Form 10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D. C. 20549

 


Form 10-Q

 


(Mark One)

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

For the Quarterly Period Ended September 30, 2006

or

 

¨ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from                      to                     

Commission File Number: 001-31240

 


NEWMONT MINING CORPORATION

(Exact name of registrant as specified in its charter)

 


 

Delaware    84-1611629

(State or Other Jurisdiction of

Incorporation or Organization)

  

(I.R.S. Employer

Identification No.)

1700 Lincoln Street

Denver, Colorado

   80203
(Address of Principal Executive Offices)    (Zip Code)

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.    x  Yes    ¨  No

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer. See definition of “accelerated filer” and “large accelerated filer” in Rule 12-b2 of the Exchange Act.

(Check one): Large accelerated filer    x     Accelerated filer    ¨     Non-accelerated filer    ¨

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12-b2 of the Exchange Act).    ¨  Yes     x  No

There were 422,460,240 shares of common stock outstanding on October 30, 2006 (and 27,761,153 exchangeable shares).

 



PART I—FINANCIAL INFORMATION

 

ITEM 1. FINANCIAL STATEMENTS.

NEWMONT MINING CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF INCOME

 

     Three Months
Ended
September 30,
    Nine Months
Ended
September 30,
 
     2006     2005     2006     2005  
     (unaudited, in millions except per share)  

Revenues

        

Sales - gold, net

   $ 1,009     $ 914     $ 3,095     $ 2,556  

Sales - copper, net

     93       231       432       504  
                                
     1,102       1,145       3,527       3,060  
                                

Costs and expenses

        

Costs applicable to sales (exclusive of depreciation, depletion and amortization shown separately below)

        

Gold

     525       502       1,564       1,437  

Copper

     66       86       215       226  

Depreciation, depletion and amortization

     153       155       444       466  

Exploration

     41       39       120       103  

Advanced projects, research and development

     19       18       68       47  

General and administrative

     29       32       103       95  

Other expense, net

     37       20       64       61  
                                
     870       852       2,578       2,435  
                                

Other income (expense)

        

Other income, net (Note 3)

     317       66       386       177  

Interest expense, net

     (28 )     (23 )     (70 )     (75 )
                                
     289       43       316       102  
                                

Income from continuing operations before income tax expense, minority interest and equity income of affiliates

     521       336       1,265       727  

Income tax expense

     (206 )     (96 )     (362 )     (191 )

Minority interest in income of consolidated subsidiaries

     (52 )     (115 )     (279 )     (248 )

Equity income of affiliates

     1             1       3  
                                

Income from continuing operations

     264       125       625       291  

Gain (loss) from discontinued operations (Note 5)

     (66 )     1       (57 )     (31 )
                                

Net income

   $ 198     $ 126     $ 568     $ 260  
                                

Income per common share (Note 6)

        

Basic and diluted:

        

Income from continuing operations

   $ 0.59     $ 0.28     $ 1.39     $ 0.65  

Loss from discontinued operations

     (0.15 )           (0.13 )     (0.07 )
                                

Net income

   $ 0.44     $ 0.28     $ 1.26     $ 0.58  
                                

Basic weighted-average common shares outstanding

     450       446       449       446  
                                

Diluted weighted-average common shares outstanding

     452       449       451       449  
                                

Cash dividends declared per common share

   $ 0.10     $ 0.10     $ 0.30     $ 0.30  
                                

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

 

2


NEWMONT MINING CORPORATION

CONDENSED CONSOLIDATED BALANCE SHEETS

 

     At September 30,
2006
   At December 31,
2005
     (unaudited, in millions)
ASSETS      

Cash and cash equivalents

   $ 1,059    $ 1,082

Marketable securities and other short-term investments (Note 10)

     273      817

Trade receivables

     150      94

Accounts receivable

     148      135

Inventories (Note 11)

     372      304

Stockpiles and ore on leach pads (Note 12)

     336      241

Deferred stripping costs (Note 2)

          78

Deferred income tax assets

     140      159

Other current assets

     115      90
             

Current assets

     2,593      3,000

Property, plant and mine development, net

     6,547      5,581

Investments (Note 10)

     1,239      955

Long-term stockpiles and ore on leach pads (Note 12)

     795      599

Deferred stripping costs (Note 2)

          100

Deferred income tax assets

     814      515

Other long-term assets

     202      181

Goodwill

     2,895      2,879

Assets of operations held for sale (Note 5)

     36      182
             

Total assets

   $ 15,121    $ 13,992
             
LIABILITIES      

Current portion of long-term debt (Note 13)

   $ 158    $ 195

Accounts payable

     251      227

Employee-related benefits

     167      176

Derivative instruments (Note 9)

     453      270

Other current liabilities (Note 14)

     609      471
             

Current liabilities

     1,638      1,339

Long-term debt (Note 13)

     1,799      1,723

Reclamation and remediation liabilities (Note 15)

     483      442

Deferred income tax liabilities

     571      446

Employee-related benefits

     284      273

Other long-term liabilities (Note 14)

     311      415

Liabilities of operations held for sale (Note 5)

     3      47
             

Total liabilities

     5,089      4,685
             

Commitments and contingencies (Note 18)

     

Minority interest in subsidiaries

     996      931
             
STOCKHOLDERS’ EQUITY      

Common stock

     675      666

Additional paid-in capital

     6,683      6,578

Accumulated other comprehensive income

     572      378

Retained earnings

     1,106      754
             

Total stockholders’ equity

     9,036      8,376
             

Total liabilities and stockholders’ equity

   $ 15,121    $ 13,992
             

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

 

3


NEWMONT MINING CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

 

     Nine Months Ended
September 30,
 
     2006     2005  
     (unaudited, in millions)  

Operating activities:

    

Net income

   $ 568     $ 260  

Adjustments to reconcile net income to net cash from continuing operations:

    

Depreciation, depletion and amortization

     444       466  

Revenue from prepaid forward sales obligation

     (48 )     (48 )

Loss from discontinued operations

     57       31  

Accretion of accumulated reclamation obligations

     22       20  

Deferred income taxes

     (117 )     (34 )

Minority interest expense

     279       248  

Gain on asset sales, net

     (312 )     (36 )

Gain on sale of investments, net

     (4 )     (27 )

Hedge loss, net

     82       4  

Other operating adjustments and write-downs

     90       (35 )

Decrease (increase) in operating assets:

    

Trade and accounts receivable

     (51 )     25  

Inventories, stockpiles and ore on leach pads

     (323 )     (155 )

Other assets

     (49 )      

Increase (decrease) in operating liabilities:

    

Accounts payable and other accrued liabilities

     208       59  

Reclamation liabilities

     (44 )     (24 )
                

Net cash provided from continuing operations

     802       754  

Net cash (used in) provided from discontinued operations

     (6 )     7  
                

Net cash from operations

     796       761  
                

Investing activities:

    

Additions to property, plant and mine development

     (1,109 )     (884 )

Investments in marketable debt and equity securities

     (1,389 )     (2,530 )

Proceeds from sale of marketable debt and equity securities

     1,934       2,562  

Acquisitions (Note 8)

     (348 )      

Proceeds from sale of assets, net

     331       61  

Other

     (3 )     1  
                

Net cash used in investing activities of continuing operations

     (584 )     (790 )

Net cash (used in) provided from investing activities of discontinued operations

     (6 )     115  
                

Net cash used in investing activities

     (590 )     (675 )
                

Financing activities:

    

Proceeds from debt, net

     198       584  

Repayment of debt

     (63 )     (141 )

Early extinguishment of prepaid forward sales obligation

     (48 )      

Dividends paid to common stockholders

     (135 )     (134 )

Dividends paid to minority interests

     (235 )     (85 )

Proceeds from stock issuance

     66       17  

Change in restricted cash and other

     (11 )     (9 )
                

Net cash (used in) provided from financing activities of continuing operations

     (228 )     232  

Net cash used in financing activities of discontinued operations

     (7 )     (1 )
                

Net cash (used in) provided from financing activities

     (235 )     231  
                

Effect of exchange rate changes on cash

     6       (3 )
                

Net change in cash and cash equivalents

     (23 )     314  

Cash and cash equivalents at beginning of period

     1,082       781  
                

Cash and cash equivalents at end of period

   $ 1,059     $ 1,095  
                

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

 

4


NEWMONT MINING CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)

(dollars in millions, except per share, per ounce and per pound amounts)

(1) BASIS OF PRESENTATION

The interim Condensed Consolidated Financial Statements of Newmont Mining Corporation and its subsidiaries (collectively, “Newmont” or the “Company”) are unaudited. In the opinion of management, all adjustments and disclosures necessary for a fair presentation of these interim statements have been included. The results reported in these interim Condensed Consolidated Financial Statements are not necessarily indicative of the results that may be reported for the entire year. These interim Condensed Consolidated Financial Statements should be read in conjunction with Newmont’s Consolidated Financial Statements included in its Annual Report on Form 10-K/A for the year ended December 31, 2005, filed October 26, 2006.

