UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
Form 10-Q
(Mark One)
x | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the Quarterly Period Ended September 30, 2006
or
¨ | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the transition period from to
Commission File Number: 001-31240
NEWMONT MINING CORPORATION
(Exact name of registrant as specified in its charter)
Delaware | 84-1611629 | |
(State or Other Jurisdiction of Incorporation or Organization) |
(I.R.S. Employer Identification No.) | |
1700 Lincoln Street Denver, Colorado |
80203 | |
(Address of Principal Executive Offices) | (Zip Code) |
Registrants telephone number, including area code (303) 863-7414
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. x Yes ¨ No
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer. See definition of accelerated filer and large accelerated filer in Rule 12-b2 of the Exchange Act.
(Check one): Large accelerated filer x Accelerated filer ¨ Non-accelerated filer ¨
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12-b2 of the Exchange Act). ¨ Yes x No
There were 422,460,240 shares of common stock outstanding on October 30, 2006 (and 27,761,153 exchangeable shares).
PART IFINANCIAL INFORMATION
ITEM 1. | FINANCIAL STATEMENTS. |
NEWMONT MINING CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
Three Months Ended September 30, |
Nine Months Ended September 30, |
|||||||||||||||
2006 | 2005 | 2006 | 2005 | |||||||||||||
(unaudited, in millions except per share) | ||||||||||||||||
Revenues |
||||||||||||||||
Sales - gold, net |
$ | 1,009 | $ | 914 | $ | 3,095 | $ | 2,556 | ||||||||
Sales - copper, net |
93 | 231 | 432 | 504 | ||||||||||||
1,102 | 1,145 | 3,527 | 3,060 | |||||||||||||
Costs and expenses |
||||||||||||||||
Costs applicable to sales (exclusive of depreciation, depletion and amortization shown separately below) |
||||||||||||||||
Gold |
525 | 502 | 1,564 | 1,437 | ||||||||||||
Copper |
66 | 86 | 215 | 226 | ||||||||||||
Depreciation, depletion and amortization |
153 | 155 | 444 | 466 | ||||||||||||
Exploration |
41 | 39 | 120 | 103 | ||||||||||||
Advanced projects, research and development |
19 | 18 | 68 | 47 | ||||||||||||
General and administrative |
29 | 32 | 103 | 95 | ||||||||||||
Other expense, net |
37 | 20 | 64 | 61 | ||||||||||||
870 | 852 | 2,578 | 2,435 | |||||||||||||
Other income (expense) |
||||||||||||||||
Other income, net (Note 3) |
317 | 66 | 386 | 177 | ||||||||||||
Interest expense, net |
(28 | ) | (23 | ) | (70 | ) | (75 | ) | ||||||||
289 | 43 | 316 | 102 | |||||||||||||
Income from continuing operations before income tax expense, minority interest and equity income of affiliates |
521 | 336 | 1,265 | 727 | ||||||||||||
Income tax expense |
(206 | ) | (96 | ) | (362 | ) | (191 | ) | ||||||||
Minority interest in income of consolidated subsidiaries |
(52 | ) | (115 | ) | (279 | ) | (248 | ) | ||||||||
Equity income of affiliates |
1 | | 1 | 3 | ||||||||||||
Income from continuing operations |
264 | 125 | 625 | 291 | ||||||||||||
Gain (loss) from discontinued operations (Note 5) |
(66 | ) | 1 | (57 | ) | (31 | ) | |||||||||
Net income |
$ | 198 | $ | 126 | $ | 568 | $ | 260 | ||||||||
Income per common share (Note 6) |
||||||||||||||||
Basic and diluted: |
||||||||||||||||
Income from continuing operations |
$ | 0.59 | $ | 0.28 | $ | 1.39 | $ | 0.65 | ||||||||
Loss from discontinued operations |
(0.15 | ) | | (0.13 | ) | (0.07 | ) | |||||||||
Net income |
$ | 0.44 | $ | 0.28 | $ | 1.26 | $ | 0.58 | ||||||||
Basic weighted-average common shares outstanding |
450 | 446 | 449 | 446 | ||||||||||||
Diluted weighted-average common shares outstanding |
452 | 449 | 451 | 449 | ||||||||||||
Cash dividends declared per common share |
$ | 0.10 | $ | 0.10 | $ | 0.30 | $ | 0.30 | ||||||||
The accompanying notes are an integral part of the condensed consolidated financial statements.
2
NEWMONT MINING CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEETS
At September 30, 2006 |
At December 31, 2005 | |||||
(unaudited, in millions) | ||||||
ASSETS | ||||||
Cash and cash equivalents |
$ | 1,059 | $ | 1,082 | ||
Marketable securities and other short-term investments (Note 10) |
273 | 817 | ||||
Trade receivables |
150 | 94 | ||||
Accounts receivable |
148 | 135 | ||||
Inventories (Note 11) |
372 | 304 | ||||
Stockpiles and ore on leach pads (Note 12) |
336 | 241 | ||||
Deferred stripping costs (Note 2) |
| 78 | ||||
Deferred income tax assets |
140 | 159 | ||||
Other current assets |
115 | 90 | ||||
Current assets |
2,593 | 3,000 | ||||
Property, plant and mine development, net |
6,547 | 5,581 | ||||
Investments (Note 10) |
1,239 | 955 | ||||
Long-term stockpiles and ore on leach pads (Note 12) |
795 | 599 | ||||
Deferred stripping costs (Note 2) |
| 100 | ||||
Deferred income tax assets |
814 | 515 | ||||
Other long-term assets |
202 | 181 | ||||
Goodwill |
2,895 | 2,879 | ||||
Assets of operations held for sale (Note 5) |
36 | 182 | ||||
Total assets |
$ | 15,121 | $ | 13,992 | ||
LIABILITIES | ||||||
Current portion of long-term debt (Note 13) |
$ | 158 | $ | 195 | ||
Accounts payable |
251 | 227 | ||||
Employee-related benefits |
167 | 176 | ||||
Derivative instruments (Note 9) |
453 | 270 | ||||
Other current liabilities (Note 14) |
609 | 471 | ||||
Current liabilities |
1,638 | 1,339 | ||||
Long-term debt (Note 13) |
1,799 | 1,723 | ||||
Reclamation and remediation liabilities (Note 15) |
483 | 442 | ||||
Deferred income tax liabilities |
571 | 446 | ||||
Employee-related benefits |
284 | 273 | ||||
Other long-term liabilities (Note 14) |
311 | 415 | ||||
Liabilities of operations held for sale (Note 5) |
3 | 47 | ||||
Total liabilities |
5,089 | 4,685 | ||||
Commitments and contingencies (Note 18) |
||||||
Minority interest in subsidiaries |
996 | 931 | ||||
STOCKHOLDERS EQUITY | ||||||
Common stock |
675 | 666 | ||||
Additional paid-in capital |
6,683 | 6,578 | ||||
Accumulated other comprehensive income |
572 | 378 | ||||
Retained earnings |
1,106 | 754 | ||||
Total stockholders equity |
9,036 | 8,376 | ||||
Total liabilities and stockholders equity |
$ | 15,121 | $ | 13,992 | ||
The accompanying notes are an integral part of the condensed consolidated financial statements.
3
NEWMONT MINING CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
Nine Months Ended September 30, |
||||||||
2006 | 2005 | |||||||
(unaudited, in millions) | ||||||||
Operating activities: |
||||||||
Net income |
$ | 568 | $ | 260 | ||||
Adjustments to reconcile net income to net cash from continuing operations: |
||||||||
Depreciation, depletion and amortization |
444 | 466 | ||||||
Revenue from prepaid forward sales obligation |
(48 | ) | (48 | ) | ||||
Loss from discontinued operations |
57 | 31 | ||||||
Accretion of accumulated reclamation obligations |
22 | 20 | ||||||
Deferred income taxes |
(117 | ) | (34 | ) | ||||
Minority interest expense |
279 | 248 | ||||||
Gain on asset sales, net |
(312 | ) | (36 | ) | ||||
Gain on sale of investments, net |
(4 | ) | (27 | ) | ||||
Hedge loss, net |
82 | 4 | ||||||
Other operating adjustments and write-downs |
90 | (35 | ) | |||||
Decrease (increase) in operating assets: |
||||||||
Trade and accounts receivable |
(51 | ) | 25 | |||||
Inventories, stockpiles and ore on leach pads |
(323 | ) | (155 | ) | ||||
Other assets |
(49 | ) | | |||||
Increase (decrease) in operating liabilities: |
||||||||
Accounts payable and other accrued liabilities |
208 | 59 | ||||||
Reclamation liabilities |
(44 | ) | (24 | ) | ||||
Net cash provided from continuing operations |
802 | 754 | ||||||
Net cash (used in) provided from discontinued operations |
(6 | ) | 7 | |||||
Net cash from operations |
796 | 761 | ||||||
Investing activities: |
||||||||
Additions to property, plant and mine development |
(1,109 | ) | (884 | ) | ||||
Investments in marketable debt and equity securities |
(1,389 | ) | (2,530 | ) | ||||
Proceeds from sale of marketable debt and equity securities |
1,934 | 2,562 | ||||||
Acquisitions (Note 8) |
(348 | ) | | |||||
Proceeds from sale of assets, net |
331 | 61 | ||||||
Other |
(3 | ) | 1 | |||||
Net cash used in investing activities of continuing operations |
(584 | ) | (790 | ) | ||||
Net cash (used in) provided from investing activities of discontinued operations |
(6 | ) | 115 | |||||
Net cash used in investing activities |
(590 | ) | (675 | ) | ||||
Financing activities: |
||||||||
Proceeds from debt, net |
198 | 584 | ||||||
Repayment of debt |
(63 | ) | (141 | ) | ||||
Early extinguishment of prepaid forward sales obligation |
(48 | ) | | |||||
Dividends paid to common stockholders |
(135 | ) | (134 | ) | ||||
Dividends paid to minority interests |
(235 | ) | (85 | ) | ||||
Proceeds from stock issuance |
66 | 17 | ||||||
Change in restricted cash and other |
(11 | ) | (9 | ) | ||||
Net cash (used in) provided from financing activities of continuing operations |
(228 | ) | 232 | |||||
Net cash used in financing activities of discontinued operations |
(7 | ) | (1 | ) | ||||
Net cash (used in) provided from financing activities |
(235 | ) | 231 | |||||
Effect of exchange rate changes on cash |
6 | (3 | ) | |||||
Net change in cash and cash equivalents |
(23 | ) | 314 | |||||
Cash and cash equivalents at beginning of period |
1,082 | 781 | ||||||
Cash and cash equivalents at end of period |
$ | 1,059 | $ | 1,095 | ||||
The accompanying notes are an integral part of the condensed consolidated financial statements.
