10-Q 1 nem-20160630x10q.htm 10-Q nem_Q2_Q3_Current folio_10Q_Taxonomy2015

 

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D. C. 20549

 


 

Form 10-Q

 


(Mark One)

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

For the Quarterly Period Ended June 30, 2016

or

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

For the transition period from              to              

Commission File Number: 001-31240

 


C:\Users\02015832\Desktop\Corporate_3CLR_POS_jpg.jpg 

NEWMONT MINING CORPORATION

(Exact name of registrant as specified in its charter)

 


 

 

 

 

Delaware

 

84-1611629

(State or Other Jurisdiction of
Incorporation or Organization)

 

(I.R.S. Employer
Identification No.)

 

6363 South Fiddler’s Green Circle

 

 

Greenwood Village, Colorado

 

80111

(Address of Principal Executive Offices)

 

(Zip Code)

 

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

 


Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.      Yes      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 during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).      Yes      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 definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12-b2 of the Exchange Act.

 

 

 

 

 

 

 

 

Large accelerated filer

 

 

Accelerated filer

 

Non-accelerated filer

 

(Do not check if a smaller reporting company.)

Smaller reporting company

 

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

 

There were 530,594,563 shares of common stock outstanding on July 13, 2016.

 

 

 


 

TABLE OF CONTENTS

 

 

 

 

 

 

 

 

 

Page

 

 

PART I – FINANCIAL INFORMATION

 

 

ITEM 1. 

 

FINANCIAL STATEMENTS

 

 

 

Condensed Consolidated Statements of Income

 

 

 

Condensed Consolidated Statements of Comprehensive Income

 

 

 

Condensed Consolidated Statements of Cash Flows

 

 

 

Condensed Consolidated Balance Sheets

 

 

 

Notes to Condensed Consolidated Financial Statements

 

ITEM 2. 

 

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

 

48 

 

 

Overview

 

48 

 

 

Selected Financial and Operating Results

 

51 

 

 

Consolidated Financial Results

 

51 

 

 

Results of Consolidated Operations

 

57 

 

 

Liquidity and Capital Resources

 

65 

 

 

Environmental

 

68 

 

 

Accounting Developments

 

69 

 

 

Non-GAAP Financial Measures

 

70 

 

 

Safe Harbor Statement

 

78 

ITEM 3. 

 

QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

 

80 

ITEM 4. 

 

CONTROLS AND PROCEDURES

 

82 

 

 

PART II – OTHER INFORMATION

 

 

ITEM 1. 

 

LEGAL PROCEEDINGS

 

84 

ITEM 1A. 

 

RISK FACTORS

 

84 

ITEM 2. 

 

UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

 

84 

ITEM 3. 

 

DEFAULTS UPON SENIOR SECURITIES

 

84 

ITEM 4. 

 

MINE SAFETY DISCLOSURES

 

84 

ITEM 5. 

 

OTHER INFORMATION

 

84 

ITEM 6. 

 

EXHIBITS

 

85 

SIGNATURES 

 

86 

EXHIBIT INDEX 

 

87 

 

 

 

 


 

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 June 30, 

 

Six Months Ended June 30, 

 

 

    

2016

    

2015

    

2016

    

2015

  

Sales

 

$

2,038

 

$

1,908

 

$

4,070

 

$

3,880

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Costs and expenses

 

 

 

 

 

 

 

 

 

 

 

 

 

Costs applicable to sales (1) 

 

 

1,059

 

 

1,027

 

 

2,140

 

 

2,054

 

Depreciation and amortization

 

 

314

 

 

276

 

 

636

 

 

565

 

Reclamation and remediation (Note 5)

 

 

25

 

 

26

 

 

50

 

 

49

 

Exploration 

 

 

38

 

 

48

 

 

68

 

 

81

 

Advanced projects, research and development

 

 

44

 

 

33

 

 

72

 

 

61

 

General and administrative 

 

 

64

 

 

68

 

 

121

 

 

126

 

Other expense, net

 

 

19

 

 

27

 

 

37

 

 

44

 

 

 

 

1,563

 

 

1,505

 

 

3,124

 

 

2,980

 

Other income (expense)

 

 

 

 

 

 

 

 

 

 

 

 

 

Other income, net

 

 

 —

 

 

(23)

 

 

98

 

 

(12)

 

Interest expense, net

 

 

(71)

 

 

(82)

 

 

(150)

 

 

(167)

 

 

 

 

(71)

 

 

(105)

 

 

(52)

 

 

(179)

 

Income (loss) before income and mining tax and other items

 

 

404

 

 

298

 

 

894

 

 

721

 

Income and mining tax benefit (expense) (Note 6)

 

 

(310)

 

 

(152)

 

 

