10-Q 1 c91265e10vq.htm FORM 10-Q 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 September 30, 2009
or
     
o   TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from                      to                     
Commission File Number: 001-31240
NEWMONT MINING CORPORATION
(Exact name of registrant as specified in its charter)
     
Delaware
(State or Other Jurisdiction of
Incorporation or Organization)
  84-1611629
(I.R.S. Employer
Identification No.)
     
6363 South Fiddler’s Green Circle
Greenwood Village, Colorado
(Address of Principal Executive Offices)
  80111
(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 480,405,625 shares of common stock outstanding on October 23, 2009 (and 9,763,091 exchangeable shares).
 
 

 

 


 

TABLE OF CONTENTS
         
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PART I
 
       
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PART II
 
       
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 Exhibit 3.1
 Exhibit 3.5
 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

 

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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     Nine Months Ended  
    September 30,     September 30,  
    2009     2008     2009     2008  
Revenues
                               
Sales — gold, net
  $ 1,653     $ 1,281     $ 4,401     $ 4,094  
Sales — copper, net
    396       90       786       705  
 
                       
 
    2,049       1,371       5,187       4,799  
Costs and expenses
                               
Costs applicable to sales — gold (1)
    694       692       1,983       1,969  
Costs applicable to sales — copper (1)
    71       88       217       342  
Amortization
    199       186       566       548  
Accretion (Note 23)
    8       7       25       23  
Exploration
    55       57       147       154  
Advanced projects, research and development (Note 3)
    27       44       100       113  
General and administrative
    39       37       118       103  
Other expense, net (Note 4)
    67       69       259       249  
 
                       
 
    1,160       1,180       3,415       3,501  
 
                       
Other income (expense)
                               
Other income, net (Note 5)
    25       66       43       100  
Interest expense, net
    (10 )     (35 )     (65 )     (98 )
 
                       
 
    15       31       (22 )     2  
 
                       
Income from continuing operations before income tax and other items
    904       222       1,750       1,300  
Income tax expense (Note 8)
    (253 )     (6 )     (494 )     (193 )
Equity loss of affiliates
    (6 )     (1 )     (14 )     (6 )
 
                       
Income from continuing operations
    645       215       1,242       1,101  
Income (loss) from discontinued operations (Note 9)
          7       (14 )     17  
 
                       
Net income
    645       222       1,228       1,118  
Net income attributable to noncontrolling interests (Note 10)
    (257 )     (31 )     (489 )     (291 )
 
                       
Net income attributable to Newmont stockholders
  $ 388     $ 191     $ 739     $ 827  
 
                       
 
                               
Net income attributable to Newmont stockholders:
                               
Continuing operations
  $ 388     $ 182     $ 748     $ 809  
Discontinued operations
          9       (9 )     18  
 
                       
 
  $ 388     $ 191     $ 739     $ 827  
 
                       
Income per common share (Note 11)
                               
Basic:
                               
Continuing operations
  $ 0.79     $ 0.40     $ 1.54     $ 1.78  
Discontinued operations
          0.02       (0.02 )     0.04  
 
                       
 
  $ 0.79     $ 0.42     $ 1.52     $ 1.82  
 
                       
Diluted:
                               
Continuing operations
  $ 0.79     $ 0.40     $ 1.54     $ 1.77  
Discontinued operations
          0.02       (0.02 )     0.04  
 
                       
 
  $ 0.79     $ 0.42     $ 1.52     $ 1.81  
 
                       
Basic weighted-average common shares outstanding
    490       454       485       454  
 
                       
Diluted weighted-average common shares outstanding
    491       455       486       456  
 
                       
Cash dividends declared per common share
  $ 0.10     $ 0.10     $ 0.30     $ 0.30  
 
                       
 
     
(1)   Exclusive of Amortization and Accretion.
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 September 30,     At December 31,  
    2009     2008  
ASSETS
               
Cash and cash equivalents
  $ 3,022     $ 435  
Marketable securities and other short-term investments (Note 17)
    19       12  
Trade receivables
    280       104  
Accounts receivable
    114       214  
Inventories (Note 18)
    479       507  
Stockpiles and ore on leach pads (Note 19)
    354       290  
Deferred income tax assets
    189       284  
Other current assets (Note 20)
    581       455  
 
           
Current assets
    5,038       2,301  
Property, plant and mine development, net
    12,150       10,128  
Investments (Note 17)
    1,069       655  
Stockpiles and ore on leach pads (Note 19)
    1,411       1,136  
Deferred income tax assets
    999       1,039  
Other long-term assets (Note 20)
    261       207  
Goodwill
    188       188  
Assets of operations held for sale (Note 9)
    31       73  
 
           
Total assets
  $ 21,147     $ 15,727  
 
           
LIABILITIES
               
Current portion of long-term debt (Note 21)
  $ 225     $ 165  
Accounts payable
    338       411  
Employee-related benefits
    201       170  
Income and mining taxes
    211       61  
Other current liabilities (Note 22)
    1,226       770  
 
           
Current liabilities
    2,201       1,577  
Long-term debt (Note 21)
    4,698       3,072  
Reclamation and remediation liabilities (Note 23)
    724       699  
Deferred income tax liabilities
    1,229       1,051  
Employee-related benefits
    377       379  
Other long-term liabilities (Note 22)
    236       252  
Liabilities of operations held for sale (Note 9)
    13       36  
 
           
Total liabilities
    9,478       7,066  
 
           
 
               
Commitments and contingencies (Note 27)
               
EQUITY
               
Common stock
    768       709  
Additional paid-in capital
    8,060       6,831  
Accumulated other comprehensive income (loss)
    454       (253 )
Retained earnings
    641       4  
 
           
Newmont stockholders’ equity
    9,923       7,291  
Noncontrolling interests
    1,746       1,370  
 
           
Total equity (Note 13)
    11,669       8,661  
 
           
Total liabilities and equity
  $ 21,147     $ 15,727  
 
           
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)
                 
    Nine Months Ended  
    September 30,  
    2009     2008  
Operating activities:
               
Net income
  $ 1,228     $ 1,118  
Adjustments:
               
Amortization
    566       548  
Loss (income) from discontinued operations (Note 9)
    14       (17 )
Accretion of accumulated reclamation obligations (Note 23)
    34       30  
Deferred income taxes
    7       (222 )
Impairment of marketable securities (Note 17)
    6       90  
Stock based compensation and other benefits
    44       38  
Gain on asset sales, net
    (3 )     (70 )
Reclamation estimate revisions (Note 23)
          74  
Other operating adjustments and write-downs
    77       73  
Net change in operating assets and liabilities (Note 24)
    (27 )     (494 )
 
           
Net cash provided from continuing operations
    1,946       1,168  
Net cash provided from (used in) discontinued operations (Note 9)
    3       (105 )
 
           
Net cash provided from operations
    1,949       1,063  
 
           
Investing activities:
               
Additions to property, plant and mine development
    (1,314 )     (1,350 )
Investments in marketable debt and equity securities
          (18 )
Proceeds from sale of marketable debt and equity securities
    10       50  
Acquisitions, net (Note 14)
    (766 )     (325 )
Other
    (18 )     26  
 
           
Net cash used in investing activities of continuing operations
    (2,088 )     (1,617 )
Net cash used in investing activities of discontinued operations (Note 9)
          (11 )
 
           
Net cash used in investing activities
    (2,088 )     (1,628 )
 
           
Financing activities:
               
Proceeds from debt, net
    4,302       2,801  
Repayment of debt
    (2,604 )     (2,249 )
Dividends paid to common stockholders
    (147 )     (136 )
Dividends paid to noncontrolling interests
    (115 )     (247 )
Proceeds from stock issuance, net
    1,248       27  
Change in restricted cash and other
    5       19  
 
           
Net cash provided from financing activities of continuing operations
    2,689       215  
Net cash used in financing activities of discontinued operations (Note 9)
    (2 )     (3 )
 
           
Net cash provided from financing activities
    2,687       212  
 
           
Effect of exchange rate changes on cash
    39       (24 )
 
           
Net change in cash and cash equivalents
    2,587       (377 )
Cash and cash equivalents at beginning of period
    435       1,230  
 
           
Cash and cash equivalents at end of period
  $ 3,022     $ 853  
 
           
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) (Continued)
(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 Company has evaluated all subsequent events through October 28, 2009. 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, 2008 included in its Form 8-K, filed September 15, 2009. 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
The Accounting Standards Codification
In June 2009, the Financial Accounting Standards Board (“FASB”) established the FASB Accounting Standards Codification (“ASC”) as the single source of authoritative GAAP to be applied by nongovernmental entities. The ASC is a new structure which took existing accounting pronouncements and organized them by accounting topic. Relevant authoritative literature issued by the Securities and Exchange Commission (“SEC”) and select SEC staff interpretations and administrative literature was also included in the ASC. All other accounting guidance not included in the ASC is non-authoritative. The ASC was effective for the Company’s interim quarterly period beginning July 1, 2009. The adoption of the ASC did not have an impact on the Company’s consolidated financial position, results of operations or cash flows.
Subsequent Events
In May 2009, the ASC guidance for subsequent events was updated to establish accounting and reporting standards for events that occur after the balance sheet date but before financial statements are issued or are available to be issued. The update sets forth: (i) the period after the balance sheet date during which management of a reporting entity should evaluate events or transactions that may occur for potential recognition or disclosure in the financial statements, (ii) the circumstances under which an entity should recognize events or transactions occurring after the balance sheet in its financial statements, and (iii) the disclosures that an entity should make about events or transactions occurring after the balance sheet date in its financial statements. The Company adopted the updated guidance for the interim period ended June 30, 2009. The adoption had no impact on the Company’s consolidated financial position, results of operations or cash flows.
Post-Retirement Benefit Plans
In December 2008, the ASC guidance for retirement benefits was updated to expand the requirements of employers’ disclosures about post-retirement benefit plan assets in a defined benefit pension or other post-retirement plan. The objective is to require more detailed disclosures about employers’ plan assets, including employers’ investment strategies, major categories of plan assets, concentrations of risk within plan assets, and valuation techniques used to measure the fair value of plan assets. The Company adopted the updated guidance on January 1, 2009. These disclosures are not required for earlier periods that are presented for comparative purposes.
Equity Method Investments
In November 2008, the ASC guidance for equity method and joint venture investments was updated to clarify the accounting for certain transactions and impairment considerations involving equity method investments. The intent is to provide guidance on: (i) determining the initial measurement of an equity method investment, (ii) recognizing other-than- temporary impairments of an equity method investment and (iii) accounting for an equity method investee’s issuance of shares. The updated guidance was effective for the Company’s fiscal year beginning January 1, 2009 and was applied prospectively. The adoption had no impact on the Company’s consolidated financial position or results of operations.

 

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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)
Equity-Linked Financial Instruments
In June 2008, the ASC guidance for derivatives and hedging when accounting for contracts in an entity’s own equity was updated to clarify the determination of whether an instrument (or embedded feature) is indexed to an entity’s own stock which would qualify as a scope exception from hedge accounting. The updated guidance was effective for the Company’s fiscal year beginning January 1, 2009. The adoption had no impact on the Company’s consolidated financial position or results of operations.
Accounting for Convertible Debt Instruments
In May 2008, the ASC guidance was updated for convertible debt instruments that, by their stated terms, may be settled in cash (or other assets) upon conversion, including partial cash settlement, unless the embedded conversion option is required to be separately accounted for as a derivative. The update requires that the liability and equity components of convertible debt instruments within the scope be separately accounted for in a manner that reflects the entity’s nonconvertible debt borrowing rate. This requires an allocation of convertible debt proceeds between the liability component and the embedded conversion option (i.e., the equity component). The difference between the principal amount of the debt and the amount of the proceeds allocated to the liability component is reported as a debt discount and subsequently amortized to earnings over the instrument’s expected life using the effective interest method. The updated guidance required retrospective application to all periods presented.
During July 2007, the Company completed an offering of $1,150 convertible senior notes due 2014 and 2017, each in the amount of $575. The 2014 notes, maturing on July 15, 2014, pay interest semi-annually at a rate of 1.25% per annum, and the 2017 notes, maturing on July 15, 2017, pay interest semi-annually at a rate of 1.625% per annum. The notes are convertible, at the holder’s option, equivalent to a conversion price of $46.21 per share of common stock (24,887,956 shares of common stock). In connection with the convertible senior notes offering, the Company entered into convertible note hedge transactions and warrant transactions (“Call Spread Transactions”). The Call Spread Transactions 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. At September 30, 2009, the if-converted value did not exceed the principal amounts.
During February 2009, the Company completed an offering of $518 convertible senior notes due on February 15, 2012. The notes will pay interest semi-annually at a rate of 3.00% per annum. The notes are convertible, at the holder’s option, equivalent to a conversion price of $46.25 per share of common stock (11,189,189 shares of common stock). At September 30, 2009, the if-converted value did not exceed the principal amount.
The Company recorded the following in the Condensed Consolidated Balance Sheets related to the convertible senior notes:
                                                 
    At September 30, 2009     At December 31, 2008  
    Convertible Senior Notes Due     Convertible Senior Notes Due  
    2012     2014     2017     2012     2014     2017  
Additional paid-in capital
  $ 46     $ 97     $ 123     $     $ 97     $ 123  
Principal amount
  $ 518     $ 575     $ 575     $     $ 575     $ 575  
Unamortized debt discount
    (60 )     (112 )     (162 )           (127 )     (174 )
 
                                   
Net carrying amount
  $ 458     $ 463     $ 413     $     $ 448     $ 401  
 
                                   

 

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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 adopting the updated guidance, the effective interest rates increased by approximately 5 percentage points to 8.5%, 6.0% and 6.25% for the 2012, 2014 and 2017 notes, respectively, for the non-cash amortization of the debt discount over the lives of the notes. Interest expense was increased by $9 which decreased the Company’s Income from continuing operations and Net income by $5 ($0.01 per share) for the three months ended September 30, 2008. Interest expense was increased by $25 which decreased the Company’s Income from continuing operations and Net income by $16 ($0.03 per share) for the nine months ended September 30, 2008. Had the update been effective in 2008, the Company would have charged its fourth quarter 2008 dividends to Additional paid-in capital rather than Retained earnings; therefore the Company made the reclassification in 2009. Cash flows from operations were not impacted by the adoption of the updated guidance. The impact on the Company’s 2009 opening balance in Retained earnings was as follows:
         
    At December 31,  
    2008  
Balance before application of updated guidance
  $ 7  
Impact of adoption of updated guidance
    (31 )
Reclassification of dividends to Additional paid-in capital
    28  
 