References to “A$” refer to Australian currency, “CDN$” to Canadian currency, “IDR” to Indonesian currency and “$” to United States currency.

Certain amounts for the three and nine months ended September 30, 2005 and at December 31, 2005 have been reclassified to conform to the 2006 presentation. The Company has reclassified the income statement, balance sheet and cash flow statement amounts for the Golden Grove, Holloway and Zarafshan-Newmont Joint Venture operations from the historical presentation to discontinued operations in the Condensed Consolidated Statements of Income and Cash Flows and to assets and liabilities of operations held for sale on the Condensed Consolidated Balance Sheets for all periods presented.

(2) RECENT ACCOUNTING PRONOUNCEMENTS

Deferred Stripping Costs

On January 1, 2006 the Company adopted Emerging Issues Task Force Issue No. 04-06 (“EITF 04-06”), “Accounting for Stripping Costs Incurred during Production in the Mining Industry.” EITF 04-06 addresses the accounting for stripping costs incurred during the production phase of a mine and refers to these costs as variable production costs that should be included as a component of inventory to be recognized in Costs applicable to sales in the same period as the revenue from the sale of inventory. As a result, capitalization of post-production stripping costs is appropriate only to the extent product inventory exists at the end of a reporting period. The guidance requires application through recognition of a cumulative effect adjustment to opening retained earnings in the period of adoption, with no charge to current earnings for prior periods. The results for prior periods have not been restated. The cumulative effect adjustment reduced opening retained earnings by $81 (net of tax and minority interests) and eliminated the $71 net deferred stripping asset from the balance sheet. Adoption of EITF 04-06 had no impact on the Company’s cash position or net cash from operations.

Prior to 2006 at some of the Company’s mining operations, deferred stripping costs were charged to Costs applicable to sales as gold or copper was produced and sold using the units of production method based on estimated recoverable quantities of proven and probable gold or copper reserves, using a stripping ratio calculated as the ratio of total tons to be moved to total proven and probable ore reserves, which resulted in the recognition of the costs of waste removal activities over the life of the mine as gold or copper was produced. The application of the deferred stripping accounting method generally resulted in an asset (deferred stripping costs), although a liability (advanced stripping costs) arose when the actual stripping ratio incurred to date was less than the expected stripping ratio over the life of the mine. The Advanced stripping costs primarily pertained to the Batu Hijau operation.

Movements in the net deferred stripping cost balance were as follows:

 

     Nine Months Ended September 30,  
     2006     2005  

Opening balance

   $ 71     $ 20  

Cumulative effect adjustment

     (71 )      

Disposition of Ovacik

           (4 )

Additions

           127  

Amortization

           (78 )
                

Closing balance

   $     $ 65  
                

 

5


NEWMONT MINING CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) Continued

(dollars in millions, except per share, per ounce and per pound amounts)

 

The deferred and advanced stripping cost balances are presented in the balance sheet at December 31, 2005 in other assets or other liabilities as follows:

 

     At December 31, 2005

Other Assets:

  

Current

   $ 78

Long-term

     100
      
     178
      

Other Liabilities:

  

Current

   $ 14

Long-term

     93
      
     107
      

Deferred stripping, net

   $ 71
      

Stock Based Compensation

On January 1, 2006, the Company adopted the fair value recognition provisions of FASB Statement No. 123(R), “Share-Based Payment” (“FAS 123(R)”). Prior to January 1, 2006, the Company accounted for share-based payments under the recognition and measurement provisions of APB Opinion No. 25, Accounting for Stock Issued to Employees, and related Interpretations, as permitted by Financial Accounting Standards Board (“FASB”) Statement No. 123, Accounting for Stock-Based Compensation. In accordance with APB 25, no compensation cost was required to be recognized for options granted that had an exercise price equal to the market value of the underlying common stock on the date of grant.

The Company adopted FAS 123(R) using the modified prospective transition method. Under this method, compensation cost recognized in the three and nine months ended September 30, 2006 includes: a) compensation cost for all share-based payments granted prior to, but not yet vested as of January 1, 2006, based on the grant-date fair value estimated in accordance with the original provisions of FAS 123, and b) compensation cost for all share-based payments granted subsequent to January 1, 2006, based on the grant-date fair value estimated in accordance with the provisions of FAS 123(R). The results for prior periods have not been restated.

As a result of adopting FAS 123(R), the Company’s Income from continuing operations and Net income for the three and nine month periods of 2006 is $4 ($0.01 per share, basic and diluted) and $14 ($0.03 per share, basic and diluted) lower, respectively, than if we had continued to account for share-based compensation under APB 25 as we did in the comparable prior year periods. Prior to the adoption of FAS 123(R), cash retained as a result of tax deductions relating to stock-based compensation was included in operating cash flows, along with other tax cash flows, and requires tax benefits relating to the deductibility of increases in the equity instruments issued under share-based compensation arrangements that are not included in Costs applicable to sales (“excess tax benefits”) to be presented in the Statement of Cash Flows as financing cash inflows. The (expense) benefit realized for tax deductions from option exercises totaled $(8) and $4 for the three and nine month periods of 2006, respectively.

The Company currently maintains the 2005 Stock Incentive Plan (“Stock Plan”), approved by stockholders on April 27, 2005, for executives and eligible employees. Under this Stock Plan, options to purchase shares of stock can be granted with exercise prices not less than fair market value of the underlying stock at the date of grant. Fair market value of a share of common stock as of the grant date is the average of the high and low sales prices for a share of the Company’s common stock on the New York Stock Exchange. The Company also maintains prior stock plans, but no longer grants awards under these plans. Options granted under the Company’s stock plans vest over periods ranging from two to four years and are exercisable over a period of time not to exceed 10 years from grant date. At September 30, 2006, 17,570,931 shares were available for future grants under the Company’s Stock Plan.

The value of each option award is estimated on the date of grant using the Black-Scholes option-pricing model. The Black-Scholes option-pricing model requires the input of subjective assumptions, including the expected term of the option award and stock price volatility. The expected term of options granted is derived from historical data on employee exercise and post-vesting employment termination behavior. Expected volatility is based on the historical volatility of our stock. These estimates involve inherent uncertainties and the application of management judgment. In addition, we are required to estimate the expected forfeiture rate and only recognize expense for those options expected to vest. As a result, if other assumptions had been used, our recorded and pro forma stock-based compensation expense could have been different from that reported. The Black-Scholes option-pricing model used the following assumptions for the nine months ended September 30, 2006 and 2005, respectively: weighted-average risk-free interest rates of 4.9% and 3.9%; dividend yields of 0.7% and 1%; expected lives of five years and four years; and volatility of 34%

 

6


NEWMONT MINING CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) Continued

(dollars in millions, except per share, per ounce and per pound amounts)

 

and 40%. 1,238,750 and 1,056,368 stock option awards were granted during the nine months ended September 30, 2006 and 2005, respectively.

The following table summarizes activity for stock options outstanding at September 30, 2006:

 

     Options Outstanding
     Number of
Shares
    Weighted
Average
Exercise
Price

Outstanding at beginning of year

   9,433,669     $ 35.90

Granted

   1,238,750     $ 57.71

Exercised

   (2,146,006 )   $ 32.32

Forfeited and expired

   (521,159 )   $ 54.23
        

Outstanding at September 30, 2006

   8,005,254     $ 38.97
        

Options exercisable at September 30, 2006

   4,678,496     $ 34.72

The following table summarizes information about stock options outstanding at September 30, 2006, with exercise prices equal to the fair market value on the date of grant with no restrictions on exercisability after vesting:

 

     Options Outstanding         Options Exercisable

Range of Exercise Prices

   Number
Outstanding
   Weighted-
Average
Remaining
Contractual
Life
(in years)
   Weighted-
Average
Exercise
Price
   Number
Exercisable
   Weighted-
Average
Exercise
Price

$0 to $20

   1,118,906    2.7    $ 18.61    1,118,906    $ 18.61

$20 to $30

   1,538,022    5.2    $ 25.88    1,459,699    $ 25.98

$30 to $40

   962,439    7.5    $ 37.56    459,959    $ 37.03

$40 to $50

   3,044,420    8.0    $ 45.45    1,454,215    $ 45.48

$50+

   1,341,467    8.7    $ 57.18    185,717    $ 53.89
                  

Total/average

   8,005,254    6.8    $ 38.97    4,678,496    $ 34.72
                  

As of September 30, 2006, there was $32 of unrecognized compensation cost related to unvested stock options. This cost is expected to be recognized over a weighted-average period of approximately 2.1 years. The total intrinsic value of options exercised in the third quarter of 2006 and 2005 was $10 and $5, respectively. The total intrinsic value of options exercised in the nine month period of 2006 and 2005 was $48 and $10, respectively. 1,153,974 stock options vested during the nine months ended September 30, 2006. The weighted-average exercise price of the stock options vested was $36.65 in 2006. 1,024,047 stock options vested during the three and nine months ended September 30, 2005. The weighted-average exercise price of the stock options vested was $32.75 in 2005.

