Table of Contents

 

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D. C. 20549

 

 

Form 10-Q

 

 

(Mark One)

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

For the Quarterly Period Ended March 31, 2014

or

 

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

For the transition period from                      to                     

Commission File Number: 001-31240

 

 

 

NEWMONT MINING CORPORATION

(Exact name of registrant as specified in its charter)

 

 

 

Delaware		84-1611629
(State or Other Jurisdiction of Incorporation or Organization)		(I.R.S. Employer Identification No.)
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.    x  Yes    ¨  No

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§ 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).    x  Yes    ¨  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		x		Accelerated filer		¨
Non-accelerated filer		¨  (Do not check if a smaller reporting company.)		Smaller reporting company		¨

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

There were 498,529,240 shares of common stock outstanding on April 16, 2014.

 

 

 

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Table of Contents

TABLE OF CONTENTS

 

				Page
		PART I
ITEM 1.		FINANCIAL STATEMENTS			1
		Condensed Consolidated Statements of Income			1
		Condensed Consolidated Statements of Comprehensive Income			2
		Condensed Consolidated Statements of Cash Flows			3
		Condensed Consolidated Balance Sheets			4
		Notes to Condensed Consolidated Financial Statements			5
ITEM 2.		MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS			41
		Overview			41
		Selected Financial and Operating Results			43
		Consolidated Financial Results			44
		Results of Consolidated Operations			49
		Liquidity and Capital Resources			54
		Environmental			57
		Accounting Developments			57
		Non-GAAP Financial Measures			58
		Safe Harbor Statement			64
ITEM 3.		QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK			65
ITEM 4.		CONTROLS AND PROCEDURES			67
		PART II
ITEM 1.		LEGAL PROCEEDINGS			68
ITEM 1A.		RISK FACTORS			68
ITEM 2.		ISSUER PURCHASES OF EQUITY SECURITIES			68
ITEM 3.		DEFAULTS UPON SENIOR SECURITIES			68
ITEM 4.		MINE SAFETY DISCLOSURES			68
ITEM 5.		OTHER INFORMATION			69
ITEM 6.		EXHIBITS			69
SIGNATURES					70
EXHIBIT INDEX					71

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PART I—FINANCIAL INFORMATION

 

ITEM 1.

FINANCIAL STATEMENTS.

NEWMONT MINING CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF INCOME

(unaudited, in millions except per share)

 

		Three Months Ended March 31,
		2014				2013
Sales (Note 4)		$	1,764			$	2,188
Costs and expenses
Costs applicable to sales (1) (Note 4)			1,083				1,057
Amortization (Note 4)			298				267
Reclamation and remediation (Note 5)			20				18
Exploration			34				59
Advanced projects, research and development			42				52
General and administrative			45				56
Other expense, net (Note 6)			52				100
			1,574				1,609
Other income (expense)
Other income, net (Note 7)			46				26
Interest expense, net			(93	)			(65	)
			(47	)			(39	)
Income before income and mining tax and other items			143				540
Income and mining tax expense (Note 8)			(78	)			(180	)
Equity income (loss) of affiliates			—				(4	)
Income from continuing operations			65				356
Income (loss) from discontinued operations (Note 9)			(17	)			—
Net income			48				356
Net loss (income) attributable to noncontrolling interests (Note 10)			52				(42	)
Net income attributable to Newmont stockholders		$	100			$	314
Net income (loss) attributable to Newmont stockholders:
Continuing operations		$	117			$	314
Discontinued operations			(17	)			—
		$	100			$	314
Income (loss) per common share (Note 11)
Basic:
Continuing operations		$	0.23			$	0.63
Discontinued operations			(0.03	)			—
		$	0.20			$	0.63
Diluted:
Continuing operations		$	0.23			$	0.63
Discontinued operations			(0.03	)			—
		$	0.20			$	0.63
Cash dividends declared per common share		$	0.150			$	0.425

  

 

(1)	Excludes Amortization and Reclamation and remediation.

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

 

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NEWMONT MINING CORPORATION

STATEMENTS OF CONDENSED CONSOLIDATED COMPREHENSIVE INCOME (LOSS)

(unaudited, in millions)

 

		Three Months Ended March 31,
		2014				2013
		(in millions)
Net income		$	48			$	356
Other comprehensive income (loss):
Unrealized gain(loss) on marketable securities, net of $(1) and $38 tax benefit (expense), respectively			(31	)			(52	)
Foreign currency translation adjustments			(5	)			(12	)
Change in pension and other post-retirement benefits, net of $1 and $3 tax expense, respectively			2				5
Change in fair value of cash flow hedge instruments, net of $4 and $15 tax benefit (expense), respectively
Net change from periodic revaluations			9				21
Net amount reclassified to income			—				(24	)
Net unrecognized (loss) gain on derivatives			9				(3	)
Other comprehensive income (loss)			(25	)			(62	)
Comprehensive income		$	23			$	294
Comprehensive income attributable to:
Newmont stockholders		$	77			$	253
Noncontrolling interests			(54	)			41
		$	23			$	294

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

 

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NEWMONT MINING CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(unaudited, in millions)

 

		Three Months Ended March 31,
		2014				2013
Operating activities:
Net income		$	48			$	356
Adjustments:
Amortization			298				267
Stock based compensation and other non-cash benefits			13				19
Reclamation and remediation			20				18
Loss (income) from discontinued operations			17				—
Impairment of marketable securities			1				4
Deferred income taxes			35				(11	)
Gain on asset and investment sales, net			(50	)			(1	)
Other operating adjustments and write-downs			151				74
Net change in operating assets and liabilities (Note 24)			(350	)			(287	)
Net cash provided from continuing operations			183				439
Net cash used in discontinued operations			(3	)			(6	)
Net cash provided from operations			180				433
Investing activities:
Additions to property, plant and mine development			(235	)			(510	)
Acquisitions, net			(28	)			(8	)
Sale of marketable securities			25				1
Purchases of marketable securities			(1	)			(1	)
Proceeds from sale of other assets			70				25
Other			(9	)			(14	)
Net cash used in investing activities			(178	)			(507	)
Financing activities:
Proceeds from debt, net			3				80
Proceeds from stock issuance, net			—				1
Sale of noncontrolling interests			—				32
Acquisition of noncontrolling interests			(2	)			(6	)
Dividends paid to common stockholders			(77	)			(211	)
Other			(4	)			(1	)
Net cash provided from (used in) financing activities			(80	)			(105	)
Effect of exchange rate changes on cash			(2	)			(4	)
Net change in cash and cash equivalents			(80	)			(183	)
Cash and cash equivalents at beginning of period			1,555				1,561
Cash and cash equivalents at end of period		$	1,475			$	1,378

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 March 31,				At December 31,
		2014				2013
ASSETS
Cash and cash equivalents		$	1,475			$	1,555
Trade receivables			206				230
Accounts receivable			319				252
Investments (Note 16)			83				78
Inventories (Note 17)			814				717
Stockpiles and ore on leach pads (Note 18)			760				805
Deferred income tax assets			239				246
Other current assets (Note 19)			1,351				1,006
Current assets			5,247				4,889
Property, plant and mine development, net			14,138				14,277
Investments (Note 16)			393				439
Stockpiles and ore on leach pads (Note 18)			2,723				2,680
Deferred income tax assets			1,416				1,473
Other long-term assets (Note 19)			881				849
Total assets		$	24,798			$	24,607
LIABILITIES
Debt (Note 20)		$	615			$	595
Accounts payable			463				478
Employee-related benefits			247				341
Income and mining taxes			27				13
Other current liabilities (Note 21)			1,532				1,313
Current liabilities			2,884				2,740
Debt (Note 20)			6,146				6,145
Reclamation and remediation liabilities (Note 5)			1,519				1,513
Deferred income tax liabilities			696				635
Employee-related benefits			333				323
Other long-term liabilities (Note 21)			339				342
Total liabilities			11,917				11,698
Commitments and contingencies (Note 26)
EQUITY
Common stock			798				789
Additional paid-in capital			8,458				8,441
Accumulated other comprehensive income (loss)			(205	)			(182	)
Retained earnings			968				945
Newmont stockholders’ equity			10,019				9,993
Noncontrolling interests			2,862				2,916
Total equity			12,881				12,909
Total liabilities and equity		$	24,798			$	24,607

