Table of Contents
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
Form 10-Q
(Mark One)
| þ | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the Quarterly Period Ended June 30, 2010
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: 001-31240
NEWMONT MINING CORPORATION
(Exact name of registrant as specified in its charter)
| Delaware (State or Other Jurisdiction of Incorporation or Organization) |
84-1611629 (I.R.S. Employer Identification No.) |
|
| 6363 South Fiddler’s Green Circle | ||
| Greenwood Village, Colorado | 80111 | |
| (Address of Principal Executive Offices) | (Zip Code) |
Registrant’s 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. þ Yes o No
Indicate by check mark whether the registrant has submitted electronically and posted on its
corporate Web site, if any, every Interactive Data File required to be submitted and posted
pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months
(or for such shorter period that the registrant was required to submit and post such files).
þ Yes o No
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated
filer, a non-accelerated filer, or a smaller reporting company. See definition of “accelerated
filer” and “large accelerated filer” in Rule 12-b2 of the Exchange Act. (Check one):
| Large accelerated filer þ | Accelerated filer o | Non-accelerated filer o | Smaller reporting company o | |||
| (Do not check if a smaller reporting company.) |
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12-b2 of
the Exchange Act). o Yes þ No
There were 484,698,098 shares of common stock outstanding on July 21, 2010 (and 7,682,369
exchangeable shares).
TABLE OF CONTENTS
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| PART II |
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| Exhibit 10.1 | ||||||||
| Exhibit 10.2 | ||||||||
| Exhibit 10.3 | ||||||||
| Exhibit 10.4 | ||||||||
| Exhibit 12.1 | ||||||||
| Exhibit 31.1 | ||||||||
| Exhibit 31.2 | ||||||||
| Exhibit 32.1 | ||||||||
| Exhibit 32.2 | ||||||||
| EX-101 INSTANCE DOCUMENT | ||||||||
| EX-101 SCHEMA DOCUMENT | ||||||||
| EX-101 CALCULATION LINKBASE DOCUMENT | ||||||||
| EX-101 LABELS LINKBASE DOCUMENT | ||||||||
| EX-101 PRESENTATION LINKBASE DOCUMENT | ||||||||
| EX-101 DEFINITION LINKBASE DOCUMENT | ||||||||
Table of Contents
PART I—FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS.
NEWMONT MINING CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(unaudited, in millions except per share)
(unaudited, in millions except per share)
| Three Months Ended | Six Months Ended | |||||||||||||||
| June 30, | June 30, | |||||||||||||||
| 2010 | 2009 | 2010 | 2009 | |||||||||||||
Sales (Note 3) |
$ | 2,153 | $ | 1,602 | $ | 4,395 | $ | 3,138 | ||||||||
Costs and expenses |
||||||||||||||||
Costs applicable to sales (1) (Note 3) |
858 | 696 | 1,733 | 1,435 | ||||||||||||
Amortization (Note 3) |
231 | 176 | 455 | 367 | ||||||||||||
Reclamation and remediation (Note 4) |
13 | 12 | 26 | 24 | ||||||||||||
Exploration |
53 | 51 | 96 | 92 | ||||||||||||
Advanced projects, research and development (Note 5) |
57 | 42 | 103 | 73 | ||||||||||||
General and administrative |
43 | 40 | 88 | 79 | ||||||||||||
Other expense, net (Note 6) |
61 | 112 | 150 | 185 | ||||||||||||
| 1,316 | 1,129 | 2,651 | 2,255 | |||||||||||||
Other income (expense) |
||||||||||||||||
Other income, net (Note 7) |
44 | 9 | 92 | 18 | ||||||||||||
Interest expense, net |
(69 | ) | (23 | ) | (144 | ) | (55 | ) | ||||||||
| (25 | ) | (14 | ) | (52 | ) | (37 | ) | |||||||||
Income from continuing operations before income tax and
other items |
812 | 459 | 1,692 | 846 | ||||||||||||
Income tax expense (Note 10) |
(273 | ) | (136 | ) | (408 | ) | (241 | ) | ||||||||
Equity income (loss) of affiliates |
(2 | ) | (3 | ) | (4 | ) | (8 | ) | ||||||||
Income from continuing operations |
537 | 320 | 1,280 | 597 | ||||||||||||
Income (loss) from discontinued operations (Note 11) |
— | (14 | ) | — | (14 | ) | ||||||||||
Net income |
537 | 306 | 1,280 | 583 | ||||||||||||
Net income attributable to noncontrolling interests (Note 12) |
(155 | ) | (144 | ) | (352 | ) | (232 | ) | ||||||||
Net income attributable to Newmont stockholders |
$ | 382 | $ | 162 | $ | 928 | $ | 351 | ||||||||
Net income attributable to Newmont stockholders: |
||||||||||||||||
Continuing operations |
382 | 171 | $ | 928 | $ | 360 | ||||||||||
Discontinued operations |
— | (9 | ) | — | (9 | ) | ||||||||||
| 382 | 162 | $ | 928 | $ | 351 | |||||||||||
Income per common share (Note 13) |
||||||||||||||||
Basic: |
||||||||||||||||
Continuing operations |
$ | 0.78 | $ | 0.35 | $ | 1.89 | $ | 0.75 | ||||||||
Discontinued operations |
— | (0.02 | ) | — | (0.02 | ) | ||||||||||
| $ | 0.78 | $ | 0.33 | $ | 1.89 | $ | 0.73 | |||||||||
Diluted: |
||||||||||||||||
Continuing operations |
$ | 0.77 | $ | 0.35 | $ | 1.87 | $ | 0.75 | ||||||||
Discontinued operations |
— | (0.02 | ) | — | (0.02 | ) | ||||||||||
| $ | 0.77 | $ | 0.33 | $ | 1.87 | $ | 0.73 | |||||||||
Cash dividends declared per common share |
0.10 | 0.10 | $ | 0.20 | $ | 0.20 | ||||||||||
| (1) | Exclusive of Amortization and Reclamation and remediation. |
The accompanying notes are an integral part of the condensed consolidated financial statements.
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NEWMONT MINING CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited, in millions)
(unaudited, in millions)
| Six Months Ended | ||||||||
| June 30, | ||||||||
| 2010 | 2009 | |||||||
Operating activities: |
||||||||
Net income |
$ | 1,280 | $ | 583 | ||||
Adjustments: |
||||||||
Amortization |
455 | 367 | ||||||
Loss from discontinued operations (Note 11) |
— | 14 | ||||||
Reclamation and remediation (Note 4) |
26 | 24 | ||||||
Deferred income taxes |
(86 | ) | (13 | ) | ||||
Stock based compensation and other benefits |
39 | 30 | ||||||
Other operating adjustments and write-downs |
18 | 59 | ||||||
Net change in operating assets and liabilities (Note 24) |
(251 | ) | (178 | ) | ||||
Net cash provided from continuing operations |
1,481 | 886 | ||||||
Net cash provided from (used in) discontinued operations (Note 11) |
(13 | ) | 8 | |||||
Net cash provided from operations |
1,468 | 894 | ||||||
Investing activities: |
||||||||
Additions to property, plant and mine development |
(628 | ) | (910 | ) | ||||
Investments in marketable debt and equity securities |
(7 | ) | — | |||||
Acquisitions, net |
— | (760 | ) | |||||
Proceeds from sale of other assets |
52 | 2 | ||||||
Other |
(22 | ) | (4 | ) | ||||
Net cash used in investing activities |
(605 | ) | (1,672 | ) | ||||
Financing activities: |
||||||||
Proceeds from debt, net |
— | 1,494 | ||||||
Repayment of debt |
(263 | ) | (1,668 | ) | ||||
Sale of subsidiary shares to noncontrolling interests |
229 | — | ||||||
Acquisition of subsidiary shares from noncontrolling interests |
(109 | ) | — | |||||
Dividends paid to common stockholders |
(98 | ) | (98 | ) | ||||
Dividends paid to noncontrolling interests |
(307 | ) | (112 | ) | ||||
Proceeds from stock issuance, net |
30 | 1,247 | ||||||
Change in restricted cash and other |
48 | 5 | ||||||
Net cash provided from (used in) financing activities of continuing operations |
(470 | ) | 868 | |||||
Net cash used in financing activities of discontinued operations (Note 11) |
— | (2 | ) | |||||
Net cash provided from (used in) financing activities |
(470 | ) | 866 | |||||
Effect of exchange rate changes on cash |
(6 | ) | 21 | |||||
Net change in cash and cash equivalents |
387 | 109 | ||||||
Cash and cash equivalents at beginning of period |
3,215 | 435 | ||||||
Cash and cash equivalents at end of period |
$ | 3,602 | $ | 544 | ||||
The accompanying notes are an integral part of the condensed consolidated financial statements.
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NEWMONT MINING CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEETS
(unaudited, in millions)
(unaudited, in millions)
| At June 30, | At December 31, | |||||||
| 2010 | 2009 | |||||||
| ASSETS |
||||||||
Cash and cash equivalents |
$ | 3,602 | $ | 3,215 | ||||
Trade receivables |
358 | 438 | ||||||
Accounts receivable |
106 | 102 | ||||||
Investments (Note 18) |
64 | 56 | ||||||
Inventories (Note 19) |
510 | 493 | ||||||
Stockpiles and ore on leach pads (Note 20) |
527 | 403 | ||||||
Deferred income tax assets |
202 | 215 | ||||||
Other current assets (Note 21) |
702 | 900 | ||||||
Current assets |
6,071 | 5,822 | ||||||
Property, plant and mine development, net |
12,399 | 12,370 | ||||||
Investments (Note 18) |
1,146 | 1,186 | ||||||
Stockpiles and ore on leach pads (Note 20) |
1,607 | 1,502 | ||||||
Deferred income tax assets |
1,083 | 937 | ||||||
Other long-term assets (Note 21) |
463 | 482 | ||||||
Total assets |
$ | 22,769 | $ | 22,299 | ||||
| LIABILITIES |
||||||||
Debt (Note 22) |
$ | 295 | $ | 157 | ||||
Accounts payable |
366 | 396 | ||||||
Employee-related benefits |
194 | 250 | ||||||
Income and mining taxes |
197 | 200 | ||||||
Other current liabilities (Note 23) |
1,143 | 1,317 | ||||||
Current liabilities |
2,195 | 2,320 | ||||||
Debt (Note 22) |
4,280 | 4,652 | ||||||
Reclamation and remediation liabilities (Note 4) |
810 | 805 | ||||||
Deferred income tax liabilities |
1,320 | 1,341 | ||||||
Employee-related benefits |
394 | 381 | ||||||
Other long-term liabilities (Note 23) |
215 | 174 | ||||||
Liabilities of operations held for sale (Note 11) |
— | 13 | ||||||
Total liabilities |
9,214 | 9,686 | ||||||
Commitments and contingencies (Note 26) |
||||||||
| EQUITY |
||||||||
Common stock |
775 | 770 | ||||||
Additional paid-in capital |
8,235 | 8,158 | ||||||
Accumulated other comprehensive income |
526 | 626 | ||||||
Retained earnings |
1,979 | 1,149 | ||||||
Newmont stockholders’ equity |
11,515 | 10,703 | ||||||
Noncontrolling interests |
2,040 | 1,910 | ||||||
Total equity |
13,555 | 12,613 | ||||||
Total liabilities and equity |
$ | 22,769 | $ | 22,299 | ||||
The accompanying notes are an integral part of the condensed consolidated financial statements.
3
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NEWMONT MINING CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)
(dollars in millions, except per share, per ounce and per pound amounts)
(dollars in millions, except per share, per ounce and per pound amounts)
NOTE 1 BASIS OF PRESENTATION
The interim Condensed Consolidated Financial Statements (“interim 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 statements are
not necessarily indicative of the results that may be reported for the entire year. These interim
statements should be read in conjunction with Newmont’s Consolidated Financial Statements for the
year ended December 31, 2009 filed February 25, 2010. The year-end balance sheet data was derived
from the audited financial statements, but does not include all disclosures required by U.S.
generally accepted accounting principles (“GAAP”).
References to “A$” refer to Australian currency, “C$” to Canadian currency, “IDR” to
Indonesian currency, “NZ$” to New Zealand currency and “$” to United States currency.
NOTE 2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Recently Adopted Accounting Pronouncements
Variable Interest Entities
In June 2009, the Accounting Standards Codification (“ASC”) guidance for consolidation
accounting was updated to require an entity to perform a qualitative analysis to determine whether
the enterprise’s variable interest gives it a controlling financial interest in a Variable Interest
Entity (“VIE”). This qualitative analysis identifies the primary beneficiary of a VIE as the
entity that has both of the following characteristics: (i) the power to direct the activities of a
VIE that most significantly impact the entity’s economic performance and (ii) the obligation to
absorb losses or receive benefits from the entity that could potentially be significant to the VIE.
The updated guidance also requires ongoing reassessments of the primary beneficiary of a VIE.
Adoption of the updated guidance, effective for the Company’s fiscal year beginning January 1,
2010, had no impact on the Company’s condensed consolidated financial position, results of
operations or cash flows.
The Company identified Nusa Tenggara Partnership (“NTP”), a partnership between Newmont and an
affiliate of Sumitomo, that owns a 56% interest in PT Newmont Nusa Tenggara (“PTNNT” or “Batu
Hijau”), as a VIE due to certain capital structures and contractual relationships. Newmont also
identified P.T Pukuafu Indah (“PTPI”), and PT Indonesia Masbaga Investama (“PTIMI”), unrelated
noncontrolling partners of PTNNT, as VIEs. Newmont entered into transactions with PTPI and PTIMI,
whereby the Company agreed to advance certain funds in exchange for a pledge of the noncontrolling
partners’ combined 20% share of PTNNT dividends, net of withholding tax. The agreements also
provide Newmont with certain voting rights and obligations related to the noncontrolling partners’
combined 20% share of PTNNT and commitments from PTPI and PTIMI to support the application of
Newmont’s standards to the operation of the Batu Hijau mine. The Company has determined itself to
be the primary beneficiary of these entities and control the operations of Batu Hijau, and
therefore consolidates PTNNT in the Company’s financial statements.
Fair Value Accounting
In January 2010, ASC guidance for fair value measurements and disclosure was updated to
require additional disclosures related to transfers in and out of level 1 and 2 fair value
measurements and enhanced detail in the level 3 reconciliation. The guidance was amended to clarify
the level of disaggregation required for assets and liabilities and the disclosures required for
inputs and valuation techniques used to measure the fair value of assets and liabilities that fall
in either level 2 or level 3. The updated guidance was effective for the Company’s fiscal year
beginning January 1, 2010, with the exception of the level 3 disaggregation which is effective for
the Company’s fiscal year beginning January 1, 2011. The adoption had no impact on the Company’s
condensed consolidated financial position, results of operations or cash flows. Refer to Note 16
for further details regarding the Company’s assets and liabilities measured at fair value.
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NEWMONT MINING CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) (Continued)
(dollars in millions, except per share, per ounce and per pound amounts)
(dollars in millions, except per share, per ounce and per pound amounts)
NOTE 3 SEGMENT INFORMATION
The Company’s reportable segments are based upon the Company’s management organization
structure that is focused on the geographic region for the Company’s operations. The financial
information relating to Newmont’s segments is as follows:
| Costs | Advanced | |||||||||||||||||||
| Applicable to | Projects and | Pre-Tax | ||||||||||||||||||
| Sales | Sales | Amortization | Exploration | Income | ||||||||||||||||
Three Months Ended June 30, 2010 |
||||||||||||||||||||
Nevada |
$ | 505 | $ | 252 | $ | 64 | $ | 20 | $ | 158 | ||||||||||
La Herradura |
53 | 19 | 5 | 2 | 29 | |||||||||||||||
Hope Bay |
— | — | 3 | 33 | (36 | ) | ||||||||||||||
Other North America |
— | — | — | — | (1 | ) | ||||||||||||||
North America |
558 | 271 | 72 | 55 | 150 | |||||||||||||||
Yanacocha |
425 | 139 | 40 | 7 | 219 | |||||||||||||||
Other South America |
— | — | — | 7 | (6 | ) | ||||||||||||||
South America |
425 | 139 | 40 | 14 | 213 | |||||||||||||||
Boddington: |
||||||||||||||||||||
Gold |
234 | 113 | 34 | |||||||||||||||||
Copper |
40 | 25 | 6 | |||||||||||||||||
Total Boddington |
274 | 138 | 40 | 3 | 92 | |||||||||||||||
Batu Hijau: |
||||||||||||||||||||
Gold |
170 | 42 | 12 | |||||||||||||||||
Copper |
258 | 73 | 19 | |||||||||||||||||
Total Batu Hijau |
428 | 115 | 31 | — | 270 | |||||||||||||||
Other Australia/New Zealand |
308 | 140 | 24 | 7 | 138 | |||||||||||||||
Other Asia Pacific |
— | — | 1 | 5 | (9 | ) | ||||||||||||||
Asia Pacific |
1,010 | 393 | 96 | 15 | 491 | |||||||||||||||
Africa |
160 | 55 | 19 | 5 | 73 | |||||||||||||||
Corporate and Other |
— | — | 4 | 21 | (115 | ) | ||||||||||||||
Consolidated |
$ | 2,153 | $ | 858 | $ | 231 | $ | 110 | $ | 812 | ||||||||||
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NEWMONT MINING CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) (Continued)
(dollars in millions, except per share, per ounce and per pound amounts)
(dollars in millions, except per share, per ounce and per pound amounts)
| Costs | Advanced | |||||||||||||||||||
| Applicable to | Projects and | Pre-Tax | ||||||||||||||||||
| Sales | Sales | Amortization | Exploration | Income | ||||||||||||||||
Three Months Ended June 30, 2009 |
||||||||||||||||||||
Nevada |
$ | 372 | $ | 228 | $ | 53 | $ | 13 | $ | 70 | ||||||||||
La Herradura |
29 | 12 | 3 | 1 | 11 | |||||||||||||||
Hope Bay |
— | — | 3 | 22 | (23 | ) | ||||||||||||||
Other North America |
— | — | — | — | (1 | ) | ||||||||||||||
North America |
401 | 240 | 59 | 36 | 57 | |||||||||||||||
Yanacocha |
489 | 173 | 44 | 6 | 244 | |||||||||||||||
Other South America |
— | — | — | 8 | (7 | ) | ||||||||||||||
South America |
489 | 173 | 44 | 14 | 237 | |||||||||||||||
Boddington |
— | — | — | 12 | (69 | ) | ||||||||||||||
Batu Hijau: |
||||||||||||||||||||
Gold |
98 | 24 | 6 | |||||||||||||||||
Copper |
229 | 61 | 16 | |||||||||||||||||
Total Batu Hijau |
327 | 85 | 22 | — | 204 | |||||||||||||||
Other Australia/New Zealand |
263 | 141 | 30 | 6 | 89 | |||||||||||||||
Other Asia Pacific |
— | — | — | 3 | (7 | ) | ||||||||||||||
Asia Pacific |
590 | 226 | 52 | 21 | 217 | |||||||||||||||
Africa |
122 | 57 | 16 | 6 | 38 | |||||||||||||||
Corporate and Other |
— | — | 5 | 16 | (90 | ) | ||||||||||||||
Consolidated |
$ | 1,602 | $ | 696 | $ | 176 | $ | 93 | $ | 459 | ||||||||||
6
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NEWMONT MINING CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) (Continued)
(dollars in millions, except per share, per ounce and per pound amounts)
(dollars in millions, except per share, per ounce and per pound amounts)
| Costs | Advanced | |||||||||||||||||||||||||||
| Applicable to | Projects and | Pre-Tax | Total | Capital | ||||||||||||||||||||||||
| Sales | Sales | Amortization | Exploration | Income | Assets | Expenditures (1) | ||||||||||||||||||||||
Six Months Ended June 30, 2010 |
||||||||||||||||||||||||||||
Nevada |
$ | 972 | $ | 509 | $ | 126 | $ | 37 | $ | 279 | $ | 3,309 | $ | 117 | ||||||||||||||
La Herradura |
97 | 32 | 8 | 3 | 54 | 180 | 22 | |||||||||||||||||||||
Hope Bay |
— | — | 6 | 50 | (57 | ) | 1,938 | 48 | ||||||||||||||||||||
Other North America |
— | — | — | 1 | (3 | ) | 53 | — | ||||||||||||||||||||
North America |
1,069 | 541 | 140 | 91 | 273 | 5,480 | 187 | |||||||||||||||||||||
Yanacocha |
885 | 293 | 77 | 14 | 461 | 2,698 | 111 | |||||||||||||||||||||
Other South America |
— | — | — | 12 | (11 | ) | 28 | — | ||||||||||||||||||||
South America |
885 | 293 | 77 | 26 | 450 | 2,726 | 111 | |||||||||||||||||||||
Boddington: |
||||||||||||||||||||||||||||
Gold |
401 | 193 | 56 | |||||||||||||||||||||||||
Copper |
79 | 49 | 13 | |||||||||||||||||||||||||
Total Boddington |
480 | 242 | 69 | 4 | 160 | 4,136 | 81 | |||||||||||||||||||||
Batu Hijau: |
||||||||||||||||||||||||||||
Gold |
335 | 76 | 22 | |||||||||||||||||||||||||
Copper |
713 | 165 | 46 | |||||||||||||||||||||||||
Total Batu Hijau |
1,048 | 241 | 68 | — | 677 | 2,911 | 33 | |||||||||||||||||||||
Other Australia/New Zealand |
622 | 297 | 56 | 11 | 264 | 884 | 71 | |||||||||||||||||||||
Other Asia Pacific |
— | — | 1 | 10 | 9 | 183 | 3 | |||||||||||||||||||||
Asia Pacific |
2,150 | 780 | 194 | 25 | 1,110 | 8,114 | 188 | |||||||||||||||||||||
Africa |
291 | 119 | 36 | 12 | 111 | 1,234 | 73 | |||||||||||||||||||||
Corporate and Other |
— | — | 8 | 45 | (252 | ) | 5,215 | 11 | ||||||||||||||||||||
Consolidated |
$ | 4,395 | $ | 1,733 | $ | 455 | $ | 199 | $ | 1,692 | $ | 22,769 | $ | 570 | ||||||||||||||
| (1) | Accrual basis includes a decrease in accrued capital expenditures of $58; consolidated capital expenditures on a cash basis were $628. |
7
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NEWMONT MINING CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) (Continued)
(dollars in millions, except per share, per ounce and per pound amounts)
(dollars in millions, except per share, per ounce and per pound amounts)
| Costs | Advanced | |||||||||||||||||||||||||||
| Applicable to | Projects and | Pre-Tax | Total | Capital | ||||||||||||||||||||||||
| Sales | Sales | Amortization | Exploration | Income | Assets | Expenditures(1) | ||||||||||||||||||||||
Six Months Ended June 30, 2009 |
||||||||||||||||||||||||||||
Nevada |
$ | 840 | $ | 491 | $ | 114 | $ | 27 | $ | 191 | $ | 3,232 | $ | 111 | ||||||||||||||
La Herradura |
52 | 22 | 5 | 1 | 24 | 106 | 19 | |||||||||||||||||||||
Hope Bay |
— | — | 6 | 36 | (40 | ) | 1,706 | 3 | ||||||||||||||||||||
Other North America |
— | — | — | 1 | (4 | ) | 52 | — | ||||||||||||||||||||
North America |
892 | 513 | 125 | 65 | 171 | 5,096 | 133 | |||||||||||||||||||||
Yanacocha |
916 | 325 | 85 | 10 | 448 | 1,918 | 62 | |||||||||||||||||||||
Other South America |
— | — | — | 14 | (11 | ) | 29 | — | ||||||||||||||||||||
South America |
916 | 325 | 85 | 24 | 437 | 1,947 | 62 | |||||||||||||||||||||
Boddington |
— | — | — | 17 | (76 | ) | 3,490 | 684 | ||||||||||||||||||||
Batu Hijau: |
||||||||||||||||||||||||||||
Gold |
157 | 51 | 13 | |||||||||||||||||||||||||
Copper |
390 | 146 | 37 | |||||||||||||||||||||||||
Total Batu Hijau |
547 | 197 | 50 | — | 268 | 2,604 | 23 | |||||||||||||||||||||
Other Australia/New Zealand |
532 | 286 | 62 | 12 | 166 | 837 | 47 | |||||||||||||||||||||
Other Asia Pacific |
— | — | 1 | 5 | (15 | ) | 142 | 1 | ||||||||||||||||||||
Asia Pacific |
1,079 | 483 | 113 | 34 | 343 | 7,073 | 755 | |||||||||||||||||||||
Africa |
251 | 114 | 34 | 12 | 84 | 1,167 | 24 | |||||||||||||||||||||
Corporate and Other (2) |
— | — | 10 | 30 | (189 | ) | 2,828 | 8 | ||||||||||||||||||||
Consolidated |
$ | 3,138 | $ | 1,435 | $ | 367 | $ | 165 | $ | 846 | $ | 18,111 | $ | 982 | ||||||||||||||
| (1) | Accrual basis includes an increase in accrued capital expenditures of $72; consolidated capital expenditures on a cash basis were $910. | |
| (2) | Corporate and Other includes $69 of Assets held for sale. |
NOTE 4 RECLAMATION AND REMEDIATION
At June 30, 2010 and December 31, 2009, $714 and $698, respectively, were accrued for
reclamation obligations relating to mineral properties. 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 June 30, 2010 and December 31, 2009, $149 and $161, respectively,
were accrued for such obligations.
The following is a reconciliation of reclamation and remediation liabilities:
| Six Months Ended June 30, | ||||||||
| 2010 | 2009 | |||||||
Balance at beginning of period |
$ | 859 | $ | 757 | ||||
Additions, changes in estimates and other |
(4 | ) | 17 | |||||
Liabilities settled |
(18 | ) | (22 | ) | ||||
Accretion expense |
26 | 24 | ||||||
Balance at end of period |
$ | 863 | $ | 776 | ||||
8
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NEWMONT MINING CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) (Continued)
(dollars in millions, except per share, per ounce and per pound amounts)
(dollars in millions, except per share, per ounce and per pound amounts)
The current portion of Reclamation and remediation liabilities of $53 and $54 at June 30, 2010
and December 31, 2009, respectively, are included in Other current liabilities (see Note 23).