     
Balance after application of updated guidance
  $ 4  
 
     
For the three months ended September 30, 2009, the Company recorded $8 and $15 of interest expense for the contractual interest coupon and amortization of the debt discount, respectively, related to the convertible senior notes. For the nine months ended September 30, 2009, the Company recorded $22 and $41 of interest expense for the contractual interest coupon and amortization of the debt discount, respectively, related to the convertible senior notes. The remaining unamortized debt discount is amortized over the remaining 3, 5 and 8 year periods of the 2012, 2014 and 2017 convertible senior notes, respectively.
Accounting for the Useful Life of Intangible Assets
In April 2008, the ASC guidance for Goodwill and Other Intangibles was updated to amend the factors that should be considered in developing renewal or extension assumptions used to determine the useful life of a recognized intangible asset. The intent of this update is to improve the consistency between the useful life of a recognized intangible asset and the period of expected cash flows used to measure the fair value of the asset under guidance for business combinations. The updated guidance was effective for the Company’s fiscal year beginning January 1, 2009 and was applied prospectively to intangible assets acquired after the effective date. The adoption had no impact on the Company’s consolidated financial position, results of operations or cash flows.
Derivative Instruments
In March 2008, the ASC guidance for derivatives and hedging was updated for enhanced disclosures about how and why an entity uses derivative instruments, how derivative instruments and the related hedged items are accounted for, and how derivative instruments and the related hedged items affect an entity’s financial position, financial performance and cash flows. The Company adopted the updated guidance on January 1, 2009. The adoption had no impact on the Company’s consolidated financial position, results of operations or cash flows. See Note 16 for the Company’s derivative instruments disclosure.
Business Combinations
In December 2007, the ASC guidance for business combinations was updated to provide new guidance for recognizing and measuring identifiable assets and goodwill acquired, liabilities assumed, and any noncontrolling interest in the acquiree. The updated guidance also provides disclosure requirements to enable users of the financial statements to evaluate the nature and financial effects of the business combination. The Company adopted the updated guidance on January 1, 2009 and applied it to the acquisition of the remaining 33.33% interest in the Boddington project completed on June 25, 2009 (see Note 14).
In April 2009, the guidance was updated to address application issues on initial recognition and measurement, subsequent measurement and accounting, and disclosure of assets and liabilities arising from contingencies in a business combination. This update is effective for assets or liabilities arising from contingencies in business combinations for which the acquisition date is on or after January 1, 2009. The adoption of the updated guidance did not have any impact on the Company’s acquisition of the remaining 33.33% interest in the Boddington project completed on June 25, 2009 (see Note 14).

 

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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)
Noncontrolling Interests
In December 2007, the ASC guidance for Noncontrolling Interests was updated to establish accounting and reporting standards pertaining to: (i) ownership interests in subsidiaries held by parties other than the parent (“noncontrolling interest”), (ii) the amount of net income attributable to the parent and to the noncontrolling interest, (iii) changes in a parent’s ownership interest, and (iv) the valuation of any retained noncontrolling equity investment when a subsidiary is deconsolidated. If a subsidiary is deconsolidated, any retained noncontrolling equity investment in the former subsidiary is measured at fair value and a gain or loss is recognized in net income based on such fair value. For presentation and disclosure purposes, the guidance requires noncontrolling interests to be classified as a separate component of equity. The Company adopted the updated guidance on January 1, 2009. Except for presentation changes, the adoption had no impact on the Company’s consolidated financial position, results of operations or cash flows.
Fair Value Accounting
In September 2006, the ASC guidance for fair value measurements and disclosure was updated to define fair value, establish a framework for measuring fair value, and expand disclosures about fair value measurements. The Company adopted the updated guidance for assets and liabilities measured at fair value on a recurring basis on January 1, 2008. In February 2008, the FASB staff issued an update to the guidance which delayed the effective date for nonfinancial assets and nonfinancial liabilities that are recognized or disclosed at fair value in the financial statements on a nonrecurring basis. The Company adopted the updated guidance for the Company’s nonfinancial assets and liabilities measured at fair value on a nonrecurring basis on January 1, 2009.
In April 2009, the guidance was further updated to provide additional guidance on determining fair value when the volume and level of activity for the asset or liability have significantly decreased and identifying circumstances that indicate when a transaction is not orderly. In April 2009, the guidance for investments in debt and equity securities was updated to: (i) clarify the interaction of the factors that should be considered when determining whether a debt security is other than temporarily impaired, (ii) provide guidance on the amount of an other-than-temporary impairment recognized for a debt security in earnings and other comprehensive income and (iii) expand the disclosures required for other-than-temporary impairments for debt and equity securities. Also in April 2009, the guidance for financial instruments was updated to require disclosures about the fair value of financial instruments for interim reporting periods of publicly traded companies as well as in annual financial statements. Adoption of this updated guidance was required for the Company’s interim reporting period beginning April 1, 2009 with early adoption permitted. The Company adopted the updated guidance for the interim period ended March 31, 2009. Refer to Note 15 for further details regarding the Company’s assets and liabilities measured at fair value.
Recently Issued Accounting Pronouncements
Fair Value Accounting
In August 2009, the ASC guidance for fair value measurements and disclosure was updated to further define fair value of liabilities. This update provides clarification for circumstances in which: (i) a quoted price in an active market for the identical liability is not available, (ii) the liability has a restriction that prevents its transfer, and (iii) the identical liability is traded as an asset in an active market in which no adjustments to the quoted price of an asset are required. The updated guidance is effective for the Company’s interim reporting period beginning October 1, 2009. The Company is evaluating the potential impact of adopting this guidance on the Company’s consolidated financial position, results of operations and cash flows.
Variable Interest Entities
In June 2009, the 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 analysis identifies a 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. The updated guidance is effective for the Company’s fiscal year beginning January 1, 2010. The Company currently accounts for Nusa Tenggara Partnership (“NTP”) as a VIE and is evaluating the potential impact of adopting this guidance on the Company’s consolidated financial position, results of operations and cash flows.

 

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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 ADVANCED PROJECTS, RESEARCH AND DEVELOPMENT
                                 
    Three Months Ended     Nine Months Ended  
    September 30,     September 30,  
    2009     2008     2009     2008  
Boddington
  $ 11     $ 1     $ 24     $ 3  
Hope Bay
    2       16       18       29  
Technical and project services
    6       5       18       15  
Corporate
    3       3       10       10  
Nevada underground
    1       1       9       1  
Akyem
    2       2       5       5  
Fort a la Corne JV
          6       1       19  
Other
    2       10       15       31  
 
                       
 
  $ 27     $ 44     $ 100     $ 113  
 
                       
NOTE 4 OTHER EXPENSE, NET
                                 
    Three Months Ended     Nine Months Ended  
    September 30,     September 30,  
    2009     2008     2009     2008  
Boddington acquisition costs (Note 14)
  $     $     $ 67     $  
Regional administration
    14       10       40       31  
Community development
    12       15       33       47  
Western Australia power plant
    18       2       27       15  
Peruvian royalty
    8       4       19       15  
Workforce reduction
                15        
Batu Hijau divestiture
    3       2       9       7  
Accretion, non-operating (Note 23)
    3       2       9       7  
World Gold Council dues
    2       3       8       8  
Reclamation estimate revisions (Note 23)
          13             74  
Pension settlement loss (Note 6)
          1             12  
Provision for bad debts
          11             11  
Other
    7       6       32       22  
 
                       
 
  $ 67     $ 69     $ 259     $ 249  
 
                       
NOTE 5 OTHER INCOME, NET
                                 
    Three Months Ended     Nine Months Ended  
    September 30,     September 30,  
    2009     2008     2009     2008  
Canadian Oil Sands Trust income
  $ 7     $ 36     $ 16     $ 91  
Refinery income
    9       2       13       2  
Interest income
    2       7       11       24  
Gain on sale of investments, net
    2       19       2       29  
Foreign currency exchange gains (losses), net
    2       (7 )           (20 )
Gain on sale of exploration property
          32             32  
Income from development projects, net
          3             12  
(Loss) gain on ineffective portion of derivative instruments, net (Note 16)
    (1 )     3       (5 )     5  
Impairment of marketable securities (Note 17)
          (34 )     (6 )     (90 )
Other
    4       5       12       15  
 
                       
 
  $ 25     $ 66     $ 43     $ 100  
 
                       

 

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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 6 EMPLOYEE PENSION AND OTHER BENEFIT PLANS
                                 
    Three Months Ended     Nine Months Ended  
    September 30,     September 30,  
    2009     2008     2009     2008  
Pension benefit costs, net
                               
Service cost
  $ 5     $ 4     $ 14     $ 12  
Interest cost
    8       7       24       22  
Expected return on plan assets
    (8 )     (7 )     (22 )     (21 )
Amortization of prior service cost
                1        
Amortization of loss
    4             11       2  
 
                       
 
  $ 9     $ 4     $ 28     $ 15  
 
                       
                                 
    Three Months Ended     Nine Months Ended  
    September 30,     September 30,  
    2009     2008     2009     2008  
Other benefit costs, net
                               
Service cost
  $ 1     $     $ 2     $ 1  
Interest cost
    1       1       4       3  
Amortization of gain
                      (1 )
 
                       
 
  $ 2     $ 1     $ 6     $ 3  
 
                       
For the three months ended September 30, 2009 and 2008, the Company recognized pension settlement losses of $nil and $1, respectively, related to senior management retirements. For the nine months ended September 30, 2009 and 2008, the Company recognized pension settlement losses of $nil and $12, respectively, related to senior management retirements. These costs were recorded in Other expense, net (see Note 4).
NOTE 7 STOCK BASED COMPENSATION
The Company recognized stock options and other stock based compensation as follows:
                                 
    Three Months Ended     Nine Months Ended  
    September 30,     September 30,  
    2009     2008     2009     2008  
Stock options
  $ 3     $ 5     $ 11     $ 13  
Restricted stock units
    3             6        
Deferred stock awards
    2       3       10       8  
Restricted stock awards
          1       3       4  
 
                       
 
  $ 8     $ 9     $ 30     $ 25  
 
                       
For the three months ended September 30, 2009 and 2008, no stock options were granted. For the nine months ended September 30, 2009 and 2008, 1,157,825 and 1,116,963 stock options, respectively, were granted at a weighted-average exercise price of $40 and $44, respectively, per underlying share of the Company’s common stock. At September 30, 2009, unrecognized compensation costs related to unvested stock options was $22. This cost is expected to be recognized over a weighted-average period of approximately 2.2 years.
For the three months ended September 30, 2009 and 2008, no shares of restricted stock units were granted. For the nine months ended September 30, 2009 and 2008, 490,273 and 8,927 shares of restricted stock units, respectively, were granted, at a weighted-average fair market value of $42 and $49, respectively.
No deferred stock awards were granted during the three and nine months ended September 30, 2009, and the three months ended September 30, 2008. For the nine months ended September 30, 2008, 394,095 deferred stock awards were granted at a weighted-average fair market value of $44.
No restricted stock awards were granted during the three and nine months ended September 30, 2009. For the three and nine months ended September 30, 2008, 4,034 and 118,697 shares of restricted stock, respectively, were granted and issued, at a weighted-average fair market value of $50 and $49, 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)
NOTE 8 INCOME TAXES
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 paid the 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. At September 30, 2009, the Company’s total unrecognized tax benefit was $120 for uncertain tax positions taken or expected to be taken on tax returns. Of this, $93 represents the amount of unrecognized tax benefits that, if recognized, would affect the Company’s effective income tax rate. Also included in the balance at September 30, 2009 is $12 of tax positions that, due to the impact of deferred tax accounting, the potential disallowance of which would not affect the annual effective tax rate.
In April 2009, the United States Tax Court issued an opinion for Santa Fe Pacific Gold Company and Subsidiaries (“Santa Fe”), by and through its successor in interest, Newmont USA Limited, a member of the Newmont Mining Corporation (“Newmont”) affiliated group. The Tax Court ruled in favor of Santa Fe regarding the deductibility of a termination fee that had been paid in 1997 as part of a merger agreement. At September 30, 2009, Newmont had not been notified by the Commissioner of the Internal Revenue Service (“Commissioner”) regarding a decision to appeal the Tax Court Ruling. If the Commissioner does not file an appeal, the Company will be decreasing its liability and accrued interest for uncertain income tax positions in the fourth quarter of 2009.
As a result of (i) statute of limitations that expire in the next 12 months in various jurisdictions, (ii) the effects of the aforementioned closure with respect to the Santa Fe matters described above and (iii) possible settlements of audit-related issues with taxing authorities in various jurisdictions, the Company believes that it is reasonably possible that the total amount of its net unrecognized income tax benefits will decrease by approximately $55 to $87 in the next 12 months.
NOTE 9 DISCONTINUED OPERATIONS
Discontinued operations include the Company’s Kori Kollo operation sold in July 2009 and the royalty portfolio and Pajingo operations, both sold in December 2007.
The Company has reclassified the historical balance sheet amounts and the income statement results 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 for all periods presented. The Condensed Consolidated Statements of Cash Flows have been reclassified for assets held for sale and discontinued operations for all periods presented.
The following table details selected financial information included in the Income (loss) from discontinued operations in the Condensed Consolidated Statements of Income:
                                 
    Three Months Ended     Nine Months Ended  
    September 30,     September 30,  
    2009     2008     2009     2008  
Sales — gold, net
  $     $ 21     $ 32     $ 58  
 
                       
 
                               
Income (loss) from operations
  $     $ (19 )   $ 1     $ (7 )
Loss on impairment
                (44 )      
Gain on sale of royalty portfolio
                      5  
Gain on sale of Pajingo assets
                      1  
 
                       
Pre-tax loss
          (19 )     (43 )     (1 )
Income tax benefit
          26       29       18  
 
                       
Income (loss) from discontinued operations
  $     $ 7     $ (14 )   $ 17  
 
                       

 

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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 major classes of Assets and Liabilities of operations held for sale in the Condensed Consolidated Balance Sheets are as follows:
                 
    At September 30,     At December 31,  
    2009     2008  
Assets:
               
Accounts receivable
  $     $ 9  
Inventories
          12  
Stockpiles and ore on leach pads
          43  
Property, plant and mine development
          4  
Deferred income tax assets
    31       2  
Other assets
          3  
 
           
Total assets of operations held for sale
  $ 31     $ 73  
 
           
 
               
Liabilities:
               