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, 2013 filed February 20, 2014 on Form 10-K. The year-end balance sheet data was derived from the audited financial statements and, in accordance with the instructions to Form 10-Q, certain information and footnote disclosures required by United States generally accepted accounting principles (“GAAP”) have been condensed or omitted. References to “A$” refer to Australian currency, “C$” to Canadian currency and “NZ$” to New Zealand currency.

On February 18, 2014 the Company redeemed all outstanding exchangeable shares (other than those held by Newmont and its affiliates). On the date of the redemption, holders of exchangeable shares received, in exchange for each exchangeable share, one share of common stock of Newmont. At December 31, 2013, the value of the remaining outstanding exchangeable shares was included in Additional paid-in capital and Common shares.

Certain amounts in prior years have been reclassified to conform to the 2014 presentation. Reclassifications are related to a change in our reportable segments (see Notes 2 and 4), and include a change from by-product accounting for our Phoenix segment to co-product accounting.

In March 2014, we completed a review of our deferred tax and stockpile balances that resulted in the identification of certain errors in these accounts. These errors were not material to our consolidated financial condition, results of operations or cash flows as presented in our previously filed annual and quarterly financial statements; however, the adjustment to correct the cumulative effect of these errors would have been material if recorded in the first quarter of 2014. Accordingly, we revised our financial statements to correct these errors at and for the year ended December 31, 2013. The cumulative decrease to retained earnings was $148 at January 1, 2014. See Note 2 Revision of Financial Statements.

NOTE 2 REVISION OF FINANCIAL STATEMENTS

In March 2014, we determined our deferred tax assets related to certain foreign subsidiaries and Yanacocha stockpiles were overstated by $143 and $20 ($14 net of tax) at December 31, 2013, respectively. The stockpiles revision increased Costs applicable to sales by $2 ($1 net of tax) for the three months ended March 31, 2013. We have assessed the materiality of these misstatements in accordance with the Securities and Exchange Commission’s Staff Accounting Bulletin (“SAB”) No. 99 and concluded that these errors are not material to our previously issued consolidated financial statements. Accordingly, by reference to SAB No. 108, our previously issued consolidated financial statements have been revised as follows:

 

		Three Months Ended March 31, 2013
Condensed Consolidated Statement of Income		As Previously Reported				Co-product Reclassification(1)				Revision				As Revised
Sales		$	2,177			$	11			$	—			$	2,188
Costs applicable to sales			1,044				11				2				1,057
Net income (loss)			357				—				(1	)			356
Net income (loss) attributable to Newmont stockholders			315				—				(1	)			314
Income (loss) per common share
Basic		$	0.63			$	—			$	—			$	0.63
Diluted		$	0.63			$	—			$	—			$	0.63

 

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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 March 31, 2013
Condensed Consolidated Statement of Cash Flows		As Previously Reported				Revision				As Revised
Net income		$	357			$	(1	)		$	356
Net changes in operating assets and liabilities			(288	)			1				(287	)
Net cash provided from continuing operations			439				—				439

 

		At December 31, 2013
Condensed Consolidated Balance Sheet		As Previously Reported				Revision				As Revised
Stockpiles and ore on leach pads(2)		$	3,506			$	(21	)		$	3,485
Deferred income tax assets(3)			1,860				(141	)			1,719
Other long-term assets			844				5				849
Total Assets			24,764				(157	)			24,607
Employee-related benefits			325				(2	)			323
Total liabilities			11,700				(2	)			11,698
Retained earnings			1,093				(148	)			945
Newmont stockholders’ equity			10,141				(148	)			9,993
Noncontrolling interests			2,923				(7	)			2,916
Total equity			13,064				(155	)			12,909
Total liabilities and equity			24,764				(157	)			24,607

 

(1)	Refer to Note 1 for information on the segment reclassifications.

(2)	Includes current and noncurrent stockpiles and ore on leach pads.

(3)	Includes current and noncurrent deferred tax assets.

NOTE 3 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Recently Adopted Accounting Pronouncements

Presentation of an Unrecognized Tax Benefit

In July 2013, ASC guidance was issued related to the presentation of an unrecognized tax benefit when a net operating loss carryforward, a similar tax loss or a tax credit carryforward exists. The updated guidance requires an entity to net its unrecognized tax benefits against the deferred tax assets for all same jurisdiction net operating loss carryforward, a similar tax loss, or tax credit carryforwards. A gross presentation will be required only if such carryforwards are not available or would not be used by the entity to settle any additional income taxes resulting from disallowance of the uncertain tax position. Adoption of the new guidance, effective for the fiscal year beginning January 1, 2014, had no impact on the 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)

 

Foreign Currency Matters

In March 2013, ASC guidance was issued related to Foreign Currency Matters to clarify the treatment of cumulative translation adjustments when a parent sells a part or all of its investment in a foreign entity or no longer holds a controlling financial interest in a subsidiary or group of assets that is a business within a foreign entity. The updated guidance also resolves the diversity in practice for the treatment of business combinations achieved in stages in a foreign entity. Adoption of the new guidance, effective for the fiscal year beginning January 1, 2014, had no impact on the consolidated financial position, results of operations or cash flows.

Discontinued Operations

In April 2014, ASC guidance was issued related to Discontinued Operations which changed the criteria for determining which disposals can be presented as discontinued operations and modified related disclosure requirements. The updated guidance requires an entity to only classify discontinued operations due to a major strategic shift or a major effect on an entity’s operations in the financial statements. The updated guidance will also require additional disclosures relating to discontinued operations. The Company early adopted this guidance prospectively at the beginning of fiscal year January 1, 2014. Adoption of the new guidance did not have an impact on the consolidated financial position, results of operations or cash flows.

