-----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, N+0V82IUfPdyr7lYVtQldQA0Tic5KRN18wh4yOHiXuzImVo5NpSDEd6pRsCII551 iDPWkaxcq6jdVqpLZHq2bA== 0000950134-99-002280.txt : 19990402 0000950134-99-002280.hdr.sgml : 19990402 ACCESSION NUMBER: 0000950134-99-002280 CONFORMED SUBMISSION TYPE: 10-K405 PUBLIC DOCUMENT COUNT: 16 CONFORMED PERIOD OF REPORT: 19981231 FILED AS OF DATE: 19990331 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: 99579789 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-K FOR FISCAL YEAR END DECEMBER 31, 1998 1 - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- 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, 1998 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 Offices) (Zip Code)
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 Lima 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 4, 1999 was approximately $3,081,580,000. The number of shares of Registrant's common stock outstanding on March 4, 1999 was 167,349,331. DOCUMENTS INCORPORATED BY REFERENCE PORTIONS OF REGISTRANT'S ANNUAL REPORT TO STOCKHOLDERS FOR THE YEAR ENDED DECEMBER 31, 1998 ARE INCORPORATED BY REFERENCE INTO PARTS I, II, III AND IV OF THIS REPORT AND PORTIONS OF REGISTRANT'S DEFINITIVE PROXY STATEMENT SUBMITTED TO THE REGISTRANT'S STOCKHOLDERS IN CONNECTION WITH ITS 1999 ANNUAL MEETING TO BE HELD ON MAY 6, 1999 ARE INCORPORATED BY REFERENCE INTO PART III OF THIS REPORT. - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- 2 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 thereof, see page 15. PART I ITEMS 1 AND 2. BUSINESS AND PROPERTIES INTRODUCTION Newmont Mining Corporation (the "Corporation") was incorporated in 1921 under the laws of Delaware. It is engaged, directly and through its subsidiaries and affiliates, in the production of gold, the development of gold properties, the exploration for gold and the acquisition of gold properties worldwide. It produces gold from operations in Nevada and California, as well as in Peru, Indonesia, Mexico and the Central Asian Republic of Uzbekistan. Newmont Mining Corporation, together with its subsidiaries (unless the context otherwise requires), is referred to herein as "Newmont." On May 5, 1997, the Corporation acquired through a merger Santa Fe Pacific Gold Corporation ("Santa Fe") (the "Santa Fe Merger") in which each outstanding share of common stock of Santa Fe was converted into the right to receive 0.43 of a share of common stock of the Corporation. As a result, Santa Fe became a wholly-owned subsidiary of Newmont Gold Company ("NGC"). The Santa Fe Merger qualified as a tax-free reorganization and was accounted for as a pooling of interests. All information set forth in this Report with respect to periods prior to 1997 has been restated to reflect the Santa Fe Merger. On October 7, 1998, the Corporation acquired the 6.25% minority interest in the common stock of NGC through a merger in which 1.0125 shares of the Corporation's common stock was issued in exchange for each share of NGC stock not then owned by the Corporation. The merger was accounted for at historic cost, with the exception of the minority interest which was accounted for as a purchase. Gold has two main categories of use -- product fabrication and bullion investment. Fabricated gold has a wide variety of end uses, including jewelry (the largest fabrication component), electronics, dentistry, industrial and decorative uses, medals, medallions and official coins. Purchasers of official coins and high-karat jewelry frequently are motivated by investment considerations, so that net private bullion purchases alone do not necessarily represent the total investment activity in gold. OVERVIEW Newmont produces gold primarily through 100% owned operations in Nevada and California. It also produces gold through a 51.35% owned company in Peru and a 50% owned venture in Uzbekistan. Newmont also has an 80% interest in an Indonesian company which commenced gold production in March 1996 and a 45% interest in a second Indonesian company that holds an interest in a large copper/gold project which is currently in construction and is expected to commence operations in late 1999. In Mexico, Newmont has a 44% interest in a project which commenced production in June 1998. Newmont recorded 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 1998 included $424.7 million ($2.67 per share) for the write-down of assets impaired at a low gold price and $32.9 million ($0.21 per share) for the cumulative effect of an accounting change. Newmont produced 4.07 million equity ounces of gold in 1998, 3.96 million equity ounces in 1997 and 3.1 million equity ounces in 1996. In 1998, 72% of Newmont's equity production of gold related to its U.S. operations and 28% to its foreign operations. In 1997, 76% of Newmont's equity production of gold related to its U.S. operations and 24% to its foreign operations. In 1996, 81% of Newmont's equity production of gold related to its U.S. operations and 19% to its foreign operations. At December 31, 1998, approximately 37% of Newmont's consolidated assets related to its foreign operations. 3 Newmont had 52.6 million equity ounces of proven and probable gold reserves at December 31, 1998 and 52.7 million equity ounces of proven and probable gold reserves at December 31, 1997. Newmont's equity in proven and probable copper reserves was 4.8 billion pounds at December 31, 1998 and 1997. For information as to the calculation of reserves see page 11 and for information regarding risks associated with the estimation of reserves see page 17. In addition to exploration activities conducted in connection with these projects, Newmont continues to explore for gold and/or is conducting joint venture activities in other parts of these countries as well as in other areas of North America, Latin America, Southeast Asia and Central Asia. NEVADA Production Newmont's Nevada operations include Carlin, located on the geological feature known as the Carlin Trend which Newmont discovered in 1961, and operations in the Winnemucca Region which were acquired in the Santa Fe Merger. The Carlin Trend, located near Carlin, Nevada, is the largest gold district discovered in North America in this century. The Winnemucca Region includes (i) the Twin Creeks mine located near Winnemucca, Nevada (ii) the Lone Tree Complex located near Battle Mountain, Nevada and (iii) a 50% interest in The Rosebud Mining Company, L.L.C. ("Rosebud") 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. See map on page 5. Gold production in Nevada totaled 2,769,600 ounces in 1998 at a total cash cost of $209 per ounce, 2,776,500 ounces in 1997 at a total cash cost of $205 per ounce and 2,328,300 ounces in 1996 at a total cash cost of $232 per ounce. A table presenting Nevada operations mine production data is set forth on page 46 in the 1998 Annual Report to Stockholders which is incorporated herein by reference. In 1998, ore was mined from 17 open-pit deposits and four underground mines. The Post 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. Production initially scheduled from 1998 mining activity at the Post deposit was deferred due to a pit wall failure that occurred in mid-1997. During 1999, mining will resume 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 at an agreed upon cost. Processing Facilities Oxide ore is amenable to gold extraction through the use of size-reduction processes, such as crushing and grinding, and the dissolution of the gold in such ore using conventional cyanidation treatment techniques. Refractory ore contains minerals which require pre-treatment, such as roasting, pressure-oxidation, flotation or bio-oxidation, to optimize recovery of gold in the cyanidation processes. Approximately 73% of Newmont's 1998 year-end proven and probable gold reserves in Nevada were refractory and the balance were oxide. Nevada's production is increasingly coming from higher-cost refractory ores from both deep open pits and underground mines as lower-cost, near-surface oxide ores are depleted. Refractory ore treatment facilities are expected to generate approximately 56% of Newmont's Nevada gold production in 1999, compared with 42% in 1998 and 35% in 1997. Prior to 1994, processing consisted primarily of either milling or heap leaching of oxide ores. In 1994, Newmont expanded its facilities at Carlin and at the Lone Tree Complex to facilitate refractory ore processing. In 1997, Newmont completed expansion projects at Twin Creeks and Lone Tree for additional refractory ore treatment facilities. During 1998, Newmont processed higher-grade oxide ores at seven mills and lower-grade oxide ores at heap-leaching facilities. Higher-grade refractory ores are processed by a roaster at Carlin, and by autoclaves in the Winnemucca Region. Lower-grade refractory ores are processed through a flotation plant at the Lone Tree Complex or by bio-oxidation and heap-leaching at Carlin. Ores and concentrates are transported to the facility that maximizes gold recovery, production and cash flow. 2 4 Newmont's refractory ore treatment plant, or roaster, treats high-grade refractory ores that contain either sulfides or active carbon. A portion of the concentrates from the Lone Tree Complex flotation plant were processed through the roaster during the latter half of 1997 and in 1998. For a discussion of the financing of the roaster, see Note 9 to the financial statements in the 1998 Annual Report to Stockholders at page 29 therein which is incorporated herein by reference. Refractory ores at Twin Creeks are processed through the Sage Mill, a twin autoclave facility that utilizes a patented fine-grinding, pressure-oxidation process to oxidize ore by the action of heat, pressure and elevated oxygen. The first autoclave was commissioned in May 1997 and the second in October 1997. Refractory ores from certain deposits at the Lone Tree Complex and a portion of the concentrates from the Lone Tree flotation plant are also processed through the Sage Mill. Since the Santa Fe Merger, certain ores from the Carlin North Area have been transported to and processed through the Sage Mill. During scheduled maintenance periods, oxide ore is processed through the Sage Mill, bypassing the autoclave circuits. The Lone Tree Complex mill contains a patented partial-oxidation autoclave circuit that commenced operation in early 1994. Oxide ore has been processed through the mill, bypassing the autoclave circuit, when the autoclave was undergoing scheduled maintenance. The Lone Tree Complex mill was shut down in November 1998; however, it will operate on a scheduled periodic basis during 1999 to process a portion of the Lone Tree Complex's higher grade refractory ore. A portion of the Lone Tree Complex's higher grade refractory ores are processed through the autoclave and remaining refractory ores are treated at a flotation plant commissioned in mid-1997. In the flotation process, sulfide mineralization, with which gold is associated, is concentrated and separated from other minerals present in the ore utilizing inert gas. The resulting concentrates, containing higher percentages of gold in substantially smaller volumes of material, are processed through either the Lone Tree Complex mill, the Sage Mill or the Carlin roaster. During 1997, Newmont completed a large-scale bio-leach demonstration facility to process lower-grade refractory ores from Carlin's Gold Quarry deposit. Approximately 7,700 ounces of gold were produced in 1998 and 13,800 ounces of gold were produced in 1997 from this facility. This process utilizes bacterial oxidation and ammonium thiosulfate leaching applications. An eight million ton commercial-scale refractory leach pad, originally scheduled for completion in 1999, has been deferred as part of Newmont's plans to reduce capital spending during a period of low gold prices. Gold-bearing activated carbon from Carlin's milling and leaching facilities is processed on site at a central carbon processing plant and adjacent refinery. Separate carbon processing facilities are located in North and South Areas at Twin Creeks with one refinery in the North Area. Lone Tree has two carbon processing facilities. Material from the Lone Tree carbon processing facilities is refined at Carlin's refinery. A table presenting Nevada operations mill and leach production data is set forth on page 46 in the 1998 Annual Report to Stockholders which is incorporated herein by reference. Other Facilities Analytical laboratories, maintenance facilities and administration offices are located at Carlin, Twin Creeks and the Lone Tree Complex. Newmont also has 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. Refining Newmont has refining agreements with three foreign refiners and one U.S. refiner to further refine the dore bars it produces in Nevada to 0.995% pure gold or better, the recognized standard on world markets. Under the terms of the agreements with these refiners, the dore bars are toll refined and the refined gold and 3 5 the separately recovered silver are returned to Newmont's account for sale to third parties. Management believes that there would be no adverse effect on the Corporation if it lost the services of any of its refiners due to the availability of alternative refiners, each able to supply all services needed by Newmont for its Nevada operations. Exploration Newmont conducts extensive exploration in Nevada where it owns or otherwise controls the mineral interests on approximately 1.9 million acres of property. Exploration efforts at Carlin have been focused on high-grade refractory targets near existing deposits. In addition, a concerted effort continues to evaluate the lands acquired in the Santa Fe Merger. This evaluation included geological mapping, an airborne geophysical survey and re-logging of drill holes in order to develop target areas around the Twin Creeks, Lone Tree and Rosebud mines. Mineral Rights Newmont owns in fee or controls through long-term mining leases and unpatented mining claims all of the minerals and surface area within the boundaries of the present Carlin mining areas. Such long-term leases extend for at least the anticipated mine life of those deposits. With respect to Gold Quarry, Newmont owns a 10% undivided interest in the minerals in a majority of the present and projected mining areas, and with respect to the remaining 90% of such areas has agreed to pay a royalty on production to third party lessors that is equivalent to 18% of production. Newmont owns in fee or controls through long-term mining leases and unpatented mining claims all of the minerals and surface area within the boundaries of the present Winnemucca Region mining areas. The long-term leases extend for at least the anticipated mine life of those deposits. With respect to certain smaller deposits in the Winnemucca Region, Newmont is obligated to pay a royalty on production to third parties that varies from 4% to 7% of production. On February 3, 1999, Newmont and Barrick Gold Corporation signed an agreement in principle to exchange approximately 2 million ounces of reserves and various land rights on the north Carlin Trend that will consolidate each company's respective land positions in the area. Newmont expects to close the transaction early in the second quarter of 1999. See also "North American Operations" in Management's Discussion and Analysis in the 1998 Annual Report to Stockholders on page 12 therein which is incorporated herein by reference. For information regarding risks associated with unpatented mining claims, see page 18. 4 6 [MAP: NEVADA OPERATING PROPERTIES AND PRINCIPAL AREA OF LAND HOLDINGS] 5 7 CALIFORNIA Newmont has one mine in California, the Mesquite mine, which was acquired in the Santa Fe Merger. 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 154,000 ounces in 1998; 227,900 ounces in 1997 and 191,600 ounces in 1996. Total cash costs per ounce were $176, $213 and $245 for 1998, 1997 and 1996, respectively. Tables presenting Mesquite mine, mill and leach production data are set forth on page 46 in the 1998 Annual Report to Stockholders which is incorporated herein by reference. Gold-bearing activated carbon from leaching facilities is processed at an on-site carbon processing plant and refinery. Maintenance facilities and administration offices are also located at Mesquite. Electric power is supplied by a local utility. Mesquite is approaching the end of its mine life. Following a recent land exchange between the Bureau of Land Management and the State of California, Newmont gained access to property located just north of an existing pit through a lease with the State. Newmont began drilling on this property during 1998 which resulted in approximately 60,000 ounces being added to reserves at December 31, 1998. In 1998, mining rates at Mesquite were reduced to allow continuation of operations through the period of time required to continue the development of this property. As a result, the workforce was reduced by approximately 125 employees in January 1998. Newmont owns in fee or controls 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 its Mesquite deposits. The long-term leases extend for at least the anticipated mine life of those deposits. For information regarding risks associated with unpatented mining claims, see page 18. PERU Introduction Newmont produces gold through Minera Yanacocha S.A. ("Minera Yanacocha") in Peru. Minera Yanacocha is located approximately 375 miles north of Lima and 28 miles north of the city of Cajamarca. In 1986, Newmont 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, Newmont owned a 38% equity interest in Minera Yanacocha. In 1997, Newmont consolidated Minera Yanacocha in its financial statements following the acquisition of an additional 13.35% interest. The remaining interest is held by Compania de Minas Buenaventura, S.A. ("Buenaventura") (43.65%) and the International Finance Corporation (5%). A description of such acquisition is set forth in Note 4 to the financial statements in the 1998 Annual Report to Stockholders at page 26 therein which is incorporated herein by reference. Minera Yanacocha has mining rights with respect to a large land position, which includes eight 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. Newmont acts as manager of Minera Yanacocha. Production Four open-pit mines and three leach pads are in operation at Minera Yanacocha. Production commenced in August 1993 at the Carachugo deposit, in October 1994 at the Maqui Maqui deposit which is located three miles north of Carachugo, in January 1996 at the San Jose deposit which is located one mile southwest of Carachugo, and in December 1997 at the Yanacocha Norte deposit which is located one mile northwest of Carachugo. In 1998, production was 1,335,800 ounces of gold (685,900 equity ounces) at a total cash cost of $95 per equity ounce as compared to 1997 production of 1,052,800 ounces of gold (530,900 equity ounces at 51.35%, beginning February 1, 1997) at a total cash cost of $87 per equity ounce and 1996 production of 811,400 ounces of gold (308,300 equity ounces at 38%) at a total cash cost of $100 per equity ounce. Tables 6 8 presenting Minera Yanacocha mine and leach production data are set forth on page 47 in the 1998 Annual Report to Stockholders which is incorporated herein by reference. The ore is not crushed, but transported directly 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 two Merrill-Crowe plants (the second of which was placed in service in December 1997) 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 toll 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. Exploration Exploration continues to be conducted at numerous properties owned by Minera Yanacocha. Approximately $27.8 million was spent by Minera Yanacocha on exploration and mine geology in 1998. Exploration work on the Minas Conga joint venture, 40% owned by Newmont, 40% by Cedimin and 20% by Compania Minera Condesa S.A., a subsidiary of Buenaventura, continued throughout 1998 with an aggressive drilling campaign. Encouraging porphyry gold-copper mineralization has been identified on two separate targets. In addition, the joint venture continues to explore the surrounding area. A second Peruvian joint venture, Minera Coshuro, is 65% owned by Newmont and 35% by Buenaventura and 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, Newmont and Buenaventura are active in the southern part of Peru. Initial exploration work is underway in these prospective areas and a number of targets have been outlined. UZBEKISTAN Introduction In Uzbekistan, 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 have guaranteed to Zarafshan-Newmont 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 for the project. At December 31, 1998, approximately 202 million tons of stockpiled ore and ore in process remained at an average grade of 0.034 ounces of gold per ton, containing approximately 6.8 million ounces of gold for the project. Production In 1998, total production was 374,600 ounces of gold (187,300 equity ounces) at a total cash cost of $207 per equity ounce. In 1997, total production was 430,100 ounces of gold (215,000 equity ounces) at a total cash cost of $201 per equity ounce. In 1996, total production was 326,500 ounces of gold (163,200 equity ounces) at a total cash cost of $224 per equity ounce. A table presenting Zarafshan-Newmont leach production data is set forth on page 47 in the 1998 Annual Report to Stockholders which is incorporated herein by reference. Ore from the existing stockpiles is crushed in four stages. The crushed material is transported 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 7 9 refined gold. Power for the project is provided pursuant to a contractual arrangement with Navoi which acquires such power from a local plant. Although not contractually obligated to do so, Newmont has made, and may from time to time make, advances or contributions to Zarafshan-Newmont to cover debt service requirements and other capital and operating costs. Exploration Newmont signed an agreement in September 1996 with the Uzbekistan government and Mitsui & Co., Ltd. for the development of gold deposits (subject to satisfaction of certain conditions) in the Angren region of Uzbekistan, approximately 60 miles south of the city of Tashkent. Newmont has a 40% interest in the project. Pre-feasibility technical studies and negotiations with the Uzbekistan government were conducted in 1998 and are continuing in 1999. INDONESIA Introduction Newmont has two projects in Indonesia -- Minahasa which is in operation and Batu Hijau which is under construction. The Minahasa project is 80% owned by Newmont and 20% carried interest owned by P.T. Tanjung Serapung, an Indonesian company. However, because Newmont funded 100% of the construction costs, it is entitled to 100% of the gold production until it recovers its investment, including interest. Newmont has a 45% interest in the Batu Hijau project which it owns through a partnership with an affiliate of Sumitomo Corporation ("Sumitomo"). Sumitomo holds an indirect 35% interest in the Batu Hijau project through this partnership arrangement and the remaining 20% interest is a carried interest held by P. T. Pukuafu Indah, an Indonesian company. 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, Newmont entered into fourth generation Contracts of Work with the Indonesian government covering the Minahasa and Batu Hijau projects. Under the Contracts of Work, Newmont was granted the exclusive right to explore the contract area, construct any required facilities and 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. Once facilities are constructed and mining operations commence, the private party has the right to continue operating the project for 30 years, or longer if approved by the Indonesian government. Under the Contracts of Work, beginning in the sixth year after mining operations commence (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 (collectively the "Indonesian Parties"), thereby potentially reducing the non-Indonesian parties 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, Newmont entered into a Contract of Work granting rights to Newmont to explore an area located near the Minahasa contract area through a new company, P. T. Newmont Mongondow Mining ("Mongondow"). Newmont has 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. 8 10 Minahasa Minahasa, a multi-deposit project discovered by Newmont on the island of Sulawesi, began production 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 261,000 ounces of gold in 1998 at a total cash cost of $127 per ounce as compared to 206,500 ounces of gold in 1997 at a total cash cost of $156 per ounce. Production in 1996 was 112,700 ounces of gold at a total cash cost of $222 per ounce. Tables presenting Minahasa mine and mill production data are set forth on page 47 in the 1998 Annual Report to Stockholders which is incorporated herein by reference. 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 ore's high mercury content necessitated installation of a $8 million mercury scrubber in 1997. 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 Newmont's 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 discovered by Newmont 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 is being developed for transportation of materials, equipment and copper concentrate. Start up is expected to begin in late 1999. Newmont owned an 80% interest in Batu Hijau until it entered into a general partnership arrangement in July 1996 with Sumitomo to develop and operate the Batu Hijau project. The partnership arrangement was approved by the Indonesian government and is controlled jointly by Newmont and Sumitomo. As a result of this ownership structure and certain rights held by Sumitomo, Newmont is accounting for its investment in Batu Hijau as an equity investment. Newmont completed a final feasibility study for Batu Hijau in 1996. Based on the results of that study, and after obtaining the required approvals from the Indonesian government and entering into the partnership with Sumitomo, development and construction activities began in 1997. The project is expected to mine an average of 197 million tons per annum and the ore will be processed at the concentrator at an average rate of 150 thousand tons per day. Other facilities included in the project include a port, a coal-fired electrical generating plant, a townsite for the workforce, and other ancillary facilities. The total cost of the project is expected to be approximately $1.9 billion including cost escalations, capitalized interest during construction and working capital. Long-term smelter contracts for approximately 70% of the project's average annual concentrate production have been signed. Production over the 26-year mine life is expected to average 115,000 tons of copper and 420,000 ounces of gold per year at an expected average cash cost of about $0.50 per pound of copper, including gold credits, over the life of the project. In July 1997, agreements for $1 billion in financing for the Batu Hijau project were signed. The financing is guaranteed by Newmont and Sumitomo, 56.25% and 43.75%, respectively, until project completion tests are met, and will be non-recourse to Newmont and Sumitomo thereafter. Newmont and Sumitomo also entered into contingent support agreements related to this debt. As of December 31, 1998, $640 million had been used under this facility. See also Note 3 to the financial statements in the 1998 Annual Report to Stockholders at page 26 therein which is incorporated herein by reference. Exploration Exploration work continued through 1998 in areas surrounding Minahasa and Batu Hijau. 9 11 MEXICO In Mexico, Newmont is involved in two projects -- La Herradura, which commenced production in June 1998, and Mezcala, a 12,000 acre exploration site in southern Mexico. Newmont has a 44% interest in La Herradura and is earning a 44% interest in Mezcala by investing $15 million over four years of which $14.6 million had been invested through December 31, 1998. The balance of both projects is held by the Penoles group, a leading Mexican mining company. The Penoles group will be the operator of Mezcala. The La Herradura mine is operated by the Penoles group and is located in northwest Sonora, Mexico. Mining is conducted in two open pits and the ore is processed by run-of-mine heap-leaching. In 1998, La Herradura produced 29,224 ounces of gold, 12,859 ounces attributable to Newmont at a total cash cost of $115 per equity ounce. Tables presenting La Herradura mine and leach production data are set forth on page 46 in the 1998 Annual Report to Stockholders which is incorporated herein by reference. EXPLORATION In 1998, Newmont's total exploration and research expense was $68.4 million compared with $98.4 million in 1997. These figures exclude capitalized exploration costs associated with mine development of $12.2 million in 1998 and $21.3 million in 1997. Near Fairbanks, Alaska, Newmont continued exploration in 1998 on the True North property. Under the terms of a joint venture agreement signed with La Teko Resources, Inc. ("La Teko") in 1995, Newmont has the right to earn a 65% interest in the property by making cash payments of $6 million to La Teko, funding $3 million in exploration, and then funding up to $18 million in additional exploration and development costs. In 1996, Newmont completed its payment obligations to La Teko, and to date has spent approximately $19.2 million exploring the property of which approximately $17.8 million is applicable to the earn-in. Newmont's exploration team has a staff of approximately 195 geologists, geochemists and geophysicists. State-of-the-art technology, including airborne geophysical data acquisition systems, satellite location devices and field-portable imaging systems, also aids in the location of prospective targets. For information regarding risks associated with exploration and development, see page 19. SALES Newmont's gold sales generally are made at the monthly average market 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 16 to the financial statements in the 1998 Annual Report to Stockholders at page 37 therein for information regarding major customers and export sales which is incorporated herein by reference. MISCELLANEOUS Other than operating licenses for mining, processing and refining facilities built for, or acquired by Newmont, there are no patents, licenses or franchises material to Newmont's business. In many foreign countries, Newmont conducts mining or exploration pursuant to concessions granted by or contracts with the host government. These countries include, among others, Indonesia, Peru and Mexico. In each case, Newmont believes that such concessions or contracts are sufficient in extent and duration to justify any proposed investment it might make based on any such concessions or contracts. In general, such concessions or contracts are subject to the usual political risks associated with foreign operations. Management believes that Newmont's facilities are generally in a state of good repair. Newmont has a continuous program of capital investment that includes, as necessary or advisable, the replacement, modernization or expansion of its equipment and facilities. See "Liquidity and Capital Resources" discussion in Management's Discussion and Analysis in the 1998 Annual Report to Stockholders on page 15 therein which is incorporated herein by reference. 10 12 There were 5,700 persons employed by Newmont worldwide at December 31, 1998 and 6,760 persons employed by Newmont worldwide at December 31, 1997. PROVEN AND PROBABLE RESERVES Newmont's equity in proven and probable gold reserves was 52.6 million ounces at December 31, 1998 and 52.7 million ounces at December 31, 1997. In addition, Newmont's equity in proven and probable copper reserves was 4.8 billion pounds at December 31, 1998 and 1997. 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, 1998 and 1997 were based on a gold price of $350 per ounce. Newmont's management believes that if such reserve estimates were based on a gold price of $325 per ounce using current operating costs and other current economic assumptions, 1998 year-end proven and probable gold reserves could decrease by approximately 6%. If such estimates were based on a gold price of $300 per ounce using current operating costs and other current economic assumptions, 1998 year-end proven and probable gold reserves could decrease by approximately 16%. Such potential reduction in reserves would not have a material impact on Newmont's production rates for the next three years. After that time, assuming no change in mining plans or Newmont's cost structure, the impact would be progressively greater. However, if Newmont's gold reserves were actually calculated at a gold price of $300 per ounce, such calculation would be based on new mine plans and operating costs to minimize any adverse impact of any reduction in gold reserves. Newmont's proven and probable gold and copper reserves represent the total quantity of ore to be extracted from the deposits or stockpiles allowing for mining efficiencies and ore dilution. Ounces of gold or pounds of copper in Newmont's proven and probable gold and copper reserves are prior to any losses during metallurgical treatment. For information regarding risks associated with Newmont's estimates of its proven and probable reserves, see page 17. Newmont's estimate of its proven and probable reserves at December 31, 1998 and 1997 is set forth in the following table. 11 13 NEWMONT MINING CORPORATION PROVEN AND PROBABLE RESERVES
DECEMBER 31, 1998 DECEMBER 31, 1997 ------------------------------------------ ------------------------------------------ (100%) NEWMONT (100%) NEWMONT NEWMONT -------------------------------- EQUITY -------------------------------- EQUITY DEPOSITS WITH PROVEN EQUITY TONNAGE GRADE OUNCES OUNCES TONNAGE GRADE OUNCES OUNCES AND PROBABLE RESERVES(1)(2) (%) (000 TONS) (OZ/TON) (000) (000) (000 TONS) (OZ/TON) (000) (000) - --------------------------- ------- ---------- -------- -------- ------- ---------- -------- -------- ------- GOLD NORTH AMERICAN NEVADA Nevada Open Pit Carlin North-Post....... 100 9,680 0.180 1,747 1,747 9,680 0.180 1,747 1,747 Carlin North-Genesis Complex............... 100 20,306 0.033 665 665 21,576 0.033 710 710 Carlin North-Other...... 100 26,382 0.050 1,324 1,324 25,839 0.051 1,323 1,323 Carlin South (includes Gold Quarry)............... 100 102,638 0.051 5,261 5,261 135,946 0.048 6,470 6,470 Carlin Rain District.... 100 14,320 0.025 352 352 13,455 0.026 344 344 Twin Creeks............. 100 96,175 0.078 7,484 7,484 109,288 0.075 8,211 8,211 Lone Tree Complex....... 100 54,883 0.059 3,221 3,221 65,120 0.064 4,151 4,151 --------- ----- ------ ------ --------- ----- ------ ------ Total Nevada Open Pit................. 324,384 0.062 20,054 20,054 380,904 0.060 22,956 22,956 Nevada Underground Carlin North Area....... 100 2,551 0.641 1,634 1,634 2,889 0.620 1,790 1,790 Deep Post............... 100 2,391 0.813 1,943 1,943 2,430 0.802 1,949 1,949 Goldbug-Barrel.......... 100 2,917 0.391 1,140 1,140 2,917 0.391 1,140 1,140 Carlin North JV (High Desert)............... 60 7,050 0.425 2,993 1,796 7,050 0.425 2,993 1,796 Carlin Rain District.... 100 374 0.270 101 101 374 0.270 101 101 Rosebud................. 50 484 0.392 190 95 943 0.420 396 198 --------- ----- ------ ------ --------- ----- ------ ------ Total Nevada Underground......... 15,767 0.507 8,001 6,709 16,603 0.504 8,369 6,974 Stockpiles and In-Process.............. 100 77,147 0.053 4,115 4,115 71,139 0.053 3,803 3,803 --------- ----- ------ ------ --------- ----- ------ ------ NEVADA TOTALS(3).............. 417,298 0.077 32,170 30,878 468,646 0.075 35,128 33,733 Mesquite, California.......... 100 29,007 0.021 595 595 29,041 0.021 613 613 La Herradura, Mexico(5)....... 44 52,890 0.031 1,638 721 54,408 0.031 1,683 740 --------- ----- ------ ------ --------- ----- ------ ------ TOTAL NORTH AMERICAN.. 446,305 0.073 32,765 31,473 497,687 0.072 35,741 34,346 OVERSEAS Minera Yanacocha, Peru...... 51 Carachugo................. 51 55,691 0.027 1,491 766 34,018 0.035 1,179 605 Maqui Maqui............... 51 9,789 0.041 400 205 20,632 0.042 875 4 49 San Jose.................. 51 37,367 0.031 1,154 593 47,817 0.028 1,355 696 Yanacocha................. 51 290,028 0.032 9,227 4,738 245,596 0.029 7,167 3,680 La Quinua................. 51 273,061 0.026 7,128 3,660 120,943 0.025 3,002 1,542 Cerro Negro............... 51 23,943 0.027 657 337 In-Process................ 51 12,370 0.045 558 287 7,045 0.043 304 156 --------- ----- ------ ------ --------- ----- ------ ------ Total Yanacocha(4).... 702,249 0.029 20,615 10,586 476,051 0.029 13,882 7,128 Zarafshan-Newmont, Uzbekistan(6)............. 50 202,381 0.034 6,845 3,422 216,907 0.035 7,510 3,755 Minahasa, Indonesia(7)...... 80 7,207 0.189 1,364 1,091 6,758 0.234 1,583 1,267 --------- ----- ------ ------ --------- ----- ------ ------ TOTAL OVERSEAS........ 964,727 0.032 30,462 15,820 754,124 0.033 24,658 12,890 (EXCLUDING BATU HIJAU) Batu Hijau, Indonesia(8)...... 45 1,008,036 0.012 11,849 5,332 1,006,593 0.012 12,096 5,443 ------ ------ ------ ------ TOTAL WORLDWIDE-GOLD.. 75,076 52,625 72,495 52,679 ====== ====== ====== ======
COPPER COPPER COPPER COPPER TONNAGE GRADE (MILLION (MILLION TONNAGE GRADE (MILLION (MILLION COPPER (000 TONS) (CU%) POUNDS) POUNDS) (000 TONS) (CU%) POUNDS) POUNDS) - ------ ---------- -------- -------- -------- ---------- -------- -------- -------- Batu Hijau, Indonesia(8).... 45 1,008,036 0.525 10,580 4,761 1,006,593 0.528 10,631 4,784
12 14 Numbers may differ slightly from those reported previously as a result of different deposit groupings yielding different rounding of totals. - --------------- (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 the U.S. were calculated using cut-off grades as follows: oxide leach material not less than 0.005 ounce per ton; oxide mill cutoffs varied; refractory leach materials not less than 0.030 ounce per ton at Gold Quarry (which contains 96% of the refractory leach reserve ounces); refractory mill material not less than 0.043 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 1998 were as follows: oxide leach recoveries ranged from 44% to 80% averaging 64%; oxide mill recoveries ranged from 72% to 96% averaging 86%; refractory leach recoveries at Gold Quarry ranged from 45% to 60%, averaging 56%; refractory mill recoveries ranged from 85% to 93%, averaging 88%. 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. (3) These reserves are approximately 73% refractory in nature which are not amenable to the normal 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 not less than 0.011 ounce per ton. Assumed leach recoveries is 50% to 82%, depending on each deposit's metallurgical properties. All ore is oxidized. (5) Calculated using a cut-off grade of 0.01 ounce per ton and a leach recovery of 61%. All ore is oxidized. Construction began in 1997 and production commenced in mid-1998. (6) Material available to Zarafshan-Newmont for processing from designated stockpiles or from other specified sources. All ore is oxidized. 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 and leached. Ore reserves calculated using 50% to 65% leach recoveries, depending on material type. (7) Calculated using a cut-off grade of 0.102 ounce per ton and a mill recovery of 90% for refractory material. For oxide material a cut-off grade of 0.022 ounce per ton was used and a leach recovery of 62%. (8) Based on a feasibility study completed in 1996 and updated in 1998. Production is scheduled to begin in late 1999. Production will be in the form of copper 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. 13 15 ENVIRONMENTAL MATTERS General Newmont's 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. Newmont has successfully permitted all mine and processing operations and expansion activities as specified under regulations promulgated by the U.S. and the States of Nevada and California. Management does not believe that ongoing compliance with such regulations will have a material adverse effect on its competitive position. At this time Newmont does not expect any material impact on the future recurring operating cost of compliance with currently enacted environmental regulations. Ongoing costs to comply with environmental obligations have not been significant to Newmont's total operating costs. Since Newmont is not able to pass on any net increases in costs to its customers, any such increases could have an adverse effect on future profitability of Newmont. Amendments to current laws and regulations governing operations and activities of mining companies or the stringent implementation thereof could have a material adverse impact on Newmont in terms of increased capital and operating expenditures. Domestic Operations It is estimated that with respect to Newmont's Nevada and California operations, compliance with federal, state and local regulations relating to the discharge of material into the environment, or otherwise relating to the protection of the environment, required capital expenditures of approximately $5 million in 1998. It is estimated that Newmont will require approximately $4 million of capital expenditures for environmental compliance in 1999 and annually thereafter. Newmont's Nevada and California gold mining and processing operations generate solid waste which is subject to regulation under the federal Resource Conservation and Recovery Act ("RCRA") and similar laws of the States of Nevada and California. Solid waste that is considered "hazardous" is subject to extensive regulation by the U.S. Environmental Protection Agency (the "EPA") and the States of Nevada and California under Subtitle C of RCRA, while non-hazardous solid waste is governed by a less stringent program under Subtitle D of RCRA and solid waste management regulations 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. Newmont is participating in that process. Currently, there is not a sufficient basis to predict the potential impact of such regulations on Newmont. Wastes from the "processing" of ores and minerals (including refining wastes) at Newmont's Nevada and California operations are subject to regulation under Subtitle C of RCRA. Newmont recycles 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 Newmont's operations. Newmont's Nevada and California operations are subject to stringent state permitting regulations for protection of surface and ground water, as well as wildlife. These regulations may require additional capital and operating expenditures for expansion of current operations and development of new projects and may increase closure and reclamation costs for pits, tailing impoundments and leaching facilities. Such compliance has not had, and is not expected to have, a material adverse impact on Newmont's 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 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 federal Clean Air Act could ultimately increase Newmont's compliance costs for air pollution permitting and/or control, but the impact on Newmont's mining operations is so dependent on future regulations and other contingencies that it cannot reasonably be predicted at this time. 14 16 Foreign Operations Newmont's 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 Newmont's operations or its competitive position. Newmont has successfully permitted all new mine and processing operations as specified under regulations promulgated by the respective national governments in Peru, Uzbekistan and Indonesia. In addition, Newmont has mandated that all facilities constructed and operated outside of the U.S. materially comply with a level of environmental protection that is equivalent to that for its U.S. operations. Nevertheless, the adoption of new laws or regulations, or amendments to current laws or regulations, regarding the operations and activities of mining companies could have a material adverse impact on Newmont's capital and operating expenditures. Minera Yanacocha has an advisory role on the Ministry of Energy and Mines environmental affairs group to provide technical assistance with the development of achievable environmental strategies for Peru's mining industry. All Newmont-managed international projects have adopted and implemented environmental policies and procedures developed by Newmont. Newmont is committed to educating and training mine operations, exploration and environmental personnel to meet the highest levels of environmental standards. Newmont maintains an international environmental compliance program which utilizes state of the art compliance monitoring protocols and builds and maintains facilities with high levels of environmental protection and monitoring equipment. Former Operations Newmont is involved in matters involving environmental cleanup obligations arising from past mining activities (not in all cases conducted by Newmont) at three separate locations. Idarado Mining Company, an 80.1% owned subsidiary of Newmont, agreed by consent decree in 1992 with the State of Colorado to undertake specific remediation work in the Telluride/Ouray area of Colorado. Resurrection Mining Company, 100% owned by Newmont, is a defendant in lawsuits brought by the State of Colorado and the U.S. for environmental remediation in the Leadville, Colorado area. Dawn Mining Company, 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. Remediation activities were conducted at these three sites in 1998. At Idarado, remediation work was completed in 1998. If such remediation work does not achieve specific performance objectives defined in the consent decree, the State of Colorado may require Idarado to implement supplemental activities, also as specified in the consent decree. At December 31, 1998 Newmont had an aggregate $44.9 million accrued for remediation of these four sites and other sites, a decrease of $7.3 million accrued at the end of 1997, as a result of 1998 expenditures and changes in estimated future remediation costs, net of expenditures incurred in 1998. See also "Environmental and Other" discussion in Management's Discussion and Analysis in the 1998 Annual Report to Stockholders on page 16 therein and Note 18 to the financial statements in the 1998 Annual Report to Stockholders on page 39 therein which are incorporated herein by reference. FORWARD-LOOKING STATEMENTS Certain statements contained herein (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. Such 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. 15 17 Where Newmont expresses 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, such 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 such forward-looking statements. Important factors that could cause actual results to differ materially from such forward-looking statements ("cautionary statements") are described below. See also "Safe Harbor Statement" discussion in Management's Discussion and Analysis in the 1998 Annual Report to Stockholders on page 17 therein which is included herein by reference. Given these uncertainties, readers are cautioned not to place undue reliance on such forward-looking statements. 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. Newmont disclaims any intent or 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. RISK FACTORS Gold and Copper Price Volatility The cash flows and profitability of Newmont's operations are significantly affected by changes in the market price of gold. Market gold prices can fluctuate widely and are affected by numerous factors beyond Newmont's control, including industrial and jewelry demand, expectations with respect to the rate of inflation, the strength of the U.S. dollar (the currency in which the price of gold is generally quoted) and of other currencies, interest rates, gold sales and loans by central banks, forward sales by producers, global or regional political or economic events, and production and cost levels in major gold-producing regions such as South Africa. In addition, the price of gold sometimes is subject to rapid short-term changes because of speculative activities. The current demand for and supply of gold affect gold prices, but not necessarily in the same manner as current supply and demand affect the prices of other commodities. The supply of gold consists of a combination of new production from mining and existing stocks of bullion and fabricated gold held by governments, public and private financial institutions, industrial organizations and private individuals. As the amounts produced in any single year constitute a very small portion of the total potential supply of gold, normal variations in current production do not necessarily have a significant impact on the supply of gold or on its price. If revenue from gold sales falls for a substantial period below Newmont's cost of production at its operations, Newmont could determine that it is not economically feasible to continue commercial production at some or all of its operations or to continue the development of some or all of its projects. Newmont's weighted average total cash cost of equity production for its worldwide operations was $183 per ounce of gold sold in 1998, $187 in 1997 and $218 in 1996. See also "Gold Price" discussion in Management's Discussion and Analysis in the 1998 Annual Report to Stockholders on page 10 therein which is incorporated herein by reference. 16 18 The gold market generally is characterized by volatile prices. The volatility of gold prices is illustrated in the following table of annual high, low and average afternoon fixing prices for gold per ounce on the London Bullion Market:
YEAR HIGH LOW AVERAGE - ---- ---- ---- ------- 1989.................................................... $416 $356 $381 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 through March 26).................................. $294 $279 $287
- --------------- Source of Data: Metals Week and Reuters. On March 26, 1999, the afternoon fixing price for gold on the London Bullion Market and the spot market price of gold per ounce on the New York Commodity Exchange was $279. The Batu Hijau copper/gold project is expected to commence operations in late 1999. The cash flow and profitability of this project will be significantly affected by changes in the market price of copper. Copper prices fluctuate widely and are affected by numerous factors beyond Newmont's control or ability to predict, including but not limited to domestic and international economic and political conditions, industry inventory levels and capacity, global and regional demand and production, the availability and costs of substitute materials, speculative activities and inflationary expectations. Newmont may use commodity instruments to protect the selling price of certain anticipated gold and copper production. Although the use of such instruments could protect Newmont against low gold and copper prices, it might also prevent full participation in subsequent increases in the market prices for gold and copper with respect to covered production. Production Estimates Estimates of future production for particular properties for Newmont as a whole are derived from annual mining plans prepared by Newmont. Such plans have been developed based on, among other things, mining experience, reserve estimates, assumptions regarding ground conditions and physical characteristics of ores (such as hardness and presence or absence of certain metallurgical characteristics) and estimated rates and cost of production. Actual production may vary from estimates for a variety of reasons, including risks and hazards of the types discussed, actual ore mined varying from estimates of grade and metallurgical and other characteristics, mining dilution, pitwall failures or cave-ins, strikes and other actions by labor at unionized locations, restrictions imposed by government agencies and other factors. Estimates of production from properties not yet in production or from operations that are to be expanded are based on similar factors (including, in some instances, feasibility reports prepared by company personnel and/or outside consultants) but, as such estimates do not have the benefit of actual experience, there is a greater likelihood that actual results will vary from the estimates. Ore Reserve Estimates The proven and probable reserve figures presented herein are estimates, and no assurance can be given that the indicated levels of recovery of gold and copper will be realized. Reserve estimates may require revision based on actual production experience. Market price fluctuations of gold and copper, as well as increased production costs or reduced recovery rates, could render Newmont's proven and probable gold and copper 17 19 reserves containing relatively lower grades of mineralization uneconomic to exploit and may ultimately result in a reduction of reserves. Regulation, Environmental Risks and Unpatented Mining Claims Mining is subject to potential risks and liabilities associated with pollution of the environment and the disposal of waste products occurring as a result of mineral exploration and production. Newmont has been, and may in the future be, subject to clean-up liability under the Comprehensive Environmental Response, Compensation and Liability Act of 1980 and comparable state laws which establish clean-up liability for the release of hazardous substances. Newmont has interests in certain sites associated with former mining activities for which clean-up liabilities exist. Although Newmont believes it has made adequate provisions in its financial statements for clean-up costs, it cannot guarantee that such provisions will be adequate. In the context of environmental permitting, including the approval of reclamation plans, Newmont must comply with existing standards, laws and regulations which may entail greater or lesser costs and delays depending on the nature of the activity to be permitted and how such standards, laws and regulations are interpreted or implemented by the permitting authority. Domestic and foreign mining operations and exploration activities are subject to extensive laws and regulations governing prospecting, development, production, exports, taxes, labor standards, occupational health, waste disposal, protection and remediation of the environment, protection of endangered and protected species, mine safety, toxic substances and other matters. It is possible that the costs and delays associated with the compliance with such standards, laws, regulations and permits could result in Newmont not proceeding with the development of a project or the operation or further development of a mine. Amendments to current laws and regulations governing operations and activities of mining companies are actively considered from time to time and could have a material adverse impact on Newmont. In recent years, the U.S. Congress has considered a number of proposed amendments to the General Mining Law of 1872, as amended (the "General Mining Law"), which governs mining claims and related activities on U.S. federal lands. Although no such legislation has been adopted to date, there can be no assurances that such legislation will not be adopted in the future. If ever adopted, such legislation could, among other things, impose royalties on gold production from currently unpatented mining claims located on U.S. federal lands. If such legislation is ever adopted, it could reduce the amount of future exploration and development activity conducted by Newmont on such U.S. federal lands. In addition, in 1992, a holding fee of $100 per claim was imposed upon unpatented mining claims located on U.S. federal lands. In October 1994, a moratorium on the processing of new patent applications was approved. While such moratorium currently remains in effect, its future is unclear. As of December 31, 1998, approximately 77.5% of Newmont's proven and probable reserves in the U.S. are located on private land. The remainder are located on unpatented mining claims on U.S. federal lands. Of those, 13.6% of Newmont's proven and probable reserves in the U.S. are located on unpatented mining claims for which Newmont received first half final entry certificates before the imposition of the moratorium and is pursuing patenting under the General Mining Law. Risks of Foreign Investments Certain of Newmont's activities are located in foreign countries which are subject to the risks normally associated with conducting business in foreign countries. Such countries are often less developed or have an emerging economy, including uncertain political and economic environments, as well as risks of war and civil disturbances or other risks which may limit or disrupt a project, restrict the movement of funds or result in the deprivation of contract rights or the taking of property by nationalization or expropriation without fair compensation, risk of adverse changes in laws or policies of particular countries, increases in foreign taxation, delays in obtaining or the inability to obtain necessary governmental permits, limitations on ownership and on repatriation of earnings, and foreign exchange controls and currency devaluations. Although Newmont is not currently experiencing any significant problems in foreign countries arising from such risks, there can be no assurance that such problems will not arise in the future. While political risk insurance has been obtained to cover portions of Newmont's investments in Peru, Indonesia and Uzbekistan against certain expropriation, war, civil unrest and political violence risks, such insurance is limited by its terms to the particular risks 18 20 specified therein 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 a foreign country. Foreign investments may also be adversely affected by laws and policies of the U.S. affecting foreign trade, investment and taxation. See also "Foreign Currency" discussion in Management's Discussion and Analysis in the 1998 Annual Report to Stockholders on page 11 therein which is incorporated herein by reference. In certain of the countries other than the U.S. where Newmont has operations or conducts exploration activities, the mineral rights are owned by the relevant governments. Such governments have entered into contracts with or granted concessions that enable Newmont to conduct operations or exploration activities on such lands. Notwithstanding such arrangements, Newmont's ability to conduct its operations or exploration activities on such lands is subject to changes in government policy over which Newmont has no control. If such a change were to occur that affected the right of Newmont to conduct operations or exploration activities, it could have a material adverse impact on Newmont. Speculative Nature of Gold Exploration and Uncertainty of Development Projects Gold exploration is highly speculative in nature, involves many risks and frequently is nonproductive. Success in increasing 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 several 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 be successful. With respect to development projects which have no operations 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, and feasibility studies which 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 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 those currently estimated. It is not unusual in new mining operations to experience unexpected problems during the start-up phase. Delays often can occur in the commencement of production. Mining Risks and Risk of Nonavailability of Insurance The business of gold mining is subject to a number of risks and hazards, including environmental hazards, industrial accidents, labor disputes, encountering unusual or unexpected geologic formations or other geological or grade problems, encountering unanticipated ground or water conditions, cave-ins, pitwall failures, flooding, rock falls, periodic interruptions due to inclement or hazardous weather conditions or other unfavorable operating conditions and other acts of God and gold bullion losses. Such risks could result in damage to, or destruction of, mineral properties or producing facilities, personal injury or death, environmental damage, delays in mining, monetary losses and possible legal liability. Newmont maintains insurance against risks that are typical in the operation of its business and in amounts that it believes to be reasonable. Such insurance, however, contains exclusions and limitations on coverage. There can be no assurance that such insurance will continue to be available, will be available at economically acceptable premiums or will be adequate to cover any resulting liability. Proposed Repeal of Percentage Depletion for Nonfuel Minerals Mined on Certain Federal Lands Newmont presently benefits from the percentage depletion allowance permitted under current U.S. tax law. Subject to limitations, taxpayers may claim deductions for the depletion of mineral resources. Such deductions may be based upon the taxpayer's tax cost of the mineral resources ("cost depletion") or upon a 19 21 percentage of the gross revenues or net income from sales of the mineral resources ("percentage depletion"). There are proposals which would repeal the present percentage depletion provisions for nonfuel minerals, including gold, extracted from any land where title to the land or the right to extract minerals from such land was originally obtained pursuant to the provisions of the General Mining Law. The proposals are stated only in general terms and do not provide specific details as to their potential operation, including the lands that will ultimately be affected. It is uncertain whether the repeal of these provisions will ultimately be adopted. If adopted, however, such repeal could have an adverse effect on the results of operations of Newmont. The magnitude of such effect cannot be determined presently, but would be affected by several factors, including the specific landholdings of Newmont that are actually impacted, the level of future production from such landholdings and future gold prices. ITEM 3. LEGAL PROCEEDINGS 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 ("Resurrection") 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 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 development of feasibility studies were sent to the EPA for approval in 1997. Remedial activities were conducted in 1998 and will continue in 1999. 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. Further, Resurrection's cleanup and reimbursement obligations are subject to certain sharing percentages with at least one other defendant. 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 also Note 18 to the financial statements in the 1998 Annual Report to Stockholders on page 39 therein which is incorporated herein by reference. In December 1996, Santa Fe entered into a definitive merger agreement with Homestake Mining Company ("Homestake") and a subsidiary of Homestake, subsequent to discussions during November 1996 with both Homestake and the Corporation regarding potential business combinations. In January 1997, the Corporation announced a proposal for a business combination with Santa Fe. Santa Fe commenced discussions with the Corporation in January 1997 and in March 1997, the merger agreement between Homestake and Santa Fe was terminated and Santa Fe entered into a merger agreement with the Corporation. In December 1996, six Santa Fe stockholders filed class action complaints against Santa Fe and Santa Fe's Board of Directors (collectively, "Defendants"). The complaints alleged, among other things, that members of the Santa Fe Board of Directors breached their fiduciary responsibilities to Santa Fe's stockholders by failing to consider fully the Corporation's proposal to acquire Santa Fe and the Santa Fe Board of Directors approved the Homestake merger transaction to ensure that certain of the defendants would retain their positions. Subsequent to the consummation of the Santa Fe Merger, the plaintiffs dismissed the complaints but sought to have the Delaware Court of Chancery retain jurisdiction for the purpose of determining whether plaintiffs' counsel were entitled to an award of attorneys' fees. On November 30, 1998, plaintiffs voluntarily withdrew their complaints and the Court ordered the litigation dismissed without prejudice. 20 22 For a description of the litigation involving Newmont's ownership interest in Minera Yanacocha, see Note 4 to the financial statements in the 1998 Annual Report to Stockholders at page 26 therein which is incorporated herein by reference. 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, 1998. EXECUTIVE OFFICERS OF THE REGISTRANT The Corporation's executive officers as of March 4, 1999 were:
NAME AGE OFFICE ---- --- ------ Ronald C. Cambre...................... 60 Chairman, President and Chief Executive Officer Wayne W. Murdy........................ 54 Executive Vice President and Chief Financial Officer John A. S. Dow........................ 53 Senior Vice President, Exploration David H. Francisco.................... 49 Senior Vice President, International Operations Lawrence T. Kurlander................. 59 Senior Vice President and Chief Administrative Officer W. James Mullin....................... 53 Senior Vice President, North American Operations David A. Baker........................ 44 Vice President, Government and Environmental Affairs Patricia A. Flanagan.................. 40 Vice President, Treasurer and Assistant Secretary Bruce D. Hansen....................... 41 Vice President, Project Development Joy E. Hansen......................... 53 Vice President and General Counsel Donald G. Karras...................... 45 Vice President, Taxes Linda K. Wheeler...................... 45 Vice President and Controller
There are no family relationships by blood, marriage or adoption among any of the above executive officers of the Corporation. All executive officers are elected annually by the Board of Directors of the Corporation 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 officer. Mr. Cambre was elected Chairman of the Corporation in November 1994 (effective January 1995), President in June 1994 and Chief Executive Officer in September 1993 (effective November 1993). He served as Vice Chairman of the Corporation from November 1993 through December 1994. Mr. Murdy was elected Executive Vice President of the Corporation in July 1996 and designated Chief Financial Officer effective in December 1992. He served as a Senior Vice President of the Corporation from December 1992 to July 1996. Mr. Dow was elected Senior Vice President, Exploration of the Corporation in July 1996. He served as Vice President, Exploration of the Corporation from April 1992 to July 1996. Mr. Francisco was elected Senior Vice President, International Operations of the Corporation in November 1998. He also has served as Senior Vice President, International Operations of NGC since May 1997. Previously, he served as Vice President, International Operations of NGC from July 1995 to May 1997. Prior thereto, he served as Executive Vice President and General Manager of P.T. Freeport Indonesia Co., a natural resources company, from August 1992 to May 1995. 21 23 Mr. Kurlander was elected Senior Vice President and Chief Administrative Officer of the Corporation in May 1997. Previously, he served as Senior Vice President, Administration of the Corporation from March 1994 to May 1997. Prior thereto, he served as Senior Vice President, Public Affairs and Government Affairs, of Nabisco International Inc. of RJR Nabisco, Inc., a consumer products company since 1992. Mr. Mullin was elected Senior Vice President, North American Operations of the Corporation in November 1998. He also has served as Senior Vice President, North American Operations of NGC since 1997. Previously, he served as Vice President and Regional Director, Nevada Operations of NGC from May 1994 to May 1997, and prior thereto he served as Vice President and General Manager of NGC from December 1993 to May 1994. Mr. Baker was elected Vice President, Government and Environmental Affairs of the Corporation in November 1998. He also has served as Vice President, Environmental Affairs of NGC since 1991 and Vice President, Governmental Affairs of NGC since November 1998. Ms. Flanagan was elected a Vice President of the Corporation in March 1995 and was elected Treasurer in December 1992. She was appointed Assistant Secretary in June 1992. Mr. Hansen was elected Vice President, Project Development of the Corporation in November 1998. He also has served as Vice President, Project Development of NGC since May 1997. Previously, he served as Senior Vice President, Corporate Development of Santa Fe from April 1994 to May 1997 and prior thereto held various senior positions with Santa Fe since 1982. Ms. Hansen was elected Vice President and General Counsel of the Corporation in September 1996. She also has served as Vice President and General Counsel of NGC since July 1996. Previously, she served as Vice President and Associate General Counsel of NGC from March 1995 to July 1996 and prior to that she served as Associate General Counsel of NGC. Mr. Karras has served as Vice President, Taxes of the Corporation since November 1992. Ms. Wheeler was elected Vice President of the Corporation in November 1998 and Controller of the Corporation in May 1997. Previously, she served as Controller of Santa Fe from May 1994 to May 1997, and prior thereto held various management positions with Santa Fe. 22 24 PART II ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS The Corporation'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, the Swiss Stock Exchange and the Lima Stock Exchange. The following table sets forth, for the periods indicated, the high and low sales prices per share of the Corporation's common stock as reported on the New York Stock Exchange Composite Tape.