Current and long-term debt
  $     $ 4  
Accounts payable
          1  
Employee-related benefits
          8  
Reclamation and remediation liabilities
          17  
Other liabilities
    13       6  
 
           
Total liabilities of operations held for sale
  $ 13     $ 36  
 
           
The following table details selected financial information included in Net cash provided from (used in) discontinued operations, Net cash used in investing activities of discontinued operations and Net cash used in financing activities of discontinued operations:
                 
    Nine Months Ended  
    September 30,  
    2009     2008  
Net cash provided from (used in) discontinued operations:
               
(Loss) income from discontinued operations
  $ (14 )   $ 17  
Impairment of assets held for sale
    44        
Write-down of inventory
    7        
Amortization
    3       7  
Deferred income taxes
    (30 )     (1 )
Other operating adjustments
    1       15  
Decrease in net operating liabilities
    (8 )     (143 )
 
           
 
  $ 3     $ (105 )
 
           
 
               
Net cash used in investing activities of discontinued operations:
               
Additions to property, plant and mine development
  $     $ (5 )
Proceeds from asset sales, net
          (6 )
 
           
 
  $     $ (11 )
 
           
 
               
Net cash used in financing activities of discontinued operations:
               
Repayment of debt
  $ (2 )   $ (3 )
 
           
 
  $ (2 )   $ (3 )
 
           
NOTE 10 NONCONTROLLING INTERESTS
                                 
    Three Months Ended     Nine Months Ended  
    September 30,     September 30,  
    2009     2008     2009     2008  
Batu Hijau
  $ 156     $ (17 )   $ 248     $ 103  
Yanacocha
    99       49       243       188  
Other
    2       (1 )     (2 )      
 
                       
 
  $ 257     $ 31     $ 489     $ 291  
 
                       

 

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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 currently has a 45% ownership interest in Batu Hijau, held through NTP with an affiliate of Sumitomo Corporation of Japan (“Sumitomo”). Newmont has a 56.25% interest in NTP and the Sumitomo affiliate holds the remaining 43.75%. NTP in turn owns 80% of P.T. Newmont Nusa Tenggara (“PTNNT”), the Indonesian subsidiary that operates the Batu Hijau mine. Newmont identified NTP as a VIE as a result of certain capital structures and contractual relationships and has fully consolidated Batu Hijau in its consolidated financial statements since January 1, 2004. The remaining 20% interest in PTNNT is owned by P.T. Pukuafu Indah (“PTPI”), an unrelated Indonesian company. NTP’s interest in PTNNT was the subject of an international arbitration proceeding and a final award concerning PTNNT’s interest was issued by the arbitration panel on March 31, 2009. For further information concerning the arbitration award, see Note 27.
Newmont has a 51.35% ownership interest in Yanacocha, with the remaining interests held by Compañia de Minas Buenaventura, S.A.A. (43.65%) and the International Finance Corporation (5%).
In April 2008, the Company purchased 15,960 additional shares of European Gold Refineries SA joint venture (“EGR”) for $11 in cash increasing its ownership interest to 56.67% from 46.72%. The acquisition of the additional interest resulted in the consolidation of EGR. In November 2008, EGR repurchased 6.55% of its own shares from a minority shareholder bringing Newmont’s ownership to 60.64%. Swiss residents hold the remaining 39.36%. Prior to consolidation, the Company accounted for EGR using the equity method of accounting.
NOTE 11 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 the denominator is increased to include the number of additional common shares that would have been outstanding if the potentially dilutive common shares had been issued.
                                 
    Three Months Ended     Nine Months Ended  
    September 30,     September 30,  
    2009     2008     2009     2008  
Numerator:
                               
Net income attributable to Newmont stockholders
                               
Continuing operations
  $ 388     $ 182     $ 748     $ 809  
Discontinued operations
          9       (9 )     18  
 
                       
 
  $ 388     $ 191     $ 739     $ 827  
 
                       
 
                               
Denominator:
                               
Basic
    490       454       485       454  
Effect of employee stock-based awards
    1       1       1       2  
 
                       
Diluted
    491       455       486       456  
 
                       
 
                               
Net income attributable to Newmont stockholders per common share
                               
Basic:
                               
Continuing operations
  $ 0.79     $ 0.40     $ 1.54     $ 1.78  
Discontinued operations
          0.02       (0.02 )     0.04  
 
                       
 
  $ 0.79     $ 0.42     $ 1.52     $ 1.82  
 
                       
Diluted:
                               
Continuing operations
  $ 0.79     $ 0.40     $ 1.54     $ 1.77  
Discontinued operations
          0.02       (0.02 )     0.04  
 
                       
 
  $ 0.79     $ 0.42     $ 1.52     $ 1.81  
 
                       
In February 2009, the Company completed a public offering of 34,500,000 shares of common stock at $37 per share for net proceeds of $1,233.
Options to purchase 5.1 million and 1.1 million shares of common stock at average exercise prices of $46 and $55 were outstanding at September 30, 2009 and 2008, respectively, but were not included in the computation of diluted weighted average number of common shares because the exercise prices of the options exceeded the price of the common stock.

 

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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 July 2007 and February 2009, Newmont issued $1,150 and $518, respectively, of convertible notes that, if converted in the future, would have a potentially dilutive effect on the Company’s stock. 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 in accordance with accounting guidance for earnings per share. 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 all periods presented did not exceed the conversion price of $46.25 and $46.21 for the notes issued in 2009 and 2007, respectively, and therefore, did not have a dilutive effect on earnings per share.
In connection with the 2007 convertible senior notes offering, the Company entered into Call Spread Transactions. These transactions 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 (i.e. Newmont’s share price exceeds $60.27) the underlying shares will be included in the computation of diluted income per common share.
NOTE 12 COMPREHENSIVE INCOME (LOSS)
                                 
    Three Months Ended     Nine Months Ended  
    September 30,     September 30,  
    2009     2008     2009     2008  
 
Net income
  $ 645     $ 222     $ 1,228     $ 1,118  
Other comprehensive income (loss), net of tax:
                               
Unrealized gain (loss) on marketable securities (Note 17)
    120       (481 )     312       (77 )
Foreign currency translation adjustments
    118       (103 )     207       (120 )
Pension and other benefit liability adjustments
    3       1       6       9  
Change in fair value of cash flow hedge instruments:
                               
Net change from periodic revaluations
    77       (106 )     163       (55 )
Net amount reclassified to income
    (5 )     (2 )     19       (10 )
 
                       
Net unrecognized gain (loss) on derivatives
    72       (108 )     182       (65 )
 
                       
 
    313       (691 )     707       (253 )
 
                       
Comprehensive income (loss)
  $ 958     $ (469 )   $ 1,935     $ 865  
 
                       
 
                               
Comprehensive income (loss) attributable to:
                               
Newmont stockholders
  $ 700     $ (498 )   $ 1,444     $ 576  
Noncontrolling interests
    258       29       491       289  
 
                       
 
  $ 958     $ (469 )   $ 1,935     $ 865  
 
                       

 

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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 CHANGES IN EQUITY
                 
    Nine Months Ended  
    September 30,  
    2009     2008  
Common stock:
               
At beginning of period
  $ 709     $ 696  
Common stock offering
    55        
Stock based compensation
    2       2  
Shares issued in exchange for exchangeable shares
    2       6  
 
           
At end of period
    768       704  
 
               
Additional paid-in capital:
               
At beginning of period
    6,831       6,916  
Common stock offering
    1,178        
Convertible debt issuance
    46        
Common stock dividends
    (45 )     (136 )
Stock based compensation
    53       71  
Shares issued in exchange for exchangeable shares
    (3 )     (7 )
 
           
At end of period
    8,060       6,844  
 
               
Accumulated other comprehensive income (loss):
               
At beginning of period
    (253 )     957  
Other comprehensive income (loss) (Note 12)
    707       (253 )
 
           
At end of period
    454       704  
 
               
Retained earnings (deficit):
               
At beginning of period
    4       (809 )
Net income attributable to Newmont stockholders
    739       827  
Common stock dividends
    (102 )      
 
           
At end of period
    641       18  
 
               
Noncontrolling interests:
               
At beginning of period
    1,370       1,449  
Net income attributable to noncontrolling interests
    489       291  
Dividends paid to noncontrolling interests
    (115 )     (247 )
Other comprehensive income (loss)
    2       (2 )
Acquisition of noncontrolling interest in Miramar Mining Corporation
          (39 )
Acquisition of noncontrolling interest in EGR
          24  
 
           
At end of period
    1,746       1,476  
 
           
Total equity
  $ 11,669     $ 9,746  
 
           
On February 3, 2009, the Company completed a public offering of $518 convertible senior notes, including notes offered to cover over-allotments, maturing on February 15, 2012 for net proceeds of $504 after deducting the underwriters discount and expenses of the offering (see Note 21). Additionally, on February 3, 2009, the Company completed a public offering of 34,500,000 shares of common stock, including shares offered to cover over-allotments, at a price of $37 per share, for net proceeds of $1,233 after deducting the underwriters discount and expenses of the offering.
NOTE 14 ACQUISITIONS
On June 25, 2009, the Company completed the acquisition of the remaining 33.33% interest in Boddington from AngloGold Ashanti Australia Limited (“AngloGold”). The valuation date for the transaction is January 1, 2009, and closing adjustments were made to reflect Newmont’s economic ownership from that date. Consideration for the acquisition consists of $750 less an $8 closing adjustment paid in cash at closing, $240 payable in cash and/or Newmont common stock, at the Company’s option, by December 2009, and a contingent royalty capped at $100, equal to 50% of the average realized operating margin (Revenue less Costs applicable to sales on a by-product basis), if any, exceeding $600 per ounce, payable quarterly on one-third of gold sales from Boddington.

 

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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 table summarizes the consideration to acquire the remaining interest in Boddington:
         
Cash
  $ 742  
Cash and/or common shares
    240  
Contingent consideration (fair value)
    62  
 
     
 
  $ 1,044  
 
     
The Company estimates that the fair value of the contingent consideration is approximately $62, and recognized this as part of the purchase price at the acquisition date. Amounts are payable under the contingent royalty beginning in the second quarter of 2010. The range of undiscounted amounts the Company could pay is between $0 and $100. The fair value of the contingent royalty recognized was estimated by applying the income approach. See Note 15 for a description of the key inputs used in deriving fair value.
In connection with the acquisition, Newmont incurred transaction costs of $67 (shown in Note 4, Other expense, net), including Australian stamp duties. $14 of these costs were paid at September 30, 2009. Additionally, in June 2009, Newmont paid $182 to reimburse AngloGold for its share of capital and other project expenditures from January 1, 2009 to June 25, 2009. The reimbursement of capital expenditures is included in Property, plant and mine development, net, and as Additions to property, plant and mine development on the cash flow statement.
The purchase price allocation based on the estimated fair values of assets acquired and liabilities assumed is as follows:
         
Assets:
       
Cash
  $ 1  
Property, plant and mine development, net
    1,073  
Inventories and stockpiles
    7  
Deferred income tax asset
    28  
Other assets
    11  
 
     
 
  $ 1,120  
 
     
Liabilities:
       
Accrued liabilities
  $ 33  
Reclamation liabilities
    15  
Deferred income tax liability
    28  
 
     
 
    76  
 
     
Net assets acquired
  $ 1,044  
 
     
In the first quarter of 2009, La Herradura (of which Newmont owns 44%) purchased a mining property near its Mexico operation for cash consideration of $11 (Newmont’s 44% share).
The pro forma impact of all 2009 acquisitions on Net Income was not material.
In December 2007, the Company purchased approximately 70% of the common shares of Miramar Mining Corporation (“Miramar”), which, in addition to the shares previously owned, brought the Company’s interest in Miramar to approximately 78%. During the first quarter of 2008, the Company completed the acquisition of 100% of Miramar.
NOTE 15 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).

 

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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 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 September 30, 2009  
    Total     Level 1     Level 2     Level 3  
Assets:
                               
Cash equivalents
  $ 1,733     $ 1,733     $     $  
Marketable equity securities
    1,029       1,029              
Corporate marketable debt securities
    10       10              
Other marketable debt securities:
                               
Asset backed commercial paper
    18                   18  
Auction rate securities
    5                   5  
Trade receivable from provisional copper and gold concentrate sales, net
    191       191              
Derivative instruments, net
    149             149        
 
                       
 
  $ 3,135     $ 2,963     $ 149     $ 23  
 
                       
Liabilities:
                               
8 5/8% debentures ($100 hedged portion)
  $ 97     $     $ 97     $  
Boddington contingent consideration
    62                   62  
 
                       
 
  $ 159     $     $ 97     $ 62  
 
                       
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.
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 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 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 other marketable debt securities include investments in asset backed commercial paper and auction rate securities. In January 2009, the investments in the Company’s asset backed commercial paper were restructured under court order. The restructuring allowed a return of a portion of the investment and 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 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. The asset backed commercial paper and auction rate securities are classified within Level 3 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 the forward London Metal Exchange (“LME”) (copper) and the London Bullion Market Association P.M. fix (“London P.M. fix”) (gold) 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.

 

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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 has fixed to floating swap contracts to hedge a portion of the interest rate risk exposure of its 8 5/8% uncollateralized 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 acquisition of the remaining 33.33% interest in Boddington (Note 14). 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 table below sets forth a summary of changes in the fair value of the Company’s Level 3 financial assets and liabilities for the nine months ended September 30, 2009.
                                 