NOTE 4 SEGMENT INFORMATION

The Company’s reportable segments are based upon the Company’s management structure that is focused on the geographic region for the Company’s operations. Geographic regions include North America, South America, Australia/New Zealand, Indonesia, Africa and Corporate and Other. Segment results for 2013 have been retrospectively revised to reflect a change in our reportable segments to align with a change in the chief operating decision makers’ evaluation of the organization, effective in the first quarter of 2014. The Nevada operations have been revised to reflect Carlin, Phoenix, and Twin Creeks segments and Other Australia/New Zealand operations have been revised to reflect Tanami, Jundee, Waihi and Kalgoorlie segments. The Conga development project will be reported in the Other South America segment. The Nimba and Merian development projects, historically reported in Other Africa and Other South America, respectively, will be reported in Corporate and Other. The financial information relating to the Company’s segments for all periods presented have been updated to reflect these changes and is as follows:

 

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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)

 

		Sales				Costs Applicable to Sales				Amortization				Advanced Projects and Exploration				Pre-Tax Income (Loss)				Capital Expenditures (1)
Three Months Ended March 31, 2014
Carlin		$	293			$	192			$	35			$	4			$	61			$	42
Phoenix
Gold			70				34				5
Copper			32				26				3
Total			102				60				8				1				29				7
Twin Creeks			132				55				11				1				111				32
La Herradura			31				16				8				4				3				6
Other North America			—				—				—				6				(9	)			5
North America			558				323				62				16				195				92
Yanacocha			265				221				101				7				(87	)			14
Other South America			—				—				—				8				(8	)			7
South America			265				221				101				15				(95	)			21
Boddington:
Gold			220				142				25
Copper			39				40				6
Total			259				182				31				—				37				20
Tanami			105				55				17				1				28				20
Jundee			82				42				17				1				21				7
Waihi			33				19				5				—				7				3
Kalgoorlie			118				77				6				1				33				1
Other Australia/New Zealand			—				—				4				1				(12	)			1
Australia/New Zealand			597				375				80				4				114				52
Batu Hijau:
Gold			8				8				2
Copper			42				57				13
Total			50				65				15				1				(51	)			15
Indonesia			50				65				15				1				(51	)			15
Ahafo			141				61				16				9				44				22
Akyem			153				38				21				—				88				1
Other Africa			—				—				—				2				(3	)			—
Africa			294				99				37				11				129				23
Corporate and Other			—				—				3				29				(149	)			6
Consolidated		$	1,764			$	1,083			$	298			$	76			$	143			$	209

 

(1)	Includes a decrease in accrued capital expenditures of $26; consolidated capital expenditures on a cash basis were $235.

 

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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)

 

		Sales				Costs Applicable to Sales				Amortization				Advanced Projects and Exploration				Pre-Tax Income (Loss)				Capital Expenditures (1)
Three Months Ended March 31, 2013
Carlin		$	351			$	179			$	32			$	11			$	128			$	46
Phoenix
Gold			53				41				7
Copper			11				11				2
Total			64				52				9				4				(4	)			31
Twin Creeks			166				52				18				3				92				25
La Herradura			90				40				6				6				37				19
Other North America			—				—				—				8				(9	)			4
North America			671				323				65				32				244				125
Yanacocha			455				160				70				13				193				48
Other South America			—				—				—				3				(2	)			86
South America			455				160				70				16				191				134
Boddington:
Gold			329				174				42
Copper			65				48				10
Total			394				222				52				—				115				25
Tanami			98				75				16				2				4				23
Jundee			124				54				16				4				50				13
Waihi			50				28				8				1				12				3
Kalgoorlie			120				75				5				1				39				1
Other Australia/New Zealand			—				—				2				4				(12	)			1
Australia/New Zealand			786				454				99				12				208				66
Batu Hijau:
Gold			11				7				2
Copper			70				47				9
Total			81				54				11				6				(4	)			23
Other Indonesia			—				—				—				—				3				—
Indonesia			81				54				11				6				(1	)			23
Ahafo			195				66				17				13				103				60
Akyem			—				—				—				3				(5	)			66
Other Africa			—				—				—				2				(9	)			—
Africa			195				66				17				18				89				126
Corporate and Other			—				—				5				27				(191	)			23
Consolidated		$	2,188			$	1,057			$	267			$	111			$	540			$	497

 

(1)	Includes a decrease in accrued capital expenditures of $13; consolidated capital expenditures on a cash basis were $510.

 

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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 5 RECLAMATION AND REMEDIATION

The Company’s Reclamation and remediation expense consisted of:

 

		Three Months Ended March 31,
		2014				2013
Accretion—operating		$	18			$	15
Accretion—non-operating			2				3
		$	20			$	18

At March 31, 2014 and December 31, 2013, $1,441 and $1,432, respectively, were accrued for reclamation obligations relating to operating 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 March 31, 2014 and December 31, 2013, $174 and $179, 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:

 

		Three Months Ended March 31,
		2014				2013
Balance at beginning of period		$	1,611			$	1,539
Additions, changes in estimates and other			(8	)			(3	)
Liabilities settled			(8	)			(9	)
Accretion expense			20				18
Balance at end of period		$	1,615			$	1,545

The current portion of Reclamation and remediation liabilities of $96 and $98 at March 31, 2014 and December 31, 2013, respectively, are included in Other current liabilities (see Note 21).

NOTE 6 OTHER EXPENSE, NET

 

		Three Months Ended March 31,
		2014				2013
Regional administration		$	15			$	18
Community development			11				13
Restructuring and other			7				9
Western Australia power plant			6				4
World Gold Council dues			1				1
Transaction/Acquisition costs			—				45
Other			12				10
		$	52			$	100

 

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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 7 OTHER INCOME, NET

 

		Three Months Ended March 31,
		2014				2013
Gain on Midas sale		$	47			$	—
Refinery income, net			4				3
Gain on sale of investments, net			4				—
Development projects, net			2				1
Interest			1				4
Canadian Oil Sands dividends			—				10
Derivative ineffectiveness, net			—				3
Impairment of marketable securities			(1	)			(4	)
Foreign currency exchange, net			(14	)			(3	)
Other			3				12
		$	46			$	26

NOTE 8 INCOME AND MINING TAXES

During the first quarter of 2014, the Company recorded estimated income and mining tax expense of $78 resulting in an effective tax rate of 55%. Estimated income and mining tax expense during the first quarter of 2013 was $180 for an effective tax rate of 33%.

The Company’s income and mining tax expense differed from the statutory rate of 35% for the following reasons:

 

		Three Months Ended March 31,
		2014								2013
Income before income and mining tax and other items						$	143							$	540
Tax on income at 35% statutory rate			35	%		$	50				35	%		$	189
Reconciling items:
Percentage depletion			(8	)			(11	)			(7	)			(41	)
Change in valuation allowance on deferred tax assets			9				13				1				6
Disallowed loss on sale of Midas			9				13
Mining and other taxes			6				8				3				18
Effect of foreign earnings, net of credits			2				2
Other			2				3				1				8
Income and mining tax expense			55	%		$	78				33	%		$	180

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 March 31, 2014, the Company’s total unrecognized tax benefit was $321 for uncertain income tax positions taken or expected to be taken on income tax returns. Of this, $78 represents the amount of unrecognized tax benefits that, if recognized, would affect the Company’s effective income tax rate.

 

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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)

 

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.

NOTE 9 DISCONTINUED OPERATIONS

Discontinued operations include Holloway Mining Company, which owned the Holt-McDermott property (“Holt property”) that was sold to St. Andrew Goldfields Ltd. (“St. Andrew”) in 2006. 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 was upheld in 2011 by the Ontario Court of Appeal. During the first quarter of 2014, the Company recorded a charge of $17, net of tax benefits of $8, related to an increase in gold price, an increase in expected future production and a decrease in discount rates at quarter end.

Net operating cash used in discontinued operations of $3 and $6 in the first quarter of 2014 and 2013 respectively relates to payments on the Holt property royalty.

NOTE 10 NET INCOME (LOSS) ATTRIBUTABLE TO NONCONTROLLING INTERESTS

 

		Three Months Ended March 31,
		2014				2013
Minera Yanacocha		$	(29	)		$	57
Batu Hijau			(23	)			(3	)
TMAC			(1	)			(12	)
Other			1				—
		$	(52	)		$	42

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%).