(634)

 

 

(345)

 

Equity income (loss) of affiliates

 

 

(5)

 

 

(7)

 

 

(10)

 

 

(16)

 

Income (loss) from continuing operations 

 

 

89

 

 

139

 

 

250

 

 

360

 

Income (loss) from discontinued operations

 

 

(27)

 

 

9

 

 

(53)

 

 

17

 

Net income (loss)

 

 

62

 

 

148

 

 

197

 

 

377

 

Net loss (income) attributable to noncontrolling interests (Note 7)

 

 

(39)

 

 

(76)

 

 

(122)

 

 

(122)

 

Net income (loss) attributable to Newmont stockholders 

 

$

23

 

$

72

 

$

75

 

$

255

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net income (loss) attributable to Newmont stockholders:

 

 

 

 

 

 

 

 

 

 

 

 

 

Continuing operations 

 

$

50

 

$

63

 

$

128

 

$

238

 

Discontinued operations 

 

 

(27)

 

 

9

 

 

(53)

 

 

17

 

 

 

$

23

 

$

72

 

$

75

 

$

255

 

Income (loss) per common share (Note 8)

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic:

 

 

 

 

 

 

 

 

 

 

 

 

 

Continuing operations 

 

$

0.09

 

$

0.13

 

$

0.24

 

$

0.48

 

Discontinued operations 

 

 

(0.05)

 

 

0.01

 

 

(0.10)

 

 

0.03

 

 

 

$

0.04

 

$

0.14

 

$

0.14

 

$

0.51

 

Diluted:

 

 

 

 

 

 

 

 

 

 

 

 

 

Continuing operations 

 

$

0.09

 

$

0.13

 

$

0.24

 

$

0.48

 

Discontinued operations 

 

 

(0.05)

 

 

0.01

 

 

(0.10)

 

 

0.03

 

 

 

$

0.04

 

$

0.14

 

$

0.14

 

$

0.51

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Cash dividends declared per common share 

 

$

0.025

 

$

0.025

 

$

0.050

 

$

0.050

 

 


(1)

Excludes Depreciation and amortization and Reclamation and remediation. 

 

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

1


 

NEWMONT MINING CORPORATION

 

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME 

(unaudited, in millions)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Three Months Ended June 30, 

 

Six Months Ended June 30, 

 

 

    

2016

    

2015

    

2016

    

2015

    

Net income (loss)

 

$

62

  

$

148

    

$

197

 

$

377

 

Other comprehensive income (loss):

 

 

 

 

 

 

 

 

 

 

 

 

 

Unrealized gain (loss) on marketable securities, net of $nil, $nil, $nil and $nil tax benefit (expense), respectively

 

 

21

 

 

(8)

 

 

(56)

 

 

(7)

 

Foreign currency translation adjustments 

 

 

4

 

 

5

 

 

7

 

 

(5)

 

Change in pension and other post-retirement benefits, net of $nil, $(20), $(2) and $(22) tax benefit (expense), respectively

 

 

4

 

 

39

 

 

7

 

 

44

 

Change in fair value of cash flow hedge instruments, net of $(7), $(7), $(15) and $(3) tax benefit (expense), respectively

 

 

16

 

 

16

 

 

35

 

 

6

 

Other comprehensive income (loss)

 

 

45

 

 

52

 

 

(7)

 

 

38

 

Comprehensive income (loss)

 

$

107

 

$

200

 

$

190

 

$

415

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Comprehensive income (loss) attributable to:

 

 

 

 

 

 

 

 

 

 

 

 

 

Newmont stockholders 

 

$

68

 

$

124

 

$

68

 

$

293

 

Noncontrolling interests

 

 

39

 

 

76

 

 

122

 

 

122

 

 

 

$

107

 

$

200

 

$

190

 

$

415

 

 

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

 

 

2


 

NEWMONT MINING CORPORATION

 

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS 

(unaudited, in millions)

 

 

 

 

 

 

 

 

 

 

 

Six Months Ended June 30, 

 

 

    

2016

    

2015

 

Operating activities:

 

 

 

  

 

 

 

Net income (loss)

    

$

197

  

$

377

 

Adjustments:

 

 

 

  

 

 

 

Depreciation and amortization

 

 

636

  

 

565

 

Stock-based compensation

 

 

37

 

 

40

 

Reclamation and remediation

 

 

48

 

 

47

 

Loss (income) from discontinued operations

 

 

53

 

 

(17)

 

Impairment of investments

 

 

 —

 

 

73

 

Deferred income taxes 

 

 

441

  

 

130

 

Gain on asset and investment sales, net

 

 

(104)

 

 

(43)

 

Other operating adjustments and impairments

 

 

181

 

 

165

 