                    Boddington        
    Auction Rate     Asset Backed     Contingent        
    Securities     Commercial Paper     Consideration     Total  
Balance at beginning of period
  $ 5     $ 22     $     $ 27  
Settlements
          (4 )           (4 )
Transfers in
                62       62  
 
                       
Balance at end of period
  $ 5     $ 18     $ 62     $ 85  
 
                       
At September 30, 2009, the assets and liabilities classified within Level 3 of the fair value hierarchy represent 1% and 39% of the total assets and liabilities measured at fair value, respectively.
NOTE 16 DERIVATIVE INSTRUMENTS
The Company is exposed to certain financial and market risks relating to its ongoing business operations. The primary risks managed by using derivative instruments are foreign currency exchange risk, diesel price risk, and interest rate risk. In accordance with hedge accounting guidance, the Company designated currency fixed forward and option contracts as cash flow hedges, diesel forward contracts as cash flow hedges, treasury rate lock contracts as cash flow hedges of proceeds realized from debt issuances, and interest rate swap contracts as fair value hedges of a fixed-rate borrowing. All of the derivative instruments were transacted for risk management purposes and qualify as hedging instruments. The maximum period over which hedged forecasted transactions are expected to occur is three years.
Cash Flow Hedges
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 currency rates. Newmont hedges up to 80% of the Company’s IDR denominated operating expenditures which results in a blended IDR/$ rate realized each period. The hedging instruments are forward purchase contracts with expiration dates ranging up to one year from the date of issue. The principal hedging objective is reduction in the volatility of realized period-on-period IDR/$ rates. For the three months ended September 30, 2009 and 2008, the IDR/$ forward purchase contracts reduced Batu Hijau Costs applicable to sales by $1. For the nine months ended September 30, 2009 and 2008, the IDR/$ forward purchase contracts increased Batu Hijau Costs applicable to sales by $1 and reduced Batu Hijau Costs applicable to sales by $2, respectively. At September 30, 2009, the Company has hedged 20% of its expected remaining 2009 IDR operating expenditures.
The Company hedges up to 85% of the Company’s A$ denominated operating expenditures with forward contracts that have 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 $/A$ rates. Each month, fixed forward contracts are obtained to hedge 1/36th of the forecasted monthly A$ operating cost exposure in the rolling three-year hedge period resulting in a blended $/A$ rate realized. For the three months ended September 30, 2009 and 2008, the A$ operating hedging instruments reduced Australia/New Zealand Costs applicable to sales by $4 and $nil, respectively. For the nine months ended September 30, 2009 and 2008, the A$ operating hedging instruments increased Australia/New Zealand Costs applicable to sales by $21 and reduced Australia/New Zealand Costs applicable to sales by $5, respectively. At September 30, 2009, the Company has hedged 78% of its expected remaining 2009 A$ operating expenditures, and 53%, 30% and 9% of its expected 2010, 2011 and 2012 A$ operating expenditures, 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)
The Company hedges up to 75% of the Company’s NZ$ denominated operating expenditures with forward contracts that have expiration dates ranging up to two years from the date of issue. The principal hedging objective is reduction in the volatility of realized period-on-period $/NZ$ rates. Each month, fixed forward contracts are obtained to hedge 1/24th of the forecasted monthly NZ$ operating cost exposure in the rolling two-year hedge period resulting in a blended $/NZ$ rate realized. For the three months ended September 30, 2009 and 2008, the NZ$ operating hedging instruments reduced Australia/New Zealand Costs applicable to sales by $nil. For the nine months ended September 30, 2009 and 2008, the NZ$ operating hedging instruments increased Australia/New Zealand Costs applicable to sales by $3 and $nil, respectively. At September 30, 2009, the Company has hedged 68% of its expected remaining 2009 NZ$ operating expenditures, and 42% and 9% of its expected 2010 and 2011 NZ$ operating expenditures, respectively.
The Company hedges up to 95% of the Company’s A$ denominated capital expenditures related to the construction of Boddington. The hedging instruments consist of a series of fixed forward contracts with expiration dates ranging up to one year from the date of issue. The realized gains and losses associated with the capital expenditure hedge program will impact Amortization during future periods in which the Boddington assets are placed into service. At September 30, 2009, the Company has hedged 33% of its expected remaining A$ denominated Boddington capital expenditures.
All of the foreign currency contracts were 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 (loss) and are recorded in earnings during the period in which the hedged transaction affects earnings. Gains and losses on the derivative representing hedge ineffectiveness are recognized in current earnings.
Newmont had the following foreign currency derivative contracts outstanding at September 30, 2009:
                                         
    Expected Maturity Date  
                                    Total/  
    2009     2010     2011     2012     Average  
IDR Forward Purchase Contracts:
                                       
$ (millions)
  $ 6     $     $     $     $ 6  
Average rate (IDR/$)
    10,584                         10,584  
IDR notional (millions)
    63,501                         63,501  
A$ Operating Forward Purchase Contracts:
                                       
$ (millions)
  $ 118     $ 489     $ 275     $ 61     $ 943  
Average rate ($/A$)
    0.77       0.76       0.72       0.73       0.75  
A$ notional (millions)
    154       644       379       83       1,260  
NZ$ Operating Forward Purchase Contracts:
                                       
$ (millions)
  $ 12     $ 28     $ 6     $     $ 46  
Average rate ($/NZ$)
    0.64       0.62       0.63             0.63  
NZ$ notional (millions)
    19       46       9             74  
A$ Boddington Capital Forward Purchase Contracts:
                                       
$ (millions)
  $ 25     $     $     $     $ 25  
Average rate ($/A$)
    0.80                         0.80  
A$ notional (millions)
    31                         31  
Diesel Fixed Forward Contracts
Newmont hedges up to 66% of its operating cost exposure related to diesel prices of fuel 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 of up to two years from the date of issue. For the three months ended September 30, 2009 and 2008, the Nevada diesel hedge program increased Nevada Costs applicable to sales by $2 and $nil, respectively. For the nine months ended September 30, 2009 and 2008, the Nevada diesel hedge program increased Nevada Costs applicable to sales by $13 and $nil, respectively. The contracts have been designated as cash flow hedges of future diesel purchases, and as such, the effective portion of unrealized changes in the market value have been recorded in Accumulated other comprehensive income (loss) 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. At September 30, 2009, the Company has hedged 64% of its expected remaining 2009 Nevada diesel expenditures, and 43% and 14% of its expected 2010 and 2011 Nevada diesel expenditures, 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)
Newmont had the following diesel derivative contracts outstanding at September 30, 2009:
                                 
    Expected Maturity Date  
                            Total/  
    2009     2010     2011     Average  
Diesel Forward Purchase Contracts:
                               
$ (millions)
  $ 12     $ 33     $ 9     $ 54  
Average rate ($/gallon)
    1.78       1.90       2.07       1.90  
Diesel gallons (millions)
    7       17       4       28  
Treasury Rate Lock Contracts
In connection with the 2019 and 2039 notes issued in September 2009, Newmont acquired treasury rate lock contracts to reduce the variability of the proceeds realized from the bond issuances. The treasury rate locks resulted in $6 and $5 unrealized gains for the 2019 and 2039 notes, respectively. The Company previously acquired treasury rate locks in connection with the issuance of the 2035 notes that resulted in a $10 unrealized loss. The gains/losses from these contracts will be recognized over the terms of the respective notes.
Fair Value Hedges
Interest Rate Swap Contracts
At September 30, 2009, Newmont had $100 fixed to floating swap contracts designated as a hedge against a portion of its 8 5/8% debentures due 2011. The interest rate swap contracts provide balance to the Company’s mix of fixed and floating rate debt. Under the hedge contract terms, the Company receives fixed-rate interest payments at 8.625% and pays floating-rate interest amounts based on periodic London Interbank Offered Rate (“LIBOR”) settings plus a spread, ranging from 2.60% to 3.49%. The interest rate swap contracts were designated as fair value hedges, and as such, 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. Changes in the mark-to-market value of the effective portion of the interest rate swap contracts are recognized as a component of Interest expense, net. The hedge contracts decreased Interest expense, net by $1 and $nil for the three months ended September 30, 2009 and 2008, respectively, and decreased Interest expense, net by $3 and $1 for the nine months ended September 30, 2009 and 2008, respectively. For the three months ended September 30, 2009 and 2008, losses of $1 and $nil were included in Other income, net for the ineffective portion of derivative instruments designated as fair value hedges, respectively. For the nine months ended September 30, 2009 and 2008, losses of $2 and $nil, respectively, were included in Other income, net for the ineffective portion of derivative instruments designated as fair value hedges.

 

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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)
Derivative Instrument Fair Values
Newmont had the following derivative instruments designated as hedges with fair values at September 30, 2009 and December 31, 2008:
                                 
    Fair Values of Derivative Instruments  
    At September 30, 2009  
    Other     Other     Other     Other  
    Current     Long-Term     Current     Long-Term  
    Assets     Assets     Liabilities     Liabilities  
Foreign currency exchange contracts:
                               
IDR operating forward purchase contracts
  $ 1     $     $     $  
NZ$ operating forward contracts
    5       1              
A$ forward purchase contracts
    72       59              
Diesel forward contracts
    2       1              
Interest rate swap contracts
    2       6              
 
                       
Total derivative instruments (Notes 20 and 22)
  $ 82     $ 67     $     $  
 
                       
                                 
    Fair Values of Derivative Instruments  
    At December 31, 2008  
    Other     Other     Other     Other  
    Current     Long-Term     Current     Long-Term  
    Assets     Assets     Liabilities     Liabilities  
Foreign currency exchange contracts:
                               
IDR operating forward purchase contracts
  $     $     $ 4     $  
NZ$ operating forward contracts
                5       1  
A$ forward purchase contracts
    3       1       87       42  
A$ call option contracts
    1                    
Diesel forward contracts
                15        
Interest rate swap contracts
    2       7              
 
                       
Total derivative instruments (Notes 20 and 22)
  $ 6     $ 8     $ 111     $ 43  
 
                       

 

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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                     Treasury Rate  
    Exchange Contracts     Diesel Forward Contracts     Lock Contracts  
    2009     2008     2009     2008     2009     2008  
Cash flow hedging relationships:
                                               
For the three months ended September 30,
                                               
Gain (loss) recognized in other comprehensive income (effective portion)
  $ 102     $ (148 )   $ (1 )   $ (5 )   $ 11     $  
Gain (loss) reclassified from Accumulated other comprehensive income into income (effective portion) (1)
    2       2       (2 )                  
 
                                   
 
  $ 104     $ (146 )   $ (3 )   $ (5 )   $ 11     $  
 
                                   
For the nine months ended September 30,
                                               
Gain (loss) recognized in other comprehensive income (effective portion)
  $ 220     $ (74 )   $ 3     $ (3 )   $ 11     $  
(Loss) gain reclassified from Accumulated other comprehensive income into income (effective portion) (1)
    (28 )     8       (13 )                  
 
                                   
 
  $ 192     $ (66 )   $ (10 )   $ (3 )   $ 11     $  
 
                                   
 
     
(1)   The gain (loss) for the effective portion of foreign exchange and diesel cash flow hedges reclassified from Accumulated other comprehensive income is recorded in Costs applicable to sales. The gain for the effective portion of treasury rate lock cash flow hedges reclassified from Accumulated other comprehensive income is recorded in Interest expense, net.
The amount to be reclassified from Accumulated other comprehensive income (loss), net of tax to income for derivative instruments during the next 12 months is a gain of approximately $56.
                                 
    Interest Rate     8 5/8% Debentures  
    Swap Contracts     (Hedged Portion)  
    2009     2008     2009     2008  
Fair value hedging relationships:                                
For the three months ended September 30,
                               
Gain (loss) recognized in income (effective portion) (1)
  $ 1     $     $ (1 )   $ (1 )
(Loss) gain recognized in income (ineffective portion) (2)
    (1 )                 3  
 
                       
 
  $     $     $ (1 )   $ 2  
 
                       
For the nine months ended September 30,
                               
Gain (loss) recognized in income (effective portion) (1)
  $ 3     $ 1     $ (2 )   $ (2 )
(Loss) gain recognized in income (ineffective portion) (2)
    (2 )           (3 )     5  
 
                       
 
  $ 1     $ 1     $ (5 )   $ 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
LME copper prices averaged $2.65 per pound during the three months ended September 30, 2009, compared with the Company’s recorded average provisional price of $2.73 per pound before mark-to-market gains and treatment and refining charges. LME copper prices averaged $2.12 per pound during the nine months ended September 30, 2009, compared with the Company’s recorded average provisional price of $2.23 per pound before mark-to-market gains and treatment and refining charges. The applicable forward copper price at the end of the quarter was $2.79 per pound. During the three months ended September 30, 2009, increasing copper prices resulted in a provisional pricing mark-to-market gain of $48 ($0.34 per pound). During the nine months ended September 30, 2009, changes in copper prices resulted in a provisional pricing mark-to-market gain of $112 ($0.33 per pound). At September 30, 2009, the Company had copper sales of 140 million pounds priced at an average of $2.79 per pound, subject to final pricing over the next several months.
The average London P.M. gold fix was $960 per ounce during the three months ended September 30, 2009, compared with the Company’s recorded average provisional gold price of $961 per ounce before mark-to-market gains and treatment and refining charges. The average London P.M. gold fix was $931 per ounce during the nine months ended September 30, 2009, compared with the Company’s recorded average provisional gold price of $930 per ounce before mark-to-market gains and treatment and refining charges. The applicable forward gold price at the end of the quarter was $996 per ounce. During the three months ended September 30, 2009, changes in gold prices resulted in a provisional pricing mark-to-market gain of $5 ($3 per ounce). During the nine months ended September 30, 2009, changes in gold prices resulted in a provisional pricing mark-to-market gain of $6 ($1 per ounce). At September 30, 2009, the Company had gold sales of 96,000 ounces priced at an average of $996 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 17 INVESTMENTS
                                 
    At September 30, 2009  
    Cost/Equity     Unrealized     Fair/Equity  
    Basis     Gain     Loss     Basis  
Current:
                               
Marketable Equity Securities
  $ 8     $ 11     $     $ 19  
 
                       
 
                               
Long-term:
                               
Marketable Debt Securities:
                               
Asset backed securities
  $ 25     $     $ (7 )   $ 18  
Auction rate securities
    7             (2 )     5  
Corporate
    8       2             10  
 
                       
 
    40       2       (9 )     33  
 
                       
Marketable Equity Securities:
                               
Canadian Oil Sands Trust
    285       593             878  
Gabriel Resources Ltd.
    72       29             101  
Shore Gold Inc.
    4       14             18  
Other
    9       4             13  
 
                       
 
    370       640             1,010  
 
                       
Other investments, at cost
    7                   7  
Investment in Affiliate:
                               
AGR Matthey Joint Venture
    19                   19  
 
                       
 
  $ 436     $ 642     $ (9 )   $ 1,069  
 
                       
                                 
    At December 31, 2008  
    Cost/Equity     Unrealized     Fair/Equity  
    Basis     Gain     Loss     Basis  
Current:
                               
Marketable Equity Securities
  $ 14     $ 1     $ (3 )   $ 12  
 
                       
 
                               
Long-term:
                               
Marketable Debt Securities:
                               
Asset backed securities
  $ 25     $     $ (3 )   $ 22  
Auction rate securities
    7             (2 )     5  
 
                       
 
    32             (5 )     27  
 
                       
Marketable Equity Securities:
                               
Canadian Oil Sands Trust
    251       283             534  
Gabriel Resources Ltd.
    64                   64  
Shore Gold Inc.
    6                   6  
Other
    8             (3 )     5  
 
                       
 
    329       283       (3 )     609  
 
                       
Other investments, at cost
    7                   7  
Investment in Affiliate:
                               
AGR Matthey Joint Venture
    12                   12  
 
                       
 
  $ 380     $ 283     $ (8 )   $ 655  
 
                       
During the third quarter of 2009, the Company did not recognize any impairments for other-than temporary declines in value, resulting in total impairments for the first nine months of 2009 of $2 for Shore Gold Inc. and $4 for other marketable equity securities. During the third quarter of 2008, the Company recognized impairments for other-than temporary declines in value of $26 for Shore Gold Inc. and $8 for other marketable securities, resulting in total impairments of $58 for Shore Gold Inc., $13 for Gabriel Resources Ltd. and $19 for other marketable securities for the first nine months of 2008.