Newmont has a 48.5% effective economic interest in PT Newmont Nusa Tenggara (“PTNNT”) with remaining interests held by an affiliate of Sumitomo Corporation of Japan and various Indonesian entities. PTNNT operates the Batu Hijau copper and gold mine in Indonesia. Based on ASC guidance for variable interest entities, Newmont consolidates PTNNT in its Condensed Consolidated Financial Statements.

Newmont has a 70.4% economic ownership interest in TMAC, with remaining interests held by various outside investors.

 

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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 11 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 except that weighted average common shares is increased to reflect all dilutive instruments.

 

		Three Months Ended March 31,
		2014				2013
Net income attributable to Newmont stockholders		$	100			$	314
Weighted average common shares (millions):
Basic			498				497
Effect of employee stock-based awards			1				1
Diluted			499				498
Net income attributable to Newmont stockholders per common share
Basic:
Continuing operations		$	0.23			$	0.63
Discontinued operations			(0.03	)			—
		$	0.20			$	0.63
Diluted:
Continuing operations		$	0.23			$	0.63
Discontinued operations			(0.03	)			—
		$	0.20			$	0.63

Options to purchase 3 and 4 million shares of common stock at average exercise prices of $48 and $49 were outstanding at March 31, 2014 and 2013, respectively, but were not included in the computation of diluted weighted average common shares because their exercise prices exceeded the average price of the Company’s common stock for the respective periods presented.

Newmont is required to settle the principal amount of its 2014 and 2017 Convertible Senior Notes in cash and may elect to settle the remaining conversion premium (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 conversion price exceeded the Company’s share price for the periods presented, therefore no additional shares were included in the computation of diluted weighted average common shares.

 

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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 12 EMPLOYEE PENSION AND OTHER BENEFIT PLANS

 

		Three Months Ended March 31,
		2014				2013
Pension benefit costs, net
Service cost		$	6			$	9
Interest cost			10				10
Expected return on plan assets			(13	)			(12	)
Amortization, net			3				8
		$	6			$	15
		Three Months Ended March 31,
		2014				2013
Other benefit costs, net
Service cost		$	1			$	1
Interest cost			2				1
		$	3			$	2

NOTE 13 STOCK BASED COMPENSATION

 

		Three Months Ended March 31,
		2014				2013
Stock options		$	1			$	3
Restricted stock units			7				9
Performance leveraged stock units			3				2
Stock performance units			3				—
		$	14			$	14

 

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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 14 FAIR VALUE ACCOUNTING

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 March 31, 2014
		Total				Level 1				Level 2				Level 3
Assets:
Cash equivalents		$	816			$	816			$	—			$	—
Marketable equity securities:
Extractive industries			296				296				—				—
Other			15				15				—				—
Marketable debt securities:
Asset backed commercial paper			23				—				—				23
Auction rate securities			5				—				—				5
Trade receivable from provisional copper and gold concentrate sales, net			183				183				—				—
		$	1,338			$	1,310			$	—			$	28
Liabilities:
Derivative instruments, net:
Foreign exchange forward contracts		$	53			$	—			$	53			$	—
Boddington contingent consideration			10				—				—				10
Holt property royalty			156				—				—				156
		$	219			$	—			$	53			$	166

The fair values of the derivative instruments in the table above are presented on a net basis. The gross amounts related to the fair value of the derivatives instruments above are included in the Derivatives Instruments Note (see Note 15). All other Fair Value disclosures in the above table are presented on a gross basis.

The following table sets forth a summary of the quantitative and qualitative information related to the unobservable inputs used in the calculation of the Company’s Level 3 financial assets and liabilities at March 31, 2014:

 

Description		At March 31, 2014				Valuation technique		Unobservable input		Range/Weighted average
Auction Rate Securities		$	5			Discounted cash flow		Weighted average recoverability rate			58	%
Asset Backed Commercial Paper			23			Discounted cash flow		Recoverability rate			90	%
Boddington Contingent Consideration			10			Monte Carlo		Discount rate			5	%
								Long Term Gold price		$	1,300
								Long Term Copper price		$	3.00
Holt property royalty			156			Monte Carlo		Weighted average discount rate			5	%
								Long Term Gold price		$	1,300

 

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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 a summary of changes in the fair value of the Company’s Level 3 financial assets and liabilities at March 31, 2014:

 

		Auction Rate Securities				Asset Backed Commercial Paper				Total Assets				Boddington Contingent Royalty				Holt Property Royalty				Total Liabilities
Balance at beginning of period		$	5			$	25			$	30			$	10			$	134			$	144
Settlements			—				—				—				—				(3	)			(3	)
Revaluation			—				(2	)			(2	)			—				25				25
Balance at end of period		$	5			$	23			$	28			$	10			$	156			$	166

At March 31, 2014, assets and liabilities classified within Level 3 of the fair value hierarchy represent 2% and 76%, respectively, of total assets and liabilities measured at fair value.

NOTE 15 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 hedges.

Cash Flow Hedges

The foreign currency and diesel 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 (loss) 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 had the following foreign currency derivative contracts outstanding at March 31, 2014:

 

		Expected Maturity Date
																						Total/
		2014				2015				2016				2017				2018				Average
A$ Operating Fixed Forward Contracts:
A$ notional (millions)			234				270				158				105				6				773
Average rate ($/A$)			1.00				0.98				0.95				0.93				0.92				0.97
Expected hedge ratio			20	%			18	%			11	%			7	%			4	%			—
NZ$ Operating Fixed Forward Contracts:
NZ$ notional (millions)			46				39				2				—				—				87
Average rate ($/NZ$)			0.80				0.79				0.78				—				—				0.79
Expected hedge ratio			57	%			32	%			9	%			—				—

 

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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)

 

Diesel Fixed Forward Contracts

Newmont had the following diesel derivative contracts outstanding at March 31, 2014:

 

		Expected Maturity Date
																		Total/
		2014				2015				2016				2017				Average
Diesel Fixed Forward Contracts:
Diesel gallons (millions)			17				16				8				1				42
Average rate ($/gallon)			2.86				2.77				2.68				2.61				2.79
Expected Nevada hedge ratio			58	%			42	%			21	%			3	%

Derivative Instrument Fair Values

Newmont had the following derivative instruments designated as hedges at March 31, 2014 and December 31, 2013:

 

		Fair Value
		At March 31, 2014
		Other Current Assets				Other Long- Term Assets				Other Current Liabilities				Other Long- Term Liabilities
Foreign currency exchange contracts:
A$ operating fixed forwards		$	—			$	—			$	24			$	34
NZ$ operating fixed forwards			3				2				—				—
Diesel fixed forwards			1				—				1				—
Total derivative instruments (Notes 19 and 21)		$	4			$	2			$	25			$	34
		Fair Value
		At December 31, 2013
		Other Current Assets				Other Long- Term Assets				Other Current Liabilities				Other Long- Term Liabilities
Foreign currency exchange contracts:
A$ operating fixed forwards		$	—			$	—			$	36			$	60
NZ$ operating fixed forwards			1				—				—				—
Diesel fixed forwards			3				1				—				—
Total derivative instruments (Notes 19 and 21)		$	4			$	1			$	36			$	60

 

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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 (losses) reported in the Company’s Consolidated Financial Statements related to the Company’s cash flow hedges.

