Form 10-Q
Table of Contents

 
 
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
Form 10-Q
(Mark One)
     
þ   QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the Quarterly Period Ended September 30, 2010
or
     
o   TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from                      to                     
Commission File Number: 001-31240
(NEWMONT MINING CORPORATION LOGO)
NEWMONT MINING CORPORATION
(Exact name of registrant as specified in its charter)
     
Delaware
(State or Other Jurisdiction of
Incorporation or Organization)
  84-1611629
(I.R.S. Employer
Identification No.)
     
6363 South Fiddler’s Green Circle    
Greenwood Village, Colorado
(Address of Principal Executive Offices)
  80111
(Zip Code)
Registrant’s telephone number, including area code (303) 863-7414
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. þ Yes o No
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). þ Yes o No
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See definition of “accelerated filer” and “large accelerated filer” in Rule 12-b2 of the Exchange Act. (Check one):
             
Large accelerated filer þ   Accelerated filer o   Non-accelerated filer o   Smaller reporting company o
        (Do not check if a smaller reporting company.)    
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12-b2 of the Exchange Act). o Yes þ No
There were 486,197,880 shares of common stock outstanding on October 25, 2010 (and 6,867,299 exchangeable shares).
 
 

 

 


 

TABLE OF CONTENTS
         
    Page  
 
 
       
    1  
 
       
    1  
 
       
    2  
 
       
    3  
 
       
    4  
 
       
    43  
 
       
    43  
 
       
    44  
 
       
    44  
 
       
    50  
 
       
    56  
 
       
    58  
 
       
    59  
 
       
    59  
 
       
    60  
 
       
    61  
 
       
    63  
 
       
 
 
       
    64  
 
       
    64  
 
       
    64  
 
       
    64  
 
       
    64  
 
       
    67  
 
       
    68  
 
       
    69  
 
       
 Exhibit 12.1
 Exhibit 31.1
 Exhibit 31.2
 Exhibit 32.1
 Exhibit 32.2
 EX-101 INSTANCE DOCUMENT
 EX-101 SCHEMA DOCUMENT
 EX-101 CALCULATION LINKBASE DOCUMENT
 EX-101 LABELS LINKBASE DOCUMENT
 EX-101 PRESENTATION LINKBASE DOCUMENT
 EX-101 DEFINITION LINKBASE DOCUMENT

 

 


Table of Contents

PART I—FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS.
NEWMONT MINING CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(unaudited, in millions except per share)
                                 
    Three Months Ended     Nine Months Ended  
    September 30,     September 30,  
    2010     2009     2010     2009  
 
Sales (Note 3)
  $ 2,597     $ 2,049     $ 6,992     $ 5,187  
 
                               
Costs and expenses
                               
Costs applicable to sales (1) (Note 3)
    903       765       2,636       2,200  
Amortization
    242       199       697       566  
Reclamation and remediation (Note 4)
    18       10       44       34  
Exploration
    67       55       163       147  
Advanced projects, research and development (Note 5)
    46       27       149       100  
General and administrative
    45       39       133       118  
Other expense, net (Note 6)
    50       65       200       250  
 
                       
 
    1,371       1,160       4,022       3,415  
 
                       
Other income (expense)
                               
Other income, net (Note 7)
    5       25       97       43  
Interest expense, net
    (66 )     (10 )     (210 )     (65 )
 
                       
 
    (61 )     15       (113 )     (22 )
 
                       
Income from continuing operations before income tax and other items
    1,165       904       2,857       1,750  
Income tax expense (Note 10)
    (348 )     (253 )     (756 )     (494 )
Equity income (loss) of affiliates
    (3 )     (6 )     (7 )     (14 )
 
                       
Income from continuing operations
    814       645       2,094       1,242  
Income (loss) from discontinued operations (Note 11)
                      (14 )
 
                       
Net income
    814       645       2,094       1,228  
Net income attributable to noncontrolling interests (Note 12)
    (277 )     (257 )     (629 )     (489 )
 
                       
Net income attributable to Newmont stockholders
  $ 537     $ 388     $ 1,465     $ 739  
 
                       
 
                               
Net income attributable to Newmont stockholders:
                               
Continuing operations
  $ 537     $ 388     $ 1,465     $ 748  
Discontinued operations
                      (9 )
 
                       
 
  $ 537     $ 388     $ 1,465     $ 739  
 
                       
Income per common share (Note 13)
                               
Basic:
                               
Continuing operations
  $ 1.09     $ 0.79     $ 2.98     $ 1.54  
Discontinued operations
                      (0.02 )
 
                       
 
  $ 1.09     $ 0.79     $ 2.98     $ 1.52  
 
                       
Diluted:
                               
Continuing operations
  $ 1.07     $ 0.79     $ 2.94     $ 1.54  
Discontinued operations
                      (0.02 )
 
                       
 
  $ 1.07     $ 0.79     $ 2.94     $ 1.52  
 
                       
 
                               
Cash dividends declared per common share
    0.15       0.10     $ 0.35     $ 0.30  
 
     
(1)   Exclusive of Amortization and Reclamation and remediation.
The accompanying notes are an integral part of the condensed consolidated financial statements.

 

1


Table of Contents

NEWMONT MINING CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited, in millions)
                 
    Nine Months Ended  
    September 30,  
    2010     2009  
Operating activities:
               
Net income
  $ 2,094     $ 1,228  
Adjustments:
               
Amortization
    697       566  
Loss from discontinued operations (Note 11)
          14  
Reclamation and remediation (Note 4)
    44       34  
Deferred income taxes
    (52 )     7  
Stock based compensation and other benefits
    54       44  
Other operating adjustments and write-downs
    84       80  
Net change in operating assets and liabilities (Note 24)
    (586 )     (27 )
 
           
 
Net cash provided from continuing operations
    2,335       1,946  
Net cash provided from (used in) discontinued operations (Note 11)
    (13 )     3  
 
           
 
Net cash provided from operations
    2,322       1,949  
 
           
 
Investing activities:
               
Additions to property, plant and mine development
    (972 )     (1,314 )
Investments in marketable debt and equity securities
    (9 )      
Acquisitions, net
    (2 )     (766 )
Proceeds from sale of other assets
    53       3  
Other
    (72 )     (11 )
 
           
Net cash used in investing activities
    (1,002 )     (2,088 )
 
           
 
Financing activities:
               
Proceeds from debt, net
          4,302  
Repayment of debt
    (274 )     (2,604 )
Sale of subsidiary shares to noncontrolling interests
    229        
Acquisition of subsidiary shares from noncontrolling interests
    (109 )      
Dividends paid to common stockholders
    (172 )     (147 )
Dividends paid to noncontrolling interests
    (360 )     (115 )
Proceeds from stock issuance, net
    56       1,248  
Change in restricted cash and other
    46       5  
 
           
 
Net cash provided from (used in) financing activities of continuing operations
    (584 )     2,689  
Net cash used in financing activities of discontinued operations (Note 11)
          (2 )
 
           
 
Net cash provided from (used in) financing activities
    (584 )     2,687  
 
           
 
Effect of exchange rate changes on cash
          39  
 
           
Net change in cash and cash equivalents
    736       2,587  
Cash and cash equivalents at beginning of period
    3,215       435  
 
           
Cash and cash equivalents at end of period
  $ 3,951     $ 3,022  
 
           
The accompanying notes are an integral part of the condensed consolidated financial statements.

 

2


Table of Contents

NEWMONT MINING CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEETS
(unaudited, in millions)
                 
    At September 30,     At December 31,  
    2010     2009  
ASSETS
               
Cash and cash equivalents
  $ 3,951     $ 3,215  
Trade receivables
    489       438  
Accounts receivable
    93       102  
Investments (Note 18)
    46       56  
Inventories (Note 19)
    526       493  
Stockpiles and ore on leach pads (Note 20)
    538       403  
Deferred income tax assets
    195       215  
Other current assets (Note 21)
    1,218       900  
 
           
Current assets
    7,056       5,822  
Property, plant and mine development, net
    12,532       12,370  
Investments (Note 18)
    1,278       1,186  
Stockpiles and ore on leach pads (Note 20)
    1,722       1,502  
Deferred income tax assets
    1,086       937  
Other long-term assets (Note 21)
    702       482  
 
           
Total assets
  $ 24,376     $ 22,299  
 
           
LIABILITIES
               
Debt (Note 22)
  $ 289     $ 157  
Accounts payable
    396       396  
Employee-related benefits
    227       250  
Income and mining taxes
    265       200  
Other current liabilities (Note 23)
    1,621       1,317  
 
           
Current liabilities
    2,798       2,320  
Debt (Note 22)
    4,289       4,652  
Reclamation and remediation liabilities (Note 4)
    820       805  
Deferred income tax liabilities
    1,432       1,341  
Employee-related benefits
    349       381  
Other long-term liabilities (Note 23)
    169       174  
Liabilities of operations held for sale (Note 11)
          13  
 
           
Total liabilities
    9,857       9,686  
 
           
Commitments and contingencies (Note 26)
               
EQUITY
               
Common stock
    778       770  
Additional paid-in capital
    8,260       8,158  
Accumulated other comprehensive income
    768       626  
Retained earnings
    2,442       1,149  
 
           
Newmont stockholders’ equity
    12,248       10,703  
Noncontrolling interests
    2,271       1,910  
 
           
Total equity
    14,519       12,613  
 
           
Total liabilities and equity
  $ 24,376     $ 22,299  
 
           
The accompanying notes are an integral part of the condensed consolidated financial statements.

 

3


Table of Contents

NEWMONT MINING CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)
(dollars in millions, except per share, per ounce and per pound amounts)
NOTE 1 BASIS OF PRESENTATION
The interim Condensed Consolidated Financial Statements (“interim statements”) of Newmont Mining Corporation and its subsidiaries (collectively, “Newmont” or the “Company”) are unaudited. In the opinion of management, all adjustments and disclosures necessary for a fair presentation of these interim statements have been included. The results reported in these interim statements are not necessarily indicative of the results that may be reported for the entire year. These interim statements should be read in conjunction with Newmont’s Consolidated Financial Statements for the year ended December 31, 2009 filed February 25, 2010 on Form 10-K. The year-end balance sheet data was derived from the audited financial statements, but does not include all disclosures required by United States generally accepted accounting principles (“GAAP”).
References to “A$” refer to Australian currency, “C$” to Canadian currency, “IDR” to Indonesian currency, “NZ$” to New Zealand currency and “$” to United States currency.
NOTE 2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Recently Adopted Accounting Pronouncements
Variable Interest Entities
In June 2009, the Accounting Standards Codification (“ASC”) guidance for consolidation accounting was updated to require an entity to perform a qualitative analysis to determine whether the enterprise’s variable interest gives it a controlling financial interest in a Variable Interest Entity (“VIE”). This qualitative analysis identifies the primary beneficiary of a VIE as the entity that has both of the following characteristics: (i) the power to direct the activities of a VIE that most significantly impact the entity’s economic performance and (ii) the obligation to absorb losses or receive benefits from the entity that could potentially be significant to the VIE. The updated guidance also requires ongoing reassessments of the primary beneficiary of a VIE. Adoption of the updated guidance, effective for the Company’s fiscal year beginning January 1, 2010, had no impact on the Company’s condensed consolidated financial position, results of operations or cash flows.
The Company identified Nusa Tenggara Partnership (“NTP”), a partnership between Newmont and an affiliate of Sumitomo, that owns a 56% interest in PT Newmont Nusa Tenggara (“PTNNT” or “Batu Hijau”), as a VIE due to certain capital structures and contractual relationships. Newmont also identified PT Pukuafu Indah (“PTPI”), and PT Indonesia Masbaga Investama (“PTIMI”), unrelated noncontrolling partners of PTNNT, as VIEs. Newmont entered into transactions with PTPI and PTIMI, whereby the Company agreed to advance certain funds in exchange for a pledge of the noncontrolling partners’ combined 20% share of PTNNT dividends, net of withholding tax. The agreements also provide Newmont with certain voting rights and obligations related to the noncontrolling partners’ combined 20% share of PTNNT and commitments from PTPI and PTIMI to support the application of Newmont’s standards to the operation of the Batu Hijau mine. The Company has determined itself to be the primary beneficiary of these entities and to control the operations of Batu Hijau, and therefore consolidates PTNNT in the Company’s financial statements.
Fair Value Accounting
In January 2010, ASC guidance for fair value measurements and disclosure was updated to require additional disclosures related to transfers in and out of level 1 and 2 fair value measurements and enhanced detail in the level 3 reconciliation. The guidance was amended to clarify the level of disaggregation required for assets and liabilities and the disclosures required for inputs and valuation techniques used to measure the fair value of assets and liabilities that fall in either level 2 or level 3. The updated guidance was effective for the Company’s fiscal year beginning January 1, 2010, with the exception of the level 3 disaggregation which is effective for the Company’s fiscal year beginning January 1, 2011. The adoption had no impact on the Company’s condensed consolidated financial position, results of operations or cash flows. Refer to Note 16 for further details regarding the Company’s assets and liabilities measured at fair value.

