Form 10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D. C. 20549

 


Form 10-Q

 


(Mark One)

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

For the Quarterly Period Ended March 31, 2007

or

 

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

For the transition period from              to             

Commission File Number: 001-31240

 


NEWMONT MINING CORPORATION

(Exact name of registrant as specified in its charter)

 


 

Delaware   84-1611629

(State or Other Jurisdiction of

Incorporation or Organization)

 

(I.R.S. Employer

Identification No.)

1700 Lincoln Street

Denver, Colorado

  80203
(Address of Principal Executive Offices)   (Zip Code)

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

 


Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    x  Yes    ¨  No

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer. See definition of “accelerated filer” and “large accelerated filer” in Rule 12-b2 of the Exchange Act.

(Check one): Large accelerated filer  x    Accelerated filer  ¨    Non-accelerated filer  ¨

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

There were 425,318,265 shares of common stock outstanding on April 18, 2007 (and 25,783,773 exchangeable shares).

 



PART I—FINANCIAL INFORMATION

 

ITEM 1. FINANCIAL STATEMENTS.

NEWMONT MINING CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF INCOME

(unaudited, in millions except per share)

 

     Three Months Ended
March 31,
 
     2007     2006  

Revenues

    

Sales - gold, net

   $ 1,043     $ 995  

Sales - copper, net

     213       137  
                
     1,256       1,132  
                

Costs and expenses

    

Costs applicable to sales (exclusive of depreciation, depletion and amortization shown separately below)

    

Gold

     676       494  

Copper

     128       65  

Depreciation, depletion and amortization

     192       140  

Exploration

     40       33  

Advanced projects, research and development

     18       21  

General and administrative

     37       37  

Other expense, net

     22       14  
                
     1,113       804  
                

Other income (expense)

    

Other income, net (Note 3)

     67       35  

Interest expense, net

     (24 )     (20 )
                
     43       15  
                

Income from continuing operations before income tax expense, minority interest and equity income of affiliates

     186       343  

Income tax expense (Note 6)

     (62 )     (37 )

Minority interest in income of consolidated subsidiaries

     (56 )     (99 )
                

Income from continuing operations

     68       207  

Income from discontinued operations (Note 7)

           2  
                

Net income

   $ 68     $ 209  
                

Income per common share (Note 9)

    

Basic:

    

Income from continuing operations

   $ 0.15     $ 0.47  

Income from discontinued operations

            
                

Net income

   $ 0.15     $ 0.47  
                

Diluted:

    

Income from continuing operations

   $ 0.15     $ 0.46  

Income from discontinued operations

            
                

Net income

   $ 0.15     $ 0.46  
                

Basic weighted-average common shares outstanding

     451       448  
                

Diluted weighted-average common shares outstanding

     452       451  
                

Cash dividends declared per common share

   $ 0.10     $ 0.10  
                

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

 

2


NEWMONT MINING CORPORATION

CONDENSED CONSOLIDATED BALANCE SHEETS

(unaudited, in millions)

 

     At March 31,
2007
   At December 31,
2006

ASSETS

     

Cash and cash equivalents

   $ 786    $ 1,166

Marketable securities and other short-term investments (Note 12)

     130      109

Trade receivables

     275      142

Accounts receivable

     142      216

Inventories (Note 13)

     381      382

Stockpiles and ore on leach pads (Note 14)

     353      378

Deferred income tax assets

     149      156

Other current assets

     79      93
             

Current assets

     2,295      2,642

Property, plant and mine development, net

     7,036      6,847

Investments (Note 12)

     1,230      1,319

Long-term stockpiles and ore on leach pads (Note 14)

     805      812

Deferred income tax assets

     638      799

Other long-term assets

     185      178

Goodwill

     2,986      3,004
             

Total assets

   $ 15,175    $ 15,601
             

LIABILITIES

     

Current portion of long-term debt (Note 15)

   $ 164    $ 159

Accounts payable

     291      340

Employee-related benefits

     161      182

Derivative instruments (Note 8)

     41      174

Income and mining taxes

     334      364

Other current liabilities (Note 16)

     475      520
             

Current liabilities

     1,466      1,739

Long-term debt (Note 15)

     1,726      1,752

Reclamation and remediation liabilities (Note 17)

     528      528

Deferred income tax liabilities

     569      703

Employee-related benefits

     310      309

Other long-term liabilities (Note 16)

     226      135
             

Total liabilities

     4,825      5,166
             

Commitments and contingencies (Note 21)

     

Minority interest in subsidiaries

     1,163      1,098
             

STOCKHOLDERS’ EQUITY

     

Common stock

     680      677

Additional paid-in capital

     6,726      6,703

Accumulated other comprehensive income

     582      673

Retained earnings

     1,199      1,284
             

Total stockholders’ equity

     9,187      9,337
             

Total liabilities and stockholders’ equity

   $ 15,175    $ 15,601
             

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

 

3


NEWMONT MINING CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(unaudited, in millions)

 

     Three Months Ended
March 31,
 
     2007     2006  

Operating activities:

    

Net income

   $ 68     $ 209  

Adjustments to reconcile net income to net cash from continuing operations:

    

Depreciation, depletion and amortization

     192       140  

Income from discontinued operations

           (2 )

Accretion of accumulated reclamation obligations

     10       7  

Deferred income taxes

     1       (72 )

Minority interest expense

     56       99  

Gain on asset sales, net

     (2 )     (2 )

Gain on investments, net

     (27 )      

Hedge gain, net

     (3 )     (9 )

Other operating adjustments and write-downs

     26       37  
                

Net cash provided from continuing operations before net change in operating assets and liabilities

     321       407  

Net change in operating assets and liabilities (Note 18)

     (263 )     (174 )
                

Net cash provided from continuing operations

     58       233  

Net cash provided from discontinued operations

           2  
                

Net cash from operations

     58       235  
                

Investing activities:

    

Additions to property, plant and mine development

     (362 )     (367 )

Investments in marketable debt and equity securities

     (153 )     (672 )

Proceeds from sale of marketable debt and equity securities

     124       970  

Acquisitions (Note 11)

           (187 )

Other

     1       2  
                

Net cash used in investing activities of continuing operations

     (390 )     (254 )

Net cash used in investing activities of discontinued operations

           (3 )
                

Net cash used in investing activities

     (390 )     (257 )
                

Financing activities:

    

Repayment of debt

     (21 )     (20 )

Dividends paid to common stockholders

     (45 )     (45 )

Dividends paid to minority interests

     (1 )     (45 )

Proceeds from stock issuance

     9       38  

Change in restricted cash and other

     8       (8 )
                

Net cash used in financing activities

     (50 )     (80 )
                

Effect of exchange rate changes on cash

     2       (1 )
                

Net change in cash and cash equivalents

     (380 )     (103 )

Cash and cash equivalents at beginning of period

     1,166       1,082  
                

Cash and cash equivalents at end of period

   $ 786     $ 979  
                

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

 

4


NEWMONT MINING CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)

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

 

(1)   BASIS OF PRESENTATION

The interim Condensed Consolidated Financial Statements of Newmont Mining Corporation and its subsidiaries (collectively, “Newmont” or the “Company”) are unaudited. In the opinion of management, all adjustments and disclosures necessary for a fair presentation of these interim statements have been included. The results reported in these interim Condensed Consolidated Financial Statements are not necessarily indicative of the results that may be reported for the entire year. These interim Condensed Consolidated Financial Statements should be read in conjunction with Newmont’s Consolidated Financial Statements included in its Annual Report on Form 10-K for the year ended December 31, 2006, filed February 26, 2007.

References to “A$” refer to Australian currency, “CDN$” to Canadian currency, “IDR” to Indonesian currency and “$” to United States currency.

Certain amounts for the three months ended March 31, 2006 have been reclassified to conform to the 2007 presentation. The Company has reclassified the income statement and cash flow statement amounts for the Zarafshan-Newmont Joint Venture operation from the historical presentation to discontinued operations in the Condensed Consolidated Statements of Income and Cash Flows for all periods presented.

 

(2)   ACCOUNTING DEVELOPMENTS

Recently Adopted Pronouncements

Income Taxes

The Company adopted Financial Accounting Standards Board (“FASB”) Interpretation No. 48, “Accounting for Uncertainty in Income Taxes,” (“FIN 48”) an interpretation of FASB Statement No. 109, “Accounting for Income Taxes” on January 1, 2007. As a result of the implementation of FIN 48, the Company recognized a $72 increase in its net liability for unrecognized income tax benefits. The beginning balance of net deferred tax assets was reduced by $37 (primarily, as a result of utilization of foreign tax credits and net operating losses as part of the FIN 48 measurement process, offset, in part, by the impact of the interaction of the Alternative Minimum Tax rules), goodwill increased by $5, minority interest increased by $4, and retained earnings decreased by $108. In addition, the Company reclassified $16 of income tax liabilities from current to non-current liabilities because payment of cash is not anticipated within one year of the balance sheet date. At January 1, 2007, the Company had $267 of total gross unrecognized tax benefits. Of this, $202 represents the amount of net unrecognized tax benefits that, if recognized, would affect the Company’s effective income tax rate.

The Company’s continuing practice is to recognize interest and/or penalties related to unrecognized tax benefits as part of its income tax expense. The Company had $13 accrued for interest at January 1, 2007. This amount has been considered in the statement of financial position as part of the cumulative effect adjustment to retained earnings.

The Company or one of its subsidiaries files income tax returns in the U.S. federal jurisdiction, various states and in foreign jurisdictions. With limited exception, the Company is no longer subject to U.S. federal, state and local income or non-U.S. income tax audits by taxing authorities for years through 1999.

Recently Issued Pronouncements

Fair Value Option for Financial Assets and Liabilities

In February 2007, the FASB issued FASB Statement No. 159, “The Fair Value Option for Financial Assets and Financial Liabilities” (“FAS 159”). FAS 159 permits entities to choose to measure many financial instruments and certain other items at fair value, with the objective of improving financial reporting by mitigating volatility in reported earnings caused by measuring related assets and liabilities differently without having to apply complex hedge accounting provisions. The provisions of FAS 159 are effective for the Company’s year ending December 31, 2008. The Company is currently evaluating the impact that the adoption of this statement will have on the Company’s consolidated financial position, results of operations and disclosures.

Fair Value Measurements

In September 2006, the FASB issued FASB Statement No. 157, “Fair Value Measurements” (“FAS 157”). FAS 157 defines fair value, establishes a framework for measuring fair value in generally accepted accounting principles, and expands disclosures about fair value measurement. The provisions of FAS 157 are effective for the Company’s fiscal year ending December 31, 2008. The Company is currently evaluating the impact that the adoption of this statement will have on the Company’s consolidated financial position, results of operations and disclosures.

 

5


NEWMONT MINING CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) (Continued)

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

 

(3)   OTHER INCOME, NET

 

      Three Months Ended March 31,  
     2007     2006  

Gain on investments, net

   $ 27     $ 1  

Royalty and dividend income

     31       29  

Interest income

     13       19  

Income from development projects, net

     ––       4  

Loss on ineffective portion of derivative instruments, net (Note 8)

     (2 )     (24 )

Foreign currency exchange (losses) gains, net

     (5 )     3  

Other

     3       3  
                
   $ 67     $ 35  
                

 

(4)   EMPLOYEE PENSION AND OTHER BENEFIT PLANS

 

      Three Months Ended March 31,  
     2007     2006  

Pension benefit costs, net

    

Service cost

   $ 5     $ 4  

Interest cost

     6       5  

Expected return on plan assets

     (5 )     (4 )

Amortization of loss

     2       2  
                
   $ 8     $ 7  
                

 

      Three Months Ended March 31,
     2007    2006

Other benefit costs, net

     

Service cost

   $ 1    $ 2

Interest cost

     1      1
             
   $ 2    $ 3
             

 

(5)   STOCK BASED COMPENSATION

The Company recognized stock options and other stock based compensation as follows:

 

      Three Months Ended March 31,
     2007    2006

Stock options

   $ 4    $ 6

Restricted stock

     2      ––

Restricted stock units

     1      ––

Deferred stock awards

     2      2
             
   $ 9    $ 8
             

No stock option awards were granted during the three months ended March 31, 2007 and 2006. At March 31, 2007, there was $20 of unrecognized compensation cost related to unvested stock options. This cost is expected to be recognized over a weighted-average period of approximately 1.8 years.

For the three months ended March 31, 2007 and 2006, 141,828 and 102,491 shares of restricted stock, respectively, were granted and issued, at the weighted-average fair market value of $45 and $58, respectively.

