recovery of copper will be realized at the Las Cruces project.

Closure and Reclamation. We estimate future reclamation and mine closure costs mainly on the basis of legal and regulatory requirements. We accrue and charge these costs over the expected operating lives of our mines using the units-of-production method. At various times we review the adequacy of our closure and reclamation accruals based on our current estimates of future costs and set aside adequate cash reserves to fund those costs. In the event that actual costs differ from those estimates, our results of operations, liquidity and financial condition will be affected.

During May 2001, mining operations ceased and closure and reclamation activities began at the Castle Mountain Mine. The Castle Mountain Venture has set aside a cash reserve to fund the projected closure and reclamation costs. Our share of the cash reserve was $2.0 million at December 31, 2002. We have accrued $1.8 million for our share of these projected closure and reclamation costs. We have reviewed the closure and reclamation accrual and believe it is sufficient. However, it is possible that the ultimate closure and reclamation costs could change in the future as reclamation activities are carried out and new information becomes known. Changes to our estimates for closure and reclamation costs could have a material effect on our future financial condition, results of operations and liquidity. As more fully described under “Recently Issued Accounting Standards,” we have adopted Statement of Financial Accounting Standards No. 143, “Accounting for Asset Retirement Obligations,” as of January 1, 2003. The adoption of this Statement did not have a significant effect on our financial position or results of operations.

Capitalization of Development Costs. We expense mineral exploration costs as they are incurred. When we determine that a mineral property is economically viable, we capitalize, as mining property costs, the cost of subsequent reserve definition and expansion and property development costs. Subsequent reserve definition and expansion costs include drilling, assaying, computer block modeling and financial evaluation. Property development costs include interest on funds borrowed to finance the acquisition and costs necessary to advance the project through the permitting and project financing stages.

We capitalize, as mine development costs, all costs incurred to bring a mine into production, including land acquisition, interest, construction costs for buildings, plants, shaft sinking, permanent excavations, roads, tunnels and advance removal of overburden and waste rock.

We charge mining property, mine development and depreciation costs to operations using the units-of-production method based on proven and probable ore reserves. We initially defer costs relating to stockpiled ore as inventory costs and expense them in future periods when the ore is processed.

In the event that we determine that a property or project is no longer economically viable or that the investment is no longer recoverable, we will record a loss and write the investment down to its fair value.

As of December 31, 2002, we had capitalized a total of $20.2 million of mine development costs related to the Las Cruces project. We believe capitalization of these costs is appropriate based on our assessment of the economic viability of the Las Cruces project. The economic viability of the Las Cruces project, however, depends on a number of assumptions and estimates relating to ore reserves, costs of development and production and copper prices. Significant changes in these estimates could render all or a portion of the Las Cruces ore reserves uneconomic. If this were to occur, we would write down our investment in Las Cruces to its fair value and record a loss for the impairment associated with the uneconomic ore reserves and related capitalized mine development costs.

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Deferred Tax Asset and Tax Valuation Allowance. When we incur a net operating loss, we record a deferred tax asset to offset future tax expense. When we believe we will not be able to use a deferred tax asset, we record a valuation allowance against that deferred tax asset. Recording a deferred tax asset increases income and recording a valuation allowance decreases income in the period recorded. Due to past net operating losses, we have recorded a gross deferred tax asset of approximately $20.3 million as of December 31, 2002. We have also recorded a valuation allowance against a substantial portion of this asset. In the future, if we determine that we will be able to use all or a portion of our deferred tax asset, we will record an adjustment, increasing income in that period.

Results of Operations for the Twelve Months Ended December 31, 2002 Compared to the Twelve Months Ended December 31, 2001

Gold Production. Our attributable share of gold production from the Castle Mountain Venture decreased 27% to 14,029 ounces in 2002 from 19,167 ounces in 2001. The decrease in production is due to the completion of mining activities at the Castle Mountain Mine in May 2001. Future gold production will continue to decline as residual gold is recovered from the leach pads during the closure and reclamation phase at the mine. Residual gold production is expected to continue into 2004.

Revenue. Historically, our revenues came from two sources, contract mining and the sale of gold from the Castle Mountain Mine. Due to the completion of mining activities at the mine in 2001, we no longer receive any revenue from contract mining, and gold production is limited to residual production during reclamation at the mine. Therefore, our revenue will continue to decrease significantly until residual gold production ceases at the mine, which we expect to be in 2004. Once this residual gold production ceases, based on our current operations, we will have no revenues until production begins at the Las Cruces project.

Our product sales revenue decreased $1.2 million, or 19%, to $4.8 million for 2002, compared to $6 million for 2001. The decrease in revenue is due to declining gold production, partially offset by higher realized gold prices. Product sales revenue for 2001 includes the recognition of $0.5 million of deferred revenue. Future product sales revenue will decline as residual gold production decreases during the reclamation and closure phase at the Castle Mountain Mine.

During 2002, we sold no ounces of gold under forward sales contracts and 15,510 ounces of gold on the spot market. During 2001, we sold 10,200 ounces of gold under forward sales contracts and 9,700 ounces of gold on the spot market. We had no ounces of gold sold under forward sales contracts as of December 31, 2002. While we have used forward sales contracts in the past, we expect that our future gold sales from residual production at the Castle Mountain Mine will be made primarily at spot prices.

For 2002, the average price realized per ounce of gold was $309, compared to $277 per ounce for 2001. The average spot price for 2002 was $310 per ounce, compared to $271 per ounce for 2001.

We received no revenue from mining services for 2002, compared to $1.3 million for 2001. As a result of the completion of mining activities at the Castle Mountain Mine in May 2001, there will be no future mining services revenue from the mine.

