UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D. C. 20549

 

Form 10-Q

 

(Mark One)

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

 

For the Quarterly Period Ended September 30, 2005

 

or

 

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

 

For the transition period from                      to                     

 

Commission File Number: 001-31240

 

NEWMONT MINING CORPORATION

(Exact name of registrant as specified in its charter)

 

Delaware    84-1611629
(State or Other Jurisdiction of
Incorporation or Organization)
   (I.R.S. Employer
Identification No.)
1700 Lincoln Street
Denver, Colorado
   80203
(Address of Principal Executive Offices)    (Zip Code)

 

Registrant’s telephone number, including area code (303) 863-7414

 

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

 

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

 

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

 

There were 414,963,871 shares of common stock outstanding on October 24, 2005 (and 31,821,705 exchangeable shares).

 



 

PART I—FINANCIAL INFORMATION

 

ITEM 1. FINANCIAL STATEMENTS

 

NEWMONT MINING CORPORATION

 

CONDENSED CONSOLIDATED STATEMENTS OF INCOME

 

     Three Months Ended
September 30,


    Nine Months Ended
September 30,


 
     2005

    2004

    2005

    2004

 
     (unaudited, in millions except per share)  

Revenues

                                

Sales - gold, net

   $ 933     $ 897     $ 2,619     $ 2,644  

Sales - base metals, net

     231       247       504       588  
    


 


 


 


       1,164       1,144       3,123       3,232  
    


 


 


 


Costs and expenses

                                

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

                                

Gold

     516       478       1,482       1,442  

Base metals

     86       91       227       227  

Depreciation, depletion and amortization

     160       162       482       504  

Exploration

     41       28       107       76  

Advanced projects, research and development

     18       25       50       59  

General and administrative

     32       22       95       80  

Write down of long-lived assets

     —         10       2       26  

Other, net

     20       34       58       48  
    


 


 


 


       873       850       2,503       2,462  
    


 


 


 


Other income (expense)

                                

Other income, net (Note 12)

     66       47       177       51  

Interest expense, net

     (24 )     (27 )     (76 )     (77 )
    


 


 


 


       42       20       101       (26 )
    


 


 


 


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

     333       314       721       744  

Income tax expense

     (94 )     (94 )     (186 )     (214 )

Minority interest in income of subsidiaries

     (115 )     (90 )     (248 )     (230 )

Equity income of affiliates

     —         —         3       1  
    


 


 


 


Income from continuing operations

     124       130       290       301  

Income (loss) from discontinued operations (Note 13)

     2       (1 )     (30 )     (1 )

Cumulative effect of a change in accounting principle (Note 15)

     —         —         —         (47 )
    


 


 


 


Net income

   $ 126     $ 129     $ 260     $ 253  
    


 


 


 


Income per common share (Note 10)

                                

Basic and diluted:

                                

Income from continuing operations

   $ 0.28     $ 0.29     $ 0.65     $ 0.68  

Loss from discontinued operations

     —         —         (0.07 )     —    

Cumulative effect of a change in accounting principle

     —         —         —         (0.11 )
    


 


 


 


Net income

   $ 0.28     $ 0.29     $ 0.58     $ 0.57  
    


 


 


 


Basic weighted-average common shares outstanding

     446       443       446       443  
    


 


 


 


Diluted weighted-average common shares outstanding

     449       447       449       447  
    


 


 


 


Cash dividends declared per common share

   $ 0.10     $ 0.075     $ 0.30     $ 0.20  

 

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

 

2


 

NEWMONT MINING CORPORATION

 

CONDENSED CONSOLIDATED BALANCE SHEETS

 

     At September 30,
2005


   At December 31,
2004


     (unaudited, in millions)
ASSETS              

Cash and cash equivalents

   $ 1,095    $ 781

Marketable securities and other short-term investments (Note 3)

     952      943

Trade receivables

     100      77

Accounts receivable

     178      130

Inventories (Note 4)

     342      249

Stockpiles and ore on leach pads (Note 5)

     246      230

Other current assets

     223      288
    

  

Current assets

     3,136      2,698

Property, plant and mine development, net

     5,527      5,165

Investments (Note 3)

     795      386

Long-term stockpiles and ore on leach pads (Note 5)

     575      525

Deferred income tax assets

     633      492

Other long-term assets

     297      265

Goodwill

     2,992      2,994

Assets of operations held for sale (Note 13)

     —        251
    

  

Total assets

   $ 13,955    $ 12,776
    

  

LIABILITIES              

Current portion of long-term debt (Note 6)

   $ 217    $ 286

Accounts payable

     237      224

Employee-related benefits (Note 7)

     135      130

Other current liabilities and deferred revenue

     651      446
    

  

Current liabilities

     1,240      1,086

Long-term debt, less current portion (Note 6)

     1,790      1,316

Reclamation and remediation liabilities (Note 8)

     415      421

Employee-related benefits (Note 7)

     246      245

Deferred income tax liabilities

     519      460

Other long-term liabilities and deferred revenue

     481      489

Liabilities of operations held for sale (Note 13)

     —        46
    

  

Total liabilities

     4,691      4,063
    

  

Commitments and contingencies (Note 19)

             

Minority interest in subsidiaries

     918      775
    

  

STOCKHOLDERS’ EQUITY              

Common stock

     664      656

Additional paid-in capital

     6,546      6,524

Accumulated other comprehensive income

     399      147

Retained earnings

     737      611
    

  

Total stockholders’ equity

     8,346      7,938
    

  

Total liabilities and stockholders’ equity

   $ 13,955    $ 12,776
    

  

 

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

 

3


 

NEWMONT MINING CORPORATION

 

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

 

     Nine Months Ended
September 30,


 
     2005

    2004

 
     (unaudited, in millions)  

Operating activities:

                

Net income

   $ 260     $ 253  

Adjustments to reconcile net income to net cash provided by operating activities:

                

Depreciation, depletion and amortization

     482       504  

Revenue from prepaid forward sales obligation

     (48 )     —    

Loss from discontinued operations

     30       1  

Accretion of accumulated reclamation obligations

     20       19  

Amortization of deferred stripping costs, net

     (50 )     8  

Deferred income taxes

     (35 )     58  

Minority interest expense

     248       230  

Write-down of inventories, stockpiles and ore on leach pads

     12       11  

Write-down of long-lived assets

     2       26  

(Gain) loss on investments, net

     (27 )     39  

Cumulative effect of change in accounting principle, net

     —         47  

Gain on asset sales, net

     (36 )     (29 )

Hedge loss (gain), net

     84       (38 )

Other operating adjustments

     1       18  

Decrease (increase) in operating assets:

                

Trade and accounts receivable

     25       (18 )

Inventories, stockpiles and ore on leach pads

     (161 )     10  

Other assets

     (3 )     (13 )

Decrease in operating liabilities:

                

Accounts payable and other accrued liabilities

     (24 )     (129 )

Reclamation liabilities

     (24 )     (33 )
    


 


Net cash provided from continuing operations

     756       964  

Net cash provided from discontinued operations

     5       8  
    


 


Net cash from operations

     761       972  
    


 


Investing activities:

                

Additions to property, plant and mine development

     (890 )     (497 )

Additions to property, plant and mine development of discontinued operations

     (21 )     (23 )

Investments in marketable debt and equity securities

     (2,530 )     (1,340 )