 

		Foreign Currency								Diesel Forward								Forward Starting
		Exchange Contracts								Contracts								Swaps
		2014				2013				2014				2013				2014				2013
For the three months ended March 31,
Cash flow hedging relationships:
Gain (loss) recognized in other comprehensive income (effective portion)		$	34			$	18			$	(2	)		$	3			$	—			$	—
Gain (loss) reclassified from Accumulated other comprehensive income into income (effective portion) (1)			5				38				—				1				(5	)			(3	)
Gain (loss) reclassified from Accumulated other comprehensive income into income (ineffective portion) (2)			—				—				—				3				—				—

 

(1)

The gain (loss) for the effective portion of the foreign exchange and diesel cash flow hedges reclassified from Accumulated other comprehensive income (loss) is included in Costs applicable to sales. The realized loss for the effective portion of the forward starting swaps reclassified from Accumulated other comprehensive income (loss) is included in Interest Expense.

(2)	The ineffective portion recognized for cash flow hedges 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 loss of approximately $5.

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.

London Metal Exchange (“LME”) copper prices averaged $3.19 per pound during the first quarter of 2014, compared with the Company’s recorded average provisional price of $3.12 per pound before mark-to-market adjustments and treatment and refining charges. During the first quarter of 2014, changes in copper prices resulted in a provisional pricing mark-to-market loss of $17 ($0.37 per pound). At March 31, 2014, Newmont had copper sales of 63 million pounds priced at an average of $3.02 per pound, subject to final pricing over the next several months.

The average London P.M. fix for gold was $1,293 per ounce during the first quarter of 2014, compared to the Company’s recorded average provisional price of $1,292 per ounce before mark-to-market adjustments and treatment and refining charges. During the first quarter of 2014, changes in gold prices resulted in a provisional pricing mark-to-market gain of $4 ($4 per ounce). At March 31, 2014, Newmont had gold sales of 130,000 ounces priced at an average of $1,295 per ounce, subject to final pricing over the next several 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)

 

NOTE 16 INVESTMENTS

 

		At March 31, 2014
		Cost/Equity				Unrealized								Fair/Equity
		Basis				Gain				Loss				Basis
Current:
Marketable Equity Securities:
Gabriel Resources Ltd.		$	36			$	6			$	—			$	42
Other			28				15				(2	)			41
		$	64			$	21			$	(2	)		$	83
Long-term:
Marketable Debt Securities:
Asset backed commercial paper		$	22			$	1			$	—			$	23
Auction rate securities			8				—				(3	)			5
			30				1				(3	)			28
Marketable Equity Securities:
Regis Resources Ltd.			165				39				—				204
Other			20				5				(1	)			24
			185				44				(1	)			228
Other investments, at cost			20				—				—				20
Investment in Affiliates:
Euronimba Ltd.			3				—				—				3
Minera La Zanja S.R.L.			98				—				—				98
Novo Resources Corp.			16				—				—				16
		$	352			$	45			$	(4	)		$	393

 

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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, 2013
		Cost/Equity				Unrealized								Fair/Equity
		Basis				Gain				Loss				Basis
Current:
Marketable Equity Securities:
Gabriel Resources Ltd.		$	37			$	—			$	—			$	37
Paladin Energy Ltd.			21				1				—				22
Other			19				4				(4	)			19
		$	77			$	5			$	(4	)		$	78
Long-term:
Marketable Debt Securities:
Asset backed commercial paper		$	23			$	2			$	—			$	25
Auction rate securities			8				—				(3	)			5
			31				2				(3	)			30
Marketable Equity Securities:
Regis Resources Ltd.			165				88				—				253
Other			30				5				—				35
			195				93				—				288
Other investments, at cost			13				—				—				13
Investment in Affiliates:
Minera La Zanja S.R.L.			92				—				—				92
Novo Resources Corp.			16				—				—				16
		$	347			$	95			$	(3	)		$	439

In March 2014, the Company sold its investment in Paladin Energy Ltd. for $25, resulting in a pre-tax gain of $4 recorded in Other income, net.

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
At March 31, 2014		Fair Value				Unrealized Losses				Fair Value				Unrealized Losses				Fair Value				Unrealized Losses
Marketable equity securities		$	3			$	2			$	—			$	—			$	3			$	2
Auction rate securities			—				—				5				3				5				3
		$	3			$	2			$	5			$	3			$	8			$	5
		Less than 12 Months								12 Months or Greater								Total
At December 31, 2013		Fair Value				Unrealized Losses				Fair Value				Unrealized Losses				Fair Value				Unrealized Losses
Marketable equity securities		$	54			$	4			$	—			$	—			$	54			$	4
Auction rate securities			—				—				5				3				5				3
		$	54			$	4			$	5			$	3			$	59			$	7

 

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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)

 

While the fair value of the Company’s investment in auction rate securities is below its cost, the Company views this decline as temporary. The Company has the ability and intends to hold its investment in auction rate securities until maturity or such time that the market recovers and therefore considers this loss temporary.

NOTE 17 INVENTORIES

 

		At March 31,				At December 31,
		2014				2013
In-process		$	120			$	97
Concentrate			184				108
Precious metals			20				26
Materials, supplies and other			490				486
		$	814			$	717

The Company recorded write-downs of $1 and $1, classified as components of Costs applicable to sales and Amortization, respectively, for the first quarter of 2014, to reduce the carrying value of Yanacocha’s inventories to net realizable value.

NOTE 18 STOCKPILES AND ORE ON LEACH PADS

 

		At March 31,				At December 31,
		2014				2013
Current:
Stockpiles		$	513			$	580
Ore on leach pads			247				225
		$	760			$	805
Long-term:
Stockpiles		$	2,511			$	2,434
Ore on leach pads			212				246
		$	2,723			$	2,680

 

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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 March 31,				At December 31,
		2014				2013
Stockpiles and ore on leach pads:
Carlin		$	433			$	439
Phoenix			113				109
Twin Creeks			319				327
La Herradura			66				57
Yanacocha			405				504
Boddington			314				304
Tanami			10				12
Jundee			8				7
Waihi			1				2
Kalgoorlie			112				107
Batu Hijau			1,328				1,290
Ahafo			315				292
Akyem			59				35
		$	3,483			$	3,485

The Company recorded write-downs of $110 and $35, classified as components of Costs applicable to sales and Amortization, respectively, for the first quarter of 2014 to reduce the carrying value of stockpiles and ore on leach pads to net realizable value. Of the write-downs in 2014, $24 are related to Carlin, $2 to Twin Creeks, $54 to Yanacocha, $30 to Boddington and $35 to Batu Hijau.

NOTE 19 OTHER ASSETS

 

		At March 31,				At December 31,
		2014				2013
Other current assets:
Refinery metal inventory and receivable		$	947			$	679
Prepaid assets			265				157
Other refinery metal receivables			105				130
Derivative instruments			4				4
Other			30				36
		$	1,351			$	1,006
Other long-term assets:
Income tax receivable		$	254			$	229
Goodwill			132				132
Intangible assets			117				98
Prepaid royalties			103				103
Restricted cash			99				95
Debt issuance costs			65				62
Prepaid maintenance costs			34				31
Derivative instruments			2				1
Other			75				98
		$	881			$	849

 

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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 20 DEBT

Scheduled minimum debt repayments are $623 for the remainder of 2014, $161 in 2015, $221 in 2016, $771 in 2017, $1 in 2018 and $5,105 thereafter.

Term Loan and Revolver Extension

On March 31, 2014, the Company entered into a $575 uncollateralized term loan facility with a syndicate of banks. The term loan allows for a single drawing any business day on or prior to July 15, 2014 (the “Funding Date”) and will mature five years after the Funding Date. Borrowings under the facility will bear interest at LIBOR plus a margin ranging from 0.875% to 1.65%. Fees and other debt issuance costs related to the facility will be capitalized and amortized over the term of the debt. Proceeds from the term loan are expected to be used to retire the $575 of maturing convertible debt in July 2014. There are no borrowings outstanding under the facility at March 31, 2014.