Gross Profit. We recognized a gross profit from product sales of $2.3 million for 2002, compared to a gross loss from product sales of $0.1 million for 2001. The higher gross profit in 2002 is due to higher realized gold prices and lower production costs. Future gross profit will decline as residual gold production decreases at the Castle Mountain Mine.

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There was no gross profit from contract mining operations for 2002, compared to a gross loss from contract mining operations of $0.2 million for 2001. Mining operations were completed at the Castle Mountain Mine in 2001.

Exploration Costs. Our exploration costs decreased 6% to $0.67 million compared to $0.72 million in 2001. Our exploration expenditures decreased in 2002 because we acquired interests in fewer properties, and we focused our mapping and sampling activities on fewer properties. In addition to our exploration programs in Nevada and Spain, we conducted 68 field examinations during 2002. We continue to seek opportunities throughout the world. See Items 1 and 2, “Business and Properties—Properties and Operations.”

General and Administrative Expenses. Our general and administrative expenses for 2002 decreased $0.8 million, or 31%, to $1.7 million, compared to $2.4 million in 2001. The decrease in expenses is due primarily to higher legal and non-recurring payroll related costs in 2001.

Gain (Loss) on Disposal of Assets. During 2002, we decided not to renew a purchase option on a portion of the land needed to develop the Las Cruces project. Our management believes that the purchase price of the option is significantly above the market value of the land and that we will be able to acquire the land either through negotiations with the landowner or through expropriation. We wrote off the book value of the land purchase option as a loss on disposal of assets of $0.9 million during the third quarter of 2002. This loss was partially offset by a $0.6 million gain on disposal of mining equipment and other assets at the Castle Mountain Mine during 2002.

Unconsolidated Affiliate. In July 2000, we became a limited partner in Peru Exploration Venture LLLP. The general partner is Bear Creek Mining Company. The principal objective of the partnership is to acquire precious and base metal properties in Peru. We account for this investment using the equity method of accounting. Our commitment to the partnership is $1.0 million over a two-year period, which we fully funded as of December 31, 2001. Our share of loss from the partnership for the year ended December 31, 2002 was $0.3 million compared to $0.5 million for the year ended December 31, 2001.

On May 29, 2002, the partnership entered into a letter agreement with EVEolution Ventures, Inc., a Canadian capital pool company listed on the TSX Venture Exchange, pursuant to which EVEolution Ventures agreed to acquire all outstanding limited partnership interests and all outstanding shares of Bear Creek Mining Company in exchange for shares of EVEolution. If this transaction is completed, EVEolution will be a publicly traded mineral exploration company and we will be a minority shareholder of EVEolution.

Litigation Settlement. During 2001, we recognized a gain on litigation settlement, with Washington Group International, Inc. (formerly known as Morrison Knudsen Corporation), of $0.6 million after deducting related legal expenses.

Bankruptcy Recovery. As part of a court approved bankruptcy settlement, unsecured creditors of Washington Group International, Inc. will receive 15% of the common stock of Washington Group. As an unsecured creditor, in the second quarter of 2002, we received an initial distribution of 13,889 shares and warrants to purchase an additional 23,667 shares of Washington Group, with a combined market value of $0.3 million. We recorded this amount as income in the second quarter. In the third quarter of 2002, we received an additional distribution of 4,845 shares and warrants to purchase an additional 8,257 shares of Washington Group, with a combined market value of $0.1 million. We recorded this amount, net of related legal expenses, as income in the third quarter. The securities are classified as available for sale and any unrealized gains and losses are reflected as a component of other comprehensive income.

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Interest Expense. Interest expense for 2002 consisted primarily of the cost of the commitment fee on our credit facility, which is based on the amount available under the facility. For 2002, we capitalized $1.4 million in interest relating to the Las Cruces project.

Income Tax Provision. Due to past net operating losses, we have recorded a gross deferred tax asset of approximately $20.3 million as of December 31, 2002. We have also recorded a valuation allowance against a substantial portion of this asset, resulting in a net deferred tax asset of $2.1 million. Deferred tax liabilities are partly offset by this deferred tax asset, resulting in a net deferred tax liability of $4.0 million.

Results of Operations for the Twelve Months Ended December 31, 2001 Compared to the Twelve Months Ended December 31, 2000

Gold Production. Our attributable share of gold production from the Castle Mountain Venture decreased 35% to 19,167 ounces in 2001 from 29,419 ounces in 2000. The decrease in production was due to the completion of mining activities at the Castle Mountain Mine in May 2001. The decrease also reflects lower volumes of ore mined at the mine during the first four months of 2001.

Revenue. During 2001 and 2000, our revenues came from two sources, contract mining and the sale of gold from the Castle Mountain Mine.

Our product sales revenue decreased $5.3 million, or 47%, to $6.0 million for 2001, compared to $11.3 million for 2000. Our average price realized per ounce of gold decreased to $277 during 2001, compared to $314 in 2000. Our low product sales revenue in 2001 was the result of lower prices realized per ounce of gold, due to depressed spot prices, and fewer ounces of gold sold, due to decreased production at the Castle Mountain Mine.

Our revenue from mining services depended primarily on the quantities of materials mined during the period. Our revenue from mining services decreased 79% to $1.3 million in 2001 from $6.1 million in 2000. Our revenue decreased due to the completion of mining activities at the Castle Mountain Mine in May 2001. The decrease in revenue also reflected a reduction in the mining rate at the mine before the completion of mining activities, which was implemented in March 2000 in order to avoid the stockpiling of ore. As a result of mining completion, there was no mining services revenue during the third or fourth quarter of 2001.

Our product sales revenue represented 82% of our total revenue for 2001, compared to 65% for 2000.

Mining service revenues represented 18% of our total revenue for 2001, compared to 35% for 2000. Revenue from contract mining ended in 2001 with the completion of mining at the Castle Mountain Mine.