Proceeds from sale of marketable debt and equity securities

     2,562       680  

Proceeds from sale of discontinued operations

     142       —    

Proceeds from sale of assets

     61       23  

Cash recorded upon consolidation of Batu Hijau

     —         82  

Other investing adjustments

     1       2  
    


 


Net cash used in investing activities

     (675 )     (1,073 )
    


 


Financing activities:

                

Proceeds from debt, net

     583       38  

Repayment of debt

     (142 )     (141 )

Dividends paid to common stockholders

     (134 )     (89 )

Dividends paid to minority interests

     (85 )     (94 )

Common stock issued for compensation plans

     17       33  

Change in restricted cash and other

     (8 )     17  
    


 


Net cash provided by (used in) financing activities

     231       (236 )
    


 


Effect of exchange rate changes on cash

     (3 )     (3 )
    


 


Net change in cash and cash equivalents

     314       (340 )

Cash and cash equivalents at beginning of period

     781       1,130  
    


 


Cash and cash equivalents at end of period

   $ 1,095     $ 790  
    


 


 

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

 

4


NEWMONT MINING CORPORATION

 

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)

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

 

(1) BASIS OF PRESENTATION

 

The following interim Condensed Consolidated Financial Statements of Newmont Mining Corporation and its subsidiaries (collectively, “Newmont” or the “Company”) are unaudited. In the opinion of management, all adjustments necessary for a fair presentation of these interim statements have been included. The results reported in these interim Condensed Consolidated Financial Statements are not necessarily indicative of the results that may be reported for the entire year. These interim Condensed Consolidated Financial Statements should be read in conjunction with Newmont’s Consolidated Financial Statements included in its Annual Report on Form 10-K for the year ended December 31, 2004, filed March 15, 2005.

 

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

 

Certain amounts for the three and nine months ended September 30, 2004 and at December 31, 2004 have been reclassified to conform to the 2005 presentation. The most significant reclassifications were as follows:

 

Discontinued Operations in the Condensed Consolidated Statements of Income, Balance Sheets and Cash Flows

 

The Company has reclassified the balance sheet amounts and the income statement results for the Golden Grove copper-zinc operation from the historical presentation to assets and liabilities of operations held for sale on the Condensed Consolidated Balance Sheets and to discontinued operations in the Condensed Consolidated Statements of Income for all periods presented. The Condensed Consolidated Statements of Cash Flows have been reclassified for assets held for sale and discontinued operations for all periods presented.

 

Auction Rate Securities in the Condensed Consolidated Statements of Cash Flows

 

For the nine months ended September 30, 2004, the Company reclassified auction rate securities having a stated or contractual maturity date for the underlying security in excess of 90 days from cash equivalents to Net cash used in investing activities in the Statements of Condensed Consolidated Cash Flows. The reflection of purchases and sales of these securities decreased Net cash used in investing activities and reduced Cash and cash equivalents by $443. Cash and cash equivalents decreased by $183 and $626 at the beginning and end of the nine month period ended September 30, 2004, respectively.

 

(2) RECENT ACCOUNTING PRONOUNCEMENTS

 

Deferred Stripping Costs

 

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

 

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

 

     Nine Months Ended September 30,

 
     2005

    2004

 

Opening balance

   $ 20     $ 90  

Consolidation of Batu Hijau

     —         (67 )

Disposition of Ovacik

     (4 )     —    

Additions

     127       102  

Amortization

     (78 )     (110 )
    


 


Closing balance

   $ 65     $ 15  
    


 


 

5


NEWMONT MINING CORPORATION

 

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) Continued

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

 

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

 

     At September 30,
2005


   At December 31,
2004


Other Assets:

             

Current

   $ 53    $ 45

Long-term

     116      80
    

  

       169      125
    

  

Other Liabilities:

             

Current

   $ 29    $ 2

Long-term

     75      103
    

  

       104      105
    

  

Deferred stripping, net

   $ 65    $ 20
    

  

 

In March 2005, the Financial Accounting Standards Board (“FASB”) ratified Emerging Issues Task Force (“EITF”) Issue No. 04-06, “Accounting for Stripping Costs Incurred during Production in the Mining Industry.” EITF Issue No. 04-06 addresses the accounting for stripping costs incurred during the production phase of a mine and refers to these costs as variable production costs that should be included as a component of inventory to be recognized in costs applicable to sales in the same period as the revenue from the sale of inventory. As a result, capitalization of post-production stripping costs is appropriate only to the extent product inventory exists at the end of a reporting period. The guidance in EITF Issue No. 04-06 is effective for the first reporting period in fiscal years beginning after December 15, 2005, with early adoption permitted. The guidance requires application through recognition of a cumulative effect adjustment to opening retained earnings in the period of adoption, with no charge to current earnings for prior periods. The most significant expected impacts of adoption are the elimination of the deferred and advanced stripping costs on Newmont’s balance sheet and the recognition of future post-production stripping costs as a component of inventory to be recognized in costs applicable to sales in the same period as the revenue from the sale of inventory, or in the case of inventory on hand at the end of a period, from impairment charges where the carrying value of inventory on hand exceeds the net realizable value. The Company will adopt this new accounting rule as of January 1, 2006. A cumulative effect of an accounting change reduction to opening retained earnings of between $60 and $100 (net of tax) is currently anticipated. Adoption of the new guidance will have no impact on the Company’s cash position.

 

Stock Based Compensation

 

In December 2004, the FASB issued SFAS No. 123R, “Share-Based Payment”, which revised SFAS No. 123, “Accounting for Stock-Based Compensation” and superseded Accounting Principles Board (“APB”) Opinion 25, “Accounting for Stock Issued to Employees” and its related implementation guidance. SFAS No. 123R requires measurement and recording in the financial statements of the costs of employee services received in exchange for an award of equity instruments based on the grant-date fair value of the award, recognized over the period during which an employee is required to provide services in exchange for such award. Newmont will adopt the provisions of SFAS No. 123R on January 1, 2006, using the modified prospective method. Accordingly, compensation expense will be recognized for all newly granted awards and awards modified, repurchased, or cancelled after January 1, 2006. Compensation cost for the unvested portion of awards that are outstanding, as of January 1, 2006, will be recognized ratably over the remaining vesting period. The compensation cost for the unvested portion of awards will be based on the fair value at date of grant as utilized in the SFAS No. 123 pro forma disclosure below. The actual effect on net income and earnings per share in future periods will vary depending upon the number and fair value of options granted in future years compared to prior years.

 

6


NEWMONT MINING CORPORATION

 

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) Continued

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

 

The Company currently applies the intrinsic value method in accordance with APB Opinion 25, “Accounting for Stock Issued to Employees,” and related interpretations in accounting for stock options. Accordingly, because stock option exercise prices equal the market value on the date of grant, no compensation cost is currently recognized for stock option grants. Had compensation cost for the options been recognized based on market value at grant dates as prescribed by SFAS No. 123R, the Company’s net income and net income per common share would have been the pro forma amounts indicated below:

 

     Three Months Ended September 30,

    Nine Months Ended September 30,

 
     2005

    2004

    2005

    2004

 

Net income, as reported

   $ 126     $ 129     $ 260     $ 253  

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

     (5 )     (3 )     (14 )     (9 )
    


 


 


 


Pro forma net income

   $ 121     $ 126     $ 246     $ 244  
    


 


 


 


Net income per common share, basic and diluted:

                                

As reported

   $ 0.28     $ 0.29     $ 0.58     $ 0.57  

Pro forma net income

   $ 0.27     $ 0.28     $ 0.55     $ 0.55  

 

The Company recognized $4 and $4 of non-cash compensation expense during the three months ended September 30, 2005 and 2004, respectively, and $12 and $11 during the nine months ended September 30, 2005 and 2004, respectively, related to deferred and restricted stock awards granted.