The Company’s reclamation and remediation expenses consisted of:
| Three Months Ended June 30, | Six Months Ended June 30, | |||||||||||||||
| 2010 | 2009 | 2010 | 2009 | |||||||||||||
Accretion — operating |
$ | 11 | $ | 9 | $ | 22 | $ | 18 | ||||||||
Accretion — non-operating |
2 | 3 | 4 | 6 | ||||||||||||
| $ | 13 | $ | 12 | $ | 26 | $ | 24 | |||||||||
Asset retirement cost amortization |
$ | 7 | $ | 7 | $ | 14 | $ | 14 | ||||||||
Asset retirement cost amortization is a component of Amortization.
NOTE 5 ADVANCED PROJECTS, RESEARCH AND DEVELOPMENT
| Three Months Ended June 30, | Six Months Ended June 30, | |||||||||||||||
| 2010 | 2009 | 2010 | 2009 | |||||||||||||
Major projects: |
||||||||||||||||
Hope Bay |
$ | 25 | $ | 11 | $ | 35 | $ | 16 | ||||||||
Akyem |
1 | 2 | 4 | 3 | ||||||||||||
Conga |
2 | 1 | 3 | 1 | ||||||||||||
Subika |
2 | — | 2 | — | ||||||||||||
Boddington |
— | 10 | — | 13 | ||||||||||||
Other projects: |
||||||||||||||||
Technical and project services |
11 | 7 | 23 | 12 | ||||||||||||
Corporate |
9 | 3 | 21 | 7 | ||||||||||||
Nevada growth |
3 | 5 | 6 | 11 | ||||||||||||
South America growth |
2 | 1 | 4 | 2 | ||||||||||||
Other |
2 | 2 | 5 | 8 | ||||||||||||
| $ | 57 | $ | 42 | $ | 103 | $ | 73 | |||||||||
NOTE 6 OTHER EXPENSE, NET
| Three Months Ended June 30, | Six Months Ended June 30, | |||||||||||||||
| 2010 | 2009 | 2010 | 2009 | |||||||||||||
Community development |
$ | 12 | $ | 11 | $ | 60 | $ | 21 | ||||||||
Regional administration |
18 | 14 | 31 | 26 | ||||||||||||
Peruvian royalty |
6 | 5 | 12 | 11 | ||||||||||||
Western Australia power plant |
1 | 6 | 7 | 9 | ||||||||||||
World Gold Council dues |
3 | 3 | 6 | 6 | ||||||||||||
Boddington acquisition costs |
— | 59 | — | 67 | ||||||||||||
Workforce reduction |
— | 1 | — | 15 | ||||||||||||
Batu Hijau divestiture |
— | 1 | — | 6 | ||||||||||||
Other |
21 | 12 | 34 | 24 | ||||||||||||
| $ | 61 | $ | 112 | $ | 150 | $ | 185 | |||||||||
9
Table of Contents
NEWMONT MINING CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) (Continued)
(dollars in millions, except per share, per ounce and per pound amounts)
(dollars in millions, except per share, per ounce and per pound amounts)
NOTE 7 OTHER INCOME, NET
| Three Months Ended June 30, | Six Months Ended June 30, | |||||||||||||||
| 2010 | 2009 | 2010 | 2009 | |||||||||||||
Gain on asset sales, net |
$ | 9 | $ | — | $ | 42 | $ | 1 | ||||||||
Canadian Oil Sands Trust income |
15 | 5 | 25 | 9 | ||||||||||||
Interest income |
2 | 6 | 5 | 9 | ||||||||||||
Foreign currency gain (loss), net |
5 | 1 | (4 | ) | (2 | ) | ||||||||||
Other |
13 | (3 | ) | 24 | 1 | |||||||||||
| $ | 44 | $ | 9 | $ | 92 | $ | 18 | |||||||||
NOTE 8 EMPLOYEE PENSION AND OTHER BENEFIT PLANS
| Three Months Ended June 30, | Six Months Ended June 30, | |||||||||||||||
| 2010 | 2009 | 2010 | 2009 | |||||||||||||
Pension benefit costs, net |
||||||||||||||||
Service cost |
$ | 6 | $ | 4 | $ | 11 | $ | 9 | ||||||||
Interest cost |
9 | 8 | 18 | 16 | ||||||||||||
Expected return on plan assets |
(9 | ) | (7 | ) | (16 | ) | (14 | ) | ||||||||
Amortization, net |
5 | 5 | 9 | 8 | ||||||||||||
| $ | 11 | $ | 10 | $ | 22 | $ | 19 | |||||||||
| Three Months Ended June 30, | Six Months Ended June 30, | |||||||||||||||
| 2010 | 2009 | 2010 | 2009 | |||||||||||||
Other benefit costs, net |
||||||||||||||||
Service cost |
$ | — | $ | — | $ | 1 | $ | 1 | ||||||||
Interest cost |
2 | 2 | 3 | 3 | ||||||||||||
| $ | 2 | $ | 2 | $ | 4 | $ | 4 | |||||||||
NOTE 9 STOCK BASED COMPENSATION
| Three Months Ended June 30, | Six Months Ended June 30, | |||||||||||||||
| 2010 | 2009 | 2010 | 2009 | |||||||||||||
Stock options |
$ | 6 | $ | 5 | $ | 9 | $ | 8 | ||||||||
Restricted stock units |
4 | 2 | 8 | 3 | ||||||||||||
Performance leveraged stock units |
1 | — | 4 | — | ||||||||||||
Common stock |
1 | — | 2 | 1 | ||||||||||||
Restricted stock |
— | 1 | 1 | 2 | ||||||||||||
Deferred stock |
3 | 5 | 5 | 8 | ||||||||||||
| $ | 15 | $ | 13 | $ | 29 | $ | 22 | |||||||||
Employee Stock Options
For the three and six months ended June 30, 2010 and 2009, 918,343 and 1,157,825 stock option
awards, respectively, were granted at a weighted average exercise price of $56 and $40,
respectively, per underlying share of the Company’s common stock. At June 30, 2010, there was $28
of unrecognized compensation cost related to unvested stock options. This cost is expected to be
recognized on a weighted-average basis for a period of approximately 2 years.
10
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NEWMONT MINING CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) (Continued)
(dollars in millions, except per share, per ounce and per pound amounts)
(dollars in millions, except per share, per ounce and per pound amounts)
Other Stock Based Compensation
For the three months ended June 30, 2010 and 2009, 149,235 and 198,057 restricted stock units,
respectively, were granted, at a weighted-average fair market value of $56 and $40, respectively,
per underlying share of the Company’s common stock. For the six months ended June 30, 2010 and
2009, 475,197 and 450,195 restricted stock units, respectively, were granted, at a weighted-average
fair market value of $52 and $42, respectively, per underlying share of the Company’s common stock.
No shares of common stock were granted during the three months ended June 30, 2010 and 225
shares of common stock were granted at the weighted-average fair market value of $40 during the
three months ended June 30, 2009 under the Company’s financial performance bonus plan. For the six
months ended June 30, 2010 and 2009, 64,646 and 40,078 shares of common stock, respectively, were
granted under this plan at a weighted-average fair market value of $50 and $43, respectively.
Beginning in 2010, the Company granted performance leveraged stock units (“PSUs”) to eligible
executives. For the three and six months ended June 30, 2010, nil and 204,732 PSUs, respectively,
were granted under the performance leveraged stock bonus plan. The actual number of PSUs earned
will be determined at the end of a performance period (generally three years), based upon certain
measures of shareholder return.
At June 30, 2010, there was $39 of unrecognized compensation costs related to unvested other
stock based compensation awards. This cost is expected to be recognized over a weighted-average
period of approximately 2 years.
NOTE 10 INCOME TAXES
During the second quarter of 2010, the Company recorded estimated income tax expense of $273
resulting in an effective tax rate of 33.6%. Estimated income tax expense during the second quarter
of 2009 was $136 for an effective tax rate of 29.6%. The increase in the effective tax rate from
2009 to 2010 resulted from the change in the jurisdictional blend of the Company’s taxable income
and the effect of percentage depletion. During the first half of 2010, estimated income tax expense
was $408 resulting in an effective tax rate of 24.1%. Estimated income tax expense during the first
half of 2009 was $241 for an effective tax rate of 28.5%. The decrease in the effective tax rate
from 2009 to 2010 resulted from a tax benefit of $127 being recorded in the first quarter of 2010
from the conversion of non-US tax-paying entities to entities currently subject to U.S. income tax
resulting in an increase in net deferred tax assets, partially offset by the change in the
jurisdictional blend of the Company’s taxable income and the effect it has on the overall rate
impact from percentage depletion. The effective tax rates in the second quarter of 2010 and 2009
are different from the United States statutory rate of 35% primarily due to U.S. percentage
depletion and the effect of different income tax rates in countries where earnings are indefinitely
reinvested.
The Company operates in numerous countries around the world and accordingly it is subject to,
and pays annual income taxes under, the various income tax regimes in the countries in which it
operates. Some of these tax regimes are defined by contractual agreements with the local
government, and others are defined by the general corporate income tax laws of the country. The
Company has historically filed, and continues to file, all required income tax returns and pay the
income taxes reasonably determined to be due. The tax rules and regulations in many countries are
highly complex and subject to interpretation. From time to time the Company is subject to a review
of its historic income tax filings and in connection with such reviews, disputes can arise with the
taxing authorities over the interpretation or application of certain rules to the Company’s
business conducted within the country involved. The Company anticipates concluding a tax audit and
receiving an assessment from the Indonesian Tax Office in July 2010. The Company intends to
vigorously defend its positions through all processes available to it. The conclusion of on-going
negotiations could have an impact on our unrecognized income tax benefit balances; however, the
Company believes that the outcome will not have a material impact on the Company’s financial
position. At June 30, 2010, the Company’s total unrecognized tax benefit was $133 for uncertain
income tax positions taken or expected to be taken on income tax returns. Of this, $65 represents
the amount of unrecognized tax benefits that, if recognized, would affect the Company’s effective
income tax rate.
11
Table of Contents
NEWMONT MINING CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) (Continued)
(dollars in millions, except per share, per ounce and per pound amounts)
(dollars in millions, except per share, per ounce and per pound amounts)
As a result of (i) statute of limitations that expire in the next 12 months in various
jurisdictions, and (ii) possible settlements of audit-related issues with taxing authorities in
various jurisdictions with respect to which none of the issues are individually significant, the
Company believes that it is reasonably possible that the total amount of its net unrecognized
income tax benefits will decrease by approximately $15 to $30 in the next 12 months.
On January 1, 2010, various U.S. tax provisions expired, and as of June 30, 2010, the
provisions have not been reinstated. These expired tax provisions do not have a material effect on
the Company’s financial statements.
NOTE 11 DISCONTINUED OPERATIONS
Discontinued operations relate solely to the Kori Kollo operation in Bolivia, sold in July
2009.
The Company has reclassified the 2009 balance sheet amounts and income statement results from
the historical presentation to Assets and Liabilities of operations held for sale on the Condensed
Consolidated Balance Sheets and to Income (loss) from discontinued operations in the Condensed
Consolidated Statements of Income. 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 Income (loss) from
discontinued operations in the consolidated statements of income:
| Three Months Ended | Six Months Ended | |||||||
| June 30, 2009 | June 30, 2009 | |||||||
Sales |
$ | 16 | $ | 32 | ||||
Income from operations |
$ | 1 | $ | 1 | ||||
Loss on impairment |
(44 | ) | (44 | ) | ||||
Pre-tax loss |
(43 | ) | (43 | ) | ||||
Income tax benefit |
29 | 29 | ||||||
Income (loss) from discontinued operations |
$ | (14 | ) | $ | (14 | ) | ||
Liabilities of operations held for sale include Other liabilities of $13 at December 31, 2009.
Net operating cash provided from (used in) discontinued operations was $(13) and $8 in the
first half of 2010 and 2009, respectively.
Net cash used in financing activities of discontinued operations was $2 in the first half of
2009 for repayment of debt.
NOTE 12 NET INCOME ATTRIBUTABLE TO NONCONTROLLING INTERESTS
| Three Months Ended June 30, | Six Months Ended June 30, | |||||||||||||||
| 2010 | 2009 | 2010 | 2009 | |||||||||||||
Batu Hijau |
$ | 84 | $ | 71 | $ | 202 | $ | 92 | ||||||||
Yanacocha |
71 | 77 | 151 | 144 | ||||||||||||
Other |
— | (4 | ) | (1 | ) | (4 | ) | |||||||||
| $ | 155 | $ | 144 | $ | 352 | $ | 232 | |||||||||
12
Table of Contents
NEWMONT MINING CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) (Continued)
(dollars in millions, except per share, per ounce and per pound amounts)
(dollars in millions, except per share, per ounce and per pound amounts)
In June 2010, PTPI completed the sale of an approximate 2.2% interest in PTNNT to PTIMI. To
enable the transaction to proceed, the Company released its rights to the dividends payable on this
2.2% interest and released the security interest in the associated shares. The Company further
agreed, however, to advance certain funds to PTIMI to enable it to purchase the interest in
exchange for an assignment by PTIMI to the Company of the dividends payable on the 2.2% interest
(net of withholding tax), a pledge of the shares as security on the advance, and certain voting
rights and obligations. The funds that the Company advanced to PTIMI and which it paid to PTPI for
the shares were used by PTPI to reduce its outstanding balance with the Company. Upon completion
of this transaction, PTPI requested and was allowed to make additional draw downs under the
agreement with PTPI. The Company’s economic interest in PTPI’s and PTIMI’s combined 20% interest
in PTNNT remains at 17% and has not changed as a result of these transactions.
In March 2010, the Company (through NTP) completed the sale and transfer of shares for a 7%
interest in PTNNT, the Indonesian subsidiary that operates Batu Hijau, to PT Multi Daerah Bersaing
(“PTMDB”) in compliance with divestiture obligations under the Contract of Work, reducing NTP’s
ownership interest to 56% from 63%. In 2009, the Company (through NTP) completed the sale and
transfer of shares for a 17% interest in PTNNT to PTMDB in compliance with divestiture obligations
under the Contract of Work, reducing NTP’s ownership interest to 63% from 80%. The 2010 and 2009
share transfers resulted in gains of approximately $16 (after tax of $33) and $63 (after tax of
$115), respectively, that were recorded as Additional paid-in capital. For information on the Batu
Hijau Contract of Work and divestiture requirements, see the discussion in Note 26 to the Condensed
Consolidated Financial Statements.
In December 2009, the Company entered into a transaction with PTPI, whereby the Company agreed
to advance certain funds to PTPI in exchange for a pledge of the noncontrolling partner’s 20% share
of PTNNT dividends, net of withholding tax, and certain voting rights and obligations, and a
commitment from PTPI to support the application of Newmont’s standards to the operation of the Batu
Hijau mine. Based on the transaction with PTPI, the Company recognized an additional 17% effective
economic interest in PTNNT.
At June 30, 2010, Newmont continued to have a 48.50% effective economic interest in PTNNT.
Based on the accounting guidance for variable interest entities, Newmont continues to consolidate
PTNNT in its Consolidated Financial Statements.
Newmont has a 51.35% ownership interest in Minera Yanacocha SR.L. (“Yanacocha”), with the
remaining interests held by Compañia de Minas Buenaventura, S.A.A. (43.65%) and the International
Finance Corporation (5%).
13
Table of Contents
NEWMONT MINING CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) (Continued)
(dollars in millions, except per share, per ounce and per pound amounts)
(dollars in millions, except per share, per ounce and per pound amounts)
NOTE 13 INCOME PER COMMON SHARE
Basic income per common share is computed by dividing income available to Newmont common
stockholders by the weighted average number of common shares outstanding during the period. Diluted
income per common share is computed similarly to basic income per common share except that weighted
average common shares is increased to include the potential issuance of dilutive common shares.
| Three Months Ended June 30, | Six Months Ended June 30, | |||||||||||||||
| 2010 | 2009 | 2010 | 2009 | |||||||||||||
Net income attributable to Newmont stockholders |
||||||||||||||||
Continuing operations |
$ | 382 | $ | 171 | $ | 928 | $ | 360 | ||||||||
Discontinued operations |
— | (9 | ) | — | (9 | ) | ||||||||||
| $ | 382 | $ | 162 | $ | 928 | $ | 351 | |||||||||
Weighted average common shares (millions): |
||||||||||||||||
Basic |
492 | 490 | 491 | 483 | ||||||||||||
Effect of employee stock-based awards |
1 | 1 | 1 | 1 | ||||||||||||
Effect of convertible notes |
6 | — | 4 | — | ||||||||||||
Diluted |
499 | 491 | 496 | 484 | ||||||||||||
Net income attributable to Newmont stockholders per common share |
||||||||||||||||
Basic: |
||||||||||||||||
Continuing operations |
$ | 0.78 | $ | 0.35 | $ | 1.89 | $ | 0.75 | ||||||||
Discontinued operations |
— | (0.02 | ) | — | (0.02 | ) | ||||||||||
| $ | 0.78 | $ | 0.33 | $ | 1.89 | $ | 0.73 | |||||||||
Diluted: |
||||||||||||||||
Continuing operations |
$ | 0.77 | $ | 0.35 | $ | 1.87 | $ | 0.75 | ||||||||
Discontinued operations |
— | (0.02 | ) | — | (0.02 | ) | ||||||||||
| $ | 0.77 | $ | 0.33 | $ | 1.87 | $ | 0.73 | |||||||||
Options to purchase 2 and 5 million shares of common stock at average exercise prices of $57
and $46 were outstanding at June 30, 2010 and 2009, respectively, but were not included in the
computation of diluted weighted average number of common shares because their effect would have
been anti-dilutive under the treasury stock method.
In February 2009 and July 2007, Newmont issued $518 and $1,150, respectively, of convertible
notes that, if converted in the future, would have a potentially dilutive effect on the Company’s
weighted average number of common shares. Under the indenture for the convertible notes, upon
conversion Newmont is required to settle the principal amount of the convertible notes in cash and
may elect to settle the remaining conversion obligation (stock price in excess of the conversion
price) in cash, shares or a combination thereof. The effect of contingently convertible instruments
on diluted earnings per share is calculated under the net share settlement method. Under the net
share settlement method, the Company includes the amount of shares it would take to satisfy the
conversion obligation, assuming that all of the convertible notes are surrendered. The average
closing price of the Company’s common stock for each of the periods presented is used as the basis
for determining dilution. The average price of the Company’s common stock for the three and six
months ended June 30, 2010 exceeded the conversion price of $46.25 and $46.21 for the notes issued
in 2009 and 2007, respectively, and therefore, 6 and 4 million additional shares were included in
the computation of diluted weighted average common shares for the three and six months ended June
30, 2010, respectively.
14
Table of Contents
NEWMONT MINING CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) (Continued)
(dollars in millions, except per share, per ounce and per pound amounts)
(dollars in millions, except per share, per ounce and per pound amounts)
In connection with the 2007 convertible senior notes offering, the Company entered into Call
Spread Transactions which included the purchase of call options and the sale of warrants. As a
result of the Call Spread Transactions, the conversion price of $46.21 was effectively increased to
$60.27. Should the warrant transactions become dilutive to the Company’s earnings per share (if
Newmont’s average share price exceeds $60.27) the underlying shares will be included in the
computation of diluted income per common share.
The Net income attributable to Newmont stockholders and transfers from noncontrolling
interests was:
| Three Months Ended June 30, | Six Months Ended June 30, | |||||||||||||||
| 2010 | 2009 | 2010 | 2009 | |||||||||||||
Net income attributable to Newmont stockholders |
$ | 382 | $ | 162 | $ | 928 | $ | 351 | ||||||||
Transfers from noncontrolling interests: |
||||||||||||||||
Increase in Additional paid in capital from sale of PTNNT shares, net of tax of $33 |
1 | — | 16 | — | ||||||||||||
Net income attributable to Newmont stockholders and transfers from noncontrolling interests |
$ | 383 | $ | 162 | $ | 944 | $ | 351 | ||||||||
NOTE 14 COMPREHENSIVE INCOME
| Three Months Ended June 30, | Six Months Ended June 30, | |||||||||||||||
| 2010 | 2009 | 2010 | 2009 | |||||||||||||
Net income |
$ | 537 | $ | 306 | $ | 1,280 | $ | 583 | ||||||||
Other comprehensive income (loss), net of tax: |
||||||||||||||||
Unrealized gain (loss) on marketable securities |
(77 | ) | 99 | (28 | ) | 192 | ||||||||||
Foreign currency translation adjustments |
(55 | ) | 136 | 1 | 89 | |||||||||||
Pension and other benefit liability adjustments |
3 | 2 | 5 | 3 | ||||||||||||
Change in fair value of cash flow hedge instruments: |
||||||||||||||||
Net change from periodic revaluations |
(72 | ) | 105 | (43 | ) | 86 | ||||||||||
Net amount reclassified to income |
(16 | ) | 7 | (35 | ) | 24 | ||||||||||
Net unrecognized gain (loss) on derivatives |
(88 | ) | 112 | (78 | ) | 110 | ||||||||||
| (217 | ) | 349 | (100 | ) | 394 | |||||||||||
Comprehensive income |
$ | 320 | $ | 655 | $ | 1,180 | $ | 977 | ||||||||
Comprehensive income attributable to: |
||||||||||||||||
Newmont stockholders |
$ | 165 | $ | 510 | $ | 828 | $ | 744 | ||||||||
Noncontrolling interests |
155 | 145 | 352 | 233 | ||||||||||||
| $ | 320 | $ | 655 | $ | 1,180 | $ | 977 | |||||||||
15
Table of Contents
NEWMONT MINING CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) (Continued)
(dollars in millions, except per share, per ounce and per pound amounts)
(dollars in millions, except per share, per ounce and per pound amounts)
NOTE 15 CHANGES IN EQUITY
| Six Months Ended June 30, | ||||||||
| 2010 | 2009 | |||||||
Common stock: |
||||||||
At beginning of period |
$ | 770 | $ | 709 | ||||
Common stock offering |
— | 55 | ||||||
Stock based compensation |
2 | 2 | ||||||
Shares issued in exchange for exchangeable shares |
3 | 2 | ||||||
At end of period |
775 | 768 | ||||||
Additional paid-in capital: |
||||||||
At beginning of period |
8,158 | 6,831 | ||||||
Common stock offering |
— | 1,179 | ||||||
Convertible debt issuance |
— | 46 | ||||||
Common stock dividends |
— | (45 | ) | |||||
Stock based compensation |
64 | 43 | ||||||
Shares issued in exchange for exchangeable shares |
(3 | ) | (2 | ) | ||||
Sale of subsidiary shares to noncontrolling interests |
16 | — | ||||||
At end of period |
8,235 | 8,052 | ||||||
Accumulated other comprehensive income: |
||||||||
At beginning of period |
626 | (253 | ) | |||||
Other comprehensive income (Note 14) |
(100 | ) | 394 | |||||
At end of period |
526 | 141 | ||||||
Retained earnings: |
||||||||
At beginning of period |
1,149 | 4 | ||||||
Net income attributable to Newmont stockholders |
928 | 351 | ||||||
Common stock dividends |
(98 | ) | (53 | ) | ||||
At end of period |
1,979 | 302 | ||||||
Noncontrolling interests: |
||||||||
At beginning of period |
1,910 | 1,370 | ||||||
Net income attributable to noncontrolling interests |
352 | 232 | ||||||
Dividends paid to noncontrolling interests |
(320 | ) | (112 | ) | ||||
Other comprehensive income |
— | 1 | ||||||
Sale of subsidiary shares to noncontrolling interests, net |
98 | — | ||||||
At end of period |
2,040 | 1,491 | ||||||
Total equity |
$ | 13,555 | $ | 10,754 | ||||
16
Table of Contents
NEWMONT MINING CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) (Continued)
(dollars in millions, except per share, per ounce and per pound amounts)
(dollars in millions, except per share, per ounce and per pound amounts)
NOTE 16 FAIR VALUE ACCOUNTING
Fair value accounting establishes a fair value hierarchy that prioritizes the inputs to
valuation techniques used to measure fair value. The hierarchy gives the highest priority to
unadjusted quoted prices in active markets for identical assets or liabilities (Level 1
measurements) and the lowest priority to unobservable inputs (Level 3 measurements). The three
levels of the fair value hierarchy are described below:
| Level 1 | Unadjusted quoted prices in active markets that are accessible at the measurement date for identical, unrestricted assets or liabilities; |
| Level 2 | Quoted prices in markets that are not active, or inputs that are observable, either directly or indirectly, for substantially the full term of the asset or liability; and |
| Level 3 | Prices or valuation techniques that require inputs that are both significant to the fair value measurement and unobservable (supported by little or no market activity). |
The following table sets forth the Company’s assets and liabilities measured at fair value on
a recurring basis (at least annually) by level within the fair value hierarchy. As required by
accounting guidance, assets and liabilities are classified in their entirety based on the lowest
level of input that is significant to the fair value measurement.
| Fair Value at June 30, 2010 | ||||||||||||||||
| Total | Level 1 | Level 2 | Level 3 | |||||||||||||
Assets: |
||||||||||||||||
Cash equivalents |
$ | 1,911 | $ | 1,911 | $ | — | $ | — | ||||||||
Marketable equity securities: |
||||||||||||||||
Extractive industries |
1,130 | 1,130 | — | — | ||||||||||||
Other |
6 | 6 | — | — | ||||||||||||
Marketable debt securities: |
||||||||||||||||
Asset backed commercial paper |
18 | — | — | 18 | ||||||||||||
Corporate |
8 | 8 | — | — | ||||||||||||
Auction rate securities |
5 | — | — | 5 | ||||||||||||
Trade receivable from provisional copper
and gold concentrate sales, net |
309 | 309 | — | — | ||||||||||||
Derivative instruments, net: |
||||||||||||||||
Foreign exchange forward contracts |
29 | — | 29 | — | ||||||||||||
Interest rate swap contracts |
5 | — | 5 | — | ||||||||||||
| $ | 3,421 | $ | 3,364 | $ | 34 | $ | 23 | |||||||||
Liabilities: |
||||||||||||||||
8 5/8% debentures ($222 hedged portion) |
$ | 236 | $ | — | $ | 236 | $ | — | ||||||||
Boddington contingent consideration |
85 | — | — | 85 | ||||||||||||
Derivative instruments, net: |
||||||||||||||||
Diesel forward contracts |
1 | — | 1 | — | ||||||||||||
| $ | 322 | $ | — | $ | 237 | $ | 85 | |||||||||
The Company’s cash equivalent instruments are classified within Level 1 of the fair value
hierarchy because they are valued using quoted market prices. The cash equivalent instruments that
are valued based on quoted market prices in active markets are primarily money market securities
and U.S. Treasury securities.