On March 31, 2014, the Company’s Corporate Revolving Credit Facility was amended to extend the facility two years to 2019. The available capacity under the Corporate Revolving Credit Facility remains at $3,000. There are no borrowings outstanding under the facility at March 31, 2014.

NOTE 21 OTHER LIABILITIES

 

		At March 31,				At December 31,
		2014				2013
Other current liabilities:
Refinery metal payable		$	947			$	679
Accrued operating costs			156				157
Reclamation and remediation liabilities			96				98
Interest			82				74
Deferred income tax			74				74
Accrued capital expenditures			46				72
Royalties			32				58
Derivative instruments			25				36
Holt property royalty			14				15
Taxes other than income and mining			11				6
Other			49				44
		$	1,532			$	1,313
Other long-term liabilities:
Holt property royalty		$	142			$	119
Income and mining taxes			71				70
Power supply agreements			40				39
Derivative instruments			34				60
Boddington contingent consideration			10				10
Other			42				44
		$	339			$	342

 

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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 22 CHANGES IN EQUITY

 

		Three Months Ended March 31,
		2014				2013
Common stock:
At beginning of period		$	789			$	787
Redemption of Exchangeable Shares			8				—
Stock based awards			1				1
At end of period			798				788
Additional paid-in capital:
At beginning of period			8,441				8,330
Redemption of Exchangeable Shares			(8	)			—
Stock based awards			25				29
Sale of noncontrolling interests			—				48
At end of period			8,458				8,407
Accumulated other comprehensive income (loss):
At beginning of period			(182	)			490
Other comprehensive income (loss)			(23	)			(61	)
At end of period			(205	)			429
Retained earnings:
At beginning of period			945				4,166
Net income (loss) attributable to Newmont stockholders			100				314
Dividends Paid			(77	)			(211	)
At end of period			968				4,269
Noncontrolling interests:
At beginning of period			2,916				3,175
Net income (loss) attributable to noncontrolling interests			(52	)			42
Sale of noncontrolling interests, net			—				15
Other comprehensive income			(2	)			(1	)
At end of period			2,862				3,231
Total equity		$	12,881			$	17,124

 

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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 RECLASSIFICATIONS OUT OF ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS)

 

		Unrealized gain on marketable securities, net				Foreign currency translation adjustments				Pension and other post- retirement benefit adjustments				Changes in fair value of cash flow hedge instruments				Total
December 31, 2013		$	(35	)		$	145			$	(124	)		$	(168	)		$	(182	)
Change in other comprehensive income (loss) before reclassifications			(29	)			(3	)			—				9				(23	)
Reclassifications from accumulated other comprehensive income (loss)			(2	)			—				2				—				—
Net current-period other comprehensive income (loss)			(31	)			(3	)			2				9				(23	)
March 31, 2014		$	(66	)		$	142			$	(122	)		$	(159	)		$	(205	)

 

Details about Accumulated Other Comprehensive Income (Loss) Components		Amount Reclassified from Accumulated Other Comprehensive Income (Loss)								Affected Line Item in the Condensed Consolidated Statement of Income (Loss)
		Three Months Ended March 31, 2014				Three Months Ended March 31, 2013
Marketable securities adjustments:
Sale of marketable securities		$	(4	)		$	—			Other income, net
Impairment of marketable securities			1				4			Other income, net
Total before tax			(3	)			4
Tax benefit (expense)			1				(1	)
Net of tax		$	(2	)		$	3
Pension liability adjustments:
Amortization, net		$	3			$	8			(1)
Total before tax			3				8
Tax (expense) benefit			(1	)			(3	)
Net of tax		$	2			$	5
Hedge instruments adjustments:
Operating cash flow hedges		$	(5	)		$	(39	)		Costs applicable to sales
Forward starting swap hedges			5				3			Interest expense, net
Total before tax			—				(36	)
Tax benefit (expense)			—				12
Net of tax		$	—			$	(24	)
Total reclassifications for the period, net of tax		$	—			$	(16	)

 

(1)

This accumulated other comprehensive income (loss) component is included in General and administrative and costs that benefit the inventory/production process. Refer to Note 2 in the Newmont Annual Report on Form 10-K for the year ended December 31, 2013 for information on costs that benefit the inventory/production process.

 

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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 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:

 

		Three Months Ended March 31,
		2014				2013
Decrease (increase) in operating assets:
Trade and accounts receivable		$	(16	)		$	115
Inventories, stockpiles and ore on leach pads			(182	)			(228	)
EGR refinery assets			(256	)			308
Other assets			(50	)			(21	)
Increase (decrease) in operating liabilities:
Accounts payable and other accrued liabilities			(94	)			(144	)
EGR refinery liabilities			256				(308	)
Reclamation liabilities			(8	)			(9	)
		$	(350	)		$	(287	)

NOTE 25 CONDENSED CONSOLIDATING FINANCIAL STATEMENTS

The following Condensed Consolidating Financial Statements are presented to satisfy disclosure requirements of Rule 3-10(e) of Regulation S-X resulting from the inclusion of Newmont USA Limited (“Newmont USA”), a wholly-owned subsidiary of Newmont, as a co-registrant with Newmont on debt securities issued under a shelf registration statement on Form S-3 filed under the Securities Act of 1933 under which securities of Newmont (including debt securities guaranteed by Newmont USA) may be issued (the “Shelf Registration Statement”). In accordance with Rule 3-10(e) of Regulation S-X, Newmont USA, as the subsidiary guarantor, is 100% owned by Newmont, the guarantees are full and unconditional, and no other subsidiary of Newmont guaranteed any security issued under the Shelf Registration Statement. There are no restrictions on the ability of Newmont or Newmont USA to obtain funds from its subsidiaries by dividend or loan.

In April 2013, the Company merged one of its subsidiaries into Newmont USA. As a result of the merger, the prior periods presented have been revised to reflect this change as if the transaction had occurred at the beginning of the earliest period presented in accordance with the accounting guidance for business combinations between entities under common control. Additionally, the changes related to the revisions as described in Note 2 have also been included herein.

 

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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 March 31, 2014
																		Newmont
		Newmont																Mining
		Mining				Newmont				Other								Corporation
Condensed Consolidating Statement of Income		Corporation				USA				Subsidiaries				Eliminations				Consolidated
Sales		$	—			$	500			$	1,264			$	—			$	1,764
Costs and expenses
Costs applicable to sales (1)			—				298				785				—				1,083
Amortization			1				54				243				—				298
Reclamation and remediation			—				2				18				—				20
Exploration			—				4				30				—				34
Advanced projects, research and development			—				11				31				—				42
General and administrative			—				19				26				—				45
Other expense, net			—				6				46				—				52
			1				394				1,179				—				1,574
Other income (expense)
Other income, net			(1	)			60				(13	)			—				46
Interest income—intercompany			30				—				2				(32	)			—
Interest expense—intercompany			(2	)			—				(30	)			32				—
Interest expense, net			(82	)			(1	)			(10	)			—				(93	)
			(55	)			59				(51	)			—				(47	)
Income before income and mining tax and other items			(56	)			165				34				—				143
Income and mining tax expense			29				(38	)			(69	)			—				(78	)
Equity income (loss) of affiliates			127				(151	)			(17	)			41				—
Income from continuing operations			100				(24	)			(52	)			41				65
Income (loss) from discontinued operations			—				—				(17	)			—				(17	)
Net income			100				(24	)			(69	)			41				48
Net income attributable to noncontrolling interests			—				—				66				(14	)			52
Net income attributable to Newmont stockholders		$	100			$	(24	)		$	(3	)		$	27			$	100
Comprehensive income		$	77			$	(22	)		$	(84	)		$	52			$	23
Comprehensive income attributable to noncontrolling interests			—				—				65				(11	)			54
Comprehensive income attributable to Newmont stockholders		$	77			$	(22	)		$	(19	)		$	41			$	77