1998 1997 --------------- --------------- HIGH LOW HIGH LOW ------ ------ ------ ------ First quarter.............................................. $31.63 $23.75 $47.50 $38.25 Second quarter............................................. $34.88 $21.75 $39.88 $33.50 Third quarter.............................................. $25.25 $13.25 $45.88 $35.25 Fourth quarter............................................. $30.31 $16.25 $45.63 $26.56
On March 4, 1999, there were approximately 26,064 stockholders of record of the Corporation's common stock. A dividend of $0.03 per share of common stock outstanding was declared in each quarter of 1998, or a total of $0.12 per share for such year. In 1997, a dividend of $0.12 per share of common stock outstanding was declared in the first three quarters and $0.03 per share in the fourth quarter, or a total of $0.39 per share for such year. The determination of the amount of future dividends, however, will be made by the Corporation's Board of Directors from time to time and will depend on the Corporation's future earnings, capital requirements, financial condition and other relevant factors. ITEM 6. SELECTED FINANCIAL DATA
1998 1997 1996 1995 1994 -------- -------- -------- -------- -------- (IN MILLIONS, EXCEPT PER SHARE) FOR THE YEARS ENDED DECEMBER 31, Sales...................................... $1,453.9 $1,572.8 $1,105.7 $ 981.6 $ 967.5 Income (loss) before cumulative effect of change in accounting principle........... $ (360.5) $ 68.4 $ 98.6 $ 147.7 $ 127.4 Net income (loss)(1)....................... $ (393.4) $ 68.4 $ 98.6 $ 147.7 $ 127.4 Income (loss) per common share: Before cumulative effect of change in accounting principle.................. $ (2.27) $ 0.44 $ 0.63 $ 0.95 $ 0.80 Net income(1)............................ $ (2.47) $ 0.44 $ 0.63 $ 0.95 $ 0.80 Dividends declared per common share(2)..... $ 0.12 $ 0.39 $ 0.48 $ 0.48 $ 0.48 AT DECEMBER 31, Total assets............................... $3,186.8 $3,614.0 $3,282.1 $2,710.0 $2,429.0 Long-term debt, including current portion.................................. $1,248.7 $1,222.7 $1,059.1 $ 808.5 $ 683.6 Stockholders' equity....................... $1,439.5 $1,591.1 $1,562.8 $1,267.3 $1,171.1
- --------------- (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. (2) In the years 1994 through 1996, Newmont declared dividends of $0.48 per Newmont common share. Santa Fe declared dividends of $0.05 per Santa Fe common share in 1996 an 1995. Prior to 1995, Santa Fe paid dividends to another company as its then wholly-owned subsidiary. 23 25 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 1998 Annual Report to Stockholders on pages 10 through 17 therein is incorporated herein by reference. ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK The information set forth under the caption "Market Conditions and Risks" in Management's Discussion and Analysis in the 1998 Annual Report to Stockholders on page 10 therein is incorporated herein by reference. ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA The information set forth in the 1998 Annual Report of Stockholders on pages 17 through 42, 46 and 47 therein is incorporated herein by reference. ITEM 9. CHANGES IN DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE There have been no disagreements with Arthur Andersen LLP, the Corporation'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 the Corporation's directors will be contained in the Corporation's definitive Proxy Statement to be filed pursuant to Regulation 14A promulgated under the Securities Exchange Act of 1934 for the 1999 annual meeting of stockholders and is incorporated herein by reference. Information concerning the Corporation's executive officers is set forth under Part I of this Report. ITEM 11. EXECUTIVE COMPENSATION Information concerning this item will be contained in the Corporation's definitive Proxy Statement to be filed pursuant to Regulation 14A promulgated under the Securities Exchange Act of 1934 for the 1999 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 the Corporation's definitive Proxy Statement to be filed pursuant to Regulation 14A promulgated under the Securities Exchange Act of 1934 for the 1999 annual meeting of stockholders and is incorporated herein by reference. ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS Not applicable. 24 26 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 27, 1999, included as Exhibit 13, are incorporated by reference in this Form 10-K Annual Report. The report of Price Waterhouse LLP dated February 1, 1997, except for the fifth paragraph of Note 1, which is as of March 10, 1997 is included herein as Exhibit 13(a).
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.................. * Financial Statements of Nusa Tenggara Partnership, V.O.F. ................................................... NT-1
- --------------- * See Exhibit 13. 2. FINANCIAL STATEMENT SCHEDULES All schedules have been omitted since they are either not required, are not applicable, or the required information is shown in the financial statements or related notes. 3. EXHIBITS
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 November 1, 1993 and adopted November 1, 1993. Incorporated by reference to Exhibit 3(b) to registrant's Annual Report on Form 10-K or the year ended December 31, 1993. 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.
25 27
EXHIBIT NUMBER DESCRIPTION ------- ----------- 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. 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. 10(e). -- 1999 Employees Stock Plan 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.
26 28
EXHIBIT NUMBER DESCRIPTION ------- ----------- 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). -- Newmont Gold Company Annual Incentive Compensation Plan (amended and restated as of January 1, 1998). 10(m). -- Newmont Gold Company Intermediate Term Incentive Compensation Plan (amended and restated as of January 1, 1998). 10(n). -- Executive Change of Control Severance Plan dated as of February 1, 1999. 10(o). -- Directors' Stock Award Plan. 10(p). -- Certificate of Ownership and Merger merging NGC Acquisition Co. into Newmont Gold Company dated as of October 6, 1998. 12. -- Statement re Computation of Ratio of Earnings to Fixed Charges. 13. -- Those portions of registrant's 1998 Annual Report to Stockholders that are incorporated herein by reference. 13(a). -- Report of Price Waterhouse LLP. 21. -- Subsidiaries of registrant. 23(a). -- Consent of Arthur Andersen LLP. 23(b). -- Consent of PriceWaterhouseCoopers LLP. 24. -- Power of Attorney. 27. -- Financial Data Schedules.
(b) Reports on Form 8-K: None. 27 29 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 By /s/ TIMOTHY J. SCHMITT ----------------------------------- Timothy J. Schmitt Vice President, Secretary and Assistant General Counsel March 31, 1999 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 and on the date indicated.
SIGNATURE TITLE DATE --------- ----- ---- * Chairman, President and Chief - ----------------------------------------------------- Executive Officer and Ronald C. Cambre Director * Director - ----------------------------------------------------- James T. Curry, Jr. * Director - ----------------------------------------------------- Joseph P. Flannery * Director - ----------------------------------------------------- Thomas A. Holmes * Director - ----------------------------------------------------- George B. Munroe * Director March 31, 1999 - ----------------------------------------------------- Robin A. Plumbridge * Director - ----------------------------------------------------- Robert H. Quenon * Director - ----------------------------------------------------- Moeen A. Qureshi * Director - ----------------------------------------------------- Michael K. Reilly * Director - ----------------------------------------------------- Jean Head Sisco * Director - ----------------------------------------------------- James V. Taranik
28 30
SIGNATURE TITLE DATE --------- ----- ---- * Director - ----------------------------------------------------- William I. M. Turner, Jr. * Executive Vice President and - ----------------------------------------------------- Chief Financial Officer Wayne W. Murdy (Principal Financial Officer) March 31, 1999 * Vice President and Controller - ----------------------------------------------------- (Principal Accounting Linda K. Wheeler Officer) *By /s/ TIMOTHY J. SCHMITT ------------------------------------------------- Timothy J. Schmitt as Attorney-in-fact
29 31 NUSA TENGGARA PARTNERSHIP V.O.F. (A GENERAL PARTNERSHIP IN THE DEVELOPMENT STAGE) STATEMENTS OF OPERATIONS (Amounts in thousands of United States dollars)
From January 1, 1997 Years Ended December 31, through --------------------------- December 31, 1998 1997 1998 -------- -------- --------------- Revenues Interest income $ 93 $ 540 $ 633 -------- -------- -------- Expenses Depreciation (120) (95) (215) Exploration (1,471) (2,233) (3,704) General and administrative (194) (765) (959) Other (17,592) (45) (17,637) -------- -------- -------- Total expenses (19,377) (3,138) (22,515) -------- -------- -------- Net loss before cumulative effect of a change in accounting principle (19,284) (2,598) (21,882) Cumulative effect of a change in accounting principle (50,126) -- (50,126) -------- -------- -------- Net Loss $(69,410) $ (2,598) $(72,008) ======== ======== ========
The accompanying notes are an integral part of these financial statements. NT-1 32 NUSA TENGGARA PARTNERSHIP V.O.F. (A GENERAL PARTNERSHIP IN THE DEVELOPMENT STAGE) BALANCE SHEETS (Amounts in thousands of United States dollars)
At December 31, ----------------------- 1998 1997 ---------- -------- ASSETS - ------------------------------------------------------- Current Assets Cash and cash equivalents $ 5,694 $ 15,682 Accounts receivable from affiliates 159 168 Inventories 8,181 -- Other 3,542 470 ---------- -------- Current Assets 17,576 16,320 ---------- -------- Non-Current Assets Property, plant and mine development - net 1,430,260 664,397 Loan receivable from P.T. Pukuafu Indah 17,120 2,200 Debt issuance costs 25,446 24,056 Taxes receivable 61,572 7,494 Deferred partnership organization costs -- 984 Other 100 121 ---------- -------- Non-Current Assets 1,534,498 699,252 ---------- -------- Total Assets $1,552,074 $715,572 ========== ======== LIABILITIES AND PARTNERS' EQUITY - ------------------------------------------------------- Current Liabilities Accounts payable and accrued expenses $ 110,045 $105,294 Accounts payable affiliates 37,236 27,224 Taxes payable 5,785 2,157 ---------- -------- Current Liabilities 153,066 134,675 Long-term debt 640,000 -- ---------- -------- Total Liabilities 793,066 134,675 ---------- -------- Commitments and contingencies (Notes 2, 12, 13) -- -- Minority interest in P.T. Newmont Nusa Tenggara 17,120 2,200 ---------- -------- Partners' Equity Capital account - Newmont Indonesia Limited 417,312 325,517 Capital account - Nusa Tenggara Mining Corporation 324,576 253,180 ---------- -------- Total Partners' Equity 741,888 578,697 ---------- -------- Total Liabilities and Partners' Equity $1,552,074 $715,572 ========== ========
The accompanying notes are an integral part of these financial statements. NT - 2 33 NUSA TENGGARA PARTNERSHIP V.O.F. (A GENERAL PARTNERSHIP IN THE DEVELOPMENT STAGE) STATEMENTS OF CHANGES IN PARTNERS' EQUITY (Amounts in thousands of United States dollars)
NIL NTMC 56.25% 43.75% Total --------- --------- --------- Allocation of cumulative losses of PTNNT as of December 31, 1996 as provided for in the partnership agreement $ (23,265) $ (18,095) $ (41,360) Contributions on initial funding date (see Note 3): Cash contributions -- 163,960 163,960 Non-cash contributions - agreed value 306,201 -- 306,201 Deferred contributions related to initial funding: Cash contributions -- 75,333 75,333 Non-cash contributions - agreed value 1,461 -- 1,461 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 ========= ========= =========
The accompanying notes are an integral part of these financial statements. NT - 3 34 NUSA TENGGARA PARTNERSHIP V.O.F. (A GENERAL PARTNERSHIP IN THE DEVELOPMENT STAGE) STATEMENTS OF CASH FLOWS (Amounts in thousands of United States dollars)
From January 1, 1997 Years Ended December 31, through -------------------------- December 31, 1998 1997 1998 --------- --------- --------------- Operating Activities Net loss $ (69,410) $ (2,598) $ (72,008) Adjustments to reconcile net loss to net cash used in operating activities: Depreciation 120 95 215 Cumulative effect of a change in an accounting principle 50,126 -- 50,126 Decrease in net working capital related to operating activities (1,361) -- (1,361) --------- --------- ----------- Net cash used in operating activities (20,525) (2,503) (23,028) --------- --------- ----------- Investing Activities Additions to property, plant and mine development (845,754) (257,407) (1,103,161) Loan to P.T. Pukuafu Indah (14,920) -- (14,920) --------- --------- ----------- Net cash used in investing activities (860,674) (257,407) (1,118,081) --------- --------- ----------- Financing Activities Equity contributions from Newmont Indonesia Limited 130,838 42,581 173,419 Equity contributions from Nusa Tenggara Mining Corporation 101,763 272,412 374,175 Proceeds from short-term loan -- 79,765 79,765 Repayments of short-term loan -- (100,000) (100,000) Proceeds from senior debt 640,000 -- 640,000 Debt issuance costs (1,390) (22,559) (23,949) --------- --------- ----------- Net cash provided by financing activities 871,211 272,199 1,143,410 --------- --------- ----------- Net increase (decrease) in cash and cash equivalents (9,988) 12,289 2,301 Cash and cash equivalents at beginning of period 15,682 3,393 3,393 --------- --------- ----------- Cash and cash equivalents at end of period $ 5,694 $ 15,682 $ 5,694 ========= ========= ===========
The accompanying notes are an integral part of these financial statements. NT-4 35 NUSA TENGGARA PARTNERSHIP V.O.F. (A GENERAL PARTNERSHIP IN THE DEVELOPMENT STAGE) NOTES TO 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 ("NTMC"), 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, through P.T. Newmont Nusa Tenggara ("PTNNT"). Batu Hijau contains proven and probable reserves of 10.6 billion pounds of copper and 11.8 million ounces of gold and is scheduled to commence operation in the fourth quarter of 1999, with a projected mine life in excess of 20 years. The estimated 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 is expected to approximate US$1.9 billion. NTP holds an 80% interest in 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 project. 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 capital contributions to PTNNT. Contributions made on behalf of PTPI will be recovered by NTP from 70% of PTPI's share of future dividends from PTNNT. NTP was formed in July 1996, but partner funding did not occur until June 1997 and no material Partnership transactions occurred until after such date. Substantially all Partnership transactions relate to its 80% interest in PTNNT. Certain NTP and PTNNT actions and transactions, as described in the Partnership agreement, require unanimous approval of NTP partners. Copper and gold mining requires the use of specialized facilities and technology. Future cash flow and profitability of NTP will significantly depend upon its ability to successfully complete the development and construction of such facilities and, upon commencement of production, will be 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 two years, Indonesia has experienced significant devaluation of its currency, the Rupiah. 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, NTP's activities have not been materially affected by the economic, social and political situation in Indonesia, since its project is 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 described in Note 3, using generally accepted accounting principles of the United States ("U.S. GAAP"). NT - 5 36 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. 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 credited or charged to property, plant and mine development. 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. Inventories Materials and supplies are stated at the lower of average cost or net realizable value. Property, Plant and Mine Development Expenditures for equipment and plant facilities are capitalized at historical cost. Depreciation of assets placed in service is computed on the straight-line method over estimated 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 the project are expensed as incurred. (Notes 4 and 5). The excess of the agreed 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 will be amortized when production commences over the estimated mine 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. 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 asset's carrying value exceeds its fair value. Fair value is generally determined using estimated future cash flow analysis. An impairment is NT - 6 37 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 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, 1998, NTP does not believe that impairment has occurred. Debt Issuance Costs Costs incurred to arrange the third party project financing facility, including financial advisory fees, legal fees, loan origination and commitment fees, accounting and tax advisory services, were capitalized as debt issuance costs. Such costs will be amortized over the life of the loan upon commencement of commercial production. Taxes Receivable Value added taxes ("VAT") are paid on PTNNT's purchases of goods and services. VAT paid during each year is legally refundable in the following year upon submission of a refund claim to the government of Indonesia. NTP reports its VAT receivable as a non-current asset because such taxes have not been received until one year after refund claim submissions. VAT payments and refunds are measured in Rupiah 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. Mining Costs Because of diverse grade and waste-to-ore ratios each year over the mine's life, mining costs incurred are capitalized and will be charged to operations on the basis of the average life-of-mine-grade and waste-to-ore ratios per equivalent unit of copper. Reclamation and Remediation Costs Estimated future reclamation and remediation costs are based principally on legal, regulatory and contractual requirements and will be accrued and charged to operating expense over the expected mine life using the units-of-production method. 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 is in the development stage and will not record benefits for its deferred tax assets until commencement of operations. Such benefits, resulting from tax loss carryforwards, were approximately US$20 million and US$14 million at December 31, 1998 and 1997, respectively. Realization of these deferred tax assets is dependent on PTNNT's ability to generate sufficient income from its operations before expiration of the eight-year tax loss carryforward period. In addition, income taxes are measured in Rupiah; consequently, certain tax benefits may be subject to Rupiah/USD exchange rate fluctuations. 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. NT - 7 38 Commodity Instruments In June 1998, the Financial Accounting Standards Board issued Statements of Financial Accounting Standards ("SFAS") No. 133, "Accounting for Derivative Instruments and Hedging Activities," which 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, 1999 and requires recognition of derivative instruments, at fair value, on the balance sheet as either assets or liabilities. Changes in the derivative's fair value will be recognized currently in earnings unless specific hedge accounting criteria are met, upon which gains and losses will be recorded in either other comprehensive income or current earnings, depending on the nature of the instrument. To date the Partnership has not utilized derivatives and does not expect a material effect from adopting SFAS No. 133, planned for January 2000. Comprehensive Income In the first quarter of 1998, the Partnership 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, 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 that management 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. Reclassifications Certain amounts in the prior year have been reclassified to conform to the 1998 presentation. 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 cash 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 value of NIL's contributions over such historical cost, US$219.5 million, recorded as deferred mineral rights. 4. PROPERTY, PLANT AND MINE DEVELOPMENT Property, plant and mine development consisted of the following (in thousands of US$): NT - 8 39
At December 31, 1998 1997 ----------- --------- Deferred mineral rights $ 219,509 $ 219,509 Machinery and equipment 22,715 858 Mine development 140,006 80,616 Capitalized interest 27,116 180 Construction-in-progress 1,024,245 363,807 ----------- --------- 1,433,591 664,970 Accumulated depreciation (3,331) (573) ----------- --------- Property, plant and mine development - net $ 1,430,260 $ 664,397 =========== =========
Construction-in-progress primarily consisted of engineering, design and construction-related costs for development of the Batu Hijau copper/gold project. As described in Note 2, the Partnership adopted "SOP 98-5" effective January 1, 1998. This change resulted in expensing certain start-up costs that totaled US$17.6 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. 5. DEFERRED PARTNERSHIP ORGANIZATION COSTS As of December 31, 1997, NTP had incurred costs totaling US$984 thousand related to organizing the partnership. Such costs were primarily for legal and accounting services. In 1998, these costs were expensed as start-up costs and included in the cumulative effect of the accounting change. 6. ACCOUNTS PAYABLE AFFILIATES Accounts payable to affiliates consisted of the following (in thousands of US$) which are described in Note 12.
At December 31, 1998 1997 ------- ------- Technology and Know-How Agreement royalties - NNHI $18,339 $ 5,416 Technology and Know-How Agreement royalties - Sumitomo 14,264 4,213 Consulting Services Agreement - NISL 1,254 12,525 Consulting Service Agreement - NTMC -- 498 Payroll Agency Agreements - NIIL and NGELP 2,937 2,991 NGC 6 -- NIL -- 1,220 Other 436 361 ------- ------- Total $37,236 $27,224 ======= =======
7. 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$85.6 million and US$11.0 million at December 31, 1998 and 1997, 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$17.1 million and US$2.2 million at December 31, 1998 and 1997, respectively. These loans are subject to interest at the six-month Singapore Interbank Offering Rate ("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 Acknowledgment of Indebtedness and Assignment of Dividends agreement with NIL. Interest accrued NT - 9 40 under these loans will not be recorded by NTP until commencement of operations and recoverability of such interest is determined. On February 25, 1998, PTNNT's shareholders amended its articles of association to increase its authorized capital by US$172.3 million to US$177.3 million. Pursuant to Indonesian law, 25% of such capital, or US$44.3 million, had to be paid by the shareholders before the revised articles of association can be registered with the Ministry of Mines and Energy and the Ministry of Justice. Payment occurred on April 13, 1998. 8. TAXES PAYABLE Taxes payable consisted of the following (in thousands of US$):
At December 31, 1998 1997 ------ ------ Income taxes - withholding taxes from employees and suppliers $1,202 $ 656 Value added tax 4,583 1,501 ------ ------ Total $5,785 $2,157 ====== ======
9. LOAN AGREEMENTS SHAREHOLDER LOAN AGREEMENT PTNNT entered into a shareholder loan agreement with NIL on April 20, 1993, wherein PTNNT borrowed funds from NIL to finance its COW activities. The loan, initially for a maximum of US$50 million and subsequently amended to increase the maximum borrowing to US$150 million, was contributed by NIL to the Partnership as part of NIL's initial funding. The loan agreement was amended in November 1997, to subordinate PTNNT's liabilities under this loan to those under the project financing facility discussed below, and in early 1999, to reduce the maximum loan amount to US$77.5 million. The outstanding loan balance at December 1998 was US$77.2 million. Interest does not accrue on the loan until PTNNT commences commercial mining operations, as defined by the loan agreement. Interest then accrues at the 180-day SIBOR rate of interest plus three percent. The loan and accrued interest becomes payable on demand by the Partnership after commencement of operations. PARTNERSHIP LOAN AGREEMENT NTP entered into a Partnership loan agreement with PTNNT on June 10, 1997 (the "Initial Funding Date"), that was amended on October 15, 1997 to subordinate PTNNT's liabilities under this loan to those under the project financing facility discussed below. This agreement provided for borrowings up to US$500 million for the Batu Hijau project (referred to as "Sponsor Funding"). Such borrowings were payable on demand and bore interest generally at the 180-day SIBOR interest rate plus three percent. Any interest that was not paid on designated dates was assessed interest at the 180-day SIBOR interest rate plus 4%. The weighted average interest rates on the Sponsor funding during 1998 and 1997 were 8.9% and 8.9%, respectively, and the interest rate at December 31, 1997 was 8.9%. Sponsor funding interest and principal payments are Restricted Payments under the provisions of the project financing facility and no payments can be made prior to project completion. At December 31, 1997, outstanding Sponsor Funding principal was US$314.9 million and the related accrued interest was US$9.7 million The Sponsor Funding was refinanced on July 27, 1998 and replaced with a Subordinated Loan Agreement. The principle terms and conditions of the Subordinated Loan Agreement are consistent with the previous agreement and the NT-10 41 outstanding principal and interest under the previous agreement were repaid to NTP with borrowings from the Subordinated Loan Agreement. The weighted average interest rate on the replacement loan during 1998 was 8.7% and the interest rate at December 31, 1998 was 8.1%. At December 31, 1998, outstanding Sponsor Funding principal was US$500.0 million and the related accrued interest was US$17.6 million. Transactions related to Sponsor Funding have been eliminated in the consolidated financial statements. 10. PROJECT FINANCING FACILITY On July 30, 1997, PTNNT entered into a US$1.0 billion project financing facility for the Batu Hijau project. The facility includes commitments from three export-credit agencies with participation by various commercial banks. The facility is guaranteed by an NMC subsidiary and Sumitomo Corporation ("Sumitomo"), 56.25% and 43.75%, respectively, until certain project completion tests are met at which time the facility becomes non-recourse to the NMC subsidiary and Sumitomo. As of December 31, 1998, US$640 million was outstanding under this facility. The fair value cannot practicably be determined due to the lack of available market information for this type of debt. The facility will be repaid in semi-annual installments over a 13-year period beginning with earlier of six months after project completion or June 15, 2001. Accordingly, unless project completion tests are satisfied more than six months before June 15, 2001, no repayments will occur in 1999 and 2000, and US$86.7 million will occur in each of 2001, 2002 and 2003. The facility bears interest at blended fixed and floating rates. Based on interest rates at December 31, 1998, the weighted-average interest rates would be approximately 6.6% and 7.1% pre-completion and post-completion, respectively. The weighted average interest rate on the facility during 1998 was 6.2% and the interest rate on December 31, 1998 was 5.5%. The facility includes a number of covenants, conditions, warranties and representations that 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 US$1.0 billion project financing, except for "Permitted Indebtedness", which includes subordinated debt from NTP, unsecured working capital debt with a maturity not in excess of one year and not exceeding US$35 million, and other indebtedness with aggregate principal not to exceed US$5 million at any time. c. Senior Loans/Sponsor Funding Ratio - The ratio of outstanding funds under the project financing facility to the aggregate Sponsor Funding shall not exceed 55 to 45. d. Restricted Payments - Prior to the later of operational completion or the first scheduled principal repayment date under the project financing facility, PTNNT is prohibited from making 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, PTNNT can make Restricted Payments provided certain conditions and financial ratios are met. 11. SUPPLEMENTAL CASH FLOW INFORMATION Excluded from the statements of consolidated cash flow was the effect of a non-cash transaction wherein PTNNT purchased US$6.8 million in inventory, but deferred payment until the inventory is used. Prior to January 1, 1997, PTNNT incurred approximately US$20 million of short-term debt, pending Initial Funding, which was primarily used for plant, property and mine development. This debt, which totaled US$100 million on the Initial Funding Date, was repaid on the Initial NT - 11 42 Funding Date and such repayment was reflected in the consolidated financial statements. All interest incurred during 1998 and 1997 was capitalized. 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 indirect subsidiary 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 in such month upon commencement of production. A similar Technology and Know-How Agreement was executed with Sumitomo 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$25.5 million and US$9.9 million during 1998 and 1997, respectively. The associated liabilities at December 31, 1998 and 1997 were US$32.6 million and US$9.6 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 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$4.6 million in 1998 and US$14.5 million in 1997 and Accounts payable affiliates included US$1.3 million and US$12.5 million at December 31, 1998 and 1997, respectively (Note 6). PTNNT has a similar Consulting Services Agreement with NTMC. Pursuant to this agreement, charges totaled to US$1.2 million in 1998 and US$1.4 million in 1997 and Accounts payable affiliates included US$0.5 million at December 31, 1997 (Note 6). Payroll Agency Agreements PTNNT has entered into Payroll Agency Agreements with Newmont Indonesia Investment Limited ("NIIL") and Newmont Global Employment Limited Partnership ("NGELP"), indirect subsidiaries of NMC, whereby NIIL and NGELP agreed to act as agents of PTNNT for 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 these agents for salaries, related employee benefits and other reasonable expenses and pays a fee of US$20 for each salary payment. Agency payments totaled US$9.0 million in 1998 and US$3.3 million in 1997 and Accounts payable affiliates included US$2.9 million and US$3.0 million at December 31, 1998 and 1997, respectively (Note 6). NT - 12 43 Batu Hijau Project Engineering and Construction Agreements PTNNT has 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 Indonesia and related payments are made in USD on a cost reimbursable basis. During 1998 and 1997, US$437 million and US$121 million, respectively, were charged to construction-in-progress for such services and Accounts payable and accrued expenses included US$72 million and US$6.2 million at December 31, 1998 and 1997, respectively. PTNNT has entered into an Off-Shore Agreement with Fluor Daniel Engineers and Constructors, Ltd. ("FDEC") whereby FDEC agreed to perform engineering design and equipment procurement for PTNNT's processing facilities and related infrastructure, and to provide project management, procurement, engineering and construction management. Such services are 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 1998 and 1997, US$609 million and US$174 million, respectively, were charged to construction-in-progress for such services and Accounts payable and accrued expenses included US$37 million and US$41.8 million at December 31, 1998 and 1997, respectively. 13. 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 activities 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. PTNNT has made significant commitments related to the construction and development of its Batu Hijau copper/gold project. Such commitments are principally for engineering and construction-related services. 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 proceeding 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. NT - 13 44 Appendix I The following is a narrative description of the map in image form which has been included in the paper version of the Form 10-K but has been excluded from the EDGAR version of the Form 10-K. Map of Nevada Operating Properties and Principal Area of Land Holdings -- Page 5 of Form 10-K. On Page 5 of the Form 10-K, the registrant has included a map of Nevada with an enlargement of the geographical location of its operations on the Carlin Trend, Lone Tree Complex, Twin Creeks Mine and Rosebud Mine discussed on Pages 2 through 4 of the Form 10-K. The map also includes the registrant's principal area of land holdings in the gray shaded areas. 45 EXHIBIT INDEX
EXHIBIT NO. 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 November 1, 1993 and adopted November 1, 1993. Incorporated by reference to Exhibit 3(b) to registrant's Annual Report on Form 10-K or the year ended December 31, 1993. 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.
46
EXHIBIT NO. DESCRIPTION ----------- ----------- 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. 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. 10(e). -- 1999 Employees Stock Plan. 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.
47
EXHIBIT NO. DESCRIPTION ----------- ----------- 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) -- Newmont Gold Company Annual Incentive Compensation Plan (amended and restated as of January 1, 1998). 10(m). -- Newmont Gold Company Intermediate Term Incentive Compensation Plan (amended and restated as of January 1, 1998). 10(n). -- Executive Change of Control Severance Plan dated as of February 1, 1999. 10(o). -- Directors' Stock Award Plan. 10(p). -- Certificate of Ownership and Merger merging NGC Acquisition Co. into Newmont Gold Company dated as of October 6, 1998. 12. -- Statement re Computation of Ratio of Earnings to Fixed Charges. 13. -- Those portions of registrant's 1998 Annual Report to Stockholders that are incorporated herein by reference. 13(a). -- Report of Price Waterhouse LLP. 21. -- Subsidiaries of registrant. 23(a). -- Consent of Arthur Andersen LLP. 23(b). -- Consent of PriceWaterhouseCoopers LLP. 24. -- Power of Attorney. 27. -- Financial Data Schedules.
