10-Q 1 nem-20170630x10q.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, 2017

 

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, a smaller reporting company, or an emerging growth company. See definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth 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

 

 

 

 

Emerging growth company

 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐ 

 

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 533,271,501 shares of common stock outstanding on July 17, 2017.

 

 

 


 

TABLE OF CONTENTS

 

 

 

 

 

Page

 

 

PART I – FINANCIAL INFORMATION

 

 

SECOND QUARTER 2017 RESULTS AND HIGHLIGHTS 

 

1

ITEM 1. 

 

FINANCIAL STATEMENTS

 

3

 

 

Condensed Consolidated Statements of Operations

 

3

 

 

Condensed Consolidated Statements of Comprehensive Income (Loss) 

 

4

 

 

Condensed Consolidated Statements of Cash Flows

 

5

 

 

Condensed Consolidated Balance Sheets

 

6

 

 

Notes to Condensed Consolidated Financial Statements

 

7

ITEM 2. 

 

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

 

49

 

 

Overview

 

49

 

 

Consolidated Financial Results

 

49

 

 

Results of Consolidated Operations

 

56

 

 

Foreign Currency Exchange Rates

 

65

 

 

Liquidity and Capital Resources

 

65

 

 

Environmental

 

69

 

 

Accounting Developments

 

70

 

 

Non-GAAP Financial Measures

 

70

 

 

Safe Harbor Statement

 

80

ITEM 3. 

 

QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

 

83

ITEM 4. 

 

CONTROLS AND PROCEDURES

 

85

 

 

PART II – OTHER INFORMATION

 

 

ITEM 1. 

 

LEGAL PROCEEDINGS

 

86

ITEM 1A. 

 

RISK FACTORS

 

86

ITEM 2. 

 

UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

 

86

ITEM 3. 

 

DEFAULTS UPON SENIOR SECURITIES

 

86

ITEM 4. 

 

MINE SAFETY DISCLOSURES

 

86

ITEM 5. 

 

OTHER INFORMATION

 

87

ITEM 6. 

 

EXHIBITS

 

87

SIGNATURES 

 

88

EXHIBIT INDEX 

 

89

 

 

 


 

NEWMONT MINING CORPORATION

 

SECOND QUARTER 2017 RESULTS AND HIGHLIGHTS

(unaudited, in millions, except per share, per ounce and per pound)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Three Months Ended June 30, 

 

Six Months Ended June 30, 

 

 

    

2017

    

2016

    

2017

    

2016

 

Financial Results:

 

 

 

 

 

 

 

 

 

 

 

 

 

Sales:

 

$

1,875

 

$

1,669

 

$

3,534

 

$

3,131

 

Gold

 

$

1,799

 

$

1,612

 

$

3,387

 

$

3,023

 

Copper

 

$

76

 

$

57

 

$

147

 

$

108

 

Costs applicable to sales: (1)

 

$

999

 

$

902

 

$

1,932

 

$

1,753

 

Gold

 

$

955

 

$

847

 

$

1,849

 

$

1,653

 

Copper

 

$

44

 

$

55

 

$

83

 

$

100

 

Net income (loss) from continuing operations 

 

$

166

 

$

(2)

 

$

247

 

$

(26)

 

Net income (loss) 

 

$

151

 

$

62

 

$

209

 

$

197

 

Net income (loss) from continuing operations attributable to Newmont stockholders

 

$

192

 

$

14

 

$

261

 

$

 2

 

Per common share, diluted:

 

 

 

 

 

 

 

 

 

 

 

 

 

Net income (loss) from continuing operations attributable to Newmont stockholders

 

$

0.36

 

$

0.02

 

$

0.49

 

$

 —

 

Net income (loss) attributable to Newmont stockholders

 

$

0.33

 

$

0.04

 

$

0.42

 

$

0.14

 

Adjusted net income (loss) (2)

 

$

248

 

$

155

 

$

381

 

$

284

 

Adjusted net income (loss) per share, diluted (2)

 

$

0.46

 

$

0.29

 

$

0.71

 

$

0.53

 

Earnings before interest, taxes and depreciation and amortization (2)

 

$

708

 

$

588

 

$

1,261

 

$

1,146

 

Adjusted earnings before interest, taxes and depreciation and amortization (2)

 

$

698

 

$

600

 

$

1,264

 

$

1,070

 