Net change in operating assets and liabilities (Note 20)

 

 

(185)

  

 

(268)

 

Net cash provided by continuing operating activities

 

 

1,304

  

 

1,069

 

Net cash used in discontinued operations

 

 

(5)

  

 

(6)

 

Net cash provided by operating activities

 

 

1,299

  

 

1,063

 

Investing activities:

 

 

 

  

 

 

 

Additions to property, plant and mine development 

 

 

(591)

  

 

(606)

 

Proceeds from sales of investments

 

 

184

 

 

29

 

Proceeds from sales of other assets

 

 

8

 

 

44

 

Other 

 

 

(6)

  

 

(6)

 

Net cash used in investing activities 

 

 

(405)

  

 

(539)

 

Financing activities:

 

 

 

  

 

 

 

Repayment of debt 

 

 

(641)

  

 

(281)

 

Proceeds from stock issuance, net

 

 

 —

 

 

675

 

Proceeds from sale of noncontrolling interests

 

 

 —

 

 

37

 

Funding from noncontrolling interests

 

 

50

 

 

62

 

Dividends paid to noncontrolling interests 

 

 

(146)

  

 

(3)

 

Dividends paid to common stockholders 

 

 

(27)

  

 

(23)

 

Increase in restricted cash, net

 

 

(13)

  

 

(59)

 

Other

 

 

(1)

 

 

(8)

 

Net cash (used in) provided by financing activities

 

 

(778)

 

 

400

 

Effect of exchange rate changes on cash 

 

 

4

  

 

(19)

 

Net change in cash and cash equivalents 

 

 

120

  

 

905

 

Cash and cash equivalents at beginning of period 

 

 

2,782

  

 

2,403

 

Cash and cash equivalents at end of period 

 

$

2,902

  

$

3,308

 

 

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

 

3


 

NEWMONT MINING CORPORATION

 

CONDENSED CONSOLIDATED BALANCE SHEETS 

(unaudited, in millions)

 

 

 

 

 

 

 

 

 

 

 

   At June 30,    

 

At December 31, 

 

 

    

2016

    

2015

 

ASSETS

 

 

 

 

 

 

 

Cash and cash equivalents

 

$

2,902

 

$

2,782

 

Trade receivables

 

 

315

 

 

260

 

Other accounts receivables

 

 

194

 

 

185

 

Investments (Note 13)

 

 

46

 

 

19

 

Inventories (Note 14)

 

 

728

 

 

710

 

Stockpiles and ore on leach pads (Note 15)

 

 

953

 

 

896

 

Other current assets

 

 

156

 

 

131

 

Current assets

 

 

5,294

 

 

4,983

 

Property, plant and mine development, net

 

 

14,234

 

 

14,303

 

Investments (Note 13)

 

 

237

 

 

402

 

Stockpiles and ore on leach pads (Note 15)

 

 

2,956

 

 

3,000

 

Deferred income tax assets

 

 

1,264

 

 

1,718

 

Other non-current assets

 

 

718

 

 

730

 

Total assets

 

$

24,703

 

$

25,136

 

 

 

 

 

 

 

 

 

LIABILITIES

 

 

 

 

 

 

 

Debt (Note 16)

 

$

196

 

$

149

 

Accounts payable

 

 

348

 

 

396

 

Employee-related benefits

 

 

211

 

 

293

 

Income and mining taxes payable

 

 

126

 

 

38

 

Other current liabilities (Note 17)

 

 

479

 

 

540

 

Current liabilities

 

 

1,360

 

 

1,416

 

Debt (Note 16)

 

 

5,375

 

 

6,041

 

Reclamation and remediation liabilities (Note 5)

 

 

1,835

 

 

1,800

 

Deferred income tax liabilities

 

 

926

 

 

840

 

Employee-related benefits

 

 

463

 

 

437

 

Other non-current liabilities (Note 17)

 

 

361

 

 

310

 

Total liabilities

 

 

10,320

 

 

10,844

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

EQUITY

 

 

 

 

 

 

 

Common stock

 

 

849

 

 

847

 

Additional paid-in capital

 

 

9,457

 

 

9,427

 

Accumulated other comprehensive income (loss) (Note 19)

 

 

(341)

 

 

(334)

 

Retained earnings

 

 

1,458

 

 

1,410

 

Newmont stockholders' equity

 

 

11,423

 

 

11,350

 

Noncontrolling interests

 

 

2,960

 

 

2,942

 

Total equity (Note 18)

 

 

14,383

 

 

14,292

 

Total liabilities and equity

 

$

24,703

 

$

25,136

 

 

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

 

 

4


 

Table of Contents

NEWMONT MINING CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)

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

NOTE 1     BASIS OF PRESENTATION

 