For the three months ended March 31, 2007 and 2006, 20,212 and 19,181 shares of restricted stock units, respectively, were granted, at the weighted-average fair market value of $45 and $58, respectively, per underlying share of the Company’s common stock.

No deferred stock awards were granted during the three months ended March 31, 2007 and 2006.

 

6


NEWMONT MINING CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) (Continued)

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

 

(6)   INCOME TAXES

The Company operates in numerous countries around the world and accordingly it is subject to, and pays annual income taxes under, the various income tax regimes in the countries in which it operates. Some of these tax regimes are defined by contractual agreements with the local government, and others are defined by the general corporate income tax laws of the country. The Company has historically filed, and continues to file, all required income tax returns and to pay the taxes reasonably determined to be due. The tax rules and regulations in many countries are highly complex and subject to interpretation. From time to time the Company is subject to a review of its historic income tax filings and in connection with such reviews, disputes can arise with the taxing authorities over the interpretation or application of certain rules to the Company’s business conducted within the country involved. The Company adopted the provisions of FASB Interpretation No. 48, “Accounting for Uncertainty in Income Taxes,” (“FIN 48”) an interpretation of FASB Statement No. 109, “Accounting for Income Taxes” on January 1, 2007. FIN 48 clarifies the accounting and reporting for uncertainties in income tax law. The interpretation prescribes a comprehensive model for the financial statement recognition, measurement, presentation and disclosure of uncertain tax positions taken or expected to be taken in income tax returns. Refer to “Recently Adopted Pronouncements” for the discussion regarding the cumulative effect of adopting FIN 48.

In December 2006, the Company entered into an in-principle heads of agreement with the Australian Taxation Office (“ATO”). The heads of agreement specifies the terms of a proposed settlement of the outstanding audit issues relating to Normandy for the tax years 1994-1999. The issues relate to years before the Company acquired Normandy. At the date of the business combination, Normandy had recorded no income tax liability with respect to the tax positions taken in reporting certain transactions, therefore the Company’s initial best estimate of the income tax contingency relating to these issues was recorded as a tax liability at the date of acquisition, February 15, 2002, by increasing the purchase price of Normandy. At December 31, 2006, the long-term income tax liability balance relating to this proposed settlement was reclassified to current income taxes payable and remains outstanding at March 31, 2007.

 

(7)   DISCONTINUED OPERATIONS

Discontinued operations include the Company’s 50% interest in the Zarafshan-Newmont Joint Venture, expropriated by the Uzbekistan government in August 2006, and the Holloway mine sold in November 2006. The Company has reclassified the income statement results from the historical presentation to Income from discontinued operations in the Condensed Consolidated Statements of Income for all periods presented. The Condensed Consolidated Statements of Cash Flows have been reclassified for discontinued operations for all periods presented.

The following table details selected financial information included in Income from discontinued operations in the Condensed Consolidated Statements of Income:

 

     

Three Months Ended

March 31, 2006

Sales - gold, net

   $ 23

Income from operations

   $

Income tax benefit

     2
      

Income from discontinued operations

   $ 2
      

 

7


NEWMONT MINING CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) (Continued)

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

 

(8)   SALES CONTRACTS, COMMODITY AND DERIVATIVE INSTRUMENTS

For the three months ended March 31, 2007 and 2006, losses of $2 and $24, respectively, were included in Other income, net for the ineffective portion of derivative instruments designated as cash flow hedges. The amount anticipated to be reclassified from Accumulated other comprehensive income to income for derivative instruments during the next 12 months is a gain of approximately $6. The maximum period over which hedged forecasted transactions are expected to occur is 4 years.

Newmont had the following derivative contracts outstanding at March 31, 2007:

 

      Expected Maturity Date    Fair Value  
      2007    2008    Total/
Average
   At March 31,
2007
    At December 31,
2006
 

Copper Collar Contracts(1) ($ denominated):

             

Pounds (millions)

     13           13    $ (21 )(2)   $ (149 )(3)

Average cap price

   $ 1.43    $    $ 1.43     

Average floor price

   $ 1.10    $    $ 1.10     

$/IDR Forward Purchase Contracts(1):

             

$ (millions)

   $ 43    $ 3    $ 46    $ 2     $ 4  

Average rate (IDR/$)

     9,606      9,365      9,590     

(1)

 

56.25% guaranteed by Newmont, 43.75% guaranteed by an affiliate of Sumitomo Corporation, delivered in the first quarter of 2007, awaiting final settlement.

(2)

 

The fair value does not include amounts payable ($20) on derivative contracts that were closed out in March 2007 with the net settlement due in April 2007.

(3)

 

The fair value does not include amounts payable ($24) on derivative contracts that were closed out in December 2006 with the net settlement due and paid in January 2007.

Provisional Copper and Gold Sales

The Company’s provisional copper and gold sales contain an embedded derivative that is required to be separated from the host contract for accounting purposes. The host contract is the receivable from the sale of the copper concentrates at the forward London Metal Exchange price at the time of sale. The embedded derivative, which does not qualify for hedge accounting, is marked to market through earnings each period prior to final settlement.

At March 31, 2007 and 2006, Batu Hijau had the following gross revenues before treatment and refining charges subject to final price adjustments:

 

      At March 31,  
      2007     2006  

Gross revenue subject to final price adjustments

    

Copper

   $ 386     $ 377  

Gold

   $ 33     $ 15  
The average final price adjustments realized were as follows:     
     Three Months Ended March 31,  
     2007     2006  

Average final price adjustments

    

Copper

     (19 )%     26 %

Gold

     2 %     9 %

Price-Capped Forward Sales Contracts

In 2001, Newmont entered into transactions that closed out certain call options. The options were replaced with a series of forward sales contracts requiring physical delivery of the same quantity of gold over slightly extended future periods. Under the terms of the contracts, Newmont will realize the lower of the spot price on the delivery date or the capped price, ranging from $381 to $392 per ounce. The initial fair value of the forward sales contracts was recorded as deferred revenue. At March 31, 2007, $47 remained in deferred revenue and will be included in revenue as delivery occurs. The forward sales contracts are accounted for as normal sales contracts under SFAS No. 133 “Accounting for Derivative Instruments and Hedging Activities” and SFAS No. 138 “Accounting for

 

8


NEWMONT MINING CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) (Continued)

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

 

Certain Derivative Instruments and Certain Hedging Activities-an Amendment to SFAS No. 133.” The fair value of these contracts are not included on the Condensed Consolidated Balance Sheets.

Newmont had the following price-capped forward sales contracts outstanding at March 31, 2007:

 

      Scheduled Maturity Date or Transaction Date    Fair Value  
      2008    2009    2011    Total/
Average
   At March 31,
2007
    At December 31,
2006
 

Ounces (thousands)

     1,000      600      250      1,850    $ (589 )   $ (534 )

Average price

   $ 384    $ 381    $ 392    $ 384     

Interest Rate Swap Contracts

At March 31, 2007, Newmont had $100 fixed to floating swap contracts designated as a hedge against a portion of its $275 8 5/8% debentures expiring in 2011. Under the hedge contract terms, the Company receives fixed-rate interest payments at 8.625% and pays floating-rate interest amounts based on periodic London Interbank Offered Rate (“LIBOR”) settings plus a spread, ranging from 2.60% to 3.49%. For the three months ended March 31, 2007 and 2006, these transactions had an insignificant impact on interest expense. The fair value of the interest rate swaps was $(1) and $1 at March 31, 2007 and December 31, 2006, respectively.

 

(9)   INCOME PER COMMON SHARE

Basic income per common share is computed by dividing income available to common shareholders by the weighted average number of common shares outstanding for the period. Diluted income per common share is computed similarly to basic income per common share except that the denominator is increased to include the number of additional common shares that would have been outstanding if the potentially dilutive common shares had been issued.

 

      Three Months Ended March 31,
      2007    2006

Numerator:

     

Income from continuing operations

   $ 68    $ 207

Income from discontinued operations

          2
             

Net income

   $ 68    $ 209
             

Denominator:

     

Basic

     451      448

Effect of employee stock-based awards

     1      3
             

Diluted

     452      451
             

Income per common share

     

Basic:

     

Income from continuing operations

   $ 0.15    $ 0.47

Income from discontinued operations

         
             

Net income

   $ 0.15    $ 0.47
             

Diluted:

     

Income from continuing operations

   $ 0.15    $ 0.46

Income from discontinued operations

         
             

Net income

   $ 0.15    $ 0.46
             

Options to purchase 2.2 million and 1.2 million shares of common stock at average exercise prices of $51.40 and $50.15 were outstanding at March 31, 2007 and 2006, respectively, but were not included in the computation of diluted weighted average number of common shares because their effect would have been anti-dilutive.

 

9


NEWMONT MINING CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) (Continued)

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

 

(10)   COMPREHENSIVE INCOME

 

      Three Months Ended March 31,  
      2007     2006  

Net income

   $ 68     $ 209  

Other comprehensive income (loss), net of tax:

    

Unrealized (loss) gain on marketable equity securities (Note 12)

     (104 )     191  

Foreign currency translation adjustments

     6       (1 )

Change in pension and other benefit liabilities:

    

Net amount reclassified to income

     2        

Change in fair value of cash flow hedge instruments:

    

Net change from periodic revaluations

     11       (113 )

Net amount reclassified to income

     (6 )     78  
                

Net unrecognized gain (loss) on derivatives

     5       (35 )
                
     (91 )     155  
                

Comprehensive (loss) income

   $ (23 )   $ 364  
                

 

(11)   ACQUISITIONS

In March 2006, Newmont acquired Newcrest Mining Limited’s 22.22% interest in the Boddington unincorporated joint venture, bringing its interest in the project to 66.67%, for cash consideration of $164.

In January 2006, Newmont acquired the remaining 15% interest in the Akyem project for cash consideration of $23, bringing its interest in the project to 100%.

 

(12)   INVESTMENTS

 

      At March 31, 2007
           Unrealized      
      Cost/Equity
Basis
   Gain    Loss     Fair/Equity
Value

Current:

          

Marketable Debt Securities:

          

Auction rate securities

   $ 10    $    $     $ 10
                            

Marketable Equity Securities:

          

Oxiana Ltd.

     64                 64

Other

     10      38            48
                            
     74      38            112
                            

Other investments, at cost

     8                 8
                            
   $ 92    $ 38    $     $ 130
                            

Long-term:

          

Marketable Equity Securities:

          

Canadian Oil Sands Trust

   $ 266    $ 488    $     $ 754

Gabriel Resources, Ltd.

     97      77            174

Shore Gold, Inc.

     90      21            111

Miramar Mining Corporation

     27      60            87

Other

     32      12      (1 )     43
                            
     512      658      (1 )     1,169
                            

Other investments, at cost

     10                 10
                            

Investment in Affiliates:

          

European Gold Refineries

     25                 25

AGR Matthey Joint Venture

     16                 16

Regis Resources NL

     10                 10
                            
     51                 51
                            
   $ 573    $ 658    $ (1 )   $ 1,230
                            

 

10


NEWMONT MINING CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) (Continued)

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

 

     At December 31, 2006
     Cost/Equity    Unrealized     Fair/Equity
     Basis    Gain    Loss     Basis

Current:

          

Marketable Debt Securities:

          

Auction rate securities

   $ 10    $    $     $ 10
                            

Marketable Equity Securities:

          

Agincourt Resources

     37      10            47

Other

     10      33            43
                            
     47      43            90
                            

Other investments, at cost

     9                 9
                            
   $ 66    $ 43    $     $ 109
                            

Long-term:

          

Marketable Equity Securities:

          

Canadian Oil Sands Trust

   $ 265    $ 603    $     $ 868

Gabriel Resources, Ltd.

     69      104            173

Shore Gold, Inc.

     90                 90

Miramar Mining Corporation

     28      57            85

Other

     34      17      (4 )     47
                            
     486      781      (4 )     1,263
                            

Other investments, at cost

     12                 12
                            

Investment in Affiliates:

          

European Gold Refineries

     17                 17

AGR Matthey Joint Venture

     16                 16

Regis Resources NL

     11                 11
                            
     44                 44
                            
   $ 542    $ 781    $ (4 )   $ 1,319
                            

During the first quarter of 2007, Newmont acquired an additional interest in Gabriel Resources for approximately $27, obtained Oxiana Ltd. shares following the acquisition of Agincourt Resources by Oxiana Ltd., recognizing a $27 gain, and recognized a $6 impairment of its investment in Queenstake Resources Ltd. for an other-than-temporary decline in value of marketable equity securities and warrants. During the quarter, the unrealized value of the Company’s investments in marketable equity securities declined by $128, primarily related to a decline in the value of Canadian Oil Sands Trust.