 

(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 March 31, 2013
																		Newmont
		Newmont																Mining
		Mining				Newmont				Other								Corporation
Condensed Consolidating Statement of Income		Corporation				USA				Subsidiaries				Eliminations				Consolidated
Sales		$	—			$	543			$	1,645			$	—			$	2,188
Costs and expenses
Costs applicable to sales (1)			—				261				796				—				1,057
Amortization			—				48				219				—				267
Reclamation and remediation			—				2				16				—				18
Exploration			—				11				48				—				59
Advanced projects, research and development			—				13				39				—				52
General and administrative			—				30				26				—				56
Other expense, net			—				15				85				—				100
			—				380				1,229				—				1,609
Other income (expense)
Other income, net			—				3				23				—				26
Interest income—intercompany			48				7				5				(60	)			—
Interest expense—intercompany			(3	)			—				(57	)			60				—
Interest expense, net			(65	)			(2	)			2				—				(65	)
			(20	)			8				(27	)			—				(39	)
Income before income and mining tax and other items			(20	)			171				389				—				540
Income and mining tax expense			7				(50	)			(137	)			—				(180	)
Equity income (loss) of affiliates			327				114				43				(488	)			(4	)
Income from continuing operations			314				235				295				(488	)			356
Net income			314				235				295				(488	)			356
Net income attributable to noncontrolling interests			—				—				(66	)			24				(42	)
Net income attributable to Newmont stockholders		$	314			$	235			$	229			$	(464	)		$	314
Comprehensive income		$	253			$	239			$	188			$	(386	)		$	294
Comprehensive income attributable to noncontrolling interests			—				—				(66	)			25				(41	)
Comprehensive income attributable to Newmont stockholders		$	253			$	239			$	122			$	(361	)		$	253

 

(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 March 31, 2014
																		Newmont
		Newmont																Mining
		Mining				Newmont				Other								Corporation
Condensed Consolidating Statement of Cash Flows		Corporation				USA				Subsidiaries				Eliminations				Consolidated
Operating activities:
Net income (loss)		$	100			$	(24	)		$	(69	)		$	41			$	48
Adjustments			(120	)			265				385				(45	)			485
Net change in operating assets and liabilities			(29	)			(45	)			(276	)			—				(350	)
Net cash provided from (used in) continuing operations			(49	)			196				40				(4	)			183
Net cash used in discontinued operations			—				—				(3	)			—				(3	)
Net cash provided from (used in) operations			(49	)			196				37				(4	)			180
Investing activities:
Additions to property, plant and mine development			—				(84	)			(151	)			—				(235	)
Acquisitions, net			—				—				(28	)			—				(28	)
Sale of marketable securities			25				—				—				—				25
Purchases of marketable securities			—				—				(1	)			—				(1	)
Proceeds from sale of other assets			—				—				70				—				70
Other			—				3				(12	)			—				(9	)
Net cash used in investing activities			25				(81	)			(122	)			—				(178	)
Financing activities:
Proceeds from debt, net			(7	)			—				10				—				3
Net intercompany borrowings (repayments)			108				(219	)			111				—				—
Acquisition of noncontrolling interests			—				—				(2	)			—				(2	)
Dividends paid to common stockholders			(77	)			—				(4	)			4				(77	)
Other			—				—				(4	)			—				(4	)
Net cash provided from (used in) financing activities			24				(219	)			111				4				(80	)
Effect of exchange rate changes on cash			—				—				(2	)			—				(2	)
Net change in cash and cash equivalents			—				(104	)			24				—				(80	)
Cash and cash equivalents at beginning of period			—				428				1,127				—				1,555
Cash and cash equivalents at end of period		$	—			$	324			$	1,151			$	—			$	1,475

 

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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 March 31, 2013
																		Newmont
		Newmont																Mining
		Mining				Newmont				Other								Corporation
Condensed Consolidating Statement of Cash Flows		Corporation				USA				Subsidiaries				Eliminations				Consolidated
Operating activities:
Net income (loss)		$	314			$	235			$	295			$	(488	)		$	356
Adjustments			(308	)			(33	)			225				486				370
Net change in operating assets and liabilities			4				(186	)			(105	)			—				(287	)
Net cash provided from (used in) continuing operations			10				16				415				(2	)			439
Net cash used in discontinued operations			—				—				(6	)			—				(6	)
Net cash provided from (used in) operations			10				16				409				(2	)			433
Investing activities:
Additions to property, plant and mine development			—				(105	)			(405	)			—				(510	)
Acquisitions, net			—				—				(8	)			—				(8	)
Sale of marketable securities			—				—				1				—				1
Purchases of marketable securities			—				—				(1	)			—				(1	)
Proceeds from sale of other assets			—				—				25				—				25
Other			—				—				(14	)			—				(14	)
Net cash used in investing activities			—				(105	)			(402	)			—				(507	)
Financing activities:
Proceeds from debt, net			—				—				80				—				80
Net intercompany borrowings (repayments)			200				(143	)			(57	)			—				—
Proceeds from stock issuance, net			1				—				—				—				1
Sale of noncontrolling interests			—				—				32				—				32
Acquisition of noncontrolling interests			—				—				(6	)			—				(6	)
Dividends paid to common stockholders			(211	)			—				(2	)			2				(211	)
Other			—				—				(1	)			—				(1	)
Net cash provided from (used in) financing activities			(10	)			(143	)			46				2				(105	)
Effect of exchange rate changes on cash			—				—				(4	)			—				(4	)
Net change in cash and cash equivalents			—				(232	)			49				—				(183	)
Cash and cash equivalents at beginning of period			—				342				1,219				—				1,561
Cash and cash equivalents at end of period		$	—			$	110			$	1,268			$	—			$	1,378

 

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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 March 31, 2014
																		Newmont
		Newmont																Mining
		Mining				Newmont				Other								Corporation
Condensed Consolidating Balance Sheet		Corporation				USA				Subsidiaries				Eliminations				Consolidated
Assets
Cash and cash equivalents		$	—			$	324			$	1,151			$	—			$	1,475
Trade receivables			—				28				178				—				206
Accounts receivable			—				23				296				—				319
Intercompany receivable			1,925				6,131				4,618				(12,674	)			—
Investments			—				1				82				—				83
Inventories			—				161				653				—				814
Stockpiles and ore on leach pads			—				393				367				—				760
Deferred income tax assets			3				140				96				—				239
Other current assets			—				71				1,280				—				1,351
Current assets			1,928				7,272				8,721				(12,674	)			5,247
Property, plant and mine development, net			31				3,028				11,122				(43	)			14,138
Investments			—				12				381				—				393
Investments in subsidiaries			14,187				4,354				2,855				(21,396	)			—
Stockpiles and ore on leach pads			—				468				2,255				—				2,723
Deferred income tax assets			711				301				926				(522	)			1,416
Long-term intercompany receivable			3,176				62				377				(3,615	)			—
Other long-term assets			50				231				600				—				881
Total assets		$	20,083			$	15,728			$	27,237			$	(38,250	)		$	24,798
Liabilities
Debt		$	567			$	1			$	47			$	—			$	615
Accounts payable			—				59				404				—				463
Intercompany payable			3,636				4,519				4,519				(12,674	)			—
Employee-related benefits			—				113				134				—				247
Income and mining taxes			—				1				26				—				27
Other current liabilities			81				126				1,325				—				1,532
Current liabilities			4,284				4,819				6,455				(12,674	)			2,884
Debt			5,562				7				577				—				6,146
Reclamation and remediation liabilities			—				178				1,341				—				1,519
Deferred income tax liabilities			—				25				1,193				(522	)			696
Employee-related benefits			5				171				157				—				333
Long-term intercompany payable			213				—				3,445				(3,658	)			—
Other long-term liabilities			—				20				319				—				339
Total liabilities			10,064				5,220				13,487				(16,854	)			11,917
Equity
Newmont stockholders’ equity			10,019				10,508				9,183				(19,691	)			10,019
Noncontrolling interests			—				—				4,567				(1,705	)			2,862
Total equity			10,019				10,508				13,750				(21,396	)			12,881
Total liabilities and equity		$	20,083			$	15,728			$	27,237			$	(38,250	)		$	24,798

