Amendment #1 to Form 10-Q/A

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D. C. 20549

 

Form 10-Q/A

(Amendment No. 1)

 

(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, 2003

 

or

 

    ¨

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

 

For the Transition Period From                     to

 

Commission File Number: 001-31240

 

Newmont Mining Corporation

(Exact Name Of Registrant as Specified in Its Charter)

 

Delaware   84-1611629

(State or Other Jurisdiction of

Incorporation or Organization)

 

 

(I.R.S. Employer

Identification No.)

1700 Lincoln Street   80203
Denver, Colorado   (Zip Code)
(Address of Principal Executive Offices)    

 

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

 

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

 

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

 

There were 359,372,160 shares of common stock outstanding on May  8, 2003 (and 46,824,774 exchangeable shares).

 



PART I—FINANCIAL INFORMATION

 

ITEM 1.    FINANCIAL STATEMENTS

 

NEWMONT MINING CORPORATION

 

STATEMENTS OF CONSOLIDATED OPERATIONS AND COMPREHENSIVE INCOME

Unaudited

 

     Three Months Ended March 31,

 
     2003

    2002

 
     (in thousands, except per share)  

Revenues

                

Sales—gold

   $ 714,556     $ 482,234  

Sales—base metals, net

     19,433       9,370  

Royalties

     14,480       3,800  
    


 


       748,469       495,404  
    


 


Costs and expenses

                

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

                

Gold

     399,009       328,535  

Base metals

     15,362       10,705  

Depreciation, depletion and amortization

     130,593       102,186  

Exploration and research

     21,472       11,567  

General and administrative

     26,410       21,315  

Other

     22,019       870  
    


 


       614,865       475,178  
    


 


Other income (expense)

                

Gain on investments, net

     84,337       —    

Gain on gold commodity derivative instruments, net

     55,025       6,331  

Loss on extinguishment of debt

     (19,530 )     —    

Dividends, interest, foreign currency exchange and other income

     31,839       415  

Interest expense, net of capitalized interest of $1,290 and $1,222, respectively

     (29,946 )     (31,137 )
    


 


       121,725       (24,391 )
    


 


Pre-tax income (loss) before minority interest, equity income and impairment of affiliates and cumulative effect of a change in accounting principle

     255,329       (4,165 )

Income tax expense

     (62,563 )     (1,188 )

Minority interest in income of subsidiaries

     (37,789 )     (10,550 )

Equity (loss) income and impairment of affiliates

     (3,189 )     1,404  
    


 


Net income (loss) before cumulative effect of a change in accounting principle

     151,788       (14,499 )

Cumulative effect of a change in accounting principle, net of tax of $11,188 and ($4,147), respectively

     (34,533 )     7,701  
    


 


Net income (loss)

     117,255       (6,798 )

Preferred stock dividends

     —         (1,869 )
    


 


Net income (loss) applicable to common shares

   $ 117,255     $ (8,667 )
    


 


Net income (loss)

   $ 117,255     $ (6,798 )

Other comprehensive income, net of tax

     41,029       27,878  
    


 


Comprehensive income

   $ 158,284     $ 21,080  
    


 


Net income (loss) per common share before cumulative effect of a change in accounting principle, basic and diluted

   $ 0.38     $ (0.06 )

Cumulative effect of a change in accounting principle per common share, basic and diluted

     (0.09 )     0.03  
    


 


Net income (loss) per common share, basic and diluted

   $ 0.29     $ (0.03 )
    


 


Basic weighted average common shares outstanding

     401,890       281,467  
    


 


Diluted weighted average common shares outstanding

     404,219       281,467  
    


 


Cash dividends declared per common share

   $ 0.04     $ 0.03  
    


 


See Notes to Consolidated Financial Statements

 

2


NEWMONT MINING CORPORATION

 

CONSOLIDATED BALANCE SHEETS

Unaudited

 

     March 31, 2003

    December 31, 2002

 
     (in thousands)  
ASSETS                 

Cash and cash equivalents

   $ 380,316     $ 401,683  

Marketable securities - short-term

     12,024       13,188  

Accounts receivable

     27,519       44,510  

Inventories

     256,370       169,324  

Stockpiles and ore on leach pads

     246,843       328,993  

Prepaid taxes

     19,365       28,335  

Derivative instruments

     1,446       4,575  

Deferred stripping costs - short term

     30,184       32,085  

Deferred income tax assets

     47,912       51,451  

Other current assets

     38,977       39,112  
    


 


Current assets

     1,060,956       1,113,256  

Property, plant and mine development, net

     2,360,336       2,317,880  

Mineral interests and other intangible assets, net

     1,408,284       1,415,348  

Investments

     820,500       1,155,852  

Marketable securities - long-term

     266,444       —    

Deferred stripping costs - long-term

     31,565       23,302  

Long-term stockpiles and ore on leach pads

     228,828       199,761  

Derivative instruments

     3,986       3,022  

Deferred income tax assets

     834,886       761,428  

Other long-term assets

     146,704       140,093  

Goodwill

     3,006,086       3,024,576  
    


 


Total assets

   $ 10,168,575     $ 10,154,518  
    


 


LIABILITIES                 

Current portion of long-term debt

   $ 82,858     $ 115,322  

Accounts payable

     126,879       105,277  

Deferred income tax liabilities

     7,478       28,469  

Derivative instruments

     53,371       74,999  

Other accrued liabilities

     431,695       369,396  
    


 


Current liabilities

     702,281       693,463  

Long-term debt

     1,577,054       1,701,282  

Reclamation and remediation liabilities

     423,617       288,536  

Deferred revenue from sale of future production

     53,841       53,841  

Derivative instruments

     189,925       388,659  

Deferred income tax liabilities

     678,042       656,452  

Employee related benefits

     225,777       234,103  

Other long-term liabilities

     369,747       364,376  
    


 


Total liabilities

     4,220,284       4,380,712  
    


 


Commitments and contingencies (Notes 11 and 17)

                

Minority interest in subsidiaries

     375,124       354,558  
    


 


STOCKHOLDERS’ EQUITY                 

Preferred stock—$5.00 par value;
Authorized—5.0 million shares
Issued and outstanding—none

     —         —    

Common stock—$1.60 par value;
Authorized—750 million shares at each period, respectively
Issued and outstanding—

                

Common: 353.8 million and 353.2 million shares issued, less 59 thousand and 9 thousand treasury shares, respectively

Exchangeable: 55.9 million shares, less 7.5 million and 7.1 million redeemed shares, respectively

     566,276       565,019  

Additional paid-in capital

     5,032,846       5,038,468  

Accumulated other comprehensive loss

     (22,997 )     (64,026 )

Retained deficit

     (2,958 )     (120,213 )
    


 


Total stockholders’ equity

     5,573,167       5,419,248  
    


 


Total liabilities and stockholders’ equity

   $ 10,168,575     $ 10,154,518  
    


 


See Notes to Consolidated Financial Statements

 

3


NEWMONT MINING CORPORATION

 

STATEMENTS OF CONSOLIDATED CASH FLOWS

Unaudited

 

     Three Months Ended
March 31,


 
     2003

    2002

 
     (in thousands)  

Operating activities:

                

Net income (loss)

   $ 117,255     $ (6,798 )

Adjustments to reconcile net income (loss) to net cash provided by operating activities:

                

Depreciation, depletion and amortization

     130,593       102,186  

Amortization of deferred stripping costs, net

     (6,362 )     6,049  

Deferred tax benefit

     (35,400 )     (4,293 )

Foreign currency exchange (gain) loss

     (19,973 )     3,621  

Minority interest, net of dividends

     37,789       10,550  

Undistributed (gains) losses of affiliated companies

     8,514       (1,404 )

Write-down of inventories, stockpiles and ore on leach pads

     7,688       8,253  

Cumulative effect of a change in accounting principle, net of tax

     34,533       (7,701 )

Loss on extinguishment of debt

     19,530       —    

Gain on investments, net

     (84,337 )     —    

Loss (gain) on sale of assets and other

     1,168       (4,451 )

Gain on gold commodity derivative instruments, net

     (64,849 )     (6,331 )

(Increase) decrease in operating assets:

                

Accounts receivable

     5,855       18,920  

Inventories

     (23,480 )     5,305  

Other assets

     (1,991 )     16,642  

Increase (decrease) in operating liabilities:

                

Accounts payable and other accrued liabilities

     61,018       (40,744 )

Derivatives

     (17,328 )     (9,776 )

Early settlement of derivatives classified as cash flow hedges

     (32,779 )     —    

Other liabilities

     (1,448 )     (18,873 )
    


 


Net cash provided by operating activities

     135,996       71,155  
    


 


Investing activities:

                

Additions to property, plant and mine development

     (81,311 )     (51,830 )

Advances to joint ventures and affiliates

     (56,224 )     (24,750 )

Proceeds from sale of short-term investments

           406,731  

Proceeds from the sale of TVX Newmont Americas

     170,625       —    

Early settlement of other derivatives

     (4,097 )     —    

Cash consideration for Normandy shares

     —         (440,528 )

Cash received from acquisitions, net of transaction costs

     —         422,215  

Proceeds from asset sales and other

     2,381       269  
    


 


Net cash provided by investing activities

     31,374       312,107  
    


 


Financing activities:

                

Proceeds from long-term debt

     —         450,431  

Repayment of long-term debt

     (182,787 )     (475,244 )

Dividends paid on common and preferred stock

     (16,089 )     (13,792 )

Proceeds from stock issuance and other

     934       15,739  
    


 


Net cash used in financing activities

     (197,942 )     (22,866 )
    


 


Effect of exchange rate changes on cash

     9,205       1,731  
    


 


Net change in cash and cash equivalents

     (21,367 )     362,127  

Cash and cash equivalents at beginning of period

     401,683       149,431  
    


 


Cash and cash equivalents at end of period

   $ 380,316     $ 511,558  
    


 


Supplemental information:

                

Interest paid, net of amounts capitalized of $1,290 and $1,222, respectively

   $ 29,557     $ 31,916  

Income taxes paid

   $ 21,560     $ 13,974  

See Notes to Consolidated Financial Statements

 

 

4


NEWMONT MINING CORPORATION

 

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

 

(1)    BASIS OF PREPARATION OF FINANCIAL STATEMENTS

 

The following interim Consolidated Financial Statements of Newmont Mining Corporation and its subsidiaries (collectively, “Newmont” or the “Company”) are unaudited and prepared in accordance with the rules and regulations of the Securities and Exchange Commission for Form 10-Q. Such rules and regulations allow the omission of certain information and footnote disclosures normally included in financial statements prepared in accordance with generally accepted accounting principles as long as the statements are not misleading. In the opinion of management, all adjustments necessary for a fair presentation of these interim statements have been included. These adjustments are of a normal recurring nature, except for the effects of the February 2002 acquisitions. These interim Consolidated Financial Statements should be read in conjunction with the Consolidated Financial Statements of Newmont included in its Annual Report on Form 10-K/A for the year ended December 31, 2002.

 

The Company’s Consolidated Financial Statements have been prepared in accordance with accounting principles generally accepted in the United States of America. The preparation of the Company’s Consolidated Financial Statements requires the Company to make estimates and assumptions that affect the reported amounts of assets and liabilities and the related disclosure of contingent assets and liabilities at the date of the period. The more significant areas requiring the use of management estimates and assumptions relate to mineral reserves that are the basis for future cash flow estimates and units-of-production depreciation, depletion and amortization calculations; environmental, reclamation and closure obligations; estimates of recoverable gold and other minerals in stockpile and leach pads inventories; asset impairments (including impairments of goodwill, long-lived assets, and investments); write-downs of inventory to net realizable value; post-employment, post-retirement and other employee benefit liabilities; valuation allowances for deferred tax assets; reserves for contingencies and litigation; and the fair value and accounting treatment of financial instruments. The Company bases its estimates on the Company’s historical experience and on various other assumptions that are believed to be reasonable under the circumstances. Accordingly, actual results may differ significantly from these estimates under different assumptions or conditions.

 

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

 

Certain amounts for the three months ended March 31, 2002 and at December 31, 2002 have been reclassified to conform to 2003 presentation.

