-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, FqpanA6yy5wpcQJSQnd0qMrTdx1QLAxYiAUE2u+9xyekk3dssNYoiJfmCBAH7DOu DZtvM7W43s6vStf3E/f43Q== 0000927356-00-000580.txt : 20000329 0000927356-00-000580.hdr.sgml : 20000329 ACCESSION NUMBER: 0000927356-00-000580 CONFORMED SUBMISSION TYPE: 10-K405 PUBLIC DOCUMENT COUNT: 7 CONFORMED PERIOD OF REPORT: 19991231 FILED AS OF DATE: 20000328 FILER: COMPANY DATA: COMPANY CONFORMED NAME: NEWMONT MINING CORP CENTRAL INDEX KEY: 0000071824 STANDARD INDUSTRIAL CLASSIFICATION: GOLD & SILVER ORES [1040] IRS NUMBER: 131806811 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-K405 SEC ACT: SEC FILE NUMBER: 001-01153 FILM NUMBER: 581316 BUSINESS ADDRESS: STREET 1: ONE UNITED BANK CTR STREET 2: 1700 LINCOLN ST CITY: DENVER STATE: CO ZIP: 80203 BUSINESS PHONE: 3038637414 10-K405 1 FORM 10-K405 FOR PERIOD ENDING 12/31/1999 - ------------------------------------------------------------------------------- - ------------------------------------------------------------------------------- SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 Form 10-K FOR ANNUAL AND TRANSITION REPORTS PURSUANT TO SECTIONS 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 (Mark One) [X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the Fiscal Year Ended December 31, 1999 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 1-1153 Newmont Mining Corporation (Exact Name of Registrant as Specified in Its Charter) Delaware 13-1806811 (State or Other Jurisdiction of (I.R.S. Employer Incorporation or Organization) Identification No.) 1700 Lincoln Street Denver, Colorado 80203 (Address of Principal Executive (Zip Code) Offices) Registrant's telephone number, including area code (303) 863-7414 Securities registered pursuant to Section 12(b) of the Act:
Title of Each Class Name of Each Exchange on Which Registered ------------------- ----------------------------------------- Common Stock, $1.60 par Value New York Stock Exchange Paris Bourse Swiss Stock Exchange Brussels Stock Exchange
Securities registered pursuant to Section 12(g) of the Act: None 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 [X] No [_] Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of Registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. [X] The aggregate market value of the voting stock held by non-affiliates of the Registrant (based on the closing sale price of the shares on the New York Stock Exchange) on March 2, 2000 was approximately $3,619,800,000. The number of shares of Registrant's common stock outstanding on March 2, 2000 was 167,789,621. DOCUMENTS INCORPORATED BY REFERENCE Portions of Registrant's annual report to Stockholders for the year ended December 31, 1999 are incorporated by reference into Parts I, II and IV of this report and portions of Registrant's definitive proxy statement submitted to the Registrant's stockholders in connection with its 2000 Annual Meeting to be held on May 4, 2000 are incorporated by reference into Part III of this report. - ------------------------------------------------------------------------------- - ------------------------------------------------------------------------------- This document (including information incorporated herein by reference) contains "forward-looking statements" within the meaning of Section 21E of the Securities Exchange Act of 1934, which involve a degree of risk and uncertainty due to various factors affecting Newmont Mining Corporation and its subsidiaries. For a discussion of some of these factors see ITEM 1A of this report. PART I ITEM 1. BUSINESS Introduction Newmont Mining Corporation was incorporated in 1921 under the laws of Delaware and maintains its corporate headquarters in Denver, Colorado. We are engaged in the production of gold, the exploration for gold and the acquisition and development of gold properties worldwide. We currently produce gold from mines in Nevada and California, and, outside of the United States, from operations in Peru, Indonesia, Mexico and Uzbekistan. In 1999, we also began production of copper concentrates from a copper/gold deposit at a second location in Indonesia. See Item 2. Properties for detailed descriptions of these properties. We had revenues from gold sales of $1.4 billion in 1999 and $1.45 billion in 1998. Our 1999 net income was $24.8 million, after a non-cash unrealized loss of $29.1 million for the mark-to-market adjustment on call option contracts. In 1998, we recorded a net loss of $393.4 million as a result of a $424.7 million write-down of assets impaired at the prevailing low gold prices and a $32.9 million charge for the effect of an accounting change. Including our subsidiaries, partnerships and joint ventures, we produced 4.18 million equity ounces of gold in 1999 and 4.07 million equity ounces in 1998. Throughout this report we will use the term "equity ounces" to mean that portion of gold produced, or included in proven and probable reserves, which is attributable to our ownership interest. Approximately 64% of our gold production in 1999 came from U.S. operations and 36% from foreign operations. In 1999, 55% of our foreign production, or 20% of our total production, was attributable to Minera Yanacocha in Peru. In 1998, 72% of our gold production came from U.S. operations and 28% from foreign operations. At December 31, 1999, approximately 38% of our total long- lived assets were related to our foreign operations, with 20% of that total in Indonesia and 15% in Peru. See Note 17 to the financial statements in the 1999 Annual Report to Stockholders on page 42. Gold Product Gold has two main categories of use--product fabrication and bullion investment. Fabricated gold has a variety of end uses, including jewelry, electronics, dentistry, industrial and decorative uses, medals, medallions and official coins. End purchasers of official coins and high-karat jewelry frequently are motivated by investment considerations, so that net private bullion purchases alone do not represent the total private investment activity in gold. Most of our revenue comes from the sale of refined gold into the international market. The end product at each of Newmont's gold operations, however, is dore bars. Because dore is an alloy consisting mostly of gold but also containing silver, copper and other impurities, the dore bars are sent to refiners to produce bullion that meets the required market standard of 99.95% pure gold. We have refining agreements with six foreign refiners and no U.S. refiners. Under the terms of these agreements, the dore bars are refined for a fee and our share of the refined gold and the separately recovered silver are credited to our accounts or delivered to third parties, except in the case of the dore gold produced in Uzbekistan, which is refined at a local refinery and physically returned to us for shipment to London and sale in the international markets. If we lost the services of any of our refiners we do not believe that there would be any adverse effect due to the availability of alternative refiners, each able to supply all services that we need. 2 Gold and copper are commingled in the concentrates produced at Batu Hijau in Indonesia. The gold contained in the concentrates is determined by assay, and its value is applied against the cost of smelting and refining the copper. The gold itself is ultimately recovered as the copper is electrolytically refined. Gold Price The gold market is characterized by price volatility as illustrated in the following table of annual high, low and average late fixing prices for gold per ounce on the London Bullion Market:
Year High Low Average ---- ---- ---- ------- 1990...................................................... $424 $346 $383 1991...................................................... $403 $344 $362 1992...................................................... $360 $330 $344 1993...................................................... $406 $326 $360 1994...................................................... $396 $370 $384 1995...................................................... $396 $372 $384 1996...................................................... $415 $367 $388 1997...................................................... $367 $283 $331 1998...................................................... $313 $273 $294 1999...................................................... $326 $253 $279 2000 (through March 2).................................... $313 $279 $292
- -------- Source of Data: Metals Week and Reuters. On March 2, 2000, the late fixing price for gold on the London Bullion Market was $290 per ounce and the spot market price of gold on the New York Commodity Exchange was $288 per ounce. The supply of gold consists of a combination of new production from mining and stocks of bullion and fabricated gold held by governments, financial institutions, industrial organizations and private individuals. In recent years, mine production has accounted for 60%-65% of the total supply of gold. The price of gold is affected by numerous factors beyond our control. Factors tending to put downward pressure on the price of gold include: . sales and leasing of gold reserves by governments and central banks, . a low rate of inflation and a strong U.S. dollar, . global and regional depression or reduced economic activity and . speculative trading. In the second half of 1997 the price of gold fell sharply, to below $300 per ounce. The price remained low during 1998 and the first eight months of 1999. It reached a 20 year low in the summer of 1999 at which time the gold price was 30% below the average gold price over the three-year period 1994-1996. The principal reason for the price declines was the 1997 sale by the Australian Government of gold reserves, followed by the announcement of a proposed large sale by the Swiss Government of its gold holdings. In addition, in May 1999 Great Britain announced its intention to sell 415 metric tons of gold (approximately 13.3 million ounces) over a period of years. Extensive producer hedging during this period, coupled with speculative short selling of the metal further depressed the price. On September 26, 1999, fifteen European central banks agreed to limit the quantity of gold they would sell or lease over the next five years. The previously announced sales by Great Britain, Switzerland and the Netherlands were covered by this agreement. The price of gold immediately began a partial recovery from its 1999 low of $253 per ounce and briefly reached $326 per ounce in October 1999. 3 Gold Sales Our gold sales are generally made at the average price prevailing during the month in which the gold is delivered plus a "contango" which is essentially an interest factor, from the beginning of the month until the date of delivery. See Note 17 to the financial statements in the 1999 Annual Report to Stockholders on page 42 for information regarding major customers and export sales. Copper Product Late 1999 saw the first sale of copper concentrates from our Batu Hijau joint venture in Indonesia. The concentrates, which have the consistency of fine sand, contain about 30% copper and about 0.42 ounce per ton of gold. While the revenue from our initial concentrate sale was not significant in 1999, we expect such sales will contribute materially to our cash flow once the project reaches full production in 2002. We deliver and sell the concentrates to smelters in Japan, Korea, Australia and Europe. In 2000, approximately 85% of our production will be sold under long-term contracts, and the balance on the spot market. Refined copper, the final product from the treatment of concentrates, is incorporated into wire and cable products for use in the construction, electric utility, communication and transportation industries. Copper is also used in industrial equipment and machinery, consumer products and a variety of other electrical and electronic applications and is used to make brass. Materials that compete with copper include aluminum, plastics, stainless steel and fiber optics. Copper Price Refined, or cathode, copper is also an internationally traded commodity. The price of copper is quoted on the London Metal Exchange in terms of dollars per metric ton of high grade copper and on the Comex in terms of dollars per pound of high grade copper. The copper market differs from the gold market in that copper prices tend to be cyclical and more directly affected by the worldwide balance of supply and demand. The volatility of the copper market is illustrated by the following table showing the dollar per pound equivalent of the high, low and average price of high grade copper on the London Metal Exchange in each of the last ten years:
Year High Low Average ---- ----- ----- ------- 1990.................................................... $1.47 $1.02 $1.21 1991.................................................... $1.20 $0.92 $1.05 1992.................................................... $1.21 $0.89 $1.04 1993.................................................... $0.91 $0.72 $0.81 1994.................................................... $1.40 $0.78 $1.05 1995.................................................... $1.47 $1.23 $1.33 1996.................................................... $1.29 $0.83 $1.04 1997.................................................... $1.23 $0.77 $1.03 1998.................................................... $0.85 $0.65 $0.75 1999.................................................... $0.84 $0.61 $0.71 2000 (through March 2).................................. $0.86 $0.78 $0.82
- -------- Source of Data: Metal Bulletin On March 2, 2000, the closing spot price of high grade copper on the London Metal Exchange was equivalent to $0.78 per pound. 4 Hedging Newmont from time to time uses commodity instruments to protect the selling price of certain anticipated gold and copper production. Although the use of such instruments can protect Newmont against low gold and copper prices, it can also prevent full participation in subsequent increases in the market prices for the covered production. See "Market Conditions and Risks - Metal Price" in Management's Discussion and Analysis in the 1999 Annual Report to Stockholders on page 19; "Results of Operations - Financial Results" in Management's Discussion and Analysis in the 1999 Annual Report to Stockholders on page 21 (last paragraph on page 22); and Notes 2 and 10 to the financial statements in the 1999 Annual Report to Stockholders on pages 30 and 37, respectively. Licenses and Concessions Other than operating licenses for our mining and processing facilities, there are no patents, licenses or franchises material to Newmont's business. In many foreign countries, however, we conduct our mining and exploration activities pursuant to concessions granted by, or under contract with, the host government. These countries include, among others, Indonesia, Peru and Mexico. The concessions and contracts are subject to the usual political risks associated with foreign operations. For a more detailed description of our Indonesian Contracts of Work see page 13 of this report. Condition of Physical Assets; Insurance and Foreign Investment Risks Ours is a capital intensive business, requiring capital investment for the replacement, modernization or expansion of equipment and facilities, and for regular maintenance. See "Liquidity and Capital Resources" in Management's Discussion and Analysis in the 1999 Annual Report to Stockholders on page 23. We maintain insurance against property loss and business interruption and insure against risks that are typical in the operation of business in amounts that we believe to be reasonable. Such insurance, however, contains exclusions and limitations on coverage, particularly with respect to liability for environmental impairment. Some concern always exists with respect to investment in less developed countries and countries with emerging economies where civil unrest, nationalist movements, political violence or economic crises are endemic. These countries may also pose heightened risks of expropriation of assets, increased taxation and a unilateral modification of concessions and contracts. We have obtained political risk insurance to cover portions of our investments in Peru, Indonesia and Uzbekistan against the risk of expropriation, war, civil unrest and political violence. This insurance is limited to particular risks and is subject to certain exclusions. There can be no assurance that claims would be paid under such insurance in connection with a particular event in any of these countries. Employees There were 9,300 persons employed by Newmont and its affiliates worldwide at December 31, 1999 and 5,700 persons employed by Newmont and its affiliates worldwide at December 31, 1998. Exploration We spent $61.8 million in 1999 for exploration and reserve development and $68.5 million in 1998. For 2000, $69 million is budgeted for exploration. Exploration work is regularly conducted in areas surrounding our existing mines for the purpose of locating additional deposits and determining mine geology. In 1999, nearly one-half of the exploration budget was allocated for work around existing mine sites. Our exploration staff consists of 192 geologists, geochemists and geophysicists employing state-of-the-art technology, including airborne geophysical data acquisition systems, satellite location devices and field- portable imaging systems to aid in the location of prospective targets. We conduct extensive exploration in Nevada where we own or otherwise control the mineral assets on approximately 1.9 million acres. In 1999, we drilled on 39 distinct targets on 21 separate properties. Exploration 5 efforts in the Carlin area have been focused on high-grade refractory targets near existing deposits. Also in 1999, mine geology programs extended the size and quality of open pit and underground reserves at Carlin. In Peru, 1999 exploration led to a 60% increase to reserves at Minera Yanacocha where we have a 51.35% interest. In addition, exploration work on the Minas Conga project to the northeast of Yanacocha, in which we have a 40% interest, continued throughout 1999 with an aggressive drilling campaign. Encouraging porphyry gold-copper mineralization has been identified on two separate targets. Separately, the Northern Peru Joint Venture, 65% owned by Newmont, holds claims on 207,000 acres of prospective ground along north and south extensions of the volcanic belt hosting the Minera Yanacocha deposits. In addition, we are active in Southern Peru. Initial exploration work is underway in these prospective areas and a number of targets have been outlined. Elsewhere in South America in 1999, drilling was conducted at the 60% owned Cangrejos project in Equador to determine the potential of a located deposit and investigate its metallurgical characteristics. In Brazil, the Gurupi project, a 50% joint venture, has identified mineralization containing an indicated 2.7 million ounces (1.4 million equity ounces) of gold. Targets were also being explored in Paraguay. Newmont's exploration in the Western Pacific focused exclusively on Indonesia in 1999, within Contract of Work areas on the islands of Sumbawa and Lombok and the North Lanut project near Minahasa on the island of Sulawesi. A new area of exploration for Newmont in 1999 was Tanzania, where we undertook a joint venture in a prospective area near Lake Victoria. In Uzbekistan, we have a 40% interest in the Angren project. Pre-feasibility technical studies and negotiations with the Uzbekistan government were conducted in 1998 but were suspended in late 1999 due to the low price of gold. Elsewhere in Central Asia work continued on prospects in Kyrgyzstan and Kazakhstan. Gold exploration is highly speculative in nature, involves many risks and frequently is nonproductive. Success in finding new reserves is the result of a number of factors, including the quality of Newmont's management, its level of geological and technical expertise, the quality of land available for exploration and other factors. Once gold mineralization is discovered, it may take many years from the initial phases of drilling until production is possible, during which time the economic feasibility of production may change. Substantial expenditures are required to establish proven and probable reserves through drilling, to determine metallurgical processes to extract the metals from the ore and, in the case of new properties, to construct mining and processing facilities. As a result of these uncertainties, no assurance can be given that Newmont's exploration programs will result in new gold producing operations. From time to time we locate a gold deposit which, while economic, does not meet our investment criteria due to size or location. In 1999, we sold our interest in the True North exploration property near Fairbanks, Alaska, and our shareholding in Argentina Gold Corporation, which held a property in the exploration stage, for an aggregate net gain of $13.6 million. With respect to development projects that have no operating history, estimates of proven and probable reserves and cash operating costs are, to a large extent, based upon the interpretation of geologic data obtained from drill holes and other sampling techniques. Feasibility studies are used to derive estimates of cash operating costs based upon anticipated tonnage and grades of ore to be mined and processed, the configuration of the ore body, expected recovery rates of the gold from the ore, comparable facility and equipment and operating costs, anticipated climatic conditions and other factors. As a result, it is possible that actual cash operating costs and economic returns may differ significantly from our original estimates. Also, it is not unusual in new mining operations to experience unexpected problems and delays during the start-up phase. 6 Environmental Matters Domestic Operations Our gold mining and processing operations within the U.S. are subject to extensive federal, state and local governmental regulations for the protection of the environment, including those relating to the protection of air and water quality, hazardous waste management and mine reclamation. We strive to set industry standards of excellence for our enviromental practices and do not believe that ongoing compliance with current regulations will have a material adverse effect on our competitive position. We do not expect any material impact on our future costs of compliance by reason of existing environmental regulations. Ongoing costs to comply with environmental obligations have not been significant to our total operating costs. Since we are not able to pass on any increases in costs to our customers, new laws and regulations resulting in higher compliance costs could have an adverse effect on our future profitability. We estimate that compliance with federal, state and local regulations relating to the protection of the environment required capital expenditures of approximately $2.1 million in 1999 at our domestic operations. We estimate that we will require approximately $1.6 million of capital expenditures for environmental compliance in the U.S. in 2000 and annually thereafter. Our Nevada and California gold mining and processing operations generate solid waste that is subject to regulation under the federal Resource Conservation and Recovery Act ("RCRA") and similar laws of the States of Nevada and California. The EPA is developing specific regulations with respect to "extraction" and "beneficiation" wastes from mining operations under Subtitle D of RCRA. We are participating in that process. Currently, there is not a sufficient basis to predict the potential impact on us of such regulations. Wastes from the "processing" of ores and minerals (including refining wastes) at our Nevada and California operations are subject to regulation under Subtitle C of RCRA. We recycle substantially all of the potentially hazardous secondary materials generated during refining operations in compliance with Subtitle C. Such compliance has not had, and is not expected to have, a material adverse impact on our operations. Our Nevada and California operations are subject to stringent state permitting regulations for protection of surface and ground water, as well as wildlife. Compliance with existing state regulations has not had, and is not expected to have, a material adverse impact on our operations. Mining operations have the potential to produce fugitive dust emissions which are subject to regulation under the laws of the States of Nevada and California. The EPA's current regulations under the federal Clean Air Act, however, exclude fugitive dust from surface mines in determining whether new or expanded sources need permits for construction under the regulations for prevention of significant deterioration of air quality. Compliance with the future regulations promulgated under the Clean Air Act could increase our compliance costs for air pollution control. Reclamation and Remediation of Inactive Sites within the U.S. We are involved in environmental cleanup obligations arising from past mining activities at three separate locations. We agreed in a 1992 consent decree with the State of Colorado to undertake specific remediation work in the Telluride/Ouray area of Colorado. Remediation work there was completed in 1998 and has met all enviromental standards. If in the future the remediation work, as completed, does not achieve specific performance objectives, as defined in the consent decree, the State of Colorado may require us to do additional work, as specified in the consent decree. We are also defendants in lawsuits brought by the State of Colorado and the U.S. for environmental remediation in the Leadville, Colorado area and, since 1995, we have been 7 engaged in reclamation and remediation activities there pursuant to a partial consent decree. Dawn Mining Company LLC, a 51% owned subsidiary of Newmont, has filed reclamation proposals for an inactive uranium mine formerly leased from the Spokane Indian Tribe in Washington State and a former mill site located near Ford, Washington. At December 31, 1999 on a consolidated basis we had an aggregate $43.6 million accrued for remediation of these and other sites, a decrease of $1.3 million accrued at the end of 1998 as a result of 1999 expenditures and changes in estimated future remediation costs. See "Environmental" in Management's Discussion and Analysis in the 1999 Annual Report to Stockholders on page 24 and Note 19 to the financial statements in the 1999 Annual Report to Stockholders on page 44. Foreign Operations Our operations outside of the U.S. are also subject to governmental regulations for the protection of the environment. These regulations have not had, and are not expected to have, a material adverse impact on our operations or our competitive position. We have successfully obtained all permits for all new mine and processing operations required under regulations promulgated by the respective national governments in Peru, Uzbekistan and Indonesia. Nevertheless, the adoption of new laws or regulations, or amendments to current laws or regulations, by any of these countries regarding the operations and activities of mining companies could have a material adverse impact by increasing our capital expenditures and operating costs. Minera Yanacocha has an advisory role on the Peruvian Ministry of Energy and Mines environmental affairs group to provide technical assistance with the development of achievable environmental strategies for Peru's mining industry. We require that all facilities constructed and operated outside of the U.S. comply with a level of environmental protection that is equivalent to that for our U.S. operations. All of the international projects managed by us have adopted and implemented environmental policies and procedures developed by us. We are committed to educating and training mine operators and exploration and environmental personnel to meet the highest levels of environmental standards. We maintain an international environmental compliance program which utilizes state of the art compliance monitoring protocols. Forward-Looking Statements Certain statements contained in this report (including information incorporated by reference) are "forward-looking statements" within the meaning of Section 21E of the Securities Exchange Act of 1934, as amended, and are intended to be covered by the safe harbor created thereby. Our forward-looking statements include, without limitation, (i) estimates of future gold production for specific operations and on a consolidated basis, (ii) estimates of future production costs, exploration expenditures and other expenses for specific operations and on a consolidated basis, (iii) estimates of future capital expenditures and other cash needs for specific operations and on a consolidated basis and expectations as to the funding thereof, (iv) statements as to the projected development of certain ore deposits, including estimates of development and other capital costs, financing plans with respect thereto and expected production commencement dates, (v) estimates of future costs and other liabilities for certain environmental matters and (vi) estimates of reserves. Where we express an expectation or belief as to future events or results, such expectation or belief is expressed in good faith and believed to have a reasonable basis. However, our forward-looking statements are subject to risks, uncertainties and other factors which could cause actual results to differ materially from future results expressed or implied by those forward- looking statements. Cautionary statements setting forth important factors that could cause actual results to differ materially from our forward-looking statements are described below in Item 1A and elsewhere throughout this report. Given these uncertainties, readers are cautioned not to place undue reliance on our forward-looking statements. See "Safe Harbor Statement" in Management's Discussion and Analysis in the 1999 Annual Report to Stockholders on page 25. All subsequent written and oral forward-looking statements attributable to Newmont or to persons acting on its behalf are expressly qualified in their entirety by the cautionary statements. We disclaim any intent or 8 obligation to update publicly any forward-looking statements set forth in this report, or incorporated herein by reference, whether as a result of new information, future events or otherwise. ITEM 1A. RISK FACTORS Every investor or potential investor in Newmont should consider the following risks: Depressed Gold Price Any drop in the price of gold adversely impacts our revenues, profits and cash flows. In addition, sustained low prices can . reduce revenues further by production cutbacks due to cessation of the mining of deposits or portions of deposits that have become uneconomic at the then prevailing gold price, . halt the development of new projects, . reduce funds available for exploration, with the result that depleted reserves are not replaced, . reduce the existing reserves by removing ore from reserves that cannot be economically mined or treated at prevailing prices or . result in the write-off of assets whose value is impaired by low gold prices. See the discussion under the heading "Gold Price" in Item 1 of this report. Risk of Losses from Hedging We sometimes use commodity market instruments to protect the selling price of a portion of our future production. We also sometimes contract to sell future production at an agreed price. Our net income in 1999 was materially reduced by the recognition of an unrealized non-cash mark-to-market loss on call options we sold in 1999. Similar losses may recur in the future. An increase in the price of gold will likely increase the fair value of such options resulting in non-cash charges against our quarterly income consisting of an "unrealized mark-to-market loss on call options" equal to the difference between the fair value of the options on the date of sale and at the end of a particular quarter. However, over the life of the options, any charges would be restored to income. If the gold price rises above the price for which future production has been sold, we will have an opportunity loss. See "Market Conditions and Risks - Metal Price" in Management's Discussion and Analysis in the 1999 Annual Report to Stockholders on page 19; "Results of Operations - Financial Results" in Management's Discussion and Analysis in the 1999 Annual Report to Stockholders on page 21 (last paragraph on page 22); and Notes 2 and 10 to the financial statements in the 1999 Annual Report to Stockholders on pages 30 and 37, respectively. Risk that Ore Reserves Will Not Be Replaced We produce over four million ounces of gold annually resulting in depletion of over five million ounces from our reserves. The depleted reserves must be replaced by expanding known orebodies or by locating new deposits in order for us to maintain our production levels over the long term. Success in exploration for gold is very uncertain, however, and there is the risk that depletion of reserves will not be offset by discoveries. See page 6 of this report (sixth full paragraph). Risks Relating to Remediation Costs We have conducted remediation work on two sites as a result of liability under the federal Superfund Law. At one of these two sites, remediation requirements have not been finally determined and the ultimate cost cannot be estimated with certainty. At a third site, an inactive uranium mine and mill, significant remediation has not begun due to the failure to date of federal agencies either to agree on a plan which was submitted or to propose a remediation plan of their own. The environmental standards that may ultimately be imposed remain uncertain and there is a risk that the costs of the remediation may exceed the provision we have made for such remediation by amounts which could materially reduce net income in future periods. See also pages 7 and 18 of this report. Risk from Indonesian Unrest We have substantial investments in Indonesia, a nation that since 1997 has undergone financial crises and devaluation of its currency, outbreaks of political and religious violence, changes in national leadership and the 9 secession of East Timor, one of its former provinces. Despite recently held democratic elections, civil unrest, religious and ethnic violence, independence movements and tensions between the civilian government and the military continue to plague the country. These problems heighten the risk of abrupt changes in leadership or in the national policy toward foreign investors, which in turn could result in unilateral modification of concessions or contracts, increased taxation or expropriation of assets. We are currently involved in a dispute over a tax imposed by a governmental subdivision of an Indonesian province, which is described under Item 3. Legal Proceedings, and we have been engaged in exploration activity under a Contract of Work on the island of Lombok, where in January 2000 serious violence broke out, destroying much property and forcing ethnic Chinese inhabitants and foreign tourists to leave the island. Except for these two matters, we are not currently experiencing any significant difficulties as a result of Indonesia's internal problems, but problems could arise in the future that would have a material adverse effect on our cash flow or assets. We have assurances from the Indonesian government that our Contracts of Work will be upheld. Risk of Loss from Mining Accident or Other Adverse Event at a Mining Location At any of our operations, production may fall below historic or estimated levels as a result of mining accidents such as pit wall failure in an open pit mine, cave-ins and flooding. In addition, production may be unexpectedly reduced at a location if, during the course of mining, unfavorable ground conditions are encountered, ore grades are lower than expected or the physical or metallurgical characteristics of the ore are less amenable to mining and treatment than expected or planned. ITEM 2. PROPERTIES Tables presenting mine, mill and leach production data for each of the properties described in this Item 2 are set forth on pages 52 to 53 in the 1999 Annual Report to Stockholders. Nevada Production Our Nevada operations include Carlin, located west of Elko on the geological feature known as the Carlin Trend which we discovered in 1961, and operations in the Winnemucca Region which were acquired in the 1997 merger with Santa Fe Pacific Gold Corporation. The Carlin Trend is the largest gold district discovered in North America in the last 50 years. The Winnemucca region includes (i) the Twin Creeks mine located near Winnemucca, (ii) the Lone Tree Complex located near Battle Mountain and (iii) a 50% interest in The Rosebud Mining Company, L.L.C. located west of Winnemucca. Production began in 1965 at Carlin, in 1990 at Twin Creeks, in 1991 at Lone Tree and in 1997 at Rosebud. Gold production in Nevada totaled 2,498,700 equity ounces in 1999 at a total cash cost of $211 per ounce and 2,769,600 equity ounces in 1998 at a cash cost of $209 per ounce. In 1999, ore was mined from nine open-pit deposits and four underground mines. The Deep Post open pit deposit at Carlin is mined by Barrick Goldstrike Mines Inc. under a joint mining agreement. The parties share the cost of mining the ore body in proportion to their interests in the contained gold. Some production initially scheduled for 1998 at Deep Post was deferred due to a pit wall failure that occurred in mid-1997. During 1999, mining resumed in accordance with a revised mine plan. The 50% owned Rosebud underground mine is operated by Hecla Mining Company. All ore mined from Rosebud is transported to Twin Creeks for processing. 