The interim Condensed Consolidated Financial Statements (“interim statements”) of Newmont Mining Corporation and its subsidiaries (collectively, “Newmont” or the “Company”) are unaudited. In the opinion of management, all adjustments (including normal recurring adjustments) and disclosures necessary for a fair presentation of these interim statements have been included. The results reported in these interim statements are not necessarily indicative of the results that may be reported for the entire year. These interim statements should be read in conjunction with Newmont’s Consolidated Financial Statements for the year ended December 31, 2015 filed on February 17, 2016 on Form 10-K. The year-end balance sheet data was derived from the audited financial statements and, in accordance with the instructions to Form 10-Q, certain information and footnote disclosures required by United States (U.S.) generally accepted accounting principles (“GAAP”) have been condensed or omitted. References to “A$” refers to Australian currency and “C$” refers to Canadian currency.

 

On June 30, 2016, Nusa Tenggara Partnership B.V. (owned 56.25% by the Company and 43.75% by Nusa Tenggara Mining Corporation, majority owned by Sumitomo Corporation) entered into a binding share sale and purchase agreement with PT Amman Mineral Internasional (“PTAMI”) to sell its 56% ownership interest in PT Newmont Nusa Tenggara (“PTNNT”), which operates the Batu Hijau copper and gold mine (“Batu Hijau”) in Indonesia. In addition, NVL (USA) Limited (“NVL”), a wholly owned subsidiary of the Company, (i) entered into a binding agreement to sell a loan made to PT Pukuafu Indah (“PTPI”), secured by PTPI’s 17.8% interest in PTNNT, to PTAMI, and (ii) consented to PT Indonesia Masabaga Investama (“PTIMI”) selling its 2.2% interest in PTNNT to PTAMI with sale proceeds applied toward repayment of an NVL loan to PTIMI. Through these transactions, Newmont will effectively sell its 48.5% economic interest in PTNNT to PTAMI and will have no remaining interest.

 

The sales proceeds to be received by the Company for its 48.5% economic interest in PTNNT includes $920 in cash to be received at closing, as well as contingent payments totaling up to $403. The contingent payments of up to $403 include (i) a Metal Price Upside deferred payment of up to $133, (ii) an Elang Development deferred payment totaling $118 and (iii) a Contingent Payment of up to $152. The contingent payment amounts are determined based on certain metal price, shipment or project development criteria, as described below.

 

The Metal Price Upside contingent payment of up to $133 is payable for any quarter in which the London Metal Exchange (“LME”) quarterly average copper price exceeds $3.75 per pound. It is calculated as 30% of the product of (i) the difference between the LME quarterly average copper price and $3.75 and (ii) 96.5% of the total pounds of copper contained in shipments of mineral products mined or produced from Batu Hijau that arrived in buyers’ or customers’ designated port for delivery during the previous quarter. The Elang Development contingent payment totaling $118 is payable no later than the first anniversary of the first shipment of any form of saleable copper, gold or silver product produced from the Elang development area. The Contingent Payment of up to $152 is payable (i) as a payment of $76 if in any year after 2022 in which there is production from Phase 7 of the Batu Hijau mine and the LME annual average copper price is $2.75 or more per pound and (ii) if the full Contingent Payment amount has not already been paid, a payment of $76 in any year after both the second anniversary of the first shipment of concentrate produced from the Elang development area and December 31, 2023 in which the LME annual average copper price in respect to such year is $3.25 or more per pound.

 

The sale of the Company’s economic interest in PTNNT is subject to customary representations, warranties and covenants by the parties, and is subject to various closing conditions, including (i) obtaining approval of the Indonesian Ministry of Energy and Mineral Resources and the Indonesian Investment Coordinating Board in respect of the transfer of shares to PTAMI, and other required governmental consents and approvals; (ii) PTNNT holding a valid export license at closing; (iii) concurrent closing of PT Multi Daerah Bersaing’s (“PTMDB”) sale of its approximately 24% stake in PTNNT to PTAMI; (iv) obtaining approval of the shareholders of PTNNT for the transfer of shares in PTNNT to PTAMI and the appointment of directors nominated by PTAMI; (v) no material adverse events having occurred,

5


 

Table of Contents

NEWMONT MINING CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)

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

including (a) an event that causes significant interruption of mining or milling operations of PTNNT for three months or longer, (b) laws or regulations that prevent PTNNT from exporting its production outside of Indonesia for three months or longer, (c) the revocation or termination of PTNNT’s mineral rights and mining concessions with the Republic of Indonesia, and (d) any revocation, termination or suspension of PTNNT’s export license; and (vi) the satisfaction or waiver of the conditions precedent in other transaction and finance-related agreements, including the resolution of certain tax matters pertaining to PTNNT shareholder PTPI.