Forward Sales Activity. For 2001, our average gold price realized per ounce for the 19,900 ounces sold was $277 per ounce, compared to an average spot price of $271 per ounce. During 2001, we delivered 10,200 ounces of gold under forward sales contracts at an average price of $284 per ounce. For 2000, our average price realized for the 32,100 ounces sold was $314 per ounce, compared with an average spot price of $279 per ounce. During 2000, we delivered 29,000 ounces of gold under forward sales contracts at an average price of $318 per ounce. At December 31, 2001, we had no ounces of gold sold forward.

Gross Profit. Our gross profit from product sales decreased 103% to a $0.1 million gross loss in 2001 from a $3.6 million gross profit in 2000. As a percentage of product sales, gross loss was 2% in 2001

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compared to gross profit of 32% in 2000. The decline in our gross profit resulted primarily from lower prices realized per ounce of gold, due to depressed spot prices, and fewer ounces of gold sold, due to decreased production at the Castle Mountain Mine.

Our gross profit from mining services decreased 135% to a $0.2 million gross loss in 2001 from a $0.4 million gross profit in 2000. As a percentage of mining services revenue, gross loss was 12% in 2001 compared to gross profit of 7% in 2000. The decline in our gross profit from mining services resulted from the completion of mining at the Castle Mountain Mine in May 2001. The decline in gross profit from mining services also reflected a reduction in tons mined at the mine before the completion of mining.

Exploration Costs. Our exploration costs decreased 30% to $0.7 million compared to $1.0 million in 2000. Our exploration expenditures decreased in 2001 because we acquired interests in fewer properties, we focused our mapping and sampling activities on fewer properties, and we conducted no drilling activities on properties we were evaluating. In addition to our exploration programs in Nevada and Spain, we conducted 43 field examinations during 2001.

General and Administrative Expenses. Our general and administrative expenses for 2001 increased $0.4 million, or 22%, to $2.4 million, compared to $2.0 million in 2000. The increase in expenses was due primarily to employee termination costs and professional services related to the Las Cruces project.

Gain on Sale of Assets. Our gain on sale of assets increased $0.19 million to $0.20 million in 2001 from $0.01 million in 2000. The increase was due to the sale of operating assets of the Castle Mountain Venture due to mine closure.

Unconsolidated Affiliate. In July 2000, we became a limited partner in Peru Exploration Venture LLLP. The general partner is Bear Creek Mining Company. The principal objective of the partnership is to acquire precious and base metal properties in Peru. We account for this investment using the equity method of accounting. Our commitment to the partnership is $1.0 million over a two-year period, which we have fully funded as of December 31, 2001. Our share of loss from the partnership for the year ended December 31, 2001 was $0.5 million compared to $0.2 million for the year ended December 31, 2000.

Litigation Settlement. In 1996, we sued Morrison Knudsen Corporation, now known as Washington Group International, Inc., our former principal shareholder, for breach of a noncompete agreement. During 2001, we settled our claims against Morrison Knudsen. As a result of this settlement, we recognized a gain of $0.6 million after deducting related legal expenses.

Investment Income. Our investment income decreased 72% to $0.09 million in 2001 from $0.31 million in 2000, primarily because we had less cash and cash equivalents during 2001 than we had in 2000. During 2000, we funded development costs at the Las Cruces project with our existing cash and cash equivalents and began drawing on our credit facility in late 2000 when available cash and cash equivalents became limited. We continued to draw on our credit facility in 2001.

Interest Expense. Our interest expense decreased 26% to $0.02 million in 2001 from $0.03 million in 2000. Interest expense for 2001 consisted primarily of the cost of the commitment fee on our credit facility, which is based on the amount available under the facility. The decrease was due primarily to increased borrowings under the credit facility, which resulted in a lower amount available and, consequently, a lower commitment fee. For 2001, we capitalized $1.8 million in interest relating to the Las Cruces project.

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Income Taxes. The reduction in our deferred tax asset and the corresponding recognition of income tax expense is the result of the reversal of temporary differences relating to deferred revenue. See note 9 to our consolidated financial statements.

Liquidity and Capital Resources

Our principal sources of funds are our available resources of cash and cash equivalents, equity securities, cash generated from residual gold production at the Castle Mountain Mine and our credit facility. At December 31, 2002, we had cash and cash equivalents of $1.4 million, equity securities of $0.3 and gold bullion of $0.1 million, representing an increase in cash and cash equivalents, equity securities and gold bullion of $0.03 million from December 31, 2001. At December 31, 2002, we had $8.1 million of available borrowings under our credit facility. We expect that our cash and cash equivalents and available borrowings under our credit facility will be sufficient to cover operating expenses through 2003. However, our cash resources will not be sufficient to cover all projected costs and expenses necessary to commence mining at the Las Cruces project. Basic engineering and land acquisition activities are scheduled to begin at the project once the mining concession and initial water permits have been granted. We will require financing in order to proceed with basic engineering and land acquisition activities. We estimate that the capital cost will be approximately $290 million to bring the Las Cruces project into production, excluding interest and other financing costs.

Until May 2001, our revenues came from two sources, contract mining at the Castle Mountain Mine and the sale of gold from the mine. Since the completion of mining activities at the Castle Mountain Mine in May 2001, our only source of revenue has been sales of residual gold recovered from the leach pads during the closure and reclamation phase at the mine. Based on our current operations, expected overhead expenses and exploration costs, we will not have positive cash flow from operations before production of refined copper begins at the Las Cruces project.

Net cash provided by operating activities was $1.3 million for 2002, compared to net cash used by operating activities of $0.2 million for 2001 and net cash provided by operating activities of $1.4 million for 2000. The increase in cash from operations in 2002 compared to 2001 is due primarily to higher realized gold prices, lower production costs and decreased exploration and general and administrative expenditures.