 

(3) INVESTMENTS

 

     At September 30, 2005

     Cost/Equity
Basis


   Unrealized

   Fair/Equity
Value


        Gain

   Loss

  

Current:

                           

Marketable Debt Securities:

                           

Auction rate securities

   $ 824    $ —      $ —      $ 824
    

  

  

  

Marketable Equity Securities:

                           

Oxiana Limited

     61      22      —        83

Other

     15      16      —        31
    

  

  

  

       76      38      —        114
    

  

  

  

Other investments, at cost

     14      —        —        14
    

  

  

  

     $ 914    $ 38    $ —      $ 952
    

  

  

  

Long-term:

                           

Marketable Equity Securities:

                           

Canadian Oil Sands Trust

   $ 224    $ 434    $ —      $ 658

Gabriel Resources, Ltd.

     22      15      —        37

Shore Gold, Inc.

     42      11      —        53

Other

     14      5      —        19
    

  

  

  

       302      465      —        767
    

  

  

  

Investment in Affiliates:

                           

European Gold Refineries

     15      —        —        15

AGR Matthey Joint Venture

     13      —        —        13
    

  

  

  

       28      —        —        28
    

  

  

  

     $ 330    $ 465    $ —      $ 795
    

  

  

  

 

7


NEWMONT MINING CORPORATION

 

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) Continued

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

 

     At December 31, 2004

     Cost/Equity
Basis


   Unrealized

   Fair/Equity
Value


        Gain

   Loss

  

Current:

                           

Marketable Debt Securities:

                           

Auction rate securities

   $ 784    $ —      $ —      $ 784
    

  

  

  

Marketable Equity Securities:

                           

Kinross Gold Corporation

     80      21      —        101

Other

     25      20      —        45
    

  

  

  

       105      41      —        146
    

  

  

  

Other investments, at cost

     13      —        —        13
    

  

  

  

     $ 902    $ 41    $ —      $ 943
    

  

  

  

Long-term:

                           

Marketable Equity Securities:

                           

Canadian Oil Sands Trust

   $ 225    $ 112    $ —      $ 337

Gabriel Resources, Ltd.

     17      2      —        19

Shore Gold, Inc.

     —        —        —        —  

Other

     4      1      —        5
    

  

  

  

       246      115      —        361
    

  

  

  

Investment in Affiliates:

                           

European Gold Refineries

     13      —        —        13

AGR Matthey Joint Venture

     12      —        —        12
    

  

  

  

       25      —        —        25
    

  

  

  

     $ 271    $ 115    $ —      $ 386
    

  

  

  

 

(4) INVENTORIES

 

     At September 30,
2005


   At December 31,
2004


In-process

   $ 94    $ 61

Concentrate

     11      3

Precious metals

     7      6

Materials, supplies and other

     230      179
    

  

     $ 342    $ 249
    

  

 

(5) STOCKPILES AND ORE ON LEACH PADS

 

     At September 30,
2005


   At December 31,
2004


Current:

             

Stockpiles

   $ 108    $ 110

Ore on leach pads

     138      120
    

  

     $ 246    $ 230
    

  

Long-term:

             

Stockpiles

   $ 402    $ 394

Ore on leach pads

     173      131
    

  

     $ 575    $ 525
    

  

 

8


NEWMONT MINING CORPORATION

 

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) Continued

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

 

(6) DEBT

 

     At September 30, 2005

   At December 31, 2004

     Current

   Non-Current

   Current

   Non-Current

Sale-leaseback of refractory ore treatment plant

   $ 19    $ 256    $ 13    $ 274

5 7/8% notes, net of discount

     —        597      —        —  

8 3/8% debentures, net of discount

     —        —        50      —  

8 5/8% debentures, net of discount

     —        219      —        224

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

     —        120      —        120

Newmont Australia 7 1/2% guaranteed notes, net of premium

     —        —        20      —  

Prepaid forward sales obligation

     48      48      48      97

PTNNT project financing facility

     87      522      87      566

PTNNT partner loan

     48      —        53      —  

Project financings, capital leases and other

     15      28      15      35
    

  

  

  

     $ 217    $ 1,790    $ 286    $ 1,316
    

  

  

  

 

Scheduled minimum long-term debt repayments as of September 30, 2005 are $98 for the remainder of 2005, $169 in 2006, $165 in 2007, $234 in 2008, $116 in 2009 and $1,225 thereafter.

 

During March 2005, Newmont issued uncollateralized notes with a principal amount of $600 due April 2035 bearing an interest rate of 5 7/8%. Interest on the notes is paid semi-annually in April and October.

 

During June 2005, 161,111 ounces were physically delivered in connection with the Prepaid forward sales obligation. The effect was a non-cash reduction in debt of $48.

 

Effective July 28, 2005, the Company renegotiated the terms of its uncollateralized $1,250 revolving facility extending the maturity date one year to July 2010.

 

(7) EMPLOYEE PENSION AND OTHER BENEFIT PLANS

 

     Three Months Ended
September 30,


    Nine Months Ended
September 30,


 
     2005

    2004

    2005

    2004

 

Pension benefits:

                                

Service cost

   $ 3     $ 3     $ 10     $ 8  

Interest cost

     5       4       14       13  

Expected return on plan assets

     (4 )     (3 )     (12 )     (10 )

Amortization of prior service cost

     —         —         1       1  

Amortization of loss

     2       1       5       3  
    


 


 


 


Net periodic cost

   $ 6     $ 5     $ 18     $ 15  
    


 


 


 


 

     Three Months Ended
September 30,


   Nine Months Ended
September 30,


 
     2005

   2004

   2005

   2004

 

Other benefits:

                             

Service cost

   $ 2    $ 1    $ 4    $ 3  

Interest cost

     1      1      4      3  

Amortization of prior service cost

     —        —        —        (1 )
    

  

  

  


Net periodic cost

   $ 3    $ 2    $ 8    $ 5  
    

  

  

  


 

9


NEWMONT MINING CORPORATION

 

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) Continued

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

 

(8) RECLAMATION AND REMEDIATION (ASSET RETIREMENT OBLIGATIONS)

 

At September 30, 2005 and December 31, 2004, $405 and $399, respectively, were accrued for reclamation obligations relating to mineral properties in accordance with SFAS No. 143, “Accounting for Asset Retirement Obligations.” In addition, the Company is involved in several matters concerning environmental obligations associated with former, primarily historic, mining activities. Generally, these matters concern developing and implementing remediation plans at the various sites involved. At September 30, 2005 and December 31, 2004, $69 and $75, respectively, were accrued for such obligations. These amounts are also included in Reclamation and remediation liabilities.

 

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

 

     Nine Months Ended
September 30,


 
     2005

    2004

 

Balance at beginning of period

   $ 474     $ 410  

Consolidation of Batu Hijau

     —         47  

Disposition of liability

     (8 )     —    

Additions and changes in estimates

     11       3  

Liabilities settled

     (23 )     (32 )

Accretion expense

     20       19  
    


 


Balance at end of period

   $ 474     $ 447  
    


 


 

The current portions of Reclamation and remediation liabilities of $59 and $53 at September 30, 2005 and December 31, 2004, respectively, are included in Other current liabilities and deferred revenue.