 

5


NEWMONT MINING CORPORATION

 

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

 

(2)    ACQUISITIONS OF NORMANDY AND FRANCO-NEVADA AND GOODWILL

 

During the first quarter of 2002, Newmont acquired Franco-Nevada and Normandy. The effective date for accounting purposes of the acquisitions was February 15, 2002. For more information on the acquisitions and the related purchase price allocation, see Note 3 to the Consolidated Financial Statements in the Annual Report on Form 10-K for the year ended December 31, 2002, filed on March 27, 2003.

 

For information purposes only, the following unaudited pro forma data reflects the consolidated results of operations of Newmont as if the acquisitions of Franco-Nevada and Normandy had taken place on January 1, 2002 (unaudited, in millions, except per share data):

 

     Three months ended
March 31, 2002


 

Revenues

   $ 651.3  

Net loss applicable to common shares before cumulative effect of a change in accounting principle

   $ (149.7 )

Net loss applicable to common shares

   $ (142.0 )

Basic and diluted loss per common share before cumulative effect of a change in accounting principle

   $ (0.38 )

Basic and diluted loss per common share

   $ (0.36 )

Basic and diluted weighted average common shares outstanding

     393.9  

 

On a pro forma basis during the quarter ended March 31, 2002, the net loss reflects mark-to-market losses on derivative instruments totaling $161.3 million, net of tax. The above pro forma amounts do not include the application of hedge accounting to significant portions of the acquired derivative instruments, as hedge accounting documentation was not in place during those periods prior to the acquisition. The pro forma information is not indicative of the results of operations that would have occurred had the acquisitions been consummated on January 1, 2002. The information is not indicative of the combined company’s future results of operations.

 

6


NEWMONT MINING CORPORATION

 

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

 

Changes in the carrying amount of goodwill allocated to reporting units during 2002 and for the first three months of 2003 are summarized in the following table (unaudited, in millions):

 

     Nevada

   Other
North
America


   Total
North
America


   Yanacocha

   Other
South
America


   Total
South
America


Balance at January 1, 2002

   $ —      $ —      $ —      $ —      $      $ —  

Purchase price allocation

     40.9      —        40.9      —        —        —  

Impairment losses

     —        —        —        —        —        —  

Gain (loss) on disposal of separate reporting units

     —        —        —        —        —        —  
    

  

  

  

  

  

Balance at December 31, 2002

     40.9      —        40.9      —        —        —  

Reversal of allowances for acquired deferred tax assets

     —        —        —        —        —        —  

Impairment losses

     —        —        —        —        —        —  

Gain (loss) on disposal of separate reporting units

     —        —        —        —        —        —  
    

  

  

  

  

  

Balance at March 31, 2003

   $ 40.9    $ —        40.9    $ —      $ —      $ —  
    

  

  

  

  

  

 

     Pajingo

   Other
Australia


    Total
Australia


    Zarafshan-
Newmont


   Other
International
Operations


   Total
Gold


Balance at January 1, 2002

   $ —      $ —       $ —       $ —      $ —      $ —  

Purchase price allocation

     56.9      140.8       197.7       —        —        238.6

Impairment losses

     —        —         —         —        —        —  

Gain (loss) on disposal of separate reporting units

     —        —         —         —        —        —  
    

  


 


 

  

  

Balance at December 31, 2002

     56.9      140.8       197.7       —        —        238.6

Reversal of allowances for acquired deferred tax assets

     —        (18.5 )     (18.5 )     —        —        —  

Impairment losses

     —        —         —         —        —        —  

Gain (loss) on disposal of separate reporting units

     —        —         —         —        —        —  
    

  


 


 

  

  

Balance at March 31, 2003

   $ 56.9    $ 122.3     $ 179.2     $ —      $ —      $ 220.1
    

  


 


 

  

  

 

     Base
Metals


   Exploration

   Merchant
Banking


   Corporate
and Other


   Consolidated

 

Balance at January 1, 2002

   $ —      $ —      $ —      $ —      $ —    

Purchase price allocation

     31.5      1,129.5      1,625.0      —        3,024.6  

Impairment losses

     —        —        —        —        —    

Gain (loss) on disposal of separate reporting units

     —        —        —        —        —    
    

  

  

  

  


Balance at December 31, 2002

     31.5      1,129.5      1,625.0      —        3,024.6  

Reversal of allowances for acquired deferred tax assets

     —        —        —        —        (18.5 )

Impairment losses

     —        —        —        —        —    

Gain (loss) on disposal of separate reporting units

     —        —        —        —        —    
    

  

  

  

  


Balance at March 31, 2003

   $ 31.5    $ 1,129.5    $ 1,625.0    $ —      $ 3,006.1  
    

  

  

  

  


 

 

7


NEWMONT MINING CORPORATION

 

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

 

During the three months ended March 31, 2003, the Company reversed a valuation allowance for deferred tax assets related to capital loss carryforwards in Australia due to capital gains generated by the sale of TVX Newmont Americas during the period. The valuation allowance was originally recorded as part of the purchase price allocation for the acquisition of Normandy and was therefore reversed against goodwill.

 

(3)    INVENTORIES

 

     At March 31,
2003


   At December 31,
2002


     (unaudited, in thousands)

Current:

             

In-process

   $ 115,814    $ 46,435

Precious metals

     32,277      19,467

Materials and supplies

     106,782      103,310

Other

     1,497      112
    

  

     $ 256,370    $ 169,324
    

  

 

Write-downs of inventories included in Costs applicable to sales totaled $5.8 million and $1.5 million for the first quarters of 2003 and 2002, respectively. Write-downs in 2003 include write-downs of precious metals inventory of $1.3 million at Minahasa, $0.7 million at Bronzewing, $0.6 million at Martha and $3.2 million at Golden Grove. Write-downs in 2002 primarily related to $1.1 million for in-process inventories at Nevada.

 

(4)    STOCKPILES AND ORE ON LEACH PADS

 

     At March 31,
2003


   At December 31,
2002


     (unaudited, in thousands)

Current:

             

Stockpiles

   $ 102,974    $ 104,997

Ore on leach pads

     143,869      223,996
    

  

     $ 246,843    $ 328,993
    

  

Long-term:

             

Stockpiles

   $ 147,082    $ 136,116

Ore on leach pads

     81,746      63,645
    

  

     $ 228,828    $ 199,761
    

  

 

Write-downs of stockpiles and ore on leach pads included in Costs applicable to sales totaled $1.9 million and $6.8 million for the first quarters of 2003 and 2002, respectively, to reduce the carrying value of stockpiles and ore on leach pads to net realizable value. Stockpile and ore on leach pad write-downs in 2003 included $0.9 million at Martha for stockpiles and $0.8 million and $0.2 million, respectively, for stockpiles and ore on leach pads at Nevada. Write-downs in 2002 primarily related to $6.7 million for stockpiles at Nevada.

 

8


NEWMONT MINING CORPORATION

 

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

 

(5)    GAIN ON INVESTMENTS, NET

 

Gain on investments for the three months ended March 31, 2003 and 2002 is summarized as follows:

 

     Three months ended
March 31,


     2003

   2002

Gain on exchange of Echo Bay shares for Kinross marketable securities

   $ 84,337    $ —  
    

  

 

Lihir Gold

 

At March 31, 2002, the Company held a 9.74% interest in Lihir Gold, which was accounted for as an investment in marketable securities. During the three month period ended March 31, 2002, unrealized holding gains of $11.0 million were credited to Other comprehensive income, net of tax to reflect the market value increase during the period. On April 12, 2002, Newmont sold its equity holding in Lihir Gold through a block trade to Macquarie Equity Capital Markets Limited in Australia for approximately $84 million, resulting in the recognition of a pre-tax gain of approximately $47.3 million in the Statement of Consolidated Operations.

 

Kinross Gold Corporation

 

On January 31, 2003, Kinross Gold Corporation (“Kinross”), Echo Bay Mines Ltd. (“Echo Bay”) and TVX Gold Inc. were combined, and TVX Gold acquired Newmont’s 49.9% interest in the TVX Newmont Americas joint venture. Under the terms of the combination and acquisition, Newmont received a 13.8% interest in the restructured Kinross in exchange for its then 45.67% interest in Echo Bay and $180 million for its interest in TVX Newmont Americas. Cash proceeds of $170.6 million were received immediately after the close of the transaction. The remaining $9.4 million, originally held in escrow, was received subsequent to the end of the first quarter. Newmont recognized a pre-tax gain of $84.3 million in the transaction.

 

Newmont classifies its investment in Kinross as a long-term, available-for-sale marketable security. Changes in the fair value of the investment in Kinross are marked-to-market with the changes recorded in Other comprehensive income, net of tax. At March 31, 2003, the fair value of the Kinross investment was $266.4 million. During the quarter ended March 31, 2003, a loss of $46.0 million was recorded to Other comprehensive income, net of tax for changes in the fair value of the investment (see Note 12). If the decline in value of the Kinross shares continues, Newmont may record a loss for an other-than-temporary decline in value in a future period.

 

Sales of Debt Securities

 

As part of the Franco-Nevada acquisition in February 2002, the Company acquired significant investments in marketable debt securities. These debt securities were classified as available for sale and recorded at fair value of $402.6 million under purchase accounting. All such securities were sold immediately after the Franco-Nevada acquisition for net proceeds of $402.9 million, resulting in the recognition of a pre-tax gain of $0.3 million, which is included in Dividends, interest, foreign currency exchange, and other income for the quarter ended March 31, 2002.

 

9


NEWMONT MINING CORPORATION

 

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

 

(6)    DEFERRED STRIPPING COSTS

 

Movements in the deferred stripping costs balance were as follows:

 

    

At March 31,

2003


    At December 31,
2002


 
     (unaudited, in thousands)  

Opening balance

   $ 55,387     $ 91,631  

Additions

     40,566       65,371  

Amortization

     (34,204 )     (101,615 )
    


 


Closing balance

   $ 61,749     $ 55,387  
    


 


 

(7)    PROPERTY, PLANT AND MINE DEVELOPMENT

 

    At March 31, 2003

 

At December 31, 2002


    Cost

  Accumulated
Depreciation and
Depletion


   

Net Book

Value


  Cost

  Accumulated
Depreciation and
Depletion


   

Net Book

Value


    (unaudited, in thousands)

Land

  $ 72,236   $     $ 72,236   $ 71,521   $     $ 71,521

Buildings and equipment

    4,171,224     (2,480,413 )     1,690,811     4,129,292     (2,376,431 )     1,752,861

Mine development

    1,073,584     (639,671 )     433,913     1,005,166     (580,594 )     424,572

Asset retirement cost

    131,493     (65,790 )     65,703              

Construction-in-progress

    97,673           97,673     68,926           68,926
   

 


 

 

 


 

Total

  $ 5,546,210   $ (3,185,874 )   $ 2,360,336   $ 5,274,905   $ (2,957,025 )     $ 2,317,880
   

 


 

 

 


 

Leased assets included above in property, plant and mine development are as follows:

Leased assets

  $ 361,889   $ (154,231 )     $ 207,658   $ 361,889   $ (146,884 )   $ 215,005
   

 


 

 

 


 

 

10


NEWMONT MINING CORPORATION

 

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

 

(8)    MINERAL INTERESTS AND OTHER INTANGIBLE ASSETS

 

     At March 31, 2003

   At December 31, 2002

     Carrying
Value


   Accumulated
Amortization


    Net Book
Value


   Carrying
Value


   Accumulated
Amortization


    Net Book
Value


     (unaudited, in thousands)

Mineral Interests:

                                           

Production stage

                                           

Mineral interests

   $ 793,949    $ (346,538 )   $ 447,411    $ 712,098    $ (325,822 )   $ 386,276

Royalties–net smelter returns

     223,089      (16,225 )     206,864      222,614      (12,751 )     209,863

Royalties–net profit interest

     17,767      (3,294 )     14,473      17,340      (3,231 )     14,109
    

  


 

  

  


 

       1,034,805      (366,057 )     668,748      952,052      (341,804 )     610,248
    

  


 

  

  


 

Development stage

                                           

Mineral interests

     114,832            114,832      92,757            92,757

Royalties–net smelter returns

     1,420            1,420      1,321            1,321

Royalties–net profit interest

     6,363      (68 )     6,295      5,921      (50 )     5,871
    

  