17
Table of Contents
NEWMONT MINING CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) (Continued)
(dollars in millions, except per share, per ounce and per pound amounts)
(dollars in millions, except per share, per ounce and per pound amounts)
The Company’s marketable equity securities are valued using quoted market prices in active
markets and as such are classified within Level 1 of the fair value hierarchy. The securities are
segregated based on industry. The fair value of the marketable equity securities is calculated as
the quoted market price of the marketable equity security multiplied by the quantity of shares held
by the Company.
The Company’s marketable debt securities include investments in auction rate securities and
asset backed commercial paper. The Company reviews the fair value for auction rate securities and
asset backed commercial paper on at least a quarterly basis. The auction rate securities are traded
in markets that are not active, trade infrequently and have little price transparency. The Company
estimated the fair value of the auction rate securities based on weighted average risk calculations
using probabilistic cash flow assumptions. In January 2009, the investments in the Company’s asset
backed commercial paper were restructured by court order. The restructuring allowed an interest
distribution to be made to investors. The Company estimated the fair value of the asset backed
commercial paper using a probability of return to each class of notes reflective of information
reviewed regarding the separate classes of securities. The auction rate securities and asset backed
commercial paper are classified within Level 3 of the fair value hierarchy. The Company’s corporate
marketable debt securities are valued using quoted market prices in active markets and as such are
classified within Level 1 of the fair value hierarchy.
The Company’s net trade receivable from provisional copper and gold concentrate sales is
valued using quoted market prices based on forward curves and, as such, is classified within Level
1 of the fair value hierarchy.
The Company’s derivative instruments are valued using pricing models and the Company generally
uses similar models to value similar instruments. Where possible, the Company verifies the values
produced by its pricing models to market prices. Valuation models require a variety of inputs,
including contractual terms, market prices, yield curves, credit spreads, measures of volatility,
and correlations of such inputs. The Company’s derivatives trade in liquid markets, and as such,
model inputs can generally be verified and do not involve significant management judgment. Such
instruments are classified within Level 2 of the fair value hierarchy.
The Company has fixed to floating swap contracts to hedge a portion of the interest rate risk
exposure of its 8 5/8% debentures due May 2011. The hedged portion of the Company’s 8 5/8%
debentures are valued using pricing models which require inputs, including risk-free interest rates
and credit spreads. Because the inputs are derived from observable market data, the hedged portion
of the 8 5/8% debentures is classified within Level 2 of the fair value hierarchy.
The Company has recorded a contingent consideration liability related to the 2009 acquisition
of the final 33.33% interest in Boddington. The value of the contingent consideration was
determined using a valuation model which simulates future gold and copper prices and costs
applicable to sales to estimate fair value. The contingent consideration liability is classified
within Level 3 of the fair value hierarchy.
The Company had no significant changes in the fair value of the Level 3 financial assets and
liabilities for the six months ended June 30, 2010.
NOTE 17 DERIVATIVE INSTRUMENTS
The Company’s strategy is to provide shareholders with leverage to changes in gold and copper
prices by selling its production at spot market prices. Consequently, the Company does not hedge
its gold and copper sales. Newmont continues to manage risks associated with commodity input costs,
interest rates and foreign currencies using the derivative market. All of the cash flow and fair
value derivative instruments were transacted for risk management purposes and qualify as hedging
instruments. The maximum period over which hedged transactions are expected to occur is three
years.
Cash Flow Hedges
The foreign currency and diesel contracts are designated as cash flow hedges, and as such, the
effective portion of unrealized changes in market value have been recorded in Accumulated other
comprehensive income and are recorded in earnings during the period in which the hedged transaction
affects earnings. Gains and losses from hedge ineffectiveness are recognized in current earnings.
18
Table of Contents
NEWMONT MINING CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) (Continued)
(dollars in millions, except per share, per ounce and per pound amounts)
(dollars in millions, except per share, per ounce and per pound amounts)
Foreign Currency Contracts
Newmont utilizes foreign currency contracts to reduce the variability of the US dollar amount
of forecasted foreign currency expenditures caused by changes in exchange rates. Newmont hedges a
portion of the Company’s A$, NZ$ and IDR denominated operating expenditures which results in a
blended rate realized each period. The hedging instruments are fixed forward contracts with
expiration dates ranging up to three years from the date of issue. The principal hedging objective
is reduction in the volatility of realized period-on-period $/A$, $/NZ$ and IDR/$ rates,
respectively.
Newmont had the following foreign currency derivative contracts outstanding at June 30, 2010:
| Expected Maturity Date | ||||||||||||||||||||
| Total/ | ||||||||||||||||||||
| 2010 | 2011 | 2012 | 2013 | Average | ||||||||||||||||
A$ Fixed Forward Contracts: |
||||||||||||||||||||
$ (millions) |
$ | 373 | $ | 558 | $ | 280 | $ | 44 | $ | 1,255 | ||||||||||
Average rate ($/A$) |
0.80 | 0.78 | 0.80 | 0.80 | 0.79 | |||||||||||||||
A$ notional (millions) |
465 | 713 | 350 | 55 | 1,583 | |||||||||||||||
Expected hedge ratio |
70 | % | 54 | % | 27 | % | 8 | % | 39 | % | ||||||||||
NZ$ Fixed Forward Contracts: |
||||||||||||||||||||
$ (millions) |
$ | 22 | $ | 31 | $ | 4 | $ | — | $ | 57 | ||||||||||
Average rate ($/NZ$) |
0.65 | 0.67 | 0.66 | — | 0.67 | |||||||||||||||
NZ$ notional (millions) |
34 | 46 | 7 | — | 87 | |||||||||||||||
Expected hedge ratio |
62 | % | 38 | % | 12 | % | — | % | 37 | % | ||||||||||
IDR Fixed Forward Contracts: |
||||||||||||||||||||
$ (millions) |
$ | 14 | $ | — | $ | — | $ | — | $ | 14 | ||||||||||
Average rate (IDR/$) |
10,024 | — | — | — | 10,024 | |||||||||||||||
IDR notional (millions) |
140,337 | — | — | — | 140,337 | |||||||||||||||
Expected hedge ratio |
30 | % | — | % | — | % | — | % | 30 | % | ||||||||||
Diesel Fixed Forward Contracts
Newmont hedges a portion of its operating cost exposure related to diesel consumed at its
Nevada operations to reduce the variability in realized diesel prices. The hedging instruments
consist of a series of financially settled fixed forward contracts with expiration dates ranging up
to two years from the date of issue.
Newmont had the following diesel derivative contracts outstanding at June 30, 2010:
| Expected Maturity Date | ||||||||||||||||
| Total/ | ||||||||||||||||
| 2010 | 2011 | 2012 | Average | |||||||||||||
Diesel Fixed Forward Contracts: |
||||||||||||||||
$ (millions) |
$ | 24 | $ | 31 | $ | 4 | $ | 59 | ||||||||
Average rate ($/gallon) |
2.08 | 2.25 | 2.43 | 2.19 | ||||||||||||
Diesel gallons (millions) |
12 | 14 | 2 | 28 | ||||||||||||
Expected Nevada hedge ratio |
57 | % | 32 | % | 8 | % | 32 | % | ||||||||
19
Table of Contents
NEWMONT MINING CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) (Continued)
(dollars in millions, except per share, per ounce and per pound amounts)
(dollars in millions, except per share, per ounce and per pound amounts)
Fair Value Hedges
Interest Rate Swap Contracts
At June 30, 2010, Newmont had $222 fixed to floating swap contracts designated as a hedge
against its 8 5/8% debentures due 2011. The interest rate swap contracts assist in managing the
Company’s targeted mix of fixed and floating rate debt. Under the hedge contract terms, Newmont
receives fixed-rate interest payments at 8.63% and pays floating-rate interest amounts based on
periodic London Interbank Offered Rate (“LIBOR”) settings plus a spread, ranging from 2.60% to
7.63%. The interest rate swap contracts were designated as fair value hedges and changes in fair
value have been recorded in income in each period, consistent with recording changes to the
mark-to-market value of the underlying hedged liability in income.
Derivative Instrument Fair Values
Newmont had the following derivative instruments designated as hedges with fair values at June
30, 2010 and December 31, 2009:
| Fair Values of Derivative Instruments | ||||||||||||||||
| At June 30, 2010 | ||||||||||||||||
| Other Current | Other Long-Term | Other Current | Other Long-Term | |||||||||||||
| Assets | Assets | Liabilities | Liabilities | |||||||||||||
Foreign currency exchange contracts: |
||||||||||||||||
A$ fixed forward contracts |
$ | 44 | $ | 20 | $ | 17 | $ | 20 | ||||||||
NZ$ fixed forward contracts |
2 | — | 1 | — | ||||||||||||
IDR fixed forward contracts |
1 | — | — | — | ||||||||||||
Diesel fixed forward contracts |
2 | — | 2 | 1 | ||||||||||||
Interest rate swap contracts |
5 | — | — | — | ||||||||||||
Total derivative instruments (Notes 21 and 23) |
$ | 54 | $ | 20 | $ | 20 | $ | 21 | ||||||||
| Fair Values of Derivative Instruments | ||||||||||||||||
| At December 31, 2009 | ||||||||||||||||
| Other Current | Other Long-Term | Other Current | Other Long-Term | |||||||||||||
| Assets | Assets | Liabilities | Liabilities | |||||||||||||
Foreign currency exchange contracts: |
||||||||||||||||
A$ fixed forward contracts |
$ | 78 | $ | 53 | $ | — | $ | 1 | ||||||||
NZ$ fixed forward contracts |
5 | 1 | — | — | ||||||||||||
IDR fixed forward contracts |
1 | — | — | — | ||||||||||||
Diesel fixed forward contracts |
5 | 1 | — | — | ||||||||||||
Interest rate swap contracts |
3 | 4 | — | — | ||||||||||||
Total derivative instruments(Notes 21 and 23) |
$ | 92 | $ | 59 | $ | — | $ | 1 | ||||||||
20
Table of Contents
NEWMONT MINING CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) (Continued)
(dollars in millions, except per share, per ounce and per pound amounts)
(dollars in millions, except per share, per ounce and per pound amounts)
The following tables show the location and amount of gains (losses) reported in the Company’s
Condensed Consolidated Financial Statements related to the Company’s cash flow and fair value
hedges and the gains (losses) recorded for the hedged item related to the fair value hedges.
| Foreign Currency | ||||||||||||||||
| Exchange Contracts | Diesel Forward Contracts | |||||||||||||||
| 2010 | 2009 | 2010 | 2009 | |||||||||||||
For the three months ended June 30, |
||||||||||||||||
Cash flow hedging relationships: |
||||||||||||||||
Gain (loss) recognized
in other comprehensive
income (effective
portion) |
$ | (99 | ) | $ | 142 | $ | (6 | ) | $ | 7 | ||||||
Gain (loss)
reclassified from
Accumulated other
comprehensive income
into income (effective
portion) (1) |
21 | (9 | ) | 1 | (4 | ) | ||||||||||
For the six months ended June 30, |
||||||||||||||||
Cash flow hedging relationships: |
||||||||||||||||
Gain (loss) recognized
in other comprehensive
income (effective
portion) |
$ | (58 | ) | $ | 118 | $ | (5 | ) | $ | 4 | ||||||
Gain (loss)
reclassified from
Accumulated other
comprehensive income
into income (effective
portion) (1) |
45 | (30 | ) | 2 | (11 | ) | ||||||||||
| (1) | The gain (loss) for the effective portion of foreign exchange and diesel cash flow hedges reclassified from Accumulated other comprehensive income is included in Costs applicable to sales. |
The amount to be reclassified from Accumulated other comprehensive income, net of tax to
income for derivative instruments during the next 12 months is a gain of approximately $24.
| Interest Rate | 8 5/8% Debentures | |||||||||||||||
| Swap Contracts | (Hedged Portion) | |||||||||||||||
| 2010 | 2009 | 2010 | 2009 | |||||||||||||
For the three months ended June 30, |
||||||||||||||||
Fair value hedging relationships: |
||||||||||||||||
Gain (loss) recognized
in income (effective
portion)
(1) |
$ | 1 | $ | 1 | $ | 2 | $ | — | ||||||||
Gain (loss) recognized
in income (ineffective
portion)
(2) |
(2 | ) | (1 | ) | 1 | (2 | ) | |||||||||
For the six months ended June 30, |
||||||||||||||||
Fair value hedging relationships: |
||||||||||||||||
Gain (loss) recognized
in income (effective
portion)
(1) |
$ | 3 | $ | 2 | $ | 2 | $ | (1 | ) | |||||||
Gain (loss) recognized
in income (ineffective
portion)
(2) |
(2 | ) | (1 | ) | 1 | (3 | ) | |||||||||
| (1) | The gain (loss) recognized for the effective portion of fair value hedges and the underlying hedged debt is included in Interest expense, net. | |
| (2) | The ineffective portion recognized for fair value hedges and the underlying hedged debt is included in Other income, net. |
21
Table of Contents
NEWMONT MINING CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) (Continued)
(dollars in millions, except per share, per ounce and per pound amounts)
(dollars in millions, except per share, per ounce and per pound amounts)
Provisional Copper and Gold Sales
The Company’s 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 gold and copper concentrates at the prevailing indices’ prices 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.
LME copper prices averaged $3.19 per pound during the three months ended June 30, 2010,
compared with the Company’s recorded average provisional price of $3.13 per pound before
mark-to-market gains and treatment and refining charges. LME copper prices averaged $3.24 per pound
during the six months ended June 30, 2010, consistent with the Company’s recorded average
provisional price per pound before mark-to-market gains and treatment and refining charges. The
applicable forward copper price at the end of the second quarter was $2.96 per pound. During the
three months ended June 30, 2010, changes in copper prices resulted in a provisional pricing
mark-to-market loss of $79 ($0.62 per pound). During the six months ended June 30, 2010, changes in
copper prices resulted in a provisional pricing mark-to-market loss of $48 ($0.17 per pound). At
June 30, 2010, Newmont had copper sales of 137 million pounds priced at an average of $2.96 per
pound, subject to final pricing over the next several months.
The average London P.M. fix for gold was $1,197 per ounce during the three months ended June
30, 2010, compared with the Company’s recorded average provisional price of $1,192 per ounce before
mark-to-market gains and treatment and refining charges. The average London P.M. fix for gold was
$1,152 per ounce during the six months ended June 30, 2010, compared with the Company’s recorded
average provisional price of $1,151 per ounce before mark-to-market gains and treatment and
refining charges. The applicable forward gold price at the end of the second quarter was $1,245 per
ounce. During the three months ended June 30, 2010, changes in gold prices resulted in a
provisional pricing mark-to-market gain of $20 ($13 per ounce). During the six months ended June
30, 2010, changes in gold prices resulted in a provisional pricing mark-to-market gain of $22 ($7
per ounce). At June 30, 2010, Newmont had gold sales of 180,000 ounces priced at an average of
$1,245 per ounce, subject to final pricing over the next several months.
22
Table of Contents
NEWMONT MINING CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) (Continued)
(dollars in millions, except per share, per ounce and per pound amounts)
(dollars in millions, except per share, per ounce and per pound amounts)
NOTE 18 INVESTMENTS
| At June 30, 2010 | ||||||||||||||||
| Cost/Equity | Unrealized | Fair/Equity | ||||||||||||||
| Basis | Gain | Loss | Basis | |||||||||||||
Current: |
||||||||||||||||
Marketable Equity Securities: |
||||||||||||||||
Regis Resources |
$ | 5 | $ | 38 | $ | — | $ | 43 | ||||||||
Other |
9 | 12 | — | 21 | ||||||||||||
| $ | 14 | $ | 50 | $ | — | $ | 64 | |||||||||
Long-term: |
||||||||||||||||
Marketable Debt Securities: |
||||||||||||||||
Asset backed commercial paper |
$ | 24 | $ | — | $ | (6 | ) | $ | 18 | |||||||
Auction rate securities |
7 | — | (2 | ) | 5 | |||||||||||
Corporate |
6 | 2 | — | 8 | ||||||||||||
| 37 | 2 | (8 | ) | 31 | ||||||||||||
Marketable Equity Securities: |
||||||||||||||||
Canadian Oil Sands Trust |
294 | 500 | — | 794 | ||||||||||||
Gabriel Resources Ltd. |
74 | 159 | — | 233 | ||||||||||||
Shore Gold Inc. |
4 | 7 | — | 11 | ||||||||||||
Other |
25 | 11 | (2 | ) | 34 | |||||||||||
| 397 | 677 | (2 | ) | 1,072 | ||||||||||||
Other investments, at cost |
10 | — | — | 10 | ||||||||||||
Investment in Affiliates: |
||||||||||||||||
La Zanja |
33 | — | — | 33 | ||||||||||||
| $ | 477 | $ | 679 | $ | (10 | ) | $ | 1,146 | ||||||||
23
Table of Contents
NEWMONT MINING CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) (Continued)
(dollars in millions, except per share, per ounce and per pound amounts)
(dollars in millions, except per share, per ounce and per pound amounts)
| At December 31, 2009 | ||||||||||||||||
| Cost/Equity | Unrealized | Fair/Equity | ||||||||||||||
| Basis | Gain | Loss | Basis | |||||||||||||
Current: |
||||||||||||||||
Marketable Equity Securities: |
||||||||||||||||
Regis Resources |
$ | 5 | $ | 29 | $ | — | $ | 34 | ||||||||
Other |
10 | 12 | — | 22 | ||||||||||||
| $ | 15 | $ | 41 | $ | — | $ | 56 | |||||||||
Long-term: |
||||||||||||||||
Marketable Debt Securities: |
||||||||||||||||
Asset backed commercial paper |
$ | 24 | $ | — | $ | (6 | ) | $ | 18 | |||||||
Auction rate securities |
7 | — | (2 | ) | 5 | |||||||||||
Corporate |
8 | 2 | — | 10 | ||||||||||||
| 39 | 2 | (8 | ) | 33 | ||||||||||||
Marketable Equity Securities: |
||||||||||||||||
Canadian Oil Sands Trust |
292 | 584 | — | 876 | ||||||||||||
Gabriel Resources Ltd. |
74 | 136 | — | 210 | ||||||||||||
Shore Gold Inc. |
4 | 11 | — | 15 | ||||||||||||
Other |
11 | 7 | — | 18 | ||||||||||||
| 381 | 738 | — | 1,119 | |||||||||||||
Other investments, at cost |
6 | — | — | 6 | ||||||||||||
Investment in Affiliates: |
||||||||||||||||
AGR Matthey Joint Venture |
20 | — | — | 20 | ||||||||||||
La Zanja |
8 | — | — | 8 | ||||||||||||
| $ | 454 | $ | 740 | $ | (8 | ) | $ | 1,186 | ||||||||
The AGR Matthey Joint Venture (“AGR”), in which the Company held a 40% equity interest, was
dissolved on March 30, 2010. The remaining interests were held by West Australian Mint (“WAM”)
(40%) and Johnson Matthey Australia (“JMA”) (20%). The Company received consideration of $14 from
the dissolution and recorded a gain of $6 in the first half of 2010.
Included in Investments at June 30, 2010 and December 31, 2009 are $8 and $10, respectively,
of long-term marketable debt securities and $6 and $5 of long-term marketable equity securities,
respectively, that are legally pledged for purposes of settling asset retirement obligations
related to the San Jose Reservoir at Yanacocha.
During the first half of 2009, the Company recognized impairments for other-than temporary
declines in value of $2 for Shore Gold Inc. and $4 for other marketable equity securities.
24
Table of Contents
NEWMONT MINING CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) (Continued)
(dollars in millions, except per share, per ounce and per pound amounts)
(dollars in millions, except per share, per ounce and per pound amounts)
The following tables present the gross unrealized losses and fair value of the Company’s
investments with unrealized losses that are not deemed to be other-than-temporarily impaired,
aggregated by length of time that the individual securities have been in a continuous unrealized
loss position:
| Less than 12 Months | 12 Months or Greater | Total | ||||||||||||||||||||||
| Unrealized | Unrealized | Unrealized | ||||||||||||||||||||||
| At June 30, 2010 | Fair Value | Losses | Fair Value | Losses | Fair Value | Losses | ||||||||||||||||||
Asset backed commercial paper |
$ | — | $ | — | $ | 18 | $ | 6 | $ | 18 | $ | 6 | ||||||||||||
Auction rate securities |
— | — | 5 | 2 | 5 | 2 | ||||||||||||||||||
Marketable equity securities |
5 | 2 | — | — | 5 | 2 | ||||||||||||||||||
| $ | 5 | $ | 2 | $ | 23 | $ | 8 | $ | 28 | $ | 10 | |||||||||||||
| Less than 12 Months | 12 Months or Greater | Total | ||||||||||||||||||||||
| Unrealized | Unrealized | Unrealized | ||||||||||||||||||||||
| At December 31, 2009 | Fair Value | Losses | Fair Value | Losses | Fair Value | Losses | ||||||||||||||||||
Asset backed commercial paper |
$ | — | $ | — | $ | 18 | $ | 6 | $ | 18 | $ | 6 | ||||||||||||
Auction rate securities |
— | — | 5 | 2 | 5 | 2 | ||||||||||||||||||
| $ | — | $ | — | $ | 23 | $ | 8 | $ | 23 | $ | 8 | |||||||||||||
The unrealized loss of $10 and $8 at June 30, 2010 and December 31, 2009, respectively, relate
to the Company’s investments in asset backed commercial paper, auction rate securities and
marketable equity securities as listed in the tables above. While the fair values of these
investments are below their respective cost, the Company views these declines as temporary. The
Company intends to hold its investment in auction rate securities and asset backed commercial paper
until maturity or such time that the market recovers and therefore considers these losses
temporary.
NOTE 19 INVENTORIES
| At June 30, | At December 31, | |||||||
| 2010 | 2009 | |||||||
In-process |
$ | 79 | $ | 80 | ||||
Concentrate |
32 | 10 | ||||||
Precious metals |
9 | 9 | ||||||
Materials, supplies and other |
390 | 394 | ||||||
| $ | 510 | $ | 493 | |||||
NOTE 20 STOCKPILES AND ORE ON LEACH PADS
| At June 30, | At December 31, | |||||||
| 2010 | 2009 | |||||||
Current: |
||||||||
Stockpiles |
$ | 303 | $ | 206 | ||||
Ore on leach pads |
224 | 197 | ||||||
| $ | 527 | $ | 403 | |||||
Long-term: |
||||||||
Stockpiles |
$ | 1,272 | $ | 1,181 | ||||
Ore on leach pads |
335 | 321 | ||||||
| $ | 1,607 | $ | 1,502 | |||||
25
Table of Contents
NEWMONT MINING CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) (Continued)
(dollars in millions, except per share, per ounce and per pound amounts)
(dollars in millions, except per share, per ounce and per pound amounts)
At June 30, 2010, stockpiles were primarily located at Batu Hijau ($841), Nevada ($328), Other
Australia/New Zealand ($114), Boddington ($140) and Ahafo ($88), while ore on leach pads were
primarily located at Yanacocha ($388) and Nevada ($164).
NOTE 21 OTHER ASSETS
| At June 30, | At December 31, | |||||||
| 2010 | 2009 | |||||||
Other current assets: |
||||||||
Refinery metal inventory and receivable |
$ | 504 | $ | 671 | ||||
Prepaid assets |
89 | 70 | ||||||
Derivative instruments |
54 | 92 | ||||||
Other |
55 | 67 | ||||||
| $ | 702 | $ | 900 | |||||
Other long-term assets: |
||||||||
Goodwill |
$ | 188 | $ | 188 | ||||
Intangible assets |
91 | 29 | ||||||
Debt issuance costs |
43 | 50 | ||||||
Restricted cash |
23 | 70 | ||||||
Other receivables |
23 | 16 | ||||||
Derivative instruments |
20 | 59 | ||||||
Other |
75 | 70 | ||||||
| $ | 463 | $ | 482 | |||||
NOTE 22 DEBT
| At June 30, 2010 | At December 31, 2009 | |||||||||||||||
| Current | Non-Current | Current | Non-Current | |||||||||||||
Sale-leaseback of refractory ore treatment plant |
$ | 30 | $ | 134 | $ | 24 | $ | 164 | ||||||||
8 5/8% debentures, net of discount (due 2011) |
216 | — | — | 218 | ||||||||||||
2012 convertible senior notes, net of discount |
— | 475 | — | 463 | ||||||||||||
2014 convertible senior notes, net of discount |
— | 478 | — | 468 | ||||||||||||
2017 convertible senior notes, net of discount |
— | 425 | — | 417 | ||||||||||||
5 1/8% senior notes, net of discount (due 2019) |
— | 896 | — | 896 | ||||||||||||
5 7/8% senior notes, net of discount (due 2035) |
— | 598 | — | 597 | ||||||||||||
6 1/4% senior notes, net of discount (due 2039) |
— | 1,087 | — | 1,087 | ||||||||||||
PTNNT project financing facility |
— | — | 87 | 133 | ||||||||||||
Yanacocha credit facility |
14 | 41 | 14 | 48 | ||||||||||||
Yanacocha senior notes |
16 | 84 | 8 | 92 | ||||||||||||
Ahafo project facility |
10 | 60 | 10 | 65 | ||||||||||||
Other project financings and capital leases |
9 | 2 | 14 | 4 | ||||||||||||
| $ | 295 | $ | 4,280 | $ | 157 | $ | 4,652 | |||||||||
On February 23, 2010, PTNNT repaid the $220 remaining balance under the PTNNT project
financing facility. As a result, the Company is no longer required to maintain letters of credit to
secure 56.25% of the PTNNT project financing facility and PTNNT’s assets are no longer pledged as
collateral.