EX-10.(D) 2 1996 EMPLOYEES STOCK PLAN 1 EXHBIT 10(d) NEWMONT MINING CORPORATION 1996 EMPLOYEES STOCK PLAN (AMENDED AND RESTATED EFFECTIVE AS OF MARCH 17, 1999) 1. Purposes. The purposes of the Newmont Mining Corporation 1996 Employees Stock Plan are: (a) To further the growth, development and success of the Company and its Subsidiaries by enabling employees of the Company and its Subsidiaries to acquire a continuing equity interest in the Company, thereby increasing their personal interests in such growth, development and success and motivating such employees to exert their best efforts on behalf of the Company and its Subsidiaries and to provide incentives for the future performance of services; and (b) To maintain the ability of the Company and its Subsidiaries to attract and retain employees of outstanding ability by offering them an opportunity to acquire a continuing equity interest in the Company and its Subsidiaries which will reflect the growth, development and success of the Company and its Subsidiaries. (c) Toward these objectives, the Committee may grant Options, Stock Appreciation Rights, or Other Stock-Based Awards or award Restricted Stock to such employees or pay such employees' bonuses (if any) or other compensation in Common Stock or award or grant any combination thereof, all pursuant to the terms and conditions of the Plan (each, an "Award"). 2. Definitions. As used in the Plan, the following capitalized terms shall have the meanings set forth below: (a) "ADDITIONAL ANNUAL INCREMENT" - a number of shares of Common Stock equal to one percent of the number of shares of Common Stock outstanding on December 31 of the immediately preceding year. (b) "AGREEMENT" - an option or award agreement evidencing an Award. (c) "AWARD" - an Option, SAR, Other Stock-Based Award or Restricted Stock granted or awarded, or bonus or other compensation of an employee paid in Common Stock, pursuant to the terms and conditions of the Plan. (d) "AWARD GAIN" - the gain represented by the product of the excess of the Fair Market Value of the Common Stock on the date of exercise of an Option or SAR over the exercise price of such Option or SAR multiplied by the number of shares of Common Stock subject to such Option or SAR, or portion thereof, exercised, without regard to any subsequent decrease or increase in the Fair Market Value of the Common Stock. 2 (e) "AWARD LIMIT" - 500,000 shares of Common Stock (as adjusted in accordance with Section 15). (f) "BOARD" - the Board of Directors of the Company. (g) "CEO" - the Chief Executive Officer of the Company. (h) "CHANGE OF CONTROL" - the occurrence of any of the following events: (i) The acquisition by any individual, entity or group (within the meaning of Section 13(d)(3) or 14(d)(2) of the Securities Exchange Act of 1934, as amended (the "Exchange Act")) (a "Person") of beneficial ownership (within the meaning of Rule 13d-3 promulgated under the Exchange Act) of 20% or more of either (x) the then outstanding shares of common stock of the Company (the "Outstanding Company Common Stock") or (y) the combined voting power of the then outstanding voting securities of the Company entitled to vote generally in the election of directors (the "Outstanding Company Voting Securities"); provided, however, that for purposes of this subsection (i), the following acquisitions shall not constitute a Change of Control: (A) any acquisition directly from the Company, (B) any acquisition by the Company, (C) any acquisition by any employee benefit plan (or related trust) sponsored or maintained by the Company or any corporation controlled by the Company or (D) any acquisition by any corporation pursuant to a transaction which complies with clauses (A), (B) and (C) of paragraph (iii) below; or (ii) Individuals who, as of the Effective Date, constitute the Board (the "Incumbent Board") cease for any reason to constitute at least a majority of the Board; provided, however, that any individual becoming a director subsequent to the Effective Date whose election, or nomination for election by the Company's shareholders, was approved by a vote of at least a majority of the directors then comprising the Incumbent Board shall be considered as though such individual were a member of the Incumbent Board, but excluding, for this purpose, any such individual whose initial assumption of office occurs as a result of an actual or threatened election contest with respect to the election or removal of directors or other actual or threatened solicitation of proxies or consents by or on behalf of a Person other than the Board; or (iii) Consummation of a reorganization, merger or consolidation or sale or other disposition of all or substantially all of the assets of the Company or an acquisition of assets of another corporation (a "Business Combination"), in each case, unless, following such Business Combination, (A) all or substantially all of the individuals and entities who were the beneficial owners, respectively, of the Outstanding Company Common Stock and Outstanding Company Voting Securities immediately prior to such Business Combination beneficially own, directly or indirectly, more than 50% of, respectively, the then outstanding shares of common stock and the combined voting power of the then outstanding voting securities entitled to vote generally in the election of directors, as the case may be, of the corporation resulting from such Business Combination (including, without limitation, a corporation which as a result of such transaction owns the Company or all or substantially all of the Company's assets either directly or through one or more subsidiaries) in substantially the -2- 3 same proportions as their ownership, immediately prior to such Business Combination of the Outstanding Company Common Stock and Outstanding Company Voting Securities, as the case may be, (B) no Person (excluding any corporation resulting from such Business Combination or any employee benefit plan (or related trust) of the Company or any corporation resulting from such Business Combination) beneficially owns, directly or indirectly, 20% or more of, respectively, the then outstanding shares of common stock of the corporation resulting from such Business Combination or the combined voting power of the then outstanding voting securities of such corporation, except to the extent that such ownership existed prior to the Business Combination and (C) at least a majority of the members of the board of directors of the corporation resulting from such Business Combination were members of the Incumbent Board at the time of the execution of the initial agreement, or of the action of the Board, providing for such Business Combination; or (iv) Approval by the shareholders of the Company of a complete liquidation or dissolution of the Company. (i) "CODE" - the Internal Revenue Code of 1986, as it may be amended from time to time, including regulations and rules thereunder and successor provisions and regulations and rules thereto. (j) "COMMITTEE" - the Compensation Committee of the Board, or such other Board committee as may be designated by the Board to administer the Plan. (k) "COMMON STOCK" - the $1.60 par value common stock of the Company. (l) "COMPANY" - Newmont Mining Corporation, a Delaware corporation, or any successor entity. (m) "DIVIDEND EQUIVALENTS" - the equivalent value (in cash or Common Stock) of dividends paid on Common Stock subject to Other Stock-Based Awards granted under Section 9. (n) "EXCHANGE ACT" - the Securities Exchange Act of 1934, as it may be amended from time to time. (o) "FAIR MARKET VALUE" of a share of Common Stock as of a given date shall be the average of the high and low sales prices for a share of Common Stock as reported for New York Stock Exchange issues in The Wall Street Journal for such date; provided, however, that if there is no sale of shares of Common Stock reported in The Wall Street Journal on such date, such fair market value shall be the average between the bid and asked prices for a share of Common Stock reported in The Wall Street Journal at the close of trading on such date; provided further, however, that if no such prices are reported for such day, the most recent day for which such prices are available shall be used. In the event that the method for determining the fair market value of a share of Common Stock provided for in the previous sentence shall not be practicable, then such fair market value shall be determined by such other -3- 4 reasonable valuation method as the Committee shall, in its discretion, select and apply in good faith as of the given date; provided, however, that for purposes of paragraph (a) of Section 6, such fair market value shall be determined subject to Section 422(c)(7) of the Code. (p) "ISO," OR "INCENTIVE STOCK OPTION" - an option to purchase Common Stock granted to a Participant under the Plan in accordance with the terms and conditions set forth in Section 6 and which conforms to the applicable provisions of Section 422 of the Code. (q) "NOTICE" - written notice actually received by the Company at its offices on the day of such receipt, if received on or before 1:30 p.m., Denver time, on a day when the Company's offices are open for business, or, if received after such time, such notice shall be deemed received on the next such day, which notice may be delivered in person to the Company's Payroll Department or sent by facsimile to the Company, or sent by certified or registered mail or overnight courier, prepaid, addressed to the Company at 1700 Lincoln Street, Denver, Colorado 80203, Attention: Payroll Department. (r) "OPTION" - an option to purchase Common Stock granted to a Participant under the Plan in accordance with the terms and conditions set forth in Section 6. Options may be either ISOs or stock options other than ISOs. (s) "OPTIONEE" - a Participant who has been granted an Option under the Plan in accordance with the terms and conditions set forth in Section 6. (t) "OTHER STOCK-BASED AWARDS" - Awards granted to Participants under the Plan in accordance with the terms and conditions set forth in Section 10. (u) "PARTICIPANT" - any employee of the Company or its Subsidiaries selected to participate in the Plan pursuant to Section 3. (v) "PERFORMANCE CRITERIA" - earnings, increases in production, reductions in costs of production and reserve replacement. (w) "PLAN" - this Newmont Mining Corporation 1996 Employees Stock Plan. (x) "PREDECESSOR PLANS" - the Company's Amended and Restated 1992 Key Employees Stock Plan and the Company's Amended and Restated 1987 Key Employees Stock Option Plan. (y) "RESTRICTED STOCK" - Common Stock awarded under the Plan in accordance with the terms and conditions set forth in Section 8. (z) "RESTRICTION PERIOD" - a time period, which may or may not be based upon the achievement of particular performance goals and/or the satisfaction of vesting or earnout provisions (which may be dependent on the continued employment of the recipient) -4- 5 applicable to, and established or specified by the Committee at the time of, each award of Restricted Stock. (aa) "RULE 16B-3" - Rule 16b-3 under the Exchange Act, as such rule may be amended from time to time. (bb) "SAR" - a stock appreciation right granted to a Participant under the Plan and in accordance with the terms and conditions of Section 7. (cc) "SEC" shall mean the Securities and Exchange Commission. (dd) "SUBSIDIARY" shall mean (i) any present or future corporation which is or would be a "subsidiary corporation" of the Company as the term is defined in Section 424(f) of the Code and (ii) any unincorporated entity in which the Company and/or one or more of its "subsidiary corporations" (as defined in Section 424(f) of the Code) presently or in the future own an aggregate profits interest of fifty percent (50%) or more, which the Committee in its discretion determines will be a "Subsidiary" for purposes of the Plan. 3. Administration of the Plan. (a) The Committee shall have exclusive authority to operate, manage and administer the Plan in accordance with its terms and conditions. Notwithstanding the foregoing, in its absolute discretion, the Board may at any time and from time to time exercise any and all rights, duties and responsibilities of the Committee under the Plan, including, but not limited to, establishing procedures to be followed by the Committee, but excluding matters which under Rule 16b-3 or Section 162(m) of the Code are required to be determined in the discretion of the Committee. (b) The Committee shall be appointed from time to time by the Board, and the Committee shall consist of not less than three members of the Board, each of whom is an "outside director" within the meaning of Section 162(m) of the Code and, to the extent necessary for the Plan and/or Awards thereunder to satisfy the requirements and conditions of a "nonemployee director" under Rule 16b-3; provided, however, that if one or more of the members of the Committee does not qualify as such an "outside director" or a "non-employee director," at the time any Award is granted, such Award nevertheless shall be deemed to be properly authorized and issued under the Plan and shall remain in full force and effect subject to the other terms and conditions contained in the Plan and the relevant Agreement. (c) Without limiting the generality of paragraph (a) of this Section 3, the Committee shall have the exclusive right and discretionary authority to: (i) interpret the Plan and the Agreements; (ii) determine eligibility for participation in the Plan and the amount of Awards payable under the Plan; (iii) select, from time to time, from amongst those eligible, the employees to whom Awards shall be granted under the Plan, which selection may be based upon information furnished to the Committee by the Company's management; (iv) determine whether an Award shall take the form of an ISO, Option other than an ISO, SAR, Restricted Stock, bonuses or other compensation payable in Common Stock, Other Stock-Based Award (and, if so, the form thereof) or any combination thereof, (v) determine the number of shares of Common Stock to be included in any Award or to which any Award shall otherwise relate and -5- 6 the periods for which Awards will be outstanding; (vi) establish, amend, waive and/or rescind rules and regulations and administrative guidelines for carrying out the Plan; (vii) to the extent permitted under the Plan and the applicable Agreement, accelerate the exercisability or the termination of any Restriction Period with respect to any Award when such acceleration and/or termination would be in the best interest of the Company; (viii) to the extent permitted under the Plan and the applicable Agreement, grant waivers of Plan terms, conditions, restrictions and limitations; (ix) correct any errors, supply any omissions or reconcile any inconsistencies in the Plan and/or any Agreement or any other instrument relating to any Award; (x) to the extent permitted by the Plan, amend or adjust the terms and conditions of any outstanding Award and/or adjust the number and/or class of shares of Common Stock subject to any outstanding Award; (xi) in accordance with the Plan, establish and administer any performance goals in connection with any Awards, including the Performance Criteria to which such performance goals relate and the applicable measurement periods, and certify whether, and to what extent, any such performance goals have been met; (xii) at any time and from time to time after the granting of an Award, specify such additional terms, conditions and restrictions with respect to any ISO, Option other than an ISO, SAR, Other Stock-Based Award, Restricted Stock and/or bonuses or other compensation payable in Common Stock as may be deemed necessary or appropriate to ensure compliance with any and all applicable laws, including, but not limited to, (A) terms, restrictions and conditions for compliance with Federal and state securities laws, (B) methods of withholding or providing for the payment of required taxes and (C) restrictions regarding a Participant's ability to exercise Awards under a "cashless exercise" program established by the Committee; and (xiii) take any and all such other action it deems necessary or advisable for the proper operation and/or administration of the Plan. The Committee shall have full discretionary authority in all matters related to the discharge of its responsibilities and the exercise of its authority under the Plan. Decisions and actions by the Committee with respect to the Plan and any Agreement shall be final, conclusive and binding on all persons having or claiming to have any right or interest in or under the Plan and/or any Agreement. Awards, including Awards under the same section of the Plan, need not be uniform as to all grants and recipients thereof. (d) Each Award shall be evidenced by an Agreement, which shall be executed by the Company and the Participant to whom such Award has been granted, unless the Agreement provides otherwise; however, two or more Awards to a single Participant may be combined in a single Agreement. An Agreement shall not be a precondition to the granting of an Award; however, no person shall have any rights under any Award unless and until the Participant to whom the Award shall have been granted (i) shall have executed and delivered to the Company an Agreement or other instrument evidencing the Award, unless such Agreement provides otherwise, and (ii) has otherwise complied with the applicable terms and conditions of the Award. The Committee shall prescribe the form of all Agreements, and, subject to the terms and conditions of the Plan, shall determine the content of all Agreements. Any Agreement may be supplemented or amended in writing from time to time as approved by the Committee; provided that the terms and conditions of any such Agreement as supplemented or amended are not inconsistent with the provisions of the Plan. -6- 7 (e) A majority of the members of the entire Committee shall constitute a quorum and the actions of a majority of the members of the Committee in attendance at a meeting at which a quorum is present, or actions by a written instrument signed by all members of the Committee, shall be the actions of the Committee. (f) The Committee may, in its discretion, delegate to the CEO, any Senior Vice President of the Company or the Secretary of the Company the "administration" of the Plan under this Section 3; provided, however, that no such delegation by the Committee shall be made if such delegation would not be permitted under applicable law or with respect to the administration of the Plan as it affects the CEO or the President or Secretary of the Company or any Senior Vice President of the Company, and, provided further, however, the Committee may not delegate its authority to grant awards or correct errors, omissions or inconsistencies in the Plan. All authority delegated by the Committee under this paragraph (f) of this Section 3 shall be exercised in accordance with the terms and conditions of the Plan and any rules, regulations or administrative guidelines that may from time to time be established by the Committee, and any delegee of such authority shall periodically report to the Committee concerning the performance or discharge of the matters delegated to such individual. 4. Shares of Stock Subject to the Plan. (a) The shares of stock subject to Awards granted under the Plan shall be shares of Common Stock. Such shares of Common Stock subject to the Plan may be either authorized and unissued shares (which will not be subject to preemptive rights) or previously issued shares acquired by the Company or any Subsidiary. The total number of shares of Common Stock that may be delivered pursuant to any Awards under the Plan is 3,000,000 plus an additional number of shares on January 1 of each calendar year (beginning with calendar year 1997) during the duration of the Plan equal to the Additional Annual Increment, of which 600,000 shares of Common Stock plus an additional amount of shares of Common Stock each calendar year equal to twenty percent of the Additional Annual Increment with respect to such year may be awarded as Restricted Stock and no more than 7,500,000 shares of Common Stock may be awarded in the aggregate with respect to ISOs for the duration of the Plan. The exercise of a SAR, whether paid in cash or Common Stock, shall be deemed to be an issuance of Common Stock for purposes of determining the number of shares delivered under the Plan. (b) Notwithstanding any of the foregoing limitations set forth in this Section 4, the numbers of shares of Common Stock specified in this Section 4 shall be adjusted as provided in Section 15. (c) Any shares of Common Stock subject to an Option or SAR or Other Stock-Based Award which for any reason expires or is terminated without having been fully exercised and any Restricted Stock which is forfeited may again be granted pursuant to an Award under the Plan, subject to the limitations of this Section 4; provided, however, that forfeited shares of Common Stock shall not be available for further Awards if the recipient thereof has realized any benefits of ownership from such shares. -7- 8 5. Eligibility. Employees of the Company and its Subsidiaries (but excluding members of the Committee as well as non-employee directors) shall be eligible to become Participants and receive Awards under the Plan. 6. Terms and Conditions of Stock Options. All Options to purchase Common Stock granted under the Plan shall be either ISOs or Options other than ISOs. Each Option shall be subject to all the applicable provisions of the Plan, including the following terms and conditions, and to such other terms and conditions not inconsistent therewith as the Committee shall determine and which are set forth in the applicable Agreement. (a) The option exercise price per share of shares of Common Stock subject to each Option shall be determined by the Committee and stated in the Agreement; provided, however, that, subject to paragraph (g)(C) of this Section 6, such price shall not be less than 100% of the Fair Market Value of a share of Common Stock at the time that the Option is granted. (b) Each Option shall be exercisable in whole or in such installments, at such times and under such conditions as may be determined by the Committee in its discretion and stated in the Agreement, and, in any event, over a period of time ending not later than ten years from the date such Option was granted, subject to paragraph (g)(C) of this Section 6. (c) An Option shall not be exercisable with respect to a fractional share of Common Stock or the lesser of fifty shares or the full number of shares of Common Stock then subject to the Option. No fractional shares of Common Stock shall be issued upon the exercise of an Option. (d) Each Option may be exercised by giving Notice to the Company specifying the number of shares of Common Stock to be purchased, which shall be accompanied by payment in full including applicable taxes, if any, in accordance with Section 14. Payment shall be in any manner permitted by applicable law and prescribed by the Committee, in its discretion, and set forth in the Agreement, including, in the Committee's discretion, payment in accordance with a "cashless exercise" program established by the Committee. (e) No Optionee or other person shall become the beneficial owner of any shares of Common Stock subject to an Option, nor have any rights to dividends or other rights of a shareholder with respect to any such shares until he or she has exercised his or her Option in accordance with the provisions of the Plan and the applicable Agreement. (f) An Option may be exercised only if at all times during the period beginning with the date of the granting of the Option and ending on the date of such exercise, the Optionee was an employee of either the Company or of a Subsidiary or of another corporation referred to in Section 421(a)(2) of the Code. Notwithstanding the above, the Committee may determine in its discretion that an Option may be exercised following termination of such continuous employment, whether or not exercisable at such time, to the extent provided in the applicable Agreement. -8- 9 (g) (A) Each Agreement relating to an Option shall state whether such Option will or will not be treated as an ISO. No ISO shall be granted unless such Option, when granted, qualifies as an "incentive stock option" under Section 422 of the Code. Any ISO granted under the Plan shall contain such terms and conditions, consistent with the Plan, as the Committee may determine to be necessary to qualify such Option as an "incentive stock option" under Section 422 of the Code. Any ISO granted under the Plan may be modified by the Committee to disqualify such Option from treatment as an "incentive stock option" under Section 422 of the Code. (B) Notwithstanding any intent to grant ISOs, an Option granted under the Plan will not be considered an ISO to the extent that it, together with any other "incentive stock options" (within the meaning of Section 422 of the Code, but without regard to subsection (d) of such Section) under the Plan or any other incentive stock option plans of the Company and any Subsidiary, are exercisable for the first time by any Optionee during any calendar year with respect to Common Stock having an aggregate Fair Market Value in excess of $100,000 (or such other limit as may be required by the Code) as of the time the Option with respect to such Common Stock is granted. The rule set forth in the preceding sentence shall be applied by taking Options into account in the order in which they were granted. (C) No ISO shall be granted to a Participant who owns (within the meaning of Section 424(d) of the Code), at the time the Option is granted, more than 10% of the total combined voting power of all classes of stock of the Company or a Subsidiary. This restriction does not apply if at the time such ISO is granted the Option exercise price per share of Common Stock subject to the Option is at least 110% of the Fair Market Value of a share of Common Stock on the date such ISO is granted, and the ISO by its terms is not exercisable after the expiration of five years from such date of grant. (h) Notwithstanding any other provision contained in the Plan to the contrary, the maximum number of shares of Common Stock which may be subject to Options granted under the Plan to any Participant in any twelve-month period shall not exceed the Award Limit. To the extent required by Section 162(m) of the Code, shares of Common Stock subject to Options which are cancelled shall continue to be counted against the Award Limit and if, after the grant of an Option, the price of shares subject to such Option is reduced and the transaction is treated as a cancellation of the Option and a grant of a new Option, both the Option deemed to be canceled and the Option deemed to be granted shall be counted against the Award Limit. 7. Terms and Conditions of SARs. Any SAR granted by the Committee under the Plan shall be granted in conjunction with all or part of an Option granted under the Plan. Each SAR shall be subject to all the applicable provisions of the Plan, including the following terms and conditions, and to such other terms and conditions not inconsistent therewith as the Committee shall determine and which are set forth in the applicable Agreement. (a) The Committee may grant a SAR with respect to an Option which is not an ISO, either at the time such Option is granted or at any subsequent time during the term -9- 10 of such Option, or with respect to an ISO, only at the time such ISO is granted. A SAR shall entitle the grantee thereof to elect, in the manner described below and as set forth in the applicable Agreement, in lieu of exercising his or her related Option, for all or a portion of the shares of Common Stock covered by such Option, to surrender such Option with respect to any or all of such shares and to receive from the Company a payment, such payment shall have a value equal to the amount by which (A) the Fair Market Value of a share of Common Stock on the date of such election, multiplied by the number of shares of Common Stock as to which the grantee shall have made such election, exceeds (B) the exercise price stated in such Option multiplied by such number of shares. A SAR shall be exercisable only to the extent and at the time the related Option is exercisable. The SAR shall terminate and shall no longer be exercisable upon the expiration or exercise of the related Option. An Option with respect to which an Optionee has elected to exercise a SAR, as described above, shall, to the extent of the shares covered by such exercise, be canceled automatically and surrendered to the Company. Such Option shall thereafter remain exercisable according to its terms only with respect to the number of shares of Common Stock as to which it would otherwise be exercisable, less the number of such shares with respect to which such SAR has been so exercised. (b) The Company may, in the discretion of the Committee, as set forth in the Agreement, make payment on a properly exercised SAR; (i) in cash equal to the excess of the amount described in clause (A) over the amount described in clause (B) of paragraph 7(a) above; or (ii) in the nearest whole number of shares of Common Stock having an aggregate Fair Market Value on the date of exercise of the SAR which is not greater than the cash amount calculated in clause 7(b)(i) above; or (iii) in a combination of the manners described in clauses 7(b)(i) and (ii) above. (c) An election to exercise SARs shall be deemed to have been made on the date of Notice of such election to the Company. (d) Notwithstanding any other provision contained in the Plan to the contrary, the maximum number of shares of Common Stock for which SARs may be granted under the Plan to any Participant in any twelve-month period shall not exceed the Award Limit. To the extent required by Section 162(m) of the Code, shares of Common Stock subject to SARs which are cancelled continue to be counted against the Award Limit and if, after the grant of a SAR, the price of shares subject to such SAR is reduced and the transaction is treated as a cancellation of the SAR and a grant of a new SAR, both the SAR deemed to be canceled and the SAR deemed to be granted shall be counted against the Award Limit. 8. Terms and Conditions of Restricted Stock Awards. All awards of Restricted Stock under the Plan shall be subject to all the applicable provisions of the Plan, including the following terms and conditions, and to such other terms and conditions not inconsistent therewith, as the Committee shall determine and which are set forth in the applicable Agreement. (a) Awards of Restricted Stock may be in addition to or in lieu of any other types of Awards granted under the Plan. -10- 11 (b) (i) During the Restriction Period stated in the Agreement, the recipient shall not be permitted to sell, transfer, pledge, assign, encumber or otherwise dispose of the shares of Restricted Stock. Any attempt by such recipient to do so shall constitute the immediate and automatic forfeiture of such Award. (ii) An award of Restricted Stock with a Restriction Period based upon the attainment of particular performance goals established by the Committee, which performance goals are determined over a measurement period or periods established by the Committee and relate to one or more Performance Criteria, as determined by the Committee, in its discretion, is intended to qualify as "other performance-based compensation," as used in Code Section 162(m)(4)(c). The maximum number of shares of Restricted Stock intended to qualify as "other performance-based compensation," as used in Code Section 162(m)(4)(C), that may be awarded to a Participant in any twelve-month period shall not exceed the Award Limit. (c) Except as otherwise provided in this paragraph (c) of Section 8, shares of Restricted Stock shall be forfeited and revert to the Company upon termination for any reason of the recipient's employment with the Company or a Subsidiary and/or the failure to meet any performance goals to the extent set forth in the Agreement. Notwithstanding the foregoing, upon any such termination of employment during the Restriction Period, shares of Restricted Stock shall become free of all or part of the restrictions applicable thereto to the extent that: the Agreement, as determined by the Committee in its discretion on the award date, provides for lapse of such restrictions upon such termination of employment or the Committee in its discretion determines to waive forfeiture of such shares of Restricted Stock for whatever reason the Committee considers to be in the interests of the Company; provided, however, to the extent that subparagraph (b)(ii) of this Section 8 is intended to apply to shares of Restricted Stock, in no event shall restrictions applicable thereto be subject to lapse prior to the end of the Restriction Period for any reason other than the death or disability of the recipient or Change of Control of the Company. (d) Each recipient of shares of Restricted Stock hereunder may, but need not, be issued one or more stock certificates in respect of such shares of Restricted Stock. Any such stock certificates for shares of Restricted Stock shall be registered in the name of the recipient but shall either be appropriately legended and returned to the Company by the recipient, together with a stock power, endorsed in blank by the recipient, or delivered to and held by the Secretary of the Company. (e) The recipient of shares of Restricted Stock shall be entitled to vote shares of Restricted Stock, and shall be entitled to all dividends paid thereon, except that dividends paid in Common Stock or other property shall be subject to the same restrictions. To the extent that the Committee so determines, and sets forth in the Agreement, in the event of any adjustment as provided in Section 15, any new or additional shares or securities (or any extraordinary dividends paid in cash) received by a recipient of Restricted Stock shall be subject to the same terms and conditions as relate to the original shares of Restricted Stock. -11- 12 (f) Restricted Stock shall become free of the foregoing restrictions upon the expiration of the applicable Restriction Period and the Company shall, subject to paragraph (c) of Section 15, then deliver Common Stock certificates evidencing such stock to the Participant. 9. Terms and Conditions of Other Stock-Based Awards. The Committee may grant to Participants Awards under the Plan that are valued in whole or in part by reference to, or otherwise based on Common Stock ("Other Stock-Based Awards"). The provisions of Other Stock-Based Awards need not be the same with respect to each recipient or each Award. The Committee, in its discretion, may grant Other Stock-Based Awards as it deems appropriate, including, by way of example and not in limitation, (i) to take advantage of the compensation practices or tax laws or accounting rules applicable at the time of grant of such an Award, even if such practices, laws and/or rules are different from those in effect on the effective date of the Plan, (ii) to reflect the financial situation of the Company from time to time or (iii) to conform to and comply with tax, securities or other law or regulations in jurisdictions outside the United States. Other Stock-Based Awards shall take such form as the Committee, in its discretion, from time to time, determines, including, by way of example, and not in limitation, deferred stock, performance shares, performance units and convertible debentures. All Other Stock-Based Awards under the Plan shall be subject to all the applicable provisions of the Plan, including the following terms and conditions, and to such other terms, conditions, restrictions and/or limitations, if any, not inconsistent with the Plan, as the Committee shall determine, in its discretion, and which are set forth in the applicable Agreement. (a) Unless the Committee determines otherwise, the recipient of an Other Stock-Based Award shall be entitled to receive Dividend Equivalents based on the dividends declared with respect to the number of shares of Common Stock covered by such Award during the period between the date such Award is granted and the date such Award is exercised, vests or expires, as determined by the Committee. Such Dividend Equivalents shall be converted to cash or additional shares of Common Stock by such formula and at such time and subject to such limitations as may be determined by the Committee. (b) An Other Stock-Based Award, and any Common Stock covered by such Award, may be forfeited to the extent determined by the Committee, in its discretion, and as provided in the Agreement. (c) All Other Stock-Based Awards, and any Common Stock covered thereby, shall be forfeited upon termination of the recipient's employment with the Company or a Subsidiary. Notwithstanding the foregoing, if any such recipient's employment is terminated for any reason specified by the Committee in its discretion and set forth in the Agreement, any or all remaining limitations, restrictions or requirements imposed pursuant to the Plan or in the Agreement with respect to such recipient's Other Stock-Based Award shall be waived provided, however, that, in the case of any Other Stock-Based Award to which paragraph (d) of this Section 9 applies, no such waiver shall be available other than in the case of death or disability of the recipient or a change of control or ownership of the Company. The Committee may, in its discretion, otherwise modify or accelerate the exercisability or other terms and conditions of -12- 13 any Other Stock-Based Award, to the extent that any such modification or acceleration is (i) permitted under, and not inconsistent with, the Plan and (ii) in the best interests of the Company and, provided, that paragraph (d) of this Section 9 is not applicable to such Other Stock-Based Award. (d) An Other Stock-Based Award based in whole or in part upon the attainment of particular performance goals established by the Committee is intended to qualify as "other performance-based compensation," as used in Code Section 162(m)(4)(C). Such performance goals shall be determined over a measurement period or periods established by the Committee and shall relate to one or more Performance Criteria, as determined by the Committee, in its discretion. The maximum number of shares of Common Stock that may be awarded to a Participant subject to an Other Stock-Based Award in any twelve-month period shall not exceed the Award Limit. 10. Bonuses or Other Compensation Payable in Stock or Options. In lieu of cash bonuses or other compensation otherwise payable under the Company's or applicable Subsidiary's compensation practices to employees who are eligible to participate in the Plan, the Committee, in its discretion, may determine that such bonuses or other compensation shall be payable in Common Stock or Options, or in a combination of Stock, Options and/or cash. Such bonuses or other compensation shall be in consideration of services previously performed and as an incentive toward future services and shall consist of shares of Common Stock and/or Options subject to such terms as the Committee may determine in its discretion. 11. Forfeiture. Except as provided in Section 15 of the Plan, notwithstanding any other provisions of the Plan to the contrary: (a) To the extent provided in the Agreement, if a Participant shall exercise an Option or a SAR, or any portion thereof, and leave the employment of the Company or a Subsidiary within six months after such exercise for any reason other than death, permanent disability, retirement under a retirement plan of the Company and/or a Subsidiary or termination of employment with the written consent of the Company or such Subsidiary (as applicable), then any Award Gain realized by such Participant as the result of such exercise shall be paid by such Participant to the Company; provided, however, that no Award Gain otherwise payable by a Participant to the Company with respect to the exercise of an Option pursuant to this paragraph (a) of Section 11 shall be so payable to the extent that the Fair Market Value of the Common Stock, as of the date such Participant's employment by the Company or the Subsidiary terminates, is less than the Option exercise price previously paid by such Participant and such Participant has not, on or before such date, sold or otherwise disposed of the Common Stock received upon the exercise of such Option. (b) To the extent provided in the Agreement, if at any time prior to the latest to occur of: (x) the termination or exercise of an Option or a SAR or an Other Stock-Based Award or the expiration of the Restriction Period applicable to Restricted Stock granted to a Participant, (y) three years after a Participant leaves employment with the Company or a Subsidiary for any reason other than death or permanent disability, or (z) three years after a -13- 14 Participant exercises an Option or a SAR, or any portion thereof, such Participant engages directly or indirectly in any manner or capacity in any activity in competition with the business conducted by the Company or a Subsidiary (as determined by the Committee in its discretion) or inimical, contrary or harmful to the interests of the Company or a Subsidiary (as determined by the Committee in its discretion) then (1) any Option, SAR or Other Stock-Based Award granted to such Participant shall terminate upon the date on which such Participant enters into such activity to the extent that such Option, SAR or Other Stock-Based Award was not previously exercised or terminated in accordance with the other provisions of the Plan or the Agreement as of such date, (2) any Award Gain realized by such Participant as the result of an exercise referred to in clause (z) above shall be paid by such Participant to the Company, (3) any Restricted Stock awarded to such Participant with respect to which the Restriction Period has not expired as of such date shall be forfeited and revert to the Company and (4) any unpaid Dividend Equivalents as of such date, shall be forfeited and shall not be paid to such Participant. (c) A Participant shall satisfy any obligation he or she owes to the Company under the foregoing paragraphs (a) and (b) of this Section 11 promptly after the accrual thereof by payment in cash to the Company; however, in lieu thereof, the Company may elect to deduct the unpaid amount of any such obligation owed by such Participant to the Company from any payment of any kind otherwise due to such Participant, including, but not limited to, wages or other compensation, fringe benefits or vacation pay. (d) The Committee may release a Participant from any or all obligations that he or she owes to the Company pursuant to this Section 11, and/or waive, in whole or in part, the application of this Section 11 to a Participant if the Committee determines, in its discretion, that such action is in the best interests of the Company. 12. Transfer, Leave of Absence. For purposes of the Plan, a transfer of an employee from the Company to a Subsidiary or an affiliate of the Company, whether or not incorporated, or vice versa, or from one Subsidiary or affiliate of the Company to another, and a leave of absence, duly authorized in writing by the Company or a Subsidiary or affiliate of the Company, shall not be deemed a termination of employment of the employee. 13. Rights of Employees and Other Persons. (a) No person shall have any rights or claims under the Plan except in accordance with the provisions of the Plan and the applicable Agreement. (b) Nothing contained in the Plan or in any Agreement shall be deemed to give any employee the right to be retained in the service of the Company or its Subsidiaries nor restrict in any way the right of the Company or any Subsidiary to terminate any employee's employment at any time with or without cause. (c) The adoption of the Plan shall not be deemed to give any employee of the Company or any Subsidiary or any other person any right to be selected as a Participant or to be granted an Award. -14- 15 (d) Nothing contained in the Plan or in any Agreement shall be deemed to give any employee the right to receive any bonus, whether payable in cash or in Common Stock, or in any combination thereof, from the Company, nor be construed as limiting in any way the right of the Company to determine, in its sole discretion, whether or not it shall pay any employee bonuses, and, if so paid, the amount thereof and the manner of such payment. 14. Tax Withholding Obligations. (a) The Company and/or any Subsidiary are authorized to take whatever actions are necessary and proper to satisfy all obligations of Participants for the payment of all Federal, state, local and foreign taxes in connection with any Awards (including, but not limited to, actions pursuant to the following paragraphs (b) and (c) of this Section 14). (b) If any Participant properly elects, within the period permitted under Section 83 of the Code after the date on which property subject to an Award is transferred to such Participant to include in gross income for Federal income tax purposes an amount equal to the Fair Market Value (on the date of transfer) of the Common Stock subject to such Award, such Participant shall pay, or make arrangements satisfactory to the Company, as determined in the Committee's discretion, to pay to the Company, at the time of such election, any Federal, state or local taxes required to be withheld with respect to such Award. If any such Participant shall fail to make such tax payments as are required, the Company and its Subsidiaries shall, to the extent permitted by law, have the right to deduct any such taxes from any payment of any kind otherwise due to such Participant. (c) Any Participant who does not or cannot make the election described in paragraph (a) of this Section 14 with respect to an Award shall (and in no event shall Common Stock be delivered to such Participant with respect to such Award until), no later than the date as of which the value of the Award first becomes includible in the gross income of the Participant for income tax purposes, pay to the Company in cash, or make arrangements satisfactory to the Company, as determined in the Committee's discretion, regarding payment to the Company of, any taxes of any kind required by law to be withheld with respect to the Common Stock or other property subject to such Award, and the Company and any Subsidiary shall, to the extent permitted by law, have the right to deduct any such taxes from any payment of any kind otherwise due to such Participant. Notwithstanding the above, the Committee may, in its discretion and pursuant to procedures approved by the Committee, permit the Participant to (i) elect withholding by the Company of Common Stock otherwise deliverable to such Participant pursuant to such Award (provided, however, that the amount of any Common Stock so withheld shall not exceed the minimum required withholding obligation taking into account the Participant's effective tax rate and all applicable Federal, state, local and foreign taxes) and/or (ii) tender to the Company Common Stock owned by such Participant (or by such Participant and his or her spouse jointly) and acquired more than six months prior to such tender in full or partial satisfaction of such tax obligations. 15. Changes in Capital. (a) Upon changes in the outstanding Common Stock (or other change in corporate capitalization) by reason of a stock dividend, stock split, reverse split, subdivision, recapitalization, merger, consolidation (whether or not the Company is a -15- 16 surviving corporation), an extraordinary dividend payable in cash or property, combination or exchange of shares, separation, reorganization or liquidation, the aggregate number and class of shares available under the Plan as to which Awards may be granted, the number and class of shares under (i) each Option and the option price per share, (ii) each SAR and the exercise price thereof, (iii) each Other Stock-Based Award and the exercise price (or equivalent, if applicable) thereof and (iv) each award of Restricted Stock shall, in each case, be correspondingly adjusted by the Committee. Such adjustments shall be made in the case of any outstanding Options and/or SARs without change in the total price applicable to such Options and SARs. (b) In the event of a Change of Control, except as otherwise provided in the Agreement specifically with respect to a Change of Control: (1) all restrictions on Restricted Stock previously awarded to Participants under the Plan shall be immediately cancelled and the Restriction Periods applicable thereto shall immediately terminate, without regard to any contrary provisions contained in the Plan or the applicable Agreements, (2) the time of exercise of Options, SARs and/or Other Stock-Based Awards which are outstanding shall be accelerated so that such Awards become immediately exercisable in full without regard to any limitations of time or amount otherwise contained in the Plan or the applicable Agreements and, in the event an Optionee terminates employment for any reason during the one year period following a Change of Control, all exercisable Options held by such Optionee (or such Optionee's transferee) shall remain exercisable until the first to occur of the first anniversary of the Optionee's termination of employment or the expiration of the initial Option term, or until such later date otherwise provided by the Committee or in the applicable Agreement, (3) all such Awards shall immediately become fully vested and nonforfeitable, and (4) any payment owed by, or forfeiture imposed on a Participant pursuant to Section 11, shall be cancelled or waived. Upon the occurrence of a Change of Control, the Committee may, in its discretion, determine (A) that Options, SARs and/or Other Stock-Based Awards shall be adjusted and make such adjustments by substituting for Common Stock subject to such Options, SARs and/or Other Stock-Based Awards stock or other securities of any successor corporation to the Company or that may be issuable by another corporation that is a party to the transaction if such stock or other securities are publicly traded, in which event the aggregate exercise price (as applicable) shall remain the same and the amount of shares or other securities subject to option or other rights under an Award shall be the amount of shares or other securities which could have been purchased on the closing date or expiration date of such transaction with the proceeds which would have been received by the Participant if the Option, SAR and/or Other Stock-Based Award had been exercised in full prior to such transaction or expiration date and the Participant exchanged all of such shares in the transaction, and/or (B) that any outstanding Options, SARs and/or Other Stock-Based Awards shall, in each case, be converted into a right to receive in cash, as soon as practicable following the Change of -16- 17 Control, an amount equal to the greater of (x) the highest value of the consideration to be received in connection with such transaction for one share of Common Stock and (y) the highest market trading price of a share of the Common Stock reported in The Wall Street Journal during the 30 consecutive trading days prior to the Change of Control, less, in the case of an Award prescribing an exercise price, the per share exercise price of such Award, multiplied by the number of shares of Common Stock subject to such Award. No Participant shall have any right to prevent the consummation of any transaction affecting the number of shares available to such Participant. Any actions or determinations of the Committee under this paragraph (b) of Section 15 need not be uniform as to all outstanding Awards, nor treat all Participants identically. Notwithstanding the foregoing adjustments, in no event may any Option be exercised after ten years from the date it was originally granted and any changes to ISOs shall, unless the Committee determines otherwise, only be effective to the extent such adjustments or changes do not cause a "modification" (within the meaning of Section 424(h)(3) of the Code) of such ISOs or adversely affect the tax status of such ISOs. 16. Miscellaneous Provisions. (a) The Plan shall be unfunded. The Company shall not be required to establish any special or separate fund or to make any other segregation of assets to assure the issuance of shares or the payment of cash upon exercise or payment of any Award. Proceeds from the sale of shares of Common Stock pursuant to Options granted under the Plan shall constitute general funds of the Company. The expenses of the Plan shall be borne by the Company. (b) Except as otherwise provided in this paragraph (b) of Section 16, an Award by its terms shall be personal and may not be sold, transferred, pledged, assigned, encumbered or otherwise alienated or hypothecated otherwise than by will or by the laws of descent and distribution and shall be exercisable during the lifetime of a Participant only by him or her. The foregoing to the contrary notwithstanding, at the Committee's discretion, an Agreement may permit the receipt or exercise of a Participant's Award (or any portion thereof) after his or her death by the beneficiary most recently named by such Participant in a written designation thereof filed with the Company, or, in lieu of any such surviving beneficiary, by the legal representatives of such Participant's estate and/or an Award other than an ISO to be transferred by a Participant during his or her lifetime to such Participant's alternate payee pursuant to a qualified domestic relations order, as defined by the Code or Title I of the Employee Retirement Income Security Act of 1974, as amended, or the rules and regulations thereunder. In the event any Award is exercised by the executors, administrators, heirs or distributees of the estate of a deceased Participant, or such a Participant's beneficiary, pursuant to the terms and conditions of the Plan and the applicable Agreement, the Company shall be under no obligation to issue Common Stock thereunder unless and until the Company is satisfied, as determined in the discretion of the Committee, that the person or persons exercising such Award are the duly appointed legal representative of the deceased Participant's estate or the proper legatees or distributees thereof or the named beneficiary of such Participant. Further notwithstanding the foregoing to the contrary, at the Committee's discretion, an Agreement may permit the transfer of an Award other than an ISO by the recipient thereof, subject to such terms, conditions and limitations prescribed by the Committee, and the -17- 18 applicable transferee of such Award shall be treated under the Plan and the applicable Agreement as the Participant for purposes of any exercise of such Award. (c) It is understood that the Committee may, at any time and from time to time after the granting of an Award, specify such additional terms, conditions and restrictions with respect to such Award as may be deemed necessary or appropriate to ensure compliance with any and all applicable laws, including, but not limited to, (i) terms, restrictions and conditions for compliance with Federal and state securities laws, (ii) methods of withholding or providing for the payment of required taxes and (iii) restrictions regarding a Participant's ability to exercise Awards under a "cashless exercise" program established by the Committee. (d) If at any time the Committee shall determine, in its discretion, that the listing, registration and/or qualification of shares of Common Stock upon any national securities exchange or under any state or Federal law, or the consent or approval of any governmental regulatory body, is necessary or desirable as a condition of, or in connection with, the sale or purchase of shares of Common Stock hereunder, no Option, SAR or Other Stock-Based Award may be exercised or Restricted Stock or bonus or other compensation payable in Common Stock may be transferred in whole or in part unless and until such listing, registration, qualification, consent and/or approval shall have been effected or obtained, or otherwise provided for, free of any conditions not acceptable to the Committee. (e) The Committee may require each person receiving Common Stock in connection with any Award under the Plan to represent and agree with the Company in writing that such person is acquiring the shares for investment without a view to the distribution thereof. (f) By accepting any benefit under the Plan, each Participant and each person claiming under or through such Participant shall be conclusively deemed to have indicated their acceptance and ratification of, and consent to, all of the terms and conditions of the Plan and any action taken under the Plan by the Committee, the Company or the Board. (g) Except with respect to "incentive stock options" (as defined in Section 422 of the Code) granted under the Predecessor Plans and outstanding on the effective date of the Plan, subject to approval of the Plan by the Company's shareholders, in accordance with Section 20, the provisions of the Plan shall apply to and govern existing and subsequent awards under the Predecessor Plans and, unless otherwise determined by the Committee, existing and subsequent awards under the Predecessor Plans shall be deemed to be amended to provide any additional rights applicable to Awards hereunder, subject to the right of any affected participant in either of the Predecessor Plans to refuse to consent to such amendment pursuant to the terms and conditions of the applicable Predecessor Plan and the applicable option or award agreement between the Company and such participant. (h) Neither the adoption of the Plan nor anything contained herein shall affect any other compensation or incentive plans or arrangements of the Company or any Subsidiary (other than the Predecessor Plans, as provided in paragraph (g) of this Section 16), or prevent or limit the right of the Company or any Subsidiary to establish any other forms of -18- 19 incentives or compensation for their employees or consultants or directors, or grant or assume options or other rights otherwise than under the Plan. (i) The Plan shall be governed by and construed in accordance with the laws of the State of Delaware, except as superseded by applicable Federal law. 17. Limits of Liability. (a) Any liability of the Company or a Subsidiary to any Participant with respect to any Award shall be based solely upon contractual obligations created by the Plan and the Agreement. (b) Neither the Company nor a Subsidiary nor any member of the Committee or the Board, nor any other person participating in any determination of any question under the Plan, or in the interpretation, administration or application of the Plan, shall have any liability, in the absence of bad faith, to any party for any action taken or not taken in connection with the Plan, except as may expressly be provided by statute. 18. Limitations App1icable to Certain Awards Subject to Section 16 and Code Section 162(m). Unless stated otherwise in the Agreement, notwithstanding any other provision of the Plan, any Award granted to an executive or officer of the Company who is then subject to Section 16 of the Exchange Act, shall be subject to any additional limitations set forth in any applicable exemptive rule under Section 16 of the Exchange Act (including Rule 16b-3 as it may be amended from time to time) that are requirements for the application of such exemptive rule, and the Plan shall be deemed amended to the extent necessary to conform to such limitations. Furthermore, unless stated otherwise in the Agreement, notwithstanding any other provision of the Plan, any Award granted to an officer or executive of the Company intended to qualify as "other performance-based compensation" as described in Section 162(m)(4)(C) of the Code shall be subject to any additional limitations set forth in Section 162(m) of the Code (including any amendment to Section 162(m) of the Code) or any regulations or rulings issued thereunder that are requirements for qualification as "other performance-based compensation" as described in Section 162(m)(4)(C) of the Code, and the Plan shall be deemed amended to the extent necessary to conform to such requirements. 19. Amendments and Termination. The Board may, at any time and with or without prior notice, amend, alter, suspend, or terminate the Plan; provided, however, no amendment, alteration, suspension, or termination shall be made which would adversely affect an Outstanding Award theretofore granted without the written consent of the holder of the Award or which, without first obtaining approval of the stockholders of the Company (where such approval is necessary to satisfy (i) the then-applicable requirements of Rule 16b-3, (ii) any requirements under the Code relating to ISOs or for exemption from Section 162(m) of the Code, or (iii) applicable state law), would: (a) except as is provided in Sections 4(a) and 15, increase the maximum number of shares of Common Stock which may be sold or awarded under the Plan; (b) except as is provided in Section 15, decrease the minimum option exercise price requirements of Section 6(a); -19- 20 (c) change the class of persons eligible to receive Awards under the Plan; or (d) extend the duration of the Plan or the period during which Options may be exercised under Section 6(b). The Committee may amend the terms of any Award theretofore granted, including any Agreement, retroactively or prospectively, but no such amendment shall adversely affect an outstanding Award without the written consent of the holder of the Award. Notwithstanding the foregoing, the Board may amend the Plan and the Committee may amend any Award, including any Agreement, either retroactively or prospectively, and without the consent of the applicable Participant, so as to preserve or come within any exemptions from liability under Section 16(b) of the Exchange Act, pursuant to the rules and releases promulgated by the SEC (including Rule 16b-3) and/or so that any Award granted to an officer or executive of the Company shall qualify as "other performance-based compensation" as described in Section 162(m)(4)(C) of the Code. 20. Duration. The Plan shall become effective as of the date on which it is approved by the holders of a majority of the Company's outstanding Common Stock which is present and voted at a meeting, which approval must occur within the period ending twelve months after the date the Plan is adopted by the Board. The Plan shall terminate upon the earliest to occur of (a) the effective date of a resolution adopted by the Board terminating the Plan or (b) ten years from the date the Plan is approved by the Company's shareholders. No Award may be granted under the Plan after the earliest of (a) and (b) of this Section 20 to occur; however, Awards theretofore granted may extend beyond such date. No such termination of the Plan shall affect the rights of any Participant hereunder and all Awards previously granted hereunder shall continue in force and in operation after the termination of the Plan, except as they may be otherwise terminated in accordance with the terms of the Plan or the Agreement. -20- EX-10.(E) 3 1999 EMPLOYEES STOCK PLAN 1 EXHIBIT 10(e) NEWMONT MINING CORPORATION 1999 EMPLOYEES STOCK PLAN 1. Purposes. The purposes of the Newmont Mining Corporation 1999 Employees Stock Plan are: (a) To further the growth, development and success of the Company and its Subsidiaries by enabling employees of the Company and its Subsidiaries to acquire a continuing equity interest in the Company, thereby increasing their personal interests in such growth, development and success and motivating such employees to exert their best efforts on behalf of the Company and its Subsidiaries and to provide incentives for the future performance of services; and (b) To maintain the ability of the Company and its Subsidiaries to attract and retain employees of outstanding ability by offering them an opportunity to acquire a continuing equity interest in the Company and its Subsidiaries which will reflect the growth, development and success of the Company and its Subsidiaries. (c) Toward these objectives, the Committee may grant Options, Stock Appreciation Rights, or Other Stock-Based Awards or award Restricted Stock to such employees or pay such employees' bonuses (if any) or other compensation in Common Stock or award or grant any combination thereof, all pursuant to the terms and conditions of the Plan (each, an "Award"). 