In March 1998, we entered into a $20 million credit facility with Leucadia National Corporation. Through various amendments, the most recent of which was effective September 30, 2002, the credit facility was amended to increase the amount of the facility to $40 million and to extend the expiration to January 2, 2004. Leucadia may terminate the credit facility on December 15 of any year, provided Leucadia notifies us of the termination prior to September 15 of that year. Leucadia has notified us that it does not intend to terminate the credit facility prior to January 2, 2004. At December 31, 2002, we had outstanding borrowings under the credit facility of $31.9 million. Loans outstanding under the credit facility bear interest equal to the prime rate and interest and commitment fees are payable quarterly. The prime rate at December 31, 2002 was 4.25%. Interest paid to Leucadia under the credit facility for the year ended December 31, 2002 was approximately $1.4 million. A substantial portion of these interest payments relates to financing for the Las Cruces project. Interest related to the Las Cruces project is capitalized and is not reflected as interest expense in our consolidated statements of operations. Instead, capitalized interest is added to mining properties, plant and mine development on our consolidated balance sheets.

We are exploring various financing alternatives for projected costs and expenses associated with the Las Cruces project. In addition, we will need to repay our credit facility. We will not be able to fund the project and repay the credit facility solely from debt financing. We will need to raise a significant amount of the funds from equity investors, which we are considering doing through a subscription rights

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offering to our existing stockholders. Although we believe that a rights offering is a viable option, we cannot assure you that we will actually commence a rights offering or that, if commenced, such a rights offering will be successful. If we commence a rights offering, we do not expect to do so until the mining concession and initial water permits have been obtained for the Las Cruces project.

We are also considering other sources of financing, including product off-take agreements, which are a type of product sales agreement, supplier financing and equipment leasing. We plan to secure debt financing for approximately 70% of the project’s capital requirements. We expect debt financing to be primarily funded through a syndicated project financing facility using a lead international bank experienced in mining project financing. While we believe that we will be able to obtain financing for the Las Cruces project, we cannot assure you that we will be able to obtain financing on favorable terms or at all. If we are unable to obtain financing when needed, the development of the Las Cruces project could be delayed significantly. Any significant delay could increase the costs of developing the Las Cruces project or prohibit us from completing development of the project.

Our sources of funds available to fund new mining projects are limited. We used a significant portion of our existing sources of funds to acquire the Las Cruces project for $42 million in September 1999. Accordingly, our ability to begin new mining projects depends on our ability to obtain additional sources of funds to finance these mining projects. While we believe that we may be able to obtain financing for new mining projects through project financing or otherwise, we cannot assure you that we will be able to obtain financing on favorable terms or at all.

Additions to mining properties, plant and mine development totaled $3.5 million for 2002, $4.8 million for 2001 and $10.6 million for 2000. For all periods presented, additions to mining properties, plant and mine development consisted of: (1) mine development expenditures; (2) construction expenditures for buildings, machinery, plant and equipment; (3) expenditures for mobile mining service equipment; and (4) capitalized interest. Development costs incurred at the Las Cruces project, including interest costs, are capitalized and are reflected as investing activities in our consolidated statements of cash flows. The principal source of funds that we used to fund project development at the Las Cruces project was our credit facility with Leucadia.

Upon completion of production at a mine, we must make expenditures for reclamation and closure of the mine. We provide for future reclamation and mine closure liabilities on a units-of-production basis. At December 31, 2002, we had accrued $1.9 million for these costs, including $1.8 million for the Castle Mountain Mine. In addition to the accruals, we and Viceroy Resource Corporation, the owner of the remaining 75% interest in the Castle Mountain Venture, are depositing cash, including all proceeds from the sale of plant and equipment, in a separate fund to cover future reclamation costs at the venture properties. Our share of this fund totaled $2.0 million at December 31, 2002. We review the adequacy of our reclamation and mine closure liabilities in light of current laws and regulations and adjust our liabilities as necessary.

As shown below, at December 31, 2002, our contractual cash obligations totaled approximately $32 million. Our credit facility requires us to maintain certain financial ratios. Our credit facility also contains limitations on investments, liens, contingent obligations and other similar matters. We are in compliance with all of these restrictions.

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Contractual Obligations

(1)       This amount represents the outstanding principal balance under our $40 million credit facility with Leucadia at December 31, 2002. Leucadia may terminate the credit facility on December 15 of any year, provided Leucadia notifies us of the termination prior to September 15 of that year. Leucadia has notified us that it does not intend to terminate the credit facility prior to January 2, 2004. The credit facility has an expiration date of January 2, 2004.

Off-Balance Sheet Arrangements

Surety bonds and letters of credit totaling $2.4 million, of which our share is $0.72 million, have been provided as required by various governmental agencies for environmental protection, including reclamation bonds of $0.23 million relating to the American Girl Mine and $0.49 million relating to the Castle Mountain Mine. If closure and reclamation obligations under these agreements are not met, the agencies could draw on these bonds and letters of credit to fund expenditures for reclamation and closure requirements. We own a 53% undivided interest in the American Girl Mining Joint Venture, which operated the American Girl Mine. Mining operations ended at the American Girl Mine in 1996, and reclamation was completed in 2000.

Share Repurchase Program

In October 1998, we announced a share repurchase program. Our board of directors authorized the repurchase of up to 2 million shares. As of March 21, 2003, we had repurchased 173,700 shares under the repurchase program. We did not repurchase any shares during 2002.

Recently Issued Accounting Standards

In June 2001, the Financial Accounting Standards Board, or FASB, issued Statement of Financial Accounting Standards, or SFAS, No. 143, “Accounting for Asset Retirement Obligations,” which is effective for fiscal years beginning after June 15, 2002. SFAS No. 143 requires recognition of the fair value of liabilities associated with the retirement of long-lived assets when a legal obligation to incur such costs arises as a result of the acquisition, construction, development and/or the normal operation of a long-lived asset. Upon recognition of the liability, a corresponding asset is recorded and depreciated over the remaining life of the long-lived asset. We have adopted SFAS No. 143 as of January 1, 2003. The adoption of SFAS No. 143 did not have a significant effect on our financial position or results of operations.