 

(13)   INVENTORIES

 

     At March 31,
2007
   At December 31,
2006

In-process

   $ 60    $ 61

Concentrate

     10      6

Precious metals

     10      43

Materials, supplies and other

     301      272
             
   $ 381    $ 382
             

During the first quarter of 2007, Newmont recorded aggregate write-downs of $2 included in Costs applicable to sales in Australia/New Zealand to reduce the carrying value of inventories to net realizable value.

 

11


NEWMONT MINING CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) (Continued)

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

 

(14)   STOCKPILES AND ORE ON LEACH PADS

 

     At March 31,
2007
   At December 31,
2006

Current:

     

Stockpiles

   $ 188    $ 216

Ore on leach pads

     165      162
             
   $ 353    $ 378
             

Long-term:

     

Stockpiles

   $ 524    $ 527

Ore on leach pads

     281      285
             
   $ 805    $ 812
             

During the first quarter of 2007, Newmont recorded aggregate write-downs of $2 included in Costs applicable to sales in Australia/New Zealand to reduce the carrying value of stockpiles to net realizable value.

 

(15)   DEBT

 

     At March 31, 2007    At December 31, 2006
     Current    Non-Current    Current    Non-Current

Sale-leaseback of refractory ore treatment plant

   $ 22    $ 213    $ 21    $ 235

5 7/8% notes, net of discount

          597           597

8 5/8% debentures, net of discount

          217           217

Newmont Australia 7 5/8% guaranteed notes, net of premium

          120           120

PTNNT project financing facility

     87      393      87      393

PTNNT shareholder loan

     36           36     

Yanacocha credit facility

     14      86      10      90

Yanacocha bonds

          100           100

Project financings, capital leases and other

     5           5     
                           
   $ 164    $ 1,726    $ 159    $ 1,752
                           

Scheduled minimum debt repayments at March 31, 2007 are $138 for the remainder of 2007, $243 in 2008, $125 in 2009, $133 in 2010, $322 in 2011 and $929 thereafter.

 

(16)   OTHER LIABILITIES

 

     At March 31,
2007
   At December 31,
2006

Other current liabilities:

     

Accrued operating costs

   $ 150    $ 156

Accrued capital expenditures

     96      128

Reclamation and remediation liabilities

     75      77

Interest

     48      34

Royalties

     23      39

Taxes other than income and mining

     18      22

Deferred revenue

     23      9

Other

     42      55
             
   $ 475    $ 520
             

 

     At March 31,
2007
   At December 31,
2006

Other long-term liabilities:

     

Income taxes

   $ 143    $ 54

Deferred revenue from the sale of future production

     47      47

Other

     36      34
             
   $ 226    $ 135
             

 

12


NEWMONT MINING CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) (Continued)

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

 

(17)   RECLAMATION AND REMEDIATION LIABILITIES (ASSET RETIREMENT OBLIGATIONS)

At March 31, 2007 and December 31, 2006, $522 and $520, respectively, were accrued for reclamation obligations relating to mineral properties in accordance with SFAS No. 143, “Accounting for Asset Retirement Obligations.” In addition, the Company is involved in several matters concerning environmental obligations associated with former, primarily historic, mining activities. Generally, these matters concern developing and implementing remediation plans at the various sites involved. At March 31, 2007 and December 31, 2006, $81 and $85, respectively, were accrued for such obligations. These amounts are also included in Reclamation and remediation liabilities.

The following is a reconciliation of the liability for asset retirement obligations:

 

     Three Months Ended March 31,  
     2007     2006  

Balance at beginning of period

   $ 605     $ 508  

Additions, changes in estimates and other

           18  

Liabilities settled

     (12 )     (12 )

Accretion expense

     10       7  
                

Balance at end of period

   $ 603     $ 521  
                

The current portions of Reclamation and remediation liabilities of $75 and $77 at March 31, 2007 and December 31, 2006, respectively, are included in Other current liabilities.

 

(18)   NET CHANGE IN OPERATING ASSETS AND LIABILITIES

Net cash (used in) provided by operating activities attributable to the net change in operating assets and liabilities is composed of the following:

 

     Three Months Ended March 31,  
     2007     2006  

Decrease (increase) in operating assets:

    

Trade and accounts receivable

   $ 2     $ (44 )

Inventories, stockpiles and ore on leach pads

     9       (123 )

Other assets

           (11 )

Increase (decrease) in operating liabilities:

    

Accounts payable and other accrued liabilities

     (262 )     16  

Reclamation liabilities

     (12 )     (12 )
                
   $ (263 )   $ (174 )
                

 

13


NEWMONT MINING CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) (Continued)

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

 

(19)   SEGMENT INFORMATION

Financial information relating to Newmont’s segments is as follows:

 

     Three Months Ended March 31, 2007
     Nevada    Yanacocha    Australia/
New Zealand
    Batu
Hijau
   Africa    Other
Operations

Sales, net:

                

Gold

   $ 361    $ 297    $ 216     $ 56    $ 81    $ 32

Copper

   $    $    $     $ 213    $    $

Cost applicable to sales:

                

Gold

   $ 276    $ 141    $ 172     $ 28    $ 43    $ 16

Copper

   $    $    $     $ 128    $    $

Depreciation, depletion and amortization:

                

Gold

   $ 55    $ 42    $ 35     $ 6    $ 10    $ 5

Copper

   $    $    $     $ 28    $    $

Other

   $    $    $ 1     $    $    $

Exploration

   $    $    $     $    $    $

Advanced projects, research and development

   $    $ 2    $ 1     $    $ 6    $

Write-down of assets

   $    $    $     $    $    $

Other income, net

   $ 1    $ 6    $ 1     $ 4    $ 1    $

Interest expense, net

   $    $ 1    $     $ 10    $ 1    $

Pre-tax income (loss) before minority interest and equity income of affiliates

   $ 27    $ 112    $ (1 )   $ 72    $ 22    $ 24

Equity income of affiliates

   $    $    $ (1 )   $    $    $

Capital expenditures

   $ 158    $ 56    $ 98     $ 7    $ 37    $ 3

Goodwill

   $    $    $ 191     $    $    $

Total assets

   $ 2,742    $ 1,878    $ 1,600     $ 2,356    $  1,008    $ 147

 

     Three Months Ended March 31, 2007
     Total
Operations
    Exploration     Merchant
Banking
   Corporate
and Other
    Consolidated

Sales, net:

           

Gold

   $ 1,043     $     $    $     $ 1,043

Copper

   $ 213     $     $    $     $ 213

Cost applicable to sales:

           

Gold

   $ 676     $     $    $     $ 676

Copper

   $ 128     $     $    $     $ 128

Depreciation, depletion and amortization:

           

Gold

   $ 153     $     $    $     $ 153

Copper

   $ 28     $     $    $     $ 28

Other

   $ 1     $     $ 4    $ 6     $ 11

Exploration

   $     $ 40     $    $     $ 40

Advanced projects, research and development

   $ 9     $     $ 4    $ 5     $ 18

Write-down of assets

   $     $     $    $     $

Other income, net

   $ 13     $     $ 58    $ (4 )   $ 67

Interest expense, net

   $ 12     $     $    $ 12     $ 24

Pre-tax income (loss) before minority interest and equity income of affiliates

   $ 256     $ (40 )   $ 49    $ (79 )   $ 186

Equity income of affiliates

   $ (1 )   $     $ 1    $     $

Capital expenditures

   $ 359     $     $    $ 3     $ 362

Goodwill

   $ 191     $ 1,130     $ 1,665    $     $ 2,986

Total assets

   $ 9,731     $ 1,298     $ 2,972    $ 1,174     $ 15,175

 

14


NEWMONT MINING CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) (Continued)

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

 

     Three Months Ended March 31, 2006
     Nevada    Yanacocha    Australia/
New Zealand
   Batu
Hijau
    Africa     Other
Operations

Sales, net:

               

Gold

   $ 288    $ 427    $ 187    $ 39     $     $ 55

Copper

   $    $    $    $ 137     $     $

Cost applicable to sales:

               

Gold

   $ 206    $ 124    $ 128    $ 15     $     $ 21

Copper

   $    $    $    $ 65     $     $

Depreciation, depletion and amortization:

               

Gold

   $ 36    $ 43    $ 26    $ 4     $     $ 5

Copper

   $    $    $    $ 16     $     $

Other

   $    $    $ 1    $     $     $

Exploration

   $    $    $    $     $     $

Advanced projects, research and development

   $ 2    $ 1    $    $     $ 7     $

Write-down of assets

   $    $    $    $     $     $

Other income

   $ 4    $ 4    $ 1    $ (20 )   $     $ 2

Interest expense, net

   $    $    $    $ 11     $     $

Pre-tax income (loss) before minority interest and equity income of affiliates

   $ 47    $ 259    $ 29    $ 46     $ (7 )   $ 7

Equity income of affiliates

   $    $    $    $     $     $

Capital expenditures

   $ 154    $ 56    $ 23    $ 63     $ 65     $ 2

Goodwill

   $    $    $ 214    $     $     $

Total assets from continuing operations

   $ 2,102    $ 1,665    $ 1,207    $ 2,313     $ 737     $ 156

 

     Three Months Ended March 31, 2006
     Total
Operations
    Exploration     Merchant
Banking
   Corporate
and Other
    Consolidated

Sales, net:

           

Gold

   $ 996     $     $    $ (1 )   $ 995

Copper

   $ 137     $     $    $     $ 137

Cost applicable to sales:

           

Gold

   $ 494     $     $    $     $ 494

Copper

   $ 65     $     $    $     $ 65

Depreciation, depletion and amortization:

           

Gold

   $ 114     $     $    $     $ 114

Copper

   $ 16     $     $    $     $ 16

Other

   $ 1     $ 1     $ 5    $ 3     $ 10

Exploration

   $     $ 33     $    $     $ 33

Advanced projects, research and development

   $ 10     $     $ 5    $ 6     $ 21

Write-down of assets

   $     $     $    $     $

Other income

   $ (9 )   $ 1     $ 30    $ 13     $ 35

Interest expense, net

   $ 11     $     $    $ 9     $ 20

Pre-tax income (loss) before minority interest and equity income of affiliates

   $ 381     $ (33 )   $ 18    $ (23 )   $ 343

Capital expenditures

   $ 363     $     $ 1    $ 3     $ 367

Goodwill

   $ 214     $ 1,126     $ 1,562    $     $ 2,902

Total assets from continuing operations

   $ 8,180     $ 1,152     $ 2,923    $ 1,988     $ 14,243

Assets held for sale

            $ 182
               

Total assets

            $ 14,425
               

 

15


NEWMONT MINING CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) (Continued)

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

 

(20) CONDENSED CONSOLIDATING FINANCIAL STATEMENTS

Newmont USA, a 100% owned subsidiary of Newmont Mining Corporation, has fully and unconditionally guaranteed the 5 7/8% publicly traded notes. The following condensed consolidating financial statements are provided for Newmont USA, as guarantor, and for Newmont Mining Corporation, as issuer, as an alternative to providing separate financial statements for the guarantor. The accounts of Newmont Mining Corporation are presented using the equity method of accounting for investments in subsidiaries.