2. Definitions. As used in the Plan, the following capitalized terms shall have the meanings set forth below: (a) "AGREEMENT" - an option or award agreement evidencing an Award. (b) "AWARD" - an Option, SAR, Other Stock-Based Award or Restricted Stock granted or awarded, or bonus or other compensation of an employee paid in Common Stock, pursuant to the terms and conditions of the Plan. (c) "AWARD GAIN" - the gain represented by the product of the excess of the Fair Market Value of the Common Stock on the date of exercise of an Option or SAR over the exercise price of such Option or SAR multiplied by the number of shares of Common Stock subject to such Option or SAR, or portion thereof, exercised, without regard to any subsequent decrease or increase in the Fair Market Value of the Common Stock. (d) "BOARD" - the Board of Directors of the Company. (e) "CEO" - the Chief Executive Officer of the Company. (f) "CHANGE OF CONTROL" - the occurrence of any of the following events: 2 (i) The acquisition by any individual, entity or group (within the meaning of Section 13(d)(3) or 14(d)(2) of the Securities Exchange Act of 1934, as amended (the "Exchange Act")) (a "Person") of beneficial ownership (within the meaning of Rule 13d-3 promulgated under the Exchange Act) of 20% or more of either (x) the then outstanding shares of common stock of the Company (the "Outstanding Company Common Stock") or (y) the combined voting power of the then outstanding voting securities of the Company entitled to vote generally in the election of directors (the "Outstanding Company Voting Securities"); provided, however, that for purposes of this subsection (i), the following acquisitions shall not constitute a Change of Control: (A) any acquisition directly from the Company, (B) any acquisition by the Company, (C) any acquisition by any employee benefit plan (or related trust) sponsored or maintained by the Company or any corporation controlled by the Company or (D) any acquisition by any corporation pursuant to a transaction which complies with clauses (A), (B) and (C) of paragraph (iii) below; or (ii) Individuals who, as of the Effective Date, constitute the Board (the "Incumbent Board") cease for any reason to constitute at least a majority of the Board; provided, however, that any individual becoming a director subsequent to the Effective Date whose election, or nomination for election by the Company's shareholders, was approved by a vote of at least a majority of the directors then comprising the Incumbent Board shall be considered as though such individual were a member of the Incumbent Board, but excluding, for this purpose, any such individual whose initial assumption of office occurs as a result of an actual or threatened election contest with respect to the election or removal of directors or other actual or threatened solicitation of proxies or consents by or on behalf of a Person other than the Board; or (iii) Consummation of a reorganization, merger or consolidation or sale or other disposition of all or substantially all of the assets of the Company or an acquisition of assets of another corporation (a "Business Combination"), in each case, unless, following such Business Combination, (A) all or substantially all of the individuals and entities who were the beneficial owners, respectively, of the Outstanding Company Common Stock and Outstanding Company Voting Securities immediately prior to such Business Combination beneficially own, directly or indirectly, more than 50% of, respectively, the then outstanding shares of common stock and the combined voting power of the then outstanding voting securities entitled to vote generally in the election of directors, as the case may be, of the corporation resulting from such Business Combination (including, without limitation, a corporation which as a result of such transaction owns the Company or all or substantially all of the Company's assets either directly or through one or more subsidiaries) in substantially the same proportions as their ownership, immediately prior to such Business Combination of the Outstanding Company Common Stock and Outstanding Company Voting Securities, as the case may be, (B) no Person (excluding any corporation resulting from such Business Combination or any employee benefit plan (or related trust) of the Company or such corporation resulting from such Business Combination) beneficially owns, directly or indirectly, 20% or more of, respectively, the then outstanding shares of common stock of the corporation resulting from such Business Combination or the combined voting power of the then outstanding voting securities of such corporation, except to the extent that such ownership 3 existed prior to the Business Combination and (C) at least a majority of the members of the board of directors of the corporation resulting from such Business Combination were members of the Incumbent Board at the time of the execution of the initial agreement, or of the action of the Board, providing for such Business Combination; or (iv) Approval by the shareholders of the Company of a complete liquidation or dissolution of the Company. (g) "CODE" - the Internal Revenue Code of 1986, as it may be amended from time to time, including regulations and rules thereunder and successor provisions and regulations and rules thereto. (h) "COMMITTEE" - the Compensation Committee of the Board, or such other Board committee as may be designated by the Board to administer the Plan. (i) "COMMON STOCK" - the $1.60 par value common stock of the Company. (j) "COMPANY" - Newmont Mining Corporation, a Delaware corporation, or any successor entity. (k) "DIVIDEND EQUIVALENTS" - the equivalent value (in cash or Common Stock) of dividends paid on Common Stock subject to Other Stock-Based Awards granted under Section 9. (l) "EXCHANGE ACT" - the Securities Exchange Act of 1934, as it may be amended from time to time. (m) "FAIR MARKET VALUE" of a share of Common Stock as of a given date shall be the average of the high and low sales prices for a share of Common Stock as reported for New York Stock Exchange issues in The Wall Street Journal for such date; provided, however, that if there is no sale of shares of Common Stock reported in The Wall Street Journal on such date, such fair market value shall be the average between the bid and asked prices for a share of Common Stock reported in The Wall Street Journal at the close of trading on such date; provided further, however, that if no such prices are reported for such day, the most recent day for which such prices are available shall be used. In the event that the method for determining the fair market value of a share of Common Stock provided for in the previous sentence shall not be practicable, then such fair market value shall be determined by such other reasonable valuation method as the Committee shall, in its discretion, select and apply in good faith as of the given date; provided, however, that for purposes of paragraph (a) of Section 6, such fair market value shall be determined subject to Section 422(c)(7) of the Code. (n) "ISO," OR "INCENTIVE STOCK OPTION" - an option which conforms to the applicable provisions of Section 422 of the Code. -3- 4 (o) "NOTICE" - written notice actually received by the Company at its offices on the day of such receipt, if received on or before 1:30 p.m., Denver time, on a day when the Company's offices are open for business, or, if received after such time, such notice shall be deemed received on the next such day, which notice may be delivered in person to the Company's Payroll Department or sent by facsimile to the Company, or sent by certified or registered mail or overnight courier, prepaid, addressed to the Company at 1700 Lincoln Street, Denver, Colorado 80203, Attention: Payroll Department. (p) "OPTION" - an option to purchase Common Stock granted to a Participant under the Plan in accordance with the terms and conditions set forth in Section 6. Options shall be stock options that are not ISOs. (q) "OPTIONEE" - a Participant who has been granted an Option under the Plan in accordance with the terms and conditions set forth in Section 6. (r) "OTHER STOCK-BASED AWARDS" - Awards granted to Participants under the Plan in accordance with the terms and conditions set forth in Section 10. (s) "PARTICIPANT" - any employee of the Company or its Subsidiaries selected to participate in the Plan pursuant to Section 3. (t) "PERFORMANCE CRITERIA" - earnings, increases in production, reductions in costs of production and reserve replacement. (u) "PLAN" - this Newmont Mining Corporation 1999 Employees Stock Plan. (v) "RESTRICTED STOCK" - Common Stock awarded under the Plan in accordance with the terms and conditions set forth in Section 8. (w) "RESTRICTION PERIOD" - a time period, which may or may not be based upon the achievement of particular performance goals and/or the satisfaction of vesting or earnout provisions (which may be dependent on the continued employment of the recipient) applicable to, and established or specified by the Committee at the time of, each award of Restricted Stock. (x) "RULE 16B-3" - Rule 16b-3 under the Exchange Act, as such rule may be amended from time to time. (y) "SAR" - a stock appreciation right granted to a Participant under the Plan and in accordance with the terms and conditions of Section 7. (z) "SEC" shall mean the Securities and Exchange Commission. (aa) "SUBSIDIARY" shall mean (i) any present or future corporation which is or would be a "subsidiary corporation" of the Company as the term is defined in Section 424(f) of the Code and (ii) any unincorporated entity in which the Company and/or one or more of its -4- 5 "subsidiary corporations" (as defined in Section 424(f) of the Code) presently or in the future own an aggregate profits interest of fifty percent (50%) or more, which the Committee in its discretion determines will be a "Subsidiary" for purposes of the Plan. 3. Administration of the Plan. (a) The Committee shall have exclusive authority to operate, manage and administer the Plan in accordance with its terms and conditions. Notwithstanding the foregoing, in its absolute discretion, the Board may at any time and from time to time exercise any and all rights, duties and responsibilities of the Committee under the Plan, including, but not limited to, establishing procedures to be followed by the Committee, but excluding matters which under Rule 16b-3 or Section 162(m) of the Code are required to be determined in the discretion of the Committee. (b) The Committee shall be appointed from time to time by the Board, and the Committee shall consist of not less than three members of the Board, each of whom is, to the extent necessary for the Plan and/or Awards thereunder to satisfy the requirements and conditions of Rule 16b-3, a "nonemployee director" under Rule 16b-3; provided, however, that if one or more of the members of the Committee does not qualify as such a "non-employee director," at the time any Award is granted, such Award nevertheless shall be deemed to be properly authorized and issued under the Plan and shall remain in full force and effect subject to the other terms and conditions contained in the Plan and the relevant Agreement. (c) Without limiting the generality of paragraph (a) of this Section 3, the Committee shall have the exclusive right and discretionary authority to: (i) interpret the Plan and the Agreements; (ii) determine eligibility for participation in the Plan and the amount of Awards payable under the Plan; (iii) select, from time to time, from amongst those eligible, the employees to whom Awards shall be granted under the Plan, which selection may be based upon information furnished to the Committee by the Company's management; (iv) determine whether an Award shall take the form of an Option, SAR, Restricted Stock, bonuses or other compensation payable in Common Stock, Other Stock-Based Award (and, if so, the form thereof) or any combination thereof, (v) determine the number of shares of Common Stock to be included in any Award or to which any Award shall otherwise relate and the periods for which Awards will be outstanding; (vi) establish, amend, waive and/or rescind rules and regulations and administrative guidelines for carrying out the Plan; (vii) to the extent permitted under the Plan and the applicable Agreement, accelerate the exercisability or the termination of any Restriction Period with respect to any Award when such acceleration and/or termination would be in the best interest of the Company; (viii) to the extent permitted under the Plan and the applicable Agreement, grant waivers of Plan terms, conditions, restrictions and limitations; (ix) correct any errors, supply any omissions or reconcile any inconsistencies in the Plan and/or any Agreement or any other instrument relating to any Award; (x) to the extent permitted by the Plan, amend or adjust the terms and conditions of any outstanding Award and/or adjust the number and/or class of shares of Common Stock subject to any outstanding Award; (xi) in accordance with the Plan, establish and administer any performance goals in connection with any Awards, including the Performance Criteria to which such performance goals relate and the applicable measurement periods, and certify whether, and to what extent, any such performance goals have been met; (xii) at any time and from time to time after the granting of an Award, -5- 6 specify such additional terms, conditions and restrictions with respect to any ISO, Option other than an ISO, SAR, Other Stock-Based Award, Restricted Stock and/or bonuses or other compensation payable in Common Stock as may be deemed necessary or appropriate to ensure compliance with any and all applicable laws, including, but not limited to, (A) terms, restrictions and conditions for compliance with Federal and state securities laws, (B) methods of withholding or providing for the payment of required taxes and (C) restrictions regarding a Participant's ability to exercise Awards under a "cashless exercise" program established by the Committee; and (xiii) take any and all such other action it deems necessary or advisable for the proper operation and/or administration of the Plan. The Committee shall have full discretionary authority in all matters related to the discharge of its responsibilities and the exercise of its authority under the Plan. Decisions and actions by the Committee with respect to the Plan and any Agreement shall be final, conclusive and binding on all persons having or claiming to have any right or interest in or under the Plan and/or any Agreement. Awards, including Awards under the same section of the Plan, need not be uniform as to all grants and recipients thereof. (d) Each Award shall be evidenced by an Agreement, which shall be executed by the Company and the Participant to whom such Award has been granted, unless the Agreement provides otherwise; however, two or more Awards to a single Participant may be combined in a single Agreement. An Agreement shall not be a precondition to the granting of an Award; however, no person shall have any rights under any Award unless and until the Participant to whom the Award shall have been granted (i) shall have executed and delivered to the Company an Agreement or other instrument evidencing the Award, unless such Agreement provides otherwise, and (ii) has otherwise complied with the applicable terms and conditions of the Award. The Committee shall prescribe the form of all Agreements, and, subject to the terms and conditions of the Plan, shall determine the content of all Agreements. Any Agreement may be supplemented or amended in writing from time to time as approved by the Committee; provided that the terms and conditions of any such Agreement as supplemented or amended are not inconsistent with the provisions of the Plan. (e) A majority of the members of the entire Committee shall constitute a quorum and the actions of a majority of the members of the Committee in attendance at a meeting at which a quorum is present, or actions by a written instrument signed by all members of the Committee, shall be the actions of the Committee. (f) The Committee may, in its discretion, delegate to the CEO, any Senior Vice President of the Company or the Secretary of the Company the "administration" of the Plan under this Section 3; provided, however, that no such delegation by the Committee shall be made if such delegation would not be permitted under applicable law or with respect to the administration of the Plan as it affects the CEO or the President or Secretary of the Company or any Senior Vice President of the Company, and, provided further, however, the Committee may not delegate its authority to grant awards or correct errors, omissions or inconsistencies in the Plan. All authority delegated by the Committee under this paragraph (f) of this Section 3 shall be exercised in accordance with the terms and conditions of the Plan and any rules, regulations or administrative guidelines that may from time to time be established by the Committee, and -6- 7 any delegee of such authority shall periodically report to the Committee concerning the performance or discharge of the matters delegated to such individual. 4. Shares of Stock Subject to the Plan. (a) The shares of stock subject to Awards granted under the Plan shall be shares of Common Stock. Such shares of Common Stock subject to the Plan may be either authorized and unissued shares (which will not be subject to preemptive rights) or previously issued shares acquired by the Company or any Subsidiary. The total number of shares of Common Stock that may be delivered pursuant to any Awards under the Plan is 6,000,000. (b) Notwithstanding any of the foregoing limitations set forth in this Section 4, the number of shares of Common Stock specified in this Section 4 shall be adjusted as provided in Section 15. (c) Any shares of Common Stock subject to an Option or SAR or Other Stock-Based Award which for any reason expires or is terminated without having been fully exercised and any Restricted Stock which is forfeited may again be granted pursuant to an Award under the Plan, subject to the limitations of this Section 4. If the Option exercise price of any Option is satisfied by delivering shares of Common Stock to the Company (by either actual delivery or attestation), only the number of shares of Common Stock delivered or attested to shall be deemed delivered for purposes of determining the maximum number of shares available for delivery under the Plan. To the extent any shares of Common Stock subject to an Award are not delivered to a Participant because such shares are used to satisfy an applicable tax-withholding obligation, such shares shall not be deemed to have been delivered for purposes of determining the maximum number of shares of Common Stock available for delivery under the Plan. 5. Eligibility. Employees of the Company and its Subsidiaries (but excluding non-employee directors) shall be eligible to become Participants and receive Awards under the Plan. 6. Terms and Conditions of Stock Options. All Options to purchase Common Stock granted under the Plan shall be Options other than ISOs. Each Option shall be subject to all the applicable provisions of the Plan, including the following terms and conditions, and to such other terms and conditions not inconsistent therewith as the Committee shall determine and which are set forth in the applicable Agreement. (a) The option exercise price per share of shares of Common Stock subject to each Option shall be determined by the Committee and stated in the Agreement; provided, however, that such price shall not be less than 100% of the Fair Market Value of a share of Common Stock at the time that the Option is granted. (b) Each Option shall be exercisable in whole or in such installments, at such times and under such conditions as may be determined by the Committee in its discretion and stated in the Agreement, and, in any event, over a period of time ending not later than ten years from the date such Option was granted. -7- 8 (c) An Option shall not be exercisable with respect to a fractional share of Common Stock or the lesser of fifty shares or the full number of shares of Common Stock then subject to the Option. No fractional shares of Common Stock shall be issued upon the exercise of an Option. (d) Each Option may be exercised by giving Notice to the Company specifying the number of shares of Common Stock to be purchased, which shall be accompanied by payment in full including applicable taxes, if any, in accordance with Section 14. Payment shall be in any manner permitted by applicable law and prescribed by the Committee, in its discretion, and set forth in the Agreement, including, in the Committee's discretion, payment in accordance with a "cashless exercise" program established by the Committee. (e) No Optionee or other person shall become the beneficial owner of any shares of Common Stock subject to an Option, nor have any rights to dividends or other rights of a shareholder with respect to any such shares until he or she has exercised his or her Option in accordance with the provisions of the Plan and the applicable Agreement. (f) An Option may be exercised only if at all times during the period beginning with the date of the granting of the Option and ending on the date of such exercise, the Optionee was an employee of either the Company or of a Subsidiary or of another corporation referred to in Section 421(a)(2) of the Code. Notwithstanding the above, the Committee may determine in its discretion that an Option may be exercised following termination of such continuous employment, whether or not exercisable at such time, to the extent provided in the applicable Agreement. (g) Each Agreement relating to an Option shall state that such Option will not be treated as an ISO. 7. Terms and Conditions of SARs. Any SAR granted by the Committee under the Plan shall be granted in conjunction with all or part of an Option granted under the Plan. Each SAR shall be subject to all the applicable provisions of the Plan, including the following terms and conditions, and to such other terms and conditions not inconsistent therewith as the Committee shall determine and which are set forth in the applicable Agreement. (a) The Committee may grant a SAR with respect to an Option at the time such Option is granted or at any subsequent time during the term of such Option. A SAR shall entitle the grantee thereof to elect, in the manner described below and as set forth in the applicable Agreement, in lieu of exercising his or her related Option, for all or a portion of the shares of Common Stock covered by such Option, to surrender such Option with respect to any or all of such shares and to receive from the Company a payment, such payment shall have a value equal to the amount by which (A) the Fair Market Value of a share of Common Stock on the date of such election, multiplied by the number of shares of Common Stock as to which the grantee shall have made such election, exceeds (B) the exercise price stated in such Option multiplied by such number of shares. A SAR shall be exercisable only to the extent and at the time the related Option is exercisable. The SAR shall terminate and shall no longer be -8- 9 exercisable upon the expiration or exercise of the related Option. An Option with respect to which an Optionee has elected to exercise a SAR, as described above, shall, to the extent of the shares covered by such exercise, be canceled automatically and surrendered to the Company. Such Option shall thereafter remain exercisable according to its terms only with respect to the number of shares of Common Stock as to which it would otherwise be exercisable, less the number of such shares with respect to which such SAR has been so exercised. (b) The Company may, in the discretion of the Committee, as set forth in the Agreement, make payment on a properly exercised SAR; (i) in cash equal to the excess of the amount described in clause (A) over the amount described in clause (B) of paragraph 7(a) above; or (ii) in the nearest whole number of shares of Common Stock having an aggregate Fair Market Value on the date of exercise of the SAR which is not greater than the cash amount calculated in clause 7(b)(i) above; or (iii) in a combination of the manners described in clauses 7(b)(i) and (ii) above. (c) An election to exercise SARs shall be deemed to have been made on the date of Notice of such election to the Company. 8. Terms and Conditions of Restricted Stock Awards. All awards of Restricted Stock under the Plan shall be subject to all the applicable provisions of the Plan, including the following terms and conditions, and to such other terms and conditions not inconsistent therewith, as the Committee shall determine and which are set forth in the applicable Agreement. (a) Awards of Restricted Stock may be in addition to or in lieu of any other types of Awards granted under the Plan. (b) During the Restriction Period stated in the Agreement, the recipient shall not be permitted to sell, transfer, pledge, assign, encumber or otherwise dispose of the shares of Restricted Stock. Any attempt by such recipient to do so shall constitute the immediate and automatic forfeiture of such Award. (c) Except as otherwise provided in this paragraph (c) of Section 8, shares of Restricted Stock shall be forfeited and revert to the Company upon termination for any reason of the recipient's employment with the Company or a Subsidiary and/or the failure to meet any performance goals to the extent set forth in the Agreement. Notwithstanding the foregoing, upon any such termination of employment during the Restriction Period, shares of Restricted Stock shall become free of all or part of the restrictions applicable thereto to the extent that: the Agreement, as determined by the Committee in its discretion on the award date, provides for lapse of such restrictions upon such termination of employment or the Committee in its discretion determines to waive forfeiture of such shares of Restricted Stock for whatever reason the Committee considers to be in the interests of the Company. (d) Each recipient of shares of Restricted Stock hereunder may, but need not, be issued one or more stock certificates in respect of such shares of Restricted Stock. Any such stock certificates for shares of Restricted Stock shall be registered in the name of the -9- 10 recipient but shall either be appropriately legended and returned to the Company by the recipient, together with a stock power, endorsed in blank by the recipient, or delivered to and held by the Secretary of the Company. (e) The recipient of shares of Restricted Stock shall be entitled to vote shares of Restricted Stock, and shall be entitled to all dividends paid thereon, except that dividends paid in Common Stock or other property shall be subject to the same restrictions. To the extent that the Committee so determines, and sets forth in the Agreement, in the event of any adjustment as provided in Section 15, any new or additional shares or securities received by a recipient of Restricted Stock (or any extraordinary dividends paid in cash) shall be subject to the same terms and conditions as relate to the original shares of Restricted Stock. (f) Restricted Stock shall become free of the foregoing restrictions upon the expiration of the applicable Restriction Period and the Company shall, subject to paragraph (c) of Section 15, then deliver Common Stock certificates evidencing such stock to the Participant. 9. Terms and Conditions of Other Stock-Based Awards. The Committee may grant to Participants Awards under the Plan that are valued in whole or in part by reference to, or otherwise based on Common Stock ("Other Stock-Based Awards"). The provisions of Other Stock-Based Awards need not be the same with respect to each recipient or each Award. The Committee, in its discretion, may grant Other Stock-Based Awards as it deems appropriate, including, by way of example and not in limitation, (i) to take advantage of the compensation practices or tax laws or accounting rules applicable at the time of grant of such an Award, even if such practices, laws and/or rules are different from those in effect on the effective date of the Plan, (ii) to reflect the financial situation of the Company from time to time or (iii) to conform to and comply with tax, securities or other law or regulations in jurisdictions outside the United States. Other Stock-Based Awards shall take such form as the Committee, in its discretion, from time to time, determines, including, by way of example, and not in limitation, deferred stock, performance shares, performance units and convertible debentures. All Other Stock-Based Awards under the Plan shall be subject to all the applicable provisions of the Plan, including the following terms and conditions, and to such other terms, conditions, restrictions and/or limitations, if any, not inconsistent with the Plan, as the Committee shall determine, in its discretion, and which are set forth in the applicable Agreement. (a) Unless the Committee determines otherwise, the recipient of an Other Stock-Based Award shall be entitled to receive Dividend Equivalents based on the dividends declared with respect to the number of shares of Common Stock covered by such Award during the period between the date such Award is granted and the date such Award is exercised, vests or expires, as determined by the Committee. Such Dividend Equivalents shall be converted to cash or additional shares of Common Stock by such formula and at such time and subject to such limitations as may be determined by the Committee. -10- 11 (b) An Other Stock-Based Award, and any Common Stock covered by such Award, may be forfeited to the extent determined by the Committee, in its discretion, and as provided in the Agreement. (c) All Other Stock-Based Awards, and any Common Stock covered thereby, shall be forfeited upon termination of the recipient's employment with the Company or a Subsidiary. Notwithstanding the foregoing, if any such recipient's employment is terminated for any reason specified by the Committee in its discretion and set forth in the Agreement, any or all remaining limitations, restrictions or requirements imposed pursuant to the Plan or in the Agreement with respect to such recipient's Other Stock-Based Award shall be waived. The Committee may, in its discretion, otherwise modify or accelerate the exercisability or other terms and conditions of any Other Stock-Based Award, to the extent that any such modification or acceleration is (i) permitted under, and not inconsistent with, the Plan and (ii) in the best interests of the Company. 10. Bonuses or Other Compensation Payable in Stock or Options. In lieu of cash bonuses or other compensation otherwise payable under the Company's or applicable Subsidiary's compensation practices to employees who are eligible to participate in the Plan, the Committee, in its discretion, may determine that such bonuses or other compensation shall be payable in Common Stock or Options, or in a combination of Stock, Options and/or cash. Such bonuses or other compensation shall be in consideration of services previously performed and as an incentive toward future services and shall consist of shares of Common Stock and/or Options subject to such terms as the Committee may determine in its discretion. 11. Forfeiture. Except as provided in Section 15 of the Plan, notwithstanding any other provisions of the Plan to the contrary: (a) To the extent provided in the Agreement, if a Participant shall exercise an Option or a SAR, or any portion thereof, and leave the employment of the Company or a Subsidiary within six months after such exercise for any reason other than death, permanent disability, retirement under a retirement plan of the Company and/or a Subsidiary or termination of employment with the written consent of the Company or such Subsidiary (as applicable), then any Award Gain realized by such Participant as the result of such exercise shall be paid by such Participant to the Company; provided, however, that no Award Gain otherwise payable by a Participant to the Company with respect to the exercise of an Option pursuant to this paragraph (a) of Section 11 shall be so payable to the extent that the Fair Market Value of the Common Stock, as of the date such Participant's employment by the Company or the Subsidiary terminates, is less than the Option exercise price previously paid by such Participant and such Participant has not, on or before such date, sold or otherwise disposed of the Common Stock received upon the exercise of such Option. (b) To the extent provided in the Agreement, if at any time prior to the latest to occur of: (x) the termination or exercise of an Option or a SAR or an Other Stock-Based Award or the expiration of the Restriction Period applicable to Restricted Stock granted to a Participant, (y) three years after a Participant leaves employment with the Company or a -11- 12 Subsidiary for any reason other than death or permanent disability, or (z) three years after a Participant exercises an Option or a SAR, or any portion thereof, such Participant engages directly or indirectly in any manner or capacity in any activity in competition with the business conducted by the Company or a Subsidiary (as determined by the Committee in its discretion) or inimical, contrary or harmful to the interests of the Company or a Subsidiary (as determined by the Committee in its discretion) then (1) any Option, SAR or Other Stock-Based Award granted to such Participant shall terminate upon the date on which such Participant enters into such activity to the extent that such Option, SAR or Other Stock-Based Award was not previously exercised or terminated in accordance with the other provisions of the Plan or the Agreement as of such date, (2) any Award Gain realized by such Participant as the result of an exercise referred to in clause (z) above shall be paid by such Participant to the Company, (3) any Restricted Stock awarded to such Participant with respect to which the Restriction Period has not expired as of such date shall be forfeited and revert to the Company and (4) any unpaid Dividend Equivalents as of such date, shall be forfeited and shall not be paid to such Participant. (c) A Participant shall satisfy any obligation he or she owes to the Company under the foregoing paragraphs (a) and (b) of this Section 11 promptly after the accrual thereof by payment in cash to the Company; however, in lieu thereof, the Company may elect to deduct the unpaid amount of any such obligation owed by such Participant to the Company from any payment of any kind otherwise due to such Participant, including, but not limited to, wages or other compensation, fringe benefits or vacation pay. (d) The Committee may release a Participant from any or all obligations that he or she owes to the Company pursuant to this Section 11, and/or waive, in whole or in part, the application of this Section 11 to a Participant if the Committee determines, in its discretion, that such action is in the best interests of the Company. 12. Transfer, Leave of Absence. For purposes of the Plan, a transfer of an employee from the Company to a Subsidiary or an affiliate of the Company, whether or not incorporated, or vice versa, or from one Subsidiary or affiliate of the Company to another, and a leave of absence, duly authorized in writing by the Company or a Subsidiary or affiliate of the Company, shall not be deemed a termination of employment of the employee. 13. Rights of Employees and Other Persons. (a) No person shall have any rights or claims under the Plan except in accordance with the provisions of the Plan and the applicable Agreement. (b) Nothing contained in the Plan or in any Agreement shall be deemed to give any employee the right to be retained in the service of the Company or its Subsidiaries nor restrict in any way the right of the Company or any Subsidiary to terminate any employee's employment at any time with or without cause. (c) The adoption of the Plan shall not be deemed to give any employee of the Company or any Subsidiary or any other person any right to be selected as a Participant or to be granted an Award. -12- 13 (d) Nothing contained in the Plan or in any Agreement shall be deemed to give any employee the right to receive any bonus, whether payable in cash or in Common Stock, or in any combination thereof, from the Company, nor be construed as limiting in any way the right of the Company to determine, in its sole discretion, whether or not it shall pay any employee bonuses, and, if so paid, the amount thereof and the manner of such payment. 14. Tax Withholding Obligations. (a) The Company and/or any Subsidiary are authorized to take whatever actions are necessary and proper to satisfy all obligations of Participants for the payment of all Federal, state, local and foreign taxes in connection with any Awards (including, but not limited to, actions pursuant to the following paragraphs (b) and (c) of this Section 14). (b) If any Participant properly elects, within the period permitted under Section 83 of the Code after the date on which property subject to an Award is transferred to such Participant to include in gross income for Federal income tax purposes an amount equal to the Fair Market Value (on the date of transfer) of the Common Stock subject to such Award, such Participant shall pay, or make arrangements satisfactory to the Company, as determined in the Committee's discretion, to pay to the Company, at the time of such election, any Federal, state or local taxes required to be withheld with respect to such Award. If any such Participant shall fail to make such tax payments as are required, the Company and its Subsidiaries shall, to the extent permitted by law, have the right to deduct any such taxes from any payment of any kind otherwise due to such Participant. (c) Any Participant who does not or cannot make the election described in paragraph (a) of this Section 14 with respect to an Award shall (and in no event shall Common Stock be delivered to such Participant with respect to such Award until), no later than the date as of which the value of the Award first becomes includible in the gross income of the Participant for income tax purposes, pay to the Company in cash, or make arrangements satisfactory to the Company, as determined in the Committee's discretion, regarding payment to the Company of, any taxes of any kind required by law to be withheld with respect to the Common Stock or other property subject to such Award, and the Company and any Subsidiary shall, to the extent permitted by law, have the right to deduct any such taxes from any payment of any kind otherwise due to such Participant. Notwithstanding the above, the Committee may, in its discretion and pursuant to procedures approved by the Committee, permit the Participant to (i) elect withholding by the Company of Common Stock otherwise deliverable to such Participant pursuant to such Award (provided, however, that the amount of any Common Stock so withheld shall not exceed the minimum required withholding obligation taking into account the Participant's effective tax rate and all applicable Federal, state, local and foreign taxes) and/or (ii) tender to the Company Common Stock owned by such Participant (or by such Participant and his or her spouse jointly) and acquired more than six months prior to such tender in full or partial satisfaction of such tax obligations. 15. Changes in Capital. (a) Upon changes in the outstanding Common Stock (or other change in corporate capitalization) by reason of a stock dividend, stock split, reverse split, subdivision, recapitalization, merger, consolidation (whether or not the Company is a -13- 14 surviving corporation), an extraordinary dividend or distribution payable in cash or property, combination or exchange of shares, separation, reorganization or liquidation, the aggregate number and class of shares available under the Plan as to which Awards may be granted, the number and class of shares under (i) each Option and the option price per share, (ii) each SAR and the exercise price thereof, (iii) each Other Stock-Based Award and the exercise price (or equivalent, if applicable) thereof and (iv) each award of Restricted Stock shall, in each case, be correspondingly adjusted by the Committee. Such adjustments shall be made in the case of any outstanding Options and/or SARs without change in the total price applicable to such Options and SARs. (b) In the event of a Change of Control, except as otherwise provided in the Agreement specifically with respect to a Change of Control: (1) all restrictions on Restricted Stock previously awarded to Participants under the Plan shall be immediately cancelled and the Restriction Periods applicable thereto shall immediately terminate, without regard to any contrary provisions contained in the Plan or the applicable Agreements, (2) the time of exercise of Options, SARs and/or Other Stock-Based Awards which are outstanding shall be accelerated so that such Awards become immediately exercisable in full without regard to any limitations of time or amount otherwise contained in the Plan or the applicable Agreements and, in the event an Optionee terminates employment for any reason during the one year period following a Change of Control, all exercisable Options held by such Optionee (or such Optionee's transferee) shall remain exercisable until the first to occur of the first anniversary of the Optionee's termination of employment or the expiration of the initial Option term, or until such later date otherwise provided by the Committee or in the applicable Agreement, (3) all such Awards shall immediately become fully vested and nonforfeitable, and (4) any payment owed by, or forfeiture imposed on a Participant pursuant to Section 11, shall be cancelled or waived. Upon the occurrence of a Change of Control, the Committee may, in its discretion, determine (A) that Options, SARs and/or Other Stock-Based Awards shall be adjusted and make such adjustments by substituting for Common Stock subject to such Options, SARs and/or Other Stock-Based Awards stock or other securities of any successor corporation to the Company or that may be issuable by another corporation that is a party to the transaction if such stock or other securities are publicly traded, in which event the aggregate exercise price (as applicable) shall remain the same and the amount of shares or other securities subject to option or other rights under an Award shall be the amount of shares or other securities which could have been purchased on the closing date or expiration date of such transaction with the proceeds which would have been received by the Participant if the Option, SAR and/or Other Stock-Based Award had been exercised in full prior to such transaction or expiration date and the Participant exchanged all of such shares in the transaction, and/or (B) that any outstanding Options, SARs and/or Other Stock-Based Awards shall, in each case, be converted into a right to receive in cash, as soon as practicable following the Change of Control, an amount equal to the greater of (x) the highest value of the consideration to be -14- 15 received in connection with such transaction for one share of Common Stock and (y) the highest market trading price of a share of the Common Stock reported in The Wall Street Journal during the 30 consecutive trading days prior to the Change of Control, less, in the case of an Award prescribing an exercise price, the per share exercise price of such Award, multiplied by the number of shares of Common Stock subject to such Award. No Participant shall have any right to prevent the consummation of any transaction affecting the number of shares available to such Participant. Any actions or determinations of the Committee under this paragraph (b) of Section 15 need not be uniform as to all outstanding Awards, nor treat all Participants identically. Notwithstanding the foregoing adjustments, in no event may any Option be exercised after ten years from the date it was originally granted. 16. Miscellaneous Provisions. (a) The Plan shall be unfunded. The Company shall not be required to establish any special or separate fund or to make any other segregation of assets to assure the issuance of shares or the payment of cash upon exercise or payment of any Award. Proceeds from the sale of shares of Common Stock pursuant to Options granted under the Plan shall constitute general funds of the Company. The expenses of the Plan shall be borne by the Company. (b) Except as otherwise provided in this paragraph (b) of Section 16, an Award by its terms shall be personal and may not be sold, transferred, pledged, assigned, encumbered or otherwise alienated or hypothecated otherwise than by will or by the laws of descent and distribution and shall be exercisable during the lifetime of a Participant only by him or her. The foregoing to the contrary notwithstanding, at the Committee's discretion, an Agreement may permit the receipt or exercise of a Participant's Award (or any portion thereof) after his or her death by the beneficiary most recently named by such Participant in a written designation thereof filed with the Company, or, in lieu of any such surviving beneficiary, by the legal representatives of such Participant's estate and/or an Award to be transferred by a Participant during his or her lifetime to such Participant's alternate payee pursuant to a qualified domestic relations order, as defined by the Code or Title I of the Employee Retirement Income Security Act of 1974, as amended, or the rules and regulations thereunder. In the event any Award is exercised by the executors, administrators, heirs or distributees of the estate of a deceased Participant, or such a Participant's beneficiary, pursuant to the terms and conditions of the Plan and the applicable Agreement, the Company shall be under no obligation to issue Common Stock thereunder unless and until the Company is satisfied, as determined in the discretion of the Committee, that the person or persons exercising such Award are the duly appointed legal representative of the deceased Participant's estate or the proper legatees or distributees thereof or the named beneficiary of such Participant. Further notwithstanding the foregoing to the contrary, at the Committee's discretion, an Agreement may permit the transfer of an Award by the recipient thereof, subject to such terms, conditions and limitations prescribed by the Committee, and the applicable transferee of such Award shall be treated under the Plan and the applicable Agreement as the Participant for purposes of any exercise of such Award. (c) It is understood that the Committee may, at any time and from time to time after the granting of an Award, specify such additional terms, conditions and restrictions -15- 16 with respect to such Award as may be deemed necessary or appropriate to ensure compliance with any and all applicable laws, including, but not limited to, (i) terms, restrictions and conditions for compliance with Federal and state securities laws, (ii) methods of withholding or providing for the payment of required taxes and (iii) restrictions regarding a Participant's ability to exercise Awards under a "cashless exercise" program established by the Committee. (d) If at any time the Committee shall determine, in its discretion, that the listing, registration and/or qualification of shares of Common Stock upon any national securities exchange or under any state or Federal law, or the consent or approval of any governmental regulatory body, is necessary or desirable as a condition of, or in connection with, the sale or purchase of shares of Common Stock hereunder, no Option, SAR or Other Stock-Based Award may be exercised or Restricted Stock or bonus or other compensation payable in Common Stock may be transferred in whole or in part unless and until such listing, registration, qualification, consent and/or approval shall have been effected or obtained, or otherwise provided for, free of any conditions not acceptable to the Committee. (e) The Committee may require each person receiving Common Stock in connection with any Award under the Plan to represent and agree with the Company in writing that such person is acquiring the shares for investment without a view to the distribution thereof. (f) By accepting any benefit under the Plan, each Participant and each person claiming under or through such Participant shall be conclusively deemed to have indicated their acceptance and ratification of, and consent to, all of the terms and conditions of the Plan and any action taken under the Plan by the Committee, the Company or the Board. (g) Neither the adoption of the Plan nor anything contained herein shall affect any other compensation or incentive plans or arrangements of the Company or any Subsidiary, or prevent or limit the right of the Company or any Subsidiary to establish any other forms of incentives or compensation for their employees or consultants or directors, or grant or assume options or other rights otherwise than under the Plan. (h) The Plan shall be governed by and construed in accordance with the laws of the State of Delaware, except as superseded by applicable Federal law. 17. Limits of Liability. (a) Any liability of the Company or a Subsidiary to any Participant with respect to any Award shall be based solely upon contractual obligations created by the Plan and the Agreement. (b) Neither the Company nor a Subsidiary nor any member of the Committee or the Board, nor any other person participating in any determination of any question under the Plan, or in the interpretation, administration or application of the Plan, shall have any liability, in the absence of bad faith, to any party for any action taken or not taken in connection with the Plan, except as may expressly be provided by statute. -16- 17 18. Limitations App1icable to Certain Awards Subject to Section 16. Unless stated otherwise in the Agreement, notwithstanding any other provision of the Plan, any Award granted to an executive or officer of the Company who is then subject to Section 16 of the Exchange Act, shall be subject to any additional limitations set forth in any applicable exemptive rule under Section 16 of the Exchange Act (including Rule 16b-3 as it may be amended from time to time) that are requirements for the application of such exemptive rule, and the Plan shall be deemed amended to the extent necessary to conform to such limitations. 19. Amendments and Termination. The Board may, at any time and with or without prior notice, amend, alter, suspend, or terminate the Plan; provided, however, no amendment, alteration, suspension, or termination shall be made which would adversely affect an outstanding Award theretofore granted without the written consent of the holder of the Award. The Committee may amend the terms of any Award theretofore granted, including any Agreement, retroactively or prospectively, but no such amendment shall adversely affect an outstanding Award without the written consent of the holder of the Award. Notwithstanding the foregoing, the Board may amend the Plan and the Committee may amend any Award, including any Agreement, either retroactively or prospectively, and without the consent of the applicable Participant, so as to preserve or come within any exemptions from liability under Section 16(b) of the Exchange Act, pursuant to the rules and releases promulgated by the SEC (including Rule 16b-3). 20. Duration. The Plan shall become effective as of the date on which it is adopted by the Board. The Plan shall terminate upon the earliest to occur of (a) the effective date of a resolution adopted by the Board terminating the Plan or (b) ten years from the date the Plan is adopted by the Board. No Award may be granted under the Plan after the earliest of (a) and (b) of this Section 20 to occur; however, Awards theretofore granted may extend beyond such date. No such termination of the Plan shall affect the rights of any Participant hereunder and all Awards previously granted hereunder shall continue in force and in operation after the termination of the Plan, except as they may be otherwise terminated in accordance with the terms of the Plan or the Agreement. -17- EX-10.(L) 4 ANNUAL INCENTIVE COMPENSATION PLAN 1 EXHIBIT 10(l) =============================================================================== NEWMONT GOLD COMPANY ANNUAL INCENTIVE COMPENSATION PLAN (AMENDED AND RESTATED GENERALLY EFFECTIVE AS OF JANUARY 1, 1998) =============================================================================== 2 NEWMONT GOLD COMPANY ANNUAL INCENTIVE COMPENSATION PLAN (AMENDED AND RESTATED GENERALLY EFFECTIVE AS OF JANUARY 1, 1998) The Board of Directors of Newmont Gold Company, a Delaware corporation (the "Company"), hereby amends and restates the Newmont Gold Company Annual Incentive Compensation Plan (the "Plan"), generally effective as of January 1, 1998 (the "Effective Date"). The provisions of the Plan as in effect prior to January 1, 1998 shall continue to govern the payment of amounts pursuant to the provisions of such Plan with respect to Plan Years prior to 1998 and the provisions of this Plan document, as it may be amended from time to time, shall govern all payments and other matters with respect to the Plan for the 1998 Plan Year, including but not limited to payments with respect to 1998 that are made subsequent to December 31,1998, and subsequent Plan Years. PURPOSE The purpose of the Plan is to provide to employees of the Company and its Affiliated Entities (defined herein) that participate in the Plan a more direct interest in the success of the operations of the Company by rewarding their successful efforts to maximize production, minimize production costs, expand reserves, and develop new capital projects in an optimal manner. Employees of the Company and participating Affiliated Entities will be rewarded in accordance with the terms and conditions described below. ARTICLE I DEFINITIONS 1.1 "Actual Defined Cost Per Ounce" means, with respect to a particular Unit, the cost of producing an ounce of gold during the Plan Year, as calculated by the Company and approved by the Compensation Committee. 1.2 "Actual Production" means, with respect to a particular Unit, the number of ounces of gold produced during the Plan Year, as calculated by the Company and approved by the Compensation Committee. 1.3 "Affiliated Entity(ies)" means any corporation or other entity, now or hereafter formed, that is or shall become affiliated with the Company, either directly or indirectly, through stock ownership, control or otherwise, as determined by the Company, including but not limited to Newmont Mining Corporation, a Delaware corporation ("NMC"). 1.4 "Area of Primary Responsibility" means the Unit to which an Employee has been assigned by the Company for purposes of calculating the Employee's Unit Performance Bonus. 1 3 1.5 "Board" means the Board of Directors of the Company. 1.6 "Bonus Eligible Earnings" means the total base salary earnings of the Employee during the calendar year. If an Employee is absent from work because of a work-related injury, the Employee's "Bonus Eligible Earnings" will be determined by his actual gross W-2 base earnings during the Plan Year. In the case of a Terminated Eligible Employee who is Disabled, "Bonus Eligible Earnings" will be determined by his actual gross W-2 base earnings, including short-term disability pay received during the Plan Year, but excluding pay from any other source. If an Employee dies during the Plan Year, the "Bonus Eligible Earnings" for such Terminated Eligible Employee will be determined by his actual gross W-2 base earnings. If an Employee is on active military duty during a Plan Year, the "Bonus Eligible Earnings" will be determined by his actual gross W-2 base earnings during the Plan Year, exclusive of any military pay. If an Employee does not receive a W-2, his "Bonus Eligible Earnings" shall be determined on the basis of his actual gross base earnings for the Plan Year, or portion thereof, as shown on the payroll records of the Company or the Participating Employer. In all cases, an Employee's "Bonus Eligible Earnings" shall be computed before reduction for pre-tax contributions to an employee benefit plan of the Company pursuant to Section 401(k) or Section 125 of the Code. In the event of a Change of Control the Bonus Eligible Earnings of each Eligible Employee shall be equal to such Employee's base salary, on an annualized basis, as of the date immediately preceding the Change of Control and, in the case of a Terminated Eligible Employee, such Employee's base salary for the Plan Year through the date of termination of employment. Notwithstanding the foregoing, the "Bonus Eligible Earnings" of an Employee whose compensation is subject to the deduction limitation of Section 162(m) of the Code with respect to a Plan Year shall not exceed the annualized base salary of the Employee as in effect on the first day of such Plan Year. 1.7 "Change of Control" means: (a) The acquisition by any individual, entity or group (within the meaning of Section 13(d)(3) or 14(d)(2) of the Securities Exchange Act of 1934, as amended (the "Exchange Act")) (a "Person") of beneficial ownership (within the meaning of Rule 13d-3 promulgated under the Exchange Act) of 20% or more of either (i) the then outstanding shares of common stock of NMC (the "Outstanding NMC Common Stock") or (ii) the combined voting power of the then outstanding voting securities of NMC entitled to vote generally in the election of directors (the "Outstanding NMC Voting Securities"); provided, however, that for purposes of this subsection (a), the following acquisitions shall not constitute a Change of Control: (i) any acquisition directly from NMC, (ii) any acquisition by NMC, (iii) any acquisition by any employee benefit plan (or related trust) sponsored or maintained by NMC or any corporation controlled by NMC or (iv) any acquisition pursuant to a transaction which complies with clauses (i), (ii) and (iii) of subsection (c) of this Section; or (b) Individuals who, as of the date hereof, constitute the Board of Directors of NMC (the "Incumbent Board") cease for any reason to constitute at least a majority of the Board of Directors of NMC; provided, however, that any individual becoming a director subsequent to the date hereof whose election, or nomination for election by NMC's shareholders, was approved by a vote of at least a majority of the directors then comprising the Incumbent Board shall be considered as though such individual were a member of the Incumbent Board, but excluding, for this purpose, 2 4 any such individual whose initial assumption of office occurs as a result of an actual or threatened election contest with respect to the election or removal of directors or other actual or threatened solicitation of proxies or consents by or on behalf of a Person other than the Board of Directors of NMC; or (c) Consummation by NMC of a reorganization, merger or consolidation or sale or other disposition of all or substantially all of the assets of NMC or the acquisition of assets of another entity (a "Business Combination"), in each case, unless, following such Business Combination, (i) all or substantially all of the individuals and entities who were the beneficial owners, respectively, of the Outstanding NMC Common Stock and Outstanding NMC Voting Securities immediately prior to such Business Combination beneficially own, directly or indirectly, more than 50% of, respectively, the then outstanding shares of common stock and the combined voting power of the then outstanding voting securities entitled to vote generally in the election of directors, as the case may be, of the corporation resulting from such Business Combination (including, without limitation, a corporation which as a result of such transaction owns NMC or all or substantially all of NMC's assets either directly or through one or more subsidiaries) in substantially the same proportions as their ownership immediately prior to such Business Combination of the Outstanding NMC Common Stock and Outstanding NMC Voting Securities, as the case may be, (ii) no Person (excluding any employee benefit plan (or related trust) of NMC or such corporation resulting from such Business Combination) beneficially owns, directly or indirectly, 20% or more of, respectively, the then outstanding shares of common stock of the corporation resulting from such Business Combination or the combined voting power of the then outstanding voting securities of such corporation except to the extent that such ownership existed prior to the Business Combination and (iii) at least a majority of the members of the board of directors of the corporation resulting from such Business Combination were members of the Incumbent Board at the time of the execution of the initial agreement, or of the action of the Board, providing for such Business Combination; or (d) Approval by the shareholders of NMC of a complete liquidation or dissolution of NMC. 1.8 "Code" means the Internal Revenue Code of 1986, as amended from time to time. 1.9 "Company" means Newmont Gold Company, and where the context requires, any Affiliated Entity that has become a Participating Employer. 1.10 "Compensation Committee" means the Board and the Compensation Committee of the Board of Directors of NMC. 1.11 "Consolidated Unit" means those Employees whose Area of Primary Responsibility is the corporate office of the Company, and those Employees assigned to non-operational projects. 1.12 "Disability" means a condition such that the Employee has terminated employment with the Company and/or all Participating Employers with a qualifying disability and has immediately begun receiving benefits from a long-term disability plan of the Company or a Participating Employer. 3 5 1.13 "Earnings Per Share" means the earnings per share, before extraordinary items (determined in accordance with the provisions of Accounting Principles Board Opinion Number 30), of NMC, for the relevant Plan Year, as determined by the Company and approved by the Compensation Committee. The Earnings Per Share taken into account under the Plan for any Plan Year shall be capped at $1.00 per share. 1.14 "Earnings Per Share Factor" means the Earnings Per Share for such Plan Year (but not in excess of $1.00) expressed as a decimal. 1.15 "Employee" means a full-time, salaried employee of the Company and/or a Participating Employer, excluding temporary or leased employees. For purposes of this Plan, an employee is any individual who provides services to the Company as a common law employee and whose remuneration is subject to the withholding of federal income tax pursuant to Section 3401 of the Code. An Employee shall not include any individual (i) who provides services to the Company and/or a Participating Employer under an agreement, contract, or any other arrangement pursuant to which the individual is initially classified as an independent contractor by the Company and/or a Participating Employer, or (ii) whose remuneration for services has not been treated initially as subject to the withholding of federal income tax pursuant to Section 3401 of the Code even if the individual is subsequently reclassified as a common law employee as a result of a final decree of a court of competent jurisdiction or the settlement of an administrative or judicial proceeding. 1.16 "Exploration Team" means those Employees whose Area of Primary Responsibility is associated with the generation of reserves and who are designated by the Company as members of such a Team. 1.17 "Key Objectives" means the key results expected by the end of the review period for an Employee, as established and administered through the Company's performance management system. 1.18 "Minahasa Raya Unit" means those Employees whose Area of Primary Responsibility is the Company's Minahasa Raya operations. 1.19 "Minera Yanacocha Unit" means those Employees whose Area of Primary Responsibility is the Company's Minera Yanacocha operations. 1.20 "North American Unit" means those Employees whose Area of Primary Responsibility is the Company's North American operations. 1.21 "Participating Employer" means the Company and any Affiliated Entity that the Company determines shall participate in the Plan. 1.22 "Pay Grade" means those jobs sharing a common salary range, as designated by the Company. If the Pay Grade of an Employee changes during a Plan Year, the bonus payable to such Employee shall be calculated on a pro rata basis in accordance with the provisions of Section 6.3. 4 6 Notwithstanding the foregoing, for purposes of this Plan the Pay Grade of an Employee whose compensation is subject to the deduction limitation of Section 162(m) of the Code with respect to a Plan Year shall be the Pay Grade applicable to such Employee as of the first day of such Plan Year, or such lesser Pay Grade as may be assigned to the Employee during such Plan Year. 1.23 "Performance Distribution Guidelines" means the percent of all salaried Employees classified in each of the Company's designated performance categories as assigned by the Company. 1.24 "Performance Rating Category" means one of the following categories used to classify the performance of Employees and Teams in accordance with the Company's performance management system: "Exceptional," "Exceeds Expectations," "Meets Expectations," and "Needs Development." 1.25 "Personal Performance Bonus" means the bonus payable to an Employee based on the individual performance of such Employee, as set forth in Section 4.2. 1.26 "Personal Performance Percentage" means the percentage determined by the Company that shall apply to each Employee in accordance with Table II in Section 4.1. 1.27 "Plan Year" means the calendar year. 1.28 "Position(s)" means the defined job(s) held by an Employee during the Plan Year. 1.29 "Retirement" means termination of employment with the Company and/or all Participating Employers by an Employee who immediately begins to receive benefits from a defined benefit plan of the Company or a Participating Employer. 1.30 "Severance" means the termination of employment with the Company and/or all Participating Employers because of an event entitling the Employee to benefits under the terms of the Company's Severance Pay Plan if the Employee immediately begins receiving benefits under the terms of the Severance Pay Plan. 1.31 "Targeted Defined Cost Per Ounce" means the targeted cash cost of production of gold per ounce for the Plan Year, as established by the Compensation Committee. 1.32 "Targeted Production" means the targeted amount of gold to be produced for the Plan Year, as established by the Compensation Committee. 1.33 "Team" means the designated group of Employees to which an Employee is assigned for purposes of Article V. Each Employee shall be assigned to a Team within 30 days of the date the Employee becomes eligible for participation in the Plan. 1.34 "Team Performance Bonus" means the bonus payable to an Employee designated as a member of an Exploration Team, or any other Team designated by the Compensation Committee, 5 7 based on the performance of the Team of which the Employee is a member, as set forth in Section 5.2. 1.35 "Team Performance Percentage" means the percentage to be applied to determine the Team Performance Bonus in accordance with the provisions of Article V, which percentage shall be determined by the appropriate officer of the Company pursuant to Section 5.1. 1.36 "Terminated Eligible Employee" means an Employee who terminates employment with the Company and/or a Participating Employer during the Plan Year on account of death, Retirement, Disability, or Severance. The Company's Vice President of Human Resources may, in his sole discretion, also designate in writing other Employees who terminate employment during the Plan Year under other circumstances as "Terminated Eligible Employees". 1.37 "Unit" means the unit of Employees to which an Employee is assigned for purposes of Article III. Each Employee shall be assigned to a Unit within 30 days of the date the Employee becomes eligible for participation in the Plan. 1.38 "Unit Performance Bonus" means, with respect to each Unit, the bonus payable to an Employee based on the performance of such Employee's Unit, as set forth in Section 3.1. 1.39 "Unit Performance Percentage" means the percentage used to calculate an Employee's Unit Performance Bonus, as set forth in Section 3.1. 1.40 "Uzbekistan Unit" means those Employees whose Area of Primary Responsibility is the Company's Zarafshan-Newmont operations in Uzbekistan. ARTICLE II ELIGIBILITY All Employees of the Company and/or a Participating Employer are potentially eligible to receive a bonus payment under the Plan, provided (i) they are on the payroll of the Company and/or a Participating Employer as of the last day of the Plan Year, or (ii) they are a Terminated Eligible Employee with respect to such Plan Year. Employees who are on short-term disability under the Company's short-term disability policy or not working because of a work-related injury as of the last day of the Plan Year shall be eligible to receive a bonus under clause (i). Notwithstanding the foregoing provisions of this Article II, the Compensation Committee may, prior to the end of any Plan Year, exclude from eligibility for participation under this Plan with respect to such Plan Year any Employee or Employees, as the Compensation Committee may determine in its sole discretion. 6 8 ARTICLE III UNIT PERFORMANCE BONUS 3.1 Determination of Unit Performance Bonus. For each Plan Year, the Unit Performance Percentage for each Unit will be determined on the last day of the Plan Year pursuant to the following formula: 1 + (Actual Production - Targeted Production) ----------------------------------------- (Targeted Production) x 1 + (Targeted Defined Cost Per Ounce - Actual Defined Cost Per Ounce) ----------------------------------------------------------------- (Targeted Defined Cost Per Ounce) = Unit Performance Percentage If the Unit Performance Percentage of a Unit is greater than 100%, the Unit Performance Percentage is converted to a Percent of Target as set forth in the following Schedule. If the Unit Performance Percentage of a Unit is greater than 100%, a Unit Performance Bonus will be payable, with such Unit Performance Bonus determined by (w) multiplying the Employee's Bonus Eligible Earnings by (x) the applicable Target Unit Performance Level for the Employee's Pay Grade set forth in the applicable Table in Section 3.2 below, and by (y) the applicable percentage derived from the following Schedule and by (z) the Earnings Per Share Factor. If the Unit Performance Percentage of a Unit is equal to or less than 100%, a Unit Performance Bonus will be payable, with such Unit Performance Bonus determined by (x) multiplying the Employee's Bonus Eligible Earnings by (y) the applicable Target Unit Performance Level for the Employee's Pay Grade set forth in the applicable table in Section 3.2 below and by (z) the Earnings Per Share Factor. SCHEDULE