 

4


Table of Contents

NEWMONT MINING CORPORATION

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

(dollars in millions, except per share, per ounce and per pound amounts)
NOTE 3 SEGMENT INFORMATION
The Company’s reportable segments are based upon the Company’s management structure that is focused on the geographic region for the Company’s operations. The financial information relating to the Company’s segments is as follows:
                                         
            Costs             Advanced        
            Applicable to             Projects and     Pre-Tax  
    Sales     Sales     Amortization     Exploration     Income  
Three Months Ended September 30, 2010
                                       
Nevada
  $ 568     $ 267     $ 68     $ 27     $ 196  
La Herradura
    52       20       5       2       25  
Hope Bay
                4       20       (23 )
Other North America
                            (1 )
 
                             
North America
    620       287       77       49       197  
 
                             
 
                                       
Yanacocha
    436       149       42       6       225  
Other South America
                      11       (15 )
 
                             
South America
    436       149       42       17       210  
 
                             
 
                                       
Boddington:
                                       
Gold
    181       91       25                  
Copper
    38       19       5                  
 
                             
Total
    219       110       30       1       46  
 
                             
Batu Hijau:
                                       
Gold
    260       47       12                  
Copper
    543       96       26                  
 
                             
Total
    803       143       38       1       607  
 
                             
Other Australia/New Zealand
    351       157       26       10       145  
Other Asia Pacific
                1       5       (9 )
 
                             
Asia Pacific
    1,373       410       95       17       789  
 
                             
 
                                       
Ahafo
    168       57       22       9       87  
Other Africa
                      1       (2 )
 
                             
Africa
    168       57       22       10       85  
 
                             
 
                                       
Corporate and Other
                6       20       (116 )
 
                             
Consolidated
  $ 2,597     $ 903     $ 242     $ 113     $ 1,165  
 
                             

 

5


Table of Contents

NEWMONT MINING CORPORATION

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

(dollars in millions, except per share, per ounce and per pound amounts)
                                         
            Costs             Advanced        
            Applicable to             Projects and     Pre-Tax  
    Sales     Sales     Amortization     Exploration     Income  
Three Months Ended September 30, 2009
                                       
Nevada
  $ 481     $ 273     $ 69     $ 13     $ 118  
La Herradura
    23       8       2       1       12  
Hope Bay
                3       20       (24 )
Other North America
                            (2 )
 
                             
North America
    504       281       74       34       104  
 
                             
 
                                       
Yanacocha
    535       163       43       6       299  
Other South America
                      1       (2 )
 
                             
South America
    535       163       43       7       297  
 
                             
 
                                       
Boddington
                      12       (11 )
Batu Hijau:
                                       
Gold
    201       37       10                  
Copper
    396       71       18                  
 
                             
Total
    597       108       28             445  
 
                             
Other Australia/New Zealand
    282       152       32       6       77  
Other Asia Pacific
                1       4       (17 )
 
                             
Asia Pacific
    879       260       61       22       494  
 
                             
 
                                       
Ahafo
    131       61       17       2       46  
Other Africa
                      2       (2 )
 
                             
Africa
    131       61       17       4       44  
 
                             
 
                                       
Corporate and Other
                4       15       (35 )
 
                             
Consolidated
  $ 2,049     $ 765     $ 199     $ 82     $ 904  
 
                             

 

6


Table of Contents

NEWMONT MINING CORPORATION

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

(dollars in millions, except per share, per ounce and per pound amounts)
                                                         
            Costs             Advanced                    
            Applicable to             Projects and     Pre-Tax     Total     Capital  
    Sales     Sales     Amortization     Exploration     Income     Assets     Expenditures(1)  
Nine Months Ended September 30, 2010
                                                       
Nevada
  $ 1,540     $ 776     $ 194     $ 64     $ 475     $ 3,306     $ 200  
La Herradura
    149       52       13       5       79       198       33  
Hope Bay
                10       70       (80 )     2,046       88  
Other North America
                      1       (4 )     51        
 
                                         
North America
    1,689       828       217       140       470       5,601       321  
 
                                         
 
                                                       
Yanacocha
    1,321       442       119       17       686       2,645       109  
Other South America
                      26       (26 )     256       86  
 
                                         
South America
    1,321       442       119       43       660       2,901       195  
 
                                         
 
                                                       
Boddington:
                                                       
Gold
    582       284       81                                  
Copper
    117       68       18                                  
 
                                         
Total
    699       352       99       5       206       4,181       106  
 
                                         
Batu Hijau:
                                                       
Gold
    595       123       34                                  
Copper
    1,256       261       72                                  
 
                                         
Total
    1,851       384       106       1       1,284       3,281       48  
 
                                         
Other Australia/New Zealand
    973       454       82       21       409       913       111  
Other Asia Pacific
                2       15             388       11  
 
                                         
Asia Pacific
    3,523       1,190       289       42       1,899       8,763       276  
 
                                         
 
                                                       
Ahafo
    459       176       58       15       203       1,039       80  
Other Africa
                      7       (7 )     269       49  
 
                                         
Africa
    459       176       58       22       196       1,308       129  
 
                                         
 
                                                       
Corporate and Other
                14       65       (368 )     5,803       23  
 
                                         
Consolidated
  $ 6,992     $ 2,636     $ 697     $ 312     $ 2,857     $ 24,376     $ 944  
 
                                         
     
(1)   Includes a decrease in accrued capital expenditures of $28; consolidated capital expenditures on a cash basis were $972.

 

7


Table of Contents

NEWMONT MINING CORPORATION

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

(dollars in millions, except per share, per ounce and per pound amounts)
                                                         
            Costs             Advanced                    
            Applicable to             Projects and     Pre-Tax     Total     Capital  
    Sales     Sales     Amortization     Exploration     Income     Assets     Expenditures(1)  
Nine Months Ended September 30, 2009
                                                       
Nevada
  $ 1,321     $ 764     $ 183     $ 40     $ 309     $ 3,215     $ 154  
La Herradura
    75       30       7       2       36       116       34  
Hope Bay
                9       56       (64 )     1,818       4  
Other North America
                      1       (6 )     55        
 
                                         
North America
    1,396       794       199       99       275       5,204       192  
 
                                         
 
                                                       
Yanacocha
    1,451       488       128       16       747       2,182       78  
Other South America
                      15       (13 )     28       16  
 
                                         
South America
    1,451       488       128       31       734       2,210       94  
 
                                         
 
                                                       
Boddington
                      29       (87 )     3,832       961  
Batu Hijau:
                                                       
Gold
    358       88       23                                  
Copper
    786       217       55                                  
 
                                         
Total
    1,144       305       78             713       3,024       30  
 
                                         
Other Australia/New Zealand
    814       438       94       18       243       843       75  
Other Asia Pacific
                2       9       (32 )     215       2  
 
                                         
Asia Pacific
    1,958       743       174       56       837       7,914       1,068  
 
                                         
 
                                                       
Ahafo
    382       175       51       9       131       965       42  
Other Africa
                      7       (3 )     198       4  
 
                                         
Africa
    382       175       51       16       128       1,163       46  
 
                                         
 
                                                       
Corporate and Other (2)
                14       45       (224 )     4,656       12  
 
                                         
Consolidated
  $ 5,187     $ 2,200     $ 566     $ 247     $ 1,750     $ 21,147     $ 1,412  
 
                                         
     
(1)   Includes an increase in accrued capital expenditures of $98; consolidated capital expenditures on a cash basis were $1,314.
 
(2)   Corporate and Other includes $31 of Assets held for sale.
NOTE 4 RECLAMATION AND REMEDIATION
At September 30, 2010 and December 31, 2009, $719 and $698, respectively, were accrued for reclamation obligations relating to mineral properties. In addition, the Company is involved in several matters concerning environmental obligations associated with former, primarily historic, mining activities. Generally, these matters concern developing and implementing remediation plans at the various sites involved. At September 30, 2010 and December 31, 2009, $148 and $161, respectively, were accrued for such obligations.
The following is a reconciliation of reclamation and remediation liabilities:
                 
    Nine Months Ended September 30,  
    2010     2009  
Balance at beginning of period
  $ 859     $ 757  
Additions, changes in estimates and other
    1       21  
Liabilities settled
    (32 )     (35 )
Accretion expense
    39       34  
 
           
Balance at end of period
  $ 867     $ 777  
 
           

 

8


Table of Contents

NEWMONT MINING CORPORATION

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

(dollars in millions, except per share, per ounce and per pound amounts)
The current portion of Reclamation and remediation liabilities of $47 and $54 at September 30, 2010 and December 31, 2009, respectively, are included in Other current liabilities (see Note 23).
The Company’s reclamation and remediation expenses consisted of:
                                 
    Three Months Ended September 30,     Nine Months Ended September 30,  
    2010     2009     2010     2009  
Reclamation
  $ 5     $     $ 5     $  
Accretion — operating
    11       7       33       25  
Accretion — non-operating
    2       3       6       9  
 
                       
 
  $ 18     $ 10     $ 44     $ 34  
 
                       
 
                               
Asset retirement cost amortization (1)
  $ 8     $ 7     $ 22     $ 21  
 
                       
     
(1)   Asset retirement cost amortization is a component of Amortization.
NOTE 5 ADVANCED PROJECTS, RESEARCH AND DEVELOPMENT
                                 
    Three Months Ended September 30,     Nine Months Ended September 30,  
    2010     2009     2010     2009  
Major projects:
                               
Hope Bay
  $ 13     $ 2     $ 48     $ 18  
Subika underground
    4             6       1  
Conga
    2       1       5       2  
Akyem
          2       4       5  
Boddington
          11             24  
Other projects:
                               
Technical and project services
    12       6       35       18  
Corporate
    4       3       25       10  
South America growth
    7       1       11       5  
Nevada growth
    2       1       8       13  
Other
    2             7       4  
 
                       
 
  $ 46     $ 27     $ 149     $ 100  
 
                       
NOTE 6 OTHER EXPENSE, NET
                                 
    Three Months Ended September 30,     Nine Months Ended September 30,  
    2010     2009     2010     2009  
Community development
  $ 13     $ 12     $ 73     $ 33  
Regional administration
    16       14       47       40  
Peruvian royalty
    5       8       17       19  
World Gold Council dues
    3       2       9       8  
Western Australia power plant
          18       7       27  
Workforce reduction
                      15  
Boddington acquisition costs
                      67  
Batu Hijau divestiture
          3             9  
Other
    13       8       47       32  
 
                       
 
  $ 50     $ 65     $ 200     $ 250  
 
                       

 

9


Table of Contents

NEWMONT MINING CORPORATION

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

(dollars in millions, except per share, per ounce and per pound amounts)
NOTE 7 OTHER INCOME, NET
                                 
    Three Months Ended September 30,     Nine Months Ended September 30,  
    2010     2009     2010     2009  
Gain on asset sales, net
  $     $     $ 42     $ 1  
Canadian Oil Sands Trust income
    14       7       39       16  
Refinery income (EGR)(1)
    12       9       17       13  
Income from developing projects, net
    13             13        
Gain on sale of investments, net
    5       2       12       2  
Interest income
    3       2       8       11  
Foreign currency gain (loss) net
    (44 )     2       (48 )      
Other
    2       3       14        
 
                       
 
  $ 5     $ 25     $ 97     $ 43  
 
                       
(1) European Gold Refineries
NOTE 8 EMPLOYEE PENSION AND OTHER BENEFIT PLANS
                                 
    Three Months Ended September 30,     Nine Months Ended September 30,  
    2010     2009     2010     2009  
Pension benefit costs, net
                               
Service cost
  $ 5     $ 5     $ 16     $ 14  
Interest cost
    9       8       27       24  
Expected return on plan assets
    (8 )     (8 )     (24 )     (22 )
Amortization, net
    5       4       14       12  
 
                       
 
  $ 11     $ 9     $ 33     $ 28  
 
                       
                                 
    Three Months Ended September 30,     Nine Months Ended September 30,  
    2010     2009     2010     2009  
Other benefit costs, net
                               
Service cost
  $ 1     $ 1     $ 2     $ 2  
Interest cost
    1       1       4       4  
 
                       
 
  $ 2     $ 2     $ 6     $ 6  
 
                       
NOTE 9 STOCK BASED COMPENSATION
                                 
    Three Months Ended September 30,     Nine Months Ended September 30,  
    2010     2009     2010     2009  
Stock options
  $ 3     $ 3     $ 12     $ 11  
Restricted stock units
    4       1       12       4  
Performance leveraged stock units
    1             5        
Common stock
          1       2       2  
Restricted stock
    1       1       2       3  
Deferred stock
    2       2       7       10  
 
                       
 
  $ 11     $ 8     $ 40     $ 30  
 
                       

 