 

     Three Months Ended March 31, 2007  

Condensed Consolidating Statement of Income

   Newmont
Mining
Corporation
    Newmont
USA
    Other
Subsidiaries
    Eliminations     Newmont
Mining
Corporation
Consolidated
 

Revenues

          

Sales - gold, net

   $     $ 759     $ 284     $     $ 1,043  

Sales - copper, net

           213                   213  
                                        
           972       284             1,256  
                                        

Costs and expenses

          

Costs applicable to sales (exclusive of depreciation, depletion and amortization shown separately below)

          

Gold

           470       210       (4 )     676  

Copper

           128                   128  

Depreciation, depletion and amortization

           145       47             192  

Exploration

           26       14             40  

Advanced projects, research and development

           9       9             18  

General and administrative

           31       1       5       37  

Write-down of long-lived assets

                              

Other

           25       (2 )     (1 )     22  
                                        
           834       279             1,113  
                                        

Other income (expense)

          

Other income, net

     2       26       39             67  

Interest income - intercompany

     31       25       1       (57 )      

Interest expense - intercompany

     (2 )           (55 )     57        

Interest expense, net

     (9 )     (12 )     (3 )           (24 )
                                        
     22       39       (18 )           43  
                                        

Income (loss) from continuing operations before taxes, minority interest and equity income of affiliates

     22       177       (13 )           186  

Income tax (expense) benefit

     (6 )     (52 )     (4 )           (62 )

Minority interest in income of subsidiaries

           (55 )     (4 )     3       (56 )

Equity income (loss) of affiliates

     52             16       (68 )      
                                        

Income from continuing operations

     68       70       (5 )     (65 )     68  

Loss from discontinued operations

                              
                                        

Net income (loss)

   $ 68     $ 70     $ (5 )   $ (65 )   $ 68  
                                        

 

16


NEWMONT MINING CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) (Continued)

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

 

     Three Months Ended March 31, 2006  

Condensed Consolidating Statement of Income

   Newmont
Mining
Corporation
    Newmont
USA
    Other
Subsidiaries
    Eliminations     Newmont
Mining
Corporation
Consolidated
 

Revenues

          

Sales - gold, net

   $     $ 818     $ 177     $     $ 995  

Sales - copper, net

           137                   137  
                                        
           955       177             1,132  
                                        

Costs and expenses

          

Costs applicable to sales (exclusive of depreciation, depletion and amortization shown separately below)

          

Gold

           372       124       (2 )     494  

Copper

           65                   65  

Depreciation, depletion and amortization

           110       30             140  

Exploration

           25       8             33  

Advanced projects, research and development

           9       12             21  

General and administrative

           34       2       1       37  

Other

           12       2             14  
                                        
           627       178       (1 )     804  
                                        

Other income (expense)

          

Other income (expense), net

     2       1       32             35  

Interest income - intercompany

     29       13             (42 )      

Interest expense - intercompany

     (2 )           (40 )     42        

Interest expense, net

     (6 )     (12 )     (2 )           (20 )
                                        
     23       2       (10 )           15  
                                        

Income from continuing operations before taxes, minority interest and equity income of affiliates

     23       330       (11 )     1       343  

Income tax (expense) benefit

     (3 )     (82 )     48             (37 )

Minority interest in income of subsidiaries

           (99 )     (11 )     11       (99 )

Equity income (loss) of affiliates

     189             34       (223 )      
                                        

Income from continuing operations

     209       149       60       (211 )     207  

Income from discontinued operations

           2                   2  
                                        

Net income (loss)

   $ 209     $ 151     $ 60     $ (211 )   $ 209  
                                        

 

17


NEWMONT MINING CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) (Continued)

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

 

     At March 31, 2007

Condensed Consolidating Balance Sheets

   Newmont
Mining
Corporation
    Newmont
USA
    Other
Subsidiaries
   Eliminations     Newmont
Mining
Corporation
Consolidated

Assets

           

Cash and cash equivalents

   $     $ 645     $ 141    $     $ 786

Marketable securities and other short-term investments

     1       13       116            130

Trade receivables

           272       3            275

Accounts receivable

     1,793       687       519      (2,857 )     142

Inventories

           316       65            381

Stockpiles and ore on leach pads

           300       53            353

Deferred income tax assets

           90       59            149

Other current assets

     1       49       29            79
                                     

Current assets

     1,795       2,372       985      (2,857 )     2,295

Property, plant and mine development, net

           4,796       2,256      (16 )     7,036

Investments

                 1,230            1,230

Investments in subsidiaries

     6,133             4,935      (11,068 )    

Long-term stockpiles and ore on leach pads

           758       47            805

Deferred income tax assets

     (6 )     522       122            638

Other long-term assets

     1,788       1,233       85      (2,921 )     185

Goodwill

                 2,986            2,986
                                     

Total assets

   $ 9,710     $ 9,681     $ 12,646    $ (16,862 )   $ 15,175
                                     

Liabilities

           

Current portion of long-term debt

   $     $ 159     $ 5    $     $ 164

Accounts payable

     90       2,182       876      (2,857 )     291

Employee related benefits

           128       33            161

Derivative instruments

           41                  41

Income and mining taxes

     (6 )     15       325            334

Other current liabilities

     18       294       164      (1 )     475
                                     

Current liabilities

     102       2,819       1,403      (2,858 )     1,466

Long-term debt

     597       1,009       120            1,726

Reclamation and remediation liabilities

           392       136            528

Deferred income tax liabilities

     53       184       307      25       569

Employee-related benefits

     1       281       28            310

Other long-term liabilities

     261       155       2,892      (3,082 )     226
                                     

Total liabilities

     1,014       4,840       4,886      (5,915 )     4,825
                                     

Minority interest in subsidiaries

           1,171       376      (384 )     1,163
                                     

Stockholders’ equity

           

Preferred stock

                 61      (61 )    

Common stock

     680                        680

Additional paid-in capital

     6,235       2,219       5,142      (6,870 )     6,726

Accumulated other comprehensive income (loss)

     582       (53 )     410      (357 )     582

Retained earnings

     1,199       1,504       1,771      (3,275 )     1,199
                                     

Total stockholders’ equity

     8,696       3,670       7,384      (10,563 )     9,187
                                     

Total liabilities and stockholders’ equity

   $ 9,710     $ 9,681     $ 12,646    $ (16,862 )   $ 15,175
                                     

 

18


NEWMONT MINING CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) (Continued)

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

 

     At December 31, 2006

Condensed Consolidating Balance Sheets

   Newmont
Mining
Corporation
   Newmont
USA
    Other
Subsidiaries
   Eliminations     Newmont
Mining
Corporation
Consolidated

Assets

            

Cash and cash equivalents

   $    $ 1,040     $ 126    $     $ 1,166

Marketable securities and other short-term investments

     1      28       80            109

Trade receivables

          139       3            142

Accounts receivable

     1,817      587       646      (2,834 )     216

Inventories

          296       86            382

Stockpiles and ore on leach pads

          339       39            378

Deferred income tax assets

          100       56            156

Other current assets

          66       27            93
                                    

Current assets

     1,818      2,595       1,063      (2,834 )     2,642

Property, plant and mine development, net

          4,740       2,123      (16 )     6,847

Investments

          281       1,038            1,319

Investments in subsidiaries

     6,256      111       4,347      (10,714 )    

Long-term stockpiles and ore on leach pads

          756       56            812

Deferred income tax assets

     43      482       274            799

Other long-term assets

     1,749      1,104       198      (2,873 )     178

Goodwill

                3,004            3,004
                                    

Total assets

   $ 9,866    $ 10,069     $ 12,103    $ (16,437 )   $ 15,601
                                    

Liabilities

            

Current portion of long-term debt

   $    $ 154     $ 5    $     $ 159

Accounts payable

     47      2,376       750      (2,833 )     340

Employee related benefits

          147       35            182

Derivative instruments

          173       1            174

Income and mining taxes

     85      (54 )     333            364

Other current liabilities

     9      360       152      (1 )     520
                                    

Current liabilities

     141      3,156       1,276      (2,834 )     1,739

Long-term debt

     597      1,035       120            1,752

Reclamation and remediation liabilities

          408       120            528

Deferred income tax liabilities

     53      187       438      25       703

Employee-related benefits

     1      283       25            309

Other long-term liabilities

     258      145       2,752      (3,020 )     135
                                    

Total liabilities

     1,050      5,214       4,731      (5,829 )     5,166
                                    

Minority interest in subsidiaries

          1,140       343      (385 )     1,098
                                    

Stockholders’ equity

            

Preferred stock

                61      (61 )    

Common stock

     677                       677

Additional paid-in capital

     6,182      2,219       5,167      (6,865 )     6,703

Accumulated other comprehensive income (loss)

     673      19       427      (446 )     673

Retained earnings

     1,284      1,477       1,374      (2,851 )     1,284
                                    

Total stockholders’ equity

     8,606      3,715       7,029      (10,013 )     9,337
                                    

Total liabilities and stockholders’ equity

   $ 9,866    $ 10,069     $ 12,103    $ (16,437 )   $ 15,601
                                    

 

19


NEWMONT MINING CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) (Continued)

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

 

     Three Months Ended March 31, 2007  

Condensed Consolidating Statement of Cash Flows

   Newmont
Mining
Corporation
    Newmont
USA
    Other
Subsidiaries
    Eliminations     Newmont
Mining
Corporation
Consolidated
 

Operating activities:

          

Net income (loss)

   $ 68     $ 70     $ (5 )   $ (65 )   $ 68  

Adjustments to reconcile net income to net cash provided by operating activities

     (2 )     154       36       65       253  

Net change in operating assets and liabilities

     (40 )     (205 )     (18 )           (263 )
                                        

Net cash from operations

     26       19       13             58  
                                        

Investing activities:

          

Additions to property, plant and mine development

           (228 )     (134 )           (362 )

Investments in marketable debt and equity securities

           (124 )     (29 )           (153 )

Proceeds from sale of marketable debt and equity securities

           124                   124  

Other

           2       (1 )           1  
                                        

Net cash used in investing activities

           (226 )     (164 )           (390 )
                                        

Financing activities:

          

Net borrowings (repayments)

     5       (186 )     160             (21 )

Dividends paid to common stockholders

     (43 )           (2 )           (45 )

Dividends paid to minority interests

           (1 )                 (1 )

Proceeds from stock issuance and other

     9                         9  

Change in restricted cash and other

     3       (1 )     6             8  
                                        

Net cash (used in) provided from financing activities

     (26 )     (188 )     164             (50 )
                                        

Effect of exchange rate changes on cash

                 2             2  
                                        

Net change in cash and cash equivalents

           (395 )     15             (380 )

Cash and cash equivalents at beginning of period

           1,040       126             1,166  
                                        

Cash and cash equivalents at end of period

   $     $ 645     $ 141     $     $ 786  
                                        

 

20


NEWMONT MINING CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) (Continued)

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

 

     Three Months Ended March 31, 2006  

Condensed Consolidating Statement of Cash Flows

   Newmont
Mining
Corporation
    Newmont
USA
    Other
Subsidiaries
    Eliminations     Newmont
Mining
Corporation
Consolidated
 

Operating activities:

          

Net income (loss)

   $ 209     $ 151     $ 60     $ (211 )   $ 209  

Adjustments to reconcile net income to net cash provided by operating activities

     (195 )     222       (40 )     211       198  

Net change in operating assets and liabilities

     (16 )     (182 )     24             (174 )
                                        

Net cash (used in) provided from continuing operating activities

     (2 )     191       44             233  

Net cash provided from discontinued operations

           2                   2  
                                        

Net cash (used in) provided from operations

     (2 )     193       44             235  
                                        

Investing activities:

          

Additions to property, plant and mine development

           (279 )     (88 )           (367 )

Investments in marketable debt and equity securities

           (671 )     (1 )           (672 )

Proceeds from sale of marketable debt and equity securities

           968       2         970  

Acquisitions

                 (187 )           (187 )

Other

           2                   2  
                                        

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

           20       (274 )           (254 )

Net cash used in investing activities of discontinued operations

           (3 )                 (3 )
                                        

Net cash provided from (used in) investing activities

           17       (274 )           (257 )
                                        

Financing activities:

          

Net borrowings (repayments)

     1       (261 )     240             (20 )

Dividends paid to common stockholders

     (42 )           (3 )           (45 )

Dividends paid to minority interests

           (45 )                 (45 )

Proceeds from stock issuance

     38                         38  

Change in restricted cash and other

     5       (13 )                 (8 )
                                        

Net cash provided from (used in) financing activities

     2       (319 )     237             (80 )
                                        

Effect of exchange rate changes on cash

           2       (3 )           (1 )
                                        

Net change in cash and cash equivalents

           (107 )     4             (103 )

Cash and cash equivalents at beginning of period

     1       979       102             1,082  
                                        

Cash and cash equivalents at end of period

   $ 1     $ 872     $ 106     $     $ 979  
                                        

 

21


NEWMONT MINING CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) (Continued)

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

 

(21)   COMMITMENTS AND CONTINGENCIES

General

The Company follows FAS No. 5, “Accounting for Contingencies,” in determining its accruals and disclosures with respect to loss contingencies. Accordingly, estimated loss contingencies are accrued by a charge to income when information available prior to issuance of the financial statements indicates that it is probable (greater than a 75% probability) that a liability could be incurred and the amount of the loss can be reasonably estimated. Legal expenses associated with the contingency are expensed as incurred. If a loss contingency is not probable or reasonably estimable, disclosure of the loss contingency is made in the financial statements when it is at least reasonably possible that a material loss could be incurred.

Operating Segments

The Company’s operating segments are identified in Note 19. Except as noted in this paragraph, all of the Company’s commitments and contingencies specifically described in this Note 21 relate to the Corporate and Other reportable segment. The Nevada Operations matters under Newmont USA Limited relate to the Nevada reportable segment. The PT Newmont Minahasa Raya matters relate to the Other Operations reportable segment. The Yanacocha matters relate to the Yanacocha reportable segment. The Newmont Yandal Operations Pty Limited and the Newmont Australia Limited matters relate to the Australia/New Zealand reportable segment.