10 Processing Facilities Our operations in Nevada have a number of different ore types and processing techniques. A computerized optimization model is used to determine the best mix of ore types for each processing facility in order to obtain the maximum ounces of gold at the lowest cost from the ores. Gold is extracted from ores that are naturally oxidized by either heap leaching or milling, generally depending on the amount of gold (grade) contained in the ore. Gold contained in ores that are not naturally oxidized, known as refractory or sulfide ores, require more complex processing techniques that are more costly than processing oxide ore. Approximately 71% of Nevada's 1999 year-end proven and probable gold reserves were refractory and the balance were oxide. Nevada's production has increasingly come from higher-cost refractory ores from both deep open pits and underground mines as lower-cost, near-surface oxide ores have been depleted. Refractory ore treatment facilities are expected to generate approximately 58% of Nevada's gold production in 2000, compared with 54% in 1999 and 42% in 1998. Higher-grade oxide ores are processed at three oxide mills at Carlin, two at Twin Creeks and one at Lone Tree. The ore is ground into a fine powder and mixed with water in slurry, which then passes through a cyanide leaching circuit where gold is separated. Lower-grade oxide ores are processed using heap leaching where ore is crushed and stacked on impermeable pads. A weak cyanide solution is applied to the top surface of the heaps and dissolves the gold. The gold-bearing solution is collected and pumped to mill facilities to remove the gold by electrowinning or zinc precipitation. Higher-grade refractory ores are processed through either a roaster at Carlin or through autoclaves at Twin Creeks or Lone Tree. The roaster heats finely ground ore to a high temperature and burns off the carbon and sulfide minerals that encase the gold. Autoclaves use heat, oxygen and pressure to remove sulfide minerals from the ore. Lower-grade sulfide ores are processed through a flotation plant at Lone Tree or by bio-milling at Carlin. In flotation, ore is finely ground, turned into slurry, then placed in a tank known as a flotation cell. Chemicals are added to the slurry causing the gold- containing sulfides to float in air bubbles to the top of the cell where they can be separated from waste particles that sink to the bottom. The sulfides are removed from the cell and form a concentrate that can then be processed in an autoclave or roaster. Bio-milling incorporates patented technology referred to as bio-oxidation. Bio-oxidation involves inoculation of ore with naturally occurring bacteria that oxidize the sulfides encasing the gold. The ore is then processed through an oxide mill. Gold-bearing activated carbon from Carlin's milling and leaching facilities is processed on site at a central carbon processing plant and adjacent smelting facilities. Separate carbon processing facilities are located in the North and South Areas at Twin Creeks with one smelter in the North Area. Lone Tree has two carbon processing facilities. Material from the Lone Tree carbon processing facilities is smelted at Carlin. Other Facilities Analytical laboratories, maintenance facilities and administration offices are located at Carlin, Twin Creeks and the Lone Tree Complex. We also have an advanced metallurgical research laboratory in Denver, Colorado. Electrical power and natural gas for Newmont's Nevada operations are provided by public utilities. Oxygen for the roaster is provided on a contract basis from an oxygen plant constructed by the supplier on land leased from Newmont which is currently the sole customer of the oxygen produced. Oxygen plants used in conjunction with the autoclaves at Twin Creeks and Lone Tree are owned by Newmont and are operated and maintained by a third party. Mineral Rights We own, or control through long-term mining leases and unpatented mining claims, all of the minerals and surface area within the boundaries of the present Carlin and Winnemucca Region mining operations areas other than the Rosebud mine. The long-term leases extend for at least the anticipated mine life of those deposits. With respect to a significant portion of the Gold Quarry Mine at Carlin, we own a 10% undivided interest in the mineral rights and lease the remaining 90% on which we pay a royalty equivalent to 18% of the mineral 11 production. The remainder of the Gold Quarry mineral rights are wholly owned or controlled by Newmont, in some cases subject to additional royalties. With respect to certain smaller deposits in the Winnemucca Region, we are obligated to pay royalties on production to third parties that vary from 3% to 5% of production. In February 1999, we signed an agreement with Barrick Goldstrike Mines, Inc. to exchange approximately two million ounces of reserves and various land rights on the north Carlin Trend that consolidated our respective land positions in the area. The exchange was completed in May 1999. See "Results of Operations--North American Operations" in Management's Discussion and Analysis in the 1999 Annual Report to Stockholders on page 20. California We have one mine in California, Mesquite, that was acquired in the 1997 merger with Santa Fe Pacific Gold Corporation. It is located in Imperial County in southern California and was acquired by Santa Fe in 1993. It has been producing since 1986. Mining at Mesquite is conducted in two open pits and ore is processed by run-of-mine heap-leaching. Gold production totaled 164,600 ounces in 1999 and 154,000 ounces in 1998. Total cash costs per ounce were $167 and $176 for 1999 and 1998, respectively. Gold-bearing activated carbon from leaching facilities is processed at an on-site carbon processing plant and smelter. Maintenance facilities and administration offices are also located at Mesquite. Electric power is supplied by a local utility. Mesquite is in its last year of full production and operations will transition to shutdown and reclamation after 2000. Low grade mineralization near existing pits could potentially extend the mine life with a substantial increase in gold prices. We own, or control through long-term mining leases and unpatented mining claims, all of the minerals and surface area within the boundaries of the present mining areas of the Mesquite deposits. The long-term leases extend for at least the anticipated mine life of those deposits. Peru Introduction We produce gold in Peru through Minera Yanacocha S.R.L., whose properties are located approximately 375 miles north of Lima and 28 miles north of the city of Cajamarca. In 1986, we discovered the Yanacocha gold deposit which has since become the largest gold district in South America. Minera Yanacocha began production in 1993. Prior to 1997, we owned a 38% equity interest in Minera Yanacocha. In 1997, we consolidated Minera Yanacocha in our financial statements following the acquisition of an additional 13.35% interest. The remaining interest is held by Compania de Minas Buenaventura, S.A.A. (43.65%) and the International Finance Corporation (5%). A description of such acquisition is set forth in Note 19 to the financial statements in the 1999 Annual Report to Stockholders on page 44. We operate Minera Yanacocha. Minera Yanacocha has mining rights with respect to a large land position, which includes multiple deposits as well as other prospects. Such mining rights were acquired through assignments of concessions granted by the Peruvian government to a related entity. The assignments have a term of 20 years, beginning in the early 1990s, renewable at the option of Minera Yanacocha for another 20 years. Production Four open-pit mines and three leach pads are in operation at Minera Yanacocha. In late 1999, Minera Yanacocha terminated its contract mining agreement and, as a result, anticipates improved productivity and efficiency by conducting mine operations with its own employees. In 1999, production was 1,655,800 ounces of gold (850,300 equity ounces) at a total cash cost of $103 per ounce as compared to 1998 production of 1,335,800 ounces of gold (685,900 equity ounces) at a total cash cost of $95 per ounce. 12 The ore at Minera Yanacocha is not crushed, but transported directly to impermeable leach pads where it is treated with a weak cyanide solution that dissolves the gold. The gold bearing leach solution is collected and pumped through one of two Merrill-Crowe plants to remove the gold from the solution as a zinc-gold precipitate. After the gold is processed from the precipitate and smelted into dore, it is transported from the processing plant by a contractor and refined in Switzerland. Minera Yanacocha's operations are accessible by road. Power for the project is provided pursuant to a four year renewable contractual agreement with a local power company. Backup power is provided by diesel generators owned by Minera Yanacocha. Uzbekistan Introduction Newmont has a 50% interest in Zarafshan-Newmont, a joint venture with the State Committee for Geology and Mineral Resources ("State Committee") and Navoi Mining and Metallurgical Combine ("Navoi"), each a state entity of Uzbekistan. The joint venture produces gold by crushing and leaching ore from existing stockpiles of low-grade oxide ore from the nearby government-owned Muruntau mine. The gold produced by Zarafshan-Newmont is sold in international markets for U.S. dollars. Newmont provides technical and managerial support to Zarafshan-Newmont. The State Committee and Navoi guaranteed to furnish Zarafshan-Newmont with 242 million tons of ore with an average grade of 0.036 ounces of gold per ton, containing approximately 8.6 million ounces of gold. At December 31, 1999, approximately 185 million tons of stockpiled ore and ore in process remained at an average grade of 0.033 ounces of gold per ton, containing approximately six million ounces of gold. Production In 1999, total production was 543,000 ounces of gold (271,500 equity ounces) at a total cash cost of $161 per ounce. In 1998, total production was 374,600 ounces of gold (187,300 equity ounces) at a total cash cost of $207 per ounce. Ore from the existing stockpiles is crushed in four stages. The crushed material is transported via conveyor to impermeable leach pads where the ore is treated with a weak cyanide solution that penetrates the ore, dissolving the gold. The pregnant leach solution is collected and pumped through a Merrill-Crowe plant to remove the gold from the solution as a zinc-gold precipitate. After the gold is processed from the precipitate and smelted into dore bars it is refined at the nearby Muruntau gold refinery and then exported. The project has access to air, rail and road transport. There are no significant logistical difficulties for transportation of refined gold. Power for the project is provided pursuant to a contractual arrangement with Navoi, which acquires such power from a local plant. Indonesia Introduction We have two operating properties in Indonesia--Minahasa, a gold operation, and Batu Hijau which produces copper/gold concentrates. We own 80% of Minahasa. The remaining 20% interest is a carried interest held by P.T. Tanjung Serapung, an Indonesian company. Because we funded 100% of the construction costs, we are entitled to 100% of the gold production until we recover the bulk of our investment, including interest. We have a 45% interest in Batu Hijau which we own through a partnership with an affiliate of Sumitomo Corporation. Sumitomo holds a 35% interest, and the remaining 20% is a carried interest held by P.T. Pukuafu Indah, an Indonesian company. As a result of this ownership structure, we are accounting for our investment in Batu Hijau as an equity investment. We are entitled to 56.25% of the concentrate production until we recover the bulk of our investment, including interest. In Indonesia, rights are granted to private parties to explore for and to develop the mineral resources within defined areas through Contracts of Work entered into with the Indonesian government. In 1986, we entered into fourth generation Contracts of Work with the government covering Minahasa and Batu Hijau. Under the 13 Contracts of Work, we were granted the exclusive right to explore the contract area, construct any required facilities, extract and process the mineralized materials and sell and export the minerals produced subject to certain Indonesian government approvals and payment of royalties to the Indonesian government. We have the right to continue operating the projects for 30 years, or longer, if approved by the Indonesian government. Under our Contracts of Work, beginning in the sixth year after mining operations commenced (and continuing through the tenth year) a portion of each project not already owned by Indonesian nationals must be offered for sale to the Indonesian government or to Indonesian nationals, thereby potentially reducing our ownership in each project to 49% by the end of the tenth year. The price at which such interest would be offered for sale to the Indonesian parties would be the highest of (i) the then current replacement cost, (ii) the price at which shares of the project company would be accepted for listing on the Jakarta Stock Exchange or (iii) the fair market value of such interest as a going concern. In April 1997, we entered into a Contract of Work granting us rights to explore an area located near the Minahasa contract area through a new company, P. T. Newmont Mongondow Mining. We have an 80% interest and the remaining 20% interest is a carried interest held by P. T. Lebong Tandai, an Indonesian company. This Contract of Work is a sixth generation Contract of Work. The major differences between the fourth and sixth generation Contracts of Work are a reduced income tax rate (from 35% to 30%), elimination of the requirement that non-Indonesian parties divest part of their 80% interest and changes in the method of royalty calculation. Minahasa Our first project in Indonesia, Minahasa, on the island of Sulawesi, is a Newmont discovery and consists of a multi-deposit operation. Production began in August 1996. It is approximately 1,500 miles northeast of Jakarta. Minahasa mines and processes ore from the open pit Mesel deposit and a number of smaller peripheral deposits. These deposits contain both oxidized and refractory gold mineralization. Minahasa produced 336,800 ounces of gold in 1999 at a total cash cost of $103 per ounce as compared to 261,000 ounces of gold in 1998 at a total cash cost of $127 per ounce. The project's facilities include a dry grinding mill, a fluidized bed roaster facility and a conventional carbon-in-pulp gold recovery plant. Infrastructure facilities include a deep-water port, electrical power plant, water supply system and housing for workers. The Minahasa project is in close proximity to the coast and does not have any significant logistical difficulties for transportation of materials, equipment or its product. Batu Hijau Our second project in Indonesia, Batu Hijau, is located on the island of Sumbawa, approximately 950 miles east of Jakarta. Batu Hijau is a large porphyry copper/gold deposit which we discovered in 1990. It is located seven miles from the south coast and nine miles from the west coast of the island and has access to a natural harbor which has been developed for transportation of materials, equipment and copper concentrate. Other facilities at the operation include a coal-fired electrical generating plant, a townsite for the workforce and other ancillary facilities. The total cost of the project was approximately $1.83 billion including capitalized interest during construction and working capital. In July 1997, agreements for $1 billion in financing for the Batu Hijau project were signed. The financing is guaranteed by Newmont and Sumitomo Corporation, 56.25% and 43.75%, respectively, until project completion tests are met, and will be non-recourse to Newmont and Sumitomo thereafter. See also Note 3 to the financial statements in the 1999 Annual Report to Stockholders on page 32. Development and construction activities began in 1997 and start-up took place in late 1999. See " Results of Operations - Overseas Operations" discussion in Managements's Discussion and Analysis in the 1999 Annual Report to Stockholders on page 21. The mined ore is transported by truck to a primary crusher. A 4.3 mile conveyer belt carries ore from the primary crusher to a mill complex where it is crushed, ground and mixed in tanks with saltwater and continuously agitated with air. During this process the copper and gold bearing particles rise to the top of the tanks and leave the mill complex as a thickened concentrate slurry which is pumped through a pipeline to a port facility where it is filtered, dried to the consistency of wet sand and stored for shipping. 14 Mexico In Mexico, we have a 44% interest in La Herradura which is located in northwest Sonora, Mexico. It commenced production in June 1998. The Penoles group, Mexico's largest silver producer, holds a 56% interest and is the operator. Mining is conducted in two open pits and the ore is processed by run-of-mine heap-leaching. In 1999, La Herradura produced 91,000 ounces of gold, 40,200 ounces attributable to our interest at a total cash cost of $159 per ounce. In 1998, La Herradura produced 29,200 ounces of gold, 12,900 ounces attributable to our interest at a total cash cost of $115 per ounce. Proven and Probable Reserves Our equity in proven and probable gold reserves was 56.6 million ounces (of which approximately 753,000 ounces have been committed under a prepaid forward sales contract) at December 31, 1999 and 52.6 million ounces at December 31, 1998. In addition, our equity in proven and probable copper reserves was 5.7 billion pounds at December 31, 1999 and 4.8 billion pounds at December 31, 1998. Our equity in proven and probable silver reserves was 182.8 million ounces at December 31, 1999. Proven and probable reserves were determined by the use of mapping, drilling, sampling, assaying and evaluation methods generally applied in the mining industry. Calculations with respect to the estimates of proven and probable gold reserves at December 31, 1999 and 1998 were based on a gold price of $325 per ounce and $350 per ounce, respectively. We believe that if reserve estimates were based on a gold price of $300 per ounce, 1999 year-end proven and probable gold reserves could decrease by approximately 5%. The proven and probable reserves figures presented herein are estimates, and no assurance can be given that the indicated levels of recovery of gold, copper and silver will be realized. Ounces of gold and silver or pounds of copper in our proven and probable reserves are prior to any losses during mining or metallurgical treatment. Reserve estimates may require revision based on actual production experience. Market price fluctuations of gold, copper and silver, as well as increased production costs or reduced recovery rates, could render our proven and probable reserves containing relatively lower grades of mineralization uneconomic to exploit and might result in a reduction of reserves. 15 NEWMONT MINING CORPORATION PROVEN AND PROBABLE RESERVES
December 31, 1999 December 31, 1998 ------------------------------------- ------------------------------------- (100%) Newmont (100%) Newmont Deposits/Districts with Newmont ---------------------------- Equity ---------------------------- Equity Proven and Probable Equity Tonnage Grade Ounces Ounces Tonnage Grade Ounces Ounces Reserves(/1/) (%) (000 tons) (oz/ton) (000) (000) (000 tons) (oz/ton) (000) (000) - ----------------------- ------- ---------- -------- -------- -------- ---------- -------- -------- -------- Gold North American(/2/) Nevada Nevada Open Pit Carlin North--Post.... 100 1,317 0.501 660 660 9,680 0.180 1,747 1,747 Carlin North--Genesis Complex.............. 100 19,844 0.029 571 571 20,306 0.033 665 665 Carlin North--Other... 100 26,077 0.046 1,188 1,188 26,382 0.050 1,324 1,324 Carlin South (includes Gold Quarry).............. 100 78,428 0.059 4,621 4,621 102,638 0.051 5,261 5,261 Carlin Rain District............. 100 13,467 0.026 345 345 14,320 0.025 352 352 Twin Creeks........... 100 87,112 0.079 6,857 6,857 96,175 0.078 7,484 7,484 Lone Tree Complex..... 100 36,564 0.063 2,321 2,321 54,883 0.059 3,221 3,221 --------- ----- ------- ------- --------- ----- ------ ------ Total Nevada Open Pit................. 262,809 0.063 16,563 16,563 324,384 0.062 20,054 20,054 Nevada Underground Carlin North Area..... 100 8,525 0.495 4,223 4,223 2,551 1.000 1,634 1,634 Post District......... 100 3,043 0.769 2,341 2,341 2,391 1.000 1,943 1,943 Goldbug-Barrel........ 100 2,917 0.391 1,140 1,140 Carlin North JV (High Desert).............. 60 7,050 0.424 2,993 1,796 Carlin Rain District............. 100 411 0.316 130 130 374 0.270 101 101 Rosebud............... 50 216 0.323 70 35 484 0.392 190 95 --------- ----- ------- ------- --------- ----- ------ ------ Total Nevada Underground......... 12,195 0.555 6,764 6,729 15,767 0.507 8,001 6,709 Stockpiles and In- Process.............. 100 99,080 0.048 4,745 4,745 77,147 0.053 4,115 4,115 --------- ----- ------- ------- --------- ----- ------ ------ Nevada Totals(/3/)...... 374,084 0.075 28,072 28,037 417,298 0.077 32,170 30,878 Mesquite, California.... 100 26,231 0.019 488 488 29,007 0.021 595 595 Penoles JV, La Herradura, Mexico(/4/)............ 44 47,745 0.032 1,504 662 52,890 0.031 1,638 721 --------- ----- ------- ------- --------- ----- ------ ------ Total North American............ 448,060 0.067 30,064 29,187 499,195 0.069 34,403 32,194 Overseas Minera Yanacocha, Peru Carachugo.............. 51 139,310 0.028 3,907 2,006 55,691 0.027 1,491 766 Maqui Maqui............ 51 5,379 0.033 180 92 9,789 0.041 400 205 San Jose............... 51 45,878 0.023 1,041 535 37,367 0.031 1,154 593 Yanacocha.............. 51 575,063 0.024 13,794 7,083 290,028 0.032 9,227 4,738 La Quinua (and Tapado)............... 51 400,828 0.023 9,285 4,768 273,061 0.026 7,128 3,660 Cerro Negro............ 51 22,511 0.030 667 342 23,943 0.027 657 337 Cerro Qulish........... 51 110,951 0.028 3,132 1,608 In-Process............. 51 20,105 0.043 856 440 12,370 0.045 558 287 --------- ----- ------- ------- --------- ----- ------ ------ Total Minera Yanacocha(/5/)...... 1,320,025 0.025 32,862 16,874 702,249 0.029 20,615 10,586 Zarafshan-Newmont, Uzbekistan(/6/)........ 50 185,198 0.033 6,059 3,029 202,381 0.034 6,845 3,422 Minahasa, Indonesia(/7/)......... 80 6,582 0.168 1,104 1,052(/9/) 7,207 0.189 1,364 1,091 Batu Hijau, Indonesia(/8/)......... 45 1,001,044 0.012 11,823 6,426(/9/) 1,008,036 0.012 11,849 5,332 --------- ----- ------- ------- --------- ----- ------ ------ Total Overseas....... 2,512,849 0.021 51,848 27,381 1,919,873 0.021 40,673 20,431 Total Worldwide...... 2,960,909 0.028 81,912 56,568 2,419,068 0.031 75,076 52,625 ========= ======= ======= ========= ====== ====== Ounces committed under prepaid forward sales contract............... (753) ------- Total after Deduction of Prepaid Ounces......... 55,815 ======= Newmont Newmont Silver Equity Silver Equity Tonnage Grade Ounces Ounces Tonnage Grade Ounces Ounces (000 tons) (oz/ton) (000) (000) (000 tons) (oz/ton) (000) (000) ---------- -------- -------- -------- ---------- -------- -------- -------- Silver Minera Yanacocha, Peru(/5/) Yanacocha.............. 51 575,063 0.543 312,796 160,621 La Quinua.............. 51 400,828 0.108 43,236 22,202 --------- ----- ------- ------- Total................ 975,891 0.365 356,032 182,823 ========= ===== ======= ======= Newmont Newmont Copper Equity Copper Equity Tonnage Grade (million (million Tonnage Grade (million (million (000 tons) (Cu%) pounds) pounds) (000 tons) (Cu%) pounds) pounds) ---------- -------- -------- -------- ---------- -------- -------- -------- Copper Batu Hijau, Indonesia(/8/)......... 45 1,001,044 0.524% 10,481 5,697(/9/) 1,008,036 0.525% 10,580 4,761 ========= ===== ======= ======= ========= ===== ====== ======
Numbers may differ slightly from those reported previously as a result of different deposit groupings yielding different rounding of totals. 16 - -------- (/1/The)term "reserve" means that part of a mineral deposit which can be economically and legally extracted or produced at the time of the reserve determination. The term "economically," as used in the definition of reserve, implies that profitable extraction or production has been established or analytically demonstrated to be viable and justifiable under reasonable investment and market assumptions. The term "legally," as used in the definition of reserve, does not imply that all permits needed for mining and processing have been obtained or that other legal issues have been completely resolved. However, for a reserve to exist, there should be a reasonable certainty based on applicable laws and regulations that issuance of permits or resolution of legal issues can be accomplished in a timely manner. The term "proven reserves" means reserves for which (a) quantity is computed from dimensions revealed in outcrops, trenches, workings or drill holes; (b) grade and/or quality are computed from the result of detailed sampling and (c) the sites for inspection, sampling and measurements are spaced so closely and the geologic character is sufficiently defined that size, shape, depth and mineral content of reserves are well established. The term "probable reserves" means reserves for which quantity and grade are computed from information similar to that used for proven reserves but the sites for sampling are farther apart or are otherwise less adequately spaced. The degree of assurance, although lower than that for proven reserves, is high enough to assume continuity between points of observation. (/2/Proven)and probable reserves in North America were calculated using different cutoff grades depending on each deposit's properties. The term "cut-off grade" means the lowest grade of mineralized rock that can be included in the reserve in a given deposit. Cut-off grades vary between deposits depending upon prevailing economic conditions, mineability of the deposit, amenability of the ore to gold extraction, and milling or leaching facilities available. The cutoffs utilized in 1999 were as follows: oxide leach material not less than 0.004 ounce per ton; oxide mill cutoffs varied; refractory leach materials between 0.013 and 0.060 ounce per ton; refractory mill material not less than 0.039 ounce per ton. Proven and probable reserves were calculated using different recoveries depending on each deposit's metallurgical properties and process. The recoveries utilized in 1999 were as follows: oxide leach recoveries ranged from 44% to 80% averaging 66%; oxide mill recoveries ranged from 72% to 96% averaging 86%; refractory leach recoveries ranged from 23% to 70%, averaging 62%; refractory mill recoveries ranged from 85% to 94%, averaging 89%. (/3/These)reserves are approximately 71% refractory in nature and are not amenable to the direct cyanidation recovery processes currently used for oxide material. Such ore must be oxidized before it is subjected to the normal recovery processes. (/4/Calculated)using a cut-off grade of 0.01 ounce per ton and a leach recovery of 72%. All ore is oxidized. (/5/Calculated)using a cut-off grade not less than 0.006 ounce of gold per ton. The cutoff grade is a function of both gold and silver content. The gold leach recoveries ranged from 67% to 82%, depending on each deposit's metallurgical properties. Silver recoveries were estimated at 30%. All ore is oxidized. (/6/Material)available to Zarafshan-Newmont for processing from designated stockpiles or from other specified sources. Tonnage and gold content of material available to Zarafshan-Newmont for processing from such designated stockpiles or from other specified sources are guaranteed by state entities of Uzbekistan. Material is crushed to liberate the gold and leached. Ore reserves calculated using 61% leach recoveries. (/7/Calculated)using a cut-off grade of 0.113 ounce per ton and a mill recovery of 90% for refractory material. For oxide material a cut-off grade not less than 0.024 ounce per ton was used and a leach recovery of 62%. (/8/Based)on a feasibility study completed in 1996 and updated in 1998 and 1999. Operations commenced in late 1999. Production is in the form of a copper-gold concentrate. Average recoveries estimated at 93% for copper and 82% for gold. Cut-off grade and recoveries vary depending on the gold and copper content. (/9/Reflects)Newmont's economic interest in the underlying reserves of 95.35% with respect to Minahasa and 54.35% with respect to Batu Hijau. 17 ITEM 3. LEGAL PROCEEDINGS In 1998, the government of the Minahasa regency, which is within the Indonesian province of North Sulawesi, purported to enact a tax on overburden removed at our Minahasa mining operation. This local government then asserted a claim against us in a local court for approximately $3 million in taxes and $5 million in consequential damages and counsel fees. We have not paid these fees because we believe the taxes are not valid. In January of 2000, the local court ruled that the mine should be closed pending the final outcome of the case and on March 6, 2000 a higher court affirmed this provisional ruling. The closure ruling is not effective unless formal service is made. We are continuing to operate and have been advised by our Indonesian counsel and the Indonesian Department of Mines that the closure ruling and related claims are without basis under applicable law and in contradiction of our Contract of Work. We will continue to pursue all legal alternatives to oppose this tax and related fees. In December 1983, the State of Colorado filed a lawsuit in the U.S. District Court for the District of Colorado under the Comprehensive Environmental Response Compensation and Liability Act of 1980 ("CERCLA"), 42 U.S.C. 9601 et seq., seeking clean-up and damages for alleged injury to natural resources due to releases of hazardous substances into the environment. This case, State of Colorado v. ASARCO, Inc., et al. (Civil Action No. 83-C-2388), was consolidated with another action, United States of America v. Apache Energy & Minerals, et al. (Civil Action No. 86-C-1676), which was filed in August 1986. Both cases involve allegations of environmental impairment in the vicinity of Leadville, Colorado, including the area of the operations and property of the Res-ASARCO Joint Venture, the Yak Tunnel, and adjacent property, and seek remedial actions and damages from a number of defendants, including Newmont and Resurrection Mining Company, which is a partner with ASARCO Incorporated in the Res-ASARCO Joint Venture. In August 1994, the Court entered a Partial Consent Decree between and among the U.S., Newmont, Resurrection and certain other defendants. The Partial Consent Decree obligates Resurrection to pay for and perform the cleanup of sources of contamination in various areas, pursuant to the CERCLA administrative process. During 1995 and 1996, Resurrection implemented and completed remedial action at selected locations, and developed feasibility studies which were sent to the EPA for approval in 1997. Remedial activities were conducted in 1999 and will continue in 2000. The precise nature of the final remedial activities is subject to EPA and State of Colorado review and selection and public comment. At this time, the precise remedy and cost have not been fixed. The proposed settlement also requires Resurrection to reimburse the EPA and the State of Colorado for their response costs. The Partial Consent Decree does not resolve certain other potential liabilities, including liability for any natural resource damage and any groundwater or surface water contamination. See Note 19 to the financial statements in the 1999 Annual Report to Stockholders on page 44. For a description of the litigation relating to Newmont's ownership interest in Minera Yanacocha see Note 19 to the financial statements in the 1999 Annual Report to Stockholders on page 44. Certain appeals have been filed with the Department of Interior Board of Land Appeals in connection with an approved Environmental Impact Statement for the Twin Creeks Mine in Nevada. These appeals seek to impose mitigation and other conditions on the mine operations. We have intervened and do not feel that such appeals have merit. An unfavorable outcome of these appeals, however, could result in additional conditions on operations that may have a material adverse effect on our financial position or results of operations. ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS No matters were submitted to a vote of security holders, through the solicitation of proxies or otherwise, during the quarter ended December 31, 1999. 18 ITEM 4A. EXECUTIVE OFFICERS OF THE REGISTRANT Newmont's executive officers as of March 2, 2000 were:
Name Age Office ---- --- ------ Ronald C. Cambre........... 61 Chairman and Chief Executive Officer Wayne W. Murdy............. 55 Director and President John A. S. Dow............. 54 Executive Vice President, Exploration David H. Francisco......... 50 Executive Vice President, Operations Bruce D. Hansen............ Senior Vice President and Chief Financial 42 Officer Lawrence T. Kurlander...... Senior Vice President and Chief Administrative 60 Officer W. James Mullin............ 54 Senior Vice President, North American Operations David A. Baker............. Vice President, Environmental and Government 45 Affairs Patricia A. Flanagan....... Vice President, Treasurer and Assistant 41 Secretary Joy E. Hansen.............. 54 Vice President and General Counsel Donald G. Karras........... 46 Vice President, Taxes Linda K. Wheeler........... 46 Vice President and Controller
There are no family relationships by blood, marriage or adoption among any of the above executive officers of Newmont. All executive officers are elected annually by the Board of Directors of Newmont to serve for one year or until their respective successors are elected and qualify. There is no arrangement or understanding between any of the above executive officers and any other person pursuant to which he or she was selected as an executive officer. Mr. Cambre was elected Chairman of Newmont in November 1994 (effective January 1995) and Chief Executive Officer in September 1993 (effective November 1993). He served as President of Newmont from June 1994 through July 1999. Mr. Murdy was elected a director of Newmont in September 1999 and President of Newmont in July 1999. He served as Executive Vice President of Newmont from July 1996 to July 1999 and Chief Financial Officer from December 1992 through July 1999. He served as a Senior Vice President of Newmont from December 1992 to July 1996. Mr. Dow was elected Executive Vice President, Exploration of Newmont in July 1999. He served as Senior Vice President, Exploration of Newmont from July 1996 through July 1999 and Vice President, Exploration from April 1992 to July 1996. Mr. Francisco was elected Executive Vice President, Operations of Newmont in July 1999. He served as Senior Vice President, International Operations of Newmont from May 1997 to July 1999. Previously, he served as Vice President, International Operations of Newmont from July 1995 to May 1997. Mr. Hansen was elected Senior Vice President and Chief Financial Officer of Newmont in July 1999. He served as Vice President, Project Development of Newmont from May 1997 to July 1999. Previously, he served as Senior Vice President, Corporate Development of Santa Fe Pacific Gold Corporation, a natural resources company, from April 1994 to May 1997. Mr. Kurlander was elected Senior Vice President and Chief Administrative Officer of Newmont in May 1997. Previously, he served as Senior Vice President, Administration of Newmont from March 1994 to May 1997. Mr. Mullin was elected Senior Vice President, North American Operations of Newmont in May 1997. Previously, he served as Vice President and Regional Director, Nevada Operations of Newmont from May 1994 to May 1997. Mr. Baker was elected Vice President, Environmental and Government Affairs of Newmont in November 1998. He also has served as Vice President, Environmental Affairs of Newmont since 1991. 19 Ms. Flanagan was elected a Vice President of Newmont in March 1995 and was elected Treasurer in December 1992. She was appointed Assistant Secretary in June 1992. Ms. Hansen was elected Vice President and General Counsel of Newmont in September 1996. Previously, she served as Vice President and Associate General Counsel of Newmont from March 1995 to September 1996. Mr. Karras has served as Vice President, Taxes of Newmont since November 1992. Ms. Wheeler was elected Vice President of Newmont in November 1998 and Controller of Newmont in May 1997. Previously, she served as Controller of Santa Fe Pacific Gold Corporation, a natural resources company, from May 1994 to May 1997. PART II ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS Newmont's common stock is listed and principally traded on the New York Stock Exchange (under the symbol "NEM") and is also listed on the Paris Bourse, the Brussels Stock Exchange and the Swiss Stock Exchange. The following table sets forth, for the periods indicated, the high and low sales prices per share of Newmont's common stock as reported on the New York Stock Exchange Composite Tape.
1999 1998 ------------- ------------- High Low High Low ------ ------ ------ ------ First quarter.................................... $21.25 $16.63 $31.63 $23.75 Second quarter................................... $26.44 $16.63 $34.88 $21.75 Third quarter.................................... $30.00 $16.38 $25.25 $13.25 Fourth quarter................................... $30.06 $20.38 $30.31 $16.25
On March 2, 2000, there were 23,727 stockholders of record of Newmont's common stock. A dividend of $0.03 per share of common stock outstanding was declared in each quarter of 1999 and 1998, or a total of $0.12 per share for each such year. The determination of the amount of future dividends, however, will be made by Newmont's Board of Directors from time to time and will depend on Newmont's future earnings, capital requirements, financial condition and other relevant factors. ITEM 6. SELECTED FINANCIAL DATA
1999 1998 1997 1996 1995 -------- -------- -------- -------- -------- (In millions, except per share) For the Years Ended December 31, Sales......................... $1,398.9 $1,453.9 $1,572.8 $1,105.7 $ 981.6 Income (loss) before cumulative effect of change in accounting principle...... $ 24.8 $ (360.5) $ 68.4 $ 98.6 $ 147.7 Net income (loss)(/1/)........ $ 24.8 $ (393.4) $ 68.4 $ 98.6 $ 147.7 Income (loss) per common share: Before cumulative effect of change in accounting principle.................... $ 0.15 $ (2.27) $ 0.44 $ 0.63 $ 0.95 Net income(/1/)............... $ 0.15 $ (2.47) $ 0.44 $ 0.63 $ 0.95 Dividends declared per common share........................ $ 0.12 $ 0.12 $ 0.39 $ 0.48 $ 0.48 At December 31, Total assets.................. $3,383.4 $3,235.4 $3,614.0 $3,282.1 $2,710.0 Long-term debt, including current portion.............. $1,037.5 $1,248.7 $1,222.7 $1,059.1 $ 808.5 Stockholders' equity.......... $1,451.6 $1,439.5 $1,591.1 $1,562.8 $1,267.3
- -------- (/1/Net)loss in 1998 includes the cumulative effect of changing the accounting method for start-up costs of $32.9 million ($0.21 per share), net of tax. 20 ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS The information set forth under the caption "Management's Discussion and Analysis" in the 1999 Annual Report to Stockholders on pages 19 through 25 therein is incorporated herein by reference. ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK The information set forth under the captions "Market Conditions and Risks", "Results of Operations - Financial Results", Note 2 and Note 10 in the 1999 Annual Report to Stockholders on pages 19 and 20, page 21 (last paragraph on page 22), page 30 and 37, respectively, therein is incorporated herein by reference. ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA The information set forth in the 1999 Annual Report to Stockholders on pages 25 through 48, 52 and 53 therein is incorporated herein by reference. ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE There have been no disagreements with Arthur Andersen LLP, Newmont's independent public accountants, regarding any matter of accounting principles or practices or financial statement disclosure. PART III ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT Information concerning Newmont's directors will be contained in Newmont's definitive Proxy Statement to be filed pursuant to Regulation 14A promulgated under the Securities Exchange Act of 1934 for the 2000 annual meeting of stockholders and is incorporated herein by reference. Information concerning Newmont's executive officers is set forth under Item 4A in Part I of this report. ITEM 11. EXECUTIVE COMPENSATION Information concerning this item will be contained in Newmont's definitive Proxy Statement to be filed pursuant to Regulation 14A promulgated under the Securities Exchange Act of 1934 for the 2000 annual meeting of stockholders and is incorporated herein by reference. ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT Information concerning this item will be contained in Newmont's definitive Proxy Statement to be filed pursuant to Regulation 14A promulgated under the Securities Exchange Act of 1934 for the 2000 annual meeting of stockholders and is incorporated herein by reference. ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS Information concerning this item will be contained in Newmont's definitive Proxy Statement to be filed pursuant to Regulation 14A promulgated under the Securities Exchange Act of 1934 for the 2000 annual meeting of stockholders and is incorporated herein by reference. 21 PART IV ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K (a) The following documents are filed as a part of this report: 1. Financial Statements The financial statements, together with the report thereon of Arthur Andersen LLP dated January 21, 2000, included as part of Exhibit 13, are incorporated by reference in this Form 10-K Annual Report.