The following table illustrates the effect on net income and earnings per share if we had applied the fair value recognition provisions of FAS 123(R) to options granted under our stock option plans in the three and nine month periods of 2005:

 

     Three Months Ended
September 30, 2005
    Nine Months Ended
September 30, 2005
 

Net income, as reported

   $ 126     $ 260  

Less: Compensation expense determined under the fair value method, net of tax

     (5 )     (14 )
                

Pro forma net income

   $ 121     $ 246  
                

Net income per common share, basic and diluted:

    

As reported

   $ 0.28     $ 0.58  

Pro forma net income

   $ 0.27     $ 0.55  

 

7


NEWMONT MINING CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) Continued

(dollars in millions, except per share, per ounce and per pound amounts)

 

Other Stock-Based Compensation

The Company grants restricted stock to certain employees. Shares of restricted stock are granted upon achievement of certain financial and operating thresholds at fair market value on the grant date. Prior to vesting, these shares of restricted stock are subject to certain restrictions related to ownership and transferability. Holders of restricted stock are entitled to vote the shares and to receive any dividends declared on the shares. For the nine months ended September 30, 2006 and 2005, 102,491 and 155,061 shares of restricted stock, respectively, were granted and issued, of which 100,258 and 90,618 shares remained unvested at September 30, 2006 for the 2006 and 2005 grants, respectively. The weighted-average fair market value of the stock grants issued were $58 and $45 in 2006 and 2005, respectively. Compensation expense recorded for restricted stock was $nil and $2 for the three months ended September 30, 2006 and 2005, respectively, and $nil and $7 for the nine months ended September 30, 2006 and 2005, respectively. The shares of restricted stock vest in equal increments annually over three years.

Restricted stock units also are granted, upon achievement of certain financial and operating thresholds, to employees in certain foreign jurisdictions. For the nine months ended September 30, 2006, the Company granted 19,181 restricted stock units at the weighted-average fair market value of $58 per underlying share of the Company’s common stock. For the nine months ended September 30, 2005, the Company granted 27,386 restricted stock units at the weighted-average fair market value of $45 per underlying share of the Company’s common stock. Compensation expense recorded for the foreign jurisdiction restricted stock units was $nil for the three months ended September 30, 2006 and 2005, respectively, and $nil and $1 for the nine months ended September 30, 2006 and 2005, respectively. These restricted stock units vest in equal increments annually over three years. Upon vesting, the employee is entitled to receive for each restricted stock unit one share of the Company’s common stock.

The Company grants deferred stock awards to certain other employees. The deferred stock awards vest over periods between two and three years. For the nine months ended September 30, 2006 and 2005 there were 237,946 and 98,379 deferred stock awards granted by the Company, respectively. At September 30, 2006 and December 31, 2005, 428,263 and 303,002 deferred stock awards, respectively, remained unvested. Compensation expense recorded for deferred stock awards was $2 and $2 for the three months ended September 30, 2006 and 2005, respectively, and $6 and $5 for the nine months ended September 30, 2006 and 2005, respectively. Upon vesting, the employee is entitled to receive the number of shares of the Company’s common stock specified in the deferred stock award.

Income Taxes

In June 2006, the FASB issued FASB Interpretation No. 48, “Accounting for Uncertainty in Income Taxes,” (“FIN 48”) an interpretation of FASB Statement No. 109, “Accounting for Income Taxes.” FIN 48 prescribes a recognition threshold and measurement attribute for the financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return. FIN 48 requires that the Company recognize in its financial statements, the impact of a tax position, if that position is more likely than not of being sustained on audit, based on the technical merits of the position. FIN 48 also provides guidance on derecognition, classification, interest and penalties, accounting in interim periods and disclosure. The provisions of FIN 48 are effective beginning January 1, 2007 with the cumulative effect of the change in accounting principle recorded as an adjustment to the opening balance of retained earnings. The Company is currently evaluating the impact of adopting FIN 48 on the Company’s consolidated financial position, results of operations and disclosures.

Fair Value Measurements

In September 2006, the FASB issued FASB Statement No. 157, “Fair Value Measurements” (“FAS 157”). FAS 157 defines fair value, establishes a framework for measuring fair value in generally accepted accounting principles, and expands disclosures about fair value measurements. The provisions of FAS 157 are effective for the Company’s fiscal year ending December 31, 2008. The Company is currently evaluating the impact that the adoption of this statement will have on the Company’s consolidated financial position, results of operations and disclosures.

Pensions

In September 2006, the FASB issued FASB Statement No. 158, “Employers’ Accounting for Defined Benefit Pension and Other Postretirement Plans – an amendment of FASB Statements No. 87, 88, 106, and 132(R)” (“FAS 158”). FAS 158 requires employers that sponsor one or more defined benefit plans to (i) recognize the funded status of a benefit plan in its statement of financial position, (ii) recognize the gains or losses and prior service costs or credits that arise during the period as a component of other comprehensive income, net of tax, (iii) measure the defined benefit plan assets and obligations as of the date of the employer’s

 

8


NEWMONT MINING CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) Continued

(dollars in millions, except per share, per ounce and per pound amounts)

 

fiscal year-end statement of financial position, and (iv) disclose in the notes to the financial statements additional information about certain effects on net periodic cost for the next fiscal year that arise from delayed recognition of the gains or losses, prior service costs or credits, and transition asset or obligation. The provisions of FAS 158 are effective for the Company’s fiscal year ending December 31, 2006. The Company is currently evaluating the impact that the adoption of this statement will have on the Company’s consolidated financial position, results of operations and disclosures.

(3) OTHER INCOME, NET

 

     Three Months Ended September 30,     Nine Months Ended September 30,
     2006     2005     2006     2005

Gain on sale of Alberta oil sands project

   $ 266     $     $ 266     $

Royalty and dividend income

     30       18       88       57

Interest income

     16       17       52       41

Gain on sale of Martabe project

     30             30      

Income from development projects, net

     5             14      

Gain on sale of property, plant and equipment

     4       1       12       4

Foreign currency exchange gains

     2       8       11       10

Gain (loss) on sale of other assets, net

     3       (1 )     4       32

Gain on sale of investments, net

           21       4       27

Loss on early retirement of debt

     (40 )           (40 )    

(Loss) gain on ineffective portion of derivative instruments, net

     (1 )     1       (60 )     2

Other

     2       1       5       4
                              
   $ 317     $ 66     $ 386     $ 177
                              

During the third quarter of 2006, Newmont sold its Alberta oil sands project to the Korean National Oil Corporation and its Martabe gold project in Indonesia to Agincourt Resources Limited (“Agincourt”). Newmont received net cash proceeds of $271 for the Alberta oil sands project resulting in a $266 pre-tax gain. Newmont received $42 net cash proceeds and approximately 43 million Agincourt shares valued at $37 for the Martabe project, resulting in a $30 pre-tax gain.

On September 27, 2006, Newmont settled its remaining obligations under the prepaid forward gold sales contract and forward gold purchase contract for which it was required to deliver 17,951 ounces of gold in December 2006 and 179,062 ounces of gold in June 2007. This settlement resulted in cash payments of $96, a $48 reduction to the current portion of long-term debt and a $40 pre-tax loss on extinguishment of debt.

The gain on investments during 2005 was primarily attributable to the sale of Newmont’s investment in Kinross Gold Corporation which resulted in a $20 pre-tax gain.

(4) EMPLOYEE PENSION AND OTHER BENEFIT PLANS

 

     Three Months Ended September 30,     Nine Months Ended September 30,  
     2006     2005     2006     2005  

Pension benefit costs, net

        

Service cost

   $ 3     $ 3     $ 11     $ 10  

Interest cost

     6       4       17       14  

Expected return on plan assets

     (4 )     (4 )     (13 )     (12 )

Amortization of prior service cost

           1       1       1  

Amortization of loss

     2       2       6       5  
                                
   $ 7     $ 6     $ 22     $ 18  
                                
     Three Months Ended September 30,     Nine Months Ended September 30,  
     2006     2005     2006     2005  

Other benefit costs, net

        

Service cost

   $ 1     $ 1     $ 4     $ 4  

Interest cost

     1       2       4       4  
                                
   $ 2     $ 3     $ 8     $ 8  
                                

A pension settlement loss of $4 was recognized in the nine months ended September 30, 2005 and included in Other expense, net.