 

(9) SALES CONTRACTS, COMMODITY AND DERIVATIVE INSTRUMENTS

 

Newmont generally avoids gold hedging. Newmont’s philosophy is to provide shareholders with leverage to gold prices by selling its production at market prices. Newmont has, on a limited basis, entered into derivative contracts to protect the selling price for certain anticipated gold production and to manage risks associated with sales contracts, commodities, interest rates and foreign currency. Newmont is not required to place collateral with respect to commodity instruments and there are no margin calls associated with such contracts.

 

For the three months ended September 30, 2005 and 2004, losses of $1 and $1, respectively, were included in Other income (expense), net for the ineffective portion of derivative instruments designated as cash flow hedges. For the nine months ended September 30, 2005 and 2004, gains of $2 and $1, respectively, were included in Other income (expense), net for the ineffective portion of derivative instruments designated as cash flow hedges. The amount anticipated to be reclassified from Accumulated other comprehensive income to income for derivative instruments during the next 12 months is a loss of approximately $24. The maximum period over which hedged forecasted transactions are expected to occur is 6.5 years.

 

10


NEWMONT MINING CORPORATION

 

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) Continued

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

 

Newmont had the following contracts at September 30, 2005:

 

     Expected Maturity Date or Transaction Date

   Fair Value

 
     2005

   2006

   2007

   2008

   2009

   Thereafter

   Total/
Average


   At September 30,
2005


    At December 31,
2004


 

Gold Put Option Contracts
($ denominated):

                                                           

Ounces (thousands)

     53      100      20    —      —      —        173    $ (5 )   $ (9 )

Average price

   $ 292    $ 338    $ 397    —      —      —      $ 330                 

Silver Forward Contracts
($ denominated):

                                                           

Ounces (thousands)

     300      50      —      —      —      —        350    $ (1 )   $ (1 )

Average price

   $ 6.02    $ 6.50      —      —      —      —      $ 6.09                 

Copper Collar Contracts
($ denominated):

                                                           

Pounds (millions)

     131      406      84    —      —      —        621    $ (176 )(1)   $ (61 )(2)

Average cap price

   $ 1.30    $ 1.36    $ 1.41    —      —      —      $ 1.35                 

Average floor price

   $ 1.10    $ 1.10    $ 1.10    —      —      —      $ 1.10                 

$/IDR Forward Purchase Contracts:

                                                           

$ (millions)

     21      54      —      —      —      —        75    $ (5 )   $ —    

Average rate (IDR/$)

     9,418      10,307      —      —      —      —        10,063                 

Australian Dollar Zero-Cost Collar Contracts:

                                                           

$ (millions)

   $ 70    $ 135      —      —      —      —      $ 205    $ 2     $ 13  

Average cap price ($ per A$1)

   $ 0.80    $ 0.80      —      —      —      —      $ 0.80                 

Average floor price ($ per A$1)

   $ 0.55    $ 0.55      —      —      —      —      $ 0.55                 

(1) The fair value does not include amounts payable ($22) on derivative contracts that have been closed out in September 2005 with the net settlement due in October 2005.

 

(2) The fair value does not include amounts payable ($7) on derivative contracts that had been closed out in December 2004 with the net settlement due and paid in January 2005.

 

Provisional Copper and Gold Sales

 

For the three and nine month periods ended September 30, 2005 and 2004, Batu Hijau recorded the revenues and price adjustments as follows:

 

     Three Months Ended
September 30,


    Nine Months Ended
September 30,


 
     2005

    2004

    2005

    2004

 

Copper

                                

Revenue

   $ 326     $ 256     $ 443     $ 329  

Average price adjustment

     10.2 %     (3.0 )%     10.4 %     15.5 %

Gold

                                

Revenue

   $ 21     $ 8     $ 21     $ 20  

Average price adjustment

     (1.1 )%     (1.0 )%     1.3 %     0.9 %

 

Price-Capped Forward Sales Contracts

 

In 2001, Newmont entered into transactions that closed out certain call options. The options were replaced with a series of forward sales contracts requiring physical delivery of the same quantity of gold over slightly extended future periods. Under the terms of the contracts, Newmont will realize the lower of the spot price on the delivery date or the capped price ranging from $350 per ounce in 2005 to $392 per ounce in 2011. The initial fair value of the forward sales contracts of $54 was recorded as deferred revenue and will be included in revenues as delivery occurs. Newmont delivered 350,000 ounces in the nine months ended September 30, 2005 at the capped price of $350 per ounce and recognized deferred revenue of $13 per ounce. As of September 30, 2005, the current portion of $2 has been reclassified to Other current liabilities and deferred revenue. The forward sales contracts are accounted for as normal sales contracts under SFAS No. 133 “Accounting for Derivative Instruments and Hedging Activities” and SFAS No. 138 “Accounting for Certain Derivative Instruments and Certain Hedging Activities-an Amendment to SFAS No. 133.”

 

11


NEWMONT MINING CORPORATION

 

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) Continued

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

 

Newmont had the following price-capped forward sales contracts outstanding at September 30, 2005:

 

     Expected Maturity Date or Transaction Date

Price-capped forward sales contracts:


   2005

   2006

   2007

   2008

   2009

   Thereafter

   Total/
Average


($ denominated)                                   

Ounces (thousands)

     150      —        —        1,000      600      250      2,000

Average price

   $ 350    $ —      $ —      $ 384    $ 381    $ 392    $ 382

 

Interest Rate Swap Contracts

 

In 2001, Newmont entered into contracts to hedge the interest rate risk exposure on a portion of its $275 8 5/8% notes and its $200 8 3/8% debentures. For the three months ended September 30, 2005 and 2004, these transactions resulted in a reduction in interest expense of $1 and $2, respectively. For the nine months ended September 30, 2005 and 2004, these transactions resulted in a reduction in interest expense of $3 and $4, respectively. The fair value of the interest rate swaps was $4 at September 30, 2005 and $9 at December 31, 2004.

 

(10) INCOME PER COMMON SHARE

 

The weighted average number of common shares outstanding used to compute basic and diluted net income per common share was as follows:

 

     Three Months Ended
September 30,


   Nine Months Ended
September 30,


     2005

   2004

   2005

   2004

Basic

   446    443    446    443

Effect of employee stock-based awards

   3    4    3    4
    
  
  
  

Diluted

   449    447    449    447
    
  
  
  

 

Options to purchase 1.6 million and 1.7 million shares of common stock at average exercise prices of $53.34 and $53.73 were outstanding as of September 30, 2005 and 2004, respectively, but were not included in the computation of diluted weighted average number of common shares because the option price was greater than the average market price of the common shares.