Net cash provided by (used in) operating activities of continuing operations

 

 

 

 

 

 

 

$

908

 

$

825

 

Free Cash Flow (2)

 

 

 

 

 

 

 

$

545

 

$

262

 

Cash dividends declared per common share

 

$

0.050

 

$

0.025

 

$

0.100

 

$

0.050

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Operating Results:

 

 

 

 

 

 

 

 

 

 

 

 

 

Consolidated gold ounces (thousands):

 

 

 

 

 

 

 

 

 

 

 

 

 

Produced

 

 

1,440

 

 

1,268

 

 

2,767

 

 

2,492

 

Sold

 

 

1,439

 

 

1,281

 

 

2,740

 

 

2,466

 

Attributable gold ounces (thousands):

 

 

 

 

 

 

 

 

 

 

 

 

 

Produced

 

 

1,352

 

 

1,193

 

 

2,586

 

 

2,329

 

Sold

 

 

1,350

 

 

1,207

 

 

2,552

 

 

2,304

 

Consolidated and attributable copper pounds (millions):

 

 

 

 

 

 

 

 

 

 

 

 

 

Produced

 

 

31

 

 

29

 

 

60

 

 

57

 

Sold

 

 

32

 

 

29

 

 

58

 

 

54

 

Average realized price:

 

 

 

 

 

 

 

 

 

 

 

 

 

Gold (per ounce) 

 

$

1,250

 

$

1,257

 

$

1,236

 

$

1,226

 

Copper (per pound) 

 

$

2.46

 

$

2.00

 

$

2.56

 

$

2.02

 

Consolidated costs applicable to sales: (1)(2)

 

 

 

 

 

 

 

 

 

 

 

 

 

Gold (per ounce) 

 

$

664

 

$

661

 

$

675

 

$

670

 

Copper (per pound) 

 

$

1.38

 

$

1.90

 

$

1.43

 

$

1.85

 

All-in sustaining costs: (2)

 

 

 

 

 

 

 

 

 

 

 

 

 

Gold (per ounce) 

 

$

884

 

$

913

 

$

892

 

$

902

 

Copper (per pound) 

 

$

1.69

 

$

2.17

 

$

1.72

 

$

2.15

 


(1)

Excludes Depreciation and amortization and Reclamation and remediation.

(2)

See “Non-GAAP Financial Measures” beginning on page 70.  

 

1


 

Second Quarter 2017 Highlights

 

·

Portfolio improvements: Approved the high-grade, low-cost Twin Underground project in Nevada, mined first ore at Subika Underground in Africa, on track for commercial production of the Tanami Expansion project in Australia in the third quarter of 2017 and acquired a 19.9% stake in Continental Gold Inc. who is developing the Buriticá project in Colombia;

 

·

Attributable gold production: Increased 13% to 1.4 million ounces as new production from Merian and Long Canyon more than offset lower grades at Tanami and Yanacocha;

 

·

Net income (loss): Delivered Net income (loss) from continuing operations attributable to Newmont stockholders of $192 or $0.36 per diluted share, an increase of $178 from the prior-year quarter, primarily due to higher gold production and lower income and mining taxes;

 

·

Adjusted net income (loss): Delivered Adjusted net income (loss) of $248 or $0.46 per diluted share, a 60% increase from the prior-year quarter (See “Non-GAAP Financial Measures” beginning on page 70);

 

·

Adjusted EBITDA: Generated $698 in Adjusted EBITDA, a 16% increase from the prior-year quarter (See “Non-GAAP Financial Measures” beginning on page 70); and

 

·

Financial strength: Ended the quarter with $3.1 billion cash on hand and increased the dividend payable in the third quarter of 2017 to $0.075 per share, triple the prior-year quarter dividend.

 

Our global project pipeline

 

Projects included in our global pipeline comprise an important part of the Company’s growth strategy and reflect opportunities throughout the development cycle. The most advanced projects, including early stage development and projects in or near the execution phase are described below. The exploration, construction and execution of these projects may require significant funding to complete. 

 

Tanami Expansion, Australia. The scope for this project includes a second decline in the mine and incremental capacity in the plant to increase profitable production and serve as a platform for future growth. The project is on track to reach commercial production in the third quarter of 2017 and will maintain Tanami’s annual gold production at 425,000 to 475,000 ounces for the first five years. Development capital costs (excluding capitalized interest) since approval were $100, of which $13 were related to the second quarter of 2017.