 

  

  


 

       122,615      (68 )     122,547      99,999      (50 )     99,949
    

  


 

  

  


 

Exploration stage

                                           

Mineral interests

     542,435      (10,602 )     531,833      632,284      (8,449 )     623,835

Royalties-net smelter returns

     5,751      (394 )     5,357      5,700      (314 )     5,386
    

  


 

  

  


 

       548,186      (10,996 )     537,190      637,984      (8,763 )     629,221
    

  


 

  

  


 

Total mineral interests

     1,705,606      (377,121 )     1,328,485      1,690,035      (350,617 )     1,339,418
    

  


 

  

  


 

Oil and Gas:

                                           

Producing property

                                           

Royalties–net refining returns

     40,798      (4,831 )     35,967      37,964      (3,842 )     34,122

Working interest

     19,805      (1,713 )     18,092      18,430      (1,400 )     17,030
    

  


 

  

  


 

       60,603      (6,544 )     54,059      56,394      (5,242 )     51,152
    

  


 

  

  


 

Non-producing property

                                           

Royalties– net refining returns

     5,106            5,106      4,751            4,751

Working interest

     7,619            7,619      7,090            7,090
    

  


 

  

  


 

       12,725            12,725      11,841            11,841
    

  


 

  

  


 

Total oil and gas

     73,328      (6,544 )     66,784      68,235      (5,242 )     62,993
    

  


 

  

  


 

Other

     13,015            13,015      12,937            12,937
    

  


 

  

  


 

Total

   $ 1,791,949    $ (383,665 )   $ 1,408,284    $ 1,771,207    $ (355,859 )   $ 1,415,348
    

  


 

  

  


 

 

The Company’s mineral interests and oil and gas interests intangible assets are subject to amortization. The aggregate amortization expense for the three-month periods ended March 31, 2003 and 2002 was $21.5 million and $15.4 million, respectively.

 

11


NEWMONT MINING CORPORATION

 

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

 

(9)    INVESTMENTS AND EQUITY INCOME OF AFFILIATES

 

Investments in Affiliates:

 

    

At March 31,

2003


  

At December 31,

2002


     (unaudited, in thousands)

Investments in affiliates:

             

Batu Hijau

   $ 610,002    $ 610,075

TVX Newmont Americas

     —        183,028

Echo Bay Mines

     —        210,643

Australian Magnesium Corporation

     95,757      44,244

AGR Matthey Joint Venture

     11,588      11,213
    

  

     $ 717,347    $ 1,059,203
    

  

Other:

             

Newmont Australia infrastructure bonds

     103,153      96,649
    

  

     $ 820,500    $ 1,155,852
    

  

 

Equity Income (Loss) of Affiliates:

 

     Three Months Ended March 31,

     2003

    2002

     (unaudited, in thousands)

Batu Hijau

   $ 7,353     $ 1,404

TVX Newmont Americas

     810       —  

Australian Magnesium Corporation

     (11,727 )     —  

AGR Matthey Joint Venture

     375       —  
    


 

Total

   $ (3,189 )   $ 1,404
    


 

 

Investment in Batu Hijau

 

The Company and an affiliate Sumitomo Corporation (“Sumitomo”) are partners with interests of 56.25% and 43.75%, respectively, in the Nusa Tenggara Partnership (“NTP”), which holds 80% of P.T. Newmont Nusa Tenggara (“PTNNT”), the owner of the Batu Hijau copper/gold mine in Indonesia. Due to the significant participating rights provided to Sumitomo under the terms of the NTP partnership agreement, the Company uses the equity method to account for its investment in NTP. The Company and Sumitomo have an indirect 45% and 35% interest, respectively, in PTNNT. The remaining 20% interest is held by an unrelated Indonesian company. Because the Company and Sumitomo have carried the investment of the 20% owner, the Company and Sumitomo recognize 56.25% and 43.75% of PTNNT’s net income (loss), respectively, until recouping the bulk of its construction investment, including interest. Under the Contract of Work, a portion of PTNNT not already owned by Indonesian nationals must be offered for sale to the Indonesian government or to Indonesian nationals, beginning in the sixth year after mining operations commenced. The effect of this provision could potentially reduce the Company’s and Sumitomo’s ownership to 49% by the end of the tenth year after mining operations commenced.

 

The Company’s equity investment in PTNNT was $610.0 million and $610.1 million at March 31, 2003 and December 31, 2002, respectively, based on accounting principles generally accepted in the United States. At March 31, 2003, differences between 56.25% of PTNNT’s net assets of $253.2 million and Newmont’s investment included (i) $45.2 million for Newmont’s contribution prior to the formation of NTP;

 

12


NEWMONT MINING CORPORATION

 

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

 

(ii) $108.0 million for the fair market value adjustment recorded by Newmont in conjunction with the purchase of a subsidiary minority interest, net of amortization; (iii) $393.4 million for the contributions and interest income recorded by Newmont classified as debt and interest expense by PTNNT; (iv) negative $121.6 million for contributions to PTNNT, through NTP, by Sumitomo disproportionate to its equity interest, net of amounts recorded; (v) negative $76.9 million for stockholders’ equity of the carried interest partner; (vi) $9.2 million for other intercompany charges; and (vii) negative $0.5 million for other adjustments recorded by Newmont. At December 31, 2002, differences between 56.25% of PTNNT’s net assets of $257.6 million and Newmont’s investment included (i) $45.2 million for Newmont’s contribution prior to the formation of NTP; (ii) $109.1 million for the fair market value adjustment recorded by Newmont in conjunction with the purchase of a subsidiary minority interest, net of amortization; (iii) $391.2 million for the contributions and interest income recorded by Newmont classified as debt and interest expense by PTNNT; (iv) negative $122.6 million for contributions in PTNNT, through NTP, by Sumitomo disproportionate to its equity interest, net of amounts recorded; (v) negative $76.9 million for stockholders’ equity of the carried interest partner; (vi) $7.1 million for other intercompany charges; and (vii) negative $0.6 million for other adjustments recorded by Newmont. Certain of these amounts are amortized or depreciated on a units-of-production basis on proven on probable reserves. Below is a description of Newmont’s equity income (loss) in PTNNT, where the net income (loss) reflects the elimination of interest between PTNNT and NTP.

 

Newmont’s first quarter equity income in PTTNT was $7.4 million for 2003 versus $1.4 million for the same period in 2002. Newmont’s equity income for the three months ended March 31, 2003 was based on 56.25% of PTTNT’s net loss of $8.9 million, adjusted for the elimination of $1.8 million of inter-company interest, $1.7 million of inter-company management fees, the cumulative effect of reclamation and remediation liabilities of $8.0 million and other adjustments of $0.9 million. For the comparable 2002 period, Newmont’s equity income was based on 56.25% of PTNNT’s net loss of $6.4 million, adjusted for the elimination of $1.1 million of inter-company interest, $2.7 million of inter-company management fees, and amortization adjustments of $1.2 million.

 

Newmont and its partner provide a contingent support line of credit to PTNNT. During the three month periods ended March 31, 2003 and 2002, respectively, Newmont funded $0.0 and $24.8 million under this facility as its pro-rata share for capital expenditures. Additional support from NTP’s partners available under this facility is $115.0 million, of which Newmont’s pro-rata share is $64.7 million.

 

The following is NTP summarized financial information based on accounting principles generally accepted in the United States. The results of operations and assets and liabilities are not reflected in the Company’s Consolidated Financial Statements. As described earlier, the Company accounts for NTP as an equity investment.

 

     Three Months Ended March 31,

 
     2003

    2002

 
     (unaudited, in thousands)  

Revenues, net of smelting and refining costs

   $ 74,873     $ 71,905  

Revenues from by-product sales credited to production costs

   $ 33,612     $ 22,133  

Gross profit (loss)

   $ 10,155     $ (4,326 )

Net income (loss) before cumulative effect of a change in accounting principle

   $ 5,960     $ (4,430 )

Net income (loss)

   $ (8,258 )   $ (4,430 )

 

13


NEWMONT MINING CORPORATION

 

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

 

In the three-month period ended March 31, 2003, NTP recorded a charge of $14.2 million to reflect the cumulative effect of the adoption of Statement of Financial Accounting Standards (“SFAS”) No. 143 “Accounting for Asset Retirement Obligations.”

 

     At March 31,
2003


   At December 31,
2002


     (unaudited, in thousands)

Current assets

   $ 350,435    $ 313,110

Property, plant and mine development, net

   $ 1,634,458    $ 1,658,912

Mineral interest

   $ 185,844    $ 188,294

Other assets

   $ 345,622    $ 282,133

Debt and related interest to partners and affiliates

   $ 260,726    $ 259,793

Other current liabilities

   $ 194,366    $ 103,117

Long-term debt—third parties (including current portion)

   $ 935,771    $ 935,771

Other liabilities

   $ 152,159    $ 163,346

 

For the three months ended March 31, 2003 and 2002, PTNNT recorded gross revenues, before smelting and refining costs, of $78.9 million and $95 million, respectively, which were subject to final pricing adjustments. The average price adjustment for copper was 6.3% and 2.2% for the three months ended March 31, 2003 and 2002, respectively. The average price adjustment for gold was 1.6% and 0.6% for the three months ended March 31, 2003 and 2002, respectively.

 

By-product commodities, gold and silver, represented 45% and 31% of sales, net of smelting and refining charges, and reduced production costs by 45% and 39% for the three-month periods ended March 31, 2003 and 2002, respectively.

 

At March 31, 2003, PTNNT had consolidated embedded copper derivatives on 108.6 million pounds of copper recorded at an average price of $0.73 per pound. These derivatives are expected to be finally priced during the second quarter of 2003. A one-cent movement in the average price used for these derivatives will have an approximate $0.7 million impact on PTNNT’s 2003 net income.

 

PTNNT entered into a series of copper hedging transactions in March 2002. At March 31, 2002, 23,400 metric tonnes of copper were hedged. These contracts were settled during the second quarter of 2002. These contracts allowed PTNNT to realize an average price of $1,619 per metric tonne (approximately $0.73 per pound).

 

In 2001, PTNNT entered into two diesel hedging contracts for 360,000 barrels each at a fixed price of $27.39 per barrel and $27.98 per barrel, respectively. Each of these contracts covers purchases of 15,000 barrels monthly and will expire in August and September of 2003, respectively. Each contract is settled monthly. In December 2002, PTNNT entered into an additional hedge contract for 60,000 barrels over the following 12 months at a fixed price of $27.50 per barrel. These contracts have all been designated as cash flow hedges and the fair value at March 31, 2003 and December 31, 2002 was $1.3 million and $0.6 million, respectively. At March 31, 2003, 140,000 barrels are outstanding for these contracts.

 

TVX Newmont Americas and Echo Bay Mines Ltd.

 

Newmont had a 49.9% interest and an equity investment of $183.0 million in TVX Newmont Americas joint venture at December 31, 2002. The Company’s equity income from TVX Newmont Americas was $0.8 million, and $5.3 million in dividends were received during the quarter ended March 31, 2003. On January 31, 2003, Newmont sold its interest in TVX Newmont Americas for $180 million.

 

14


NEWMONT MINING CORPORATION

 

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

 

On January 31, 2003, Kinross, Echo Bay and TVX Gold Inc. were combined. Under the terms of the combination and acquisition, Newmont received a 13.8% interest in the restructured Kinross in exchange for its then 45.67% interest in Echo Bay. Newmont recorded a pre-tax gain on the transactions of $83.4 million (See Note 4).

 

Australian Magnesium Corporation

 

As of December 31, 2002, Newmont had a 22.8% equity and voting interest in Australian Magnesium Corporation (“AMC”) and a loan receivable from AMC in the amount of A$37 million (approximately $22 million). On January 3, 2003, Newmont contributed A$100 million (approximately $56.2 million) in equity to AMC increasing its ownership to 40.9%. However, due to additional equity contributions by other shareholders on January 31, 2003, Newmont’s interest decreased to 27.8%. At March 31, 2003, the Company’s investment in AMC, exclusive of the loan receivable, was $95.8 million.