UNIT PERFORMANCE UNIT PERFORMANCE BONUS PERCENTAGE AS A PERCENT OF TARGET - ---------------- ---------------------- 100 (Target) 100% 105 125% 110 150% 115 175% 120 or more 200%
If the Unit Performance Percentage of a Unit falls between the various Unit Performance Percentages set forth in the foregoing Schedule, then the Unit Performance Bonus as a Percent of Target percentages set forth in the foregoing Schedule shall be interpolated so that such percentage bears the same relationship to the Unit Performance Bonus as a Percent of Target percentages for the two closest Unit Performance Percentages. The Compensation Committee may, in its sole discretion, 7 9 adjust the Unit Performance Percentage of any Unit or otherwise increase the Unit Performance Bonus otherwise payable in order to reflect changed circumstances or such other matters as the Compensation Committee deems appropriate, provided that no such change shall result in any increase in the amount of the Unit Performance Bonus payable to an Employee whose compensation is subject to the limitation on the deductibility of compensation pursuant to Section 162(m) of the Code. The maximum Unit Performance Bonus that may be paid with respect to any Plan Year to an Employee whose compensation is subject to the deduction limitation of Section 162(m) of the Code shall be $3 million. Prior to the payment of any Unit Performance Bonus to an Employee whose compensation is subject to the limitation imposed by Section 162(m) of the Code, the Compensation Committee shall certify in writing that the applicable Unit Performance Percentage has been attained and shall take any other action required in order to qualify for the exemption from the deduction limitation provided by Section 162(m) of the Code. 3.2 Determination of Target Unit Performance Level. An Employee's Target Unit Performance Level is determined by the Employee's Pay Grade pursuant to the following Table I (Table IA for Employees designated as members of an Exploration Team or other Team): TABLE I Non-Team
PAY TARGET UNIT GRADE PERFORMANCE LEVEL ----- ----------------- 203 67% 202 45% 200-201 37% 113-114 29% 111-112 20% 110 17% 109 14% 107-108 15% 105-106 10% 104 5% 103 4% 11-102 5%
8 10 TABLE IA Team
PAY TARGET UNIT GRADE PERFORMANCE LEVEL ----- ----------------- 113-203 N/A 111-112 7.500% 110 6.500% 109 5.250% 107-108 6.000% 105-106 4.125% 104 2.500% 103 2.000% 11-102 2.500%
3.3 Terminated Eligible Employees. Terminated Eligible Employees shall be eligible to receive a Unit Performance Bonus based upon the actual year end Earnings Per Share Factor and the Unit Performance Percentage for the applicable Unit calculated through the end of the calendar quarter during which the Employee's termination of employment with the Company and/or all Participating Employers occurred. ARTICLE IV PERSONAL PERFORMANCE BONUS 4.1 Personal Performance Level. At the end of the Plan Year, each Employee's supervisor will evaluate the Employee and rate the Employee's Personal Performance Level. The Personal Performance Bonus for the Company's Chief Executive Officer shall be determined by the Compensation Committee. In accordance with the Company's performance management system, the supervisor will rate the degree to which the Employee met the Key Objectives that were established for the Employee during the Plan Year. Each Employee will be rated by the Employee's supervisor in one of the Company's Performance Rating Categories. In conjunction with these ratings, the Company will assign a Personal Performance Percentage for the Employee from within the applicable ranges set forth in the following Table II. The distribution of Personal Performance Ratings and Personal Performance Percentages will be reviewed annually by an executive review committee for internal equity and consistency. 9 11 TABLE II
PERSONAL PERFORMANCE PERCENTAGES (PERCENTAGE OF TARGET PERFORMANCE RATING CATEGORY PERFORMANCE BONUS PAYABLE) --------------------------- -------------------------------- Exceptional 151%-200% Exceeds Expectations 101%-150% Meets Expectations 26%-100% Needs Development 0% - 25%
4.2 Determination of Personal Performance Bonus. Subject to Section 4.3, an Employee's Personal Performance Bonus is calculated by multiplying (x) the Employee's Bonus Eligible Earnings by (y) the Personal Performance Percentage determined pursuant to Section 4.1 and (z) multiplying that product by the applicable Target Personal Performance Level, as set forth in the following Table III (Table IIIA for Employees designated as members of an Exploration Team or other Team): TABLE III Non-Team
PAY TARGET PERSONAL GRADE PERFORMANCE LEVEL ----- ----------------- 203 33.00% 202 23.00% 200-201 19.00% 113-114 15.00% 111-112 10.00% 110 9.00% 109 8.50% 107-108 9.00% 105-106 6.50% 104 4.00% 103 2.00% 11-102 N/A
10 12 TABLE IIIA Team
PAY TARGET PERSONAL GRADE PERFORMANCE LEVEL ----- ----------------- 113-203 N/A 111-112 7.500% 110 6.500% 109 5.250% 107-108 6.000% 105-106 4.125% 104 2.000% 103 2.000% 11-102 N/A
4.3 Proration of Certain Bonuses. Notwithstanding any other provision in this ARTICLE IV, except as approved by the Compensation Committee prior to the payment of Personal Performance Bonuses, or subsequently thereto by ratification, the amount of the Personal Performance Bonuses payable to all Employees of the Company and all Participating Employers in Pay Grades 103 - 202 may not exceed the amount that would be payable to all such Employees if each of their Personal Performance Percentages were determined to be 100%. 4.4 Terminated Eligible Employees. Terminated Eligible Employees shall be eligible to receive a Personal Performance Bonus based upon an assumed Personal Performance Percentage of 100%. 4.5 Ineligible Employees. Employees with a Pay Grade 102 and below and Employees whose Personal Performance Percentage (determined pursuant to Section 4.1) is less than 25% shall not be eligible to receive a Personal Performance Bonus. ARTICLE V TEAM PERFORMANCE BONUS 5.1 Team Performance Level. This ARTICLE V shall be applicable only to Employees designated as members of an Exploration Team, or other Team. At the end of the Plan Year, the Vice Presidents responsible for each Team will make an assessment of the performance of their respective Teams. The overall Team Performance Ratings for each Company officer responsible for one or more Teams will be determined by the appropriate Senior Vice President or the Chief Executive Officer of the Company. In accordance with the Company's performance management system, such Company officer will rate the degree to which the Team met the Key Objectives that were established for the Team during the Plan Year. Each Team will be rated in one of the Company's Performance Rating Categories. In conjunction with these ratings, each such Company officer will assign a Team Performance Percentage for their respective Teams in accordance with Table II in Section 4.1. If the Team Performance Level of a Team is less than 25%, the Employees 11 13 assigned to the Team will not receive a Team Performance Bonus. The percentages shown in the "Target Performance Level" category specified in the Table set forth below in Section 5.2 shall be multiplied by the Team's Team Performance Percentage to determine the applicable percentage for calculating the Team Performance Bonus of the Employees from each Team. 5.2 Determination of Team Performance Bonus. Subject to Section 5.4, an Employee's Team Performance Bonus is calculated by multiplying (x) the Employee's Bonus Eligible Earnings by (y) the Team Performance Percentage determined pursuant to Section 5.1 and (z) multiplying that product by the applicable Target Team Performance Level, as set forth in the following Table IV: TABLE IV
PAY TARGET TEAM GRADE PERFORMANCE LEVEL ----- ----------------- 113-203 N/A 111-112 15.000% 110 13.000% 109 10.500% 107-108 12.000% 105-106 8.250% 104 4.500% 103 2.000% 11-102 2.500%
5.3 Terminated Eligible Employees. Terminated Eligible Employees shall be eligible to receive a Team Performance Bonus based upon the year-end Earnings Per Share Factor, and the actual Team Performance Percentage for the applicable Team calculated through the end of the month during which the Employee's termination of employment with the Company and/or all Participating Employers occurred. 5.4 Proration of Certain Team Performance Bonuses. Notwithstanding any other provision in this Article V, except as approved by the Compensation Committee prior to the payment of Team Performance Bonuses, or subsequently thereto by ratification, the amount of Team Performance Bonuses payable to all Employees of the Company and all Participating Employers in Pay Grades 112 and below shall not exceed the amount that would be payable to all such Employees if the Team Performance Percentages applicable to all such Employees were determined to be 100%. ARTICLE VI PAYMENT OF BONUS 6.1 Stockholder Approval Requirement. Notwithstanding any other provision herein, no portion of the Unit Performance Bonus shall be paid to an Employee whose compensation is subject to the deduction limitation of Section 162(m) of the Code to the extent that such payment would be 12 14 non-deductible under such provision unless and until the stockholders of the Company have approved this Plan and the material terms of the performance goals established under this Plan with respect to Unit Performance Bonuses in conformity with the requirements of Section 162(m) of the Code and the regulations thereunder. 6.2 Deferral of Certain Payments. Notwithstanding the foregoing provisions of this Article VI, if an Employee would receive compensation with respect to any Plan Year, including a Unit Performance Bonus under this Plan, that would exceed the compensation deduction limitation of Section 162(m) of the Code and therefore be non-deductible for federal income tax purposes, the amount of the Employee's Unit Performance Bonus for such Plan Year may be reduced by the Compensation Committee to the extent necessary to avoid such limitation and any such reduction shall be paid to the Employee in a subsequent year in accordance with the provisions of this Section. In the event of any such deferral, the amount deferred, together with interest credited as set forth below, shall be paid to the Employee in the first calendar year during which the deduction of such amounts shall not be subject to the limitation of Section 162(m) of the Code. The amount of the Unit Performance Bonus deferred shall be credited to a special deferred compensation account in the name of the Employee and such account shall be credited with interest at a rate equal to the rate of interest announced publicly by The Chase Manhattan Bank (National Association) from time to time as its "prime rate", with the interest rate hereunder adjusted at such time as such "prime rate" is adjusted, from the period beginning upon the date on which such amount otherwise would have been paid under the provisions of this Plan through the last day of the month immediately preceding the date of payment. Notwithstanding the foregoing, in the event of a Change of Control, all amounts deferred in accordance with the provisions of this Section, together with interest credited with respect to such deferred amounts, shall be paid to the appropriate Employees as soon as practicable following the date of the Change of Control. Determinations with respect to the deferral of Unit Performance Bonuses hereunder shall be made by the Compensation Committee in its sole discretion. 6.3 Pay Grade. The bonus payable to an eligible Employee who was in more than one Pay Grade during the Plan Year shall be calculated on a pro-rata basis in accordance with the amount of time spent by such Employee in each Pay Grade during the Plan Year. Notwithstanding the foregoing, for purposes of determining the Unit Performance Bonus payable to an Employee whose compensation is subject to the deduction limitation of Section 162(m) of the Code with respect to a Plan Year, the Pay Grade of such Employee shall not be increased during such Plan Year if any portion of such Employee's compensation would be non-deductible under such provision. 6.4 Multiple Teams. The bonus payable to an eligible Employee who was in more than one Team during the Plan Year shall be calculated on a pro-rata basis in accordance with the amount of time spent by such Employee in each Team during the Plan Year. 6.5 Multiple Units. The bonus payable to an eligible Employee who was in more than one Unit during the Plan Year shall be calculated on a pro-rata basis in accordance with the amount of time spent by such Employee in each Unit during the Plan Year. Notwithstanding the foregoing, the Unit Performance Bonus payable to an Employee whose compensation is subject to the deduction limitation of Section 162(m) of the Code with respect to a Plan Year and who is in more than one 13 15 Unit during the Plan Year shall not be greater than the Unit Performance Bonus that would have been payable to such Employee if the Employee had remained in the Unit to which the Employee was assigned on the first day of the Plan Year if any portion of the compensation payable to such Employee would be non-deductible under such provision. 6.6 Time and Method of Payment. The aggregate of any and all bonuses payable under the Plan shall be payable to each eligible Employee and Terminated Eligible Employee in cash as soon as practicable following the close of the Plan Year. 6.7 Withholding Taxes. All bonuses payable hereunder shall be subject to the withholding of such amounts as the Company may determine is required to be withheld pursuant to any applicable federal, state or local law or regulation. ARTICLE VII CHANGE OF CONTROL 7.1 In General. In the event of a Change of Control, each eligible Employee (including Terminated Eligible Employees who terminate employment during the Plan Year in which the Change of Control occurs) shall become entitled to the payment of a Unit Performance Bonus, a Personal Performance Bonus and a Team Performance Bonus in accordance with the provisions of this Article. 7.2 Calculation of Bonuses. Upon a Change of Control, each eligible Employee, together with each Terminated Eligible Employee, shall become entitled to the payment of (i) a Unit Performance Bonus calculated on the basis of a Unit Performance Percentage equal to the greater of the actual Unit Performance Percentage attained for the Plan Year or the applicable Target Unit Performance Percentage for such Plan Year and an Earnings Per Share Factor of one, (ii) a Personal Performance Bonus calculated on the basis of a Personal Performance Percentage equal to the greater of the actual Personal Performance Percentage for the Plan Year or the applicable Target Personal Performance Percentage for such Plan Year, and (iii) each such Employee and Terminated Eligible Employee who is a member of an Exploration Team, or other Team, shall be entitled to the payment of a Team Performance Bonus based upon the greater of the actual Team Performance Percentage for such Plan Year or the applicable Target Team Performance Percentage for such Plan Year. If a Change of Control occurs prior to the time that the Compensation Committee has established the Target Unit Performance Percentage, Target Personal Performance Percentage, or Target Team Performance Percentage for the Plan Year, such percentages shall be based upon the corresponding percentages for the immediately preceding Plan Year. 7.3 Payment of Bonuses. The bonuses payable in accordance with the provisions of this Article VII shall be calculated and paid as soon as practicable following the date of the Change of Control, but in no event later than the sixtieth day after the date of the Change of Control. Such payments shall be subject to the withholding of such amounts as the Company may determine is required to be withheld pursuant to any applicable federal, state or local law or regulation. Upon the 14 16 completion of such payments, Eligible Employees and Terminated Eligible Employees shall have no further right to the payment of any bonus hereunder (other than any bonus payable hereunder with respect to a previous Plan Year that has not yet been paid) and this Plan shall terminate. ARTICLE VIII GENERAL PROVISIONS 8.1 Administration. The Plan will be administered by the Compensation Committee or its delegees. The Compensation Committee shall interpret the provisions of the Plan in its full and absolute discretion. The determinations of the Compensation Committee with respect to the Plan shall be conclusive. All expenses of the Company in administering the Plan shall be borne by the Company. 8.2 Plan Unfunded. The Plan shall be unfunded and no trust or other funding mechanism shall be established for the Plan. All benefits to be paid pursuant to the Plan shall be paid by the Company from its general assets and an Employee (or his heir or devisee) shall not have any greater rights than a general, unsecured creditor against the Company for any benefit hereunder. 8.3 Participation in Plan by Affiliates. Any Affiliated Entity shall become a party to this Plan and become a Participating Employer upon designation by the Company as a Participating Employer. 8.4 Amount Payable Upon Death of Employee. If an Employee who is entitled to payment hereunder dies before receiving full payment of the amount due, such amount shall be paid as soon as practicable after the close of the Plan Year, in a cash lump sum, to the beneficiary or beneficiaries designated by the Employee to receive life insurance proceeds under the Company's life insurance plan. In the absence of an effective beneficiary designation under said plan, any amount payable hereunder following the death of an Employee shall be paid to the Employee's estate. 8.5 Right of Offset. To the extent permitted by applicable law, the Company may, in its sole discretion, apply any bonus payments otherwise due and payable under this Plan against any Employee loans outstanding to the Company or other debts of the Employee to the Company. 8.6 Amendments, Termination, Etc. The Board, upon the recommendation of the Compensation Committee, may at any time amend, modify, suspend or terminate the Plan. 8.7 Payments Due Minors or Incapacitated Persons. If any person entitled to a payment under the Plan is a minor, or if the Compensation Committee determines that any such person is incapacitated by reason of physical or mental disability, whether or not legally adjudicated as an incompetent, the Compensation Committee shall have the power to cause the payment becoming due to such person to be made to another for his benefit, without responsibility of the Compensation Committee, the Company, or any other person or entity to see to the application of such payment. 15 17 Payments made pursuant to such power shall operate as a complete discharge of the Compensation Committee, the Plan and the Company. 8.8 Section Headings. The Section headings are included herein only for convenience, and they shall have no effect on the interpretation of the Plan. 8.9 Severability. If any article, section, subsection or specific provision is found to be illegal or invalid for any reason, such illegality or invalidity shall not affect the remaining provisions of the Plan, and the Plan shall be construed and enforced as if such illegal and invalid provision had never been set forth in the Plan. 8.10 No Right to Employment. The establishment of this Plan shall not be deemed to confer upon any person any legal right to be employed by, or to be retained in the employ of, the Company or any Affiliated Entity, or to give any Employee or any person any right to receive any payment whatsoever, except as provided under this Plan. All Employees shall remain subject to discharge from employment to the same extent as if this Plan had never been adopted. 8.11 Transferability. Any bonus payable hereunder is personal to the Employee and may not be sold, exchanged, transferred, pledged, assigned or otherwise disposed of except by will or by the laws of descent and distribution. 8.12 Successors. This Plan shall be binding upon and inure to the benefit of the Company, the Participating Employers and the Employees and their respective heirs, representatives and successors. 8.13 Governing Law. The Plan and all agreements hereunder shall be construed in accordance with and governed by the laws of the State of Colorado, unless superseded by federal law. Adopted as of January 1, 1998. NEWMONT GOLD COMPANY By: /s/ TIMOTHY J. SCHMITT ---------------------------- 16 EX-10.(M) 5 INTERMEDIATE TERM INCENTIVE PLAN 1 EXHIBIT 10(m) =============================================================================== NEWMONT GOLD COMPANY INTERMEDIATE TERM INCENTIVE COMPENSATION PLAN (AMENDED AND RESTATED GENERALLY EFFECTIVE AS OF JANUARY 1, 1998) =============================================================================== 2 NEWMONT GOLD COMPANY INTERMEDIATE TERM INCENTIVE COMPENSATION PLAN (AS AMENDED AND RESTATED GENERALLY EFFECTIVE AS OF JANUARY 1, 1998) The board of directors of Newmont Gold Company, a Delaware Corporation (the "Company" or "NGC"), established the Newmont Gold Company Intermediate Term Incentive Compensation Plan (the "Plan"), effective January 1, 1997 (the "Effective Date"). The Plan is hereby amended and restated in its entirety, generally effective as of January 1, 1998, as set forth below. PURPOSE The purpose of the Plan is to provide to selected key employees of the Company and its Affiliated Entities (defined herein) that participate in the Plan a more direct interest in the success of the operations of the Company by rewarding their successful efforts to maximize production, minimize production costs, expand reserves and develop new capital projects in an optimal manner. Employees of the Company and participating Affiliated Entities will be rewarded in accordance with the terms and conditions described below. ARTICLE I DEFINITIONS 1.1 "Affiliated Entity(ies)" means any corporation or other entity, now or hereafter formed, that is or shall become affiliated with the Company, either directly or indirectly, through stock ownership, control or otherwise, as determined by the Company, including but not limited to Newmont Mining Corporation ("NMC"). 1.2 "Board" means the Board of Directors of the Company. 1.3 "Bonus Eligible Earnings" means the total base salary earnings of the Employee during the calendar year. If an Employee is absent from work because of a work-related injury, the Employee's "Bonus Eligible Earnings" will be determined by his actual gross W-2 base earnings during the Plan Year. In the case of a Terminated Eligible Employee who is Disabled, "Bonus Eligible Earnings" will be determined by his actual gross W-2 base earnings, including short-term disability pay received during the Plan Year, but excluding pay from any other source. If an Employee dies during the Plan Year, the "Bonus Eligible Earnings" for such Terminated Eligible Employee will be determined by his actual gross W-2 base earnings. If an Employee is on active military duty during a Plan Year, the "Bonus Eligible Earnings" will be determined by his actual gross W-2 base earnings during the Plan Year, exclusive of any military pay. If an Employee does not receive a W-2, his "Bonus Eligible Earnings" shall be determined on the basis of his actual gross base earnings for the Plan Year, or portion thereof, as shown on the payroll records of the Company or the Participating Employer. In all cases, an Employee's "Bonus Eligible Earnings" shall be computed before reduction for pre-tax contributions to an employee benefit plan of the Company 1 3 pursuant to Section 401(k) or Section 125 of the Code. In the event of a Change of Control, each Participant's "Bonus Eligible Earnings" for purposes of computing the applicable ITIP Bonus in accordance with the provisions of Section 3.3 shall be equal to each such Participant's base salary, on an annualized basis, as of the date immediately preceding the Change of Control, or, in the case of a Participant who terminates employment prior to the date of the Change of Control, such Participant's base salary for the Plan Year through the date of termination of employment. Notwithstanding the foregoing, the "Bonus Eligible Earnings" of an Employee whose compensation is subject to the deduction limitation of Section 162(m) of the Code with respect to a Plan Year shall not exceed the annualized base salary of the Employee as in effect on the first day of such Plan Year. 1.4 "Change of Control" means: (a) The acquisition by any individual, entity or group (within the meaning of Section 13(d)(3) or 14(d)(2) of the Securities Exchange Act of 1934, as amended (the "Exchange Act")) (a "Person") of beneficial ownership (within the meaning of Rule 13d-3 promulgated under the Exchange Act) of 20% or more of either (i) the then outstanding shares of common stock of NMC (the "Outstanding NMC Common Stock") or (ii) the combined voting power of the then outstanding voting securities of NMC entitled to vote generally in the election of directors (the "Outstanding NMC Voting Securities"); provided, however, that for purposes of this subsection (a), the following acquisitions shall not constitute a Change of Control: (i) any acquisition directly from NMC, (ii) any acquisition by NMC, (iii) any acquisition by any employee benefit plan (or related trust) sponsored or maintained by NMC or any corporation controlled by NMC or (iv) any acquisition pursuant to a transaction which complies with clauses (i), (ii) and (iii) of subsection (c) of this Section; or (b) Individuals who, as of the date hereof, constitute the Board of Directors of NMC (the "Incumbent Board") cease for any reason to constitute at least a majority of the Board of Directors of NMC; provided, however, that any individual becoming a director subsequent to the date hereof whose election, or nomination for election by NMC's shareholders, was approved by a vote of at least a majority of the directors then comprising the Incumbent Board shall be considered as though such individual were a member of the Incumbent Board, but excluding, for this purpose, any such individual whose initial assumption of office occurs as a result of an actual or threatened election contest with respect to the election or removal of directors or other actual or threatened solicitation of proxies or consents by or on behalf of a Person other than the Board of Directors of NMC; or (c) Consummation by NMC of a reorganization, merger or consolidation or sale or other disposition of all or substantially all of the assets of NMC or the acquisition of assets of another entity (a "Business Combination"), in each case, unless, following such Business Combination, (i) all or substantially all of the individuals and entities who were the beneficial owners, respectively, of the Outstanding NMC Common Stock and Outstanding NMC Voting Securities immediately prior to such Business Combination beneficially own, directly or indirectly, more than 50% of, respectively, the then outstanding shares of common stock and the combined voting power of the then outstanding voting securities entitled to vote generally in the election of directors, as the case may be, of the corporation resulting from such Business Combination (including, without limitation, a corporation which as a result of such transaction owns NMC or all 2 4 or substantially all of NMC's assets either directly or through one or more subsidiaries) in substantially the same proportions as their ownership immediately prior to such Business Combination of the Outstanding NMC Common Stock and Outstanding NMC Voting Securities, as the case may be, (ii) no Person (excluding any employee benefit plan (or related trust) of NMC or such corporation resulting from such Business Combination) beneficially owns, directly or indirectly, 20% or more of, respectively, the then outstanding shares of common stock of the corporation resulting from such Business Combination or the combined voting power of the then outstanding voting securities of such corporation except to the extent that such ownership existed prior to the Business Combination and (iii) at least a majority of the members of the board of directors of the corporation resulting from such Business Combination were members of the Incumbent Board at the time of the execution of the initial agreement, or of the action of the Board, providing for such Business Combination; or (d) Approval by the shareholders of NMC of a complete liquidation or dissolution of NMC. 1.5 "Code" means the Internal Revenue Code of 1986, as amended from time to time. 1.6 "Common Stock" means the $1.60 par value common stock of Newmont Mining Corporation. 1.7 "Company" means NGC, and where the context requires, any Affiliated Entity that has become a Participating Employer. 1.8 "Compensation Committee" means the Board and the Compensation Committee of the Board of Directors of NMC, as applicable. 1.9 "Disability" means a condition such that the Employee has terminated employment with the Company and/or all Participating Employers with a qualifying disability and has immediately begun receiving benefits from a long-term disability plan of the Company or a Participating Employer. 1.10 "Earnings Factor" means the Performance Factor determined with respect to NMC's Earnings Per Share for the relevant Performance Period. 1.11 "Earnings Per Share" means the earnings per share, before extraordinary items (determined in accordance with the provisions of Accounting Principles Board Opinion Number 30), of NMC, for the relevant Performance Period, as determined by the Company. 1.12 "Employee" means a full time, salaried employee of the Company and/or a Participating Employer, excluding temporary or leased employees. For purposes of this Plan, an employee is any individual who provides services to the Company as a common law employee and whose remuneration is subject to the withholding of federal income tax pursuant to Section 3401 of the Code. An Employee shall not include any individual (i) who provides services to the Company and/or a Participating Employer under an agreement, contract, or any other arrangement pursuant to which the individual is initially classified as an independent contractor by the Company and/or 3 5 a Participating Employer, or (ii) whose remuneration for services has not been treated initially as subject to the withholding of federal income tax pursuant to Section 3401 of the Code even if the individual is subsequently reclassified as a common law employee as a result of a final decree of a court of competent jurisdiction or the settlement of an administrative or judicial proceeding. 1.13 "Fair Market Value" means, with respect to a share of Common Stock as of a given date, the average of the high and low sales prices for a share of Common Stock as reported for New York Stock Exchange issues in The Wall Street Journal for such date; provided, however, that if there is no sale of shares of Common Stock reported in The Wall Street Journal on such date, such fair market value shall be the average between the bid and asked prices for a share of common stock reported in The Wall Street Journal at the close of trading on such date; provided further, however, that if no such prices are reported for such day, the most recent day for which such prices are available shall be used. In the event that the method for determining the fair market value of a share of Common Stock provided for in the previous sentence shall not be practicable, then such fair market value shall be determined by such other reasonable valuation method as the Compensation Committee shall, in its discretion, select and apply in good faith as of the given date. 1.14 "ITIP Bonus" means the bonus payable to a Participant under this Plan with respect to a Performance Period (or portion thereof as provided in Section 3.2), which shall be determined by multiplying the Participant's Bonus Eligible Earnings for the last Plan Year of such Performance Period (or portion thereof) by the product of the following: 70% times (Targeted Payout Percentage times Management Effectiveness Factor) plus 30% times (Targeted Payout Percentage times Earnings Factor). 1.15 "Management Effectiveness Factor" means, with respect to any Performance Period, the average of the Production Factor, the Total Cost Factor and the Total Reserves Factor for such Performance Period. 1.16 "Measure of Performance" means Production Equity Ounces, Total Cost Per Equity Ounce, Total Reserves Equity Ounces and Earnings Per Share, as the case may be. 1.17 "NMC" means Newmont Mining Corporation, a Delaware corporation. 1.18 "Participant" means an Employee who has satisfied the eligibility requirements of Article II and who is, or may become, entitled to an ITIP Bonus under the provisions of this Plan. 1.19 "Participating Employer" means the Company and any Affiliated Entity that the Company determines shall participate in the Plan. 1.20 "Pay Grade" means those jobs sharing a common salary range, as designated by the Company. If the Pay Grade of a Participant changes during the Performance Period, the Targeted Payout Percentage applicable to such Participant shall be prorated in accordance with the provisions of Section 1.29. Notwithstanding the foregoing, for purposes of this Plan the Pay Grade of an Employee whose compensation is subject to the deduction limitation of Section 162(m) of the Code with respect to a Plan Year shall be the Pay Grade applicable to such Employee as of the first day 4 6 of the applicable Performance Period, or such lesser Pay Grade as may be assigned to the Employee during such Performance Period. 1.21 "Performance Categories" means the following categories used to determine the Performance Factors: "Outstanding," "Excellent," "Target," "Threshold" and "Unacceptable". The Compensation Committee shall approve the level of performance for each Performance Category and for each Measure of Performance with respect to each Performance Period. The approval of the level of performance for each Performance Category and for each Measure of Performance with respect to each Performance Period shall be conducted so as to comply with the requirements for exemption from the limitations of Section 162(m) of the Code. The Compensation Committee shall retain the discretion to change the required levels of performance, and the underlying measurements of performance, in order to reflect the acquisition or disposition of assets, or for other reasons as determined by the Compensation Committee in its sole discretion, provided, however, that any such change shall be in conformity with generally accepted accounting principles and provided further that no such change shall result in any increase in the amount of ITIP Bonus payable to a Participant hereunder whose compensation is subject to the deduction limitation of Section 162(m) of the Code and all such changes shall be consistent with the requirements for exemption under Section 162(m) of the Code. 1.22 "Performance Factor" means the Production Factor, the Total Cost Factor, the Total Reserves Factor or the Earnings Factor, as the case may be, for the relevant Performance Period. The Performance Factor for each of the foregoing Factors shall be determined based upon where each such Measure of Performance falls with respect to the level of performance approved by the Compensation Committee for each Performance Category. The Performance Factor for the Outstanding Performance Category shall be three, the Performance Factor for the Excellent Performance Category shall be two, the Performance Factor for the Target Performance Category shall be one, the Performance Factor for the Threshold Performance Category shall be zero, and the Performance Factor for the Unacceptable Performance Category shall be minus one. The Performance Factor for each Measure of Performance will be determined by interpolation, with rounding to the nearest 0.01, where the Measure of Performance falls between the specified Performance Categories for such Performance Period. If the Performance Factor with respect to any Measure of Performance falls below the Threshold Performance Category, a negative Performance Factor for that Measure of Performance will apply for the relevant Performance Period and such negative Performance Factor must be offset by other positive Performance Factors in order for there to be an ITIP Bonus. The Compensation Committee shall certify in writing, prior to the payment of any ITIP Bonus, that the Performance Factors used for the calculation of the ITIP Bonus have been attained and take any other action required in order to qualify for the exemption from the provisions of Section 162(m) of the Code. 1.23 "Performance Period" means the period of Plan Year(s) over which the Measures of Performance shall be calculated for purposes of determining the amount of an ITIP Bonus. The initial Performance Period shall be the calendar year 1997, the second Performance Period shall be the period from January 1, 1997 through December 31, 1998, and the next Performance Period shall be the period from January 1, 1997 through December 31, 1999. Performance Periods beginning on January 1, 1998 and future years shall be composed of three Plan Years. 5 7 1.24 "Plan Year" means the calendar year. 1.25 "Position(s)" means the defined job(s) held by an Employee during the Plan Year. 1.26 "Production Equity Ounces" means the total equity ounces produced by the Company in the relevant Performance Period, as calculated by the Company and approved by the Compensation Committee. 1.27 "Production Factor" means the Performance Factor attributable to Production Equity Ounces with respect to the relevant Performance Period. 1.28 "Retirement" means termination of employment with the Company and/or all Participating Employers by an Employee who immediately begins to receive benefits from a defined benefit pension plan of the Company or a Participating Employer. 1.29 "Targeted Payout Percentage" means the percentage of a Participant's Bonus Eligible Earnings taken into account when calculating the ITIP Bonus with respect to a Performance Period. The Targeted Payout Percentage for the Payout Period beginning January 1, 1997 and ending December 31, 1997, the Performance Period beginning January 1, 1997 and ending December 31, 1998 and the Performance Period beginning January 1, 1997 and ending December 31, 1999 shall be determined in accordance with the provisions of Schedule A attached hereto and hereby made a part hereof. Targeted Payout Percentages for subsequent Performance Periods shall be established by the Compensation Committee and attached as additional Schedules to this Plan. If the Pay Grade of a Participant changes during a Performance Period, the Targeted Payout Percentage applicable to such Participant shall be prorated based upon the number of days spent in each Pay Grade during the Performance Period, provided, however, that for purposes of this Plan, the Pay Grade of an Employee whose compensation is subject to the deduction limitation of Section 162(m) of the Code with respect to a Plan Year shall be the Pay Grade applicable to such Employee as of the first day of the applicable Performance Period, or such lesser Pay Grade as may be assigned to the Employee during such Performance Period. 1.30 "Total Cost Factor" means the Performance Factor determined with respect to the Company's Total Cost Per Equity Ounce for the relevant Performance Period. 1.31 "Total Cost Per Equity Ounce" means the Company's total cost of producing an ounce of gold during the relevant Performance Period, which shall be determined by dividing the total cost of producing an ounce of gold during such Performance Period by the total Production Equity Ounces for such Performance Period. The Total Cost Per Equity Ounce shall be calculated by the Company and approved by the Compensation Committee. 1.32 "Total Reserves Equity Ounces" means the Company's total equity ounces of gold in proven and probable gold reserves at the end of the relevant Performance Period as calculated by the Company and approved by the Compensation Committee. 6 8 1.33 "Total Reserves Factor" means the Performance Factor determined with respect to the Total Reserves Equity Ounces for the relevant Performance Period. ARTICLE II ELIGIBILITY All Employees of the Company and/or a Participating Employer in Pay Grades 109 and above are eligible to receive an ITIP Bonus under the Plan, provided (i) they are on the payroll of the Company and/or a Participating Employer as of the last day of the relevant Performance Period or (ii) they have terminated employment with the Company and/or a Participating Employer during the Performance Period and the Vice President of Human Resources of the Company, acting in his sole discretion, has approved in writing their eligibility to receive an ITIP Bonus. Employees who are on short-term disability under the Company's short-term disability policy or not working because of a work-related injury as of the last day of the Plan Year shall be eligible to receive a bonus under clause (i). Notwithstanding the foregoing provisions of this Article II, the Compensation Committee may, prior to the end of any Performance Period, exclude from eligibility for participation under this Plan with respect to such Performance Period any Employee or Employees, as the Compensation Committee may determine in its sole discretion. ARTICLE III PAYMENT OF ITIP BONUS 3.1 Determination of ITIP Bonus. As soon as reasonably practicable after the end of each Performance Period, when all of the necessary information with respect to the Performance Factors for such Performance Period have been determined, the Compensation Committee shall certify in writing the extent to which the Measures of Performance satisfy the Performance Categories, the Performance Factors achieved with respect to such Performance Period, and any other material terms of this Plan that apply to the payment of the ITIP Bonus. Following such certification, payment of the ITIP Bonus shall be made to the eligible Participants in accordance with the provisions of this Article III as soon as reasonably practicable. 3.2 Termination of Employment During Performance Period. If a Participant terminates employment during a Performance Period and the Vice President of Human Resources of the Company has determined in writing that such Participant should receive an ITIP Bonus with respect to such Performance Period, the Participant shall be entitled to a prorated ITIP Bonus calculated by using the Performance Factors applicable to the Plan Year during which the Participant terminated employment, calculated at the end of such Plan Year, and multiplied by the employee's Bonus Eligible Earnings for such Plan Year. If a Participant terminates employment before the completion of one full Plan Year during a Performance Period no ITIP Bonus shall be paid. Payment shall be made to a terminated Participant with respect to a Performance Period at the same time that 7 9 payments with respect to such Performance Period are made to Participants in accordance with the provisions of Section 3.1. 3.3 Change of Control. In the event of a Change of Control, each Participant (including any Participant who has terminated employment with the Company and/or a Participating Employer during the relevant Performance Period and who has been designated in writing by the Vice President of Human Resources of the Company as eligible to receive an ITIP Bonus) shall become entitled to the payment of an ITIP Bonus based upon the applicable Targeted Payout Percentage for the Performance Period during which such Change of Control occurs and calculated based upon a Performance Category for each Performance Factor equal to the greater of the actual Performance Category attained with respect to such Performance Factor or the Target Performance Category. If a Change of Control occurs prior to January 1, 2000, the Targeted Payout Percentages set forth on Schedule A under the column headed 1997-1999 shall be applied to determine the amount of the ITIP Bonus payable in accordance with the provisions of this Section. If a Change of Control occurs prior to the time that the Compensation Committee has established the Targeted Payout Percentages or the levels of performance for the Performance Categories and Measures of Performance for a Performance Period, the levels of performance and Targeted Payout Percentages shall be based upon the immediately preceding Performance Period. Notwithstanding the provisions of Section 3.5, in the event of a Change of Control, the ITIP Bonus payable pursuant to this Section 3.3 shall be paid entirely in cash. Payment of the ITIP Bonus under the foregoing circumstances shall be made as soon as practicable following the date of the Change of Control. Upon the completion of such payments, the Participants shall have no further right to the payment of any ITIP Bonus hereunder (other than an ITIP Bonus previously earned but not yet paid) and this Plan shall terminate. 3.4 Limitation on ITIP Bonus. The maximum ITIP Bonus payable to any Participant under this Plan with respect to a Performance Period shall not exceed 300% of the amount of such Bonus payable to the Participant if all Performance Factors were at the Target Performance Category level, based upon the Bonus Eligible Earnings of such Participant for the last Plan Year in the Performance Period. Notwithstanding the foregoing, the largest ITIP Bonus payable to any Participant under this Plan with respect to any Performance Period shall not exceed $3 million. 3.5 Form of Payment. The amount of ITIP Bonuses payable under this Plan shall be paid 50% in cash and 50% in shares of Common Stock (payable in whole shares only with excess amounts paid in cash), which shall be subject to the restrictions set forth in Section 3.7 below. The number of shares of Common Stock to be issued in payment of an ITIP Bonus shall be determined based upon the Fair Market Value of the Common Stock on the date that the Compensation Committee meets and certifies the satisfaction of the material terms of this Plan with respect to the payment of the ITIP Bonus in accordance with the provisions of Section 3.1. Notwithstanding the foregoing, (i) the Compensation Committee may, in its sole discretion, cause all or any portion of any ITIP Bonus otherwise payable in shares of Common Stock to be paid in cash, and (ii) if a Participant terminates employment before payment of an ITIP Bonus and if all of the Participant's shares of Common Stock granted pursuant to this Plan are non-forfeitable and are transferrable, in accordance with the provisions of Section 3.7, the Participant's ITIP Bonus may be paid in cash if approved by the Vice President of Human Resources of the Company. 8 10 3.6 Withholding Taxes. All bonuses payable hereunder shall be subject to the withholding of such amounts as the Company may determine is required to be withheld pursuant to any applicable federal, state or local law or regulation. The Compensation Committee may, in its sole discretion, permit any Participant to satisfy the applicable withholding by causing the Company to withhold the appropriate number of shares of Common Stock from the ITIP Bonus otherwise payable and to make the requisite withholding payments on behalf of the Participant. 3.7 Restrictions on Common Stock. (a) Shares of Common Stock issued as payment of a portion of an ITIP Bonus hereunder shall be restricted and subject to forfeiture as follows: If a Participant terminates employment prior to the first anniversary of the date on which such shares of Common Stock were granted to the Participant (as determined by the Compensation Committee) (the "Grant Date"), all such shares of Common Stock shall be forfeited. If a Participant terminates employment more than one year after the Grant Date, but prior to the second anniversary of the Grant Date, the Participant shall forfeit 50% of the shares of Common Stock awarded as a part of such ITIP Bonus. If a Participant terminates employment on or after the second anniversary of the Grant Date, the shares of Common Stock shall not be subject to forfeiture. Notwithstanding the foregoing, if a Participant terminates employment on account of death, Disability, Retirement, Change of Control, or other termination approved by the Vice President of Human Resources of the Company in writing, none of the shares of Common Stock granted to the Participant pursuant to this Plan shall be subject to forfeiture. (b) Shares of Common Stock issued hereunder as a part of an ITIP Bonus shall not be subject to transfer by the Participant for a period of five years from the Grant Date on which such shares of Common Stock were issued, provided, however, that such Common Stock shall be transferable (i) if approved in writing by the Vice President of Human Resources of the Company in the event of the Death, Disability, Retirement of the Participant, or other termination of employment, (ii) in the event of a Change of Control, or (iii) to family trusts or similar vehicles for personal estate planning purposes as approved by the Vice President of Human Resources of the Company in writing. (c) The Compensation Committee shall cause a legend to be placed on the Common Stock certificates issued pursuant to this Plan referring to the restrictions provided by this Section and, in addition, may in its sole discretion require one or more of the following methods of enforcing the restrictions: (i) requiring the Participant to keep the stock certificates, duly endorsed, in the custody of the Company while the restrictions remain in effect; or (ii) requiring that the stock certificates, duly endorsed, be held in the custody of a third party while the restrictions remain in effect. (d) Shares of Common Stock issued under this Plan may be issued pursuant to the provisions of the Newmont Mining Corporation 1996 Employees Stock Plan, or otherwise, as determined in the sole discretion of the Compensation Committee. (e) The Compensation Committee may, in its sole discretion, require the Participant to agree not to make an election pursuant to Section 83(b) of the Code as a condition for the receipt of Common Stock hereunder. 9 11 3.8 Stockholder Approval Requirement. Notwithstanding the foregoing provisions of this Article III, no ITIP Bonus shall be paid under this Plan to a Participant to the extent that such payment would be non-deductible under the provisions of Section 162(m) of the Code unless and until the stockholders of the Company have approved this Plan and the material terms of the performance goals established under this Plan in conformity with the requirements of Section 162(m) of the Code and the Regulations thereunder. 3.9 Deferral of Certain Payments. Notwithstanding the foregoing provisions of this Article III, if a Participant would receive compensation with respect to any Plan Year, including ITIP Bonuses under this Plan, that would exceed the $1 million compensation deduction limitation of Section 162(m) of the Code and therefore be non-deductible for federal income tax purposes, the amount of the Participant's ITIP Bonus for such Plan Year may be reduced by the Compensation Committee to the extent necessary to avoid such limitation and any such reduction shall be paid to the Participant in a subsequent year in accordance with the provisions of this Section. In the event of any such deferral, the amount deferred, which shall consist of the cash portion of the ITIP Bonus and the number of shares of Common Stock that would have otherwise been issuable to the Participant, together with interest and dividends credited as set forth below, shall be paid to the Participant in the first calendar year during which the deduction of such amounts shall not be subject to the limitations of Section 162(m) of the Code. The amount of the cash portion of the ITIP Bonus deferred shall be credited to a special deferred compensation account in the name of the Participant and such account shall be credited with interest at a rate equal to the rate of interest announced publicly by The Chase Manhattan Bank (National Association) from time to time as its "prime rate", with the interest rate hereunder adjusted at such time as such "prime rate" is adjusted, from the period beginning upon the date on which such amount otherwise would have been paid under the provisions of this Plan through the last day of the month immediately preceding the date of payment. Any dividends paid with respect to the shares of Common Stock that are deferred in accordance with the provisions of this Section 3.9 shall be credited to the special deferred compensation account as of the date such dividends would otherwise have been paid and such amounts shall be credited with interest as above provided. Notwithstanding the foregoing, in the event of a Change of Control, all amounts deferred in accordance with the provisions of this Section, together with interest and dividends credited with respect to such deferred amounts, shall be paid to the appropriate Participants as soon as practicable following the date of the Change of Control. Determinations with respect to the deferral of ITIP Bonuses hereunder shall be made by the Compensation Committee in its sole discretion. ARTICLE IV GENERAL PROVISIONS 4.1 Administration. The Plan will be administered by the Compensation Committee or its delegees. The Compensation Committee shall interpret the provisions of the Plan in its full and absolute discretion. The determinations of the Compensation Committee with respect to the Plan shall be conclusive. All expenses of the Company in administering the Plan shall be borne by the Company. 10 12 4.2 Plan Unfunded. The Plan shall be unfunded and no trust or other funding mechanism shall be established for the Plan. All benefits to be paid pursuant to the Plan shall be paid by the Company from its general assets and an Employee (or his heir or devisee) shall not have any greater rights than a general, unsecured creditor against the Company for any benefit hereunder. 4.3 Participation in Plan by Affiliates. Any Affiliated Entity shall become a party to this Plan and become a Participating Employer upon designation by the Company as a Participating Employer. 4.4 Amount Payable Upon Death of Employee. If a Participant who is entitled to payment hereunder dies before receiving full payment of the amount due, such amount shall be paid, in a cash lump sum, to the beneficiary or beneficiaries designated by the Participant to receive life insurance proceeds under the Company's life insurance plan. In the absence of an effective beneficiary designation under said plan, any amount payable hereunder following the death of a Participant shall be paid to the Participant's estate. 4.5 Right of Offset. To the extent permitted by applicable law, the Company may, in its sole discretion, apply any bonus payments otherwise due and payable under this Plan against any Participant loans outstanding to the Company or other debts of the Participant to the Company. 4.6 Amendments, Termination, Etc. The Board, upon the recommendation of the Compensation Committee, may at any time amend, modify, suspend or terminate the Plan. 4.7 Payments Due Minors or Incapacitated Persons. If any person entitled to a payment under the Plan is a minor, or if the Compensation Committee determines that any such person is incapacitated by reason of physical or mental disability, whether or not legally adjudicated as an incompetent, the Compensation Committee shall have the power to cause the payment becoming due to such person to be made to another for his benefit, without responsibility of the Compensation Committee, the Company, or any other person or entity to see to the application of such payment. Payments made pursuant to such power shall operate as a complete discharge of the Compensation Committee, the Plan and the Company. 4.8 Section Headings. The Section headings are included herein only for convenience, and they shall have no effect on the interpretation of the Plan. 4.9 Severability. If any article, section, subsection or specific provision is found to be illegal or invalid for any reason, such illegality or invalidity shall not affect the remaining provisions of the Plan, and the Plan shall be construed and enforced as if such illegal and invalid provision had never been set forth in the Plan. 4.10 No Right to Employment. The establishment of this Plan shall not be deemed to confer upon any person any legal right to be employed by, or to be retained in the employ of, the Company or any Affiliated Entity, or to give any Employee or any person any right to receive any payment whatsoever, except as provided under this Plan. All Employees shall remain subject to discharge from employment to the same extent as if this Plan had never been adopted. 11 13 4.11 Transferability. Any ITIP Bonus payable hereunder is personal to the Participant and may not be sold, exchanged, transferred, pledged, assigned or otherwise disposed of except by will or by the laws of descent and distribution. 4.12 Successors. This Plan shall be binding upon and inure to the benefit of the Company, the Participating Employers and the Participants and their respective heirs, representatives and successors. 4.13 Governing Law. The Plan and all agreements hereunder shall be construed in accordance with and governed by the laws of the State of Colorado, unless superseded by federal law. Adopted as of January 1, 1998. NEWMONT GOLD COMPANY By: /s/ TIMOTHY J. SCHMITT ---------------------------- 12 14 SCHEDULE A TARGETED PAYOUT PERCENTAGES
Pay Grade 1997 1997-1998 1997-1999 --------- ---- --------- --------- 203 N/A N/A N/A 202 28% 56% 85% 200-201 25% 50% 75% 113-114 17% 34% 50% 111-112 13% 26% 40% 110 10% 20% 30% 109 7% 14% 20%