 

The completion of the sale is subject to the closing conditions noted above, some of which are outside the control of the Company. Assuming the resolution of the closing conditions, the transaction is anticipated to close in the third quarter of 2016.   

 

Based on the agreement to sell the economic interest in PTNNT, the Company evaluated the criteria under ASC 360 for classifying an asset as held for sale and concluded that as of June 30, 2016, PTNNT does not meet the criteria to be treated as an asset held for sale and will not be presented as a discontinued operation.

 

The Batu Hijau mine, which constitutes 15% of the Company’s total assets at June 30, 2016, is included in the Asia Pacific segment in the condensed consolidated financial statements. Refer to Note 7 for details on Batu Hijau’s financial position. The Company expects to record a loss on the sale of its economic interest in PTNNT of approximately $500 upon closing of the transaction. The expected loss does not currently include the $403 of contingent consideration described above due to the uncertainty in valuing the amounts. 

 

As part of the Company’s asset impairment evaluation procedures at June 30, 2016, and in accordance with ASC 360, the Company has determined that the agreement to sell the economic interest in PTNNT was a triggering event that required the Company to evaluate the recoverability of the long-lived assets of PTNNT. Based on the evaluation of the probability weighted cash flows of either selling the economic interest in PTNNT or continuing to operate PTNNT as an asset held for use, the Company determined that no impairment was required at June 30, 2016.

 

The Company has reclassified certain prior period amounts to conform to the 2016 presentation including the following items:

 

The Company retrospectively adopted Accounting Standards Update (“ASU”) 2015-03, which requires debt issuance costs to be presented as a deduction from the corresponding debt liability. Refer to Note 2 for further details.

 

The Company reclassified regional administrative and community development costs of $17 and $8 from Other expense, net to General and administrative and Costs applicable to sales, respectively, for the three months ended June 30, 2015, and $31 and $16, respectively, for the six months ended June 30, 2015.

 

NOTE 2     SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

 

Risks and Uncertainties

 

As a global mining company, the Company’s revenue, profitability and future rate of growth are substantially dependent on prevailing prices for gold, copper and, to a lesser extent, silver. Historically, the commodity markets have been very volatile and there can be no assurance that commodity prices will not be subject to wide fluctuations in the future. A substantial or extended decline in commodity prices could have a material adverse effect on the Company’s financial position, results of operations, cash flows, access to capital and the quantities of reserves that the Company can economically produce. The carrying value of the Company’s Property, plant and mine development,  net; Inventories; Stockpiles and ore on leach pads and Deferred income tax assets are sensitive to the outlook for commodity prices. A

6


 

Table of Contents

NEWMONT MINING CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)

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

decline in the Company’s long-term price outlook from current levels could result in material impairment charges related to these assets.

 

On June 30, 2016, the Company, through its subsidiaries, entered into agreements to sell its 48.5% economic interest in PTNNT, which operates the Batu Hijau copper and gold mine in Indonesia. The closing of the sale is subject to various closing conditions, some of which are outside the control of the Company, and if not satisfied could result in the sale of PTNNT not being completed. See Note 1 above for a detailed description of the closing conditions specified in the share sale and purchase agreement.

 

In September 2014, PTNNT and the Government of Indonesia signed a Memorandum of Understanding (“MoU”) that resulted in the government agreeing to issue permits to allow PTNNT to export and sell copper concentrates from the Batu Hijau mine. The government then issued several six-month export permits since then, with the most recent permit renewal expected to expire in November 2016. Additionally, negotiations between PTNNT and the Government of Indonesia to amend the Contract of Work (the investment agreement entered into by PTNNT and the Indonesian government in 1986, which includes the right to export copper concentrates and a prohibition against new taxes, duties, and levies) remained on-going at the time that the Company entered into the agreement to sell its interest in PTNNT. In the event that the sale of the Company’s interest does not close prior to November 2016 or does not close at all, no assurances can be made with respect to the outcome of the Contract of Work negotiations and the renewal of the export permit. The failure to receive a timely renewal may negatively impact future operations and financial results at Batu Hijau. As a result of the on-going Contract of Work renegotiations at Batu Hijau, the need for asset impairments, inventory write-downs, tax valuation allowances and other applicable accounting charges will continue to be evaluated. At this time, the Company expects operations to continue into the future until the previously announced sale closes. The total assets at Batu Hijau as of June 30, 2016 and December 31, 2015 were $3,746 and $3,483, respectively.

 

The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the accounting for and recognition and disclosure of assets, liabilities, equity, revenues and expenses. The Company must make these estimates and assumptions because certain information used is dependent on future events, cannot be calculated with a high degree of precision from data available or simply cannot be readily calculated based on generally accepted methodologies. Actual results could differ from these estimates.