 

(11) COMPREHENSIVE INCOME

 

     Three Months Ended September 30,

    Nine Months Ended September 30,

 
     2005

    2004

    2005

    2004

 

Net income

   $ 126     $ 129     $ 260     $ 253  

Other comprehensive income (loss), net of tax:

                                

Unrealized gain on marketable equity securities

     209       48       279       55  

Foreign currency translation adjustments

     19       21       11       13  

Changes in fair value of cash flow hedge instruments

     (24 )     (4 )     (38 )     (6 )
    


 


 


 


Comprehensive income

   $ 330     $ 194     $ 512     $ 315  
    


 


 


 


 

(12) OTHER INCOME, NET

 

     Three Months Ended September 30,

    Nine Months Ended September 30,

 
     2005

   2004

    2005

   2004

 

Royalty and dividend income

   $ 18    $ 20     $ 57    $ 48  

Interest income

     17      6       41      15  

Gain on sale of other assets, net

     —        22       36      29  

Gain (loss) on investments, net

     21      —         27      (39 )

Foreign currency exchange gains (losses)

     8      3       10      (5 )

Other

     2      (4 )     6      3  
    

  


 

  


     $ 66    $ 47     $ 177    $ 51  
    

  


 

  


 

12


NEWMONT MINING CORPORATION

 

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) Continued

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

 

On March 31, 2005, the Minera El Bermejal S. de R.L. de C.V. joint venture, 44% owned by Newmont and 56% owned by Industrias Penoles S.A. de C.V., completed the sale of its interest in the Mezcala Gold Deposit for cash proceeds of $70 (Newmont’s share $31). The Company recorded a pre-tax gain of $31.

 

The gain on investments during 2005 was primarily attributable to the sale of Newmont’s investment in Kinross Gold Corporation (“Kinross”) which resulted in a pre-tax gain of $20. The loss on investments during 2004 was attributable to a pre-tax $39 impairment of Newmont’s investment in Kinross for an other-than-temporary decline in value in accordance with SFAS No. 115 “Accounting for Certain Investments in Debt and Equity Securities.”

 

(13) DISCONTINUED OPERATIONS

 

During June 2005, Newmont announced the pending sale of its Golden Grove copper-zinc operation in Western Australia to Oxiana Limited (Oxiana) for proceeds including cash of A$190 and 81.5 million Oxiana shares. The sale was completed on July 26, 2005.

 

Newmont accounted for the imminent disposition in accordance with SFAS No. 144 “Accounting for the Impairment or Disposal of Long-Lived Assets”. At June 30, 2005, the carrying value of Golden Grove was reduced to its estimated fair value based upon the pending sale. A pre-tax impairment loss of $39 was recognized for the six months ended June 30, 2005. Upon the sale, a $6 million pre-tax gain (due to increase in Oxiana share price at July 26, 2005) was recognized in the three-months ended September 30, 2005.

 

The Company has reclassified the balance sheet amounts and the income statement results from the historical presentation to assets and liabilities of operations held for sale on the Condensed Consolidated Balance Sheets and to gain (loss) from discontinued operations in the Condensed Consolidated Statements of Income for all periods presented. The Condensed Consolidated Statements of Cash Flows have been reclassified for assets held for sale and discontinued operations for all periods presented.

 

The following table details selected financial information for Golden Grove included in the gain (loss) from discontinued operations in the Condensed Consolidated Statements of Income:

 

     Three Months Ended September 30,

    Nine Months Ended September 30,

 
     2005

    2004

    2005

    2004

 

Sales - base metals, net

   $ 1     $ 19     $ 38     $ 62  
    


 


 


 


Income (loss) from operations

   $ 1     $ (3 )   $ (4 )   $ (5 )

Gain (loss) on impairment/sale

     6       —         (33 )     —    
    


 


 


 


Pre-tax income (loss)

     7       (3 )     (37 )     (5 )

Income tax (expense) benefit

     (5 )     2       7       4  
    


 


 


 


Gain (loss) from discontinued operations

   $ 2     $ (1 )   $ (30 )   $ (1 )
    


 


 


 


 

13


NEWMONT MINING CORPORATION

 

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) Continued

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

 

The major classes of assets and liabilities of operations held for sale in the Condensed Consolidated Balance Sheets are as follows:

 

     At September 30,
2005


   At December 31,
2004


Assets:

             

Accounts receivable

   $ —      $ 3

Inventories

     —        15

Stockpiles and ore on leach pads

     —        2

Property, plant and mine development

     —        196

Goodwill

     —        32

Other assets

     —        3
    

  

Total assets of operations held for sale

   $ —      $ 251
    

  

Liabilities:

             

Accounts payable

   $ —      $ 7

Reclamation and remediation

     —        11

Other liabilities

     —        28
    

  

Total liabilities of operations held for sale

   $ —      $ 46
    

  

 

(14) OVACIK

 

On March 1, 2005, Newmont sold the Ovacik mine, located in western Turkey, to a subsidiary of Koza Davetiye, a listed Turkish conglomerate. Consideration for the mine included $20 paid at closing and various contingent payments that could total up to an additional $24.5 if all conditions precedent are met. Contingent payments received and any associated gains will be recognized as and when received.

 

During the nine months ended September 30, 2004, Newmont recorded a pre-tax $16 Write-down of long-lived assets related to the Ovacik mine.

 

(15) CONSOLIDATION OF BATU HIJAU

 

Upon consolidation of Batu Hijau, effective January 1, 2004, in accordance with FASB Interpretation No. 46R, certain adjustments were recorded to the opening balance sheet of Batu Hijau to conform to Newmont’s accounting policies. These adjustments were recorded to change from units-of-production depreciation of processing plant and mining facilities to straight-line depreciation of such facilities and to change from allocating costs to stockpile inventories based on mining costs per ton to allocating costs based on recoverable pounds of copper equivalent contained in the various categories of stockpiles. The impact of these adjustments were charges of $15 and $32, respectively, which have been recorded in Cumulative effect of a change in accounting principle in the 2004 Condensed Consolidated Statement of Income, net of income tax expense and minority interest.

 

(16) SUPPLEMENTAL CASH FLOW INFORMATION

 

     Nine Months Ended September 30,

     2005

   2004

Non-cash extinguishment of infrastructure bonds

   $ —      $ 124

Non-cash settlement of prepaid forward sales obligation

   $ 48    $ —  

Oxiana Limited shares received from sale of Golden Grove

   $ 61    $ —  

Interest paid, net of amounts capitalized

   $ 44    $ 63

Income taxes paid

   $ 214    $ 215

 

14


NEWMONT MINING CORPORATION

 

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) Continued

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

 

(17) SEGMENT INFORMATION

 

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

 

     Three Months Ended September 30, 2005

 
     Nevada

    Other
North
America


    Yanacocha

   Other
South
America


   Australia/
New
Zealand


    Batu
Hijau


   Other
Indonesia


 

Sales, net:

                                                     

Gold

   $ 256     $ 32     $ 338    $ 13    $ 167     $ 126    $ —    

Base Metals

   $ —       $ —       $ —      $ —      $ —       $ 231    $ —    

Cost applicable to sales:

                                                     

Gold

   $ 212     $ 23     $ 111    $ 5    $ 121     $ 38    $ —    

Base Metals

   $ —       $ —       $ —      $ —      $ —       $ 86    $ —    

Depreciation, depletion and amortization:

                                                     

Gold

   $ 32     $ 7     $ 50    $ 1    $ 29     $ 11    $ —    

Base Metals

   $ —       $ —       $ —      $ —      $ —       $ 20    $ —    

Other

   $ —       $ —       $ —      $ —      $ —       $ —      $ —    

Exploration

   $ 6     $ 1     $ 2    $ —      $ 5     $ —      $ —    

Advanced projects, research and development

   $ —       $ 1     $ 2    $ —      $ —       $ —      $ 1  

Interest expense, net

   $ —       $ —       $ —      $ —      $ —       $ 11    $ —    

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

   $ 7     $ (1 )   $ 172    $ 6    $ 14     $ 191    $ (18 )