Environmental Matters

The Company’s mining and exploration activities are subject to various laws and regulations governing the protection of the environment. These laws and regulations are continually changing and are generally becoming more restrictive. The Company conducts its operations so as to protect the public health and environment and believes its operations are in compliance with applicable laws and regulations in all material respects. The Company has made, and expects to make in the future, expenditures to comply with such laws and regulations, but cannot predict the full amount of such future expenditures.

Estimated future reclamation costs are based principally on legal and regulatory requirements. At March 31, 2007 and December 31, 2006, $522 and $520, respectively, were accrued for reclamation costs relating to mineral properties in accordance with FAS No. 143, “Accounting for Asset Retirement Obligations.” See Note 17.

In addition, the Company is involved in several matters concerning environmental obligations associated with former mining activities. Generally, these matters concern developing and implementing remediation plans at the various sites involved. The Company believes that the related environmental obligations associated with these sites are similar in nature with respect to the development of remediation plans, their risk profile and the compliance required to meet general environmental standards. Based upon the Company’s best estimate of its liability for these matters, $81 and $85 were accrued for such obligations at March 31, 2007 and December 31, 2006, respectively. These amounts are included in Other current liabilities and Reclamation and remediation liabilities. Depending upon the ultimate resolution of these matters, the Company believes that it is reasonably possible that the liability for these matters could be as much as 93% greater or 28% lower than the amount accrued at March 31, 2007. The amounts accrued for these matters are reviewed periodically based upon facts and circumstances available at the time. Changes in estimates are recorded in Other expense, net in the period estimates are revised.

Details about certain of the more significant matters involved are discussed below.

Dawn Mining Company LLC (“Dawn”) - 51% Newmont Owned

Midnite Mine Site. Dawn previously leased an open pit uranium mine, currently inactive, on the Spokane Indian Reservation in the State of Washington. The mine site is subject to regulation by agencies of the U.S. Department of Interior (the Bureau of Indian Affairs and the Bureau of Land Management), as well as the United States Environmental Protection Agency (“EPA”).

In 1991, Dawn’s mining lease at the mine was terminated. As a result, Dawn was required to file a formal mine closure and reclamation plan. The Department of Interior commenced an analysis of Dawn’s proposed plan and alternate closure and reclamation plans for the mine. Work on this analysis has been suspended indefinitely. In mid-2000, the mine was included on the National Priorities List under the Comprehensive Environmental Response, Compensation and Liability Act (“CERCLA”). In March 2003, the EPA notified Dawn and Newmont that it had thus far expended $12 on the Remedial Investigation/Feasibility Study under CERCLA

 

22


NEWMONT MINING CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) (Continued)

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

 

(“RI/FS”). In October 2005, the EPA issued the RI/FS on this property in which it indicated a preferred remedy estimated to cost approximately $150. Newmont and Dawn filed comments on the RI/FS with the EPA in January 2006. On October 3, 2006, the EPA issued a final Record of Decision in which it formally selected the preferred remedy identified in the RI/FS.

On January 28, 2005, the EPA filed a lawsuit against Dawn and Newmont under CERCLA in the U.S. District Court for the Eastern District of Washington. The EPA has asserted that Dawn and Newmont are liable for reclamation or remediation work and costs at the mine. Dawn does not have sufficient funds to pay for the reclamation plan it proposed or for any alternate plan, or for any additional remediation work or costs at the mine. Newmont intends to vigorously contest any claims as to its liability.

Newmont cannot reasonably predict the likelihood or outcome of this lawsuit or any other action against Dawn or Newmont arising from this matter.

Dawn Mill Site. Dawn also owns a uranium mill site facility, located on private land near Ford, Washington, which is subject to state and federal regulation. In late 1999, Dawn sought and later received state approval for a revised closure plan that expedites the reclamation process at the site. The currently approved plan for the site is guaranteed by Newmont.

Idarado Mining Company (“Idarado”) - 80.1% Newmont Owned

In July 1992, Newmont and Idarado signed a consent decree with the State of Colorado (“State”), which was agreed to by the U.S. District Court of Colorado, to settle a lawsuit brought by the State under CERCLA.

Idarado agreed in the consent decree to undertake specified remediation work at its former mining site in the Telluride/Ouray area of Colorado. Remediation work at this property is substantially complete. If the remediation does not achieve specific performance objectives defined in the consent decree, the State may require Idarado to implement supplemental activities at the site, also as defined in the consent decree. Idarado and Newmont obtained a $6 reclamation bond to secure their potential obligations under the consent decree. In addition, Idarado settled natural resources damages and past and future response costs, and agreed to habitat enhancement work under the consent decree. All of this work is substantially complete.

Newmont Capital Limited - 100% Newmont Owned

In February 1999, the EPA placed the Lava Cap mine site in Nevada County, California on the National Priorities List under CERCLA. The EPA then initiated a RI/FS under CERCLA to determine environmental conditions and remediation options at the site.

Newmont Capital, formerly known as Franco-Nevada Mining Corporation, Inc., owned the property for approximately three years from 1984 to 1986 but never mined or conducted exploration at the site. The EPA asserts that Newmont Capital is responsible for clean up costs incurred at the site. Newmont Capital and the EPA have entered into an agreement tolling the statute of limitations until December 31, 2007 to facilitate on-going settlement negotiations with respect to potential claims under CERCLA. Based on Newmont Capital’s limited involvement at Lava Cap, it does not believe it has any liability for environmental conditions at the site, and intends to vigorously defend any formal claims by the EPA. Newmont cannot reasonably predict the likelihood or outcome of any future action arising from this matter.

Newmont USA Limited - 100% Newmont Owned

Pinal Creek. Newmont is a defendant in a lawsuit brought on November 5, 1991 in U.S. District Court in Arizona by the Pinal Creek Group, alleging that the company and others are responsible for some portion of costs incurred to address groundwater contamination emanating from copper mining operations located in the area of Globe and Miami, Arizona. Two former subsidiaries of Newmont, Pinto Valley Copper Corporation and Magma Copper Company (now known as BHP Copper Inc.), owned some of the mines in the area between 1983 and 1987. The court has dismissed plaintiffs’ claims seeking to hold Newmont liable for the acts or omissions of its former subsidiaries. Based on information presently available, Newmont believes it has strong defenses to plaintiffs’ remaining claims, including, without limitation, that Newmont’s agents did not participate in any pollution causing activities; that Newmont’s liabilities, if any, were contractually transferred to one of the plaintiffs; that portions of plaintiffs’ claimed damages are not recoverable; and that Newmont’s equitable share of liability, if any, would be immaterial. While Newmont has denied liability and is vigorously defending these claims, we cannot reasonably predict the final outcome of this lawsuit.

Grass Valley. On February 3, 2004, the City of Grass Valley, California brought suit against Newmont under CERCLA in the U.S. District Court for the Northern District of California. This matter involves an abandoned mine adit on property previously owned

 

23


NEWMONT MINING CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) (Continued)

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

 

by a predecessor of Newmont and currently owned by the City of Grass Valley. The complaint alleges that the adit is discharging metals-bearing water into a stream on the property, in concentrations in excess of current EPA drinking water standards. Newmont cannot reasonably predict the likely outcome of this matter.

Gray Eagle Mine Site. By letter dated September 3, 2002, the EPA notified Newmont that the EPA had expended $3 in response costs to address environmental conditions associated with a historic tailings pile located at the Grey Eagle Mine site near Happy Camp, California, and requested that Newmont pay those costs. The EPA has identified four potentially responsible parties, including Newmont. Newmont does not believe it has any liability for environmental conditions at the Grey Eagle Mine site, and intends to vigorously defend any formal claims by the EPA. Newmont cannot reasonably predict the likelihood or outcome of any future action against it arising from this matter.

PT Newmont Minahasa Raya (“PTNMR”) - 80% Newmont Owned

In July 2004, a criminal complaint was filed against PTNMR, the Newmont subsidiary that operated the Minahasa mine in Indonesia, alleging environmental pollution relating to submarine tailings placement into nearby Buyat Bay. The Indonesian police detained five PTNMR employees during September and October of 2004. The police investigation and the detention of PTNMR’s employees was declared illegal by the South Jakarta District Court in December 2004, but in March 2005, the Indonesian Supreme Court upheld the legality of the police investigation, and the police turned their evidence over to the local prosecutor. In July 2005, the prosecutor filed an indictment against PTNMR and its President Director, alleging environmental pollution at Buyat Bay. After the court rejected motions to dismiss the proceeding, the trial proceeded and all evidence, including that of the defense, was presented in court as of September 2006. In November 2006 the prosecution filed its charge, seeking a three-year jail sentence for PTNMR’s President Director plus a nominal fine. In addition, the prosecution has recommended a nominal fine against PTNMR. The defense filed responses in January 2007, and final briefing was completed in March 2007. On April 24, 2007, the court entered its verdict acquitting PTNMR and its President Director of all charges.

On March 9, 2005, the Indonesian Ministry of the Environment filed a civil lawsuit against PTNMR and its President Director in relation to these allegations, seeking in excess of $100 in monetary damages. In October 2005, PTNMR filed an objection to the court’s jurisdiction, contending that the Government previously agreed to resolve any disputes through out-of-court conciliation or arbitration. The Court upheld PTNMR’s objection and dismissed the case in November 2005. The Government filed a notice of appeal of this ruling. On February 16, 2006, PTNMR and the Government of the Republic of Indonesia signed an agreement settling the civil lawsuit. Under the terms of the agreement, the Government and PTNMR will nominate members to an independent scientific panel that will develop and implement a ten-year environmental monitoring and assessment program to make a definitive, scientific conclusion regarding the condition of Buyat Bay. PTNMR is required to fund specific remedial measures if, as a result of its mining operations, pollution has occurred. The agreement also provides for enhanced community development programs in North Sulawesi. PTNMR provided initial funding of $12 to cover the cost of the monitoring and community development programs paid in the first quarter of 2007 and which was included in Other current liabilities at December 31, 2006. Over a ten-year period, PTNMR will contribute an additional $18. The present value of $13 is included in Other long-term liabilities at December 31, 2006. The funds will be managed by an organization governed by interested stakeholders. Accountability for the fund will be ensured through yearly reports that will be made available to the public. The transparency of the scientific panel’s activities will also be assured through annual reports to the public. Pursuant to the agreement, the civil lawsuit against PTNMR has been terminated. The scientific panel held its first meeting in February 2007 and has now commenced its work program.

Independent sampling and testing of Buyat Bay water and fish, as well as area residents, conducted by the World Health Organization and the Australian Commonwealth Scientific and Industrial Research Organization, confirm that PTNMR has not polluted the Buyat Bay environment, and, therefore, has not adversely affected the fish in Buyat Bay or the health of nearby residents. The Company remains steadfast that it has not caused pollution or health problems and will continue to vigorously defend itself against these allegations.

Resurrection Mining Company (“Resurrection”) - 100% Newmont Owned

Newmont, Resurrection and other defendants were named in lawsuits filed by the State of Colorado under CERCLA in 1983, which were subsequently consolidated with a lawsuit filed by EPA in 1986. These proceedings sought to compel the defendants to remediate the impacts of pre-existing, historic mining activities near Leadville, Colorado, which date back to the mid-1800s, and which the government agencies claim were causing substantial environmental problems in the area.

 

24


NEWMONT MINING CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) (Continued)

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

 

In 1988 and 1989, the EPA issued administrative orders with respect to one area on the site and the defendants have collectively implemented those orders by constructing a water treatment plant, which was placed in operation in early 1992. Remaining remedial work for this area consists of water treatment plant operation and continuing environmental monitoring and maintenance activities. Newmont and Resurrection are currently responsible for 50% of these costs, but their share of such costs could increase in the event other defendants become unable to pay their share of such costs. On August 9, 2005, ASARCO LLC, the party responsible for the other 50% of these costs, filed for Chapter 11 bankruptcy in the United States Bankruptcy Court for the Southern District of Texas. The company is evaluating the effect that the ASARCO bankruptcy could have on its obligations.

The parties also have entered into a consent decree with respect to the remaining areas at the site, which apportions liabilities and responsibilities for these areas. The EPA has approved remedial actions for selected components of Resurrection’s portion of the site, which were initiated in 1995. The EPA has not yet selected the final remedy for the site. Accordingly, Newmont cannot yet determine the full extent or cost of its share of the remedial action that will be required. The government agencies may also seek to recover for damages to natural resources. In March 1999, the parties entered into a Memorandum of Understanding (“MOU”) to facilitate the settlement of natural resources damages claims under CERCLA for the upper Arkansas River Basin. In January 2004, an MOU report was issued that evaluated the extent of natural resource damages and possible restoration activities that might be required, which Resurrection and other parties could potentially be required to fund.