 

Subika Underground, Africa. This project leverages existing infrastructure and an optimized approach to develop Ahafo’s most promising underground resource. First production was achieved in June 2017, with commercial production expected in the second half of 2018. The project is expected to increase average annual gold production by between 150,000 and 200,000 ounces per year for the first five years beginning in 2019 with an initial mine life of approximately 11 years. Development capital costs (excluding capitalized interest) since approval were $22, all of which related to the second quarter of 2017.

 

Ahafo Mill Expansion, Africa. This project is designed to maximize resource value by improving production margins and accelerating stockpile processing. The project also supports profitable development of Ahafo’s highly prospective underground resource. First production is expected in the first half of 2019 with commercial production expected in the second half of 2019. The expansion is expected to increase average annual gold production by between 75,000 and 100,000 ounces per year for the first five years beginning in 2020. Development capital costs (excluding capitalized interest) since approval were $9, all of which related to the second quarter of 2017.

 

Twin Underground, North America. Newmont approved the development of the Twin Underground project in June 2017. The project is a portal mine beneath Twin Creek’s Vista surface mine with similar mineralization. First production is expected in the fourth quarter of 2017, with commercial production beginning in mid-2018. The expansion is expected to increase average gold production by between 30,000 and 40,000 ounces per year for the first five years beginning in 2018.

 

Quecher Main, South America. Quecher Main is a potential brownfield development within the existing footprint of Yanacocha that will add oxide production and serve as a bridge to development of Yanacocha’s considerable sulfide deposits. Quecher Main extends the life of the Yanacocha operation to 2025, with average annual gold production of about 200,000 ounces (on a consolidated basis) between 2020 and 2025. An investment decision is expected in the second half of 2017 with first production in 2019.

 

We manage our wider project portfolio to maintain flexibility to address the development risks associated with our projects including permitting, local community and government support, engineering and procurement availability, technical issues, escalating costs and other associated risks that could adversely impact the timing and costs of certain opportunities. 

 

2


 

PART I—FINANCIAL INFORMATION

 

ITEM 1.FINANCIAL STATEMENTS.

 

NEWMONT MINING CORPORATION

 

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(unaudited, in millions except per share)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Three Months Ended June 30, 

 

Six Months Ended June 30, 

 

 

  

2017

    

2016

    

2017

    

2016

  

Sales

 

$

1,875

 

$

1,669

 

$

3,534

 

$

3,131

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Costs and expenses

 

 

 

 

 

 

 

 

 

 

 

 

 

Costs applicable to sales (1) 

 

 

999

 

 

902

 

 

1,932

 

 

1,753

 

Depreciation and amortization

 

 

308

 

 

281

 

 

601

 

 

557

 

Reclamation and remediation (Note 5)

 

 

44

 

 

21

 

 

74

 

 

42

 

Exploration 

 

 

51

 

 

38

 

 

87

 

 

68

 

Advanced projects, research and development

 

 

32

 

 

44

 

 

58

 

 

71

 

General and administrative 

 

 

58

 

 

62

 

 

113

 

 

115

 

Other expense, net (Note 6)

 

 

14

 

 

15

 

 

31

 

 

33

 

 

 

 

1,506

 

 

1,363

 

 

2,896

 

 

2,639

 

Other income (expense)

 

 

 

 

 

 

 

 

 

 

 

 

 

Other income, net (Note 7)

 

 

31

 

 

 1

 

 

22

 

 

97

 

Interest expense, net

 

 

(64)

 

 

(66)

 

 

(131)

 

 

(140)

 

 

 

 

(33)

 

 

(65)

 

 

(109)

 

 

(43)

 

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

 

 

336

 

 

241

 

 

529

 

 

449

 

Income and mining tax benefit (expense) (Note 8)

 

 

(167)

 

 

(238)

 

 

(277)

 

 

(465)

 

Equity income (loss) of affiliates

 

 

(3)

 

 

(5)

 

 

(5)

 

 

(10)

 

Net income (loss) from continuing operations 

 

 

166

 

 

(2)

 

 

247

 

 

(26)

 

Net income (loss) from discontinued operations (Note 3)

 

 

(15)

 

 

64

 

 

(38)

 

 

223

 

Net income (loss)

 

 

151

 

 

62

 

 

209

 

 

197

 

Net loss (income) attributable to noncontrolling interests

 