 

Recently Adopted Accounting Pronouncements

 

Employee benefit plan accounting

 

In July 2015, the Financial Accounting Standards Board issued ASU No. 2015-12 related to defined benefit pension plans, defined contribution pension plans and health and welfare benefit plans. This update designates contract value as the only required measure for fully benefit-responsive investment contracts, simplifies and makes more effective the investment disclosure requirements for employee benefit plans and provides a simplified method for determining the measurement date for employee benefit plans. The update is effective in fiscal years, including interim periods, beginning after December 15, 2015. Adoption of this guidance, effective January 1, 2016, had no impact on the Consolidated Financial Statements or disclosures.

 

Fair value measurement

 

In May 2015, ASU No. 2015-07 was issued related to investments for which fair value is measured, or is eligible to be measured, using the net asset value per share practical expedient. This update removes the requirement to categorize within the fair value hierarchy all investments for which fair value is measured using the net asset value per share practical expedient. The amendment also removes certain disclosure requirements for these investments. This update will impact the annual disclosure related to pension plan assets measured at fair value. This update is effective in

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Table of Contents

NEWMONT MINING CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)

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

fiscal years, including interim periods, beginning after December 15, 2015. Adoption of this guidance, effective January 1, 2016, had no impact on the Consolidated Financial Statements.

 

Debt issuance costs

 

In April 2015, ASU No. 2015-03 was issued related to debt issuance costs. This update simplifies the presentation of debt issuance costs by requiring debt issuance costs to be presented as a deduction from the corresponding debt liability. The update is effective in fiscal years, including interim periods, beginning after December 15, 2015. The Company retrospectively adopted this guidance as of March 31, 2016. The Company reclassified $46 of debt issuance costs from Other non-current assets to Debt as of December 31, 2015. The December 31, 2015, balance sheet was adjusted as a result of the adoption of ASU 2015-03 as follows:

 

 

 

 

 

 

 

 

 

 

 

At December 31, 2015

 

 

    

As Reported

    

As Adjusted

    

Other non-current assets

 

$

776

 

$

730

 

Debt (non-current)

 

$

6,087

 

$

6,041

 

 

ASU No. 2015-03 does not specifically address the accounting for deferred financing costs related to line-of-credit arrangements. In August 2015, ASU No. 2015-15 was issued allowing for debt issuance costs associated with line-of-credit arrangements to continue to be presented as assets. The Company will treat all debt issuance costs as a reduction to the carrying value of debt.

 

Consolidations

 

In February 2015, ASU No. 2015-02 was issued related to consolidations. This update makes some targeted changes to current consolidation guidance and impacts both the voting and the variable interest consolidation models. In particular, the update changes how companies determine whether limited partnerships or similar entities are variable interest entities. The update is effective in fiscal years, including interim periods, beginning after December 15, 2015. The Company currently consolidates certain variable interest entities. Adoption of this guidance, effective January 1, 2016, had no impact on the Consolidated Financial Statements or disclosures.

 

Recently Issued Accounting Pronouncements

 

Stock-based compensation

 

In March 2016, ASU No. 2016-09 was issued related to stock-based compensation. The new guidance simplifies the accounting for stock-based compensation transactions, including income tax consequences, classification of awards as either equity or liabilities and classification on the statement of cash flows. This update is effective in fiscal years, including interim periods, beginning after December 15, 2016, and early adoption is permitted. The Company is currently evaluating this guidance and expects an insignificant impact on the Consolidated Financial Statements and disclosures.

 

Leases

 

In February 2016, ASU No. 2016-02 was issued related to leases. The new guidance modifies the classification criteria and requires lessees to recognize the assets and liabilities arising from most leases on the balance sheet. This update is effective in fiscal years, including interim periods, beginning after December 15, 2018, and early adoption is permitted. The Company is currently evaluating this guidance and the impact it will have on the Consolidated Financial Statements and disclosures.

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Table of Contents

NEWMONT MINING CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)

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

 

Investments

 

In January 2016, ASU No. 2016-01 was issued related to financial instruments. The new guidance requires entities to measure equity investments that do not result in consolidation and are not accounted for under the equity method at fair value and recognize any changes in fair value in net income. This new guidance also updates certain disclosure requirements for these investments. This update is effective in fiscal years, including interim periods, beginning after December 15, 2017, and early adoption is not permitted. The Company is currently evaluating this guidance and the impact it will have on the Consolidated Financial Statements and disclosures.

 

Inventory

 

In July 2015, ASU No. 2015-11 was issued related to inventory, simplifying the subsequent measurement of inventories by replacing the lower of cost or market test with a lower of cost and net realizable value test. The update is effective in fiscal years, including interim periods, beginning after December 15, 2016, and early adoption is permitted. The Company does not expect the updated guidance to have an impact on the Consolidated Financial Statements or disclosures.