Amortization of deferred (advanced) stripping, net

   $ (15 )   $ (1 )   $ —      $ —      $ (3 )   $ 15    $ —    

Capital expenditures

   $ 118     $ 3     $ 62    $ 5    $ 27     $ 24    $ —    

 

     Central
Asia


   Africa

    Exploration

    Merchant
Banking


   Corporate
and
Other


    Consolidated

 

Sales, net:

                                              

Gold

   $ 13    $ —       $ —       $ —      $ (12 )   $ 933  

Base Metals

   $ —      $ —       $ —       $ —      $ —       $ 231  

Cost applicable to sales:

                                              

Gold

   $ 6    $ —       $ —       $ —      $ —       $ 516  

Base Metals

   $ —      $ —       $ —       $      $ —       $ 86  

Depreciation, depletion and amortization:

                                              

Gold

   $ 2    $ —       $ —       $ —      $ —       $ 132  

Base Metals

   $ —      $ —       $ —       $ —      $ —       $ 20  

Other

   $ —      $ —       $ —       $ 3    $ 5     $ 8  

Exploration

   $ —      $ 3     $ 24     $ —      $ —       $ 41  

Advanced projects, research and development

   $ —      $ 5     $ —       $ 3    $ 6     $ 18  

Interest expense, net

   $ —      $ —       $ —       $ —      $ 13     $ 24  

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

   $ 4    $ (8 )   $ (23 )   $ 33    $ (44 )   $ 333  

Amortization of deferred (advanced) stripping, net

   $ —      $ —       $ —       $ —      $ —       $ (4 )

Capital expenditures

   $ 2    $ 94     $ —       $ 1    $ 20     $ 356  

 

15


NEWMONT MINING CORPORATION

 

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) Continued

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

 

     Three Months Ended September 30, 2004

 
     Nevada

    Other
North
America


    Yanacocha

   Other
South
America


    Australia/
New
Zealand


   Batu
Hijau


   Other
Indonesia


 

Sales, net:

                                                     

Gold

   $ 238     $ 23     $ 310    $ 2     $ 187    $ 94    $ 9  

Base Metals

   $ —       $ —       $ —      $ —       $ —      $ 247    $ —    

Cost applicable to sales:

                                                     

Gold

   $ 170     $ 19     $ 113    $ 1     $ 127    $ 29    $ 4  

Base Metals

   $ —       $ —       $ —      $ —       $ —      $ 90    $ —    

Depreciation, depletion and amortization:

                                                     

Gold

   $ 29     $ 5     $ 49    $ —       $ 29    $ 8    $ —    

Base Metals

   $ —       $ —       $ —      $ —       $ —      $ 22    $ —    

Other

   $ —       $ —       $ —      $ —       $ 1    $ —      $ —    

Exploration

   $ 2     $ —       $ 2    $ —       $ 5    $ —      $ —    

Advanced projects, research and development

   $ 6     $ —       $ 6    $ —       $ —      $ —      $ 3  

Interest expense, net

   $ —       $ —       $ 3    $ —       $ —      $ 10    $ —    

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

   $ 29     $ (1 )   $ 130    $ (2 )   $ 4    $ 183    $ (2 )

Amortization of deferred (advanced) stripping, net

   $ (7 )   $ —       $ —      $ —       $ 12    $ 21    $ —    

Capital expenditures

   $ 49     $ 5     $ 42    $ 1     $ 14    $ 4    $ —    

 

     Central
Asia


    Africa

    Exploration

    Merchant
Banking


   Corporate
and
Other


    Consolidated

Sales, net:

                                             

Gold

   $ 32     $ —       $ —       $ —      $ 2     $ 897

Base Metals

   $ —       $ —       $ —       $ —      $ —       $ 247

Cost applicable to sales:

                                             

Gold

   $ 15     $ —       $ —       $ —      $ —       $ 478

Base Metals

   $ —       $ —       $ —       $ —      $ 1     $ 91

Depreciation, depletion and amortization:

                                             

Gold

   $ 8     $ —       $ —       $ —      $ —       $ 128

Base Metals

   $ —       $ —       $ —       $ —      $ —       $ 22

Other

   $ —       $ —       $ —       $ 6    $ 5     $ 12

Exploration

   $ —       $ —       $ 19     $ —      $ —       $ 28

Advanced projects, research and development

   $ 1     $ 4     $ —       $ 2    $ 3     $ 25

Interest expense, net

   $ —       $ —       $ —       $ —      $ 14     $ 27

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

   $ 7     $ (4 )   $ (21 )   $ 23    $ (32 )   $ 314

Amortization of deferred (advanced) stripping, net

   $ (1 )   $ —       $ —       $ —      $ —       $ 25

Capital expenditures

   $ 3     $ 32     $ —       $ —      $ 11     $ 161

 

16


NEWMONT MINING CORPORATION

 

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) Continued

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

 

     Nine Months Ended September 30, 2005

 
     Nevada

    Other
North
America


    Yanacocha

   Other
South
America


   Australia/
New
Zealand


   Batu
Hijau


    Other
Indonesia


 

Sales, net:

                                                     

Gold

   $ 762     $ 99     $ 976    $ 20    $ 523    $ 232     $ —    

Base Metals

   $ —       $ —       $ —      $ —      $ —      $ 504     $ —    

Cost applicable to sales:

                                                     

Gold

   $ 585     $ 71     $ 334    $ 9    $ 383    $ 80     $ —    

Base Metals

   $ —       $ —       $ —      $ —      $ —      $ 226     $ —    

Depreciation, depletion and amortization:

                                                     

Gold

   $ 92     $ 21     $ 148    $ 2    $ 87    $ 25     $ —    

Base Metals

   $ —       $ —       $ —      $ —      $ —      $ 67     $ —    

Other

   $ —       $ —       $ —      $ —      $ 2    $ —       $ —    

Exploration

   $ 14     $ 6     $ 5    $ 1    $ 15    $ —       $ —    

Advanced projects, research and development

   $ —       $ 3     $ 2    $ —      $ —      $ —       $ 4  

Interest expense, net

   $ —       $ —       $ —      $ —      $ —      $ 32     $ —    

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

   $ 64     $ (2 )   $ 485    $ 6    $ 40    $ 309     $ (37 )

Amortization of deferred (advanced) stripping, net

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

Capital expenditures

   $ 324     $ 7     $ 169    $ 20    $ 72    $ 52     $ —    

Total assets

   $ 1,961     $ 98     $ 1,421    $ 54    $ 1,063    $ 2,311     $ 93  

 

     Central
Asia


   Africa

    Exploration

    Merchant
Banking


   Corporate
and Other


    Consolidated

 

Sales, net:

                                              

Gold

   $ 40    $ —       $ —       $ —      $ (33 )   $ 2,619  

Base Metals

   $ —      $ —       $ —       $ —      $ —       $ 504  

Cost applicable to sales:

                                              

Gold

   $ 20    $ —       $ —       $ —      $ —       $ 1,482  

Base Metals

   $ —      $ —       $ —       $ 1    $ —       $ 227  

Depreciation, depletion and amortization:

                                              