 

 

 

 

 

 

 

 

 

 

 

 

Continuing operations (Note 9)

 

 

26

 

 

16

 

 

14

 

 

28

 

Discontinued operations (Note 3)

 

 

 —

 

 

(55)

 

 

 —

 

 

(150)

 

 

 

 

26

 

 

(39)

 

 

14

 

 

(122)

 

Net income (loss) attributable to Newmont stockholders 

 

$

177

 

$

23

 

$

223

 

$

75

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net income (loss) attributable to Newmont stockholders:

 

 

 

 

 

 

 

 

 

 

 

 

 

Continuing operations 

 

$

192

 

$

14

 

$

261

 

$

 2

 

Discontinued operations 

 

 

(15)

 

 

 9

 

 

(38)

 

 

73

 

 

 

$

177

 

$

23

 

$

223

 

$

75

 

Net income (loss) per common share (Note 10)

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic:

 

 

 

 

 

 

 

 

 

 

 

 

 

Continuing operations 

 

$

0.36

 

$

0.02

 

$

0.49

 

$

 —

 

Discontinued operations 

 

 

(0.03)

 

 

0.02

 

 

(0.07)

 

 

0.14

 

 

 

$

0.33

 

$

0.04

 

$

0.42

 

$

0.14

 

Diluted:

 

 

 

 

 

 

 

 

 

 

 

 

 

Continuing operations 

 

$

0.36

 

$

0.02

 

$

0.49

 

$

 —

 

Discontinued operations 

 

 

(0.03)

 

 

0.02

 

 

(0.07)

 

 

0.14

 

 

 

$

0.33

 

$

0.04

 

$

0.42

 

$

0.14

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Cash dividends declared per common share 

 

$

0.050

 

$

0.025

 

$

0.100

 

$

0.050

 

 


(1)

Excludes Depreciation and amortization and Reclamation and remediation.

 

The accompanying notes are an integral part of the Condensed Consolidated Financial Statements.

3


 

NEWMONT MINING CORPORATION

 

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

(unaudited, in millions)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Three Months Ended June 30, 

 

Six Months Ended June 30, 

 

 

    

2017

    

2016

    

2017

    

2016

    

Net income (loss)

 

$

151

  

$

62

    

$

209

 

$

197

 

Other comprehensive income (loss):

 

 

 

 

 

 

 

 

 

 

 

 

 

Change in marketable securities, net of $-, $-, $- and $- tax benefit (expense), respectively

 

 

(4)

 

 

21

 

 

(11)

 

 

(56)

 

Foreign currency translation adjustments 

 

 

 —

 

 

 4

 

 

 4

 

 

 7

 

Change in pension and other post-retirement benefits, net of $(1), $-, $(5) and $(2), tax benefit (expense), respectively

 

 

 3

 

 

 4

 

 

 9

 

 

 7

 

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

 

 

 5

 

 

16

 

 

14

 

 

35

 

Other comprehensive income (loss)

 

 

 4

 

 

45

 

 

16

 

 

(7)

 

Comprehensive income (loss)

 

$

155

 

$

107

 

$

225

 

$

190

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Comprehensive income (loss) attributable to:

 

 

 

 

 

 

 

 

 

 

 

 

 

Newmont stockholders 

 

$

181

 

$

68

 

$

239

 

$

68

 

Noncontrolling interests

 

 

(26)

 

 

39

 

 

(14)

 

 

122

 

 

 

$

155

 

$

107

 

$

225

 

$

190

 

 

The accompanying notes are an integral part of the Condensed Consolidated Financial Statements.

 

 

4


 

NEWMONT MINING CORPORATION

 

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS 

(unaudited, in millions)

 

 

 

 

 

 

 

 

 

 

 

Six Months Ended June 30, 

 

 

    

2017

    

2016

 

Operating activities:

 

 

 

  

 

 

 

Net income (loss)

    

$

209

  

$

197

 

Adjustments:

 

 

 

  

 

 

 

Depreciation and amortization

 

 

601

  

 

557

 

Stock-based compensation (Note 12)

 

 

35

 

 

37

 

Reclamation and remediation

 

 

70

 

 

40

 

Loss (income) from discontinued operations (Note 3)

 

 

38

 

 

(223)

 

Deferred income taxes 

 

 

76

  

 

372

 

Gain on asset and investment sales, net

 

 

(16)