 

In the first quarter of 2003, Newmont’s equity loss in AMC was $0.7 million and Newmont recorded an increase of $7.0 million to Additional paid-in capital on the dilution of its interest in AMC (discussed above). In addition, the Company recorded a write down of $11.0 million to the investment balance for an other than temporary decline in value. See Note 18, Subsequent Events.

 

At March 31, 2003, differences between the Company’s share of $107.8 million of AMC’s net assets and Newmont’s investment include: (i) a negative $105.0 million adjustment for the fair market value of property, plant and mine development; (ii) $22.5 million for an outstanding receivable from AMC; and (iii) total fair market value increases of $70.4 million to mineral interests. At December 31, 2002, differences between the Company’s share of $50.0 million of AMC’s net assets and Newmont’s investment include: (i) a negative $51.9 million adjustment for the fair market value of property, plant, equipment and mine development; (ii) a $11.2 million provision for Newmont’s liability to contribute additional equity at a share price above fair market value; (iii) $22.5 million for an outstanding receivable from AMC; and (iv) total fair market value increases of $34.8 million to mineral interests.

 

AGR Matthey Joint Venture

 

Newmont holds a 40% interest in a joint venture with the West Australian Mint and Johnson Matthey (Australia) Ltd. known as AGR Matthey Joint Venture (“AGR”). Newmont has no guarantees related to this investment. At March 31, 2003 and December 31, 2002, the difference between Newmont’s investment in AGR and its $11.9 million ($11.5 million at December 31, 2002) share of AGR’s net assets consisted of a $0.3 million reduction in long-lived assets recorded by Newmont.

 

15


NEWMONT MINING CORPORATION

 

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

 

(10)    LONG-TERM DEBT

 

     March 31,
2003


    December 31,
2002


 
     (unaudited, in thousands)  

Sale-leaseback of refractory ore treatment plant

   $ 298,944     $ 307,880  

8 3/8% debentures, net of discount

     182,553       204,658  

8 5/8% notes, due May 2011, net of discount

     222,222       274,339  

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

     121,100       152,690  

Newmont Australia 7 1/2% notes, net of premium

     91,493       101,850  

Newmont Yandal 8 7/8% notes

     237,220       237,220  

6% convertible subordinated debentures

     99,980       99,980  

Medium-term notes

     17,000       32,000  

Newmont Australia infrastructure bonds

     105,965       99,680  

Prepaid forward sales obligation

     145,000       145,000  

Interest rate swaps

     (8,078 )     (6,684 )

Project financings, capital leases and other

     146,513       167,991  
    


 


       1,659,912       1,816,604  

Current maturities

     (82,858 )     (115,322 )
    


 


     $ 1,577,054     $ 1,701,282  
    


 


 

Scheduled minimum long-term debt repayments are $58.3 million for the remainder of 2003, $176.8 million in 2004, $439.2 million in 2005, $86.0 million in 2006, $74.8 million in 2007 and $824.8 million thereafter.

 

During the three months ended March 31, 2003, the Company repurchased $23.0 million of 8 3/8% debentures, $52.3 million of 8 5/8% debentures due in May 2011, $30.9 million of Newmont Australia 7 5/8% notes and $10.0 million of Newmont Australia 7 1/2% notes for total cash consideration of $135.8 million. As a result of these debt repurchases, the Company recognized a Loss on extinguishment of debt of $19.5 million.

 

(11)    RECLAMATION AND REMEDIATION

 

The Company’s mining and exploration activities are subject to various federal and state laws and regulations governing the protection of the environment. These laws and regulations are continually changing and are generally becoming more restrictive. The Company conducts its operations so as to protect the public health and environment and believes its operations are in compliance with all applicable laws and regulations. The Company has made, and expects to make in the future, expenditures to comply with such laws and regulations, but cannot predict the amount of such future expenditures. Estimated future reclamation costs are based principally on legal and regulatory requirements.

 

Effective January 1, 2003, the Company adopted SFAS No. 143. As a result, Reclamation and remediation liabilities increased by $120.7 million for the fair value of the estimated asset retirement obligations, Other accrued liabilities increased by $2.3 million for worker participation bonuses in Peru (bonuses required by law at Minera Yanacocha based on net income), Deferred income tax assets increased by $6.9 million, Property, plant and mine development, net increased by $69.1 million, Minority interest in subsidiaries decreased by $16.2 million and a $34.5 million loss was recorded in the Cumulative effect of a change in accounting principle, net of tax. At March 31, 2003 and December 31, 2002, $376.0 million and $254.1 million, respectively, were accrued for reclamation obligations relating to currently or recently producing 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

 

16


NEWMONT MINING CORPORATION

 

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

 

remediation plans at the various sites involved. $66.7 million and $48.1 million were accrued for such obligations at March 31, 2003 and December 31, 2002, respectively. These amounts are also included in Reclamation and remediation liabilities.

 

The following is a reconciliation of the total liability for asset retirement obligations (unaudited, in thousands):

 

Balance December 31, 2002

   $ 302,229  

Impact of adoption of SFAS No. 143

     120,707  

Additions to liabilities

     20,533  

Liabilities settled

     (6,478 )

Accretion expense

     5,744  

Revisions

     —    
    


Balance March 31, 2003

   $ 442,735  
    


 

The current portions of Reclamation and remediation liabilities of $19.1 million and $13.7 million at March 31, 2003 and December 31, 2002, respectively, are included in Other accrued liabilities.

 

On a pro forma basis, the liabilities for asset retirement obligations would have been $420.0 million and $422.9 million at January 1, 2002 and December 31, 2002, respectively, if SFAS No. 143 had been applied at the beginning of 2002.

 

There were no assets that were legally restricted for purposes of settling asset retirement obligations at March 31, 2003.

 

The table below presents the impact of the accounting change for the three-month period ended March 31, 2003 and the pro forma effect for the three-month period ended March 31, 2002 as if the change had been in effect for that period (unaudited, in thousands, except per share data):

 

    

Three months ended


 

Increase/(decrease) to net income


   March 31, 2003

   

March 31, 2002

(Pro forma)


 

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

                

Gold

   $ 5,302     $ 153  

Base Metals

     90       —    

Depreciation, depletion, and amortization

     (3,413 )     (3,307 )

Income tax (expense) benefit

     (693 )     1,104  

Minority interest

     (958 )     627  

Equity loss of affiliate

     (480 )     (340 )
    


 


Net income (loss) before cumulative effect of a change in accounting principle

   $ (152 )   $ (1,763 )
    


 


Net income (loss) before cumulative effect of a change in accounting principle per common share, basic and diluted

   $ 0.00     $ (0.01 )
    


 


 

17


NEWMONT MINING CORPORATION

 

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

 

The table below presents pro forma net income and earnings per share before cumulative effect of a change in accounting principle for the three-month period ended March 31, 2002 as if the Company had adopted the SFAS No. 143 as of January 1, 2002 (unaudited, in thousands, except per share data):

 

     Three months ended March 31, 2002

 
     Net loss applicable to
common shares
before cumulative
effect of a change in
accounting principle


    Loss per share
before cumulative
effect of a change
in accounting
principle, basic
and diluted


 

As reported

   $ (16,368 )   $ (0.06 )

Change in accounting method SFAS No. 143

     (1,763 )     (0.01 )
    


 


Pro forma

   $ (18,131 )   $ (0.07 )
    


 


 

(12)    SALES CONTRACTS, COMMODITY AND DERIVATIVE INSTRUMENTS

 

Newmont has a “no hedging” philosophy and generally sells its gold production at market prices. Newmont has, on a limited basis, entered into derivative contracts to protect the selling price for certain anticipated gold production and to manage risks associated with sales contracts, commodities, interest rates and foreign currency. In addition, at the time of Normandy’s acquisition, three of its affiliates had a substantial derivative instrument position. These three affiliates are now known as Newmont Gold Treasury Pty Ltd., Newmont NFM and Newmont Yandal Operations Limited (“NYOL”). Newmont is not required to place collateral with respect to its commodity instruments and there are no margin calls associated with such contracts. A number of NYOL’s hedging positions, however, are governed by agreements that confer on the relevant counterparties a right to terminate the position prior to its agreed scheduled maturity date. Such a termination would result in an immediate cash settlement of that contract based on the contract’s market value on the date of termination. Exercise of termination rights may result in a cash settlement obligation to NYOL hedge counterparties in excess of funds available to NYOL. NYOL obligations, however, are non-recourse to Newmont and its other subsidiaries.

 

Gold Commodity Contracts

 

The tables below are expressed in thousands of ounces of gold, and prices for contracts denominated in A$ have been translated to US$ at the exchange rate at March 31, 2003 of US$0.60 per A$1. For all floating rate instruments, the average prices quoted are gross contractual prices. The net forward prices ultimately realized on floating gold hedging contracts are the sum of the gross contractual forward prices less any associated future financing costs arising from gold borrowing commitments related to such floating rate instruments. Floating put options valuations include a deferred premium cost which is payable in gold ounces upon expiration of the options.

 

For the quarters ended March 31, 2003 and 2002, gains of $22.9 million and $1.0 million, respectively, were included in income in Gain on gold commodity derivative instruments for the ineffective portion of derivative instruments designated as cash flow hedges, and gains of $32.1 million and $5.3 million, respectively, for the change in fair value of gold commodity contracts that do not qualify as hedges. The amount anticipated to be reclassified from Accumulated other comprehensive loss, to income for derivative instruments during the next 12 months is a gain of approximately $9.2 million. The maximum period over which hedged forecasted transactions are expected to occur is 8.7 years.

 

18


Gold Forward Sales Contracts

 

Newmont had the following gold forward sales contracts at March 31, 2003 (unaudited):

 

                                        Fair Value

     Expected Maturity Date or Transaction Date

   Total/
Average


   March 31,
2003


   December 31,
2002


Gold Forward Sales Contracts:


   2003

   2004

   2005

   2006

   2007

   Thereafter

        
(A$ denominated)                                       US$ (000)

Fixed Forwards:

                                                              

Ounces

     743      306      52      52      25           1,178    $  (48,615)    $  (138,095)

Average price

   $ 310    $ 302    $ 297    $ 283    $ 271    $    $ 305              

Floating Rate Forwards:

                                                              

Ounces

       —           61      231      256      26      574    $  (24,983)    $  (37,401)

Average price

   $    $    $ 354    $ 365    $ 376    $ 387    $ 370              

Synthetic Forwards:

                                                              

Ounces

     39      80      80      80      80      80      439    $  (17,587)    $  (34,222)

Average price

   $ 334    $ 325    $ 325    $ 325    $ 325    $ 325    $ 326              

Total:

                                                              

Ounces

     782      386      193      363      361      106      2,191    $  (91,185)    $  (209,717)

Average price

   $ 311    $ 307    $ 327    $ 345    $ 357    $ 340    $ 326              

 

Gold Put Option Contracts

 

Newmont had the following gold put option contracts at March 31, 2003 (unaudited):

 

    Expected Maturity Date or Transaction Date

  Fair Value

Put Option Contracts:


  2003

  2004

  2005

  2006

  2007

  Thereafter

  Total/
Average


  March 31,
2003


  December 31,
2002


                                US$ (000)

US$ Denominated Fixed Purchased Puts:

                                                     

Ounces

    157     203     205     100     20         685   $  (6,234)   $ (6,774)

Average price

  $ 292   $ 292   $ 292   $ 338   $ 397   $   $ 302            

A$ Denominated Fixed Purchased Puts:

                                                     

Ounces

    83     88     33                 204   $  (1,913)   $  (3,690)

Average price

  $ 333   $ 339   $ 321       $   $   $ 334            

A$ Denominated Floating Forward Purchased Puts:

                                                     

Ounces

            207     69     2     213     491   $  (1,407)   $  (12,140 )

Average price

  $   $   $ 354   $ 365   $ 376   $ 367   $ 361            

Total:

                                                     

Ounces

    240     291     445     169     22     213     1,380   $  (9,554 )   $  (22,603)

Average price

  $ 306   $ 306   $ 323   $ 349   $ 395   $ 367   $ 328            

Note: Through December 31, 2002, the floating forward purchased put option contracts were accounted for as cash flow hedges as they were statistically proven to qualify as highly effective cash flow hedges through that date. However, due to changes in market conditions during the first quarter of 2003, these contracts were no longer considered highly effective cash flow hedges. The effect of this change was a gain of $5.4 million that was recorded in Gain on gold commodity derivative instruments, net in income for the first quarter of 2003.