In July 2002, the FASB issued SFAS No. 146, “Accounting for Costs Associated with Exit or Disposal Activities,” which is effective for exit or disposal activities that are initiated after December 31, 2002. SFAS No. 146 addresses issues related to the recognition, measurement, and reporting of costs associated with exit and disposal activities, including restructuring activities, and nullifies Emerging Issues Task Force Issue No. 94-3, “Liability Recognition for Certain Employee Termination Benefits and Other Costs to Exit an Activity (including Certain Costs Incurred in a Restructuring).” SFAS No. 146 requires a liability be recognized at fair value for costs associated with exit or disposal activities only when a liability

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is incurred as opposed to at the time we commit to an exit plan. We do not believe that the adoption of SFAS No. 146 will have a significant effect on our financial position or results of operations.

In December 2002, the FASB issued SFAS No. 148, “Accounting for Stock-Based Compensation – Transition and Disclosure – an amendment of FASB Statement No. 123.” SFAS No. 148, which is effective for years ending after December 15, 2002, provides alternative methods for a voluntary change to the fair value based method of accounting for stock-based employee compensation and requires prominent disclosure about the method of accounting for stock-based employee compensation and the effect of the method used on reported results. The adoption of SFAS No. 148 did not have a significant effect on our financial position and results of operations.

In November 2002, the FASB issued FASB Interpretation Number, or FIN, 45, “Guarantor’s Accounting and Disclosure Requirements for Guarantees, Including Indirect Guarantees of Indebtedness of Others (an interpretation of SFAS No. 5, 57, and 107 and rescission of FIN 34).” FIN 45 requires a guarantor for certain guarantees to recognize, at the inception of a guarantee, a liability for the fair value of the obligation undertaken in issuing the guarantee. The initial recognition and initial measurement provisions of FIN 45 are applied on a prospective basis to guarantees issued or modified after December 31, 2002. In addition, FIN 45 modified the disclosure requirements for such guarantees effective for interim or annual periods ending after December 15, 2002. We do not believe that the adoption of FIN 45 will have a significant effect on our financial position or results of operations.

In January 2003, the FASB issued FIN 46, “Consolidation of Variable Interest Entities, an interpretation of ARB 51.” FIN 46 addresses consolidation of variable interest entities, which are entities in which equity investors do not have the characteristics of a controlling financial interest or do not have sufficient equity at risk for the entity to finance its activities without additional subordinated financial support from other parties. FIN 46 is effective immediately for variable interest entities created after January 31, 2003, and variable interest entities in which an enterprise obtains an interest after that date. FIN 46 applies in the first fiscal year or interim period beginning after June 15, 2003 to variable interest entities in which an enterprise holds a variable interest that it acquired before February 1, 2003. FIN 46 may be applied prospectively with a cumulative effect adjustment as of the date on which it is first applied or by restating previously issued financial statements with a cumulative effect adjustment as of the beginning of the first year restated. We do not believe that the adoption of FIN 46 will have a significant effect on our financial position or results of operations.

Cautionary Statement for Forward-Looking Information

Certain information set forth in this Annual Report on Form 10-K contains “forward-looking statements” within the meaning of federal securities laws. These forward-looking statements are made pursuant to the safe-harbor provisions of the Private Securities Litigation Reform Act of 1995. Forward-looking statements include statements concerning our plans, objectives, goals, strategies, future events, future revenues or performance, capital expenditures, exploration efforts, project development schedules, financing needs, plans or intentions relating to potential acquisitions and other information that is not historical information. When used in this report, the words “estimates,” “expects,” “anticipates,” “forecasts,” “plans,” “intends,” “believes” and variations of such words or similar expressions are intended to identify forward-looking statements. We may make additional forward-looking statements from time to time. All subsequent forward-looking statements, whether written or oral and whether made by us or on our behalf, are also expressly qualified by these cautionary statements.

Our forward-looking statements are based on our current expectations and various assumptions. Our expectations, beliefs and projections are expressed in good faith and we believe there is a reasonable basis for them, including without limitation, management’s examination of historical operating trends, data contained in our records and other data available from third parties. However, we cannot assure you that

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management’s expectations, beliefs and projections will result or be achieved or accomplished. Our forward-looking statements apply only as of the date made. Except as required by law, we undertake no obligation to publicly update or revise forward-looking statements which may be made to reflect events or circumstances after the date made or to reflect the occurrence of unanticipated events.

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

Dependence on a Single Mining Project. We are focused primarily on the development of our Las Cruces copper project. Accordingly, our profitability depends entirely upon the successful development and operation of this project. We are currently incurring losses and we expect to continue to incur losses until copper production begins at the Las Cruces project. Although we will continue to receive a small amount of revenues from residual gold production in connection with reclamation activities at the Castle Mountain Mine, these revenues are insufficient to cover our operating expenses.

We maintain an active exploration program to evaluate other potential mining projects. However, our ability to acquire and fund additional projects is limited. In addition, there are a number of uncertainties inherent in any mineral exploration and development program that could make it difficult for us to successfully acquire and develop additional projects. These risks include the location of economically viable ore bodies, the development of appropriate metallurgical processes, the receipt of necessary governmental permits and the construction of mining and processing facilities.

We cannot assure you that our current exploration and development programs will result in any new commercial mining operations or yield new reserves to replace or expand current reserves. Even if we identify and acquire an economically viable ore body, several years may elapse from the initial stages of development until commercial production is commenced.