 

 

(104)

 

Other operating adjustments and inventory write-downs

 

 

150

 

 

180

 

Net change in operating assets and liabilities (Note 22)

 

 

(255)

  

 

(231)

 

Net cash provided by (used in) operating activities of continuing operations

 

 

908

  

 

825

 

Net cash provided by (used in) operating activities of discontinued operations (1)

 

 

(9)

  

 

478

 

Net cash provided by (used in) operating activities

 

 

899

  

 

1,303

 

Investing activities:

 

 

 

  

 

 

 

Additions to property, plant and mine development 

 

 

(363)

  

 

(563)

 

Purchases of investments

 

 

(113)

 

 

(2)

 

Proceeds from sales of investments

 

 

19

 

 

184

 

Other 

 

 

11

  

 

 4

 

Net cash provided by (used in) investing activities of continuing operations

 

 

(446)

 

 

(377)

 

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

 

 

 —

 

 

(28)

 

Net cash provided by (used in) investing activities 

 

 

(446)

  

 

(405)

 

Financing activities:

 

 

 

  

 

 

 

Distributions to noncontrolling interests

 

 

(80)

 

 

 —

 

Dividends paid to common stockholders 

 

 

(54)

  

 

(27)

 

Funding from noncontrolling interests

 

 

46

 

 

50

 

Payments for withholding of employee taxes related to stock-based compensation

 

 

(13)

 

 

(4)

 

Repayment of debt 

 

 

(3)

  

 

(501)

 

Dividends paid to noncontrolling interests

 

 

 —

  

 

(146)

 

Other

 

 

(3)

 

 

(1)

 

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

 

 

(107)

 

 

(629)

 

Net cash provided by (used in) financing activities of discontinued operations

 

 

 —

 

 

(153)

 

Net cash provided by (used in) financing activities

 

 

(107)

 

 

(782)

 

Effect of exchange rate changes on cash 

 

 

 3

  

 

 4

 

Net change in cash and cash equivalents 

 

 

349

 

 

120

 

Less net cash provided by (used in) Batu Hijau discontinued operations

 

 

 —

 

 

302

 

 

 

 

349

 

 

(182)

 

Cash and cash equivalents at beginning of period 

 

 

2,756

  

 

2,363

 

Cash and cash equivalents at end of period 

 

$

3,105

  

$

2,181

 

 


(1)

Net cash provided by (used in) operating activities of discontinued operations includes $(3) related to closing costs for the sale of Batu Hijau that were paid in 2017 and $(6) and $(5) related to the Holt royalty obligation, all of which were paid out of cash and cash equivalents held for use for the six months ended June 30, 2017 and 2016, respectively. For additional information regarding our discontinued operations, including cash flows from Batu Hijau, see Note 3.

 

The accompanying notes are an integral part of the Condensed Consolidated Financial Statements.

5


 

NEWMONT MINING CORPORATION

 

CONDENSED CONSOLIDATED BALANCE SHEETS 

(unaudited, in millions)

 

 

 

 

 

 

 

 

 

 

 

   At June 30,    

 

At December 31, 

 

 

    

2017

    

2016

 

ASSETS

 

 

 

 

 

 

 

Cash and cash equivalents

 

$

3,105

 

$

2,756

 

Trade receivables

 

 

158

 

 

127

 

Other accounts receivables

 

 

179

 

 

216

 

Investments (Note 15)

 

 

61

 

 

56

 

Inventories (Note 16)

 

 

665

 

 

617

 

Stockpiles and ore on leach pads (Note 17)

 

 

821

 

 

763

 

Other current assets

 

 

109

 

 

142

 

Current assets

 

 

5,098

 

 

4,677

 

Property, plant and mine development, net

 

 

12,262

 

 

12,485

 

Investments (Note 15)

 

 

306

 

 

227

 

Stockpiles and ore on leach pads (Note 17)

 

 

1,781

 

 

1,864

 

Deferred income tax assets

 

 

1,245

 

 

1,331

 

Other non-current assets

 

 

450

 

 

447

 

Total assets

 

$

21,142

 

$

21,031

 

 

 

 

 

 

 

 

 

LIABILITIES

 

 

 

 

 

 

 

Debt (Note 18)

 

$

577

 

$

566

 

Accounts payable

 

 

304

 

 

320

 

Employee-related benefits

 

 

223

 

 

304

 