 

19


NEWMONT MINING CORPORATION

 

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

 

Convertible Put Options and Other Instruments

 

Newmont had the following gold convertible put option contracts and other instruments outstanding at March 31, 2003 (unaudited):

 

    Expected Maturity Date or Transaction Date

  Fair Value

Convertible Put Options

and Other Instruments:


  2003

  2004

  2005

  2006

  2007

  Thereafter

  Total/
Average


  March 31,
2003


  December 31,
2002


(A$ denomitated)                               US$ (000)

Floating Convertible Put Options:

                                                     

Ounces

                    42     982     1,024   $ (56,963)   $ (102,952)

Average price

  $   $   $   $   $ 376   $ 405   $ 404            

Knock-out/knock-in Contracts:

                                                     

Ounces

    46     37     49                 132   $ (3,619)   $ (6,794)

Average price

  $ 331   $ 331   $ 331   $   $   $   $ 331            

Indexed Forward Contracts:

                                                     

Ounces

            33     65     65     33     196   $ (12,482)   $ (15,740)

Average price

  $   $   $ 325   $ 325   $ 325   $ 325   $ 325            

Total:

                                                     

Ounces

    46     37     82     65     107     1,015     1,352   $ (76,064)   $ (125,486)

Average price

  $ 331   $ 331   $ 329   $ 325   $ 345   $ 402   $ 385            

 

Sold Convertible Put Options

 

Newmont had the following gold convertible put option contracts and other instruments outstanding at March 31, 2003 (unaudited):

 

    Expected Maturity Date or Transaction Date

  Fair Value

Sold Convertible Put OptionsContracts:


  2003

  2004

  2005

  2006

  2007

  Thereafter

  Total/
Average


  March 31,
2003


  December 31,
2002


(A$ denomitated)                               US$ (000)

Ounces

        30     60     60     60   30     240   $  7,596   $  14,295

Average price

  $   $ 353   $ 356   $ 359   $ 362   365   $ 359            

 

Sold Put Options

 

Newmont had the following sold put option contracts and other instruments outstanding at March 31, 2003 (unaudited):

 

     Expected Maturity Date or Transaction Date

       Fair Value

Sold Put OptionsContracts:


   2003

   2004

   2005

   2006

   2007

   Thereafter

   Total/
Average


  March 31,
2003


    December 31,
2002


(A$ Denominated)                                      US$ (000)

Ounces

     —        —        48      64      64      32      208   $ (4,690 )   $ —  

Average price

   $ —      $ —      $ 350    $ 354    $ 359    $ 362    $ 356              

Note: Sold put options are contracts that give a third party the right, but not the obligation, to sell a specified number of gold ounces to Newmont at a specified strike price on a set date. This position was originally overlaid with a bought put position, however, the bought position was closed out during the three months ended March 31, 2003. As the contracts are to buy gold, they cannot be treated as cash flow hedges; they are therefore marked to market with the change reflected in income.

 

20


NEWMONT MINING CORPORATION

 

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

 

Price-Capped Sales Contracts

 

Newmont had the following price-capped forward sales contracts outstanding at March 31, 2003 (unaudited):

 

     Expected Maturity Date or Transaction Date

        Fair Value

Price-capped Contracts:


   2003

   2004

   2005

   2006

   2007

   Thereafter

   Total/
Average


   March 31,
2003


   December 31,
2002


(US$ Denominated)                                       US$ (000)

Ounces

     —        —        500      —        —        1,850      2,350    n/a    n/a

Average price

   $ —      $ —      $ 350    $ —      $ —      $ 384    $ 377          

Note: The fair value of the price-capped sales contracts of $53.9 million was recorded as deferred revenue in September 2001 and will be included in sales revenue as delivery occurs in 2005 through 2011. The forward sales contracts are accounted for as normal sales contracts under SFAS No. 133 “Accounting for Derivative Instruments and Hedging Activities”.

 

US$/Gold Swap Contracts

 

Newmont Australia entered into a US$/gold swap contract whereby principal payments on US$ bonds are swapped into gold-denominated payments of 600,000 ounces in 2008. Newmont Australia also receives US$ fixed interest payments and pays gold lease rates, which are indexed to market rates. This instrument is marked to market at each period end, with the change reflected in income, and at March 31, 2003 and December 31, 2002 had a negative fair value of $50.9 million and $87.2 million, respectively.

 

Other Sales Contracts, Commodity and Derivative Instruments

 

Foreign Currency Contracts

 

Newmont acquired certain currency swap contracts in the Normandy transaction intended to hedge the currency risk on repayment of US$-denominated debt. These contracts were closed out during the quarter ended June 30, 2002 for net proceeds of $50.8 million. The contracts were accounted for on a mark-to-market basis until closed out, resulting in a loss of $10.9 million for the three months ended March 31, 2002.

 

Newmont also acquired currency swap contracts to receive A$ and pay US$ designated as hedges of A$ denominated debt. The A$-denominated debt was repaid during the quarter ended June 30, 2002 and the contracts are currently undesignated. The contracts are accounted for on a mark-to-market basis. At March 31, 2003 and December 31, 2002 they had a negative fair value of $13.3 million and $21.9 million, respectively.

 

Interest Rate Swap Contracts

 

During the last half of 2001, Newmont entered into contracts to hedge the interest rate risk exposure on a portion of its $275 million 8.625% notes and its $200 million 8.375% debentures. Newmont receives fixed-rate interest payments at 8.625% and 8.375% and pays floating-rate interest amounts based on periodic LIBOR settings plus a spread, ranging from 2.60% to 4.25%. The notional principal amount of these transactions (representing the amount of principal tied to floating interest rate exposure) was $200 million at both March 31, 2003 and December 31, 2002. Half of these contracts expire in July 2005 and half expire in May 2011. For the quarters ended March 31, 2003 and March 31, 2002, these transactions resulted in a reduction in interest expense of $1.7 million and $1.5 million, respectively. These transactions have been designated as fair value hedges and had a fair value of $18.2 million and $13.8 million at March 31, 2003 and December 31, 2002, respectively.

 

21


NEWMONT MINING CORPORATION

 

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

 

(13)    STATEMENT OF COMPREHENSIVE INCOME (LOSS)

 

     Three Months Ended
March 31,


     2003

    2002

     (unaudited, in thousands)

Net income (loss)

   $ 117,255     $ (6,798)

Other comprehensive income, net of tax:

              

Unrealized (loss) gain on marketable equity securities, net of tax of $14,995 and ($5,911), respectively

     (50,843 )     10,978

Foreign currency translation adjustments

     5,963       836

Changes in fair value of cash flow hedge instruments, net of tax of ($32,103) and ($6,885), respectively

     74,907       16,064

Exchange of Echo Bay shares for Kinross shares, net of tax of ($5,924)

     11,002       —  
    


 

Total other comprehensive income, net of tax

     41,029       27,878
    


 

Comprehensive income

   $ 158,284     $ 21,080
    


 

 

(14)    DIVIDENDS, INTEREST, FOREIGN CURRENCY EXCHANGE AND OTHER INCOME

 

     Three Months Ended
March 31,


 
     2003

   2002

 
     (unaudited, in thousands)  

Interest income

   $ 2,205    $ 2,796  

Foreign currency exchange gains (losses)

     24,706      (7,626 )

Loss on sale of marketable securities

     —        (368 )

Gain on sale of exploration properties

     1,273      1,736  

Insurance settlements

     —        3,500  

Other

     3,655      377  
    

  


Total

   $ 31,839      $ 415  
    

  


 

(15)    ACCOUNTING CHANGES

 

Depreciation, Depletion and Amortization

 

During the third quarter of 2002, Newmont changed its accounting policy, retroactive to January 1, 2002, with respect to depreciation, depletion and amortization (“DD&A”) of Property, plant and mine development to exclude future estimated development costs expected to be incurred for certain underground operations. Previously, the Company had included these costs and associated reserves in its DD&A calculations at certain of its underground mining operations. In addition, the Company further revised its policy such that costs incurred to access specific ore blocks or areas that only provide benefit over the life of that area are depreciated, depleted or amortized over the reserves associated with the specific ore area. These changes were made to better match DD&A with the associated ounces of gold sold and to remove the inherent uncertainty in estimating future development costs in arriving at DD&A rates. The cumulative effect of this change in accounting principle through December 31, 2001 increased net income during three months ended March 31, 2002 by $7.7 million, net of tax of $4.1 million, and increased net income per share by $0.03.

 

Reclamation and Remediation

 

In August 2001, the Financial Accounting Standards Board (“FASB”) issued SFAS No. 143, which established uniform methodology for accounting for estimated reclamation and abandonment costs. The statement was adopted as required on January 1, 2003. See Note 11 for complete disclosure of the impact of adopting SFAS 143.

 

22


NEWMONT MINING CORPORATION

 

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

 

(16)    SEGMENT INFORMATION

 

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

 

Three Months Ended March 31, 2003

(Unaudited, in millions)

 

    North America

    South America

    Australia

 
    Nevada

    Other
North
America


    Total
North
America


    Yanacocha

    Other
South
America


   

Total

South
America


    Pajingo

  Other
Australia


    Total
Australia


 

Sales, net

  $ 221.0     $ 40.3     $ 261.3     $ 229.5     $  20.7     $ 250.2     $ 25.8   $ 124.6     $ 150.4  

Royalties

  $     $     $     $     $     $     $   $     $  

Gain on investments, net

  $     $     $     $     $     $     $   $     $  

Loss on extinguishment of debt

  $     $     $     $     $     $     $   $     $  

Interest income

  $     $     $     $ 0.4     $     $ 0.4     $   $ 1.3     $ 1.3  

Interest expense

  $     $     $     $ 1.4     $     $ 1.4     $   $ 8.9     $ 8.9  

Exploration and research expense

  $ 3.3     $     $ 3.3     $ 1.9     $     $ 1.9     $ 0.3   $ 1.4     $ 1.7  

Depreciation, depletion and amortization

  $ 31.6     $ 10.2     $ 41.8     $ 35.5     $ 2.1     $ 37.6     $ 5.6   $ 22.0     $ 27.6  

Pre-tax income (loss) before minority interest, equity income (loss) and cumulative effect

  $ 37.4     $ 3.0     $ 40.4     $ 104.1     $ 5.7     $ 109.8     $ 11.1   $ (3.5 )   $ 7.6  

Equity loss and impairment of Australian Magnesium Corporation

  $     $     $     $     $     $     $   $     $  

Equity income of affiliates

  $     $     $     $     $     $     $   $ 1.2     $ 1.2  

Cumulative effect of a change in accounting principal, net of tax

  $ (14.4 )   $ (3.4 )   $ (17.8 )   $ (32.4 )   $ (0.2 )   $ (32.6 )   $ 0.8   $ (1.1 )   $ (0.3 )

Amortization of deferred stripping, net

  $ (6.6 )   $ (0.1 )   $ (6.7 )   $     $     $     $   $ (1.0 )   $ (1.0 )

Capital expenditures

  $ 20.4     $ 0.4     $ 20.8     $ 35.4     $ 0.5     $ 35.9     $ 1.6   $ 10.1     $ 11.7  

Deferred stripping costs

  $ 43.9     $ 6.5     $ 50.4     $     $     $     $   $ 10.9     $ 10.9  

Total assets

  $ 1,488.8     $ 138.6     $ 1,627.4     $ 1,203.4     $ 29.6     $ 1,233.0     $ 180.5   $ 1,578.2     $ 1,758.7  

 

   

Zarafshan-

Newmont,
Uzbekistan


    Other
International
Operations


    Total
Gold


    Base
Metals


    Exploration

    Merchant
Banking


    Corporate
and Other


    Consolidated

 

Sales, net

  $ 21.2     $ 31.5     $ 714.6     $ 19.4     $     $     $     $ 734.0  

Royalties

  $     $     $     $     $     $ 14.5     $     $ 14.5  

Gain on investments, net

  $     $     $     $     $     $ 84.3     $       84.3  

Loss on extinguishment of debt

  $     $     $     $     $     $ (19.5 )   $     $ (19.5 )

