Form 10-Q
Table of Contents

 
 
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
Form 10-Q
(Mark One)
     
þ   QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the Quarterly Period Ended June 30, 2011
or
     
o   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 LOGO)
NEWMONT MINING CORPORATION
(Exact name of registrant as specified in its charter)
     
Delaware   84-1611629
(State or Other Jurisdiction of   (I.R.S. Employer
Incorporation or Organization)   Identification No.)
     
6363 South Fiddler’s Green Circle    
Greenwood Village, Colorado   80111
(Address of Principal Executive Offices)   (Zip Code)
Registrant’s telephone number, including area code (303) 863-7414
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. þ Yes o No
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). þ Yes o No
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12-b2 of the Exchange Act. (Check one):
             
Large accelerated filer þ   Accelerated filer o   Non-accelerated filer o   Smaller reporting company o
        (Do not check if a smaller reporting company.)    
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12-b2 of the Exchange Act). o Yes þ No
There were 487,574,675 shares of common stock outstanding on July 21, 2011 (and 6,603,235 exchangeable shares).
 
 

 

 


 

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 Exhibit 10.1
 Exhibit 10.2
 Exhibit 10.3
 Exhibit 10.4
 Exhibit 12.1
 Exhibit 31.1
 Exhibit 31.2
 Exhibit 32.1
 Exhibit 32.2
 Exhibit 99.1
 EX-101 INSTANCE DOCUMENT
 EX-101 SCHEMA DOCUMENT
 EX-101 CALCULATION LINKBASE DOCUMENT
 EX-101 LABELS LINKBASE DOCUMENT
 EX-101 PRESENTATION LINKBASE DOCUMENT
 EX-101 DEFINITION LINKBASE DOCUMENT

 

 


Table of Contents

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     Six Months Ended  
    June 30,     June 30,  
    2011     2010     2011     2010  
 
                               
Sales (Note 3)
  $ 2,384     $ 2,153     $ 4,849     $ 4,395  
 
                               
Costs and expenses
                               
Costs applicable to sales (1) (Note 3)
    917       848       1,857       1,717  
Amortization
    250       231       506       455  
Reclamation and remediation (Note 4)
    43       13       57       26  
Exploration
    89       53       151       96  
Advanced projects, research and development (Note 5)
    86       57       154       103  
General and administrative
    50       43       95       88  
Other expense, net (Note 6)
    87       61       160       150  
 
                       
 
    1,522       1,306       2,980       2,635  
 
                       
Other income (expense)
                               
Other income, net (Note 7)
    48       44       79       92  
Interest expense, net
    (63 )     (69 )     (128 )     (144 )
 
                       
 
    (15 )     (25 )     (49 )     (52 )
 
                       
Income before income and mining tax and other items
    847       822       1,820       1,708  
Income and mining tax expense (Note 10)
    (187 )     (283 )     (492 )     (424 )
Equity income (loss) of affiliates
          (2 )     2       (4 )
 
                       
Income from continuing operations
    660       537       1,330       1,280  
Loss from discontinued operations (Note 11)
    (136 )           (136 )      
 
                       
Net income
    524       537       1,194       1,280  
Net income attributable to noncontrolling interests (Note 12)
    (137 )     (155 )     (293 )     (352 )
 
                       
Net income attributable to Newmont stockholders
  $ 387     $ 382     $ 901     $ 928  
 
                       
 
                               
Net income attributable to Newmont stockholders:
                               
Continuing operations
  $ 523     $ 382     $ 1,037     $ 928  
Discontinued operations
    (136 )           (136 )      
 
                       
 
  $ 387     $ 382     $ 901     $ 928  
 
                       
Income per common share (2) (Note 13)
                               
Basic:
                               
Continuing operations
  $ 1.06     $ 0.78     $ 2.10     $ 1.89  
Discontinued operations
    (0.28 )           (0.28 )      
 
                       
 
  $ 0.78     $ 0.78     $ 1.82     $ 1.89  
 
                       
Diluted:
                               
Continuing operations
  $ 1.04     $ 0.77     $ 2.07     $ 1.87  
Discontinued operations
    (0.27 )           (0.27 )      
 
                       
 
  $ 0.77     $ 0.77     $ 1.80     $ 1.87  
 
                       
Cash dividends declared per common share
  $ 0.20     $ 0.10     $ 0.35     $ 0.20  
 
     
(1)   Excludes Amortization and Reclamation and remediation.
 
(2)   Attributable to Newmont stockholders.
The accompanying notes are an integral part of the condensed consolidated financial statements.

 

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Table of Contents

NEWMONT MINING CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited, in millions)
                 
    Six Months Ended  
    June 30,  
    2011     2010  
Operating activities:
               
Net income
  $ 1,194     $ 1,280  
Adjustments:
               
Amortization
    506       455  
Loss from discontinued operations
    136        
Reclamation and remediation
    57       26  
Deferred income taxes
    (38 )     (86 )
Stock based compensation and other non-cash benefits
    44       39  
Gain on asset sales, net
    (53 )     (49 )
Other operating adjustments and write-downs
    97       67  
Net change in operating assets and liabilities (Note 25)
    (540 )     (251 )
 
           
Net cash provided from continuing operations
    1,403       1,481  
Net cash used in discontinued operations
    (2 )     (13 )
 
           
Net cash provided from operations
    1,401       1,468  
 
           
Investing activities:
               
Additions to property, plant and mine development
    (1,020 )     (628 )
Proceeds from sale of marketable securities
    55       1  
Purchases of marketable securities
    (15 )     (7 )
Acquisitions, net
    (2,291 )      
Proceeds from sale of other assets
    6       52  
Other
    (15 )     (23 )
 
           
Net cash used in investing activities
    (3,280 )     (605 )
 
           
Financing activities:
               
Proceeds from debt, net
    775        
Repayment of debt
    (973 )     (263 )
Sale of noncontrolling interests
          229  
Acquisition of noncontrolling interests
          (109 )
Dividends paid to common stockholders
    (173 )     (98 )
Dividends paid to noncontrolling interests
    (17 )     (307 )
Proceeds from stock issuance, net
    8       30  
Change in restricted cash and other
          48  
 
           
Net cash used in financing activities
    (380 )     (470 )
 
           
Effect of exchange rate changes on cash
    58       (6 )
 
           
Net change in cash and cash equivalents
    (2,201 )     387  
Cash and cash equivalents at beginning of period
    4,056       3,215  
 
           
Cash and cash equivalents at end of period
  $ 1,855     $ 3,602  
 
           
The accompanying notes are an integral part of the condensed consolidated financial statements.

 

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NEWMONT MINING CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEETS
(unaudited, in millions)
                 
    At June 30,     At December 31,  
    2011     2010  
ASSETS
               
Cash and cash equivalents
  $ 1,855     $ 4,056  
Trade receivables
    418       582  
Accounts receivable
    135       88  
Investments (Note 19)
    203       113  
Inventories (Note 20)
    671       658  
Stockpiles and ore on leach pads (Note 21)
    696       617  
Deferred income tax assets
    308       177  
Other current assets (Note 22)
    1,613       962  
 
           
Current assets
    5,899       7,253  
Property, plant and mine development, net
    16,663       12,907  
Investments (Note 19)
    1,675       1,568  
Stockpiles and ore on leach pads (Note 21)
    1,950       1,757  
Deferred income tax assets
    1,505       1,437  
Other long-term assets (Note 22)
    946       741  
 
           
Total assets
  $ 28,638     $ 25,663  
 
           
LIABILITIES
               
Debt (Note 23)
  $ 539     $ 259  
Accounts payable
    490       427  
Employee-related benefits
    229       288  
Income and mining taxes
    184       355  
Other current liabilities (Note 24)
    1,998       1,418  
 
           
Current liabilities
    3,440       2,747  
Debt (Note 23)
    3,771       4,182  
Reclamation and remediation liabilities (Note 4)
    1,032       984  
Deferred income tax liabilities
    2,735       1,488  
Employee-related benefits
    353       325  
Other long-term liabilities (Note 24)
    314       221  
 
           
Total liabilities
    11,645       9,947  
 
           
Commitments and contingencies (Note 28)
               
EQUITY
               
Common stock
    780       778  
Additional paid-in capital
    8,330       8,279  
Accumulated other comprehensive income
    1,310       1,108  
Retained earnings
    3,908       3,180  
 
           
Newmont stockholders’ equity
    14,328       13,345  
Noncontrolling interests
    2,665       2,371  
 
           
Total equity
    16,993       15,716  
 
           
Total liabilities and equity
  $ 28,638     $ 25,663  
 
           
The accompanying notes are an integral part of the condensed consolidated financial statements.

 

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NEWMONT MINING CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)
(dollars in millions, except per share, per ounce and per pound amounts)
NOTE 1 BASIS OF PRESENTATION
The interim Condensed Consolidated Financial Statements (“interim statements”) of Newmont Mining Corporation and its subsidiaries (collectively, “Newmont” or the “Company”) are unaudited. In the opinion of management, all adjustments and disclosures necessary for a fair presentation of these interim statements have been included. The results reported in these interim statements are not necessarily indicative of the results that may be reported for the entire year. These interim statements should be read in conjunction with Newmont’s Consolidated Financial Statements for the year ended December 31, 2010 filed February 24, 2011 on Form 10-K. The year-end balance sheet data was derived from the audited financial statements, but does not include all disclosures required by United States generally accepted accounting principles (“GAAP”).
References to “A$” refer to Australian currency, “C$” to Canadian currency, “NZ$” to New Zealand currency and “$” to United States currency.
NOTE 2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Recently Adopted Accounting Pronouncements
Business Combinations
In December 2010, FASB Accounting Standards Codification (“ASC”) guidance for business combinations was updated to clarify existing guidance which requires a public entity to disclose pro forma revenue and earnings of the combined entity as though the business combination(s) that occurred during the current year had occurred as of the beginning of the comparable prior annual period only. The update also expands the supplemental pro forma disclosures required to include a description of the nature and amount of material, nonrecurring pro forma adjustments directly attributable to the business combination included in the reported pro forma revenue and earnings. Adoption of the updated guidance, effective for the Company’s fiscal year beginning January 1, 2011, had no impact on the Company’s condensed consolidated financial position, results of operations or cash flows.
Fair Value Accounting
In January 2010, ASC guidance for fair value measurements and disclosure was updated to require enhanced detail in the level 3 reconciliation. Adoption of the updated guidance, effective for the Company’s fiscal year beginning January 1, 2011, had no impact on the Company’s condensed consolidated financial position, results of operations or cash flows. Refer to Note 17 for further details regarding the Company’s assets and liabilities measured at fair value.
Recently Issued Accounting Pronouncements
Comprehensive Income
In June 2011, ASC guidance was issued related to comprehensive income. Under the updated guidance, an entity will have the option to present the total of comprehensive income either in a single continuous statement of comprehensive income or in two separate but consecutive statements. In addition, the update requires certain disclosure requirements when reporting other comprehensive income. The update does not change the items reported in other comprehensive income or when an item of other comprehensive income must be reclassified to income. The update is effective for the Company’s fiscal year beginning January 1, 2012. The Company does not expect the updated guidance to have an impact on the condensed consolidated financial position, results of operations or cash flows.

 

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NEWMONT MINING CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) (Continued)
(dollars in millions, except per share, per ounce and per pound amounts)
Fair Value Accounting
In May 2011, ASC guidance was issued related to disclosures around fair value accounting. The updated guidance clarifies different components of fair value accounting including the application of the highest and best use and valuation premise concepts, measuring the fair value of an instrument classified in a reporting entity’s shareholders’ equity and disclosing quantitative information about the unobservable inputs used in fair value measurements that are categorized in level 3 of the fair value hierarchy. The update is effective for the Company’s fiscal year beginning January 1, 2012. The Company does not expect the updated guidance to have a significant impact on the condensed consolidated financial position, results of operations or cash flows.
NOTE 3 SEGMENT INFORMATION
                                         
            Costs             Advanced        
            Applicable to             Projects and     Pre-Tax  
    Sales     Sales     Amortization     Exploration     Income  
Three Months Ended June 30, 2011
                                       
Nevada
  $ 529     $ 224     $ 56     $ 38     $ 195  
La Herradura
    81       27       5       3       44  
Hope Bay
                4       52       (55 )
Other North America
                      1       47  
 
                             
North America
    610       251       65       94       231  
 
                             
 
                                       
Yanacocha
    524       190       66       11       232  
Other South America
                1       14       (16 )
 
                             
South America
    524       190       67       25       216  
 
                             
 
                                       
Boddington:
                                       
Gold
    269       117       31       N/A       N/A  
Copper
    54       27       7       N/A       N/A  
 
                             
Total
    323       144       38       2       140  
 
                             
Batu Hijau:
                                       
Gold
    92       30       7       N/A       N/A  
Copper
    242       79       18       N/A       N/A  
 
                             
Total
    334       109       25       1       186  
 
                             
Other Australia/New Zealand
    375       158       31       10       168  
Other Asia Pacific
                      5       (34 )
 
                             
Asia Pacific
    1,032       411       94       18       460  
 
                             
 
                                       
Ahafo
    218       65       20       8       119  
Other Africa
                      4       (6 )
 
                             
Africa
    218       65       20       12       113  
 
                             
 
                                       
Corporate and Other
                4       26       (173 )
 
                             
Consolidated
  $ 2,384     $ 917     $ 250     $ 175     $ 847  
 
                             

 

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NEWMONT MINING CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) (Continued)
(dollars in millions, except per share, per ounce and per pound amounts)
                                         
            Costs             Advanced        
            Applicable to             Projects and     Pre-Tax  
    Sales     Sales     Amortization     Exploration     Income  
Three Months Ended June 30, 2010
                                       
Nevada
  $ 505     $ 246     $ 64     $ 20     $ 164  
La Herradura
    53       19       5       2       29  
Hope Bay
                3       33       (36 )
Other North America
                            (1 )
 
                             
North America
    558       265       72       55       156  
 
                             
 
                                       
Yanacocha
    425       139       40       4       222  
Other South America
                      10       (9 )
 
                             
South America
    425       139       40       14       213  
 
                             
 
                                       
Boddington
                                       
Gold
    234       113       34       N/A       N/A  
Copper
    40       25       6       N/A       N/A  
 
                             
Total
    274       138       40       3       92  
 
                             
Batu Hijau:
                                       
Gold
    170       42       12       N/A       N/A  
Copper
    258       73       19       N/A       N/A  
 
                             
Total
    428       115       31             270  
 
                             
Other Australia/New Zealand
    308       136       24       7       142  
Other Asia Pacific
                1       5       (9 )
 
                             
Asia Pacific
    1,010       389       96       15       495  
 
                             
 
                                       
Ahafo
    160       55       19       3       74  
Other Africa
                      2       (1 )
 
                             
Africa
    160       55       19       5       73  
 
                             
 
                                       
Corporate and Other
                4       21       (115 )
 
                             
Consolidated
  $ 2,153     $ 848     $ 231     $ 110     $ 822  
 
                             

 

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NEWMONT MINING CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) (Continued)
(dollars in millions, except per share, per ounce and per pound amounts)
                                                         
            Costs             Advanced                    
            Applicable to             Projects and     Pre-Tax     Total     Capital  
    Sales     Sales     Amortization     Exploration     Income     Assets     Expenditures(1)  
Six Months Ended June 30, 2011
                                                       
Nevada
  $ 1,111     $ 496     $ 128     $ 55     $ 411     $ 6,797     $ 228  
La Herradura
    146       45       9       9       80       260       27  
Hope Bay
                7       96       (103 )     2,242       41  
Other North America
                      1       45       52        
 
                                         
North America
    1,257       541       144       161       433       9,351       296  
 
                                         
 
                                                       
Yanacocha
    886       343       119       17       381       2,634       127  
Other South America
                1       24       (26 )     599       251  
 
                                         
South America
    886       343       120       41       355       3,233       378  
 
                                         
 
                                                       
Boddington:
                                                       
Gold
    501       217       59       N/A       N/A       N/A       N/A  
Copper
    107       55       14       N/A       N/A       N/A       N/A  
 
                                         
Total
    608       272       73       3       244       4,419       75  
 
                                         
Batu Hijau:
                                                       
Gold
    232       64       14       N/A       N/A       N/A       N/A  
Copper
    611       168       38       N/A       N/A       N/A       N/A  
 
                                         
Total
    843       232       52       1       509       3,513       88  
 
                                         
Other Australia/New Zealand
    790       324       66       22       365       1,124       134  
Other Asia Pacific
                1       6       (34 )     625       4  
 
                                         
Asia Pacific
    2,241       828       192       32       1,084       9,681       301  
 
                                         
 
                                                       
Ahafo
    465       145       42       15       255       1,046       37  
Other Africa
                      5       (8 )     348       67  
 
                                         
Africa
    465       145       42       20       247       1,394       104  
 
                                         
 
                                                       
Corporate and Other
                8       51       (299 )     4,979       18  
 
                                         
Consolidated
  $ 4,849     $ 1,857     $ 506     $ 305     $ 1,820     $ 28,638     $ 1,097  
 
                                         
     
(1)   Includes an increase in accrued capital expenditures of $77; consolidated capital expenditures on a cash basis were $1,020.