26
Table of Contents
NEWMONT MINING CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) (Continued)
(dollars in millions, except per share, per ounce and per pound amounts)
(dollars in millions, except per share, per ounce and per pound amounts)
Scheduled minimum debt repayments are $27 for the remainder of 2010, $287 in 2011, $576 in
2012, $72 in 2013, $545 in 2014 and $3,068 thereafter.
NOTE 23 OTHER LIABILITIES
| At June 30, | At December 31, | |||||||
| 2010 | 2009 | |||||||
Other current liabilities: |
||||||||
Refinery metal payable |
$ | 504 | $ | 671 | ||||
Accrued operating costs |
205 | 131 | ||||||
Interest |
65 | 72 | ||||||
Accrued capital expenditures |
56 | 115 | ||||||
Reclamation and remediation costs |
53 | 54 | ||||||
Boddington acquisition costs |
52 | 52 | ||||||
Royalties |
45 | 58 | ||||||
Taxes other than income and mining |
31 | 21 | ||||||
Boddington contingent consideration |
27 | 16 | ||||||
Derivative instruments |
20 | — | ||||||
Other |
85 | 127 | ||||||
| $ | 1,143 | $ | 1,317 | |||||
Other long-term liabilities: |
||||||||
Boddington contingent consideration |
$ | 58 | $ | 69 | ||||
Income and mining taxes |
51 | 38 | ||||||
Power supply agreements |
38 | — | ||||||
Derivative instruments |
21 | 1 | ||||||
Other |
47 | 66 | ||||||
| $ | 215 | $ | 174 | |||||
NOTE 24 NET CHANGE IN OPERATING ASSETS AND LIABILITIES
Net cash provided from operations attributable to the net change in operating assets and
liabilities is composed of the following:
| Six Months Ended June 30, | ||||||||
| 2010 | 2009 | |||||||
Decrease (increase) in operating assets: |
||||||||
Trade and accounts receivable |
$ | 74 | $ | 68 | ||||
Inventories, stockpiles and ore on leach pads |
(187 | ) | (155 | ) | ||||
EGR refinery assets |
138 | (70 | ) | |||||
Other assets |
(30 | ) | 5 | |||||
Increase (decrease) in operating liabilities: |
||||||||
Accounts payable and other accrued liabilities |
(90 | ) | (74 | ) | ||||
EGR refinery liabilities |
(138 | ) | 70 | |||||
Reclamation liabilities |
(18 | ) | (22 | ) | ||||
| $ | (251 | ) | $ | (178 | ) | |||
27
Table of Contents
NEWMONT MINING CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) (Continued)
(dollars in millions, except per share, per ounce and per pound amounts)
(dollars in millions, except per share, per ounce and per pound amounts)
NOTE 25 CONDENSED CONSOLIDATING FINANCIAL STATEMENTS
Newmont USA, a 100% owned subsidiary of Newmont Mining Corporation, has fully and
unconditionally guaranteed the 5 7/8%, 5 1/8% and 6 1/4% publicly traded notes and the 2012, 2014
and 2017 convertible senior notes. The following consolidating financial statements are 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 June 30, 2010 | ||||||||||||||||||||
| Newmont | ||||||||||||||||||||
| Newmont | Mining | |||||||||||||||||||
| Mining | Newmont | Other | Corporation | |||||||||||||||||
| Condensed Consolidating Statement of Income | Corporation | USA | Subsidiaries | Eliminations | Consolidated | |||||||||||||||
Sales |
$ | — | $ | 1,410 | $ | 743 | $ | — | $ | 2,153 | ||||||||||
Costs and expenses |
||||||||||||||||||||
Costs applicable to sales (1) |
— | 525 | 339 | (6 | ) | 858 | ||||||||||||||
Amortization |
— | 143 | 89 | (1 | ) | 231 | ||||||||||||||
Reclamation and remediation |
— | 10 | 3 | — | 13 | |||||||||||||||
Exploration |
— | 32 | 21 | — | 53 | |||||||||||||||
Advanced projects, research and development |
— | 25 | 32 | — | 57 | |||||||||||||||
General and administrative |
— | 37 | — | 6 | 43 | |||||||||||||||
Other expense, net |
— | 39 | 21 | 1 | 61 | |||||||||||||||
| — | 811 | 505 | — | 1,316 | ||||||||||||||||
Other income (expense) |
||||||||||||||||||||
Other income, net |
— | 13 | 31 | — | 44 | |||||||||||||||
Interest income — intercompany |
35 | 2 | 1 | (38 | ) | — | ||||||||||||||
Interest expense — intercompany |
(3 | ) | — | (35 | ) | 38 | — | |||||||||||||
Interest expense, net |
(64 | ) | (4 | ) | (1 | ) | — | (69 | ) | |||||||||||
| (32 | ) | 11 | (4 | ) | — | (25 | ) | |||||||||||||
Income (loss) before income tax and other items |
(32 | ) | 610 | 234 | — | 812 | ||||||||||||||
Income tax expense |
9 | (221 | ) | (61 | ) | — | (273 | ) | ||||||||||||
Equity income (loss) of affiliates |
405 | 1 | 63 | (471 | ) | (2 | ) | |||||||||||||
Net income (loss) |
382 | 390 | 236 | (471 | ) | 537 | ||||||||||||||
Net loss (income) attributable to noncontrolling
interests |
— | (185 | ) | (10 | ) | 40 | (155 | ) | ||||||||||||
Net income (loss) attributable to Newmont
stockholders |
$ | 382 | $ | 205 | $ | 226 | $ | (431 | ) | $ | 382 | |||||||||
| (1) | Exclusive of Amortization and Reclamation and remediation. |
28
Table of Contents
NEWMONT MINING CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) (Continued)
(dollars in millions, except per share, per ounce and per pound amounts)
(dollars in millions, except per share, per ounce and per pound amounts)
| Three Months Ended June 30, 2009 | ||||||||||||||||||||
| Newmont | ||||||||||||||||||||
| Newmont | Mining | |||||||||||||||||||
| Mining | Newmont | Other | Corporation | |||||||||||||||||
| Condensed Consolidating Statement of Income | Corporation | USA | Subsidiaries | Eliminations | Consolidated | |||||||||||||||
Sales |
$ | — | $ | 1,217 | $ | 385 | $ | — | $ | 1,602 | ||||||||||
Costs and expenses |
||||||||||||||||||||
Costs applicable to sales (1) |
— | 499 | 203 | (6 | ) | 696 | ||||||||||||||
Amortization |
— | 125 | 51 | — | 176 | |||||||||||||||
Reclamation and remediation |
— | 8 | 4 | — | 12 | |||||||||||||||
Exploration |
— | 26 | 25 | — | 51 | |||||||||||||||
Advanced projects, research and development |
— | 17 | 26 | (1 | ) | 42 | ||||||||||||||
General and administrative |
— | 33 | — | 7 | 40 | |||||||||||||||
Other expense, net |
8 | 26 | 78 | — | 112 | |||||||||||||||
| 8 | 734 | 387 | — | 1,129 | ||||||||||||||||
Other income (expense) |
||||||||||||||||||||
Other income, net |
(6 | ) | (6 | ) | 21 | — | 9 | |||||||||||||
Interest income — intercompany |
28 | 2 | 1 | (31 | ) | — | ||||||||||||||
Interest expense — intercompany |
(3 | ) | — | (28 | ) | 31 | — | |||||||||||||
Interest expense, net |
(9 | ) | (12 | ) | (2 | ) | — | (23 | ) | |||||||||||
| 10 | (16 | ) | (8 | ) | — | (14 | ) | |||||||||||||
Income before income tax and other items |
2 | 467 | (10 | ) | — | 459 | ||||||||||||||
Income tax expense |
(3 | ) | (160 | ) | 27 | — | (136 | ) | ||||||||||||
Equity income (loss) of affiliates |
177 | 2 | 28 | (210 | ) | (3 | ) | |||||||||||||
Income (loss) from continuing operations |
176 | 309 | 45 | (210 | ) | 320 | ||||||||||||||
Income (loss) from discontinued operations |
(14 | ) | (14 | ) | — | 14 | (14 | ) | ||||||||||||
Net income (loss) |
162 | 295 | 45 | (196 | ) | 306 | ||||||||||||||
Net loss (income) attributable to noncontrolling
interests |
— | (144 | ) | (15 | ) | 15 | (144 | ) | ||||||||||||
Net income (loss) attributable to Newmont
stockholders |
$ | 162 | $ | 151 | $ | 30 | $ | (181 | ) | $ | 162 | |||||||||
| (1) | Exclusive of Amortization and Reclamation and remediation. |
29
Table of Contents
NEWMONT MINING CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) (Continued)
(dollars in millions, except per share, per ounce and per pound amounts)
(dollars in millions, except per share, per ounce and per pound amounts)
| Six Months Ended June 30, 2010 | ||||||||||||||||||||
| Newmont | ||||||||||||||||||||
| Newmont | Mining | |||||||||||||||||||
| Mining | Newmont | Other | Corporation | |||||||||||||||||
| Condensed Consolidating Statement of Income | Corporation | USA | Subsidiaries | Eliminations | Consolidated | |||||||||||||||
Sales |
$ | — | $ | 3,002 | $ | 1,393 | $ | — | $ | 4,395 | ||||||||||
Costs and expenses |
||||||||||||||||||||
Costs applicable to sales (1) |
— | 1,076 | 668 | (11 | ) | 1,733 | ||||||||||||||
Amortization |
— | 286 | 170 | (1 | ) | 455 | ||||||||||||||
Reclamation and remediation |
— | 19 | 7 | — | 26 | |||||||||||||||
Exploration |
— | 56 | 40 | — | 96 | |||||||||||||||
Advanced projects, research and development |
— | 54 | 49 | — | 103 | |||||||||||||||
General and administrative |
— | 75 | 1 | 12 | 88 | |||||||||||||||
Other expense, net |
— | 115 | 35 | — | 150 | |||||||||||||||
| — | 1,681 | 970 | — | 2,651 | ||||||||||||||||
Other income (expense) |
||||||||||||||||||||
Other income, net |
— | 14 | 78 | — | 92 | |||||||||||||||
Interest income — intercompany |
71 | 4 | 2 | (77 | ) | — | ||||||||||||||
Interest expense — intercompany |
(5 | ) | — | (72 | ) | 77 | — | |||||||||||||
Interest expense, net |
(126 | ) | (16 | ) | (2 | ) | — | (144 | ) | |||||||||||
| (60 | ) | 2 | 6 | — | (52 | ) | ||||||||||||||
Income (loss) before income tax and other items |
(60 | ) | 1,323 | 429 | — | 1,692 | ||||||||||||||
Income tax expense |
150 | (454 | ) | (104 | ) | — | (408 | ) | ||||||||||||
Equity income (loss) of affiliates |
838 | 1 | 130 | (973 | ) | (4 | ) | |||||||||||||
Net income (loss) |
928 | 870 | 455 | (973 | ) | 1,280 | ||||||||||||||
Net loss (income) attributable to noncontrolling
interests |
— | (428 | ) | (5 | ) | 81 | (352 | ) | ||||||||||||
Net income (loss) attributable to Newmont
stockholders |
$ | 928 | $ | 442 | $ | 450 | $ | (892 | ) | $ | 928 | |||||||||
| (1) | Exclusive of Amortization and Reclamation and remediation. |
30
Table of Contents
NEWMONT MINING CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) (Continued)
(dollars in millions, except per share, per ounce and per pound amounts)
(dollars in millions, except per share, per ounce and per pound amounts)
| Six Months Ended June 30, 2009 | ||||||||||||||||||||
| Newmont | ||||||||||||||||||||
| Newmont | Mining | |||||||||||||||||||
| Mining | Newmont | Other | Corporation | |||||||||||||||||
| Condensed Consolidating Statement of Income | Corporation | USA | Subsidiaries | Eliminations | Consolidated | |||||||||||||||
Sales |
$ | — | $ | 2,355 | $ | 783 | $ | — | $ | 3,138 | ||||||||||
Costs and expenses |
||||||||||||||||||||
Costs applicable to sales (1) |
— | 1,036 | 411 | (12 | ) | 1,435 | ||||||||||||||
Amortization |
— | 262 | 105 | — | 367 | |||||||||||||||
Reclamation and remediation |
— | 17 | 7 | — | 24 | |||||||||||||||
Exploration |
— | 48 | 44 | — | 92 | |||||||||||||||
Advanced projects, research and development |
— | 35 | 40 | (2 | ) | 73 | ||||||||||||||
General and administrative |
— | 63 | 2 | 14 | 79 | |||||||||||||||
Other expense, net |
8 | 84 | 93 | — | 185 | |||||||||||||||
| 8 | 1,545 | 702 | — | 2,255 | ||||||||||||||||
Other income (expense) |
||||||||||||||||||||
Other income, net |
(10 | ) | — | 28 | — | 18 | ||||||||||||||
Interest income — intercompany |
60 | 4 | 1 | (65 | ) | — | ||||||||||||||
Interest expense — intercompany |
(5 | ) | — | (60 | ) | 65 | — | |||||||||||||
Interest expense, net |
(27 | ) | (25 | ) | (3 | ) | — | (55 | ) | |||||||||||
| 18 | (21 | ) | (34 | ) | — | (37 | ) | |||||||||||||
Income before income tax and other items |
10 | 789 | 47 | — | 846 | |||||||||||||||
Income tax expense |
(13 | ) | (243 | ) | 15 | — | (241 | ) | ||||||||||||
Equity income (loss) of affiliates |
368 | 3 | 54 | (433 | ) | (8 | ) | |||||||||||||
Income (loss) from continuing operations |
365 | 549 | 116 | (433 | ) | 597 | ||||||||||||||
Income (loss) from discontinued operations |
(14 | ) | (14 | ) | — | 14 | (14 | ) | ||||||||||||
Net income (loss) |
351 | 535 | 116 | (419 | ) | 583 | ||||||||||||||
Net loss (income) attributable to noncontrolling
interests |
— | (234 | ) | (28 | ) | 30 | (232 | ) | ||||||||||||
Net income (loss) attributable to Newmont
stockholders |
$ | 351 | $ | 301 | $ | 88 | $ | (389 | ) | $ | 351 | |||||||||
| (1) | Exclusive of Amortization and Reclamation and remediation. |
31
Table of Contents
NEWMONT MINING CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) (Continued)
(dollars in millions, except per share, per ounce and per pound amounts)
(dollars in millions, except per share, per ounce and per pound amounts)
| Six Months Ended June 30, 2010 | ||||||||||||||||||||
| Newmont | ||||||||||||||||||||
| Newmont | Mining | |||||||||||||||||||
| Mining | Newmont | Other | Corporation | |||||||||||||||||
| Condensed Consolidating Statement of Cash Flows | Corporation | USA | Subsidiaries | Eliminations | Consolidated | |||||||||||||||
Operating activities: |
||||||||||||||||||||
Net income (loss) |
$ | 928 | $ | 870 | $ | 455 | $ | (973 | ) | $ | 1,280 | |||||||||
Adjustments |
(115 | ) | 319 | (725 | ) | 973 | 452 | |||||||||||||
Net change in operating assets and liabilities |
(2 | ) | (160 | ) | (89 | ) | — | (251 | ) | |||||||||||
Net cash provided from (used in) continuing operations |
811 | 1,029 | (359 | ) | — | 1,481 | ||||||||||||||
Net cash used in discontinued operations |
— | (13 | ) | — | — | (13 | ) | |||||||||||||
Net cash provided from (used in) operations |
811 | 1,016 | (359 | ) | — | 1,468 | ||||||||||||||
Investing activities: |
||||||||||||||||||||
Additions to property, plant and mine development |
— | (283 | ) | (345 | ) | — | (628 | ) | ||||||||||||
Investment in marketable debt and equity securities |
— | — | (7 | ) | — | (7 | ) | |||||||||||||
Proceeds from sale of other assets |
— | 8 | 44 | — | 52 | |||||||||||||||
Other |
— | — | (22 | ) | — | (22 | ) | |||||||||||||
Net cash used in investing activities |
— | (275 | ) | (330 | ) | — | (605 | ) | ||||||||||||
Financing activities: |
||||||||||||||||||||
Net repayments |
— | (257 | ) | (6 | ) | — | (263 | ) | ||||||||||||
Net intercompany borrowings (repayments) |
(751 | ) | (23 | ) | 855 | (81 | ) | — | ||||||||||||
Sale of subsidiary shares to noncontrolling interests |
— | 229 | — | — | 229 | |||||||||||||||
Acquisition of subsidiary shares from noncontrolling
interests |
— | — | (109 | ) | — | (109 | ) | |||||||||||||
Dividends paid to common stockholders |
(98 | ) | — | — | — | (98 | ) | |||||||||||||
Dividends paid to noncontrolling interests |
— | (388 | ) | — | 81 | (307 | ) | |||||||||||||
Proceeds from stock issuance, net |
30 | — | — | — | 30 | |||||||||||||||
Change in restricted cash and other |
— | 48 | — | — | 48 | |||||||||||||||
Net cash provided from (used in) financing activities |
(819 | ) | (391 | ) | 740 | — | (470 | ) | ||||||||||||
Effect of exchange rate changes on cash |
— | — | (6 | ) | — | (6 | ) | |||||||||||||
Net change in cash and cash equivalents |
(8 | ) | 350 | 45 | — | 387 | ||||||||||||||
Cash and cash equivalents at beginning of period |
8 | 3,067 | 140 | — | 3,215 | |||||||||||||||
Cash and cash equivalents at end of period |
$ | — | $ | 3,417 | $ | 185 | $ | — | $ | 3,602 | ||||||||||
32
Table of Contents
NEWMONT MINING CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) (Continued)
(dollars in millions, except per share, per ounce and per pound amounts)
(dollars in millions, except per share, per ounce and per pound amounts)
| Six Months Ended June 30, 2009 | ||||||||||||||||||||
| Newmont | ||||||||||||||||||||
| Newmont | Mining | |||||||||||||||||||
| Mining | Newmont | Other | Corporation | |||||||||||||||||
| Condensed Consolidating Statement of Cash Flows | Corporation | USA | Subsidiaries | Eliminations | Consolidated | |||||||||||||||
Operating activities: |
||||||||||||||||||||
Net income (loss) |
$ | 351 | $ | 535 | $ | 116 | $ | (419 | ) | $ | 583 | |||||||||
Adjustments |
49 | 343 | (330 | ) | 419 | 481 | ||||||||||||||
Net change in operating assets and liabilities |
1 | (220 | ) | 41 | — | (178 | ) | |||||||||||||
Net cash provided from (used in) continuing operations |
401 | 658 | (173 | ) | — | 886 | ||||||||||||||
Net cash provided from discontinued operations |
— | 8 | — | — | 8 | |||||||||||||||
Net cash provided from (used in) operations |
401 | 666 | (173 | ) | — | 894 | ||||||||||||||
Investing activities: |
||||||||||||||||||||
Additions to property, plant and mine development |
— | (234 | ) | (676 | ) | — | (910 | ) | ||||||||||||
Acquisitions, net |
(8 | ) | (11 | ) | (741 | ) | — | (760 | ) | |||||||||||
Proceeds from sale of other assets |
— | — | 2 | — | 2 | |||||||||||||||
Other |
— | 1 | (5 | ) | — | (4 | ) | |||||||||||||
Net cash used in investing activities |
(8 | ) | (244 | ) | (1,420 | ) | — | (1,672 | ) | |||||||||||
Financing activities: |
||||||||||||||||||||
Net borrowings (repayments) |
(154 | ) | (26 | ) | 6 | — | (174 | ) | ||||||||||||
Net intercompany borrowings (repayments) |
(1,381 | ) | (207 | ) | 1,588 | — | — | |||||||||||||
Dividends paid to common stockholders |
(98 | ) | — | — | — | (98 | ) | |||||||||||||
Dividends paid to noncontrolling interests |
— | (112 | ) | — | — | (112 | ) | |||||||||||||
Proceeds from stock issuance |
1,247 | — | — | — | 1,247 | |||||||||||||||
Change in restricted cash and other |
(7 | ) | — | 12 | — | 5 | ||||||||||||||
Net cash provided from (used in) financing activities of
continuing operations |
(393 | ) | (345 | ) | 1,606 | — | 868 | |||||||||||||
Net cash used in financing activities of discontinued
operations |
— | (2 | ) | — | — | (2 | ) | |||||||||||||
Net cash provided from (used in) financing activities |
(393 | ) | (347 | ) | 1,606 | — | 866 | |||||||||||||
Effect of exchange rate changes on cash |
— | — | 21 | — | 21 | |||||||||||||||
Net change in cash and cash equivalents |
— | 75 | 34 | — | 109 | |||||||||||||||
Cash and cash equivalents at beginning of period |
— | 310 | 125 | — | 435 | |||||||||||||||
Cash and cash equivalents at end of period |
$ | — | $ | 385 | $ | 159 | $ | — | $ | 544 | ||||||||||
33
Table of Contents
NEWMONT MINING CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) (Continued)
(dollars in millions, except per share, per ounce and per pound amounts)
(dollars in millions, except per share, per ounce and per pound amounts)
| At June 30, 2010 | ||||||||||||||||||||
| Newmont | ||||||||||||||||||||
| Newmont | Mining | |||||||||||||||||||
| Mining | Newmont | Other | Corporation | |||||||||||||||||
| Condensed Consolidating Balance Sheet | Corporation | USA | Subsidiaries | Eliminations | Consolidated | |||||||||||||||
Assets |
||||||||||||||||||||
Cash and cash equivalents |
$ | — | $ | 3,417 | $ | 185 | $ | — | $ | 3,602 | ||||||||||
Trade receivables |
— | 278 | 80 | — | 358 | |||||||||||||||
Accounts receivable |
2,277 | 764 | 384 | (3,319 | ) | 106 | ||||||||||||||
Investments |
— | 5 | 59 | — | 64 | |||||||||||||||
Inventories |
— | 327 | 183 | — | 510 | |||||||||||||||
Stockpiles and ore on leach pads |
— | 448 | 79 | — | 527 | |||||||||||||||
Deferred income tax assets |
— | 171 | 31 | — | 202 | |||||||||||||||
Other current assets |
— | 105 | 597 | — | 702 | |||||||||||||||
Current assets |
2,277 | 5,515 | 1,598 | (3,319 | ) | 6,071 | ||||||||||||||
Property, plant and mine development, net |
— | 5,165 | 7,252 | (18 | ) | 12,399 | ||||||||||||||
Investments |
— | 29 | 796 | 321 | 1,146 | |||||||||||||||
Investments in subsidiaries |
10,630 | 32 | 1,615 | (12,277 | ) | — | ||||||||||||||
Stockpiles and ore on leach pads |
— | 1,344 | 263 | — | 1,607 | |||||||||||||||
Deferred income tax assets |
116 | 891 | 76 | — | 1,083 | |||||||||||||||
Other long-term assets |
2,552 | 313 | 454 | (2,856 | ) | 463 | ||||||||||||||
Total assets |
$ | 15,575 | $ | 13,289 | $ | 12,054 | $ | (18,149 | ) | $ | 22,769 | |||||||||
Liabilities |
||||||||||||||||||||
Debt |
$ | — | $ | 285 | $ | 10 | $ | — | $ | 295 | ||||||||||
Accounts payable |
32 | 1,253 | 2,391 | (3,310 | ) | 366 | ||||||||||||||
Employee-related benefits |
— | 151 | 43 | — | 194 | |||||||||||||||
Income and mining taxes |
— | 191 | 6 | — | 197 | |||||||||||||||
Other current liabilities |
56 | 307 | 2,751 | (1,971 | ) | 1,143 | ||||||||||||||
Current liabilities |
88 | 2,187 | 5,201 | (5,281 | ) | 2,195 | ||||||||||||||
Debt |
3,959 | 261 | 60 | — | 4,280 | |||||||||||||||
Reclamation and remediation liabilities |
— | 574 | 236 | — | 810 | |||||||||||||||
Deferred income tax liabilities |
— | 516 | 804 | — | 1,320 | |||||||||||||||
Employee-related benefits |
5 | 334 | 55 | — | 394 | |||||||||||||||
Other long-term liabilities |
343 | 76 | 2,670 | (2,874 | ) | 215 | ||||||||||||||
Total liabilities |
4,395 | 3,948 | 9,026 | (8,155 | ) | 9,214 | ||||||||||||||
Equity |
||||||||||||||||||||
Preferred stock |
— | — | 61 | (61 | ) | — | ||||||||||||||
Common stock |
775 | — | — | — | 775 | |||||||||||||||
Additional paid-in capital |
7,900 | 2,722 | 3,885 | (6,272 | ) | 8,235 | ||||||||||||||
Accumulated other comprehensive income (loss) |
526 | (121 | ) | 629 | (508 | ) | 526 | |||||||||||||
Retained earnings (deficit) |
1,979 | 4,244 | (1,633 | ) | (2,611 | ) | 1,979 | |||||||||||||
Newmont stockholders’ equity |
11,180 | 6,845 | 2,942 | (9,452 | ) | 11,515 | ||||||||||||||
Noncontrolling interests |
— | 2,496 | 86 | (542 | ) | 2,040 | ||||||||||||||
Total equity |
11,180 | 9,341 | 3,028 | (9,994 | ) | 13,555 | ||||||||||||||
Total liabilities and equity |
$ | 15,575 | $ | 13,289 | $ | 12,054 | $ | (18,149 | ) | $ | 22,769 | |||||||||
34
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NEWMONT MINING CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) (Continued)
(dollars in millions, except per share, per ounce and per pound amounts)
(dollars in millions, except per share, per ounce and per pound amounts)
| At December 31, 2009 | ||||||||||||||||||||
| Newmont | ||||||||||||||||||||
| Newmont | Mining | |||||||||||||||||||
| Mining | Newmont | Other | Corporation | |||||||||||||||||
| Condensed Consolidating Balance Sheet | Corporation | USA | Subsidiaries | Eliminations | Consolidated | |||||||||||||||
Assets |
||||||||||||||||||||
Cash and cash equivalents |
$ | 8 | $ | 3,067 | $ | 140 | $ | — | $ | 3,215 | ||||||||||
Trade receivables |
— | 417 | 21 | — | 438 | |||||||||||||||
Accounts receivable |
2,338 | 673 | 363 | (3,272 | ) | 102 | ||||||||||||||
Investments |
— | 4 | 52 | — | 56 | |||||||||||||||
Inventories |
— | 307 | 186 | — | 493 | |||||||||||||||
Stockpiles and ore on leach pads |
— | 331 | 72 | — | 403 | |||||||||||||||
Deferred income tax assets |
— | 157 | 58 | — | 215 | |||||||||||||||
Other current assets |
— | 78 | 822 | — | 900 | |||||||||||||||
Current assets |
2,346 | 5,034 | 1,714 | (3,272 | ) | 5,822 | ||||||||||||||
Property, plant and mine development, net |
— | 5,195 | 7,193 | (18 | ) | 12,370 | ||||||||||||||
Investments |
— | 26 | 1,160 | — | 1,186 | |||||||||||||||
Investments in subsidiaries |
9,842 | 31 | 1,089 | (10,962 | ) | — | ||||||||||||||
Stockpiles and ore on leach pads |
— | 1,323 | 179 | — | 1,502 | |||||||||||||||
Deferred income tax assets |
— | 844 | 93 | — | 937 | |||||||||||||||
Other long-term assets |
2,551 | 357 | 419 | (2,845 | ) | 482 | ||||||||||||||
Total assets |
$ | 14,739 | $ | 12,810 | $ | 11,847 | $ | (17,097 | ) | $ | 22,299 | |||||||||
Liabilities |
||||||||||||||||||||
Debt |
$ | — | $ | 147 | $ | 10 | $ | — | $ | 157 | ||||||||||
Accounts payable |
46 | 1,201 | 2,413 | (3,264 | ) | 396 | ||||||||||||||
Employee-related benefits |
— | 202 | 48 | — | 250 | |||||||||||||||
Income and mining taxes |
— | 192 | 8 | — | 200 | |||||||||||||||
Other current liabilities |
58 | 281 | 2,949 | (1,971 | ) | 1,317 | ||||||||||||||
Current liabilities |
104 | 2,023 | 5,428 | (5,235 | ) | 2,320 | ||||||||||||||
Debt |
3,928 | 659 | 65 | — | 4,652 | |||||||||||||||
Reclamation and remediation liabilities |
— | 565 | 240 | — | 805 | |||||||||||||||
Deferred income tax liabilities |
31 | 494 | 816 | — | 1,341 | |||||||||||||||
Employee-related benefits |
4 | 324 | 53 | — | 381 | |||||||||||||||
Other long-term liabilities |
338 | 62 | 2,637 | (2,863 | ) | 174 | ||||||||||||||
Liabilities of operations held for sale |
— | 13 | — | — | 13 | |||||||||||||||
Total liabilities |
4,405 | 4,140 | 9,239 | (8,098 | ) | 9,686 | ||||||||||||||
Equity |
||||||||||||||||||||
Preferred stock |
— | — | 61 | (61 | ) | — | ||||||||||||||
Common stock |
770 | — | — | — | 770 | |||||||||||||||
Additional paid-in capital |
7,789 | 2,709 | 3,874 | (6,214 | ) | 8,158 | ||||||||||||||
Accumulated other comprehensive income (loss) |
626 | (125 | ) | 738 | (613 | ) | 626 | |||||||||||||
Retained earnings (deficit) |
1,149 | 3,801 | (2,080 | ) | (1,721 | ) | 1,149 | |||||||||||||
Newmont stockholders’ equity |
10,334 | 6,385 | 2,593 | (8,609 | ) | 10,703 | ||||||||||||||
Noncontrolling interests |
— | 2,285 | 15 | (390 | ) | 1,910 | ||||||||||||||
Total equity |
10,334 | 8,670 | 2,608 | (8,999 | ) | 12,613 | ||||||||||||||
Total liabilities and equity |
$ | 14,739 | $ | 12,810 | $ | 11,847 | $ | (17,097 | ) | $ | 22,299 | |||||||||
35
Table of Contents
NEWMONT MINING CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) (Continued)
(dollars in millions, except per share, per ounce and per pound amounts)
(dollars in millions, except per share, per ounce and per pound amounts)
NOTE 26 COMMITMENTS AND CONTINGENCIES
General
The Company follows ASC guidance in determining its accruals and disclosures with respect to
loss contingencies. Accordingly, estimated losses from loss contingencies are accrued by a charge
to income when information available prior to issuance of the financial statements indicates that
it is probable (greater than a 75% probability) that a liability could be incurred and the amount
of the loss can be reasonably estimated. Legal expenses associated with the contingency are
expensed as incurred. If a loss contingency is not probable or reasonably estimable, disclosure of
the loss contingency is made in the financial statements when it is at least reasonably possible
that a material loss could be incurred.