Gold

   $ 7    $ —       $ —       $ —      $ —       $ 382  

Base Metals

   $ —      $ —       $ —       $ —      $ —       $ 67  

Other

   $ 2    $ 1     $ —       $ 15    $ 13     $ 33  

Exploration

   $ —      $ 6     $ 60     $ —      $ —       $ 107  

Advanced projects, research and development

   $ 1    $ 13     $ —       $ 12    $ 15     $ 50  

Interest expense, net

   $ 1    $ —       $ —       $ —      $ 43     $ 76  

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

   $ 8    $ (21 )   $ (60 )   $ 80    $ (151 )   $ 721  

Amortization of deferred (advanced) stripping, net

   $ —      $ —       $ —       $ —      $ —       $ (50 )

Capital expenditures

   $ 3    $ 206     $ —       $ 3    $ 34     $ 890  

Total assets

   $ 108    $ 575     $ 1,135     $ 2,989    $ 2,147     $ 13,955  

 

17


NEWMONT MINING CORPORATION

 

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) Continued

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

 

     Nine Months Ended September 30, 2004

 
     Nevada

    Other
North
America


   Yanacocha

   Other
South
America


    Australia/
New
Zealand


   Batu
Hijau


    Other
Indonesia


 

Sales, net:

                                                     

Gold

   $ 736     $ 88    $ 882    $ 8     $ 572    $ 209     $ 30  

Base Metals

   $ —       $ —      $    $ —       $ —      $ 588     $ —    

Cost applicable to sales:

                                                     

Gold

   $ 525     $ 61    $ 321    $ 8     $ 390    $ 68     $ 20  

Base Metals

   $ —       $ —      $ —      $ —       $ —      $ 226     $ —    

Depreciation, depletion and amortization:

                                                     

Gold

   $ 96     $ 17    $ 151    $ 2     $ 95    $ 20     $ 3  

Base Metals

   $ —       $ —      $ —      $ —       $ —      $ 65     $ —    

Other

   $ —       $ —      $ —      $ —       $ 3    $ —       $ —    

Exploration

   $ 10     $ —      $ 3    $ —       $ 11    $ —       $ —    

Advanced projects, research and development

   $ 6     $ —      $ 11    $ 1     $ —      $ —       $ 7  

Interest expense, net

   $ —       $ —      $ 4    $ —       $ —      $ 32     $ —    

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

   $ 99     $ 9    $ 383    $ (6 )   $ 42    $ 388     $ (3 )

Cumulative effect of a change in accounting principle, net of tax

   $ —       $ —      $ —      $ —       $ —      $ (84 )   $ —    

Amortization of deferred (advanced) stripping, net

   $ (47 )   $ —      $ —      $ —       $ 9    $ 48     $ —    

Capital expenditures

   $ 117     $ 9    $ 176    $ 1     $ 67    $ 30     $ —    

Total assets from continuing operations

   $ 1,547     $ 101    $ 1,147    $ 12     $ 1,138    $ 2,337     $ 94  

 

     Central
Asia


    Africa

    Exploration

    Merchant
Banking


    Corporate
and
Other


    Consolidated

 

Sales, net:

                                                

Gold

   $ 112     $ —       $ —       $ —       $ 7     $ 2,644  

Base Metals

   $ —       $ —       $ —       $ —       $ —       $ 588  

Cost applicable to sales:

                                                

Gold

   $ 49     $ —       $ —       $ —       $ —       $ 1,442  

Base Metals

   $ —       $ —       $ —       $ —       $ 1     $ 227  

Depreciation, depletion and amortization:

                                                

Gold

   $ 24     $ —       $ —       $ —       $ —       $ 408  

Base Metals

   $ —       $ —       $ —       $ —       $ —       $ 65  

Other

   $ —       $ —       $ 1     $ 18     $ 9     $ 31  

Exploration

   $ 1     $ —       $ 51     $ —       $ —       $ 76  

Advanced projects, research and development

   $ 2     $ 11     $ —       $ 5     $ 16     $ 59  

Interest expense, net

   $ —       $ —       $ —       $ —       $ 41     $ 77  

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

   $ 18     $ (15 )   $ (56 )   $ (5 )   $ (110 )   $ 744  

Cumulative effect of a change in accounting principle, net of tax

   $ —       $ —       $ —       $ —       $ 37     $ (47 )

Amortization of deferred (advanced) stripping, net

   $ (2 )   $ —       $ —       $ —       $ —       $ 8  

Capital expenditures

   $ 16     $ 52     $ —       $ 4     $ 25     $ 497  

Total assets from continuing operations

   $ 179     $ 292     $ 1,144     $ 2,408     $ 1,767     $ 12,166  

Assets held for sale

                                           $ 252  
                                            


Total assets

                                           $ 12,418  
                                            


 

18


NEWMONT MINING CORPORATION

 

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) Continued

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

 

(18) CONDENSED CONSOLIDATING FINANCIAL STATEMENTS

 

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

 

     Three Months Ended September 30, 2005

 

Condensed Consolidating Statement of Income


   Newmont
Mining
Corporation


    Newmont
USA


    Other
Subsidiaries


    Eliminations

    Newmont
Mining
Corporation
Consolidated


 

Revenues

                                        

Sales - gold, net

   $ —       $ 779     $ 154     $ —       $ 933  

Sales - base metals, net

     —         231       —         —         231  
    


 


 


 


 


       —         1,010       154       —         1,164  
    


 


 


 


 


Costs and expenses

                                        

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

                                        

Gold

     —         402       114               516  

Base metals

     —         86       —         —         86  

Depreciation, depletion and amortization

     —         130       30       —         160  

Exploration

     —         28       13       —         41  

Advanced projects, research and development

     —         9       9       —         18  

General and administrative

     —         30       2       —         32  

Other

     —         21       —         (1 )     20  
    


 


 


 


 


       —         706       168       (1 )     873  
    


 


 


 


 


Other income (expense)

                                        

Other income (expense), net

     7       14       45       —         66  

Interest income - intercompany

     28       12       —         (40 )     —    

Interest expense - intercompany

     (2 )     —         (38 )     40       —    

Interest expense, net

     (10 )     (12 )     (2 )     —         (24 )
    


 


 


 


 


       23       14       5       —         42  
    


 


 


 


 


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

     23       318       (9 )     1       333  

Income tax (expense) benefit

     (26 )     (68 )     —         —         (94 )

Minority interest in income of subsidiaries

     —         (116 )     —         1       (115 )

Equity income (loss) of affiliates

     129       —         27       (156 )     —    
    


 


 


 


 


Income from continuing operations

     126       134       18       (154 )     124  

Income from discontinued operations

     —         —         2       —         2  
    


 


 


 


 


Net income

   $ 126     $ 134     $ 20     $ (154 )   $ 126  
    


 


 


 


 


 

19


NEWMONT MINING CORPORATION

 

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) Continued

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

 

     Three Months Ended September 30, 2004

 

Condensed Consolidating Statement of Income


   Newmont
Mining
Corporation


    Newmont
USA


    Other
Subsidiaries


    Eliminations

    Newmont
Mining
Corporation
Consolidated


 

Revenues

                                        

Sales - gold, net

   $ —       $ 706     $ 191     $ —       $ 897  

Sales - base metals, net

     —         247       —         —         247  
    


 


 


 


 


       —         953       191       —         1,144  
    


 


 


 


 


Costs and expenses

                                        

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

                                        

Gold

     —         351       131       (4 )     478  

Base metals

     —         91       —         —         91  

Depreciation, depletion and amortization

     —         122       40       —         162  

Exploration

     —         20       8       —         28  

Advanced projects, research and development

     —         15       10       —         25  

General and administrative

     —         19       —         3       22  

Write-down of long-lived assets

     —         4       6       —         10  

Other

     —         15       19       —         34  
    


 