 

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NEWMONT MINING CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) (Continued)
(dollars in millions, except per share, per ounce and per pound amounts)
                                                         
            Costs             Advanced                    
            Applicable to             Projects and     Pre-Tax     Total     Capital  
    Sales     Sales     Amortization     Exploration     Income     Assets     Expenditures(1)  
Six Months Ended June 30, 2010
                                                       
Nevada
  $ 972     $ 497     $ 126     $ 37     $ 291     $ 3,309     $ 117  
La Herradura
    97       32       8       3       54       180       22  
Hope Bay
                6       50       (57 )     1,938       48  
Other North America
                      1       (3 )     53        
 
                                         
North America
    1,069       529       140       91       285       5,480       187  
 
                                         
 
                                                       
Yanacocha
    885       293       77       11       465       2,532       68  
Other South America
                      15       (15 )     194       43  
 
                                         
South America
    885       293       77       26       450       2,726       111  
 
                                         
 
                                                       
Boddington
                                                       
Gold
    401       193       56       N/A       N/A       N/A       N/A  
Copper
    79       49       13       N/A       N/A       N/A       N/A  
 
                                         
Total
    480       242       69       4       160       4,136       81  
 
                                         
Batu Hijau:
                                                       
Gold
    335       76       22       N/A       N/A       N/A       N/A  
Copper
    713       165       46       N/A       N/A       N/A       N/A  
 
                                         
Total
    1,048       241       68             677       2,911       33  
 
                                         
Other Australia/New Zealand
    622       293       56       11       268       884       71  
Other Asia Pacific
                1       10       9       183       3  
 
                                         
Asia Pacific
    2,150       776       194       25       1,114       8,114       188  
 
                                         
 
                                                       
Ahafo
    291       119       36       6       116       1,005       51  
Other Africa
                      6       (5 )     229       22  
 
                                         
Africa
    291       119       36       12       111       1,234       73  
 
                                         
 
                                                       
Corporate and Other
                8       45       (252 )     5,215       11  
 
                                         
Consolidated
  $ 4,395     $ 1,717     $ 455     $ 199     $ 1,708     $ 22,769     $ 570  
 
                                         
     
(1)   Includes a decrease in accrued capital expenditures of $58; consolidated capital expenditures on a cash basis were $628.

 

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NEWMONT MINING CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) (Continued)
(dollars in millions, except per share, per ounce and per pound amounts)
NOTE 4 RECLAMATION AND REMEDIATION
At June 30, 2011 and December 31, 2010, $922 and $904, respectively, were accrued for reclamation obligations relating to mineral properties. 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 June 30, 2011 and December 31, 2010, $172 and $144, respectively, were accrued for such obligations. These amounts are also included in Reclamation and remediation liabilities.
The following is a reconciliation of reclamation and remediation liabilities:
                 
    Six Months Ended June 30,  
    2011     2010  
Balance at beginning of period
  $ 1,048     $ 859  
Additions, changes in estimates and other
    32       (4 )
Liabilities settled
    (15 )     (18 )
Accretion expense
    29       26  
 
           
Balance at end of period
  $ 1,094     $ 863  
 
           
The current portion of Reclamation and remediation liabilities of $62 and $64 at June 30, 2011 and December 31, 2010, respectively, are included in Other current liabilities (see Note 24).
The Company’s reclamation and remediation expenses consisted of:
                                 
    Three Months Ended June 30,     Six Months Ended June 30,  
    2011     2010     2011     2010  
Reclamation
  $ 28     $     $ 28     $  
Accretion — operating
    13       11       25       22  
Accretion — non-operating
    2       2       4       4  
 
                       
 
  $ 43     $ 13     $ 57     $ 26  
 
                       
NOTE 5 ADVANCED PROJECTS, RESEARCH AND DEVELOPMENT
                                 
    Three Months Ended June 30,     Six Months Ended June 30,  
    2011     2010     2011     2010  
Hope Bay
  $ 41     $ 25     $ 79     $ 35  
Conga
    5       2       6       3  
Akyem
    1       1       1       4  
Technical and project services
    18       11       33       23  
Corporate
    6       9       9       21  
Other
    15       9       26       17  
 
                       
 
  $ 86     $ 57     $ 154     $ 103  
 
                       

 

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NEWMONT MINING CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) (Continued)
(dollars in millions, except per share, per ounce and per pound amounts)
NOTE 6 OTHER EXPENSE, NET
                                 
    Three Months Ended June 30,     Six Months Ended June 30,  
    2011     2010     2011     2010  
Community development
  $ 23     $ 20     $ 40     $ 75  
Regional administration
    21       18       37       31  
Indonesian value added tax settlement
                21        
Fronteer acquisition costs
    20             21        
Western Australia power plant
    5       1       9       7  
Other
    18       22       32       37  
 
                       
 
  $ 87     $ 61     $ 160     $ 150  
 
                       
NOTE 7 OTHER INCOME, NET
                                 
    Three Months Ended June 30,     Six Months Ended June 30,  
    2011     2010     2011     2010  
Gain on sale of investments, net
  $ 50     $ 5     $ 50     $ 7  
Canadian Oil Sands
    10       15       16       25  
Interest income
    2       2       6       5  
Gain on asset sales, net
          9       3       42  
Foreign currency exchange gain (loss), net
    (18 )     5       (29 )     (4 )
Other
    4       8       33       17  
 
                       
 
  $ 48     $ 44     $ 79     $ 92  
 
                       
NOTE 8 EMPLOYEE PENSION AND OTHER BENEFIT PLANS
                                 
    Three Months Ended June 30,     Six Months Ended June 30,  
    2011     2010     2011     2010  
Pension benefit costs, net
                               
Service cost
  $ 6     $ 6     $ 12     $ 11  
Interest cost
    10       9       20       18  
Expected return on plan assets
    (11 )     (9 )     (21 )     (16 )
Amortization, net
    7       5       12       9  
 
                       
 
  $ 12     $ 11     $ 23     $ 22  
 
                       
                                 
    Three Months Ended June 30,     Six Months Ended June 30,  
    2011     2010     2011     2010  
Other benefit costs, net
                               
Service cost
  $     $     $ 1     $ 1  
Interest cost
    1       2       2       3  
 
                       
 
  $ 1     $ 2     $ 3     $ 4  
 
                       

 

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NEWMONT MINING CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) (Continued)
(dollars in millions, except per share, per ounce and per pound amounts)
NOTE 9 STOCK BASED COMPENSATION
                                 
    Three Months Ended June 30,     Six Months Ended June 30,  
    2011     2010     2011     2010  
Stock options
  $ 7     $ 6     $ 10     $ 9  
Restricted stock units
    10       4       17       8  
Performance leveraged stock units
    1       1       3       4  
Common stock
          1       1       2  
Restricted stock
                      1  
Deferred stock
    1       3       3       5  
 
                       
 
  $ 19     $ 15     $ 34     $ 29  
 
                       
NOTE 10 INCOME AND MINING TAXES
During the second quarter of 2011, the Company recorded estimated income and mining tax expense of $187 resulting in an effective tax rate of 22%. Estimated income and mining tax expense during the second quarter of 2010 was $283 for an effective tax rate of 34%. The lower effective tax rate in the second quarter of 2011 resulted from a tax benefit of $65 recorded in connection with conversion of non-US tax-paying entities to entities currently subject to U.S. income tax which resulted in an increase in net deferred tax assets. During the first half of 2011, estimated income and mining tax expense was $492 resulting in an effective tax rate of 27%. Estimated income and mining tax expense during the first half of 2010 was $424 for an effective tax rate of 25%. In the first half of 2010, a tax benefit of $127 was recorded in connection with conversion of non-U.S. tax-paying entities to entities currently subject to U.S. income tax which resulted in an increase in net deferred tax assets.
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 pay the income 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.
At June 30, 2011, the Company’s total unrecognized tax benefit was $106 for uncertain income tax positions taken or expected to be taken on income tax returns. Of this, $55 represents the amount of unrecognized tax benefits that, if recognized, would affect the Company’s effective income tax rate.
As a result of the statute of limitations that expire in the next 12 months in various jurisdictions, and possible settlements of audit-related issues with taxing authorities in various jurisdictions with respect to which none of the issues are individually significant, the Company believes that it is reasonably possible that the total amount of its net unrecognized income tax benefits will decrease by approximately $5 to $10 in the next 12 months.

 

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NEWMONT MINING CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) (Continued)
(dollars in millions, except per share, per ounce and per pound amounts)
The Company’s income and mining tax expense differed from the amounts computed by applying the United States statutory corporate income tax rate for the following reasons:
                                 
    Three Months Ended June 30,     Six Months Ended June 30,  
    2011     2010     2011     2010  
Income before income and mining tax and other items
  $ 847     $ 822     $ 1,820     $ 1,708  
United States statutory corporate income tax rate
    35 %     35 %     35 %     35 %
 
                       
Income and mining tax expense computed at United States statutory corporate income tax rate
    (296 )     (288 )     (637 )     (598 )
Reconciling items:
                               
Tax benefit generated on change in form of a non-U.S. subsidiary
    65             65       127  
Percentage depletion
    56       21       111       54  
Other
    (12 )     (16 )     (31 )     (7 )
 
                       
Income and mining tax expense
  $ (187 )   $ (283 )   $ (492 )   $ (424 )
 
                       
NOTE 11 DISCONTINUED OPERATIONS
Discontinued operations include Holloway Mining Company, which owned the Holt-McDermott property (“Holt property”) and was sold to St. Andrew Goldfields Ltd. (“St. Andrew”) in 2006 (see Note 28). In 2009, the Superior Court issued a decision finding Newmont Canada Corporation (“Newmont Canada”) liable for a sliding scale royalty on production from the Holt property, which Newmont Canada appealed. In December 2010, the Company recognized a $28 charge, net of tax benefits of $12, related to these legal claims. In May 2011, the Ontario Court of Appeal upheld the Superior Court ruling resulting in an additional $136 charge, net of tax benefits of $7, in the second quarter.
Net operating cash used in discontinued operations was $2 and $13 in the first half of 2011 and 2010, respectively. In 2011, we made an initial payment related to the Holt property royalty and the 2010 amount related to the Kori Kollo operation in Bolivia which was sold in 2009.
NOTE 12 NET INCOME ATTRIBUTABLE TO NONCONTROLLING INTERESTS
                                 
    Three Months Ended June 30,     Six Months Ended June 30,  
    2011     2010     2011     2010  
Batu Hijau
  $ 64     $ 84     $ 166     $ 202  
Yanacocha
    76       71       132       151  
Other
    (3 )           (5 )     (1 )
 
                       
 
  $ 137     $ 155     $ 293     $ 352  
 
                       
At June 30, 2011, Newmont had a 48.5% effective economic interest in PT Newmont Nusa Tenggara (“PTNNT”). PTNNT operates the Batu Hijau copper and gold mine in Indonesia. Based on ASC guidance for variable interest entities, Newmont continues to consolidate PTNNT in its Condensed Consolidated Financial Statements.
Newmont has a 51.35% ownership interest in Minera Yanacocha S.R.L. (“Yanacocha”), with the remaining interests held by Compañia de Minas Buenaventura, S.A.A. (43.65%) and the International Finance Corporation (5%).

 

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NEWMONT MINING CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) (Continued)
(dollars in millions, except per share, per ounce and per pound amounts)
NOTE 13 INCOME PER COMMON SHARE
Basic income per common share is computed by dividing income available to Newmont common stockholders by the weighted average number of common shares outstanding during the period. Diluted income per common share is computed similarly to basic income per common share except that weighted average common shares is increased to include the potential issuance of dilutive common shares.
                                 
    Three Months Ended June 30,     Six Months Ended June 30,  
    2011     2010     2011     2010  
 
Net income attributable to Newmont stockholders
                               
Continuing operations
  $ 523     $ 382     $ 1,037     $ 928  
Discontinued operations
    (136 )           (136 )      
 
                       
 
  $ 387     $ 382     $ 901     $ 928  
 
                       
 
                               
Weighted average common shares (millions):
                               
Basic
    494       492       494       491  
Effect of employee stock-based awards
    1       1       1       1  
Effect of convertible notes
    6       6       6       4  
 
                       
Diluted
    501       499       501       496  
 
                       
 
                               
Net income attributable to Newmont stockholders per common share
                               
Basic:
                               
Continuing operations
  $ 1.06     $ 0.78     $ 2.10     $ 1.89  
Discontinued operations
    (0.28 )           (0.28 )      
 
                       
 
  $ 0.78     $ 0.78     $ 1.82     $ 1.89  
 
                       
Diluted:
                               
Continuing operations
  $ 1.04     $ 0.77     $ 2.07     $ 1.87  
Discontinued operations
    (0.27 )           (0.27 )      
 
                       
 
  $ 0.77     $ 0.77     $ 1.80     $ 1.87  
 
                       
Options to purchase 3 and 2 million shares of common stock at average exercise prices of $57 and $57 were outstanding at June 30, 2011 and 2010, respectively, but were not included in the computation of diluted weighted average common shares because their effect would have been anti-dilutive.
In February 2009 and July 2007, Newmont issued $518 and $1,150, respectively, of convertible senior notes that, if converted in the future, may have a dilutive effect on the Company’s weighted average number of common shares. The notes issued in 2009 and 2007 are convertible, at the holder’s option, equivalent to a conversion price of $46.04 and $46.00, respectively, per share of common stock. Under the convertible note indenture, Newmont is required to settle the principal amount of the convertible senior notes in cash and may elect to settle the remaining conversion obligation (Newmont average share price in excess of the conversion price), if any, in cash, shares or a combination thereof. The effect of contingently convertible instruments on diluted earnings per share is calculated under the net share settlement method in accordance with ASC guidance. The average price of the Company’s common stock for the three and six months ended June 30, 2011 exceeded the conversion price of $46.04 and $46.00 for the notes issued in 2009 and 2007, respectively, and therefore, 6 and 6 million additional shares were included in the computation of diluted weighted average common shares for the three and six months ended June 30, 2011, respectively. The average price of the Company’s common stock for the three and six months ended June 30, 2010 exceeded the conversion price of $46.25 and $46.21 for the notes issued in 2009 and 2007, respectively, and therefore, 6 and 4 million additional shares were included in the computation of diluted weighted average common shares for the three and six months ended June 30, 2010, respectively.