 

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

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

 

		At December 31, 2013
																		Newmont
		Newmont																Mining
		Mining				Newmont				Other								Corporation
Condensed Consolidating Balance Sheet		Corporation				USA				Subsidiaries				Eliminations				Consolidated
Assets
Cash and cash equivalents		$	—			$	428			$	1,127			$	—			$	1,555
Trade receivables			—				21				209				—				230
Accounts receivable			—				23				229				—				252
Intercompany receivable			1,400				6,089				5,672				(13,161	)			—
Investments			22				1				55				—				78
Inventories			—				146				571				—				717
Stockpiles and ore on leach pads			—				358				447				—				805
Deferred income tax assets			3				157				86				—				246
Other current assets			—				73				933				—				1,006
Current assets			1,425				7,296				9,329				(13,161	)			4,889
Property, plant and mine development, net			32				3,026				11,263				(44	)			14,277
Investments			—				7				432				—				439
Investments in subsidiaries			13,982				5,299				2,839				(22,120	)			—
Stockpiles and ore on leach pads			—				512				2,168				—				2,680
Deferred income tax assets			694				320				985				(526	)			1,473
Long-term intercompany receivable			3,204				62				367				(3,633	)			—
Other long-term assets			46				228				575				—				849
Total assets		$	19,383			$	16,750			$	27,958			$	(39,484	)		$	24,607
Liabilities
Debt		$	561			$	1			$	33			$	—			$	595
Accounts payable			—				80				398				—				478
Intercompany payable			3,092				5,404				4,665				(13,161	)			—
Employee-related benefits			—				175				166				—				341
Income and mining taxes			—				—				13				—				13
Other current liabilities			71				161				1,081				—				1,313
Current liabilities			3,724				5,821				6,356				(13,161	)			2,740
Debt			5,556				7				582				—				6,145
Reclamation and remediation liabilities			—				176				1,337				—				1,513
Deferred income tax liabilities			—				23				1,138				(526	)			635
Employee-related benefits			5				169				149				—				323
Long-term intercompany payable			196				—				3,481				(3,677	)			—
Other long-term liabilities			—				20				322				—				342
Total liabilities			9,481				6,216				13,365				(17,364	)			11,698
Equity
Newmont stockholders’ equity			9,902				10,534				9,984				(20,427	)			9,993
Noncontrolling interests			—				—				4,609				(1,693	)			2,916
Total equity			9,902				10,534				14,593				(22,120	)			12,909
Total liabilities and equity		$	19,383			$	16,750			$	27,958			$	(39,484	)		$	24,607

 

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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 March 31, 2013
		Newmont Mining Corporation												Newmont USA												Other Subsidiaries												Eliminations
Condensed Consolidating Statement of Income		As Previously Presented				Change				As Currently Presented				As Previously Presented				Change				As Currently Presented				As Previously Presented				Change				As Currently Presented				As Previously Presented				Change				As Currently Presented
Sales		$	—			$	—			$	—			$	488			$	55			$	543			$	1,689			$	(44	)		$	1,645			$	—			$	—			$	—
Costs and expenses
Costs applicable to sales			—				—				—				220				41				261				824				(28	)			796				—				—				—
Amortization			—				—				—				40				8				48				227				(8	)			219				—				—				—
Reclamation and remediation			—				—				—				2				—				2				16				—				16				—				—				—
Exploration			—				—				—				8				3				11				51				(3	)			48				—				—				—
Advanced projects, research and development			—				—				—				12				1				13				40				(1	)			39				—				—				—
General and administrative			—				—				—				30				—				30				26				—				26				—				—				—
Other expense, net			—				—				—				16				(1	)			15				84				1				85				—				—				—
			—				—				—				328				52				380				1,268				(39	)			1,229				—				—				—
Other income (expense)
Other income, net			—				—				—				4				(1	)			3				22				1				23				—				—				—
Interest income—intercompany			48				—				48				7				—				7				(2	)			7				5				(53	)			(7	)			(60	)
Interest expense—intercompany			(3	)			—				(3	)			—				—				—				(50	)			(7	)			(57	)			53				7				60
Interest expense, net			(65	)			—				(65	)			(2	)			—				(2	)			2				—				2				—				—				—
			(20	)			—				(20	)			9				(1	)			8				(28	)			1				(27	)			—				—				—
Income (loss) before income and mining tax and other items			(20	)			—				(20	)			169				2				171				393				(4	)			389				—				—				—
Income and mining tax benfit (expense)			7				—				7				(50	)			—				(50	)			(138	)			1				(137	)			—				—				—
Equity income (loss) of affiliates			328				(1	)			327				115				(1	)			114				43				—				43				(490	)			2				(488	)
Income from continuing operations			315				(1	)			314				234				1				235				298				(3	)			295				(490	)			2				(488	)
Net income			315				(1	)			314				234				1				235				298				(3	)			295				(490	)			2				(488	)
Net income attributable to noncontrolling interests			—				—				—				—				—				—				(67	)			1				(66	)			25				(1	)			24
Net income attributable to Newmont stockholders		$	315			$	(1	)		$	314			$	234			$	1			$	235			$	231			$	(2	)		$	229			$	(465	)		$	1			$	(464	)
Comprehensive income		$	254			$	(1	)		$	253			$	238			$	1			$	239			$	190			$	(2	)		$	188			$	(387	)		$	1			$	(386	)
Comprehensive income attributable to noncontrolling interests			—				—				—				—				—				—				(66	)			—				(66	)			25				—				25
Comprehensive income attributable to Newmont stockholders		$	254			$	(1	)		$	253			$	238			$	1			$	239			$	124			$	(2	)		$	122			$	(362	)		$	1			$	(361	)

 

33

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Table of Contents

NEWMONT MINING CORPORATION

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

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

 

		As of the Three Months Ended March 31, 2013
		Newmont Mining Company												Newmont USA												Other Subsidiaries												Eliminations
Condensed Consolidating Statement of Cash Flows		As Previously Presented				Change				As Revised				As Previously Presented				Change				As Revised				As Previously Presented				Change				As Revised				As Previously Presented				Change				As Revised
Operating activities:
Net income (loss)		$	315			$	(1	)		$	314			$	234			$	1			$	235			$	298			$	(3	)		$	295			$	(490	)		$	2			$	(488	)
Adjustments			(310	)			2