Operating Segments
The Company’s operating segments are identified in Note 3. Except as noted in this paragraph,
all of the Company’s commitments and contingencies specifically described in this Note 26 relate to
the Corporate and Other reportable segment. The Nevada Operations matters under Newmont USA Limited
relate to the North America reportable segment. The PT Newmont Minahasa Raya matters relate to the
Asia Pacific reportable segment. The Yanacocha matters relate to the South America reportable
segment. The PTNNT matters relate to the Asia Pacific reportable segment.
Environmental Matters
The Company’s mining and exploration activities are subject to various laws and regulations
governing the protection of the environment. These laws and regulations are continually changing
and are generally becoming more restrictive. The Company conducts its operations so as to protect
the public health and environment and believes its operations are in compliance with applicable
laws and regulations in all material respects. The Company has made, and expects to make in the
future, expenditures to comply with such laws and regulations, but cannot predict the full amount
of such future expenditures.
Estimated future reclamation costs are based principally on legal and regulatory requirements.
At June 30, 2010 and December 31, 2009, $714 and $698, respectively, were accrued for reclamation
costs relating to currently producing mineral properties in accordance with asset retirement
obligation guidance. The current portions of $33 and $36 at June 30, 2010 and December 31, 2009,
respectively, are included in Other current liabilities.
In addition, the Company is involved in several matters concerning environmental obligations
associated with former mining activities. Generally, these matters concern developing and
implementing remediation plans at the various sites involved. The Company believes that the related
environmental obligations associated with these sites are similar in nature with respect to the
development of remediation plans, their risk profile and the compliance required to meet general
environmental standards. Based upon the Company’s best estimate of its liability for these matters,
$149 and $161 were accrued for such obligations at June 30, 2010 and December 31, 2009,
respectively. These amounts are included in Other current liabilities and Reclamation and
remediation liabilities. Depending upon the ultimate resolution of these matters, the Company
believes that it is reasonably possible that the liability for these matters could be as much as
158% greater or 3% lower than the amount accrued at June 30, 2010. The amounts accrued for these
matters are reviewed periodically based upon facts and circumstances available at the time. Changes
in estimates are recorded in Reclamation and remediation in the period estimates are revised.
Details about certain of the more significant matters involved are discussed below.
Dawn Mining Company LLC (“Dawn”) — 51% Newmont Owned
Midnite Mine Site. Dawn previously leased an open pit uranium mine, currently inactive, on
the Spokane Indian Reservation in the State of Washington. The mine site is subject to regulation
by agencies of the U.S. Department of Interior (the Bureau of Indian Affairs and the Bureau of Land
Management), as well as the United States Environmental Protection Agency (“EPA”).
36
Table of Contents
NEWMONT MINING CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) (Continued)
(dollars in millions, except per share, per ounce and per pound amounts)
(dollars in millions, except per share, per ounce and per pound amounts)
In 1991, Dawn’s mining lease at the mine was terminated. As a result, Dawn was required to
file a formal mine closure and reclamation plan. The Department of Interior commenced an analysis
of Dawn’s proposed plan and alternate closure and reclamation plans for the mine. Work on this
analysis has been suspended indefinitely. In mid-2000, the mine was included on the National
Priorities List under the Comprehensive Environmental Response, Compensation and Liability Act
(“CERCLA”). In March 2003, the EPA notified Dawn and Newmont that it had thus far expended $12 on
the Remedial Investigation/Feasibility Study (“RI/FS”) under CERCLA. In October 2005, the EPA
issued the RI/FS on this property in which it indicated a preferred remedy that it estimated to
cost approximately $150. Newmont and Dawn filed comments on the RI/FS with the EPA in January 2006.
On October 3, 2006, the EPA issued a final Record of Decision in which it formally selected the
preferred remedy identified in the RI/FS.
On January 28, 2005, the EPA filed a lawsuit against Dawn and Newmont under CERCLA in the U.S.
District Court for the Eastern District of Washington. The EPA has asserted that Dawn and Newmont
are liable for reclamation or remediation work and costs at the mine. Dawn does not have sufficient
funds to pay for the reclamation plan it proposed or for any alternate plan, or for any additional
remediation work or costs at the mine.
On July 14, 2008, after a bench trial, the Court held Newmont liable under CERCLA as an
“operator” of the Midnite Mine. The Court previously ruled on summary judgment that both the U.S.
Government and Dawn were liable under CERCLA. On October 17, 2008 the Court issued its written
decision in the bench trial. The Court found Dawn and Newmont jointly and severally liable under
CERCLA for past and future response costs, and ruled that each of Dawn and Newmont are responsible
to pay one-third of such costs. The Court also found the U.S. Government liable on Dawn’s and
Newmont’s contribution claim, and ruled that the U.S. Government is responsible to pay one-third of
all past and future response costs. In November 2008, all parties appealed the Court’s ruling. Also
in November 2008, the EPA issued an Administrative Order pursuant to Section 106 of CERCLA ordering
Dawn and Newmont to conduct water treatment, testing and other preliminary remedial actions.
Newmont has initiated those preliminary remedial actions.
Newmont intends to continue to vigorously defend this matter and cannot reasonably predict the
outcome of this lawsuit or the likelihood of any other action against Dawn or Newmont arising from
this matter.
Dawn Mill Site. Dawn also owns a uranium mill site facility, located on private land near
Ford, Washington, which is subject to state and federal regulation. In late 1999, Dawn sought and
later received approval from the State of Washington for a revised closure plan that expedites the
reclamation process at the site. The currently approved plan for the site is guaranteed by Newmont.
Newmont Canada Limited (“Newmont Canada”) — 100% Newmont Owned
On November 11, 2008, St. Andrew Goldfields Ltd. (“St. Andrew”) filed an Application in the
Superior Court of Justice in Ontario, Canada, seeking a declaration to clarify St. Andrew’s royalty
obligations regarding certain mineral rights and property formerly owned by Newmont Canada and now
owned by St. Andrew.
Newmont Canada purchased the property, called the Holt-McDermott property (“Holt Property”),
from Barrick Gold Corporation (“Barrick”) in October 2004. At that time, Newmont Canada entered
into a royalty agreement with Barrick (the “Barrick Royalty”), allowing Barrick to retain a royalty
on the Holt Property. In August 2006, Newmont Canada sold all of its interests in the Holt Property
to Holloway Mining Company (“Holloway”) in exchange for common stock issued by Holloway. In
September 2006, Newmont Canada entered into a purchase and sale agreement with St. Andrew (the
“2006 Agreement”), under which St. Andrew acquired all the common stock of Holloway. In 2008,
Barrick sold its Barrick Royalty to Royal Gold, Inc. (“Royal Gold”).
In the court proceedings, St. Andrew alleged that in the 2006 Agreement it only agreed to
assume royalty obligations equal to 0.013% of net smelter returns from operations on the Holt
Property. Such an interpretation of the 2006 Agreement would make Newmont responsible for any
royalties exceeding that amount payable to Royal Gold pursuant to the Barrick Royalty. On July 23,
2009, the Court issued a decision finding in favor of St. Andrews’ interpretation. On August 21,
2009, Newmont Canada appealed the decision. Newmont Canada intends to continue to vigorously defend
this matter but cannot reasonably predict the outcome.
37
Table of Contents
NEWMONT MINING CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) (Continued)
(dollars in millions, except per share, per ounce and per pound amounts)
(dollars in millions, except per share, per ounce and per pound amounts)
Newmont USA Limited — 100% Newmont Owned
Grey Eagle Mine Site. By letter dated September 3, 2002, the EPA notified Newmont that the
EPA had expended $3 in response costs to address environmental conditions associated with a
historic tailings pile located at the Grey Eagle Mine site near Happy Camp, California, and
requested that Newmont pay those costs. The EPA has identified four potentially responsible
parties, including Newmont. Newmont does not believe it has any liability for environmental
conditions at the Grey Eagle Mine site, and intends to vigorously defend any formal claims by the
EPA. Newmont cannot reasonably predict the likelihood or outcome of any future action against it
arising from this matter.
Ross-Adams Mine Site. By letter dated June 5, 2007, the U.S. Forest Service notified
Newmont that it had expended approximately $0.3 in response costs to address environmental
conditions at the Ross-Adams mine in Prince of Wales, Alaska, and requested Newmont USA Limited pay
those costs and perform an Engineering Evaluation/Cost Analysis (“EE/CA”) to assess what future
response activities might need to be completed at the site. Newmont intends to vigorously defend
any formal claims by the EPA. Newmont has agreed to perform the EE/CA. Newmont cannot reasonably
predict the likelihood or outcome of any future action against it arising from this matter.
PT Newmont Minahasa Raya (“PTNMR”) — 80% Newmont Owned
On March 22, 2007, an Indonesian non-governmental organization named Wahana Lingkungan Hidup
Indonesia (“WALHI”) filed a civil suit against PTNMR, the Newmont subsidiary that operated the
Minahasa mine in Indonesia, and Indonesia’s Ministry of Energy and Mineral Resources and Ministry
for the Environment, alleging pollution from the disposal of mine tailings into Buyat Bay, and
seeking a court order requiring PTNMR to fund a 25-year monitoring program in relation to Buyat
Bay. In December 2007, the court ruled in PTNMR’s favor and found that WALHI’s allegations of
pollution in Buyat Bay were without merit. In March 2008, WALHI appealed this decision to the
Indonesian High Court. On January 27, 2010, the Indonesian High Court upheld the December 2007
ruling in favor of PTNMR. On May 17, 2010, WALHI filed an appeal of the January 27, 2010
Indonesian High Court ruling seeking review from the Indonesian Supreme Court. The appeal by WALHI
is still being processed by the district court of South Jakarta before being reviewed by the
Indonesian Supreme Court. Independent sampling and testing of Buyat Bay water and fish, as well as
area residents, conducted by the World Health Organization and the Australian Commonwealth
Scientific and Industrial Research Organization, confirm that PTNMR has not polluted the Buyat Bay
environment, and, therefore, has not adversely affected the fish in Buyat Bay or the health of
nearby residents. The Company remains steadfast that it has not caused pollution or health
problems.
Other Legal Matters
Minera Yanacocha S.R.L. (“Yanacocha”) — 51.35% Newmont Owned
Choropampa. In June 2000, a transport contractor of Yanacocha spilled approximately 151
kilograms of elemental mercury near the town of Choropampa, Peru, which is located 53 miles (85
kilometers) southwest of the Yanacocha mine. Elemental mercury is not used in Yanacocha’s
operations but is a by-product of gold mining and was sold to a Lima firm for use in medical
instruments and industrial applications. A comprehensive health and environmental remediation
program was undertaken by Yanacocha in response to the incident. In August 2000, Yanacocha paid
under protest a fine of 1,740,000 Peruvian soles (approximately $0.5) to the Peruvian government.
Yanacocha has entered into settlement agreements with a number of individuals impacted by the
incident. As compensation for the disruption and inconvenience caused by the incident, Yanacocha
entered into agreements with and provided a variety of public works in the three communities
impacted by this incident. Yanacocha cannot predict the likelihood of additional expenditures
related to this matter.
Additional lawsuits relating to the Choropampa incident were filed against Yanacocha in the
local courts of Cajamarca, Peru, in May 2002 by over 900 Peruvian citizens. A significant number of
the plaintiffs in these lawsuits entered into settlement agreements with Yanacocha prior to filing
such claims. In April 2008, the Peruvian Supreme Court upheld the validity of these settlement
agreements, which should result in the dismissal of all claims brought by previously settled
plaintiffs. Yanacocha has also entered into settlement agreements with approximately 350 additional
plaintiffs. The claims asserted by approximately 200 plaintiffs remain. Neither Newmont nor
Yanacocha can reasonably estimate the ultimate loss relating to such claims.
38
Table of Contents
NEWMONT MINING CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) (Continued)
(dollars in millions, except per share, per ounce and per pound amounts)
(dollars in millions, except per share, per ounce and per pound amounts)
PT Newmont Nusa Tenggara (“PTNNT”) — 31.5% Newmont Direct Ownership
Under the Batu Hijau Contract of Work, beginning in 2006 and continuing through 2010, a
portion of PTNNT’s shares were required to be offered for sale, first, to the Indonesian government
or, second, to Indonesian nationals, equal to the difference between the following percentages and
the percentage of shares already owned by the Indonesian government or Indonesian nationals (if
such number is positive): 23% by March 31, 2006; 30% by March 31, 2007; 37% by March 31, 2008; 44%
by March 31, 2009; and 51% by March 31, 2010. As PT Pukuafu Indah (“PTPI”), an Indonesian national,
has owned a 20% interest in PTNNT at all relevant times, in 2006, a 3% interest was required to be
offered for sale and, in each of 2007 through 2010, an additional 7% interest was required to be
offered (for an aggregate 31% interest). The price at which such interests were to be offered for
sale to the Indonesian parties is the highest of the then-current replacement cost, the price at
which shares would be accepted for listing on the Indonesian Stock Exchange, or the fair market
value of such interest as a going concern, as agreed with the Indonesian government.
In accordance with the Contract of Work, an offer to sell a 3% interest was made to the
Indonesian government in 2006 and an offer for an additional 7% interest was made in each of 2007,
2008 and 2009, and the offer for the final 7% interest was made in March 2010. While the central
government declined to participate in the 2006 and 2007 offers, local governments in the area in
which the Batu Hijau mine is located expressed interest in acquiring shares, as did various
Indonesian nationals. After disagreement with the government over whether the government’s first
right to purchase had expired and receipt of Notices of Default from the government claiming breach
and threatening termination of the Contract of Work, on March 3, 2008, the Indonesian government
filed for international arbitration as provided under the Contract of Work, as did PTNNT. In the
arbitration proceeding, PTNNT sought a declaration that the Indonesian government was not entitled
to terminate the Contract of Work and additional declarations pertaining to the procedures for
divesting the shares. For its part, the Indonesian government sought declarations that PTNNT was in
default of its divestiture obligations, that the government may terminate the Contract of Work and
recover damages for breach of the Contract of Work, and that PTNNT must cause shares subject to
divestiture to be sold to certain local governments.
An international arbitration panel (the “Panel”) was appointed to resolve these claims and
other claims that had arisen in relation to divestment and a hearing was held in Jakarta in
December 2008. On March 31, 2009, the Panel issued its final award and decision on the matter. In
its decision, the Panel determined that PTNNT’s foreign shareholders had not complied with the
divestiture procedure required by the Contract of Work in 2006 and 2007, but the Panel ruled that
the Indonesian government was not entitled to immediately terminate the Contract of Work and
rejected the Indonesian government’s claim for damages. The Panel granted PTNNT 180 days from the
date of notification of the final award to transfer the 2006 3% interest and the 2007 7% interest
in PTNNT to the local governments or their respective nominees. The Panel also applied a 180-day
cure period to the 2008 7% interest, requiring that PTNNT offer the 2008 7% interest to the
Indonesian government or its nominee within such 180-day period, and transfer such shares if, after
agreement on the transfer price, the Indonesian government invoked its right of first refusal under
the Contract of Work. The Panel ruled that shares offered to the Indonesian government pursuant to
the Contract of Work must be offered free of any pledge or obligation to re-pledge the shares to
the Senior Lenders to PTNNT. Finally, the Panel directed PTNNT to pay to the Indonesian government
an allocated portion of certain legal fees and costs of the arbitration. PTNNT submitted payment of
$2 for legal fees and costs. The Company also entered a formal agreement with the Senior Lenders
under which the Senior Lenders released the pledge on the aggregate 31% of shares in PTNNT that
were subject to divestiture requirements in exchange for the Company and Sumitomo agreeing to
provide joint and several guarantees, thus allowing the Company to transfer these shares free of
any pledge or obligation to re-pledge the shares to the lenders. The Company subsequently replaced
this joint and several guarantee in October 2009 with letters of credit supporting 56.25% of the
obligations under the PTNNT project financing facility. In February 2010, PTNNT repaid the Senior
Lenders in full and the Company’s letter of credit was terminated. On July 14, 2009, the Company
reached agreement with the Indonesian government on the price of the 2008 7% interest and the 2009
7% interest. PTNNT reoffered the 2008 7% interest and the 2009 7% interest to the Indonesian
government at this newly agreed price. In November and December 2009, sale agreements were
concluded pursuant to which the 2006, 2007 and 2008 shares were transferred to PTMDB, the nominee
of the local governments, and the 2009 shares were transferred to PTMDB in February 2010, resulting
in PTMDB owning a 24% interest in PTNNT. Although the Indonesian government has acknowledged that
PTNNT is no longer in breach of the Contract of Work, future disputes may arise as to the final
divestiture of the 2010 shares. It is uncertain who will acquire the divestiture shares in the
future, and the nature of our relationship with the new owners of the 2010 shares and any future
owners of the divested shares remain uncertain.
39
Table of Contents
NEWMONT MINING CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) (Continued)
(dollars in millions, except per share, per ounce and per pound amounts)
(dollars in millions, except per share, per ounce and per pound amounts)
As part of the negotiation of the sale agreements with PTMDB, the parties executed an
operating agreement (the “Operating Agreement”) under which each recognizes the rights of the
Company and Sumitomo to apply their operating standards to the management of PTNNT’s operations,
including standards for safety, environmental stewardship and community responsibility. The
Operating Agreement became effective upon the completion of the sale of the 2009 shares in February
2010 and will continue for so long as the Company and Sumitomo own more shares of PTNNT than PTMDB.
If the Operating Agreement terminates, then the Company may lose control over the applicable
operating standards for Batu Hijau and will be at risk for operations conducted in a manner that
either detracts from value or results in safety, environmental or social standards below those
adhered to by the Company and Sumitomo.
In the event of any future disputes under the Contract of Work or Operating Agreement, there
can be no assurance that the Company would prevail in any such dispute and any termination of such
contracts could result in substantial diminution in the value of the Company’s interests in PTNNT.
Additionally, in February 2010, PTNNT was notified by the tax authorities of the Indonesian
government, that PTNNT may be obligated to pay value added taxes on certain goods imported after
the year 2000. PTNNT believes that, pursuant to the terms of its Contract of Work, it is only
required to pay value added taxes on these types of goods imported after February 28, 2010. The
Company and PTNNT are working cooperatively with the applicable government authorities to resolve
this matter.
Other Commitments and Contingencies
Tax contingencies are provided for in accordance with ASC income tax guidance (see Note 10).
In a 1993 asset exchange, a wholly-owned subsidiary transferred a coal lease under which the
subsidiary had collected advance royalty payments totaling $484. From 1994 to 2018, remaining
advance payments under the lease to the transferee total $390. In the event of title failure as
stated in the lease, this subsidiary has a primary obligation to refund previously collected
payments and has a secondary obligation to refund any of the $390 collected by the transferee, if
the transferee fails to meet its refund obligation. The subsidiary has title insurance on the
leased coal deposits of $240 covering the secondary obligation. The Company and the subsidiary
regard the circumstances entitling the lessee to a refund as remote.
The Company has minimum royalty obligations on one of its producing mines in Nevada for the
life of the mine. Amounts paid as a minimum royalty (where production royalties are less than the
minimum obligation) in any year are recoverable in future years when the minimum royalty obligation
is exceeded. Although the minimum royalty requirement may not be met in a particular year, the
Company expects that over the mine life, gold production will be sufficient to meet the minimum
royalty requirements. Minimum royalty payments payable are $40 in 2010, $28 in 2011 through 2014
and $266 thereafter.
40
Table of Contents
NEWMONT MINING CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) (Continued)
(dollars in millions, except per share, per ounce and per pound amounts)
(dollars in millions, except per share, per ounce and per pound amounts)
As part of its ongoing business and operations, the Company and its affiliates are required to
provide surety bonds, bank letters of credit and bank guarantees as financial support for various
purposes, including environmental reclamation, exploration permitting, workers compensation
programs and other general corporate purposes. At June 30, 2010 and December 31, 2009, there were
$982 and $1,073, respectively, of outstanding letters of credit, surety bonds and bank guarantees.
The surety bonds, letters of credit and bank guarantees reflect fair value as a condition of their
underlying purpose and are subject to fees competitively determined in the market place. The
obligations associated with these instruments are generally related to performance requirements
that the Company addresses through its ongoing operations. As the specific requirements are met,
the beneficiary of the associated instrument cancels and/or returns the instrument to the issuing
entity. Certain of these instruments are associated with operating sites with long-lived assets and
will remain outstanding until closure. Generally, bonding requirements associated with
environmental regulation are becoming more restrictive. In addition, the surety markets for certain
types of environmental bonding used by the Company have become increasingly constrained. The
Company, however, believes it is in compliance with all applicable bonding obligations and will be
able to satisfy future bonding requirements, through existing or alternative means, as they arise.
Newmont is from time to time involved in various legal proceedings related to its business.
Except in the above-described proceedings, management does not believe that adverse decisions in
any pending or threatened proceeding or that amounts that may be required to be paid by reason
thereof will have a material adverse effect on the Company’s financial condition or results of
operations.
