Form 10-Q
Table of Contents

 
 
UNITED STATES
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 LOGO)
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 I
 
       
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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)
                                 
    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)
                 
    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)
                 
    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.

 

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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)
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)
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)
                                         
            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  
 
                             

 

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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)
                                                         
            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.

 

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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)
                                                         
            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  
 
           

 

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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)
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  
 
                       

 

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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)
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.

 

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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)
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.

 

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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)
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  
 
                       

 

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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)
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%).

 

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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)
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.

 

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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)
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  
 
                       

 

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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)
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  
 
           

 

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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)
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.

 

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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)
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.

 

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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)
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 %

 

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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)
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  
 
                       

 

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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)
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.

 

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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)
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.

 

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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)
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  
 
                       

 

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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)
                                 
    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.

 

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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)
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  
 
           

 

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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)
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.

 

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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)
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 )
 
           

 

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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)
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.

 

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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)
                                         
    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.

 

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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)
                                         
    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.

 

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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)
                                         
    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.

 

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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)
                                         
    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  
 
                             

 

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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)
                                         
    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  
 
                             

 

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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)
                                         
    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  
 
                             

 

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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)
                                         
    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  
 
                             

 

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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)
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”).

 

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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)
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.

 

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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)
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.

 

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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)
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.

 

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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)
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.

 

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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)
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.

 

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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).

 

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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.

 

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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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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  
 
           

 

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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.

 

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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.

 

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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.

 

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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.

 

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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    <