 

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NEWMONT MINING CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) (Continued)
(dollars in millions, except per share, per ounce and per pound amounts)
In connection with the 2007 convertible senior notes offering, the Company entered into Call Spread Transactions which included the purchase of call options and the sale of warrants. As a result of the Call Spread Transactions, the conversion price of $46.00 was effectively increased to $60.00. Should the warrant transactions become dilutive to the Company’s earnings per share (Newmont’s average share price exceeds $60.00) the effect of the warrant transactions on diluted earnings per share will be calculated in accordance with the net share settlement method.
The Net income attributable to Newmont stockholders and transfers from noncontrolling interests was:
                                 
    Three Months Ended June 30,     Six Months Ended June 30,  
    2011     2010     2011     2010  
 
                               
Net income attributable to Newmont stockholders
  $ 387     $ 382     $ 901     $ 928  
Transfers from noncontrolling interests:
                               
Increase in Additional paid in capital from sale of PTNNT shares, net of tax of $33
          1             16  
 
                       
Net income attributable to Newmont stockholders and transfers from noncontrolling interests
  $ 387     $ 383     $ 901     $ 944  
 
                       
NOTE 14 COMPREHENSIVE INCOME
                                 
    Three Months Ended June 30,     Six Months Ended June 30,  
    2011     2010     2011     2010  
 
                               
Net income
  $ 524     $ 537     $ 1,194     $ 1,280  
Other comprehensive income (loss), net of tax:
                               
Unrealized loss on marketable securities
    (243 )     (77 )     (75 )     (28 )
Foreign currency translation adjustments
    38       (55 )     127       1  
Pension and other benefit liability adjustments
    4       3       8       5  
Change in fair value of cash flow hedge instruments:
                               
Net change from periodic revaluations
    162       (72 )     217       (43 )
Net amount reclassified to income
    (39 )     (16 )     (72 )     (35 )
 
                       
Net unrecognized gain (loss) on derivatives
    123       (88 )     145       (78 )
 
                       
 
    (78 )     (217 )     205       (100 )
 
                       
Comprehensive income
  $ 446     $ 320     $ 1,399     $ 1,180  
 
                       
 
                               
Comprehensive income attributable to:
                               
Newmont stockholders
  $ 308     $ 165     $ 1,103     $ 828  
Noncontrolling interests
    138       155       296       352  
 
                       
 
  $ 446     $ 320     $ 1,399     $ 1,180  
 
                       

 

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NEWMONT MINING CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) (Continued)
(dollars in millions, except per share, per ounce and per pound amounts)
NOTE 15 CHANGES IN EQUITY
                 
    Six Months Ended June 30,  
    2011     2010  
Common stock:
               
At beginning of period
  $ 778     $ 770  
Stock based awards
    2       2  
Shares issued in exchange for exchangeable shares
          3  
 
           
At end of period
    780       775  
 
           
 
               
Additional paid-in capital:
               
At beginning of period
    8,279       8,158  
Stock based awards
    52       64  
Shares issued in exchange for exchangeable shares
    (1 )     (3 )
Sale of noncontrolling interests
          16  
 
           
At end of period
    8,330       8,235  
 
           
 
               
Accumulated other comprehensive income:
               
At beginning of period
    1,108       626  
Other comprehensive income
    202       (100 )
 
           
At end of period
    1,310       526  
 
           
 
               
Retained earnings:
               
At beginning of period
    3,180       1,149  
Net income attributable to Newmont stockholders
    901       928  
Dividends paid
    (173 )     (98 )
 
           
At end of period
    3,908       1,979  
 
           
 
               
Noncontrolling interests:
               
At beginning of period
    2,371       1,910  
Net income attributable to noncontrolling interests
    293       352  
Dividends paid
    (2 )     (320 )
Other comprehensive income
    3        
Sale of noncontrolling interests, net
          98  
 
           
At end of period
    2,665       2,040  
 
           
Total equity
  $ 16,993     $ 13,555  
 
           

 

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NEWMONT MINING CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) (Continued)
(dollars in millions, except per share, per ounce and per pound amounts)
NOTE 16 ACQUISITIONS
On February 3, 2011, we announced an agreement with Fronteer Gold, Inc. (“Fronteer”) to acquire all of the outstanding common shares of Fronteer. On April 6, 2011, Newmont acquired 153 million common shares of Fronteer pursuant to the Company’s offer. Under the Arrangement, shareholders of Fronteer received C$14.00 in cash and one-fourth common share in Pilot Gold, which retained certain exploration assets of Fronteer, for each common share of Fronteer. Fronteer owns, among other assets, the exploration stage Long Canyon project, which is located approximately one hundred miles from the Company’s existing infrastructure in Nevada and provides the potential for significant development and operating synergies.
In connection with the acquisition, Newmont incurred transaction costs of $21, which were recorded in Other Expense, net.
The Fronteer purchase price of $2,259 was preliminarily allocated based on the estimated fair values of assets acquired and liabilities assumed at the April 6, 2011 acquisition date as follows:
         
Assets:
       
Cash
  $ 2  
Property, plant and mine development, net
    3,208  
Investments
    281  
Other assets
    6  
 
     
 
  $ 3,497  
 
     
 
       
Liabilities:
       
Deferred income tax liability
  $ 1,223  
Other liabilities
    15  
 
     
 
    1,238  
 
     
Net assets acquired
  $ 2,259  
 
     
The allocation of the purchase price will be completed later in the year.
The pro forma impact of the acquisition on Net Income was not material as Fronteer was not in production.
NOTE 17 FAIR VALUE ACCOUNTING
Fair value accounting establishes a fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1 measurements) and the lowest priority to unobservable inputs (Level 3 measurements). The three levels of the fair value hierarchy are described below:
     
Level 1
  Unadjusted quoted prices in active markets that are accessible at the measurement date for identical, unrestricted assets or liabilities;
 
   
Level 2
  Quoted prices in markets that are not active, or inputs that are observable, either directly or indirectly, for substantially the full term of the asset or liability; and
 
   
Level 3
  Prices or valuation techniques that require inputs that are both significant to the fair value measurement and unobservable (supported by little or no market activity).

 

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NEWMONT MINING CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) (Continued)
(dollars in millions, except per share, per ounce and per pound amounts)
The following table sets forth the Company’s assets and liabilities measured at fair value on a recurring basis (at least annually) by level within the fair value hierarchy. As required by accounting guidance, assets and liabilities are classified in their entirety based on the lowest level of input that is significant to the fair value measurement.
                                 
    Fair Value at June 30, 2011  
    Total     Level 1     Level 2     Level 3  
Assets:
                               
Cash equivalents
  $ 36     $ 36     $     $  
Marketable equity securities:
                               
Extractive industries
    1,757       1,757              
Other
    6       6              
Marketable debt securities:
                               
Asset backed commercial paper
    20                   20  
Corporate
    9       9              
Auction rate securities
    5                   5  
Trade receivable from provisional copper and gold concentrate sales, net
    306       306              
Derivative instruments, net:
                               
Foreign exchange forward contracts
    376             376        
Diesel forward contracts
    11             11        
 
                       
 
  $ 2,526     $ 2,114     $ 387     $ 25  
 
                       
 
                               
Liabilities:
                               
Derivative instruments, net:
                               
Forward starting swap contracts
  $ 11     $     $ 11     $  
Boddington contingent consideration
    70                   70  
Holt property royalty
    181                   181  
 
                       
 
  $ 262     $     $ 11     $ 251  
 
                       
The Company’s cash equivalent instruments are classified within Level 1 of the fair value hierarchy because they are valued using quoted market prices. The cash equivalent instruments that are valued based on quoted market prices in active markets are primarily money market securities and U.S. Treasury securities.
The Company’s marketable equity securities are valued using quoted market prices in active markets and as such are classified within Level 1 of the fair value hierarchy. The securities are segregated based on industry. The fair value of the marketable equity securities is calculated as the quoted market price of the marketable equity security multiplied by the quantity of shares held by the Company.
The Company’s marketable debt securities include investments in auction rate securities and asset backed commercial paper. The Company reviews the fair value for auction rate securities and asset backed commercial paper on at least a quarterly basis. The auction rate securities are traded in markets that are not active, trade infrequently and have little price transparency. The Company estimated the fair value of the auction rate securities based on weighted average risk calculations using probabilistic cash flow assumptions. The Company estimated the fair value of the asset backed commercial paper using a probability of return to each class of notes reflective of information reviewed regarding the separate classes of securities. The auction rate securities and asset backed commercial paper are classified within Level 3 of the fair value hierarchy. The Company’s corporate marketable debt securities are valued using quoted market prices in active markets and as such are classified within Level 1 of the fair value hierarchy.
The Company’s net trade receivable from provisional copper and gold concentrate sales, subject to final pricing, is valued using quoted market prices based on forward curves and, as such, is classified within Level 1 of the fair value hierarchy.
The Company’s derivative instruments are valued using pricing models and the Company generally uses similar models to value similar instruments. Valuation models require a variety of inputs, including contractual terms, market prices, yield curves, credit spreads, measures of volatility, and correlations of such inputs. The Company’s derivatives trade in liquid markets, and as such, model inputs can generally be verified and do not involve significant management judgment. Such instruments are classified within Level 2 of the fair value hierarchy.

 

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NEWMONT MINING CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) (Continued)
(dollars in millions, except per share, per ounce and per pound amounts)
The Company recorded a contingent consideration liability related to the 2009 acquisition of the final 33.33% interest in Boddington. The estimated value of the contingent consideration was determined using a valuation model which simulates future gold and copper prices and costs applicable to sales. The contingent consideration liability is classified within Level 3 of the fair value hierarchy.
The Company recorded a sliding scale royalty liability related to the divestiture of the Holt property. The estimated fair value of the liability was determined using a Monte Carlo valuation model to simulate future gold prices utilizing a $1,300 per ounce long-term assumption, various gold production scenarios based on publicly available reserve and resource information for the Holt property and a 4.2% weighted average discount rate. The contingent royalty liability is classified within Level 3 of the fair value hierarchy.
The table below sets forth a summary of changes in the fair value of the Company’s Level 3 financial assets and liabilities for the six months ended June 30, 2011:
                                                 
            Asset Backed             Boddington              
    Auction Rate     Commercial             Contingent     Holt Property     Total  
    Securities     Paper     Total Assets     Consideration     Royalty     Liabilities  
Balance at beginning of period
  $ 5     $ 19     $ 24     $ 83     $     $ 83  
Unrealized gain
          1       1                    
Settlements
                      (13 )           (13 )
Valuation
                            181       181  
 
                                   
Balance at end of period
  $ 5     $ 20     $ 25     $ 70     $ 181     $ 251  
 
                                   
Unrealized gains of $1 were included in Accumulated other comprehensive income as a result of changes in C$ exchange rates from January 1, 2011 to June 30, 2011. At June 30, 2011, assets and liabilities classified within Level 3 of the fair value hierarchy represent 1% and 96%, respectively, of total assets and liabilities measured at fair value.
NOTE 18 DERIVATIVE INSTRUMENTS
The Company’s strategy is to provide shareholders with leverage to changes in gold and copper prices by selling its production at spot market prices. Consequently, the Company does not hedge its gold and copper sales. The Company continues to manage certain risks associated with commodity input costs, interest rates and foreign currencies using the derivative market. All of the derivative instruments described below were transacted for risk management purposes and qualify as cash flow or fair value hedges.
Cash Flow Hedges
The foreign currency, diesel and forward starting swap contracts are designated as cash flow hedges, and as such, the effective portion of unrealized changes in market value have been recorded in Accumulated other comprehensive income and are reclassified to income during the period in which the hedged transaction affects earnings. Gains and losses from hedge ineffectiveness are recognized in current earnings.
Foreign Currency Contracts
Newmont utilizes foreign currency contracts to reduce the variability of the US dollar amount of forecasted foreign currency expenditures caused by changes in exchange rates. Newmont hedges a portion of the Company’s A$ and NZ$ denominated operating expenditures which results in a blended rate realized each period. The hedging instruments are fixed forward contracts with expiration dates ranging up to five years from the date of issue. The principal hedging objective is reduction in the volatility of realized period-on-period $/A$ and $/NZ$ rates, respectively.

 

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NEWMONT MINING CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) (Continued)
(dollars in millions, except per share, per ounce and per pound amounts)
Beginning in June 2011, Newmont utilizes foreign currency contracts to hedge a portion of the Company’s A$ denominated capital expenditures related to the construction of the Akyem project in Africa. The hedging instruments are fixed forward contracts with expiration dates up to two years.
Newmont had the following foreign currency derivative contracts outstanding at June 30, 2011:
                                                         
    Expected Maturity Date  
                                                    Total/  
    2011     2012     2013     2014     2015     2016     Average  
A$ Operating Fixed Forward Contracts:
                                                       
A$ notional (millions)
    594       947       665       436       204       25       2,871  
Average rate ($/A$)
    0.86       0.88       0.90       0.87       0.84       0.88       0.88  
Expected hedge ratio
    82 %     64 %     44 %     30 %     14 %     3 %        
A$ Akyem Capital Fixed Forward Contracts:
                                                       
A$ notional (millions)
    10       18                               28  
Average rate ($/A$)
    1.04       1.02                               1.03  
Expected hedge ratio
    34 %     41 %                                
NZ$ Operating Fixed Forward Contracts:
                                                       
NZ$ notional (millions)
    37       41       6                         84  
Average rate ($/NZ$)
    0.71       0.73       0.77                         0.72  
Expected hedge ratio
    66 %     35 %     10 %                          
Diesel Fixed Forward Contracts
Newmont hedges a portion of its operating cost exposure related to diesel consumed at its Nevada operations to reduce the variability in realized diesel prices. The hedging instruments consist of a series of financially settled fixed forward contracts with expiration dates ranging up to two years from the date of issue.
Newmont had the following diesel derivative contracts outstanding at June 30, 2011:
                                 
    Expected Maturity Date  
                            Total/  
    2011     2012     2013     Average  
Diesel Fixed Forward Contracts:
                               
Diesel gallons (millions)
    11       11       1       23  
Average rate ($/gallon)
    2.51       2.68       3.19       2.62  
Expected hedge ratio
    53 %     25 %     5 %        
Forward Starting Swap Contracts
During the three months ended June 30, 2011, Newmont entered into forward starting swaps with a total notional value of $1,000. Newmont entered into these swaps as a hedge against adverse movements in treasury rates related to a potential debt issuance in the second half of 2011. At June 30, 2011, the hedge contracts were in a net liability position of $11.

 

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NEWMONT MINING CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) (Continued)
(dollars in millions, except per share, per ounce and per pound amounts)
Fair Value Hedges
Interest Rate Swap Contracts
Newmont had $222 fixed to floating swap contracts designated as a hedge against debt which matured in May 2011.
Derivative Instrument Fair Values
Newmont had the following derivative instruments designated as hedges at June 30, 2011 and December 31, 2010:
                                 
    Fair Value  
    At June 30, 2011  
    Other             Other     Other Long-  
    Current     Other Long-     Current     Term  
    Assets     Term Assets     Liabilities     Liabilities  
Foreign currency exchange contracts:
                               
A$ operating fixed forward contracts
  $ 204     $ 165     $ 1     $  
A$ Akyem capital fixed forward contracts
                       
NZ$ operating fixed forward contracts
    7       1              
Diesel fixed forward contracts
    11       1       1        
Forward starting swap contracts
    4             15        
 
                       
Total derivative instruments (Note 22)
  $ 226     $ 167     $ 17     $  
 
                       
                                 
    Fair Value  
    At December 31, 2010  
    Other             Other     Other Long-  
    Current     Other Long-     Current     Term  
    Assets     Term Assets     Liabilities     Liabilities  
Foreign currency exchange contracts:
                               
A$ operating fixed forward contracts
  $ 181       114              
NZ$ operating fixed forward contracts
    5       1              
Diesel fixed forward contracts
    7       1              
Interest rate swap contracts
    3                    
 
                       
Total derivative instruments (Note 22)
  $ 196     $ 116     $     $  
 
                       

 

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NEWMONT MINING CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) (Continued)
(dollars in millions, except per share, per ounce and per pound amounts)
The following tables show the location and amount of gains reported in the Company’s Condensed Consolidated Financial Statements related to the Company’s cash flow and fair value hedges and the gains (losses) recorded for the hedged item related to the fair value hedges.
                                 