 

9


NEWMONT MINING CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) Continued

(dollars in millions, except per share, per ounce and per pound amounts)

 

(5) DISCONTINUED OPERATIONS AND ASSETS AND LIABILITIES HELD FOR SALE

In early July 2006, Newmont’s Board of Directors approved a plan to sell the Company’s 50% interest in the Zarafshan-Newmont Joint Venture. However, as a result of the Uzbek government’s expropriation of the Company’s assets in August 2006, an impairment loss of $101 was recognized for the three and nine months ended September 30, 2006. The Company will continue to challenge the Uzbek government’s actions through international arbitration.

During the fourth quarter of 2005, Newmont committed to plans to divest its Holloway operation in Canada. In September 2006, Newmont reached an agreement with St. Andrew Goldfields Ltd. to sell the Holloway operation for cash proceeds of $40 plus certain royalties. Newmont expects the sale of Holloway to be completed during the fourth quarter of 2006.

During June 2005, Newmont announced the pending sale of its Golden Grove copper-zinc operation in Western Australia to Oxiana Limited (“Oxiana”) for cash of A$190 and 82 million Oxiana shares. The sale was completed on July 26, 2005.

Newmont has accounted for these dispositions in accordance with SFAS No. 144 “Accounting for the Impairment or Disposal of Long-Lived Assets.” The Company has reclassified the balance sheet amounts and the income statement results from the historical presentation to Assets and Liabilities of operations held for sale on the Condensed Consolidated Balance Sheets and to Loss from discontinued operations in the Condensed Consolidated Statements of Income for all periods presented. The Condensed Consolidated Statements of Cash Flows have been reclassified for assets held for sale and discontinued operations for all periods presented.

The following table details selected financial information included in the Gain (loss) from discontinued operations:

 

     Three Months Ended September 30,     Nine Months Ended September 30,  
     2006     2005     2006     2005  

Sales - gold, net

   $ 5     $ 19     $ 52     $ 63  

Sales - base metals, net

           1             38  
                                
   $ 5     $ 20     $ 52     $ 101  
                                

Gain (loss) from operations

   $ (1 )   $ (2 )   $ 6     $ (10 )

Gain (loss) on impairment

     (101 )     6       (101 )     (33 )
                                

Pre-tax (loss) gain

     (102 )     4       (95 )     (43 )

Income tax benefit (expense)

     36       (3 )     38       12  
                                

Gain (loss) from discontinued operations

   $ (66 )   $ 1     $ (57 )   $ (31 )
                                

The major classes of Assets and Liabilities of operations held for sale are as follows:

 

     At September 30,
2006
   At December 31,
2005

Assets:

     

Accounts receivable

   $    $ 2

Inventories

     2      20

Stockpiles and ore on leach pads

          18

Property, plant and mine development

     21      129

Other assets

     13      13
             

Total assets of operations held for sale

   $ 36    $ 182
             

Liabilities:

     

Accounts payable

   $    $ 7

Reclamation and remediation

     3      5

Other liabilities

          35
             

Total liabilities of operations held for sale

   $ 3    $ 47
             

 

10


NEWMONT MINING CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) Continued

(dollars in millions, except per share, per ounce and per pound amounts)

 

(6) INCOME PER COMMON SHARE

Basic income per common share is computed by dividing income available to common shareholders by the weighted average number of common shares outstanding for the period. Diluted income per common share is computed similarly to basic income per common share except that the denominator is increased to include the number of additional common shares that would have been outstanding if the potentially dilutive common shares had been issued.

 

     Three Months Ended September 30,    Nine Months Ended September 30,  
     2006     2005    2006     2005  

Numerator:

         

Income from continuing operations

   $ 264     $ 125    $ 625     $ 291  

Gain (loss) from discontinued operations

     (66 )     1      (57 )     (31 )
                               

Net income

   $ 198     $ 126    $ 568     $ 260  
                               

Denominator:

         

Basic

     450       446      449       446  

Effect of employee stock-based awards

     2       3      2       3  
                               

Diluted

     452       449      451       449  
                               

Income per common share

         

Basic and diluted:

         

Income from continuing operations

   $ 0.59     $ 0.28    $ 1.39     $ 0.65  

Gain (loss) from discontinued operations

     (0.15 )          (0.13 )     (0.07 )
                               

Net income

   $ 0.44     $ 0.28    $ 1.26     $ 0.58  
                               

Options to purchase 2.1 million and 1.6 million shares of common stock at average exercise prices of $52.45 and $53.34 were outstanding as of September 30, 2006 and 2005, respectively, but were not included in the computation of diluted weighted average number of common shares because their effect would have been anti-dilutive.

(7) COMPREHENSIVE INCOME

 

     Three Months Ended September 30,     Nine Months Ended September 30,  
     2006     2005     2006     2005  

Net income

   $ 198     $ 126     $ 568     $ 260  

Other comprehensive income (loss), net of tax:

        

Unrealized (loss) gain on marketable equity securities

     (83 )     209       172       279  

Foreign currency translation adjustments

     7       19       26       11  

Changes in fair value of cash flow hedge instruments

     46       (24 )     (4 )     (38 )
                                
     (30 )     204       194       252  
                                

Comprehensive income

   $ 168     $ 330     $ 762     $ 512  
                                

(8) ACQUISITIONS

On September 27, 2006, Newmont acquired a 40% interest in Shore Gold Inc.’s Fort a la Corne Joint Venture in Saskatchewan, Canada for $152.

On March 20, 2006, Newmont acquired Newcrest Mining Limited’s 22.22% interest in the Boddington Project, bringing its interest in the project to 66.67%, for total consideration of $164 plus stamp duty of $9 paid in the third quarter of 2006.

On January 20, 2006, Newmont acquired the remaining 15% interest in the Akyem project for total consideration of $23, bringing its interest in the project to 100%.

 

11


NEWMONT MINING CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) Continued

(dollars in millions, except per share, per ounce and per pound amounts)

 

(9) SALES CONTRACTS, COMMODITY AND DERIVATIVE INSTRUMENTS

For the three months ended September 30, 2006 and 2005, losses of $1 and gains of $1, respectively, were included in Other income, net for the ineffective portion of derivative instruments designated as cash flow hedges. For the nine months ended September 30, 2006 and 2005, losses of $60 and gains of $2, respectively, were included in Other income, net for the ineffective portion of derivative instruments designated as cash flow hedges. The amount anticipated to be reclassified from Accumulated other comprehensive income to income for derivative instruments during the next 12 months is a loss of approximately $50. The maximum period over which hedged forecasted transactions are expected to occur is 5 years.

Newmont had the following derivative contracts outstanding at September 30, 2006:

 

     Expected Maturity Date or
Transaction Date
   Fair Value  
     2006    2007    Total/
Average
   At September 30,
2006
    At December 31,
2005
 

Gold Put Option Contracts

             

($ denominated):

             

Ounces (thousands)

     10      20      30    $ (2 )   $ (3 )

Average price

   $ 393    $ 397    $ 396     

Copper Collar Contracts (3)

             

($ denominated):

             

Pounds (millions) (4)

     93      84      177    $ (351 )(1)   $ (261 )(2)

Average cap price

   $ 1.38    $ 1.41    $ 1.39     

Average floor price

   $ 1.10    $ 1.10    $ 1.10     

$/IDR Forward Purchase Contracts (3):

             

$ (millions)

   $ 21    $ 50    $ 71    $ 3     $  

Average rate (IDR/$)

     10,261      9,725      9,881     

  (1) The fair value does not include amounts payable ($100) on derivative contracts that were closed out in September 2006 with the net settlement due in October 2006. At September 30, 2006, $451 was included in Current liabilities, Derivative instruments.
  (2) The fair value does not include amounts payable ($36) on derivative contracts that were closed out in December 2005 with the net settlement due and paid in January 2006.
  (3) 56.25% guaranteed by Newmont, 43.75% guaranteed by an affiliate of Sumitomo Corporation.
  (4) Of the contracts maturing in 2007, 71 million pounds are designated against expected 2006 sales. The remainder are designated against 2007 sales.

Provisional Copper and Gold Sales

The 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 copper concentrates at the forward London Metal Exchange price at the time of sale. The embedded derivative, which does not qualify for hedge accounting, is marked to market through earnings each period prior to final settlement.