Need for Financing. We estimate that the total capital costs for the development of the Las Cruces project are approximately $290 million, including working capital, land purchases and contingencies, but excluding interest and other financing costs. We are exploring various financing alternatives for the balance of the projected costs and expenses of the Las Cruces project. However, we have no commitments for any additional financing. We cannot assure you that we will be able to obtain the necessary financing for the Las Cruces project on favorable terms or at all.

Potential Delays in Development of Las Cruces. We have experienced delays in developing the Las Cruces project, and we may experience further delays. These delays may affect the timing of development of the project. These delays also could increase the costs of developing the project, affect the economic viability of the project, or prohibit us from completing development of the project.

The timing of development of the Las Cruces project will be affected by many factors, some of which are beyond our control. Successful development of the Las Cruces project will be subject to the timely issuance of mining concessions and water permits, procurement of significant financing, acquisition of land required to develop the project, completion of basic engineering and construction of the mine. Adverse political and environmental developments in Spain could delay or preclude the issuance of permits or the expropriation of land necessary to develop the Las Cruces project. If we are unable to obtain the necessary permits, we will be unable to develop the Las Cruces project. In addition, factors such as fluctuations in the market price of copper and interest rates could adversely affect our ability to obtain adequate financing to fund the development of the project.

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Imprecision of Estimates. The estimates of the costs to develop the Las Cruces presented in this report may not be accurate. If the actual costs to complete the development of the Las Cruces project are significantly higher than we expect, we may not have enough funds to cover these costs and we may not be able to obtain other sources of financing to cover these costs. In addition, we may be unable to achieve our anticipated production volumes. Unexpected cost increases or our failure to achieve anticipated production volumes could have a material adverse effect on our results of operations, liquidity and financial condition.

The ore reserve figures presented in this report for the Las Cruces project are estimates, and we cannot assure you that we will realize the indicated levels of copper recovery. Reserve estimates are expressions of judgment based on knowledge, experience and industry practices. Valid estimates may change significantly when new information becomes available. While we believe that the reserve estimates presented in this report are well established, reserve estimates are imprecise and depend on statistical inferences, which may prove unreliable. The reserve estimates for the Las Cruces project have been determined based on an assumed long-term copper price of $0.80 per pound, a cut-off grade of 0.00% copper and projected average production costs of $0.33 per pound, based on the feasibility study relating to the project. Although we believe these assumptions are reasonable based upon available information, these assumptions may not be accurate. Increases in production costs or fluctuations in the market price of copper may make it unprofitable to mine ore reserves containing relatively lower grades of mineralization.

Because we have not begun production at the Las Cruces project, there is additional risk that we may need to reduce or adjust the reserves and mineralization estimates for the Las Cruces project based upon actual production experience. A material reduction in the estimates of our reserves or mineralization, or in our ability to extract these reserves or mineralization, could have a material adverse effect on our results of operations, liquidity and financial condition.

Uncertainty of Government Subsidies. If we do not receive the amount of subsidies that we expect, we will need to obtain additional funds from other sources, which could delay the development of the Las Cruces project and reduce the profitability of the project. We have applied for approximately $80 million in subsidies from regional and central governments in Spain, and we expect to apply for an additional $12 million in subsidies as the Las Cruces project progresses. Upon completing their review of our applications, the central and regional governments recommended subsidies of up to 53 million euros, or approximately $56 million as of March 21, 2003. Because the recommendation exceeded 50 million euros, it required the approval of the European Commission. The European Commission has reviewed the recommended subsidies and considers them to be compatible with the European Commission Treaty. However, we have not received official notice from the central and regional governments indicating the amount of subsidies, if any, that will be granted. Our estimates regarding the timing for development at the Las Cruces project, the amount of financing required and the potential for economic copper production at the Las Cruces project are based on the assumption that we will receive a significant portion of the subsidies for which we have applied. However, we cannot predict the amount of subsidies we will receive, if any.

Volatility of Copper Prices. Our future profitability and long-term viability will depend, in large part, on the market price of copper. Market prices for copper are volatile and are affected by numerous factors beyond our control, including expectations regarding inflation, global and regional demand, speculative activities, political and economic conditions and production costs in major copper producing regions. The aggregate effect of these factors on copper prices is impossible for us to predict. A decrease in copper prices could adversely affect our ability to finance the development of the Las Cruces project, which would have a material adverse affect on our results of operations, liquidity and financial condition.

Since 1989, spot prices for copper, per pound, have ranged from a high of $1.60 in 1989 to a low of $0.59 in 2001. The average spot price for 2002 was $0.71.

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From time to time, we may seek to mitigate the risk of fluctuations in copper prices through periodic forward sales. Forward sales transactions result in a reduction in possible revenue if the contract price is less than the market price at the time of settlement. Additional risks associated with forward sales activities could result if we are unable to meet the delivery requirements of forward sales contracts or to extend delivery dates if necessary. The relative risks and benefits of engaging in forward sales activities depend on prevailing market conditions.

Currency Fluctuations. All of our revenues are denominated in U.S. dollars. However, because Spain is a member state of the European Monetary Union, we will incur a substantial portion of the costs to develop and operate the Las Cruces project in euros. The exchange rate of the euro relative to the U.S. dollar fluctuates and we cannot predict what the exchange rates will be over the course of development of the project. We do know, however, that the exchange rate for one U.S. dollar has decreased from approximately 1.138 euros, at the time the feasibility study was completed, to its current level of approximately 0.95 euro. If this trend continues, our actual development costs will likely be higher than our estimates based on the feasibility study. We do not currently engage in currency hedging activities.