    Foreign Currency Exchange        
    Contracts     Diesel Forward Contracts  
    2011     2010     2011     2010  
For the three months ended June 30,
                               
Cash flow hedging relationships:
                               
Gain (loss) recognized in other comprehensive income (effective portion)
  $ 126     $ (99 )   $ (5 )   $ (6 )
Gain (loss) reclassified from Accumulated other comprehensive income into income (effective portion) (1)
    49       21       5       1  
 
                               
For the six months ended June 30,
                               
Cash flow hedging relationships:
                               
Gain (loss) recognized in other comprehensive income (effective portion)
  $ 193     $ (58 )   $ 10     $ (5 )
Gain (loss) reclassified from Accumulated other comprehensive income into income (effective portion) (1)
    91       45       9       2  
     
(1)   The gain for the effective portion of foreign exchange and diesel cash flow hedges reclassified from Accumulated other comprehensive income is included in Costs applicable to sales.
                                 
    Interest Rate     8 5/8% Debentures  
    Swap Contracts     (Hedged Portion)  
    2011     2010     2011     2010  
For the three months ended June 30,
                               
Fair value hedging relationships:
                               
Gain (loss) recognized in income (effective portion) (1)
  $ 1     $ 1     $ (1 )   $ 2  
Gain (loss) recognized in income (ineffective portion) (2)
    (1 )     (2 )           1  
 
                               
For the six months ended June 30,
                               
Fair value hedging relationships:
                               
Gain (loss) recognized in income (effective portion) (1)
  $ 3     $ 3     $ (6 )   $ 2  
Gain (loss) recognized in income (ineffective portion) (2)
    (2 )     (2 )           1  
     
(1)   The gain (loss) recognized for the effective portion of fair value hedges and the underlying hedged debt is included in Interest expense, net.
 
(2)   The ineffective portion recognized for fair value hedges and the underlying hedged debt is included in Other income, net.
The amount to be reclassified from Accumulated other comprehensive income, net of tax to income for derivative instruments during the next 12 months is a gain of approximately $146.
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 gold and copper concentrates at the prevailing indices’ prices 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.

 

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NEWMONT MINING CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) (Continued)
(dollars in millions, except per share, per ounce and per pound amounts)
LME copper prices averaged $4.14 per pound during the three months ended June 30, 2011, compared with the Company’s recorded average provisional price of $4.22 per pound before mark-to-market losses and treatment and refining charges. LME copper prices averaged $4.26 per pound during the six months ended June 30, 2011, compared with the Company’s recorded average provisional price of $4.31 per pound before mark-to-market losses and treatment and refining charges. During the three and six months ended June 30, 2011, changes in copper prices resulted in a provisional pricing mark-to-market loss of $16 ($0.21 per pound) and $28 ($0.16 per pound), respectively. At June 30, 2011, Newmont had copper sales of 84 million pounds priced at an average of $4.22 per pound, subject to final pricing over the next several months.
The average London P.M. fix for gold was $1,506 per ounce during the three months ended June 30, 2011, compared with the Company’s recorded average provisional price of $1,500 per ounce before mark-to-market gains and treatment and refining charges. The average London P.M. fix for gold was $1,445 per ounce during the six months ended June 30, 2011, compared to the Company’s recorded average provisional price of $1,441 per ounce before mark-to-market gains and treatment and refining charges. During the three and six months ended June 30, 2011, changes in gold prices resulted in a provisional pricing mark-to-market gain of $10 ($7 per ounce) and $18 ($6 per ounce), respectively. At June 30, 2011, Newmont had gold sales of 105,000 ounces priced at an average of $1,506 per ounce, subject to final pricing over the next several months.
NOTE 19 INVESTMENTS
                                 
    At June 30, 2011  
    Cost/Equity     Unrealized     Fair/Equity  
    Basis     Gain     Loss     Basis  
Current:
                               
Marketable Equity Securities:
                               
Paladin Energy Ltd.
  $ 208     $     $ (67 )   $ 141  
Other
    28       36       (2 )     62  
 
                       
 
  $ 236     $ 36     $ (69 )   $ 203  
 
                       
 
                               
Long-term:
                               
Marketable Debt Securities:
                               
Asset backed commercial paper
  $ 26     $     $ (6 )   $ 20  
Auction rate securities
    7             (2 )     5  
Corporate
    7       2             9  
 
                       
 
    40       2       (8 )     34  
 
                       
Marketable Equity Securities:
                               
Canadian Oil Sands Ltd.
    320       570             890  
Gabriel Resources Ltd.
    80       270             350  
Regis Resources Ltd.
    23       163             186  
Other
    125       29       (20 )     134  
 
                       
 
    548       1,032       (20 )     1,560  
 
                       
 
                               
Other investments, at cost
    9                   9  
 
                               
Investment in Affiliates:
                               
La Zanja
    72                   72  
 
                       
 
  $ 669     $ 1,034     $ (28 )   $ 1,675  
 
                       

 

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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, 2010  
    Cost/Equity     Unrealized     Fair/Equity  
    Basis     Gain     Loss     Basis  
Current:
                               
Marketable Equity Securities:
                               
New Gold Inc.
  $ 5     $ 54     $     $ 59  
Other
    19       35             54  
 
                       
 
  $ 24     $ 89     $     $ 113  
 
                       
Long-term:
                               
Marketable Debt Securities:
                               
Asset backed commercial paper
  $ 25     $     $ (6 )   $ 19  
Auction rate securities
    7             (2 )     5  
Corporate
    7       3             10  
 
                       
 
    39       3       (8 )     34  
 
                       
Marketable Equity Securities:
                               
Canadian Oil Sands Ltd.
    308       508             816  
Gabriel Resources Ltd.
    78       325             403  
Regis Resources Ltd.
    23       148             171  
Other
    39       37             76  
 
                       
 
    448       1,018             1,466  
 
                       
 
                               
Other investments, at cost
    11                   11  
 
                               
Investment in Affiliates:
                               
La Zanja
    57                   57  
 
                       
 
  $ 555     $ 1,021     $ (8 )   $ 1,568  
 
                       
Included in Investments at June 30, 2011 and December 31, 2010 are $9 and $10, respectively, of long-term marketable debt securities and $6 and $6 of long-term marketable equity securities, respectively, that are legally pledged for purposes of settling asset retirement obligations related to the San Jose Reservoir at Yanacocha.
In conjunction with the April 6, 2011 acquisition of Fronteer, Newmont acquired $208 of Paladin Energy Ltd. securities and $73 of other marketable equity securities and warrants. During the first half of 2011 and 2010, the Company purchased other marketable securities for $15 and $7, respectively. In June 2011, Newmont sold its investment in New Gold Inc. and realized a gain of $50.

 

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NEWMONT MINING CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) (Continued)
(dollars in millions, except per share, per ounce and per pound amounts)
The following tables present the gross unrealized losses and fair value of the Company’s investments with unrealized losses that are not deemed to be other-than-temporarily impaired, aggregated by length of time that the individual securities have been in a continuous unrealized loss position:
                                                 
    Less than 12 Months     12 Months or Greater     Total  
            Unrealized             Unrealized             Unrealized  
At June 30, 2011   Fair Value     Losses     Fair Value     Losses     Fair Value     Losses  
Marketable equity securities
  $ 62     $ 22     $     $     $ 62     $ 22  
Paladin Energy Ltd.
    141       67                   141       67  
Asset backed commercial paper
                20       6       20       6  
Auction rate securities
                5       2       5       2  
 
                                   
 
  $ 203     $ 89     $ 25     $ 8     $ 228     $ 97  
 
                                   
                                                 
    Less than 12 Months     12 Months or Greater     Total  
            Unrealized             Unrealized             Unrealized  
At December 31, 2010   Fair Value     Losses     Fair Value     Losses     Fair Value     Losses  
Asset backed commercial paper
  $     $     $ 19     $ 6     $ 19     $ 6  
Auction rate securities
                5       2       5       2  
 
                                   
 
  $     $     $ 24     $ 8     $ 24     $ 8  
 
                                   
Included in the tables above are the unrealized losses of $97 and $8 at June 30, 2011 and December 31, 2010, respectively, related to the Company’s investments in asset backed commercial paper, auction rate securities and marketable equity securities as listed in the tables above. While the fair values of these investments are below their respective cost, the Company views these declines as temporary. The Company intends to hold its investment in auction rate securities and asset backed commercial paper until maturity or such time that the market recovers and therefore considers these losses temporary.
NOTE 20 INVENTORIES
                 
    At June 30,     At December 31,  
    2011     2010  
In-process
  $ 101     $ 142  
Concentrate
    110       111  
Precious metals
    15       4  
Materials, supplies and other
    445       401  
 
           
 
  $ 671     $ 658  
 
           

 

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NEWMONT MINING CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) (Continued)
(dollars in millions, except per share, per ounce and per pound amounts)
NOTE 21 STOCKPILES AND ORE ON LEACH PADS
                 
    At June 30,     At December 31,  
    2011     2010  
Current:
               
Stockpiles
  $ 443     $ 389  
Ore on leach pads
    253       228  
 
           
 
  $ 696     $ 617  
 
           
Long-term:
               
Stockpiles
  $ 1,640     $ 1,397  
Ore on leach pads
    310       360  
 
           
 
  $ 1,950     $ 1,757  
 
           
                 
    At June 30,     At December 31,  
    2011     2010  
Stockpiles and ore on leach pads:
               
Nevada
  $ 497     $ 479  
La Herradura
    9       6  
Yanacocha
    503       496  
Boddington
    357       248  
Batu Hijau
    995       879  
Other Australia/New Zealand
    152       145  
Ahafo
    133       121  
 
           
 
  $ 2,646     $ 2,374  
 
           
NOTE 22 OTHER ASSETS
                 
    At June 30,     At December 31,  
    2011     2010  
Other current assets:
               
Refinery metal inventory and receivable
  $ 1,166     $ 617  
Derivative instruments
    226       196  
Prepaid assets
    141       65  
Other
    80       84  
 
           
 
  $ 1,613     $ 962  
 
           
 
               
Other long-term assets:
               
Goodwill
  $ 188     $ 188  
Income tax receivable
    176       119  
Derivative instruments
    167       116  
Intangible assets
    151       91  
Debt issuance costs
    62       39  
Restricted cash
    26       25  
Other receivables
    19       19  
Other
    157       144  
 
           
 
  $ 946     $ 741  
 
           

 

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NEWMONT MINING CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) (Continued)
(dollars in millions, except per share, per ounce and per pound amounts)
NOTE 23 DEBT
                                 
    At June 30, 2011     At December 31, 2010  
    Current     Non-Current     Current     Non-Current  
Sale-leaseback of refractory ore treatment plant
  $ 28     $ 106     $ 30     $ 134  
8 5/8% debentures, net of discount (due 2011)
                217        
2012 convertible senior notes, net of discount
    501                   488  
2014 convertible senior notes, net of discount
          500             489  
2017 convertible senior notes, net of discount
          443             434  
2019 senior notes, net of discount
          896             896  
2035 senior notes, net of discount
          598             598  
2039 senior notes, net of discount
          1,087             1,087  
Corporate revolving credit facility
          90              
Ahafo project facility
    10       50       10       55  
Other capital leases
          1       2       1  
 
                       
 
  $ 539     $ 3,771     $ 259     $ 4,182  
 
                       
In May 2011, Newmont repaid the $223 balance outstanding on the 8 5/8% Senior Notes. Scheduled minimum debt repayments are $5 for the remainder of 2011, $572 in 2012, $42 in 2013, $544 in 2014, $18 in 2015 and $3,129 thereafter.
Corporate Revolving Credit Facility
Effective May 20, 2011, the Company entered into a new uncollateralized $2,500 revolving credit facility with a syndicate of commercial banks. This new revolving credit facility replaced the existing revolving credit facility which was cancelled upon the effectiveness of the new facility. The new facility provides for borrowings in U.S. dollars and contains a letter of credit sub-facility. The new facility matures in May 2016. Interest rates and facility fees vary based on the credit ratings of the Company’s senior, uncollateralized, long-term debt. Borrowings under the facility currently bear interest at a rate per annum equal to LIBOR plus a margin of 1.075%. Facility fees currently accrue at an annual rate of 0.175% of the aggregate commitments. At June 30, 2011, there were $90 in borrowings outstanding and $239 outstanding in letters of credit.
Subsidiary Financings
PTNNT Revolving Credit Facility
Effective May 27, 2011, PTNNT entered into a new $600 reducing revolving credit facility with a syndicate of banks. This new reducing revolving credit facility provides for borrowings in U.S. dollars. The facility matures in March 2017. The facility is non-recourse to Newmont and substantially all of PTNNT’s assets are pledged as collateral. Borrowings under the facility bear interest at a rate per annum equal to LIBOR plus a margin of 4.00%. Commitment fees currently accrue on the daily average unused amount of the commitment of each lender at an annual rate of 2.00%. There were no borrowings outstanding under the facility at June 30, 2011.

 

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NEWMONT MINING CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) (Continued)
(dollars in millions, except per share, per ounce and per pound amounts)
NOTE 24 OTHER LIABILITIES
                 
    At June 30,     At December 31,  
    2011     2010  
Other current liabilities:
               
Refinery metal payable
  $ 1,166     $ 617  
Accrued operating costs
    249       217  
Accrued capital expenditures
    156       83  
Taxes other than income and mining
    105       135  
Reclamation and remediation liabilities
    62       64  
Interest
    57       66  
Royalties
    44       90  
Boddington contingent consideration
    42       32  
Deferred income tax
    18       54  
Holt property royalty
    14        
Other
    85       60  
 
           
 
  $ 1,998     $ 1,418  
 
           
 
               
Other long-term liabilities:
               
Holt property royalty
  $ 167     $ 40  
Power supply agreements
    47       45  
Income and mining taxes
    29       36  
Boddington contingent consideration
    28       51  
Other
    43       49  
 
           
 
  $ 314     $ 221  
 
           
NOTE 25 NET CHANGE IN OPERATING ASSETS AND LIABILITIES
Net cash provided from operations attributable to the net change in operating assets and liabilities is composed of the following:
                 
    Six Months Ended June 30,  
    2011     2010  
Decrease (increase) in operating assets:
               
Trade and accounts receivable
  $ 121     $ 74  
Inventories, stockpiles and ore on leach pads
    (230 )     (187 )
EGR refinery assets
    (437 )     138  
Other assets
    (67 )     (30 )
Increase (decrease) in operating liabilities:
               
Accounts payable and other accrued liabilities
    (349 )     (90 )
EGR refinery liabilities
    437       (138 )
Reclamation liabilities
    (15 )     (18 )
 
           
 
  $ (540 )   $ (251 )
 
           

 

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NEWMONT MINING CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) (Continued)
(dollars in millions, except per share, per ounce and per pound amounts)
NOTE 26 SUPPLEMENTAL CASH FLOW INFORMATION
                 
    Six Months Ended June 30,  
    2011     2010  
Income and mining taxes, net of refunds
  $ 892     $ 546  
Interest, net of amounts capitalized
  $ 92     $ 116  
NOTE 27 CONDENSED CONSOLIDATING FINANCIAL STATEMENTS
Newmont USA, a 100% owned subsidiary of Newmont Mining Corporation, has fully and unconditionally guaranteed the 2019, 2035 and 2039 senior notes, the 2012, 2014 and 2017 convertible senior notes and the corporate revolving credit facility. The following 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 June 30, 2011  
                                    Newmont  
    Newmont                             Mining  
    Mining     Newmont     Other             Corporation  
Condensed Consolidating Statement of Income   Corporation     USA     Subsidiaries     Eliminations     Consolidated  
 
                                       
Sales
  $     $ 1,468     $ 916     $     $ 2,384  
 
                                       
Costs and expenses
                                       
Costs applicable to sales (1)
          551       375       (9 )     917  
Amortization
          156       94             250  
Reclamation and remediation
          37       6             43  
Exploration
          47       42             89  
Advanced projects, research and development
          41       46       (1 )     86  
General and administrative
          39       1       10       50  
Other expense, net
          67       20             87  
 
                             
 
          938       584             1,522  
 
                             
 
                                       
Other income (expense)
                                       
Other income, net
    (2 )     41       9             48  
Interest income — intercompany
    40       2       2       (44 )      
Interest expense — intercompany
    (3 )           (41 )     44        
Interest expense, net
    (59 )     (3 )     (1 )           (63 )
 
                             
 
    (24 )     40       (31 )           (15 )
 
                             
 
                                       
Income before income and mining tax and other items
    (24 )     570       301             847  
Income and mining tax expense
    5       (111 )     (81 )           (187 )
Equity income (loss) of affiliates
    406       2       50       (458 )      
 
                             
Income from continuing operations
    387       461       270       (458 )     660  
Loss from discontinued operations
          7       (143 )           (136 )
 
                             
Net income
    387       468       127       (458 )     524  
Net income attributable to noncontrolling interests
          (173 )     30       6       (137 )
 
                             
Net income attributable to Newmont stockholders
  $ 387     $ 295     $ 157     $ (452 )   $ 387  
 
                             
     
(1)   Excludes Amortization and Reclamation and remediation.