13 EX-10.(N) 6 EXECUTIVE CHANGE OF CONTROL SEVERANCE PLAN 1 EXHIBIT 10(n) NEWMONT MINING CORPORATION EXECUTIVE CHANGE OF CONTROL SEVERANCE PLAN INTRODUCTION The Board of Directors of Newmont Mining Corporation recognizes that, as is the case with many publicly held corporations, there exists the possibility of a Change of Control of the Company. This possibility and the uncertainty it creates may result in the loss or distraction of executives of the Company and its Subsidiaries to the detriment of the Company and its shareholders. The Board considers the avoidance of such loss and distraction to be essential to protecting and enhancing the best interests of the Company and its shareholders. The Board also believes that when a Change of Control is perceived as imminent, or is occurring, the Board should be able to receive and rely on disinterested service from executives regarding the best interests of the Company and its shareholders without concern that executives might be distracted or concerned by the personal uncertainties and risks created by the perception of an imminent or occurring Change of Control. In addition, the Board believes that it is consistent with the Company's employment practices and policies of the Company and its Subsidiaries and in the best interests of the Company and its shareholders to treat fairly its executives whose employment terminates in connection with or following a Change of Control. Accordingly, the Board has determined that appropriate steps should be taken to assure the Company and its Subsidiaries of the continued employment and attention and dedication to duty of its executives and to seek to ensure the availability of their continued service, notwithstanding the possibility, threat or occurrence of a Change of Control. Therefore, in order to fulfill the above purposes, the following plan has been developed and is hereby adopted. ARTICLE I ESTABLISHMENT OF PLAN As of the Effective Date, the Company hereby establishes a separation compensation plan known as the Newmont Mining Corporation Executive Change of Control Severance Plan, as set forth in this document. ARTICLE II DEFINITIONS As used herein the following words and phrases shall have the following respective meanings unless the context clearly indicates otherwise. 2 (a) Affiliate. Any entity which controls, is controlled by or is under common control with the Company. (b) Annual Bonus. The aggregate annual bonus that a Participant is eligible to earn pursuant to the Annual Incentive Compensation Plan and Intermediate Term Incentive Compensation Plan of the Company or any Affiliate, or any successor or replacement plans. (c) Annual Bonus Amount. The highest amount a Participant received as an annual bonus in any of the last three full fiscal years prior to the Change of Control. (d) Annual Salary. The Participant's regular annual base salary immediately prior to his or her termination of employment, including compensation converted to other benefits under a flexible pay arrangement maintained by the Company or any Affiliate or deferred pursuant to a written plan or agreement with the Company or any Affiliate, but excluding overtime pay, allowances, premium pay, compensation paid or payable under any bonus or incentive plan of the Company or any Affiliate or any similar payment. (e) Board. The Board of Directors of Newmont Mining Corporation. (f) Cause. With respect to any Participant: (i) the willful and continued failure of the Participant to perform substantially the Participant's duties with the Company or one of its Affiliates (other than any such failure resulting from incapacity due to physical or mental illness), after a written demand for substantial performance is delivered to the Participant by the Board or the Chief Executive Officer of the Company which specifically identifies the manner in which the Board or Chief Executive Officer believes that the Participant has not substantially performed the Participant's duties, or (ii) the willful engaging by the Participant in illegal conduct or gross misconduct which is materially and demonstrably injurious to the Company or any Affiliate. For purposes of this definition, no act or failure to act on the part of the Participant shall be considered "willful" unless it is done, or omitted to be done, by the Participant in bad faith or without reasonable belief that the Participant's action or omission was in the best interests of the Company or any Affiliate. Any act or failure to act based upon authority given pursuant to a resolution duly adopted by the Board or upon the instructions of the Chief Executive Officer or a senior officer of the Company or any Affiliate or based upon the advice of counsel for the Company shall be conclusively presumed to be done, or omitted to be done, by the Participant in good faith and in the best interests of the Company. (g) Change of Control The occurrence of any of the following events: (i) The acquisition by any individual, entity or group (within the meaning of Section 13(d)(3) or 14(d)(2) of the Securities Exchange Act of 1934, as amended (the "Exchange Act")) (a "Person") of beneficial ownership (within the meaning of Rule 13d-3 promulgated under the Exchange Act) of 20% or more of either (x) the then outstanding shares of common stock of the Company (the "Outstanding Company Common Stock") or (y) the -2- 3 combined voting power of the then outstanding voting securities of the Company entitled to vote generally in the election of directors (the "Outstanding Company Voting Securities"); provided, however, that for purposes of this subsection (i), the following acquisitions shall not constitute a Change of Control: (A) any acquisition directly from the Company, (B) any acquisition by the Company, (C) any acquisition by any employee benefit plan (or related trust) sponsored or maintained by the Company or any corporation controlled by the Company or (D) any acquisition by any corporation pursuant to a transaction which complies with clauses (A), (B) and (C) of paragraph (iii) below; or (ii) Individuals who, as of the Effective Date, constitute the Board (the "Incumbent Board") cease for any reason to constitute at least a majority of the Board; provided, however, that any individual becoming a director subsequent to the Effective Date whose election, or nomination for election by the Company's shareholders, was approved by a vote of at least a majority of the directors then comprising the Incumbent Board shall be considered as though such individual were a member of the Incumbent Board, but excluding, for this purpose, any such individual whose initial assumption of office occurs as a result of an actual or threatened election contest with respect to the election or removal of directors or other actual or threatened solicitation of proxies or consents by or on behalf of a Person other than the Board; or (iii) Consummation of a reorganization, merger or consolidation or sale or other disposition of all or substantially all of the assets of the Company or an acquisition of assets of another corporation (a "Business Combination"), in each case, unless, following such Business Combination, (A) all or substantially all of the individuals and entities who were the beneficial owners, respectively, of the Outstanding Company Common Stock and Outstanding Company Voting Securities immediately prior to such Business Combination beneficially own, directly or indirectly, more than 50% of, respectively, the then outstanding shares of common stock and the combined voting power of the then outstanding voting securities entitled to vote generally in the election of directors, as the case may be, of the corporation resulting from such Business Combination (including, without limitation, a corporation which as a result of such transaction owns the Company or all or substantially all of the Company's assets either directly or through one or more subsidiaries) in substantially the same proportions as their ownership, immediately prior to such Business Combination of the Outstanding Company Common Stock and Outstanding Company Voting Securities, as the case may be, (B) no Person (excluding any corporation resulting from such Business Combination or any employee benefit plan (or related trust) beneficially owns, directly or indirectly, 20% or more of, respectively, the then outstanding shares of common stock of the corporation resulting from such Business Combination or the combined voting power of the then outstanding voting securities of such corporation, except to the extent that such ownership existed prior to the Business Combination and (C) at least a majority of the members of the board of directors of the corporation resulting from such Business Combination were members of the Incumbent Board at the time of the execution of the initial agreement, or of the action of the Board, providing for such Business Combination; or -3- 4 (iv) Approval by the shareholders of the Company of a complete liquidation or dissolution of the Company. (h) Code. The Internal Revenue Code of 1986, as amended from time to time. (i) Committee. The Compensation Committee of the Board. (j) Company. Newmont Mining Corporation and any successor thereto. (k) Date of Termination. The date on which a Participant ceases to be an Employee of the Company and its Affiliates. (l) Disability. A condition such that the Employee has terminated employment with the Company and/or all participating Employers with a qualifying disability and has immediately began receiving benefits from a long-term disability plan of the Company or any participating Employer. (m) Effective Date. February 1, 1999. (n) Employee. Any full-time, regular-benefit, non-bargaining employee of an Employer. (o) Employer. The Company or any Subsidiary which participates in the Plan pursuant to Article V hereof or, under the circumstances set forth in the second sentence of Section 3.1 hereof, any Subsidiary or Affiliate described in such sentence. (p) ERISA. The Employee Retirement Income Security Act of 1974, as amended from time to time. (q) Good Reason. With respect to any Participant, without such Participant's written consent, (i) the assignment to the Participant of any duties inconsistent in any respect with the Participant's position (including status, offices, titles and reporting requirements), authority, duties or responsibilities immediately before the Change of Control, or any other action by the Company which results in a significant diminution in such position, authority, duties or responsibilities, excluding for this purpose an isolated, insubstantial and inadvertent action not taken in bad faith and which is remedied by the Company or the Employer promptly after receipt of notice thereof given by the Participant; (ii) any reduction in the Participant's Annual Salary, or annual target bonus opportunity, or any material reduction in other compensation or employee benefits, as in effect during the 120-day period immediately preceding the Change of Control (or as such amounts may be increased from time to time), other than as a result of an isolated and inadvertent action not taken in bad faith and which is remedied by the Company promptly after receipt of notice thereof given by the Participant; (iii) the Company or the Employer requiring the Participant to relocate his or her principal place of -4- 5 business to a location which is more than 35 miles from his or her previous principal place of business; (iv) any purported termination of the Plan otherwise than as expressly permitted by the Plan; or (v) any failure by the Company to comply with and satisfy Article V of the Plan. For purposes of the Plan, any good faith determination of "Good Reason" made by the Participant shall be conclusive. (r) Participant. An individual who is designated as such pursuant to Section 3.1. (s) Plan. The Newmont Mining Corporation Executive Change of Control Severance Plan. (t) Separation Benefits. The benefits described in Section 4.2 that are provided to qualifying Participants under the Plan. (u) Subsidiary. Any corporation in which the Company, directly or indirectly, holds a majority of the voting power of such corporation's outstanding shares of capital stock. (v) Target Annual Bonus. The annual bonus that the Participant would have received for the year in which his or her Date of Termination occurs, if the target goals had been achieved. ARTICLE III ELIGIBILITY 3.1 Participation. Each of the individuals named on Schedule 1 hereto shall be a Participant in the Plan. Schedule 1 may be amended by the Chief Executive Officer of the Company from time to time to add individuals as Participants. If a Participant's employment is transferred from an Employer to a Subsidiary or Affiliate of the Company which is not a participating Employer under the Plan, the provisions of the Plan will continue to apply to such Participant while employed by such Subsidiary or Affiliate. 3.2 Duration of Participation. A Participant shall only cease to be a Participant in the Plan as a result of an amendment or termination of the Plan complying with Article VII of the Plan, or when he ceases to be an Employee of any Employer, unless, at the time he ceases to be an Employee, such Participant is entitled to payment of a Separation Benefit as provided in the Plan or there has been an event or occurrence constituting Good Reason that would enable the Participant to terminate his employment and receive a Separation Benefit. A Participant entitled to payment of a Separation Benefit or any other amounts under the Plan shall remain a Participant in the Plan until the full amount of the Separation Benefit and any other amounts payable under the Plan have been paid to the Participant. -5- 6 ARTICLE IV SEPARATION BENEFITS 4.1 Terminations of Employment Which Give Rise to Separation Benefits Under This Plan. A Participant shall be entitled to Separation Benefits as set forth in Section 4.2 below if, at any time following a Change of Control and prior to the third anniversary of the Change of Control, the Participant's Employment is terminated (i) by the Company for any reason other than Cause, death, or Disability or (ii) by the Participant within 120 days after the Participant has knowledge of the occurrence of Good Reason. 4.2 Separation Benefits. (a) If a Participant's employment is terminated in circumstances entitling such participant to Separation Benefits pursuant to Section 4.1, the Company shall provide to such Participant, within ten days following the Date of Termination, a lump sum cash payment as set forth in subsection (b) below, and shall provide to the Participant the continued benefits as set forth in subsection (c) below and the outplacement services set forth in subsection (d) below. For purposes of determining the benefits set forth in subsections (b) and (c), if the termination of the Participant's employment is for Good Reason based upon a reduction of the Participant's Annual Salary, opportunity to earn annual bonuses, or other compensation or employee benefits, such reduction shall be ignored. (b) The cash lump sum referred to in Section 4.2(a) shall be the aggregate of the following amounts: (i) the sum of (A) the Participant's Annual Salary through the Date of Termination, (B) the product of (1) the Participant's Target Annual Bonus and (2) a fraction, the numerator of which is the number of days in the such year through the Date of Termination, and the denominator of which is 365, and (C) any compensation previously deferred by the Participant (together with any accrued interest or earnings thereon) and any accrued vacation pay, in each case to the extent not theretofore paid and in full satisfaction of the rights of the Participant thereto; (ii) an amount equal to the product of (A) two, times (B) the sum of (1) the Participant's Annual Salary, (2) the higher of the Participant's Annual Bonus Amount or the annual bonus paid or payable, including any bonus or portion thereof which has been earned but deferred (and annualized for any fiscal year consisting of less than 12 full months or during which the Participant was employed for less than 12 full months), for the most recently completed fiscal year prior to the Participant's Date of Termination, and (3) the highest employer matching contribution made to the 401(k) Plan of the Company or any Affiliate, or any successor or replacement plans, on behalf of the Participant, during the last three full fiscal years prior to the Change of Control; and -6- 7 (iii) an amount (calculated consistent with the example set forth on Exhibit A to this Plan) equal to the excess (without present value discount, as a result of receiving such amount prior to the end of the three-year period following the Date of Termination) of (a) the actuarial equivalent of the benefit under the qualified defined benefit retirement plan of the Company or any Affiliate in which the Participant participates immediately prior to the Change of Control, or under any such plan with more favorable benefits in which the Participant participates following the Change of Control (the "Retirement Plan"), and any excess or supplemental retirement plan, program or arrangement of the Company or any Affiliate in which the Participant participates immediately prior to the Change of Control or under any such plans, programs or arrangements with more favorable benefits in which the Participant participates following the Change of Control (together, the "SERP") which the Participant would receive if the Participant's employment continued for three years after the Date of Termination, assuming for this purpose that (i) the Participant is fully vested in all benefits to be calculated under this clause (a), and (ii) the Participant is treated as having attained three additional years of age under the Retirement Plan or the SERP, including for purposes of reducing any otherwise applicable actuarial reduction, but not for purposes of reducing the number of years of the Participant's life expectancy, over (b) the actuarial equivalent of the Participant's actual benefit (paid or payable), if any, under the Retirement Plan and the SERP as of the Date of Termination. The actuarial assumptions used for determining actuarial equivalence in this Section 4.2(b)(iii) shall be no less favorable to the Participant, than the most favorable of those in effect under the Company's Retirement Plan and SERP, as the case may be, immediately prior to the Change of Control or on the Date of Termination. (c) During the three-year period following the Participant's Date of Termination, the Participant and his or her family shall be provided with medical, dental, disability and life insurance benefits as if the Participant's employment had not been terminated; provided, that such benefits and the cost to the Participant shall be no less favorable than under the programs in which the Participant participated during the 120-day period immediately prior to the Change of Control); provided, however, that if the Participant becomes reemployed with another employer and is eligible to receive medical or other welfare benefits under another employer-provided plan, the medical and other welfare benefits described herein shall be secondary to those provided under such other plan during such applicable period of eligibility. For purposes of determining eligibility (but not the time of commencement of benefits) of the Participant for retiree medical, dental and life insurance benefits under the Company's plans, practices, programs and policies, the Participant shall be considered to have remained employed during the two-year period following the Date of Termination and to have retired on the last day of such period. To the extent any benefits described in this Section 4.2(c) cannot be provided pursuant to the appropriate plan or program maintained for Employees, the Company shall provide such benefits outside such plan or program at no additional cost (including without limitation tax cost) to the Participant. (d) The Company shall, at its sole expense as incurred, provide the Participant with outplacement services the scope and provider of which shall be consistent with the Company's practices during the one-year period immediately preceding the Change of Control. -7- 8 4.3 Other Benefits Payable. To the extent not theretofore paid or provided, the Company shall timely pay or provide (or cause to be paid or provided) to a Participant entitled to the Separation Benefits, any other amounts or benefits required to be paid or provided to the Participant or which the Participant is eligible to receive under any plan, program, policy or practice or contract or agreement of the Company and its Affiliates, but excluding any severance pay or pay in lieu of notice required to be paid to such Participant under applicable law or any other severance pay plan or policy of the Company or any Employer. 4.4 Certain Additional Payments by the Company. (a) Anything in this Plan to the contrary notwithstanding and except as set forth below, in the event it shall be determined that any payment or distribution by the Company or its affiliates to or for the benefit of a Participant (whether paid or payable or distributed or distributable pursuant to the terms of this Plan or otherwise, but determined without regard to any additional payments required under this Section 4.4(a)) (a "Payment") would be subject to the excise tax imposed by Section 4999 of the Code or any interest or penalties are incurred by the Participant with respect to such excise tax (such excise tax, together with any such interest and penalties, are hereinafter collectively referred to as the "Excise Tax"), then the Participant shall be entitled to receive an additional payment (a "Gross-Up Payment") in an amount such that after payment by the Participant of all taxes (including any interest or penalties imposed with respect to such taxes), including, without limitation, any income taxes (and any interest and penalties imposed with respect thereto) and Excise Tax imposed upon the Gross-Up Payment, the Participant retains an amount of the Gross-Up Payment equal to the Excise Tax imposed upon the Payments. Notwithstanding the foregoing provisions of this Section 4.4(a), if it shall be determined that the Participant is entitled to a Gross-Up Payment, but that the Payments do not exceed 110% of the greatest amount (the "Safe Harbor Amount") that could be paid to the Participant such that the receipt of Payments would not give rise to any Excise Tax, then no Gross-Up Payment shall be made to the Participant and the amounts payable under this Plan shall be reduced so that the Payments, in the aggregate, are reduced to the Safe Harbor Amount. The reduction of the amounts payable hereunder, if applicable, shall be made by first reducing the payments under Section 4.2(b)(ii), unless an alternative method of reduction is elected by the Participant. For purposes of reducing the Payments to the Safe Harbor Amount, only amounts payable under this Plan (and no other Payments) shall be reduced. If the reduction of the amount payable under this Plan would not result in a reduction of the Payments to the Safe Harbor Amount, no amounts payable under this Plan shall be reduced pursuant to this Section 4.4(a). (b) Subject to the provisions of Section 4.4(c), all determinations required to be made under this Section 4.4, including whether and when a Gross-Up Payment is required and the amount of such Gross-Up Payment and the assumptions to be utilized in arriving at such determination, shall be made by Arthur Andersen LLP (the "Accounting Firm") which shall provide detailed supporting calculations both to the Company and the Participant within 15 business days of the receipt of notice from the Participant that there has been a Payment, or such earlier time as is requested by the Company. In the event that the Accounting Firm is serving as -8- 9 accountant or auditor for the individual, entity or group effecting the Change of Control, the Participant shall appoint another nationally recognized accounting firm to make the determinations required hereunder (which accounting firm shall then be referred to as the Accounting Firm hereunder). All fees and expenses of the Accounting Firm shall be borne solely by the Company. Any Gross-Up Payment, as determined pursuant to this Section 4.4, shall be paid by the Company to the Participant within five days of the receipt of the Accounting Firm's determination. Any determination by the Accounting Firm shall be binding upon the Company and the Participant. As a result of the uncertainty in the application of Section 4999 of the Code at the time of the initial determination by the Accounting Firm hereunder, it is possible that Gross-Up Payments which will not have been made by the Company should have been made ("Underpayment"), consistent with the calculations required to be made hereunder. In the event that the Company exhausts its remedies pursuant to Section 4.4(c) and the Participant thereafter is required to make a payment of any Excise Tax, the Accounting Firm shall determine the amount of the Underpayment that has occurred and any such Underpayment shall be promptly paid by the Company to or for the benefit of the Participant. (c) The Participant shall notify the Company in writing of any claim by the Internal Revenue Service that, if successful, would require the payment by the Company of the Gross-Up Payment. Such notification shall be given as soon as practicable but no later than ten business days after the Participant is informed in writing of such claim and shall apprise the Company of the nature of such claim and the date on which such claim is requested to be paid. The Participant shall not pay such claim prior to the expiration of the 30-day period following the date on which it gives such notice to the Company (or such shorter period ending on the date that any payment of taxes with respect to such claim is due). If the Company notifies the Participant in writing prior to the expiration of such period that it desires to contest such claim, the Participant shall: (i) give the Company any information reasonably requested by the Company relating to such claim, (ii) take such action in connection with contesting such claim as the Company shall reasonably request in writing from time to time, including, without limitation, accepting legal representation with respect to such claim by an attorney reasonably selected by the Company, (iii) cooperate with the Company in good faith in order effectively to contest such claim, and (iv) permit the Company to participate in any proceedings relating to such claim; provided, however, that the Company shall bear and pay directly all costs and expenses (including additional interest and penalties) incurred in connection with such contest and shall -9- 10 indemnify and hold the Participant harmless, on an after-tax basis, for any Excise Tax or income tax (including interest and penalties with respect thereto) imposed as a result of such representation and payment of costs and expenses. Without limitation on the foregoing provisions of this Section 4.4(c), the Company shall control all proceedings taken in connection with such contest and, at its sole option, may pursue or forgo any and all administrative appeals, proceedings, hearings and conferences with the taxing authority in respect of such claim and may, at its sole option, either direct the Participant to pay the tax claimed and sue for a refund or contest the claim in any permissible manner, and the Participant agrees to prosecute such contest to a determination before any administrative tribunal, in a court of initial jurisdiction and in one or more appellate courts, as the Company shall determine; provided, however, that if the Company directs the Participant to pay such claim and sue for a refund, the Company shall advance the amount of such payment to the Participant, on an interest-free basis and shall indemnify and hold the Participant harmless, on an after-tax basis, from any Excise Tax or income tax (including interest or penalties with respect thereto) imposed with respect to such advance or with respect to any imputed income with respect to such advance; and further provided that any extension of the statute of limitations relating to payment of taxes for the taxable year of the Participant with respect to which such contested amount is claimed to be due is limited solely to such contested amount. Furthermore, the Company's control of the contest shall be limited to issues with respect to which a Gross-Up Payment would be payable hereunder and the Participant shall be entitled to settle or contest, as the case may be, any other issue raised by the Internal Revenue Service or any other taxing authority. (d) If, after the receipt by the Participant of an amount advanced by the Company pursuant to Section 4.4(c), the Participant becomes entitled to receive any refund with respect to such claim, the Participant shall (subject to the Company's complying with the requirements of Section 4.4(c)) promptly pay to the Company the amount of such refund (together with any interest paid or credited thereon after taxes applicable thereto). If, after the receipt by the Participant of an amount advanced by the Company pursuant to Section 4.4(c), a determination is made that the Participant shall not be entitled to any refund with respect to such claim and the Company does not notify the Participant in writing of its intent to contest such denial of refund prior to the expiration of 30 days after such determination, then such advance shall be forgiven and shall not be required to be repaid and the amount of such advance shall offset, to the extent thereof, the amount of Gross-Up Payment required to be paid. ARTICLE V PARTICIPATING EMPLOYERS Any Subsidiary of the Company may become a participating Employer in the Plan following approval by the Company. The provisions of the Plan shall be fully applicable to the Employees of any such Subsidiary who are Participants pursuant to Section 3.1. -10- 11 ARTICLE VI SUCCESSOR TO COMPANY This Plan shall bind any successor of the Company, its assets or its businesses (whether direct or indirect, by purchase, merger, consolidation or otherwise), in the same manner and to the same extent that the Company would be obligated under this Plan if no succession had taken place. In the case of any transaction in which a successor would not by the foregoing provision or by operation of law be bound by this Plan, the Company shall require such successor expressly and unconditionally to assume and agree to perform the Company's obligations under this Plan, in the same manner and to the same extent that the Company would be required to perform if no such succession had taken place. The term "Company," as used in this Plan, shall mean the Company as hereinbefore defined and any successor or assignee to the business or assets which by reason hereof becomes bound by this Plan. ARTICLE VII DURATION, AMENDMENT AND TERMINATION 7.1 Duration. If a Change of Control has not occurred, this Plan shall expire five years from the Effective Date, unless extended for an additional period or periods by resolution adopted by the Board. If a Change of Control occurs while this Plan is in effect, this Plan shall continue in full force and effect for at least three years following such Change of Control, and shall not terminate or expire until after all Participants who become entitled to any payments hereunder shall have received such payments in full. 7.2 Amendment or Termination. The Board may amend or terminate this Plan; provided, that this Plan may not be terminated or amended in a manner adverse to Participants (including modifying the eligibility of Employees to participate in the Plan) prior to the fifth anniversary of the Effective Date or during the three-year period following a Change of Control. 7.3 Procedure for Extension, Amendment or Termination. Any extension, amendment or termination of this Plan by the Board in accordance with the foregoing shall be made by action of the Board in accordance with the Company's charter and by-laws and applicable law. ARTICLE VIII MISCELLANEOUS 8.1 Full Settlement. The Company's obligation to make the payments provided for under this Plan and otherwise to perform its obligations hereunder shall not be affected by any set-off, counterclaim, recoupment, defense or other claim, right or action which the Company may have against a Participant or others. In no event shall a Participant be -11- 12 obligated to seek other employment or take any other action by way of mitigation of the amounts payable to the Participant under any of the provisions of this Plan and such amounts shall not be reduced whether or not the Participant obtains other employment. The Company agrees to pay as incurred, to the full extent permitted by law, all legal fees and expenses which a Participant may reasonably incur as a result of any contest (regardless of the outcome thereof) by the Company, the Participant or others of the validity or enforceability of, or liability under, any provision of this Plan or any guarantee of performance thereof (including as a result of any contest by the Participant about the amount of any payment pursuant to this Plan), plus in each case interest on any delayed payment at the applicable Federal rate provided for in Section 7872(f)(2)(A) of the Code. 8.2 Employment Status. This Plan does not constitute a contract of employment or impose on the Participant or the Participant's Employer any obligation for the Participant to remain an Employee or change the status of the Participant's employment or the policies of the Company and its affiliates regarding termination of employment. 8.3 Confidential Information. Each Participant shall hold in a fiduciary capacity for the benefit of the Company all secret or confidential information, knowledge or data relating to the Company or any of its affiliated companies, and their respective businesses, which shall have been obtained by the Participant during the Participant's employment by the Company or any of its affiliated companies and which shall not be or become public knowledge (other than by acts by the Participant or representatives of the Participant in violation of this Plan). After termination of a Participant's employment with the Company, the Participant shall not, without the prior written consent of the Company or as may otherwise be required by law or legal process, communicate or divulge any such information, knowledge or data to anyone other than the Company and those designated by it. In no event shall an asserted violation of the provisions of this Section 8.3 constitute a basis for deferring or withholding any amounts otherwise payable under this Plan. 8.4 Named Fiduciary; Administration. The Company is the named fiduciary of the Plan, and shall administer the Plan, acting through the Plan Administration Committee. 8.5 Claim Procedure. If an Employee or former Employee makes a written request alleging a right to receive benefits under this Plan or alleging a right to receive an adjustment in benefits being paid under the Plan, the Company shall treat it as a claim for benefit. All claims for benefit under the Plan shall be sent to the Plan Claims Review Committee of the Company and must be received within 30 days after termination of employment. If the Company determines that any individual who has claimed a right to receive benefits, or different benefits, under the Plan is not entitled to receive all or any part of the benefits claimed, it will inform the claimant in writing of its determination and the reasons therefor in terms calculated to be understood by the claimant. The notice will be sent within 60 days of the claim. The notice shall make specific reference to the pertinent Plan provisions on which the denial is based, and describe any additional material or information is necessary. Such notice shall, in addition, -12- 13 inform the claimant what procedure the claimant should follow to take advantage of the review procedures set forth below in the event the claimant desires to contest the denial of the claim. The claimant may within 90 days thereafter submit in writing to the Company a notice that the claimant contests the denial of his or her claim by the Company and desires a further review. The Plan Appeals Committee of the Company shall within 60 days thereafter review the claim and authorize the claimant to appear personally and review pertinent documents and submit issues and comments relating to the claim to the persons responsible for making the determination on behalf of the Company. The Company will render its final decision with specific reasons therefor in writing and will transmit it to the claimant within 60 days of the written request for review. If the Company fails to respond to a claim filed in accordance with the foregoing within 60 days, the Company shall be deemed to have denied the claim. This Section 8.5 shall not serve to prohibit any Participant from bringing an action in a court of competent jurisdiction to enforce his or her rights under the Plan after satisfaction of the foregoing procedures. 8.6 Unfunded Plan Status. This Plan is intended to be an unfunded plan maintained primarily for the purpose of providing deferred compensation for a select group of management or highly compensated employees, within the meaning of Section 401 of ERISA. All payments pursuant to the Plan shall be made from the general funds of the Company and no special or separate fund shall be established or other segregation of assets made to assure payment. No Participant or other person shall have under any circumstances any interest in any particular property or assets of the Company as a result of participating in the Plan. Notwithstanding the foregoing, the Company may (but shall not be obligated to) create one or more grantor trusts, the assets of which are subject to the claims of the Company's creditors, to assist it in accumulating funds to pay its obligations under the Plan. 8.7 Validity and Severability. The invalidity or unenforceability of any provision of the Plan shall not affect the validity or enforceability of any other provision of the Plan, which shall remain in full force and effect, and any prohibition or unenforceability in any jurisdiction shall not invalidate or render unenforceable such provision in any other jurisdiction. 8.8 Governing Law. The validity, interpretation, construction and performance of the Plan shall in all respects be governed by the laws of Colorado, without reference to principles of conflict of law, except to the extent pre-empted by Federal law. -13- 14 Schedule 1 to Section 3.1 NEWMONT MINING CORPORATION EXECUTIVE CHANGE OF CONTROL SEVERANCE PLAN Participants (as of February 1, 1999) Timothy Acton Paul Lahti David A. Baker Guy L. Lansdown Britt D. Banks Brian Levet D. Scott Barr Thomas P. Mahoney John Brownlie James Miller Robert Bush Jack H. Morris Odin Christensen Richard Ness Steven A. Conte James Osterkamp Thomas Conway Richard Perry Anthony Cost Jean Rendu Tom Enos Scott Santti W. Durand Eppler Timothy J. Schmitt Gary Farmar Lee Shumway Alan Fitzpatrick Gary Simmons Patricia Flanagan Craig Smith Bruce D. Hansen Ali Soltani Joy E. Hansen Douglas Sparks William Hart Trent Tempel Gary Hevelone Michael Thomsen Don Hullinger James Voorhees Jeffrey Huspeni Linda K. Wheeler Donald G. Karras Mark Wood Leendert Krol Leland Krugerud Ihor Kunasz 15 EXHIBIT A NEWMONT MINING CORPORATION EXECUTIVE CHANGE OF CONTROL SEVERANCE PLAN
"Enhanced" "Actual" Pension Pension Benefit Benefit ------------ ------------ 1. Final average earnings (pensionable earnings) $ 350,000 $ 350,000(1) 2. Times 1.75% x .0175 x .0175 ------------ ------------ 6,125 6,125 3. Social Security offset(2) -0- -0- 4. Net benefit unit 6,125 6,125 5. Times years of credited service x 15 x 12(3) ------------ ------------ 91,875 73,500 6. Early commencement of pension adjustment(4) Age 58 55 Factor x 84% x 72% ------------ ------------ 7. Early commencement benefit 77,175 52,920 8. Times life expectancy x 25.658 yrs. x 25.658 yrs. ------------ ------------ 9. Lump sum benefit $ 1,980,156 $ 1,357,821 ============ ============ 10. Benefit payable pursuant to Section 4.2(b)(iii): $ 1,980,156 ( 1,357,821) ----------- $ 622,335 ===========
- -------- (1) Assumes a separation benefit pursuant to Section 4.2(b)(ii) of $500,000 (excluding any amount attributable to Section 4.2(b)(ii)(3)). Such amount is includible pursuant to Section 1.25(b)(i) of Newmont Gold Company's Pension Plan. Divide by "5" for impact on final average earnings. (2) Ignored for purposes of this example. (3) Includes two additional years of deemed service pursuant to Section 1.26(d) of Newmont Gold Company's Pension Plan. (4) For purposes of this example only, Section 3.7 of Newmont Gold Company's Pension Plan is ignored. EX-10.(O) 7 NMC DIRECTORS STOCK AWARD PLAN 1 EXHIBIT 10(o) NEWMONT MINING CORPORATION DIRECTORS' STOCK AWARD PLAN AMENDED AND RESTATED AS OF NOVEMBER 18, 1998 1. PURPOSE. The Directors' Stock Award Plan ("Plan") is intended to (a) attract and retain highly qualified individuals to serve as directors of Newmont Mining Corporation (the "Company"), (b) increase non-employee directors' stock ownership in the Company and (c) align non-employee directors' financial interests more closely with those of the stockholders of the Company. 2. PARTICIPANTS. Participants in the Plan shall consist of directors of the Company who are not employees of the Company or any of the Company's subsidiaries. The term "subsidiary" means a corporation more than 50% of the voting stock of which is owned directly or indirectly by the Company. 3. (a) SHARE AWARDS. On the date of the Annual Meeting of Stockholders of the Company (the "Annual Meeting") in each year, commencing in 1999, each non-employee director of the Company who is elected or re-elected at such Annual Meeting shall receive, for service as a director of the Company previously rendered and to be rendered during the year in which such Annual Meeting is held, shares of Common Stock of the Company (the "Common Stock") in the Determined Amount. If a person who is not an employee of the Company is elected a director of the Company in any year after the Annual Meeting held in such year, then such person shall receive on the effective date of such person's election as a director of the Company, for service as a director of the Company to be rendered during the relevant year, shares of Common Stock in the Determined Amount. The term "Determined Amount" shall mean an amount (rounded down to the nearest whole share) equal to (a) $25,000 divided by (b) the Fair Market Value on the applicable Determination Date. The term "Fair Market Value" of a share of Common Stock as of a given date shall be the average of the high and low sales prices for a share of Common Stock as reported for New York Stock Exchange issues in The Wall Street Journal for such date; provided, however, that if there is no sale of shares of Common Stock reported in The Wall Street Journal for such date, such fair market value shall be the average between the bid and asked prices for a share of Common Stock reported in The Wall Street Journal at the close of trading on such date; provided further, however, that if no such prices are reported for such day, the most recent day for which such prices are available shall be used. In the event that the method for determining the fair market value of a share of Common Stock provided for in the previous sentence shall not be practicable, then such fair market value shall be determined by such other reasonable valuation method as the Company shall, in its reasonable discretion, select and apply in good faith as of the given date. The term "Determination Date" shall mean (a) in the case of a person who is elected a director of the Company at an Annual Meeting, the day immediately preceding the day of such Annual Meeting and (b) in the case of a person who is elected a director of the Company in any year after the Annual Meeting, the day immediately preceding the effective date of such person's election as a director of the Company. 2 (b) A director may forego any award under the Plan for any year by giving irrevocable written notice to such effect to the Secretary of the Company on or before December 31 of the preceding year or, in the case of awards to be made to a person on the effective date of such person's election as a director of the Company, on or prior to such effective date. A director shall not be required to make any payment for any shares of Common Stock issued under the Plan. Subject to Section 6, a director participant in the Plan shall have full beneficial ownership of, and rights and privileges of a shareholder as to awarded shares, including the right to vote and the right to receive dividends. 4. ADJUSTMENTS. If the outstanding Common Stock shall at any time be changed or exchanged by exchanges of shares, recapitalization, merger, consolidation or other corporate reorganization in which the Company is the surviving corporation, the class of shares thereafter to be issued under the Plan shall be appropriately and equitably adjusted. 5. SHARES ISSUED UNDER PLAN. Common Stock issued under the Plan shall be newly issued shares. 6. TRANSFER RESTRICTIONS. The shares of Common Stock received by a participant pursuant to the Plan may not be sold, transferred, pledged, assigned or otherwise encumbered or disposed of by such participant until the earliest of (a) the expiration of five years after the date of the receipt of such shares by such participant, (b) the date such participant ceases to be a director of the Company by reason of death or disability, or (c) the later of (x) the date such participant ceases to be a director of the Company for any reason other than death or disability or (y) the expiration of six months after the date of the receipt of such shares by such participant; provided, however, a participant (i) may sell, transfer or assign shares of Common Stock received by such participant pursuant to the Plan to members of his or her immediate family (as defined below) sharing the same household ("Immediate Family Members"), or a trust, partnership, limited liability company, corporation (including a personal holding company) or similar vehicle established solely for the benefit of, or the partners, members or shareholders of which are solely, the participant and/or any such Immediate Family Members (an "Eligible Transferee") or (ii) may direct the Company, by written notice delivered to the Secretary of the Company prior to the date of issuance of any shares of Common Stock that such participant is entitled to receive pursuant to the Plan, to issue such shares in the name of, and to deliver such shares to, an Eligible Transferee of such participant, provided that, in the case of clause (i) or (ii), the foregoing restrictions on transfer shall apply to such Eligible Transferee. The term "immediate family" shall mean any child, stepchild, grandchild, parent, stepparent, grandparent, spouse, sibling, mother-in-law, father-in-law, son-in-law, daughter-in-law, brother-in-law or sister-in-law, and shall include adoptive relationships. Upon receiving an award of shares of Common Stock pursuant to the Plan, a participant may be required to represent in writing that such shares are being acquired for such participant's account for investment and not with a view to, or for sale in connection with, the distribution of any part thereof. In addition, the shares of Common Stock received by a participant pursuant to the Plan may not be sold, transferred, pledged, assigned or otherwise encumbered or disposed of except pursuant to an available exemption from the registration requirements of the Securities Act of 1933, as amended. -2- 3 Certificates for shares delivered under the Plan may include any legend which the Company deems appropriate to reflect any or all of the foregoing restrictions on transfers. 7. GOVERNMENT AND OTHER REGULATIONS. The obligation of the Company to deliver shares of Common Stock under the Plan shall be subject to all applicable laws, rules and regulations and such approvals by any governmental agencies or regulatory authorities as may be required or be deemed necessary or appropriate by counsel for the Company. 8. NO RIGHT TO CONTINUE AS DIRECTOR. Nothing contained in the Plan shall be deemed to confer upon any person any right to continue as a director of or to be associated in any other way with the Company. 9. GOVERNING LAW; AMENDMENTS. The Plan shall be construed in accordance with the law of the State of Delaware and may be amended or terminated at any time by action of the Board of Directors of the Company. -3- EX-10.(P) 8 CERTIFICATE OF OWNERSHIP AND MERGER 1 EXHIBIT 10(p) CERTIFICATE OF OWNERSHIP AND MERGER MERGING NGC ACQUISITION CO. INTO NEWMONT GOLD COMPANY * * * * * NGC Acquisition Co. ("Acquisition Co."), a corporation organized and existing under the laws of Delaware, DOES HEREBY CERTIFY: FIRST: That Acquisition Co. was incorporated on the twenty-first day of September, 1998, pursuant to the General Corporation Law of the State of Delaware (the "DGCL"). SECOND: That Acquisition Co. owns 93.75% of the outstanding shares of common stock, par value $0.01 per share of Newmont Gold Company ("NGC"), a corporation incorporated on the twenty-sixth day of March, 1965, pursuant to the DGCL and that no other class of capital stock is currently issued and outstanding. THIRD: That Acquisition Co., by the following resolutions of its Board of Directors, duly adopted by unanimous written consent, filed with the minutes of the Board on the 6th day of October, 1998, determined to and did merge itself into NGC: RESOLVED, that Acquisition Co. merge itself into Newmont Gold Company, a Delaware corporation ("NGC"), and NGC shall assume all of Acquisition Co.'s obligations (the "Merger"); and it is further RESOLVED, that NGC shall be the surviving corporation (the "Surviving Corporation") of the Merger; and it is further RESOLVED, that the Certificate of Incorporation of NGC as heretofore amended and as in effect on the date of the Merger shall continue in full force and effect as the Certificate of Incorporation of the Surviving Corporation; provided, however, that pursuant to the Merger, Article FOURTH of the NGC Restated Certificate of Incorporation be amended 2 by deleting the current Article FOURTH in its entirety and inserting in lieu thereof the text set forth on Exhibit A attached hereto; and it is further RESOLVED, that on the effective date of the Merger each share of NGC common stock, par value $0.01 per share ("Common Stock") (other than shares of Common Stock in NGC's treasury and shares of Common Stock held by Acquisition Co., which in each case will be cancelled and other than shares of Common Stock held by stockholders who elect to perfect their appraisal rights pursuant to the Delaware General Corporation Law) will be converted into the right to receive 1.025 shares of common stock, par value $1.60 per share, of Newmont Mining Corporation, a Delaware corporation, together with related share purchase rights; and it is further RESOLVED, that the By-Laws of NGC as they exist on the effective date of the Merger shall be and remain the By-Laws of the Surviving Corporation until the same shall be altered, amended or repealed as therein provided; and it is further RESOLVED, that each of the officers of NGC as they exist on the effective date of the Merger shall be and remain officers of the Surviving Corporation until the next annual meeting of the Surviving Corporation and/or until his or her respective successor shall have been duly elected and qualified; and it is further RESOLVED, that the directors of Acquisition Co. shall be the directors of the Surviving Corporation on the effective date of the Merger, each such director holding the same directorship for the term elected and until his respective successor is duly elected or appointed and qualified; and it is further RESOLVED, that upon the merger becoming effective, all property, rights, privileges, franchises, patents, trademarks, licenses, registrations and other assets of every kind and description of Acquisition Co. shall be transferred to, vested in and devolve upon the Surviving Corporation without further act or deed, and all property, rights and every other interest of Acquisition Co. shall be as effectively the property of the Surviving Corporation as they were of Acquisition Co. and that, from time to time as and when requested by the Surviving Corporation or by its successors or assigns, Acquisition Co. shall execute and deliver or cause to be executed and delivered all such deeds and instruments and to take or cause to be taken such further or other action as the Surviving Corporation may deem necessary or desirable in order to vest in and confirm to the Surviving Corporation title to and possession of any property of Acquisition Co. acquired or to be acquired by reason of or as a result of the Merger, and the proper officers and directors of the Surviving Corporation are fully authorized in the name of Acquisition Co. or otherwise to take any and all such action; and it is further RESOLVED, that the Merger shall become effective at 5:00 p.m. on October 7, 1998; and RESOLVED, that the Vice President and Secretary of Acquisition Co. be, and he is, hereby directed to make and execute such documentation as may be necessary to -2- 3 effectuate the Merger, including a Certificate of Ownership and Merger in the form attached hereto as Annex I (the "Delaware Merger Certificate"), and to cause the Delaware Merger Certificate to be filed with the Secretary of State of Delaware and to do all acts and things whatsoever, whether within or without the State of Delaware, which may be in any way necessary or proper to effect the Merger; and it is further RESOLVED, that each officer of Acquisition Co. be, and each is, authorized, in the name and on behalf of Acquisition Co., to take all such other actions, including executing and delivering such agreements, documents, certificates, instruments and filings as may be necessary or appropriate (such necessity or appropriateness to be conclusively evidenced by the execution and delivery thereof), to effectuate or carry out the purposes and intent of the foregoing resolutions and for the performance of Acquisition Co.'s obligations under the Delaware Merger Certificate and otherwise to consummate the transactions contemplated by the Delaware Merger Certificate; and it is further RESOLVED, that all actions and deeds heretofore taken by any officer of Acquisition Co. in connection with the transactions contemplated by the Delaware Merger Certificate or any of the other transactions contemplated by these resolutions are hereby approved, ratified and confirmed in all respects. FOURTH: That the Merger was approved by the written consent of the sole stockholder of Acquisition Co. on October 6, 1998. FIFTH: Anything herein or elsewhere to the contrary notwithstanding, this merger may be amended or terminated and abandoned by the Board of Directors of Acquisition Co. at any time prior to the effective time and date of the Merger. -3- 4 IN WITNESS WHEREOF, Acquisition Co. has caused this Certificate to be signed by Timothy J. Schmitt, its Vice President and Secretary, as of the 6th day of October, 1998. By /s/ TIMOTHY J. SCHMITT ------------------------------------- Name: Timothy J. Schmitt Title: Vice President and Secretary -4- 5 EXHIBIT A "FOURTH: The total number of shares of all classes of stock which the Company shall have authority to issue is One Thousand (1,000) shares of which all shall be Common Stock of the par value of One Cent ($0.01) per share." EX-12 9 RATIO OF EARNINGS TO FIXED CHARGES 1 EXHIBIT 12 COMPUTATION OF RATIO OF EARNINGS TO COMBINED FIXED CHARGES (AMOUNTS IN THOUSANDS EXCEPT RATIOS) (UNAUDITED)
Year Ended December 31, --------------------------------------------------------------------------- 1998 1997 1996 1995 1994 ------------ ------------ ------------ ------------ ------------ Earnings: Income (loss) before income taxes and cumulative effect of changes in accounting principles $ (541,335) $ 60,477 $ 82,652 $ 177,666 $ 115,755 Adjustments: Net interest expense (1) 78,823 77,067 58,619 47,099 18,588 Amortization of capitalized interest 4,434 3,221 2,359 2,594 2,299 Portion of rental expense representative of interest 3,373 2,714 3,428 2,834 1,581 Minority interest of majority- owned subsidiaries that have fixed charges 70,286 71,438 6,584 9,864 8,298 Undistributed income of less-than-50%-owned entities -- -- (18,359) (7,027) (15,549) ------------ ------------ ------------ ------------ ------------ $ (384,419) $ 214,917 $ 135,283 $ 233,030 $ 130,972 ============ ============ ============ ============ ============ Fixed Charges Net interest expense (1) $ 78,823 $ 77,067 $ 58,619 $ 47,099 $ 18,588 Capitalized interest 13,720 15,604 16,571 14,043 19,982 Portion of rental expense representative of interest 3,373 2,714 3,428 2,834 1,581 ------------ ------------ ------------ ------------ ------------ $ 95,916 $ 95,385 $ 78,618 $ 63,976 $ 40,151 ============ ============ ============ ============ ============ Ratio of Earnings to Fixed Charges (4.0) 2.3 1.7 3.6 3.3 ============ ============ ============ ============ ============
(1) Includes interest expense of majority-owned subsidiaries and amortization of debt issuance costs. EX-13 10 PORTIONS OF 1998 ANNUAL REPORT TO STOCKHOLDERS 1 EXHIBIT 13 NEWMONT MINING CORPORATION MANAGEMENTS 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 (Notes). As described in Note 1, (i) on October 7, 1998, NMC acquired the minority interest of Newmont Gold Company (NGC) and NGC became 100%-owned by NMC, (ii) in May 1997, NMC acquired Santa Fe Pacific Gold Corporation (Santa Fe) and (iii) in February 1997, Newmonts interest in Minera Yanacocha increased to 51.35%. Newmonts consolidated financial statements included Minera Yanacocha beginning in 1997 (previously accounted for on an equity basis) and were restated for periods prior to 1997 to reflect the Santa Fe merger as a pooling of interests. SUMMARY Newmont recorded a net loss of $393.4 million ($2.47 per share) in 1998 compared with net income of $68.4 million ($0.44 per share) in 1997. Results for 1998 included, after tax and minority interest: o $424.7 million ($2.67 per share) for the write-down of assets impaired at a low gold price, o $32.9 million ($0.21 per share) for the cumulative effect of an accounting change for start-up costs and o $5.0 million ($0.03 per share) for the current-year effect of this accounting change. 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 $69.2 million ($0.44 per share) in 1998 and $166.3 million ($1.07 per share) in 1997, compared with earnings of $98.6 million ($0.63 per share) in 1996. Gold sales revenue declined $118.9 million in 1998 to $1.45 billion, but was $348.2 million higher than in 1996. The past two years have been characterized by rising production and an extensive effort by Newmont to reduce costs, optimize operations and defer discretionary spending in order to maximize cash flow in response to declining gold prices. The gold price fell to a 20-year low of $273 an ounce in August 1998 and since has recovered only modestly. As a largely unhedged company, Newmonts realized gold price closely tracks the spot price for the commodity. Newmonts average realized gold price was $310, $354 and $395 per equity ounce in 1998, 1997 and 1996, respectively. Since 1996, total cash costs of production were pared $35 ($4 in 1998) to $183 an ounce. Exploration and research expense was reduced $13 to $17 an ounce (an $8 reduction in 1998) and General and administrative expense was cut $9 to $12 an ounce (a $5 reduction in 1998). As a result, cash flow from operating activities increased to $373.5 million in 1998 from $283.8 million in 1997 and $207.6 million in 1996. Total equity gold production in 1998 increased to 4.07 million ounces from 3.10 million ounces in 1996. Of the nearly one million ounce increase since 1996, approximately 55% came from overseas operations, primarily in Peru and Indonesia, while North American operations accounted for 45%. Over the next two years, total equity production is expected to be between 3.8 million and 4.0 million ounces at a total cash cost per ounce of under $190. Gold reserves at December 31, 1998 totaled 52.6 million equity ounces, essentially unchanged from December 31, 1997. Reserve calculations for both years were based on a long-term price of $350 per ounce. Using long-term gold prices of $325 and $300 per ounce could lower reserves approximately 6% and 16%, respectively. MARKET CONDITIONS AND RISKS GOLD PRICE AND ASSET IMPAIRMENT Changes in the market price of gold significantly affect Newmonts profitability. Gold prices can fluctuate widely and are affected by numerous factors, such as demand, forward selling by producers, central bank sales, purchases and lending, investor sentiment and production levels. The decline in the gold price has occurred concurrently with a strong U.S. dollar, weakened economies in major global regions such as Asia and Russia, central bank selling and lending and general uncertainties surrounding future actions of central banks, especially those in the European Monetary Union. These and other factors could continue to adversely affect market gold prices. Revenue, earnings and cash flow are highly leveraged to the gold price. Based on estimates of 1999 production and expenses, a $10 per ounce change in the gold price would result in an increase or decrease of approximately $38 million in cash flow from operations and approximately $28 million (about $0.16 per share) in net income. 10 2 NEWMONT MINING CORPORATION MANAGEMENTS DISCUSSION AND ANALYSIS Newmont generally sells its production at market prices, but has entered into a forward sales contract for 125,000 ounces per year from its Minahasa mine in Indonesia at an average price of $454 per ounce through December 2000. Additionally, through September 1998 approximately 614,000 ounces from former Santa Fe mines were sold under spot deferred forward contracts at an average price of $423 per ounce. In 1997, Newmont entered into forward purchase contracts at an average price of $331 per ounce, offsetting the remaining Santa Fe spot deferred contracts. The net gain from these contracts was recognized in sales revenue as the related gold was delivered in 1997 and 1998. As a result of the prolonged period of low gold prices, Newmont reviewed its long-lived assets during the fourth quarter of 1998 to determine whether their carrying values were recoverable from projected future cash flows. As discussed in Note 14, a $424.7 million after-tax write-down resulted with respect to Newmonts U.S. operations, primarily former Santa Fe properties in Nevada. Assumptions underlying projected future cash flows are subject to risks and uncertainties. Any differences between significant assumptions and actual market conditions and/or Newmonts performance could have a material effect on Newmonts financial position and results of operations. While gold prices remain at historically low levels, Newmont continues to pursue operating alternatives that maximize cash flow. During 1998, Newmont reduced costs, decreased its workforce and reviewed life-of-mine plans and processing options for optimization and flexibility. Further cost reduction measures are planned for 1999 such that Newmont expects to fund capital expenditures and dividends from operating cash flow without incurring additional debt, excluding project financing for the development of the Batu Hijau copper/gold project in Indonesia. FOREIGN CURRENCY In addition to the U.S., Newmont operates mines 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 that 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 two years, Indonesia has experienced a significant devaluation of its currency, the rupiah. The functional currency for Newmonts Indonesian projects is the U.S. dollar; however, certain receivables, primarily refunds of Value Added Tax, are rupiah-denominated. During 1998 and 1997, $0.9 million and $3.3 million, respectively, were expensed for devaluation of these receivables. Newmonts Minahasa operation and Batu Hijau project are in remote locations and have been largely unaffected by social problems caused by the economic and political situation in Indonesia. INTEREST RATES At December 31, 1998, Newmonts long-term debt of $1,248.7 million included $415.4 million of variable-rate debt with an average interest rate of 6.08%, and fixed-rate debt of $833.3 million, with an average interest rate of 7.48% and an estimated fair value of $840.7 million. Newmonts public debt has received investment-grade ratings from both Moodys Investors Service and Standard & Poors Ratings Services. RESULTS OF OPERATIONS PRODUCTION Increased capacities at Minera Yanacocha in Peru and at Minahasa in Indonesia, as well as expanded refractory ore processing facilities in Nevada, have led to growing production in recent years. This, coupled with cost-reduction efforts and processing higher-grade ore with improved recovery rates, has generally lowered cash costs per equity ounce.