Page ---- Report of Independent Public Accountants............................. * Statements of Consolidated Income.................................... * Consolidated Balance Sheets.......................................... * Statements of Consolidated Changes in Stockholders' Equity........... * Statements of Consolidated Cash Flows................................ * Notes to Consolidated Financial Statements........................... *
- -------- * See Exhibit 13. 2. Financial Statement Schedules
Page ---- Consolidating Financial Statements of Newmont Mining Corporation.... CS-1 Financial Statements of Nusa Tenggara Partnership, V. O. F. ........ NT-1
3. Exhibits Reference is made to the Exhibit Index beginning on page E-1 hereof. (a) No current reports on Form 8-K were filed by us during the quarter ended December 31, 1999. 22 CONSOLIDATING STATEMENTS OF NEWMONT MINING CORPORATION On July 12, 1999, Newmont Mining Corporation and its wholly owned subsidiary, Newmont Gold Company, filed with the SEC, a registration statement on Form S-3 (the "Registration Statement") providing for the issuance by Newmont Mining from time to time of up to $500 million aggregate offering price of securities, consisting of common stock, preferred stock, common stock warrants, debt securities and warrants for debt securities. The debt securities will be fully and unconditionally guaranteed by Newmont Gold. As a result of this guarantee by Newmont Gold of the debt securities of Newmont Mining that may be issued from time to time, the SEC requires the inclusion in this Annual Report certain condensed consolidating financial statements depicting Newmont Mining (carrying its investment in subsidiaries under the equity method), Newmont Gold (carrying its investment in subsidiaries under the equity method) and any other subsidiaries of Newmont Mining (on a combined basis). Such financial statements for the three-year period ended December 31, 1999 are shown below. The following condensed consolidating financial statements of Newmont Mining Corporation should be read in conjunction with the consolidated financial statements and the notes for the year ended December 31, 1999. Certain assets previously held by other subsidiaries are held by Newmont Gold Company in 1999.
Newmont Newmont Newmont Mining Gold Other Mining Corp. Corp. Company Subsidiaries Eliminations Consolidated ------- ------- ------------ ------------ ------------ (In millions) Consolidating Statement of Operations: Year Ended December 31, 1999 Sales and other income Sales.................. $ -- $ 730.0 $668.9 $ -- $1,398.9 Dividends, interest and other--intercompany... -- 18.2 -- (18.2) -- Dividends, interest and other................. -- 3.5 29.2 -- 32.7 ----- ------- ------ ------- -------- -- 751.7 698.1 (18.2) 1,431.6 ----- ------- ------ ------- -------- Costs and expenses Costs applicable to sales................. -- 561.2 270.8 -- 832.0 Depreciation, depletion and amortization...... -- 134.1 105.5 -- 239.6 Exploration and research.............. -- 25.9 31.6 -- 57.5 General and administrative........ -- 52.3 0.4 -- 52.7 Interest expense-- intercompany.......... -- -- 18.2 (18.2) 0.0 Interest, net of capitalized interest.. -- 36.3 26.2 -- 62.5 Write-down of assets... -- 3.5 -- -- 3.5 Other.................. -- 4.3 12.3 -- 16.6 ----- ------- ------ ------- -------- -- 817.6 465.0 (18.2) 1,264.4 ----- ------- ------ ------- -------- Operating income (loss)................. -- (65.9) 233.1 -- 167.2 Unrealized mark-to- market loss on call options................ -- (44.8) -- -- (44.8) ----- ------- ------ ------- -------- Pre-tax income (loss) before minority interest and equity loss................... -- (110.7) 233.1 -- 122.4 Income tax (expense) benefit................ -- 38.7 (53.1) -- (14.4) Minority interest in income of Minera Yanacocha.............. -- -- (72.5) -- (72.5) Equity in income of subsidiaries........... 24.8 96.8 -- (121.6) 0.0 Equity in loss of affiliated company..... -- -- (10.7) -- (10.7) ----- ------- ------ ------- -------- Net loss................ $24.8 $ 24.8 $ 96.8 $(121.6) $ 24.8 ===== ======= ====== ======= ========
CS-1
Newmont Newmont Newmont Mining Gold Other Mining Corp. Corp. Company Subsidiaries Eliminations Consolidated ------- ------- ------------ ------------ ------------ (In millions) Consolidating Statement of Operations: Year Ended December 31, 1998 Sales and other income Sales.................. $ -- $ 483.0 $ 970.9 $ -- $1,453.9 Dividends, interest and other--intercompany... -- 24.8 -- (24.8) -- Dividends, interest and other................. -- 10.2 11.8 (1.0) 21.0 ------- ------- -------- ------- -------- -- 518.0 982.7 (25.8) 1,474.9 ------- ------- -------- ------- -------- Costs and expenses Costs applicable to sales................. -- 366.9 459.0 (1.0) 824.9 Depreciation, depletion and amortization...... -- 90.2 198.9 -- 289.1 Exploration and research.............. -- 15.3 53.1 -- 68.4 General and administrative........ -- 47.7 2.0 -- 49.7 Interest expense-- intercompany.......... -- -- 24.8 (24.8) 0.0 Interest, net of capitalized interest.. -- 47.6 31.2 -- 78.8 Write-down of assets... -- 111.3 503.6 -- 614.9 Other.................. -- 5.0 6.0 -- 11.0 ------- ------- -------- ------- -------- -- 684.0 1,278.6 (25.8) 1,936.8 ------- ------- -------- ------- -------- Pre-tax loss before minority interest, equity loss and cumulative effect of a change in accounting principle.............. -- (166.0) (295.9) -- (461.9) Income tax benefit...... -- 80.2 100.7 -- 180.9 Minority interest in income of Minera Yanacocha.............. -- -- (66.2) -- (66.2) Minority interest in income of Newmont Gold Company................ (4.1) -- -- -- (4.1) Equity in loss of subsidiaries........... (391.5) (306.5) -- 698.0 0.0 Equity in loss of affiliated company..... -- -- (9.2) -- (9.2) ------- ------- -------- ------- -------- Net loss before cumulative effect of a change in accounting principle.............. (395.6) (392.3) (270.6) 698.0 (360.5) Cumulative effect of a change in accounting principle.............. 2.2 0.8 (35.9) -- (32.9) ------- ------- -------- ------- -------- Net loss................ $(393.4) $(391.5) $ (306.5) $ 698.0 $ (393.4) ======= ======= ======== ======= ======== Year Ended December 31, 1997 Sales and other income Sales.................. $ -- $ 609.6 $ 963.1 $ -- $1,572.7 Dividends, interest and other--intercompany... -- 8.8 -- (8.8) -- Dividends, interest and other................. -- 12.7 46.4 (3.8) 55.3 ------- ------- -------- ------- -------- -- 631.1 1,009.5 (12.6) 1,628.0 ------- ------- -------- ------- -------- Costs and expenses Costs applicable to sales................. -- 375.1 419.2 (3.8) 790.5 Depreciation, depletion and amortization...... -- 94.9 170.9 -- 265.8 Exploration and research.............. -- 19.2 79.2 -- 98.4 General and administrative........ -- 56.9 9.5 -- 66.4 Interest expense-- intercompany.......... -- -- 8.8 (8.8) 0.0 Interest, net of capitalized interest.. -- 43.2 33.9 -- 77.1 Merger and related expenses.............. -- 29.3 133.4 -- 162.7 Write-down of assets... -- 9.5 -- -- 9.5 Other.................. -- (0.1) 25.8 -- 25.7 ------- ------- -------- ------- -------- -- 628.0 880.7 (12.6) 1,496.1 ------- ------- -------- ------- -------- Pre-tax income before minority interest and equity income.......... -- 3.1 128.8 -- 131.9 Income tax benefit...... -- 7.9 -- -- 7.9 Minority interest in income of Minera Yanacocha.............. -- -- (66.9) -- (66.9) Minority interest in income of Newmont Gold Company................ (4.5) -- -- -- (4.5) Equity in income of subsidiaries........... 72.9 61.9 -- (134.8) 0.0 ------- ------- -------- ------- -------- Net income.............. $ 68.4 $ 72.9 $ 61.9 $(134.8) $ 68.4 ======= ======= ======== ======= ========
CS-2
Newmont Newmont Newmont Mining Gold Other Mining Corp. Corp. Company Subsidiaries Eliminations Consolidated -------- -------- ------------ ------------ ------------ (In millions) Consolidating Balance Sheets At December 31, 1999 Cash and cash equivalents.......... $ -- $ 2.5 $ 52.8 $ -- $ 55.3 Short-term investments.......... -- -- 9.4 -- 9.4 Accounts receivable... 9.0 3.3 223.0 (194.7) 40.6 Inventories........... -- 185.2 137.4 -- 322.6 Other current assets.. -- 35.7 70.5 -- 106.2 -------- -------- -------- --------- -------- Current assets...... 9.0 226.7 493.1 (194.7) 534.1 -------- -------- -------- --------- -------- Property, plant and mine development, net.................. -- 1,326.2 646.1 -- 1,972.3 Investment in subsidiaries......... 1,442.7 1,898.1 -- (3,340.8) -- Investment in Batu Hijau................ -- -- 438.3 -- 438.3 Long-term inventory... -- 171.2 -- -- 171.2 Other long-term assets............... -- 216.5 1,010.5 (959.5) 267.5 -------- -------- -------- --------- -------- Total assets........ $1,451.7 $3,838.7 $2,588.0 $(4,495.0) $3,383.4 ======== ======== ======== ========= ======== Liabilities Current portion of long-term debt....... $ -- $ 8.4 $ 14.9 $ -- $ 23.3 Accounts payable...... -- 221.6 11.1 (194.7) 38.0 Other accrued liabilities.......... -- 98.0 114.5 -- 212.5 -------- -------- -------- --------- -------- Current liabilities........ -- 328.0 140.5 (197.7) 273.8 -------- -------- -------- --------- -------- Long-term debt........ -- 719.1 295.1 -- 1,014.2 Reclamation and remediation liabilities.......... -- 48.7 56.0 -- 104.7 Other long-term liabilities.......... -- 1,300.2 71.9 (959.5) 412.6 -------- -------- -------- --------- -------- Total liabilities... -- 2,396.0 563.5 (1,154.2) 1,805.3 -------- -------- -------- --------- -------- Minority interest....... -- -- 126.4 -- 126.4 -------- -------- -------- --------- -------- Stockholders' Equity Common stock.......... 268.3 -- 56.6 (56.6) 268.3 Additional paid-in capital.............. 1,069.2 601.6 1,357.7 (1,959.3) 1,069.2 Retained earnings..... 114.2 841.1 483.8 (1,324.9) 114.2 -------- -------- -------- --------- -------- Total stockholders' equity............. 1,451.7 1,442.7 1,898.1 (3,340.8) 1,451.7 -------- -------- -------- --------- -------- Total liabilities and stockholders' equity............. $1,451.7 $3,838.7 $2,588.0 $(4,495.0) $3,383.4 ======== ======== ======== ========= ========
CS-3
Newmont Newmont Newmont Mining Gold Other Mining Corp. Corp. Company Subsidiaries Eliminations Consolidated -------- -------- ------------ ------------ ------------ (In millions) Consolidating Balance Sheets: At December 31, 1998 Cash and cash equivalents........... $ -- $ 21.6 $ 57.5 $ -- $ 79.1 Short-term investments........... -- 11.8 -- -- 11.8 Accounts receivable.... -- 445.6 30.0 (423.6) 52.0 Inventories............ -- -- 122.1 158.3 280.4 Other current assets... -- -- 33.0 56.8 89.8 -------- -------- -------- --------- -------- Current assets......... -- 622.3 314.4 (423.6) 513.1 -------- -------- -------- --------- -------- Property, plant and mine development, net................... -- 856.5 1,192.2 -- 2,048.7 Investment in subsidiaries.......... 1,444.6 2,817.9 -- (4,262.5) -- Investment in Batu Hijau................. -- -- 277.2 -- 277.2 Long-term inventory.... -- 143.3 16.4 -- 159.7 Other long-term assets................ -- 168.2 2,094.8 (2,026.3) 236.7 -------- -------- -------- --------- -------- Total assets........... $1,444.6 $4,608.2 $3,895.0 $(6,712.4) $3,235.4 ======== ======== ======== ========= ======== Liabilities Current portion of long-term debt........ $ -- $ 17.8 $ 29.8 $ -- $ 47.6 Accounts payable....... 5.1 17.2 439.2 (423.6) 37.9 Other accrued liabilities........... -- 64.4 69.6 -- 134.0 -------- -------- -------- --------- -------- Current liabilities.... 5.1 99.4 538.6 (423.6) 219.5 -------- -------- -------- --------- -------- Long-term debt......... -- 902.5 298.6 -- 1,201.1 Reclamation and remediation liabilities........... -- 26.3 68.5 -- 94.8 Other long-term liabilities........... -- 2,135.4 78.6 (2,026.3) 187.7 -------- -------- -------- --------- -------- Total liabilities...... 5.1 3,163.6 984.3 (2,449.9) 1,703.1 -------- -------- -------- --------- -------- Minority interest....... -- -- 92.8 -- 92.8 -------- -------- -------- --------- -------- Stockholders' Equity Common stock........... 267.5 56.5 (56.5) 267.5 Additional paid-in capital............... 1,060.8 592.1 2,154.3 (2,746.4) 1,060.8 Retained earnings...... 111.2 852.5 607.1 (1,459.6) 111.2 -------- -------- -------- --------- -------- Total stockholders' equity................ 1,439.5 1,444.6 2,817.9 (4,262.5) 1,439.5 -------- -------- -------- --------- -------- Total liabilities and stockholders' equity.. $1,444.6 $4,608.2 $3,895.0 $(6,712.4) $3,235.4 ======== ======== ======== ========= ======== Newmont Newmont Newmont Mining Gold Other Mining Corp. Corp. Company Subsidiaries Eliminations Consolidated -------- -------- ------------ ------------ ------------ (In millions) Statement of Consolidating Cash Flows: Year Ended December 31, 1999 Operating activities Net income............. $ 24.8 $ 24.8 $ 96.8 $ (121.6) $ 24.8 Adjustments to reconcile net income to net cash provided by operating activities............ 0.3 80.0 122.6 96.5 299.4 Change in working capital............... (5.1) 37.8 45.1 -- 77.8 -------- -------- -------- --------- -------- Net cash provided by operating activities.. 20.0 142.6 264.5 (25.1) 402.0 -------- -------- -------- --------- -------- Investing activities Additions to property, plant and mine development........... -- (80.4) (140.6) -- (221.0) Proceeds from sale of future production..... -- 137.2 -- -- 137.2 Investments in affiliates and Other.. -- -- ( 97.1) -- ( 97.1) -------- -------- -------- --------- -------- Net cash provided by (used for) investing activities............ -- 56.8 (237.7) -- (180.9) -------- -------- -------- --------- -------- Financing activities Net repayments......... -- (192.9) (30.7) -- (223.6) Dividends paid......... (20.1) (25.1) -- 25.1 (20.1) Other.................. 0.1 (1.2) (0.1) -- (1.2) -------- -------- -------- --------- -------- Net cash used for financing activities... (20.0) (219.2) (30.8) 25.1 (244.9) -------- -------- -------- --------- -------- Net decrease in cash and cash equivalents....... 0.0 (19.8) (4.0) 0.0 (23.8) Cash and cash equivalents at beginning of period.... -- 22.3 56.8 -- 79.1 -------- -------- -------- --------- -------- Cash and cash equivalents at end of period................. $ -- $ 2.5 $ 52.8 $ -- $ 55.3 ======== ======== ======== ========= ========
CS-4
Newmont Newmont Newmont Mining Gold Other Mining Corp. Corp. Company Subsidiaries Eliminations Consolidated ------- ------- ------------ ------------ ------------ (In millions) Statement of Consolidating Cash Flows Year Ended December 31, 1998 Operating activities Net loss.............. $(393.4) $(391.5) $(306.5) $ 698.0 $(393.4) Adjustments to reconcile net loss to net cash provided by operating activities........... 407.1 537.9 582.7 (713.0) 814.7 Change in working capital.............. 5.1 (196.8) 143.9 -- (47.8) ------- ------- ------- ------- ------- Net cash provided by (used for) operating activities........... 18.8 (50.4) 420.1 (15.0) 373.5 ------- ------- ------- ------- ------- Investing activities Additions to property, plant and mine development.......... -- (61.3) (154.7) -- (216.0) Investments in affiliates and Other................ -- -- (204.8) -- (204.8) ------- ------- ------- ------- ------- Net cash used for investing activities........... -- (61.3) (359.5) -- (420.8) ------- ------- ------- ------- ------- Financing activities Net borrowings (repayments)......... -- 63.2 (63.0) -- 0.2 Dividends paid........ (19.1) (15.0) -- 15.0 (19.1) Other................. 0.3 -- (1.2) -- (0.9) ------- ------- ------- ------- ------- Net cash provided by (used for) financing activities............. (18.8) 48.2 (64.2) 15.0 (19.8) ------- ------- ------- ------- ------- Net decrease in cash and cash equivalents....... 0.0 (63.5) (3.6) 0.0 (67.1) Cash and cash equivalents at beginning of period.... -- 85.1 61.1 -- 146.2 ------- ------- ------- ------- ------- Cash and cash equivalents at end of period................. $ -- $ 21.6 $ 57.5 $ -- $ 79.1 ======= ======= ======= ======= ======= Year Ended December 31, 1997 Operating activities Net income............ $ 68.4 $ 72.9 $ 61.9 $(134.8) $ 68.4 Adjustments to reconcile net income to net cash provided by operating activities........... (13.9) 45.1 217.3 76.6 325.1 Change in working capital.............. -- (401.1) 291.4 -- (109.7) ------- ------- ------- ------- ------- Net cash provided by (used for) operating activities........... 54.5 (283.1) 570.6 (58.2) 283.8 ------- ------- ------- ------- ------- Investing activities Additions to property, plant and mine development.......... -- (78.8) (336.3) -- (415.1) Investments in affiliates and Other................ (12.6) -- (10.0) 12.6 (10.0) ------- ------- ------- ------- ------- Net cash used for investing activities........... (12.6) (78.8) (346.3) 12.6 (425.1) ------- ------- ------- ------- ------- Financing activities Net borrowings (repayments)......... -- 316.0 (210.8) -- 105.2 Dividends paid........ (54.5) (58.2) -- 58.2 (54.5) Other................. 12.6 12.6 (2.8) (12.6) 9.8 ------- ------- ------- ------- ------- Net cash provided by (used for) financing activities............. (41.9) 270.4 (213.6) 45.6 60.5 ------- ------- ------- ------- ------- Net increase (decrease) in cash and cash equivalents............ 0.0 (91.5) 10.7 0.0 (80.8) Cash and cash equivalents at beginning of period.... -- 176.7 50.3 -- 227.0 ------- ------- ------- ------- ------- Cash and cash equivalents at end of period................. $ -- $ 85.2 $ 61.0 $ -- $ 146.2 ======= ======= ======= ======= =======
CS-5 NUSA TENGGARA PARTNERSHIP V.O.F. CONSOLIDATED STATEMENTS OF OPERATIONS (Amounts in thousands of United States dollars)
Years Ended December 31, --------------------------- 1999 1998 1997 -------- -------- ------- Sales and other income Copper sales.................................... $ 15,213 $ -- $ -- Interest income................................. 11 93 540 -------- -------- ------- 15,224 93 540 -------- -------- ------- Costs and expenses Costs applicable to sales....................... 15,618 -- -- Depreciation, depletion and amortization........ 9,310 120 95 Exploration..................................... 24 1,471 2,233 General and administrative...................... 59 194 765 Interest expense................................ 11,967 -- -- Other........................................... 14,071 14,231 45 -------- -------- ------- 51,049 16,016 3,138 -------- -------- ------- Net loss before tax and cumulative effect of a change in accounting principle........................ (35,825) (15,923) (2,598) Income tax benefit (expense)...................... 47,671 (3,361) -- -------- -------- ------- Net income (loss) before cumulative effect of a change in accounting principle........................ 11,846 (19,284) (2,598) Cumulative effect of a change in accounting principle...................................... -- (50,126) -- -------- -------- ------- Net income (loss)................................. $ 11,846 $(69,410) $(2,598) ======== ======== =======
The accompanying notes are an integral part of these financial statements. NT-1 NUSA TENGGARA PARTNERSHIP V.O.F. CONSOLIDATED BALANCE SHEETS (Amounts in thousands of United States dollars)
At December 31, --------------------- 1999 1998 ---------- ---------- ASSETS Assets Cash and cash equivalents................................ $ 3,407 $ 5,694 Accounts receivable from affiliates...................... 62 159 Metal sales receivables.................................. 2,252 -- Value added taxes receivable............................. 35,000 -- Inventories.............................................. 94,744 8,181 Other.................................................... 2,077 3,542 ---------- ---------- Current assets.......................................... 137,542 17,576 ---------- ---------- Non-current assets Ore inventory............................................ 14,417 -- Property, plant and mine development--net................ 1,948,398 1,430,260 Capitalized mining costs................................. 8,117 -- Loan receivable from P.T. Pukuafu Indah.................. 35,455 17,120 Debt issuance costs...................................... 26,849 25,446 Value added taxes receivable............................. 62,500 61,572 Deferred tax asset....................................... 50,738 -- Other.................................................... 100 100 ---------- ---------- Non-current assets...................................... 2,146,574 1,534,498 ---------- ---------- Total assets............................................ $2,284,116 $1,552,074 ========== ========== LIABILITIES AND PARTNERS' EQUITY Liabilities Accounts payable and accrued expenses.................... $ 139,099 $ 110,045 Accounts payable affiliates.............................. 53,024 37,236 Deferred revenue......................................... 6,198 -- Taxes payable............................................ 4,906 5,785 Other.................................................... 4,418 -- ---------- ---------- Current liabilities..................................... 207,645 153,066 Senior Debt.............................................. 1,000,000 640,000 Loans and accrued interest to partners................... 195,478 -- Reclamation and remediation liabilities.................. 132 -- ---------- ---------- Total liabilities....................................... 1,403,255 793,066 ---------- ---------- Commitments and contingencies (Notes 12, 13 and 14)..... -- -- Minority interest in P.T. Newmont Nusa Tenggara........... 35,455 17,120 ---------- ---------- Partners' Equity Capital account--Newmont Indonesia Limited............... 475,541 417,312 Capital account--Nusa Tenggara Mining Corporation........ 369,865 324,576 ---------- ---------- Total partners' equity.................................. 845,406 741,888 ---------- ---------- Total liabilities and partners' equity.................. $2,284,116 $1,552,074 ========== ==========
The accompanying notes are an integral part of these financial statements. NT-2 NUSA TENGGARA PARTNERSHIP V.O.F. CONSOLIDATED STATEMENTS OF CHANGES IN PARTNERS' EQUITY (Amounts in thousands of United States dollars)
NIL NTMC 56.25% 43.75% Total -------- -------- -------- Balance at December 31, 1996...................... $284,397 $221,198 $505,595 Cash contributions................................ 42,581 33,119 75,700 Net loss for the year............................. (1,461) (1,137) (2,598) -------- -------- -------- Balance at December 31, 1997...................... 325,517 253,180 578,697 Cash contributions................................ 130,838 101,763 232,601 Net loss for the year............................. (39,043) (30,367) (69,410) -------- -------- -------- Balance at December 31, 1998...................... 417,312 324,576 741,888 Cash contributions................................ 51,566 40,106 91,672 Net income for the year........................... 6,663 5,183 11,846 -------- -------- -------- Balance at December 31, 1999...................... $475,541 $369,865 $845,406 ======== ======== ========
The accompanying notes are an integral part of these financial statements. NT-3 NUSA TENGGARA PARTNERSHIP V.O.F. CONSOLIDATED STATEMENTS OF CASH FLOWS (Amounts in thousands of United States dollars)
Years Ended December 31, ------------------------------- 1999 1998 1997 --------- --------- --------- Operating Activities Net income (loss)............................ $ 11,846 $ (69,410) $ (2,598) Adjustments to reconcile net income (loss) to net cash used in operating activities: Depreciation................................ 9,310 120 95 Deferred tax benefit........................ (50,738) -- -- Cumulative effect of a change in an account- ing principle.............................. -- 50,126 -- (Increase) decrease in operating assets: Accounts and other receivables............. (2,155) 9 -- Inventory.................................. (100,980) 8,181 -- Other assets............................... 177 (27,942) -- Increase (decrease) in operating liabili- ties: Accounts payable........................... 78,310 14,763 -- Other liabilities.......................... 13,725 3,628 -- --------- --------- --------- Net cash used in operating activities........ (40,505) (20,525) (2,503) --------- --------- --------- Investing Activities Taxes receivable............................ (35,928) (54,077) (7,494) Additions to property, plant and mine devel- opment..................................... (567,950) (806,597) (249,913) --------- --------- --------- Net cash used in investing activities........ (603,878) (860,674) (257,407) --------- --------- --------- Financing Activities Equity contributions from Newmont Indonesia Limited.................................... 51,566 130,838 42,581 Equity contributions from Nusa Tenggara Min- ing Corporation............................ 40,106 101,763 272,412 Proceeds from short-term loan............... -- -- 79,765 Repayments of short-term loan............... -- -- (100,000) Proceeds from senior debt................... 360,000 640,000 -- Proceeds from Partners (NIL & NTMC)......... 191,827 -- -- Debt issuance costs......................... (1,403) (1,390) (22,559) --------- --------- --------- Net cash provided by financing activities.... 642,096 871,211 272,199 --------- --------- --------- Net increase (decrease) in cash and cash equivalents.................................. (2,287) (9,988) 12,289 Cash and cash equivalents at beginning of year......................................... 5,694 15,682 3,393 --------- --------- --------- Cash and cash equivalents at end of year...... $ 3,407 $ 5,694 $ 15,682 ========= ========= =========
The accompanying notes are an integral part of these financial statements. NT-4 Nusa Tenggara Partnership V.O.F. Notes to Consolidated Financial Statements - ------------------------------------------------------------------------------- 1. GENERAL Nusa Tenggara Partnership ("NTP" or the "Partnership") is a general partnership organized under the laws of The Netherlands. NTP is 56.25%-owned by Newmont Indonesia Limited ("NIL"), an indirect subsidiary of Newmont Mining Corporation ("NMC"), both Delaware, U.S.A corporations, and 43.75%-owned by Nusa Tenggara Mining Corporation ("NMTC"), a Japanese corporation owned by Sumitomo Corporation (74.3%), Sumitomo Metal Mining Co., Ltd. (14.3%), Mitsubishi Materials Corporation (7.1%) and Furukawa Co., Ltd. (4.3%). NTP was formed to develop and mine the Batu Hijau copper/gold deposit located in Sumbawa, Nusa Tenggara Barat, Indonesia that, with proven and probable reserves of 10.5 billion pounds of copper and 11.8 million ounces of gold, has a projected mine life in excess of 20 years. Operations commenced in the fourth quarter of 1999, with initial sales of concentrate in December 1999. The cost for the development of the open-pit mine, mill and infrastructure, including employee housing, a port, electrical generation facilities, interest during construction and working capital was approximately US$1.83 billion. NTP holds an 80% interest in P. T. Newmont Nusa Tenggara ("PTNNT"), an Indonesian corporation that holds the Contract of Work ("COW") issued by the Indonesian government, granting PTNNT sole rights to develop the Batu Hijau mine. The remaining 20% interest in PTNNT is held by P.T. Pukuafu Indah ("PTPI"), an unrelated Indonesian company. PTPI's interest is a "carried interest" such that at the request of PTPI, NTP funds PTPI's share of capital contributions to PTNNT. Contributions made on behalf of PTPI are recoverable by NTP from 70% of PTPI's share of future dividends from PTNNT. (See Note 9) Substantially all Partnership transactions relate to its 80% interest in PTNNT. Certain NTP and PTNNT actions and transactions require unanimous approval of NTP partners. Copper and gold mining requires the use of specialized facilities and technology. PTNNT relies heavily on such facilities to reach and maintain designed production levels. Also, the cash flow and profitability of PTNNT's operations are significantly affected by market prices of copper and gold. Such commodity prices fluctuate widely and are affected by numerous factors beyond NTP's control. Over the past three years, Indonesia has experienced significant devaluation of its currency, the Rupiah, with partial recovery during 1999. This and other factors have also led to political and social problems in the country. NTP's cost and debt structure is primarily U.S. dollar-denominated. To the extent that there are fluctuations in the Rupiah, its devaluation is generally economically neutral or beneficial to NTP since local salaries and supply contracts will decrease against the U.S. dollar. Excluding certain tax receivables described in Note 2, PTNNT's activities have not been materially affected by the economic, social and political situation in Indonesia, primarily because they are located in a remote location. 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Basis of Financial Statements The financial statements have been prepared on the historical cost basis of accounting, except as noted in Note 3, using generally accepted accounting principles of the United States ("U.S. GAAP"). Principles of Consolidation The financial statements reflect the consolidated financial position and the results of operations of NTP and PTNNT. Because PTPI's interest in PTNNT is a "carried interest", PTNNT is consolidated on a 100% basis and PTPI's carried equity contribution is reflected as a minority interest. All significant intercompany balances and transactions have been eliminated. NT-5 Nusa Tenggara Partnership V.O.F. Notes to Consolidated Financial Statements--Continued Foreign Currency Transactions and Balances NTP maintains its accounting records in U.S. dollars ("USD" or "US$"). Transactions in other currencies are recorded in USD based on exchange rates prevailing at the time of such transactions. Monetary assets and liabilities denominated in other currencies are translated into USD at exchange rates prevailing at the balance sheet dates, and any resulting gains or losses are reflected in current earnings. Cash and Cash Equivalents Cash and cash equivalents consist of all cash balances and highly liquid investments with an original maturity of three months or less. Because of the short maturity of these investments, the carrying amounts approximate their fair value. Cash and cash equivalents are primarily invested in money market accounts. Taxes Receivable PTNNT pays value added taxes ("VAT") on its purchases of goods and services. VAT paid while in the "development stage" is statutorily refundable within a twelve-month period from submission of a formal refund claim to the Indonesian tax authorities. Beginning December 1999, VAT is refundable each month, up to a maximum amount equal to 7% of the total concentrate export value. If the VAT refund exceeds 7% of total concentrate export value, such excess is carried forward to the next month and the cumulative unrecovered VAT refund is subject to that month's maximum. VAT payments and refunds are local currency transactions, and consequently are subject to exchange rate fluctuations. VAT receivable balances are adjusted to reflect the Rupiah / USD exchange rate as of the balance sheet dates and are classified as current or long-term based on expected refund date. Inventories Ore and in-process inventories and materials and supplies are stated at the lower of average cost or net realizable market value. Property, Plant and Mine Development Expenditures for new facilities or expenditures that extend the useful lives of existing facilities are capitalized at historical cost. Depreciation for mining and milling life of mine assets is determined using unit-of-production method based on useful life and estimated life of mine tonnage. Other assets are depreciated on a straight-line basis over the estimated productive lives, ranging from four to 10 years or the mine life. The Partnership adopted AICPA Statement of Position 98-5, "Reporting on the Costs of Start-Up Activities" ("SOP 98-5") effective January 1, 1998. Under this accounting method, certain costs, such as organization, training and pre- feasibility expenses, incurred in the start-up phase of a project are expensed as incurred. (Note 5). This change resulted in expensing certain start-up costs that totaled US$14.2 million in 1998 (included in other expense). Previously capitalized start-up costs (incurred prior to January 1, 1998) of US$50.1 million were expensed as the cumulative effect of the accounting change. The excess of the agreed fair value of the assets contributed to NTP when it was initially funded over the historical cost basis was recorded as deferred mineral rights (Note 3). Such costs are amortized during the production life of the Batu Hijau mine. Mineral exploration costs are expensed as incurred. When it has been determined that a mineral property can be economically developed, the subsequent costs incurred to develop such property, including costs to further delineate the orebody and remove overburden to initially expose the orebody for mining, are capitalized as mine development costs. Mine development costs are amortized using the unit-of-production method over the life of the orebody. NT-6 Nusa Tenggara Partnership V.O.F. Notes to Consolidated Financial Statements--Continued Interest costs related to developing mining properties and constructing new facilities are capitalized until operations commence. Asset Impairment The Partnership reviews and evaluates its long-lived assets for impairment when events or changes in circumstances indicate that the related carrying amounts may not be recoverable. An impairment loss is measured as the amount by which an assets carrying value exceeds its fair value. Fair value is generally determined using estimated future cash flow analysis. An impairment is considered to exist if total estimated future cash flows on an undiscounted basis are less than the carrying amount of the asset. An impairment loss is measured and recorded based on discounted estimated future cash flows. Future cash flows include estimates of recoverable pounds and ounces, metal prices (considering current and historical prices, price trends and related factors) and production, capital and reclamation costs. Assumptions underlying future cash flow estimates are subject to risks and uncertainties. Any differences between significant assumptions and actual market conditions and /or the Partnership's performance could have a material effect on the Partnership's financial position and results of operations. As of December 31, 1999, NTP does not believe that impairment has occurred. Debt Issuance Costs Costs incurred to arrange the third party senior debt for development of PTNNT's Batu Hijau mine, including financial advisory fees, legal fees, loan origination and commitment fees, accounting and tax advisory services, etc., were capitalized as deferred debt issuance costs. Such costs will be amortized over the term of the loan when commercial production (as defined by the senior debt agreement) begins. Revenue Recognition Concentrates are sold at the London Metal Exchange ("LME") average price in the month of delivery or shipment, according to the terms of sales contracts. Concentrate sales are recorded on a provisional basis on the date of shipment and are adjusted on a monthly basis to reflect the latest LME price. A final adjustment is made upon settlement with customers. Deferred Revenue Certain concentrates have been sold prior to shipment. Proceeds received from such advance sales are recorded as deferred revenue and are recognized in income when shipped. Mining Costs Because of the diverse grade and waste-to-ore ratios over the mine life, mining costs are capitalized and are charged to operations on the basis of the average life-of-mine grade and waste-to-ore ratios per equivalent unit of copper recovered. Reclamation and Remediation Costs Estimated future reclamation and remediation costs are based principally on legal, regulatory and contractual requirements and are accrued and charged to operating expense over the expected mine life using the unit-of-production method. NT-7 Nusa Tenggara Partnership V.O.F. Notes to Consolidated Financial Statements--Continued Income Taxes PTNNT accounts for income taxes using the liability method, recognizing certain temporary differences between the financial reporting basis of its liabilities and assets and the related income tax basis of such liabilities and assets. This method generates a net deferred income tax liability or net deferred income tax asset as of the end of the year, as measured by the statutory tax rates in effect as enacted. PTNNT derives its deferred income tax charge or benefit by recording the change in the net deferred income tax liability or net deferred income tax asset balance for the year. PTNNT's deferred income tax assets include certain future tax benefits. PTNNT records a valuation allowance against any portion of those deferred income tax assets that it believes may more likely than not fail to be realized. NTP is not subject to income taxes. The taxable income or loss of the Partnership, which may vary substantially from income or loss reported for financial reporting purposes, is passed through to NTP partners. NTP is subject to withholding taxes on certain payments made from Indonesia. Such withholding taxes are included in income tax expense (benefit). Hedging PTNNT does not acquire, hold or issue commodity instruments for trading or speculative purposes. Financial instruments are used to manage copper price risk. Copper is an internationally traded commodity, and its prices are effectively determined by the LME. On a limited basis, PTNNT hedges sales commitments by entering into copper swap contracts. Swap contracts are settled at the LME average monthly price in accordance with the terms of the contracts. Gains or losses on these contracts are recognized in income when the hedged transaction occurs. Financial Accounting Standards ("SFAS") No. 133, "Accounting for Derivative Instruments and Hedging Activities," establishes accounting and reporting standards for derivative instruments and hedging activities. SFAS No. 133 is effective for quarters in all fiscal years beginning after June 15, 2000. SFAS No. 133 requires recognition of derivative instruments on the balance sheet as either assets or liabilities and measurement at fair market value. Changes in the derivative's fair value will be recognized currently in earnings unless specific hedge accounting criteria are met. Gains and losses must be recorded in either other comprehensive income or current earnings, depending on the nature of the instrument. Upon adoption of FAS 133, planned for January 2001, PTNNT will record the fair value of its swap contracts qualifying as cash flow hedges on the balance sheet and adjustments to such fair value at each reporting date will be recorded in comprehensive income. Comprehensive Income In addition to net income, comprehensive income includes all changes in equity during a period, except those resulting from investments by and distributions to owners. The Partnership has no material comprehensive income items. Use of Estimates The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions. These estimates and assumptions affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements, as well as the reported amount of revenues and expenses during the reporting period. Actual amounts could differ from these estimates. NT-8 Nusa Tenggara Partnership V.O.F. Notes to Consolidated Financial Statements--Continued Reclassifications Certain amounts in prior years have been reclassified to conform to the 1999 presentations. 3. INITIAL FUNDING OF THE PARTNERSHIP The Partnership agreement, executed on July 2, 1996, provided for initial contributions from its partners. The date of such contributions (referred to as the "Initial Funding Date") was June 10, 1997. NIL contributed its 80% interest in PTNNT in exchange for a 56.25% interest in NTP. NIL also contributed rights to its shareholder loan receivable of US$77.2 million and a PTPI loan receivable of US$2.2 million. The agreed upon value of NIL's initial contributions was US$306.2 million. NTMC contributed approximately US$164 million and subsequent deferred contributions, as defined in the agreement, in exchange for a 43.75% interest in NTP. PTNNT's losses up to the Initial Funding Date, of US$41.4 million were allocated to the capital accounts of NIL and NTMC in proportion to their respective Partnership interests. Assets contributed to NTP on the Initial Funding Date were recorded at historical cost, with the excess of the agreed fair value of NIL's contributions over such historical cost, US$219.5 million, recorded as deferred mineral rights. 4. INVENTORIES
At December 31, ---------------------- 1999 1998 ---------- ---------- (in thousands of US$) Current: Ore inventory.......................................... $ 13,685 $ -- Inventory in concentrate............................... $ 19,861 $ -- Materials and supplies................................. 61,198 8,181 ---------- ---------- Total inventories.................................... $ 94,744 $ 8,181 ---------- ---------- Non-current: Ore inventory.......................................... $ 14,417 $ -- ---------- ---------- 5. PROPERTY, PLANT AND MINE DEVELOPMENT Property, plant and mine development consisted of the following (in thousands of US$): At December 31, ---------------------- 1999 1998 ---------- ---------- Deferred mineral rights................................ $ 219,509 $ 219,509 Machinery and equipment................................ 269,059 22,715 Buildings and infrastructure........................... 1,018,047 -- Mine development....................................... 157,871 140,006 Capitalized interest................................... 66,545 27,116 Construction-in-progress............................... 240,870 1,024,245 ---------- ---------- 1,971,901 1,433,591 Accumulated depreciation and amortization.............. (23,503) (3,331) ---------- ---------- Property, plant and mine development--net.............. $1,948,398 $1,430,260 ========== ==========
Construction-in-progress primarily consisted of engineering, design and construction-related costs for development of the Batu Hijau copper/gold project. NT-9 Nusa Tenggara Partnership V.O.F. Notes to Consolidated Financial Statements--Continued 6. ACCOUNTS PAYABLE AFFILIATES Accounts payable affiliates was comprised of the following amounts (in thousands of US$) and are described in Note 12.