 


 


 


       —         637       214       (1 )     850  
    


 


 


 


 


Other income (expense)

                                        

Other income (expense), net

     4       18       25       —         47  

Interest income - intercompany

     28       57       1       (86 )     —    

Interest expense - intercompany

     (51 )     —         (35 )     86       —    

Interest expense, net

     (1 )     (23 )     (3 )     —         (27 )
    


 


 


 


 


       (20 )     52       (12 )     —         20  
    


 


 


 


 


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

     (20 )     368       (35 )     1       314  

Income tax expense

     7       (129 )     28       —         (94 )

Minority interest in income of subsidiaries

     —         (91 )     5       (4 )     (90 )

Equity income (loss) of affiliates

     142       —         27       (169 )     —    
    


 


 


 


 


Income from continuing operations

     129       148       25       (172 )     130  

Loss from discontinued operations

     —         —         (1 )     —         (1 )
    


 


 


 


 


Net income (loss)

   $ 129     $ 148     $ 24     $ (172 )   $ 129  
    


 


 


 


 


 

20


NEWMONT MINING CORPORATION

 

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) Continued

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

 

     Nine Months Ended September 30, 2005

 

Condensed Consolidating Statement of Income


   Newmont
Mining
Corporation


    Newmont
USA


    Other
Subsidiaries


    Eliminations

    Newmont
Mining
Corporation
Consolidated


 

Revenues

                                        

Sales - gold, net

   $ —       $ 2,126     $ 493     $ —       $ 2,619  

Sales - base metals, net

     —         504       —         —         504  
    


 


 


 


 


       —         2,630       493       —         3,123  
    


 


 


 


 


Costs and expenses

                                        

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

                                        

Gold

     —         1,121       367       (6 )     1,482  

Base metals

     —         226       1       —         227  

Depreciation, depletion and amortization

     —         382       100       —         482  

Exploration

     —         72       35       —         107  

Advanced projects, research and development

     —         20       30       —         50  

General and administrative

     —         88       3       4       95  

Write-down of long-lived assets

     —         —         2       —         2  

Other

     —         49       9       —         58  
    


 


 


 


 


       —         1,958       547       (2 )     2,503  
    


 


 


 


 


Other income (expense)

                                        

Other income (expense), net

     12       72       93       —         177  

Interest income - intercompany

     89       33       1       (123 )     —    

Interest expense - intercompany

     (6 )     —         (117 )     123       —    

Interest expense, net

     (21 )     (48 )     (7 )     —         (76 )
    


 


 


 


 


       74       57       (30 )     —         101  
    


 


 


 


 


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

     74       729       (84 )     2       721  

Income tax (expense) benefit

     (19 )     (217 )     50       —         (186 )

Minority interest in income of subsidiaries

     —         (251 )     2       1       (248 )

Equity income of affiliates

     205       —         57       (259 )     3  
    


 


 


 


 


Income from continuing operations

     260       261       25       (256 )     290  

Loss from discontinued operations

     —         —         (30 )     —         (30 )
    


 


 


 


 


Net income (loss)

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


 


 


 


 


 

21


NEWMONT MINING CORPORATION

 

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) Continued

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

 

Condensed Consolidating Statement of Income


   Nine Months Ended September 30, 2004

 
   Newmont
Mining
Corporation


    Newmont
USA


    Other
Subsidiaries


    Eliminations

    Newmont
Mining
Corporation
Consolidated


 

Revenues

                                        

Sales- gold, net

   $ —       $ 2,059     $ 585     $ —       $ 2,644  

Sales - base metals, net

     —         588       —         —         588  
    


 


 


 


 


       —         2,647       585       —         3,232  
    


 


 


 


 


Costs and expenses

                                        

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

                                        

Gold

     —         1,051       401       (10 )     1,442  

Base metals

     —         227       —         —         227  

Depreciation, depletion and amortization

     —         379       125       —         504  

Exploration

     —         52       24       —         76  

Advanced projects, research and development

     —         34       25       —         59  

General and administrative

     —         62       9       9       80  

Write-down of long-lived assets

     —         4       22       —         26  

Other

     —         20       28       —         48  
    


 


 


 


 


       —         1,829       634       (1 )     2,462  
    


 


 


 


 


Other income (expense)

                                        

Other income (expense), net

     3       19       29       —         51  

Interest income - intercompany

     74       35       1       (110 )     —    

Interest expense - intercompany

     (6 )     —         (104 )     110       —    

Interest expense, net

     (2 )     (68 )     (7 )     —         (77 )
    


 


 


 


 


       69       (14 )     (81 )     —         (26 )
    


 


 


 


 


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

     69       804       (130 )     1       744  

Income tax expense

     (24 )     (316 )     126       —         (214 )

Minority interest in income of subsidiaries

     —         (233 )     4       (1 )     (230 )

Equity income of affiliates

     208       —         43       (250 )     1  
    


 


 


 


 


Income from continuing operations

     253       255       43       (250 )     301  

Loss from discontinued operations

     —         —         (1 )     —         (1 )

Cumulative effect of a change in accounting principle

     —         (47 )     —         —         (47 )
    


 


 


 


 


Net income

   $ 253     $ 208     $ 42     $ (250 )   $ 253  
    


 


 


 


 


 

22


NEWMONT MINING CORPORATION

 

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) Continued

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

 

Condensed Consolidating Balance Sheets


   At September 30, 2005

   Newmont
Mining
Corporation


    Newmont
USA


    Other
Subsidiaries


   Eliminations

    Newmont
Mining
Corporation
Consolidated


Assets

                                     

Cash and cash equivalents

   $ 1     $ 880     $ 214    $ —       $ 1,095

Marketable securities and other short-term investments

     —         830       122      —         952

Trade receivables

     —         94       6      —         100

Accounts receivable

     1,759       2,283       409      (4,273 )     178

Inventories

     —         293       49      —         342

Stockpiles and ore on leach pads

     —         222       24      —         246

Other current assets

     3       195       25      —         223
    


 


 

  


 

Current assets

     1,763       4,797       849      (4,273 )     3,136

Property, plant and mine development, net

     (9 )     3,992       1,544      —         5,527

Investments

     —         1       794      —         795

Investments in subsidiaries

     5,098       1       4,070      (9,169 )     —  

Long-term stockpiles and ore on leach pads

     —         536       39      —         575

Deferred income tax assets

     (6 )     521       118      —         633

Other long-term assets

     1,650       987       319      (2,659 )     297

Goodwill

     —         41       2,951      —         2,992
    


 


 

  


 

Total assets

   $ 8,496     $ 10,876     $ 10,684    $ (16,101 )   $ 13,955
    


 


 

  


 

Liabilities

                                     

Current portion of long-term debt

   $ —       $ 216     $ 1    $ —       $ 217

Accounts payable

     50       3,913       546      (4,272 )     237

Employee related benefits

     —         108       27      —         135

Other current liabilities and deferred revenue

     45       455       152      (1 )     651
    


 


 

  


 

Current liabilities

     95       4,692       726      (4,273 )     1,240

Long-term debt

     597       1,068       125      —         1,790

Reclamation and remediation liabilities

     —         301       114      —         415

Employee-related benefits

     —         225       21      —         246

Deferred income tax liabilities

     52       224       243      —         519

Other long-term liabilities and deferred revenue

     247       236       2,568