10


Table of Contents

NEWMONT MINING CORPORATION

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

(dollars in millions, except per share, per ounce and per pound amounts)
NOTE 10 INCOME TAXES
During the third quarter of 2010, the Company recorded estimated income tax expense of $348 resulting in an effective tax rate of 29.9%. Estimated income tax expense during the third quarter of 2009 was $253 for an effective tax rate of 28.0%. The increase in the effective tax rate from 2009 to 2010 resulted from the change in the jurisdictional blend of the Company’s taxable income and the effect of the percentage depletion deduction. During the first nine months of 2010, estimated income tax expense was $756 resulting in an effective tax rate of 26.5%. Estimated income tax expense during the first nine months of 2009 was $494 for an effective tax rate of 28.2%. The decrease in the effective tax rate from 2009 to 2010 resulted from a tax benefit of $127 being recorded in the first quarter of 2010 from the conversion of non-US tax-paying entities to entities currently subject to U.S. income tax resulting in an increase in net deferred tax assets, partially offset by the change in the jurisdictional blend of the Company’s taxable income and the effect it has on the overall rate impact from percentage depletion. The effective tax rates in the third quarter of 2010 and 2009 are different from the United States statutory rate of 35% primarily due to the U.S. percentage depletion deduction and the effect of different income tax rates in countries where earnings are indefinitely reinvested.
The Company operates in numerous countries around the world and accordingly it is subject to, and pays annual income taxes under, the various income tax regimes in the countries in which it operates. Some of these tax regimes are defined by contractual agreements with the local government, and others are defined by the general corporate income tax laws of the country. The Company has historically filed, and continues to file, all required income tax returns and pay the income taxes reasonably determined to be due. The tax rules and regulations in many countries are highly complex and subject to interpretation. From time to time the Company is subject to a review of its historic income tax filings and in connection with such reviews, disputes can arise with the taxing authorities over the interpretation or application of certain rules to the Company’s business conducted within the country involved. PTNNT, the Company’s partially owned subsidiary in Indonesia, received a final tax assessment from the Indonesian Tax Office during the third quarter. Although required to pay $132 (of which, $119 related to corporate income tax matters) of tax and penalties upon receipt of the tax assessment, PTNNT intends to vigorously defend its positions through all processes available to it. PTNNT believes it is more likely than not that they will prevail and therefore has recorded a corresponding receivable (see Note 21).
At September 30, 2010, the Company’s total unrecognized tax benefit was $122 for uncertain income tax positions taken or expected to be taken on income tax returns. Of this, $53 represents the amount of unrecognized tax benefits that, if recognized, would affect the Company’s effective income tax rate.
As a result of the statute of limitations that expire in the next 12 months in various jurisdictions, and possible settlements of audit-related issues with taxing authorities in various jurisdictions with respect to which none of the issues are individually significant, the Company believes that it is reasonably possible that the total amount of its net unrecognized income tax benefits will decrease by approximately $1 to $3 in the next 12 months.
On January 1, 2010, various U.S. tax laws expired, and as of September 30, 2010, they have not been reinstated. These expired tax laws do not have a material effect on the Company’s financial statements.
NOTE 11 DISCONTINUED OPERATIONS
Discontinued operations relate to the Kori Kollo operation in Bolivia, sold in July 2009.
The Company has reclassified the 2009 balance sheet amounts and income statement results from the historical presentation to Assets and Liabilities of operations held for sale on the Condensed Consolidated Balance Sheets and to Income (loss) from discontinued operations in the Condensed Consolidated Statements of Income. The Condensed Consolidated Statements of Cash Flows have been reclassified for assets held for sale and discontinued operations for all periods presented.

 

11


Table of Contents

NEWMONT MINING CORPORATION

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

(dollars in millions, except per share, per ounce and per pound amounts)
The following table details selected financial information included in the Income (loss) from discontinued operations in the consolidated statements of income:
         
    Nine Months Ended  
    September 30, 2009  
Sales
  $ 32  
 
     
 
       
Income from operations
  $ 1  
Loss on impairment
    (44 )
 
     
Pre-tax loss
    (43 )
Income tax benefit
    29  
 
     
Income (loss) from discontinued operations
  $ (14 )
 
     
Liabilities of operations held for sale include Other liabilities of $13 at December 31, 2009.
Net operating cash provided from (used in) discontinued operations was $(13) and $3 in the first nine months of 2010 and 2009, respectively.
Net cash used in financing activities of discontinued operations was $2 in the first nine months of 2009 for repayment of debt.
NOTE 12 NET INCOME ATTRIBUTABLE TO NONCONTROLLING INTERESTS
                                 
    Three Months Ended September 30,     Nine Months Ended September 30,  
    2010     2009     2010     2009  
Batu Hijau
  $ 203     $ 156     $ 405     $ 248  
Yanacocha
    72       99       223       243  
Other
    2       2       1       (2 )
 
                       
 
  $ 277     $ 257     $ 629     $ 489  
 
                       
In June 2010, PTPI completed the sale of an approximate 2.2% interest in PTNNT to PTIMI. To enable the transaction to proceed, the Company released its rights to the dividends payable on this 2.2% interest and released the security interest in the associated shares. The Company further agreed to advance certain funds to PTIMI to enable it to purchase the interest in exchange for an assignment by PTIMI to the Company of the dividends payable on the 2.2% interest (net of withholding tax), a pledge of the shares as security on the advance, and certain voting rights and obligations. The funds that the Company advanced to PTIMI and which PTIMI paid to PTPI for the shares were used by PTPI to reduce its outstanding balance with the Company. Upon completion of this transaction, PTPI requested and was allowed to make additional draw-downs under the agreement with PTPI. The Company’s economic interest in PTPI’s and PTIMI’s combined 20% interest in PTNNT remains at 17% and has not changed as a result of these transactions.
In March 2010, the Company (through NTP) completed the sale and transfer of shares representing a 7% interest in PTNNT, the Indonesian subsidiary that operates Batu Hijau, to PT Multi Daerah Bersaing (“PTMDB”) in compliance with the divestiture obligations under the Contract of Work (the “COW”), reducing NTP’s ownership interest to 56% from 63%. In 2009, the Company (through NTP) completed the sale and transfer of shares for a 17% interest in PTNNT to PTMDB in compliance with divestiture obligations under the COW, reducing NTP’s ownership interest to 63% from 80%. The 2010 and 2009 share transfers resulted in gains of approximately $9 (after tax of $40) and $63 (after tax of $115), respectively, that were recorded as Additional paid-in capital. For information on the COW and divestiture requirements, see the discussion in Note 26 to the Condensed Consolidated Financial Statements.
In December 2009, the Company entered into a transaction with PTPI, whereby the Company agreed to advance certain funds to PTPI in exchange for a pledge of the noncontrolling partner’s 20% share of PTNNT dividends, net of withholding tax, and certain voting rights and obligations, and a commitment from PTPI to support the application of Newmont’s standards to the operation of Batu Hijau. Based on the transaction with PTPI, the Company recognized an additional 17% effective economic interest in PTNNT.

 

12


Table of Contents

NEWMONT MINING CORPORATION

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

(dollars in millions, except per share, per ounce and per pound amounts)
At September 30, 2010, Newmont continued to have a 48.50% effective economic interest in PTNNT. Based on the accounting guidance for variable interest entities, Newmont continues to consolidate PTNNT in its Consolidated Financial Statements.
Newmont has a 51.35% ownership interest in Minera Yanacocha SR.L. (“Yanacocha”), with the remaining interests held by Compañia de Minas Buenaventura, S.A.A. (43.65%) and the International Finance Corporation (5%).
NOTE 13 INCOME PER COMMON SHARE
Basic income per common share is computed by dividing income available to Newmont common stockholders by the weighted average number of common shares outstanding during the period. Diluted income per common share is computed similarly to basic income per common share except that weighted average common shares is increased to include the potential issuance of dilutive common shares.
                                 
    Three Months Ended September 30,     Nine Months Ended September 30,  
    2010     2009     2010     2009  
 
Net income attributable to Newmont stockholders
                               
Continuing operations
  $ 537     $ 388     $ 1,465     $ 748  
Discontinued operations
                      (9 )
 
                       
 
  $ 537     $ 388     $ 1,465     $ 739  
 
                       
 
                               
Weighted average common shares (millions):
                               
Basic
    493       490       492       485  
Effect of employee stock-based awards
    1       1       1       1  
Effect of convertible notes
    8             5        
 
                       
Diluted
    502       491       498       486  
 
                       
 
                               
Net income attributable to Newmont stockholders per common share
                               
Basic:
                               
Continuing operations
  $ 1.09     $ 0.79     $ 2.98     $ 1.54  
Discontinued operations
                      (0.02 )
 
                       
 
  $ 1.09     $ 0.79     $ 2.98     $ 1.52  
 
                       
Diluted:
                               
Continuing operations
  $ 1.07     $ 0.79     $ 2.94     $ 1.54  
Discontinued operations
                      (0.02 )
 
                       
 
  $ 1.07     $ 0.79     $ 2.94     $ 1.52  
 
                       
Options to purchase 2 and 5 million shares of common stock at average exercise prices of $57 and $46 were outstanding at September 30, 2010 and 2009, respectively, but were not included in the computation of diluted weighted average number of common shares because their effect would have been anti-dilutive under the treasury stock method.

 

13


Table of Contents

NEWMONT MINING CORPORATION

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

(dollars in millions, except per share, per ounce and per pound amounts)
In February 2009 and July 2007, Newmont issued $518 and $1,150, respectively, of convertible notes that, if converted in the future, would have a potentially dilutive effect on the Company’s weighted average number of common shares. Under the indenture for the convertible notes, upon conversion Newmont is required to settle the principal amount of the convertible notes in cash and may elect to settle the remaining conversion obligation (stock price in excess of the conversion price) in cash, shares or a combination thereof. The effect of contingently convertible instruments on diluted earnings per share is calculated under the net share settlement method. Under the net share settlement method, the Company includes the amount of shares it would take to satisfy the conversion obligation, assuming that all of the convertible notes are surrendered. The average closing price of the Company’s common stock for each of the periods presented is used as the basis for determining dilution. The average price of the Company’s common stock for the three and nine months ended September 30, 2010 exceeded the conversion price of $46.21 and $46.17 for the notes issued in 2009 and 2007, respectively, and therefore, 8 and 5 million additional shares were included in the computation of diluted weighted average common shares for the three and nine months ended September 30, 2010, respectively.
In connection with the 2007 convertible senior notes offering, the Company entered into Call Spread Transactions which included the purchase of call options and the sale of warrants. As a result of the Call Spread Transactions, the conversion price of $46.17 was effectively increased to $60.22. Should the warrant transactions become dilutive to the Company’s earnings per share (if Newmont’s average share price exceeds $60.22) the underlying shares will be included in the computation of diluted income per common share.
The Net income attributable to Newmont stockholders and transfers from noncontrolling interests was:
                                 
    Three Months Ended September 30,     Nine Months Ended September 30,  
    2010     2009     2010     2009  
 
Net income attributable to Newmont stockholders
  $ 537     $ 388     $ 1,465     $ 739  
Transfers from noncontrolling interests:
                               
Increase in Additional paid in capital from sale of PTNNT shares, net of tax of $40
    (7 )           9        
 
                       
Net income attributable to Newmont stockholders and transfers from noncontrolling interests
  $ 530     $ 388     $ 1,474     $ 739  
 
                       

 

14


Table of Contents

NEWMONT MINING CORPORATION

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

(dollars in millions, except per share, per ounce and per pound amounts)
NOTE 14 COMPREHENSIVE INCOME
                                 
    Three Months Ended September 30,     Nine Months Ended September 30,  
    2010     2009     2010     2009  
 
                               
Net income
  $ 814     $ 645     $ 2,094     $ 1,228  
Other comprehensive income, net of tax:
                               
Unrealized gain on marketable securities
    58       120       30       312  
Foreign currency translation adjustments
    34       118       35       207  
Pension and other benefit liability adjustments
    3       3       8       6  
Change in fair value of cash flow hedge instruments:
                               
Net change from periodic revaluations
    163       79       120       165  
Net amount reclassified to income
    (15 )     (5 )     (50 )     19  
 
                       
Net unrecognized gain on derivatives
    148       74       70       184  
 
                       
 
    243       315       143       709  
 
                       
Comprehensive income
  $ 1,057     $ 960     $ 2,237     $ 1,937  
 
                       
 
                               
Comprehensive income attributable to:
                               
Newmont stockholders
  $ 779     $ 702     $ 1,607     $ 1,446  
Noncontrolling interests
    278       258       630       491  
 
                       
 
  $ 1,057     $ 960     $ 2,237     $ 1,937  
 
                       

 

15


Table of Contents

NEWMONT MINING CORPORATION

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

(dollars in millions, except per share, per ounce and per pound amounts)
NOTE 15 CHANGES IN EQUITY
                 
    Nine Months Ended September 30,  
    2010     2009  
Common stock:
               
At beginning of period
  $ 770     $ 709  
Common stock offering
          55  
Stock based awards
    4       2  
Shares issued in exchange for exchangeable shares
    4       2  
 
           
At end of period
    778       768  
 
           
 
               
Additional paid-in capital:
               
At beginning of period
    8,158       6,831  
Common stock offering
          1,178  
Convertible debt issuance
          46  
Common stock dividends
          (45 )
Stock based awards
    97       53  
Shares issued in exchange for exchangeable shares
    (4 )     (3 )
Sale of subsidiary shares to noncontrolling interests
    9        
 
           
At end of period
    8,260       8,060  
 
           
 
               
Accumulated other comprehensive income:
               
At beginning of period
    626       (253 )
Other comprehensive income
    142       707  
 
           
At end of period
    768       454  
 
           
 
               
Retained earnings:
               
At beginning of period
    1,149       4  
Net income attributable to Newmont stockholders
    1,465       739  
Common stock dividends
    (172 )     (102 )
 
           
At end of period
    2,442       641  
 
           
 
               
Noncontrolling interests:
               
At beginning of period
    1,910       1,370  
Net income attributable to noncontrolling interests
    629       489  
Dividends paid to noncontrolling interests
    (367 )     (115 )
Other comprehensive income
    1       2  
Sale of subsidiary shares to noncontrolling interests, net
    98        
 
           
At end of period
    2,271       1,746  
 
           
Total equity
  $ 14,519     $ 11,669  
 
           

 

16


Table of Contents

NEWMONT MINING CORPORATION

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

(dollars in millions, except per share, per ounce and per pound amounts)
NOTE 16 FAIR VALUE ACCOUNTING
Fair value accounting establishes a fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1 measurements) and the lowest priority to unobservable inputs (Level 3 measurements). The three levels of the fair value hierarchy are described below:
     
Level 1
  Unadjusted quoted prices in active markets that are accessible at the measurement date for identical, unrestricted assets or liabilities;
 
   
Level 2
  Quoted prices in markets that are not active, or inputs that are observable, either directly or indirectly, for substantially the full term of the asset or liability; and
 
   
Level 3
  Prices or valuation techniques that require inputs that are both significant to the fair value measurement and unobservable (supported by little or no market activity).
The following table sets forth the Company’s assets and liabilities measured at fair value on a recurring basis (at least annually) by level within the fair value hierarchy. As required by accounting guidance, assets and liabilities are classified in their entirety based on the lowest level of input that is significant to the fair value measurement.
                                 