 

Revenue recognition

 

In May 2014, ASU No. 2014-09 was issued related to revenue from contracts with customers. This ASU was further amended in August 2015, March 2016, April 2016 and May 2016 by ASU No. 2015-14, No. 2016-08, No. 2016-10 and No. 2016-12, respectively. The new standard provides a five-step approach to be applied to all contracts with customers and also requires expanded disclosures about revenue recognition. In August 2015, the effective date was deferred to reporting periods, including interim periods, beginning after December 15, 2017, and will be applied retrospectively. Early adoption is not permitted. The Company is currently evaluating this guidance and the impact it will have on the Consolidated Financial Statements and disclosures.

 

NOTE 3    BUSINESS ACQUISITION

 

On June 8, 2015, the Company announced an agreement with AngloGold Ashanti Limited to acquire 100% ownership in the Cripple Creek & Victor (“CC&V”) gold mining business in Colorado. CC&V is a surface mine with heap leach operations that provides ore to a crusher and a leach facility. During 2015, the Company received $675 in net proceeds from a common stock issuance. Newmont used the proceeds, supplemented with cash from the Company’s balance sheet, to fund the acquisition. On August 3, 2015, the Company completed the acquisition of CC&V for $821, plus a 2.5% net smelter return royalty on future gold production from underground ore which had no fair value at the acquisition date. In connection with the acquisition, the Company incurred acquisition costs of $3, for the three and six months ended June 30, 2016, which were recorded in Other expense, net. The acquisition is not material to the Company's results of operations, individually or in the aggregate; as a result, no pro forma financial information is provided.

 

During the second quarter of 2016, the final valuation of acquired assets and liabilities assumed was completed. There were no adjustments to the purchase price allocation since December 31, 2015. For further discussion of the CC&V acquisition, refer to Note 3 to the Consolidated Financial Statements for the year ended December 31, 2015 filed February 17, 2016 on Form 10-K.

 

 

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NEWMONT MINING CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)

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

NOTE 4     SEGMENT INFORMATION

 

The Company has organized its operations into four geographic regions. The geographic regions include North America, South America, Asia Pacific and Africa and represent the Company’s operating segments. The results of these operating segments are reviewed by the Company’s chief operating decision maker to make decisions about resources to be allocated to the segments and assess their performance. As a result, these operating segments represent the Company’s reportable segments. Notwithstanding this structure, the Company internally reports information on a mine-by-mine basis for each mining operation and have chosen to disclose this information on the following tables. Income (loss) before income and mining tax and other items from reportable segments does not reflect general corporate expenses, interest (except project-specific interest) or income and mining taxes (except for equity investments). Intercompany revenue and expense amounts have been eliminated within each segment in order to report on the basis that management uses internally for evaluating segment performance. Newmont’s business activities that are not considered operating segments are included in Corporate and Other although they are not required to be included in this footnote; they are provided for reconciliation purposes. In the first quarter of 2016, Merian was moved from Corporate and Other to the South America reportable segment as a result of the mine being included in the operating results and resource allocation of the South America segment. In the second quarter of 2016, Long Canyon was moved from Other North America to its own line item to reflect how the project is being reported internally. Segment results for prior periods have been retrospectively revised to reflect these changes. The financial information relating to the Company’s segments is as follows:

 

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Table of Contents

NEWMONT MINING CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)

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

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

  

 

  

 

 

 

 

 

 

Advanced

  

Income (Loss)

  

 

 

 

 

 

 

Costs

 

Depreciation

 

Projects, Research

 

before Income

 

 

 

 

 

 

 

 

Applicable

 

and

 

and Development 

 

and Mining Tax

 

Capital

 

    

Sales

    

to Sales

    

Amortization

    

and Exploration

    

and Other Items

 

Expenditures(1)

Three Months Ended June 30, 2016

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Carlin

    

$

256

 

$

184

 

$

43

 

$

4

 

$

22

 

$

43

Phoenix:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Gold

 

 

62

 

 

39

 

 

12

 

 

 

 

 

 

 

 

 

Copper

 

 

22

 

 

22

 

 

7

 

 

 

 

 

 

 

 

 

Total Phoenix

 

 

84

 

 

61

 

 

19

 

 

1

 

 

3

 

 

3

Twin Creeks

 

 

144

 

 

58

 

 

13

 

 

2

 

 

70

 

 

14

Long Canyon

 

 

 —

 

 

 —

 

 

 —

 

 

7

 

 

(7)

 

 

37

CC&V (2)

 

 

144

 

 

58

 

 

28

 

 