 

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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 June 30, 2010  
                                    Newmont  
    Newmont                             Mining  
    Mining     Newmont     Other             Corporation  
Condensed Consolidating Statement of Income   Corporation     USA     Subsidiaries     Eliminations     Consolidated  
 
                                       
Sales
  $     $ 1,410     $ 743     $     $ 2,153  
 
                                       
Costs and expenses
                                       
Costs applicable to sales (1)
          519       335       (6 )     848  
Amortization
          143       89       (1 )     231  
Reclamation and remediation
          10       3             13  
Exploration
          32       21             53  
Advanced projects, research and development
          25       32             57  
General and administrative
          37             6       43  
Other expense, net
          39       21       1       61  
 
                             
 
          805       501             1,306  
 
                             
 
                                       
Other income (expense)
                                       
Other income, net
          13       31             44  
Interest income — intercompany
    35       2       1       (38 )      
Interest expense — intercompany
    (3 )           (35 )     38        
Interest expense, net
    (64 )     (4 )     (1 )           (69 )
 
                             
 
    (32 )     11       (4 )           (25 )
 
                             
 
                                       
Income before income and mining tax and other items
    (32 )     616       238             822  
Income and mining tax expense
    9       (227 )     (65 )           (283 )
Equity income (loss) of affiliates
    405       1       63       (471 )     (2 )
 
                             
Net income (loss)
    382       390       236       (471 )     537  
Net loss (income) attributable to noncontrolling interests
          (185 )     (10 )     40       (155 )
 
                             
Net income (loss) attributable to Newmont stockholders
  $ 382     $ 205     $ 226     $ (431 )   $ 382  
 
                             
     
(1)   Excludes Amortization and Reclamation and remediation.

 

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NEWMONT MINING CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) (Continued)
(dollars in millions, except per share, per ounce and per pound amounts)
                                         
    Six Months Ended June 30, 2011  
                                    Newmont  
    Newmont                             Mining  
    Mining     Newmont     Other             Corporation  
Condensed Consolidating Statement of Income   Corporation     USA     Subsidiaries     Eliminations     Consolidated  
 
                                       
Sales
  $     $ 2,986     $ 1,863     $     $ 4,849  
 
                                       
Costs and expenses
                                       
Costs applicable to sales (1)
          1,117       759       (19 )     1,857  
Amortization
          315       191             506  
Reclamation and remediation
          48       9             57  
Exploration
          81       70             151  
Advanced projects, research and development
          68       87       (1 )     154  
General and administrative
          73       2       20       95  
Other expense, net
          121       39             160  
 
                             
 
          1,823       1,157             2,980  
 
                             
 
                                       
Other income (expense)
                                       
Other income, net
    (8 )     67       20             79  
Interest income — intercompany
    76       4       4       (84 )      
Interest expense — intercompany
    (6 )           (78 )     84        
Interest expense, net
    (113 )     (12 )     (3 )           (128 )
 
                             
 
    (51 )     59       (57 )           (49 )
 
                             
 
                                       
Income before income and mining tax and other items
    (51 )     1,222       649             1,820  
Income and mining tax expense
    15       (319 )     (188 )           (492 )
Equity income (loss) of affiliates
    937       3       139       (1,077 )     2  
 
                             
Income from continuing operations
    901       906       600       (1,077 )     1,330  
Loss from discontinued operations
          7       (143 )           (136 )
 
                             
Net income
    901       913       457       (1,077 )     1,194  
Net income attributable to noncontrolling interests
          (365 )     10       62       (293 )
 
                             
Net income attributable to Newmont stockholders
  $ 901     $ 548     $ 467     $ (1,015 )   $ 901  
 
                             
     
(1)   Excludes Amortization and Reclamation and remediation.

 

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NEWMONT MINING CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) (Continued)
(dollars in millions, except per share, per ounce and per pound amounts)
                                         
    Six Months Ended June 30, 2010  
                                    Newmont  
    Newmont                             Mining  
    Mining     Newmont     Other             Corporation  
Condensed Consolidating Statement of Income   Corporation     USA     Subsidiaries     Eliminations     Consolidated  
 
                                       
Sales
  $     $ 3,002     $ 1,393     $     $ 4,395  
 
                                       
Costs and expenses
                                       
Costs applicable to sales (1)
          1,064       664       (11 )     1,717  
Amortization
          286       170       (1 )     455  
Reclamation and remediation
          19       7             26  
Exploration
          56       40             96  
Advanced projects, research and development
          54       49             103  
General and administrative
          75       1       12       88  
Other expense, net
          115       35             150  
 
                             
 
          1,669       966             2,635  
 
                             
 
                                       
Other income (expense)
                                       
Other income, net
          14       78             92  
Interest income — intercompany
    71       4       2       (77 )      
Interest expense — intercompany
    (5 )           (72 )     77        
Interest expense, net
    (126 )     (16 )     (2 )           (144 )
 
                             
 
    (60 )     2       6             (52 )
 
                             
 
                                       
Income before income and mining tax and other items
    (60 )     1,335       433             1,708  
Income and mining tax expense
    150       (466 )     (108 )           (424 )
Equity income (loss) of affiliates
    838       1       130       (973 )     (4 )
 
                             
Net income (loss)
    928       870       455       (973 )     1,280  
Net loss (income) attributable to noncontrolling interests
          (428 )     (5 )     81       (352 )
 
                             
Net income (loss) attributable to Newmont stockholders
  $ 928     $ 442     $ 450     $ (892 )   $ 928  
 
                             
     
(1)   Excludes Amortization and Reclamation and remediation.

 

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NEWMONT MINING CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) (Continued)
(dollars in millions, except per share, per ounce and per pound amounts)
                                         
    Six Months Ended June 30, 2011  
                                    Newmont  
    Newmont                           Mining  
Condensed Consolidating Statement   Mining     Newmont     Other           Corporation  
of Cash Flows   Corporation     USA     Subsidiaries     Eliminations     Consolidated  
Operating activities:
                                       
Net income (loss)
  $ 901     $ 913     $ 457     $ (1,077 )   $ 1,194  
Adjustments
    39       362       (729 )     1,077       749  
Net change in operating assets and liabilities
    (27 )     (509 )     (4 )           (540 )
 
                             
Net cash provided from (used in) continuing operations
    913       766       (276 )           1,403  
Net cash used in discontinued operations
                (2 )           (2 )
 
                             
Net cash provided from (used in) operations
    913       766       (278 )           1,401  
 
                             
Investing activities:
                                       
Additions to property, plant and mine development
          (671 )     (349 )           (1,020 )
Proceeds from sale of marketable securities
          55                   55  
Purchases of marketable securities
                (15 )           (15 )
Acquisitions, net
                (2,291 )           (2,291 )
Proceeds from sale of other assets
          (56 )     62             6  
Other
                (15 )           (15 )
 
                             
Net cash used in investing activities
          (672 )     (2,608 )           (3,280 )
 
                             
Financing activities:
                                       
Net borrowings (repayments)
    83       (276 )     (5 )           (198 )
Net intercompany borrowings (repayments)
    (831 )     (2,018 )     2,849              
Dividends paid to common stockholders
    (173 )                       (173 )
Dividends paid to noncontrolling interests
          (17 )                 (17 )
Proceeds from stock issuance, net
    8                         8  
Change in restricted cash and other
          1       (1 )            
 
                             
Net cash provided from (used in) financing activities
    (913 )     (2,310 )     2,843             (380 )
 
                             
Effect of exchange rate changes on cash
          1       57             58  
 
                             
Net change in cash and cash equivalents
          (2,215 )     14             (2,201 )
Cash and cash equivalents at beginning of period
          3,877       179             4,056  
 
                             
Cash and cash equivalents at end of period
  $     $ 1,662     $ 193     $     $ 1,855  
 
                             

 

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NEWMONT MINING CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) (Continued)
(dollars in millions, except per share, per ounce and per pound amounts)
                                         
    Six Months Ended June 30, 2010  
                                    Newmont  
    Newmont                           Mining  
Condensed Consolidating Statement   Mining     Newmont     Other           Corporation  
of Cash Flows   Corporation     USA     Subsidiaries     Eliminations     Consolidated  
Operating activities:
                                       
Net income (loss)
  $ 928     $ 870     $ 455     $ (973 )   $ 1,280  
Adjustments
    (115 )     319       (725 )     973       452  
Net change in operating assets and liabilities
    (2 )     (160 )     (89 )           (251 )
 
                             
Net cash provided from (used in) continuing operations
    811       1,029       (359 )           1,481  
Net cash used in discontinued operations
          (13 )                 (13 )
 
                             
Net cash provided from (used in) operations
    811       1,016       (359 )           1,468  
 
                             
Investing activities:
                                       
Additions to property, plant and mine development
          (283 )     (345 )           (628 )
Proceeds from sale of marketable securities
                1             1  
Purchases of marketable securities
                (7 )           (7 )
Proceeds from sale of other assets
          8       44             52  
Other
                (23 )           (23 )
 
                             
Net cash used in investing activities
          (275 )     (330 )           (605 )
 
                             
Financing activities:
                                       
Net repayments
          (257 )     (6 )           (263 )
Net intercompany borrowings (repayments)
    (751 )     (23 )     855       (81 )      
Sale of noncontrolling interests
          229                   229  
Acquisition of noncontrolling interests
                (109 )           (109 )
Dividends paid to common stockholders
    (98 )                       (98 )
Dividends paid to noncontrolling interests
          (388 )           81       (307 )
Proceeds from stock issuance, net
    30                         30  
Change in restricted cash and other
          48                   48  
 
                             
Net cash provided from (used in) financing activities
    (819 )     (391 )     740             (470 )
 
                             
Effect of exchange rate changes on cash
                (6 )           (6 )
 
                             
Net change in cash and cash equivalents
    (8 )     350       45             387  
Cash and cash equivalents at beginning of period
    8       3,067       140             3,215  
 
                             
Cash and cash equivalents at end of period
  $     $ 3,417     $ 185     $     $ 3,602  
 
                             

 

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NEWMONT MINING CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) (Continued)
(dollars in millions, except per share, per ounce and per pound amounts)
                                         
    At June 30, 2011  
                                    Newmont  
    Newmont                             Mining  
    Mining     Newmont     Other             Corporation  
Condensed Consolidating Balance Sheet   Corporation     USA     Subsidiaries     Eliminations     Consolidated  
Assets
                                       
Cash and cash equivalents
  $     $ 1,662     $ 193     $     $ 1,855  
Trade receivables
          355       63             418  
Accounts receivable
    1,608       2,497       1,356       (5,326 )     135  
Investments
    141       16       46             203  
Inventories
          363       308             671  
Stockpiles and ore on leach pads
          591       105             696  
Deferred income tax assets
    3       254       51             308  
Other current assets
    6       144       1,463             1,613  
 
                             
Current assets
    1,758       5,882       3,585       (5,326 )     5,899  
Property, plant and mine development, net
          5,687       10,997       (21 )     16,663  
Investments
          22       1,653             1,675  
Investments in subsidiaries
    16,569       33       2,692       (19,294 )      
Stockpiles and ore on leach pads
          1,413       537             1,950  
Deferred income tax assets
    661       685       159             1,505  
Other long-term assets
    2,617       653       829       (3,153 )     946  
 
                             
Total assets
  $ 21,605     $ 14,375     $ 20,452     $ (27,794 )   $ 28,638  
 
                             
 
                                       
Liabilities
                                       
Debt
  $ 501     $ 28     $ 10     $     $ 539  
Accounts payable
    3,008       920       1,877       (5,315 )     490  
Employee-related benefits
          159       70             229  
Income and mining taxes
          15       169             184  
Other current liabilities
    66       388       3,517       (1,973 )     1,998  
 
                             
Current liabilities
    3,575       1,510       5,643       (7,288 )     3,440  
Debt
    3,614       107       50             3,771  
Reclamation and remediation liabilities
          719       313             1,032  
Deferred income tax liabilities
    6       554       2,175             2,735  
Employee-related benefits
    5       255       93             353  
Other long-term liabilities
    389       47       3,053       (3,175 )     314  
 
                             
Total liabilities
    7,589       3,192       11,327       (10,463 )     11,645  
 
                             
Equity
                                       
Preferred stock
                61       (61 )      
Common stock
    780                         780  
Additional paid-in capital
    8,018       2,721       6,991       (9,400 )     8,330  
Accumulated other comprehensive income
    1,310       (107 )     1,545       (1,438 )     1,310  
Retained earnings
    3,908       5,394       (637 )     (4,757 )     3,908  
 
                             
Newmont stockholders’ equity
    14,016       8,008       7,960       (15,656 )     14,328  
Noncontrolling interests
          3,175       1,165       (1,675 )     2,665  
 
                             
Total equity
    14,016       11,183       9,125       (17,331 )     16,993  
 
                             
Total liabilities and equity
  $ 21,605     $ 14,375     $ 20,452     $ (27,794 )   $ 28,638  
 
                             

 

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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, 2010  
                                    Newmont  
    Newmont                             Mining  
    Mining     Newmont     Other             Corporation  
Condensed Consolidating Balance Sheet   Corporation     USA     Subsidiaries     Eliminations     Consolidated  
Assets
                                       
Cash and cash equivalents
  $     $ 3,877     $ 179     $     $ 4,056  
Trade receivables
          501       81             582  
Accounts receivable
    2,222       802       265       (3,201 )     88  
Investments
          72       41             113  
Inventories
          388       270             658  
Stockpiles and ore on leach pads
          513       104             617  
Deferred income tax assets
          170       7             177  
Other current assets
          77       885             962  
 
                             
Current assets
    2,222       6,400       1,832       (3,201 )     7,253  
Property, plant and mine development, net
          5,364       7,562       (19 )     12,907  
Investments
          25       1,543             1,568  
Investments in subsidiaries
    12,295       35       1,909       (14,239 )      
Stockpiles and ore on leach pads
          1,347       410             1,757  
Deferred income tax assets
    638       690       109             1,437  
Other long-term assets
    2,675       496       584       (3,014 )     741  
 
                             
Total assets
  $ 17,830     $ 14,357     $ 13,949     $ (20,473 )   $ 25,663  
 
                             
 
                                       
Liabilities
                                       
Debt
  $     $ 249     $ 10     $     $ 259  
Accounts payable
    355       1,269       1,996       (3,193 )     427  
Employee-related benefits
          222       66             288  
Income and mining taxes
    19       261       75             355  
Other current liabilities
    56       373       2,959       (1,970 )     1,418  
 
                             
Current liabilities
    430       2,374       5,106       (5,163 )     2,747  
Debt
    3,991       135       56             4,182  
Reclamation and remediation liabilities
          676       308             984  
Deferred income tax liabilities
          513       975             1,488  
Employee-related benefits
    5       244       76             325  
Other long-term liabilities
    375       56       2,824       (3,034 )     221  
 
                             
Total liabilities
    4,801       3,998       9,345       (8,197 )     9,947  
 
                             
Equity
                                       
Preferred stock
                61       (61 )      
Common stock
    778                         778  
Additional paid-in capital
    7,963       2,722       3,894       (6,300 )     8,279  
Accumulated other comprehensive income
    1,108       (75 )     1,180       (1,105 )     1,108  
Retained earnings
    3,180       4,850       (1,109 )     (3,741 )     3,180  
 
                             
Newmont stockholders’ equity
    13,029       7,497       4,026       (11,207 )     13,345  
Noncontrolling interests
          2,862       578       (1,069 )     2,371  
 
                             
Total equity
    13,029       10,359       4,604       (12,276 )     15,716  
 
                             
Total liabilities and equity
  $ 17,830     $ 14,357     $ 13,949     $ (20,473 )   $ 25,663  
 
                             

 

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NEWMONT MINING CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) (Continued)
(dollars in millions, except per share, per ounce and per pound amounts)
NOTE 28 COMMITMENTS AND CONTINGENCIES
General
The Company follows ASC guidance in determining its accruals and disclosures with respect to loss contingencies. Accordingly, estimated losses from 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 3. Except as noted in this paragraph, all of the Company’s commitments and contingencies specifically described in this Note 28 relate to the Corporate and Other reportable segment. The PT Newmont Minahasa Raya and PTNNT matters relate to the Asia Pacific reportable segment. The Yanacocha matters relate to the South America 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 June 30, 2011 and December 31, 2010, $922 and $904, respectively, were accrued for reclamation costs relating to currently or recently producing mineral properties in accordance with asset retirement obligation guidance. The current portions of $43 and $46 at June 30, 2011 and December 31, 2010, respectively, are included in Other current liabilities.
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, $172 and $144 were accrued for such obligations at June 30, 2011 and December 31, 2010, 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 137% greater or 3% lower than the amount accrued at June 30, 2011. The amounts accrued are reviewed periodically based upon facts and circumstances available at the time. Changes in estimates are recorded in Reclamation and remediation 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”).