    Fair Value at September 30, 2010  
    Total     Level 1     Level 2     Level 3  
Assets:
                               
Cash equivalents
  $ 2,073     $ 2,073     $     $  
Marketable equity securities:
                               
Extractive industries
    1,230       1,230              
Other
    7       7              
Marketable debt securities:
                               
Asset backed commercial paper
    18                   18  
Corporate
    8       8              
Auction rate securities
    5                   5  
Trade receivable from provisional copper and gold concentrate sales, net
    403       403              
Derivative instruments, net:
                               
Foreign exchange forward contracts
    237             237        
Interest rate swap contracts
    5             5        
Diesel forward contracts
    3             3        
 
                       
 
  $ 3,989     $ 3,721     $ 245     $ 23  
 
                       
Liabilities:
                               
8 5/8% debentures ($222 hedged portion)
  $ 232     $     $ 232     $  
Boddington contingent consideration
    83                   83  
 
                       
 
  $ 315     $     $ 232     $ 83  
 
                       
The Company’s cash equivalent instruments are classified within Level 1 of the fair value hierarchy because they are valued using quoted market prices. The cash equivalent instruments that are valued based on quoted market prices in active markets are primarily money market securities and U.S. Treasury securities.
The Company’s marketable equity securities are valued using quoted market prices in active markets and as such are classified within Level 1 of the fair value hierarchy. The securities are segregated based on industry. The fair value of the marketable equity securities is calculated as the quoted market price of the marketable equity security multiplied by the quantity of shares held by the Company.

 

17


Table of Contents

NEWMONT MINING CORPORATION

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

(dollars in millions, except per share, per ounce and per pound amounts)
The Company’s marketable debt securities include investments in auction rate securities and asset backed commercial paper. The Company reviews the fair value for auction rate securities and asset backed commercial paper on at least a quarterly basis. The auction rate securities are traded in markets that are not active, trade infrequently and have little price transparency. The Company estimated the fair value of the auction rate securities based on weighted average risk calculations using probabilistic cash flow assumptions. In January 2009, the investments in the Company’s asset backed commercial paper were restructured by court order. The restructuring allowed an interest distribution to be made to investors. The Company estimated the fair value of the asset backed commercial paper using a probability of return to each class of notes reflective of information reviewed regarding the separate classes of securities. The auction rate securities and asset backed commercial paper are classified within Level 3 of the fair value hierarchy. The Company’s corporate marketable debt securities are valued using quoted market prices in active markets and as such are classified within Level 1 of the fair value hierarchy.
The Company’s net trade receivable from provisional copper and gold concentrate sales is valued using quoted market prices based on forward curves and, as such, is classified within Level 1 of the fair value hierarchy.
The Company’s derivative instruments are valued using pricing models and the Company generally uses similar models to value similar instruments. Where possible, the Company verifies the values produced by its pricing models to market prices. Valuation models require a variety of inputs, including contractual terms, market prices, yield curves, credit spreads, measures of volatility, and correlations of such inputs. The Company’s derivatives trade in liquid markets, and as such, model inputs can generally be verified and do not involve significant management judgment. Such instruments are classified within Level 2 of the fair value hierarchy.
The Company has fixed to floating swap contracts to hedge a portion of the interest rate risk exposure of its 8 5/8% debentures due May 2011. The hedged portion of the Company’s 8 5/8% debentures are valued using pricing models which require inputs, including risk-free interest rates and credit spreads. Because the inputs are derived from observable market data, the hedged portion of the 8 5/8% debentures is classified within Level 2 of the fair value hierarchy.
The Company has recorded a contingent consideration liability related to the 2009 acquisition of the final 33.33% interest in Boddington. The value of the contingent consideration was determined using a valuation model which simulates future gold and copper prices and costs applicable to sales to estimate fair value. The contingent consideration liability is classified within Level 3 of the fair value hierarchy.
The table below sets forth a summary of changes in the fair value of the Company’s Level 3 financial assets and liabilities for the nine months ended September 30, 2010.
                                         
            Asset Backed             Boddington        
    Auction Rate     Commercial             Contingent     Total  
    Securities     Paper     Total Assets     Consideration     Liabilities  
Balance at beginning of period
  $ 5     $ 18     $ 23     $ 85     $ 85  
Settlements
                      (2 )     (2 )
 
                             
Balance at end of period
  $ 5     $ 18     $ 23     $ 83     $ 83  
 
                             
At September 30, 2010, assets and liabilities classified within Level 3 of the fair value hierarchy represent 1% and 26%, respectively, of total assets and liabilities measured at fair value.

 

18


Table of Contents

NEWMONT MINING CORPORATION

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

(dollars in millions, except per share, per ounce and per pound amounts)
NOTE 17 DERIVATIVE INSTRUMENTS
The Company’s strategy is to provide shareholders with leverage to changes in gold and copper prices by selling its production at spot market prices. Consequently, the Company does not hedge its gold and copper sales. Newmont has and will continue to manage risks associated with commodity input costs, interest rates and foreign currencies using the derivative market. All of the cash flow and fair value derivative instruments were transacted for risk management purposes and qualify as hedging instruments. The maximum period over which hedged transactions are expected to occur is five years.
Cash Flow Hedges
The foreign currency and diesel contracts are designated as cash flow hedges, and as such, the effective portion of unrealized changes in market value have been recorded in Accumulated other comprehensive income and are recorded in earnings during the period in which the hedged transaction affects earnings. Gains and losses from hedge ineffectiveness are recognized in current earnings.
Foreign Currency Contracts
Newmont utilizes foreign currency contracts to reduce the variability of the US dollar amount of forecasted foreign currency expenditures caused by changes in exchange rates. Newmont hedges a portion of the Company’s A$, NZ$ and IDR denominated operating expenditures which results in a blended rate realized each period. The hedging instruments are fixed forward contracts with expiration dates ranging up to five years from the date of issue. The principal hedging objective is reduction in the volatility of realized period-on-period $/A$, $/NZ$ and IDR/$ rates, respectively.
Newmont had the following foreign currency derivative contracts outstanding at September 30, 2010:
                                                         
    Expected Maturity Date  
                                                    Total/  
    2010     2011     2012     2013     2014     2015     Average  
A$ Fixed Forward Contracts:
                                                       
$ (millions)
  $ 215     $ 688     $ 395     $ 134     $ 77     $ 44     $ 1,553  
Average rate ($/A$)
    0.81       0.80       0.81       0.81       0.80       0.78       0.81  
A$ notional (millions)
    264       862       486       165       96       56       1,929  
Expected hedge ratio
    80 %     63 %     36 %     12 %     8 %     6 %     30 %
NZ$ Fixed Forward Contracts:
                                                       
$ (millions)
  $ 12     $ 39     $ 10     $     $     $     $ 61  
Average rate ($/NZ$)
    0.66       0.68       0.67                         0.67  
NZ$ notional (millions)
    18       58       15                         91  
Expected hedge ratio
    70 %     50 %     18 %     %     %     %     40 %
IDR Fixed Forward Contracts:
                                                       
$ (millions)
  $ 2     $     $     $     $     $     $ 2  
Average rate (IDR/$)
    10,062                                     10,062  
IDR notional (millions)
    20,123                                     20,123  
Expected hedge ratio
    18 %     %     %     %     %     %     18 %

 

19


Table of Contents

NEWMONT MINING CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) (Continued)
(dollars in millions, except per share, per ounce and per pound amounts)
Diesel Fixed Forward Contracts
Newmont hedges a portion of its operating cost exposure related to diesel consumed at its Nevada operations to reduce the variability in realized diesel prices. The hedging instruments consist of a series of financially settled fixed forward contracts with expiration dates ranging up to two years from the date of issue.
Newmont had the following diesel derivative contracts outstanding at September 30, 2010:
                                 
    Expected Maturity Date  
                            Total/  
    2010     2011     2012     Average  
Diesel Fixed Forward Contracts:
                               
$ (millions)
  $ 13     $ 39     $ 10     $ 62  
Average rate ($/gallon)
    2.10       2.25       2.38       2.24  
Diesel gallons (millions)
    6       17       4       27  
Expected Nevada hedge ratio
    63 %     41 %     13 %     33 %
Fair Value Hedges
Interest Rate Swap Contracts
At September 30, 2010, Newmont had $222 fixed to floating swap contracts designated as a hedge against its 8 5/8% debentures due 2011. The interest rate swap contracts assist in managing the Company’s mix of fixed and floating rate debt. Under the hedge contract terms, Newmont receives fixed-rate interest payments at 8.63% and pays floating-rate interest amounts based on periodic London Interbank Offered Rate (“LIBOR”) settings plus a spread, ranging from 2.60% to 7.63%. The interest rate swap contracts were designated as fair value hedges and changes in fair value have been recorded in income in each period, consistent with recording changes to the mark-to-market value of the underlying hedged liability in income.
Derivative Instrument Fair Values
Newmont had the following derivative instruments designated as hedges with fair values at September 30, 2010 and December 31, 2009:
                                 
    Fair Values of Derivative Instruments  
    At September 30, 2010  
    Other Current     Other Long-Term     Other Current     Other Long-Term  
    Assets     Assets     Liabilities     Liabilities  
Foreign currency exchange contracts:
                               
A$ fixed forward contracts
  $ 138     $ 95     $     $  
NZ$ fixed forward contracts
    3       1              
Diesel fixed forward contracts
    3                    
Interest rate swap contracts
    5                    
 
                       
Total derivative instruments (Note 21)
  $ 149     $ 96     $     $  
 
                       

 

20


Table of Contents

NEWMONT MINING CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) (Continued)
(dollars in millions, except per share, per ounce and per pound amounts)
                                 
    Fair Values of Derivative Instruments  
    At December 31, 2009  
    Other Current     Other Long-Term     Other Current     Other Long-Term  
    Assets     Assets     Liabilities     Liabilities  
Foreign currency exchange contracts:
                               
A$ fixed forward contracts
  $ 78     $ 53     $     $ 1  
NZ$ fixed forward contracts
    5       1              
IDR fixed forward contracts
    1                    
Diesel fixed forward contracts
    5       1              
Interest rate swap contracts
    3       4              
 
                       
Total derivative instruments (Note 21)
  $ 92     $ 59     $     $ 1  
 
                       
The following tables show the location and amount of gains (losses) reported in the Company’s Condensed Consolidated Financial Statements related to the Company’s cash flow and fair value hedges and the gains (losses) recorded for the hedged item related to the fair value hedges.
                                                 
    Foreign Currency     Diesel Forward     Treasury Rate Lock  
    Exchange Contracts     Contracts     Contracts  
    2010     2009     2010     2009     2010     2009  
For the three months ended September 30,
                                               
Cash flow hedging relationships:
                                               
Gain (loss) recognized in other comprehensive income (effective portion)
  $ 232     $ 102     $ 5     $ (1 )   $     $ 11  
Gain (loss) reclassified from Accumulated other comprehensive income into income (effective portion) (1)
    18       2       1       (2 )            
 
                                               
For the nine months ended September 30,
                                               
Cash flow hedging relationships:
                                               
Gain (loss) recognized in other comprehensive income (effective portion)
  $ 174     $ 220     $     $ 3     $     $ 11  
Gain (loss) reclassified from Accumulated other comprehensive income into income (effective portion) (1)
    63       (28 )     3       (13 )            
     
(1)   The gain (loss) for the effective portion of foreign exchange and diesel cash flow hedges reclassified from Accumulated other comprehensive income is included in Costs applicable to sales.
The amount to be reclassified from Accumulated other comprehensive income, net of tax to income for derivative instruments during the next 12 months is a gain of approximately $103.