4
NEWMONT MINING CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)
(dollars in millions, except per share, per ounce and per pound amounts)
(1) BASIS OF PRESENTATION
The interim Condensed Consolidated Financial Statements of Newmont Mining Corporation and its subsidiaries (collectively, Newmont or the Company) are unaudited. In the opinion of management, all adjustments and disclosures necessary for a fair presentation of these interim statements have been included. The results reported in these interim Condensed Consolidated Financial Statements are not necessarily indicative of the results that may be reported for the entire year. These interim Condensed Consolidated Financial Statements should be read in conjunction with Newmonts Consolidated Financial Statements included in its Annual Report on Form 10-K/A for the year ended December 31, 2005, filed October 26, 2006.
References to A$ refer to Australian currency, CDN$ to Canadian currency, IDR to Indonesian currency and $ to United States currency.
Certain amounts for the three and nine months ended September 30, 2005 and at December 31, 2005 have been reclassified to conform to the 2006 presentation. The Company has reclassified the income statement, balance sheet and cash flow statement amounts for the Golden Grove, Holloway and Zarafshan-Newmont Joint Venture operations from the historical presentation to discontinued operations in the Condensed Consolidated Statements of Income and Cash Flows and to assets and liabilities of operations held for sale on the Condensed Consolidated Balance Sheets for all periods presented.
(2) RECENT ACCOUNTING PRONOUNCEMENTS
Deferred Stripping Costs
On January 1, 2006 the Company adopted Emerging Issues Task Force Issue No. 04-06 (EITF 04-06), Accounting for Stripping Costs Incurred during Production in the Mining Industry. EITF 04-06 addresses the accounting for stripping costs incurred during the production phase of a mine and refers to these costs as variable production costs that should be included as a component of inventory to be recognized in Costs applicable to sales in the same period as the revenue from the sale of inventory. As a result, capitalization of post-production stripping costs is appropriate only to the extent product inventory exists at the end of a reporting period. The guidance requires application through recognition of a cumulative effect adjustment to opening retained earnings in the period of adoption, with no charge to current earnings for prior periods. The results for prior periods have not been restated. The cumulative effect adjustment reduced opening retained earnings by $81 (net of tax and minority interests) and eliminated the $71 net deferred stripping asset from the balance sheet. Adoption of EITF 04-06 had no impact on the Companys cash position or net cash from operations.
Prior to 2006 at some of the Companys mining operations, deferred stripping costs were charged to Costs applicable to sales as gold or copper was produced and sold using the units of production method based on estimated recoverable quantities of proven and probable gold or copper reserves, using a stripping ratio calculated as the ratio of total tons to be moved to total proven and probable ore reserves, which resulted in the recognition of the costs of waste removal activities over the life of the mine as gold or copper was produced. The application of the deferred stripping accounting method generally resulted in an asset (deferred stripping costs), although a liability (advanced stripping costs) arose when the actual stripping ratio incurred to date was less than the expected stripping ratio over the life of the mine. The Advanced stripping costs primarily pertained to the Batu Hijau operation.
Movements in the net deferred stripping cost balance were as follows:
Nine Months Ended September 30, | ||||||||
2006 | 2005 | |||||||
Opening balance |
$ | 71 | $ | 20 | ||||
Cumulative effect adjustment |
(71 | ) | | |||||
Disposition of Ovacik |
| (4 | ) | |||||
Additions |
| 127 | ||||||
Amortization |
| (78 | ) | |||||
Closing balance |
$ | | $ | 65 | ||||
5
NEWMONT MINING CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) Continued
(dollars in millions, except per share, per ounce and per pound amounts)
The deferred and advanced stripping cost balances are presented in the balance sheet at December 31, 2005 in other assets or other liabilities as follows:
At December 31, 2005 | |||
Other Assets: |
|||
Current |
$ | 78 | |
Long-term |
100 | ||
178 | |||
Other Liabilities: |
|||
Current |
$ | 14 | |
Long-term |
93 | ||
107 | |||
Deferred stripping, net |
$ | 71 | |
Stock Based Compensation
On January 1, 2006, the Company adopted the fair value recognition provisions of FASB Statement No. 123(R), Share-Based Payment (FAS 123(R)). Prior to January 1, 2006, the Company accounted for share-based payments under the recognition and measurement provisions of APB Opinion No. 25, Accounting for Stock Issued to Employees, and related Interpretations, as permitted by Financial Accounting Standards Board (FASB) Statement No. 123, Accounting for Stock-Based Compensation. In accordance with APB 25, no compensation cost was required to be recognized for options granted that had an exercise price equal to the market value of the underlying common stock on the date of grant.
The Company adopted FAS 123(R) using the modified prospective transition method. Under this method, compensation cost recognized in the three and nine months ended September 30, 2006 includes: a) compensation cost for all share-based payments granted prior to, but not yet vested as of January 1, 2006, based on the grant-date fair value estimated in accordance with the original provisions of FAS 123, and b) compensation cost for all share-based payments granted subsequent to January 1, 2006, based on the grant-date fair value estimated in accordance with the provisions of FAS 123(R). The results for prior periods have not been restated.
As a result of adopting FAS 123(R), the Companys Income from continuing operations and Net income for the three and nine month periods of 2006 is $4 ($0.01 per share, basic and diluted) and $14 ($0.03 per share, basic and diluted) lower, respectively, than if we had continued to account for share-based compensation under APB 25 as we did in the comparable prior year periods. Prior to the adoption of FAS 123(R), cash retained as a result of tax deductions relating to stock-based compensation was included in operating cash flows, along with other tax cash flows, and requires tax benefits relating to the deductibility of increases in the equity instruments issued under share-based compensation arrangements that are not included in Costs applicable to sales (excess tax benefits) to be presented in the Statement of Cash Flows as financing cash inflows. The (expense) benefit realized for tax deductions from option exercises totaled $(8) and $4 for the three and nine month periods of 2006, respectively.
The Company currently maintains the 2005 Stock Incentive Plan (Stock Plan), approved by stockholders on April 27, 2005, for executives and eligible employees. Under this Stock Plan, options to purchase shares of stock can be granted with exercise prices not less than fair market value of the underlying stock at the date of grant. Fair market value of a share of common stock as of the grant date is the average of the high and low sales prices for a share of the Companys common stock on the New York Stock Exchange. The Company also maintains prior stock plans, but no longer grants awards under these plans. Options granted under the Companys stock plans vest over periods ranging from two to four years and are exercisable over a period of time not to exceed 10 years from grant date. At September 30, 2006, 17,570,931 shares were available for future grants under the Companys Stock Plan.
The value of each option award is estimated on the date of grant using the Black-Scholes option-pricing model. The Black-Scholes option-pricing model requires the input of subjective assumptions, including the expected term of the option award and stock price volatility. The expected term of options granted is derived from historical data on employee exercise and post-vesting employment termination behavior. Expected volatility is based on the historical volatility of our stock. These estimates involve inherent uncertainties and the application of management judgment. In addition, we are required to estimate the expected forfeiture rate and only recognize expense for those options expected to vest. As a result, if other assumptions had been used, our recorded and pro forma stock-based compensation expense could have been different from that reported. The Black-Scholes option-pricing model used the following assumptions for the nine months ended September 30, 2006 and 2005, respectively: weighted-average risk-free interest rates of 4.9% and 3.9%; dividend yields of 0.7% and 1%; expected lives of five years and four years; and volatility of 34%
6
NEWMONT MINING CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) Continued
(dollars in millions, except per share, per ounce and per pound amounts)
and 40%. 1,238,750 and 1,056,368 stock option awards were granted during the nine months ended September 30, 2006 and 2005, respectively.
The following table summarizes activity for stock options outstanding at September 30, 2006:
Options Outstanding | ||||||
Number of Shares |
Weighted Average Exercise Price | |||||
Outstanding at beginning of year |
9,433,669 | $ | 35.90 | |||
Granted |
1,238,750 | $ | 57.71 | |||
Exercised |
(2,146,006 | ) | $ | 32.32 | ||
Forfeited and expired |
(521,159 | ) | $ | 54.23 | ||
Outstanding at September 30, 2006 |
8,005,254 | $ | 38.97 | |||
Options exercisable at September 30, 2006 |
4,678,496 | $ | 34.72 |
The following table summarizes information about stock options outstanding at September 30, 2006, with exercise prices equal to the fair market value on the date of grant with no restrictions on exercisability after vesting:
Options Outstanding | Options Exercisable | |||||||||||
Range of Exercise Prices |
Number Outstanding |
Weighted- Average Remaining Contractual Life (in years) |
Weighted- Average Exercise Price |
Number Exercisable |
Weighted- Average Exercise Price | |||||||
$0 to $20 |
1,118,906 | 2.7 | $ | 18.61 | 1,118,906 | $ | 18.61 | |||||
$20 to $30 |
1,538,022 | 5.2 | $ | 25.88 | 1,459,699 | $ | 25.98 | |||||
$30 to $40 |
962,439 | 7.5 | $ | 37.56 | 459,959 | $ | 37.03 | |||||
$40 to $50 |
3,044,420 | 8.0 | $ | 45.45 | 1,454,215 | $ | 45.48 | |||||
$50+ |
1,341,467 | 8.7 | $ | 57.18 | 185,717 | $ | 53.89 | |||||
Total/average |
8,005,254 | 6.8 | $ | 38.97 | 4,678,496 | $ | 34.72 | |||||
As of September 30, 2006, there was $32 of unrecognized compensation cost related to unvested stock options. This cost is expected to be recognized over a weighted-average period of approximately 2.1 years. The total intrinsic value of options exercised in the third quarter of 2006 and 2005 was $10 and $5, respectively. The total intrinsic value of options exercised in the nine month period of 2006 and 2005 was $48 and $10, respectively. 1,153,974 stock options vested during the nine months ended September 30, 2006. The weighted-average exercise price of the stock options vested was $36.65 in 2006. 1,024,047 stock options vested during the three and nine months ended September 30, 2005. The weighted-average exercise price of the stock options vested was $32.75 in 2005.
The following table illustrates the effect on net income and earnings per share if we had applied the fair value recognition provisions of FAS 123(R) to options granted under our stock option plans in the three and nine month periods of 2005:
Three Months Ended September 30, 2005 |
Nine Months Ended September 30, 2005 |
|||||||
Net income, as reported |
$ | 126 | $ | 260 | ||||
Less: Compensation expense determined under the fair value method, net of tax |
(5 | ) | (14 | ) | ||||
Pro forma net income |
$ | 121 | $ | 246 | ||||
Net income per common share, basic and diluted: |
||||||||
As reported |
$ | 0.28 | $ | 0.58 | ||||
Pro forma net income |
$ | 0.27 | $ | 0.55 |
7
NEWMONT MINING CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) Continued
(dollars in millions, except per share, per ounce and per pound amounts)
Other Stock-Based Compensation
The Company grants restricted stock to certain employees. Shares of restricted stock are granted upon achievement of certain financial and operating thresholds at fair market value on the grant date. Prior to vesting, these shares of restricted stock are subject to certain restrictions related to ownership and transferability. Holders of restricted stock are entitled to vote the shares and to receive any dividends declared on the shares. For the nine months ended September 30, 2006 and 2005, 102,491 and 155,061 shares of restricted stock, respectively, were granted and issued, of which 100,258 and 90,618 shares remained unvested at September 30, 2006 for the 2006 and 2005 grants, respectively. The weighted-average fair market value of the stock grants issued were $58 and $45 in 2006 and 2005, respectively. Compensation expense recorded for restricted stock was $nil and $2 for the three months ended September 30, 2006 and 2005, respectively, and $nil and $7 for the nine months ended September 30, 2006 and 2005, respectively. The shares of restricted stock vest in equal increments annually over three years.