For the three and nine months ended September 30, 2006 and 2005, the Company recorded the following gross revenues before treatment and refining charges, which were subject to final price adjustments at September 30, 2006 and 2005, as follows:

 

     Three Months Ended September 30,     Nine Months Ended September 30,  
     2006     2005     2006     2005  

Gross revenue subject to final price adjustments

        

Copper

   $ 309     $ 326     $ 405     $ 443  

Gold

   $ 9     $ 21     $ 19     $ 21  
The average final price adjustments realized were as follows:    
     Three Months Ended September 30,     Nine Months Ended September 30,  
     2006     2005     2006     2005  

Average final price adjustments

        

Copper

     26 %     12 %     39 %     10 %

Gold

     (4 )%     3 %     4 %      

 

12


NEWMONT MINING CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) Continued

(dollars in millions, except per share, per ounce and per pound amounts)

 

Price-Capped Forward Sales Contracts

In 2001, Newmont entered into transactions that closed out certain call options. The options were replaced with a series of forward sales contracts requiring physical delivery of the same quantity of gold over slightly extended future periods. Under the terms of the contracts, Newmont will realize the lower of the spot price on the delivery date or the capped price ranging from $381 to $392 per ounce. The initial fair value of the forward sales contracts was recorded as deferred revenue. At September 30, 2006, $47 remained in deferred revenue and will be included in revenue as delivery occurs. The forward sales contracts are accounted for as normal sales contracts under SFAS No. 133 “Accounting for Derivative Instruments and Hedging Activities” and SFAS No. 138 “Accounting for Certain Derivative Instruments and Certain Hedging Activities-an Amendment to SFAS No. 133.”

Newmont had the following price-capped forward sales contracts outstanding at September 30, 2006:

 

     Scheduled Maturity Date or Transaction Date    Fair Value  
     2008    2009    2011    Total/
Average
   At September 30,
2006
    At December 31,
2005
 

Ounces (thousands)

     1,000      600      250      1,850    $ (486 )   $ (338 )

Average price

   $ 384    $ 381    $ 392    $ 384     

Interest Rate Swap Contracts

In 2001, Newmont entered into contracts to hedge the interest rate risk exposure on a portion of its $275 8 5/8% notes and its $200 8 3/8% debentures. For the three months ended September 30, 2006 and 2005, these transactions resulted in a reduction in interest expense of $nil and $1, respectively. For the nine months ended September 30, 2006 and 2005, these transactions resulted in a reduction in interest expense of $nil and $3, respectively. The fair value of the interest rate swaps was $1 and $2 at September 30, 2006 and December 31, 2005, respectively.

 

13


NEWMONT MINING CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) Continued

(dollars in millions, except per share, per ounce and per pound amounts)

 

(10) INVESTMENTS

 

     At September 30, 2006
          Unrealized      
     Cost/Equity
Basis
   Gain    Loss     Fair/Equity
Value

Current:

          

Marketable Debt Securities:

          

Auction rate securities

   $ 197    $    $     $ 197
                            

Marketable Equity Securities:

          

Agincourt Resources

     37           (3 )     34

Other

     10      23            33
                            
     47      23      (3 )     67
                            

Other investments, at cost

     9                 9
                            
   $ 253    $ 23    $ (3 )   $ 273
                            

Long-term:

          

Marketable Equity Securities:

          

Canadian Oil Sands Trust

   $ 268    $ 551    $     $ 819

Gabriel Resources, Ltd.

     72      91            163

Shore Gold, Inc.

     94           (7 )     87

Miramar Mining Corporation

     29      48            77

Other

     32      13      (1 )     44
                            
     495      703      (8 )     1,190
                            

Other investments, at cost

     12                 12
                            

Investment in Affiliates:

          

European Gold Refineries

     15                 15

AGR Matthey Joint Venture

     15                 15

Other

     7                 7
                            
     37                 37
                            
   $ 544    $ 703    $ (8 )   $ 1,239
                            
     At December 31, 2005
          Unrealized      
     Cost/Equity
Basis
   Gain    Loss     Fair/Equity
Value

Current:

          

Marketable Debt Securities:

          

Auction rate securities

   $ 785    $    $     $ 785
                            

Marketable Equity Securities:

          

Other

     11      12            23
                            

Other investments, at cost

     9                 9
                            
   $ 805    $ 12    $     $ 817
                            

Long-term:

          

Marketable Equity Securities:

          

Canadian Oil Sands Trust

   $ 240    $ 410    $     $ 650

Gabriel Resources, Ltd.

     53      29            82

Shore Gold, Inc.

     89      22            111

Miramar Mining Corporation

     27      19            46

Other

     20      8            28
                            
     429      488            917
                            

Other investments, at cost

     10                 10
                            

Investment in Affiliates:

          

European Gold Refineries

     15                 15

AGR Matthey Joint Venture

     13                 13
                            
     28                 28
                            
   $ 467    $ 488    $     $ 955
                            

 

14


NEWMONT MINING CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) Continued

(dollars in millions, except per share, per ounce and per pound amounts)

 

(11) INVENTORIES

 

     At September 30,
2006
   At December 31,
2005

In-process

   $ 78    $ 72

Concentrate

     12      3

Precious metals

     13      3

Materials, supplies and other

     269      226
             
   $ 372    $ 304
             

(12) STOCKPILES AND ORE ON LEACH PADS

 

     At September 30,
2006
   At December 31,
2005

Current:

     

Stockpiles

   $ 183    $ 128

Ore on leach pads

     153      113
             
   $ 336    $ 241
             

Long-term:

     

Stockpiles

   $ 522    $ 404

Ore on leach pads

     273      195
             
   $ 795    $ 599
             

(13) DEBT

 

     At September 30, 2006    At December 31, 2005
     Current    Non-Current    Current    Non-Current

Sale-leaseback of refractory ore treatment plant

   $ 21    $ 235    $ 19    $ 256

5 7/8% notes, net of discount

          597           597

8 5/8% debentures, net of discount

          217           218

Newmont Australia 7 5/8% guaranteed notes, net of premium

          120           120

Prepaid forward sales obligation

               48      48

PTNNT project financing facility

     87      436      87      479

PTNNT shareholder loan

     39           39     

Yanacocha credit facility

     7      93          

Yanacocha bonds

          100          

Project financings, capital leases and other

     4      1      2      5
                           
   $ 158    $ 1,799    $ 195    $ 1,723
                           

Scheduled minimum debt repayments at September 30, 2006 are $83 for the remainder of 2006, $122 in 2007, $243 in 2008, $125 in 2009, $133 in 2010 and $1,251 thereafter.

On September 27, 2006, Newmont settled its remaining obligations under the prepaid forward gold sales contract and forward gold purchase contract for which it was required to deliver 17,951 ounces of gold in December 2006 and 179,062 ounces of gold in June 2007. This settlement resulted in cash payments of approximately $96, a $48 reduction to the current portion of long-term debt and a pre-tax loss on extinguishment of debt of approximately $40. During June 2006, 161,111 ounces of gold were physically delivered in connection with the prepaid forward sales obligation and the Company recorded a non-cash reduction in debt of $48.

On July 27, 2006, Yanacocha issued $100 of bonds into the Peruvian capital markets under a $200 bond program approved by the Peruvian securities regulatory authority. The bonds are held by various Peruvian entities, including pension funds, mutual funds, government funds and insurance companies. The issuance is comprised of $42 of floating interest rate bonds bearing interest at a rate of Libor plus 1.4375%; and $58 of fixed rate bonds bearing interest at 7.0%. The bonds have a four year grace period and amortize quarterly over six years. The bonds are unsecured and are non-recourse to Newmont.

On May 19, 2006, Yanacocha entered into an unsecured $100 bank financing with a syndicate of Peruvian commercial banks, comprised of Banco de Credito del Peru, Banco Continental and Banco Wiese Sudameris. Quarterly repayments begin in May 2007 with final maturity May 2014. Borrowings under the facility bear interest at a rate of Libor plus 1.875%. The loan is non-recourse to Newmont.

 

15


NEWMONT MINING CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) Continued

(dollars in millions, except per share, per ounce and per pound amounts)

 

(14) OTHER LIABILITIES

 

     At September 30,
2006
   At December 31,
2005

Other current liabilities:

     

Income and mining taxes

   $ 203    $ 77

Accrued operating costs

     121      79

Accrued capital expenditures

     93      78

Reclamation and remediation costs

     53      63

Interest

     53      42

Royalties

     22      26

Taxes other than income and mining

     16      18

Deferred income tax liabilities

     4      4

Deferred revenue

     4      17

Advanced stripping costs

          14

Other

     40      53
             
   $ 609    $ 471
             
     At September 30,
2006
   At December 31,
2005

Other long-term liabilities:

     

Income taxes

   $ 230    $ 220

Deferred revenue from the sale of future product

     47      47

Derivative instruments

          30

Advanced stripping costs

          93

Other

     34      25
             
   $ 311    $ 415
             

(15) RECLAMATION AND REMEDIATION (ASSET RETIREMENT OBLIGATIONS)

At September 30, 2006 and December 31, 2005, $467 and $428, respectively, were accrued for reclamation obligations relating to mineral properties in accordance with SFAS No. 143, “Accounting for Asset Retirement Obligations.” In addition, the Company is involved in several matters concerning environmental obligations associated with former, primarily historic, mining activities. Generally, these matters concern developing and implementing remediation plans at the various sites involved. At September 30, 2006 and December 31, 2005, $69 and $77, respectively, were accrued for such obligations. These amounts are also included in Reclamation and remediation liabilities.