Interest income

  $     $     $ 1.7     $     $     $ 0.1     $ 0.4     $ 2.2  

Interest expense

  $ 0.2     $     $ 10.5     $     $     $     $ 19.4     $ 29.9  

Exploration and research expense

  $     $ 1.8     $ 8.7     $ 0.7     $ 7.4     $     $ 4.7     $ 21.5  

Depreciation, depletion and amortization

  $ 2.6     $ 7.2     $ 116.8     $ 7.1     $ 0.8     $ 4.7     $ 1.2     $ 130.6  

Pre-tax income (loss) before minority interest, equity income (loss) and cumulative effect

  $ 9.8     $ 2.2     $ 169.8     $ (3.8 )   $ (8.1 )   $ 73.5     $ 23.9     $ 255.3  

Equity loss and impairment of Australian Magnesium Corporation

  $     $     $     $     $     $     $ (11.7 )   $ (11.7 )

Equity income of affiliates

  $     $     $ 1.2     $     $     $     $ 7.3     $ 8.5  

Cumulative effect of a change in accounting principal, net of tax

  $ (1.3 )   $ (3.2 )   $ (55.2 )   $ (0.2 )   $     $     $ 20.9     $ (34.5 )

Amortization of deferred stripping, net

  $     $ (1.3 )   $ (6.4 )   $     $     $     $     $ (6.4 )

Capital expenditures

  $ 0.5     $ 6.3     $ 75.2     $ 2.2     $ 0.1     $     $ 3.8     $ 81.3  

Deferred stripping costs

  $     $ 0.5     $ 61.8     $     $     $     $     $ 61.8  

Total assets

  $ 104.7     $ 173.4     $ 4,897.2     $ 245.3     $ 1,276.7     $ 2,262.2     $ 1,487.2     $ 10,168.6  

 

Newmont has made corrections for certain misclassifications resulting from clerical errors that existed in the disclosure of Pre-tax income (loss) before minority interest, equity income (loss) and cumulative effect by segment for the three months ended March 31, 2003; the corrections resulted in an increase of $7.6 million,

 

23


NEWMONT MINING CORPORATION

 

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

 

$7.6 million and $3.9 million for Nevada, Other Australia and Corporate and Other, respectively, and a decrease of $19.1 million in Merchant Banking. Furthermore, Newmont has reclassified the $11.7 million Equity loss and impairment of Australian Magnesium Corporation from Other Australia to Corporate and Other.

 

Three Months Ended March 31, 2002

(Unaudited, in millions)

 

    North America

    South America

  Australia

 
    Nevada

    Other
North
America


    Total
North
America


    Yanacocha

  Other
South
America


  TotalSouth
America


  Pajingo

    Other
Australia


    Total
Australia


 

Sales, net

  $ 176.3     $ 35.6     $ 211.9     $ 140.2   $ 19.9   $ 160.1   $ 16.8     $ 56.2     $ 73.0  

Royalties

  $     $     $     $   $   $   $     $     $  

Interest income

  $     $     $     $ 0.1   $   $ 0.1   $ 0.2     $ 1.4     $ 1.6  

Interest expense

  $ 0.1     $     $ 0.1     $ 2.9   $ 0.1   $ 3.0   $ 0.2     $ 5.9     $ 6.1  

Exploration and research expense

  $ 2.4     $     $ 2.4     $ 1.8   $ 0.4   $ 2.2   $ 0.2     $ 0.6     $ 0.8  

Depreciation, depletion and amortization

  $ 26.8     $ 8.6     $ 35.4     $ 35.0   $ 3.1   $ 38.1   $ 3.5     $ 12.0     $ 15.5  

Pre-tax income (loss) before
minority interest, equity income (loss) and cumulative effect

  $ (8.9 )   $ 2.4     $ (6.5 )   $ 27.7   $ 4.9   $ 32.6   $ 7.8     $ (11.8 )   $ (4.0 )

Equity income (loss) of affiliates

  $     $     $     $   $   $   $     $     $  

Amortization of deferred stripping, net

  $ 6.3     $ (0.3 )   $ 6.0     $   $   $   $     $     $  

Cumulative effect

  $ 0.9     $ 7.2     $ 8.1     $   $   $   $ (0.4 )   $     $ (0.4 )

Capital expenditures

  $ 8.7     $ 3.2     $ 11.9     $ 26.4   $ 0.2   $ 26.6   $ 2.1     $ 5.3     $ 7.4  

Total assets

  $ 1,811.5     $ 180.0     $ 1,991.5     $ 1,054.6   $ 45.6   $ 1,100.2   $ 264.0     $ 2,211.4     $ 2,475.4  

 

   

Zarafshan-

Newmont,
Uzbekistan


  Other
International
Operations


  Total
Gold


  Base
Metals


    Exploration

    Merchant
Banking


    Corporate
and Other


    Consolidated

 

Sales, net

  $ 15.2   $ 22.0   $ 482.2   $ 9.4     $     $     $     $ 491.6  

Royalties

  $   $   $   $     $     $ 3.8     $     $ 3.8  

Interest income

  $   $   $ 1.7   $     $     $ 0.8     $ 0.3     $ 2.8  

Interest expense

  $ 0.1   $   $ 9.3   $     $     $     $ 21.8     $ 31.1  

Exploration and research expense

  $   $   $ 5.4   $ 0.1     $ 3.4     $     $ 2.7     $ 11.6  

Depreciation, depletion and amortization

  $ 2.3   $ 5.4   $ 96.7   $ 0.3     $ 1.5     $ 2.2     $ 1.5     $ 102.2  

Pre-tax income (loss) before minority interest, equity income (loss) and cumulative effect

  $ 5.4   $ 2.3   $ 29.5   $ (1.3 )   $ (4.9 )   $ 1.3     $ (28.8 )   $ (4.2 )

Equity income (loss) of affiliates

  $   $   $   $     $     $ (0.5 )   $ 1.9     $ 1.4  

Amortization of deferred stripping, net

  $   $   $ 6.0   $     $     $     $     $ 6.0  

Cumulative effect

  $   $   $ 7.7   $     $     $     $     $ 7.7  

Capital expenditures

  $ 1.9   $ 0.8   $ 48.6   $ 1.6     $ 0.2     $     $ 1.4     $ 51.8  

Total assets

  $ 108.0   $ 541.2   $ 6,216.3   $ 534.3     $ 230.8     $ 2,082.2     $ 1,056.2     $ 10,117.8  

 

24


NEWMONT MINING CORPORATION

 

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

 

(17)    COMMITMENTS AND CONTINGENCIES

 

General

 

The Company follows Statement of Financial Accounting Standards No. 5, “Accounting for Contingencies,” 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 that an asset had been impaired or a liability had been incurred and the amount of the loss can be reasonably estimated. If a loss contingency is not probable or reasonably estimable, disclosure of the loss contingency is made in the financial statements when it as at least reasonably possible that a loss may be incurred.

 

Operating Segments

 

The Company’s operating segments are identified in Note 16. Except as noted in this paragraph, all of the Company’s commitments and contingencies specifically described in this Note 17 relate to the Corporate and Other category. The Newmont Madencilik A.S. matters are related to the Other International operating segment. The Nevada Operations matters under Newmont USA Limited are related to the Nevada operating segment. The Minera Yanacocha matters are related to the Yanacocha operating segment. The Yandal Gold Pty Ltd. and the Newmont Australia Limited are related to the Other Australia operating segment.

 

Environmental

 

The Company’s mining and exploration activities are subject to various federal and state laws and regulations governing the protection of the environment. These laws and regulations are continually changing and are generally becoming more restrictive. The Company conducts its operations so as to protect the public health and environment and believes its operations are in compliance with all applicable laws and regulations. The Company has made, and expects to make in the future, expenditures to comply with such laws and regulations, but cannot predict the amount of such future expenditures. Estimated future reclamation costs are based principally on legal and regulatory requirements. At March 31, 2003 and December 31, 2002, $376.0 million and $254.1 million, respectively, were accrued for reclamation costs relating to currently or recently producing mineral properties.

 

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. 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, $66.7 million and $48.1 million were accrued for such obligations at March 31, 2003 and December 31, 2002, respectively. These amounts are included in Other accrued liabilities and Reclamation and remediation liabilities. Depending upon the ultimate resolution of these matters, the Company believes that it is reasonably possible that the liability for these matters could be as much as 46% greater or 33% lower than the amount accrued at March 31, 2003. The amounts accrued for these matters are reviewed periodically based upon facts and circumstances available at the time. Changes in estimates are charged to Costs and expenses, Other in the period estimates are revised.

 

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

 

25


NEWMONT MINING CORPORATION

 

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

 

Battle Mountain Resources, Inc.-100% Newmont Owned

 

San Luis, Colorado:    The San Luis open-pit gold mine in southern Colorado was operated by Battle Mountain Resources, Inc. and ceased operations in November 1996. Since then, substantial closure and reclamation work has been performed. In August 1999, the Colorado Department of Public Health and Environment (“CDPHE”) issued a notice of violation of the Water Quality Control Act and in October 1999 amended the notice to authorize operation of a water treatment facility and the discharge of treated water. Battle Mountain Resources has made all submittals required by the CDPHE notice and conducted the required response activities. Battle Mountain Resources negotiated a settlement with CDPHE resolving alleged violations that became effective September 1, 2000. In October 2000, the CDPHE received an “Application for Reconsideration of Order for Civil Penalty” filed by project opponents, seeking to appeal the terms of the settlement. The application was denied by CDPHE. Project opponents filed a judicial appeal in the District Court for Costilla County, Colorado and Battle Mountain intervened to protect its interest in the settlement. In May 2002 this matter was resolved and the settlement was upheld in favor of CDPHE and Battle Mountain Resources.

 

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

 

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

 

In 1991, Dawn’s mining lease at the mine was terminated. As a result, Dawn was required to file a formal mine closure and reclamation plan. The Department of Interior commenced an analysis of Dawn’s proposed plan and alternate closure and reclamation plans for the mine. Work on this analysis has been suspended indefinitely. In mid-2000, the mine was included on the National Priorities List under the Comprehensive Environmental Response, Compensation and Liability Act (“CERCLA”). In March 2003, the EPA notified Dawn and Newmont that it had thus far expended $11.5 million on the remedial investigation feasibility study under CERCLA.

 

The EPA has asserted that Dawn and Newmont are liable for reclamation or remediation work and costs at the mine. Dawn does not have sufficient funds to pay for the reclamation plan it proposed or for any alternate plan, or for any additional remediation work or costs at the mine. Newmont intends to vigorously contest any claims as to its liability.

 

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

 

Dawn Mill:    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 state approval for a revised mill closure plan that, if implemented, would expedite the reclamation process at the mill. The State of Washington has approved this revised plan. The currently approved plan for the mill is secured by a $14.1 million bond, which is guaranteed by Newmont.

 

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

 

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

 

26


NEWMONT MINING CORPORATION

 

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

 

Idarado agreed in the consent decree to undertake specified remediation work at its former mining site in the Telluride/Ouray area of Colorado. Remediation work at this property is substantially complete. If the remediation does not achieve specific performance objectives defined in the consent decree, the State may require Idarado to implement supplemental activities at the site, also as defined in the consent decree. Idarado and Newmont have obtained a $5.8 million reclamation bond to secure their potential obligations under the consent decree. In addition, Idarado settled natural resources damages and past and future response costs, and agreed to habitat enhancement work under the consent decree. All of this work is substantially completed.

 

Newmont Madencilik A.S.—100% Newmont Owned

 

The Ovacik mine has a long history of legal challenges to the operation of the mine and, in particular, its use of cyanide in gold production. These challenges involve a multitude of proceedings and have a complex procedural history that, in June 2001, resulted in a judicial order granting the plaintiffs’ request to cancel Ovacik’s operating permits. Newmont has appealed this decision and, at present, the mine continues to operate under interim licenses pending the outcome of Newmont’s appeal. In addition, the Ovacik mine is the subject of a separate action being brought against the Turkish government in the European Court of Human Rights (“ECHR”). The plaintiffs in that case assert that the Turkish government’s authorization of operating permits and use of cyanide for the Ovacik mine violates Turkish law and Turkey’s obligations under the European Convention on Human Rights. Plaintiffs have asked, among other things, that the ECHR grant interim relief ordering the shutdown of the mine pending the ECHR’s hearing and decision on the merits. Newmont has filed an application to intervene in this action, but as yet has not received permission to do so. Newmont cannot reasonably predict the final outcome of any of the above described legal proceedings. Either the Turkish courts or the ECHR, however, might grant relief that could require the closure of the mine or the interruption of mining activities.