Equity Production Ozs. (000) Total Cash Cost Per Equity Oz. ------------------------------------------------------------------- 1998 1997 1996 1998 1997 1996 ------- ------- ------- ------- ------- ------- Nevada operations 2,769.6 2,776.5 2,328.3 $ 209 $ 205 $ 232 Mesquite, California 154.0 227.9 191.6 176 213 245 La Herradura, Mexico 12.9 -- -- 115 -- -- Minera Yanacocha, Peru* 685.9 530.9 308.3 95 87 100 Zarafshan-Newmont, Uzbekistan 187.3 215.0 163.2 207 201 224 Minahasa, Indonesia 261.0 206.5 112.7 127 156 222 ------- ------- ------- ------- ------- ------- Total/Weighted average 4,070.7 3,956.8 3,104.1 $ 183 $ 187 $ 218 ======= ======= ======= ======= ======= =======
*51.35% beginning February 1997, 38% in 1996 11 3 NEWMONT MINING CORPORATION MANAGEMENTS DISCUSSION AND ANALYSIS 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 Newmonts 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 17 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 and Carlin demonstration bio-oxidation facility process lower-grade refractory ores. Nevada production of 2.77 million ounces in 1998 was essentially unchanged from 1997, but up substantially from 1996. Positively affecting this trend was the start-up of operations at (a) the Twin Creeks autoclaves in the second half of 1997, (b) the Lone Tree flotation plant in March 1997 and (c) the 50%-owned Rosebud mine in February 1997. Higher ore grades and recovery rates and, following the Santa Fe merger, the transfer of selected ore types to the optimal process facility also enhanced production and lowered costs in 1997 and 1998. However, declining availability of oxide ores and a decision to reduce mining levels in the second half of 1998, were partially offsetting factors. Refractory ore treatment facilities generated 42% of Nevadas production in 1998, increasing from 35% and 30% in 1997 and 1996, respectively. Cash costs per ounce, which declined with the rise in production in 1997, increased slightly in 1998 as cost reduction efforts nearly offset higher costs associated with refractory ore processing. During 1998, mining was reduced 26% to 274 million tons with cutbacks at high-cost pits and mines with high waste-to-ore ratios, and processing was optimized to maximize cash flow. The Nevada workforce was pared by 950 employees. Cost reduction efforts will continue in 1999, as mining rates are expected to drop another 25% and certain processing facilities will operate on a periodic basis. Gold from refractory ores will comprise approximately 56% of Nevadas 1999 production. While production will be curtailed by approximately 15%, total cash costs per ounce are expected to increase only slightly. In early 1999, Newmont and Barrick Gold Corporation signed an agreement in principle to exchange approximately two million ounces of reserves and various land rights on the north Carlin Trend. This exchange will create operational and exploration synergies for both companies by consolidating their respective land positions. The transaction is expected to close by the end of the first quarter of 1999. Among other benefits, the exchange will accelerate Newmonts access to the high-grade Deep Post deposit and reduce future development costs. Production at the Mesquite mine, a heap-leach operation in southern California, decreased 32% to 154,000 ounces in 1998 as mining rates and the workforce were reduced to improve cash flow and facilitate an orderly phase-out of operations. Mesquite is reaching the end of its economic life; however, results of development drilling on a recently-acquired adjacent property led to gold reserve additions in 1998 and may extend the mine life. Total cash costs per ounce declined 17% from 1997. Production is expected to increase to about 180,000 ounces in 1999, with somewhat higher ore tons and grades. Total cash costs per ounce will increase slightly. In the third quarter of 1998, production commenced at La Herradura, a 44%-owned joint venture with Minera Peoles, S.A. de C.V., the operator of the heap-leach operation located in Sonora, Mexico. During 1998, production totaled 29,200 ounces (12,900 equity ounces) at a total cash cost of $115 per equity ounce. Production for 1999 is expected to approximate 90,000 ounces (40,000 equity ounces). OVERSEAS OPERATIONS Minera Yanacocha in Peru achieved record production of 1.34 million ounces (685,900 equity ounces) in 1998, 27% higher than the prior year with the completion of an additional mine and facilities in late 1997 and improved recovery rates. Newmonts equity share of 1997 production was 72% higher than in 1996, primarily reflecting Newmonts increased ownership. Production in 1999 is expected to reach 1.45 million ounces (745,000 equity ounces). Total cash costs are comparatively low at Minera Yanacocha because of low waste-to-ore ratios and porous ore that yields high gold recovery without crushing prior to heap leaching. After declining with rising production in 1997, total cash costs rose slightly in 1998 to $95 an ounce because of longer haul distances. Higher waste-to-ore ratios and lower ore grades will cause a minimal increase in costs in 1999. As described in Note 4, Newmont acquired an additional 13.35% interest in Minera Yanacocha in 1997. The acquisition was contested, but resolved in Newmonts favor in 1998 with a decision of the Peruvian Supreme Court. In spite of this final decision, a former partner filed a request for arbitration against the Republic of Peru, alleging that it had been deprived 12 4 NEWMONT MINING CORPORATION MANAGEMENTS DISCUSSION AND ANALYSIS of its shares in Minera 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. 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. After reaching design capacity of 430,000 ounces (215,000 equity ounces) in 1997, lower recovery rates in 1998 caused a drop in production to 374,600 ounces (187,300 equity ounces). However, cash costs per ounce increased only nominally. Recovery rates improved in December 1998 following operational and metallurgical changes, and 1999 production is expected to increase to 400,000 ounces (200,000 equity ounces) with an approximate 5% reduction in cash costs per equity ounce. In Indonesia, production began in 1996 at the Minahasa property, where Newmont has an 80% interest, but receives 100% of the gold production until recouping the bulk of its investment, including interest. Production of 261,000 ounces at a total cash cost of $127 per ounce in 1998 reflected a significant increase in processed ore grades following the addition of a mercury scrubber in late 1997. The devaluation of the rupiah and reduced mining rates also contributed to lower operating costs. Production in 1999 will increase to approximately 300,000 ounces with the commencement of heap-leach operations for low-grade oxide ore. No material change in cash costs is anticipated. FINANCIAL RESULTS Consolidated sales include 100% of Minera Yanacocha production, except in 1996, and Newmonts equity production elsewhere. Variances in sales revenue are illustrated in the following table:
1998 1997 1996 ---------- ---------- ---------- Consolidated sales (in millions) $ 1,453.9 $ 1,572.8 $ 1,105.7 Consolidated production ozs. (000) 4,720.6 4,478.7 2,790.1 Average price received per ounce $ 308 $ 351 $ 396 Average market price per ounce $ 294 $ 331 $ 388 ========== ========== ==========
1998 vs. 1997 1997 vs. 1996 ------------- ------------- Increase (decrease) in consolidated sales due to (in millions): Consolidated production* $ 72.7 $ 251.1 Average gold price received (191.6) (128.3) Consolidation of Minera Yanacocha N/A 344.3 ------------ ------------ Total $ (118.9) $ 467.1 ============ ============
*Excluding Minera Yanacocha in 1996 Realized gold prices higher than average market gold prices resulted from sales under commodity hedging instruments of 18% of equity production in 1998 and 30% in each of 1997 and 1996. Dividends, interest and other for 1998, 1997 and 1996 included $8.3 million, $6.5 million and $3.1 million, respectively, 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 $7.8 million in 1998 from $14.6 million in 1997 reflecting lower interest rates and cash balances. 13 5 NEWMONT MINING CORPORATION MANAGEMENTS DISCUSSION AND ANALYSIS Costs applicable to sales include total cash costs and provisions for estimated final reclamation expenses related to consolidated production. The increase in Costs applicable to sales in 1998 from 1997 primarily related to higher production levels at Minera Yanacocha, partially offset by cost-reduction efforts at all locations.
1998 1997 1996 --------- --------- --------- Costs applicable to sales (in millions): Nevada operations $ 586.2 $ 565.8 $ 544.1 Mesquite 27.9 49.4 47.5 La Herradura 1.5 -- -- Minera Yanacocha 136.5 98.9 -- Zarafshan-Newmont 39.0 43.8 36.9 Minahasa 33.8 32.6 23.8 --------- --------- --------- Total $ 824.9 $ 790.5 $ 652.3 ========= ========= =========
Certain mining costs associated with deposits that have diverse grade and waste-to-ore ratios over the mine life are capitalized. In 1998, 1997 and 1996, such costs were capitalized for certain deposits at the Nevada operations ($29.5 million, $66.5 million and $130.4 million, respectively) and at Minahasa ($3.6 million, $8.4 million and $6.1 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. Capitalized mining costs also declined in 1997 with lower mining rates following a pit wall failure at Nevadas Post deposit. Capitalized mining costs are expected to increase approximately 15% in 1999 as mining at the Post deposit resumes. Depreciation, depletion and amortization (DD&A) increased 9% in 1998 and 30% in 1997 from each prior year. The addition of mine and leach facilities as well as higher production at Minera Yanacocha caused the 1998 increase, while the consolidation of Minera Yanacocha, completion of Nevadas mine and mill expansion projects and a full year of Minahasa operations accounted for the 1997 increase.
1998 1997 1996 --------- --------- --------- Depreciation, depletion and amortization (in millions): Nevada operations $ 172.6 $ 168.9 $ 157.2 Mesquite 19.1 23.5 27.2 La Herradura 0.6 -- -- Minera Yanacocha 59.6 41.7 -- Zarafshan-Newmont 11.3 11.9 10.8 Minahasa 20.1 18.3 8.7 Other 5.8 1.5 0.2 --------- --------- --------- Total $ 289.1 $ 265.8 $ 204.1 ========= ========= =========
In 1999, an approximate $50 million reduction in DD&A will result primarily from the 1998 asset write-down. Because of the decline in gold prices, Newmont reduced 1998 Exploration and research and General and administrative expenses 31% and 25%, respectively, from 1997. In 1999, these combined expenses are targeted to be approximately $15 million to $20 million lower than in 1998. Interest expense, net of amounts capitalized was $78.8 million, $77.1 million and $58.6 million in 1998, 1997 and 1996, respectively. The 1997 increase from 1996 reflected higher debt balances following the consolidation of Minera Yanacochas $100 million financing obtained during 1997 and credit facility borrowings for expansion projects. Net interest expense for 1999 is expected to be comparable to 1998. Write-down of assets totaled $614.9 million ($424.7 million net of tax) in 1998 and related to Property, plant and mine development ($528 million), Inventories ($80 million) and Other long-term assets ($7 million). Nevada operations, primarily at Santa Fe properties, accounted for $587.6 million, certain Santa Fe exploration properties, $13.4 million and other investments, $13.9 million (including $7.2 million at the Mesquite mine in California). In 1997, Nevada stockpile inventories were written-down $9.5 million. 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 included $10.0 million and $8.7 million for severance costs associated with workforce reductions in 1997 and 1996, respectively, and $4.8 million, $5.0 million and $6.6 million in 1998, 1997 and 1996, respectively, for environmental obligations associated with former mining activities. In 1998, the $180.9 million income tax benefit was primarily attributable to the asset write-down. The 1997 tax benefit ($7.9 million) reflected the consolidation of Minera Yanacocha, synergies from the Santa Fe merger and refunds from settling prior-year tax audits. The 1996 benefit ($15.9 million) included foreign tax credits associated with Minera Yanacocha and benefits from resolving prior-year tax issues. 14 6 NEWMONT MINING CORPORATION MANAGEMENTS DISCUSSION AND ANALYSIS 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 17, 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 the Batu Hijau project and $11 million for Nevada operations. During 1998, substantially all start-up costs were related to Batu Hijau (reflected in Equity loss of affiliated companies). LIQUIDITY AND CAPITAL RESOURCES During 1998, cash flow from operating activities of $373.5 million and draw-downs of existing cash balances of $67.1 million funded capital expenditures ($216.0 million), net advances to joint ventures and affiliates ($131.0 million), payment for the acquisition of an additional interest in Minera Yanacocha ($75.9 million) and dividends ($19.1 million). Newmont plans to use cash on hand at December 31, 1998 of $79.1 million and operating cash flow to fund 1999 capital expenditures, advances to affiliates and dividends. Consolidated debt reduction is also planned in 1999, assuming comparable or higher gold price realizations. INVESTING ACTIVITIES AND CAPITAL EXPENDITURES BATU HIJAU As discussed in Note 3, Newmont has a 45% interest in the Batu Hijau project in Indonesia. At December 31, 1998 and 1997, Newmonts investment in Batu Hijau was $277.2 million and $76.9 million, respectively. The project was 72% complete at year-end 1998 and is on schedule for start-up in the fourth quarter of 1999. Batu Hijau contains proven and probable reserves of 10.6 billion pounds of copper (4.8 billion equity pounds) and 11.8 million ounces of gold (5.3 million equity ounces). 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, a port, electrical generation facilities, interest during construction, cost escalation and working capital is expected to approximate $1.9 billion. During 1998, Newmont advanced project funding of $130.8 million (reflected in Advances to joint ventures and affiliates) and expects to fund approximately $150 million in 1999. Financing facilities for $1.0 billion are guaranteed by Newmont and its partner, Sumitomo Corporation(Sumitomo), 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). The lenders carry all political risk coverage on their investment from inception of the project. Debt repayments will begin the earlier of six months after project completion or June 15, 2001. The financing facilities provided $640 million in 1998, with the remaining balance to be drawn in 1999. Capital Expenditures As part of Newmonts strategic focus on maximizing cash flow, coupled with the completion in 1997 of several Nevada expansion projects, 1998 capital expenditures were reduced $199.1 million from 1997.
1998 1997 1996 --------- --------- --------- Capital expenditures (in millions): Nevada operations $ 95.6 $ 231.0 $ 450.8 Minera Yanacocha 82.5 113.7 -- Minahasa 6.4 24.2 27.4 Mesquite 6.7 18.8 3.6 Zarafshan-Newmont 0.9 5.6 7.3 La Herradura 9.7 -- -- Batu Hijau -- -- 15.1 Other projects and capitalized interest 14.2 21.8 43.6 --------- --------- --------- Total $ 216.0 $ 415.1 $ 547.8 ========= ========= =========
During 1998, capital expenditures in Nevada included capitalized mining costs ($29.5 million), refractory leach pads ($22.0 million), process equipment ($14.6 million) and other ongoing capital requirements. Minera Yanacochas expenditures included $47.8 million for mine/facility expansion and $16.4 million for development drilling. In 1997, Nevadas expenditures for completion of the Winnemucca Region Sage Mill and other processing equipment totaled $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 Minera Yanacocha expenditures included mine and facility expansion ($78.4 million) and development drilling ($14.0 million). In 1996, capital expenditures included $296.8 million in the Winnemucca Region, primarily for expansion projects and $130.4 million for capitalized mining costs. 15 7 NEWMONT MINING CORPORATION MANAGEMENTS DISCUSSION AND ANALYSIS Capital spending in 1999 is expected to be approximately $175 million, including $75 million at Minera Yanacocha (primarily for leach pad expansion and mine geology work at the La Quinua deposit); $55 million in Nevada (primarily for capitalized mining costs); $23 million in capitalized interest (primarily for Batu Hijau); $12 million at Minahasa (including $6 million for construction of leach facilities); and $5 million at Zarafshan-Newmont. FINANCING ACTIVITIES Newmont has a $1.0 billion revolving credit facility with a consortium of banks that expires in June 2002. At December 31, 1998, $385 million was outstanding under this facility. The interest rate is variable and was 5.8% at December 31, 1998. Of the $615 million available under this facility, an estimated $515 million could be utilized, if necessary, given current loan covenant compliance requirements; however, Newmont does not anticipate additional borrowing under this facility. Scheduled minimum long-term debt repayments are $47.6 million in 1999. Newmont expects to fund maturities of its debt through operating cash flow and/or by refinancing the debt as it becomes due. OTHER On October 7, 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 NMCs carrying value of its minority interest (approximately $207 million) was allocated to assets and liabilities of NGC (primarily to Investment in Batu Hijau and to Minera Yanacocha Property, plant and mine development) and stockholders equity increased $259 million. Cash used for accounts payable and accrued expenses of $51.9 million in 1998 included payments for interest, severance and other benefit-related accruals. ENVIRONMENTAL Included in 1998 capital expenditures was approximately $5 million required to comply with environmental regulations. Expenditures of $4 million are anticipated in 1999. Ongoing costs to comply with environmental regulations have not been a significant component of Newmonts cash operating costs. Estimated future reclamation and remediation costs relating to currently producing mines are accrued over each mine life and at December 31, 1998, $56.0 million had been accrued. Newmont spent $10.9 million, $13.0 million and $14.8 million in 1998, 1997 and 1996, respectively, for environmental obligations related to former mining sites discussed in Note 18, and expects to spend approximately $9 million in 1999. At December 31, 1998, $44.9 million was accrued for total estimated future costs associated with such obligations. During 1997, approximately $10 million, net of related expenses, was received pursuant to settlements with several insurance companies for remediation expenses at certain former mining sites. These proceeds were applied against the charges for changes in estimated future costs. Because of the uncertain nature of these liabilities, Newmont estimates that it is reasonably possible that the ultimate liability may be as much as 70% greater or 15% lower than the amount accrued at December 31, 1998. 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. YEAR 2000 READINESS DISCLOSURE Newmont has undertaken a comprehensive Year 2000 Readiness Program (Program) to address its year 2000 issues, which generally refer to the ability of hardware, software and control systems to correctly identify two-digit references to specific years, beginning with the year 2000. The Program, conducted by a cross-functional employee group and outside consultants, consists of four work streams at each geographic location, including automated processes, process control systems (including embedded technology such as microprocessors), personal computers and third-party material suppliers and contractors. Within each work stream there are five phases consisting of assessment; analysis; remediation (including development of contingency plans); testing; and certification. A third party audit of the Program was completed in 1998 with favorable findings and Newmont has incorporated resulting recommendations that further strengthen its Program. Year 2000 readiness for all material systems is on schedule for mid-1999 completion. Each location has completed the assessment and analysis phases of each work stream. As of the end of January 1999, the remediation phase was approximately 70% complete and the testing and certification phases were approximately 50% and 40% complete, respectively. Based on results from the assessment and analysis phases, the estimated cost of the Program is expected to total approximately $5 million, of which $1.6 million had been spent as of January 31, 1999. Newmont does not separately track its internal costs 16 8 NEWMONT MINING CORPORATION REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS incurred for the Program; however, such costs are principally the related payroll costs for its information systems group. Although Newmont believes that the Program will adequately address year 2000 issues and prevent significant business disruptions, there can be no assurances that compliance-related failures will not occur. Such compliance-related failures, including those of material third-party suppliers (such as suppliers of power, oxygen, chemicals and refining), could result in temporary delays in Newmonts ability to generate cash from its operations. Contingency plans have been developed and are continually reviewed and refined to mitigate any such temporary delays. However, if such delays occur, they are not reasonably likely to have a material adverse effect on Newmonts financial condition or results of operations. 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 NMCs Annual Report on Form 10-K as well as other filings with the Securities and Exchange Commission. Many of these factors are beyond Newmonts 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. To 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, 1998 and 1997, 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, 1998. 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 did not audit the financial statements of Santa Fe Pacific Gold Corporation in 1996, a company merged into the Company during 1997 in a transaction accounted for as a pooling of interests, as discussed in Note 1. Such statements are included in the consolidated financial statements of the Company and reflect 30 percent of total consolidated revenues in 1996, after restatement to reflect certain adjustments as set forth in Note 1. The financial statements of Santa Fe Pacific Gold Corporation prior to those adjustments were audited by other auditors whose report has been furnished to us and our opinion, insofar as it relates to amounts included for Santa Fe Pacific Gold Corporation, is based solely on the report of the other auditors. We conducted our audits in accordance with generally accepted auditing standards. 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 and the report of other auditors provide a reasonable basis for our opinion. In our opinion, based on our audits and the report of other auditors, 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, 1998 and 1997, and the results of their operations and their cash flows for each of the three years in the period ended December 31, 1998, in conformity with generally accepted accounting principles. As explained in Notes 2 and 17 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 27, 1999. 17 9 NEWMONT MINING CORPORATION STATEMENTS OF CONSOLIDATED OPERATIONS
Years Ended December 31, (In thousands, except per share) 1998 1997 1996 ----------- ----------- ----------- Sales and other income Sales $ 1,453,856 $ 1,572,757 $ 1,105,666 Dividends, interest and other 21,057 55,235 29,460 ----------- ----------- ----------- 1,474,913 1,627,992 1,135,126 ----------- ----------- ----------- Costs and expenses Costs applicable to sales 824,858 790,545 652,305 Depreciation, depletion and amortization 289,067 265,765 204,081 Exploration and research 68,373 98,420 92,863 General and administrative 49,724 66,380 65,671 Interest, net of amounts capitalized 78,823 77,067 58,619 Write-down of assets 614,893 9,500 -- Merger and related expenses -- 162,674 -- Other 11,060 25,726 22,521 ----------- ----------- ----------- 1,936,798 1,496,077 1,096,060 ----------- ----------- ----------- Pre-tax income (loss) before minority interest, equity income (loss) and cumulative effect of a change in accounting principle (461,885) 131,915 39,066 Income tax benefit 180,876 7,900 15,949 Minority interest in Minera Yanacocha (66,193) (66,882) -- Minority interest in Newmont Gold Company (4,093) (4,556) (6,584) Equity income (loss) of affiliated companies (9,164) -- 50,170 ----------- ----------- ----------- Net income (loss) before cumulative effect of a change in accounting principle (360,459) 68,377 98,601 Cumulative effect of a change in accounting principle, net (32,924) -- -- ----------- ----------- ----------- Net income (loss) and comprehensive income (loss) $ (393,383) $ 68,377 $ 98,601 =========== =========== =========== Net income (loss) before cumulative effect of a change in accounting principle per common share, basic and diluted $ (2.27) $ 0.44 $ 0.63 =========== =========== =========== Net income (loss) per common share, basic and diluted $ (2.47) $ 0.44 $ 0.63 =========== =========== =========== Basic weighted average shares outstanding 159,010 156,243 155,573 =========== =========== ===========
The accompanying notes are an integral part of these statements. 18 10 NEWMONT MINING CORPORATION CONSOLIDATED BALANCE SHEETS
At December 31, (In thousands, except shares and per share) 1998 1997 ---------- ---------- ASSETS Cash and cash equivalents $ 79,086 $ 146,232 Short-term investments 11,802 12,790 Accounts receivable 52,066 52,410 Inventories 280,371 339,549 Other current assets 89,755 90,389 ---------- ---------- Current assets 513,080 641,370 Property, plant and mine development, net 2,048,707 2,598,809 Investment in Batu Hijau 277,221 76,861 Long-term inventory 159,674 174,445 Other long-term assets 188,072 122,497 ---------- ---------- Total assets $3,186,754 $3,613,982 ========== ========== LIABILITIES Short-term debt $ -- 25,771 Current portion of long-term debt 47,575 43,301 Accounts payable 37,943 83,101 Other accrued liabilities 126,825 242,358 ---------- ---------- Current liabilities 212,343 394,531 Long-term debt 1,201,131 1,179,410 Reclamation and remediation liabilities 94,840 88,651 Other long-term liabilities 146,099 192,033 ---------- ---------- Total liabilities 1,654,413 1,854,625 ---------- ---------- Commitments and contingencies (See Notes 3, 4 and 18) Minority interest in Minera Yanacocha 92,808 62,253 Minority interest in Newmont Gold Company -- 106,017 ---------- ---------- STOCKHOLDERS EQUITY Common stock$1.60 par value; 250 million shares authorized; 167.5 million and 156.8 million shares issued, less 309 thousand and 307 thousand treasury shares, respectively 267,544 250,350 Additional paid-in capital 1,060,803 817,040 Retained earnings 111,186 523,697 ---------- ---------- Total stockholders equity 1,439,533 1,591,087 ---------- ---------- Total liabilities and stockholders equity $3,186,754 $3,613,982 ========== ==========
The accompanying notes are an integral part of these statements. 19 11 NEWMONT MINING CORPORATION STATEMENTS OF CONSOLIDATED CHANGES IN STOCKHOLDERS EQUITY
Common Stock Additional --------------------------- Paid-In Retained (In thousands) Shares Amount Capital Earnings ----------- ----------- ----------- ----------- Balance at December 31, 1995 150,713 $ 241,141 $ 546,253 $ 479,895 Common stock issuance 4,651 7,442 233,814 (13,765) Shares issued under stock compensation plans 666 1,065 23,579 (1,190) Net income -- -- -- 98,601 Common stock dividends -- -- -- (54,305) Other -- -- (315) 537 ----------- ----------- ----------- ----------- Balance at December 31, 1996 156,030 249,648 803,331 509,773(1) 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) =========== =========== =========== ===========
(1) Includes accumulated other comprehensive income for adjustments to minimum pension liabilities of $2,274, $2,191 and $2,168 as of December 31, 1998, 1997 and 1996, respectively. The accompanying notes are an integral part of these statements. 20 12 NEWMONT MINING CORPORATION STATEMENTS OF CONSOLIDATED CASH FLOWS
Years Ended December 31, (In thousands) 1998 1997 1996 --------- --------- --------- Operating Activities Net income (loss) $(393,383) $ 68,377 $ 98,601 Adjustments to reconcile net income (loss) to net cash provided by operating activities: Depreciation, depletion and amortization 289,067 265,765 204,081 Amortization of capitalized mining costs 52,634 55,254 -- Write-down of assets 614,893 9,500 -- Deferred tax benefit (221,020) (48,800) (16,607) Cumulative effect of change in accounting principle 32,924 -- -- Undistributed earnings (losses) of affiliates 9,164 -- (18,359) Minority interest, net of dividends 33,647 7,735 1,589 Merger related asset write-offs -- 27,288 -- Other 3,379 8,374 3,585 (Increase) decrease in operating assets: Accounts receivable 17,341 (12,188) (4,245) Inventories (7,821) (149,296) (63,233) Other assets (5,193) 8,414 (13,125) Increase (decrease) in operating liabilities: Accounts payable and other accrued liabilities (51,894) 41,983 11,891 Other liabilities (225) 1,375 3,430 --------- --------- --------- Net cash provided by operating activities 373,513 283,781 207,608 --------- --------- --------- Investing Activities Additions to property, plant and mine development (216,025) (415,082) (547,757) Acquisition of additional interest in Minera Yanacocha (75,868) -- -- Advances to joint ventures and affiliates (131,029) (67,119) (3,684) Repayments from joint ventures and affiliates -- 16,356 -- Cash effect of consolidating Minera Yanacocha -- 40,705 -- Other 2,099 48 (2,335) --------- --------- --------- Net cash used in investing activities (420,823) (425,092) (553,776) --------- --------- --------- Financing Activities Proceeds from short-term debt -- 7,630 16,802 Repayments of short-term debt (25,771) (27,840) -- Proceeds from long-term debt 135,000 828,000 255,000 Repayments of long-term debt (109,017) (702,541) (4,375) Proceeds from issuance of common stock 256 12,580 265,449 Dividends paid on common stock (19,105) (54,540) (54,305) Other (1,199) (2,799) (344) --------- --------- --------- Net cash (used in) provided by financing activities (19,836) 60,490 478,227 --------- --------- --------- Net change in cash and cash equivalents (67,146) (80,821) 132,059 Cash and cash equivalents at beginning of year 146,232 227,053 94,994 --------- --------- --------- Cash and cash equivalents at end of year $ 79,086 $ 146,232 $ 227,053 ========= ========= =========
The accompanying notes are an integral part of these statements. 21 13 NEWMONT MINING CORPORATION 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 is currently under construction. NGC MERGER Prior to October 7, 1998, NMC owned 93.75% of the common stock of Newmont Gold Company (NGC), through which all of NMCs operations are conducted. On October 7, 1998, NMC acquired the remaining 6.25% interest in NGC through the merger of a wholly-owned subsidiary of NMC into NGC. Each outstanding share of NGC, other than the shares held by the Company, which were canceled, were converted into 1.025 shares of NMC. 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 value of the shares of NMC common stock issued to NGC stockholders pursuant to the merger, which totaled approximately 10.7 million shares valued at $24.25 per share. 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 NGCs 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 Minera 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 On May 5, 1997, NMC completed a merger with Santa Fe Pacific Gold Corporation (Santa Fe), a U.S. gold mining company, under which each outstanding share of Santa Fe common stock was exchanged for 0.43 of a share of NMC common stock. The outstanding shares of common stock of Santa Fe were converted into approximately 56.5 million shares of NMC common stock, reflected as outstanding for all periods presented. NMC also reserved approximately 566,000 shares of its common stock for issuance in connection with outstanding Santa Fe stock options that were assumed by NMC in the merger. The merger qualified as a tax-free reorganization and was accounted for as a pooling of interests. The consolidated financial statements have been restated for periods prior to the merger to include the operations of Santa Fe, adjusted to conform with NMCs accounting policies and presentations. 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. The more significant transaction costs included a $65.2 million fee paid to terminate an existing definitive merger agreement between Santa Fe and another company, investment advisory fees of $20.5 million, employee benefit and severance costs of $18.0 million and professional fees of $18.4 million. The asset write-offs, related to certain Santa Fe assets that did not meet the Company's valuation criteria, included a write-down of the Elkhorn, Montana exploration project and the write-off of duplicative facilities, equipment and information system costs. 22 14 NEWMONT MINING CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS The following table provides a reconciliation of sales and net income reported by NMC to the consolidated amounts presented (in thousands).