Restricted stock units also are granted, upon achievement of certain financial and operating thresholds, to employees in certain foreign jurisdictions. For the nine months ended September 30, 2006, the Company granted 19,181 restricted stock units at the weighted-average fair market value of $58 per underlying share of the Companys common stock. For the nine months ended September 30, 2005, the Company granted 27,386 restricted stock units at the weighted-average fair market value of $45 per underlying share of the Companys common stock. Compensation expense recorded for the foreign jurisdiction restricted stock units was $nil for the three months ended September 30, 2006 and 2005, respectively, and $nil and $1 for the nine months ended September 30, 2006 and 2005, respectively. These restricted stock units vest in equal increments annually over three years. Upon vesting, the employee is entitled to receive for each restricted stock unit one share of the Companys common stock.
The Company grants deferred stock awards to certain other employees. The deferred stock awards vest over periods between two and three years. For the nine months ended September 30, 2006 and 2005 there were 237,946 and 98,379 deferred stock awards granted by the Company, respectively. At September 30, 2006 and December 31, 2005, 428,263 and 303,002 deferred stock awards, respectively, remained unvested. Compensation expense recorded for deferred stock awards was $2 and $2 for the three months ended September 30, 2006 and 2005, respectively, and $6 and $5 for the nine months ended September 30, 2006 and 2005, respectively. Upon vesting, the employee is entitled to receive the number of shares of the Companys common stock specified in the deferred stock award.
Income Taxes
In June 2006, the FASB issued FASB Interpretation No. 48, Accounting for Uncertainty in Income Taxes, (FIN 48) an interpretation of FASB Statement No. 109, Accounting for Income Taxes. FIN 48 prescribes a recognition threshold and measurement attribute for the financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return. FIN 48 requires that the Company recognize in its financial statements, the impact of a tax position, if that position is more likely than not of being sustained on audit, based on the technical merits of the position. FIN 48 also provides guidance on derecognition, classification, interest and penalties, accounting in interim periods and disclosure. The provisions of FIN 48 are effective beginning January 1, 2007 with the cumulative effect of the change in accounting principle recorded as an adjustment to the opening balance of retained earnings. The Company is currently evaluating the impact of adopting FIN 48 on the Companys consolidated financial position, results of operations and disclosures.
Fair Value Measurements
In September 2006, the FASB issued FASB Statement No. 157, Fair Value Measurements (FAS 157). FAS 157 defines fair value, establishes a framework for measuring fair value in generally accepted accounting principles, and expands disclosures about fair value measurements. The provisions of FAS 157 are effective for the Companys fiscal year ending December 31, 2008. The Company is currently evaluating the impact that the adoption of this statement will have on the Companys consolidated financial position, results of operations and disclosures.
Pensions
In September 2006, the FASB issued FASB Statement No. 158, Employers Accounting for Defined Benefit Pension and Other Postretirement Plans an amendment of FASB Statements No. 87, 88, 106, and 132(R) (FAS 158). FAS 158 requires employers that sponsor one or more defined benefit plans to (i) recognize the funded status of a benefit plan in its statement of financial position, (ii) recognize the gains or losses and prior service costs or credits that arise during the period as a component of other comprehensive income, net of tax, (iii) measure the defined benefit plan assets and obligations as of the date of the employers
8
NEWMONT MINING CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) Continued
(dollars in millions, except per share, per ounce and per pound amounts)
fiscal year-end statement of financial position, and (iv) disclose in the notes to the financial statements additional information about certain effects on net periodic cost for the next fiscal year that arise from delayed recognition of the gains or losses, prior service costs or credits, and transition asset or obligation. The provisions of FAS 158 are effective for the Companys fiscal year ending December 31, 2006. The Company is currently evaluating the impact that the adoption of this statement will have on the Companys consolidated financial position, results of operations and disclosures.
(3) OTHER INCOME, NET
Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||
2006 | 2005 | 2006 | 2005 | ||||||||||||
Gain on sale of Alberta oil sands project |
$ | 266 | $ | | $ | 266 | $ | | |||||||
Royalty and dividend income |
30 | 18 | 88 | 57 | |||||||||||
Interest income |
16 | 17 | 52 | 41 | |||||||||||
Gain on sale of Martabe project |
30 | | 30 | | |||||||||||
Income from development projects, net |
5 | | 14 | | |||||||||||
Gain on sale of property, plant and equipment |
4 | 1 | 12 | 4 | |||||||||||
Foreign currency exchange gains |
2 | 8 | 11 | 10 | |||||||||||
Gain (loss) on sale of other assets, net |
3 | (1 | ) | 4 | 32 | ||||||||||
Gain on sale of investments, net |
| 21 | 4 | 27 | |||||||||||
Loss on early retirement of debt |
(40 | ) | | (40 | ) | | |||||||||
(Loss) gain on ineffective portion of derivative instruments, net |
(1 | ) | 1 | (60 | ) | 2 | |||||||||
Other |
2 | 1 | 5 | 4 | |||||||||||
$ | 317 | $ | 66 | $ | 386 | $ | 177 | ||||||||
During the third quarter of 2006, Newmont sold its Alberta oil sands project to the Korean National Oil Corporation and its Martabe gold project in Indonesia to Agincourt Resources Limited (Agincourt). Newmont received net cash proceeds of $271 for the Alberta oil sands project resulting in a $266 pre-tax gain. Newmont received $42 net cash proceeds and approximately 43 million Agincourt shares valued at $37 for the Martabe project, resulting in a $30 pre-tax gain.
On September 27, 2006, Newmont settled its remaining obligations under the prepaid forward gold sales contract and forward gold purchase contract for which it was required to deliver 17,951 ounces of gold in December 2006 and 179,062 ounces of gold in June 2007. This settlement resulted in cash payments of $96, a $48 reduction to the current portion of long-term debt and a $40 pre-tax loss on extinguishment of debt.
The gain on investments during 2005 was primarily attributable to the sale of Newmonts investment in Kinross Gold Corporation which resulted in a $20 pre-tax gain.
(4) EMPLOYEE PENSION AND OTHER BENEFIT PLANS
Three Months Ended September 30, | Nine Months Ended September 30, | |||||||||||||||
2006 | 2005 | 2006 | 2005 | |||||||||||||
Pension benefit costs, net |
||||||||||||||||
Service cost |
$ | 3 | $ | 3 | $ | 11 | $ | 10 | ||||||||
Interest cost |
6 | 4 | 17 | 14 | ||||||||||||
Expected return on plan assets |
(4 | ) | (4 | ) | (13 | ) | (12 | ) | ||||||||
Amortization of prior service cost |
| 1 | 1 | 1 | ||||||||||||
Amortization of loss |
2 | 2 | 6 | 5 | ||||||||||||
$ | 7 | $ | 6 | $ | 22 | $ | 18 | |||||||||
Three Months Ended September 30, | Nine Months Ended September 30, | |||||||||||||||
2006 | 2005 | 2006 | 2005 | |||||||||||||
Other benefit costs, net |
||||||||||||||||
Service cost |
$ | 1 | $ | 1 | $ | 4 | $ | 4 | ||||||||
Interest cost |
1 | 2 | 4 | 4 | ||||||||||||
$ | 2 | $ | 3 | $ | 8 | $ | 8 | |||||||||
A pension settlement loss of $4 was recognized in the nine months ended September 30, 2005 and included in Other expense, net.
9
NEWMONT MINING CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) Continued
(dollars in millions, except per share, per ounce and per pound amounts)
(5) DISCONTINUED OPERATIONS AND ASSETS AND LIABILITIES HELD FOR SALE
In early July 2006, Newmonts Board of Directors approved a plan to sell the Companys 50% interest in the Zarafshan-Newmont Joint Venture. However, as a result of the Uzbek governments expropriation of the Companys assets in August 2006, an impairment loss of $101 was recognized for the three and nine months ended September 30, 2006. The Company will continue to challenge the Uzbek governments actions through international arbitration.
During the fourth quarter of 2005, Newmont committed to plans to divest its Holloway operation in Canada. In September 2006, Newmont reached an agreement with St. Andrew Goldfields Ltd. to sell the Holloway operation for cash proceeds of $40 plus certain royalties. Newmont expects the sale of Holloway to be completed during the fourth quarter of 2006.
During June 2005, Newmont announced the pending sale of its Golden Grove copper-zinc operation in Western Australia to Oxiana Limited (Oxiana) for cash of A$190 and 82 million Oxiana shares. The sale was completed on July 26, 2005.
Newmont has accounted for these dispositions in accordance with SFAS No. 144 Accounting for the Impairment or Disposal of Long-Lived Assets. The Company has reclassified the balance sheet amounts and the income statement results from the historical presentation to Assets and Liabilities of operations held for sale on the Condensed Consolidated Balance Sheets and to Loss from discontinued operations in the Condensed Consolidated Statements of Income for all periods presented. The Condensed Consolidated Statements of Cash Flows have been reclassified for assets held for sale and discontinued operations for all periods presented.
The following table details selected financial information included in the Gain (loss) from discontinued operations:
Three Months Ended September 30, | Nine Months Ended September 30, | |||||||||||||||
2006 | 2005 | 2006 | 2005 | |||||||||||||
Sales - gold, net |
$ | 5 | $ | 19 | $ | 52 | $ | 63 | ||||||||
Sales - base metals, net |
| 1 | | 38 | ||||||||||||
$ | 5 | $ | 20 | $ | 52 | $ | 101 | |||||||||
Gain (loss) from operations |
$ | (1 | ) | $ | (2 | ) | $ | 6 | $ | (10 | ) | |||||
Gain (loss) on impairment |
(101 | ) | 6 | (101 | ) | (33 | ) | |||||||||
Pre-tax (loss) gain |
(102 | ) | 4 | (95 | ) | (43 | ) | |||||||||
Income tax benefit (expense) |
36 | (3 | ) | 38 | 12 | |||||||||||
Gain (loss) from discontinued operations |
$ | (66 | ) | $ | 1 | $ | (57 | ) | $ | (31 | ) | |||||
The major classes of Assets and Liabilities of operations held for sale are as follows:
At September 30, 2006 |
At December 31, 2005 | |||||
Assets: |
||||||
Accounts receivable |
$ | | $ | 2 | ||
Inventories |
2 | 20 | ||||
Stockpiles and ore on leach pads |
| 18 | ||||
Property, plant and mine development |
21 | 129 | ||||
Other assets |
13 | 13 | ||||
Total assets of operations held for sale |
$ | 36 | $ | 182 | ||
Liabilities: |
||||||
Accounts payable |
$ | | $ | 7 | ||
Reclamation and remediation |
3 | 5 | ||||
Other liabilities |
| 35 | ||||
Total liabilities of operations held for sale |
$ | 3 | $ | 47 | ||
10
NEWMONT MINING CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) Continued
(dollars in millions, except per share, per ounce and per pound amounts)
(6) INCOME PER COMMON SHARE
Basic income per common share is computed by dividing income available to common shareholders by the weighted average number of common shares outstanding for the period. Diluted income per common share is computed similarly to basic income per common share except that the denominator is increased to include the number of additional common shares that would have been outstanding if the potentially dilutive common shares had been issued.
Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||
2006 | 2005 | 2006 | 2005 | ||||||||||||
Numerator: |
|||||||||||||||
Income from continuing operations |
$ | 264 | $ | 125 | $ | 625 | $ | 291 | |||||||
Gain (loss) from discontinued operations |
(66 | ) | 1 | (57 | ) | (31 | ) | ||||||||
Net income |
$ | 198 | $ | 126 | $ | 568 | $ | 260 | |||||||
Denominator: |
|||||||||||||||
Basic |
450 | 446 | 449 | 446 | |||||||||||
Effect of employee stock-based awards |
2 | 3 | 2 | 3 | |||||||||||
Diluted |
452 | 449 | 451 | 449 | |||||||||||
Income per common share |
|||||||||||||||
Basic and diluted: |
|||||||||||||||
Income from continuing operations |
$ | 0.59 | $ | 0.28 | $ | 1.39 | $ | 0.65 | |||||||
Gain (loss) from discontinued operations |
(0.15 | ) | | (0.13 | ) | (0.07 | ) | ||||||||
Net income |
$ | 0.44 | $ | 0.28 | $ | 1.26 | $ | 0.58 | |||||||
Options to purchase 2.1 million and 1.6 million shares of common stock at average exercise prices of $52.45 and $53.34 were outstanding as of September 30, 2006 and 2005, respectively, but were not included in the computation of diluted weighted average number of common shares because their effect would have been anti-dilutive.
(7) COMPREHENSIVE INCOME
Three Months Ended September 30, | Nine Months Ended September 30, | |||||||||||||||
2006 | 2005 | 2006 | 2005 | |||||||||||||
Net income |
$ | 198 | $ | 126 | $ | 568 | $ | 260 | ||||||||
Other comprehensive income (loss), net of tax: |
||||||||||||||||
Unrealized (loss) gain on marketable equity securities |
(83 | ) | 209 | 172 | 279 | |||||||||||
Foreign currency translation adjustments |
7 | 19 | 26 | 11 | ||||||||||||
Changes in fair value of cash flow hedge instruments |
46 | (24 | ) | (4 | ) | (38 | ) | |||||||||
(30 | ) | 204 | 194 | 252 | ||||||||||||
Comprehensive income |
$ | 168 | $ | 330 | $ | 762 | $ | 512 | ||||||||
(8) ACQUISITIONS
On September 27, 2006, Newmont acquired a 40% interest in Shore Gold Inc.s Fort a la Corne Joint Venture in Saskatchewan, Canada for $152.
On March 20, 2006, Newmont acquired Newcrest Mining Limiteds 22.22% interest in the Boddington Project, bringing its interest in the project to 66.67%, for total consideration of $164 plus stamp duty of $9 paid in the third quarter of 2006.
On January 20, 2006, Newmont acquired the remaining 15% interest in the Akyem project for total consideration of $23, bringing its interest in the project to 100%.
11
NEWMONT MINING CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) Continued
(dollars in millions, except per share, per ounce and per pound amounts)
(9) SALES CONTRACTS, COMMODITY AND DERIVATIVE INSTRUMENTS
For the three months ended September 30, 2006 and 2005, losses of $1 and gains of $1, respectively, were included in Other income, net for the ineffective portion of derivative instruments designated as cash flow hedges. For the nine months ended September 30, 2006 and 2005, losses of $60 and gains of $2, respectively, were included in Other income, net for the ineffective portion of derivative instruments designated as cash flow hedges. The amount anticipated to be reclassified from Accumulated other comprehensive income to income for derivative instruments during the next 12 months is a loss of approximately $50. The maximum period over which hedged forecasted transactions are expected to occur is 5 years.
Newmont had the following derivative contracts outstanding at September 30, 2006:
Expected Maturity Date or Transaction Date |
Fair Value | ||||||||||||||||
2006 | 2007 | Total/ Average |
At September 30, 2006 |
At December 31, 2005 |
|||||||||||||
Gold Put Option Contracts |
|||||||||||||||||
($ denominated): |
|||||||||||||||||
Ounces (thousands) |
10 | 20 | 30 | $ | (2 | ) | $ | (3 | ) | ||||||||
Average price |
$ | 393 | $ | 397 | $ | 396 | |||||||||||
Copper Collar Contracts (3) |
|||||||||||||||||
($ denominated): |
|||||||||||||||||
Pounds (millions) (4) |
93 | 84 | 177 | $ | (351 | )(1) | $ | (261 | )(2) | ||||||||
Average cap price |
$ | 1.38 | $ | 1.41 | $ | 1.39 | |||||||||||
Average floor price |
$ | 1.10 | $ | 1.10 | $ | 1.10 | |||||||||||
$/IDR Forward Purchase Contracts (3): |
|||||||||||||||||
$ (millions) |
$ | 21 | $ | 50 | $ | 71 | $ | 3 | $ | | |||||||
Average rate (IDR/$) |
10,261 | 9,725 | 9,881 |
(1) | The fair value does not include amounts payable ($100) on derivative contracts that were closed out in September 2006 with the net settlement due in October 2006. At September 30, 2006, $451 was included in Current liabilities, Derivative instruments. |
(2) | The fair value does not include amounts payable ($36) on derivative contracts that were closed out in December 2005 with the net settlement due and paid in January 2006. |
(3) | 56.25% guaranteed by Newmont, 43.75% guaranteed by an affiliate of Sumitomo Corporation. |
(4) | Of the contracts maturing in 2007, 71 million pounds are designated against expected 2006 sales. The remainder are designated against 2007 sales. |
Provisional Copper and Gold Sales
The Companys provisional copper and gold sales contain an embedded derivative that is required to be separated from the host contract for accounting purposes. The host contract is the receivable from the sale of the copper concentrates at the forward London Metal Exchange price at the time of sale. The embedded derivative, which does not qualify for hedge accounting, is marked to market through earnings each period prior to final settlement.
For the three and nine months ended September 30, 2006 and 2005, the Company recorded the following gross revenues before treatment and refining charges, which were subject to final price adjustments at September 30, 2006 and 2005, as follows:
Three Months Ended September 30, | Nine Months Ended September 30, | |||||||||||||||
2006 | 2005 | 2006 | 2005 | |||||||||||||
Gross revenue subject to final price adjustments |
||||||||||||||||
Copper |
$ | 309 | $ | 326 | $ | 405 | $ | 443 | ||||||||
Gold |
$ | 9 | $ | 21 | $ | 19 | $ | 21 | ||||||||
The average final price adjustments realized were as follows: | ||||||||||||||||
Three Months Ended September 30, | Nine Months Ended September 30, | |||||||||||||||
2006 | 2005 | 2006 | 2005 | |||||||||||||
Average final price adjustments |
||||||||||||||||
Copper |
26 | % | 12 | % | 39 | % | 10 | % | ||||||||
Gold |
(4 | )% | 3 | % | 4 | % | |
12
NEWMONT MINING CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) Continued
(dollars in millions, except per share, per ounce and per pound amounts)
Price-Capped Forward Sales Contracts
In 2001, Newmont entered into transactions that closed out certain call options. The options were replaced with a series of forward sales contracts requiring physical delivery of the same quantity of gold over slightly extended future periods. Under the terms of the contracts, Newmont will realize the lower of the spot price on the delivery date or the capped price ranging from $381 to $392 per ounce. The initial fair value of the forward sales contracts was recorded as deferred revenue. At September 30, 2006, $47 remained in deferred revenue and will be included in revenue as delivery occurs. The forward sales contracts are accounted for as normal sales contracts under SFAS No. 133 Accounting for Derivative Instruments and Hedging Activities and SFAS No. 138 Accounting for Certain Derivative Instruments and Certain Hedging Activities-an Amendment to SFAS No. 133.
Newmont had the following price-capped forward sales contracts outstanding at September 30, 2006:
Scheduled Maturity Date or Transaction Date | Fair Value | |||||||||||||||||||
2008 | 2009 | 2011 | Total/ Average |
At September 30, 2006 |
At December 31, 2005 |
|||||||||||||||
Ounces (thousands) |
1,000 | 600 | 250 | 1,850 | $ | (486 | ) | $ | (338 | ) | ||||||||||
Average price |
$ | 384 | $ | 381 | $ | 392 | $ | 384 |
Interest Rate Swap Contracts
In 2001, Newmont entered into contracts to hedge the interest rate risk exposure on a portion of its $275 8 5/8% notes and its $200 8 3/8% debentures. For the three months ended September 30, 2006 and 2005, these transactions resulted in a reduction in interest expense of $nil and $1, respectively. For the nine months ended September 30, 2006 and 2005, these transactions resulted in a reduction in interest expense of $nil and $3, respectively. The fair value of the interest rate swaps was $1 and $2 at September 30, 2006 and December 31, 2005, respectively.