Other Legal Matters

Minera Yanacocha S.R.L. (“Yanacocha”) - 51.35% Newmont Owned

Choropampa. In June 2000, a transport contractor of Yanacocha spilled approximately 151 kilograms of elemental mercury near the town of Choropampa, Peru, which is located 53 miles (85 kilometers) southwest of the Yanacocha mine. Elemental mercury is not used in Yanacocha’s operations but is a by-product of gold mining and was sold to a Lima firm for use in medical instruments and industrial applications. A comprehensive health and environmental remediation program was undertaken by Yanacocha in response to the incident. In August 2000, Yanacocha paid under protest a fine of 1,740,000 Peruvian soles (approximately $0.5) to the Peruvian government. Yanacocha has entered into settlement agreements with a number of individuals impacted by the incident. As compensation for the disruption and inconvenience caused by the incident Yanacocha entered into agreements with and provided a variety of public works in the three communities impacted by this incident. Yanacocha cannot predict the likelihood of additional expenditures related to this matter.

Yanacocha, various wholly-owned subsidiaries of Newmont, and other defendants have been named in lawsuits filed by approximately 1,100 Peruvian citizens in Denver District Court for the State of Colorado. These actions seek compensatory damages based on claims associated with the elemental mercury spill incident. In February 2005, Yanacocha and the various Newmont defendants answered the complaint in the Denver District Court. The parties in these cases have agreed to submit these matters to binding arbitration.

Additional lawsuits relating to the Choropampa incident were filed against Yanacocha in the local courts of Cajamarca, Peru, in May 2002 by over 900 Peruvian citizens. A significant number of the plaintiffs in these lawsuits entered into settlement agreements with Yanacocha prior to filing such claims. In September 2006, the Peruvian Supreme Court issued contradictory opinions on the validity of these settlement agreements. Subsequent lower court decisions have upheld the validity of these settlement agreements, discharging a number of the lawsuits. In 2005, Yanacocha entered into settlement agreements with approximately 350 additional plaintiffs.

Neither Newmont nor Yanacocha can reasonably predict the final outcome of any of the above-described lawsuits.

Conga. Yanacocha is involved in a dispute with the Provincial Municipality of Celendin regarding the authority of that governmental body to regulate the development of the Conga project. In the fourth quarter of 2004, the Municipality of Celendin enacted an ordinance declaring the area around Conga to be a mining-free reserve and naturally protected area. Yanacocha has challenged this ordinance on the grounds that, under Peruvian law, local governments lack authority to create such areas and deny the rights granted by Yanacocha’s mining concessions. Based on legal precedent established by Peru's Constitutional Tribunal, it is reasonable to believe that Yanacocha’s mining rights will be upheld.

 

25


NEWMONT MINING CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) (Continued)

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

 

Yanacocha has carefully evaluated the social issues and dynamics of the communities in and around the area of Conga. Yanacocha has engaged in extensive community and external affairs efforts at this early stage of the Conga project. It is Yanacocha’s current assessment that a significant percentage of the population in the communities immediately surrounding the Conga area support the project. Yanacocha will continue to engage actively with these communities during the process of permitting the project, and will expand its outreach efforts to communities in the surrounding region. It will continually monitor and evaluate conditions in the area and any resulting impact on Yanacocha’s ability to successfully permit and develop the Conga project.

Newmont Mining Corporation

On June 8, 2005, UFCW Local 880 – Retail Food Employers Joint Pension Fund filed a putative class action in the federal district court in Colorado purportedly on behalf of purchasers of Newmont Mining Corporation (“Newmont”) publicly traded securities between July 28, 2004 and April 26, 2005. The action named Newmont, Wayne W. Murdy, Pierre Lassonde and Bruce D. Hansen as defendants. Substantially similar purported class actions were filed in the same court on June 15, 2005 by John S. Chapman and on June 20, 2005 by Zoe Myerson. In November 2005, the court consolidated these cases and, in March 2006, appointed a lead plaintiff. In April 2006, the lead plaintiff filed a consolidated amended complaint naming David Francisco, Russell Ball, Thomas Enos and Robert Gallagher as additional defendants. It alleged, among other things, that Newmont and the individual defendants violated certain antifraud provisions of the federal securities laws by failing to disclose alleged operating deficiencies and sought unspecified monetary damages and other relief. On October 20, 2006, the lead plaintiff, on behalf of a settlement class consisting of all purchasers of Newmont securities from November 1, 2003, through and including March 23, 2006 (except defendants and certain related persons), entered into a Stipulation of Settlement with defendants. If approved by the Court, the Settlement (a) would release all claims asserted, or that could have been asserted, in the action; (b) would provide for a payment by Newmont of $15 to be distributed to class members pursuant to a plan of allocation developed by the lead plaintiff; and (c) would provide that all defendants deny any wrongdoing or liability with respect to the settled matters. The parties have moved for preliminary approval of the settlement, but the court has not ruled on the motion. Gideon Minerals, U.S.A., Inc. ("Gideon") has sought to intervene to bring a claim alleging that Gideon has an interest in the Batu Hijau operation in Indonesia; the court has denied that motion. Gideon subsequently filed a substantially similar motion and moved for default judgment; the court has also denied this motion and has required Gideon to show cause as to why it should not be sanctioned in relation to its filings.

On June 14, 2005, June 30, 2005 and July 1, 2005, purported derivative actions were filed, on behalf of Newmont, by Doris Staehr, Frank J. Donio and Jack G. Blaz, respectively, in the federal district court in Colorado against certain of Newmont’s current and former directors and officers. Each action alleged that certain defendants breached their fiduciary duties by engaging in insider trading and misappropriation of information, and that all defendants breached their fiduciary duties and engaged in conduct that constituted abuse of control, gross mismanagement, waste of corporate assets and unjust enrichment in connection with, among other things, failing to disclose alleged operating deficiencies and failing to prevent alleged violations of environmental laws in Indonesia. The plaintiffs seek, on behalf of Newmont, among other remedies, all damages sustained by the Company as a result of the allegedly improper conduct. In November 2005, the court consolidated these cases and in December 2005 the court appointed a lead plaintiff. On April 10, 2006, the lead plaintiff filed a consolidated amended complaint. This action has been administratively closed without prejudice to any party filing a motion to reopen prior to June 19, 2007. The defendants deny the claims made and, should the case be re-opened, intend to vigorously defend against them. The Company cannot reasonably predict the final outcome of these cases. In a related development, on January 13, 2006, a purported Newmont shareholder sent to the Board of Directors a letter demanding the Company take action against the defendants in the purported derivative actions with respect to the matters alleged in the derivative complaints. The Board has taken the demand under consideration. Counsel for plaintiffs in the derivative actions, counsel for the demanding shareholder and the Company have agreed to settle the action and related disputes on the basis of certain revisions to the Company's corporate governance arrangements, and an attorneys' fee to be paid by the Company. This settlement is subject to court approval.

Newmont Yandal Operations Pty Ltd (“NYOL”)—100% Newmont Owned

On September 3, 2003, J. Aron & Co. commenced proceedings in the Supreme Court of New South Wales (Australia) against NYOL, its subsidiaries and the administrator in relation to the completed voluntary administration of the NYOL group. J. Aron & Co., an NYOL creditor, initially sought injunctive relief that was denied by the court on September 8, 2003. On October 30, 2003, J. Aron & Co. filed a statement of claim alleging various deficiencies in the implementation of the voluntary administration process and seeking damages and other relief against NYOL and other parties. Newmont cannot reasonably predict the final outcome of this lawsuit.

 

26


NEWMONT MINING CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) (Continued)

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

 

Zarafshan-Newmont Joint Venture—50% Newmont Owned

In June 2006, an economic court in Uzbekistan ruled in favor of tax authorities and against the Zarafshan-Newmont Joint Venture (“ZNJV”), which is 50% owned by the Company, on two claims to collect approximately $48 in taxes other than income taxes. The tax authorities argued that Decree 151, which protected ZNJV from changes in tax laws and provided other financial and operational benefits, became ineffective and that the taxes and penalties claimed were owed for the period 2002-2005. Decree 151 had been granted by the Republic of Uzbekistan in 1992 as an incentive for the Company’s investment in ZNJV. The benefits it provided, including the stability of the tax and legal regime in effect at that time, were guaranteed to remain in effect for so long as ZNJV had ongoing operations.

On July 26, 2006, the Republic of Uzbekistan caused the seizure of gold, silver and unfinished product belonging to ZNJV. On August 14, 2006, the Company received notice that the economic court had accepted the petition of an agency of the Republic of Uzbekistan to institute a bankruptcy proceeding against ZNJV. Neither ZNJV nor the Company received advance notice that the petition was filed or that a hearing would be held. The court ordered “supervisory measures” restricting normal operations, including the export of gold or repayment of loans, without the approval of a court-appointed temporary administrator, who has been overseeing all operations of ZNJV.

At a September 19, 2006 meeting of the ZNJV creditor’s committee, which was principally composed of government representatives, the committee voted to liquidate ZNJV. On September 29, 2006, the economic court concluded that ZNJV was insolvent and ordered ZNJV to be liquidated by December 29, 2006. At this hearing, representatives of ZNJV and the Company were denied an opportunity to present the case against liquidation. The remaining assets of ZNJV are anticipated to be liquidated to pay the tax liabilities that have been imposed on ZNJV by the Republic of Uzbekistan, resulting in the effective transfer to the Republic of Uzbekistan of the Company’s interest in ZNJV. The liquidation sale has been postponed three times, and is now scheduled for May 2007. Despite the Company’s demands for compensation for the losses it has suffered, the Republic of Uzbekistan has refused to provide such compensation. On October 31, 2006, the Company filed demands for arbitration against the Republic of Uzbekistan in two separate international venues on the basis that the Republic of Uzbekistan repudiated its obligations to the Company under Decree 151, Uzbek and international law, and various agreements. The Uzbekistan parties to the joint venture agreement are also named as defendants in one of these proceedings. The Company and the defendants have appointed the arbitrators for both proceedings. At September 30, 2006, the Company wrote off the book value of its ownership interest in ZNJV. The ultimate outcome of this matter cannot be determined at this time.

Other Commitments and Contingencies

Tax contingencies are provided for under FIN 48. See Notes 2 and 6.

In a 1993 asset exchange, a wholly-owned subsidiary transferred a coal lease under which the subsidiary had collected advance royalty payments totaling $484. From 1994 to 2018, remaining advance payments under the lease to the transferee total $390. In the event of title failure as stated in the lease, this subsidiary has a primary obligation to refund previously collected payments and has a secondary obligation to refund any of the $390 collected by the transferee, if the transferee fails to meet its refund obligation. The subsidiary has title insurance on the leased coal deposits of $240 covering the secondary obligation. The Company and the subsidiary regard the circumstances entitling the lessee to a refund as remote.

The Company has minimum royalty obligations on one of its producing mines in Nevada for the life of the mine. Amounts paid as a minimum royalty (where production royalties are less than the minimum obligation) in any year are recoverable in future years when the minimum royalty obligation is exceeded. Although the minimum royalty requirement may not be met in a particular year, the Company expects that over the mine life, gold production will be sufficient to meet the minimum royalty requirements. Minimum royalty payments payable are $8 for 2007, $13 for 2008, $2 in 2009 and 2010, $18 in 2011 and $98 thereafter.

As part of its ongoing business and operations, the Company and its affiliates are required to provide surety bonds, bank letters of credit and bank guarantees as financial support for various purposes, including environmental reclamation, exploration permitting, workers compensation programs and other general corporate purposes. At March 31, 2007 and December 31, 2006, there were $475 and $445, respectively, of outstanding letters of credit, surety bonds and bank guarantees. The surety bonds, letters of credit and bank guarantees reflect fair value as a condition of their underlying purpose and are subject to fees competitively determined in the market place. The obligations associated with these instruments are generally related to performance requirements that the Company addresses through its ongoing operations. As the specific requirements are met, the beneficiary of the associated instrument cancels and/or returns the instrument to the issuing entity. Certain of these instruments are associated with operating sites with long-lived

 

27


NEWMONT MINING CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) (Continued)

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

 

assets and will remain outstanding until closure. Generally, bonding requirements associated with environmental regulation are becoming more restrictive. In addition, the surety markets for certain types of environmental bonding used by the Company have become increasingly constrained. The Company, however, believes it is in compliance with all applicable bonding obligations and will be able to satisfy future bonding requirements, through existing or alternative means, as they arise.