At December 31, --------------- 1999 1998 ------- ------- Technology and Know How Agreement Royalties--NNHI............. $26,272 $18,339 Technology and Know How Agreement Royalties--Sumitomo......... 20,434 14,264 Consulting Services Agreement--NISL........................... 2,316 1,254 Payroll Agency Agreements--NIIL and NGELP..................... 3,230 2,937 Other......................................................... 772 442 ------- ------- Total....................................................... $53,024 $37,236 ======= =======
7. INCOME TAXES NTPs Indonesian income tax (benefit) expense consisted of (in thousands US$):
Years Ending December 31, ------------------------ 1999 1998 1997 -------- ------- ----- Current............................................. $ 3,067 $ 3,361 $ -- Deferred............................................ (50,738) -- -- -------- ------- ----- Total (benefit) expense........................... $(47,671) $ 3,361 $ -- ======== ======= ===== NTP's income tax (benefit) differed from the amounts computed by applying the Indonesian Contract of Work ("CoW") corporate income tax statutory rate for the following reasons (in thousands of US$): Years Ending December 31, ------------------------ 1999 1998 1997 -------- ------- ----- Indonesian corporate income tax (benefit) at COW rate............................................... $(14,162) $(9,392) $(829) Valuation allowance on deferred tax assets.......... (36,576) 9,392 829 -------- ------- ----- Income tax (benefit) expense........................ (50,738) -- -- -------- ------- ----- Income withholding tax.............................. 3,067 3,361 -- ======== ======= ===== Total (benefit) expense........................... $(47,671) $ 3,361 $ -- ======== ======= =====
NT-10 Nusa Tenggara Partnership V.O.F. Notes to Consolidated Financial Statements--Continued Components of NTP's deferred income tax assets are as follows (in thousands of US$):
At December 31, ---------------- 1999 1998 ------- ------- Deferred tax assets Capitalized start-up costs................................... $19,198 $17,256 Exploration costs............................................ 15,467 15,464 Capitalized interest......................................... 5,956 3,856 Net operating loss carry forward............................. 9,793 4,211 Book depreciation............................................ 8,007 1,166 Other........................................................ 535 -- ------- ------- Gross deferred tax assets.................................... 58,956 41,953 Valuation allowance for deferred tax assets.................. (5,377) (41,953) ------- ------- Net deferred tax assets...................................... 53,579 -- Deferred tax liabilities Capitalized mining cost...................................... (2,841) ------- ------- Net deferred tax assets...................................... $50,738 $ -- ======= =======
Primarily based on estimates of future sources of taxable income, PTNNT believes that it, more likely than not, will utilize US$53.6 million of the US$59.0 million of deferred income tax assets at December 31, 1999. This estimate reflects a valuation allowance of US$5.4 million. 8. DEBT SENIOR DEBT On July 30, 1997, PTNNT entered into a US$1.0 billion project financing facility for the Batu Hijau project ("Senior Debt"), of which US$1.0 billion and US$640 million was outstanding as of December 31, 1999 and 1998, respectively. The Senior Debt includes commitments from three export-credit agencies with participation by various commercial banks. An NMC subsidiary and Sumitomo Corporation ("Sumitomo") guarantee the Senior Debt, 56.25% and 43.75% respectively, until certain operational completion tests are met at which time the Senior Debt becomes non-recourse to the NMC subsidiary and Sumitomo. The fair value cannot be practicably determined due to the lack of available market information for this type of debt. Repayment of borrowings under the Senior debt will be in semi-annual installments of US$43.5 million over a 13-year period beginning the earlier of six months after operational completion tests are met or June 15, 2001. Completion tests are expected to be met during 2000. The interest rate is based on blended fixed and floating rates and at current market rates on December 31, 1999, the weighted average interest rate would be approximately 7.4% post-completion. The weighted average interest rates were 6.4% and 6.2 % during 1999 and 1998, respectively, and 6.6% and 5.5% at December 31, 1999 and December 31, 1998, respectively. Senior Debt covenants, conditions, warranties and representations include: a. Concentrate Sales Agreements--During each year after completion, PTNNT shall sell not less than 455,000 tonnes of annual copper concentrate production for export to non-Indonesian buyers for U.S. dollars, and shall commit not less than 480,000 tonnes under long-term sales agreements. b. Limitation on Indebtedness--PTNNT shall not incur any indebtedness, other than the $1 billion Senior Debt, except for "Permitted Indebtedness", which includes subordinated debt from NTP, unsecured working NT-11 Nusa Tenggara Partnership V.O.F. Notes to Consolidated Financial Statements--Continued capital debt with maturity not in excess of one year and not exceeding $35 million, and other indebtedness with aggregate principal not to exceed $5 million at any one time. c. Senior Loans/Sponsor Funding Ratio--The ratio of outstanding funds under the Senior Debt to the aggregate Sponsor Funding shall not exceed 55:45. "Restricted Payments"--Prior to the later of operational completion and the first scheduled principal repayment date of the Senior Debt, PTNNT is prohibited from making any Restricted Payments. Restricted Payments include dividends or return of capital and payment of principal or interest on subordinated loans to NTP, its partners or their affiliates. Subsequent to such restricted period, Restricted Payments can be made provided certain conditions and financial ratios are met. LOANS AND ACCRUED INTEREST TO PARTNERS On April 19, 1999, amended on November 1, 1999, PTNNT entered into separate shareholder subordinated loan agreements with NIL and NTMC ("Sponsor Loans") under which $191.8 million of principal and $3.7 million of accrued interest was outstanding at December 31, 1999. Borrowings under Sponsor Loans are guaranteed by NTP and are payable on demand, subject to Senior Debt subordination terms. The interest rate is based on SIBOR and the interest rate on any unpaid interest is based on SIBOR plus 1%. The weighted average interest rate during 1999 was 5.83% and at December 31, 1999 was 6.13%. Payments of Sponsor Loan principal and interest are Restricted Payments under provisions of the Senior Debt. 9. MINORITY INTEREST IN PTNNT As described in Note 1, PTPI owns a 20% carried interest in PTNNT, whose paid- in capital and deposits for future stock subscriptions totaled US$177.3 million and US$85.6 million at December 31, 1999 and 1998, respectively. PTPI's share of such capital, reflected on the balance sheet as Minority interest in PTNNT, was funded with loans from NIL and NTMC, through NTP, and totaled US$35.5 million and US$17.1 million at December 31, 1999 and 1998, respectively. These loans are subject to interest at the six-month SIBOR plus two percent. PTPI agreed to assign 70% of its rights to dividends from PTNNT to repay such loans, including interest, pursuant to an Acknowledgement of Indebtedness and Assignment of Dividends agreement with NIL. Interest accrued under these loans are fully reserved until recoverability of such interest is determined. 10. MAJOR CUSTOMERS AND EXPORT SALES PTNNT sells its concentrates primarily pursuant to long-term sales agreements. As a percentage of total sales, 100% were pursuant to such contracts during 1999, and two Japanese customers accounted for $13.8 million, and $4.0 million of total sales, each of which accounted for more than 10% of total sales, and together accounted for 96% of total sales. 11. SUPPLEMENTAL CASH FLOW INFORMATION Excluded from the consolidated statements of cash flows were the effects of non-cash transactions wherein PTNNT purchased spare parts inventory, but defers payment until such inventory is used. The amount so purchased was US$12.5 million at December 31, 1999 and was US$6.8 million at December 31, 1998. Interest paid net of amounts capitalized totaled US$6.1 million in 1999. All interest incurred during 1998 and 1997 was capitalized as property, plant and mine development. Taxes paid consisting of withholding taxes on interest earned, was US$3.1 million, $3.4 million and none in 1999, 1998 and 1997 respectively. NT-12 Nusa Tenggara Partnership V.O.F. Notes to Consolidated Financial Statements--Continued 12. OTHER SIGNIFICANT AGREEMENTS Technology and Know-How Agreements On July 2, 1996 PTNNT entered into a Technology and Know-How Agreement with Newmont Nevada Holdings Incorporated ("NNHI"), an affiliate of NMC, whereby NNHI agreed to provide proprietary information, technology, know-how and related intellectual property rights. Under the terms of this agreement, PTNNT pays NNHI a royalty of 1.6875% of the preceding month's aggregate capital expenditures determined in accordance with U.S. GAAP, and US$3.9375 per equivalent ounce of gold produced by PTNNT. A similar Technology and Know-How Agreement was executed with Sumitomo Corporation on the same date, providing a royalty of 1.3125% of aggregate capital expenditures and US$3.0625 per equivalent ounce of gold produced. Obligations under these agreements totaled US$17.3 million, US$25.5 million and US$9.9 million during 1999, 1998 and 1997, respectively. The associated liabilities at December 31, 1999 and 1998 were US$46.7 million and US$32.6 million, respectively, and were included in Accounts payable affiliates (Note 6). Consulting Services Agreements In July 1996, PTNNT entered into a Consulting Services Agreement with Newmont International Services Limited ("NISL"), an indirect subsidiary of NMC, whereby NISL agreed to provide certain support; advisory and consulting services related to general project engineering, control and development; procurement advice and implementation; contract negotiation support; general construction advice and support; operations management support; tax and legal planning; general and administrative services; and management and business support services. NISL provides these services primarily outside of the Republic of Indonesia. Under the terms of this agreement, PTNNT reimburses NISL for its actual payroll costs, including related employee benefits, incurred to provide these services, other out-of-pocket costs, and an administrative fee. Charges totaled US$6.1 million in 1999, US$4.6 million in 1998 and US$14.5 million in 1997 and Accounts payable affiliates included US$2.3 and US$1.3 million at December 31, 1999 and 1998, respectively (Note 6). PTNNT has a similar Consulting Services Agreement with NTMC. Pursuant to this agreement, charges totaled US$0.7 million in 1999, US$1.2 million in 1998 and US$1.4 million in 1997, and no amounts were payable at December 31, 1999 and 1998 (Note 6). Payroll Agency Agreements PTNNT entered into Payroll Agency Agreements with Newmont Indonesia Investment Limited ("NIIL") and Newmont Global Employment Limited Partnership ("NGELP"), wholly-owned subsidiaries of NMC, whereby NIIL and NGELP agreed to act as agents of PTNNT to handle personnel, payroll and benefits management of non- Indonesian employees assigned to work for PTNNT in Indonesia. NIIL manages expatriates from the U.S. and NGELP manages expatriates from countries other than the U.S. Under the terms of these agreements, PTNNT reimburses the agents for salaries, related employee benefits and other reasonable expenses and pays a fee of US$20 for each salary payment made. Agency payments totaled US$15.1 million in 1999 and US$9.0 million in 1998 and US$3.3 million in 1997, and Accounts payable affiliates included US$3.2 and US$2.9 million at December 31, 1999 and 1998, respectively (Note 6). Batu Hijau Project Engineering and Construction Agreements PTNNT entered into an On-Shore Agreement with P.T. Fluor Daniel Indonesia ("FDI") whereby FDI agreed to construct PTNNT's processing facilities and related infrastructure, and to provide project management, procurement, engineering and construction management. Such services are performed in NT-13 Nusa Tenggara Partnership V.O.F. Notes to Consolidated Financial Statements--Continued Indonesia and related payments are made in USD on a cost reimbursable basis. During 1999, 1998 and 1997, US$301 million, US$437 million and US$121 million, respectively, were charged for such services and accounts payable and accrued liabilities included US$18 million and US$72 million at December 31, 1999 and 1998, respectively. PTNNT entered into an Off-Shore Agreement with Fluor Daniel Engineers and Constructors, Ltd. ("FDEC") whereby FDEC agreed to perform the engineering design and procurement of equipment for PTNNT's processing facilities and related infrastructure, and provide project management, procurement, engineering and construction management. Such services were performed outside Indonesia and related payments are made in USD on a cost reimbursable basis with an additional discretionary fee payable as determined by the Partnership. During 1999, 1998 and 1997, US$91 million, US$609 million and US$174 million, respectively, were charged for such services and accounts payable and accrued liabilities included US$6 million and US$37 million at December 31, 1999 and 1998, respectively. Maintenance and Repair Cost Agreements During 1999, PTNNT entered into a long term Maintenance and Repair Cost agreements ("MARC") with PT Trakindo Utama ("Trakindo"), an Indonesian company, to provide maintenance on PTNNT's Caterpillar equipment at a fixed cost per operating hour. Under the terms of the MARC agreements, Trakindo will provide all normal "wear and tear" parts and labor necessary to perform maintenance and repairs on such equipment. Either party can cancel the contracts with one year written notice. 13. HEDGING PROGRAMS In September 1999, PTNNT entered into a hedging transaction, referred to as a swap contract, for 12,000 metric tonnes (MT) of copper, or 1,000 MT per month beginning March 2000. This contract allows PTNNT to realize US$2,000 per MT (about $91 cents per pound), if the LME copper price is at or above a stated reference level US$1,600 per MT (about 73 cents per pound). The fair value of the contract at December 31, 1999 was a negative US$47 thousand. 14. COMMITMENTS AND CONTINGENCIES NTP's exploration, development and mining activities are subject to various Indonesian laws and regulations governing the protection of the environment. These laws and regulations are continually changing and are generally becoming more restrictive. NTP conducts its operations so as to protect the public health and environment and believes its operations are in compliance with all applicable laws and regulations. NTP has incurred, and in the future expects to incur, expenditures to comply with such laws and regulations, however, NTP cannot predict the amount of such future expenditures. NTP is from time to time involved in various legal proceedings of a character normally incident to its business. It does not believe that adverse decisions in any pending or threatened proceedings or that any amounts it may be required to pay by reason thereof will have a material adverse effect on its financial condition or results of operations. 15. SUBSEQUENT EVENTS On January 5, 2000, PTNNT entered into separate shareholder subordinated loan agreements ("Second Sponsor Loans") with NIL and NTMC aggregating US$29,812,500 and US$23,187,500, respectively. The terms of the Second Sponsor Loans are similar to the Sponsor Loans described in Note 8 where; (i) borrowings are guaranteed by NTP and are payable on demand, subject to Senior Debt subordination terms, (ii) interest rates are based on SIBOR for principal and SIBOR plus 1% for unpaid accrued interest and (iii) loan repayments and interest are Restricted Payments under provisions of the Senior. NT-14 SIGNATURES Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. Newmont Mining Corporation /s/ Timothy J. Schmitt By: _________________________________ Timothy J. Schmitt Vice President, Secretary and Assistant General Counsel March 28, 2000 Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities indicated on March 28, 2000.
Signature Capacity --------- -------- /s/ Ronald C. Cambre Chairman, Chief Executive ______________________________________ Officer and Director Ronald C. Cambre (Principal Executive Officer) /s/ Wayne W. Murdy President and Director ______________________________________ Wayne W. Murdy /s/ Bruce D. Hansen Senior Vice President and ______________________________________ Chief Financial Officer Bruce D. Hansen (Principal Financial Officer) /s/ Linda K. Wheeler Vice President and ______________________________________ Controller (Principal Linda K. Wheeler Accounting Officer) /s/ James T. Curry, Jr. Director ______________________________________ James T. Curry, Jr. /s/ Joseph P. Flannery Director ______________________________________ Joseph P. Flannery /s/ Leo I. Higdon, Jr. Director /s/ Timothy J. Schmitt ______________________________________ ______________________ Leo I. Higdon, Jr. Timothy J. Schmitt Attorney-in-Fact /s/ Robert J. Miller Director ______________________________________ Robert J. Miller /s/ Robin A. Plumbridge Director ______________________________________ Robin A. Plumbridge /s/ Robert H. Quenon Director ______________________________________ Robert H. Quenon /s/ Moeen A. Qureshi Director ______________________________________ Moeen A. Qureshi /s/ Michael K. Reilly Director ______________________________________ Michael K. Reilly /s/ James V. Taranik Director ______________________________________ James V. Taranik /s/ William I. M. Turner, Jr. Director ______________________________________ William I. M. Turner, Jr.
S-1 Newmont Mining Corporation EXHIBIT INDEX
Exhibit Number Description ------- ----------- 3(a) --Restated Certificate of Incorporation dated as of July 13, 1987. Incorporated by reference to Exhibit 3 to registrant's Annual Report on Form 10-K for the year ended December 31, 1987. 3(b) --By-Laws as amended through September 15, 1999 and adopted September 15, 1999. Incorporated by reference to Exhibit 3 to registrant's Quarterly Report on Form 10-Q for the quarter ended September 30, 1999. 3(c) --Certificate of Designations, Preferences and Rights of $5.50 Convertible Preferred Stock, $5 par value, dated November 13, 1992. Incorporated by reference to Exhibit (3)c to registrant's Annual Report on Form 10-K for the year ended December 31, 1992. 4(a) --Rights Agreement dated August 30, 1990 between registrant and Manufacturers Hanover Trust Company, as Rights Agent. Incorporated by reference to Exhibit 1 to registrant's Registration Statement on Form 8-A dated August 31, 1990. 4(b)/4(c) --First Amendment dated November 27, 1990 and Second Amendment dated December 7, 1990 to the aforementioned Rights Agreement dated August 30, 1990. Incorporated by reference to Exhibits 2 and 3, respectively, to registrant's Form 8 dated December 7, 1990. 4(d) --Third Amendment dated February 26, 1992 to the aforementioned Rights Agreement dated August 30, 1990. Incorporated by reference to Exhibit 4 to registrant's Form 8 dated March 17, 1992. 4(e) --Indenture dated March 23, 1992 between registrant and Bank of Montreal Trust Company. Incorporated by reference to Exhibit 4 to registrant's Quarterly Report on Form 10-Q for the quarter ended June 30, 1992. 4(f) --In reliance upon Item 601(b)(4)(iii) of Regulation S-K, various instruments defining the rights of holders of long-term debt of the registrant are not being filed herewith because the total of securities authorized under each such instrument does not exceed 10% of the total assets of registrant. Registrant hereby agrees to furnish a copy of any such instrument to the Commission upon request. 4(g) --Pass Through Trust Agreement dated as of July 15, 1994 between Newmont Gold Company and The First National Bank of Chicago relating to the Pass Through Certificates, Series 1994-A1. (The front cover of this Exhibit indicates the material differences between such Exhibit and the substantially similar (except for price-related information) Pass-Through Agreement between Newmont Gold Company and The First National Bank of Chicago relating to the Pass-Through Certificates, Series 1994-A2.) Incorporated by reference to Exhibit 4.1 to Newmont Gold Company's Quarterly Report on Form 10-Q for the quarter ended September 30, 1994. 4(h) --Lease dated as of September 30, 1994 between Newmont Gold Company and Shawmut Bank Connecticut, National Association relating to Trust No. 1 and a 75% undivided interest in Newmont Gold Company's refractory gold ore treatment facility. (The front cover of this Exhibit indicates the material differences between such Exhibit and the substantially similar (except for price-related information) entered into on the same date relating to the remaining 25% undivided interest in the facility.) Incorporated by reference to Exhibit 4.2 to Newmont Gold Company's Quarterly Report on Form 10-Q for the quarter ended September 30, 1994.
E-1 4(i) --Trust Indenture and Security Agreement dated as of July 15, 1994 between Shawmut Bank Connecticut, National Association and The First National Bank of Chicago relating to Trust No. 1 and a 75% undivided interest in Newmont Gold Company's refractory gold ore treatment facility. (The front cover of this Exhibit indicates the material differences between such Exhibit and the substantially similar (except for price-related information) entered into on the same date relating to the remaining 25% undivided interest in the facility.) Incorporated by reference to Exhibit 4.3 to Newmont Gold Company's Quarterly Report on Form 10-Q for the quarter ended September 30, 1994. 10(a) --1982 Key Employees Stock Option Plan. Incorporated by reference to Exhibit to registrant's Registration Statement on Form S-8 (No. 33- 10141). 10(b) --1987 Key Employees Stock Option Plan as amended as of October 25, 1993. Incorporated by reference to Exhibit 10(e) to registrant's Annual Report on Form 10-K for year ended December 31, 1993. 10(c) --1992 Key Employees Stock Plan as amended as of October 25, 1993. Incorporated by reference to Exhibit 10(p) to registrant's Annual Report on Form 10-K for the year ended December 31, 1993. 10(d) --1996 Employees Stock Plan amended and restated effective as of March 17, 1999. Incorporated by reference to Exhibit 10(d) to registrant's Annual Report on Form 10-K for the year ended December 31, 1998. 10(e) --1999 Employees Stock Plan. Incorporated by reference to Exhibit 10(e) to registrant's Annual Report on Form 10-K for the year ended December 31, 1998. 10(f) --Agreement dated October 15, 1993, effective November 1, 1993, among registrant, Newmont Gold Company and Ronald C. Cambre. Incorporated by reference to Exhibit 10 to registrant's Quarterly Report on Form 10-Q for the quarter ended September 30, 1993. 10(g) --Amendment No. 1, dated June 24, 1997, to Agreement dated October 15, 1993, effective November 1, 1993 among registrant, Newmont Gold Company and Ronald C. Cambre. Incorporated by reference to Exhibit 10 to registrant's Quarterly Report on Form 10-Q for the quarter ended June 30, 1997. 10(h) --Letter Agreement dated December 15, 1993, between Newmont Gold Company and registrant. Incorporated by reference to Exhibit A to Registrant's Proxy Statement dated February 16, 1994. 10(i) --Tax Sharing Agreement dated as of January 1, 1994 between registrant and Newmont Gold Company. Incorporated by reference to Exhibit 10(i) to registrant's Annual Report on Form 10-K for the year Ended December 31, 1994. 10(j) --Letter Agreement dated May 6, 1993 between Newmont Gold Company and Wayne W. Murdy. Incorporated by reference to Exhibit 10 to Newmont Gold Company's Quarterly Report on Form 10-Q for the quarter ended March 31, 1993. 10(k) --Agreement dated September 8, 1998, effective August 6, 1998, between Newmont Gold Company and Lawrence T. Kurlander. Incorporated by reference to Exhibit 10 to Newmont Gold Company's Quarterly Report on Form 10-Q for the quarter ended September 30, 1998. 10(l) --Agreement dated as of February 1, 1999 among registrant, Newmont Gold Company and Ronald C. Cambre. Incorporated by reference to Exhibit 10(b) to registrant's Current Report on Form 8-K, dated July 12, 1999. 10(m) --Annual Incentive Compensation Plan dated as of January 1, 1999. Incorporated by reference to Exhibit 10(a) to registrant's Current Report on Form 8-K, dated July 12, 1999. 10(n) --Newmont Gold Company Intermediate Term Incentive Compensation Plan amended and restated as of January 1, 1998. Incorporated by reference to Exhibit 10(l) to registrant's Annual Report on Form 10-K for the year ended December 31, 1998.
E-2 10(o) --Executive Change of Control Severance Plan dated as of February 1, 1999. Incorporated by reference to Exhibit 10(n) to registrant's Annual Report on Form 10-K for the year ended December 31, 1998. 10(p) --Directors' Stock Award Plan. Incorporated by reference to Exhibit 10(o) to registrant's Annual Report on Form 10-K for the year ended December 31, 1998. 10(q) --Certificate of Ownership and Merger dated as of October 6, 1998, merging NGC Acquisition Co. into Newmont Gold Company. Incorporated by reference to Exhibit 10(p) to registrant's Annual Report on Form 10-K for the year ended December 31, 1998. 10(r) --Agreement dated September 15, 1999 among registrant, Newmont Gold Company and Bruce D. Hansen. Incorporated by reference to Exhibit 10(a) to registrant's Quarterly Report on Form 10-Q for the quarter ended September 30, 1999. 10(s) --Agreement dated August 20, 1999 with respect to estate tax equalization between Newmont Gold Company and John A. S. Dow, as Executive, and Executive's Spouse. Incorporated by reference to Exhibit 10(b) to registrant's Quarterly Report on Form 10-Q for the quarter ended September 30, 1999. 10(t) --Agreement dated February 1, 1999 among registrant, Newmont Gold Company and Lawrence T. Kurlander. Incorporated by reference to Exhibit 10(a) to registrant's Quarterly Report on Form 10-Q for the quarter ended March 31, 1999. 10(u) --Agreement dated February 1, 1999 among registrant, Newmont Gold Company and certain executive officers. Incorporated by reference to Exhibit 10(b) to registrant's Quarterly Report on Form 10-Q for the quarter ended March 31, 1999. 10(v) --Letter Agreement dated August 1, 1999 between Wayne W. Murdy and registrant. 12 --Statement re Computation of Ratio of Earnings to Fixed Charges. 13 --Those portions of registrant's 1999 Annual Report to Stockholders that are incorporated herein by reference. 21 --Subsidiaries of registrant. 23 --Consent of Arthur Andersen LLP. 24 --Power of Attorney. 27 --Financial Data Schedules. 99 --Consulting Agreement dated April 1, 1999 between Newmont International Services Limited and Robert J. Miller. Incorporated by reference to Exhibit 99 to registrant's Quarterly Report on Form 10-Q for the quarter ended June 30, 1999.