For the Years Ended December 31, 1997 1996 ----------- ----------- Sales Pre-merger NMC $ 357,316 $ 768,455 Santa Fe 130,540 337,211 Post-merger 1,084,901 -- Merger adjustments -- -- ----------- ----------- Consolidated $ 1,572,757 $ 1,105,666 =========== =========== Net income Pre-merger NMC $ 31,608 $ 85,076 Santa Fe 31,702 21,068 Post-merger 110,441 -- Merger adjustments (105,374) (7,543) ----------- ----------- Consolidated $ 68,377 $ 98,601 =========== ===========
Merger adjustments reflect conforming accounting policy changes, transaction fees, other one-time expenses associated with the merger and the tax effect of such adjustments. Accounting policy changes were primarily related to the accounting treatment for capitalized mining costs. Santa Fe included certain depreciation, depletion and amortization charges in capitalized mining costs. To the extent Santa Fe capitalized such charges as mining costs or as inventory, restatement adjustments have been made to reflect these charges against earnings in the appropriate period. In addition, ore and in-process inventories were not maintained on the same basis as NMC, which resulted in certain balance sheet reclassifications. OPERATIONS The Company's sales result from operations in the United States, Mexico, Peru, Uzbekistan and Indonesia. Operations commenced in Indonesia in March 1996 and in Mexico in July 1998. The Company had an equity interest in a mining operation in Peru that was consolidated beginning in 1997 as a result of the acquisition of an additional interest described in Note 4. 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 its more-than-50%-owned subsidiaries. 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 primarily invested in United States Treasury bills, with lesser amounts invested in 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. At December 31, 1998 and 1997, $8.5 million of such investments secured letters of credit. Investments in incorporated entities in which the Company's ownership is greater than 20% and less than 50% are accounted for by the equity method and are included in long-term assets. Income or loss from such investments is included in Equity income (loss) of affiliated companies. 23 15 NEWMONT MINING CORPORATION 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 17). 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 operations commence. 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 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 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 actual 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 14). REVENUE RECOGNITION Gold sales are recognized when gold is produced. 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 mines 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 managements 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. 24 16 NEWMONT MINING CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 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. COMMODITY INSTRUMENTS On a limited basis, the Company has entered into forward sales 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. 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. In June 1998, the Financial Accounting Standards Board issued Statement of Financial Accounting Standards (SFAS) No. 133, Accounting for Derivative Instruments and Hedging Activities, which 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, 1999. 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 derivatives 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 is currently assessing the effect of adopting SFAS No. 133 on its financial statements and plans to adopt the statement on January 1, 2000. EARNINGS PER COMMON SHARE Earnings or loss per share are presented for basic and diluted net income or 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 (the numerator) by the weighted-average number of 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). The denominator is based on the following weighted-average number of common shares (in thousands):
1998 1997 1996 ------- ------- ------- Basic 159,010 156,243 155,573 Diluted 159,010 156,347 155,905 ------- ------- -------
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, except those resulting from investments by and distributions to owners. The Company 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 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 1998 presentation. 25 17 NEWMONT MINING CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS NOTE 3 BATU HIJAU In July 1996, the Company and Sumitomo Corporation (Sumitomo) entered into a definitive partnership agreement to develop and operate the Batu Hijau copper/gold deposit in Indonesia. Batu Hijau contains proven and probable reserves of 10.6 billion pounds of copper (4.8 billion equity pounds) and 11.8 million ounces of gold (5.3 million equity ounces). Start-up is expected in the fourth quarter of 1999, with a projected mine life in excess of 20 years. The estimated cost for development of the open pit mine, mill, and infrastructure including employee housing, a port, electrical generation facilities, interest during construction, cost escalations and working capital is expected to approximate $1.9 billion. Under the terms of the agreement with Sumitomo, the Company contributed its interest in the company that owns the project to the partnership and Sumitomo contributed an agreed upon amount of cash. The Company retained an indirect 45% interest in the company that owns the project and Sumitomo has an indirect 35% interest. The remaining 20% interest is held by an unrelated Indonesian company. Until recouping its construction investment, including interest, the Company recognizes 56.25% of Batu Hijaus income. As a result of the ownership structure, effective July 1996, the Company accounted for its investment in Batu Hijau as an equity investment. At December 31, 1998 and 1997 such investment was $277.2 million and $76.9 million, respectively. Differences between 56.25% of the partnerships net assets and the Company's investment include $220 million for the fair market value adjustment recorded by the partnership in conjunction with the Company's initial contribution, $26 million for intercompany charges and $122 million for the fair market value adjustment recorded by the Company in conjunction with the NGC minority interest acquisition. These amounts will be amortized or depreciated upon commencement of production. The Company's investment also reflects $42 million for exploration expenditures incurred prior to the formation of the partnership. In connection with the Batu Hijau project, the entity owning the project has entered into a construction contract for approximately $1.0 billion. Financing agreements were signed in July 1997 for $1.0 billion in funds for the project and the Company and Sumitomo are funding $0.9 billion. The financing is 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 with respect to a $125 million contingent support facility that the Company and Sumitomo will provide). Repayment of borrowings under the financing will be over a 13-year period beginning the earlier of six months after project completion or June 15, 2001, and will bear interest at blended fixed and floating rates. Based on current market rates at December 31, 1998, the average interest rates would be approximately 5.7% and 6.8% pre-completion and post-completion, respectively. Following is summarized financial information for the partnership (in thousands):
Years Ended December 31, 1998 1997 1996 ----------- ----------- ----------- Revenues $ 93 $ 540 $ -- Loss before cumulative effect of a change in accounting principle (19,284) (2,598) -- Net loss (69,410) (2,598) -- Dividends received $ -- $ -- $ -- ----------- ----------- -----------
At December 31, 1998 1997 ----------- ----------- Current assets $ 17,576 $ 16,320 Property, plant and mine development, net 1,430,260 664,397 Other assets 104,238 34,855 Current liabilities 153,066 134,675 Long-term debt 640,000 -- Other liabilities 17,120 2,200 ----------- -----------
NOTE 4 ADDITIONAL INTEREST IN MINERA YANACOCHA The Company has an interest in Minera Yanacocha, a gold mining operation located in Peru. Prior to 1997, that interest was 38.0% 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 Geologiques et Minieres (BRGM), the geological and mining bureau of the French government. In September 1994, BRGM announced its intention to transfer its 24.7% interest in Minera Yanacocha to a third party. The 26 18 NEWMONT MINING CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Company and Compaia de Minas Buenaventura, S.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 February 1997, the Superior Court upheld the decision of the trial court. As a result, the Company reflected the increase in its ownership from 38.0% to 51.35% as of February 1997. In June 1998, the Peruvian Supreme Court issued a resolution upholding the Superior Court decision and resolving the litigation in favor of the Company and Buenaventura. 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, the Company believes that Mine Ors claims are unfounded. It is unclear at this time what effect, if any, the arbitration might have on the Company. See Note 16 for summarized 1996 Minera Yanacocha financial information. NOTE 5 INVENTORIES
At December 31, (In thousands) 1998 1997 ---------- ---------- Current: Ore and in-process inventories $ 138,341 $ 172,589 Precious metals 62,642 82,594 Materials and supplies 78,254 82,819 Other 1,134 1,547 ---------- ---------- $ 280,371 $ 339,549 ========== ========== Ore-in-stockpiles (included in Long-term inventory) $ 159,674 $ 174,445 ========== ==========
As described in Note 14, the Company wrote down certain assets at December 31, 1998, reducing ore and in-process inventories approximately $67 million and materials and supplies approximately $13 million. NOTE 6 PROPERTY, PLANT AND MINE DEVELOPMENT
At December 31, (In thousands) 1998 1997 ----------- ----------- Land and mining claims $ 292,410 $ 362,049 Buildings and equipment 2,442,554 2,536,810 Mine development 584,325 537,819 Construction-in-progress 60,018 154,974 ----------- ----------- 3,379,307 3,591,652 Accumulated depreciation, depletion and amortization (1,584,585) (1,343,885) Capitalized mining costs 253,985 351,042 ----------- ----------- $ 2,048,707 $ 2,598,809 =========== ===========
As described in Note 14, the Company wrote down certain assets at December 31, 1998, reducing Property, plant and mine development approximately $528 million. NOTE 7 OTHER ACCRUED LIABILITIES
At December 31, (In thousands) 1998 1997 -------- -------- Payroll and related benefits $ 44,242 $ 53,349 Interest 26,000 28,081 Royalties 6,264 5,671 Reclamation and remediation 6,073 9,157 Severance benefits 2,908 10,000 Purchase price payable (see Note 4) -- 59,100 Other 41,338 77,000 -------- -------- $126,825 $242,358 ======== ========
27 19 NEWMONT MINING CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS NOTE 8 INCOME TAXES The Company's income tax benefit consisted of (in thousands):
Years Ended December 31, 1998 1997 1996 --------- -------- -------- Current: Domestic $ -- $ 13,700 $ 3,347 Foreign (40,144) (54,600) (4,005) --------- -------- -------- (40,144) (40,900) (658) --------- -------- -------- Deferred: Domestic 234,509 57,822 18,232 Foreign (13,489) (9,022) (1,625) --------- -------- -------- 221,020 48,800 16,607 --------- -------- -------- $ 180,876 $ 7,900 $ 15,949 ========= ======== ========
The Company's income tax 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, 1998 1997 1996 --------- --------- --------- U.S. corporate income tax at statutory rate $ 161,660 $ (46,170) $ (13,673) Percentage depletion 29,793 39,155 32,620 Valuation allowance on deferred tax assets (26,448) (1,400) (3,970) Resolution of tax issues associated with prior years -- 12,885 6,000 Foreign tax credits 8,905 4,377 -- Foreign losses (earnings) 8,553 1,377 (4,842) Other (1,587) (2,324) (186) --------- --------- --------- $ 180,876 $ 7,900 $ 15,949 ========= ========= =========
The Company's Pre-tax income (loss) before minority interest, equity income (loss) and cumulative effect of a change in accounting principle consisted of (in thousands):
Years Ended December 31, 1998 1997 1996 --------- --------- --------- Domestic $(670,383) $ (60,989) $ 42,677 Foreign 208,498 192,904 (3,611) --------- --------- --------- $(461,885) $ 131,915 $ 39,066 ========= ========= =========
Components of the Company's consolidated deferred income tax liabilities and assets are as follows (in thousands):
At December 31, 1998 1997 --------- --------- Deferred tax liabilities: Depletion of the cost of land and mining claims $ (91,589) $ (64,599) Net undistributed earnings from subsidiaries (56,033) (16,913) Capitalized mining costs (65,348) (83,049) Capitalized interest (17,228) (13,046) Accelerated tax depreciation -- (65,261) Mine development costs -- (35,137) Other (1,151) (1,260) --------- --------- Deferred tax liabilities $(231,349) $(279,265) --------- --------- Deferred tax assets: Exploration costs 101,981 99,652 Depreciation 81,623 -- Alternative minimum tax credit carry forward 52,983 46,684 Capitalized inventory costs 34,863 4,915 Foreign tax credit carry forward 12,701 -- Remediation and reclamation costs 24,633 40,875 Mine development costs 22,399 -- Net operating loss carry forwards 16,046 27,670 Retiree benefit costs 15,504 19,621 Sale/leaseback transaction, net 6,878 10,029 Deferred gain on interest rate hedges 2,386 2,426 Relocation/reorganization costs 1,285 1,876 Other 7,463 7,480 --------- --------- 380,745 261,228 Valuation allowance for deferred tax assets (41,800) (15,400) --------- --------- Net deferred tax assets 338,945 245,828 --------- --------- Net deferred tax assets (liabilities) $ 107,596 $ (33,437) ========= =========
Primarily based on estimates of future sources of taxable income, the Company believes that it, more likely than not, will utilize $338.9 million of the $380.7 million of deferred income tax assets at December 31, 1998. This estimate reflects a valuation allowance of $41.8 million. 28 20 NEWMONT MINING CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS NOTE 9 DEBT LONG-TERM DEBT Long-term debt consists of (in thousands):
At December 31, 1998 1997 ----------- ----------- Sale-leaseback of refractory ore treatment plant $ 343,339 $ 349,134 Credit facility 385,000 316,000 838% debentures, net 199,889 199,866 858% notes 150,000 150,000 Medium-term notes 42,000 42,000 Project financing 128,478 165,711 ----------- ----------- 1,248,706 1,222,711 Current maturities (47,575) (43,301) ----------- ----------- $ 1,201,131 $ 1,179,410 =========== ===========
Scheduled minimum long-term debt repayments are $47.6 million in 1999, $26.1 million in 2000, $25.9 million in 2001, $564.8 million in 2002, $39.3 million in 2003 and $545.0 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, 1998 and 1997 were $578.8 million and $608.5 million, respectively. Payments began in January 1996 and are $29.7 million annually in 1999 through 2004. 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%. 21 NEWMONT MINING CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS CREDIT FACILITIES On June 11, 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, 1998, $385 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 the Company and are subject to adjustment if changes in the Company's long-term debt ratings occur. As of and for the year ended December 31, 1998, the interest rate was 5.8%. 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, 1998 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 incurrence of 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, 1998 and 1997. The debentures were issued by Santa Fe and subsequent to the merger are guaranteed by NGC. The debentures were priced at 99.928% to yield 8.386% and are not redeemable prior to maturity. 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 $204.9 million and $213.3 million at December 31, 1998 and 1997, 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, 1998 and 1997. 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, 1998 and 1997, the estimated fair value of this debt was $154.4 million and $159.6 million, respectively. 29 22 NEWMONT MINING CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS MEDIUM-TERM NOTES Unsecured notes totaling $42 million were outstanding as of December 31, 1998 and 1997, with a weighted average fixed interest rate of 7.75% and maturing on various dates ranging from 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, 1998 and 1997, the estimated fair value of these notes was $42.2 million and $43.2 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, 1998 and 1997, $94 million and $98 million 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 $91.8 million at December 31, 1998, and approximated the related carrying amount at December 31, 1997. Minera Yanacocha also had $9.9 million and $23.8 million outstanding under loans with the International Finance Corporation (IFC) and with Deutsche Investitions und Entwicklungsgesellschaft mbH (DEG) at December 31, 1998 and 1997, 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 9.1% as of and for the years ended December 31, 1998 and 1997, and the fair value of the fixed-rate portion of such loans approximated carrying value. All Minera Yanacocha debt (non-recourse to its shareholders) is secured by certain restricted funds and substantially all of Minera Yanacochas property, plant and equipment. Zarafshan-Newmont The Company, through a wholly-owned subsidiary, is a 50% participant in the Zarafshan-Newmont Joint Venture in the Republic of Uzbekistan. The other 50% participants are two Uzbekistan government entities. As of December 31, 1998, Zarafshan-Newmont had $49.3 million outstanding under a project financing loan secured by the assets of the project. The loan is to be repaid in semi-annual installments until 2001. The average interest rate is between 3.9 and 4.25 percentage points over the three-month LIBOR. The weighted average interest rates for 1998 and 1997 were 9.5% and 9.6%, respectively, and the interest rates at December 31, 1998 and 1997 were 9.2% and 9.7%, respectively. The carrying amount of the loan is estimated to approximate its fair market value. Until defined completion tests have been satisfied, the Company has guaranteed payment of certain amounts due under the loan, which totaled $23.8 million at December 31, 1998, and the Uzbek partners have guaranteed payment of the balance. After satisfaction of the completion tests, the loan becomes non-recourse to Zarafshan-Newmont partners. The lenders have agreed to extend the completion test date to April 2000. SHORT-TERM DEBT The Company's short-term debt at December 31, 1997 consisted of bank debt with a weighted average interest rate of approximately 7% that was repaid in 1998. CAPITALIZED INTEREST Capitalized interest was $13.7 million, $15.6 million and $16.6 million in 1998, 1997 and 1996, respectively. 30 23 NEWMONT MINING CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS NOTE 10 STOCKHOLDERS EQUITY COMMON STOCK OFFERINGS As discussed in Note 1, NMC issued 10.7 million shares of common stock in conjunction with the acquisition of NGCs minority interest on October 7, 1998. In January 1996, NMC issued 4.65 million shares of common stock for $51.87 per share under an existing shelf registration statement with the Securities and Exchange Commission. Proceeds of $241.3 million were used to fund the Company's operations. DIVIDENDS The Company paid dividends of $0.12 per common share in 1998, $0.39 per share in 1997 and $0.48 per share in 1996. Santa Fe paid dividends of $0.05 per Santa Fe common share in 1996. PREFERRED SHARE PURCHASE RIGHTS Each share of NMCs 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. NOTE 11 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, 1998, 1,859,851 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. 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 NMCs 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, 1998, 503,354 of these options were outstanding. 31 24 NEWMONT MINING CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS The following table summarizes annual total stock option activity for each of the three years in the period ended December 31:
1998 1997 1996 ----------------------- ----------------------- ----------------------- 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 4,068,828 $ 41 3,063,087 $ 43 2,719,682 $ 38 Granted 2,257,583 $ 26 1,602,802 $ 35 1,216,916 $ 49 Exercised (8,502) $ 30 (439,363) $ 31 (666,164) $ 37 Forfeited (364,941) $ 37 (157,698) $ 47 (207,347) $ 38 -------- ----------- --------- ----------- --------- ----------- Outstanding at end of year 5,952,968 $ 35 4,068,828 $ 41 3,063,087 $ 43 Options exercisable at year end 2,644,156 $ 44 1,944,027 $ 43 1,320,799 $ 40 ========= =========== ========= =========== ========= =========== Weighted average fair value of options granted during the year $ 18.34 $ 14.31 $ 18.46
The following table summarizes information about stock options outstanding at December 31, 1998 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 - --------------- ----------- ---------------- -------- ----------- ----- $21 to $29 2,250,682 9.4 years $ 26 83,333 $ 29 $30 to $35 734,054 8.2 years $ 32 386,977 $ 32 $37 to $44 1,662,317 7.3 years $ 39 1,104,571 $ 39 $45 to $59 802,561 7.3 years $ 54 802,561 $ 54 --------- ------- --------- ------ $21 to $59 5,449,614 8.3 years $ 36 2,377,442 $ 43
Information about all other stock options outstanding at December 31, 1998 is summarized below:
Options Outstanding Options Exercisable ---------------------------------------- ------------------------ Weighted Weighted Weighted Range of Average Average Average Exercise Number Remaining Exercise Number Exercise Type of Option 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 4.5 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 4.8 years $ 37 -- $ --
32 25 The Company applies APB Opinion No. 25 and related interpretations in accounting for stock options. Accordingly, no compensation cost has been recognized for its stock options. Had compensation cost for the options been determined based on fair value at grant dates in 1998, 1997 and 1996, 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, 1998 1997 1996 ----------- ----------- ----------- Net income (loss) (000) As reported $ (393,383) $ 68,377 $ 98,601 Pro forma $ (406,484) $ 57,540 $ 93,057 Net income (loss) per share, basic and diluted As reported $ (2.47) $ 0.44 $ 0.63 Pro forma $ (2.56) $ 0.37 $ 0.60 ----------- ----------- -----------
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 1998, 1997 and 1996, respectively: weighted average risk-free interest rates of 4.5%, 5.8% and 6.1%; dividend yield of 0.5% for 1998 and 1% for the other periods; expected lives of six years for 1998 and five years for the other periods; and volatility of 85%, 40% and 35%, 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 from the date of the grant. In 1998, 31,705 shares of restricted stock were issued under ITIP, of which 28,052 shares remain outstanding at December 31, 1998. Also in 1998, the Company awarded 10,643 shares of restricted stock to certain key executives. Compensation expense recorded for these grants was $1.2 million and $0.8 million in 1998 and 1997, respectively. NOTE 12 EMPLOYEE PENSION AND OTHER BENEFIT PLANS For the year ended December 31, 1998, the Company adopted SFAS No. 132, Employers Disclosure about Pensions and Other Postretirement Benefits. SFAS No. 132 revises employers pension and other postretirement benefit plan disclosures but does not change measurement or recognition associated with these plans. It standardizes disclosure requirements for pensions and other postretirement benefits to the extent practicable. 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 for each plan is five years of service. The plans benefit formulas are based on an employees years of credited service and either (1) such employees last five years average pay (salaried plan), (2) a percentage of annual pay (international plan) or (3) 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, 33 26 NEWMONT MINING CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 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, 1998, and a statement of the funded status as of December 31 of both years (in thousands):
Pension Benefits Other Benefits 1998 1997 1998 1997 --------- --------- --------- --------- Change in Benefit Obligation: Benefit obligation at beginning of year $ 118,099 $ 96,465 $ 42,898 $ 31,013 Service cost-benefits earned during the year 7,023 6,529 3,604 2,908 Interest cost 8,122 7,435 2,961 2,317 Amendments -- 5 -- 4,998 Actuarial (gain)/loss 4,775 12,827 1,785 2,692 Curtailment -- (1,867) -- -- Special benefits -- 899 -- -- Benefits paid (4,609) (4,194) (1,205) (1,030) --------- --------- --------- --------- Benefit obligation at end of year $ 133,410 $ 118,099 $ 50,043 $ 42,898 ========= ========= ========= ========= Change in Fair Value of Assets: Fair value of assets at beginning of year $ 108,585 $ 97,784 $ -- $ -- Adjustment to fair value of assets 287 (1,657) -- -- Actual return on plan assets 8,064 15,409 -- -- Employer contributions 2,173 1,243 1,205 1,030 Benefits paid (4,609) (4,194) (1,205) (1,030) --------- --------- --------- --------- Fair value of assets at end of year $ 114,500 $ 108,585 $ -- $ -- ========= ========= ========= ========= Funded status $ (18,910) $ (9,514) $ (50,043) $ (42,898) Unrecognized prior service cost 1,565 1,679 3,246 3,476 Unrecognized net loss (gain) 10,573 5,340 (1,936) (2,706) Unrecognized net obligation (asset) 288 203 -- -- --------- --------- --------- --------- Accrued cost $ (6,484) $ (2,292) $ (48,733) $ (42,128) ========= ========= ========= =========
In connection with the Santa Fe merger, the Company's projected pension benefit obligation increased $0.9 million for special pension benefits to certain key executives and decreased $1.9 million for curtailment resulting from the reduction in workforce. At December 31 of both years, the Company's hourly pension plan was the only qualified pension plan with an accumulated benefit obligation (ABO) in excess of plan assets. This plans ABO was $13.7 million and $11.5 million at December 31, 1998 and 1997, respectively, while the fair value of plan assets was $11.3 million and $10.0 million as of the same dates. Assets in qualified plans consist of stocks, bonds and cash. The Company's non-qualified pension plans and postretirement benefit plans have ABOs in excess of plan assets. The ABO was $4.4 million and $3.9 million for supplemental pension plans and $50.0 million and $42.9 million for postretirement benefit plans, at December 31, 1998 and 1997, respectively. The Company maintains trusts to fund these benefits. The trust maintained to fund the supplemental pension plan also funds death benefits for officers of the Company. This trust is funded at the discretion of the Company and had a balance, which approximated market value, of $1.5 million at December 31, 1998 and $1.7 million at December 31, 1997. The trust used to fund postretirement benefits, which can also be used to pay other employee benefits, had assets with a market value of $0.7 million and $1.3 million at December 31, 1998 and 1997, respectively. 34 27 NEWMONT MINING CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS The following table provides amounts recognized in the consolidated balance sheets as of December 31 (in thousands):
Pension Benefits Other Benefits 1998 1997 1998 1997 ---------- ---------- ---------- ---------- Amounts recognized in the consolidated balance sheets: (Accrued) benefit cost $ (13,374) $ (9,189) $ (48,733) $ (42,128) Intangible asset 3,427 3,151 -- -- Accumulated other comprehensive income 3,463 3,746 -- -- ---------- ---------- ---------- ---------- Net amount recognized $ (6,484) $ (2,292) $ (48,733) $ (42,128) ========== ========== ========== ==========
In accordance with the provisions of SFAS No. 87, an adjustment was required to reflect a minimum liability for the supplemental pension plan in 1998, 1997 and 1996. 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 $2.3 million, $2.2 million and $2.2 million (net of related deferred income tax benefits) at December 31, 1998, 1997 and 1996, respectively. The following table provides components of net periodic pension benefit cost for the indicated fiscal years (in thousands):
Pension Benefits Other Benefits --------------------------------------------------------- 1998 1997 1996 1998 1997 1996 ------- ------- ------- ------- ------- ------- Components of net periodic pension benefit cost: Service cost $ 7,023 $ 6,529 $ 5,590 $ 3,604 $ 2,908 $ 2,845 Interest cost 8,122 7,435 6,342 2,961 2,317 2,017 Expected return on plan assets (9,093) (7,895) (7,195) -- -- -- Amortization of prior service cost 119 119 31 232 -- -- Amortization of loss/(gain) 280 297 424 (12) (302) (299) Amortization of net obligation (asset) (86) (86) (85) -- (235) (119) ------- ------- ------- ------- ------- ------- Total net periodic pension benefit cost $ 6,365 $ 6,399 $ 5,107 $ 6,785 $ 4,688 $ 4,444 ======= ======= ======= ======= ======= =======
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 employees service to the Company. Assumptions used in measuring the Company's benefit obligation were as follows:
Pension Other Benefits Benefits ------------------------------------- 1998 1997 1998 1997 ---- ---- ---- ---- Weighted-average assumptions as of December 31: Discount rate 6.75% 7.00% 6.75% 7.00% Expected return on plan assets 9.00% 9.00% N/A N/A Rate of compensation increase 4.00% 4.00% 4.00% 4.00% ---- ---- ---- ----
The assumed health care cost trend rates to measure the expected cost of benefits at December 31, 1998 start at a 6% annual increase for coverage before age 65 and a 5% annual increase for coverage after age 64. The assumed health care cost trend rates to measure the expected cost of benefits at December 31, 1997 start at a 7% annual increase for coverage before age 65 and a 6% annual increase for coverage after age 64. These rates were assumed to decrease one percentage point each year until a 5% annual rate of increase was reached and assumed 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 $ 1,150 $ (950) Effect on the health care component of the accumulated postretirement benefit obligation $ 7,300 $(6,000)
35 28 NEWMONT MINING CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS SAVINGS PLANS 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. Prior to 1998, the Company also had a qualified defined contribution savings plan that covered salaried employees of Santa Fe. At January 1, 1998 this plan was combined with NMCs salaried plan. 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. Employees covered by the Santa Fe plan received matching contributions up to 4% of base salary and eligible hourly employees also received an employer contribution equal to 2% of before-tax eligible compensation. The Company's matching contributions under these plans were $8.7 million, $8.9 million and $8.2 million in 1998, 1997 and 1996, respectively. NOTE 13 DIVIDENDS, INTEREST AND OTHER Included in Dividends, interest and other were $8.3 million, $6.5 million and $3.1 million in 1998, 1997 and 1996, respectively, for recoveries from business interruption insurance. Also included in 1997 was a gain of $23.7 million related to closing Santa Fe put and call option contracts. NOTE 14 WRITE-DOWN OF ASSETS 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 15 SUPPLEMENTAL CASH FLOW INFORMATION Net cash provided by operating activities includes the following cash payments (in thousands):
Year Ended December 31, 1998 1997 1996 -------- -------- -------- Income taxes, net of refunds $ 52,695 $ 46,671 $ (9,708) Interest, net of amounts capitalized $ 80,903 $ 76,711 $ 55,644 -------- -------- --------
As described in Note 1, in October 1998, NMC acquired the remaining 6.25% interest in NGC. This transaction (accounted for under the purchase method of accounting) 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). The following reflects non-cash adjustments recorded on January 1, 1997 for the Minera Yanacocha transaction described in Note 4 (in thousands): Assets Inventories $ 15,661 Other current assets 28,848 ---------- Current assets 44,509 Property, plant and mine development, net 106,308 Other long-term assets 1,887 ---------- Total assets $ 152,704 ========== Liabilities Current portion of long-term debt $ 14,256 Other current liabilities 31,190 ---------- Current liabilities 45,446 Long-term debt 24,244 Other long-term liabilities 15,520 ---------- Total liabilities $ 85,210 ==========
In connection with the Minera Yanacocha acquisition described above, the Company recorded $59.8 million in Property, plant and mine development representing the excess of the cost to purchase the additional interest over the net book value of such interest. 36 29 NEWMONT MINING CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS As described in Note 3, in July 1996, the Company began accounting for its 45% interest in Batu Hijau as an equity investment. Related non-cash adjustments were as follows (in thousands):
Increase (decrease) ------------------ Assets Other current assets $ (849) Property, plant and mine development, net (43,936) Investment in Batu Hijau (3,607) Liabilities Accounts payable 182 ---------- Total $ (48,210) ==========
In 1998 and 1996 the Company retired mostly fully depreciated property, plant and mine development with an original cost of $50 million and $77 million, respectively, which is not reflected in the statements of consolidated cash flows. In 1997 and 1996, the Company recognized income tax benefits of $12.9 million and $6.0 million, respectively, resulting from the resolution of certain tax issues associated with prior years. NOTE 16 SEGMENT AND RELATED INFORMATION In 1998, the Company adopted SFAS No. 131, Disclosures about Segments of an Enterprise and Related Information that established standards for reporting information about operating segments. SFAS No. 131 also established standards for related disclosures about products and services, geographic areas and major customers. Information for 1997 and 1996 has been restated to conform to this standard. 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 the United States, Mexico, 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). Financial information relating to the Company's consolidated segments is as follows (in millions):
YEAR ENDED DECEMBER 31, 1998 --------------------------------------------------------------------------------------- North American Minera 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 income (loss) and cumulative effect of a change in accounting principle (511.2) 177.1 41.2 (0.5) (168.5) (461.9) 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 $ 605.3 $ 3,186.8 ---------- ---------- ---------- ---------- ---------- ----------
*Not reduced for minority interest
Year Ended December 31, 1997 ---------------------------------------------------------------------------------------- North American Minera 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 income (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 37 30 NEWMONT MINING CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Year Ended December 31, 1996 --------------------------------------------------------------------------------- North American Zarafshan Operations Minahasa Newmont Other Consolidated ------------ ------------ ------------ ------------ ------------ Sales $ 995.1 $ 48.0 $ 62.6 $ -- $ 1,105.7 Interest income -- -- 1.4 7.4 8.8 Interest expense -- -- 7.5 51.1 58.6 Depreciation and amortization 184.4 8.7 10.8 0.2 204.1 Pre-tax income (loss) before minority interest, equity income (loss) and cumulative effect of a change in accounting principle 218.2 11.4 15.3 (205.8) 39.1 Capital expenditures $ 454.4 $ 27.4 $ 7.3 $ 58.7 $ 547.8 ------------ ------------ ------------ ------------ ------------
Financial information relating to the Company's equity investments was as follows (in millions):
1996 1998 1997 ------------------------------ Batu Batu Batu Minera Hijau Hijau Hijau Yanacocha ---------- ---------- ---------- ------------ For the years ended December 31: Sales $ -- $ -- $ -- $ 313.9 Interest income -- -- -- 2.3 Interest expense -- -- -- 3.7 Depreciation and amortization 0.1 0.1 -- 24.6 Net income (loss) before cumulative effect of a change in accounting principle (26.8) (2.4) (1.6) 132.0** Cumulative effect of a change in accounting principle (49.3) -- -- -- Capital expenditures 873.6 257.7 78.3 45.1 At December 31, Total Assets $ 1,351.4 $ 502.5 N/A N/A --------- --------- --------- ---------
** Excludes intercompany charges. Reported net income was $124.7 million. Equity income (loss) of affiliated companies was $(9.2) million in 1998 (based on 56.25% of the Batu Hijau loss, after elimination of approximately ~$11 million of intercompany interest) and $50.2 million in 1996 (based on 38% of Minera Yanacocha earnings). Equity losses for Batu Hijau for 1997 and 1996 were included in Exploration expense. In 1996, the Company received $29.6 million in dividends related to its interest in Minera Yanacocha. Revenues from export and domestic sales were as follows (in millions):
For the Years Ended December 31, ---------------------------------------------- 1998 1997 1996 ------------ ------------ ------------ Europe $ 1,382.0 $ 1,498.0 $ 749.4 United States 7.2 6.0 341.3 Other 64.7 68.8 15.0 ------------ ------------ ------------ $ 1,453.9 $ 1,572.8 $ 1,105.7 ============ ============ ============
Long-lived assets in the United States and other countries are as follows (in millions): As of December 31:
1998 1997 ------------ ------------ United States $ 1,849.7 $ 2,205.6 Indonesia 394.1 269.0 Other 429.9 498.0 ------------ ------------ $ 2,673.7 $ 2,972.6 ============ ============
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 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. In 1996, sales to one customer accounted for $213 million or 19% of total sales. NOTE 17 ACCOUNTING CHANGE As described in Note 1, 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. The quarters ended March 31, June 30, and September 30, 1998 were restated to reflect the accounting change, which totaled $5.0 million (net of tax and minority interest) for the year (see Note 19). Previously capitalized start-up costs (incurred prior to January 1, 1998) of $32.9 million (net of tax and minority interest) were reflected as the cumulative effect of the accounting change and included approximately $18 million for Batu Hijau and $11 million for Nevada operations. 38 31 NEWMONT MINING CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS NOTE 18 COMMITMENTS AND CONTINGENCIES ENVIRONMENTAL OBLIGATIONS The Company(1)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. The Company cannot predict such future expenditures. Estimated future reclamation and remediation costs are based principally on legal and regulatory requirements. At December 31, 1998 and 1997, $56.0 million and $45.6 million, respectively, were accrued for reclamation and remediation costs relating to currently producing mineral properties. Certain appeals have been filed with the Department of Interior Board of Land Appeals in conjunction with the Twin Creeks Environmental Impact Statement and the Lone Tree Mine Plan of Operations. 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(1)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(1)s best estimate of its liability for these matters, $44.9 million and $52.2 million were accrued for such obligations at December 31, 1998 and 1997, 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 15% lower than the amount accrued at December 31, 1998. The amounts accrued for these matters are reviewed periodically based upon facts and circumstances available at the time. In 1998, 1997 and 1996, charges related to environmental obligations associated with former mining activities of $4.8 million, $15.0 million and $6.6 million, respectively, were included in Other expenses. In 1997, the Company received $10 million, net of related expenses for the settlement of litigation against certain insurance carriers related to recovery of costs for certain of its remediation activities. These net proceeds were applied against charges taken for changes in estimated future remediation costs. Details about certain of the more significant sites involved are discussed below. IDARADO MINING COMPANY ((3)IDARADO(2))--80.1%-OWNED In July 1992, the Company and Idarado signed a consent decree with the State of Colorado ((3)State(2)) 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 ((3)CERCLA(2)), generally referred to as the (3)Superfund Act.(2) 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 was substantially complete by the end of 1997. 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 $9.6 million letter of credit to secure their potential obligations under the consent decree. RESURRECTION MINING COMPANY ((3)RESURRECTION(2))--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 ((3)EPA(2)) 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-1800s, which government agencies claim are causing substantial environmental problems in the area. 39 32 NEWMONT MINING CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 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. The parties are in negotiations regarding remaining remedial work for this area, which primarily consists of environmental monitoring and operating and maintenance activities. The parties have entered into a consent decree with respect to the remaining area that apportions liabilities and responsibilities for the site among the various parties. The EPA has approved remedial actions for selected components of Resurrection(1)s portion of the site, which were initiated in 1995. However, 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. DAWN MINING COMPANY ((3)DAWN(2))--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. In 1991, Dawn(1)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(1)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(1)s then 51% owner) liable for any costs incurred as a result of Dawn(1)s failure to comply with the lease and applicable regulations. Other government agencies also might attempt to hold the Company 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. If asserted, the Company will vigorously contest any such claims. The Company cannot reasonably predict the likelihood or outcome of any future action against Dawn or the Company arising from this matter. Dawn has received a license for a mill closure plan that could generate funds to close and reclaim both the mine and the mill. GUARANTEE OF THIRD PARTY INDEBTEDNESS The Company guaranteed a former subsidiary(1)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. COMMODITY INSTRUMENTS In 1996, the Company entered into a forward sales contract that continues through December 2000 for 125,000 ounces of gold per year from its Minahasa property at an average price of $454 an ounce. OTHER COMMITMENTS AND CONTINGENCIES Under a 1992 agreement, Barrick Goldstrike Mines Inc. ((3)Barrick(2)), is mining the Post deposit which is located on both companies(1) property and with respect to which both companies share mining costs and de-watering costs. The Company paid $33.0 million and $63.8 million for its share of such costs in 1997 and 1996, respectively. No payments were made in 1998, but payments of approximately $18 million are expected during 1999. 40 33 NEWMONT MINING CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 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. 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(1)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, 1998, there were $76.3 million of outstanding letters of credit and surety bonds primarily for bonding reclamation plans and electric supply and reinsurance agreements. The Company has provided investment collateral for $8.5 million of these letters of credit. The remaining $67.8 million represents unsecured letters of credit. The 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. STOCK MARKET INFORMATION (UNAUDITED) Newmonts 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, the Swiss Stock Exchange and the Lima Stock Exchange. The following table sets forth, for the periods indicated, the high and low sales prices per share of Newmonts common stock as reported on the New York Stock Exchange Composite Tape.
1998 1997 --------------------- --------------------- High Low High Low -------- -------- -------- -------- First quarter $ 31.63 $ 23.75 $ 47.50 $ 38.25 Second quarter $ 34.88 $ 21.75 $ 39.88 $ 33.50 Third quarter $ 25.25 $ 13.25 $ 45.88 $ 35.25 Fourth quarter $ 30.31 $ 16.25 $ 45.63 $ 26.56
On March 4, 1999, there were approximately 26,064 stockholders of record of Newmonts common stock. A dividend of $0.03 per share of common stock outstanding was declared in each quarter of 1998, or a total of $0.12 per share for such year. In 1997, a dividend of $0.12 per share of common stock outstanding was declared in the first three quarters and $0.03 per share in the fourth quarter, or a total of $0.39 per share for such year. The determination of the amount of future dividends, however, will be made by Newmonts Board of Directors from time to time and will depend on Newmonts future earnings, capital requirements, financial condition and other relevant factors. 41 34 NEWMONT MINING CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS NOTE 19 UNAUDITED SUPPLEMENTARY DATA QUARTERLY DATA The following is a summary of selected quarterly financial information (in millions except per share amounts):
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 $ 30.5625 $ 23.625 $ 24.25 $ 18.25 $ 18.25 ------------ ------------ ------------ ------------ ------------
1997 ------------------------------------------------------------------------- Three Months Ended --------------------------------------------------------- Year Ended March 31, June 30, September 30, December 31, December 31, ------------ ------------ ------------ ------------ ------------ Sales $ 355.0 $ 421.8 $ 383.8 $ 412.2 $ 1,572.8 Gross profit(1) $ 110.5 $ 143.9 $ 132.2 $ 129.9 $ 516.5 Net income (loss)(4) $ 51.2 $ (64.6) $ 43.1 $ 38.6 $ 68.4 Net income (loss) per common share, basic and diluted $ 0.32 $ (0.41) $ 0.28 $ 0.25 $ 0.44 Basic weighted average shares outstanding 156.1 156.1 156.3 156.5 156.2 Dividends declared per NMC common share $ 0.12 $ 0.12 $ 0.12 $ 0.03 $ 0.39 Closing price of NMC common stock $ 38.75 $ 39.00 $ 44.94 $ 29.375 $ 29.375 ------------ ------------ ------------ ------------ ------------
(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 17. The accounting principle was applied retroactively to January 1, 1998, and 1998 quarterly information was restated to reflect a) $32.9 million for the cumulative effect of the change and $0.5 million additional expense, net of tax, in the quarter ended March 31, and b) $1.1 million and $0.8 million additional expense, net of tax, in the quarters ended June 30 and September 30, respectively. The effect of these changes on previously reported information was as follows:
March 31, June 30, September 30, ----------------------- ----------------------- ----------------------- Originally Originally Originally Reported Restated Reported Restated Reported Restated ---------- ---------- ---------- ---------- ---------- ---------- Gross profit $ 95.4 $ 96.2 $ 94.1 $ 94.8 $ 69.7 $ 70.4 Net income before cumulative effect of a change in accounting principle $ 30.8 $ 30.3 $ 25.7 $ 24.6 $ 6.9 $ 6.1 Net income (loss) $ 30.8 $ (2.7) $ 25.7 $ 24.6 $ 6.9 $ 6.1 Net income before cumulative effect of a change in accounting principle per common share, basic and diluted $ 0.20 $ 0.19 $ 0.16 $ 0.16 $ 0.04 $ 0.04 Net income (loss) per common share, basic and diluted $ 0.20 $ (0.02) $ 0.16 $ 0.16 $ 0.04 $ 0.04 ---------- ---------- ---------- ---------- ---------- ----------
(3) Included an after-tax charge of $2.6 million for expenses related to the adoption of SOP 98-5 and an after-tax impairment charge of $424.7 million in the quarter ended December 31. (4) Included an after-tax gain of $14.4 million from the close-out of put and call option contracts in the quarter ended March 31 and an after-tax charge of $109.2 million and $3.1 million for expenses and write-offs associated with the Santa Fe merger (see Note 1) in the quarters ended June 30 and December 31, respectively. RATIO OF EARNINGS TO FIXED CHARGES The ratio of earnings to fixed charges was (4.0), 2.3, 1.7, 3.6, and 3.3 for the years ended December 31, 1998, 1997, 1996, 1995, and 1994, 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. 42 35 NEWMONT MINING CORPORATION OPERATING STATISTICS FOR THE YEAR ENDED DECEMBER 31, NORTH AMERICAN MINE PRODUCTION (Dry Short Tons 000)
1998 1997 ------------------------------------------------------- -------------------------------------------------- Average Mill Leach Average Mill Leach Grade* Ore Ore Waste Total Grade* Ore Ore Waste Total ------- ------- ------- ------- ------- ------- ------- ------- ------- ------- NEVADA Open-Pit Mines Carlin Trend: Carlin South 5,973 17,075 25,598 48,646 7,649 27,544 41,312 76,505 Carlin North-Post 40 6 11,925 11,971 4,721 7 47,914 52,642 Carlin North- Genesis Complex 428 7,441 14,924 22,793 612 10,381 26,331 37,324 Carlin North-Other 695 4,872 19,699 25,266 1,860 3,668 20,843 26,371 Twin Creeks 4,703 7,591 97,882 110,176 4,418 11,191 99,942 115,551 Lone Tree Complex 2,641 3,616 47,822 54,079 2,874 7,104 50,267 60,245 ------- ------- ------- ------- ------- ------- ------- ------- ------- ------- Total Open-Pit 0.053 14,480 40,601 217,850 272,931 0.047 22,134 59,895 286,609 368,638 ------- ------- ------- ------- ------- ------- ------- ------- ------- ------- Nevada Underground Carlin North 591 0 0 591 683 0 0 683 Carlin Rain 26 4 0 30 145 29 0 174 Rosebud (50%) 168 0 0 168 113 0 0 113 ------- ------- ------- ------- ------- ------- ------- ------- ------- ------- Total Underground 0.625 785 4 0 789 0.517 941 29 0 970 ------- ------- ------- ------- ------- ------- ------- ------- ------- ------- TOTAL NEVADA 0.062 15,265 40,605 217,850 273,720 0.052 23,075 59,924 286,609 369,608 CALIFORNIA Mesquite 0.016 0 11,537 13,457 24,994 0.016 0 16,463 29,142 45,605 ------- ------- ------- ------- ------- ------- ------- ------- ------- ------- MEXICO La Herradura 0.022 0 1,647 4,238 5,885 -- ------- ------- ------- ------- ------- ------- ------- ------- ------- ------- TOTAL NORTH AMERICAN 0.053 15,265 53,789 235,545 304,599 0.045 23,075 76,387 315,751 415,213 ======= ======= ======= ======= ======= ======= ======= ======= ======= ======= 1996 ------------------------------------------------------- Average Mill Leach Grade* Ore Ore Waste Total ------- ------- ------- ------- ------- NEVADA Open-Pit Mines Carlin Trend: Carlin South 8,407 30,891 57,805 97,103 Carlin North-Post 1,037 136 78,180 79,353 Carlin North- Genesis Complex 1,753 12,493 43,822 58,068 Carlin North-Other 661 1,289 4,969 6,919 Twin Creeks 3,136 18,238 106,845 128,219 Lone Tree Complex 1,910 4,736 41,645 48,291 ------- ------- ------- ------- ------- Total Open-Pit 0.037 16,904 67,783 333,266 417,953 ------- ------- ------- ------- ------- Nevada Underground Carlin North 546 0 0 546 Carlin Rain 160 6 0 166 Rosebud (50%) 0 0 0 0 ------- ------- ------- ------- ------- Total Underground 0.471 706 6 0 712 ------- ------- ------- ------- ------- TOTAL NEVADA 0.040 17,610 67,789 333,266 418,665 CALIFORNIA Mesquite 0.023 0 15,528 25,891 41,419 ------- ------- ------- ------- ------- MEXICO La Herradura ------- ------- ------- ------- ------- TOTAL NORTH AMERICAN 0.038 17,610 83,317 359,157 460,084 ======= ======= ======= ======= =======
NORTH AMERICAN MILL AND LEACH PRODUCTION (Dry Short Tons 000)
1998 1997 ------------------------------------------------- ------------------------------------------------ Ounces Ounces Dry Tons Average Recovery Produced Dry Tons Average Recovery Produced (000) Grade* Rate (%) (000s) (000) Grade* Rate (%) (000s) ----------- ----------- ----------- ----------- ----------- ----------- ----------- ----------- NEVADA Oxide Mills: Carlin Trend Mill No. 3 121 0.195 84.2 20.5 0 0.000 0.0 0.0 Mill No. 4 804 0.139 78.5 93.6 2,104 0.125 76.6 207.7 Mill No. 5 5,515 0.117 85.9 577.7 6,170 0.087 81.5 443.7 Twin Creeks 1,542 0.155 93.2 175.6 3,633 0.096 86.2 286.4 Lone Tree Complex 432 0.140 87.9 56.4 680 0.138 83.0 71.0 ----------- ----------- ----------- ----------- ----------- ----------- ----------- ----------- Total Oxide Mills 8,414 0.129 86.8 923.8 12,587 0.099 81.9 1,008.8 ----------- ----------- ----------- ----------- ----------- ----------- ----------- ----------- Refractory Mills: Carlin Roaster 2,325 0.226 89.5 477.7 2,330 0.336 87.3 700.9 Twin Creeks Autoclaves 2,722 0.240 89.1 581.0 763 0.206 89.5 144.0 Lone Tree Autoclave 2,251 0.101 86.5 110.6 1,382 0.106 85.8 114.2 ----------- ----------- ----------- ----------- ----------- ----------- ----------- ----------- Total Refractory Mills 7,298 0.193 88.8 1,169.3 4,475 0.242 87.4 959.1 ----------- ----------- ----------- ----------- ----------- ----------- ----------- ----------- Total Mills 15,712 0.158 88.0 2,093.1 17,062 0.137 83.3 1,967.9 ----------- ----------- ----------- ----------- ----------- ----------- ----------- ----------- Leach Production: Carlin-Oxide 24,354 0.027 N/A 398.3 34,820 0.022 N/A 465.3 Carlin-Refractory 0 0.000 N/A 7.7 363 0.075 N/A 13.8 Twin Creeks-Oxide 7,660 0.024 N/A 179.7 11,187 0.018 N/A 202.0 Lone Tree-Oxide 3,608 0.340 N/A 90.8 6,926 0.026 N/A 127.5 ----------- ----------- ----------- ----------- ----------- ----------- ----------- ----------- Total Leach 35,622 0.028 676.5 53,296 0.022 808.6 ----------- ----------- ----------- ----------- ----------- ----------- ----------- ----------- TOTAL NEVADA PRODUCTION 51,334 0.068 2,769.6 70,358 0.050 2,776.5 CALIFORNIA Mesquite-Leach 11,537 0.016 N/A 154.0 16,463 0.016 N/A 227.9 ----------- ----------- ----------- ----------- ----------- ----------- ----------- ----------- MEXICO La Herradura-Leach 1,647 0.022 N/A 12.9 -- -- ----------- ----------- ----------- ----------- ----------- ----------- ----------- ----------- TOTAL NORTH AMERICAN PRODUCTION 64,518 0.057 2,936.5 86,821 0.040 =========== =========== =========== =========== =========== =========== =========== =========== 1996 -------------------------------------------------------- Ounces Dry Tons Average Recovery Produced (000) Grade* Rate (%) (000s) ----------- ----------- ----------- ----------- NEVADA Oxide Mills: Carlin Trend Mill No. 3 242 0.186 68.2 39.6 Mill No. 4 2,741 0.071 75.6 152.7 Mill No. 5 5,904 0.084 77.8 400.8 Twin Creeks 2,768 0.085 83.7 160.7 Lone Tree Complex 241 0.133 86.0 27.6 ----------- ----------- ----------- ----------- Total Oxide Mills 11,896 0.084 79.1 781.4 ----------- ----------- ----------- ----------- Refractory Mills: Carlin Roaster 2,364 0.256 84.8 540.0 Twin Creeks Autoclaves 0 0.000 0.0 0.0 Lone Tree Autoclave 841 0.165 90.9 127.7 ----------- ----------- ----------- ----------- Total Refractory Mills 3,205 0.232 86.0 667.7 ----------- ----------- ----------- ----------- Total Mills 15,101 0.115 80.6 1,449.1 ----------- ----------- ----------- ----------- Leach Production: Carlin-Oxide 38,658 0.022 N/A 547.3 Carlin-Refractory 352 0.107 N/A 19.7 Twin Creeks-Oxide 18,238 0.022 N/A 261.3 Lone Tree-Oxide 4,716 0.025 N/A 50.9 ----------- ----------- ----------- ----------- Total Leach 61,964 0.023 879.2 ----------- ----------- ----------- ----------- TOTAL NEVADA PRODUCTION 77,065 0.041 2,328.3 CALIFORNIA Mesquite-Leach 15,527 0.023 N/A 191.6 ----------- ----------- ----------- ----------- MEXICO La Herradura-Leach -- -- ----------- ----------- ----------- ----------- TOTAL NORTH AMERICAN PRODUCTION 92,592 0.035 2,519.9 =========== =========== =========== ===========
*Ounce per ton. 45 36 NEWMONT MINING CORPORATION OPERATING STATISTICS FOR THE YEAR ENDED DECEMBER 31, OVERSEAS MINE PRODUCTION (Dry Short Tons 000)
1998 1997 --------------------------------------------------- --------------------------------------------------- Average Mill Leach Average Mill Leach Grade* Ore Ore Waste Total Grade* Ore Ore Waste Total ------- ------- ------- ------- ------- ------- ------- ------- ------- ------- BATU HIJAU -- -- 42,267 42,267 -- -- -- -- MINAHASA 0.269 1,271 76 6,907 8,254 0.231 1,269 0 10,032 11,301 YANACOCHA Carachugo N/A 13,174 10,606 23,780 0 10,658 7,509 18,167 Maqui Maqui N/A 12,572 6,843 19,415 0 14,909 7,379 22,288 Yanacocha N/A 11,642 6,692 18,334 0 601 831 1,432 San Jose N/A 4,980 3,405 8,385 0 3,239 1,484 4,723 ------- ------- ------- ------- ------- ------- ------- ------- ------- ------- TOTAL YANACOCHA 0.045 42,368 27,546 69,914 0.043 0 29,407 17,203 46,610 ------- ------- ------- ------- ------- ------- ------- ------- ------- ------- TOTAL OVERSEAS 0.052 1,271 42,444 76,720 120,435 0.051 1,269 29,407 27,235 57,911 ======= ======= ======= ======= ======= ======= ======= ======= ======= ======= 1996 --------------------------------------------------- Average Mill Leach Grade* Ore Ore Waste Total ------- ------- ------- ------- ------- BATU HIJAU -- -- -- -- MINAHASA 0.258 1,048 0 9,062 10,110 YANACOCHA Carachugo 0 2,491 1,380 3,871 Maqui Maqui 0 15,218 4,291 19,509 Yanacocha 0 0 0 0 San Jose 0 6,026 1,145 7,171 ------- ------- ------- ------- ------- TOTAL YANACOCHA 0.046 0 23,735 6,816 30,551 ------- ------- ------- ------- ------- TOTAL OVERSEAS 0.055 1,048 23,735 15,878 40,661 ======= ======= ======= ======= =======
OVERSEAS MILL AND LEACH PRODUCTION
1998 --------------------------------------------------------------------------------- Ounces Equity Dry Tons Average Recovery Produced Ounces (000) Grade* Rate (%) (000s) (000s) ------------- ------------- ------------- ------------- ------------- MINAHASA Mill 780 0.383 89.3 261.0 261.0 YANACOCHA Leach 42,368 0.045 N/A 1,335.8 685.9 ZARAFSHAN-NEWMONT Leach 14,851 0.051 N/A 374.6 187.3 ------------- ------------- ------------- ------------- ------------- TOTAL OVERSEAS PRODUCTION 58,000 0.051 1,971.4 1,134.2 ============= ============= ============= ============= ============= TOTAL NORTH AMERICAN PRODUCTION 2,936.5 2,936.5 ============= ============= ============= ============= ============= TOTAL PRODUCTION 4,907.9 4,070.7 ============= ============= ============= ============= ============= 1997 --------------------------------------------------------------------------------- Ounces Equity Dry Tons Average Recovery Produced Ounces (000) Grade* Rate (%) (000s) (000s) ------------- ------------- ------------- ------------- ------------- MINAHASA Mill 794 0.289 91.4 206.5 206.5 YANACOCHA Leach 29,407 0.043 N/A 1,052.8 530.9 ZARAFSHAN-NEWMONT Leach 14,618 0.050 N/A 430.1 215.0 ------------- ------------- ------------- ------------- ------------- TOTAL OVERSEAS PRODUCTION 44,819 0.049 1,689.4 952.4 ============= ============= ============= ============= ============= TOTAL NORTH AMERICAN PRODUCTION 3,004.4 3,004.4 ============= ============= ============= ============= ============= TOTAL PRODUCTION 4,693.8 3,956.8 ============= ============= ============= ============= ============= 1996 ----------------------------------------------------------------------------------- Ounces Equity Dry Tons Average Recovery Produced Ounces (000) Grade* Rate (%) (000s) (000s) ------------- ------------- ------------- ------------- ------------- MINAHASA Mill 454 0.279 90.3 112.7** 112.7** YANACOCHA Leach 23,735 0.046 N/A 811.4 308.3 ZARAFSHAN-NEWMONT Leach 12,737 0.053 N/A 326.5 163.2 ------------- ------------- ------------- ------------- ------------- TOTAL OVERSEAS PRODUCTION 36,926 0.052 1,250.6 584.2 ============= ============= ============= ============= ============= TOTAL NORTH AMERICAN PRODUCTION 2,519.9 2,519.5 ============= ============= ============= ============= ============= TOTAL PRODUCTION 3,770.5 3,104.1 ============= ============= ============= ============= =============
*Ounce per ton. **Includes 5,700 ounces produced before commercial operations commenced. 47 EX-13.(A) 11 REPORT OF PRICE WATERHOUSE LLP 1 EXHIBIT 13(a) REPORT OF INDEPENDENT ACCOUNTANTS To the Board of Directors and Shareholders of Santa Fe Pacific Gold Corporation In our opinion, the consolidated statements of operations, of cash flows and of shareholders' equity of Santa Fe Pacific Gold Corporation (not presented separately herein) present fairly, in all material respects, the results of operations and cash flows of Santa Fe Pacific Gold Corporation and its subsidiaries for the year ended December 31, 1996, in conformity with generally accepted accounting principles. 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 audit. We conducted our audit of these statements in accordance with generally accepted auditing standards which 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, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for the opinion expressed above. PRICE WATERHOUSE LLP Phoenix, Arizona February 1, 1997, except for the fifth paragraph of Note 1, which is as of March 10, 1997 EX-21 12 SUBSIDIARIES OF THE REGISTRANT 1 EXHIBIT 21 SUBSIDIARIES OF NEWMONT MINING CORPORATION
Name Ownership Place of Incorporation - ---- --------- ---------------------- Newmont Gold Company 100% Delaware Santa Fe Pacific Gold Corporation 100% Delaware Hospah Coal Company 100% Delaware Minera Yanacocha, S.A. 51.35% Peru PT Newmont Minahasa Raya 80% Indonesia PT Newmont Nusa Tenggara 45% Indonesia
EX-23.(A) 13 CONSENT OF ARTHUR ANDERSEN LLP 1 Exhibit 23(a) 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 33-53267, 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 and S-8 Registration Statement No. 333-69145. ARTHUR ANDERSEN LLP Denver, Colorado, March 30, 1999. EX-23.(B) 14 CONSENT OF PRICEWATERHOUSECOOPERS LLP 1 EXHIBIT 23(b) CONSENT OF INDEPENDENT ACCOUNTANTS We hereby consent to the incorporation by reference in the Prospectus constituting part of the Registration Statements on Form S-3 (Nos. 33-54249 and 33-59141), and Form S-4 (No. 333-19335), and the Registration Statements on Form S-8 (Nos. 33-49872; 33-53267; 33-62469; 333-04161; 333-64795; 333-69147; 333-69145; and 333-19335-01) of Newmont Mining Corporation of our report dated February 1, 1997, except for the fifth paragraph of Note 1, which is as of march 10, 1997, pertaining to the consolidated financial statements of Santa Fe Pacific Gold Corporation and Subsidiaries appearing in Newmont Mining Corporation's Annual Report on Form 10-K for the year ended December 31, 1998. It should be noted, however, that such financial statements are not included in such Annual Report on Form 10-K. PricewaterhouseCoopers LLP Phoenix, Arizona March 30, 1999 EX-24 15 POWER OF ATTORNEY 1 EXHIBIT 24 POWER OF ATTORNEY KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears below constitutes and appoints Timothy J. Schmitt his true and lawful attorney-in-fact and agent, with full power of substitution and revocation, in his name and on his behalf, to do any and all acts and things and to execute any and all instruments which he may deem necessary or advisable to enable Newmont Mining Corporation to comply with the Securities Exchange Act of 1934, as amended (the "Act"), and any rules, regulations or requirements of the Securities and Exchange Commission in respect thereof, including power and authority to sign his name in any and all capacities (including his capacity as a Director and/or Officer of Newmont Mining Corporation) to the Annual Report on form 10-K of Newmont Mining Corporation for the fiscal year ended December 31, 1998 and the undersigned hereby ratifies and confirms all that said attorney-in-fact and agent shall lawfully do or cause to be done by virtue hereof. IN WITNESS WHEREOF, the undersigned have subscribed these presents as of the 17th day of March, 1999.
SIGNATURES TITLE ---------- ----- /s/ RONALD C. CAMBRE Chairman, President and Chief ----------------------------- Executive Officer and Director Ronald C. Cambre (Principal Executive Officer) /s/ JAMES T. CURRY, JR. Director ---------------------------- James T. Curry, Jr. /s/ JOSEPH P. FLANNERY Director ---------------------------- Joseph P. Flannery /s/ THOMAS A. HOLMES Director ---------------------------- Thomas A. Holmes /s/ GEORGE B. MUNROE Director ---------------------------- George B. Munroe /s/ ROBIN A. PLUMBRIDGE Director ---------------------------- Robin A. Plumbridge /s/ ROBERT H. QUENON Director ---------------------------- Robert H. Quenon
2
SIGNATURES TITLE ---------- ----- /s/ MOEEN A. QURESHI Director ----------------------------- Moeen A. Qureshi /s/ MICHAEL K. REILLY Director ----------------------------- Michael K. Reilly /s/ JEAN HEAD SISCO Director ----------------------------- Jean Head Sisco /s/ JAMES V. TARANIK Director ----------------------------- James V. Taranik /s/ WILLIAM I. M. TURNER, JR. Director ----------------------------- William I. M. Turner, Jr. /s/ WAYNE W. MURDY Executive Vice President and Chief ----------------------------- Financial Officer (Principal Wayne W. Murdy Financial Officer) /s/ LINDA K. WHEELER Vice President and Controller ----------------------------- (Principal Accounting Officer) Linda K. Wheeler
-2- EX-27 16 FINANCIAL DATA SCHEDULE
5 1,000 12-MOS DEC-31-1998 DEC-31-1998 79,086 11,802 52,066 0 280,371 513,080 3,633,292 1,584,585 3,186,754 212,343 1,201,131 0 0 267,544 1,171,989 3,186,754 1,453,856 1,474,913 824,858 1,113,925 744,050 0 78,823 (461,885) (180,876) (360,459) 0 0 (32,924) (393,383) (2.47) (2.47)
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