Under the Batu Hijau Contract of Work with the Indonesian government, beginning in 2005, and continuing through 2010, a portion of each foreign shareholders’ equity interest in the project must be offered for sale to the Indonesian government or to Indonesian nationals. The price at which such interest must be offered for sale to the Indonesian parties is the highest of the then-current replacement cost, the price at which shares of the project company would be accepted for listing on the Jakarta Stock Exchange, or the fair market value of such interest in the project company as a going concern. Pursuant to this provision of the Batu Hijau Contract of Work, it is possible that the ownership interest of the Newmont/Sumitomo partnership in Batu Hijau could be reduced to 49% by the end of 2010.

A company owned by an Indonesian national currently owns a 20% equity interest in Batu Hijau, and the Newmont/Sumitomo partnership was required to offer a 3% interest in 2006. An offer to sell a 3% interest was made to the government of Indonesia. While the central government declined to participate, local governments in the area in which the mine is located have expressed interest in acquiring shares, as have various Indonesian nationals. The Newmont/Sumitomo partnership continues discussions with various interested parties to meet its divestiture obligations. Under the terms of the Contract of Work, an additional 7% interest in Batu Hijau was offered for sale in March 2007 to the government of Indonesia.

Newmont is from time to time involved in various legal proceedings related to its business. Except in the above-described proceedings, management does not believe that adverse decisions in any pending or threatened proceeding or that amounts that may be required to be paid by reason thereof will have a material adverse effect on the Company’s financial condition or results of operations.

(22) SUPPLEMENTARY DATA

Ratio of Earnings to Fixed Charges

The ratio of earnings to fixed charges for the three months ended March 31, 2007 was 5.8. The ratio of earnings to fixed charges represents income from continuing operations before income tax expense, minority interest and equity income of affiliates, divided by interest expense. Interest expense includes amortization of capitalized interest and the portion of rent expense representative of interest. Interest expense does not include interest on income tax liabilities. The computation of the ratio of earnings to fixed charges can be found in Exhibit 12.1.

(23) SUBSEQUENT EVENT

Revolving Credit Facility

Effective April 24, 2007, the Company renegotiated the terms of its uncollateralized $1,250 revolving credit facility, increasing the facility amount to $2,000 and extending the maturity date to April 2012.

Buyat Bay

On April 24, 2007, an Indonesian court ruled that PTNMR and its President Director Richard Ness were innocent of all criminal charges of pollution and regulatory violations. The court further found that the Company was in compliance with all regulations and permits during its eight years of operations from 1996 to 2004.

 

28


ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND FINANCIAL CONDITION (dollars in millions, except per share, per ounce and per pound amounts).

The following discussion provides information that management believes is relevant to an assessment and understanding of the consolidated financial condition and results of operations of Newmont Mining Corporation and its subsidiaries (collectively, “Newmont” or the “Company”). References to “A$” refer to Australian currency, “CDN$” to Canadian currency, “IDR” to Indonesian currency and “$” to United States currency.

This item should be read in conjunction with our interim unaudited Condensed Consolidated Financial Statements and the notes thereto included in this quarterly report.

Selected Financial and Operating Results

 

     Three Months Ended March 31,
     2007    2006

Revenues

   $ 1,256    $ 1,132

Income from continuing operations

   $ 68    $ 207

Net income

   $ 68    $ 209

Net income per common share, basic

     

Income from continuing operations

   $ 0.15    $ 0.47

Net income

   $ 0.15    $ 0.47

Consolidated gold ounces sold (thousands) (1)

     1,605      1,809

Consolidated copper pounds sold (millions)

     91      81

Average price received (2)

     

Gold (per ounce)

   $ 653    $ 556

Copper (per pound)

   $ 2.74    $ 2.08

Costs applicable to sales (3)

     

Gold (per ounce)

   $ 421    $ 275

Copper (per pound)

   $ 1.40    $ 0.81

(1)

 

Includes 14 incremental start-up sales from Phoenix and Leeville in 2006 which are not included in Revenue, Costs applicable to sales and Depreciation, depletion and amortization per ounce calculations.

(2)

 

Before treatment and refining charges but after hedge losses.

(3)

 

Excludes depreciation, depletion and amortization.

Consolidated Financial Results

Newmont’s income from continuing operations for the three month period ended March 31, 2007 was $68, or $0.15 per share. Results for the first three months of 2007 compared to 2006 were impacted by fewer gold ounces sold and higher operating costs, partially offset by higher realized gold and copper prices, higher copper pounds sold, the gain realized on the exchange of Agincourt Resources equity securities for Oxiana Ltd. equity securities and the commencement of operations at the Ahafo mine in August 2006.

 

29


Sales—gold, net for the first quarter of 2007 increased $48, or 5%, compared to the first quarter of 2006 as higher realized prices more than offset lower ounces sold. The following analysis summarizes the change in consolidated gold sales revenue:

 

     Three Months Ended March 31,  
     2007     2006  

Consolidated gold sales:

    

Gross

   $ 1,049     $ 998  

Less: Treatment and refining charges

     (6 )     (3 )
                

Net

   $ 1,043     $ 995  
                

Consolidated gold ounces sold (thousands):

    

Gross

     1,605       1,809  

Less: Incremental start-up sales

     —         (14 )
                

Net

     1,605       1,795  
                

Average realized price (per ounce):

    

Before treatment and refining charges

   $ 653     $ 556  

After treatment and refining charges

   $ 649     $ 554  

The change in consolidated gold sales is due to:

 

     Three Months
Ended
March 31,
 
     2007 vs. 2006  

Reduction in consolidated ounces sold

   $ (106 )

Increase in average realized gold price

     157  

Increase in treatment and refining charges

     (3 )
        
   $ 48  
        

Sales—copper, net for the first quarter of 2007 increased $76, or 55%, compared to the first quarter of 2006 primarily due to higher realized prices and increased sales volumes. Hedge losses recognized during the first quarter of 2007 were lower than the first quarter of 2006 as the final deliveries were made under copper collar contracts. At March 31, 2007, 13 million pounds delivered under the contracts remain subject to final settlement. In the first quarter of 2006, a loss of $23 was included in Other income, net for the ineffective portion of copper hedges. For a complete discussion regarding variations in gold and copper volumes, see Results of Consolidated Operations below.

The following analysis summarizes the change in consolidated copper sales revenue:

 

     Three Months Ended March 31,  
     2007     2006  

Consolidated copper sales:

    

Gross before hedging

   $ 245     $ 176  

Hedging loss

     (1 )     (95 )

Provisional pricing mark-to-market gain

     6       87  
                

Gross after hedging

     250       168  

Less: Treatment and refining charges

     (37 )     (31 )
                

Net

   $ 213     $ 137  
                

Consolidated copper pounds sold (millions)

     91       81  

Average realized price (per pound):

    

Gross before hedging

   $ 2.68     $ 2.18  

Hedging loss

     (0.01 )     (1.18 )

Provisional pricing mark-to-market gain

     0.07       1.08  
                

Gross after hedging

     2.74       2.08  

Less: Treatment and refining charges

     (0.41 )     (0.38 )
                

Net

   $ 2.33     $ 1.70  
                

 

30


The change in consolidated copper sales is due to:

 

     Three Months
Ended
March 31,
 
     2007 vs. 2006  

Increase in consolidated pounds sold

   $ 22  

Increase in average realized copper price

     60  

Increase in treatment and refining charges

     (6 )
        
   $ 76  
        

The following is a summary of net gold and copper sales:

 

     Three Months Ended March 31,  
     2007    2006  

Gold

     

Nevada, USA

   $ 361    $ 288  

Yanacocha, Peru

     297      427  

Australia/New Zealand:

     

Tanami, Australia

     74      60  

Kalgoorlie, Australia

     62      52  

Jundee, Australia

     40      36  

Pajingo, Australia

     31      18  

Martha, New Zealand

     9      21  
               
     216      187  
               

Batu Hijau, Indonesia

     56      39  

Ahafo, Ghana

     81      —    

Other Operations:

     

Golden Giant, Canada

     2      19  

Kori Kollo, Bolivia

     16      24  

La Herradura, Mexico

     14      12  
               
     32      55  
               

Corporate

     —        (1 )
               
   $ 1,043    $ 995  
               

Copper

     

Batu Hijau, Indonesia

   $ 213    $ 137  
               

 

31


Costs applicable to sales increased $182 for gold and $63 for copper for the first quarter of 2007 compared to the first quarter of 2006, as detailed in the table below. The increase in the first quarter of 2007 is primarily due to new operations at Ahafo and Phoenix and Leeville in Nevada, increased input commodity prices, higher labor costs, higher waste removal costs and unfavorable exchange rate movements in the Australian dollar. For a complete discussion regarding variations in operations, see Results of Consolidated Operations below.

The following is a summary of Costs applicable to sales, excluding depreciation, depletion and amortization:

 

     Three Months Ended March 31,
     2007    2006

Gold

     

Nevada, USA

   $ 276    $ 206

Yanacocha, Peru

     141      124

Australia/New Zealand:

     

Tanami, Australia

     50      38

Kalgoorlie, Australia

     58      44

Jundee, Australia

     36      26

Pajingo, Australia

     19      14

Martha, New Zealand

     9      6
             
     172      128
             

Batu Hijau, Indonesia

     28      15

Ahafo, Ghana

     43      —  

Other Operations:

     

Golden Giant, Canada

     1      8

Kori Kollo, Bolivia

     8      7

La Herradura, Mexico

     7      6
             
     16      21
             
   $ 676    $ 494
             

Copper

     

Batu Hijau, Indonesia

   $ 128    $ 65
             

 

32


Depreciation, depletion and amortization (“DD&A”) increased for the first quarter of 2007 compared to the first quarter of 2006 as detailed in the table below, and primarily relates to increases from new operations at Ahafo and Phoenix and Leeville in Nevada, sales of inventory in Australia/NewZealand and the expansion of the mining fleet at Batu Hijau in the later half of 2006. Newmont expects 2007 DD&A to be approximately $800 to $865.

The following is a summary of Depreciation, depletion and amortization:

 

     Three Months Ended March 31,
     2007    2006

Nevada, USA

   $ 55    $ 36

Yanacocha, Peru

     42      43

Australia/New Zealand:

     

Tanami, Australia

     9      7

Kalgoorlie, Australia

     8      6

Jundee, Australia

     6      5

Pajingo, Australia

     9      5

Martha, New Zealand

     3      3
             

Gold

     35      26

Other

     1      1
             
     36      27
             

Batu Hijau, Indonesia:

     

Gold

     6      4

Copper

     28      16
             
     34      20
             

Ahafo, Ghana

     10     
             

Other Operations:

     

Golden Giant, Canada

          1

Kori Kollo, Bolivia

     3      2

La Herradura, Mexico

     2      2
             
     5      5

Other:

     

Exploration

          1

Merchant Banking

     4      5

Corporate and Other

     6      3
             
     10      9
             
   $ 192    $ 140
             

Exploration increased $7, or 21% for the first quarter of 2007 compared to the first quarter of 2006. The increase was primarily a result of spending at the Fort a la Corne diamond joint venture in Canada and increased spending in Nevada. Newmont expects 2007 Exploration expense to be approximately $170 to $175.

Advanced projects, research and development and General and administrative expenses remained constant for the first quarter of 2007 compared to the first quarter of 2006. Newmont expects 2007 Advanced projects, research and development expenses to be approximately $85 to $100 and General and administrative expenses to be approximately $155 to $165.

Other expense, net increased by $8 for the first quarter of 2007 compared to the first quarter of 2006. The increase is primarily due to a $5 loss on an unfavorable natural gas supply agreement for the Company’s power plant in Western Australia.

 

33


Other income, net for the first quarter of 2007 and 2006 is summarized as follows:

 

     Three Months Ended March 31,  
     2007     2006  

Gain on investments, net

   $ 27     $ 1  

Royalty and dividend income

     31       29  

Interest income

     13       19  

Income from development projects, net

           4  

Loss on ineffective portion of derivative instruments, net

     (2 )     (24 )

Foreign currency exchange (losses) gains, net

     (5 )     3  

Other

     3       3  
                
   $ 67     $ 35  
                

Gain on investments, net includes a $27 gain resulting from Oxiana Ltd. shares obtained following the acquisition of Agincourt Resources by Oxiana Ltd., a $6 gain on the sale of other investments offset by a $6 write-down of the Company’s investment in Queenstake Resources Ltd.