 

Newmont Capital Limited—100% Newmont Owned

 

Lava Cap Mine Site:    In February 1999, EPA placed the Lava Cap mine site in Nevada County, California on the National Priorities List under CERCLA. The EPA then initiated a remedial investigation/feasibility study under CERCLA to determine environmental conditions and remediation options at the site.

 

Newmont Capital owned the property for approximately three years from 1984 to 1986 but never mined or conducted exploration at the site. The EPA asserts that Newmont Capital is responsible for clean up costs incurred at the site. Newmont Capital has sought to resolve this matter through a de minimis settlement with EPA. The parties have entered into a tolling agreement until December 31, 2003 to facilitate settlement negotiations with respect to potential claims under CERCLA. Based on Newmont Capital’s limited involvement at Lava Cap mine, it does not believe it has any liability for environmental conditions at the site, and intends to vigorously defend any formal claims by the EPA. Newmont cannot reasonably predict the likelihood or outcome of any future action against it arising from this matter.

 

Newmont USA Limited—100% Newmont Owned

 

Pinal Creek:    Newmont is a defendant in a lawsuit brought in U.S. District Court in Arizona by the Pinal Creek Group, alleging that the company and others are responsible for some portion of costs incurred to address groundwater contamination emanating from copper mining operations located in the area of Globe and Miami, Arizona. Two former subsidiaries of Newmont, Pinto Valley Copper Corporation and Magma Copper Company (now known as BHP Copper Inc.), owned some of the mines in the area between 1983 and 1987. The court has dismissed plaintiffs’ claims seeking to hold Newmont liable for the acts or omissions of its former subsidiaries.

 

27


NEWMONT MINING CORPORATION

 

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

 

Based on information presently available, Newmont believes it has strong defenses to plaintiffs’ remaining claims, including, without limitation, that Newmont’s agents did not participate in any pollution causing activities; that Newmont’s liabilities, if any, were contractually transferred to one of the plaintiffs; that portions of plaintiffs’ claimed damages are not recoverable; and that Newmont’s equitable share of liability, if any, is small. While Newmont has denied liability and is vigorously defending these claims, we cannot reasonably predict the final outcome of this lawsuit.

 

Nevada Operations:    In November 2002, Great Basin Mine Watch and the Mineral Policy Center (Appellants) filed suit in U.S. District Court in Nevada against the Department of the Interior and the Bureau of Land Management (BLM), challenging and seeking to enjoin the BLM’s July 2002 Record of Decision approving the company’s amended Plan of Operations covering the Gold Quarry South Layback Project, and the BLM’s September 2002 Record of Decision approving a new Plan of Operations for the company’s proposed Leeville Mine. Appellants seek a declaration that the BLM’s decisions were unlawful and an injunction prohibiting Newmont’s approved activities. Newmont has intervened in this action on behalf of the government defendants and has filed an answer denying all of Appellants’ claims. While Newmont believes that this appeal is without merit, an unfavorable outcome could result in additional conditions on operations that could have a material adverse effect on the company’s financial position or results of operations.

 

In October 2002, Great Basin Mine Watch (Appellant) filed an appeal with the Nevada State Environmental Commission, challenging the Nevada Division of Environmental Protection’s (NDEP) renewal of the Clean Water Act discharge permit for Newmont’s Gold Quarry Mine. This permit governs the conditions under which Newmont may discharge mine-dewatering water in connection with its ongoing mining operations. Appellant alleges that the terms of the renewed permit violate the Clean Water Act and Nevada water quality laws. Newmont has intervened in this action on behalf of the NDEP. While Newmont believes that this appeal is without merit, an unfavorable outcome could result in additional conditions on operations that could have a material adverse effect on the company’s financial position or results of operations.

 

In December 2002, Great Basin Mine Watch filed an appeal with the Nevada State Environmental Commission challenging NDEP’s November 2002 decision renewing a water pollution control permit for Newmont’s Lone Tree Mine. This appeal alleges that NDEP’s renewal violated various procedural and substantive requirements under Nevada’s water quality laws. Newmont has intervened in this appeal. A hearing before the Nevada State Environmental Commission was held on February 25-26, 2003 in Carson City, Nevada. At the close of the hearing, the Commission ruled in favor of NDEP on all claims, and affirmed NDEP’s renewal of the permit. Great Basin Mine Watch appealed this decision in the Nevada District Court in Carson City.

 

Gray Eagle Mine Site:    By letter dated September 3, 2002, the EPA notified Newmont that the EPA had expended $2.6 million 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.

 

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

 

Leadville, Colorado:    Newmont, Resurrection and other defendants were named in lawsuits filed by the State of Colorado under CERCLA in 1983, which were subsequently consolidated with a lawsuit filed by EPA in 1986. These proceedings sought to compel the defendants to remediate the impacts of pre-existing, historic

 

28


NEWMONT MINING CORPORATION

 

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

 

mining activities near Leadville, Colorado, which date back to the mid-1800s, and which the government agencies claim are causing substantial environmental problems in the area.

 

In 1988 and 1989, the EPA issued administrative orders with respect to one area on the site and the defendants have collectively implemented those orders by constructing a water treatment plant, which was placed in operation in early 1992. Remaining remedial work for this area primarily consists of water treatment plant operation and continuing environmental monitoring and maintenance activities. Newmont and Resurrection are currently responsible for 50% of these costs, but their share of such costs could increase in the event other defendants become unable to pay their share of such costs.

 

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

 

Other Legal Matters

 

Newmont USA Limited—100% Newmont Owned

 

Peru:    In February 2002, a French citizen filed a complaint against the Company and certain of its subsidiaries and former officers, Compañia de Minas Buenaventura, S.A.A. (“Buenaventura”), one of Buenaventura’s subsidiaries, and other individuals, in U.S. District Court in Denver. The plaintiff alleges that he had an arrangement with Normandy Mining Limited, under which his fee was dependent on the outcome of the Minera Yanacocha shareholder dispute (which was resolved in 2000 pursuant to a comprehensive settlement agreement among the parties). The suit alleges that the defendants violated the federal Racketeer Influenced Corrupt Organization Act (“RICO”), and a parallel Colorado statute, by corrupting the Peruvian Supreme Court in 1998. Various common law torts including conspiracy, defamation, and tortious interference with beneficial economic interests are also alleged. The suit seeks damages of not less than $25 million plus interest (which could be subject to trebling), as well as unspecified punitive damages. A motion to dismiss this lawsuit is currently pending before the Court, and the Company is and will continue to vigorously defend itself against these allegations.

 

Minera Yanacocha—51.35% Newmont Owned

 

Choropampa:    In June 2000, a transport contractor of Minera Yanacocha spilled approximately 151 kilograms of elemental mercury near the town of Choropampa, Peru, which is located 53 miles (85 kilometers) southwest of the mine. Elemental mercury is a byproduct 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 Minera Yanacocha in response to the incident. In August 2000, Minera Yanacocha paid under protest a fine of 1,740,000 soles (approximately $500,000) to the Peruvian government. Minera Yanacocha has entered into settlement agreements with a number of individuals impacted by the incident. In addition, it has entered into agreements with three of the communities impacted by this incident to provide a variety of public works as compensation for the disruption and inconvenience caused by the incident.

 

29


NEWMONT MINING CORPORATION

 

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

 

On September 10, 2001, Minera Yanacocha, various wholly owned subsidiaries of Newmont, and other defendants were named in a lawsuit filed by over 900 Peruvian citizens in Denver District Court for the State of Colorado. This action seeks compensatory and punitive damages based on claims associated with the elemental mercury spill incident. This action was dismissed by the Denver District Court on May 22, 2002, and this ruling was reaffirmed by the court on July 30, 2002. Plaintiffs’ attorneys have appealed this dismissal.

 

In July 2002, other lawsuits were served against Minera Yanacocha, various wholly owned subsidiaries of Newmont and/or other defendants in the Denver District Court for the State of Colorado and in the United States District Court for the District of Colorado, by approximately 140 additional Peruvian plaintiffs and by the same plaintiffs who filed the September 2001 lawsuit. These actions also seek compensatory and punitive damages based on claims associated with the elemental mercury spill incident. All but one of these lawsuits has been stayed pending the outcome of the appeal in the September 2001 matter. A motion to stay the one remaining lawsuit is currently pending before the Denver District Court.

 

Additional lawsuits relating to the Choropampa incident were filed against Minera 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 previously have entered into settlement agreements with Minera Yanacocha.

 

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

 

Cerro Quilish:    Minera Yanacocha is involved in a dispute with the Provincial Municipality of Cajamarca regarding the authority of that governmental body to regulate the development of the Cerro Quilish ore deposit (which contains reserves of 1.9 million equity ounces). Cerro Quilish is located in the same watershed in which the City of Cajamarca is located. The Municipality has enacted an ordinance declaring Cerro Quilish and its watershed to be a reserved and natural protected area. Minera Yanacocha challenged this ordinance on the grounds that, under Peruvian law, local governments lack authority to create such areas. The case was heard in early 2003, and on April 30, 2003, the Constitutional Tribunal issued a decision holding that, because Minera Yanacocha acquired the mining concessions in the Cerro Quilish area many years before the adoption of the contested ordinance, its rights were not impacted by the ordinance.

 

Minera Yanacocha is committed to completing a full environmental impact study prior to initiating any development at Cerro Quilish, and will adopt mitigation measures necessary to protect the quality and quantity of the water supply of the City of Cajamarca. While the central government has the primary responsibility and the necessary technical expertise to regulate this matter, the Company is also committed to working with the local government and other affected stakeholders in completing the required studies and designing and implementing any necessary mitigation measures.

 

Newmont Australia Limited—100% Newmont Owned

 

Australian Taxation Office Review:    In February 1999, Normandy (now Newmont Australia Limited) sold certain subsidiary companies in a transaction that resulted in net cash proceeds of A$663 million. The sale did not give rise to any tax liability to Newmont Australia Limited because of the tax basis that Newmont Australia Limited had in the shares in the subsidiaries and the capital losses available to Newmont Australia Limited to offset the net gain of the sale. This transaction is currently the subject of a review by the Australian Taxation Office (“ATO”), which commenced in early 2001 and is still ongoing. The ATO has sought documents from Newmont Australia Limited, the buyer of the subsidiaries and other parties. It is not yet known whether the ATO will disagree with the tax treatment of the transaction. Newmont Australia Limited believes that its tax treatment

 

30


NEWMONT MINING CORPORATION

 

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

 

was in accordance with the provisions of the relevant tax laws. The Company cannot reasonably predict what future action the ATO may take in relation to this matter.

 

Yandal Gold Pty Ltd.—100% Newmont Owned

 

Newmont Yandal Operations:    In a Federal Court action brought by the Australian Securities and Investment Commission (“ASIC”) against Yandal Gold Pty Ltd., a subsidiary of Newmont Australia Limited, Edensor Nominees Pty Ltd (“Edensor”), and others in relation to the 1999 acquisition of Great Central Mines (“GCM”, now named Newmont Yandal Operations Limited), the judge found violations of the Australian Corporations Law and ordered payment by Edensor to ASIC of A$28.5 million for distribution to former GCM shareholders. The judge also entered an order allowing the former shareholders to elect to reacquire their shares in GCM. After appeals to the Full Federal Court and the High Court on jurisdictional matters, the Full Federal Court rejected Edensor’s appeal on the merits and in September 2002, the High Court declined further review of the matter. Newmont Australia Limited had previously agreed to pay one-half of the A$28.5 million and, after finalizing an additional commercial transaction with Edensor in relation to certain mining properties and interests, Newmont Australia Limited paid in full A$28.5 million plus interest to ASIC in September 2002 all of which has been accounted for as part of the Normandy purchase price. Newmont Australia Limited filed a motion with the Federal Court to negate that portion of its original order granting former GCM shareholders the right to reacquire their shares and ASIC consented to the orders sought in this motion. On February 18, 2003, the Court granted the application for the consent orders such that the former GCM shareholders will not have the opportunity to reacquire their shares in GCM.