13
NEWMONT MINING CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) Continued
(dollars in millions, except per share, per ounce and per pound amounts)
(10) INVESTMENTS
At September 30, 2006 | |||||||||||||
Unrealized | |||||||||||||
Cost/Equity Basis |
Gain | Loss | Fair/Equity Value | ||||||||||
Current: |
|||||||||||||
Marketable Debt Securities: |
|||||||||||||
Auction rate securities |
$ | 197 | $ | | $ | | $ | 197 | |||||
Marketable Equity Securities: |
|||||||||||||
Agincourt Resources |
37 | | (3 | ) | 34 | ||||||||
Other |
10 | 23 | | 33 | |||||||||
47 | 23 | (3 | ) | 67 | |||||||||
Other investments, at cost |
9 | | | 9 | |||||||||
$ | 253 | $ | 23 | $ | (3 | ) | $ | 273 | |||||
Long-term: |
|||||||||||||
Marketable Equity Securities: |
|||||||||||||
Canadian Oil Sands Trust |
$ | 268 | $ | 551 | $ | | $ | 819 | |||||
Gabriel Resources, Ltd. |
72 | 91 | | 163 | |||||||||
Shore Gold, Inc. |
94 | | (7 | ) | 87 | ||||||||
Miramar Mining Corporation |
29 | 48 | | 77 | |||||||||
Other |
32 | 13 | (1 | ) | 44 | ||||||||
495 | 703 | (8 | ) | 1,190 | |||||||||
Other investments, at cost |
12 | | | 12 | |||||||||
Investment in Affiliates: |
|||||||||||||
European Gold Refineries |
15 | | | 15 | |||||||||
AGR Matthey Joint Venture |
15 | | | 15 | |||||||||
Other |
7 | | | 7 | |||||||||
37 | | | 37 | ||||||||||
$ | 544 | $ | 703 | $ | (8 | ) | $ | 1,239 | |||||
At December 31, 2005 | |||||||||||||
Unrealized | |||||||||||||
Cost/Equity Basis |
Gain | Loss | Fair/Equity Value | ||||||||||
Current: |
|||||||||||||
Marketable Debt Securities: |
|||||||||||||
Auction rate securities |
$ | 785 | $ | | $ | | $ | 785 | |||||
Marketable Equity Securities: |
|||||||||||||
Other |
11 | 12 | | 23 | |||||||||
Other investments, at cost |
9 | | | 9 | |||||||||
$ | 805 | $ | 12 | $ | | $ | 817 | ||||||
Long-term: |
|||||||||||||
Marketable Equity Securities: |
|||||||||||||
Canadian Oil Sands Trust |
$ | 240 | $ | 410 | $ | | $ | 650 | |||||
Gabriel Resources, Ltd. |
53 | 29 | | 82 | |||||||||
Shore Gold, Inc. |
89 | 22 | | 111 | |||||||||
Miramar Mining Corporation |
27 | 19 | | 46 | |||||||||
Other |
20 | 8 | | 28 | |||||||||
429 | 488 | | 917 | ||||||||||
Other investments, at cost |
10 | | | 10 | |||||||||
Investment in Affiliates: |
|||||||||||||
European Gold Refineries |
15 | | | 15 | |||||||||
AGR Matthey Joint Venture |
13 | | | 13 | |||||||||
28 | | | 28 | ||||||||||
$ | 467 | $ | 488 | $ | | $ | 955 | ||||||
14
NEWMONT MINING CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) Continued
(dollars in millions, except per share, per ounce and per pound amounts)
(11) INVENTORIES
At September 30, 2006 |
At December 31, 2005 | |||||
In-process |
$ | 78 | $ | 72 | ||
Concentrate |
12 | 3 | ||||
Precious metals |
13 | 3 | ||||
Materials, supplies and other |
269 | 226 | ||||
$ | 372 | $ | 304 | |||
(12) STOCKPILES AND ORE ON LEACH PADS
At September 30, 2006 |
At December 31, 2005 | |||||
Current: |
||||||
Stockpiles |
$ | 183 | $ | 128 | ||
Ore on leach pads |
153 | 113 | ||||
$ | 336 | $ | 241 | |||
Long-term: |
||||||
Stockpiles |
$ | 522 | $ | 404 | ||
Ore on leach pads |
273 | 195 | ||||
$ | 795 | $ | 599 | |||
(13) DEBT
At September 30, 2006 | At December 31, 2005 | |||||||||||
Current | Non-Current | Current | Non-Current | |||||||||
Sale-leaseback of refractory ore treatment plant |
$ | 21 | $ | 235 | $ | 19 | $ | 256 | ||||
5 7/8% notes, net of discount |
| 597 | | 597 | ||||||||
8 5/8% debentures, net of discount |
| 217 | | 218 | ||||||||
Newmont Australia 7 5/8% guaranteed notes, net of premium |
| 120 | | 120 | ||||||||
Prepaid forward sales obligation |
| | 48 | 48 | ||||||||
PTNNT project financing facility |
87 | 436 | 87 | 479 | ||||||||
PTNNT shareholder loan |
39 | | 39 | | ||||||||
Yanacocha credit facility |
7 | 93 | | | ||||||||
Yanacocha bonds |
| 100 | | | ||||||||
Project financings, capital leases and other |
4 | 1 | 2 | 5 | ||||||||
$ | 158 | $ | 1,799 | $ | 195 | $ | 1,723 | |||||
Scheduled minimum debt repayments at September 30, 2006 are $83 for the remainder of 2006, $122 in 2007, $243 in 2008, $125 in 2009, $133 in 2010 and $1,251 thereafter.
On September 27, 2006, Newmont settled its remaining obligations under the prepaid forward gold sales contract and forward gold purchase contract for which it was required to deliver 17,951 ounces of gold in December 2006 and 179,062 ounces of gold in June 2007. This settlement resulted in cash payments of approximately $96, a $48 reduction to the current portion of long-term debt and a pre-tax loss on extinguishment of debt of approximately $40. During June 2006, 161,111 ounces of gold were physically delivered in connection with the prepaid forward sales obligation and the Company recorded a non-cash reduction in debt of $48.
On July 27, 2006, Yanacocha issued $100 of bonds into the Peruvian capital markets under a $200 bond program approved by the Peruvian securities regulatory authority. The bonds are held by various Peruvian entities, including pension funds, mutual funds, government funds and insurance companies. The issuance is comprised of $42 of floating interest rate bonds bearing interest at a rate of Libor plus 1.4375%; and $58 of fixed rate bonds bearing interest at 7.0%. The bonds have a four year grace period and amortize quarterly over six years. The bonds are unsecured and are non-recourse to Newmont.
On May 19, 2006, Yanacocha entered into an unsecured $100 bank financing with a syndicate of Peruvian commercial banks, comprised of Banco de Credito del Peru, Banco Continental and Banco Wiese Sudameris. Quarterly repayments begin in May 2007 with final maturity May 2014. Borrowings under the facility bear interest at a rate of Libor plus 1.875%. The loan is non-recourse to Newmont.
15
NEWMONT MINING CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) Continued
(dollars in millions, except per share, per ounce and per pound amounts)
(14) OTHER LIABILITIES
At September 30, 2006 |
At December 31, 2005 | |||||
Other current liabilities: |
||||||
Income and mining taxes |
$ | 203 | $ | 77 | ||
Accrued operating costs |
121 | 79 | ||||
Accrued capital expenditures |
93 | 78 | ||||
Reclamation and remediation costs |
53 | 63 | ||||
Interest |
53 | 42 | ||||
Royalties |
22 | 26 | ||||
Taxes other than income and mining |
16 | 18 | ||||
Deferred income tax liabilities |
4 | 4 | ||||
Deferred revenue |
4 | 17 | ||||
Advanced stripping costs |
| 14 | ||||
Other |
40 | 53 | ||||
$ | 609 | $ | 471 | |||
At September 30, 2006 |
At December 31, 2005 | |||||
Other long-term liabilities: |
||||||
Income taxes |
$ | 230 | $ | 220 | ||
Deferred revenue from the sale of future product |
47 | 47 | ||||
Derivative instruments |
| 30 | ||||
Advanced stripping costs |
| 93 | ||||
Other |
34 | 25 | ||||
$ | 311 | $ | 415 | |||
(15) RECLAMATION AND REMEDIATION (ASSET RETIREMENT OBLIGATIONS)
At September 30, 2006 and December 31, 2005, $467 and $428, respectively, were accrued for reclamation obligations relating to mineral properties in accordance with SFAS No. 143, Accounting for Asset Retirement Obligations. In addition, the Company is involved in several matters concerning environmental obligations associated with former, primarily historic, mining activities. Generally, these matters concern developing and implementing remediation plans at the various sites involved. At September 30, 2006 and December 31, 2005, $69 and $77, respectively, were accrued for such obligations. These amounts are also included in Reclamation and remediation liabilities.
The following is a reconciliation of the liability for asset retirement obligations:
Nine Months Ended September 30, | ||||||||
2006 | 2005 | |||||||
Balance at beginning of period |
$ | 505 | $ | 469 | ||||
Additions, changes in estimates and other |
51 | 9 | ||||||
Liabilities settled |
(42 | ) | (23 | ) | ||||
Disposition of liability |
| (7 | ) | |||||
Accretion expense |
22 | 20 | ||||||
Balance at end of period |
$ | 536 | $ | 468 | ||||
The current portions of Reclamation and remediation liabilities of $53 and $63 at September 30, 2006 and December 31, 2005, respectively, are included in Other current liabilities. The additions in 2006 relate to expansions of waste dumps at Batu Hijau ($33) and Nevada ($8), and the acquisition of an additional interest at Boddington ($10).