 

21


Table of Contents

NEWMONT MINING CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) (Continued)
(dollars in millions, except per share, per ounce and per pound amounts)
                                 
    Interest Rate     8 5/8% Debentures  
    Swap Contracts     (Hedged Portion)  
    2010     2009     2010     2009  
For the three months ended September 30,
                               
Fair value hedging relationships:
                               
Gain (loss) recognized in income (effective portion) (1)
  $ 1     $ 1     $ 2     $ (1 )
Gain (loss) recognized in income (ineffective portion) (2)
    (1 )     (1 )     1        
 
                               
For the nine months ended September 30,
                               
Fair value hedging relationships:
                               
Gain (loss) recognized in income (effective portion) (1)
  $ 4     $ 3     $ 4     $ (2 )
Gain (loss) recognized in income (ineffective portion) (2)
    (3 )     (2 )     2       (3 )
     
(1)   The gain (loss) recognized for the effective portion of fair value hedges and the underlying hedged debt is included in Interest expense, net.
 
(2)   The ineffective portion recognized for fair value hedges and the underlying hedged debt is included in Other income, net.
Provisional Copper and Gold Sales
The Company’s provisional copper and gold sales contain an embedded derivative that is required to be separated from the host contract for accounting purposes. The host contract is the receivable from the sale of the gold and copper concentrates at the prevailing indices’ prices at the time of sale. The embedded derivative, which does not qualify for hedge accounting, is marked to market through earnings each period prior to final settlement.
LME copper prices averaged $3.29 per pound during the three months ended September 30, 2010, compared with the Company’s recorded average provisional price of $3.41 per pound before mark-to-market gains and treatment and refining charges. LME copper prices averaged $3.26 per pound during the nine months ended September 30, 2010, compared with the Company’s recorded average provisional price of $3.31 per pound before mark-to-market gains and treatment and refining charges. The applicable forward copper price at the end of the third quarter was $3.65 per pound. During the three months ended September 30, 2010, changes in copper prices resulted in a provisional pricing mark-to-market gain of $78 ($0.49 per pound). During the nine months ended September 30, 2010, changes in copper prices resulted in a provisional pricing mark-to-market gain of $30 ($0.07 per pound). At September 30, 2010, Newmont had copper sales of 151 million pounds priced at an average of $3.65 per pound, subject to final pricing over the next several months.
The average London P.M. fix for gold was $1,222 per ounce during the three months ended September 30, 2010, compared with the Company’s recorded average provisional price of $1,227 per ounce before mark-to-market gains and treatment and refining charges. The average London P.M. fix for gold was $1,178 per ounce during the nine months ended September 30, 2010, equal to the Company’s recorded average provisional price per ounce before mark-to-market gains and treatment and refining charges. The applicable forward gold price at the end of the third quarter was $1,308 per ounce. During the three months ended September 30, 2010, changes in gold prices resulted in a provisional pricing mark-to-market gain of $5 ($3 per ounce). During the nine months ended September 30, 2010, changes in gold prices resulted in a provisional pricing mark-to-market gain of $27 ($6 per ounce). At September 30, 2010, Newmont had gold sales of 146,000 ounces priced at an average of $1,308 per ounce, subject to final pricing over the next several months.

 

22


Table of Contents

NEWMONT MINING CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) (Continued)
(dollars in millions, except per share, per ounce and per pound amounts)
NOTE 18 INVESTMENTS
                                 
    At September 30, 2010  
    Cost/Equity     Unrealized     Fair/Equity  
    Basis     Gain     Loss     Basis  
Current:
                               
Marketable Equity Securities:
                               
Other
  $ 15     $ 31     $     $ 46  
 
                       
 
Long-term:
                               
Marketable Debt Securities:
                               
Asset backed commercial paper
  $ 24     $     $ (6 )   $ 18  
Auction rate securities
    7             (2 )     5  
Corporate
    5       3             8  
 
                       
 
    36       3       (8 )     31  
 
                       
Marketable Equity Securities:
                               
Canadian Oil Sands Trust
    298       463             761  
Gabriel Resources Ltd.
    75       218             293  
Regis Resources
    18       74             92  
Shore Gold Inc.
    5       8             13  
Other
    22       11       (1 )     32  
 
                       
 
    418       774       (1 )     1,191  
 
                       
 
                               
Other investments, at cost
    11                   11  
 
                               
Investment in Affiliates:
                               
La Zanja
    45                   45  
 
                       
 
  $ 510     $ 777     $ (9 )   $ 1,278  
 
                       

 

23


Table of Contents

NEWMONT MINING CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) (Continued)
(dollars in millions, except per share, per ounce and per pound amounts)
                                 
    At December 31, 2009  
    Cost/Equity     Unrealized     Fair/Equity  
    Basis     Gain     Loss     Basis  
Current:
                               
Marketable Equity Securities:
                               
Regis Resources
  $ 5     $ 29     $     $ 34  
Other
    10       12             22  
 
                       
 
  $ 15     $ 41     $     $ 56  
 
                       
Long-term:
                               
Marketable Debt Securities:
                               
Asset backed commercial paper
  $ 24     $     $ (6 )   $ 18  
Auction rate securities
    7             (2 )     5  
Corporate
    8       2             10  
 
                       
 
    39       2       (8 )     33  
 
                       
Marketable Equity Securities:
                               
Canadian Oil Sands Trust
    292       584             876  
Gabriel Resources Ltd.
    74       136             210  
Shore Gold Inc.
    4       11             15  
Other
    11       7             18  
 
                       
 
    381       738             1,119  
 
                       
 
                               
Other investments, at cost
    6                   6  
 
                               
Investment in Affiliates:
                               
AGR Matthey Joint Venture
    20                   20  
La Zanja
    8                   8  
 
                       
 
  $ 454     $ 740     $ (8 )   $ 1,186  
 
                       
Included in Investments at September 30, 2010 and December 31, 2009 are $8 and $10, respectively, of long-term marketable debt securities and $7 and $5 of long-term marketable equity securities, respectively, that are legally pledged for purposes of settling asset retirement obligations related to the San Jose Reservoir at Yanacocha.
In March 2010, Regis Resources Ltd (“Regis”) issued an A$10 interest free convertible notes to Newmont which were repayable by December 31, 2012. On September 30, 2010 Newmont accepted the offer to terminate its equity participation right on all Regis tenements and in return for 9 million Regis shares upon conversion of the interest free convertible notes. This conversion resulted in a gain of approximately $5 and increased Newmont’s ownership in Regis from 13.46% to 15.31%.
The AGR Matthey Joint Venture (“AGR”), in which the Company held a 40% equity interest, was dissolved on March 30, 2010. The remaining interests were held by West Australian Mint (“WAM”) (40%) and Johnson Matthey Australia (“JMA”) (20%). The Company received consideration of $14 from the dissolution and recorded a gain of $6 during the first nine months of 2010.
During the first nine months of 2009, the Company recognized a charge of $6 for other-than-temporary declines in marketable equity securities.

 

24


Table of Contents

NEWMONT MINING CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) (Continued)
(dollars in millions, except per share, per ounce and per pound amounts)
The following tables present the gross unrealized losses and fair value of the Company’s investments with unrealized losses that are not deemed to be other-than-temporarily impaired, aggregated by length of time that the individual securities have been in a continuous unrealized loss position:
                                                 
    Less than 12 Months     12 Months or Greater     Total  
            Unrealized             Unrealized             Unrealized  
At September 30, 2010   Fair Value     Losses     Fair Value     Losses     Fair Value     Losses  
Asset backed commercial paper
  $     $     $ 18     $ 6     $ 18     $ 6  
Auction rate securities
                5       2       5       2  
Marketable equity securities
    6       1                   6       1  
 
                                   
 
  $ 6     $ 1     $ 23     $ 8     $ 29     $ 9  
 
                                   
                                                 
    Less than 12 Months     12 Months or Greater     Total  
            Unrealized             Unrealized             Unrealized  
At December 31, 2009   Fair Value     Losses     Fair Value     Losses     Fair Value     Losses  
Asset backed commercial paper
  $     $     $ 18     $ 6     $ 18     $ 6  
Auction rate securities
                5       2       5       2  
 
                                   
 
  $     $     $ 23     $ 8     $ 23     $ 8  
 
                                   
The unrealized loss of $9 and $8 at September 30, 2010 and December 31, 2009, respectively, relate to the Company’s investments in asset backed commercial paper, auction rate securities and marketable equity securities as listed in the tables above. While the fair values of these investments are below their respective cost, the Company views these declines as temporary. The Company intends to hold its investment in auction rate securities and asset backed commercial paper until maturity or such time that the market recovers and therefore considers these losses temporary.
NOTE 19 INVENTORIES
                 
    At September 30,     At December 31,  
    2010     2009  
In-process
  $ 82     $ 80  
Concentrate
    41       10  
Precious metals
    9       9  
Materials, supplies and other
    394       394  
 
           
 
  $ 526     $ 493  
 
           
During the first nine months of 2010 and 2009, the Company recorded write-downs of $4 and $5, respectively, to reduce the carrying value of materials and supplies inventories to net realizable value at Nevada and Batu Hijau. Inventory write-downs are classified as components of Costs applicable to sales.

 

25


Table of Contents

NEWMONT MINING CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) (Continued)
(dollars in millions, except per share, per ounce and per pound amounts)
NOTE 20 STOCKPILES AND ORE ON LEACH PADS
                 
    At September 30,     At December 31,  
    2010     2009  
Current:
               
Stockpiles
  $ 334     $ 206  
Ore on leach pads
    204       197  
 
           
 
  $ 538     $ 403  
 
           
 
               
Long-term:
               
Stockpiles
  $ 1,335     $ 1,181  
Ore on leach pads
    387       321  
 
           
 
  $ 1,722     $ 1,502  
 
           
At September 30, 2010, stockpiles were primarily located at Batu Hijau ($857), Nevada ($324), Boddington ($196), Other Australia/New Zealand ($126) and Ahafo ($103), while ore on leach pads were primarily located at Yanacocha ($426) and Nevada ($157).
NOTE 21 OTHER ASSETS
                 
    At September 30,     At December 31,  
    2010     2009  
Other current assets:
               
Refinery metal inventory and receivable (EGR)
  $ 911     $ 671  
Derivative instruments
    149       92  
Prepaid assets
    84       70  
Other
    74       67  
 
           
 
  $ 1,218     $ 900  
 
           
 
               
Other long-term assets:
               
Goodwill
  $ 188     $ 188  
Income tax receivable
    119        
Derivative instruments
    96       59  
Intangible assets
    92       29  
Debt issuance costs
    41       50  
Restricted cash
    24       70  
Other receivables
    16       16  
Other
    126       70  
 
           
 
  $ 702     $ 482  
 
           

 

26


Table of Contents

NEWMONT MINING CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) (Continued)
(dollars in millions, except per share, per ounce and per pound amounts)
NOTE 22 DEBT
                                 
    At September 30, 2010     At December 31, 2009  
    Current     Non-Current     Current     Non-Current  
Sale-leaseback of refractory ore treatment plant
  $ 30     $ 134     $ 24     $ 164  
8 5/8% debentures, net of discount (due 2011)
    213                   218  
2012 convertible senior notes, net of discount
          481             463  
2014 convertible senior notes, net of discount
          484             468  
2017 convertible senior notes, net of discount
          430             417  
5 1/8% senior notes, net of discount (due 2019)
          896             896  
5 7/8% senior notes, net of discount (due 2035)
          598             597  
6 1/4% senior notes, net of discount (due 2039)
          1,087             1,087  
PTNNT project financing facility
                87       133  
Yanacocha credit facility
    14       38       14       48  
Yanacocha senior notes
    16       80       8       92  
Ahafo project facility
    10       60       10       65  
Other project financings and capital leases
    6       1       14       4  
 
                       
 
  $ 289     $ 4,289     $ 157     $ 4,652  
 
                       
On February 23, 2010, PTNNT repaid the $220 remaining balance under the PTNNT project financing facility. As a result, the Company is no longer required to maintain letters of credit to secure 56.25% of the PTNNT project financing facility and PTNNT’s assets are no longer pledged as collateral.
Scheduled minimum debt repayments are $16 for the remainder of 2010, $285 in 2011, $582 in 2012, $72 in 2013, $550 in 2014 and $3,073 thereafter.