1

 

 

55

 

 

15

Other North America

 

 

 —

 

 

 —

 

 

 —

 

 

5

 

 

(6)

 

 

2

North America

 

 

628

 

 

361

 

 

103

 

 

20

 

 

137

 

 

114

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Yanacocha

 

 

194

 

 

120

 

 

59

 

 

11

 

 

(19)

 

 

24

Merian

 

 

 —

 

 

 —

 

 

 —

 

 

11

 

 

(10)

 

 

60

Other South America

 

 

 —

 

 

 —

 

 

4

 

 

10

 

 

(14)

 

 

 —

South America

 

 

194

 

 

120

 

 

63

 

 

32

 

 

(43)

 

 

84

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Boddington:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Gold

 

 

250

 

 

141

 

 

29

 

 

 

 

 

 

 

 

 

Copper

 

 

35

 

 

33

 

 

6

 

 

 

 

 

 

 

 

 

Total Boddington

 

 

285

 

 

174

 

 

35

 

 

 —

 

 

75

 

 

12

Tanami

 

 

179

 

 

64

 

 

23

 

 

3

 

 

89

 

 

33

Kalgoorlie

 

 

122

 

 

67

 

 

4

 

 

2

 

 

49

 

 

5

Batu Hijau:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Gold

 

 

191

 

 

65

 

 

14

 

 

 

 

 

 

 

 

 

Copper

 

 

178

 

 

92

 

 

19

 

 

 

 

 

 

 

 

 

Total Batu Hijau (3)

 

 

369

 

 

157

 

 

33

 

 

 —

 

 

163

 

 

10

Other Asia Pacific

 

 

 —

 

 

 —

 

 

2

 

 

2

 

 

(10)

 

 

 —

Asia Pacific

 

 

955

 

 

462

 

 

97

 

 

7

 

 

366

 

 

60

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Ahafo

 

 

115

 

 

60

 

 

17

 

 

7

 

 

30

 

 

22

Akyem

 

 

146

 

 

56

 

 

32

 

 

3

 

 

55

 

 

3

Other Africa

 

 

 —

 

 

 —

 

 

 —

 

 

 —

 

 

(2)

 

 

 —

Africa

 

 

261

 

 

116

 

 

49

 

 

10

 

 

83

 

 

25

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Corporate and Other

 

 

 —

 

 

 —

 

 

2

 

 

13

 

 

(139)

 

 

2

Consolidated

 

$

2,038

 

$

1,059

 

$

314

 

$

82

 

$

404

 

$

285

 


(1)

Includes a decrease in accrued capital expenditures of $9; consolidated capital expenditures on a cash basis were $294.

(2)

The Company acquired the CC&V gold mining business on August 3, 2015.

(3)

On June 30, 2016, the Company announced the anticipated sale of Batu Hijau. Refer to Note 1 for additional information. 

 

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Table of Contents

NEWMONT MINING CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)

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

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

  

 

 

 

 

 

 

Advanced

  

Income (Loss)

 

 

 

 

  

 

 

Costs

 

Depreciation

 

Projects, Research

 

before Income

  

 

 

 

 

 

 

 

Applicable

 

and

 

and Development 

 

and Mining Tax

 

Capital

 

    

Sales

    

to Sales

    

Amortization

    

and Exploration

    

and Other Items

 

Expenditures(1)

Three Months Ended June 30, 2015

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Carlin

    

$

243

 

$

187

 

$

46

 

$

4

 

$

3

 

$

58

Phoenix:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Gold

 

 

50

 

 

32

 

 

8

 

 

 

 

 

 

 

 

 

Copper

 

 

24

 

 

17

 

 

3

 

 

 

 

 

 

 

 

 

Total Phoenix

 

 

74

 

 

49

 

 

11

 

 

1

 

 

9

 

 

8

Twin Creeks

 

 

150

 

 

65

 

 

12

 

 

3

 

 

68

 

 

12

Long Canyon

 

 

 —

 

 

 —

 

 

 —

 

 

3

 

 

(3)

 

 

19

Other North America

 

 

 —

 

 

 —

 

 

 —

 

 

4

 

 

(3)

 

 

1

North America

 

 

467

 

 

301

 

 

69

 

 

15

 

 

74

 

 

98

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Yanacocha

 

 

242

 

 

130

 

 

66

 

 

8

 

 

20

 

 

19

Merian

 

 

 —

 

 

 —

 

 

 —

 

 

3

 

 

(4)

 

 

78

Other South America

 

 

 —

 

 

 —

 

 

2

 

 

12

 

 

(16)

 

 

 —

South America

 

 

242

 

 

130

 

 

68

 

 

23

 

 

 —

 

 

97

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Boddington:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Gold

 

 

202