International Political Instability. Increased international political instability, evidenced by the threat or occurrence of terrorist attacks, enhanced national security measures, military action in Afghanistan and Iraq, strained international relations with North Korea and other conflicts in the Middle East and Asia may halt or hinder our ability to develop the Las Cruces project and conduct exploration activities. This increased instability may, for example, negatively impact the reliability and cost of transportation, negatively affect the desire of our employees to travel, adversely affect our ability to obtain adequate insurance at reasonable rates or require us to take extra security precautions. In addition, this international political instability has had and may continue to have negative effects on financial markets, which could affect our ability to finance the development of the Las Cruces project.

Significant Indebtedness. We have a large amount of indebtedness compared to our equity capitalization, and we intend to raise a significant portion of the funds necessary to develop the Las Cruces project through additional debt financing. As a result, we will have significant debt service obligations, which will limit our flexibility and impose significant restrictions on us.

Our relative amount of debt and the terms of our existing or future credit agreements or other instruments governing our indebtedness could have material consequences to our business, including making it more difficult for us to satisfy our debt covenants and debt service, lease payments and other obligations. Our indebtedness may also increase our vulnerability to general adverse economic and industry conditions and limit our ability to obtain additional financing to fund additional exploration or development projects, working capital, capital expenditures or other general corporate requirements. Our debt service obligations will reduce the availability of cash flow from operations for other purposes and limit our flexibility in planning for, or reacting to, changes in our business, the mining industry or metals prices. These restrictions and limitations may place us at a disadvantage compared to competitors with relatively lower amounts of debt.

We are currently experiencing a period of very low interest rates in the United States. These low interest rates result in relatively low interest payments on our credit facility, which provides for a variable rate of interest equal to the prime rate. Interest rates fluctuate and will likely increase in the future. Increases in interest rates will increase the amount of interest we are obligated to pay under our credit facility. In addition, because we intend to finance a significant portion of the Las Cruces project through debt financing, increases in interest rates will increase our costs to finance the Las Cruces project and could significantly affect the profitability and long-term economic viability of the project.

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Risks Associated with Mining Activities. The business of mining is generally subject to various types of risks and hazards, including environmental hazards, industrial accidents, unusual or unexpected rock formations, structural cave-ins or slides, flooding, metals losses and periodic interruptions due to inclement or hazardous weather conditions. These risks could result in damage to, or destruction of, mineral properties or production facilities, personal injury, environmental damage, delays in mining, monetary losses and possible legal liability. Insurance to cover these risks may not be available to us at economically feasible premiums. Insurance against environmental risks, including potential liability for pollution or other hazards as a result of the disposal of waste products occurring from production, is not generally available to us or to other companies within the mining industry.

Risks of Development in Foreign Countries. Because our exploration and mine development activities are located primarily outside the United States, including the Las Cruces project in Spain and other exploration activities in Spain and other countries, we are subject to the usual risks associated with conducting business in a foreign country. These risks include uncertain political and economic environments, fluctuations in currency exchange rates, limits on repatriation of earnings, war and civil disturbances, expropriation or nationalization, high rates of inflation, submitting to the jurisdiction of a foreign court or panel or enforcing the judgment of a foreign court or arbitration panel against a sovereign nation within its own territory, underdeveloped industrial and economic infrastructure, and forced modification of existing contracts and unenforceability of contractual rights.

Changes in mining or investment policies or shifts in prevailing political climate in any of the countries in which we conduct exploration and development activities could adversely affect our business. Among other things, our operations may be affected by regulations relating to production restrictions, price controls, export controls, income and other taxes, maintenance of claims, environmental legislation, foreign ownership restrictions, foreign exchange and currency controls, labor, welfare benefit policies, land use, land claims of local residents, water use, and mine safety.

We cannot predict the effect of these factors. In addition, legislation in the United States regulating foreign trade, investment and taxation could have a material adverse effect on our financial condition, results of operations and liquidity.

Environmental and Other Laws and Regulations. Compliance with environmental laws and regulations may require significant capital outlays and may cause material changes or delays in our intended activities. Any of these factors could materially affect the economics of a given project and could cause us to discontinue operations at a given project. New or different standards imposed by any governmental authority in the future may adversely affect our activities. Our activities in the United States are subject to extensive federal, state and local laws and regulations controlling not only the exploration and mining of mineral properties, but also the actual or potential effects of such activities upon the environment. Our development and operation of the Las Cruces project will be subject to the environmental laws and regulations of Spain. To the extent we conduct exploration activities or undertake new mining activities in other foreign countries, we will also be subject to environmental laws and regulations in these jurisdictions.

Environmental legislation in many countries is evolving and is generally becoming more restrictive. Future legislation will likely provide for stricter standards and enforcement, increased fines and penalties for non-compliance, more stringent environmental assessments of proposed projects, and a heightened degree of responsibility for companies and their officers, directors and employees.

Competition. There is significant competition for the acquisition of properties producing or capable of producing gold, copper and other metals. We may be at a competitive disadvantage in acquiring additional mining properties because we must compete with other individuals and companies, many of which may have greater financial resources and larger technical staffs than we have. As a result of this

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competition, we may be unable to acquire attractive mining properties on acceptable terms. The number of persons skilled in the operation and development of mining properties is also limited and significant competition exists for these individuals. As a result of this competition, we may find it difficult to attract skilled individuals to conduct mining operations.

Key Executives. We depend on the services of key executives, including G. Frank Joklik, our chairman and chief executive officer, and a small number of experienced executives and personnel focused on the development of the Las Cruces project. Due to the relatively small size of our company, the loss of these persons or our inability to attract and retain additional highly-skilled employees required for development of the Las Cruces project may delay or otherwise adversely affect the development of the Las Cruces project, which could have a material adverse effect on our business and future operations.