E-3 EX-10 2 LETTER AGREEMENT DATED 8/1/1999 Exhibit 10(v) NEWMONT MINING CORPORATION 1700 LINCOLN STREET DENVER, COLORADO RONALD C. CAMBRE TELEPHONE (303) 863-7414 CHAIRMAN FACSIMILE (303) 837-5928 CHIEF EXECUTIVE OFFICER August 1, 1999 Mr. Wayne W. Murdy President Newmont Mining Corporation 1700 Lincoln Street Denver, CO 80203 Dear Wayne: This letter is being delivered to you regarding the Demand Promissory Note dated as of October 7, 1998 in the principal amount of $50,000 that was issued by you to Newmont Mining Corporation (the "Original Note"). On behalf of Newmont, and in recognition of your service to Newmont, most recently evidenced by your election as President of Newmont, I wish to inform you that $25,000 of the principal amount of the Original Note and all accrued interest on the entire principal amount of the Original Note to the date hereof is hereby forgiven by Newmont. As a result, the Original Note will be canceled and you will execute and deliver to Newmont a new promissory note for the remaining principal amount of the Original Note (i.e. $25,000) (the "New Note"). We hereby agree that, if you are still employed with Newmont on April 1, 2000, then in consideration for the services rendered by you to Newmont, Newmont will forgive the remaining principal and interest due under the New Note and the New Note will be canceled at such time. Sincerely, /s/ Ronald C. Cambre Acknowledged and Accepted: /s/ Wayne W. Murdy - ---------------------------------- Wayne W. Murdy President EX-12 3 STATEMENT RE COMPUTATION OF RATIO EARNINGS EXHIBIT 12 Newmont Mining Corporation Computation of Ratio of Earnings to Fixed Charges (Amounts in thousands except ratio) (Unaudited)
For the Year Ended December 31 -------------------------------------------------------------------------------- 1999 1998 1997 1996 1995 ------------ ------------ ------------ ------------ ------------ Earnings: Income (loss) before income taxes and cumulative effect of changes in accounting principles $ 49,868 $ (541,335) $ 60,477 $ 82,652 $ 177,666 Adjustments: Net interst expense (1) 62,554 78,823 77,067 58,619 47,099 Amortization of capitalized interest 4,886 4,434 3,221 2,359 2,594 Portion of rental expense representative of interest 2,059 3,373 2,714 3,428 2,834 Minority interest of majority- owned subsidiaries that have fixed charges 72,470 70,286 71,438 6,584 9,864 Undistributed income (loss) of affiliate (10,675) -- -- (18,359) (7,027) ------------ ------------ ------------ ------------ ------------ $ 181,162 $ (384,419) $ 214,917 $ 135,283 $ 233,030 ============= ============ ============ ============ ============ Fixed Charges Net interest expense (1) $ 62,554 $ 78,823 $ 77,067 $ 58,619 $ 47,099 Capitalized interest 23,345 13,720 15,604 16,571 14,043 Portion of rental expense representative of interest 2,059 3,373 2,714 3,428 2,834 ------------ ------------ ------------ ------------ ------------ $ 87,958 $ 95,916 $ 95,385 $ 78,618 $ 63,976 ============= ============ ============ ============ ============ Ratio of Earnings to Fixed Charges 2.1 (4.0) 2.3 1.7 3.6 ============= ============ ============ ============ ============ (1) Includes interest expense of majority-owned subsidiaries and amortization of debt issuance costs.
EX-13 4 PORTIONS OF REGISTRANT'S 1999 ANNUAL REPORTS Exhibit 13 Management's Discussion and Analysis The following provides information that management believes is relevant to an assessment and understanding of the consolidated results of operations and financial condition of Newmont Mining Corporation (NMC) and its subsidiaries (collectively, Newmont). The discussion should be read in conjunction with the consolidated financial statements and accompanying Notes. As described in Note 1, in October 1998, NMC acquired the minority interest of Newmont Gold Company (NGC) and NGC became 100%-owned by NMC, and in May 1997, NMC acquired Santa Fe Pacific Gold Corporation (Santa Fe). Summary Newmont recorded net income of $24.8 million ($0.15 per share) compared with a net loss of $393.4 million ($2.47 per share) in 1998 and net income of $68.4 million ($0.44 per share) in 1997. Results for 1999 included, net of tax, an unrealized mark-to-market loss on call options of $29.1 million ($0.17 per share); charges for start-up losses at Batu Hijau, termination of a mining contract in Peru and a Nevada stockpile write-down totaling $16.5 million ($0.10 per share); and gains from the sale of exploration properties of $13.6 million ($0.08 per share). In 1998, the net loss, after tax and minority interest, included $424.7 million ($2.67 per share) for the write-down of assets impaired at a low gold price, $9.2 million ($0.05 per share) for the Batu Hijau start-up loss and $32.9 million ($0.21 per share) for the cumulative effect of an accounting change for start-up costs. In 1997, net income, after tax and minority interest, included $112.3 million ($0.72 per share) for expenses and write-offs associated with the Santa Fe merger and $14.4 million ($0.09 per share) from a gain on closing certain Santa Fe option contracts. Excluding these items, Newmont earned $56.8 million ($0.34 per share) in 1999, $73.4 million ($0.46 per share) in 1998 and $166.3 million ($1.07 per share) in 1997. As a largely unhedged company, NewmontOs realized gold price of $285, $310 and $354 per equity ounce in 1999, 1998 and 1997, respectively, closely tracked the declining spot market price for the metal. In this environment, NewmontOs focus has been on maximizing cash flow through cost reduction, operation optimization and discretionary spending deferral. Since 1997, total cash costs of production were reduced $12 to $175 an ounce and total production costs declined $23 to $227 an ounce. Cash flow from operating activities increased to $402.0 million in 1999, from $373.5 million in 1998 and from $283.8 million in 1997. Gold production in 1999 increased to 4.18 million equity ounces from 4.07 million ounces in 1998 and from 3.96 million ounces in 1997. Annual production in 2000 is expected to grow to approximately 4.5 million equity ounces at a total cash cost of $175 per ounce. Gold reserves at December 31, 1999 totaled 56.6 million equity ounces, up 8% from December 31, 1998. Reserve calculations for 1999 were based on a long- term price assumption of $325 per ounce versus $350 in 1998. Better ore definition and metallurgical analysis, as well as overall lower production costs and increased reserves from lower-cost deposits, reduced the sensitivity of reserves to changes in the metal price. A long-term gold price of $300 per ounce could lower reserves approximately 5%, while a $350 per ounce price could increase reserves approximately 2%. In December 1999, copper concentrate shipments commenced at the Batu Hijau mine in Indonesia, in which Newmont holds an indirect 45% equity interest. Construction of the mine was completed during the fourth quarter of 1999 at a cost of $1.83 billion. Market Conditions and Risks Metal Price Changes in the market price of gold significantly affect NewmontOs profitability and cash flow. Gold prices can fluctuate widely due to numerous factors, such as demand; forward selling by producers; central bank sales, purchases and lending; investor sentiment and production levels. Based on estimates of 2000 production and expenses, a $10-per-ounce change in the gold price would result in an increase or decrease of approximately $42 million in cash flow from operations and approximately $34 million (about $0.20 per share) in net income excluding the unrealized mark-to-market gain or loss on call options. Changes in the market price of copper will also affect NewmontOs profitability and cash flow from its Batu Hijau mine in Indonesia. Newmont generally sells its gold production at market prices, but has forward sales contracts for 125,000 ounces in 2000 from its Minahasa mine in Indonesia at an average price of $454 per ounce. Following a decline in spot market prices to $253 per ounce in July 1999, Newmont entered into two put and call option contracts to provide a measure of price protection. As described in Note 10, Newmont purchased near-term put options contracts for 2.85 million ounces of gold, with a strike price of $270 per ounce. This purchase was paid for by selling call option contracts for 2.35 million ounces, with strike prices between $350 and $392 per ounce, expiring in 2004 though 2009. Gold subject to call options contracts represents approximately 4% of proven and probable reserves at December 31, 1999. The call options are marked-to-market at each quarter-end and the resulting gains or losses may fluctuate significantly, primarily depending upon gold market prices and volatility. 19 Management's Discussion and Analysis Foreign Currency In addition to the U.S., Newmont operates in Peru, Uzbekistan and Indonesia. Gold produced at these operations is sold in the international markets for U.S. dollars. The cost and debt structures at these operations are primarily U.S. dollar-denominated. To the extent there are fluctuations in local currency exchange rates against the U.S. dollar, the devaluation of a local currency is generally economically neutral or beneficial to the operation since local salaries and supply contracts will decrease against the U.S. dollar revenue stream. Over the past three years, Indonesia has experienced a significant devaluation of its currency, the rupiah, with partial recovery during 1999. The functional currency for Newmont's Indonesian projects is the U.S. dollar; however, certain receivables, primarily refunds of Value Added Tax, are rupiah- denominated. During 1999, 1998 and 1997, $2.6 million, $3.6 million and $3.3 million, respectively, were expensed for exchange rate adjustments. Interest Rates At December 31, 1999, Newmont's long-term debt of $1,037.5 billion included $232.2 million of variable-rate debt with an average interest rate of 7.0%, and fixed-rate debt of $805.3 million, with an average interest rate of 7.6% and an estimated fair value of $793.6 million. Newmont's public debt has received an investment-grade credit rating from both Moody's Investors Service (Baa3) and Standard & Poor's Ratings Services (BBB).
Results of Operations Production Equity Production Ozs. (000) Total Cash Cost Per Equity Oz. - ----------------------------------------------------------------------------------------------------------------------- 1999 1998 1997 1999 1998 1997 - ----------------------------------------------------------------------------------------------------------------------- North American operations: Nevada operations 2,498.7 2,769.6 2,776.5 $ 211 $ 209 $ 205 Mesquite, California 164.6 154.0 227.9 167 176 213 La Herradura, Mexico 40.2 12.9 --- 159 115 --- Yanacocha, Peru 850.3 685.9 530.9 103 95 87 Zarafshan-Newmont, Uzbekistan 271.5 187.3 215.0 161 207 201 Minahasa, Indonesia 343.9 261.0 206.5 103 127 156 Batu Hijau, Indonesia 6.3 --- --- n/a --- --- - ----------------------------------------------------------------------------------------------------------------------- Total/Weighted average 4,175.5 4,070.7 3,956.8 $ 175 $ 183 $ 187 - -----------------------------------------------------------------------------------------------------------------------
Total cash costs include charges for mining ore and waste associated with current period gold production, processing ore through milling and leaching facilities, production taxes, royalties and other cash costs. North American Operations Newmont's Nevada operations (along the Carlin Trend near Elko and in the Winnemucca region, where Twin Creeks and the Lone Tree Complex are located) include production from nine open-pit and four underground mines. Oxide ores are processed by milling or heap leaching, depending upon ore grade. The Carlin roaster and Winnemucca region autoclaves process higher-grade refractory ores. The Lone Tree flotation plant processes lower-grade refractory ores. Computerized optimization is utilized to determine the best mix of ores for each processing plant to maximize recoveries and economic returns. Nevada production of 2.5 million ounces in 1999 was 10% lower than in 1998, reflecting the declining availability of surface oxide ores and reduced mining rates. Approximately 221 million tons of material were mined from surface open pits in 1999, down 19% and 40% from 1998 and 1997, respectively. Refractory ore treatment facilities generated 54% of Nevada's production in 1999, increasing from 42% and 35% in 1998 and 1997, respectively. Total cash costs increased slightly to $211 per ounce in 1999 as cost reduction efforts nearly offset higher costs associated with refractory ore processing. In 2000, with gold from refractory ores comprising approximately 58% of Nevada's estimated 2.65 million ounces of production, total cash costs per ounce are expected to increase moderately. In May 1999, Newmont exchanged approximately two million ounces of reserves and various land rights on the north Carlin Trend with a neighboring producer. By consolidating Newmont's land position in the area, the exchange provided operational and exploration synergies that, among other benefits, accelerated development of the high-grade Deep Post underground deposit. Gold production at the Mesquite heap-leach mine in southern California increased 7% to 164,600 ounces in 1999 with 21% more ore placed on the leach pads. Total cash costs per ounce declined 5% to $167 per ounce. Production in 2000 is expected to stay at the current level, but with higher total cash costs per ounce. Mesquite is nearing the end of its mine life. 20 Management's Discussion and Analysis At La Herradura, a 44%-owned joint venture with Minera Pe-oles, S.A. de C.V., the operator of the heap-leach operation in Sonora, Mexico, Newmont's equity share of 1999 production totaled 40,200 ounces at a total cash cost of $159 per ounce. Production began in the third quarter of 1998 and totaled 12,900 equity ounces at a total cash cost of $115 per equity ounce. Commencement of ore crushing prior to leaching in 2000 is expected to increase production 48% with a modest increase in per ounce costs. Overseas Operations Minera Yanacocha, a 51.35%-owned joint venture with Compa-ia de Minas Buenaventura, S.A.A. in Peru, includes four open pit mines, three leach pads and two gold recovery plants. In 1999, Yanacocha achieved record production of 1.66 million ounces (850,300 equity ounces), a 24% increase from 1998 and 600,000 ounces higher than in 1997. Total cash costs of $103 per ounce, while up slightly from 1998, are comparatively low because of low waste-to-ore ratios and porous ore that yields high gold recoveries without crushing prior to heap leaching. Production at Yanacocha has grown annually through the discovery and development of reserves and increased mining and processing capacity. During 1999, approximately 106 million tons of material were mined (61.4 million ore tons and 44.6 million waste tons), a 51% increase from 1998 and 126% more tonnage than in 1997. In late 1999, Yanacocha terminated its contract mining agreement and anticipates improved productivity and efficiency by conducting mine operations with its own employees. In 2000, production is expected to exceed 1.75 million ounces (900,000 equity ounces), at somewhat lower total cash costs per ounce. A fifth deposit, La Quinua, will be developed in 2000 for production beginning in 2001. As described in Note 19, Newmont acquired an additional 13.35% interest in Minera Yanacocha in 1997. The acquisition was contested by a former partner, but resolved in Newmont's favor in 1998 with a decision of the Peruvian Supreme Court. In spite of this final decision, the former partner filed with the International Centre for Settlement of Investment Disputes a request for arbitration against the Republic of Peru, alleging that the Peruvian courts had wrongfully deprived it of its shares in Yanacocha. While Newmont is not a party to the arbitration and believes that the claims are unfounded, it is unclear what effect, if any, the arbitration might have on the company. Newmont continues to monitor this and related arbitration and remains open to consider alternatives which could bring these issues to conclusion. The Zarafshan-Newmont Joint Venture, in the Central Asian Republic of Uzbekistan, is a 50/50 joint venture between Newmont and two Uzbekistan governmental entities. Zarafshan-Newmont produces gold by crushing and heap leaching low-grade oxide ore from existing stockpiles at the government-owned Muruntau mine. Changes in grinding size and other recovery rate enhancements increased 1999 production 45% to 543,000 ounces (271,500 equity ounces). Total cash costs per ounce decreased to $161 per ounce from $207 in 1998. In 2000, production is expected to be approximately 400,000 ounces (200,000 equity ounces) with a further reduction in total cash costs per ounce. At Minahasa, in Indonesia, where Newmont has an 80% interest, but receives 100% of the gold production until recouping the bulk of its investment, including interest, production rose 32% to 343,900 ounces. Total cash cost of $103 per ounce, a $24 decline from 1998, reflected a significant increase in processed ore grades and initial production from Indonesia's first heap leach operation. Production in 2000 is expected to increase to approximately 350,000 ounces, with somewhat higher total cash costs per ounce. Construction of the Batu Hijau copper/gold mine in Indonesia was completed in the fourth quarter of 1999. Newmont holds an indirect 45% equity interest in the mine, but receives 56.25% of production until recouping the bulk of its investment. Production totaled 52.6 million pounds of copper (29.6 million equity pounds) and 28,700 ounces of gold (16,100 equity ounces). Concentrate sales in 1999 included 10.2 million equity pounds of copper and 6,300 equity ounces of gold. Production in 2000 is expected to be 500 million pounds of copper (281 million equity pounds) and 290,000 ounces of gold (163,000 equity ounces). Total cash production costs are expected to be 55 cents per pound, after gold sales credits, and to decline in future years as the mine and mill ramp up to steady-state operating rates. Financial Results Consolidated sales include 100% of Yanacocha production and Newmont's ownership share of production elsewhere, except for Batu Hijau, which is accounted for as an equity investment. Variances in sales revenue are illustrated in the following table:
1999 1998 1997 - ---------------------------------------------------------------------------------------------- Consolidated sales (in millions) $1,398.9 $1,453.9 $1,572.8 Consolidated production ozs. (000) 4,974.7 4,720.6 4,478.7 Average price received per ounce $ 285 $ 308 $ 351 Average market price per ounce $ 280 $ 294 $ 331 - ----------------------------------------------------------------------------------------------
1999 vs. 1998 1998 vs. 1997 Increase (decrease) in consolidated sales due to (in millions): Consolidated production $ 77.7 $ 72.7 Average gold price received (132.7) (191.6) - ---------------------------------------------------------------------------------------------- Total $ (55.0) $ (118.9) - ----------------------------------------------------------------------------------------------
21 Management's Discussion and Analysis Realized gold prices higher than average market gold prices resulted from sales under commodity hedging instruments of 6% of equity production in 1999, 18% in 1998 and 30% in 1997. Dividends, interest and other for 1999 included $21 million from the sale of two exploration properties: True North in Alaska and an equity investment in Argentina Gold. In 1998 and 1997, $8.3 million and $6.5 million, respectively, was included for recoveries from business interruption insurance related to processing facilities in Nevada. 1997 also included gains from closing certain put and call option contracts ($23.7 million) and from a property disposition ($5.1 million). Interest income declined to $8.7 million and $7.8 million in 1999 and 1998, respectively, from $14.6 million in 1997 reflecting lower interest rates and cash balances. Costs applicable to sales include total cash costs and provisions for estimated final reclamation expenses related to consolidated production. The increase in costs, primarily related to higher production levels at Yanacocha, was partially offset by cost-reduction efforts at all locations. 1999 1998 1997 - ------------------------------------------------------------------ Costs applicable to sales (in millions): North American operations: Nevada operations $534.1 $586.2 $565.8 Mesquite 27.5 27.9 49.4 La Herradura 6.4 1.5 --- Yanacocha 183.8 136.5 98.9 Zarafshan-Newmont 44.1 39.0 43.8 Minahasa 36.1 33.8 32.6 - ------------------------------------------------------------------ Total $832.0 $824.9 $790.5 - ------------------------------------------------------------------ Certain mining costs associated with deposits that have diverse grade and waste-to-ore ratios over the mine life are capitalized. In 1999, 1998 and 1997, such costs were capitalized for certain deposits at the Nevada operations ($25.0 million, $29.5 million and $66.5 million, respectively) and at Minahasa (none, $3.6 million and $8.4 million, respectively). These costs are charged to operating expenses as the related gold is sold. Reduced mining rates led to lower capitalized mining costs in 1998 and 1999. Depreciation, depletion and amortization decreased in 1999 primarily as a result of the 1998 asset write-down described in the next column. The 9% increase in 1998 from 1997 resulted from the addition of mine and leach facilities as well as higher production at Yanacocha. 1999 1998 1997 - ---------------------------------------------------------------------------- Depreciation, depletion and amortization (in millions): North American operations: Nevada operations $123.8 $172.6 $168.9 Mesquite 7.0 19.1 23.5 La Herradura 2.1 0.6 --- Yanacocha 66.8 59.6 41.7 Zarafshan-Newmont 11.8 11.3 11.9 Minahasa 24.2 20.1 18.3 Other 3.9 5.8 1.5 - ---------------------------------------------------------------------------- Total $239.6 $289.1 $265.8 - ---------------------------------------------------------------------------- Exploration and research expenses were reduced in 1999 and 1998 by 42% and 31%, respectively, from 1997, because of the decline in gold prices. In 2000, these expenses are targeted to increase approximately 10%. Interest expense, net of amounts capitalized was $62.6 million, $78.8 million and $77.1 million in 1999, 1998 and 1997, respectively. Net interest expense in 1999 declined because of higher capitalized interest for Newmont's investment in Batu Hijau. In 2000, with Batu Hijau in operation, such interest will not be capitalized and interest expense is expected to increase about 30%. Write-down of assets in 1998 totaled $614.9 million ($424.7 million net of tax) and related to Property, plant and mine development ($528 million), Inventories ($80 million) and Other long-term assets ($7 million), primarily at Nevada operations. In 1999 and 1997, Nevada stockpile inventories were written down $3.5 million and $9.5 million, respectively. Merger and related expenses in 1997 of $162.7 million ($112.3 million net of tax and minority interest) consisted of $135.4 million for transaction costs and $27.3 million for write-offs associated with the Santa Fe merger. Other expenses in 1999, 1998 and 1997 included $7.9 million, $4.8 million and $5.0 million, respectively, for environmental obligations associated with former mining activities. 1999 also included $5.4 million for costs associated with terminating the mining contract at Yanacocha. 1997 included $10.0 million for severance costs associated with a workforce reduction. An Unrealized mark-to-market loss on call options in 1999 of $44.8 million ($29.1 million, net of tax) reflected the difference between the fair value of call option contracts on the date sold and the fair value on December 31, 1999. An increase in fair value represents an unrealized gain to the counterparty holding these contracts and a corresponding unrealized loss to Newmont. The increase in fair value primarily resulted from the price increase and volatility in the gold spot market during the fourth quarter. Over the life of the contracts, these losses will be restored to income. 22 Management's Discussion and Analysis Income tax expense of $14.4 million in 1999, with an effective tax rate of 12%, primarily reflected a reduction in the valuation allowance for deferred tax assets. The $180.9 million income tax benefit in 1998 was primarily attributable to the asset write-down while the $7.9 million benefit in 1997 reflected the consolidation of Yanacocha, synergies from the Santa Fe merger and refunds from settling prior-year tax audits. Equity loss of affiliated company of $10.7 million and $9.2 million in 1999 and 1998, respectively, were start-up losses for the Batu Hijau project that commenced production in the fourth quarter of 1999. Effective January 1, 1998, Newmont adopted the American Institute of Certified Public Accountants Statement of Position 98-5 requiring that certain start-up costs be expensed rather than capitalized. As discussed in Note 18, such costs incurred and capitalized prior to January 1, 1998 were expensed. The cumulative effect of the accounting change was $32.9 million, net of tax and minority interest, and included approximately $18 million for Batu Hijau and $11 million for Nevada operations. Liquidity and Capital Resources During 1999, cash flow from operating activities of $402.0 million funded capital expenditures ($220.9 million), advances to Batu Hijau ($158.9 million) and dividends ($20.1 million). Proceeds from prepaid forward gold sales of $137.2 million and cash received from joint ventures and asset sales enabled debt reduction, net of cash, of $187 million during 1999. Newmont expects to generate approximately 15% more cash from operations in 2000 (with comparable gold price realizations). These cash flows are expected to sufficiently fund capital expenditures, advances to affiliates, dividends and consolidated debt reduction. Investing Activities and Capital Expenditures Batu Hijau As discussed in Note 3, Newmont has an indirect 45% interest in the Batu Hijau mine in Indonesia that, with proven and probable reserves of 10.5 billion pounds of copper (5.7 billion equity pounds) and 11.8 million ounces of gold (6.4 million equity ounces), has a projected mine life in excess of 20 years. Until recovering the bulk of its investment, Newmont recognizes 56.25% of Batu Hijau's income. At December 31, 1999 and 1998, Newmont's investment in Batu Hijau was $438.3 million and $277.2 million, respectively. Construction was completed during the fourth quarter of 1999 at a cost of $1.83 billion that included development of the open pit mine, mill and infrastructure (employee housing, port and electrical generation facilities), interest during construction and working capital. During 1999, Newmont advanced $158.9 million to the project (reflected in Advances to affiliated company) and expects to fund approximately $90 million in 2000. Third-party project loans of $1.0 billion were fully utilized as of December 31, 1999. These loans are guaranteed by Newmont and its partner, Sumitomo Corporation, 56.25% and 43.75%, respectively, until project completion tests are met, and will be non-recourse thereafter (except for a $125 million contingent support facility that Newmont and Sumitomo will provide on a pro-rata basis). Project completion tests are expected to be met during 2000. The lenders carry all political risk on their investment. Debt repayments of $43.5 million semi-annually will begin the earlier of six months after project completion or June 15, 2001. Capital Expenditures As part of Newmont's strategic focus on maximizing cash flow, coupled with the completion in 1997 of several Nevada expansion projects, capital expenditures in 1999 and 1998 were reduced approximately 47% from 1997. 1999 1998 1997 - ------------------------------------------------------------------ Capital expenditures (in millions): North American operations: Nevada operations $ 52.2 $ 95.6 $231.0 Mesquite 1.2 6.7 18.8 La Herradura 5.2 9.7 --- Yanacocha (100%) 126.3 82.5 113.7 Minahasa 10.8 6.4 24.2 Zarafshan-Newmont 3.2 0.9 5.6 Other projects and capitalized interest 22.0 14.2 21.8 - ------------------------------------------------------------------ Total $220.9 $216.0 $415.1 - ------------------------------------------------------------------ During 1999, capital expenditures in Nevada included capitalized mining costs ($25.0 million), deferred mine development ($15.1 million), refractory leach pads ($5.8 million) and other ongoing capital requirements. Yanacocha capital expenditures included costs to convert to owner mining ($58.3 million), leach pad expansion ($41.2 million) and development drilling and mine development ($18.0 million). In 1998, capital expenditures in Nevada included capitalized mining costs ($29.5 million), refractory leach pads ($22.0 million) and process equipment ($14.6 million). Yanacocha's expenditures included $47.8 million for mine/facility expansion and $16.4 million for development drilling. During 1997, Nevada expenditures were for completion of refractory ore treatment facilities ($90.3 million), capitalized mining costs ($66.5 million), mining and de-watering equipment ($22.9 million), deferred mine development ($22.5 million) and refractory leach pads ($10.9 million). At Yanacocha, expenditures included mine and facility expansion ($78.4 million) and development drilling ($14.0 million). 23 Management's Discussion and Analysis Capital spending in 2000 is expected to be approximately $290 million; including, $205 million at Yanacocha (primarily for leach pad expansion and development of the La Quinua deposit); $65 million in Nevada (primarily for development of the Deep Post underground mine and capitalized mining) and $20 million at all other sites. Financing Activities Newmont has a $1.0 billion revolving credit facility with a consortium of banks that expires in June 2002. At December 31, 1999, $210 million was outstanding under this facility. The interest rate is variable and was 6.7% at December 31, 1999. In July 1999, long-term debt was reduced $135 million with initial proceeds from a prepaid forward sale contract described in Note 9. Scheduled minimum long-term debt repayments are $23.3 million in 2000. Newmont expects to fund maturities of its debt through operating cash flow and/or by refinancing the debt as it becomes due. Other In October 1998, NMC acquired the 6.25% minority interest of NGC by merging an NMC subsidiary into NGC and issuing 10.7 million shares of NMC common stock to NGC minority interest stockholders. The merger was accounted for at historic cost, with the exception of the minority interest, which was accounted for using purchase accounting. The excess purchase price over NMC's carrying value of its minority interest (approximately $207 million) was allocated to assets and liabilities of NGC and Stockholders' equity increased $259 million. The decrease in accounts payable and accrued expenses of $51.9 million in 1998 included payments for interest, severance and other benefit-related accruals. Developments in Indonesia Indonesia, a nation of thousands of islands stretching between the Indian and Pacific Oceans, is experiencing a period of political and social change in an economically challenged environment. This has resulted in civil disturbances in several cities. Following the significant devaluation of its currency three years ago, the country has coped with a weakened economy, the departure of its president of 32 years and the election of new central government leadership. Local provinces and regions are seeking greater autonomy and an opportunity to obtain a greater share of collected tax revenue. Newmont operates the Minahasa mine on the island of Sulawesi and the Batu Hijau mine on the island of Sumbawa. Both are in remote locations and have been largely unaffected by the civil unrest. Both mines operate under Contracts of Work issued by the central government. These contracts grant Newmont (through its subsidiaries and/or affiliates) exclusive rights to conduct exploration, construct required facilities to extract and process minerals, and to export and sell its production abroad. Operating rights under the contracts continue for 30 years after commencement of commercial production, or longer upon government approval. Indonesia's new government has reaffirmed its intention to uphold existing Contracts of Work. On January 22, 2000, a regional court issued a provisional judgment to shut down the Minahasa mine pending the outcome of a court case submitted by a local official involving the application of taxes on overburden, or sand, gravel and rock lying over the ore body. The judgment cannot take effect unless confirmed by northern Sulawesi's Manado High Court. Newmont has been advised by its Indonesian counsel that such tax is not applicable to the Minahasa operation and the Indonesian Minister of Mines and Energy has confirmed this view in a December 1999 letter to the Minister of Home Affairs. The letter also states that the Minister of Mines and Energy is the only party who could issue a temporary or permanent closure order to Minahasa. Any disputes under the Contract of Work are subject to international arbitration. Newmont is committed to fair and equitable business practices and compliance with all applicable laws, rules and regulations, and will continue its efforts to resolve this issue within the proper legal framework. Environmental Included in 1999 capital expenditures was approximately $3 million to comply with environmental regulations. Expenditures of $2 million are anticipated in 2000. Ongoing costs to comply with environmental regulations have not been a significant component of cash operating costs. Estimated future reclamation and remediation costs relating to currently producing mines are accrued over each mine life and at December 31, 1999, $66.9 million had been accrued. Newmont spent $9.1 million, $10.9 million and $13.0 million in 1999, 1998 and 1997, respectively, for environmental obligations related to former mining sites discussed in Note 19, and expects to spend approximately $8 million in 2000. At December 31, 1999, $43.6 million was accrued for total estimated future costs associated with such obligations. It is reasonably possible that the ultimate liability may be as much as 70% greater or 20% lower than the amount accrued at December 31, 1999. Environmental obligations are continuously monitored and reviewed and, although Newmont believes that its reserves are adequate, as additional facts become known, further provisions may be required. 24 Year 2000 Readiness Disclosure Newmont completed its comprehensive "Year 2000 Readiness Program" during 1999 to address the ability of its computer hardware, software and control systems to correctly identify two-digit references to specific years, beginning with the year 2000. Although Newmont did not separately track its internal costs incurred for the program (such costs being principally the related payroll costs for its information systems group), external costs for completing the project were approximately $2 million. Significant cost savings were achieved through innovative remediation solutions and the extensive use of its own workforce in performing the remediation tasks. Newmont realized additional cost savings because the business continuity and contingency plans did not require activation during or after the date rollover. The program successfully addressed Newmont's year 2000 concerns. During the rollover to the year 2000, Newmont's operations experienced no significant date-related incidents and no future date-related incidents are anticipated. Safe Harbor Statement The foregoing discussion and analysis, as well as certain information contained elsewhere in this Annual Report, contain "forward-looking statements" within the meaning of Section 21E of the Securities Exchange Act of 1934, as amended. These statements concerning future operations or events are subject to important risks, uncertainties and other factors that could cause actual results to differ materially. Forward-looking statements involve certain factors that are subject to change including, but not limited to, the price of gold and copper; interest and currency exchange rates; geological and metallurgical assumptions; operating performance of equipment, processes and facilities; labor relations; timing of receipt of necessary governmental permits or approvals; weather and other acts of God; domestic and foreign laws or regulations, particularly relating to the environment and mining; domestic and international economic and political conditions; the ability of joint venture partners to meet their obligations; the ability of Newmont to obtain or maintain necessary financing; and other risks and hazards associated with mining operations. More detailed information regarding Newmont, its operations and factors that could materially affect its financial position and results of operations are included in NMC's Annual Report on Form 10-K as well as other filings with the Securities and Exchange Commission. Many of these factors are beyond Newmont's ability to control or predict. Readers are cautioned not to put undue reliance on forward-looking statements. Newmont disclaims any intent or obligation to update publicly any forward-looking statements set forth herein, whether as a result of new information, future events or otherwise. Report of Independent Public Accountants To the Board of Directors and the Shareholders of Newmont Mining Corporation: We have audited the accompanying consolidated balance sheets of Newmont Mining Corporation (a Delaware corporation) and subsidiaries (the "Company") as of December 31, 1999 and 1998, and the related consolidated statements of operations, changes in stockholders' equity and cash flows for each of the three years in the period ended December 31, 1999. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with auditing standards generally accepted in the United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Newmont Mining Corporation and subsidiaries as of December 31, 1999 and 1998, and the results of their operations and their cash flows for each of the three years in the period ended December 31, 1999 in conformity with accounting principles generally accepted in the United States. As explained in Notes 2 and 18 to the consolidated financial statements, effective January 1, 1998, the Company changed its method of accounting for start-up costs. /s/ ARTHUR ANDERSEN LLP - ----------------------- ARTHUR ANDERSEN LLP Denver, Colorado, January 21, 2000. 25 Statements of Consolidated Operations