NOTE 27 SUPPLEMENTARY DATA
Ratio of Earnings to Fixed Charges
The ratio of earnings to fixed charges for the six months ended June 30, 2010 was 11.8. The
ratio of earnings to fixed charges represents income before income tax expense, equity loss of
affiliates and noncontrolling interests in subsidiaries, divided by interest expense. Interest
expense includes amortization of capitalized interest and the portion of rent expense
representative of interest. Interest expense does not include interest on income tax liabilities.
The computation of the ratio of earnings to fixed charges can be found in Exhibit 12.1.
41
Table of Contents
| ITEM 2. | MANAGEMENT’S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND FINANCIAL CONDITION (dollars in millions, except per share, per ounce and per pound amounts) |
The following discussion provides information that management believes is relevant to an
assessment and understanding of the consolidated financial condition and results of operations of
Newmont Mining Corporation and its subsidiaries (collectively, “Newmont,” the “Company,” “our” and
“we”). We use certain non-GAAP financial performance measures in our MD&A. For a detailed
description of each of the non-GAAP financial measures used in this MD&A, please see the discussion
under “Non-GAAP Financial Performance Measures” beginning on page 59. References to “A$” refer to
Australian currency, “C$” to Canadian currency, “IDR” to Indonesian currency, “NZ$” to New Zealand
currency and “$” to United States currency.
This item should be read in conjunction with our interim unaudited Condensed Consolidated
Financial Statements and the notes thereto included in this quarterly report. Additionally, the
following discussion and analysis should be read in conjunction with Management’s Discussion and
Analysis of Consolidated Financial Condition and Results of Operations and the consolidated
financial statements included in Part II of our Annual Report on Form 10-K for the year ended
December 31, 2009.
Overview
Newmont is one of the world’s largest gold producers and is the only gold company included in
the S&P 500 Index and Fortune 500, and was the first gold company included in the Dow Jones
Sustainability Index-World. We are also engaged in the exploration for and acquisition of gold and
gold/copper properties. We have significant assets or operations in the United States, Australia,
Peru, Indonesia, Ghana, Canada, New Zealand and Mexico. Our vision is to be the most valued and
respected mining company through industry leading performance.
On balance, our portfolio continues to perform as anticipated in 2010, with favorable
operating performance in Ghana, coupled with higher metal prices, offsetting cost pressures
relating to adverse foreign exchange movements, higher royalties and lower than anticipated gold
ore grades experienced thus far during Boddington’s ramp-up.
| • | Consolidated gold production of approximately 1.6 million and 3.2 million ounces for the second quarter and first half of 2010, respectively, up from 1.5 million and 3.0 million ounces for the same periods in 2009; |
| • | Consolidated copper production of approximately 148 million and 307 million pounds for the second quarter and first half of 2010, respectively, up from 114 million and 195 million pounds for the same periods in 2009; |
| • | Sales of $2,153 and $4,395 for the second quarter and first half of 2010, respectively, an increase of 34% and 40% over the same periods in 2009; |
| • | Average realized gold price of $1,200 and $1,152 per ounce for the second quarter and first half of 2010, respectively, compared to $915 and $911 per ounce for the same periods in 2009; |
| • | Average realized copper price of $2.33 and $2.87 per pound for the second quarter and first half of 2010, respectively, compared to $2.17 and $1.94 per pound for the same periods in 2009; |
| • | Costs applicable to sales of $492 and $486 per ounce of gold for the second quarter and first half of 2010, respectively, compared to $423 and $427 per ounce for the same periods in 2009; |
| • | Costs applicable to sales of $0.77 and $0.78 per pound of copper for the second quarter and first half of 2010, respectively, compared to $0.58 and $0.73 per pound for the same periods in 2009; |
| • | Net income attributable to Newmont stockholders of $0.78 and $1.89 per share for the second quarter and first half of 2010, respectively, compared to $0.33 and $0.73 per share for the same periods in 2009; |
| • | Net cash provided from continuing operations of $1,481, an increase of 67% from the first half of 2009; and |
| • | Adjusted net income of $377 ($0.77 per share) and $786 ($1.60 per share) for the second quarter and first half of 2010, respectively, up from $211 ($0.43 per share) and $409 ($0.85 per share) for the same periods in 2009 (See “Non-GAAP Financial Measures” on page 59). |
42
Table of Contents
Selected Financial and Operating Results
| Three Months Ended June 30, | Six Months Ended June 30, | |||||||||||||||
| 2010 | 2009 | 2010 | 2009 | |||||||||||||
Sales |
$ | 2,153 | $ | 1,602 | $ | 4,395 | $ | 3,138 | ||||||||
Income from continuing operations |
$ | 537 | $ | 320 | $ | 1,280 | $ | 597 | ||||||||
Net income |
$ | 537 | $ | 306 | $ | 1,280 | $ | 583 | ||||||||
Net income attributable to Newmont
stockholders |
$ | 382 | $ | 162 | $ | 928 | $ | 351 | ||||||||
Per common share, basic: |
||||||||||||||||
Income from continuing operations
attributable to Newmont
stockholders |
$ | 0.78 | $ | 0.35 | $ | 1.89 | $ | 0.75 | ||||||||
Net income attributable to Newmont
stockholders |
$ | 0.78 | $ | 0.33 | $ | 1.89 | $ | 0.73 | ||||||||
Adjusted net income (1) |
$ | 377 | $ | 211 | $ | 786 | $ | 409 | ||||||||
Adjusted net income per share (1) |
$ | 0.77 | $ | 0.43 | $ | 1.60 | $ | 0.85 | ||||||||
Consolidated gold ounces (thousands) |
||||||||||||||||
Produced |
1,557 | 1,481 | 3,173 | 3,018 | ||||||||||||
Sold |
1,546 | 1,502 | 3,127 | 3,019 | ||||||||||||
Consolidated copper pounds (millions) |
||||||||||||||||
Produced |
148 | 114 | 307 | 195 | ||||||||||||
Sold |
128 | 105 | 275 | 201 | ||||||||||||
Average price received, net: |
||||||||||||||||
Gold (per ounce) |
$ | 1,200 | $ | 915 | $ | 1,152 | $ | 911 | ||||||||
Copper (per pound) |
$ | 2.33 | $ | 2.17 | $ | 2.87 | $ | 1.94 | ||||||||
Costs applicable to sales: |
||||||||||||||||
Gold (per ounce) |
$ | 492 | $ | 423 | $ | 486 | $ | 427 | ||||||||
Copper (per pound) |
$ | 0.77 | $ | 0.58 | $ | 0.78 | $ | 0.73 | ||||||||
| (1) | See “Non-GAAP Financial Measures” on page 59. |
Consolidated Financial Results
Net income attributable to Newmont stockholders for the second quarter of 2010 was $382, or
$0.78 per share, compared to $162, or $0.33 per share, for the second quarter of 2009. Results for
the second quarter of 2010 compared to the second quarter of 2009 were impacted by higher realized
gold prices combined with higher gold and copper sales volumes. Net income attributable to Newmont
stockholders for the first half of 2010 was $928, or $1.89 per share, compared to $351, or $0.73
per share, for the first half of 2009. Results for the first half of 2010 compared to the first
half of 2009 were impacted by higher realized gold and copper prices, higher sales volumes, a $127
tax benefit related to the conversion of non-U.S. entities for income tax purposes in the first
quarter of 2010 and $67 million of acquisition expenses related to Boddington in 2009.
43
Table of Contents
Sales — gold, net for the second quarter of 2010 increased 35% compared to the second quarter
of 2009 due to higher realized prices and increased sales volume. Sales — gold, net for the first
half of 2010 increased 31% compared to the first half of 2009 due to higher realized prices and
increased sales volume, partially offset by an increase in treatment and refining charges. The
following analysis summarizes the change in consolidated gold sales revenue:
| Three Months Ended June 30, | Six Months Ended June 30, | |||||||||||||||
| 2010 | 2009 | 2010 | 2009 | |||||||||||||
Consolidated gold sales: |
||||||||||||||||
Gross before provisional pricing |
$ | 1,845 | $ | 1,383 | $ | 3,604 | $ | 2,761 | ||||||||
Provisional pricing mark-to-market gain |
20 | — | 22 | — | ||||||||||||
Gross after provisional pricing |
1,865 | 1,383 | 3,626 | 2,761 | ||||||||||||
Less: Treatment and refining charges |
(10 | ) | (10 | ) | (23 | ) | (13 | ) | ||||||||
Net |
$ | 1,855 | $ | 1,373 | $ | 3,603 | $ | 2,748 | ||||||||
Average realized gold price (per ounce): |
||||||||||||||||
Gross before provisional pricing |
$ | 1,193 | $ | 922 | $ | 1,152 | $ | 915 | ||||||||
Provisional pricing mark-to-market gain |
13 | — | 7 | — | ||||||||||||
Gross after provisional pricing |
1,206 | 922 | 1,159 | 915 | ||||||||||||
Less: Treatment and refining charges |
(6 | ) | (7 | ) | (7 | ) | (4 | ) | ||||||||
Net |
$ | 1,200 | $ | 915 | $ | 1,152 | $ | 911 | ||||||||
The change in consolidated gold sales is due to:
| Three Months Ended | Six Months Ended | |||||||
| June 30, | June 30, | |||||||
| 2010 vs. 2009 | 2010 vs. 2009 | |||||||
Increase in consolidated ounces sold |
$ | 42 | $ | 100 | ||||
Increase in average realized gold price |
440 | 765 | ||||||
Increase in treatment and refining charges |
— | (10 | ) | |||||
| $ | 482 | $ | 855 | |||||
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Table of Contents
Sales — copper, net for the second quarter of 2010 increased 30% compared to the second
quarter of 2009 primarily due to higher sales volume. Sales — copper, net for the first half of
2010 more than doubled from the first half of 2009 due to higher realized prices and sales volume.
The following analysis summarizes the change in consolidated copper sales revenue:
| Three Months Ended June 30, | Six Months Ended June 30, | |||||||||||||||
| 2010 | 2009 | 2010 | 2009 | |||||||||||||
Consolidated copper sales: |
||||||||||||||||
Gross before provisional pricing |
$ | 401 | $ | 223 | $ | 894 | $ | 377 | ||||||||
Provisional pricing mark-to-market
gain (loss) |
(79 | ) | 35 | (48 | ) | 64 | ||||||||||
Gross after provisional pricing |
322 | 258 | 846 | 441 | ||||||||||||
Less: Treatment and refining charges |
(24 | ) | (29 | ) | (54 | ) | (51 | ) | ||||||||
Net |
$ | 298 | $ | 229 | $ | 792 | $ | 390 | ||||||||
Average realized copper price (per pound): |
||||||||||||||||
Gross before provisional pricing |
$ | 3.13 | $ | 2.12 | $ | 3.24 | $ | 1.88 | ||||||||
Provisional pricing mark-to-market
gain (loss) |
(0.62 | ) | 0.33 | (0.17 | ) | 0.32 | ||||||||||
Gross after provisional pricing |
2.51 | 2.45 | 3.07 | 2.20 | ||||||||||||
Less: Treatment and refining charges |
(0.18 | ) | (0.28 | ) | (0.20 | ) | (0.26 | ) | ||||||||
Net |
$ | 2.33 | $ | 2.17 | $ | 2.87 | $ | 1.94 | ||||||||
The change in consolidated copper sales is due to:
| Three Months Ended | Six Months Ended | |||||||
| June 30, | June 30, | |||||||
| 2010 vs. 2009 | 2010 vs. 2009 | |||||||
Increase in consolidated pounds sold |
$ | 55 | $ | 165 | ||||
Increase in average realized copper price |
9 | 240 | ||||||
Decrease (increase) in treatment and
refining charges |
5 | (3 | ) | |||||
| $ | 69 | $ | 402 | |||||
45
Table of Contents
The following is a summary of consolidated gold and copper sales, net:
| Three Months Ended June 30, | Six Months Ended June 30, | |||||||||||||||
| 2010 | 2009 | 2010 | 2009 | |||||||||||||
Gold |
||||||||||||||||
North America: |
||||||||||||||||
Nevada |
$ | 505 | $ | 372 | $ | 972 | $ | 840 | ||||||||
La Herradura |
53 | 29 | 97 | 52 | ||||||||||||
| 558 | 401 | 1,069 | 892 | |||||||||||||
South America: |
||||||||||||||||
Yanacocha |
425 | 489 | 885 | 916 | ||||||||||||
Asia Pacific: |
||||||||||||||||
Boddington |
234 | — | 401 | — | ||||||||||||
Batu Hijau |
170 | 98 | 335 | 157 | ||||||||||||
Jundee |
106 | 102 | 211 | 190 | ||||||||||||
Kalgoorlie |
99 | 66 | 218 | 132 | ||||||||||||
Tanami |
73 | 81 | 133 | 159 | ||||||||||||
Waihi |
30 | 14 | 60 | 51 | ||||||||||||
| 712 | 361 | 1,358 | 689 | |||||||||||||
Africa: |
||||||||||||||||
Ahafo |
160 | 122 | 291 | 251 | ||||||||||||
| 1,855 | 1,373 | 3,603 | 2,748 | |||||||||||||
Copper |
||||||||||||||||
Asia Pacific: |
||||||||||||||||
Batu Hijau |
258 | 229 | 713 | 390 | ||||||||||||
Boddington |
40 | — | 79 | — | ||||||||||||
| 298 | 229 | 792 | 390 | |||||||||||||
| $ | 2,153 | $ | 1,602 | $ | 4,395 | $ | 3,138 | |||||||||
Costs applicable to sales increased in the second quarter of 2010 compared to the second
quarter of 2009, as detailed in the table below. The increase in Costs applicable to sales for gold
is due to the addition of Boddington production as of November 2009, higher production at Batu
Hijau and La Herradura and higher mining costs in Nevada related to the December 2009 geotechnical
event at Gold Quarry. The increase in Costs applicable to sales for copper is due to the addition
of Boddington production and higher production at Batu Hijau. Similarly, Costs applicable to sales
increased in the first half of 2010 compared to the first half of 2009. The increase in Costs
applicable to sales for gold is due to the addition of Boddington production, higher production at
Batu Hijau, Kalgoorlie and La Herradura and higher mining costs in Nevada related to the
geotechnical event at Gold Quarry. The increase in Costs applicable to sales for copper is due to
the addition of Boddington production and higher production at Batu Hijau. For a complete
discussion regarding variations in operations, see Results of Consolidated Operations below.
Amortization increased in the second quarter of 2010 compared to the second quarter of 2009,
as detailed in the table below. The increase in Amortization is due to the commencement of
commercial production at Boddington in November 2009 and higher capitalized mine development in
Nevada. Amortization increased in the first half of 2010 compared to the first half of 2009, as
detailed in the table below. The increase in Amortization is due to the commencement of commercial
production at Boddington and higher capitalized mine development in Nevada. We expect 2010
Amortization to be approximately $970 to $1,000.
46
Table of Contents
The following is a summary of Costs applicable to sales and Amortization:
| Costs Applicable | Costs Applicable | |||||||||||||||||||||||||||||||
| to Sales | Amortization | to Sales | Amortization | |||||||||||||||||||||||||||||
| Three Months Ended | Three Months Ended | Six Months Ended | Six Months Ended | |||||||||||||||||||||||||||||
| June 30, | June 30, | June 30, | June 30, | |||||||||||||||||||||||||||||
| 2010 | 2009 | 2010 | 2009 | 2010 | 2009 | 2010 | 2009 | |||||||||||||||||||||||||
Gold |
||||||||||||||||||||||||||||||||
North America: |
||||||||||||||||||||||||||||||||
Nevada |
$ | 252 | $ | 228 | $ | 64 | $ | 53 | $ | 509 | $ | 491 | $ | 126 | $ | 114 | ||||||||||||||||
La Herradura |
19 | 12 | 5 | 3 | 32 | 22 | 8 | 5 | ||||||||||||||||||||||||
| 271 | 240 | 69 | 56 | 541 | 513 | 134 | 119 | |||||||||||||||||||||||||
South America: |
||||||||||||||||||||||||||||||||
Yanacocha |
139 | 173 | 40 | 44 | 293 | 325 | 77 | 85 | ||||||||||||||||||||||||
Asia Pacific: |
||||||||||||||||||||||||||||||||
Boddington |
113 | — | 34 | — | 193 | — | 56 | — | ||||||||||||||||||||||||
Batu Hijau |
42 | 24 | 12 | 6 | 76 | 51 | 22 | 13 | ||||||||||||||||||||||||
Jundee |
35 | 36 | 7 | 12 | 70 | 70 | 18 | 21 | ||||||||||||||||||||||||
Kalgoorlie |
45 | 43 | 3 | 3 | 103 | 91 | 7 | 6 | ||||||||||||||||||||||||
Tanami |
44 | 53 | 10 | 11 | 90 | 101 | 21 | 22 | ||||||||||||||||||||||||
Waihi |
16 | 9 | 4 | 4 | 34 | 24 | 10 | 13 | ||||||||||||||||||||||||
| 295 | 165 | 70 | 36 | 566 | 337 | 134 | 75 | |||||||||||||||||||||||||
Africa: |
||||||||||||||||||||||||||||||||
Ahafo |
55 | 57 | 19 | 16 | 119 | 114 | 36 | 34 | ||||||||||||||||||||||||
| 760 | 635 | 198 | 152 | 1,519 | 1,289 | 381 | 313 | |||||||||||||||||||||||||
Copper |
||||||||||||||||||||||||||||||||
Asia Pacific: |
||||||||||||||||||||||||||||||||
Batu Hijau |
73 | 61 | 19 | 16 | 165 | 146 | 46 | 37 | ||||||||||||||||||||||||
Boddington |
25 | — | 6 | — | 49 | — | 13 | — | ||||||||||||||||||||||||
| 98 | 61 | 25 | 16 | 214 | 146 | 59 | 37 | |||||||||||||||||||||||||
Other |
||||||||||||||||||||||||||||||||
Hope Bay |
— | — | 3 | 3 | — | — | 6 | 6 | ||||||||||||||||||||||||
Asia Pacific |
— | — | 1 | — | — | — | 1 | 1 | ||||||||||||||||||||||||
Corporate and other |
— | — | 4 | 5 | — | — | 8 | 10 | ||||||||||||||||||||||||
| — | — | 8 | 8 | — | — | 15 | 17 | |||||||||||||||||||||||||
| $ | 858 | $ | 696 | $ | 231 | $ | 176 | $ | 1,733 | $ | 1,435 | $ | 455 | $ | 367 | |||||||||||||||||
Exploration expense increased $2 in the second quarter of 2010 compared to the second
quarter of 2009 due to additional expenditures in the North America region. Exploration expense
increased $4 in the first half of 2010 compared to the first half of 2009 due to additional
expenditures in the North America and Asia Pacific regions. Due to additional exploration at
Leeville/Turf, we now expect 2010 Exploration expense to increase to approximately $220 to $245
from our previous guidance of $190 to $220.
Advanced projects, research and development expense increased $15 in the second quarter of
2010 compared to the second quarter of 2009 primarily due to additional expenditures at Hope Bay as
we evaluate a small underground operation to advance into production. Advanced projects, research
and development expense increased $30 in the first half of 2010 compared to the first half of 2009
due to additional expenditures for Hope Bay, corporate projects and discovery and development.
47
Table of Contents
The following is a summary of Advanced projects, research and development:
| Three Months Ended June 30, | Six Months Ended June 30, | |||||||||||||||
| 2010 | 2009 | 2010 | 2009 | |||||||||||||
Major projects: |
||||||||||||||||
Hope Bay |
$ | 25 | $ | 11 | $ | 35 | $ | 16 | ||||||||
Akyem |
1 | 2 | 4 | 3 | ||||||||||||
Conga |
2 | 1 | 3 | 1 | ||||||||||||
Subika |
2 | — | 2 | — | ||||||||||||
Boddington |
— | 10 | — | 13 | ||||||||||||
Other projects: |
||||||||||||||||
Technical and project services |
11 | 7 | 23 | 12 | ||||||||||||
Corporate |
9 | 3 | 21 | 7 | ||||||||||||
Nevada growth |
3 | 5 | 6 | 11 | ||||||||||||
South America growth |
2 | 1 | 4 | 2 | ||||||||||||
Other |
2 | 2 | 5 | 8 | ||||||||||||
| $ | 57 | $ | 42 | $ | 103 | $ | 73 | |||||||||
We continue to expect Advanced projects, research and development expenses to be
approximately $230 to $250 in 2010.
General and administrative expenses increased by $3 in the second quarter of 2010 compared to
the second quarter of 2009 due to higher compensation costs. General and administrative expenses
increased by $9 in the first half of 2010 compared to the first half of 2009 due to higher
compensation and benefit costs. We expect 2010 General and administrative expenses to be
approximately $160 to $170.
Other expense, net was $61 and $112 for the three months ended June 30, 2010 and 2009,
respectively. The decrease is due to $59 of Boddington acquisition costs incurred during the
second quarter of 2009. Other expense, net was $150 and $185 for the six months ended June 30, 2010
and 2009, respectively. The decrease is due to Boddington acquisition costs incurred during 2009,
partially offset by additional community development at PTNNT during the first quarter 2010.
Other income, net was $44 and $9 for the three months ended June 30, 2010 and 2009,
respectively. The increase is primarily related to an increase in Canadian Oil Sands Trust income
due to a higher declared dividend in 2010 and the sale of non-core assets. Other income, net was
$92 and $18 for the six months ended June 30, 2010 and 2009, respectively. The increase is
primarily related to the sale of non-core assets and an increase in Canadian Oil Sands Trust income
due to a higher declared dividend in 2010.
Interest expense, net increased by $46 in the second quarter of 2010 compared to the second
quarter of 2009 and increased by $89 in the first half of 2010 compared to the first half of 2009
due to additional interest related to the 2019 and 2039 senior notes issued during the third
quarter of 2009 and lower capitalized interest. Capitalized interest decreased $23 to $4 in the
second quarter of 2010 compared to the second quarter of 2009 and decreased $36 to $6 in the first
half of 2010 compared to the first half of 2009 due to completion of Boddington construction in
November 2009. We expect 2010 Interest expense, net to be approximately $270 to $290.
48
Table of Contents
Income tax expense during the second quarter of 2010 was $273 resulting in an effective tax
rate of 33.6%. Income tax expense during the second quarter of 2009 was $136 for an effective tax
rate of 29.6%. The increase in the effective tax rate from 2009 to 2010 resulted from the change in
the jurisdictional blend of our taxable income and the effect it has on the overall rate impact
from percentage depletion and non-reoccurring discrete items in the prior quarter. Income tax
expense during the first half of 2010 was $408 resulting in an effective tax rate of 24.1%. Income
tax expense during the first half of 2009 was $241 for an effective tax rate of 28.5%. The decrease
in the effective tax rate from 2009 to 2010 resulted from a tax benefit of $127 being recorded in
the first quarter of 2010 from the conversion of non-US tax-paying entities to entities currently
subject to U.S. income tax resulting in an increase in net deferred tax assets, partially offset by
the change in the jurisdictional blend of the our taxable income and the effect it has on the
overall rate impact from percentage depletion. The effective tax rates in the second quarter of
2010 and 2009 are different from the United States statutory rate of 35% primarily due to the above
mentioned tax benefit in 2010, U.S. percentage depletion and the effect of different income tax
rates in countries where earnings are indefinitely reinvested. For a complete discussion of the
factors that influence our effective tax rate, see Management’s Discussion and Analysis of
Consolidated Financial Condition and Results of Operations in Newmont’s Annual Report on Form 10-K
for the year ended December 31, 2009 filed February 25, 2010. We expect the 2010 full year tax rate
to be approximately 24% to 28%, assuming an average gold price of $1,100 per ounce.
Net income attributable to noncontrolling interests increased to $155 in the second quarter of
2010 compared to $144 in the second quarter of 2009 as a result of increased earnings at Batu
Hijau, partially offset by lower earnings at Yanacocha. Net income attributable to noncontrolling
interests increased to $352 in the first half of 2010 compared to $232 in the first half of 2009 as
a result of increased earnings at Batu Hijau and Yanacocha.
Income (loss) from discontinued operations was as follows:
| Three Months Ended | Six Months Ended | |||||||
| June 30, 2009 | June 30, 2009 | |||||||
Sales |
$ | 16 | $ | 32 | ||||
Income from operations |
$ | 1 | $ | 1 | ||||
Loss on impairment |
(44 | ) | (44 | ) | ||||
Pre-tax loss |
(43 | ) | (43 | ) | ||||
Income tax benefit |
29 | 29 | ||||||
Income (loss) from discontinued operations |
$ | (14 | ) | $ | (14 | ) | ||
Discontinued operations relate solely to the Kori Kollo operation in Bolivia, sold in
July 2009.