 

27


Table of Contents

NEWMONT MINING CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) (Continued)
(dollars in millions, except per share, per ounce and per pound amounts)
NOTE 23 OTHER LIABILITIES
                 
    At September 30,     At December 31,  
    2010     2009  
Other current liabilities:
               
Refinery metal payable (EGR)
  $ 911     $ 671  
Accrued operating costs
    203       131  
Interest
    99       72  
Accrued capital expenditures
    85       115  
Royalties
    53       58  
Reclamation and remediation costs
    47       54  
Boddington contingent consideration
    27       16  
Taxes other than income and mining
    93       73  
Other
    103       127  
 
           
 
  $ 1,621     $ 1,317  
 
           
 
               
Other long-term liabilities:
               
Boddington contingent consideration
  $ 56     $ 69  
Power supply agreements
    43        
Income and mining taxes
    23       38  
Other
    47       67  
 
           
 
  $ 169     $ 174  
 
           
NOTE 24 NET CHANGE IN OPERATING ASSETS AND LIABILITIES
Net cash provided from operations attributable to the net change in operating assets and liabilities is composed of the following:
                 
    Nine Months Ended September 30,  
    2010     2009  
Decrease (increase) in operating assets:
               
Trade and accounts receivable
  $ (63 )   $ 200  
Inventories, stockpiles and ore on leach pads
    (297 )     (249 )
EGR refinery assets
    (200 )     (179 )
Other assets
    (50 )     4  
Increase (decrease) in operating liabilities:
               
Accounts payable and other accrued liabilities
    (144 )     53  
EGR refinery liabilities
    200       179  
Reclamation liabilities
    (32 )     (35 )
 
           
 
  $ (586 )   $ (27 )
 
           

 

28


Table of Contents

NEWMONT MINING CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) (Continued)
(dollars in millions, except per share, per ounce and per pound amounts)
NOTE 25 CONDENSED CONSOLIDATING FINANCIAL STATEMENTS
Newmont USA, a 100% owned subsidiary of Newmont Mining Corporation, has fully and unconditionally guaranteed the 5 7/8%, 5 1/8% and 6 1/4% publicly traded notes and the 2012, 2014 and 2017 convertible senior notes. The following consolidating financial statements are provided for Newmont USA, as guarantor, and for Newmont Mining Corporation, as issuer, as an alternative to providing separate financial statements for the guarantor. The accounts of Newmont Mining Corporation are presented using the equity method of accounting for investments in subsidiaries.
                                         
    Three Months Ended September 30, 2010  
                                    Newmont  
    Newmont                             Mining  
    Mining     Newmont     Other             Corporation  
Condensed Consolidating Statement of Income   Corporation     USA     Subsidiaries     Eliminations     Consolidated  
 
                                       
Sales
  $     $ 1,860     $ 737     $     $ 2,597  
 
                                       
Costs and expenses
                                       
Costs applicable to sales (1)
          579       330       (6 )     903  
Amortization
          159       83             242  
Reclamation and remediation
          13       5             18  
Exploration
          41       26             67  
Advanced projects, research and development
          26       21       (1 )     46  
General and administrative
          37       1       7       45  
Other expense, net
          41       9             50  
 
                             
 
          896       475             1,371  
 
                             
 
                                       
Other income (expense)
                                       
Other income, net
          1       4             5  
Interest income — intercompany
    35       2             (37 )      
Interest expense — intercompany
    (3 )           (34 )     37        
Interest expense, net
    (61 )     (3 )     (2 )           (66 )
 
                             
 
    (29 )           (32 )           (61 )
 
                             
Income (loss) before income tax and other items
    (29 )     964       230             1,165  
Income tax expense
    (1 )     (301 )     (46 )           (348 )
Equity income (loss) of affiliates
    567       1       79       (650 )     (3 )
 
                             
Net income (loss)
    537       664       263       (650 )     814  
Net loss (income) attributable to noncontrolling interests
          (346 )     25       44       (277 )
 
                             
Net income (loss) attributable to Newmont stockholders
  $ 537     $ 318     $ 288     $ (606 )   $ 537  
 
                             
     
(1)   Exclusive of Amortization and Reclamation and remediation.

 

29


Table of Contents

NEWMONT MINING CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) (Continued)
(dollars in millions, except per share, per ounce and per pound amounts)
                                         
    Three Months Ended September 30, 2009  
                                    Newmont  
    Newmont                             Mining  
    Mining     Newmont     Other             Corporation  
Condensed Consolidating Statement of Income   Corporation     USA     Subsidiaries     Eliminations     Consolidated  
 
                                       
Sales
  $     $ 1,636     $ 413     $     $ 2,049  
 
                                       
Costs and expenses
                                       
Costs applicable to sales (1)
          551       219       (5 )     765  
Amortization
          146       54       (1 )     199  
Reclamation and remediation
          7       3             10  
Exploration
          26       29             55  
Advanced projects, research and development
          11       17       (1 )     27  
General and administrative
          31       1       7       39  
Other expense, net
          33       32             65  
 
                             
 
          805       355             1,160  
 
                             
 
                                       
Other income (expense)
                                       
Other income, net
    (2 )     (1 )     28             25  
Interest income — intercompany
    17       1       3       (21 )      
Interest expense — intercompany
    (2 )           (19 )     21        
Interest expense, net
    3       (12 )     (1 )           (10 )
 
                             
 
    16       (12 )     11             15  
 
                             
Income before income tax and other items
    16       819       69             904  
Income tax benefit (expense)
    11       (250 )     (14 )           (253 )
Equity income (loss) of affiliates
    361       (3 )     48       (412 )     (6 )
 
                             
Net income (loss)
    388       566       103       (412 )     645  
Net loss (income) attributable to noncontrolling interests
          (257 )     (16 )     16       (257 )
 
                             
Net income (loss) attributable to Newmont stockholders
  $ 388     $ 309     $ 87     $ (396 )   $ 388  
 
                             
     
(1)   Exclusive of Amortization and Reclamation and remediation.

 

30


Table of Contents

NEWMONT MINING CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) (Continued)
(dollars in millions, except per share, per ounce and per pound amounts)
                                         
    Nine Months Ended September 30, 2010  
                                    Newmont  
    Newmont                             Mining  
    Mining     Newmont     Other             Corporation  
Condensed Consolidating Statement of Income   Corporation     USA     Subsidiaries     Eliminations     Consolidated  
 
                                       
Sales
  $     $ 4,862     $ 2,130     $     $ 6,992  
 
                                       
Costs and expenses
                                       
Costs applicable to sales (1)
          1,655       998       (17 )     2,636  
Amortization
          445       253       (1 )     697  
Reclamation and remediation
          32       12             44  
Exploration
          97       66             163  
Advanced projects, research and development
          80       70       (1 )     149  
General and administrative
          112       2       19       133  
Other expense, net
          156       44             200  
 
                             
 
          2,577       1,445             4,022  
 
                             
 
                                       
Other income (expense)
                                       
Other income, net
          15       82             97  
Interest income — intercompany
    106       6       2       (114 )      
Interest expense — intercompany
    (8 )           (106 )     114        
Interest expense, net
    (187 )     (19 )     (4 )           (210 )
 
                             
 
    (89 )     2       (26 )           (113 )
 
                             
Income (loss) before income tax and other items
    (89 )     2,287       659             2,857  
Income tax expense
    149       (755 )     (150 )           (756 )
Equity income (loss) of affiliates
    1,405       2       209       (1,623 )     (7 )
 
                             
Net income (loss)
    1,465       1,534       718       (1,623 )     2,094  
Net loss (income) attributable to noncontrolling interests
          (774 )     20       125       (629 )
 
                             
Net income (loss) attributable to Newmont stockholders
  $ 1,465     $ 760     $ 738     $ (1,498 )   $ 1,465  
 
                             
     
(1)   Exclusive of Amortization and Reclamation and remediation.

 

31


Table of Contents

NEWMONT MINING CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) (Continued)
(dollars in millions, except per share, per ounce and per pound amounts)
                                         
    Nine Months Ended September 30, 2009  
                                    Newmont  
    Newmont                             Mining  
    Mining     Newmont     Other             Corporation  
Condensed Consolidating Statement of Income   Corporation     USA     Subsidiaries     Eliminations     Consolidated  
 
                                       
Sales
  $     $ 3,991     $ 1,196     $     $ 5,187  
 
                                       
Costs and expenses
                                       
Costs applicable to sales (1)
          1,587       630       (17 )     2,200  
Amortization
          408       159       (1 )     566  
Reclamation and remediation
          24       10             34  
Exploration
          74       73             147  
Advanced projects, research and development
          46       57       (3 )     100  
General and administrative
          94       3       21       118  
Other expense, net
    8       117       125             250  
 
                             
 
    8       2,350       1,057             3,415  
 
                             
Other income (expense)
                                       
Other income, net
    (12 )     (1 )     56             43  
Interest income — intercompany
    77       5       4       (86 )      
Interest expense — intercompany
    (7 )           (79 )     86        
Interest expense, net
    (24 )     (37 )     (4 )           (65 )
 
                             
 
    34       (33 )     (23 )           (22 )
 
                             
Income from continuing operations before income tax tax and other items
    26       1,608       116             1,750  
Income tax benefit (expense)
    (2 )     (493 )     1             (494 )
Equity income (loss) of affiliates
    729             102       (845 )     (14 )
 
                             
Income (loss) from continuing operations
    753       1,115       219       (845 )     1,242  
Income (loss) from discontinued operations
    (14 )     (14 )           14       (14 )
 
                             
Net income (loss)
    739       1,101       219       (831 )     1,228  
Net loss (income) attributable to noncontrolling interests
          (491 )     (44 )     46       (489 )
 
                             
Net income (loss) attributable to Newmont stockholders
  $ 739     $ 610     $ 175     $ (785 )   $ 739  
 
                             
     
(1)   Exclusive of Amortization and Reclamation and remediation.

 

32


Table of Contents

NEWMONT MINING CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) (Continued)
(dollars in millions, except per share, per ounce and per pound amounts)
                                         
    Nine Months Ended September 30, 2010  
                                    Newmont  
    Newmont                             Mining  
    Mining     Newmont     Other             Corporation  
Condensed Consolidating Statement of Cash Flows   Corporation     USA     Subsidiaries     Eliminations     Consolidated  
Operating activities:
                                       
Net income (loss)
  $ 1,465     $ 1,534     $ 718     $ (1,623 )   $ 2,094  
Adjustments
    (98 )     496       (1,194 )     1,623       827  
Net change in operating assets and liabilities
    (43 )     (415 )     (128 )           (586 )
 
                             
Net cash provided from (used in) continuing operations
    1,324       1,615       (604 )           2,335  
Net cash used in discontinued operations
          (13 )                 (13 )
 
                             
Net cash provided from (used in) operations
    1,324       1,602       (604 )           2,322  
 
                             
Investing activities:
                                       
Additions to property, plant and mine development
          (478 )     (494 )           (972 )
Investment in marketable debt and equity securities
                (9 )           (9 )
Acquisitions, net
                (2 )           (2 )
Proceeds from sale of other assets
          8       45             53  
Other
                (72 )           (72 )
 
                             
Net cash used in investing activities
          (470 )     (532 )           (1,002 )
 
                             
Financing activities:
                                       
Net repayments
          (269 )     (5 )           (274 )
Net intercompany borrowings (repayments)
    (1,216 )     (11 )     1,325       (98 )      
Sale of subsidiary shares to noncontrolling interests
          229                   229  
Acquisition of subsidiary shares from noncontrolling interests
                (109 )           (109 )
Dividends paid to common stockholders
    (172 )                       (172 )
Dividends paid to noncontrolling interests
          (458 )           98       (360 )
Proceeds from stock issuance, net
    56                         56  
Change in restricted cash and other
          47       (1 )           46  
 
                             
Net cash provided from (used in) financing activities
    (1,332 )     (462 )     1,210             (584 )
 
                             
Effect of exchange rate changes on cash
          2       (2 )            
 
                             
Net change in cash and cash equivalents
    (8 )     672       72             736  
Cash and cash equivalents at beginning of period
    8       3,067       140             3,215  
 
                             
Cash and cash equivalents at end of period
  $     $ 3,739     $ 212     $     $ 3,951  
 
                             

 

33


Table of Contents

NEWMONT MINING CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) (Continued)
(dollars in millions, except per share, per ounce and per pound amounts)
                                         
    Nine Months Ended September 30, 2009  
                                    Newmont  
    Newmont                             Mining  
    Mining     Newmont     Other             Corporation  
Condensed Consolidating Statement of Cash Flows   Corporation     USA     Subsidiaries     Eliminations     Consolidated  
Operating activities:
                                       
Net income (loss)
  $ 739     $ 1,101     $ 219     $ (831 )   $ 1,228  
Adjustments
    72       526       (684 )     831       745  
Net change in operating assets and liabilities
    (58 )     (11 )     42             (27 )
 
                             
Net cash provided from (used in) continuing operations
    753       1,616       (423 )           1,946  
Net cash provided from discontinued operations
          3                   3  
 
                             
Net cash provided from (used in) operations
    753       1,619       (423 )           1,949  
 
                             
Investing activities:
                                       
Additions to property, plant and mine development
          (334 )     (980 )           (1,314 )
Acquisitions, net
    (8 )     (11 )     (747 )           (766 )
Proceeds from sale of other assets
          2       1             3  
Other
          (1 )     (10 )           (11 )
 
                             
Net cash used in investing activities
    (8 )     (344 )     (1,736 )           (2,088 )
 
                             
Financing activities:
                                       