Income and mining taxes payable

 

 

127

 

 

153

 

Other current liabilities (Note 19)

 

 

341

 

 

407

 

Current liabilities

 

 

1,572

 

 

1,750

 

Debt (Note 18)

 

 

4,046

 

 

4,049

 

Reclamation and remediation liabilities (Note 5)

 

 

2,060

 

 

2,029

 

Deferred income tax liabilities

 

 

614

 

 

592

 

Employee-related benefits

 

 

434

 

 

411

 

Other non-current liabilities (Note 19)

 

 

376

 

 

326

 

Total liabilities

 

 

9,102

 

 

9,157

 

 

 

 

 

 

 

 

 

EQUITY

 

 

 

 

 

 

 

Common stock

 

 

853

 

 

849

 

Additional paid-in capital

 

 

9,508

 

 

9,490

 

Accumulated other comprehensive income (loss) (Note 21)

 

 

(318)

 

 

(334)

 

Retained earnings

 

 

885

 

 

716

 

Newmont stockholders' equity

 

 

10,928

 

 

10,721

 

Noncontrolling interests

 

 

1,112

 

 

1,153

 

Total equity

 

 

12,040

 

 

11,874

 

Total liabilities and equity

 

$

21,142

 

$

21,031

 

 

The accompanying notes are an integral part of the Condensed Consolidated Financial Statements.

 

 

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)

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, 2016 filed on February 21, 2017 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 November 2, 2016, Newmont completed the sale of its 48.5% economic interest in PT Newmont Nusa Tenggara (“PTNNT”), which operated the Batu Hijau copper and gold mine (“Batu Hijau”) in Indonesia (the “Batu Hijau Transaction”). As a result, Newmont presents Batu Hijau as a discontinued operation for all periods presented. Accordingly, (i) our Condensed Consolidated Statements of Operations and Cash Flows have been reclassified to present Batu Hijau as a discontinued operation for all periods presented and (ii) the amounts presented in these notes relate only to our continuing operations, unless otherwise noted. For additional information regarding our discontinued operations, see Note 3.

 

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 and copper. 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 on 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 particularly sensitive to the outlook for commodity prices. A decline in the Company’s price outlook from current levels could result in material impairment charges related to these assets.

 

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

 

Inventory

 

In July 2015, Accounting Standard Update (“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. The Company records inventory at the lower of cost or net realizable value and the adoption of this guidance effective January 1, 2017, had no impact on the Consolidated Financial Statements or disclosures.

7


 

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)

 

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 of cash payments related to tax withholdings on behalf of employees on the Consolidated Statements of Cash Flows. This update is effective in fiscal years, including interim periods, beginning after December 15, 2016. The Company adopted this guidance as of January 1, 2017, and reclassified $(4) from Net cash provided by (used in) operating activities of continuing operations to Net cash provided by (used in) financing activities of continuing operations for the six months ended June 30, 2016. Adoption of this guidance had no other impact on the Consolidated Financial Statements or disclosures.

 

Business Combinations

 

In January 2017, ASU No. 2017-01 was issued clarifying the definition of a business and providing additional guidance for determining whether transactions should be accounted for as acquisitions of assets or businesses. This update is effective in fiscal years, including interim periods, beginning after December 15, 2017, and early adoption is permitted. The new guidance is required to be applied on a prospective basis. Adoption of this guidance, effective April 1, 2017, had no impact on the Consolidated Financial Statements or disclosures.

 

Goodwill

 

In January 2017, ASU No. 2017-04 was issued, which removes step two from the goodwill impairment test. As a result, an entity should perform its annual goodwill impairment test by comparing the fair value of a reporting unit with its carrying amount and should recognize an impairment charge for the amount by which the carrying amount exceeds the reporting unit’s fair value. This update is effective in fiscal years, including interim periods, beginning after December 15, 2019, and early adoption is permitted. Adoption of this guidance, effective April 1, 2017, had no impact on the Consolidated Financial Statements or disclosures. 

 

Recently Issued Accounting Pronouncements

 

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, May 2016 and December 2016 by ASU No. 2015-14, No. 2016-08, No. 2016-10, No. 2016-12 and No. 2016-20, respectively. The new guidance 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.