Interest income decreased in 2007 due to a reduction in funds available for investment, partially offset by a higher return on funds invested.

Income from development projects in 2006 included revenue net of incremental operating costs incurred prior to commencement of commercial production at the Leeville and Phoenix operations in Nevada during the fourth quarter of 2006.

Loss on ineffective portion of derivative instruments, net included $2 for the ineffective portion of interest rate swap derivative instruments designated as cash flow hedges in 2007. In 2006, the losses included $23 for the ineffective portion of copper collar contracts and $1 for interest rate swap derivative instruments each designated as cash flow hedges.

Interest expense, net increased in 2007 due to $200 debt issued at Yanacocha during 2006 and $3 lower capitalized interest. Capitalized interest decreased as a result of the completion of the Ahafo, Phoenix and Leeville development projects in 2006. Newmont expects 2007 Interest expense, net to be approximately $95 to $105.

Income tax expense during the first quarter of 2007 was $62 compared to $37 during the first quarter of 2006. The effective tax rate for the first quarter of 2007 was 33% compared to 11% for the first quarter of 2006. The 22% increase over the 2006 first quarter rate primarily relates to the following non-recurring discrete items occurring in 2006; (i) the Australian tax functional currency election, (ii) Ghanaian tax rate change, and (iii) the valuation allowance release on foreign tax credits. The effective tax rate in the first quarter of 2007 is different from the United States statutory rate of 35% primarily due to (i) U.S. percentage depletion, (ii) the valuation allowance release relative to the Company’s deferred tax asset for capital losses in Australia, and (iii) the effect of different income tax rates in countries where earnings are indefinitely reinvested. The effective tax rate in 2006 is different from the United States statutory rate of 35% primarily due to (i) U.S. percentage depletion, (ii) additional tax benefits associated with the change in Australian tax law regarding the ability of the company to file consolidated income tax returns, and (iii) the valuation allowance release relative to the Company’s deferred tax assets for post-retirement benefit obligations, the latter two being discrete non-recurring items. For a complete discussion of the factors that influence the Company’s effective tax rate, see Management’s Discussion and Analysis of Results of Operations and Financial Condition in Newmont’s Annual Report on Form 10-K for the year ended December 31, 2006, filed February 26, 2007. Newmont expects the 2007 full year tax rate to be approximately 29% to 34% assuming an average gold price of $650 per ounce.

In December 2006, the Company entered into an in-principle heads of agreement with the Australian Taxation Office (“ATO”). The heads of agreement specifies the terms of a proposed settlement of the outstanding audit issues relating to Normandy for the tax years 1994-1999. These issues relate to years before the Company acquired Normandy. At the date of the business combination, Normandy had recorded no income tax liability with respect to the tax positions taken in reporting certain transactions, therefore the Company’s initial best estimate of the income tax contingency relating to these issues was recorded as a tax liability at the date of acquisition, February 15, 2002, by increasing the purchase price of Normandy. At December 31, 2006, the long-term income tax liability balance relating to this proposed settlement was reclassified to current income taxes payable and remains outstanding at March 31, 2007.

The Income from discontinued operations in 2006 resulted from the Holloway and Zarafshan gold operations being discontinued from sale and expropriation, respectively. The Company reclassified the income statement results from the historical presentation to discontinued operations in the Condensed Consolidated Statements of Income for all periods presented (see Note 7 to the Condensed Consolidated Financial Statements).

 

34


Results of Consolidated Operations

 

     Gold Ounces or
Copper Pounds Sold(1)
   Costs Applicable to Sales(2)    Depreciation, Depletion
and Amortization
     2007    2006    2007    2006    2007    2006
     (ounces in thousands)    ($ per ounce)    ($ per ounce)

Three Months Ended March 31,

                 

Gold

                 

Nevada

   560    535    $ 493    $ 395    $ 98    $ 68

Yanacocha(3) (51.35% owned)

   455    770      310      161      93      56

Australia/New Zealand

   332    333      519      384      107      79

Batu Hijau(3) (52.875% economic interest)

   84    73      330      208      74      51

Ahafo

   125         341           78     

Other(3)

   49    98      331      209      101      48
                                     

Total/Weighted-Average

   1,605    1,809    $ 421    $ 275    $ 95    $ 63
                                     
     (pounds in millions)    ($ per pound)    ($ per pound)

Copper

        

Batu Hijau(3) (52.875% economic interest)

   91    81    $ 1.40    $ 0.81    $ 0.31    $ 0.19

(1)

 

Includes 14 ounces in 2006 from Phoenix and Leeville start-up activities which are not included in Revenue, Costs applicable to sales and Depreciation, depletion and amortization per ounce calculations.

(2)

 

Excludes depreciation, depletion and amortization.

(3)

 

Consolidated gold ounces or copper pounds sold includes minority interests’ share.

Consolidated gold ounces sold decreased 11% in the first quarter of 2007 from 2006, primarily due to lower production at Yanacocha, partially offset by the commencement of operations at Ahafo in the third quarter of 2006 and Phoenix and Leeville in Nevada during the fourth quarter of 2006.

Consolidated copper pounds sold increased 12% in the first quarter of 2007 from 2006, primarily due to increased mill throughput, partially offset by lower recovery at Batu Hijau.

Costs applicable to sales per consolidated gold ounce sold increased 53% in the first quarter of 2007 from 2006, primarily due to the decrease in production, higher waste removal costs at Nevada, Yanacocha, Batu Hijau and Kalgoorlie (Australia/New Zealand) and high operating costs at Phoenix in Nevada. Also, the strengthening of the Australian dollar increased Consolidated Costs applicable to sales by $6 per ounce in the first quarter of 2007 compared to 2006. Costs applicable to sales per consolidated copper pound increased 73% in the first quarter of 2007 from 2006, primarily due to the increase in waste removal costs at Batu Hijau.

The Company expects consolidated gold sales of approximately 6.1 to 6.6 million ounces in 2007, primarily as a result of lower production from Yanacocha and Australia, as well as the completion of mining at Lone Tree in Nevada and lower remnant production from Golden Giant (Other operations). Costs applicable to sales per ounce for the full year in 2007 are expected to be approximately 25% higher than 2006, primarily from lower production at Yanacocha and Australia, as well as higher labor, consumables and energy prices in all operating regions. Additionally, continued operating difficulties at Phoenix, unfavorable exchange rate movements in Australia and potential power interruptions in Ghana could negatively impact the Company’s Costs applicable to sales in 2007.

The Company expects consolidated copper sales of approximately 400 to 435 million pounds of copper in 2007 at Costs applicable to sales of approximately $1.10 to $1.20 per pound.

Nevada Operations

 

     Gold Ounces Sold(1)    Costs Applicable to Sales(2)   

Depreciation, Depletion

and Amortization

     2007    2006    2007    2006    2007    2006
     (in thousands)    ($ per ounce)    ($ per ounce)

Three months ended March 31,

   560    535    $ 493    $ 395    $ 98    $ 68

(1)

 

Includes 14 incremental start-up ounces in 2006.

(2)

 

Excludes depreciation, depletion and amortization.

Gold ounces sold in Nevada increased 5% in the first quarter of 2007 from 2006. Gold sales increased with the commencement of commercial production at Phoenix and Leeville in October of 2006. Open pit and underground ore mined increased to 11.1 million tons in the first quarter of 2007, up from 9.1 million tons in the first quarter of 2006. Mining at Phoenix and Leeville contributed to the increase in ore mined. Ore milled increased to 6.2 million tons from 3.6 million tons in the first quarter of 2006, although milled ore

 

35


grade decreased 28% with the processing of lower grade ore from Phoenix. Ore placed on leach pads decreased by 49% due to the completion of mining at Lone Tree in 2006 and fewer leach ore tons were processed at Carlin in the first quarter of 2007, as the ore mined contained a higher proportion of mill ore. Stockpile processing at the Lone Tree mill continued in the first quarter of 2007 and is expected to continue throughout the remainder of 2007. Incorporating the first quarter results summarized above, the Company continues to expect gold sales in Nevada of approximately 2.35 to 2.55 million ounces for 2007.

Phoenix optimization remains the primary risk influencing Nevada’s gold sales and Costs applicable to sales outlook for the year. During the quarter, Phoenix experienced lower than expected ore grade, tailings line restrictions, harder than anticipated ore and lower mill availability. The Company continues to evaluate solutions to address metallurgical and startup challenges related to oxide and transitional ores at Phoenix. Higher grades, throughput and recovery opportunities exist throughout the rest of the Nevada complex, particularly as Leeville continues to ramp up and as Twin Creeks begins mining ore from recently accessed laybacks.

Nevada’s Costs applicable to sales per ounce increased 25% from $395 in the first quarter of 2006 to $493 per ounce in the first quarter of 2007. Higher cost production from Phoenix contributed to the increase in operating costs. Waste removal costs also increased due to accelerated mining at Pete, Gold Quarry and Twin Creeks. Costs for underground contracted services also increased at Leeville and Carlin East. Labor and input commodity cost escalation continued to impact operating costs. Depreciation, depletion and amortization per ounce increased 44% from the first quarter of 2006 as a result of increased investment in new equipment and facilities in 2006.

The Company continues to expect Costs applicable to sales of approximately $375 to $400 per ounce for 2007, provided that the current oxide and transitional ore issues at Phoenix are resolved. Unit costs during the first quarter of 2007 were above the expected range as a result of the higher cost production and lower by-product credits at Phoenix, as well as continued deployment of higher cost contracted underground and maintenance services. Contractor expenses are expected to decrease as Newmont employees are deployed for the remainder of the year. Ongoing challenges at Phoenix could result in Costs applicable to sales per ounce above the expected range for the year. During the second quarter of 2007, Costs applicable to sales per ounce will be temporarily impacted by the regularly planned annual maintenance at Mill 6. Potentially higher grades, improving throughput and increased recoveries at Leeville and Twin Creeks provide cost enhancement opportunities for the remainder of 2007.

Construction of the 200-megawatt coal-fired power plant was approximately 55% complete at March 31, 2007 and remains on schedule for completion in 2008. Anticipated capital costs for the power plant are expected to be between $620 and $640.

Yanacocha Operations

 

     Gold Ounces Sold(1)    Costs Applicable to Sales(2)    Depreciation, Depletion
and Amortization
     2007    2006    2007    2006    2007    2006
     (in thousands)    ($ per ounce)    ($ per ounce)

Three months ended March 31,

   455    770    $ 310    $ 161    $ 93    $ 56

(1)

 

Consolidated gold ounces sold includes minority interests’ share (51.35% Newmont owned).

(2)

 

Excludes depreciation, depletion and amortization.

As expected, consolidated gold sales at Yanacocha decreased 41% in the first quarter of 2007 from the first quarter of 2006. Ore mined and placed on the leach pads decreased to 16.5 million tons in the first quarter of 2007 from 31.1 million tons in the first quarter of 2006. During the same periods, the amount of waste material mined increased to 29.7 million tons from 19.3 million tons as expected in the mine plan. Leached ore grade also decreased by 63% from 0.035 to 0.013 ounces per ton in the first quarter of 2007.

The Company continues to expect consolidated gold sales of approximately 1.5 to 1.6 million ounces for 2007. Higher than anticipated gold sales during the first quarter of 2007 resulted from sales of inventory on hand at year-end. Yanacocha’s gold sales for the remainder of the year could be adversely impacted by potentially higher waste removal rates and lower ore grades, while opportunities exist for inventory reductions and increased recoveries during the remainder of the year at La Quinua and Carachugo deposits.

Costs applicable to sales per ounce increased in the first quarter of 2007 to $310 per ounce from $161 per ounce in the first quarter of 2006, primarily due to higher waste removal, lower production and rising labor costs. Consumption of fuel, cyanide, chemicals and reagents decreased from the first quarter of 2006 as the volume of tons mined and placed on leach pads declined. The Company continues to expect Costs applicable to sales of approximately $340 to $360 per ounce for the full year. Increased recoveries could result in Costs applicable to sales per ounce towards the lower end of the expected range for the full year.

Construction of the gold mill at Yanacocha was approximately 56% complete at March 31, 2007. Progress on the gold mill continues as expected, with costs expected to be between $250 and $270 with completion anticipated by mid-2008.

 

36


The collective bargaining agreement at Yanacocha expired in February 2007. Most employees covered by this contract continue to work while a new agreement is currently being negotiated.

Australia/New Zealand Operations

 

     Gold Ounces Sold    Costs Applicable to Sales(1)    Depreciation, Depletion
and Amortization
     2007    2006    2007    2006    2007    2006
     (in thousands)    ($ per ounce)    ($ per ounce)

Three Months