49
Table of Contents
Results of Consolidated Operations
| Gold Ounces or | ||||||||||||||||||||||||
| Copper Pounds Produced | Costs Applicable to Sales(1) | Amortization | ||||||||||||||||||||||
| Three Months Ended June 30, | 2010 | 2009 | 2010 | 2009 | 2010 | 2009 | ||||||||||||||||||
| (in thousands) | ($ per ounce) | ($ per ounce) | ||||||||||||||||||||||
Gold |
||||||||||||||||||||||||
North America |
463 | 447 | $ | 585 | $ | 538 | $ | 149 | $ | 124 | ||||||||||||||
South America(2) |
353 | 517 | 389 | 323 | 113 | 82 | ||||||||||||||||||
Asia Pacific(2) |
609 | 383 | 498 | 426 | 119 | 95 | ||||||||||||||||||
Africa |
132 | 134 | 416 | 428 | 147 | 119 | ||||||||||||||||||
Total/Weighted-Average |
1,557 | 1,481 | $ | 492 | $ | 423 | $ | 129 | $ | 101 | ||||||||||||||
Equity |
1,298 | 1,179 | ||||||||||||||||||||||
| (in millions) | ($ per pound) | ($ per pound) | ||||||||||||||||||||||
| Copper | ||||||||||||||||||||||||
Asia Pacific(2) |
148 | 114 | $ | 0.77 | $ | 0.58 | $ | 0.20 | $ | 0.15 | ||||||||||||||
Equity |
80 | 51 | ||||||||||||||||||||||
| Gold Ounces or | ||||||||||||||||||||||||
| Copper Pounds Produced | Costs Applicable to Sales(1) | Amortization | ||||||||||||||||||||||
| Six Months Ended June 30, | 2010 | 2009 | 2010 | 2009 | 2010 | 2009 | ||||||||||||||||||
| (in thousands) | ($ per ounce) | ($ per ounce) | ||||||||||||||||||||||
Gold |
||||||||||||||||||||||||
North America |
936 | 990 | $ | 586 | $ | 519 | $ | 145 | $ | 120 | ||||||||||||||
South America(2) |
776 | 1,016 | 380 | 324 | 100 | 84 | ||||||||||||||||||
Asia Pacific(2) |
1,209 | 748 | 479 | 450 | 113 | 101 | ||||||||||||||||||
Africa |
252 | 264 | 475 | 413 | 146 | 123 | ||||||||||||||||||
Total/Weighted-Average |
3,173 | 3,018 | $ | 486 | $ | 427 | $ | 122 | $ | 104 | ||||||||||||||
Equity |
2,630 | 2,455 | ||||||||||||||||||||||
| (in millions) | ($ per pound) | ($ per pound) | ||||||||||||||||||||||
| Copper | ||||||||||||||||||||||||
Asia Pacific(2) |
307 | 195 | $ | 0.78 | $ | 0.73 | $ | 0.21 | $ | 0.19 | ||||||||||||||
Equity |
170 | 88 | ||||||||||||||||||||||
| (1) | Excludes Amortization and Reclamation and remediation. | |
| (2) | Consolidated gold ounces or copper pounds produced includes noncontrolling interests’ share at Yanacocha and Batu Hijau. |
Consolidated gold ounces produced increased 5% in the second quarter of 2010 from 2009 due to
the start-up of Boddington and higher production in North America, partially offset by lower
production in South America. Consolidated copper pounds produced increased 30% in the second
quarter of 2010 from 2009 due to higher grade and throughput at Batu Hijau combined with the
start-up of Boddington.
Costs applicable to sales per consolidated gold ounce sold increased 16% in the second quarter
of 2010 from 2009 due to higher royalties, production taxes, a higher proportion of costs allocated
to gold than copper driven by higher gold prices, lower production at existing operations, combined
with a stronger Australian dollar. Costs applicable to sales per consolidated copper pound sold
increased 33% in the second quarter of 2010 from 2009 due to higher milling costs at Batu Hijau and
the addition of higher cost production from Boddington.
Consolidated gold ounces produced increased 5% in the first half of 2010 from 2009 due to the
start-up of Boddington and higher production at Batu Hijau, partially offset by lower production in
North America, South America and Africa. Consolidated copper pounds produced increased 57% in the
first half of 2010 from 2009 due to higher grade and throughput at Batu Hijau combined with the
start-up of Boddington.
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Costs applicable to sales per consolidated gold ounce sold increased 14% in the first half of
2010 from 2009 due to lower production and higher mining costs in North America, lower production
and higher mining and maintenance costs in South America, higher mining costs and a stronger
Australian dollar in Asia Pacific and lower production and higher diesel costs in Africa. Costs
applicable to sales per consolidated copper pound sold increased 7% in the first half of 2010 from
2009 due to addition of higher cost production from Boddington, partially offset by higher
production at Batu Hijau.
Our 2010 guidance for consolidated gold production remains approximately 6.3 to 6.8 million
ounces at a slightly narrower range of Costs applicable to sales per ounce of approximately $460 to
$480 (from previous guidance of $450 to $480 per ounce). Our Costs applicable to sales guidance for
2010 assumes an oil price of $80 per barrel and an A$ exchange rate of 0.90 for the remainder of
the year. Our Costs applicable to sales per ounce for the remainder of the year are expected to
change by approximately $3 for every $10 change in the oil price and by approximately $3 for every
$0.10 change in the A$ exchange rate, net of existing hedges. In the event that adverse foreign
exchange movements, higher gold royalties and increasing energy prices continue throughout the
remainder of the year, Costs applicable to sales per ounce could be near or exceed the top end of
our current 2010 guidance.
Our 2010 guidance for consolidated copper production is approximately 610 to 670 million
pounds at Costs applicable to sales per pound of approximately $0.85 to $0.95.
North America Operations
| Gold Ounces Produced | Costs Applicable to Sales(1) | Amortization | ||||||||||||||||||||||
| Three Months Ended June 30, | 2010 | 2009 | 2010 | 2009 | 2010 | 2009 | ||||||||||||||||||
| (in thousands) | ($ per ounce) | ($ per ounce) | ||||||||||||||||||||||
Nevada |
420 | 417 | $ | 601 | $ | 549 | $ | 153 | $ | 126 | ||||||||||||||
La Herradura (44% owned) |
43 | 30 | 431 | 398 | 109 | 91 | ||||||||||||||||||
Total/Weighted-Average |
463 | 447 | $ | 585 | $ | 538 | $ | 149 | $ | 124 | ||||||||||||||
| Gold Ounces Produced | Costs Applicable to Sales(1) | Amortization | ||||||||||||||||||||||
| Six Months Ended June 30, | 2010 | 2009 | 2010 | 2009 | 2010 | 2009 | ||||||||||||||||||
| (in thousands) | ($ per ounce) | ($ per ounce) | ||||||||||||||||||||||
Nevada |
853 | 935 | $ | 605 | $ | 527 | $ | 150 | $ | 122 | ||||||||||||||
La Herradura (44% owned) |
83 | 55 | 389 | 393 | 102 | 90 | ||||||||||||||||||
Total/Weighted-Average |
936 | 990 | $ | 586 | $ | 519 | $ | 145 | $ | 120 | ||||||||||||||
| (1) | Excludes Amortization and Reclamation and remediation. |
Second quarter 2010 compared to 2009
Nevada, USA. Gold ounces produced were slightly higher as higher Midas and Leeville
underground production was offset by the completion of mining activity at Deep Post in 2009
combined with lower mill throughput and leach tons placed. Mill throughput and leach tons placed
were impacted by the December 2009 geotechnical event at Gold Quarry and harder ore at Phoenix.
Costs applicable to sales per ounce increased 9% due to higher surface mining costs related to the
geotechnical event at Gold Quarry. Amortization per ounce increased 21% due to higher capitalized
mine development.
La Herradura, Mexico. Gold ounces produced increased 43% due to the commencement of
production from the Soledad and Dipolos pits in January 2010. Costs applicable to sales per ounce
increased 8% due to higher waste mining costs. Amortization per ounce increased 20% due to the use
of additional mining equipment and leach pads.
First half 2010 compared to 2009
Nevada, USA. Gold ounces produced decreased 9% due to the completion of mining activity at
Deep Post in 2009 combined with lower throughput and leach tons placed. Throughput and leach tons
placed were impacted by the December 2009 geotechnical event at Gold Quarry and harder ore at
Phoenix. Costs applicable to sales per ounce increased 15% due to lower production and the
geotechnical event at Gold Quarry. Amortization per ounce increased 23% due to lower production and
higher capitalized mine development.
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La Herradura, Mexico. Gold ounces produced increased 51% due to the commencement of
production from the Soledad and Dipolos pits in January 2010. Costs applicable to sales per ounce
decreased slightly due to higher
production, partially offset by higher waste mining costs. Amortization per ounce increased
13% due to the use of additional mining equipment and leach pads.
We expect gold production in North America of approximately 1.7 to 1.9 million ounces at Costs
applicable to sales per ounce of approximately $575 to $615 in 2010.
South America Operations
| Gold Ounces Produced | Costs Applicable to Sales(1) | Amortization | ||||||||||||||||||||||
| Three Months Ended June 30, | 2010 | 2009 | 2010 | 2009 | 2010 | 2009 | ||||||||||||||||||
| (in thousands) | ($ per ounce) | ($ per ounce) | ||||||||||||||||||||||
Yanacocha |
353 | 517 | $ | 389 | $ | 323 | $ | 113 | $ | 82 | ||||||||||||||
Equity(2) |
181 | 265 | ||||||||||||||||||||||
| Gold Ounces Produced | Costs Applicable to Sales(1) | Amortization | ||||||||||||||||||||||
| Six Months Ended June 30, | 2010 | 2009 | 2010 | 2009 | 2010 | 2009 | ||||||||||||||||||
| (in thousands) | ($ per ounce) | ($ per ounce) | ||||||||||||||||||||||
Yanacocha |
776 | 1,016 | $ | 380 | $ | 324 | $ | 100 | $ | 84 | ||||||||||||||
Equity(2) |
398 | 521 | ||||||||||||||||||||||
| (1) | Excludes Amortization and Reclamation and remediation. | |
| (2) | Consolidated gold ounces produced includes noncontrolling interests’ share (51.35% owned). |
Second quarter 2010 compared to 2009
Yanacocha, Peru. Gold ounces produced decreased 32% due to lower leach tons placed related to
mine sequencing and transitional ore stockpiling combined with lower mill ore grade. Costs
applicable to sales per ounce increased 20% due to lower production, higher waste mining and
maintenance costs, partially offset by higher by-product credits. Amortization per ounce increased
38% due to lower production.
First half 2010 compared to 2009
Yanacocha, Peru. Gold ounces produced decreased 24% due to higher waste mining combined with
lower leach tons placed and lower mill ore grade. Costs applicable to sales per ounce increased 17%
due to lower production, higher waste mining, maintenance and workers’ participation costs,
partially offset by higher by-product credits. Amortization per ounce increased 19% due to lower
production.
We expect consolidated gold production in South America of approximately 1.5 to 1.6 million
ounces at Costs applicable to sales per ounce of approximately $360 to $400 in 2010.
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Asia Pacific Operations
| Gold Ounces or | ||||||||||||||||||||||||
| Copper Pounds Produced | Costs Applicable to Sales(1) | Amortization | ||||||||||||||||||||||
| 2010 | 2009 | 2010 | 2009 | 2010 | 2009 | |||||||||||||||||||
| (in thousands) | ($ per ounce) | ($ per ounce) | ||||||||||||||||||||||
| Three Months Ended June 30, | ||||||||||||||||||||||||
| Gold | ||||||||||||||||||||||||
Boddington |
184 | — | $ | 582 | $ | — | $ | 177 | $ | — | ||||||||||||||
Batu Hijau (2)(3) |
169 | 120 | 294 | 229 | 81 | 62 | ||||||||||||||||||
Other |
||||||||||||||||||||||||
Jundee |
88 | 99 | 397 | 338 | 83 | 110 | ||||||||||||||||||
Kalgoorlie (50% owned) |
82 | 70 | 539 | 607 | 37 | 39 | ||||||||||||||||||
Tanami |
61 | 82 | 733 | 599 | 168 | 127 | ||||||||||||||||||
Waihi |
25 | 12 | 666 | 582 | 162 | 287 | ||||||||||||||||||
| 256 | 263 | 549 | 500 | 96 | 107 | |||||||||||||||||||
Total/Weighted-Average |
609 | 383 | $ | 498 | $ | 426 | $ | 119 | $ | 95 | ||||||||||||||
Equity(4) |
522 | 318 | ||||||||||||||||||||||
| (in millions) | ($ per pound) | ($ per pound) | ||||||||||||||||||||||
| Three Months Ended June 30, | ||||||||||||||||||||||||
| Copper | ||||||||||||||||||||||||
Boddington |
15 | — | $ | 1.55 | $ | — | $ | 0.40 | $ | — | ||||||||||||||
Batu Hijau(2)(3) |
133 | 114 | 0.66 | 0.58 | 0.17 | 0.15 | ||||||||||||||||||
Total/Weighted-Average |
148 | 114 | $ | 0.77 | $ | 0.58 | $ | 0.20 | $ | 0.15 | ||||||||||||||
Equity(4) |
80 | 51 | ||||||||||||||||||||||
| Gold Ounces or | ||||||||||||||||||||||||
| Copper Pounds Produced | Costs Applicable to Sales(1) | Amortization | ||||||||||||||||||||||
| 2010 | 2009 | 2010 | 2009 | 2010 | 2009 | |||||||||||||||||||
| (in thousands) | ($ per ounce) | ($ per ounce) | ||||||||||||||||||||||
| Six Months Ended June 30, | ||||||||||||||||||||||||
| Gold | ||||||||||||||||||||||||
Boddington |
342 | — | $ | 560 | $ | — | $ | 163 | $ | — | ||||||||||||||
Batu Hijau (2)(3) |
335 | 179 | 253 | 297 | 71 | 78 | ||||||||||||||||||
Other |
||||||||||||||||||||||||
Jundee |
180 | 201 | 391 | 345 | 99 | 104 | ||||||||||||||||||
Kalgoorlie (50% owned) |
186 | 146 | 539 | 625 | 38 | 43 | ||||||||||||||||||
Tanami |
114 | 171 | 786 | 586 | 184 | 125 | ||||||||||||||||||
Waihi |
52 | 51 | 660 | 426 | 187 | 241 | ||||||||||||||||||
| 532 | 569 | 554 | 496 | 104 | 108 | |||||||||||||||||||
Total/Weighted-Average |
1,209 | 748 | $ | 479 | $ | 450 | $ | 113 | $ | 101 | ||||||||||||||
Equity(4) |
1,044 | 650 | ||||||||||||||||||||||
| (in millions) | ($ per pound) | ($ per pound) | ||||||||||||||||||||||
| Six Months Ended June 30, | ||||||||||||||||||||||||
| Copper | ||||||||||||||||||||||||
Boddington |
29 | — | $ | 1.80 | $ | — | $ | 0.47 | $ | — | ||||||||||||||
Batu Hijau(2)(3) |
278 | 195 | 0.66 | 0.73 | 0.19 | 0.19 | ||||||||||||||||||
Total/Weighted-Average |
307 | 195 | $ | 0.78 | $ | 0.73 | $ | 0.21 | $ | 0.19 | ||||||||||||||
Equity(4) |
170 | 88 | ||||||||||||||||||||||
| (1) | Excludes Amortization and Reclamation and remediation. | |
| (2) | Consolidated gold ounces or copper pounds produced includes noncontrolling interests’ share. |
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| (3) | Our economic interest in Batu Hijau was 45% in the first half of 2009. As a result of transactions with noncontrolling partners, our economic interest in Batu Hijau was 52.44% in the first quarter of 2010 and 48.50% in the second quarter of 2010. See Note 12 to the Condensed Consolidated Financial Statements for a discussion of the changes in our ownership and economic interest in Batu Hijau. | |
| (4) | Gold ounces and copper pounds produced attributable to Newmont after noncontrolling interests. |
Boddington, Australia. Gold and copper produced in the second quarter of 2010 were 184
thousand ounces and 15 million pounds, respectively, as Boddington continues to experience lower
than anticipated gold ore grades during ramp-up to full production. Costs applicable to sales were
$582 per ounce ($503 per ounce on a by-product basis; see “Non-GAAP Financial Measures” on page 59)
and $1.55 per pound, respectively. Amortization was $177 per ounce and $0.40 per pound,
respectively. Compared to the first quarter of 2010, gold and copper production increased 16% and
13%, respectively.
The processing plant continues to perform in line with expectations, recovery has been
exceeding Feasibility Study expectations, and the high pressure grinding rolls and wet plants are
performing better than anticipated. However, production has been lower than expected as the Company
has encountered approximately 12% less contained gold and 23% more contained copper than originally
modeled. As a result of lower gold production to date, higher direct mining costs and a stronger
Australian dollar, gold production for 2010 at Boddington is now expected to be between 750,000 and
825,000 ounces at Costs applicable to sales of $475 to $550 per ounce (compared with an original
outlook of 800,000 to 875,000 ounces at Costs applicable to sales of $375 to $395 per ounce). A
stronger Australian dollar accounts for approximately 25% of the expected increase in 2010 gold
operating costs, while increased mining costs account for approximately 50% and lower volume and
other factors account for the remaining approximately 25%. Copper production for 2010 is expected
to be between 65 and 75 million pounds at Costs applicable to sales of between $1.55 and $1.75 per
pound (compared with an original outlook of between $1.30 and $1.45 per pound).
For 2011, we expect gold production at Boddington to be between 850,000 and 925,000 ounces at
Costs applicable to sales of between $475 and $525 per ounce as the mine begins its first year of
steady-state production. It is still too early in the ramp-up process to conclusively
determine any longer-term impacts of the lower gold ore grades experienced to date (less than 2%
of total reserves have been mined to date).
Second quarter 2010 compared to 2009
Batu Hijau, Indonesia. Copper and gold produced increased 17% and 41%, respectively, due to
higher grade and throughput as a result of mining in the bottom of Phase 5, partially offset by
lower recovery. However, mining in the bottom of Phase 5 was less than expected due to abnormally
high rainfall restricting access to the mine, resulting in a higher proportion of waste mining and
processing more stockpiled ore. Costs applicable to sales increased to $0.66 per pound and $294 per
ounce, from $0.58 and $229, respectively, due to higher waste mining and milling costs, partially
offset by higher production. A higher allocation of costs was applied to gold due to higher
realized gold prices. Amortization increased 13% per pound and 31% per ounce due to equipment
additions, partially offset by higher production.
Other Australia/New Zealand. Gold ounces produced decreased 3% due to lower grade as a result
of ore dilution and lower mill throughput as a result of maintenance at Tanami combined with lower
ore grade at Jundee, partially offset by higher ore grade at Kalgoorlie and higher mill throughput
at Waihi. Costs applicable to sales per ounce increased 10% due to lower production and the
stronger Australian dollar. Amortization per ounce decreased 10% due to higher production at
Kalgoorlie and lower deferred mine development, partially offset by lower production at Jundee and
Tanami.
First half 2010 compared to 2009
Batu Hijau, Indonesia. Copper and gold produced increased 43% and 87%, respectively, due to
higher grade and throughput as a result of mining in the bottom of Phase 5. Costs applicable to
sales decreased to $0.66 per pound and $253 per ounce, from $0.73 and $297, respectively, due to
higher production and lower mining costs. Amortization per pound was consistent, while Amortization
per ounce decreased 9% due to higher production, partially offset by equipment additions. In late
2010 or in 2011, we expect to complete mining the bottom of Phase 5. In 2011, we anticipate
processing ore from stockpiles as mining will be primarily for waste removal in Phase 6.
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Other Australia/New Zealand. Gold ounces produced decreased 7% due to lower ore grade and
mill throughput at Tanami and lower ore grade at Jundee, partially offset by higher ore grade at
Kalgoorlie. Costs applicable to sales per ounce increased 12% due to lower production and the
stronger Australian dollar. Amortization per ounce decreased 4% due to higher production at
Kalgoorlie and lower deferred mine development, partially offset by lower production at Jundee and
Tanami.
We expect 2010 consolidated gold production for Asia Pacific of approximately 2.6 to 2.8
million ounces at increased Costs applicable to sales of approximately $440 to $480 per ounce (from
previous guidance of $400 to $440
per ounce). We continue to expect consolidated copper production for Asia Pacific to be
approximately 610 to 670 million pounds of copper at Costs applicable to sales of approximately
$0.85 to $0.95 per pound in 2010.
Africa Operations
| Gold Ounces Produced | Costs Applicable to Sales(1) | Amortization | ||||||||||||||||||||||
| Three Months Ended June 30, | 2010 | 2009 | 2010 | 2009 | 2010 | 2009 | ||||||||||||||||||
| (in thousands) | ($ per ounce) | ($ per ounce) | ||||||||||||||||||||||
Ahafo |
132 | 134 | $ | 416 | $ | 428 | $ | 147 | $ | 119 | ||||||||||||||
| Gold Ounces Produced | Costs Applicable to Sales(1) | Amortization | ||||||||||||||||||||||
| Six Months Ended June 30, | 2010 | 2009 | 2010 | 2009 | 2010 | 2009 | ||||||||||||||||||
| (in thousands) | ($ per ounce) | ($ per ounce) | ||||||||||||||||||||||
Ahafo |
252 | 264 | $ | 475 | $ | 413 | $ | 146 | $ | 123 | ||||||||||||||
| (1) | Excludes Amortization and Reclamation and remediation. |
Second quarter 2010 compared to 2009
Ahafo, Ghana. Gold ounces produced were slightly lower as lower ore grade and recovery were
offset by higher mill throughput. Costs applicable to sales per ounce decreased 3% due to lower
milling costs resulting from softer ore, partially offset by higher diesel costs. Amortization per
ounce increased 24% due to equipment additions.
First half 2010 compared to 2009
Ahafo, Ghana. Gold ounces produced decreased 5% due to lower grade and recovery, partially
offset by higher throughput. Costs applicable to sales per ounce increased 15% due to lower
production and higher diesel costs, partially offset by lower milling costs. Amortization per ounce
increased 19% due to lower production and equipment additions.
Due to higher than projected production in the first half of 2010, the Company now expects
2010 gold production at Ahafo of between 500,000 and 530,000 ounces (up from between 460,000 and
500,000 ounces) at Costs applicable to sales between $475 and $515 per ounce (lower than our
original outlook of between $515 to $555 per ounce), based on higher volumes.
Foreign Currency Exchange Rates
Our foreign operations sell their gold and copper production based on U.S. dollar metal
prices. Approximately 36% and 23% of our Costs applicable to sales were paid in local currencies
during the second quarter of 2010 and 2009, respectively. Approximately 35% and 22% of our Costs
applicable to sales were paid in local currencies during the first half of 2010 and 2009,
respectively. Variations in the local currency exchange rates in relation to the U.S. dollar at our
foreign mining operations increased consolidated Costs applicable to sales per ounce by
approximately $12, net of hedging gains and losses, during the second quarter of 2010 as compared
to the second quarter of 2009 and by approximately $20 during the first half of 2010 compared to
the first half of 2009.
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Liquidity and Capital Resources
Cash Provided from Operating Activities
Net cash provided from continuing operations increased to $1,481 for the first half of 2010
from $886 for the first half of 2009 due to higher realized gold and copper prices and higher sales
volumes, as discussed above in Consolidated Financial Results.
Investing Activities
Net cash used in investing activities was $605 during the first half of 2010 compared to
$1,672 during the same period of 2009, driven largely by the 2009 Boddington acquisition and
completion of the Boddington construction in the fourth quarter of 2009. Additions to property,
plant and mine development were as follows:
| Six Months Ended June 30, | ||||||||
| 2010 | 2009 | |||||||
North America: |
||||||||
Nevada |
$ | 117 | $ | 111 | ||||
Hope Bay |
48 | 3 | ||||||
La Herradura |
22 | 19 | ||||||
| 187 | 133 | |||||||
South America: |
||||||||
Yanacocha |
68 | 51 | ||||||
Conga |
43 | 11 | ||||||
| 111 | 62 | |||||||
Asia Pacific: |
||||||||
Boddington |
81 | 684 | ||||||
Jundee |
21 | 14 | ||||||
Tanami |
38 | 28 | ||||||
Kalgoorlie |
7 | 2 | ||||||
Waihi |
5 | 3 | ||||||
Batu Hijau |
33 | 23 | ||||||
Other |
3 | 1 | ||||||
| 188 | 755 | |||||||
Africa: |
||||||||
Ahafo |
51 | 23 | ||||||
Akyem |
22 | 1 | ||||||
| 73 | 24 | |||||||
Corporate and Other |
11 | 8 | ||||||
Accrual basis |
570 | 982 | ||||||
Decrease (increase) in accrued capital expenditures |
58 | (72 | ) | |||||
Cash basis |
$ | 628 | $ | 910 | ||||
Capital expenditures in North America are primarily related to the Hope Bay Project, the
Turf/Leeville underground project, and sustaining mine development. Capital expenditures in South
America are primarily related to the Conga project and leach pad development and equipment
purchases at Yanacocha. The majority of capital expenditures in Asia Pacific are for surface and
underground development, mining equipment, and infrastructure improvements. Capital expenditures in
Africa are primarily related to the development of the Akyem, Amoma, and Subika Expansion projects,
tailings dam construction and sustaining mine development at Ahafo. We expect 2010 capital
expenditures to be approximately $1,400 to $1,600.
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Capital expenditures in North America during the first half of 2009 were primarily related to
sustaining mine development at Nevada and the Hope Bay Project. Capital expenditures in South
America primarily related to the Conga project, dewatering projects and leach pad development at
Yanacocha. The vast majority of capital expenditures in Asia Pacific were for the Boddington
project, (which includes 100% of expenditures for 2009) with other sustaining capital expenditures
for mine development at Australia and equipment purchases at Batu Hijau. Capital expenditures in
Africa primarily related to sustaining mine development at Ahafo.
Acquisitions, net. During the first half of 2009 we paid $741 (net of $1 cash acquired) and
paid $8 in acquisition costs to acquire the remaining 33.33% interest in Boddington. Consideration
for the acquisition also includes $240 paid in cash in December 2009 and a contingent royalty
capped at $100, equal to 50% of the average realized operating margin (Revenue less Costs
applicable to sales on a by-product basis), if any, exceeding $600 per ounce, payable on one-third
of gold sales from Boddington beginning in the second quarter of 2010. The completion of the
acquisition in June 2009 brought Newmont’s interest in Boddington to 100%. Additionally, we paid
$11 for a mining property near the La Herradura, Mexico operation in the first half of 2009.
Proceeds from sale of other assets. During the first half of 2010 we received $13 from the
sale of our 40% interest in AGR Matthey Joint Venture (“AGR”) and $5 for the sale of our joint
venture exploration property in Armenia. We also received $34 from the sale of other assets
including non-core assets held at Tanami.
Financing Activities
Net cash provided from (used in) financing activities of continuing operations was $(470) and
$868 during the first half of 2010 and 2009, respectively.
Proceeds from and repayment of debt, net. During the first half of 2010, we repaid $263 of
debt, including pre-payment of the $220 balance under the PTNNT project financing facility,
scheduled debt repayments of $24 related to the sale-leaseback of the refractory ore treatment
plant (classified as a capital lease) and $19 on other credit facilities and capital leases. At
June 30, 2010, $277 of the $2,000 revolving credit facility is currently used to secure the
issuance of letters of credit, primarily supporting reclamation obligations (see “Off-Balance Sheet
Arrangements” below).