16
NEWMONT MINING CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) Continued
(dollars in millions, except per share, per ounce and per pound amounts)
(16) SEGMENT INFORMATION
Financial information relating to Newmonts segments is as follows:
Three Months Ended September 30, 2006 | |||||||||||||||||||
Nevada | Yanacocha | Australia/ New Zealand |
Batu Hijau |
Africa | Other Operations |
||||||||||||||
Sales, net: |
|||||||||||||||||||
Gold |
$ | 309 | $ | 358 | $ | 221 | $ | 35 | $ | 47 | $ | 37 | |||||||
Copper |
$ | | $ | | $ | | $ | 93 | $ | | $ | | |||||||
Cost applicable to sales: |
|||||||||||||||||||
Gold |
$ | 224 | $ | 121 | $ | 134 | $ | 16 | $ | 19 | $ | 11 | |||||||
Copper |
$ | | $ | | $ | | $ | 66 | $ | | $ | | |||||||
Depreciation, depletion and amortization: |
|||||||||||||||||||
Gold |
$ | 37 | $ | 46 | $ | 32 | $ | 7 | $ | 6 | $ | 5 | |||||||
Copper |
$ | | $ | | $ | | $ | 12 | $ | | $ | | |||||||
Other |
$ | | $ | | $ | 1 | $ | | $ | | $ | | |||||||
Exploration |
$ | 8 | $ | 3 | $ | 5 | $ | | $ | 4 | $ | 1 | |||||||
Advanced projects, research and development |
$ | 4 | $ | 1 | $ | 2 | $ | 2 | $ | 6 | $ | | |||||||
Other income, net |
$ | 4 | $ | 4 | $ | 4 | $ | 1 | $ | 1 | $ | (39 | ) | ||||||
Interest expense, net |
$ | | $ | 9 | $ | | $ | 11 | $ | | $ | 1 | |||||||
Pre-tax income (loss) before minority interest and equity income of affiliates |
$ | 40 | $ | 158 | $ | 60 | $ | 13 | $ | 11 | $ | (24 | ) | ||||||
Additions to property, plant and mine development |
$ | 211 | $ | 61 | $ | 53 | $ | 13 | $ | 65 | $ | 1 |
Three Months Ended September 30, 2006 | |||||||||||||||||||
Total Operations |
Exploration | Merchant Banking |
Corporate and Other |
Consolidated | |||||||||||||||
Sales, net: |
|||||||||||||||||||
Gold |
$ | 1,007 | $ | | $ | | $ | 2 | $ | 1,009 | |||||||||
Copper |
$ | 93 | $ | | $ | | $ | | $ | 93 | |||||||||
Cost applicable to sales: |
|||||||||||||||||||
Gold |
$ | 525 | $ | | $ | | $ | | $ | 525 | |||||||||
Copper |
$ | 66 | $ | | $ | | $ | | $ | 66 | |||||||||
Depreciation, depletion and amortization: |
|||||||||||||||||||
Gold |
$ | 133 | $ | | $ | | $ | | $ | 133 | |||||||||
Copper |
$ | 12 | $ | | $ | | $ | | $ | 12 | |||||||||
Other |
$ | 1 | $ | | $ | 5 | $ | 2 | $ | 8 | |||||||||
Exploration |
$ | 21 | $ | 20 | $ | | $ | | $ | 41 | |||||||||
Advanced projects, research and development |
$ | 15 | $ | | $ | (2 | ) | $ | 6 | $ | 19 | ||||||||
Other income, net |
$ | (25 | ) | $ | 1 | $ | 298 | $ | 43 | $ | 317 | ||||||||
Interest expense, net |
$ | 21 | $ | | $ | | $ | 7 | $ | 28 | |||||||||
Pre-tax income (loss) before minority interest and equity income of affiliates |
$ | 258 | $ | (20 | ) | $ | 294 | $ | (11 | ) | $ | 521 | |||||||
Additions to property, plant and mine development |
$ | 404 | $ | | $ | 3 | $ | | $ | 407 |
17
NEWMONT MINING CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) Continued
(dollars in millions, except per share, per ounce and per pound amounts)
Three Months Ended September 30, 2005 | ||||||||||||||||||||||
Nevada | Yanacocha | Australia/ New Zealand |
Batu Hijau |
Africa | Other Operations |
|||||||||||||||||
Sales, net: |
||||||||||||||||||||||
Gold |
$ | 256 | $ | 338 | $ | 167 | $ | 126 | $ | | $ | 40 | ||||||||||
Copper |
$ | | $ | | $ | | $ | 231 | $ | | $ | | ||||||||||
Cost applicable to sales: |
||||||||||||||||||||||
Gold |
$ | 212 | $ | 111 | $ | 121 | $ | 38 | $ | | $ | 20 | ||||||||||
Copper |
$ | | $ | | $ | | $ | 86 | $ | | $ | | ||||||||||
Depreciation, depletion and amortization: |
||||||||||||||||||||||
Gold |
$ | 32 | $ | 50 | $ | 29 | $ | 11 | $ | | $ | 5 | ||||||||||
Copper |
$ | | $ | | $ | | $ | 20 | $ | | $ | | ||||||||||
Other |
$ | | $ | | $ | | $ | | $ | | $ | | ||||||||||
Exploration |
$ | 6 | $ | 2 | $ | 5 | $ | | $ | 2 | $ | | ||||||||||
Advanced projects, research and development |
$ | | $ | 2 | $ | | $ | | $ | 6 | $ | 1 | ||||||||||
Other income, net |
$ | 1 | $ | 1 | $ | 4 | $ | | $ | | $ | | ||||||||||
Interest expense, net |
$ | | $ | | $ | | $ | 11 | $ | | $ | | ||||||||||
Pre-tax income (loss) before minority interest and equity income of affiliates |
$ | 7 | $ | 172 | $ | 14 | $ | 191 | $ | (8 | ) | $ | (6 | ) | ||||||||
Amortization of deferred (advanced) stripping, net |
$ | (16 | ) | $ | | $ | (3 | ) | $ | 16 | $ | | $ | (1 | ) | |||||||
Additions to property, plant and mine development |
$ | 118 | $ | 62 | $ | 27 | $ | 24 | $ | 94 | $ | 8 |
Three Months Ended September 30, 2005 | |||||||||||||||||||
Total Operations |
Exploration | Merchant Banking |
Corporate and Other |
Consolidated | |||||||||||||||
Sales, net: |
|||||||||||||||||||
Gold |
$ | 927 | $ | | $ | | $ | (13 | ) | $ | 914 | ||||||||
Copper |
$ | 231 | $ | | $ | | $ | | $ | 231 | |||||||||
Cost applicable to sales: |
|||||||||||||||||||
Gold |
$ | 502 | $ | | $ | | $ | | $ | 502 | |||||||||
Copper |
$ | 86 | $ | | $ | | $ | | $ | 86 | |||||||||
Depreciation, depletion and amortization: |
|||||||||||||||||||
Gold |
$ | 127 | $ | | $ | | $ | | $ | 127 | |||||||||
Copper |
$ | 20 | $ | | $ | | $ | | $ | 20 | |||||||||
Other |
$ | | $ | 1 | $ | 3 | $ | 4 | $ | 8 | |||||||||
Exploration |
$ | 15 | $ | 24 | $ | | $ | | $ | 39 | |||||||||
Advanced projects, research and development |
$ | 9 | $ | | $ | 3 | $ | 6 | $ | 18 | |||||||||
Other income, net |
$ | 6 | $ | 1 | $ | 39 | $ | 20 | $ | 66 | |||||||||
Interest expense, net |
$ | 11 | $ | | $ | | $ | 12 | $ | 23 | |||||||||
Pre-tax income (loss) before minority interest and equity income of affiliates |
$ | 370 | $ | (23 | ) | $ | 33 | $ | (44 | ) | $ | 336 | |||||||
Amortization of deferred (advanced) stripping, net |
$ | (4 | ) | $ | | $ | | $ | | $ | (4 | ) | |||||||
Additions to property, plant and mine development |
$ | 333 | $ | | $ | 1 | $ | 20 | $ | 354 |
18
NEWMONT MINING CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) Continued
(dollars in millions, except per share, per ounce and per pound amounts)
Nine Months Ended September 30, 2006 | |||||||||||||||||||||
Nevada | Yanacocha | Australia/ New Zealand |
Batu Hijau |
Africa | Other Operations |
||||||||||||||||
Sales, net: |
|||||||||||||||||||||
Gold |
$ | 913 | $ | 1,274 | $ | 599 | $ | 159 | $ | 47 | $ | 133 | |||||||||
Copper |
$ | | $ | | $ | | $ | 432 | $ | | $ | | |||||||||
Cost applicable to sales: |
|||||||||||||||||||||
Gold |
$ | 664 | $ | 390 | $ | 385 | $ | 58 | $ | 19 | $ | 48 | |||||||||
Copper |
$ | | $ | | $ | | $ | 215 | $ | | $ | | |||||||||
Depreciation, depletion and amortization: |
|||||||||||||||||||||
Gold |
$ | 108 | $ | 138 | $ | 86 | $ | 17 | $ | 6 | $ | 14 | |||||||||
Copper |
$ | | $ | | $ | | $ | 46 | $ | | $ | | |||||||||
Other |
$ | | $ | | $ | 2 | $ | | $ | 1 | $ | | |||||||||
Exploration |
$ | 22 | $ | 7 | $ | 15 | $ | | $ | 9 | $ | 3 | |||||||||
Advanced projects, research and development |
$ | 10 | $ | 2 | $ | 2 | $ | 2 | $ | 23 | $ | 1 | |||||||||
Other income, net |
$ | 14 | $ | 13 | $ | 4 | $ | (48 | ) | $ | 1 | $ | (24 | ) | |||||||
Interest expense, net |
$ | | $ | 10 | $ | | $ | 33 | $ | | $ | 1 | |||||||||
Pre-tax income (loss) before minority interest and equity income of affiliates |
$ | 119 | $ | 710 | $ | 108 | $ | 170 | $ | (11 | ) | $ | 7 | ||||||||
Additions to property, plant and mine development |
$ | 501 | $ | 174 | $ | 115 | $ | 97 | $ | 200 | $ | 8 | |||||||||
Total assets from continuing operations |
$ | 2,470 | $ | 1,760 | $ | 1,262 | $ | 2,494 | $ | 914 | $ | 150 |
Nine Months Ended September 30, 2006 | ||||||||||||||||||
Total Operations |
Exploration | Merchant Banking |
Corporate and Other |
Consolidated | ||||||||||||||
Sales, net: |
||||||||||||||||||
Gold |
$ | 3,125 | $ | | $ | | $ | (30 | ) | $ | 3,095 | |||||||
Copper |
$ | 432 | $ | | $ | | $ | | $ | 432 | ||||||||
Cost applicable to sales: |
||||||||||||||||||
Gold |
$ | 1,564 | $ | | $ | | $ | | $ | 1,564 | ||||||||
Copper |
$ | 215 | $ | | $ | | $ | | $ | 215 | ||||||||
Depreciation, depletion and amortization: |
||||||||||||||||||
Gold |
$ | 369 | $ | | $ | | $ | | $ | 369 | ||||||||
Copper |
$ | 46 | $ | | $ | | $ | | $ | 46 | ||||||||
Other |
$ | 3 | $ | | $ | 14 | $ | 12 | $ | 29 | ||||||||
Exploration |
$ | 56 | $ | 63 | $ | | $ | 1 | $ | 120 | ||||||||
Advanced projects, research and development |
$ | 40 | $ | | $ | 7 | $ | 21 | $ | 68 | ||||||||
Other income, net |
$ | (40 | ) | $ | 3 | $ | 361 | $ | 62 | $ | 386 | |||||||
Interest expense, net |
$ | 44 | $ | | $ | | $ | 26 | $ | 70 | ||||||||
Pre-tax income (loss) before minority interest and equity income of affiliates |
$ | 1,103 | $ | (63 | ) | $ | 337 | $ | (113 | ) | $ | 1,265 | ||||||
Additions to property, plant and mine development |
$ | 1,095 | $ | | $ | 5 | $ | 9 | $ | 1,109 | ||||||||
Total assets from continuing operations |
$ | 9,050 | $ | 1,141 | $ | 3,192 | $ | 1,702 | $ | 15,085 | ||||||||
Assets held for sale |
$ | 36 | ||||||||||||||||
Total assets |
$ | 15,121 | ||||||||||||||||
19
NEWMONT MINING CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) Continued
(dollars in millions, except per share, per ounce and per pound amounts)
Nine Months Ended September 30, 2005 | ||||||||||||||||||||||
Nevada | Yanacocha | Australia/ New Zealand |
Batu Hijau |
Africa | Other Operations |
|||||||||||||||||