Net borrowings (repayments)
    1,724       (32 )     6             1,698  
Net intercompany borrowings (repayments)
    (3,565 )     1,402       2,163              
Dividends paid to common stockholders
    (147 )                       (147 )
Dividends paid to noncontrolling interests
          (112 )     (3 )           (115 )
Proceeds from stock issuance
    1,248                         1,248  
Change in restricted cash and other
    (5 )           10             5  
 
                             
Net cash provided from (used in) financing activities of continuing operations
    (745 )     1,258       2,176             2,689  
Net cash used in financing activities of discontinued operations
          (2 )                 (2 )
 
                             
Net cash provided from (used in) financing activities
    (745 )     1,256       2,176             2,687  
 
                             
Effect of exchange rate changes on cash
                39             39  
 
                             
Net change in cash and cash equivalents
          2,531       56             2,587  
Cash and cash equivalents at beginning of period
          310       125             435  
 
                             
Cash and cash equivalents at end of period
  $     $ 2,841     $ 181     $     $ 3,022  
 
                             

 

34


Table of Contents

NEWMONT MINING CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) (Continued)
(dollars in millions, except per share, per ounce and per pound amounts)
                                         
    At September 30, 2010  
                                    Newmont  
    Newmont                             Mining  
    Mining     Newmont     Other             Corporation  
Condensed Consolidating Balance Sheet   Corporation     USA     Subsidiaries     Eliminations     Consolidated  
Assets
                                       
Cash and cash equivalents
  $     $ 3,739     $ 212     $     $ 3,951  
Trade receivables
          457       32             489  
Accounts receivable
    2,267       785       349       (3,308 )     93  
Investments
          12       34             46  
Inventories
          313       213             526  
Stockpiles and ore on leach pads
          453       85             538  
Deferred income tax assets
          171       24             195  
Other current assets
          97       1,121             1,218  
 
                             
Current assets
    2,267       6,027       2,070       (3,308 )     7,056  
Property, plant and mine development, net
          5,200       7,350       (18 )     12,532  
Investments
          27       1,251             1,278  
Investments in subsidiaries
    11,447       34       1,795       (13,276 )      
Stockpiles and ore on leach pads
          1,383       339             1,722  
Deferred income tax assets
    117       905       64             1,086  
Other long-term assets
    2,548       448       570       (2,864 )     702  
 
                             
Total assets
  $ 16,379     $ 14,024     $ 13,439     $ (19,466 )   $ 24,376  
 
                             
 
                                       
Liabilities
                                       
Debt
  $     $ 279     $ 10     $     $ 289  
Accounts payable
    33       1,374       2,289       (3,300 )     396  
Employee-related benefits
          173       54             227  
Income and mining taxes
          254       11             265  
Other current liabilities
    85       310       3,196       (1,970 )     1,621  
 
                             
Current liabilities
    118       2,390       5,560       (5,270 )     2,798  
Debt
    3,976       253       60             4,289  
Reclamation and remediation liabilities
          581       239             820  
Deferred income tax liabilities
          521       911             1,432  
Employee-related benefits
    4       284       61             349  
Other long-term liabilities
    355       55       2,641       (2,882 )     169  
 
                             
Total liabilities
    4,453       4,084       9,472       (8,152 )     9,857  
 
                             
Equity
                                       
Preferred stock
                61       (61 )      
Common stock
    778                         778  
Additional paid-in capital
    7,938       2,715       3,885       (6,278 )     8,260  
Accumulated other comprehensive income (loss)
    768       (106 )     863       (757 )     768  
Retained earnings (deficit)
    2,442       4,561       (1,346 )     (3,215 )     2,442  
 
                             
Newmont stockholders’ equity
    11,926       7,170       3,463       (10,311 )     12,248  
Noncontrolling interests
          2,770       504       (1,003 )     2,271  
 
                             
Total equity
    11,926       9,940       3,967       (11,314 )     14,519  
 
                             
Total liabilities and equity
  $ 16,379     $ 14,024     $ 13,439     $ (19,466 )   $ 24,376  
 
                             

 

35


Table of Contents

NEWMONT MINING CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) (Continued)
(dollars in millions, except per share, per ounce and per pound amounts)
                                         
    At December 31, 2009  
                                    Newmont  
    Newmont                             Mining  
    Mining     Newmont     Other             Corporation  
Condensed Consolidating Balance Sheet   Corporation     USA     Subsidiaries     Eliminations     Consolidated  
Assets
                                       
Cash and cash equivalents
  $ 8     $ 3,067     $ 140     $     $ 3,215  
Trade receivables
          417       21             438  
Accounts receivable
    2,338       673       363       (3,272 )     102  
Investments
          4       52             56  
Inventories
          307       186             493  
Stockpiles and ore on leach pads
          331       72             403  
Deferred income tax assets
          157       58             215  
Other current assets
          78       822             900  
 
                             
Current assets
    2,346       5,034       1,714       (3,272 )     5,822  
Property, plant and mine development, net
          5,195       7,193       (18 )     12,370  
Investments
          26       1,160             1,186  
Investments in subsidiaries
    9,842       31       1,089       (10,962 )      
Stockpiles and ore on leach pads
          1,323       179             1,502  
Deferred income tax assets
          844       93             937  
Other long-term assets
    2,551       357       419       (2,845 )     482  
 
                             
Total assets
  $ 14,739     $ 12,810     $ 11,847     $ (17,097 )   $ 22,299  
 
                             
 
                                       
Liabilities
                                       
Debt
  $     $ 147     $ 10     $     $ 157  
Accounts payable
    46       1,201       2,413       (3,264 )     396  
Employee-related benefits
          202       48             250  
Income and mining taxes
          192       8             200  
Other current liabilities
    58       281       2,949       (1,971 )     1,317  
 
                             
Current liabilities
    104       2,023       5,428       (5,235 )     2,320  
Debt
    3,928       659       65             4,652  
Reclamation and remediation liabilities
          565       240             805  
Deferred income tax liabilities
    31       494       816             1,341  
Employee-related benefits
    4       324       53             381  
Other long-term liabilities
    338       62       2,637       (2,863 )     174  
Liabilities of operations held for sale
          13                   13  
 
                             
Total liabilities
    4,405       4,140       9,239       (8,098 )     9,686  
 
                             
Equity
                                       
Preferred stock
                61       (61 )      
Common stock
    770                         770  
Additional paid-in capital
    7,789       2,709       3,874       (6,214 )     8,158  
Accumulated other comprehensive income (loss)
    626       (125 )     738       (613 )     626  
Retained earnings (deficit)
    1,149       3,801       (2,080 )     (1,721 )     1,149  
 
                             
Newmont stockholders’ equity
    10,334       6,385       2,593       (8,609 )     10,703  
Noncontrolling interests
          2,285       15       (390 )     1,910  
 
                             
Total equity
    10,334       8,670       2,608       (8,999 )     12,613  
 
                             
Total liabilities and equity
  $ 14,739     $ 12,810     $ 11,847     $ (17,097 )   $ 22,299  
 
                             

 

36


Table of Contents

NEWMONT MINING CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) (Continued)
(dollars in millions, except per share, per ounce and per pound amounts)
NOTE 26 COMMITMENTS AND CONTINGENCIES
General
The Company follows ASC guidance in determining its accruals and disclosures with respect to loss contingencies. Accordingly, estimated losses from loss contingencies are accrued by a charge to income when information available prior to issuance of the financial statements indicates that it is probable (greater than a 75% probability) that a liability could be incurred and the amount of the loss can be reasonably estimated. Legal expenses associated with the contingency are expensed as incurred. If a loss contingency is not probable or reasonably estimable, disclosure of the loss contingency is made in the financial statements when it is at least reasonably possible that a material loss could be incurred.
Operating Segments
The Company’s operating segments are identified in Note 3. Except as noted in this paragraph, all of the Company’s commitments and contingencies specifically described in this Note 26 relate to the Corporate and Other reportable segment. The Nevada Operations matters under Newmont USA Limited relate to the North America reportable segment. The PT Newmont Minahasa Raya matters relate to the Asia Pacific reportable segment. The Yanacocha matters relate to the South America reportable segment. The PTNNT matters relate to the Asia Pacific reportable segment.
Environmental Matters
The Company’s mining and exploration activities are subject to various laws and regulations governing the protection of the environment. These laws and regulations are continually changing and are generally becoming more restrictive. The Company conducts its operations so as to protect the public health and environment and believes its operations are in compliance with applicable laws and regulations in all material respects. The Company has made, and expects to make in the future, expenditures to comply with such laws and regulations, but cannot predict the full amount of such future expenditures.
Estimated future reclamation costs are based principally on legal and regulatory requirements. At September 30, 2010 and December 31, 2009, $719 and $698, respectively, were accrued for reclamation costs relating to currently producing mineral properties in accordance with asset retirement obligation guidance. The current portions of $31 and $36 at September 30, 2010 and December 31, 2009, respectively, are included in Other current liabilities.
In addition, the Company is involved in several matters concerning environmental obligations associated with former mining activities. Generally, these matters concern developing and implementing remediation plans at the various sites involved. The Company believes that the related environmental obligations associated with these sites are similar in nature with respect to the development of remediation plans, their risk profile and the compliance required to meet general environmental standards. Based upon the Company’s best estimate of its liability for these matters, $148 and $161 were accrued for such obligations at September 30, 2010 and December 31, 2009, respectively. These amounts are included in Other current liabilities and Reclamation and remediation liabilities. Depending upon the ultimate resolution of these matters, the Company believes that it is reasonably possible that the liability for these matters could be as much as 159% greater or 3% lower than the amount accrued at September 30, 2010. The amounts accrued for these matters are reviewed periodically based upon facts and circumstances available at the time. Changes in estimates are recorded in Reclamation and remediation in the period estimates are revised.
Details about certain of the more significant matters involved are discussed below.
Dawn Mining Company LLC (“Dawn”) — 51% Newmont Owned
Midnite Mine Site. Dawn previously leased an open pit uranium mine, currently inactive, on the Spokane Indian Reservation in the State of Washington. The mine site is subject to regulation by agencies of the U.S. Department of Interior (the Bureau of Indian Affairs and the Bureau of Land Management), as well as the United States Environmental Protection Agency (“EPA”).

 

37


Table of Contents

NEWMONT MINING CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) (Continued)
(dollars in millions, except per share, per ounce and per pound amounts)
In 1991, Dawn’s mining lease at the mine was terminated. As a result, Dawn was required to file a formal mine closure and reclamation plan. The Department of Interior commenced an analysis of Dawn’s proposed plan and alternate closure and reclamation plans for the mine. Work on this analysis has been suspended indefinitely. In mid-2000, the mine was included on the National Priorities List under the Comprehensive Environmental Response, Compensation and Liability Act (“CERCLA”). In March 2003, the EPA notified Dawn and Newmont that it had thus far expended $12 on the Remedial Investigation/Feasibility Study (“RI/FS”) under CERCLA. In October 2005, the EPA issued the RI/FS on this property in which it indicated a preferred remedy that it estimated to cost approximately $150. Newmont and Dawn filed comments on the RI/FS with the EPA in January 2006. On October 3, 2006, the EPA issued a final Record of Decision in which it formally selected the preferred remedy identified in the RI/FS.
On January 28, 2005, the EPA filed a lawsuit against Dawn and Newmont under CERCLA in the U.S. District Court for the Eastern District of Washington. The EPA has asserted that Dawn and Newmont are liable for reclamation or remediation work and costs at the mine. Dawn does not have sufficient funds to pay for the reclamation plan it proposed or for any alternate plan, or for any additional remediation work or costs at the mine.
On July 14, 2008, after a bench trial, the Court held Newmont liable under CERCLA as an “operator” of the Midnite Mine. The Court previously ruled on summary judgment that both the U.S. Government and Dawn were liable under CERCLA. On October 17, 2008 the Court issued its written decision in the bench trial. The Court found Dawn and Newmont jointly and severally liable under CERCLA for past and future response costs, and ruled that each of Dawn and Newmont are responsible to pay one-third of such costs. The Court also found the U.S. Government liable on Dawn’s and Newmont’s contribution claim, and ruled that the U.S. Government is responsible to pay one-third of all past and future response costs. In November 2008, all parties appealed the Court’s ruling. Also in November 2008, the EPA issued an Administrative Order pursuant to Section 106 of CERCLA ordering Dawn and Newmont to conduct water treatment, testing and other preliminary remedial actions. Newmont has initiated those preliminary remedial actions.
Newmont intends to continue to vigorously defend this matter and cannot reasonably predict the outcome of this lawsuit or the likelihood of any other action against Dawn or Newmont arising from this matter.
Dawn Mill Site. Dawn also owns a uranium mill site facility, located on private land near Ford, Washington, which is subject to state and federal regulation. In late 1999, Dawn sought and later received approval from the State of Washington for a revised closure plan that expedites the reclamation process at the site. The currently approved plan for the site is guaranteed by Newmont.
Newmont Canada Limited (“Newmont Canada”) — 100% Newmont Owned
On November 11, 2008, St. Andrew Goldfields Ltd. (“St. Andrew”) filed an Application in the Superior Court of Justice in Ontario, Canada, seeking a declaration to clarify St. Andrew’s royalty obligations regarding certain mineral rights and property formerly owned by Newmont Canada and now owned by St. Andrew.
Newmont Canada purchased the property, called the Holt-McDermott property (“Holt Property”), from Barrick Gold Corporation (“Barrick”) in October 2004. At that time, Newmont Canada entered into a royalty agreement with Barrick (the “Barrick Royalty”), allowing Barrick to retain a royalty on the Holt Property. In August 2006, Newmont Canada sold all of its interests in the Holt Property to Holloway Mining Company (“Holloway”) in exchange for common stock issued by Holloway. In September 2006, Newmont Canada entered into a purchase and sale agreement with St. Andrew (the “2006 Agreement”), under which St. Andrew acquired all the common stock of Holloway. In 2008, Barrick sold its Barrick Royalty to Royal Gold, Inc. (“Royal Gold”).
In the court proceedings, St. Andrew alleged that in the 2006 Agreement it only agreed to assume royalty obligations equal to 0.013% of net smelter returns from operations on the Holt Property. Such an interpretation of the 2006 Agreement would make Newmont responsible for any royalties exceeding that amount payable to Royal Gold pursuant to the Barrick Royalty, which is a royalty determined by multiplying 0.00013 by the quarterly average gold price. On July 23, 2009, the Superior Court issued a decision finding in favor of St. Andrews’ interpretation. On August 21, 2009, Newmont Canada appealed the decision. If the Court of Appeals upholds the lower court ruling, Newmont will be liable for the sliding scale royalty, which would equal a 13% royalty at a quarterly average gold price of $1,000, minus a 0.013% of net smelter returns. There is no cap on the royalty at issue and it increases or decreases with the gold price, based upon the multiplication of 0.00013 by the quarterly average gold price. Newmont Canada intends to continue to vigorously defend this matter but cannot reasonably predict the outcome.