 

The Company has performed an assessment of the revised guidance and the impacts on the Company’s Consolidated Financial Statements and disclosures. The Company has completed the review of all contracts and determined that the adoption of this guidance will primarily impact the timing of revenue recognition on certain concentrate contracts based on the Company’s determination of when control is transferred. Currently, revenue is recognized for these contracts based on varying contractual terms indicating when risk of loss and title have transferred to the buyer. Upon adoption, revenue related to concentrate sales will typically be recognized upon completion of loading the material for shipment to the customer and satisfaction of the Company’s significant performance obligations. The Company is finalizing the assessment and quantifying the impacts of changes on certain concentrate contracts.

 

8


 

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)

The Company furthered its evaluation of variable consideration for concentrate sales related to the variable nature of the price and metal quantity. Based on our current analysis, the estimate of revenue recognized for concentrates will remain unchanged as sales will initially be recorded on a provisional basis based on the forward prices for the estimated month of settlement and the Company’s estimated metal quantities delivered based on weighing and assay data. The Company believes changes in the underlying weight and metal content are not significant to the sale as a whole and therefore do not preclude the recognition of revenue upon transfer of control.

 

Additionally, the Company completed its evaluation of the impacts of insurance and refining fee classification. Newmont has determined that insurance on the transportation of goods is not considered a separate performance obligation. Newmont has also determined that revenue will be recognized, net of treatment and refining charges when these payments are to customers. When these payments are to third parties, the charges will be recognized within Costs applicable to sales. This classification remains unchanged from current practice.

 

The Company will adopt the new guidance effective January 1, 2018. The guidance may be applied retrospectively for all periods presented or retrospectively with the cumulative effect of initially applying the guidance recognized at the date of initial application. The Company currently anticipates adopting the guidance retrospectively with the cumulative effect of initially applying the amended guidance recognized at January 1, 2018. Results for reporting periods beginning after January 1, 2018, will be presented in the Consolidated Financial Statements under the new guidance, while prior period amounts will not be adjusted and continue to be reported under the guidance in effect for those periods. In the related disclosures, results for reporting periods beginning after January 1, 2018, will be presented under prior guidance along with prior period amounts for comparative purposes.

 

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 upon adoption, an entity should apply the amendments by means of a cumulative-effect adjustment to the balance sheet at the beginning of the first reporting period in which the guidance is effective. Early adoption is not permitted. The Company expects the updated guidance to result in a significant reclassification of unrealized gains and losses on equity investments from Accumulated other comprehensive income (loss) to Retained earnings in the Consolidated Balance Sheets upon adoption.

 

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. The Company expects to begin assessment of the new guidance during the second half of 2017 with impact analysis performed in 2018. The Company is currently evaluating this guidance and the impact it will have on the Consolidated Financial Statements and disclosures. This update is effective in fiscal years, including interim periods, beginning after December 15, 2018, and early adoption is permitted. The Company anticipates adopting the new guidance effective January 1, 2019.

 

Statement of Cash Flows

 

In August 2016, ASU No. 2016-15 was issued related to the statement of cash flows. This new guidance addresses eight specific cash flow issues with the objective of reducing the existing diversity in practice in how certain cash receipts and cash payments are presented and classified in the statement of cash flows. This update is effective in fiscal

9


 

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)

years, including interim periods, beginning after December 15, 2017, 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. The Company anticipates adopting the new guidance effective January 1, 2018.

 

Intra-Entity Transfers

 

In October 2016, ASU No. 2016-16 was issued related to the intra-entity transfers of assets other than inventory. This new guidance requires entities to recognize the income tax consequences of an intra-entity transfer of an asset other than inventory when the transfer occurs. This update is effective in fiscal years, including interim periods, beginning after December 15, 2017, 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. The Company anticipates adopting the new guidance effective January 1, 2018.

 

Restricted Cash

 

In November 2016, ASU No. 2016-18 was issued related to the inclusion of restricted cash in the statement of cash flows. This new guidance requires that a statement of cash flows explain the change during the period in the total of cash, cash equivalents and amounts generally described as restricted cash or restricted cash equivalents. This update is effective in fiscal years, including interim periods, beginning after December 15, 2017, and early adoption is permitted. The adoption of this guidance will result in the inclusion of the restricted cash balances within the overall cash balance and removal of the changes in restricted cash activity, which is currently recognized in Other within financing activities, on the Consolidated Statements of Cash Flows. Furthermore, the Company will be required to reconcile Cash and cash equivalents and restricted cash reported within the Consolidated Balance Sheets to the total shown in the Consolidated Statements of Cash Flows. The Company anticipates adopting this new guidance effective January 1, 2018, and does not expect it to have a material impact on the Consolidated Financial Statements or disclosures.