Years Ended December 31, (In thousands, except per share) 1999 1998 1997 - ---------------------------------------------------------------------------------------------------- Sales and other income Sales $1,398,927 $1,453,856 $1,572,757 Dividends, interest and other 32,661 21,057 55,235 - ---------------------------------------------------------------------------------------------------- 1,431,588 1,474,913 1,627,992 - ---------------------------------------------------------------------------------------------------- Costs and expenses Costs applicable to sales 832,013 824,858 790,545 Depreciation depletion and amortization 239,568 289,067 265,765 Exploration and research 57,558 68,373 98,420 General and administrative 52,650 49,724 66,380 Interest, net of amounts capitalized 62,554 78,823 77,067 Write-down of assets 3,514 614,893 9,500 Merger and related expenses --- --- 162,674 Other 16,572 11,060 25,726 - ---------------------------------------------------------------------------------------------------- 1,264,429 1,936,798 1,496,077 - ---------------------------------------------------------------------------------------------------- Operating income (loss) 167,159 (461,885) 131,915 Unrealized mark-to-market loss on call options (44,821) --- --- - ---------------------------------------------------------------------------------------------------- Pre-tax income (loss) before minority interest, equity loss and cumulative effect of a change in accounting principle 122,338 (461,885) 131,915 Income tax (expense) benefit (14,400) 180,876 7,900 Minority interest in Minera Yanacocha (72,470) (66,193) (66,882) Minority interest in Newmont Gold Company --- (4,093) (4,556) Equity loss of affiliated company (10,675) (9,164) --- - ---------------------------------------------------------------------------------------------------- Net income (loss) before cumulative effect of a change in accounting principle 24,793 (360,459) 68,377 Cumulative effect of a change in accounting principle, net --- (32,924) --- - ---------------------------------------------------------------------------------------------------- Net income (loss) $ 24,793 $ (393,383) $ 68,377 ==================================================================================================== Other comprehensive income (loss) (1,642) (39) --- - ---------------------------------------------------------------------------------------------------- Comprehensive income (loss) $ 23,151 $ (393,422) $ 68,377 ==================================================================================================== Net income (loss) before cumulative effect of a change in accounting principle per basic and diluted $0.15 $ (2.27) $ 0.44 ==================================================================================================== Net income (loss) per common share, basic and diluted $0.15 $(2.47) $0.44 ==================================================================================================== Basic weighted average shares outstanding 167,462 159,010 156,243 ==================================================================================================== Diluted weighted average shares outstanding 167,800 159,023 156,347 ====================================================================================================
The accompanying notes are an integral part of these statements. 26 Consolidated Balance Sheets
At December 31, (In thousands, except shares and per share) 1999 1998 - -------------------------------------------------------------------------------------------------- Assets Cash and cash equivalents $ 55,314 $ 79,086 Short-term investments 9,414 11,802 Accounts receivable 40,553 52,066 Put option premiums 19,148 --- Inventories 322,614 280,371 Other current assets 87,010 89,755 - -------------------------------------------------------------------------------------------------- Current assets 534,053 513,080 Property, plant and mine development, net 1,972,348 2,048,707 Investment in Batu Hijau 438,318 277,221 Long-term inventory 171,206 159,674 Deferred income tax assets 197,456 146,042 Other long-term assets 70,001 90,703 - -------------------------------------------------------------------------------------------------- Total assets $3,383,382 $3,235,427 ================================================================================================== Liabilities Current portion of long-term debt $ 23,293 $ 47,575 Accounts payable 38,039 37,943 Current portion of deferred income tax liabilities 29,520 7,200 Other accrued liabilities 183,021 126,825 - -------------------------------------------------------------------------------------------------- Current liabilities 273,873 219,543 Long-term debt 1,014,193 1,201,131 Deferred revenue from sale of future production 137,198 --- Reclamation and remediation liabilities 104,677 94,840 Fair value of written call options 82,434 --- Deferred income tax liabilities 34,322 41,473 Other long-term liabilities 158,680 146,099 - -------------------------------------------------------------------------------------------------- Total liabilities 1,805,377 1,703,086 Commitments and contingencies (See Notes 3, 9 and 19) Minority interest in Minera Yanacocha 126,357 92,808 - -------------------------------------------------------------------------------------------------- Stockholders' Equity Common stock--$1.60 par value; 250 million shares authorized; 167.9 million and 167.5 million shares issued, less 242 thousand and 309 thousand treasury shares, respectively 268,262 267,544 Additional paid-in capital 1,069,146 1,060,803 Retained earnings 114,240 111,186 - -------------------------------------------------------------------------------------------------- Total stockholders' equity 1,451,648 1,439,533 - -------------------------------------------------------------------------------------------------- Total liabilities and stockholders' equity $3,383,382 $3,235,427 ==================================================================================================
The accompanying notes are an integral part of these statements. 27 Statements of Consolidated Changes in Stockholders' Equity
Common Stock Additional ------------ Paid-In Retained (In thousands) Shares Amount Capital Earnings - ---------------------------------------------------------------------------------------------------------------------- Balance at December 31, 1996 156,030 $ 249,648 $ 803,331 $ 509,773 Shares issued under stock compensation plans 439 702 13,382 87 Net income --- --- --- 68,377 Common stock dividends --- --- --- (54,540) Other --- --- 327 --- - ---------------------------------------------------------------------------------------------------------------------- Balance at December 31, 1997 156,469 250,350 817,040 523,697(1) Common stock issued for acquisition of minority interest of Newmont Gold Company 10,694 17,111 242,225 --- Shares issued under stock compensation plans 52 83 1,538 --- Net loss --- --- --- (393,383) Common stock dividends --- --- --- (19,105) Other --- --- --- (23) - ---------------------------------------------------------------------------------------------------------------------- Balance at December 31, 1998 167,215 267,544 1,060,803 111,186(1) Shares issued under retirement savings plans 380 608 7,087 --- Shares issued under stock compensation plans 69 110 1,230 --- Net income --- --- --- 24,793 Common stock dividends --- --- --- (20,097) Other --- --- 26 (1,642) - ---------------------------------------------------------------------------------------------------------------------- Balance at December 31, 1999 167,664 $ 268,262 $1,069,146 $ 114,240(1) ======================================================================================================================
(1) Includes accumulated other comprehensive income for adjustments to minimum pension liabilities of $3,494, $2,274 and $2,191 as of December 31, 1999, 1998 and 1997, respectively. The accompanying notes are an integral part of these statements. 28 Statements of Consolidated Cash Flows
Years Ended December 31, (In thousands) 1999 1998 1997 - ------------------------------------------------------------------------------------------------------------------- Operating Activities Net income (loss) $ 24,793 $(393,383) $ 68,377 Adjustments to reconcile net income (loss) to net cash provided by operating activities: Depreciation, depletion and amortization 239,568 289,067 265,765 Unrealized mark-to-market loss on call options 44,821 --- --- Amortization of capitalized mining costs 38,334 52,634 55,254 Amortization of put option premiums 18,465 --- --- Write-down of assets 3,514 614,893 9,500 Deferred tax benefit (65,000) (221,020) (48,800) Cumulative effect of change in accounting principle --- 32,924 --- Undistributed losses of affiliated company 10,675 9,164 --- Minority interest, net of dividends 33,549 33,647 7,735 Merger related asset write-down --- --- 27,288 (Gain) loss on asset sales and other (24,502) 3,379 8,374 (Increase) decrease in operating assets: Accounts receivable 15,091 17,341 (12,188) Inventories (24,390) (7,821) (149,296) Other assets 65 (5,193) 8,414 Increase (decrease) in operating liabilities: Accounts payable and other accrued liabilities 55,623 (51,894) 41,983 Other liabilities 31,393 (225) 1,375 - ------------------------------------------------------------------------------------------------------------------- Net cash provided by operating activities 401,999 373,513 283,781 - ------------------------------------------------------------------------------------------------------------------- Investing Activities Additions to property, plant and mine development (220,946) (216,025) (415,082) Proceeds from sale of future production 137,198 --- --- Acquisition of additional interest in Minera Yanacocha --- (75.868) --- Advances to affiliated company (158,878) (131,029) (67,119) Repayments from joint ventures and affiliates 19,873 --- 16,356 Cash effect of consolidating Minera Yanacocha --- --- 40,705 Proceeds from asset sales and other 41,917 2,099 48 - ------------------------------------------------------------------------------------------------------------------- Net cash used in investing activities (180,836) (420,823) (425,092) - ------------------------------------------------------------------------------------------------------------------- Financing Activities Proceeds from short-term debt 3,000 --- 7,630 Repayments of short-term debt (3,000) (25,771) (27,840) Proceeds from long-term debt 174,000 135,000 828,000 Repayments of long-term debt (397,591) (109,017) (702,541) Dividends paid on common stock (20,097) (19,105) (54,540) Other (1,247) (943) 9,781 - ------------------------------------------------------------------------------------------------------------------- Net cash (used in) provided by financing activities (244,935) (19,836) 60,490 - ------------------------------------------------------------------------------------------------------------------- Net change in cash and cash equivalents (23,772) (67,146) (80,821) Cash and cash equivalents at beginning of year 79,086 146,232 227,053 - ------------------------------------------------------------------------------------------------------------------- Cash and cash equivalents at end of year $ 55,314 $ 79,086 $ 146,232 ===================================================================================================================
See Note 16 for supplemental cash flow information. The accompanying notes are an integral part of these statements. 29 Notes to Consolidated Financial Statements Note 1 The Company Newmont Mining Corporation and its subsidiaries (collectively, "NMC" or the "Company") is a worldwide company engaged in gold production, exploration for gold and acquisition of gold properties. The Company also has an interest in a copper/gold mine that commenced production in late 1999. All of NMC's operations are conducted through Newmont Gold Company ("NGC"), a wholly-owned subsidiary of NMC. NGC Merger Prior to October 1998, NMC owned 93.75% of the common stock of NGC. In October 1998, NMC acquired the remaining 6.25% interest in NGC through the merger of a wholly-owned subsidiary of NMC into NGC. The merger was accounted for at historic cost, with the exception of the minority interest, which was accounted for as a purchase. The purchase price was based on the $24.25 per share value of the 10.7 million shares of NMC common stock issued to NGC stockholders. The excess purchase price over the carrying value of such minority interest (including transaction costs of $1.0 million and related deferred taxes of $53.6 million) was $206.9 million and was allocated to NGC's assets and liabilities based on their respective fair market values ($122.0 million to Investment in Batu Hijau and $84.9 million to Property, plant and mine development primarily for Yanacocha). The Company's stockholders' equity increased $259.3 million as a result of this transaction. The following unaudited pro forma information reflects the consolidated results of operations of the Company as if the acquisition had taken place on January 1, 1997. The pro forma results have been prepared for comparative purposes only and are not indicative of the results of operations that would have actually occurred had the merger been consummated on the date indicated. The pro forma information includes adjustments for the additional depreciation, depletion and amortization resulting from the allocation of the excess purchase price, elimination of the minority shareholders' interest in NGC, and the related income tax effects (in thousands, except per share). For the Years Ended December 31, 1998 1997 - ---------------------------------------------------------------- Sales $1,453,856 $1,572,757 Net income (loss) $ (404,010) $ 63,248 Net income (loss) per share, basic and diluted $ (2.42) $ 0.38 - ---------------------------------------------------------------- Santa Fe Merger In May 1997, NMC completed a merger with Santa Fe Pacific Gold Corporation ("Santa Fe"), a U.S. gold mining company, under which the outstanding shares of common stock of Santa Fe were converted into approximately 56.5 million shares of NMC common stock. The merger qualified as a tax-free reorganization and was accounted for as a pooling of interests. Merger expenses of $162.7 million ($112.3 million, net of tax and minority interest) consisted of $135.4 million of transaction costs and $27.3 million in asset write-downs. Operations The Company's sales result from operations in the United States, Mexico, Peru, Uzbekistan and Indonesia. Gold mining requires the use of specialized facilities and technology. The Company relies heavily on such facilities to maintain its production levels. Also, the cash flow and profitability of the Company's current operations are significantly affected by the market price of gold. Gold prices can fluctuate widely and are affected by numerous factors beyond the Company's control. Note 2 Summary of Significant Accounting Policies Principles of Consolidation The consolidated financial statements include the accounts of Newmont Mining Corporation and the more-than-50%-owned subsidiaries that it controls. The Company also includes its pro-rata share of assets, liabilities and operations for unincorporated joint ventures in which it has an interest. All significant intercompany balances and transactions have been eliminated. The functional currency for all subsidiaries is the U. S. dollar. Cash and Cash Equivalents Cash and cash equivalents consist of all cash balances and highly liquid investments with an original maturity of three months or less. Because of the short maturity of these investments, the carrying amounts approximate their fair value. Cash and cash equivalents are invested in United States Treasury bills and high-quality commercial paper and time deposits. Investments Short-term investments are carried at cost, which approximates market, and include Eurodollar, government and corporate obligations rated AA or higher. Investments in incorporated entities in which the Company's ownership is greater than 20% and less than 50%, and which the Company does not control, are accounted for by the equity method and are included in long-term assets. Income or loss from such investments is included in Equity loss of affiliated company. 30 Notes to Consolidated Financial Statements Inventories Ore and in-process inventories, and materials and supplies are stated at the lower of average cost or net realizable value. Precious metals are stated at market value. Property, Plant and Mine Development Expenditures for new facilities or expenditures that extend the useful lives of existing facilities are capitalized and depreciated using the straight-line method at rates sufficient to depreciate such costs over the estimated productive lives of such facilities. Productive lives range from 2 to 21 years. The Company adopted AICPA Statement of Position 98-5, "Reporting on the Costs of Start-Up Activities" ("SOP 98-5") effective January 1, 1998. Under this accounting method, certain costs, such as organization, training and pre- feasibility expenses incurred in the start-up phase of a project are expensed as incurred (See Note 18). Mineral exploration costs are expensed as incurred. When it has been determined that a mineral property can be economically developed, the costs incurred to develop such property, including costs to further delineate the ore body and remove overburden to initially expose the ore body, are capitalized. Such costs, and estimated future development costs, are amortized using the unit-of-production method over the estimated life of the ore body. Ongoing development expenditures to maintain production are generally charged to operations as incurred. Significant payments related to the acquisition of exploration interests are capitalized. If a mineable ore body is discovered, such costs are amortized using the unit-of-production method. If no mineable ore body is discovered, such costs are expensed in the period in which it is determined the property has no future economic value. Interest expense allocable to the cost of developing mining properties and to constructing new facilities is capitalized until assets are ready for their intended use. Gains or losses from normal sales or retirements of assets are included in other income or expense. Asset Impairment The Company reviews and evaluates its long-lived assets for impairment when events or changes in circumstances indicate that the related carrying amounts may not be recoverable. An impairment loss is measured as the amount by which asset carrying value exceeds fair value. Fair value is generally determined using estimated future cash flow analysis. An impairment is considered to exist if total estimated future cash flows on an undiscounted basis is less than the carrying amount of the asset. An impairment loss is measured and recorded based on discounted estimated future cash flows. Future cash flows include estimates of recoverable ounces, gold prices (considering current and historical prices, price trends and related factors) and production, capital and reclamation costs. Assumptions underlying future cash flow estimates are subject to risks and uncertainties. Any differences between significant assumptions and market conditions and/or the Company's performance could have a material effect on the Company's financial position and results of operations (See Note 15). Revenue Recognition Gold sales are recognized when gold is produced. Initial proceeds from prepaid forward sales contracts are recorded as deferred revenue and are recognized in income when the related gold is delivered. Mining Costs In general, mining costs are charged to operations as incurred. However, certain of the Company's deposits have diverse grade and waste-to-ore ratios over the mine's life. Mining costs for these deposits, to the extent they do not relate to current gold production, are capitalized and then charged to operations when the applicable gold is produced. Reclamation and Remediation Costs Estimated future reclamation and remediation costs are based principally on legal and regulatory requirements. Such costs related to active mines are accrued and charged over the expected operating lives of the mines using the unit-of-production method. Future reclamation and remediation costs for inactive mines are accrued based on management's best estimate at the end of each period of the undiscounted costs expected to be incurred at a site. Such cost estimates include, where applicable, ongoing care, maintenance and monitoring costs. Changes in estimates are reflected in earnings in the period an estimate is revised. Income Taxes The Company accounts for income taxes using the liability method, recognizing certain temporary differences between the financial reporting basis of the Company's liabilities and assets and the related income tax basis for such liabilities and assets. This method generates a net deferred income tax liability or net deferred income tax asset for the Company as of the end of the year, as measured by the statutory tax rates in effect as enacted. The Company derives its deferred income tax charge or benefit by recording the change in the net deferred income tax liability or net deferred income tax asset balance for the year. The Company's deferred income tax assets include certain future tax benefits. The Company records a valuation allowance against any portion of those deferred income tax assets that it believes will more likely than not fail to be realized. 31 Notes to Consolidated Financial Statements Commodity Instruments On a limited basis the Company has entered into commodity contracts to protect the selling price for certain anticipated gold production. The Company does not acquire, hold or issue commodity instruments for trading or speculative purposes. Put option contracts purchased by the Company provide the right, but not the obligation, to sell a specified number of ounces of gold at a specified strike price. Put options qualify for deferral accounting such that gains or losses on the contracts are recognized as the designated production is delivered or as the options expire. The initial fair value of put options is recorded as Put option premiums and is amortized over the term of the options. Call option contracts sold by the Company provide the contract holder the right, but not the obligation, to buy a specified number of ounces of gold at a specified strike price. The call option contracts are recorded at fair value and are marked to market at each reporting date. Forward sales contracts enable the Company to deliver to a counterparty a specified number of ounces of gold at a specified price and date. Gains and losses realized on these contracts, as well as any cost or revenue associated therewith, are recognized in sales when the related gold is delivered. Statement of Financial Accounting Standards ("SFAS") No. 133, "Accounting for Derivative Instruments and Hedging Activities," establishes accounting and reporting standards for derivative instruments and hedging activity. SFAS No. 133 is effective for all periods in fiscal years beginning after June 15, 2000. SFAS No. 133 requires recognition of all derivative instruments on the balance sheet as either assets or liabilities and measurement at fair value. Changes in the derivative's fair value will be recognized currently in earnings unless specific hedge accounting criteria are met. Gains and losses on derivative hedging instruments must be recorded in either other comprehensive income or current earnings, depending on the nature of the instrument. The Company plans to adopt the statement on January 1, 2001, under which call option contracts will continue to be marked to market in current earnings and Deferred revenue from the sale of future production is expected to be bifurcated into a debt component and a derivative hedging component wherein gains and losses will be recorded in comprehensive income. Earnings Per Common Share Earnings or loss per share are presented for basic and diluted net income (loss) and, if applicable, for net income or loss before the cumulative effect of a change in accounting principle. Basic earnings per share is computed by dividing net income or loss (the numerator) by the weighted-average number of outstanding common shares (the denominator) for the period. The computation of diluted earnings per share includes the same numerator, but the denominator is increased to include the number of additional common shares that would have been outstanding if potentially dilutive common shares had been issued (such as the common share equivalents for employee stock options). Comprehensive Income In the first quarter of 1998, the Company adopted SFAS No. 130 "Reporting Comprehensive Income" that established standards for reporting and displaying comprehensive income and its components in a full set of general purpose financial statements. In addition to net income, comprehensive income includes all changes in equity during a period (such as adjustments to minimum pension liabilities), except those resulting from investments by and distributions to owners. Use of Estimates The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions. These estimates and assumptions affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements, as well as the reported amounts of revenues and expenses during the reporting period. Actual amounts could differ from those estimates. Reclassifications Certain amounts in prior years have been reclassified to conform to the 1999 presentation. Note 3 Batu Hijau In July 1996, the Company and Sumitomo Corporation ("Sumitomo") formed the Nusa Tenggara Partnership ("NTP") to develop and operate the Batu Hijau copper/gold deposit in Indonesia. Production began in the fourth quarter of 1999 and the projected mine life is in excess of 20 years. The cost for development of the open pit mine, mill, and infrastructure (including employee housing, port, and electrical generation facilities), interest during construction and working capital was approximately $1.83 billion. Under the terms of the NTP agreement, the Company contributed its interest in the company that owns the project (P.T. Newmont Nusa Tenggara, "PTNNT") to NTP and Sumitomo contributed an agreed upon amount of cash. The Company retained an indirect 45% interest in PTNNT and Sumitomo an indirect 35% interest. The remaining 20% interest is held by an unrelated Indonesian company. Until recouping the bulk of its construction investment, including interest, the Company recognizes 56.25% of Batu Hijau's income. 32 Notes to Consolidated Financial Statements As a result of the ownership structure, the Company accounts for its investment in Batu Hijau as an equity investment. At December 31, 1999 and 1998, such investment was $438.3 million and $277.2 million, respectively. Differences between 56.25% of the NTP's net assets and the Company's investment include (i) $220 million for the fair market value adjustment recorded by NTP in conjunction with the Company's initial contribution, (ii) $33 million for intercompany charges, (iii) $122 million for the fair market value adjustment recorded by the Company in conjunction with the NGC minority interest acquisition and (iv) $108 million for contributions recorded by the Company that were classified as debt by NTP. Certain of these amounts are amortized or depreciated on a unit-of- production basis. The Company's investment also reflects $42 million for exploration expenditures incurred prior to the formation of NTP. (See Note 17 for a description of Equity loss of affiliated company, where Net income (loss) reflects the elimination of interest expense between Batu Hijau and NTP). Project development was funded by $1.0 billion from third party loans and $0.83 billion from the Company and Sumitomo. The loans are guaranteed by the Company and Sumitomo, 56.25% and 43.75%, respectively, until project completion tests are met (except for political risk which is born by the lenders), and will be non-recourse to the Company thereafter (except for a contingent obligation to fund its pro rata share of an additional $125 million). Repayment of the loans of $43.5 million semi-annually will be over a 13-year period beginning the earlier of six months after project completion tests are met or June 15, 2001, and will bear interest at blended fixed and floating rates. Based on current market rates at December 31, 1999, the average interest rates would be approximately 7.4% post-completion. The weighted average interest rates were 6.4% and 6.2% during 1999 and 1998, respectively, and 6.6% and 5.5% at December 31, 1999 and 1998, respectively. Following is summarized financial information for NTP (in thousands):
Years Ended December 31, 1999 1998 1997 - ------------------------------------------------------------------------------------- Sales and other income $ 15,224 $ 93 $ 540 Income (loss) before cumulative effect of a change in accounting principle $ 11,846 $ (19,284) $ (2,598) Net income (loss) $ 11,846 $ (69,410) $ (2,598) - -------------------------------------------------------------------------------------
At December 31, 1999 1998 - ------------------------------------------------------------------------------------- Current assets $ 123,857 $ 17,576 Property, plant and mine development, net $1,956,515 $1,430,260 Other assets $ 203,744 $ 104,238 Current liabilities $ 207,645 $ 153,066 Long-term debt--third parties $1,000,000 $ 640,000 Debt and related interest to partners and affiliates $ 195,478 --- Other liabilities $ 132 --- Minority interest in PTNNT $ 35,455 $ 17,120 - -------------------------------------------------------------------------------------
Note 4 Inventories
At December 31, (In thousands) 1999 1998 - ------------------------------------------------------------------------------------- Current: Ore and in-process inventories $190,576 $138,341 Precious metals 52,525 62,642 Materials and supplies 78,461 78,254 Other 1,052 1,134 - ------------------------------------------------------------------------------------- $322,614 $280,371 ===================================================================================== Ore-in-stockpiles (included in Long-term inventory) $171,206 $159,674 =====================================================================================
During 1999, $32.9 million was reclassified from Property, plant and mine development to Ore and in-process inventories as a result of a Nevada like-kind property exchange. 33 Notes to Consolidated Financial Statements Note 5 Property, Plant and Mine Development
At December 31, (In thousands) 1999 1998 - ---------------------------------------------------------------------------------------------------------- Land and mining claims $ 279,396 $ 292,410 Buildings and equipment 2,546,473 2,442,554 Mine development 641,494 584,325 Construction-in-progress 75,232 60,018 - ---------------------------------------------------------------------------------------------------------- 3,542,595 3,379,307 Accumulated depreciation, depletion and amortization (1,769,105) (1,584,585) Capitalized mining costs 198,858 253,985 - ---------------------------------------------------------------------------------------------------------- $1,972,348 $ 2,048,707 ==========================================================================================================
Note 6 Other Accrued Liabilities
At December 31, (In thousands) 1999 1998 - ---------------------------------------------------------------------------------------------------------- Payroll and related benefits $ 55,116 $ 44,242 Interest 24,014 26,000 Royalties 6,737 6,264 Reclamation and remediation 5,915 6,073 Severance benefits 1,489 2,908 Income taxes 34,396 187 Other 55,354 41,151 - ---------------------------------------------------------------------------------------------------------- $ 183,021 $ 126,825 ==========================================================================================================
Note 7 Income Taxes The Company's income tax (expense) benefit consisted of (in thousands):
Years Ended December 31, 1999 1998 1997 - ------------------------------------------------------------------------------------------------------------- Current: Domestic $ (7,072) $ --- $ 13,700 Foreign (72,328) (40,144) (54,600) - ------------------------------------------------------------------------------------------------------------- (79,400) (40,144) (40,900) - ------------------------------------------------------------------------------------------------------------- Deferred: Domestic 69,693 234,509 57,822 Foreign (4,693) (13,489) (9,022) - ------------------------------------------------------------------------------------------------------------- 65,000 221,020 48,800 - ------------------------------------------------------------------------------------------------------------- Total tax (expense) benefit $ (14,400) $ 180,876 $ 7,900 =============================================================================================================
The Company's income tax (expense) benefit differed from the amounts computed by applying the United States corporate income tax statutory rate for the following reasons (in thousands):
Years Ended December 31, 1999 1998 1997 - -------------------------------------------------------------------------------- U.S. corporate income tax at statutory rate $(42,818) $161,660 $(46,170) Percentage depletion 11,353 29,793 39,155 Valuation allowance on deferred tax assets 11,075 (26,448) (1,400) Resolution of tax issues associated with prior years --- --- 12,885 Foreign tax credits 6,831 8,905 4,377 Foreign earnings 1,039 8,553 1,377 Other (1,880) (1,587) (2,324) - -------------------------------------------------------------------------------- Total tax (expense) benefit $(14,400) $180,876 $ 7,900 ================================================================================
The Company's pretax income (loss) before minority interest, equity loss and cumulative effect of a change in accounting principle consisted of (in thousands):
Years Ended December 31, 1999 1998 1997 - ---------------------------------------------------------------------------------------- Domestic $( 149,153) $(670,383) $(60,989) Foreign 271,491 208,498 192,904 - ---------------------------------------------------------------------------------------- $122,338 $ (461,885) $ 131,915 ========================================================================================
34 Notes to Consolidated Financial Statements Components of the Company's consolidated deferred income tax assets and liabilities are as follows (in thousands):
At December 31, 1999 1998 - ------------------------------------------------------------------------------------------------ Deferred tax assets: Exploration costs $ 81,727 $101,981 Depreciation 70,522 81,623 Depletion of the cost of land and mining claims 79,173 --- Alternative minimum tax credit carry forward 44,689 52,983 Capitalized inventory costs 19,665 34,863 Foreign tax credit carry forward --- 12,701 Remediation and reclamation costs 25,735 24,633 Mine development costs 6,944 22,399 Net operating loss carry forwards --- 16,046 Retiree benefit costs 18,263 15,504 Sale/leaseback transaction, net 6,184 9,264 Relocation/reorganization costs 1,215 1,285 Unrealized mark-to-market adjustments and amortization of put option premiums 22,150 --- Other 7,219 7,463 - ------------------------------------------------------------------------------------------------ 383,486 380,745 Valuation allowance for deferred tax assets (30,725) (41,800) - ------------------------------------------------------------------------------------------------ Net deferred tax assets 352,761 338,945 - ------------------------------------------------------------------------------------------------ Deferred tax liabilities: Depletion of the cost of land and mining claims --- (91,589) Net undistributed earnings from subsidiaries (124,706) (56,033) Capitalized mining costs (58,418) (65,348) Capitalized interest (24,849) (17,228) Other (948) (1,151) - ------------------------------------------------------------------------------------------------ Deferred tax liabilities (208,921) (231,349) - ------------------------------------------------------------------------------------------------ Deferred tax assets, net of deferred tax liabilities $143,840 $107,596 ================================================================================================
Net deferred tax assets of $207.7 million and $156.3 million related to domestic tax jurisdiction and net deferred tax liabilities of $63.8 million and $48.7 million related to foreign tax jurisdiction at December 31, 1999 and 1998, respectively. Note 8 Debt Long-Term Debt Long-term debt consisted of (in thousands):