The following is a reconciliation of the liability for asset retirement obligations:

 

     Nine Months Ended September 30,  
     2006     2005  

Balance at beginning of period

   $ 505     $ 469  

Additions, changes in estimates and other

     51       9  

Liabilities settled

     (42 )     (23 )

Disposition of liability

           (7 )

Accretion expense

     22       20  
                

Balance at end of period

   $ 536     $ 468  
                

The current portions of Reclamation and remediation liabilities of $53 and $63 at September 30, 2006 and December 31, 2005, respectively, are included in Other current liabilities. The additions in 2006 relate to expansions of waste dumps at Batu Hijau ($33) and Nevada ($8), and the acquisition of an additional interest at Boddington ($10).

 

16


NEWMONT MINING CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) Continued

(dollars in millions, except per share, per ounce and per pound amounts)

 

(16) SEGMENT INFORMATION

Financial information relating to Newmont’s segments is as follows:

 

       Three Months Ended September 30, 2006  
       Nevada      Yanacocha      Australia/
New Zealand
     Batu
Hijau
     Africa      Other
Operations
 

Sales, net:

                             

Gold

     $ 309      $ 358      $ 221      $ 35      $ 47      $ 37  

Copper

     $      $      $      $ 93      $      $  

Cost applicable to sales:

                             

Gold

     $ 224      $ 121      $ 134      $ 16      $ 19      $ 11  

Copper

     $      $      $      $ 66      $      $  

Depreciation, depletion and amortization:

                             

Gold

     $ 37      $ 46      $ 32      $ 7      $ 6      $ 5  

Copper

     $      $      $      $ 12      $      $  

Other

     $      $      $ 1      $      $      $  

Exploration

     $ 8      $ 3      $ 5      $      $ 4      $ 1  

Advanced projects, research and development

     $ 4      $ 1      $ 2      $ 2      $ 6      $  

Other income, net

     $ 4      $ 4      $ 4      $ 1      $ 1      $ (39 )

Interest expense, net

     $      $ 9      $      $ 11      $      $ 1  

Pre-tax income (loss) before minority interest and equity income of affiliates

     $ 40      $ 158      $ 60      $ 13      $ 11      $ (24 )

Additions to property, plant and mine development

     $ 211      $ 61      $ 53      $ 13      $ 65      $ 1  

 

     Three Months Ended September 30, 2006
     Total
Operations
    Exploration     Merchant
Banking
    Corporate
and Other
    Consolidated

Sales, net:

          

Gold

   $ 1,007     $     $     $ 2     $ 1,009

Copper

   $ 93     $     $     $     $ 93

Cost applicable to sales:

          

Gold

   $ 525     $     $     $     $ 525

Copper

   $ 66     $     $     $     $ 66

Depreciation, depletion and amortization:

          

Gold

   $ 133     $     $     $     $ 133

Copper

   $ 12     $     $     $     $ 12

Other

   $ 1     $     $ 5     $ 2     $ 8

Exploration

   $ 21     $ 20     $     $     $ 41

Advanced projects, research and development

   $ 15     $     $ (2 )   $ 6     $ 19

Other income, net

   $ (25 )   $ 1     $ 298     $ 43     $ 317

Interest expense, net

   $ 21     $     $     $ 7     $ 28

Pre-tax income (loss) before minority interest and equity income of affiliates

   $ 258     $ (20 )   $ 294     $ (11 )   $ 521

Additions to property, plant and mine development

   $ 404     $     $ 3     $     $ 407

 

17


NEWMONT MINING CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) Continued

(dollars in millions, except per share, per ounce and per pound amounts)

 

     Three Months Ended September 30, 2005  
     Nevada     Yanacocha    Australia/
New Zealand
    Batu
Hijau
   Africa     Other
Operations
 

Sales, net:

              

Gold

   $ 256     $ 338    $ 167     $ 126    $     $ 40  

Copper

   $     $    $     $ 231    $     $  

Cost applicable to sales:

              

Gold

   $ 212     $ 111    $ 121     $ 38    $     $ 20  

Copper

   $     $    $     $ 86    $     $  

Depreciation, depletion and amortization:

              

Gold

   $ 32     $ 50    $ 29     $ 11    $     $ 5  

Copper

   $     $    $     $ 20    $     $  

Other

   $     $    $     $    $     $  

Exploration

   $ 6     $ 2    $ 5     $    $ 2     $  

Advanced projects, research and development

   $     $ 2    $     $    $ 6     $ 1  

Other income, net

   $ 1     $ 1    $ 4     $    $     $  

Interest expense, net

   $     $    $     $ 11    $     $  

Pre-tax income (loss) before minority interest and equity income of affiliates

   $ 7     $ 172    $ 14     $ 191    $ (8 )   $ (6 )

Amortization of deferred (advanced) stripping, net

   $ (16 )   $    $ (3 )   $ 16    $     $ (1 )

Additions to property, plant and mine development

   $ 118     $ 62    $ 27     $ 24    $ 94     $ 8  

 

     Three Months Ended September 30, 2005  
     Total
Operations
    Exploration     Merchant
Banking
   Corporate
and Other
    Consolidated  

Sales, net:

           

Gold

   $ 927     $     $    $ (13 )   $ 914  

Copper

   $ 231     $     $    $     $ 231  

Cost applicable to sales:

           

Gold

   $ 502     $     $    $     $ 502  

Copper

   $ 86     $     $    $     $ 86  

Depreciation, depletion and amortization:

           

Gold

   $ 127     $     $    $     $ 127  

Copper

   $ 20     $     $    $     $ 20  

Other

   $     $ 1     $ 3    $ 4     $ 8  

Exploration

   $ 15     $ 24     $    $     $ 39  

Advanced projects, research and development

   $ 9     $     $ 3    $ 6     $ 18  

Other income, net

   $ 6     $ 1     $ 39    $ 20     $ 66  

Interest expense, net

   $ 11     $     $    $ 12     $ 23  

Pre-tax income (loss) before minority interest and equity income of affiliates

   $ 370     $ (23 )   $ 33    $ (44 )   $ 336  

Amortization of deferred (advanced) stripping, net

   $ (4 )   $     $    $     $ (4 )

Additions to property, plant and mine development

   $ 333     $     $ 1    $ 20     $ 354  

 

18


NEWMONT MINING CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) Continued

(dollars in millions, except per share, per ounce and per pound amounts)

 

     Nine Months Ended September 30, 2006  
     Nevada    Yanacocha    Australia/
New Zealand
   Batu
Hijau
    Africa     Other
Operations
 

Sales, net:

               

Gold

   $ 913    $ 1,274    $ 599    $ 159     $ 47     $ 133  

Copper

   $    $    $    $ 432     $     $  

Cost applicable to sales:

               

Gold

   $ 664    $ 390    $ 385    $ 58     $ 19     $ 48  

Copper

   $    $    $    $ 215     $     $  

Depreciation, depletion and amortization:

               

Gold

   $ 108    $ 138    $ 86    $ 17     $ 6     $ 14  

Copper

   $    $    $    $ 46     $     $  

Other

   $    $    $ 2    $     $ 1     $  

Exploration

   $ 22    $ 7    $ 15    $     $ 9     $ 3  

Advanced projects, research and development

   $ 10    $ 2    $ 2    $ 2     $ 23     $ 1  

Other income, net

   $ 14    $ 13    $ 4    $ (48 )   $ 1     $ (24 )

Interest expense, net

   $    $ 10    $    $ 33     $     $ 1  

Pre-tax income (loss) before minority interest and equity income of affiliates

   $ 119    $ 710    $ 108    $ 170     $ (11 )   $ 7  

Additions to property, plant and mine development

   $ 501    $ 174    $ 115    $ 97     $ 200     $ 8  

Total assets from continuing operations

   $ 2,470    $ 1,760    $ 1,262    $ 2,494     $ 914     $ 150  

 

     Nine Months Ended September 30, 2006
     Total
Operations
    Exploration     Merchant
Banking
   Corporate
and Other
    Consolidated

Sales, net:

           