 

Employee Benefits

 

In March 2017, ASU No. 2017-07 was issued related to the presentation of net periodic pension and postretirement cost. The new guidance requires the service cost component of net benefit costs be classified similar to other compensation costs arising from services rendered by employees. Other components of net benefit costs are required to be classified separately from the service cost and outside income from operations. This update is effective in fiscal years, including interim periods, beginning after December 15, 2017. The Company anticipates adopting this new guidance effective January 1, 2018. The adoption of this guidance will result in the recognition of other components of net benefit costs within Other income, net rather than Costs and expenses and will no longer be included in costs that benefit the inventory/production process. The adoption of this guidance is not expected to have a material impact on the Consolidated Financial Statements or disclosures.

 

 

 NOTE 3     DISCONTINUED OPERATIONS

 

The details of our Net income (loss) from discontinued operations are set forth below:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Three Months Ended 

    

Six Months Ended

 

 

 

June 30, 

    

June 30, 

 

 

    

2017

    

2016

    

2017

    

2016

  

Holt royalty obligation

 

$

(15)

 

$

(27)

    

$

(38)

 

$

(53)

 

Batu Hijau operations

 

 

 —

 

 

91

    

 

 —

 

 

276

 

Net income (loss) from discontinued operations

 

$

(15)

 

$

64

    

$

(38)

 

$

223

 

 

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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)

The Batu Hijau Transaction

 

On November 2, 2016, Newmont completed the sale of its 48.5% economic interest in PTNNT, which operated the Batu Hijau copper and gold mine, previously reported in the Asia Pacific segment (renamed as the Australia segment during the first quarter of 2017).  

 

Net income (loss) from discontinued operations in the Condensed Consolidated Statements of Operations that relates to Batu Hijau consists of the following:

 

 

 

 

 

 

 

 

 

 

 

Three Months Ended

 

Six Months Ended

 

    

    

June 30, 2016

    

June 30, 2016

  

Sales

 

$

369

 

$

939

 

 

 

 

 

 

 

 

 

Costs and expenses

 

 

 

 

 

 

 

Costs applicable to sales (1) 

 

 

157

 

 

387

 

Depreciation and amortization

 

 

33

 

 

79

 

Reclamation and remediation

 

 

 5

 

 

 9

 

Advanced projects, research and development

 

 

 —

 

 

 1

 

General and administrative 

 

 

 2

 

 

 6

 

Other expense (income), net

 

 

 5

 

 

 3

 

 

 

 

202

 

 

485

 

Interest expense, net

 

 

(5)

 

 

(10)

 

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

 

 

162

 

 

444

 

Income and mining tax benefit (expense)

 

 

(71)

 

 

(168)

 

Net income (loss) from discontinued operations

 

 

91

 

 

276

 

Net loss (income) attributable to noncontrolling interests

 

 

(55)

 

 

(150)

 

Net income (loss) from discontinued operations attributable to Newmont stockholders 

 

$

36

 

$

126

 


(1)

Excludes Depreciation and amortization and Reclamation and remediation. 

 

The consolidated statements of comprehensive income (loss) were not impacted by discontinued operations as PTNNT did not have any other comprehensive income (loss).

 

Cash flows from Batu Hijau consist of the following:

 

 

 

 

 

 

 

 

Six Months Ended

 

 

    

June 30, 2016

  

Net cash provided by (used in) operating activities

 

$

483

 

Net cash provided by (used in) investing activities

 

 

(28)

 

Net cash provided by (used in) financing activities

 

 

(153)

 

Net cash provided by (used in) Batu Hijau discontinued operations

 

$

302

 

 

The Holt Royalty Obligation

 

Discontinued operations include a retained royalty obligation to Holloway Mining Company. Holloway Mining Company, which owned the Holt-McDermott property (“Holt”), was sold to St. Andrew Goldfields Ltd. (“St. Andrew”) in 2006. In January 2016, St. Andrew was acquired by Kirkland Lake Gold Ltd.

 

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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)

At June 30, 2017 and December 31, 2016, the estimated fair value of the Holt royalty obligation was $240 and $187, respectively. Changes to the estimated fair value resulting from periodic revaluations are recorded to