At December 31, 1999 1998 - ------------------------------------------------------------------------------- Sale-leaseback of refractory ore treatment plant $ 335,482 $ 343,339 Credit facility 210,000 385,000 83U8% debentures, net 199,902 199,889 85U8% notes 150,000 150,000 Medium-term notes 32,000 42,000 Project financings 110,102 128,478 - ------------------------------------------------------------------------------- 1,037,486 1,248,706 Current maturities (23,293) (47,575) - ------------------------------------------------------------------------------- $1,014,193 $1,201,131 ===============================================================================
Scheduled minimum long-term debt repayments are $23.3 million in 2000, $29.4 million in 2001, $188.9 million in 2002, $53.7 million in 2003, $44.8 million in 2004 and $697.4 million thereafter. The Company may accelerate credit facility repayments, depending on available operating cash flow. Sale-Leaseback of the Refractory Ore Treatment Plant In September 1994, the Company entered into a sale and leaseback agreement for its refractory ore treatment plant located in Carlin, Nevada. The transaction was accounted for as debt and the cost of the refractory ore treatment plant was recorded as a depreciable asset. The lease term is 21 years and aggregate future minimum lease payments, which include interest, as of December 31, 1999 and 1998 were $549.1 million and $578.8 million, respectively. Payments are $29.7 million annually over the next five years. The lease includes purchase options during and at the end of the lease at predetermined prices. The interest rate on this sale-leaseback transaction is 6.36%. Because this asset is specialized, it is not practicable to estimate the fair value of this debt. In connection with this transaction, the Company entered into certain interest rate hedging contracts that were settled for a gain of $11 million, which is recognized as a reduction of interest expense over the term of the lease. Including this gain, the effective interest rate on the transaction is 6.15%. Credit Facilities In June 1997, the Company entered into a $1.0 billion revolving credit facility with a consortium of banks, replacing separate credit facilities held by NGC and Santa Fe. As of December 31, 1999, $210.0 million was outstanding under the credit facility, which expires in June 2002. Interest rates are variable, can be fixed for up to six months at the option of 35 Notes to Consolidated Financial Statements the Company and are subject to adjustment if changes in the Company's long-term debt ratings occur. As of December 31, 1999 and 1998, the interest rate was 6.7% and 5.8%, respectively, and the weighted average interest rate for such years was 5.4% and 5.9%, respectively. An annual facility fee, currently 0.1%, is required based on the lenders' total commitment. The fair value of amounts outstanding under the credit facility at December 31, 1999 approximated the related carrying amount. The credit facility contains certain covenants, including limitations on aggregate consolidated indebtedness (including guarantees) to 60% of total capitalization, requirements for $1.0 billion of minimum consolidated tangible net worth and limitations on incurring liens, fundamental business changes and transactions with affiliates. 8 3/8% Debentures Unsecured debentures in an aggregate principal amount of $200 million maturing July 1, 2005 bearing an annual interest rate of 8.375% were outstanding at December 31, 1999 and 1998. The debentures were initially issued by Santa Fe and have become the obligations of NGC. The debentures were priced at 99.928% to yield 8.386% and are not redeemable prior to maturity. Interest is payable semi- annually in January and July. The costs related to the issuance of the debentures were capitalized and are amortized to interest expense over the term of the debentures. Using prevailing interest rates on similar instruments, the fair value of these debentures was approximately $195.6 million and $204.9 million at December 31, 1999 and 1998, respectively. 8 5/8% Notes Unsecured notes with a principal amount of $150 million due April 1, 2002 bearing an annual interest rate of 8.625% were outstanding at December 31, 1999 and 1998. Interest is payable semi-annually in April and October and the notes are not redeemable prior to maturity. Using interest rates prevailing on similar instruments at December 31, 1999 and 1998, the estimated fair value of this debt was $150.6 million and $154.4 million, respectively. Medium-Term Notes Unsecured notes totaling $32 million and $42 million were outstanding as of December 31, 1999 and 1998, respectively, with a weighted average fixed interest rate of 7.68% and maturing on various dates beginning mid-1999 to late 2004. Interest is payable semi-annually in March and September and the notes are not redeemable prior to maturity. Using interest rates prevailing on similar instruments at December 31, 1999 and 1998, the estimated fair value of these notes was $31.0 million and $42.2 million, respectively. Project Financings Minera Yanacocha Minera Yanacocha issued debt through the sale of $100 million 8.4% 1997 Series A Trust Certificates ("Certificates") to various institutional investors. At December 31, 1999 and 1998, $88 million and $94 million, respectively, was outstanding under the financing. Interest on the Certificates is fixed at 8.4% and repayments are required quarterly through 2004. The fair value of the Certificates was $81.0 million and $91.8 million at December 31, 1999 and 1998, respectively. Minera Yanacocha also had $1.7 million and $9.9 million outstanding under loans with the International Finance Corporation ("IFC") and with Deutsche Investitions und Entwicklungsgesellschaft mbH ("DEG") at December 31, 1999 and 1998, respectively. The IFC and DEG loans mature in 2000, and interest rates on a portion of the loans are variable, ranging from 2.88% to 3.25% over LIBOR. A portion of the IFC loan is subject to an interest rate premium (not to exceed 2.5%) when the average realized gold price exceeds $370 per ounce. Interest rates on a portion of the DEG loan are fixed at 9.3%. Weighted average interest rates on the IFC and DEG loans were 9.0% and 9.1% as of and for the years ended December 31, 1999 and 1998, respectively, and the fair value of the fixed-rate portion of such loans approximated carrying value. In December 1999, Minera Yanacocha entered into a $100 million credit facility with the IFC for the development of its La Quinua project. No amounts were outstanding under the credit facility as of December 31, 1999. Interest rates will be LIBOR plus 2.375% on the $20 million "A tranche" and LIBOR plus 2.0% on the $80 million "B tranche". Also in December 1999, Minera Yanacocha assumed certain lease and purchase agreements for mining equipment. At December 31, 1999, the net present value of future minimum payments was $11.4 million, with an interest component of 11.1%. All Minera Yanacocha debt (non-recourse to Newmont) is secured by certain restricted funds and substantially all of Minera Yanacocha's property, plant and equipment. Zarafshan-Newmont The Company, through a wholly-owned subsidiary, is a 50% participant in the Uzbek-American Joint Venture Zarafshan-Newmont ("Zarafshan-Newmont") in the Republic of Uzbekistan. The other 50% participants are two Uzbek government entities. As of December 31, 1999, Zarafshan-Newmont had $18.0 million outstanding under a project financing loan secured by the assets of the project. The loan is to be repaid in semi-annual installments of $6.0 million beginning July 2001. The interest rate is 4.25% over the three-month LIBOR. The weighted average interest rates for 1999 and 1998 were 9.6% and 9.5%, respectively, and the interest rates at December 31, 36 Notes to Consolidated Financial Statements 1999 and 1998 were 10.4% and 9.2%, respectively. The carrying amount of the loan is estimated to approximate its fair market value. The Company has guaranteed payment of certain amounts due under the loan, which totaled $9.0 million at December 31, 1999, and the Uzbek partners have guaranteed payment of the balance. Capitalized Interest Capitalized interest was $23.3 million, $13.7 million and $15.6 million in 1999, 1998 and 1997, respectively. Note 9 Deferred Revenue fromSale of Future Production In July 1999, the Company entered into a prepaid forward sale contract for approximately 483,333 ounces of gold, with initial proceeds of $137.2 million, for delivery in June 2005, 2006 and 2007. Such proceeds were recorded as deferred revenue and will be recognized in income when the related gold is delivered. Additional proceeds will be determined at each delivery date based on the excess of the then existing market price (not to exceed $380 per ounce) over $300 per ounce. The prepaid forward sale contract also included semi-annual delivery requirements of approximately 17,950 ounces beginning June 2000 through June 2007. Newmont has entered into forward purchase contracts at prices increasing from $263 per ounce in 2000 to $354 per ounce in 2007 to coincide with these delivery commitments. Note 10 Option Contracts In late July and early August 1999, the Company purchased put option contracts for 2.85 million ounces of gold, with a strike price of $270 per ounce. This purchase was paid for by selling call option contracts for 2.35 million ounces at the strike prices noted below. Put option contracts for one million ounces were subject to termination if the market price reached $270 per ounce at any time prior to such contracts' expiration date, which was August 2000 through July 2001. These put option contracts were thus terminated in September 1999. As of December 31, 1999, the following contracts were outstanding: Purchased Put Options Sold Call Options --------------------- ----------------- Ozs. Price Ozs. Price - ----------------------------------------------------------------- 2000 1,183,333 $270 --- --- 2004 --- --- 250,000 $350 2005 --- --- 250,000 $350 2008 --- --- 1,000,000 $386 2009 --- --- 850,000 $385 - ----------------------------------------------------------------- The put options qualify for deferral accounting such that gains and losses on the contracts are recognized as the designated production is delivered or as the options expire. The initial fair value of the options of $37.6 million was recorded as Put option premiums and is amortized over the term of the options. At December 31, 1999, $18.5 million was amortized in Sales, including the premiums associated with terminated options. The call option contracts, with an initial fair value of $37.6 million, are marked to market at each reporting date and on December 31, 1999, had a fair value of $82.4 million, resulting in a non-cash, unrealized loss of $44.8 million. Call options in 2004 and 2005 terminate if the market price is $240 per ounce or lower at any time prior to expiration. Note 11 Stockholders' Equity As discussed in Note 1, NMC issued 10.7 million shares of common stock in conjunction with the acquisition of NGC's minority interest in October 1998. The Company paid dividends of $0.12 per common share in each of 1999 and 1998 and $0.39 per share, in 1997. Each share of NMC's common stock carries one Preferred Share Purchase Right ("PSPR") that expires in September 2000 unless earlier redeemed. Each PSPR entitles the holder to purchase from NMC one five-hundredth of a share of NMC participating preferred stock for $150 (subject to adjustment). Until exercised, holders of PSPRs have no stockholder rights. The PSPRs become exercisable only if a defined acquiring person has acquired 15% or more of NMC common stock or has begun a tender or exchange offer that would result in such person owning 15% or more of NMC common stock. If such events occur, PSPR holders will have a right to receive, upon exercise, NMC common stock (or in certain circumstances common stock of the acquiring company) having a value equal to two times the purchase price of the PSPR. NMC may redeem the PSPRs for $0.01 each prior to an announcement that a defined acquiring person exists. 37 Notes to Consolidated Financial Statements Note 12 Stock Options Employee Stock Options Under the Company's stock option plans, options to purchase shares of stock have been granted to key employees generally at the fair market value of such shares on the date of grant. The options under these plans generally vest over a two- year period (except for certain options granted to key employees, which vest over a four-year period) and are exercisable over a period not exceeding ten years. At December 31, 1999, 4,699,474 shares were available for future grants under the Company's plans. In conjunction with the merger with Santa Fe, 566,000 shares were authorized for issuance in connection with outstanding Santa Fe stock options that were assumed by NMC. The following table summarizes annual total stock option activity for each of the three years in the period ended December 31:
1999 1998 1997 ----------------------- --------------------- ---------------------- Weighted Weighted Weighted Average Average Average Number Exercise Number Exercise Number Exercise of Shares Price of Shares Price of Shares Price - --------------------------------------------------------------------------------------------------------------------------------- Outstanding at beginning of year 5,952,968 $ 35 4,068,828 $ 41 3,063,087 $ 43 Granted 5,065,550 $ 19 2,257,583 $ 26 1,602,802 $ 35 Exercised (1,625) $ 22 (8,502) $ 30 (439,363) $ 31 Forfeited (268,197) $ 30 (364,941) $ 37 (157,698) $ 47 - --------------------------------------------------------------------------------------------------------------------------------- Outstanding at end of year 10,748,696 $ 28 5,952,968 $ 35 4,068,828 $ 41 ================================================================================================================================= Options exercisable at year end 3,867,965 $ 39 2,644,156 $ 44 1,944,027 $ 43 Weighted average fair value of options granted during the year $11.54 $18.34 $14.31 =================================================================================================================================
The following table summarizes information about stock options outstanding at December 31, 1999 with exercise prices equal to the fair market value on the date of grant and no restrictions on exercisability after vesting:
Options Outstanding Options Exercisable ------------------------------------------------- ------------------------------- Weighted Weighted Weighted Average Average Average Range of Number Remaining Exercise Number Exercise Exercise Prices Outstanding Contractual Life Price Exercisable Price - ------------------------------------------------------------------------------------------------------------------- $18 to $24 5,922,415 9.2 years $20 361,495 $22 $25 to $29 1,233,338 8.1 years $28 539,890 $29 $30 to $35 683,176 7.0 years $32 573,901 $32 $36 to $44 1,596,459 6.0 years $39 1,316,011 $39 $45 to $59 809,954 5.8 years $53 809,954 $53 - ------------------------------------------------------------------------------------------------------------------- $18 to $59 10,245,342 8.1 years $28 3,601,251 $39 ===================================================================================================================
38 Notes to Consolidated Financial Statements In 1994, 1993 and 1992, certain key executives were granted options that, although the exercise price was generally equal to the fair market value on the date of grant, cannot be exercised when otherwise vested unless the market price of NMC's common stock is a defined amount above the option exercise price. In addition, the same executives were granted options in 1994, 1993 and 1992 having exercise prices in excess of the fair market value on the date of grant. Generally, these key executive options vest over a period of one to five years and are exercisable over a ten-year period. At December 31, 1999, 503,354 of these options were outstanding and 266,714 were exercisable. Information about all other stock options outstanding at December 31, 1999 is summarized below:
Options Outstanding Options Exercisable -------------------------------------------------------- --------------------- Weighted Weighted Weighted Range of Average Average Average Exercise Number Remaining Exercise Number Exercise Prices Outstanding Contractual Life Price Exercisable Price - ----------------------------------------------------------------------------------------------------------------------------------- Options with exercise prices in excess of the fair market value on the date of the grant $40 to $56 266,714 3.5 years $50 266,714 $50 Options that cannot be exercised until the market price exceeds a fixed amount above the exercise price $30 to $41 236,640 3.8 years $37 -- $-- - -----------------------------------------------------------------------------------------------------------------------------------
The Company applies APB Opinion No. 25 and related interpretations in accounting for stock options. Accordingly, because stock option exercise prices equal the market value on the date of grant, no compensation cost has been recognized for its stock options. Had compensation cost for the options been determined based on market value at grant dates in 1999, 1998 and 1997, as prescribed by SFAS No. 123, the Company's net income and earnings per share would have been the pro forma amounts indicated below: Years Ended December 31, 1999 1998 1997 - ---------------------------------------------------------------------------- Net income (loss) (000) As reported $24,793 $(393,383) $68,377 Pro forma $ 1,846 $(406,484) $57,540 Net income (loss) per share, basic and diluted As reported $ 0.15 $ (2.47) $ 0.44 Pro forma $ 0.01 $ (2.56) $ 0.37 - ---------------------------------------------------------------------------- For purposes of determining the pro forma amounts, the fair value of each option grant was estimated on the date of the grant using the Black-Scholes option-pricing model with the following assumptions for 1999, 1998 and 1997, respectively: weighted average risk-free interest rates of 6.4%, 4.5% and 5.8%; dividend yield of 0.6%, 0.5% 1.0%; expected lives of eight years, six years and five years; and volatility of 52%, 85% and 40%, respectively. Compensation costs included in the pro forma amounts reflect only fair values of options granted after January 1, 1995. These amounts may not be indicative of actual results had the Company used fair-value-based accounting for stock options. Other Stock-Based Compensation In 1997, the Company adopted an intermediate term incentive plan ("ITIP") under which restricted stock may be granted to certain key employees. These shares are granted upon achievement of certain financial and operating thresholds at fair market value on the grant date. ITIP stock grants are subject to certain restrictions related to ownership and transferability that currently lapse two years (for ownership) and five years (for transfer) from the date of the grant. In 1999 and 1998, 62,800 and 31,705 shares of restricted stock, respectively, were issued under ITIP, of which 74,394 shares remain restricted at December 31, 1999. In 1998, the Company awarded 10,643 shares of restricted stock to certain key executives, of which 5,322 shares remain restricted at December 31, 1999. Compensation expense recorded for these grants was $1.1 million, $1.2 million and $0.8 million in 1999, 1998 and 1997, respectively. Note 13 Employee Pension and Other Benefit Plans Pension Plans The Company's pension plans include: (1) three qualified non-contributory defined benefit plans (for salaried employees and substantially all domestic hourly employees); (2) two non-qualified supplemental plans (for salaried employees whose benefits under the qualified plan are limited by federal legislation); and (3) a non-qualified cash balance international plan (for select employees who are not eligible to participate in the U.S.-based plans because of citizenship). The vesting period 39 Notes to Consolidated Financial Statements for each plan is five years of service. The plans' benefit formulas are based on an employee's years of credited service and either (i) such employee's last five years average pay (salaried plan), (ii) a percentage of annual pay (international plan) or (iii) a flat dollar amount adjusted by a service- weighted multiplier (hourly plan). Pension costs are determined annually by independent actuaries and pension contributions to the qualified plans are made based on funding standards established under the Employee Retirement Income Security Act of 1974 . Other Benefit Plans The Company provides defined medical benefits to qualified retirees (and to their eligible dependents) who were salaried employees and defined life insurance benefits to qualified retirees who were salaried employees. In general, participants become eligible for these benefits upon retirement directly from the Company if they are at least 55 years old and the combination of their age and years of service with the Company equals 75 or more. Beginning in 1998, these plans included former Santa Fe employees who were previously covered under separate contributory medical and noncontributory life insurance plans. Defined medical benefits cover most of the reasonable and customary charges for hospital, surgical, diagnostic and physician services and prescription drugs. Life insurance benefits are based on a percentage of final base annual salary and decline over time after retirement commences. The following tables provide a reconciliation of changes in the plans' benefit obligations and assets' fair values over the two-year period ended December 31, 1999 and a statement of the funded status as of December 31 of both years (in thousands):
Pension Benefits Other Benefits ------------------ ------------------- 1999 1998 1999 1998 - ---------------------------------------------------------------------------------------------------- Change in Benefit Obligation: Benefit obligation at beginning of year $133,410 $118,099 $ 50,043 $42,898 Service cost-benefits earned during the year 8,536 7,023 3,693 3,604 Interest cost 9,081 8,122 2,951 2,961 Actuarial (gain)/loss (15,023) 4,775 (12,989) 1,785 Benefits paid (7,572) (4,609) (1,450) (1,205) - ---------------------------------------------------------------------------------------------------- Benefit obligation at end of year $128,432 $133,410 $42,248 $ 50,043 ==================================================================================================== Change in Fair Value of Assets: Fair value of assets at beginning of year $114,500 $108,585 $ -- $ -- Adjustment to fair value of assets 4,586 287 -- -- Actual return on plan assets 8,944 8,064 -- -- Employer contributions 3,417 2,173 1,450 1,205 Benefits paid (7,572) (4,609) (1,450) (1,205) - ---------------------------------------------------------------------------------------------------- Fair value of assets at end of year $123,875 $114,500 $ -- $ -- ==================================================================================================== Funded status $ (4,556) $(18,910) $(42,248) $(50,043) Unrecognized prior service cost 1,445 1,565 1,322 3,246 Unrecognized net loss (gain) (8,028) 10,573 (13,006) (1,936) Unrecognized net obligation 374 288 -- -- - ---------------------------------------------------------------------------------------------------- Accrued cost $(10,765) $ (6,484) $(53,932) $(48,733) ====================================================================================================
The Company's non-qualified pension plans and postretirement benefit plans have Accumulated Benefit Obligations (OABOO) in excess of plan assets. The ABO was $5.4 million and $4.4 million for supplemental pension plans and $42.2 million and $50.0 million for postretirement benefit plans, at December 31, 1999 and 1998, respectively. The following table provides amounts recognized in the consolidated balance sheets as of December 31 (in thousands):
Pension Benefits Other Benefits ------------------ ------------------- 1999 1998 1999 1998 - ---------------------------------------------------------------------------------------------------- Amounts recognized in the consolidated balance sheets: Accrued benefit cost $(18,200) $(13,374) $(53,932) $(48,733) Intangible asset 1,641 3,427 -- -- Accumulated other comprehensive income 5,794 3,463 -- -- - ---------------------------------------------------------------------------------------------------- Net amount recognized $(10,765) $ (6,484) $(53,932) $(48,733) ====================================================================================================
40 Notes to Consolidated Financial Statements In accordance with the provisions of SFAS No. 87, an adjustment was required to reflect a minimum liability for the supplemental pension plan in 1999, 1998 and 1997. As a result of such adjustment, an intangible asset was recorded and (to the extent the minimum liability adjustment exceeded the unrecognized net transition liability) stockholders' equity was reduced $3.5 million, $2.3 million and $2.2 million (net of related deferred income tax benefits) at December 31, 1999, 1998 and 1997, respectively. The following table provides components of net periodic pension benefit cost for the indicated fiscal years (in thousands):
Pension Benefits Other Benefits ------------------------------ ------------------------- 1999 1998 1997 1999 1998 1997 - ---------------------------------------------------------------------------------------------------------------------- Components of net periodic pension benefit cost: Service cost $ 8,536 $ 7,023 $ 6,529 $3,693 $3,604 $2,908 Interest cost 9,081 8,122 7,435 2,951 2,961 2,317 Expected return on plan assets (10,318) (9,093) (7,895) -- -- -- Amortization of prior service cost 119 119 119 102 232 -- Amortization of loss/(gain) 366 280 297 (97) (12) (302) Amortization of net obligation (asset) (86) (86) (86) -- -- (235) - ---------------------------------------------------------------------------------------------------------------------- Total net periodic pension benefit cost $ 7,698 $ 6,365 $ 6,399 $6,649 $6,785 $4,688 ______________________________________________________________________________________________________________________
For the pension plans, prior-service costs are amortized on a straight- line basis over the average remaining service period of active participants. Gains and losses in excess of 10% of the greater of the benefit obligation and the market-related value of assets are amortized over the average remaining service period of active participants. Postretirement benefits other than pensions are accrued during an employee's service to the Company. Assumptions used in measuring the Company's benefit obligation were as follows:
Pension Other Benefits Benefits -------------- --------------- 1999 1998 1999 1998 - ------------------------------------------------------------------------ Weighted-average assumptions as of December 31: Discount rate 7.75% 6.75% 7.75% 6.75% Expected return on plan assets 9.25% 9.00% N/A N/A Rate of compensation increase 4.00% 4.00% 4.00% 4.00% - ------------------------------------------------------------------------
The assumed health care cost trend rate to measure the expected cost of benefits was 5% for 2000 and each year thereafter. Assumed health care cost trend rates have a significant effect on amounts reported for the health care plans. A 1% change in assumed health care cost trend rates would have the following effects (in thousands): 1% 1% Increase Decrease - ------------------------------------------------------------------------ Effect on total of service and interest cost components of net periodic postretirement health care benefit cost $ 1,250 $ (1.050) Effect on the health care component of the accumulated postretirement benefit obligation $ 6,900 $ (5,800) - ------------------------------------------------------------------------
Savings Plan The Company has two qualified defined contribution savings plans, one that covers salaried employees and another that covers substantially all hourly employees. In addition, the Company has a non-qualified supplemental savings plan for salaried employees whose benefits under the qualified plan are limited by federal regulations. When an employee meets eligibility requirements, the Company matches 100% of employee contributions of up to 6% and 4% of base salary for the salaried and hourly plans, respectively. The Company's matching contributions under these plans were $8.2 million, $8.7 million and $8.9 million in 1999, 1998 and 1997, respectively. 41 Notes to Consolidated Financial Statements Note 14 Dividends, Interest and Other Dividends, interest and other in 1999 included a $13 million gain from the sale of the True North exploration property in Alaska and an $8 million gain from the sale of an investment in another mining company. In 1998 and 1997, $8.3 million and $6.5 million, respectively, was included for recoveries from business interruption insurance. In 1997, $23.7 million was included from closing Santa Fe put and call option contracts. Note 15 Write-Down of Assets In 1998, as a result of a prolonged period of low gold prices, the Company adjusted the carrying value of certain long-lived assets to their estimated fair values resulting in an impairment loss of $614.9 million ($424.7 million net of tax). The write-down included $587.6 million for Nevada operations (primarily at former Santa Fe properties), $13.4 million for certain Santa Fe exploration properties and $13.9 million for other investments (including $7.2 million at the Mesquite mine). The write-down related to Property, plant and mine development ($528 million), ore-in-stockpiles inventory ($67 million), materials and supplies inventory ($13 million) and Other long-term assets ($7 million). Note 16 Supplemental Cash Flow Information Net cash provided by operating activities included the following cash payments (in thousands):
Year Ended December 31, 1999 1998 1997 - --------------------------------------------------------- Income taxes, net of refunds $11,360 $52,695 $46,671 Interest, net of amounts capitalized $63,226 $80,903 $76,711 - ---------------------------------------------------------
In the third quarter of 1999, NMC entered into two put and call option contracts described in Note 10. As a result, non-cash increases to Put option premiums and Fair value of written call options ($37.6 million) were recorded for the initial fair value of these contracts. In December 1999, Minera Yanacocha assumed certain equipment lease and purchase agreements (see Note 8) that resulted in a non-cash increase to Property, plant and mine development and long-term debt ($12.4 million). In October 1998, NMC acquired the remaining 6.25% interest in NGC. As described in Note 1, this transaction resulted in non-cash increases to: stockholders' equity ($259 million), Investment in Batu Hijau ($122 million), Property, plant and mine development ($85 million), deferred income tax liability ($54 million); and a non-cash decrease to minority interest ($107 million). In 1998, the Company retired mostly fully depreciated property, plant and mine development with an original cost of $50 million, which is not reflected in the statements of consolidated cash flows. In 1997, the Company recognized income tax benefits of $12.9 million resulting from the resolution of certain tax issues associated with prior years. Note 17 Segment and Related Information The Company predominantly operates in a single industry as a worldwide corporation engaged in gold production, exploration for gold and acquisition of gold properties. The Company has operations in North America, Peru, Indonesia and Uzbekistan and its reportable segments are based on the geographic location of these operations. Earnings from operations do not include general corporate expenses, interest (except project-specific interest) or income taxes (except for equity investments). 42 Notes to Consolidated Financial Statements
Financial information relating to the Company's consolidated segments is as follows (in millions): Year Ended December 31, 1999 - ----------------------------------------------------------------------------------------------------------------------------- North American Zarafshan- Operations Yanacocha* Minahasa Newmont Other Consolidated - ----------------------------------------------------------------------------------------------------------------------------- Sales $ 741.0 $ 464.3 $ 118.3 $ 75.3 $ $1,398.9 Interest income $ -- $ 3.8 $ 0.1 $ -- $ 4.8 $ 8.7 Interest expense $ 0.4 $ 7.5 $ $ 2.7 $ 52.0 $ 62.6 Depreciation and amortization $ 132.8 $ 66.8 $ 23.0 $ 11.2 $ 5.8 $ 239.6 Pre-tax income (loss) before minority interest and equity loss $ 34.6 $ 193.7 $ 58.5 $ 17.2 $ (181.7) $ 122.3 Significant non-cash items: Amortization of capitalized mining $ 30.6 $ -- $ 7.2 $ -- $ 0.5 $ 38.3 Write-down of assets $ 3.5 $ -- $ -- $ -- $ -- $ 3.5 Capital expenditures $ 58.6 $ 126.3 $ 10.8 $ 3.2 $ 22.0 $ 220.9 Total assets at December 31, 1999 $1,750.2 $ 599.4 $ 132.6 $ 107.4 $ 793.8 $3,383.4 - ----------------------------------------------------------------------------------------------------------------------------- *Not reduced for minority interest Year Ended December 31, 1998 - ----------------------------------------------------------------------------------------------------------------------------- North American Zarafshan- Operations Yanacocha* Minahasa Newmont Other Consolidated - ----------------------------------------------------------------------------------------------------------------------------- Sales $ 909.7 $ 392.5 $ 96.6 $ 55.1 $ -- $1,453.9 Interest income $ -- $ 3.2 $ 0.2 $ -- $ 4.4 $ 7.8 Interest expense $ 0.4 $ 9.0 $ -- $ 5.1 $ 64.3 $ 78.8 Depreciation and amortization $ 192.3 $ 59.6 $ 20.1 $ 11.3 $ 5.8 $ 289.1 Pre-tax income (loss) before minority interest, equity loss and cumulative $ (511.2) $ 177.1 $ 41.2 $ (0.5) $ (168.5) $ (461.9) effect of a change in accounting principle Cumulative effect of a change in accounting principle $ (10.6) $ -- $ (1.5) $ (2.5) $ (18.3) $ (32.9) Significant non-cash items: Amortization of capitalized mining $ 48.4 $ -- $ 4.2 $ -- $ -- $ 52.6 Write-down of assets $ 594.8 $ -- $ -- $ -- $ 20.1 $ 614.9 Capital expenditures $ 112.0 $ 82.5 $ 6.4 $ 0.9 $ 14.2 $ 216.0 Total assets at December 31, 1998 $1,811.8 $ 500.2 $ 147.2 $ 122.3 $ 653.9 $3,235.4 - ------------------------------------------------------------------------------------------------------------------------------ *Not reduced for minority interest Year Ended December 31, 1998 - ----------------------------------------------------------------------------------------------------------------------------- North American Zarafshan- Operations Yanacocha* Minahasa Newmont Other Consolidated - ----------------------------------------------------------------------------------------------------------------------------- Sales $1,075.2 $ 344.3 $ 83.1 $ 70.2 $ -- $1,572.8 Interest income $ -- $ 4.2 $ 0.1 $ -- $ 10.3 $ 14.6 Interest expense $ 0.3 $ 6.2 $ -- $ 6.9 $ 63.7 $ 77.1 Depreciation and amortization $ 192.4 $ 41.7 $ 18.3 $ 11.9 $ 1.5 $ 265.8 Pre-tax income (loss) before minority interest, equity loss and cumulative effect of a change in accounting principle $ 223.5 $ 190.1 $ 25.5 $ 8.7 $ (315.9) $ 131.9 Amortization of capitalized mining $ 55.3 $ -- $ -- $ -- $ -- $ 55.3 Capital expenditures $ 249.8 $ 113.7 $ 24.2 $ 5.6 $ 21.8 $ 415.1 Total assets at December 31, 1997 $1,605.5 $ 350.6 $ 179.5 $ 137.1 $1,341.3 $3,614.0 - ----------------------------------------------------------------------------------------------------------------------------- * Not reduced for minority interest