During the first half of 2009, we received proceeds from debt of $1,494, including $504 net
proceeds from the issuance of convertible senior notes due in 2012, $926 under our revolving credit
facility and $64 million from other credit facilities. In addition, we repaid $1,668 of debt,
including $1,583 under the revolving credit facility, $43 million for the Batu Hijau project
financing facility, $24 related to the sale-leaseback of the refractory ore treatment plant
(classified as a capital lease) and $18 on other credit facilities and capital leases.
Scheduled minimum debt repayments are $27 for the remainder of 2010, $287 in 2011, $576 in
2012, $72 in 2013, $545 in 2014, and $3,068 thereafter. We expect to be able to fund maturities of
debt from Net cash provided by operating activities, short-term investments, existing cash balances
and available credit facilities.
At June 30, 2010, we were in compliance with all required debt covenants and other
restrictions related to debt agreements.
Sale of subsidiary shares to noncontrolling interests. In March 2010, Nusa Tenggara
Partnership (“NTP”) completed the sale of 7% of shares in PTNNT to a third party buyer. This
transaction reduced our direct ownership interest in PTNNT to 31.5%. Cash proceeds from the sale
were $229, with our 56.25% share being $129 and the balance of $100 was paid to our NTP partner.
Acquisition of subsidiary shares from noncontrolling interests. On June 25, 2010, P.T.
Pukuafu Indah (“PTPI”), an unrelated noncontrolling partner of PTNNT, completed the sale of an
approximately 2.2% interest in PTNNT to PT Indonesia Masbaga Investama (“PTIMI”). To enable the
transaction to proceed, we released our rights to the dividends payable on this 2.2% interest and
released our security interest in the associated shares. We further agreed, however, to advance
certain funds to PTIMI to enable it to purchase the interest in exchange for an assignment by PTIMI
to us of the dividends payable on the 2.2% interest (net of withholding tax), a pledge of the
shares as security for the loan, and certain voting rights and obligations. The funds that we
advanced to PTIMI and which it paid to PTPI for the shares were used by PTPI to reduce its
outstanding loan balance with us. Upon completion of this transaction, PTPI requested and was
allowed to make additional draw downs under our agreement with PTPI. Our economic interest in
PTPI’s and PTIMI’s combined 20% interest in PTNNT remains at 17% and has not changed as a result of
these transactions.
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On December 22, 2009, we entered into a transaction with PTPI whereby we agreed to advance
certain funds to PTPI in exchange for a pledge of the noncontrolling partner’s 20% share of PTNNT
dividends, net of withholding tax, certain voting rights and obligations, and a commitment from
PTPI to support the application of our standards to the operation of the Batu Hijau mine. As a
result, our effective economic interest in PTNNT increased by 17%. In connection with the above
transaction, we advanced additional funds to PTPI during the first half of 2010.
Dividends paid to common stockholders. We declared regular quarterly dividends totaling $0.20
per common share for the six months ended June 30, 2010 and June 30, 2009. Additionally, Newmont
Mining Corporation of Canada Limited, a subsidiary of the Company, declared regular quarterly
dividends on its exchangeable shares totaling C$0.2058 per
share through June 30, 2010 and C$0.2461 through June 30, 2009. We paid dividends of $98 to
common stockholders in the first half of 2010 and 2009.
Dividends paid to noncontrolling interest. We paid dividends of $307 and $112 to
noncontrolling interests during the first half of 2010 and 2009, respectively. The dividends paid
during the first half of 2010 included $100 for our NTP partner’s share of the sale of the 7%
interest in Batu Hijau and $205 for our partners’ share of $476 in PTNNT dividends declared to
date.
Proceeds from stock issuance. We received proceeds of $30 and $1,247 during the first half of
2010 and 2009, respectively, from the issuance of common stock. In February 2009 we completed a
public offering of 34,500,000 shares of common stock at $37.00 per share, for net proceeds of
$1,236.
Discontinued Operations
Net operating cash provided from (used in) discontinued operations was $(13) and $8 in the
first half of 2010 and 2009, respectively, related to the Kori Kollo operation in Bolivia, sold in
2009.
Net cash used in financing activities of discontinued operations was $2 in the first half of
2009 for repayment of debt at Kori Kollo.
Off-Balance Sheet Arrangements
We have the following off-balance sheet arrangements: operating leases (as discussed in Note
30 to the Consolidated Financial Statements in our Annual Report on Form 10-K for the year ended
December 31, 2009, filed on February 25, 2010), $982 of outstanding letters of credit, surety bonds
and bank guarantees (see Note 26 to the Condensed Consolidated Financial Statements) and sales
agreements to sell copper and gold concentrates at market prices as follows, in thousands of tons:
| 2010 | 2011 | 2012 | 2013 | 2014 | Thereafter | |||||||||||||||||||
Batu Hijau |
446 | 617 | 440 | 430 | 518 | — | ||||||||||||||||||
Boddington |
193 | 237 | 248 | 243 | 254 | 904 | ||||||||||||||||||
Nevada |
50 | 46 | — | — | — | — | ||||||||||||||||||
| 689 | 900 | 688 | 673 | 772 | 904 | |||||||||||||||||||
Environmental
Our mining and exploration activities are subject to various federal and state laws and
regulations governing the protection of the environment. These laws and regulations are continually
changing and are generally becoming more restrictive. We conduct our operations so as to protect
the public health and environment and believe our operations are in compliance with applicable laws
and regulations in all material respects. We have made, and expect to make in the future,
expenditures to comply with such laws and regulations, but cannot predict the full amount of such
future expenditures. Estimated future reclamation costs are based principally on legal and
regulatory requirements. At June 30, 2010 and December 31, 2009, $714 and $698, respectively, were
accrued for reclamation costs relating to currently producing mineral properties.
In addition, we are involved in several matters concerning environmental obligations
associated with former mining activities. Generally, these matters concern developing and
implementing remediation plans at the various sites involved. We believe that the related
environmental obligations associated with these sites are similar in nature with respect to the
development of remediation plans, their risk profile and the compliance required to meet general
environmental standards. Based upon our best estimate of our liability for these matters, $149 and
$161 were accrued for such obligations at June 30, 2010 and December 31, 2009, respectively.
Depending upon the ultimate resolution of these matters, we believe that it is reasonably possible
that the liability for these matters could be as much as 158% greater or 3% lower than the amount
accrued at June 30, 2010. The amounts accrued for these matters are reviewed periodically based
upon facts and circumstances available at the time. Changes in estimates are charged to Reclamation
and remediation in the period estimates are revised.
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For more information on the Company’s reclamation and remediation liabilities, see Notes 4 and
26 to the Consolidated Financial Statements.
During the first half of 2010 and 2009, capital expenditures were approximately $36 and $78,
respectively, to comply with environmental regulations. Ongoing costs to comply with environmental
regulations have not been a significant component of operating costs.
Newmont spent $8, during the first half of 2010 and 2009, respectively, for environmental
obligations related to the former, primarily historic, mining activities discussed in Note 4 to the
Consolidated Financial Statements.
Accounting Developments
For a discussion of Recently Adopted Accounting Pronouncements, see Note 2 to the Condensed
Consolidated Financial Statements.
Non-GAAP Financial Measures
Non-GAAP financial measures are intended to provide additional information only and do not
have any standard meaning prescribed by generally accepted accounting principles (“GAAP”). These
measures should not be considered in isolation or as a substitute for measures of performance
prepared in accordance with GAAP.
Adjusted net income
Management of the Company uses Adjusted net income to evaluate the Company’s operating
performance, and for planning and forecasting future business operations. The Company believes the
use of Adjusted net income allows investors and analysts to compare results of the continuing
operations of the Company and its direct and indirect subsidiaries relating to the production and
sale of minerals to similar operating results of other mining companies, by excluding exceptional
or unusual items, income or loss from discontinued operations and the permanent impairment of
assets, including marketable securities and goodwill. Management’s determination of the components
of Adjusted net income are evaluated periodically and based, in part, on a review of non-GAAP
financial measures used by mining industry analysts. Net income attributable to Newmont
stockholders is reconciled to Adjusted net income as follows:
| Three Months Ended June 30, | Six Months Ended June 30, | |||||||||||||||
| 2010 | 2009 | 2010 | 2009 | |||||||||||||
Net income attributable to Newmont stockholders |
$ | 382 | $ | 162 | $ | 928 | $ | 351 | ||||||||
Income tax benefit from internal
restructuring |
— | — | (127 | ) | — | |||||||||||
Net gain on asset sales |
(7 | ) | — | (31 | ) | — | ||||||||||
PTNNT community contribution |
— | — | 13 | — | ||||||||||||
Impairment of assets |
2 | 1 | 3 | 5 | ||||||||||||
Boddington acquisition costs |
— | 39 | — | 44 | ||||||||||||
Discontinued operations loss |
— | 9 | — | 9 | ||||||||||||
Adjusted net income |
$ | 377 | $ | 211 | $ | 786 | $ | 409 | ||||||||
Adjusted net income per share(1) |
$ | 0.77 | $ | 0.43 | $ | 1.60 | $ | 0.85 | ||||||||
| (1) | Calculated using weighted average number of shares outstanding, basic. |
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By-product costs applicable to sales
Sales and Costs applicable to sales for Boddington are presented in the Condensed Consolidated
Financial Statements for both gold and copper due to the significant portion of copper production
(approximately 15-20% of total sales based on the latest life-of-mine plan and metal price
assumptions). The co-product method allocates costs applicable to sales to each metal based on
specifically identifiable costs where applicable and on a relative proportion of sales values for
other costs. Management also assesses the performance of the Boddington mine on a by-product basis
due to the majority of sales being derived from gold and to determine contingent consideration
payments to AngloGold. The by-product method deducts copper sales margin from costs applicable to
sales as shown in the following table:
| Three Months Ended | Six Months Ended | |||||||
| June 30, 2010 | June 30, 2010 | |||||||
Co-product costs applicable to sales — gold |
$ | 113 | $ | 193 | ||||
Less copper margin: |
||||||||
Sales — copper |
40 | 79 | ||||||
Costs applicable to
sales — copper |
(25 | ) | (49 | ) | ||||
| 15 | 30 | |||||||
By-product costs applicable to sales — gold |
$ | 98 | $ | 163 | ||||
Costs applicable to sales — gold ($ per ounce) |
||||||||
Co-product |
$ | 582 | $ | 560 | ||||
By-product |
$ | 503 | $ | 474 | ||||
Gold ounces sold (in thousands) |
194 | 344 | ||||||
Safe Harbor Statement
Certain statements contained in this report (including information incorporated by reference)
are “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933,
as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, and are intended to
be covered by the safe harbor provided for under these sections. Our forward-looking statements
include, without limitation: (a) statements regarding future earnings, and the sensitivity of
earnings to gold and other metal prices; (b) estimates of future mineral production and sales for
specific operations and on a consolidated basis; (c) estimates of future production costs and other
expenses, for specific operations and on a consolidated basis; (d) estimates of future cash flows
and the sensitivity of cash flows to gold and other metal prices; (e) estimates of future capital
expenditures and other cash needs for specific operations and on a consolidated basis and
expectations as to the funding thereof; (f) statements as to the projected development of certain
ore deposits, including estimates of development and other capital costs, financing plans for these
deposits, and expected production commencement dates; (g) estimates of future costs and other
liabilities for certain environmental matters; (h) estimates of reserves, and statements regarding
future exploration results and reserve replacement; (i) statements regarding modifications to
Newmont’s hedge positions; (j) statements regarding future transactions relating to portfolio
management or rationalization efforts; and (k) projected synergies and costs associated with
acquisitions and related matters.
Where we express an expectation or belief as to future events or results, such expectation or
belief is expressed in good faith and believed to have a reasonable basis. However, our
forward-looking statements are subject to risks, uncertainties, and other factors, which could
cause actual results to differ materially from future results expressed, projected, or implied by
those forward-looking statements. Important factors that could cause actual results to differ
materially from such forward-looking statements (“cautionary statements”) are disclosed under “Risk
Factors” in the Newmont Annual Report on Form 10-K for the year ended December 31, 2009, as well as
in other filings with the Securities and Exchange Commission. Many of these factors are beyond
Newmont’s ability to control or predict. Given these uncertainties, readers are cautioned not to
place undue reliance on our forward-looking statements.
All subsequent written and oral forward-looking statements attributable to Newmont or to
persons acting on its behalf are expressly qualified in their entirety by the cautionary
statements. Newmont disclaims any intention or obligation to update publicly any forward-looking
statements, whether as a result of new information, future events or otherwise, except as may be
required under applicable securities laws.
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| ITEM 3. | QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK (dollars in millions, except per ounce and per pound amounts). |
Metal Prices
Changes in the market price of gold significantly affect our profitability and cash flow. Gold
prices can fluctuate widely due to numerous factors, such as demand; forward selling by producers;
central bank sales, purchases and lending; investor sentiment; the strength of the U.S. dollar;
inflation, deflation, or other general price instability; and global mine production levels.
Changes in the market price of copper also affect our profitability and cash flow. Copper is traded
on established international exchanges and copper prices generally reflect market supply and
demand, but can also be influenced by speculative trading in the commodity or by currency exchange
rates.
Hedging
Our strategy is to provide shareholders with leverage to changes in gold and copper prices by
selling our production at spot market prices. Consequently, we do not hedge our gold and copper
sales. We continue to manage risks associated with commodity input costs, interest rates and
foreign currencies using the derivative market.
By using derivatives, we are affected by credit risk, market risk and market liquidity risk.
Credit risk is the risk that a third party might fail to fulfill its performance obligations under
the terms of a financial instrument. We mitigate credit risk by entering into derivatives with high
credit quality counterparties, limiting the amount of exposure to each counterparty, and monitoring
the financial condition of the counterparties. Market risk is the risk that the fair value of a
derivative might be adversely affected by a change in underlying commodity prices, interest rates,
or currency exchange rates, and that this in turn affects our financial condition. We manage market
risk by establishing and monitoring parameters that limit the types and degree of market risk that
may be undertaken. We mitigate this risk by establishing trading agreements with counterparties
under which we are not required to post any collateral or make any margin calls on our derivatives.
Our counterparties cannot require settlement solely because of an adverse change in the fair value
of a derivative. Market liquidity risk is the risk that a derivative cannot be eliminated quickly,
by either liquidating it or by establishing an offsetting position. Under the terms of our trading
agreements, counterparties cannot require us to immediately settle outstanding derivatives, except
upon the occurrence of customary events of default such as covenant breeches, including financial
covenants, insolvency or bankruptcy. We generally mitigate market liquidity risk by spreading out
the maturity of our derivatives over time.
Cash Flow Hedges
We utilize foreign currency contracts to reduce the variability of the US dollar amount of
forecasted foreign currency expenditures caused by changes in exchange rates. We hedge a portion of
our A$, NZ$ and IDR denominated operating expenditures which results in a blended rate realized
each period. The hedging instruments are fixed forward contracts with expiration dates ranging up
to three years from the date of issue. The principal hedging objective is reduction in the
volatility of realized period-on-period $/A$, $/NZ$ and IDR/$ rates, respectively. We use diesel
contracts to reduce the variability of our operating cost exposure related to diesel prices of fuel
consumed at our Nevada operations. All of the currency and diesel contracts have been designated as
cash flow hedges of future expenditures, and as such, changes in the market value have been
recorded in Accumulated other comprehensive income. Gains and losses from hedge ineffectiveness are
recognized in current earnings.
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Foreign Currency Exchange Risk
We had the following derivative instruments designated as hedges with fair values at June 30,
2010 and December 31, 2009:
| Expected Maturity Date | Fair Value, Net | |||||||||||||||||||||||||||
| Total | At June 30, | At December 31, | ||||||||||||||||||||||||||
| 2010 | 2011 | 2012 | 2013 | Average | 2010 | 2009 | ||||||||||||||||||||||
A$ Fixed Forward Contracts: |
||||||||||||||||||||||||||||
$(millions) |
$ | 373 | $ | 558 | $ | 280 | $ | 44 | $ | 1,255 | $ | 27 | $ | 130 | ||||||||||||||
Average rate ($/A$) |
0.80 | 0.78 | 0.80 | 0.80 | 0.79 | |||||||||||||||||||||||
A$ notional (millions) |
465 | 713 | 350 | 55 | 1,583 | |||||||||||||||||||||||
Expected hedge ratio |
70 | % | 54 | % | 27 | % | 8 | % | 39 | % | ||||||||||||||||||
NZ$ Fixed Forward Contracts: |
||||||||||||||||||||||||||||
$(millions) |
$ | 22 | $ | 31 | $ | 4 | $ | — | $ | 57 | $ | 1 | $ | 6 | ||||||||||||||
Average rate ($/NZ$) |
0.65 | 0.67 | 0.66 | — | 0.67 | |||||||||||||||||||||||
NZ$ notional (millions) |
34 | 46 | 7 | — | 87 | |||||||||||||||||||||||
Expected hedge ratio |
62 | % | 38 | % | 12 | % | — | 37 | % | |||||||||||||||||||
IDR Fixed Forward Contracts: |
||||||||||||||||||||||||||||
$(millions) |
$ | 14 | $ | — | $ | — | $ | — | $ | 14 | $ | 1 | $ | 1 | ||||||||||||||
Average rate (IDR/$) |
10,024 | — | — | — | 10,024 | |||||||||||||||||||||||
IDR notional (millions) |
140,337 | — | — | — | 140,337 | |||||||||||||||||||||||
Expected hedge ratio |
30 | % | — | — | — | 30 | % | |||||||||||||||||||||
Diesel Price Risk
We had the following diesel derivative contracts with fair values at June 30, 2010 and
December 31, 2009:
| Expected Maturity Date | Fair Value, Net | |||||||||||||||||||||||
| Total | At June 30, | At December 31, | ||||||||||||||||||||||
| 2010 | 2011 | 2012 | Average | 2010 | 2009 | |||||||||||||||||||
Diesel Fixed Forward Contracts: |
||||||||||||||||||||||||
$(millions) |
$ | 24 | $ | 31 | $ | 4 | $ | 59 | $ | (1 | ) | $ | 6 | |||||||||||
Average rate ($/gallon) |
2.08 | 2.25 | 2.43 | 2.19 | ||||||||||||||||||||
Diesel gallons (millions) |
12 | 14 | 2 | 28 | ||||||||||||||||||||
Expected Nevada hedge ratio |
57 | % | 32 | % | 8 | % | 32 | % | ||||||||||||||||
Fair Value Hedges
Interest Rate Risk
At June 30, 2010, we had $222 fixed to floating swap contracts designated as a hedge against
our 8 5/8% debentures due 2011. The interest rate swap contracts assist in managing our targeted
mix of fixed and floating rate debt. Under the hedge contract terms, we receive fixed-rate interest
payments at 8.63% and pay floating-rate interest amounts based on periodic London Interbank Offered
Rate (“LIBOR”) settings plus a spread, ranging from 2.60% to 7.63%. The interest rate swap
contracts were designated as fair value hedges and changes in fair value have been recorded in
income in each period, consistent with recording changes to the mark-to-market value of the
underlying hedged liability in income. The fair value of the interest rate swaps was $5 and $7 at
June 30, 2010 and December 31, 2009, respectively.
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Commodity Price Risk
Our 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 gold and copper concentrates at the prevailing indices’ prices 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.
LME copper prices averaged $3.19 per pound during the three months ended June 30, 2010,
compared with our recorded average provisional price of $3.13 per pound before mark-to-market gains
and treatment and refining charges.
LME copper prices averaged $3.24 per pound during the six months ended June 30, 2010,
consistent with our recorded average provisional price per pound before mark-to-market gains and
treatment and refining charges. The applicable forward copper price at the end of the second
quarter was $2.96 per pound. During the three months ended June 30, 2010, changes in copper prices
resulted in a provisional pricing mark-to-market loss of $79 ($0.62 per pound). During the six
months ended June 30, 2010, changes in copper prices resulted in a provisional pricing
mark-to-market loss of $48 ($0.17 per pound). At June 30, 2010, we had copper sales of 137 million
pounds priced at an average of $2.96 per pound, subject to final pricing over the next several
months.
The average London P.M. fix for gold was $1,197 per ounce during the three months ended June
30, 2010, compared with our recorded average provisional price of $1,192 per ounce before
mark-to-market gains and treatment and refining charges. The average London P.M. fix for gold was
$1,152 per ounce during the six months ended June 30, 2010, compared with our recorded average
provisional price of $1,151 per ounce before mark-to-market gains and treatment and refining
charges. The applicable forward gold price at the end of the second quarter was $1,245 per ounce.
During the three months ended June 30, 2010, changes in gold prices resulted in a provisional
pricing mark-to-market gain of $20 ($13 per ounce). During the six months ended June 30, 2010,
changes in gold prices resulted in a provisional pricing mark-to-market gain of $22 ($7 per ounce).
At June 30, 2010, we had gold sales of 180,000 ounces priced at an average of $1,245 per ounce,
subject to final pricing over the next several months.
| ITEM 4. | CONTROLS AND PROCEDURES. |
During the fiscal period covered by this report, the Company’s management, with the
participation of the Chief Executive Officer and Chief Financial Officer of the Company, carried
out an evaluation of the effectiveness of the design and operation of the Company’s disclosure
controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) of the Securities Exchange Act
of 1934, as amended (the “Exchange Act”)). Based on such evaluation, the Company’s Chief Executive
Officer and Chief Financial Officer have concluded that, as of the end of the period covered by
this report, the Company’s disclosure controls and procedures are effective to ensure that
information required to be disclosed by the Company in reports that it files or submits under the
Exchange Act is recorded, processed, summarized and reported within the required time periods and
are designed to ensure that information required to be disclosed in its reports is accumulated and
communicated to the Company’s management, including the Chief Executive Officer and Chief Financial
Officer, as appropriate to allow timely decisions regarding required disclosure.
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PART II — OTHER INFORMATION
| ITEM 1. | LEGAL PROCEEDINGS. |
Information regarding legal proceedings is contained in Note 26 to the Condensed Consolidated
Financial Statements contained in this Report and is incorporated herein by reference.
| ITEM 1A. | RISK FACTORS. |
There were no material changes to the risk factors disclosed in Item 1A of Part 1 in our
Annual Report on Form 10-K for the year ended December 31, 2009, as filed with the SEC on February
25, 2010.
| ITEM 2. | ISSUER PURCHASES OF EQUITY SECURITIES. |
| (a) | (b) | (c) | (d) | |||||||||||||
| Total Number of | Maximum Number (or | |||||||||||||||
| Shares Purchased | Approximate Dollar Value) | |||||||||||||||
| Total Number | Average | as Part of Publicly | of Shares that may yet be | |||||||||||||
| of Shares | Price Paid | Announced Plans | Purchased under the | |||||||||||||
| Period | Purchased | Per Share | or Programs | Plans or Programs | ||||||||||||
April 1, 2010 through April 30, 2010 |
— | — | — | N/A | ||||||||||||
May 1, 2010 through May 31, 2010 |
— | — | — | N/A | ||||||||||||
June 1, 2010 through June 30, 2010 |
— | — | — | N/A | ||||||||||||
| ITEM 3. | DEFAULTS UPON SENIOR SECURITIES. |
None.
| ITEM 5. | OTHER INFORMATION. |
None.
| ITEM 6. | EXHIBITS. |
(a) The exhibits to this report are listed in the Exhibit Index.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly
caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
| NEWMONT MINING CORPORATION | ||||
| (Registrant) | ||||
Date: July 28, 2010
|
/s/ RUSSELL BALL
|
|||
| Executive Vice President and Chief Financial Officer | ||||
| (Principal Financial Officer) | ||||
Date: July 28, 2010
|
/s/ ROGER P. JOHNSON
|
|||
| Vice President and Chief Accounting Officer | ||||
| (Principal Accounting Officer) |
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NEWMONT MINING CORPORATION
EXHIBIT INDEX
| Exhibit Number |
Description | |
10.1
|
Letter Agreement dated May 3, 2010 between Newmont Mining Corporation and Robert J. Miller, filed herewith. | |
10.2
|
Transition Agreement dated May 5, 2010 between Newmont International Services Limited and Alan Blank, filed herewith. | |
10.3
|
Annual Incentive Compensation Program of Newmont Mining Corporation, as Amended and Restated Effective January 1, 2010, filed herewith. | |
10.4
|
Employee Performance Incentive Compensation Program, Effective and Restated January 1, 2010, filed herewith. | |
12.1
|
Computation of Ratio of Earnings to Fixed Charges, filed herewith | |
31.1
|
Certification Pursuant to Rule 13A-14 or 15-D-14 of the Securities Exchange Act of 1934, as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 signed by the Principal Executive Officer, filed herewith. | |
31.2
|
Certification Pursuant to Rule 13A-14 or 15-D-14 of the Securities Exchange Act of 1934, as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 signed by the Chief Financial Officer, filed herewith. | |
32.1
|
Statement Required by 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 signed by Principal Executive Officer, filed herewith.(1) | |
32.2
|
Statement Required by 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 signed by Chief Financial Officer, filed herewith.(1) | |
101
|
The following materials are filed herewith: (i) XBRL Instance, (ii) XBRL Taxonomy Extension Schema, (iii) XBRL Taxonomy Extension Calculation, (iv) XBRL Taxonomy Extension Labels, (v) XBRL Taxonomy Extension Presentation, and (vi) XBRL Taxonomy Extension Definition. In accordance with Rule 406T of Regulation S-T, the information in these exhibits is furnished and deemed not filed or a part of a registration statement or prospectus for purposes of Sections 11 or 12 of the Securities Act of 1933, is deemed not filed for purposes of section 18 of the Exchange Act of 1934, and otherwise is not subject to liability under these sections and shall not be incorporated by reference into any registration statement or other document filed under the Securities Act of 1933, as amended, except as expressly set forth by the specific reference in such filing. |
| (1) | This document is being furnished in accordance with SEC Release Nos. 33-8212 and 34-47551. |