 

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NEWMONT MINING CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) (Continued)
(dollars in millions, except per share, per ounce and per pound amounts)
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 (“RI/FS”) under CERCLA. In October 2005, the EPA issued the RI/FS on this property in which it indicated a preferred remedy that it 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.
On July 14, 2008, after a bench trial, the Court held Newmont liable under CERCLA as an “operator” of the Midnite Mine. The Court previously ruled on summary judgment that both the U.S. Government and Dawn were liable under CERCLA. On October 17, 2008 the Court issued its written decision in the bench trial. The Court found Dawn and Newmont jointly and severally liable under CERCLA for past and future response costs, and ruled that each of Dawn and Newmont are responsible to pay one-third of such costs. The Court also found the U.S. Government liable on Dawn’s and Newmont’s contribution claim, and ruled that the U.S. Government is responsible to pay one-third of all past and future response costs. In November 2008, all parties appealed the Court’s ruling. Also in November 2008, the EPA issued an Administrative Order pursuant to Section 106 of CERCLA ordering Dawn and Newmont to conduct water treatment, testing and other preliminary remedial actions. Newmont has initiated those preliminary remedial actions.
Newmont intends to continue to vigorously defend this matter and cannot reasonably predict the outcome of this lawsuit or the likelihood of 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 approval from the State of Washington for a revised closure plan that expedites the reclamation process at the site. The currently approved plan for the site is guaranteed by Newmont.
Newmont Canada Corporation (“Newmont Canada”) — 100% Newmont Owned
On November 11, 2008, St. Andrew Goldfields Ltd. (“St. Andrew”) filed an Application in the Superior Court of Justice in Ontario, Canada, seeking a declaration to clarify St. Andrew’s royalty obligations regarding certain mineral rights and property formerly owned by Newmont Canada and now owned by St. Andrew.
Newmont Canada purchased the property, called the Holt-McDermott property (“Holt Property”), from Barrick Gold Corporation (“Barrick”) in October 2004. At that time, Newmont Canada entered into a royalty agreement with Barrick (the “Barrick Royalty”), allowing Barrick to retain a royalty on the Holt Property. In August 2006, Newmont Canada sold all of its interests in the Holt Property to Holloway Mining Company (“Holloway”) in exchange for common stock issued by Holloway. In September 2006, Newmont Canada entered into a purchase and sale agreement with St. Andrew (the “2006 Agreement”), under which St. Andrew acquired all the common stock of Holloway. In 2008, Barrick sold its Barrick Royalty to Royal Gold, Inc. (“Royal Gold”).
In the court proceedings, St. Andrew alleged that in the 2006 Agreement it only agreed to assume royalty obligations equal to 0.013% of net smelter returns from operations on the Holt Property. Such an interpretation of the 2006 Agreement would make Newmont responsible for any royalties exceeding that amount payable to Royal Gold pursuant to the Barrick Royalty, which is a royalty determined by multiplying 0.013% by the quarterly average gold price. On July 23, 2009, the Superior Court issued a decision finding in favor of St. Andrews’ interpretation. On August 21, 2009, Newmont Canada appealed the decision. On May 13, 2011, the Ontario Court of Appeal upheld the lower court ruling, finding Newmont liable for the sliding scale royalty, which equals 0.013% of net smelter returns multiplied by the quarterly average gold price, minus a 0.013% of net smelter returns. There is no cap on the sliding scale royalty and it increases or decreases with the gold price.

 

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NEWMONT MINING CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) (Continued)
(dollars in millions, except per share, per ounce and per pound amounts)
Newmont USA Limited — 100% Newmont Owned
Grey 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.
Ross-Adams Mine Site. By letter dated June 5, 2007, the U.S. Forest Service notified Newmont that it had expended approximately $0.3 in response costs to address environmental conditions at the Ross-Adams mine in Prince of Wales, Alaska, and requested Newmont USA Limited pay those costs and perform an Engineering Evaluation/Cost Analysis (“EE/CA”) to assess what future response activities might need to be completed at the site. Newmont intends to vigorously defend any formal claims by the EPA. Newmont has agreed to perform the EE/CA. 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
On March 22, 2007, an Indonesian non-governmental organization named Wahana Lingkungan Hidup Indonesia (“WALHI”) filed a civil suit against PTNMR, the Newmont subsidiary that operated the Minahasa mine in Indonesia, and Indonesia’s Ministry of Energy and Mineral Resources and Ministry for the Environment, alleging pollution from the disposal of mine tailings into Buyat Bay, and seeking a court order requiring PTNMR to fund a 25-year monitoring program in relation to Buyat Bay. In December 2007, the court ruled in PTNMR’s favor and found that WALHI’s allegations of pollution in Buyat Bay were without merit. In March 2008, WALHI appealed this decision to the Indonesian High Court. On January 27, 2010, the Indonesian High Court upheld the December 2007 ruling in favor of PTNMR. On May 17, 2010, WALHI filed an appeal of the January 27, 2010 Indonesian High Court ruling seeking review from the Indonesian Supreme Court. 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.
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.
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 April 2008, the Peruvian Supreme Court upheld the validity of these settlement agreements, which the Company expects to result in the dismissal of all claims brought by previously settled plaintiffs. Yanacocha has also entered into settlement agreements with approximately 350 additional plaintiffs. The claims asserted by approximately 200 plaintiffs remain. In 2011, Yanacocha was served with 22 complaints alleging grounds to nullify the settlements entered between Yanacocha and the plaintiffs. Yanacocha has answered the complaints and will continue to vigorously defend its position. Neither the Company nor Yanacocha can reasonably estimate the ultimate loss relating to such claims.

 

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NEWMONT MINING CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) (Continued)
(dollars in millions, except per share, per ounce and per pound amounts)
PT Newmont Nusa Tenggara (“PTNNT”) — 31.5% Newmont Direct Ownership
Under the Batu Hijau Contract of Work, beginning in 2006 and continuing through 2010, a portion of PTNNT’s shares were required to be offered for sale, first, to the Indonesian government or, second, to Indonesian nationals, equal to the difference between the following percentages and the percentage of shares already owned by the Indonesian government or Indonesian nationals (if such number is positive): 23% by March 31, 2006; 30% by March 31, 2007; 37% by March 31, 2008; 44% by March 31, 2009; and 51% by March 31, 2010. As PT Pukuafu Indah (“PTPI”) , an Indonesian national, owned a 20% interest in PTNNT at all relevant times, in 2006, a 3% interest was required to be offered for sale and, in each of 2007 through 2010, an additional 7% interest was required to be offered (for an aggregate 31% interest). The price at which such interests were to be offered for sale to the Indonesian parties is the highest of the then-current replacement cost, the price at which shares would be accepted for listing on the Indonesian Stock Exchange, or the fair market value of such interest as a going concern, as agreed with the Indonesian government.
In accordance with the Contract of Work, an offer to sell a 3% interest was made to the Indonesian government in 2006 and an offer for an additional 7% interest was made in each of 2007, 2008, 2009 and 2010. While the central government declined to participate in the 2006 and 2007 offers, local governments in the area in which the Batu Hijau mine is located expressed interest in acquiring shares, as did various Indonesian nationals. After disagreement with the government over whether the government’s first right to purchase had expired and receipt of Notices of Default from the government claiming breach and threatening termination of the Contract of Work, on March 3, 2008, the Indonesian government filed for international arbitration as provided under the Contract of Work, as did PTNNT. In the arbitration proceeding, PTNNT sought a declaration that the Indonesian government was not entitled to terminate the Contract of Work and additional declarations pertaining to the procedures for divesting the shares. For its part, the Indonesian government sought declarations that PTNNT was in default of its divestiture obligations, that the government may terminate the Contract of Work and recover damages for breach of the Contract of Work, and that PTNNT must cause shares subject to divestiture to be sold to certain local governments.
An international arbitration panel (the “Panel”) was appointed to resolve these claims and other claims that had arisen in relation to divestment and a hearing was held in Jakarta in December 2008. On March 31, 2009, the Panel issued its final award and decision on the matter. In its decision, the Panel determined that PTNNT’s foreign shareholders had not complied with the divestiture procedure required by the Contract of Work in 2006 and 2007, but the Panel ruled that the Indonesian government was not entitled to immediately terminate the Contract of Work and rejected the Indonesian government’s claim for damages. The Panel granted PTNNT 180 days from the date of notification of the final award to effect transfer of the 2006 3% interest and the 2007 7% interest in PTNNT to the local governments or their respective nominees. The Panel also applied a 180-day cure period to the 2008 7% interest, requiring that PTNNT effect the offer of the 2008 7% interest to the Indonesian government or its nominee within such 180-day period, and ensure the transfer of such shares if, after agreement on the transfer price, the Indonesian government invoked its right of first refusal under the Contract of Work. On July 14, 2009, the Company reached agreement with the Indonesian government on the price of the 2008 7% interest and the 2009 7% interest. PTNNT effected the reoffer of the 2008 7% interest and the 2009 7% interest to the Indonesian government at this newly agreed price. In November and December 2009, sale agreements were concluded pursuant to which the 2006, 2007 and 2008 shares were transferred to PT Multi Daerah Bersaing (“PTMDB”), the nominee of the local governments, and the 2009 shares were transferred to PTMDB in February 2010, resulting in PTMDB owning a 24% interest in PTNNT.
On December 17, 2010, the Ministry of Energy & Mineral Resources, acting on behalf of the Indonesian government, accepted the offer to acquire the final 7% interest in PTNNT. Subsequently, the Indonesian government designated Pusat Investasi Pemerintah (“PIP”), an agency of the Ministry of Finance, as the entity that will buy the final stake. On May 6, 2011, PIP and the foreign shareholders entered into a definitive agreement for the sale and purchase of the final 7% divestiture stake. Closing of the transaction is pending receipt of approvals from certain Indonesian government ministries. Further disputes may arise in regard to the divestiture of the 2010 shares.
As part of the negotiation of the sale agreements with PTMDB, the parties executed an operating agreement (the “Operating Agreement”) under which each recognizes the rights of the Company and Sumitomo to apply their operating standards to the management of PTNNT’s operations, including standards for safety, environmental stewardship and community responsibility. The Operating Agreement became effective upon the completion of the sale of the 2009 shares in February 2010 and will continue for so long as the Company and Sumitomo own more shares of PTNNT than PTMDB. If the Operating Agreement terminates, then the Company may lose control over the applicable operating standards for Batu Hijau and will be at risk for operations conducted in a manner that either detracts from value or results in safety, environmental or social standards below those adhered to by the Company and Sumitomo.

 

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NEWMONT MINING CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) (Continued)
(dollars in millions, except per share, per ounce and per pound amounts)
In the event of any future disputes under the Contract of Work or Operating Agreement, there can be no assurance that the Company would prevail in any such dispute and any termination of such contracts could result in substantial diminution in the value of the Company’s interests in PTNNT.
Effective as of January 1, 2011, the local government in the region where the Batu Hijau mine is located commenced the enforcement of local regulations that purport to require PTNNT to pay additional taxes based on revenue and the value of PTNNT’s contracts. In addition, the regulations purport to require PTNNT to obtain certain export-related documents from the regional government for purposes of shipping copper concentrate. PTNNT is required to and has obtained all export related-documents in compliance with the laws and regulations of the central government. PTNNT believes that the new regional regulations are not enforceable as they expressly contradict higher level Indonesian laws that set out the permissible taxes that can be imposed by a regional government and all effective export requirements. PTNNT’s position is supported by Indonesia’s Ministry of Energy & Mineral Resources, Ministry of Trade, and the provincial government. To date, PTNNT has not been forced to comply with these new contradictory regional regulations. On February 4, 2011, PTNNT filed legal proceedings seeking to have the regulations declared null and void because they conflict with the laws of Indonesia. Subsequently, the Ministry of Home Affairs issued a decree declaring these local regulations to be contrary to Indonesian law and thus unenforceable. Further disputes with the local government could arise in relation to these regulations. PTNNT intends to vigorously defend its position in this dispute.
PT Pukuafu Indah Litigation
In October 2009, PTPI filed a lawsuit in the Central Jakarta District Court against PTNNT and the Indonesian government seeking to cancel the March 2009 arbitration award pertaining to the manner in which divestiture of shares in PTNNT should proceed (refer to the discussion of PTNNT above for the arbitration results). On October 11, 2010, the District Court ruled in favor of PTNNT and the Indonesian government finding, among other things, that PTPI lacks standing to contest the validity of the arbitration award. PTPI has filed a notice of appeal of the court’s ruling.
Subsequent to its initial claim, PTPI filed numerous additional lawsuits, two of which have been withdrawn, against Newmont Indonesia Limited (“NIL”) and Nusa Tenggara Mining Corporation (“NTMC”), a subsidiary of Sumitomo, in the South Jakarta District Court. Fundamentally, the cases all relate to PTPI’s contention that it owns, or has rights to own, the shares in PTNNT that have or will be divested to fulfill the requirements of the PTNNT Contract of Work and the March 2009 arbitration award. PTPI also makes various other allegations, including alleged rights in or to the Company’s or Sumitomo’s non-divestiture shares in PTNNT, and PTPI asserts claims for significant damages allegedly arising from NIL’s and NTMC’s unlawful acts in transferring the divestiture shares to a third party. On November 30, 2010, the South Jakarta District Court rendered a decision in favor of PTPI in one of the cases which included an order that NIL/NTMC transfer 31% of PTNNT shares to PTPI and pay PTPI $26 in damages and certain monetary penalties. The order is not final and binding until the appeal process is completed. NIL and NTMC appealed the decision. On June 28, 2011, the South Jakarta District Court ruled in favor of NIL and NTMC in one of PTPI’s lawsuits contending that PTPI has rights in or to NIL’s and NTMC’s non-divestiture shares. In the Company’s view, this ruling further conflicts with the November 30, 2010 ruling finding that PTPI has rights in the divestiture shares. PTPI has filed a notice of appeal.
In January 2010, PTPI also filed a lawsuit against PTNNT’s President Director, Mr. Martiono Hadianto, alleging wrongful acts associated with the arbitration, including failure to properly share certain information. The South Jakarta District Court issued a decision partially in favor of PTPI against the PTNNT President Director, requiring the production of arbitration documents. The PTNNT President Director has appealed the decision which is nonbinding until the appeal process is completed.
Newmont, Sumitomo and PTNNT’s management believe that all of PTPI’s claims in these matters are without merit and constitute a material breach of a written release agreement executed by PTPI in 2009, in which it and its shareholders committed to cease prosecution of all then-pending lawsuits and not to initiate new proceedings, in conjunction with Newmont’s provision of financing to PTPI in late 2009.