Sales, net: |
||||||||||||||||||||||
Gold |
$ | 762 | $ | 976 | $ | 523 | $ | 232 | $ | | $ | 96 | ||||||||||
Copper |
$ | | $ | | $ | | $ | 504 | $ | | $ | | ||||||||||
Cost applicable to sales: |
||||||||||||||||||||||
Gold |
$ | 585 | $ | 334 | $ | 383 | $ | 80 | $ | | $ | 55 | ||||||||||
Copper |
$ | | $ | | $ | | $ | 226 | $ | | $ | | ||||||||||
Depreciation, depletion and amortization: |
||||||||||||||||||||||
Gold |
$ | 92 | $ | 148 | $ | 87 | $ | 25 | $ | | $ | 14 | ||||||||||
Copper |
$ | | $ | | $ | | $ | 67 | $ | | $ | | ||||||||||
Other |
$ | | $ | | $ | 2 | $ | | $ | 1 | $ | 2 | ||||||||||
Exploration |
$ | 14 | $ | 5 | $ | 15 | $ | | $ | 6 | $ | 3 | ||||||||||
Advanced projects, research and development |
$ | | $ | 2 | $ | | $ | | $ | 13 | $ | 5 | ||||||||||
Other income, net |
$ | 4 | $ | 2 | $ | 7 | $ | 3 | $ | | $ | | ||||||||||
Interest expense, net |
$ | | $ | | $ | | $ | 32 | $ | | $ | | ||||||||||
Pre-tax income (loss) before minority interest and equity income of affiliates |
$ | 64 | $ | 485 | $ | 40 | $ | 309 | $ | (21 | ) | $ | (19 | ) | ||||||||
Amortization of deferred (advanced) stripping, net |
$ | (48 | ) | $ | | $ | 1 | $ | (1 | ) | $ | | $ | (2 | ) | |||||||
Additions to property, plant and mine development |
$ | 324 | $ | 169 | $ | 72 | $ | 52 | $ | 206 | $ | 24 | ||||||||||
Total assets from continuing operations |
$ | 1,961 | $ | 1,421 | $ | 1,063 | $ | 2,311 | $ | 575 | $ | 220 |
Nine Months Ended September 30, 2005 | |||||||||||||||||||
Total Operations |
Exploration | Merchant Banking |
Corporate and Other |
Consolidated | |||||||||||||||
Sales, net: |
|||||||||||||||||||
Gold |
$ | 2,589 | $ | | $ | | $ | (33 | ) | $ | 2,556 | ||||||||
Copper |
$ | 504 | $ | | $ | | $ | | $ | 504 | |||||||||
Cost applicable to sales: |
|||||||||||||||||||
Gold |
$ | 1,437 | $ | | $ | | $ | | $ | 1,437 | |||||||||
Copper |
$ | 226 | $ | | $ | | $ | | $ | 226 | |||||||||
Depreciation, depletion and amortization: |
|||||||||||||||||||
Gold |
$ | 366 | $ | | $ | | $ | | $ | 366 | |||||||||
Copper |
$ | 67 | $ | | $ | | $ | | $ | 67 | |||||||||
Other |
$ | 5 | $ | 3 | $ | 15 | $ | 10 | $ | 33 | |||||||||
Exploration |
$ | 43 | $ | 60 | $ | | $ | | $ | 103 | |||||||||
Advanced projects, research and development |
$ | 20 | $ | | $ | 12 | $ | 15 | $ | 47 | |||||||||
Other income, net |
$ | 16 | $ | 3 | $ | 115 | $ | 43 | $ | 177 | |||||||||
Interest expense, net |
$ | 32 | $ | | $ | | $ | 43 | $ | 75 | |||||||||
Pre-tax income (loss) before minority interest and equity income of affiliates |
$ | 858 | $ | (60 | ) | $ | 80 | $ | (151 | ) | $ | 727 | |||||||
Amortization of deferred (advanced) stripping, net |
$ | (50 | ) | $ | | $ | | $ | | $ | (50 | ) | |||||||
Additions to property, plant and mine development |
$ | 847 | $ | | $ | 3 | $ | 34 | $ | 884 | |||||||||
Total assets from continuing operations |
$ | 7,551 | $ | 1,135 | $ | 2,989 | $ | 2,147 | $ | 13,822 | |||||||||
Assets held for sale |
133 | ||||||||||||||||||
Total assets |
$ | 13,955 | |||||||||||||||||
20
NEWMONT MINING CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) Continued
(dollars in millions, except per share, per ounce and per pound amounts)
(17) CONDENSED CONSOLIDATING FINANCIAL STATEMENTS
Newmont USA, a 100 percent owned subsidiary of Newmont Mining Corporation, has fully and unconditionally guaranteed the 5 7/8% publicly traded notes. The following condensed consolidating financial information is provided for Newmont USA, as guarantor, and for Newmont Mining Corporation, as issuer, as an alternative to providing separate financial statements for the guarantor. The accounts of Newmont Mining Corporation are presented using the equity method of accounting for investments in subsidiaries.
Three Months Ended September 30, 2006 | ||||||||||||||||||||
Condensed Consolidating Statement of Income |
Newmont Mining Corporation |
Newmont USA |
Other Subsidiaries |
Eliminations | Newmont Mining Corporation Consolidated |
|||||||||||||||
Revenues |
||||||||||||||||||||
Sales - gold, net |
$ | | $ | 755 | $ | 254 | $ | | $ | 1,009 | ||||||||||
Sales - copper, net |
| 93 | | | 93 | |||||||||||||||
| 848 | 254 | | 1,102 | ||||||||||||||||
Costs and expenses |
||||||||||||||||||||
Costs applicable to sales (exclusive of depreciation, depletion and amortization shown separately below) |
||||||||||||||||||||
Gold |
| 381 | 146 | (2 | ) | 525 | ||||||||||||||
Copper |
| 66 | | | 66 | |||||||||||||||
Depreciation, depletion and amortization |
| 114 | 39 | | 153 | |||||||||||||||
Exploration |
| 31 | 10 | | 41 | |||||||||||||||
Advanced projects, research and development |
| 11 | 8 | | 19 | |||||||||||||||
General and administrative |
| 31 | (4 | ) | 2 | 29 | ||||||||||||||
Other |
| 36 | 2 | (1 | ) | 37 | ||||||||||||||
| 670 | 201 | (1 | ) | 870 | |||||||||||||||
Other income (expense) |
||||||||||||||||||||
Other income (expense), net |
82 | (17 | ) | 253 | (1 | ) | 317 | |||||||||||||
Interest income - intercompany |
31 | 23 | | (54 | ) | | ||||||||||||||
Interest expense - intercompany |
(2 | ) | | (52 | ) | 54 | | |||||||||||||
Interest expense, net |
(4 | ) | (22 | ) | (2 | ) | | (28 | ) | |||||||||||
107 | (16 | ) | 199 | (1 | ) | 289 | ||||||||||||||
Income from continuing operations before taxes, minority interest and equity income of affiliates |
107 | 162 | 252 | | 521 | |||||||||||||||
Income tax (expense) benefit |
(52 | ) | (8 | ) | (146 | ) | | (206 | ) | |||||||||||
Minority interest in income of subsidiaries |
| (52 | ) | (5 | ) | 5 | (52 | ) | ||||||||||||
Equity income (loss) of affiliates |
143 | (1 | ) | 10 | (151 | ) | 1 | |||||||||||||
Income from continuing operations |
198 | 101 | 111 | (146 | ) | 264 | ||||||||||||||
Loss from discontinued operations |
| (66 | ) | | | (66 | ) | |||||||||||||
Net income (loss) |
$ | 198 | $ | 35 | $ | 111 | $ | (146 | ) | $ | 198 | |||||||||
21
NEWMONT MINING CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) Continued
(dollars in millions, except per share, per ounce and per pound amounts)
Three Months Ended September 30, 2005 | ||||||||||||||||||||
Condensed Consolidating Statement of Income |
Newmont Mining Corporation |
Newmont USA |
Other Subsidiaries |
Eliminations | Newmont Mining Corporation Consolidated |
|||||||||||||||
Revenues |
||||||||||||||||||||
Sales - gold, net |
$ | | $ | 759 | $ | 155 | $ | | $ | 914 | ||||||||||
Sales - copper, net |
| 231 | | | 231 | |||||||||||||||
| 990 | 155 | | 1,145 | ||||||||||||||||
Costs and expenses |
||||||||||||||||||||
Costs applicable to sales (exclusive of depreciation, depletion and amortization shown separately below) |
||||||||||||||||||||
Gold |
| 386 | 116 | | 502 | |||||||||||||||
Copper |
| 86 | | | 86 | |||||||||||||||
Depreciation, depletion and amortization |
| 125 | 30 | | 155 | |||||||||||||||
Exploration |
| 26 | 13 | | 39 | |||||||||||||||
Advanced projects, research and development |
| 9 | 9 | | 18 | |||||||||||||||
General and administrative |
| 31 | 2 | (1 | ) | 32 | ||||||||||||||
Other |
| 21 | (1 | ) | | 20 | ||||||||||||||
| 684 | 169 | (1 | ) | 852 | |||||||||||||||
Other income (expense) |
||||||||||||||||||||
Other income (expense), net |
7 | 14 | 45 | | 66 | |||||||||||||||
Interest income, foreign currency exchange and other income - intercompany |
28 | 12 | | (40 | ) | | ||||||||||||||
Interest expense - intercompany |
(2 | ) | | (38 | ) | 40 | | |||||||||||||
Interest expense, net |
(10 | ) | (12 | ) | (1 | ) | | (23 | ) | |||||||||||
23 | 14 | 6 | | 43 | ||||||||||||||||
Income from continuing operations before taxes, minority interest and equity income of affiliates |
23 | 320 | (8 | ) | 1 | 336 | ||||||||||||||
Income tax (expense) benefit |
(26 | ) | (70 | ) | | | (96 | ) | ||||||||||||
Minority interest in income of subsidiaries |
| (116 | ) | | 1 | (115 | ) | |||||||||||||
Equity income (loss) of affiliates |
129 | | 27 | (156 | ) | | ||||||||||||||
Income from continuing operations |
126 | 134 | 19 | (154 | ) | 125 | ||||||||||||||
Loss from discontinued operations |
| (1 | ) | 2 | | 1 | ||||||||||||||
Net income (loss) |
$ | 126 | $ | 133 | $ | 21 | $ | (154 | ) | $ | 126 | |||||||||
22
NEWMONT MINING CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) Continued
(dollars in millions, except per share, per ounce and per pound amounts)
Nine Months Ended September 30, 2006 | ||||||||||||||||||||
Condensed Consolidating Statement of Income |
Newmont Mining Corporation |
Newmont USA |
Other Subsidiaries |
Eliminations | Newmont Mining Corporation Consolidated |
|||||||||||||||
Revenues |
||||||||||||||||||||
Sales - gold, net |
$ | | $ | 2,482 | $ | 613 | $ | | $ | 3,095 | ||||||||||
Sales - copper, net |
| 432 | | | 432 | |||||||||||||||
| 2,914 | 613 | | 3,527 | ||||||||||||||||
Costs and expenses |
||||||||||||||||||||
Costs applicable to sales (exclusive of depreciation, depletion and amortization shown separately below) |
||||||||||||||||||||
Gold |
| 1,184 | 386 | (6 | ) | 1,564 | ||||||||||||||
Copper |
| 215 | | | 215 | |||||||||||||||
Depreciation, depletion and amortization |
| 343 | 101 | | 444 | |||||||||||||||
Exploration |
| 90 | 30 | | 120 | |||||||||||||||
Advanced projects, research and development |
| 34 | 34 | | 68 | |||||||||||||||
General and administrative |