 

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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 September 30, 2009   Fair Value     Losses     Fair Value     Losses     Fair Value     Losses  
Asset backed securities
  $ 18     $ 7     $     $     $ 18     $ 7  
Auction rate securities
                5       2       5       2  
 
                                   
 
  $ 18     $ 7     $ 5     $ 2     $ 23     $ 9  
 
                                   
                                                 
    Less than 12 Months     12 Months or Greater     Total  
            Unrealized             Unrealized             Unrealized  
At December 31, 2008   Fair Value     Losses     Fair Value     Losses     Fair Value     Losses  
Marketable equity securities
  $ 6     $ 6     $     $     $ 6     $ 6  
Asset backed securities
    22       3                   22       3  
Auction rate securities
                5       2       5       2  
 
                                   
 
  $ 28     $ 9     $ 5     $ 2     $ 33     $ 11  
 
                                   
The unrealized loss of $9 and $11 at September 30, 2009 and December 31, 2008, respectively, relates to the Company’s investments in marketable equity securities, auction rate securities and asset backed commercial paper 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. Generally, the Company’s policy is to treat a decline in a marketable equity security’s quoted market value that has lasted continuously for more than six months as an other-than-temporary decline in value. The fair values of these marketable equity securities have not been continuously below cost for the past six months. 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 18 INVENTORIES
                 
    At September 30,     At December 31,  
    2009     2008  
In-process
  $ 70     $ 53  
Concentrate
    12       54  
Precious metals
    15       20  
Materials, supplies and other
    382       380  
 
           
 
  $ 479     $ 507  
 
           
During the first nine months of 2009, the Company recorded write-downs of $5 to reduce the carrying value of material and supplies inventories to net realizable value, primarily related to Nevada and Batu Hijau. During the first nine months of 2008, the Company recorded write-downs of $1 to reduce the carrying value of material and supplies inventories to net realizable value, primarily related to Batu Hijau. Inventory write-downs are classified as components of Costs applicable to sales.
NOTE 19 STOCKPILES AND ORE ON LEACH PADS
                 
    At September 30,     At December 31,  
    2009     2008  
Current:
               
Stockpiles
  $ 158     $ 117  
Ore on leach pads
    196       173  
 
           
 
  $ 354     $ 290  
 
           
Long-term:
               
Stockpiles
  $ 1,113     $ 872  
Ore on leach pads
    298       264  
 
           
 
  $ 1,411     $ 1,136  
 
           

 

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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 September 30, 2009, stockpiles were primarily located at Batu Hijau ($788), Nevada ($250) and Australia/New Zealand ($140) and leach pads were primarily located at Yanacocha ($310) and Nevada ($177). During the first nine months of 2008, the Company recorded write-downs of $2 included in Costs applicable to sales in Australia/New Zealand to reduce the carrying value of stockpiles to net realized value. Stockpile write-downs are classified as components of Costs applicable to sales.
NOTE 20 OTHER ASSETS
                 
    At September 30,     At December 31,  
    2009     2008  
Other current assets:
               
Refinery metal inventory and receivable
  $ 355     $ 168  
Derivative instruments (Note 16)
    82       6  
Other prepaid assets
    64       43  
Notes receivable
    11       8  
Prepaid income and mining taxes
    11       187  
Other
    58       43  
 
           
 
  $ 581     $ 455  
 
           
 
               
Other long-term assets:
               
Derivative instruments (Note 16)
  $ 67     $ 8  
Debt issuance costs
    53       29  
Restricted cash
    30       33  
Prepaid royalties
    19       19  
Other receivables
    15       17  
Corporate-owned life insurance
    13       26  
Prepaid maintenance costs
    11       13  
Other
    53       62  
 
           
 
  $ 261     $ 207  
 
           
NOTE 21 DEBT
                                 
    At September 30, 2009     At December 31, 2008  
    Current     Non-Current     Current     Non-Current  
Sale-leaseback of refractory ore treatment plant
  $ 24     $ 164     $ 24     $ 188  
8 5/8% debentures, net of discount (due 2011)
          219             214  
Corporate revolving credit facility (due 2012)
                      757  
2012 convertible senior notes, net of discount
          458              
2014 convertible senior notes, net of discount
          463             448  
2017 convertible senior notes, net of discount
          413             401  
5 1/8% senior notes, net of discount (due 2019)
          896              
5 7/8% notes, net of discount (due 2035)
          597             597  
6 1/4% senior notes, net of discount (due 2039)
          1,087              
PTNNT project financing facility
    87       176       87       219  
PTNNT shareholder loans
    72             18        
Yanacocha credit facility
    14       52       14       62  
Yanacocha bonds
    4       96             100  
Ahafo project facility
    10       70       9       66  
Other project financings and capital leases
    14       7       13       20  
 
                       
 
  $ 225     $ 4,698     $ 165     $ 3,072  
 
                       
During the first nine months of 2009, the Company repaid all borrowings under its $2,000 revolving credit facility and completed three debt offerings. In February, the Company issued $518 convertible senior notes maturing on February 15, 2012 for net proceeds of $504. The notes pay interest semi-annually at a rate of 3.0% per annum and the effective interest rate is 8.5%. The notes are convertible, at the holder’s option, equivalent to a conversion price of $46.25 per share of common stock. The portion of the proceeds related to the conversion feature has been recognized as additional paid-in capital. In September, the Company completed a two part public offering of $900 and $1,100 senior notes maturing on October 1, 2019 and October 1, 2039, respectively. Net proceeds from the 2019 and 2039 notes were $896 and $1,082, respectively. The 2019 notes pay interest semi-annually at a rate of 5.125% per annum and the 2039 notes pay semi-annual interest of 6.25% per annum.

 

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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)
During the first quarter of 2009, PTNNT shareholders loaned an additional $124 to PTNNT. Total principal outstanding under the shareholder loans was $165 and $41 at September 30, 2009 and December 31, 2008, respectively. At September 30, 2009 and December 31, 2008, 43.75% or approximately $72 and $18, respectively, were due to Nusa Tenggara Mining Corporation, an affiliate of Sumitomo Mining Corporation, an unrelated third party, and was non-recourse to Newmont, with the remainder payable to Newmont.
As further discussed in Note 27, through mid-October 2009 the Company provided a joint and several guarantee for the payment of principal and interest amounts associated with the PTNNT project financing facility, which was non-recourse to Newmont at December 31, 2008. On October 21, 2009, the Company provided letters of credit to the Senior Lenders to secure 56.25% of the PTNNT project financing facility, and as a result, the Company no longer provides a separate corporate guarantee in support of the financing.
Scheduled minimum debt repayments at September 30, 2009 are $127 for the remainder of 2009, $157 in 2010, $336 in 2011, $603 in 2012, $116 in 2013 and $3,584 thereafter.
NOTE 22 OTHER LIABILITIES
                 
    At September 30,     At December 31,  
    2009     2008  
Other current liabilities:
               
Refinery metal payable
  $ 355     $ 168  
Boddington acquisition costs (Note 14)
    292        
Accrued capital expenditures
    214       107  
Accrued operating costs
    133       137  
Reclamation and remediation costs (Note 23)
    53       58  
Interest
    53       35  
Royalties
    33       28  
Peruvian royalty
    19       18  
Taxes other than income and mining
    10       39  
Deferred income tax
    8       8  
Derivative instruments (Note 16)
          111  
Other
    56       61  
 
           
 
  $ 1,226     $ 770  
 
           
 
               
Other long-term liabilities:
               
Income and mining taxes
  $ 120     $ 167  
Boddington contingent consideration (Note 14)
    62        
Derivative instruments (Note 16)
          43  
Other
    54       42  
 
           
 
  $ 236     $ 252  
 
           

 

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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 23 RECLAMATION AND REMEDIATION LIABILITIES (ASSET RETIREMENT OBLIGATIONS)
At September 30, 2009 and December 31, 2008, $624 and $594, respectively, were accrued for reclamation obligations relating to mineral properties in accordance with asset retirement obligation accounting guidance. 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, 2009 and December 31, 2008, $153 and $163, respectively, were accrued for such obligations. These amounts are also included in Reclamation and remediation liabilities.
The following is a reconciliation of the liability for asset retirement obligations:
                 
    Nine Months Ended  
    September 30,  
    2009     2008  
Balance at beginning of period
  $ 757     $ 672  
Additions, changes in estimates and other
    21       57  
Liabilities settled
    (35 )     (83 )
Accretion expense
    34       30  
 
           
Balance at end of period
  $ 777     $ 676  
 
           
The current portions of Reclamation and remediation liabilities of $53 and $58 at September 30, 2009 and December 31, 2008, respectively, are included in Other current liabilities.
The Company’s reclamation and remediation expenses consisted of:
                                 
    Three Months Ended     Nine Months Ended  
    September 30,     September 30,  
    2009     2008     2009     2008  
Asset retirement cost amortization
  $ 7     $ 7     $ 21     $ 18  
Accretion — operating
    8       7       25       23  
Accretion — non-operating (Note 4)
    3       2       9       7  
Reclamation estimate revisions — non-operating (Note 4)
          13             74  
 
                       
 
  $ 18     $ 29     $ 55     $ 122  
 
                       
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:
                 
    Nine Months Ended  
    September 30,  
    2009     2008  
Decrease (increase) in operating assets:
               
Trade and accounts receivable
  $ 200     $ 25  
Inventories, stockpiles and ore on leach pads
    (249 )     (236 )
EGR refinery assets
    (179 )     (47 )
Other assets
    4       (112 )
Increase (decrease) in operating liabilities:
               
Accounts payable and other accrued liabilities
    53       (88 )
EGR refinery liabilities
    179       47  
Reclamation liabilities
    (35 )     (83 )
 
           
 
  $ (27 )   $ (494 )
 
           

 

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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 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. Segment results for 2008 have been retrospectively revised to reflect an organizational change, effective in the first quarter of 2009, that (i) moved the results of the La Herradura operation in Mexico to North America from Other and (ii) combined the management of exploration and advanced projects activities under one executive and assigned the legacy exploration segment to the regional reportable segments. As a result of management’s decision in the second quarter of 2009 to dispose of the Kori Kollo operation in Bolivia, Kori Kollo has been reclassified to discontinued operations.
Financial information relating to Newmont’s segments is as follows:
                                         
            Costs             Advanced        
            Applicable to             Projects and     Pre-Tax  
Three Months Ended September 30, 2009   Sales     Sales     Amortization     Exploration     Income  
 
                                       
Nevada
  $ 481     $ 273     $ 69     $ 13     $ 118  
Hope Bay
                3       20       (24 )
La Herradura
    23       8       2       1       12  
Other North America
                            (2 )
 
                             
North America
    504       281       74       34       104  
 
                             
 
                                       
Yanacocha
    535       163       43       6       299  
Other South America
                      1       (2 )
 
                             
South America
    535       163       43       7       297  
 
                             
 
                                       
Boddington
                      12       (11 )
Other Australia/New Zealand
    282       152       32       6       77  
 
                             
Australia/New Zealand
    282       152       32       18       66  
 
                             
Batu Hijau:
                                       
Gold
    201       37       10                  
Copper
    396       71       18                  
 
                             
Total Batu Hijau
    597       108       28             445  
 
                             
Other Asia Pacific
                1       4       (17 )
 
                             
Asia Pacific
    879       260       61       22       494  
 
                             
 
                                       
Africa
    131       61       17       4       44  
 
                             
 
                                       
Corporate and Other
                4       15       (35 )
 
                             
Consolidated
  $ 2,049     $ 765     $ 199     $ 82     $ 904  
 
                             

 

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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  
Three Months Ended September 30, 2008   Sales     Sales     Amortization     Exploration     Income  
 
                                       
Nevada
  $ 471     $ 271     $ 65     $ 13     $ 109  
Hope Bay
                      21       (21 )
La Herradura
    19       9       2       2       6  
Other North America
                1       6       (9 )
 
                             
North America
    490       280       68       42       85  
 
                             
 
                                       
Yanacocha
    378       159       43       7       157  
Other South America
                      8       21  
 
                             
South America
    378       159       43       15       178  
 
                             
 
                                       
Boddington
                      2       (7 )
Other Australia/New Zealand
    273       178       33       7       66  
 
                             
Australia/New Zealand
    273       178       33       9       59  
 
                             
Batu Hijau:
                                       
Gold
    23       20       4                  
Copper
    90       88       16                  
 
                             
Total Batu Hijau
    113       108       20       2       (43 )
 
                             
Other Asia Pacific
                      6       (19 )
 
                             
Asia Pacific
    386       286       53       17       (3 )
 
                             
 
                                       
Africa
    117       55       16       12       29  
 
                             
 
                                       
Corporate and Other
                6       15       (67 )
 
                             
Consolidated
  $ 1,371     $ 780     $ 186     $ 101     $ 222  
 
                             

 

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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                    
Nine Months Ended           Applicable to             Projects and     Pre-Tax     Total     Capital  
September 30, 2009     Sales   Sales     Amortization     Exploration    Income     Asset (1)     Expenditures (2)  
 
                                                       
Nevada
  $ 1,321     $ 764     $ 183     $ 40     $ 309     $ 3,215     $ 154  
Hope Bay
                9       56       (64 )     1,818       4  
La Herradura
    75       30       7       2       36       116       34  
Other North America
                      1       (6 )     55        
 
                                         
North America
    1,396       794       199       99       275       5,204       192  
 
                                         
 
                                                       
Yanacocha
    1,451       488       128       16       747       2,182       94  
Other South America
                      15       (13 )     28        
 
                                         
South America
    1,451       488       128       31       734       2,210       94  
 
                                         
 
                                                       
Boddington
                      29       (87 )     3,832       961  
Other Australia/New Zealand
    814       438       94       18       243       843       75  
 
                                         
Australia/New Zealand
    814       438       94       47       156       4,675       1,036  
 
                                         
Batu Hijau:
                                                       
Gold
    358       88       23                                  
Copper
    786       217       55                                  
 
                                         
Total Batu Hijau
    1,144       305       78             713       3,024       30  
 
                                         
Other Asia Pacific
                2       9       (32 )     215       2  
 
                                         
Asia Pacific
    1,958       743       174       56       837       7,914       1,068  
 
                                         
 
                                                       
Africa
    382       175       51       16       128       1,163       46  
 
                                         
 
                                                       
Corporate and Other (1)
                14       45       (224 )     4,656       12  
 
                                         
Consolidated
  $ 5,187     $ 2,200     $ 566     $ 247     $ 1,750     $ 21,147     $ 1,412  
 
                                         
 
     
(1)   Corporate and Other includes $31 of Assets held for sale (Note 9). (2) Accrual basis; includes increase in accrued capital of $98. Consolidated capital expenditures on a cash basis were $1,314.
 