 

Income Taxes

 

The Company operates in numerous countries around the world and accordingly it is subject to, and pays annual income taxes with 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, but many of which are the general corporate income tax laws of the country. The Company has historically filed, and continues to file, all required income tax returns and to pay the taxes reasonably determined to be due. The tax rules and regulations in many countries are highly complex and subject to interpretation. From time to time the Company will undergo a review of its historic income tax filings and in connection with such reviews, disputes can arise with the taxing authorities over the interpretation of the rules or the application of certain rules to the Company’s business conducted within the country involved. As of March 31, 2003 and December 31, 2002 the Company has income taxes (and related interest and penalties, if applicable) in the amount of $321.5 million. This amount represents what the Company believes will be the probable outcome from the settlement of such disputes for all tax years for which additional income taxes can be assessed.

 

Guarantee of Third Party Indebtedness

 

Newmont USA Limited has guaranteed Pollution Control Revenue Bonds with a principal amount of $35.7 million, due 2009, of BHP Copper Inc., formerly known as Magma Copper Company. At the time the bonds were issued, Magma was a wholly-owned subsidiary of Newmont USA Limited. Magma was spun-off as an independent, separately traded company in 1987, and was acquired in 1995 by the company now known as BHP Billiton Limited. Newmont USA Limited will be required to perform under the guarantee in the event that BHP Copper defaults on the bonds; in that event, Newmont USA Limited would be liable for the amount of any unpaid principal and interest outstanding at the time of the default. It is expected that Newmont USA Limited will be required to remain liable on this guarantee as long as the bonds remain outstanding. Newmont USA Limited currently has no carrying value for this contingent liability, because it does not expect to have to pay any

 

31


NEWMONT MINING CORPORATION

 

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

 

amount under the guarantee in the future given the financial strength of BHP Copper’s parent company. In the event that it does have to perform under the guarantee, Newmont USA Limited would have a right of subrogation to the bondholders.

 

Other Commitments and Contingencies

 

In a 1993 asset exchange, a wholly-owned subsidiary transferred a coal lease under which the subsidiary had collected advance royalty payments totaling $484 million. From 1994 to 2018, remaining advance payments under the lease to the transferee total $390 million. In the event of title failure as stated in the lease, this subsidiary has a primary obligation to refund previously collected payments and has a secondary obligation to refund any of the $390 million collected by the transferee, if the transferee fails to meet its refund obligation. The subsidiary has no direct liability to the lessor and has title insurance on the leased coal deposits of $240 million covering the secondary obligation. The Company and the subsidiary regard the circumstances entitling the lessor to a refund as remote. The Company has agreed to maintain the subsidiary’s net worth at $108 million until July 1, 2025.

 

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.

 

As part of its ongoing business and operations, the Company and its affiliates are required to provide surety bonds, bank letters of credit and bank guarantees as financial support for various purposes, including environmental reclamation, exploration permitting, workers compensation programs and other general corporate purposes. At March 31, 2003 and December 31, 2002, there were $195.0 million and $177.0 million of outstanding letters of credit, surety bonds and bank guarantees (excluding the surety bond supporting the prepaid forward transaction described in the Financing Activities section of Management’s Discussion and Analysis of Results of Operations and Financial Condition). 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 closure. Generally, bonding requirements associated with environmental regulation are becoming more restrictive. In addition, the surety markets for certain types of environmental bonding used by the Company have become increasingly constrained. The Company, however, believes it is in compliance with all applicable bonding obligations and will be able to satisfy future bonding requirements, through existing or alternative means, as they arise.

 

Newmont is from time to time involved in various legal proceedings related to its business. Except as discussed above, 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.

 

32


NEWMONT MINING CORPORATION

 

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

 

(18)    PRO FORMA STOCK OPTION COMPENSATION EXPENSE

 

The Company applies the intrinsic value method in accordance with Accounting Principles Board Opinion No. 25, “Accounting for Stock Issued to Employees,” and related interpretations in accounting for stock options. Accordingly, because stock option exercise prices equal the market value on the date of grant, no compensation cost has been recognized for its stock options. Had compensation cost for the options been determined based on market value at grant dates in 2003 and 2002 as prescribed by SFAS No. 123, “Accounting for Stock Based Compensation,” the Company’s net income and earnings per share would have been the pro forma amounts indicated below (in millions, except per share):

 

     Three Months Ended
March 31,


 
     2003

     2002

 

Net income (loss) applicable to common shares

                 

As reported

   $ 117.3      $ (8.7 )

SFAS 123 expense

     (2.8 )      (1.7 )
    


  


Pro forma

   $ 114.5      $ (10.4 )
    


  


Net income (loss) per share, basic and diluted

                 

As reported

   $ 0.29      $ (0.03 )

SFAS 123 expense

     (0.01 )      (0.01 )
    


  


Pro forma

   $ 0.28      $ (0.04 )
    


  


 

33


NEWMONT MINING CORPORATION

 

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

 

(19)    CONDENSED CONSOLIDATING FINANCIAL STATEMENTS

 

    Three Months Ended March 31, 2003

 

Consolidating Statement of Operations


  Newmont
Mining
Corporation


    Newmont
USA


    Other
Subsidiaries


    Eliminations

    Newmont
Mining
Corporation
Consolidated


 
    (unaudited, in millions)  

Revenues

                                       

Sales—gold

  $     $ 557.7     $ 156.9     $     $ 714.6  

Sales—base metals, net

                19.4             19.4  

Royalties

                15.0       (0.5 )     14.5  
   


 


 


 


 


            557.7       191.3       (0.5 )     748.5  
   


 


 


 


 


Costs and expenses

                                       

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

                                       

Gold

            292.0       107.6       (0.6 )     399.0  

Base metals

                15.4             15.4  

Depreciation, depletion and amortization

          87.5       43.1             130.6  

Exploration and research

          10.8       10.7             21.5  

General and administrative

          19.9       6.4       0.1       26.4  

Other

          24.6       4.9       (7.6 )     21.9  
   


 


 


 


 


            434.8       188.1       (8.1 )     614.8  
   


 


 


 


 


Other income (expense)

                                       

Gain on investments, net

                91.9       (7.6 )     84.3  

Gain on gold commodity derivative instruments

                55.0             55.0  

Loss on extinguishment of debt

          (14.3 )     (5.2 )           (19.5 )

Dividends, interest, foreign, currency exchange and other income (loss)—intercompany

    24.9       2.8       4.1             31.8  

Dividends, interest, foreign curreny exchange and other income (loss)

    4.9       4.2       3.9       (13.0 )      

Interest expense—intercompany

    (2.2 )     (3.4 )     (7.4 )     13.0        

Interest, net of capitalized interest

    (0.5 )     (20.6 )     (8.8 )           (29.9 )
   


 


 


 


 


      27.1       (31.3 )     133.5       (7.6 )     121.7  
   


 


 


 


 


Pre-tax income before minority interest, equity income and impairment of affiliates, and cumulative effect of a change in accounting principle

    27.1       91.6       136.7             255.4  

Income tax expense

    (9.5 )     (20.9 )     (32.2 )           (62.6 )

Minority interest in (income) loss of subsidiaries

          (39.0 )     (3.6 )     4.8       (37.8 )

Equity income (loss) and impairment of affiliates

    99.6       7.4       4.2       (114.4 )     (3.2 )
   


 


 


 


 


Net income (loss) before cumulative effect of a change in accounting principle

    117.2       39.1       105.1       (109.6 )     151.8  

Cumulative effect of a change in accounting principle, net of tax

          (31.5 )     (3.0 )           (34.5 )
   


 


 


 


 


Net income (loss)

    117.2       7.6       102.1       (109.6 )     117.3  

Preferred stock dividends

                             
   


 


 


 


 


Net income (loss) applicable to common shares

  $ 117.2     $ 7.6     $ 102.1     $ (109.6 )   $ 117.3  
   


 


 


 


 


 

34


NEWMONT MINING CORPORATION

 

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

 

    Three Months Ended March 31, 2002

 

Consolidating Statement of Operations


  Newmont
Mining
Corporation


    Newmont
USA


    Other
Subsidiaries


    Eliminations

    Newmont
Mining
Corporation
Consolidated


 
    (unaudited, in millions)  

Revenues

                                       

Sales—gold

  $     $ 403.9     $ 78.3     $     $ 482.2  

Sales—base metals, net

                9.4             9.4  

Royalties

          0.6       3.4       (0.2 )     3.8  
   


 


 


 


 


            404.5       91.1       (0.2 )     495.4  
   


 


 


 


 


Costs and expenses

                                       

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

                                       

Gold

          276.0       52.6       (0.1 )     328.5  

Base metals

                10.7             10.7  

Depreciation, depletion and amortization

          81.1       21.1             102.2  

Exploration and research

          9.0       2.6             11.6  

General and administrative

          16.8       4.5             21.3  

Other

          3.0       (2.1 )           0.9  
   


 


 


 


 


            385.94       89.4       (0.1 )     475.2  
   


 


 


 


 


Other income (expense)

                                       

Gain on gold commodity derivative instruments

                6.3             6.3  

Dividends, interest, foreign currency exchange and other income (loss)—intercompany

          0.5       2.1       (2.6 )      

Dividends, interest, foreign currency exchange and other income (loss)

          5.1       (4.7 )           0.4  

Interest expense—intercompany

                (2.9 )     2.9        

Interest, net of capitalized interest

          (25.2 )     (5.9 )           (31.1 )
   


 


 


 


 


            (19.6 )     (5.1 )     0.3       (24.4 )
   


 


 


 


 


Pre-tax (loss) income before minority interest, equity income (loss) and impairment of affiliates, and cumulative effect of a change in accounting principle

          (1.0 )     (3.4 )     0.2       (4.2 )

Income tax benefit (expense)

          1.7       (2.9 )           (1.2 )

Minority interest in (income) loss of subsidiaries

          (10.7 )     1.7       (1.5 )     (10.5 )

Equity income (loss) and impairment of affiliates

    (6.8 )     1.5       (1.5 )     8.2       1.4  
   


 


 


 


 


Net (loss) income before cumulative effect of a change in accounting principle

    (6.8 )     (8.5 )     (6.1 )     6.9       (14.5 )

Cumulative effect of a change in accounting principle, net of tax

          7.7                   7.7  
   


 


 


 


 


Net (loss) income

    (6.8 )     (0.8 )     (6.1 )     6.9       (6.8 )

Preferred stock dividends

    (1.9 )                       (1.9 )
   


 


 


 


 


Net (loss) income applicable to common shares

  $ (8.7 )   $ (0.8 )   $ (6.1 )   $ 6.9     $ (8.7 )
   


 


 


 


 


 

35


NEWMONT MINING CORPORATION

 

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

 

     At March 31, 2003

 

Consolidating Balance Sheets


   Newmont
Mining
Corporation


    Newmont
USA


    Other
Subsidiaries


    Eliminations

    Newmont
Mining
Corporation
Consolidated


 
     (unaudited, in millions)  

Assets

                                        

Cash and cash equivalents

   $     $ 257.2     $ 123.1     $     $ 380.3  

Marketable securities—short-term

           0.6       11.4             12.0  

Accounts receivable

     6.9       11.9       160.3       (151.6 )     27.5  

Inventories

           195       60.7             256.4  

Stockpiles and ore on leach pads

           220.4       26.4             246.8  

Prepaid taxes

           19.4                   19.4  

Derivative instruments

                 1.4             1.4  

Deferred stripping costs—short-term

           24.8       5.4             30.2  

Deferred income tax assets

           (3.8 )     51.7             47.9  

Other current assets

     361.7       58.1       226.5       (607.3 )     39.0  
    


 


 


 


 


Current assets

     368.6       784.3       666.9       (758.9 )     1,060.9  
    


 


 


 


 


Property, plant and mine development, net

           1,968.2       392.1             2,360.3  

Mineral interests and other intangible assets, net

           263.5       1,144.8             1,408.3  

Investments

           610.0       1,062.8       (852.3 )     820.5  

Investment in subsidiaries

     4,653.0             1,930.8      <