| 97 | 1 | 5 | 103 | |||||||||||||||
Other |
| 54 | 11 | (1 | ) | 64 | ||||||||||||||
| 2,017 | 563 | (2 | ) | 2,578 | |||||||||||||||
Other income (expense) |
||||||||||||||||||||
Other income (expense), net |
99 | (17 | ) | 305 | (1 | ) | 386 | |||||||||||||
Interest income - intercompany |
90 | 53 | | (143 | ) | | ||||||||||||||
Interest expense - intercompany |
(6 | ) | | (137 | ) | 143 | | |||||||||||||
Interest expense, net |
(17 | ) | (47 | ) | (6 | ) | | (70 | ) | |||||||||||
166 | (11 | ) | 162 | (1 | ) | 316 | ||||||||||||||
Income from continuing operations before taxes, minority interest and equity income of affiliates |
166 | 886 | 212 | 1 | 1,265 | |||||||||||||||
Income tax (expense) benefit |
(65 | ) | (255 | ) | (42 | ) | | (362 | ) | |||||||||||
Minority interest in income of subsidiaries |
| (281 | ) | (15 | ) | 17 | (279 | ) | ||||||||||||
Equity income (loss) of affiliates |
467 | (2 | ) | 67 | (531 | ) | 1 | |||||||||||||
Income from continuing operations |
568 | 348 | 222 | (513 | ) | 625 | ||||||||||||||
Loss from discontinued operations |
| (57 | ) | | | (57 | ) | |||||||||||||
Net income (loss) |
$ | 568 | $ | 291 | $ | 222 | $ | (513 | ) | $ | 568 | |||||||||
23
NEWMONT MINING CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) Continued
(dollars in millions, except per share, per ounce and per pound amounts)
Nine Months Ended September 30, 2005 | ||||||||||||||||||||
Condensed Consolidating Statement of Income |
Newmont Mining Corporation |
Newmont USA |
Other Subsidiaries |
Eliminations | Newmont Mining Corporation Consolidated |
|||||||||||||||
Revenues |
||||||||||||||||||||
Sales - gold, net |
$ | | $ | 2,063 | $ | 493 | $ | | $ | 2,556 | ||||||||||
Sales - copper, net |
| 504 | | | 504 | |||||||||||||||
| 2,567 | 493 | | 3,060 | ||||||||||||||||
Costs and expenses |
||||||||||||||||||||
Costs applicable to sales (exclusive of depreciation, depletion and amortization shown separately below) |
||||||||||||||||||||
Gold |
| 1,076 | 367 | (6 | ) | 1,437 | ||||||||||||||
Copper |
| 226 | | | 226 | |||||||||||||||
Depreciation, depletion and amortization |
| 366 | 100 | | 466 | |||||||||||||||
Exploration |
| 68 | 35 | | 103 | |||||||||||||||
Advanced projects, research and development |
| 17 | 30 | | 47 | |||||||||||||||
General and administrative |
| 88 | 3 | 4 | 95 | |||||||||||||||
Other |
| 49 | 12 | | 61 | |||||||||||||||
| 1,890 | 547 | (2 | ) | 2,435 | |||||||||||||||
Other income (expense) |
||||||||||||||||||||
Other income (expense), net |
12 | 72 | 93 | | 177 | |||||||||||||||
Interest income, foreign currency exchange and other income - intercompany |
89 | 33 | 1 | (123 | ) | | ||||||||||||||
Interest expense - intercompany |
(6 | ) | | (117 | ) | 123 | | |||||||||||||
Interest expense, net |
(21 | ) | (47 | ) | (7 | ) | | (75 | ) | |||||||||||
74 | 58 | (30 | ) | | 102 | |||||||||||||||
Income from continuing operations before taxes, minority interest and equity income of affiliates |
74 | 735 | (84 | ) | 2 | 727 | ||||||||||||||
Income tax (expense) benefit |
(19 | ) | (222 | ) | 50 | | (191 | ) | ||||||||||||
Minority interest in income of subsidiaries |
| (251 | ) | 2 | 1 | (248 | ) | |||||||||||||
Equity income of affiliates |
205 | | 57 | (259 | ) | 3 | ||||||||||||||
Income from continuing operations |
260 | 262 | 25 | (256 | ) | 291 | ||||||||||||||
Loss from discontinued operations |
| (1 | ) | (30 | ) | | (31 | ) | ||||||||||||
Net income (loss) |
$ | 260 | $ | 261 | $ | (5 | ) | $ | (256 | ) | $ | 260 | ||||||||
24
NEWMONT MINING CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) Continued
(dollars in millions, except per share, per ounce and per pound amounts)
At September 30, 2006 | |||||||||||||||||
Condensed Consolidating Balance Sheets |
Newmont Mining Corporation |
Newmont USA |
Other Subsidiaries |
Eliminations | Newmont Mining Corporation Consolidated | ||||||||||||
Assets |
|||||||||||||||||
Cash and cash equivalents |
$ | 1 | $ | 792 | $ | 266 | $ | | $ | 1,059 | |||||||
Marketable securities and other short-term investments |
1 | 213 | 59 | | 273 | ||||||||||||
Trade receivables |
| 146 | 4 | | 150 | ||||||||||||
Accounts receivable |
1,761 | 560 | 703 | (2,876 | ) | 148 | |||||||||||
Inventories |
| 308 | 64 | | 372 | ||||||||||||
Stockpiles and ore on leach pads |
| 294 | 42 | | 336 | ||||||||||||
Deferred income tax assets |
| 119 | 21 | | 140 | ||||||||||||
Other current assets |
| 90 | 25 | | 115 | ||||||||||||
Current assets |
1,763 | 2,522 | 1,184 | (2,876 | ) | 2,593 | |||||||||||
Property, plant and mine development, net |
| 4,521 | 2,041 | (15 | ) | 6,547 | |||||||||||
Investments |
| 270 | 969 | | 1,239 | ||||||||||||
Investments in subsidiaries |
5,990 | 4 | 4,406 | (10,400 | ) | | |||||||||||
Long-term stockpiles and ore on leach pads |
| 744 | 51 | | 795 | ||||||||||||
Deferred income tax assets |
31 | 623 | 160 | | 814 | ||||||||||||
Other long-term assets |
1,734 | 1,206 | 93 | (2,831 | ) | 202 | |||||||||||
Goodwill |
| | 2,895 | | 2,895 | ||||||||||||
Assets of operations held for sale |
| 36 | | | 36 | ||||||||||||
Total assets |
$ | 9,518 | $ | 9,926 | $ | 11,799 | $ | (16,122 | ) | $ | 15,121 | ||||||
Liabilities |
|||||||||||||||||
Current portion of long-term debt |
$ | | $ | 154 | $ | 4 | $ | | $ | 158 | |||||||
Accounts payable |
50 | 2,276 | 800 | (2,875 | ) | 251 | |||||||||||
Employee related benefits |
| 133 | 34 | | 167 | ||||||||||||
Derivative instruments |
| 452 | 1 | | 453 | ||||||||||||
Other current liabilities |
101 | 348 | 161 | (1 | ) | 609 | |||||||||||
Current liabilities |
151 | 3,363 | 1,000 | (2,876 | ) | 1,638 | |||||||||||
Long-term debt |
597 | 1,081 | 121 | | 1,799 | ||||||||||||
Reclamation and remediation liabilities |
| 359 | 124 | | 483 | ||||||||||||
Deferred income tax liabilities |
53 | 231 | 262 | 25 | 571 | ||||||||||||
Employee-related benefits |
1 | 260 | 23 | | 284 | ||||||||||||
Other long-term liabilities |
263 | 147 | 2,885 | (2,984 | ) | 311 | |||||||||||
Liabilities of operations held for sale |
| 3 | | | 3 | ||||||||||||
Total liabilities |
1,065 | 5,444 | 4,415 | (5,835 | ) | 5,089 | |||||||||||
Minority interest in subsidiaries |
| 1,038 | 340 | (382 | ) | 996 | |||||||||||
Stockholders equity |
|||||||||||||||||
Preferred stock |
| | 61 | (61 | ) | | |||||||||||
Common stock |
675 | | | | 675 | ||||||||||||
Additional paid-in capital |
6,100 | 2,220 | 5,191 | (6,828 | ) | 6,683 | |||||||||||
Accumulated other comprehensive income (loss) |
572 | (39 | ) | 314 | (275 | ) | 572 | ||||||||||
Retained earnings |
1,106 | 1,263 | 1,478 | (2,741 | ) | 1,106 | |||||||||||
Total stockholders equity |
8,453 | 3,444 | 7,044 | (9,905 | ) | 9,036 | |||||||||||
Total liabilities and stockholders equity |
$ | 9,518 | $ | 9,926 | $ | 11,799 | $ | (16,122 | ) | $ | 15,121 | ||||||
25
NEWMONT MINING CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) Continued
(dollars in millions, except per share, per ounce and per pound amounts)
At December 31, 2005 | ||||||||||||||||||
Condensed Consolidating Balance Sheets |
Newmont Mining Corporation |
Newmont USA |
Other Subsidiaries |
Eliminations | Newmont Mining Corporation Consolidated | |||||||||||||
Assets |
||||||||||||||||||
Cash and cash equivalents |
$ | 1 | $ | 979 | $ | 102 | $ | | $ | 1,082 | ||||||||
Marketable securities and other short-term investments |
| 794 | 23 | | 817 | |||||||||||||
Trade receivables |
| 93 | 1 | | 94 | |||||||||||||
Accounts receivable |
1,733 | 263 | 561 | (2,422 | ) | 135 | ||||||||||||
Inventories |
| 262 | 42 | | 304 | |||||||||||||
Stockpiles and ore on leach pads |
| 215 | 26 | | 241 | |||||||||||||
Deferred stripping costs |
| 67 | 11 | | 78 | |||||||||||||
Deferred income tax assets |
| 139 | 20 | | 159 | |||||||||||||
Other current assets |
3 | 72 | 15 | | 90 | |||||||||||||
Current assets |
1,737 | 2,884 | 801 | (2,422 | ) | 3,000 | ||||||||||||
Property, plant and mine development, net |
(11 | ) | 4,078 | 1,514 | | 5,581 | ||||||||||||
Investments |
| 198 | 757 | | 955 | |||||||||||||
Investments in subsidiaries |
5,180 | 111 | 3,979 | (9,270 | ) | | ||||||||||||
Long-term stockpiles and ore on leach pads |
| 562 | 37 | | 599 | |||||||||||||
Deferred stripping costs |
| 92 | 8 | | 100 | |||||||||||||
Deferred income tax assets |
12 | 407 | 96 | | 515 | |||||||||||||
Other long-term assets |
1,646 | 850 | 188 | (2,503 | ) | 181 | ||||||||||||
Goodwill |
| | 2,879 | | 2,879 | |||||||||||||
Assets of operations held for sale |
| 134 | 48 | | 182 | |||||||||||||
Total assets |
$ | 8,564 | $ | 9,316 | $ | 10,307 | $ | (14,195 | ) | $ | 13,992 | |||||||
Liabilities |
||||||||||||||||||
Current portion of long-term debt |
$ | | $ | 194 | $ | 1 | $ | | $ | 195 | ||||||||
Accounts payable |
50 | 2,165 | 437 | (2,425 | ) | 227 | ||||||||||||
Employee related benefits |
| 151 | 25 | | 176 | |||||||||||||
Derivative instruments |
| 267 | 3 | | 270 | |||||||||||||
Other current liabilities |
38 | 296 | 138 | (1 | ) | 471 | ||||||||||||
Current liabilities |
88 | 3,073 | 604 | (2,426 | ) | 1,339 | ||||||||||||
Long-term debt |
597 | 1,002 | 124 | | 1,723 | |||||||||||||
Reclamation and remediation liabilities |
| 330 | 112 | | 442 | |||||||||||||
Deferred income tax liabilities |
52 | 231< |