(2)   Accrual basis; includes increase in accrued capital of $98. Consolidated capital expenditures on a cash basis were $1,314.

 

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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                    
Nine Months Ended           Applicable to             Projects and     Pre-Tax     Total     Capital  
September 30, 2008   Sales     Sales     Amortization     Exploration     Income     Assets(1)     Expenditures(2)  
 
Nevada
  $ 1,457     $ 724     $ 175     $ 35     $ 495     $ 3,249     $ 227  
Hope Bay
                      43       (43 )     1,848       63  
La Herradura
    64       27       6       4       27       88       17  
Other North America
                1       21       (27 )     196        
 
                                         
North America
    1,521       751       182       103       452       5,381       307  
 
                                         
 
Yanacocha
    1,265       488       131       20       571       2,047       126  
Other South America
                      25       5       38        
 
                                         
South America
    1,265       488       131       45       576       2,085       126  
 
                                         
 
                                                       
Boddington
                      7       (8 )     1,557       604  
Other Australia/New Zealand
    815       504       89       19       203       836       97  
 
                                         
Australia/New Zealand
    815       504       89       26       195       2,393       701  
 
                                         
Batu Hijau:
                                                       
Gold
    171       76       15                                  
Copper
    705       342       67                                  
 
                                         
Total Batu Hijau
    876       418       82       2       315       2,322       65  
 
                                         
Other Asia Pacific
                2       13       (82 )     99       1  
 
                                         
Asia Pacific
    1,691       922       173       41       428       4,814       767  
 
                                         
 
                                                       
Africa
    321       150       47       33       90       1,188       77  
 
                                         
 
                                                       
Corporate and Other (1)
    1             15       45       (246 )     3,115       6  
 
                                         
Consolidated
  $ 4,799     $ 2,311     $ 548     $ 267     $ 1,300     $ 16,583     $ 1,283  
 
                                         
 
     
(1)   Corporate and Other includes $82 of Assets held for sale.
 
(2)   Accrual basis; includes increase in accrued capital of $67. Consolidated capital expenditures on a cash basis were $1,350.
                 
    At September 30,     At December 31,  
    2009     2008  
Goodwill:
               
Other Australia/New Zealand
  $ 188     $ 188  

 

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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 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 September 30, 2009  
                                    Newmont  
    Newmont                             Mining  
    Mining     Newmont     Other             Corporation  
Condensed Consolidating Statement of Income   Corporation     USA     Subsidiaries     Eliminations     Consolidated  
Revenues
                                       
Sales — gold, net
  $     $ 1,240     $ 413     $     $ 1,653  
Sales — copper, net
          396                   396  
 
                             
 
          1,636       413             2,049  
 
                             
 
                                       
Costs and expenses
                                       
Costs applicable to sales — gold (1)
          480       219       (5 )     694  
Costs applicable to sales — copper (1)
          71                   71  
Amortization
          146       54       (1 )     199  
Accretion
          6       2             8  
Exploration
          26       29             55  
Advanced projects, research and development
          11       17       (1 )     27  
General and administrative
          31       1       7       39  
Other expense, net
          34       33             67  
 
                             
 
          805       355             1,160  
 
                             
 
                                       
Other income (expense)
                                       
Other income, net
    (2 )     (1 )     28             25  
Interest income — intercompany
    17       1       3       (21 )      
Interest expense — intercompany
    (2 )           (19 )     21        
Interest expense, net
    3       (12 )     (1 )           (10 )
 
                             
 
    16       (12 )     11             15  
 
                             
Income from continuing operations before income tax and other items
    16       819       69             904  
Income tax benefit (expense)
    11       (250 )     (14 )           (253 )
Equity income (loss) of affiliates
    361       (3 )     48       (412 )     (6 )
 
                             
Income (loss) from continuing operations
    388       566       103       (412 )     645  
Income (loss) from discontinued operations
                             
 
                             
Net income (loss)
    388       566       103       (412 )     645  
Net loss (income) attributable to noncontrolling interests
          (257 )     (16 )     16       (257 )
 
                             
Net income (loss) attributable to Newmont stockholders
  $ 388     $ 309     $ 87     $ (396 )   $ 388  
 
                             
 
     
(1)   Exclusive of Amortization and Accretion.

 

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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 September 30, 2008  
                                    Newmont  
    Newmont                             Mining  
    Mining     Newmont     Other             Corporation  
Condensed Consolidating Statement of Income   Corporation     USA     Subsidiaries     Eliminations     Consolidated  
Revenues
                                       
Sales — gold, net
  $     $ 890     $ 391     $     $ 1,281  
Sales — copper, net
          90                   90  
 
                             
 
          980       391             1,371  
 
                             
 
                                       
Costs and expenses
                                       
Costs applicable to sales — gold (1)
          460       237       (5 )     692  
Costs applicable to sales — copper (1)
          88                   88  
Amortization
          135       51             186  
Accretion
          5       2             7  
Exploration
          34       23             57  
Advanced projects, research and development
          14       31       (1 )     44  
General and administrative
          29       2       6       37  
Other expense, net
    1       52       16             69  
 
                             
 
    1       817       362             1,180  
 
                             
 
                                       
Other income (expense)
                                       
Other income, net
    (24 )     39       51             66  
Interest income — intercompany
    77       2             (79 )      
Interest expense — intercompany
    (2 )           (77 )     79        
Interest expense, net
    (16 )     (19 )                 (35 )
 
                             
 
    35       22       (26 )           31  
 
                             
Income from continuing operations before income tax benefit (expense) and other items
    34       185       3             222  
Income tax benefit (expense)
    16       (32 )     10             (6 )
Equity income (loss) of affiliates
    134       3       17       (155 )     (1 )
 
                             
Income (loss) from continuing operations
    184       156       30       (155 )     215  
Income (loss) from discontinued operations
    7       (9 )           9       7  
 
                             
Net income (loss)
    191       147       30       (146 )     222  
Net (income) loss attributable to noncontrolling interests
          (33 )     (5 )     7       (31 )
 
                             
Net income (loss) attributable to Newmont stockholders
  $ 191     $ 114     $ 25     $ (139 )   $ 191  
 
                             
 
     
(1)   Exclusive of Amortization and Accretion.

 

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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)
                                         
    Nine Months Ended September 30, 2009  
                                    Newmont  
    Newmont                             Mining  
    Mining     Newmont     Other             Corporation  
Condensed Consolidating Statement of Income   Corporation     USA     Subsidiaries     Eliminations     Consolidated  
Revenues
                                       
Sales — gold, net
  $     $ 3,205     $ 1,196     $     $ 4,401  
Sales — copper, net
          786                   786  
 
                             
 
          3,991       1,196             5,187  
 
                             
 
                                       
Costs and expenses
                                       
Costs applicable to sales — gold (1)
          1,370       630       (17 )     1,983  
Costs applicable to sales — copper (1)
          217                   217  
Amortization
          408       159       (1 )     566  
Accretion
          19       6             25  
Exploration
          74       73             147  
Advanced projects, research and development
          46       57       (3 )     100  
General and administrative
          94       3       21       118  
Other expense, net
    8       122       129             259  
 
                             
 
    8       2,350       1,057             3,415  
 
                             
 
                                       
Other income (expense)
                                       
Other income, net
    (12 )     (1 )     56             43  
Interest income — intercompany
    77       5       4       (86 )      
Interest expense — intercompany
    (7 )           (79 )     86        
Interest expense, net
    (24 )     (37 )     (4 )           (65 )
 
                             
 
    34       (33 )     (23 )           (22 )
 
                             
Income from continuing operations before income tax and other items
    26       1,608       116             1,750  
Income tax (expense) benefit
    (2 )     (493 )     1             (494 )
Equity income (loss) of affiliates
    729             102       (845 )     (14 )
 
                             
Income (loss) from continuing operations
    753       1,115       219       (845 )     1,242  
(Loss) income from discontinued operations
    (14 )     (14 )           14       (14 )
 
                             
Net income (loss)
    739       1,101       219       (831 )     1,228  
Net loss (income) attributable to noncontrolling interests
          (491 )     (44 )     46       (489 )
 
                             
Net income (loss) attributable to Newmont stockholders
  $ 739     $ 610     $ 175     $ (785 )   $ 739  
 
                             
 
     
(1)   Exclusive of Amortization and Accretion.

 

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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)
                                         
    Nine Months Ended September 30, 2008  
                                    Newmont  
    Newmont                             Mining  
    Mining     Newmont     Other             Corporation  
Condensed Consolidating Statement of Income   Corporation     USA     Subsidiaries     Eliminations     Consolidated  
Revenues
                                       
Sales — gold, net
  $     $ 2,957     $ 1,137     $     $ 4,094  
Sales — copper, net
          705                   705  
 
                             
 
          3,662       1,137             4,799  
 
                             
 
                                       
Costs and expenses
                                       
Costs applicable to sales — gold (1)
          1,317       667       (15 )     1,969  
Costs applicable to sales — copper (1)
          342                   342  
Amortization
          409       140       (1 )     548  
Accretion
          17       6             23  
Exploration
          93       61             154  
Advanced projects, research and development
          38       76       (1 )     113  
General and administrative
          82       4       17       103  
Other expense, net
    1       166       82             249  
 
                             
 
    1       2,464       1,036             3,501  
 
                             
 
                                       
Other income (expense)
                                       
Other income, net
    (33 )     92       41             100  
Interest income — intercompany
    222       22             (244 )      
Interest expense — intercompany
    (6 )           (238 )     244        
Interest expense, net
    (52 )     (41 )     (5 )           (98 )
 
                             
 
    131       73       (202 )           2  
 
                             
Income (loss) from continuing operations before income tax (expense) benefit and other items
    130       1,271       (101 )           1,300  
Income tax (expense) benefit
    (48 )     (189 )     44             (193 )
Equity income (loss) of affiliates
    728       4       89       (827 )     (6 )
 
                             
Income (loss) from continuing operations
    810       1,086       32       (827 )     1,101  
Income (loss) from discontinued operations
    17       (2 )     3       (1 )     17  
 
                             
Net income (loss)
    827       1,084       35       (828 )     1,118  
Net (income) loss attributable to noncontrolling interests
          (304 )     3       10       (291 )
 
                             
Net income (loss) attributable to Newmont stockholders
  $ 827     $ 780     $ 38     $ (818 )   $ 827  
 
                             
 
     
(1)   Exclusive of Amortization and Accretion.

 

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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 September 30, 2009  
                                    Newmont  
    Newmont                             Mining  
    Mining     Newmont     Other             Corporation  
Condensed Consolidating Balance Sheets   Corporation     USA     Subsidiaries     Eliminations     Consolidated  
Assets
                                       
Cash and cash equivalents
  $     $ 2,841     $ 181     $     $ 3,022  
Marketable securities and other short-term investments
          3       16             19  
Trade receivables
          266       14             280  
Accounts receivable
    2,527       346       420       (3,179 )     114  
Inventories
          329       150             479  
Stockpiles and ore on leach pads
          292       62             354  
Deferred income tax assets
          155       34             189  
Other current assets
    8       76       497             581  
 
                             
Current assets
    2,535       4,308       1,374       (3,179 )     5,038  
Property, plant and mine development, net
          5,184       6,984       (18 )     12,150  
Investments
          19       1,050             1,069  
Investments in subsidiaries
    8,979       31       990       (10,000 )      
Stockpiles and ore on leach pads
          1,262       149             1,411  
Deferred income tax assets
          816       183             999  
Other long-term assets
    2,546       291       230       (2,806 )     261  
Goodwill
                188             188  
Assets of operations held for sale
          31                   31  
 
                             
Total assets
  $ 14,060     $ 11,942     $ 11,148     $ (16,003 )   $ 21,147  
 
                             
 
                                       
Liabilities
                                       
Current portion of long-term debt
  $     $ 215     $ 10     $     $ 225  
Accounts payable
    29       1,438       2,041       (3,170 )     338  
Employee related benefits
          157       44             201  
Income and mining taxes
          207       4             211  
Other current liabilities
    26       247       2,924       (1,971 )     1,226  
 
                             
Current liabilities
    55       2,264       5,023       (5,141 )     2,201  
Long-term debt
    3,913       714       71             4,698  
Reclamation and remediation liabilities
    1       510       213             724  
Deferred income tax liabilities
    43       370       816             1,229  
Employee-related benefits
    4       319       54             377  
Other long-term liabilities
    314       130       2,616       (2,824 )     236  
Liabilities of operations held for sale
          13                   13  
 
                             
Total liabilities
    4,330       4,320       8,793       (7,965 )     9,478  
 
                             
Equity
                                       
Preferred stock
                61       (61 )      
Common stock
    768                         768  
Additional paid-in capital
    7,867       2,647       3,622       (6,076 )     8,060  
Accumulated other comprehensive income (loss)
    454       (146 )     583       (437 )     454  
Retained earnings (deficit)
    641       3,315       (2,208 )     (1,107 )     641  
 
                             
Newmont stockholders’ equity
    9,730       5,816       2,058       (7,681 )     9,923  
Noncontrolling interests
          1,806       297       (357 )     1,746  
 
                             
Total equity
    9,730       7,622       2,355       (8,038 )     11,669  
 
                             
Total liabilities and equity
  $ 14,060     $ 11,942     $ 11,148     $ (16,003 )   $ 21,147  
 
                             

 

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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, 2008  
                                    Newmont  
    Newmont                             Mining  
    Mining     Newmont     Other             Corporation  
Condensed Consolidating Balance Sheets   Corporation     USA     Subsidiaries     Eliminations     Consolidated  
Assets
                                       