43 Financial information relating to the Company's equity investment in Batu Hijau was as follows (in millions): Years Ended December 31, 1999 1998 1997 - ---------------------------------------------------------------------- Sales $ 15.2 $ -- $ Interest income $ -- $ -- $ -- Interest expense $ 17.1 $ 11.0 $ -- Depreciation and amortization $ 8.8 $ 0.1 $ 0.1 Net income (loss) before cumulative effect of a change in accounting principle $ 10.3 $ (26.8) $ (2.4) Cumulative effect of a change in accounting principle $ -- $ (49.3) $ -- Capital expenditures $ 607.9 $ 826.3 $ 250.2 Total assets at December 31, $2,107.6 $1,353.5 $ 502.5 - ---------------------------------------------------------------------- Equity loss of affiliated company was $10.7 in 1999 (based on 56.25% of Batu Hijau's net income of $10.3 million plus $5.2 million of eliminated intercompany interest, reduced by $20.6 million to reclassify deferred tax benefits and increased by $1.2 million for other items) and $9.2 million in 1998 (based on 56.25% of the Batu Hijau loss after elimination of $11 million intercompany interest). Equity losses for Batu Hijau for 1997 were included in Exploration and research expense. Revenues from export and domestic sales were as follows (in millions): For the Years Ended December 31, 1999 1998 1997 - ---------------------------------------------------------------------- Europe $1,350.8 $1,382.0 $1,498.0 United States 4.9 7.2 6.0 Other 61.7 64.7 68.8 - ---------------------------------------------------------------------- Total $1,417.4* $1,453.9 $1,572.8 ______________________________________________________________________ *Excludes $18.5 million for amortization of put option premium amortization Long-lived assets in the United States and other countries are as follows (in millions): As of December 31: 1999 1998 - ---------------------------------------------------------------------- United States $1,757.2 $1,898.3 Indonesia 569.8 394.1 Peru 414.8 267.3 Other 107.5 162.6 - ---------------------------------------------------------------------- $2,849.3 $2,722.3 ______________________________________________________________________ The Company is not economically dependent on a limited number of customers for the sale of its product because gold can be sold through numerous commodity market traders worldwide. In 1999, sales to two customers totaled $757 million and $493 million or 53% and 35%, respectively. In 1998, sales to two customers totaled $869 million and $239 million or 61% and 17% of total sales, respectively. In 1997, sales to one customer totaled $897 million or 57% of total sales. Note 18 Accounting Change As described in Note 2, the Company adopted SOP 98-5 effective January 1, 1998. The change resulted in expensing certain costs incurred in the start-up phase of a project. Previously capitalized start-up costs (incurred prior to January 1, 1998) of $32.9 million (net of tax and minority interest) reflected the cumulative effect of the change and included approximately $18 million for Batu Hijau and $11 million for Nevada operations. Note 19 Commitments and Contingencies Environmental Obligations The Company's mining and exploration activities are subject to various federal and state 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 all applicable laws and regulations. The Company has made, and expects to make in the future, expenditures to comply with such laws and regulations, but cannot predict the amount of such future expenditures. Estimated future reclamation and remediation costs are based principally on legal and regulatory requirements. At December 31, 1999 and December 31, 1998, $66.9 million and $56.0 million, respectively, were accrued for reclamation and remediation costs relating to currently producing mineral properties. Certain appeals have been filed by third parties with the Department of Interior Board of Land Appeals in conjunction with the Twin Creeks Environmental Impact Statement. These appeals seek to impose mitigation and other conditions on the mine operations. The Company has intervened and does not believe that such appeals have merit. An unfavorable outcome of such appeals, however, could result in additional conditions on operations that may have a material adverse effect on the Company's financial position or results of operations. 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 44 Notes to Consolidated Financial Statements its liability for these matters, $43.6 million and $44.9 million were accrued for such obligations at December 31, 1999 and December 31, 1998, respectively. These amounts are included in Other accrued 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 70% greater or 20% lower than the amount accrued at December 31, 1999. The amounts accrued for these matters are reviewed periodically based upon facts and circumstances available at the time. Changes in estimates are charged to Costs and expenses, Other in the period estimates are revised. Details about certain of the more significant sites involved are discussed below. Idarado Mining Company ("Idarado")-80.1% owned In July 1992, the Company and Idarado signed a consent decree with the State of Colorado ("State") that was agreed to by the U.S. District Court of Colorado to settle a lawsuit brought by the State under the Comprehensive Environmental Response, Compensation and Liability Act ("CERCLA"), generally referred to as the "Superfund Act." Idarado settled natural resources damages and past and future response costs and provided habitat enhancement work. In addition, Idarado agreed in the consent decree to undertake specified remediation work at its former mining site in the Telluride/Ouray area of Colorado. Remediation work at this property is substantially complete. If the remediation does not achieve specific performance objectives defined in the consent decree, the State may require Idarado to implement supplemental activities at the site, also as defined in the consent decree. Idarado and the Company have obtained a $5.2 million reclamation bond to secure their potential obligations under the consent decree. Resurrection Mining Company ("Resurrection")-100% owned The Company, Resurrection and other defendants have been named in lawsuits filed by the State of Colorado, under the Superfund Act in 1983 and subsequently consolidated with a lawsuit filed by the U.S. Environmental Protection Agency ("EPA") in 1986. These proceedings seek to compel the defendants to remediate the impacts of pre-existing, historic mining activities near Leadville, Colorado that date back to the mid-1800's, which the government agencies claim are causing substantial environmental problems in the area. In 1988 and 1989, the EPA issued administrative orders with respect to one area on the site and the defendants have collectively implemented those orders by constructing a water treatment plant, which was placed in operation in early 1992. Remaining remedial work for this area primarily consists of environmental monitoring and maintenance activities. The parties have entered into a consent decree with respect to the remaining areas that apportions liabilities and responsibilities for the site among the various parties. The EPA has approved remedial actions for selected components of Resurrection's portion of the site, which were initiated in 1995. The EPA has not yet selected the final remedy for the site. Accordingly, the Company cannot yet determine the full extent or cost of its share of the remedial action that will be required. The government agencies may also seek to recover for damages to natural resources. In March 1999, the parties entered into a Memorandum of Understanding ("MOU") to facilitate the settlement of natural resources damages claims under CERCLA for the upper Arkansas River Basin. The MOU provides a structure for evaluation of damages and possible restoration activities that may be required if it is concluded such damages have occurred. Dawn Mining Company LLC ("Dawn")-51% owned Dawn leased a currently inactive open-pit uranium mine on the Spokane Indian Reservation in the State of Washington. The mine 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 EPA. Dawn also owns a nearby uranium millsite facility that is subject to federal and state regulation. 45 Notes to Consolidated Financial Statements In 1991, Dawn's lease was terminated. As a result, Dawn was required to file a formal mine closure and reclamation plan. The Department of Interior has commenced an Environmental Impact Study to analyze Dawn's proposed plan and to consider alternate closure and reclamation plans for the mine. Dawn cannot predict at this time what type of mine reclamation plan may be selected by the Department of Interior. Dawn does not have sufficient funds to pay for the reclamation plan it proposed, for any alternate plan, or for the closure of its mill. The Department of Interior previously notified Dawn that when the lease was terminated, it would seek to hold Dawn and the Company (as Dawn's 51% owner) liable for any costs incurred as a result of Dawn's failure to comply with the lease and applicable regulations. Other government agencies have asserted that the Company is liable for future reclamation or remediation work at the mine or millsite. In early 1999, the EPA proposed that the mine be included on the National Priorities List under CERCLA. The Company will vigorously contest any claims as to its liability. The Company cannot reasonably predict the likelihood or outcome of any future action against Dawn or the Company arising from this matter. In late 1999, Dawn initiated state approval for a revised mill closure plan that, if implemented, would expedite the reclamation process at the mill. The State of Washington is reviewing this revised plan. The currently approved clean fill plan for the mill is secured by a $19.9 million bond that is 50% secured by a letter of credit and is guaranteed by the Company. Additional Interest in Minera Yanacocha The Company has an interest in Minera Yanacocha, a gold mining operation located in Peru, that began production in 1993. Prior to 1997, that interest was 38% and was accounted for on an equity basis. Beginning in 1997, Minera Yanacocha was consolidated into the Company's financial statements following the acquisition of an additional 13.35% interest. The acquisition was disputed and, in June 1998, the Peruvian Supreme Court resolved the dispute in favor of the Company as described below. In November 1993, the French government announced its intention to privatize the mining assets of Bureau de Recherches G[_]ologiques et Mini[_]res, the geological and mining bureau of the French government ("BRGM") and in September 1994, BRGM announced its intention to transfer its 24.7% interest in Minera Yanacocha to a third party. The Company and Compa-ia de Minas Buenaventura, S.A.A. ("Buenaventura"), then 38.0% and 32.3% owners of Minera Yanacocha, respectively, filed suit in Peru to seek enforcement of their preemptive rights with respect to the proposed BRGM transfer. In September 1996, the trial court ruled in favor of the Company and Buenaventura and held that the preemptive rights were triggered in November 1993, and that the value of the 24.7% interest was $109.3 million. In June 1998, the Peruvian Supreme Court issued a resolution upholding the decision. In spite of the final decision of the Peruvian Supreme Court, in October 1998, BRGM, through its subsidiary Compagnie Miniere International Or S.A. ("Mine Or"), filed with the International Centre for Settlement of Investment Disputes a request for arbitration against the Republic of Peru. The request alleges that the decision of the Peruvian courts wrongfully deprived Mine Or of its shares in Minera Yanacocha (which Mine Or values at approximately $560 million) and seeks restitution and damages from the Republic of Peru. While the Company is not a party to the arbitration, it believes that Mine Or's claims are unfounded. It is unclear at this time what effect, if any, the arbitration might have on the Company. The Company continues to monitor this and related arbitration and remains open to consider alternatives which could bring these issues to conclusion. Guarantee of Third Party Indebtedness The Company guaranteed a former subsidiary's $35.7 million Pollution Control Revenue Bonds, due 2009. The former subsidiary is BHP Copper Inc., formerly known as Magma Copper Company. It is expected that the Company will be required to remain liable on this guarantee as long as the bonds remain outstanding; however, the Company has not been required to pay any of these amounts, nor does it expect to have to pay any in the future. Other Commitments and Contingencies The Company has forward sale contracts for 125,000 ounces of gold from its Minahasa property in 2000, at an average price of $454 per ounce. Under a 1992 agreement with Barrick Goldstrike Mines Inc. ("Barrick"), Barrick is mining the Deep Post deposit, which is located on both companies' property and with respect to which both companies share mining costs and dewatering costs. The Company paid $14.5 million and $33.0 million for its share of such costs in 1999 and 1997, respectively. No payments were made in 1998 and payments of approximately $31 million are expected during 2000. In a 1993 asset exchange, a wholly-owned subsidiary of Santa Fe transferred a coal lease under which the subsidiary had collected advance royalty payments totaling $484 million. Remaining payments under the lease to the transferee total $390 million from 1994 to 2018. 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 million collected by the transferee, if the transferee fails to meet its refund obligation. 46 Notes to Consolidated Financial Statements The subsidiary has no direct liability to the lessor and has title insurance on the leased coal deposits of $240 million covering the secondary obligation. The Company and the subsidiary regard the circumstances entitling the lessor to a refund as remote. The Company has agreed to maintain the subsidiary's net worth at $108 million until July 1, 2005. The Company has minimum royalty obligations on one of its producing mines 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. At December 31, 1999, there were $94.7 million of outstanding letters of credit and surety bonds primarily for bonding reclamation plans and reinsurance agreements. The surety bonds and letters of credit reflect fair value as a condition of their underlying purpose and are subject to fees competitively determined in the marketplace. The Company is from time to time involved in various legal proceedings of a character normally incident to its business. It does not believe that adverse decisions in any pending or threatened proceeding or that amounts which it may be required to pay by reason thereof will have a material adverse effect on its financial condition or results of operations. 47 Notes to Consolidated Financial Statements Note 20 Unaudited Supplementary Data Quarterly Data The following is a summary of selected quarterly financial information (in millions except per share amounts):
1999 - ----------------------------------------------------------------------------------------------------------------------------- Three Months Ended Year Ended --------------------------------------------------------------- March 31, June 30, September 30, December 31, December 31, - ----------------------------------------------------------------------------------------------------------------------------- Sales $ 327.1 $ 315.8 $ 327.9 $ 428.1 $1,398.9 Gross profit(1) $ 71.9 $ 56.5 $ 60.7 $ 138.2 $ 327.3 Net income (loss) $ 9.9 $ 7.1 $ (39.0) $ 46.8 $ 24.8 Net income (loss) per common share, basic and diluted $ 0.06 $ 0.04 $ (0.23) $ 0.28 $ 0.15 Basic weighted average shares outstanding 167.3 167.4 167.5 167.6 167.5 Dividends declared per NMC common share $ 0.03 $ 0.03 $ 0.03 $ 0.03 $ 0.12 Closing price of NMC common stock $ 17.50 $ 19.88 $ 25.88 $ 24.50 $ 24.50 - ----------------------------------------------------------------------------------------------------------------------------- 1998 - ----------------------------------------------------------------------------------------------------------------------------- Three Months Ended Year Ended --------------------------------------------------------------- March 31, June 30, September 30, December 31, December 31, - ----------------------------------------------------------------------------------------------------------------------------- Sales $ 378.1 $ 374.0 $ 349.8 $ 352.0 $1,453.9 Gross profit(1) $ 96.2 $ 94.8 $ 70.4 $ 78.5 $ 339.9 Net income (loss) before cumulative effect of change in accounting principle(2)(3) $ 30.2 $ 24.6 $ 6.1 $(421.4) $ (360.5) Net income (loss) $ (2.7) $ 24.6 $ 6.1 $(421.4) $ (393.4) Net income (loss) before cumulative effect of a change in accounting principle per common share, basic and diluted $ 0.19 $ 0.16 $ 0.04 $ (2.53) $ (2.27) Net income (loss) per common share, basic and diluted $ (0.02) $ 0.16 $ 0.04 $ (2.53) $ (2.47) Basic weighted average shares outstanding 156.5 156.5 156.5 166.5 159.0 Dividends declared per NMC common share $ 0.03 $ 0.03 $ 0.03 $ 0.03 $ 0.12 Closing price of NMC common stock $ 30.56 $ 23.63 $ 24.25 $ 18.25 $ 18.25 - -----------------------------------------------------------------------------------------------------------------------------
(1) Sales less costs applicable to sales and depreciation, depletion and amortization. (2) In the quarter ended December 31, 1998, the Company adopted SOP 98-5 related to start-up costs, as described in Note 18. The accounting principle was applied retroactively to January 1, 1998, and 1998 quarterly information was restated. (3) Included an after-tax charge of $0.5 million, $1.1 million, $0.8 million and $2.6 million in the quarters ended March 31, June 30, September 30 and December 31, respectively, for expenses related to the adoption of SOP 98-5 (see Note 18) and an after-tax impairment charge of $424.7 million, in the quarter ended December 31. Ratio of Earnings to Fixed Charges The ratio of earnings to fixed charges was 2.1, (4.0), 2.3, 1.7, and 3.6 for the years ended December 31, 1999, 1998, 1997, 1996, and 1995, respectively. Earnings in 1998 were inadequate to cover fixed charges, with a deficiency of $480 million. The Company guarantees certain third party debt; however, it has not been and does not expect to be required to pay any amounts associated with such debt. Therefore, related interest on such debt has not been included in the ratio of earnings to fixed charges. 48 Operating Statistics For the Year Ended December 31,
North American Mine Production (Dry Short Tons 000) 1999 1998 - ------------------------------------------------------------------------------------------------------------------------------------ Average Mill Leach Average Mill Leach Grade* Ore Ore Waste Total Grade* Ore Ore Waste Total - ------------------------------------------------------------------------------------------------------------------------------------ Nevada Open-Pit Mines Carlin Trend: Carlin South 4,684 13,005 12,914 30,603 5,973 17,075 25,598 48,646 Carlin North-Post 891 27 7,002 7,920 40 6 11,925 11,971 Carlin North- Genesis Complex 925 985 5,448 7,358 428 7,441 14,924 22,793 Carlin North- Other 853 7,131 24,868 32,852 695 4,872 19,699 25,266 Twin Creeks 4,141 6,543 92,621 103,305 4,703 7,591 97,882 110,176 Lone Tree Complex 1,913 3,104 34,055 39,072 2,641 3,616 47,822 54,079 - ------------------------------------------------------------------------------------------------------------------------------------ Total Open Pit 0.062 13,407 30,795 176,908 221,110 0.053 14,480 40,601 217,850 272,931 - ------------------------------------------------------------------------------------------------------------------------------------ Nevada Underground Carlin Trend: Carlin North 689 0 0 689 591 0 0 591 Carlin Rain 71 22 0 93 26 4 0 30 Rosebud 137 0 0 137 168 0 0 168 - ------------------------------------------------------------------------------------------------------------------------------------ Total Underground 0.615 897 22 0 919 0.625 785 4 0 789 - ------------------------------------------------------------------------------------------------------------------------------------ Total Nevada 0.073 14,304 30,817 176,908 222,029 0.062 15,265 40,605 217,850 273,720 - ------------------------------------------------------------------------------------------------------------------------------------ California Mesquite 0.017 0 13,964 9,880 23,844 0.016 0 11,537 13,457 24,944 - ------------------------------------------------------------------------------------------------------------------------------------ Mexico La Herradura 0.023 0 2,577 6,746 9,323 0.022 0 1,647 4,238 5,885 - ------------------------------------------------------------------------------------------------------------------------------------ Total North American Mined 0.058 14,304 47,358 193,534 255,196 0.053 15,265 53,789 235,545 304,599 ____________________________________________________________________________________________________________________________________
North American Mine Production (Dry Short Tons 000) 1997 - ------------------------------------------------------------------------------------------------------------------------------------ Average Mill Leach Grade* Ore Ore Waste Total - ------------------------------------------------------------------------------------------------------------------------------------ Nevada Open-Pit Mines Carlin Trend: Carlin South 41,312 76,505 Carlin North-Post 4,721 7 47,914 52,642 Carlin North- Genesis Complex 612 10,381 26,331 37,324 Carlin North- Other 1,860 3,668 20,843 26,371 Twin Creeks 4,418 11,191 99,942 115,551 Lone Tree Complex 2,874 7,104 50,267 60,245 - ------------------------------------------------------------------------------------------------------------------------------------ Total Open Pit 0.047 22,134 59,895 286,609 368,638 - ------------------------------------------------------------------------------------------------------------------------------------ Nevada Underground Carlin Trend: Carlin North 683 0 0 683 Carlin Rain 145 29 0 174 Rosebud 113 0 0 113 - ------------------------------------------------------------------------------------------------------------------------------------ Total Underground 0.517 941 29 0 970 - ------------------------------------------------------------------------------------------------------------------------------------ Total Nevada 0.052 23,075 59,924 286,609 369,608 - ------------------------------------------------------------------------------------------------------------------------------------ California Mesquite 0.016 0 16,463 29,142 45,605 - ------------------------------------------------------------------------------------------------------------------------------------ Mexico La Herradura - ------------------------------------------------------------------------------------------------------------------------------------ Total North American Mined 0.045 23,075 76,387 315,751 415,213 ____________________________________________________________________________________________________________________________________
North American Mill and Leach Gold Production 1999 1998 - ------------------------------------------------------------------------------------------------------------------------------------ Ounces Ounces Dry Tons Average Recovery Produced Dry Tons Average Recovery Produced (000's) Grade Rate (%) (000's) (000's) Grade Rate (%) (000's) - ------------------------------------------------------------------------------------------------------------------------------------ Nevada Oxide Mills: Carlin Trend Mill No.3 0 N/A N/A 0.0 121 0.195 84.2 20.5 Mill No.4 1,042 0.105 76.0 83.8 804 0.139 78.5 93.6 Mill No.5 4,385 0.103 71.3 316.4 5,515 0.117 85.9 577.7 Twin Creeks 1,243 0.172 90.3 146.8 1,542 0.155 93.2 175.6 Lone Tree Complex 87 0.124 90.8 9.8 432 0.140 87.9 56.4 - ------------------------------------------------------------------------------------------------------------------------------------ Total Oxide Mills 6,757 0.116 77.4 556.8 8,414 0.129 86.8 923.8 - ------------------------------------------------------------------------------------------------------------------------------------ Refractory Mills: Carlin Roaster 2,826 0.255 89.4 640.6 2,325 0.226 89.5 477.7 Twin Creeks Autoclaves 3,248 0.218 86.0 623.0 2,722 0.240 89.1 581.0 Lone Tree Complex 2,115 0.100 88.6 74.0 2,251 0.101 86.5 110.6 - ------------------------------------------------------------------------------------------------------------------------------------ Total Refractory Mills 8,189 0.200 87.9 1,337.6 7,298 0.193 88.8 1,169.3 - ------------------------------------------------------------------------------------------------------------------------------------ Total Nevada Mills 14,946 0.162 84.5 1,894.4 15,712 0.158 88.0 2,093.1 - ------------------------------------------------------------------------------------------------------------------------------------ Leach Production: Carlin-Oxide 17,782 0.029 N/A 325.6 24,354 0.027 N/A 398.3 Carlin-Refractory 0 N/A N/A 4.7 0 N/A N/A 7.7 Twin Creeks-Oxide 6,543 0.031 N/A 165.8 7,660 0.024 N/A 179.7 Lone Tree-Oxide 3,697 0.036 N/A 108.2 3,608 0.034 N/A 90.8 - ------------------------------------------------------------------------------------------------------------------------------------ Total Nevada Leach 28,022 0.031 604.3 35,622 0.028 676.5 - ------------------------------------------------------------------------------------------------------------------------------------ Total Nevada Production 42,968 0.076 2,498.7 51,334 0.068 2,769.6 - ------------------------------------------------------------------------------------------------------------------------------------ California Mesquite-Leach 13,964 0.017 N/A 164.6 11,537 0.016 N/A 154.0 - ------------------------------------------------------------------------------------------------------------------------------------ Mexico La Herradura-Leach 2,577 0.023 N/A 40.2 1,647 0.022 N/A 12.9 - ------------------------------------------------------------------------------------------------------------------------------------ Total North American Production 59,509 0.060 2,703.5 64,518 0.057 2,936.5 ____________________________________________________________________________________________________________________________________ *Ounce per ton
North American Mill and Leach Gold Production 1997 - ------------------------------------------------------------------------------------------------------------------------------------ Ounces Dry Tons Average Recovery Produced (000's) Grade Rate (%) (000's) - ------------------------------------------------------------------------------------------------------------------------------------ Nevada Oxide Mills: Carlin Trend Mill No.3 0.0 0.000 0.0 0.0 Mill No.4 2,104 0.125 76.6 207.7 Mill No.5 6,170 0.087 81.5 443.7 Twin Creeks 3,633 0.096 86.2 286.4 Lone Tree Complex 680 0.138 83.0 71.0 - ------------------------------------------------------------------------------------------------------------------------------------ Total Oxide Mills 12,587 0.099 81.9 1,008.8 - ------------------------------------------------------------------------------------------------------------------------------------ Refractory Mills: Carlin Roaster 2,330 0.336 87.3 700.9 Twin Creeks Autoclaves 763 0.206 89.5 144.0 Lone Tree Complex 1,382 0.106 85.8 114.2 - ------------------------------------------------------------------------------------------------------------------------------------ Total Refractory Mills 4,475 0.242 87.4 959.1 - ------------------------------------------------------------------------------------------------------------------------------------ Total Nevada Mills 17,062 0.137 83.3 1,967.9 - ------------------------------------------------------------------------------------------------------------------------------------ Leach Production: Carlin-Oxide 34,820 0.022 N/A 465.3 Carlin-Refractory 363 0.075 N/A 13.8 Twin Creeks-Oxide 11,187 0.018 N/A 202.0 Lone Tree-Oxide 6,926 0.026 N/A 127.5 - ------------------------------------------------------------------------------------------------------------------------------------ Total Nevada Leach 53,296 0.022 808.6 - ------------------------------------------------------------------------------------------------------------------------------------ Total Nevada Production 70,358 0.050 2,776.5 - ------------------------------------------------------------------------------------------------------------------------------------ California Mesquite-Leach 16,463 0.016 N/A 227.9 - ------------------------------------------------------------------------------------------------------------------------------------ Mexico La Herradura-Leach - ------------------------------------------------------------------------------------------------------------------------------------ Total North American Production 86,821 0.040 3,004.4 ____________________________________________________________________________________________________________________________________ *Ounce per ton
52
Operating Statistics For the Year Ended December 31, Overseas Mine Production (Dry Short Tons 000) 1999 1998 - ------------------------------------------------------------------------------------------------------------------------------------ Average Mill Leach Average Mill Leach Grade* Ore Ore Waste Total Grade* Ore Ore Waste Total - ------------------------------------------------------------------------------------------------------------------------------------ Batu Hijau-copper 0.627 15,218 N/A 72,685 87,903 -- -- -- 42,267 42,267 -gold 0.006 Minahasa 0.326 1,032 235 7,182 8,449 0.269 1,271 76 6,907 8,254 Yanacocha Carachugo 0.037 N/A 14,260 17,377 31,637 0.049 N/A 13,174 10,606 23,780 Maqui Maqui 0.041 N/A 8,851 5,963 14,814 0.049 N/A 12,572 6,843 19,415 San Jose 0.041 N/A 19,380 10,767 30,147 0.040 N/A 11,642 6,692 18,334 Yanacocha 0.032 N/A 18,876 10,446 29,322 0.034 N/A 4,980 3,405 8,385 - ------------------------------------------------------------------------------------------------------------------------------------ Total Yanacocha 0.037 61,367 44,553 105,920 0.045 42,368 27,546 69,914 - ------------------------------------------------------------------------------------------------------------------------------------ Total Overseas Mined 0.042 16,250 61,602 124,420 202,272 0.052 1,271 42,444 76,620 120,435 - ------------------------------------------------------------------------------------------------------------------------------------ Overseas Mine Production (Dry Short Tons 000) 1997 - ------------------------------------------------------------------------------------------------------------------------------------ Average Mill Leach Grade* Ore Ore Waste Total - ------------------------------------------------------------------------------------------------------------------------------------ Batu Hijau-copper -- -- -- -- -- -gold Minahasa 0.231 1,269 0 10,032 11,301 Yanacocha Carachugo 0 10,658 7,509 18,167 Maqui Maqui 0 14,909 7,379 22,288 San Jose 0 601 831 1,432 Yanacocha 0 3,239 1,484 4,723 - ------------------------------------------------------------------------------------------------------------------------------------ Total Yanacocha 0.043 0 29,407 17,203 46,610 - ------------------------------------------------------------------------------------------------------------------------------------ Total Overseas Mined 0.051 1,269 29,407 27,235 57,911 - ------------------------------------------------------------------------------------------------------------------------------------
Overseas Mill and Leach Gold Production 1999 1998 1997 - ------------------------------------------------------------------------------------------------------------------------------------ Dry Ounces Equity Dry Ounces Equity Dry Ounces Equity Tons Average Recovery Produced Ounces Tons Average Recovery Produced Ounces Tons Average Recovery Produced Ounces (000's) Grade* Rate(%) (00O's) (000's)(000's)Grade* Rate(%) (000's) (000's) (000's) Grade* Rate (%) (00O's) (000's) - ------------------------------------------------------------------------------------------------------------------------------------ Batu Hijau Mill (Sales) 11.3 6.3 N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A Minahasa Mill 754 0.480 92.5 336.8 336.8 780 0.383 89.3 261.0 261.0 794 0.289 91.4 206.5 206.5 Leach 448 0.089 N/A 7.1 7.1 N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A Yanacocha Leach 61,367 0.037 N/A 1,655.8 850.3 42,368 0.045 N/A 1,335.8 685.9 29,407 0.043 N/A 1,052.8 530.9 Zaraf- shan- Newmont Leach 14,996 0.056 N/A 543.0 271.5 14,851 0.051 N/A 374.6 187.3 14,618 0.050 N/A 430.1 215.0 - ------------------------------------------------------------------------------------------------------------------------------------ Total Over- seas Produc- tion 77,565 0.046 2,554.0 1,472.0 58,000 0.051 1,971.4 1,134.2 44,819 0.049 1,689.4 952.4 - ------------------------------------------------------------------------------------------------------------------------------------ Total North Ameri- can Pro- duc- tion 2,703.5 2,703.5 2,936.5 2,936.5 3,004.4 3,004.4 - ------------------------------------------------------------------------------------------------------------------------------------ Total Gold Pro- duc- tion 5,257.5 4,175.5 4,907.9 4,070.7 4,693.8 3,956.8 - ------------------------------------------------------------------------------------------------------------------------------------ *Ounce per ton
Overseas Mill and Leach Gold Production 1999 1998 1997 - ------------------------------------------------------------------------------------------------------------------------------------ Dry Equity Dry Equity Dry Equity Tons Recovery Pounds Pounds Tons Recovery Pounds Pounds Tons Recovery Pounds Pounds (000's) Grade Rate(%) (00O's) (000's)(000's)Grade* Rate(%) (000's) (000's) (000's) Grade Rate (%) (00O's) (000's) - ------------------------------------------------------------------------------------------------------------------------------------ Total Copper Produc- tion Batu Hijau- Mill 5,727 0.75% 60.9 52,571 29,571 N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A - ------------------------------------------------------------------------------------------------------------------------------------ Total Copper Sales 18,168 10,220 - ------------------------------------------------------------------------------------------------------------------------------------
53 EX-21 5 SUBSIDIARIES OF REGISTRANT Exhibit 21 Subsidiaries of Newmont Mining Corporation
Name Ownership Place of Incorpoation ---- --------- --------------------- Augment Technologies 50% Delaware Canmont Mining Properties Limited 100% Delaware CG Properties, Inc. 100% Delaware Dawn Mining Company LLC 51% Delaware Elko Land and Livestock Company 100% Nevada Hospah Coal Company 100% Delaware Idarado Mining Company 80.1% Delaware Minas Congas S.R. Limitada 40% Peru Minera Penmont, S.A. de C.V. 44% Mexico Minera Santa Fe de Mexico, S.A. de C.V. 100% Mexico Minera Santa Fe Pacific Chile Limitada 100% Chile Minera Yanacocha, S.R.L. 51% Peru Mineracao Chega Tudo Ltda 50% Brazil New Verde Mines LLC 100% Delaware Newmont Alaska Limited 100% Delaware Newmont China Limited 100% Delaware Newmont de Mexico, S.A. de C.V. 100% Mexico Newmont Exploration of Canada Limited 100% Canada Newmont Global Employment Limited Partnership 100% Bermuda Newmont Gold Company 100% Delaware Newmont Grassy Mountain Corporation 100% Delaware Newmont Indonesia Finance Company 100% Delaware Newmont Indonesia Investment Limited 100% Delaware Newmont Indonesia Limited 100% Delaware Newmont International Services Limited 100% Delaware Newmont Kazakstan Gold Limited 100% Delaware Newmont Kyrgyzstan Gold Limited 100% Delaware Newmont Laos Limited 100% Delaware Newmont Latin America Limited 100% Delaware Newmont Mineral Exploration B.V. 100% Netherlands Newmont Mineral Holdings B.V. 100% Netherlands Newmont Mines Limited 100% Delaware
Name Ownership Place of Incorpoation ---- --------- --------------------- Newmont Nevada Holdings, Inc. 100% Nevada Newmont North America 100% Delaware Exploration Limited Newmont Overseas Exploration Limited 100% Delaware Newmont Peru Limited 100% Delaware Newmont Philippines, Inc. 100% Philippines Newmont Philippines First Resources, Inc. 100% Philippines Newmont Philippines Second Resources, Inc. 100% Philippines Newmont Philippines Third Resources, Inc. 100% Philippines Newmont Philippines Fourth Resources, Inc. 100% Philippines Newmont Philippines Fifth Resources, Inc. 100% Philippines Newmont Philippines Sixth Resources, Inc. 100% Philippines Newmont Philippines Investment Limited 100% Philippines Newmont Realty Company 100% Philippines Newmont Second Capital Corporation 100% Phillippines Newmont Southeast Asia Limited 100% Philippines Newmont Third Capital Corporation 100% Philippines Newmont (Uzbekistan) Limited 100% Cyprus N. I. Limited 100% Bermuda Nusa Tenggara Partnership 56.25% Netherlands PT Newmont Bengkulu Minerals 70% Indonesia PT Newmont Minahasa Raya 80% Indonesia PT Newmont Mongondow Mining 80% Indonesia PT Newmont Nusa Tenggara 45% Indonesia PT Newmont Pacific Nusantara 100% Indonesia Resurrection Mining Company 100% Delaware Rosebud Mining Company, L.L.C. 50% Delaware San Juan Basin Coal Holding Company 100% Delaware Santa Fe do Brasil Empreendimentos Ltda 100% Brazil Santa Fe Canadian Mining Limited 100% Canada Santa Fe Gold Corporation 100% Delaware Santa Fe Pacific Gold South America, Inc. 100% Delaware Santa Fe Mining, Inc. 100% Delaware Santa Fe Mining Australia Pty Limited 100% Australia
Name Ownership Place of Incorpoation ---- --------- --------------------- Santa Fe Pacific Gold Corporation 100% Delaware Saryjaz Joint Venture 51% Kyrgyzstan Sharaltyn Limited Liability Partnership 100% Kazakstan Sociedad Minera Coshuro de Responsabilidad Limitada 65% Peru Sociedad Minera de Responsabilidad Limitada Chaupiloma dos de Cajamarca 40% Peru Solton-Sary Joint Venture 50% Kyrgyzstan Zarafshan - Newmont Joint Venture 50% Uzbekistan
EX-23 6 CONSENT OF ARTHUR ANDERSEN LLP. Exhibit 23 CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS As independent public accountants, we hereby consent to the incorporation of our report included in this Form 10-K, into Newmont Mining Corporation's previously filed S-8 Registration Statement No. 33-49872, S-8 Registration Statement No 3353267, S-3 Registration Statement No. 33-54249, S-8 Registration Statement No. 33-62469, S-8 Registration Statement No. 333-04161, S-4 Registration Statement No. 333-19335, Post Effective Amendment No. 1 on Form S-8 to Form S-4 No. 333- 19335-01, S-3 Registration Statement No. 333-59141, S-8 Registration Statement No. 333-64795, S-8 Registration Statement No. 333-69147, S-8 Registration Statement No. 333-69145, S-8 Registration Statement No. 333-75993, S-3 Registration Statement No. 333-82671, S-4 Registration Statement No. 333-92029 and S-3 Registration Statement No.333-82671-01. /s/ Arthur Andersen Denver, Colorado, March 28, 2000. EX-27 7 FINANCIAL DATA SCHEDULES OF ELEC FILING ONLY
5 1,000 12-MOS 12-MOS DEC-31-1998 DEC-31-1999 JAN-01-1998 JAN-01-1999 DEC-31-1998 DEC-31-1999 79,086 55,314 11,802 9,414 52,066 40,553 0 0 280,371 322,614 513,080 534,053 3,633,292 3,741,453 1,584,585 1,769,105 3,235,427 3,383,382 219,543 273,873 1,201,131 1,014,193 0 0 0 0 267,544 268,262 1,171,989 1,183,386 3,235,427 3,383,382 1,453,856 1,398,927 1,474,913 1,431,588 824,858 832,013 1,113,925 1,071,581 744,050 85,473 0 0 78,823 62,554 (461,885) 122,338 (180,876) 14,400 (360,459) 24,793 0 0 0 0 (32,924) 0 (393,383) 24,793 (2.47) 0.15 (2.47) 0.15
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