Gold

   $ 3,125     $     $    $ (30 )   $ 3,095

Copper

   $ 432     $     $    $     $ 432

Cost applicable to sales:

           

Gold

   $ 1,564     $     $    $     $ 1,564

Copper

   $ 215     $     $    $     $ 215

Depreciation, depletion and amortization:

           

Gold

   $ 369     $     $    $     $ 369

Copper

   $ 46     $     $    $     $ 46

Other

   $ 3     $     $ 14    $ 12     $ 29

Exploration

   $ 56     $ 63     $    $ 1     $ 120

Advanced projects, research and development

   $ 40     $     $ 7    $ 21     $ 68

Other income, net

   $ (40 )   $ 3     $ 361    $ 62     $ 386

Interest expense, net

   $ 44     $     $    $ 26     $ 70

Pre-tax income (loss) before minority interest and equity income of affiliates

   $ 1,103     $ (63 )   $ 337    $ (113 )   $ 1,265

Additions to property, plant and mine development

   $ 1,095     $     $ 5    $ 9     $ 1,109

Total assets from continuing operations

   $ 9,050     $ 1,141     $ 3,192    $ 1,702     $ 15,085

Assets held for sale

            $ 36
               

Total assets

            $ 15,121
               

 

19


NEWMONT MINING CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) Continued

(dollars in millions, except per share, per ounce and per pound amounts)

 

     Nine Months Ended September 30, 2005  
     Nevada     Yanacocha    Australia/
New Zealand
   Batu
Hijau
    Africa     Other
Operations
 

Sales, net:

              

Gold

   $ 762     $ 976    $ 523    $ 232     $     $ 96  

Copper

   $     $    $    $ 504     $     $  

Cost applicable to sales:

              

Gold

   $ 585     $ 334    $ 383    $ 80     $     $ 55  

Copper

   $     $    $    $ 226     $     $  

Depreciation, depletion and amortization:

              

Gold

   $ 92     $ 148    $ 87    $ 25     $     $ 14  

Copper

   $     $    $    $ 67     $     $  

Other

   $     $    $ 2    $     $ 1     $ 2  

Exploration

   $ 14     $ 5    $ 15    $     $ 6     $ 3  

Advanced projects, research and development

   $     $ 2    $    $     $ 13     $ 5  

Other income, net

   $ 4     $ 2    $ 7    $ 3     $     $  

Interest expense, net

   $     $    $    $ 32     $     $  

Pre-tax income (loss) before minority interest and equity income of affiliates

   $ 64     $ 485    $ 40    $ 309     $ (21 )   $ (19 )

Amortization of deferred (advanced) stripping, net

   $ (48 )   $    $ 1    $ (1 )   $     $ (2 )

Additions to property, plant and mine development

   $ 324     $ 169    $ 72    $ 52     $ 206     $ 24  

Total assets from continuing operations

   $ 1,961     $ 1,421    $ 1,063    $ 2,311     $ 575     $ 220  

 

     Nine Months Ended September 30, 2005  
     Total
Operations
    Exploration     Merchant
Banking
   Corporate
and Other
    Consolidated  

Sales, net:

           

Gold

   $ 2,589     $     $    $ (33 )   $ 2,556  

Copper

   $ 504     $     $    $     $ 504  

Cost applicable to sales:

           

Gold

   $ 1,437     $     $    $     $ 1,437  

Copper

   $ 226     $     $    $     $ 226  

Depreciation, depletion and amortization:

           

Gold

   $ 366     $     $    $     $ 366  

Copper

   $ 67     $     $    $     $ 67  

Other

   $ 5     $ 3     $ 15    $ 10     $ 33  

Exploration

   $ 43     $ 60     $    $     $ 103  

Advanced projects, research and development

   $ 20     $     $ 12    $ 15     $ 47  

Other income, net

   $ 16     $ 3     $ 115    $ 43     $ 177  

Interest expense, net

   $ 32     $     $    $ 43     $ 75  

Pre-tax income (loss) before minority interest and equity income of affiliates

   $ 858     $ (60 )   $ 80    $ (151 )   $ 727  

Amortization of deferred (advanced) stripping, net

   $ (50 )   $     $    $     $ (50 )

Additions to property, plant and mine development

   $ 847     $     $ 3    $ 34     $ 884  

Total assets from continuing operations

   $ 7,551     $ 1,135     $ 2,989    $ 2,147     $ 13,822  

Assets held for sale

              133  
                 

Total assets

            $ 13,955  
                 

 

20


NEWMONT MINING CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) Continued

(dollars in millions, except per share, per ounce and per pound amounts)

 

(17) CONDENSED CONSOLIDATING FINANCIAL STATEMENTS

Newmont USA, a 100 percent owned subsidiary of Newmont Mining Corporation, has fully and unconditionally guaranteed the 5 7/8% publicly traded notes. The following condensed consolidating financial information is provided for Newmont USA, as guarantor, and for Newmont Mining Corporation, as issuer, as an alternative to providing separate financial statements for the guarantor. The accounts of Newmont Mining Corporation are presented using the equity method of accounting for investments in subsidiaries.

 

     Three Months Ended September 30, 2006  

Condensed Consolidating Statement of Income

   Newmont
Mining
Corporation
    Newmont
USA
    Other
Subsidiaries
    Eliminations     Newmont
Mining
Corporation
Consolidated
 

Revenues

          

Sales - gold, net

   $     $ 755     $ 254     $     $ 1,009  

Sales - copper, net

           93                   93  
                                        
           848       254             1,102  
                                        

Costs and expenses

          

Costs applicable to sales (exclusive of depreciation, depletion and amortization shown separately below)

          

Gold

           381       146       (2 )     525  

Copper

           66                   66  

Depreciation, depletion and amortization

           114       39             153  

Exploration

           31       10             41  

Advanced projects, research and development

           11       8             19  

General and administrative

           31       (4 )     2       29  

Other

           36       2       (1 )     37  
                                        
           670       201       (1 )     870  
                                        

Other income (expense)

          

Other income (expense), net

     82       (17 )     253       (1 )     317  

Interest income - intercompany

     31       23             (54 )      

Interest expense - intercompany

     (2 )           (52 )     54        

Interest expense, net

     (4 )     (22 )     (2 )           (28 )
                                        
     107       (16 )     199       (1 )     289  
                                        

Income from continuing operations before taxes, minority interest and equity income of affiliates

     107       162       252             521  

Income tax (expense) benefit

     (52 )     (8 )     (146 )           (206 )

Minority interest in income of subsidiaries

           (52 )     (5 )     5       (52 )

Equity income (loss) of affiliates

     143       (1 )     10       (151 )     1  
                                        

Income from continuing operations

     198       101       111       (146 )     264  

Loss from discontinued operations

           (66 )                 (66 )
                                        

Net income (loss)

   $ 198     $ 35     $ 111     $ (146 )   $ 198  
                                        

 

21


NEWMONT MINING CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) Continued

(dollars in millions, except per share, per ounce and per pound amounts)

 

     Three Months Ended September 30, 2005  

Condensed Consolidating Statement of Income

   Newmont
Mining
Corporation
    Newmont
USA
    Other
Subsidiaries
    Eliminations     Newmont
Mining
Corporation
Consolidated
 

Revenues

          

Sales - gold, net

   $     $ 759     $ 155     $     $ 914  

Sales - copper, net

           231                   231  
                                        
           990       155             1,145  
                                        

Costs and expenses

          

Costs applicable to sales (exclusive of depreciation, depletion and amortization shown separately below)

          

Gold

           386       116             502  

Copper

           86                   86  

Depreciation, depletion and amortization

           125       30             155  

Exploration

           26       13             39  

Advanced projects, research and development

           9       9             18  

General and administrative

           31       2       (1 )     32  

Other

           21       (1 )           20  
                                        
           684       169       (1 )     852  
                                        

Other income (expense)

          

Other income (expense), net

     7       14       45             66  

Interest income, foreign currency exchange and other income - intercompany

     28       12             (40 )      

Interest expense - intercompany

     (2 )           (38 )     40        

Interest expense, net

     (10 )     (12 )     (1 )           (23 )
                                        
     23       14       6             43  
                                        

Income from continuing operations before taxes, minority interest and equity income of affiliates

     23       320       (8 )     1       336  

Income tax (expense) benefit

     (26 )     (70 )                 (96 )

Minority interest in income of subsidiaries

           (116 )           1       (115 )

Equity income (loss) of affiliates

     129             27       (156 )      
                                        

Income from continuing operations

     126       134       19       (154 )     125  

Loss from discontinued operations

           (1 )     2             1  
                                        

Net income (loss)

   $ 126     $ 133     $ 21     $ (154 )   $ 126  
                                        

 