Cash and cash equivalents
  $     $ 310     $ 125     $     $ 435  
Marketable securities and other short-term investments
          1       11             12  
Trade receivables
          97       7             104  
Accounts receivable
    1,941       904       370       (3,001 )     214  
Inventories
          395       112             507  
Stockpiles and ore on leach pads
          242       48             290  
Deferred income tax assets
          236       48             284  
Other current assets
    1       220       234             455  
 
                             
Current assets
    1,942       2,405       955       (3,001 )     2,301  
Property, plant and mine development, net
          5,325       4,822       (19 )     10,128  
Investments
          11       644             655  
Investments in subsidiaries
    6,247       25       828       (7,100 )      
Stockpiles and ore on leach pads
          1,031       105             1,136  
Deferred income tax assets
    (45 )     873       211             1,039  
Other long-term assets
    1,977       320       153       (2,243 )     207  
Goodwill
                188             188  
Assets of operations held for sale
          73                   73  
 
                             
Total assets
  $ 10,121     $ 10,063     $ 7,906     $ (12,363 )   $ 15,727  
 
                             
 
                                       
Liabilities
                                       
Current portion of long-term debt
  $     $ 156     $ 9     $     $ 165  
Accounts payable
    524       586       2,292       (2,991 )     411  
Employee-related benefits
          139       31             170  
Income and mining taxes
    21       39       1             61  
Other current liabilities
    15       303       461       (9 )     770  
 
                             
Current liabilities
    560       1,223       2,794       (3,000 )     1,577  
Long-term debt
    2,203       802       67             3,072  
Reclamation and remediation liabilities
    1       502       196             699  
Deferred income tax liabilities
          364       687             1,051  
Employee-related benefits
    3       341       35             379  
Other long-term liabilities
    283       182       2,049       (2,262 )     252  
Liabilities of operations held for sale
          36                   36  
 
                             
Total liabilities
    3,050       3,450       5,828       (5,262 )     7,066  
 
                             
Equity
                                       
Preferred stock
                61       (61 )      
Common stock
    709                         709  
Additional paid-in capital
    6,611       2,647       4,334       (6,761 )     6,831  
Accumulated other comprehensive (loss) income
    (253 )     (173 )     (138 )     311       (253 )
Retained earnings (deficit)
    4       2,707       (2,381 )     (326 )     4  
 
                             
Newmont stockholders’ equity
    7,071       5,181       1,876       (6,837 )     7,291  
Noncontrolling interests
          1,432       202       (264 )     1,370  
 
                             
Total equity
    7,071       6,613       2,078       (7,101 )     8,661  
 
                             
Total liabilities and equity
  $ 10,121     $ 10,063     $ 7,906     $ (12,363 )   $ 15,727  
 
                             

 

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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)
                                         
    Nine Months Ended September 30, 2009  
                                    Newmont  
    Newmont                             Mining  
    Mining     Newmont     Other             Corporation  
Condensed Consolidating Statement of Cash Flows   Corporation     USA     Subsidiaries     Eliminations     Consolidated  
Operating activities:
                                       
Net income
  $ 739     $ 1,101     $ 219     $ (831 )   $ 1,228  
Adjustments
    72       526       (684 )     831       745  
Net change in operating assets and liabilities
    (58 )     (11 )     42             (27 )
 
                             
Net cash provided from (used in) continuing operations
    753       1,616       (423 )           1,946  
Net cash provided from discontinued operations
          3                   3  
 
                             
Net cash provided from (used in) operations
    753       1,619       (423 )           1,949  
 
                             
Investing activities:
                                       
Additions to property, plant and mine development
          (334 )     (980 )           (1,314 )
Proceeds from sale of marketable debt and equity securities
                10             10  
Acquisitions, net
    (8 )     (11 )     (747 )           (766 )
Other
          1       (19 )           (18 )
 
                             
Net cash used in investing activities
    (8 )     (344 )     (1,736 )           (2,088 )
 
                             
Financing activities:
                                       
Net borrowings (repayments)
    1,724       (32 )     6             1,698  
Net intercompany (repayments) borrowings
    (3,565 )     1,402       2,163              
Dividends paid to common stockholders
    (147 )                       (147 )
Dividends paid to noncontrolling interests in subsidiaries
          (112 )     (3 )           (115 )
Proceeds from stock issuance
    1,248                         1,248  
Change in restricted cash and other
    (5 )           10             5  
 
                             
Net cash provided from financing activities of continuing operations
    (745 )     1,258       2,176               2,689  
Net cash (used in) provided from financing activities of discontinued operations
          (2 )                   (2 )
 
                             
Net cash (used in) provided from financing activities
    (745 )     1,256       2,176             2,687  
 
                             
Effect of exchange rate changes on cash
                39             39  
 
                             
Net change in cash and cash equivalents
          2,531       56             2,587  
Cash and cash equivalents at beginning of period
          310       125             435  
 
                             
Cash and cash equivalents at end of period
  $     $ 2,841     $ 181     $     $ 3,022  
 
                             

 

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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)
                                         
    Nine Months Ended September 30, 2008  
                                    Newmont  
    Newmont                             Mining  
    Mining     Newmont     Other             Corporation  
Condensed Consolidating Statement of Cash Flows   Corporation     USA     Subsidiaries     Eliminations     Consolidated  
Operating activities:
                                       
Net income
  $ 827     $ 1,084     $ 35     $ (828 )   $ 1,118  
Adjustments
    59       223       (566 )     828       544  
Net change in operating assets and liabilities
    24       (428 )     (90 )           (494 )
 
                             
Net cash provided from (used in) continuing operations
    910       879       (621 )           1,168  
Net cash (used in) provided from discontinued operations
          (125 )     20             (105 )
 
                             
Net cash provided from (used in) operations
    910       754       (601 )           1,063  
 
                             
Investing activities:
                                       
Additions to property, plant and mine development
          (480 )     (870 )           (1,350 )
Investments in marketable debt and equity securities
                (18 )           (18 )
Proceeds from sale of marketable debt and equity securities
                50             50  
Acquisitions, net
          (7 )     (318 )           (325 )
Other
          26                   26  
 
                             
Net cash used in investing activities of continued operations
          (461 )     (1,156 )           (1,617 )
Net cash (used in) provided from investing activities of discontinued operations
          (15 )     4             (11 )
 
                             
Net cash used in investing activities
          (476 )     (1,152 )           (1,628 )
 
                             
Financing activities:
                                       
Net borrowings (repayments)
    755       (84 )     (119 )           552  
Net intercompany (repayments) borrowings
    (1,566 )     (125 )     1,691              
Dividends paid to common stockholders
    (136 )                       (136 )
Dividends paid to noncontrolling interests in subsidiaries
          (244 )     (3 )           (247 )
Proceeds from stock issuance
    27                         27  
Change in restricted cash and other
    10       3       6             19  
 
                             
Net cash (used in) provided from financing activities of continuing operations
    (910 )     (450 )     1,575             215  
Net cash used in financing activities of discontinued operations
          (3 )                 (3 )
 
                             
Net cash (used in) provided from financing activities
    (910 )     (453 )     1,575             212  
 
                             
Effect of exchange rate changes on cash
          (2 )     (22 )           (24 )
 
                             
Net change in cash and cash equivalents
          (177 )     (200 )           (377 )
Cash and cash equivalents at beginning of period
          789       441             1,230  
 
                             
Cash and cash equivalents at end of period
  $     $ 612     $ 241     $     $ 853  
 
                             

 

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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 27 COMMITMENTS AND CONTINGENCIES
General
The Company follows loss contingency accounting guidance in determining its accruals and disclosures with respect to loss contingencies other than tax contingencies provided for in accordance with income tax accounting guidance (see Note 8). 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 25. Except as noted in this paragraph, all of the Company’s commitments and contingencies specifically described in this Note 27 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 Newmont Yandal Operations Pty Limited matter relates to the Asia Pacific 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 September 30, 2008 and December 31, 2008, $624 and $594, respectively, were accrued for reclamation costs relating to mineral properties in accordance with asset retirement obligation accounting guidance. The current portions of $53 and $58 at September 30, 2009 and December 31, 2008, 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, $153 and $163 were accrued for such obligations at September 30, 2009 and December 31, 2008, 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 135% greater or 7% lower than the amount accrued at September 30, 2009. The amounts accrued for these matters are reviewed periodically based upon facts and circumstances available at the time. Changes in estimates are recorded in Other expense, net 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. However, the issue of whether the EPA’s current preferred remedy is consistent with the National Contingency Plan has not yet come before the Court.
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 Capital Limited (“Newmont Capital”) — 100% Newmont Owned
In February 1999, the EPA placed the Lava Cap mine site in Nevada County, California on the National Priorities List under CERCLA. The EPA then initiated a RI/FS under CERCLA to determine environmental conditions and remediation options at the site.
Newmont Capital, formerly known as Franco-Nevada Mining Corporation, Inc., owned the property for approximately three years from 1984 to 1986 but never mined or conducted exploration at the site. The EPA asserts that Newmont Capital is responsible for clean up costs incurred at the site. Newmont Capital and the EPA entered into a consent decree to settle all aspects of this matter except future potential Natural Resource Damage claims. In February 2009, the U.S. District Court for the Northern District of California approved the consent decree and the settlement was completed.
Newmont USA Limited — 100% Newmont Owned
Pinal Creek. Newmont is a defendant in a lawsuit brought on November 5, 1991 in U.S. District Court in Arizona by the Pinal Creek Group, alleging that Newmont and others are responsible for some portion of costs incurred to address groundwater contamination emanating from copper mining operations located in the area of Globe and Miami, Arizona. Two former subsidiaries of Newmont, Pinto Valley Copper Corporation and Magma Copper Company (now known as BHP Copper Inc.) owned some of the mines in the area between 1983 and 1987. The court has dismissed plaintiffs’ claims seeking to hold Newmont liable for the acts or omissions of its former subsidiaries. Newmont believes it has strong defenses to plaintiffs’ remaining claims, including, without limitation that Newmont’s agents did not participate in any pollution causing activities; that Newmont’s liabilities, if any, were contractually transferred to one of the plaintiffs; that portions of plaintiffs’ claimed damages are not recoverable; and that Newmont’s equitable share of liability, if any, would be immaterial. While Newmont has denied liability and is vigorously defending these claims, it cannot reasonably predict the final outcome of this lawsuit.
Grass Valley. On February 3, 2004, the City of Grass Valley, California brought suit against Newmont under CERCLA in the U.S. District Court for the Northern District of California. This matter involves an abandoned mine adit on property previously owned by a predecessor of Newmont and currently owned by the City of Grass Valley. The complaint alleges that the adit is discharging metals-bearing water into a stream on the property, in concentrations in excess of current EPA drinking water standards. On February 4, 2009, this matter was fully resolved by settlement. Pursuant to the settlement, Newmont has agreed to manage the water discharge on an ongoing basis.
Gray 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 does not believe it has any liability for environmental conditions at the site, and 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.

 

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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 Minahasa Raya (“PTNMR”) — 80% Newmont Owned
In July 2004, a criminal complaint was filed against PTNMR, the Newmont subsidiary that operated the Minahasa mine in Indonesia, alleging environmental pollution relating to submarine tailings placement into nearby Buyat Bay. The Indonesian police detained five PTNMR employees during September and October of 2004. The police investigation and the detention of PTNMR’s employees was declared illegal by the South Jakarta District Court in December 2004, but in March 2005, the Indonesian Supreme Court upheld the legality of the police investigation, and the police turned their evidence over to the local prosecutor. In July 2005, the prosecutor filed an indictment against PTNMR and its President Director, alleging environmental pollution at Buyat Bay. After the court rejected motions to dismiss the proceeding, the trial proceeded and all evidence, including that of the defense, was presented in court by September 2006. In November 2006 the prosecution filed its charge, seeking a three-year jail sentence for PTNMR’s President Director plus a nominal fine. In addition, the prosecution recommended a nominal fine against PTNMR. The defense filed responses in January 2007, and final briefing was completed in March 2007. On April 24, 2007, the court entered its verdict acquitting PTNMR and its President Director of all charges. In May 2007, the prosecution appealed the decision of the court to the Indonesian Supreme Court, despite Indonesian laws that prohibit the appeal of a verdict of acquittal. In October 2008, a panel of Supreme Court justices was assigned to consider the appeal. In April 2009, the Indonesian Supreme Court summarily dismissed the appeal of the prosecutor related to PTNMR and its President Director.
In addition, on March 22, 2007, an Indonesian non-governmental organization named Wahana Lingkungan Hidup Indonesia (“WALHI”) filed a civil suit against PTNMR 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 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.
Yanacocha, various wholly-owned subsidiaries of Newmont, and other defendants have been named in lawsuits filed by approximately 1,100 Peruvian citizens in Denver District Court for the State of Colorado. These actions seek compensatory damages based on claims associated with the elemental mercury spill incident. The parties in these cases agreed to submit these matters to binding arbitration. In October 2007, the parties to the arbitration entered a court-approved settlement agreement, resolving most of these cases. In April 2009, all remaining matters were settled.
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)
Conga. Yanacocha is involved in a dispute with the Provincial Municipality of Celendin regarding the authority of that governmental body to regulate the development of the Conga project. In the fourth quarter of 2004, the Municipality of Celendin enacted an ordinance declaring the area around Conga to be a mining-free reserve and naturally protected area. Yanacocha challenged this ordinance by means of two legal actions, one filed by Yanacocha (as the lease holder of the Conga mining concessions) and one filed by Minera Chaupiloma (as the titleholder of the Conga mining concessions). In August 2007, a Peruvian Court of first instance upheld Chaupiloma’s claim, stating that the Municipality of Celendin lacks the authority to create natural protected areas. The Municipality of Celendin has not appealed the ruling. In July 2008, a Peruvian Court of first instance dismissed Yanacocha’s claim as groundless. Yanacocha appealed the ruling to the appellate Court in Lima, and in January 2009, the appellate Court in Lima reversed the lower Court ruling and upheld Yanacocha’s claim.
Newmont Yandal Operations Pty Ltd (“NYOL”) — 100% Newmont Owned
On September 3, 2003, J. Aron & Co. commenced proceedings in the Supreme Court of New South Wales (Australia) against NYOL, its subsidiaries and the administrator in relation to the completed voluntary administration of the NYOL group. J. Aron & Co., a NYOL creditor, initially sought injunctive relief that was denied by the court on September 8, 2003. On October 30, 2003, J. Aron & Co. filed a statement of claim alleging various deficiencies in the implementation of the voluntary administration process and seeking damages and other relief against NYOL and other parties. Newmont cannot reasonably predict the final outcome of this lawsuit.
PT Newmont Nusa Tenggara (“PTNNT”) — 45% Newmont Owned
Under the Batu Hijau Contract of Work, beginning in 2006 and continuing through 2010, a portion of PTNNT’s shares must 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 and continues to own a 20% interest in PTNNT, in 2006 a 3% interest was required to be offered for sale and in each of 2007 through 2010 an additional 7% interest must be offered (for an aggregate 31% interest). The price at which such interest must 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. Pursuant to this provision, it is possible that the ownership interest of NTP in PTNNT could be reduced to 49% or that subsequent disputes could arise concerning the divestiture of the ownership interest of NTP in PTNNT.
Initial arbitration matter
PTPI has owned and continues to own a 20% interest in PTNNT, and therefore the Newmont-Sumitomo partnership was required to offer a 3% interest in PTNNT for sale in 2006 and an additional 7% interest in each of 2007 through 2010. 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 and 2008. A further 7% interest in the shares of PTNNT was offered for sale in March 2009. 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. In January 2008, the Newmont-Sumitomo partnership agreed to sell, under a carried interest arrangement, 2% of PTNNT’s shares to Kabupaten Sumbawa, one of the local governments, subject to satisfaction of closing conditions. The Indonesian government subsequently stated that it would not approve the transfer of shares under this agreement. On February 11, 2008, PTNNT received notification from the Department of Energy and Mineral Resources (“DEMR”) alleging that PTNNT is in breach of its divestiture requirements under the Contract of Work, and threatening to issue a notice to terminate the Contract of Work if PTNNT did not agree to divest the 2006 and 2007 shares, in accordance with the direction of the DEMR, by February 22, 2008, which date was extended to March 3, 2008. A second Notice of Default was received relating to the alleged failure to divest the 2008 shares as well. 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 is 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 is 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.