Majority Shareholder and Lender. Leucadia National Corporation owns approximately 72.8% of our outstanding common stock. In addition, four of our seven directors are officers of Leucadia. Accordingly, Leucadia has the ability to exercise significant influence over us. We also have outstanding indebtedness of $31.9 million under our credit agreement with Leucadia, which requires us to obtain the consent of Leucadia before taking certain actions, including incurring additional indebtedness. Leucadia’s interests and objectives, which may be different from ours and our other stockholders, may influence whether Leucadia is willing to grant us any approvals we may request. We may not be able to resolve potential conflicts between Leucadia and us to our satisfaction, and if we cannot, our business may be harmed.

Leucadia’s evaluation of the economic merits of the Las Cruces project will significantly influence our ability to develop the Las Cruces project. If the estimated performance of the project meets Leucadia’s investment criteria, Leucadia could be a source of the capital required for a portion of the expected development costs. In any event, we cannot be assured of being able to obtain capital from other sources, particularly since any debt financing is subject to Leucadia’s approval.

Other Risks and Uncertainties. In addition to the factors described above, we face a number of other risks and uncertainties, including those discussed under “Quantitative and Qualitative Disclosures About Market Risk,” below.

ITEM 7A.       QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

See note 1 to our consolidated financial statements for additional information regarding forward sales activities.

Copper Price Risk

Our future profitability and long-term viability will depend, in large part, on the market price of copper. Market prices for copper are volatile and are affected by numerous factors beyond our control, including expectations regarding inflation, global and regional demand, speculative activities, political and economic conditions, and production costs in major copper producing regions. The aggregate effect of these factors on copper prices is impossible for us to predict. A decrease in copper prices could adversely affect our ability to finance the development of the Las Cruces project, which would have a material adverse affect on our results of operations and financial condition. A $0.01 decrease in the cash price per pound of copper could reduce annual cash flows from the Las Cruces project by up to $1 million.

From time to time, we may seek to mitigate the risk of fluctuations in copper prices through periodic forward sales. Forward sales transactions result in a reduction in possible revenue if the contract price is less than the market price at the time of settlement. Additional risks associated with forward sales activities could result if we are unable to meet the delivery requirements of forward sales contracts or to

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extend delivery dates if necessary. The relative risks and benefits of engaging in forward sales activities depend on prevailing market conditions.

Gold Price Risk

The results of our operations from residual gold production at the Castle Mountain Mine are affected significantly by the market price of gold. Gold prices are influenced by numerous factors over which we have no control, including expectations with respect to the rate of inflation, the relative strength of the U.S. dollar and other currencies, interest rates, global or regional political or economic crises, demand for gold for jewelry and industrial products and sales by holders and producers of gold in response to these factors. A 10% decrease in the price of gold could reduce our expected 2003 product sales revenue by up to $0.2 million.

In the past we have entered into option contracts and forward sales contracts to establish a minimum selling price on some of the ounces of gold that we produce. We do not enter into option or sales contracts for the purpose of speculative trading. Our current policy provides for the use of forward sales contracts for up to 80% of the remaining residual production at the Castle Mountain Mine. However, we expect to sell the remaining production primarily at spot prices at various times. At December 31, 2002 and 2001, we had no ounces of gold sold under forward sales contracts.

Foreign Currency Exchange Rate Risk

Portions of our activities are located in Spain and Peru. We also conduct exploration activities in other countries from time to time. Our future profitability could be impacted by fluctuations in foreign currencies relative to the U.S. dollar. A 10% increase in the value of the euro relative to the U.S. dollar could increase our estimate of the cost to develop the Las Cruces project by up to $24 million. We have not entered into any foreign currency contracts or other derivatives to establish a foreign currency protection program.

Interest Rate Risk

At December 31, 2002, we had borrowed $31.9 million under our credit facility with Leucadia National Corporation. The credit facility carries a variable interest rate equal to the prime rate. At December 31, 2002, the prime rate was 4.25%. A 1% increase in the prime rate would increase our annual interest expense by approximately $0.32 million. The credit facility will expire on January 2, 2004, unless terminated earlier. Leucadia may terminate the credit facility on December 15 of any year, provided Leucadia notifies us of the termination before September 15 of that year. Leucadia has notified us that it does not intend to terminate the credit facility prior to January 2, 2004. We have not undertaken any hedging activities with respect to the credit facility.

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ITEM 8.          FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

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

Selected quarterly financial data for the years ended December 31, 2002 and 2001 is presented below.

______________

(a)       We wrote off the book value of a land purchase option as a loss on disposal of assets of $0.9 million during the third quarter of 2002.

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REPORT OF INDEPENDENT ACCOUNTANTS

To the Stockholders and Board of Directors of MK Gold Company:

In our opinion, the accompanying consolidated balance sheets and the related consolidated statements of operations, of stockholders’ equity and of cash flows present fairly, in all material respects, the financial position of MK Gold Company and its subsidiaries at December 31, 2002 and 2001, and the results of their operations and their cash flows for each of the three years in the period ended December 31, 2002, in conformity with accounting principles generally accepted in the United States of America. These financial statements are the responsibility of the Company’s management; our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits of these statements in accordance with auditing standards generally accepted in the United States of America, which require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

As discussed in Note 10, the Company’s credit facility with Leucadia National Corporation expires January 2, 2004.

PricewaterhouseCoopers LLP
Salt Lake City, Utah
January 31, 2003

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MK GOLD COMPANY

CONSOLIDATED STATEMENTS OF OPERATIONS
For the years ended December 31, 2002, 2001 and 2000
(Thousands of dollars except share data )

The accompanying notes are an integral part of the consolidated financial statements.

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MK GOLD COMPANY

CONSOLIDATED BALANCE SHEETS
As of December 31, 2002 and 2001
(Thousands of dollars except par value)

The accompanying notes are an integral part of the consolidated financial statements.

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MK GOLD COMPANY

CONSOLIDATED STATEMENT OF STOCKHOLDERS’ EQUITY
For the years ended December 31, 2002, 2001 and 2000
(Thousands of dollars except share data )