22


NEWMONT MINING CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) Continued

(dollars in millions, except per share, per ounce and per pound amounts)

 

     Nine Months Ended September 30, 2006  

Condensed Consolidating Statement of Income

   Newmont
Mining
Corporation
    Newmont
USA
    Other
Subsidiaries
    Eliminations     Newmont
Mining
Corporation
Consolidated
 

Revenues

          

Sales - gold, net

   $     $ 2,482     $ 613     $     $ 3,095  

Sales - copper, net

           432                   432  
                                        
           2,914       613             3,527  
                                        

Costs and expenses

          

Costs applicable to sales (exclusive of depreciation, depletion and amortization shown separately below)

          

Gold

           1,184       386       (6 )     1,564  

Copper

           215                   215  

Depreciation, depletion and amortization

           343       101             444  

Exploration

           90       30             120  

Advanced projects, research and development

           34       34             68  

General and administrative

           97       1       5       103  

Other

           54       11       (1 )     64  
                                        
           2,017       563       (2 )     2,578  
                                        

Other income (expense)

          

Other income (expense), net

     99       (17 )     305       (1 )     386  

Interest income - intercompany

     90       53             (143 )      

Interest expense - intercompany

     (6 )           (137 )     143        

Interest expense, net

     (17 )     (47 )     (6 )           (70 )
                                        
     166       (11 )     162       (1 )     316  
                                        

Income from continuing operations before taxes, minority interest and equity income of affiliates

     166       886       212       1       1,265  

Income tax (expense) benefit

     (65 )     (255 )     (42 )           (362 )

Minority interest in income of subsidiaries

           (281 )     (15 )     17       (279 )

Equity income (loss) of affiliates

     467       (2 )     67       (531 )     1  
                                        

Income from continuing operations

     568       348       222       (513 )     625  

Loss from discontinued operations

           (57 )                 (57 )
                                        

Net income (loss)

   $ 568     $ 291     $ 222     $ (513 )   $ 568  
                                        

 

23


NEWMONT MINING CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) Continued

(dollars in millions, except per share, per ounce and per pound amounts)

 

     Nine Months Ended September 30, 2005  

Condensed Consolidating Statement of Income

   Newmont
Mining
Corporation
    Newmont
USA
    Other
Subsidiaries
    Eliminations     Newmont
Mining
Corporation
Consolidated
 

Revenues

          

Sales - gold, net

   $     $ 2,063     $ 493     $     $ 2,556  

Sales - copper, net

           504                   504  
                                        
           2,567       493             3,060  
                                        

Costs and expenses

          

Costs applicable to sales (exclusive of depreciation, depletion and amortization shown separately below)

          

Gold

           1,076       367       (6 )     1,437  

Copper

           226                   226  

Depreciation, depletion and amortization

           366       100             466  

Exploration

           68       35             103  

Advanced projects, research and development

           17       30             47  

General and administrative

           88       3       4       95  

Other

           49       12             61  
                                        
           1,890       547       (2 )     2,435  
                                        

Other income (expense)

          

Other income (expense), net

     12       72       93             177  

Interest income, foreign currency exchange and other income - intercompany

     89       33       1       (123 )      

Interest expense - intercompany

     (6 )           (117 )     123        

Interest expense, net

     (21 )     (47 )     (7 )           (75 )
                                        
     74       58       (30 )           102  
                                        

Income from continuing operations before taxes, minority interest and equity income of affiliates

     74       735       (84 )     2       727  

Income tax (expense) benefit

     (19 )     (222 )     50             (191 )

Minority interest in income of subsidiaries

           (251 )     2       1       (248 )

Equity income of affiliates

     205             57       (259 )     3  
                                        

Income from continuing operations

     260       262       25       (256 )     291  

Loss from discontinued operations

           (1 )     (30 )           (31 )
                                        

Net income (loss)

   $ 260     $ 261     $ (5 )   $ (256 )   $ 260  
                                        

 

24


NEWMONT MINING CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) Continued

(dollars in millions, except per share, per ounce and per pound amounts)

 

     At September 30, 2006

Condensed Consolidating Balance Sheets

   Newmont
Mining
Corporation
   Newmont
USA
    Other
Subsidiaries
   Eliminations     Newmont
Mining
Corporation
Consolidated

Assets

            

Cash and cash equivalents

   $ 1    $ 792     $ 266    $     $ 1,059

Marketable securities and other short-term investments

     1      213       59            273

Trade receivables

          146       4            150

Accounts receivable

     1,761      560       703      (2,876 )     148

Inventories

          308       64            372

Stockpiles and ore on leach pads

          294       42            336

Deferred income tax assets

          119       21            140

Other current assets

          90       25            115
                                    

Current assets

     1,763      2,522       1,184      (2,876 )     2,593

Property, plant and mine development, net

          4,521       2,041      (15 )     6,547

Investments

          270       969            1,239

Investments in subsidiaries

     5,990      4       4,406      (10,400 )    

Long-term stockpiles and ore on leach pads

          744       51            795

Deferred income tax assets

     31      623       160            814

Other long-term assets

     1,734      1,206       93      (2,831 )     202

Goodwill

                2,895            2,895

Assets of operations held for sale

          36                  36
                                    

Total assets

   $ 9,518    $ 9,926     $ 11,799    $ (16,122 )   $ 15,121
                                    

Liabilities

            

Current portion of long-term debt

   $    $ 154     $ 4    $     $ 158

Accounts payable

     50      2,276       800      (2,875 )     251

Employee related benefits

          133       34            167

Derivative instruments

          452       1            453

Other current liabilities

     101      348       161      (1 )     609
                                    

Current liabilities

     151      3,363       1,000      (2,876 )     1,638

Long-term debt

     597      1,081       121            1,799

Reclamation and remediation liabilities

          359       124            483

Deferred income tax liabilities

     53      231       262      25       571

Employee-related benefits

     1      260       23            284

Other long-term liabilities

     263      147       2,885      (2,984 )     311

Liabilities of operations held for sale

          3                  3
                                    

Total liabilities

     1,065      5,444       4,415      (5,835 )     5,089
                                    

Minority interest in subsidiaries

          1,038       340      (382 )     996
                                    

Stockholders’ equity

            

Preferred stock

                61      (61 )    

Common stock

     675                       675

Additional paid-in capital

     6,100      2,220       5,191      (6,828 )     6,683

Accumulated other comprehensive income (loss)

     572      (39 )     314      (275 )     572

Retained earnings

     1,106      1,263       1,478      (2,741 )     1,106
                                    

Total stockholders’ equity

     8,453      3,444       7,044      (9,905 )     9,036
                                    

Total liabilities and stockholders’ equity

   $ 9,518    $ 9,926     $ 11,799    $ (16,122 )   $ 15,121
                                    

 

25


NEWMONT MINING CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) Continued

(dollars in millions, except per share, per ounce and per pound amounts)

 

     At December 31, 2005

Condensed Consolidating Balance Sheets

   Newmont
Mining
Corporation
    Newmont
USA
    Other
Subsidiaries
   Eliminations     Newmont
Mining
Corporation
Consolidated

Assets

           

Cash and cash equivalents

   $ 1     $ 979     $ 102    $     $ 1,082

Marketable securities and other short-term investments

           794       23            817

Trade receivables

           93       1            94

Accounts receivable

     1,733       263       561      (2,422 )     135

Inventories

           262       42            304

Stockpiles and ore on leach pads

           215       26            241

Deferred stripping costs

           67       11            78

Deferred income tax assets

           139       20            159

Other current assets

     3       72       15            90
                                     

Current assets

     1,737       2,884       801      (2,422 )     3,000

Property, plant and mine development, net

     (11 )     4,078       1,514            5,581

Investments

           198       757            955

Investments in subsidiaries

     5,180       111       3,979      (9,270 )    

Long-term stockpiles and ore on leach pads

           562       37            599

Deferred stripping costs

           92       8            100

Deferred income tax assets

     12       407       96            515

Other long-term assets

     1,646       850       188      (2,503 )     181

Goodwill

                 2,879            2,879

Assets of operations held for sale

           134       48            182
                                     

Total assets

   $ 8,564     $ 9,316     $ 10,307    $ (14,195 )   $ 13,992
                                     

Liabilities

           

Current portion of long-term debt

   $     $ 194     $ 1    $     $ 195

Accounts payable

     50       2,165       437      (2,425 )     227

Employee related benefits

           151       25            176

Derivative instruments

           267       3            270

Other current liabilities

     38       296       138      (1 )     471
                                     

Current liabilities

     88       3,073       604      (2,426 )     1,339

Long-term debt

     597       1,002       124            1,723

Reclamation and remediation liabilities

           330       112            442

Deferred income tax liabilities

     52       231</