 

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NEWMONT MINING CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) (Continued)
(dollars in millions, except per share, per ounce and per pound amounts)
In August 2010, NIL and NVL USA Limited (“NVL”) commenced an arbitration against PTPI in the Singapore International Arbitration Centre, as provided in relevant financing agreements, seeking declarations that PTPI has violated the release agreement by failing to dismiss its Indonesian lawsuits, that PTPI is in breach of the November 2009 loan facility and related agreements, and that NIL and NVL are entitled to damages arising from PTPI’s and its shareholders’ conduct.
On October 1, 2010, NIL and NVL requested, based upon the release agreement, that the arbitral tribunal issue an interim order requiring PTPI and its shareholders to discontinue the various Indonesian court proceedings and refrain from bringing additional lawsuits. On October 15, 2010, the tribunal issued an order granting NIL and NVL’s request. The order of the tribunal restrains PTPI and its agents from “proceeding with or continuing with or assisting or participating in the prosecution of the Indonesian [s]uits” and from commencing additional proceedings relating to the same subject matter as the Indonesian lawsuits. NIL and NVL are in the process of enforcing the interim award in Indonesian and Singapore courts but it is not known the extent to which the courts will enforce the award or whether PTPI and its shareholders will, in any event, abide by the award and any related court orders. PTPI and its shareholders have commenced proceedings in Singapore court to contest enforcement of the interim award.
On April 7, 2011, the arbitral tribunal issued a final award, while keeping the proceedings open to allow NIL and NVL to seek further relief as necessary, finding PTPI and its shareholders in breach of various provisions of the financing agreements, including the release agreement. The tribunal, for the second time, ordered PTPI and its agents to restrain from proceeding with the Indonesian lawsuits or filing new lawsuits relating to the same subject matter. In addition, the tribunal ordered PTPI and other shareholder defendants, collectively, to pay more than $11 in damages, costs and expenses. The Company has aggressively sought enforcement of the interim award and will continue to do so with regard to the April 7, 2011 award in Indonesian and Singapore courts.
The Company intends to continue vigorously defending the PTPI lawsuits and pursuing its claims against PTPI.
NWG Investments Inc. v. Fronteer Gold, Inc.
In April 2011, Newmont acquired Fronteer Gold Inc. (“Fronteer”). Fronteer has been named as a defendant in a lawsuit filed in New York State Supreme Court by NWG Investments Inc. (“NWG”).
Fronteer acquired NewWest Gold Corporation (“NewWest Gold”) in September 2007. At the time of that acquisition, NWG owned approximately 86% of NewWest Gold and an individual named Jacob Safra owned or controlled 100% of NWG. Prior to its acquisition of NewWest Gold, Fronteer entered into a June 2007 lock-up agreement with NWG providing that, among other things, NWG would support Fronteer’s acquisition of NewWest Gold. At that time, Fronteer owned approximately 42% of Aurora Energy Resources Inc. (“Aurora”), which, among other things, had a uranium exploration project in Labrador, Canada.
NWG contends that, during the negotiations leading up to the lock-up agreement, Fronteer represented to NWG that Aurora would commence uranium mining in Labrador by 2013, that this was a firm date, that Fronteer was not aware of any obstacle to doing so, that Aurora faced no serious environmental issues in Labrador and that Aurora’s competitors faced greater delays in commencing uranium mining. NWG further contends that it entered into the lock-up agreement and agreed to support Fronteer’s acquisition of NewWest Gold in reliance upon these purported representations. On October 11, 2007, less than three weeks after the Fronteer-NewWest Gold transaction closed, a member of the Nunatsiavut Assembly introduced a motion calling for the adoption of a moratorium on uranium mining in Labrador. On April 8, 2008, the Nunatsiavut Assembly adopted a three-year moratorium on uranium mining in Labrador. NWG contends that Fronteer was aware during the negotiations of the NWG/Fronteer lock-up agreement that the Nunatsiavut Assembly planned on adopting this moratorium and that its adoption would preclude Aurora from commencing uranium mining by 2013, but Fronteer nonetheless fraudulently induced NWG to enter into the lock-up agreement.
NWG has not yet filed or served a complaint upon Fronteer or Newmont. Newmont intends to defend this matter, but cannot reasonably predict the outcome.

 

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NEWMONT MINING CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) (Continued)
(dollars in millions, except per share, per ounce and per pound amounts)
Other Commitments and Contingencies
Tax contingencies are provided for in accordance with ASC income tax guidance (see Note 10).
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 $28 in 2011, $28 in 2012 through 2015 and $251 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 June 30, 2011 and December 31, 2010, there were $1,365 and $1,191, 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 assets and will remain outstanding until closure. Generally, bonding requirements associated with environmental regulation are becoming more restrictive. However, the Company 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.
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.
NOTE 29 SUPPLEMENTARY DATA
Ratio of Earnings to Fixed Charges
The ratio of earnings to fixed charges for the six months ended June 30, 2011 was 12.9. The ratio of earnings to fixed charges represents income before income and mining tax expense, equity income (loss) of affiliates, loss from discontinued operations and net income attributable to noncontrolling interests, 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.

 

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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,” the “Company,” “our” and “we”). We use certain non-GAAP financial performance measures in our MD&A. For a detailed description of each of the non-GAAP financial measures used in this MD&A, please see the discussion under “Non-GAAP Financial Performance Measures” beginning on page 60. References to “A$” refer to Australian currency, “C$” to Canadian currency, “NZ$” to New Zealand currency and “$” 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. Additionally, the following discussion and analysis should be read in conjunction with Management’s Discussion and Analysis of Consolidated Financial Condition and Results of Operations and the consolidated financial statements included in Part II of our Annual Report on Form 10-K for the year ended December 31, 2010 filed February 24, 2011.
Overview
Newmont is one of the world’s largest gold producers and is the only gold company included in the S&P 500 Index and Fortune 500, and was the first gold company included in the Dow Jones Sustainability Index-World. We are also engaged in the exploration for and acquisition of gold and gold/copper properties. We have significant assets and/or operations in the United States, Australia, Peru, Indonesia, Ghana, Canada, New Zealand and Mexico.
Our vision is to be the most valued and respected mining company through industry leading performance. We remain focused on progressing the development of our next generation of mining projects. Approximately 40% of our 2011 capital expenditures will be invested in these projects and the development of our project pipeline, as we continue to deliver solid leverage to the gold price. Second quarter 2011 highlights are included below and discussed further in Results of Consolidated Operations.
Delivered strong operating performance
    Attributable gold production of 1.2 million and 2.6 million ounces for the second quarter and first half of 2011, respectively, compared to 1.3 million and 2.6 million ounces for the same periods in 2010;
    Consolidated Costs applicable to sales of $583 and $570 per ounce, for the second quarter and first half of 2011, respectively, compared to $485 and $481 per ounce for the same periods in 2010;
    Attributable copper production of 44 million and 101 million pounds for the second quarter and first half of 2011, respectively, compared to 80 million and 170 million pounds for the same periods in 2010;
    Consolidated Costs applicable to sales of $1.34 and $1.21 per pound, for the second quarter and first half of 2011, respectively, compared to $0.77 and $0.78 per pound for the same periods in 2010;
    Sales of $2,384 and $4,849 for the second quarter and first half of 2011, respectively, an increase of 11% and 10% over the same periods in 2010;
    Average realized gold price of $1,501 and $1,440 per ounce for the second quarter and first half of 2011, respectively, compared to $1,200 and $1,152 per ounce for the same periods in 2010;
    Average realized copper price of $3.78 and $3.91 per pound for the second quarter and first half of 2011, respectively, compared to $2.33 and $2.87 per pound for the same periods in 2010; and
    Maintaining 2011 Outlook for attributable gold and copper production, costs applicable to sales and capital expenditures.

 

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Advancing our project pipeline
We previously disclosed our comprehensive plan for the development of our current portfolio of assets to potentially increase annual attributable gold production to approximately 7 million ounces by 2017. This production target represents an aggregate increase of approximately 35% from our current 2011 attributable gold production outlook of 5.1 to 5.3 million ounces. A progress update on the advancement of some of our projects follows:
Conga, Peru — We continue to advance additional drilling, engineering, procurement of long lead items, early infrastructure works and securing remaining permits needed for construction. Full funds approval by the Board of Directors (the “Board”) was received on July 27, 2011. If all permits are secured, first production is expected in late 2014 to early 2015 with approximately six months for ramp-up to commercial production. We expect annual estimated attributable production of approximately 300,000 to 350,000 gold ounces (at Costs applicable to sales of $400 to $450 per ounce) and 80 to 120 million copper pounds (at Costs applicable to sales of $1.25 to $1.75 per pound) per year for the first five years with a life of mine of approximately 19 years. Capital costs are estimated at $4,000 to $4,800 ($2,000 to $2,400 attributable to Newmont). At December 31, 2010 we reported 6.1 million attributable ounces of gold reserves and 1.7 billion pounds of copper reserves at Conga.
Akyem, Ghana — Board approval was obtained in the first quarter of 2011 and project and contractor teams continue to mobilize. We are completing detailed engineering and continue with the procurement of long lead items. We expect first production to begin in late 2013 or early 2014 with approximately three months for ramp-up to commercial production. Gold production is expected to be approximately 350,000 to 450,000 ounces (at Costs applicable to sales of $450 to $550 per ounce) per year for the first five years. Capital costs are estimated at $950 — $1,100. At December 31, 2010 we had 7.2 million ounces of gold reserves at Akyem.
Hope Bay, Canada — Hope Bay is a Canadian Arctic greenstone district with a strike length of 80 kilometers by 20 kilometers. Early stage exploration has identified numerous targets in the district and the 2009/2010 drilling programs have continued to support our view of the approximately 10 million ounce resource potential. Diamond drill operations are ongoing in 2011 with an expanded drill program of approximately 95 kilometers. An exploration decline at Doris North commenced in late 2010 and current development continues in favorable ground conditions. The decline should reach an ore face in the third quarter of 2011.
Long Canyon, Nevada — We completed the acquisition of Fronteer Gold, Inc. on April 6, 2011 and control the discovery of what we expect could be another Carlin-type trend at Long Canyon. We have commenced an initial 40 kilometer drilling program expected to be completed in 2011. Our intention is to bring the project into production in 2017 with initial estimated gold production of approximately 300,000 ounces per year.
Gold price-linked dividend
Our gold price-linked dividend policy contemplates a quarterly dividend based on our average realized gold price for the preceding quarter. Under the policy, unless otherwise determined by the Board, the dividend will be calculated based upon the average realized gold price during the preceding quarter (subject to certain adjustments) in the manner contemplated by the table below:
                 
            Associated  
Prior Quarter           Annualized  
Average Realized   Associated Quarterly     Equivalent Payout/  
Gold Price   Dividend Payout/share     share  
$1,100 – $1,199
  $ 0.10     $ 0.40  
$1,200 – $1,299
  $ 0.15     $ 0.60  
$1,300 – $1,399
  $ 0.20     $ 0.80  
$1,400 – $1,499
  $ 0.25     $ 1.00  
$1,500 – $1,599
  $ 0.30     $ 1.20  
$1,600 – $1,699
  $ 0.35     $ 1.40  
$1,700 – $1,799
  $ 0.40     $ 1.60  

 

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As noted above, the quarterly payout is anticipated to increase at a rate of $0.05 per share for each $100 per ounce rise in the average realized gold price for the preceding quarter. The third quarter 2011 dividend under this policy of $0.30 per share (based on a second quarter 2011 average realized gold price of $1,501 per ounce) represents an increase of 50% over the $0.20 dividend paid in the second quarter of 2011, and an increase of 100% over the third of quarter 2010 dividend. This dividend policy is intended as a non-binding guideline which will be periodically reviewed and reassessed by the Board. The declaration and payment of future dividends remains at the discretion of the Board and will depend on the Company’s financial results, cash requirements, future prospects and other factors deemed relevant by the Board.
Selected Financial and Operating Results
                                 
    Three Months Ended June 30,     Six Months Ended June 30,  
    2011     2010     2011     2010  
Sales
  $ 2,384     $ 2,153     $ 4,849     $ 4,395  
Income from continuing operations
  $ 660     $ 537     $ 1,330     $ 1,280  
Net income
  $ 524     $ 537     $ 1,194     $ 1,280  
Net income attributable to Newmont stockholders
  $ 387     $ 382     $ 901     $ 928  
 
                               
Per common share, basic:
                               
Income from continuing operations attributable to Newmont stockholders
  $ 1.06     $ 0.78     $ 2.10     $ 1.89  
Net income attributable to Newmont stockholders
  $ 0.78     $ 0.78     $ 1.82     $ 1.89  
 
                               
Adjusted net income (1)
  $ 445     $ 377     $ 958     $ 786  
Adjusted net income per share (1)
  $ 0.90     $ 0.77     $ 1.94     $ 1.60  
 
                               
Consolidated gold ounces (thousands)
                               
Produced (2)
    1,398       1,557       2,914       3,173  
Sold
    1,391       1,546       2,869       3,127  
 
                               
Consolidated copper pounds (millions)
                               
Produced (3)
    74       148       176       307  
Sold
    79       128       184       275  
 
                               
Average price received, net:
                               
Gold (per ounce)
  $ 1,501     $ 1,200     $ 1,440     $ 1,152  
Copper (per pound)
  $ 3.78     $ 2.33     $ 3.91     $ 2.87  
 
                               
Costs applicable to sales:
                               
Gold (per ounce)
  $ 583     $ 485     $ 570     $ 481  
Copper (per pound)
  $ 1.34     $ 0.77     $ 1.21     $ 0.78  
     
(1)   See “Non-GAAP Financial Measures” on page 60.
 
(2)   Contained basis (Attributable production after smelter recoveries were 1,223 and 1,292 thousand gold ounces for second quarter 2011 and 2010, respectively. Attributable production after smelter recoveries were 2,561 and 2,619 thousand gold ounces for first half 2011 and 2010, respectively).
 
(3)   Contained basis (Attributable production after smelter recoveries were 43 and 77 million copper pounds for second quarter 2011 and 2010, respectively. Attributable production after smelter recoveries were 97 and 163 million copper pounds for first half 2011 and 2010, respectively).
Consolidated Financial Results
Net income attributable to Newmont stockholders for the second quarter of 2011 was $387 ($0.78 per share) compared to $382 ($0.78 per share) for the second quarter of 2010. Results for the second quarter of 2011 compared to the second quarter of 2010 were impacted by higher realized gold and copper prices, lower income taxes and a gain on sale of marketable securities, mostly offset by lower sales volumes, higher production costs, a $136 Loss from discontinued operations and costs related to the acquisition of Fronteer Gold, Inc. Net income attributable to Newmont stockholders for the first half of 2011 was $901 ($1.82 per share) compared to $928 ($1.89 per share) for the first half of 2010. Results for the first half of 2011 compared to the first half of 2010 were impacted by lower sales volumes, higher production costs and income taxes, a $136 Loss from discontinued operations and acquisition related expenses, partially offset by higher realized gold and copper prices.