 

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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)
Second arbitration matter
In 1997, to enable development of the Batu Hijau mine, PTNNT secured an aggregate $1,000 in financing from the United States Export-Import Bank, the Japan Bank for International Cooperation (formerly the Japan Export-Import Bank), and Kreditanstalt fur Wiederaufbau (the German Export-Import Bank) (collectively, the “Senior Lenders”). The Senior Lenders required the shareholders of PTNNT to pledge 100% of the shares of PTNNT as security for repayment of the loans. As part of that process, on October 30, 1997, the Minister of Energy and Mineral Resources approved the share pledge arrangements.
Subsequent to an additional 7% interest in PTNNT being offered by NTP for sale on March 28, 2008 (as required under the Contract of Work), the Director General of Mineral, Coal and Geothermal Resources at DEMR claimed that PTNNT breached its obligations under the Contract of Work by allowing shares to be offered for sale that are pledged to the Senior Lenders as security for the repayment of the senior debt. In the letter, the Director General claimed that NTP would be in default under the Contract of Work if the shares of PTNNT offered for sale in March 2008, together with the shares offered in 2006 and 2007, were not in the possession of “Indonesian government and/or government owned entities,” free of any such senior pledge, by July 13, 2008. Consequently, on July 10, 2008, PTNNT filed a notice to commence an additional international arbitration proceeding, as provided for under the Contract of Work, to resolve the claim that PTNNT breached its obligations under the Contract of Work by allowing shares to be offered that are subject to pledge obligations to the Senior Lenders. This issue was incorporated into and resolved as part of the initial arbitration proceeding.
An international arbitration panel was appointed to resolve these claims and a hearing was held in Jakarta in December 2008. On March 31, 2009, the arbitration panel issued its Final Award and decision on the matter. In its decision, the arbitration 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 is not entitled to immediately terminate the Contract of Work and the panel rejected the Indonesian government’s claim for damages. The Arbitration 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 Arbitration Panel also applied a 180-day cure period to the 2008 7% interest, ruling that PTNNT must (within such 180-day period) offer the 2008 7% interest to the Indonesian government or its nominee, and transfer such shares if, after agreement on the transfer price, the Indonesian government invokes 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. 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 aggregated 31% of shares in PTNNT that are 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. As discussed in Note 22, the Company subsequently replaced this joint and several guarantee in October with letters of credit supporting 56.25% of the obligations under the PTNNT project financing facility. 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 has reoffered the 2008 7% interest and the 2009 7% interest to the Indonesian government at this newly agreed price. In September 2009, the deadline for completion of transfer of the 2006 3% interest, the 2007 7% interest and the 2008 7% interest was extended to November 12, 2009 by agreement between PTNNT and the Indonesian Government. This date coincides with the deadline for the sale and transfer of the 2009 7% interest. The Company cannot predict the outcome of these discussions. Subsequent disputes may arise concerning the divestiture of the shares including if the transfer is not completed to the satisfaction of the parties within the period described above.

 

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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 Commitments and Contingencies
Tax contingencies are provided for under income tax accounting guidance (see Note 8).
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 $29 in 2009, $23 in 2010 through 2013 and $140 thereafter.
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 September 30, 2009 and December 31, 2008, there were $872 and $778, 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 28 SUPPLEMENTARY DATA
Ratio of Earnings to Fixed Charges
The ratio of earnings to fixed charges for the nine months ended September 30, 2009 was 11.5. The ratio of earnings to fixed charges represents income from continuing operations 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”). 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 Item 8 of our Form 8-K for the year ended December 31, 2008 filed on September 15, 2009.
Selected Financial and Operating Results
                                 
    Three Months Ended     Nine Months Ended  
    September 30,     September 30,  
    2009     2008     2009     2008  
Revenues
  $ 2,049     $ 1,371     $ 5,187     $ 4,799  
Income from continuing operations
  $ 645     $ 215     $ 1,242     $ 1,101  
Net income
  $ 645     $ 222     $ 1,228     $ 1,118  
Net income attributable to Newmont stockholders
  $ 388     $ 191     $ 739     $ 827  
 
                               
Per common share, basic
                               
Income from continuing operations attributable to Newmont stockholders
  $ 0.79     $ 0.40     $ 1.54     $ 1.78  
Net income attributable to Newmont stockholders
  $ 0.79     $ 0.42     $ 1.52     $ 1.82  
 
                               
Consolidated gold ounces sold (thousands) (1)
    1,715       1,485       4,734       4,569  
Consolidated copper pounds sold (millions)
    141       44       342       201  
 
                               
Average price received, net (2)
                               
Gold (per ounce)
  $ 964     $ 865     $ 930     $ 900  
Copper (per pound)
  $ 2.80     $ 2.01     $ 2.30     $ 3.50  
 
                               
Costs applicable to sales (3)
                               
Gold (per ounce)
  $ 404     $ 467     $ 419     $ 433  
Copper (per pound)
  $ 0.50     $ 1.98     $ 0.63     $ 1.70  
 
     
(1)   Includes incremental start-up ounces of nil and 1 in the three and nine months ended September 30, 2009 and 3 and 20 in the three and nine months ended September 30, 2008, respectively.
 
(2)   After treatment and refining charges.
 
(3)   Excludes Amortization and Accretion.
Consolidated Financial Results
Net income attributable to Newmont stockholders for the third quarter of 2009 was $388, or $0.79 per share, compared to $191, or $0.42 per share in 2008. Results for the third quarter of 2009 compared to 2008 were impacted by increased gold and copper sales volumes, higher realized gold and copper prices and lower costs. Net income attributable to Newmont stockholders for the first nine months of 2009 was $739, or $1.52 per share, compared to $827, or $1.82 per share in 2008. Results for the first nine months of 2009 compared to 2008 were impacted by higher gold and copper sales volumes, higher realized gold prices and lower costs, partially offset by lower realized copper prices. The Net income attributable to Newmont stockholders per share for the three and nine months ended September 30, 2009, compared to the same periods for 2008, reflect higher average shares outstanding due to the issuance of 34,500,000 shares in February 2009.

 

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Sales — gold, net for the third quarter of 2009 increased $372 compared to the third quarter of 2008 as a result of a 233,000 increase in consolidated gold ounces sold and a $99 per ounce increase in the average realized price after treatment and refining charges. Sales — gold, net for the first nine months of 2009 increased $307 compared to the first nine months of 2008 as a result of a 184,000 increase in consolidated gold ounces sold and a $30 per ounce increase in the average price realized after treatment and refining charges. The following analysis summarizes the change in consolidated gold sales revenue:
                                 
    Three Months Ended     Nine Months Ended  
    September 30,     September 30,  
    2009     2008     2009     2008  
Consolidated gold sales:
                               
Gross
  $ 1,660     $ 1,282     $ 4,421     $ 4,106  
Less: Treatment and refining charges
    (7 )     (1 )     (20 )     (12 )
 
                       
Net
  $ 1,653     $ 1,281     $ 4,401     $ 4,094  
 
                       
 
                               
Consolidated gold ounces sold (thousands):
                               
Gross
    1,715       1,485       4,734       4,569  
Less: Incremental start-up sales
          (3 )     (1 )     (20 )
 
                       
Net
    1,715       1,482       4,733       4,549  
 
                       
 
                               
Average realized price (per ounce):
                               
Before treatment and refining charges
  $ 968     $ 866     $ 934     $ 903  
After treatment and refining charges
  $ 964     $ 865     $ 930     $ 900  
The change in consolidated gold sales is due to:
                 
    Three Months Ended     Nine Months Ended  
    September 30,     September 30,  
    2009 vs. 2008     2009 vs. 2008  
Increase in consolidated ounces sold
  $ 203     $ 166  
Increase in average realized gold price
    175       149  
Increase in treatment and refining charges
    (6 )     (8 )
 
           
 
  $ 372     $ 307  
 
           
Sales — copper, net for the third quarter of 2009 increased $306 compared to the third quarter of 2008 due to higher sales volume and higher realized prices. Sales — copper, net for the first nine months of 2009 increased $81 compared to the first nine months of 2008 due to higher sales volume, partially offset by lower realized prices. The following analysis summarizes the change in consolidated copper sales revenue:
                                 
    Three Months Ended     Nine Months Ended  
    September 30,     September 30,  
    2009     2008     2009     2008  
Consolidated copper sales:
                               
Gross before provisional pricing
  $ 386     $ 151     $ 763     $ 726  
Provisional pricing mark-to-market gain (loss)
    48       (52 )     112       38  
 
                       
Gross after provisional pricing
    434       99       875       764  
Less: Treatment and refining charges
    (38 )     (9 )     (89 )     (59 )
 
                       
Net
  $ 396     $ 90     $ 786     $ 705  
 
                       
 
                               
Consolidated copper pounds sold (millions)
    141       44       342       201  
 
Average price realized (per pound):
                               
Gross before provisional pricing
  $ 2.73     $ 3.39     $ 2.23     $ 3.61  
Provisional pricing mark-to-market gain (loss)
    0.34       (1.18 )     0.33       0.19  
 
                       
Gross after provisional pricing
    3.07       2.21       2.56       3.80  
Less: Treatment and refining charges
    (0.27 )     (0.20 )     (0.26 )     (0.30 )
 
                       
Net
  $ 2.80     $ 2.01     $ 2.30     $ 3.50  
 
                       

 

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The change in consolidated copper sales is due to:
                 
    Three Months Ended     Nine Months Ended  
    September 30,     September 30,  
    2009 vs. 2008     2009 vs. 2008  
Increase in consolidated pounds sold
  $ 214     $ 537  
Increase (decrease) in average realized copper price
    121       (426 )
Increase in treatment and refining charges
    (29 )     (30 )
 
           
 
  $ 306     $ 81  
 
           
The following is a summary of net gold and copper sales:
                                 
    Three Months Ended     Nine Months Ended  
    September 30,     September 30,  
    2009     2008     2009     2008  
Gold
                               
North America:
                               
Nevada
  $ 481     $ 471     $ 1,321     $ 1,457  
La Herradura
    23       19       75       64  
 
                       
 
    504       490       1,396       1,521  
 
                               
South America:
                               
Yanacocha
    535       378       1,451       1,265  
 
                               
Asia Pacific:
                               
Jundee
    103       94       293       282  
Tanami
    61       75       220       249  
Kalgoorlie
    91       69       223       189  
Waihi
    27       35       78       95  
Batu Hijau
    201       23       358       171  
 
                       
 
    483       296       1,172       986  
 
                               
Africa:
                               
Ahafo
    131       117       382       321  
 
                               
Corporate and other
                      1  
 
                       
 
  $ 1,653     $ 1,281     $ 4,401     $ 4,094  
 
                       
 
                               
Copper
                               
Asia Pacific:
                               
Batu Hijau
  $ 396     $ 90     $ 786     $ 705  
 
                       
Costs applicable to sales decreased in the third quarter and first nine months of 2009 from 2008 as detailed in the table below. The decrease in the third quarter and first nine months of 2009 is due to lower waste tons mined and lower diesel prices, partially offset by increased gold and copper sales volumes.
Amortization increased in the third quarter and first nine months of 2009 compared to 2008, due to increased gold and copper sales volumes as detailed in the table below. We expect Amortization expense in 2009 to be approximately $740 to $760.

 

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The following is a summary of Costs applicable to sales and Amortization:
                                                                 
    Costs Applicable to Sales     Amortization  
    Three Months Ended     Nine Months Ended     Three Months Ended     Nine Months Ended  
    September 30,     September 30,     September 30,     September 30,  
    2009     2008     2009     2008     2009     2008     2009     2008  
Gold
                                                               
North America:
                                                               
Nevada
  $ 273     $ 271     $ 764     $ 724     $ 69     $ 65     $ 183     $ 175  
Hope Bay
                            3             9        
La Herradura
    8       9       30       27       2       2       7       6  
 
                                               
 
    281       280       794       751       74       67       199       181  
 
                                                               
South America:
                                                               
Yanacocha
    163       159       488       488       43       43       128       131  
 
                                                               
Asia Pacific:
                                                               
Jundee
    33       44       103       126       12       9       33       26  
Tanami
    45       55       146       162       10       10       32       27  
Kalgoorlie
    60       63       151       171       5       4       11       12  
Waihi
    14       16       38       45       5       10       18       24  
Batu Hijau
    37       20       88       76       10       4       23       15  
 
                                               
 
    189       198       526       580       42       37       117       104  
 
                                                               
Africa:
                                                               
Ahafo
    61       55       175       150       17       16       51       47  
 
                                               
 
    694       692       1,983       1,969       176       163       495       463  
 
                                               
 
                                                               
Copper
                                                               
Asia Pacific:
                                                               
Batu Hijau
    71       88       217       342       18       16       55       67