 

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Gold Sales increased 13% and 15% in the second quarter and first half of 2011, respectively, compared to the same periods in 2010 due to higher realized prices, partially offset by decreased sales volumes. The following analysis summarizes the change in consolidated gold sales:
                                 
    Three Months Ended June 30,     Six Months Ended June 30,  
    2011     2010     2011     2010  
Consolidated gold sales:
                               
Gross before provisional pricing
  $ 2,089     $ 1,845     $ 4,139     $ 3,604  
Provisional pricing mark-to-market gain
    10       20       18       22  
 
                       
Gross after provisional pricing
    2,099       1,865       4,157       3,626  
Less: Treatment and refining charges
    (11 )     (10 )     (26 )     (23 )
 
                       
Net
  $ 2,088     $ 1,855     $ 4,131     $ 3,603  
 
                       
Consolidated gold ounces sold (thousands):
    1,391       1,546       2,869       3,127  
Average realized gold price (per ounce):
                               
Gross before provisional pricing
  $ 1,502     $ 1,193     $ 1,443     $ 1,152  
Provisional pricing mark-to-market gain
    7       13       6       7  
 
                       
Gross after provisional pricing
    1,509       1,206       1,449       1,159  
Less: Treatment and refining charges
    (8 )     (6 )     (9 )     (7 )
 
                       
Net
  $ 1,501     $ 1,200     $ 1,440     $ 1,152  
 
                       
The change in consolidated gold sales is due to:
                 
    Three Months Ended     Six Months Ended  
    June 30,     June 30,  
    2011 vs. 2010     2011 vs. 2010  
Decrease in consolidated ounces sold
  $ (187 )   $ (299 )
Increase in average realized gold price
    421       830  
Increase in treatment and refining charges
    (1 )     (3 )
 
           
 
  $ 233     $ 528  
 
           

 

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Copper Sales decreased 1% and 9% in the second quarter and first half of 2011, respectively, compared to the same periods in 2010 due to decreased sales volumes, mostly offset by higher realized prices. The following analysis summarizes the change in consolidated copper sales:
                                 
    Three Months Ended June 30,     Six Months Ended June 30,  
    2011     2010     2011     2010  
Consolidated copper sales:
                               
Gross before provisional pricing
  $ 330     $ 401     $ 791     $ 894  
Provisional pricing mark-to-market loss
    (16 )     (79 )     (28 )     (48 )
 
                       
Gross after provisional pricing
    314       322       763       846  
Less: Treatment and refining charges
    (18 )     (24 )     (45 )     (54 )
 
                       
Net
  $ 296     $ 298     $ 718     $ 792  
 
                       
Consolidated copper pounds sold (millions)
    79       128       184       275  
Average realized copper price (per pound):
                               
Gross before provisional pricing
  $ 4.22     $ 3.13     $ 4.31     $ 3.24  
Provisional pricing mark-to-market loss
    (0.21 )     (0.62 )     (0.16 )     (0.17 )
 
                       
Gross after provisional pricing
    4.01       2.51       4.15       3.07  
Less: Treatment and refining charges
    (0.23 )     (0.18 )     (0.24 )     (0.20 )
 
                       
Net
  $ 3.78     $ 2.33     $ 3.91     $ 2.87  
 
                       
The change in consolidated copper sales is due to:
                 
    Three Months Ended     Six Months Ended  
    June 30,     June 30,  
    2011 vs. 2010     2011 vs. 2010  
Decrease in consolidated pounds sold
  $ (127 )   $ (282 )
Increase in average realized copper price
    119       199  
Decrease in treatment and refining charges
    6       9  
 
           
 
  $ (2 )   $ (74 )
 
           

 

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The following is a summary of consolidated gold and copper sales, net:
                                 
    Three Months Ended June 30,     Six Months Ended June 30,  
    2011     2010     2011     2010  
Gold
                               
North America:
                               
Nevada
  $ 529     $ 505     $ 1,111     $ 972  
La Herradura
    81       53       146       97  
 
                       
 
    610       558       1,257       1,069  
 
                       
 
                               
South America:
                               
Yanacocha
    524       425       886       885  
 
                               
Asia Pacific:
                               
Boddington
    269       234       501       401  
Batu Hijau
    92       170       232       335  
Other Australia/New Zealand
    375       308       790       622  
 
                       
 
    736       712       1,523       1,358  
 
                       
 
                               
Africa:
                               
Ahafo
    218       160       465       291  
 
                       
 
    2,088       1,855       4,131       3,603  
 
                       
 
                               
Copper
                               
Asia Pacific:
                               
Batu Hijau
    242       258       611       713  
Boddington
    54       40       107       79  
 
                       
 
    296       298       718       792  
 
                       
 
  $ 2,384     $ 2,153     $ 4,849     $ 4,395  
 
                       
Costs applicable to sales for gold increased in the second quarter and first half of 2011 compared to the same periods in 2010 due to higher waste mining activities, higher milling, labor and royalty costs, higher diesel prices and a stronger Australian dollar, partially offset by higher by-product credits and lower workers’ participation costs. Costs applicable to sales for copper increased in the second quarter and first half of 2011 compared to the same periods in 2010 due to higher waste mining costs at Batu Hijau and higher mill maintenance costs at Boddington, partially offset by lower production at Batu Hijau and higher by-product credits. For a complete discussion regarding variations in operations, see Results of Consolidated Operations below.
Amortization increased in the second quarter of 2011 compared to the second quarter of 2010 due to higher mine development and asset retirement costs at Yanacocha and higher mine development costs at Other Australia/New Zealand, partially offset by lower production at Nevada. Amortization increased in the first half of 2011 compared to the first half of 2010 due to higher mine development and asset retirement costs at Yanacocha and higher mine development costs at Other Australia/New Zealand, partially offset by lower production from Batu Hijau. We continue to expect Amortization to be approximately $1,025 to $1,035 in 2011.

 

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The following is a summary of Costs applicable to sales and Amortization by operation:
                                                                 
    Costs Applicable                     Costs Applicable        
    to Sales     Amortization     to Sales     Amortization  
    Three Months Ended     Three Months Ended     Six Months Ended     Six Months Ended  
    June 30,     June 30,     June 30,     June 30,  
    2011     2010     2011     2010     2011     2010     2011     2010  
Gold
                                                               
North America:
                                                               
Nevada
  $ 224     $ 246     $ 56     $ 64     $ 496     $ 497     $ 128     $ 126  
La Herradura
    27       19       5       5       45       32       9       8  
 
                                               
 
    251       265       61       69       541       529       137       134  
 
                                                               
South America:
                                                               
Yanacocha
    190       139       66       40       343       293       119       77  
Asia Pacific:
                                                               
Boddington
    117       113       31       34       217       193       59       56  
Batu Hijau
    30       42       7       12       64       76       14       22  
Other Australia/New Zealand
    158       136       31       24       324       293       66       56  
 
                                               
 
    305       291       69       70       605       562       139       134  
 
                                                               
Africa:
                                                               
Ahafo
    65       55       20       19       145       119       42       36  
 
                                               
 
    811       750       216       198       1,634       1,503       437       381  
 
                                                               
Copper
                                                               
Asia Pacific:
                                                               
Batu Hijau
    79       73       18       19       168       165       38       46  
Boddington
    27       25       7       6       55       49       14       13  
 
                                               
 
    106       98       25       25       223       214       52       59  
 
                                                               
Other
                                                               
Hope Bay
                4       3                   7       6  
Asia Pacific
                      1                   1       1  
Corporate and other
                5       4                   9       8  
 
                                               
 
                9       8                   17       15  
 
                                               
 
  $ 917     $ 848     $ 250     $ 231     $ 1,857     $ 1,717     $ 506     $ 455  
 
                                               
Exploration expense increased $36 in the second quarter of 2011 compared to the second quarter of 2010 due to additional near mine expenditures in all regions, with the largest increases in Nevada and Africa. Exploration expense increased $55 in the first half of 2011 compared to the first half of 2010 due to additional near mine expenditures in all regions, with the largest increases in Nevada, Africa and Australia. We continue to expect Exploration expense to be approximately $335 to $345 in 2011.

 

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Advanced projects, research and development expense in the second quarter and first half of 2011 and 2010 are summarized as follows:
                                 
    Three Months Ended June 30,     Six Months Ended June 30,  
    2011     2010     2011     2010  
Hope Bay
  $ 41     $ 25     $ 79     $ 35  
Conga
    5       2       6       3  
Akyem
    1       1       1       4  
Technical and project services
    18       11       33       23  
Corporate
    6       9       9       21  
Other
    15       9       26       17  
 
                       
 
  $ 86     $ 57     $ 154     $ 103  
 
                       
We continue to expect Advanced projects, research and development expenses to be approximately $405 to $415 in 2011.
General and administrative expenses increased by $7 for both the second quarter and first half of 2011 compared to the same periods of 2010 due to higher compensation and benefit costs. We continue to expect General and administrative expenses to be approximately $190 to $200 in 2011.
Other expense, net increased by $26 in the second quarter of 2011 compared to the second quarter of 2010 mainly due to Fronteer acquisition costs. Other expense, net increased by $10 in the first half of 2011 compared to the first half of 2010 due to the Indonesian value added tax settlement and Fronteer acquisition costs, partially offset by lower community development costs in 2011.
Other income, net increased by $4 in the second quarter of 2011 compared to the second quarter of 2010 due to the sale of our investment in New Gold, Inc., partially offset by foreign currency exchange losses and a decrease in Canadian Oil Sands dividends. Other income, net decreased by $13 in the first half of 2011 compared to the first half of 2010 due to the sale of non-core assets in 2010, foreign currency exchange losses and a decrease in Canadian Oil Sands dividends, partially offset by the sale of our investment in New Gold, Inc.
Interest expense, net decreased by $6 and $16 in the second quarter and first half of 2011, respectively, compared to the same periods in 2010 due to the prepayment of the Yanacocha senior notes and credit facility in 2010 and higher capitalized interest. Capitalized interest increased by $6 and $10 in the second quarter and first half of 2011, respectively, compared to the same periods in 2010 due to higher capitalized costs related to the advancement of our project pipeline. We continue to expect Interest expense, net to be approximately $235 to $245 in 2011.
Income and mining tax expense during the second quarter of 2011 was $187 resulting in an effective tax rate of 22%. Income and mining tax expense during the second quarter of 2010 was $283 for an effective tax rate of 34%. The lower effective rate in 2011 resulted from the conversion of non-US tax-paying entities to entities currently subject to U.S. income tax and the change in the jurisdictional blend of our taxable income and the effect it has on the overall rate impact from percentage depletion. Income and mining tax expense during the first half of 2011 was $492 resulting in an effective tax rate of 27%. Income tax expense during the first half of 2010 was $424 for an effective tax rate of 25%. In the first half of 2010, a tax benefit of $127 was recorded in connection with conversion of non-U.S. tax-paying entities to entities currently subject to U.S. income tax resulting in an increase in net deferred tax assets. The effective tax rates are different from the United States statutory rate of 35% primarily due to the above mentioned tax benefits and U.S. percentage depletion. For a complete discussion of the factors that influence our effective tax rate, see Management’s Discussion and Analysis of Consolidated Financial Condition and Results of Operations in Newmont’s Annual Report on Form 10-K for the year ended December 31, 2010 filed February 24, 2011. We expect the 2011 tax rate to be approximately 26% to 30%, assuming an average realized gold price of $1,450 per ounce.
Net income attributable to noncontrolling interests decreased to $137 in the second quarter of 2011 compared to $155 in the second quarter of 2010 as a result of decreased earnings at Batu Hijau, partially offset by increased earnings at Yanacocha. Net income attributable to noncontrolling interests decreased to $293 in the first half of 2011 compared to $352 in the first half of 2010 as a result of decreased earnings at Batu Hijau and Yanacocha.
Loss from discontinued operations includes the accrual of St. Andrew Goldfields Ltd.’s Holt property royalty in the second quarter of 2011. In 2009, the Superior Court issued a decision finding Newmont Canada Corporation (“Newmont Canada”) liable for a sliding scale royalty on production from the Holt property, which Newmont Canada appealed. In May 2011, the Ontario Court of Appeal upheld the Superior Court ruling resulting in a $136 charge, net of tax benefits of $7.

 

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Results of Consolidated Operations
                                                 
    Gold or Copper Produced(1)     Costs Applicable to Sales(2)     Amortization  
    2011     2010     2011     2010     2011     2010  
    (ounces in thousands)     ($ per ounce)     ($ per ounce)  
Three Months Ended June 30,
                                               
Gold
                                               
North America
    410       463     $ 620     $ 570     $ 151     $ 149  
South America
    342       353       545       389       187       113  
Asia Pacific
    500       609       620       491       141       119  
Africa
    146       132       446       416       138       147  
 
                                   
Total/Weighted-Average
    1,398       1,557     $ 583     $ 485     $ 155     $ 129  
 
                                   
Attributable to Newmont(3)(4)
    1,228       1,298     $ 588     $ 507                  
 
                                       
Net Attributable to Newmont(4)
                  $ 499     $ 426                  
 
                                           
                                                 
    (pounds in millions)     ($ per pound)     ($ per pound)  
Copper
                                               
Asia Pacific
    74       148     $ 1.34     $ 0.77     $ 0.33     $ 0.20  
 
                                   
Attributable to Newmont(4)
    44       80     $ 1.41     $ 0.86                  
 
                                       
                                                 
    Gold or Copper Produced(1)     Costs Applicable to Sales(2)     Amortization  
    2011     2010     2011     2010     2011     2010  
    (ounces in thousands)     ($ per ounce)     ($ per ounce)  
Six Months Ended June 30,
                                               
Gold
                                               
North America
    892       936     $ 619     $ 573     $ 157     $ 145  
South America
    630       776       561       380       194       100  
Asia Pacific
    1,060       1,209       570       475       131       113  
Africa
    332       252       449       475       129       146  
 
                                   
Total/Weighted-Average
    2,914       3,173     $ 570     $ 481     $ 152     $ 122  
 
                                   
Attributable to Newmont(4)(5)
    2,570       2,630     $ 575     $ 506                  
 
                                       
Net Attributable to Newmont(4)
                  $ 467     $ 385                  
 
                                           
                                                 
    (pounds in millions)     ($ per pound)     ($ per pound)  
Copper
                                               
Asia Pacific
    176       307     $ 1.21     $ 0.78     $ 0.28     $ 0.21  
 
                                   
Attributable to Newmont(4)
    101       170     $ 1.32     $ 0.88                  
 
                                       
     
(1)   Contained basis (Attributable production after smelter recoveries were 1,223 and 1,292 thousand gold ounces and 43 and 77 million copper pounds for second quarter 2011 and 2010, respectively. Attributable production after smelter recoveries were 2,561 and 2,619 thousand gold ounces and 97 and 163 million copper pounds for first half 2011 and 2010, respectively.)
 
(2)   Excludes Amortization and Reclamation and remediation.
 
(3)   Includes 18 and 4 thousand ounces in 2011 from our non-consolidated interests in La Zanja and Duketon, respectively.
 
(4)   See Non-GAAP Financial Measures on page 60.
 
(5)   Includes 30 and 8 thousand ounces in 2011 from our non-consolidated interests in La Zanja and Duketon, respectively.
Second quarter 2011 compared to 2010
Consolidated gold production decreased 10% due to processing lower grade stockpiles at Batu Hijau and lower grade ore at Nevada, partially offset by higher production from Boddington and Africa. Consolidated copper production decreased 50% due to processing lower grade stockpiles at Batu Hijau.
Costs applicable to sales per consolidated gold ounce sold increased 20% due to lower production from Batu Hijau, Yanacocha and Nevada, higher waste mining, milling, labor and royalty costs and a stronger Australian dollar, net of hedging gains, partially offset by higher by-product credits and lower workers’ participation costs. Costs applicable to sales per consolidated copper pound sold increased 74% due to lower production at Batu Hijau.
Amortization increased 20% per consolidated gold ounce sold and 65% per consolidated copper pound sold due to lower production and higher mine development and asset retirement costs.

 

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First half 2011 compared to 2010
Consolidated gold production decreased 8% due to processing lower grade stockpiles at Batu Hijau, lower grade ore at Nevada and lower leach production from South America, partially offset by higher production from Africa, Boddington and La Herradura. Consolidated copper production decreased 43% due to processing lower grade stockpiles at Batu Hijau.
Costs applicable to sales