 

38


Table of Contents

NEWMONT MINING CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) (Continued)
(dollars in millions, except per share, per ounce and per pound amounts)
Newmont USA Limited — 100% Newmont Owned
Grey Eagle Mine Site. By letter dated September 3, 2002, the EPA notified Newmont that the EPA had expended $3 in response costs to address environmental conditions associated with a historic tailings pile located at the Grey Eagle Mine site near Happy Camp, California, and requested that Newmont pay those costs. The EPA has identified four potentially responsible parties, including Newmont. Newmont does not believe it has any liability for environmental conditions at the Grey Eagle Mine site, and intends to vigorously defend any formal claims by the EPA. Newmont cannot reasonably predict the likelihood or outcome of any future action against it arising from this matter.
Ross-Adams Mine Site. By letter dated June 5, 2007, the U.S. Forest Service notified Newmont that it had expended approximately $0.3 in response costs to address environmental conditions at the Ross-Adams mine in Prince of Wales, Alaska, and requested Newmont USA Limited pay those costs and perform an Engineering Evaluation/Cost Analysis (“EE/CA”) to assess what future response activities might need to be completed at the site. Newmont intends to vigorously defend any formal claims by the EPA. Newmont has agreed to perform the EE/CA. Newmont cannot reasonably predict the likelihood or outcome of any future action against it arising from this matter.
PT Newmont Minahasa Raya (“PTNMR”) — 80% Newmont Owned
On March 22, 2007, an Indonesian non-governmental organization named Wahana Lingkungan Hidup Indonesia (“WALHI”) filed a civil suit against PTNMR, the Newmont subsidiary that operated the Minahasa mine in Indonesia, and Indonesia’s Ministry of Energy and Mineral Resources and Ministry for the Environment, alleging pollution from the disposal of mine tailings into Buyat Bay, and seeking a court order requiring PTNMR to fund a 25-year monitoring program in relation to Buyat Bay. In December 2007, the court ruled in PTNMR’s favor and found that WALHI’s allegations of pollution in Buyat Bay were without merit. In March 2008, WALHI appealed this decision to the Indonesian High Court. On January 27, 2010, the Indonesian High Court upheld the December 2007 ruling in favor of PTNMR. On May 17, 2010, WALHI filed an appeal of the January 27, 2010 Indonesian High Court ruling seeking review from the Indonesian Supreme Court. The appeal by WALHI is still being processed by the district court of South Jakarta before being reviewed by the Indonesian Supreme Court. Independent sampling and testing of Buyat Bay water and fish, as well as area residents, conducted by the World Health Organization and the Australian Commonwealth Scientific and Industrial Research Organization, confirm that PTNMR has not polluted the Buyat Bay environment, and, therefore, has not adversely affected the fish in Buyat Bay or the health of nearby residents. The Company remains steadfast that it has not caused pollution or health problems.
Other Legal Matters
Minera Yanacocha S.R.L. (“Yanacocha”) — 51.35% Newmont Owned
Choropampa. In June 2000, a transport contractor of Yanacocha spilled approximately 151 kilograms of elemental mercury near the town of Choropampa, Peru, which is located 53 miles (85 kilometers) southwest of the Yanacocha mine. Elemental mercury is not used in Yanacocha’s operations but is a by-product of gold mining and was sold to a Lima firm for use in medical instruments and industrial applications. A comprehensive health and environmental remediation program was undertaken by Yanacocha in response to the incident. In August 2000, Yanacocha paid under protest a fine of 1,740,000 Peruvian soles (approximately $0.5) to the Peruvian government. Yanacocha has entered into settlement agreements with a number of individuals impacted by the incident. As compensation for the disruption and inconvenience caused by the incident, Yanacocha entered into agreements with and provided a variety of public works in the three communities impacted by this incident. Yanacocha cannot predict the likelihood of additional expenditures related to this matter.
Additional lawsuits relating to the Choropampa incident were filed against Yanacocha in the local courts of Cajamarca, Peru, in May 2002 by over 900 Peruvian citizens. A significant number of the plaintiffs in these lawsuits entered into settlement agreements with Yanacocha prior to filing such claims. In April 2008, the Peruvian Supreme Court upheld the validity of these settlement agreements, which the Company expects to result in the dismissal of all claims brought by previously settled plaintiffs. Yanacocha has also entered into settlement agreements with approximately 350 additional plaintiffs. The claims asserted by approximately 200 plaintiffs remain. Neither the Company nor Yanacocha can reasonably estimate the ultimate loss relating to such claims.

 

39


Table of Contents

NEWMONT MINING CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) (Continued)
(dollars in millions, except per share, per ounce and per pound amounts)
PT Newmont Nusa Tenggara (“PTNNT”) — 31.5% Newmont Direct Ownership
Under the Batu Hijau Contract of Work, beginning in 2006 and continuing through 2010, a portion of PTNNT’s shares were required to be offered for sale, first, to the Indonesian government or, second, to Indonesian nationals, equal to the difference between the following percentages and the percentage of shares already owned by the Indonesian government or Indonesian nationals (if such number is positive): 23% by March 31, 2006; 30% by March 31, 2007; 37% by March 31, 2008; 44% by March 31, 2009; and 51% by March 31, 2010. As PT Pukuafu Indah (“PTPI”), an Indonesian national, has owned a 20% interest in PTNNT at all relevant times, in 2006, a 3% interest was required to be offered for sale and, in each of 2007 through 2010, an additional 7% interest was required to be offered (for an aggregate 31% interest). The price at which such interests were to be offered for sale to the Indonesian parties is the highest of the then-current replacement cost, the price at which shares would be accepted for listing on the Indonesian Stock Exchange, or the fair market value of such interest as a going concern, as agreed with the Indonesian government.
In accordance with the Contract of Work, an offer to sell a 3% interest was made to the Indonesian government in 2006 and an offer for an additional 7% interest was made in each of 2007, 2008 and 2009, and the offer for the final 7% interest was made in March 2010. While the central government declined to participate in the 2006 and 2007 offers, local governments in the area in which the Batu Hijau mine is located expressed interest in acquiring shares, as did various Indonesian nationals. After disagreement with the government over whether the government’s first right to purchase had expired and receipt of Notices of Default from the government claiming breach and threatening termination of the Contract of Work, on March 3, 2008, the Indonesian government filed for international arbitration as provided under the Contract of Work, as did PTNNT. In the arbitration proceeding, PTNNT sought a declaration that the Indonesian government was not entitled to terminate the Contract of Work and additional declarations pertaining to the procedures for divesting the shares. For its part, the Indonesian government sought declarations that PTNNT was in default of its divestiture obligations, that the government may terminate the Contract of Work and recover damages for breach of the Contract of Work, and that PTNNT must cause shares subject to divestiture to be sold to certain local governments.
An international arbitration panel (the “Panel”) was appointed to resolve these claims and other claims that had arisen in relation to divestment and a hearing was held in Jakarta in December 2008. On March 31, 2009, the Panel issued its final award and decision on the matter. In its decision, the Panel determined that PTNNT’s foreign shareholders had not complied with the divestiture procedure required by the Contract of Work in 2006 and 2007, but the Panel ruled that the Indonesian government was not entitled to immediately terminate the Contract of Work and rejected the Indonesian government’s claim for damages. The Panel granted PTNNT 180 days from the date of notification of the final award to effect transfer of the 2006 3% interest and the 2007 7% interest in PTNNT to the local governments or their respective nominees. The Panel also applied a 180-day cure period to the 2008 7% interest, requiring that PTNNT effect the offer of the 2008 7% interest to the Indonesian government or its nominee within such 180-day period, and ensure the transfer of such shares if, after agreement on the transfer price, the Indonesian government invoked its right of first refusal under the Contract of Work. On July 14, 2009, the Company reached agreement with the Indonesian government on the price of the 2008 7% interest and the 2009 7% interest. PTNNT effected the reoffer of the 2008 7% interest and the 2009 7% interest to the Indonesian government at this newly agreed price. In November and December 2009, sale agreements were concluded pursuant to which the 2006, 2007 and 2008 shares were transferred to PT Multi Daerah Bersaing (“PTMDB”), the nominee of the local governments, and the 2009 shares were transferred to PTMDB in February 2010, resulting in PTMDB owning a 24% interest in PTNNT. Although the Indonesian government has acknowledged that PTNNT is no longer in breach of the Contract of Work, future disputes may arise as to the final divestiture of the 2010 shares. It is uncertain who will acquire the 2010 divestiture shares, and the nature of our relationship with the new owners of the 2010 shares and any future owners of the divested shares remain uncertain.
As part of the negotiation of the sale agreements with PTMDB, the parties executed an operating agreement (the “Operating Agreement”) under which each recognizes the rights of the Company and Sumitomo to apply their operating standards to the management of PTNNT’s operations, including standards for safety, environmental stewardship and community responsibility. The Operating Agreement became effective upon the completion of the sale of the 2009 shares in February 2010 and will continue for so long as the Company and Sumitomo own more shares of PTNNT than PTMDB. If the Operating Agreement terminates, then the Company may lose control over the applicable operating standards for Batu Hijau and will be at risk for operations conducted in a manner that either detracts from value or results in safety, environmental or social standards below those adhered to by the Company and Sumitomo.

 

40


Table of Contents

NEWMONT MINING CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) (Continued)
(dollars in millions, except per share, per ounce and per pound amounts)
In the event of any future disputes under the Contract of Work or Operating Agreement, there can be no assurance that the Company would prevail in any such dispute and any termination of such contracts could result in substantial diminution in the value of the Company’s interests in PTNNT.
Additionally, in February 2010, PTNNT was notified by the tax authorities of the Indonesian government, that PTNNT may be obligated to pay value added taxes on certain goods imported after the year 2000. PTNNT believes that pursuant to the terms of its Contract of Work, it is only required to pay value added taxes on these types of goods imported after February 28, 2010. The Company and PTNNT are working cooperatively with the applicable government authorities to resolve this matter.
PT Pukuafu Indah Litigation
In October 2009, PTPI filed a lawsuit in the Central Jakarta District Court against PTNNT and the Indonesian government seeking to cancel the March 2009 arbitration award pertaining to the manner in which divestiture of shares in PTNNT should proceed (refer to the discussion of PTNNT above for the arbitration results). On October 11, 2010, the District Court ruled in favor of PTNNT and the Indonesian government finding, among other things, that PTPI lacks standing to contest the validity of the arbitration award. PTPI has filed a notice of appeal of the court’s ruling.
Subsequent to its initial claim, PTPI filed three additional lawsuits, one of which was recently withdrawn, against Newmont Indonesia Limited (“NIL”) and Nusa Tenggara Mining Corporation (“NTMC”), a subsidiary of Sumitomo, in the South Jakarta District Court. Fundamentally, the cases all relate to PTPI’s contention that it owns, or has rights to own, the shares in PTNNT that NIL and NTMC have or will divest to fulfill the requirements of the PTNNT Contract of Work and the March 2009 arbitration award. PTPI also makes various other allegations, including alleged rights in or to NIL’s, NTMC’s or Sumitomo’s non-divestiture shares, and PTPI asserts claims for significant damages allegedly arising from NIL’s and NTMC’s unlawful acts in transferring the divestiture shares to a third party. In January 2010, PTPI also filed a lawsuit against PTNNT’s President Director, Mr. Martiono Hadianto, alleging wrongful acts associated with the arbitration, including failure to properly share information. Newmont, NIL, NTMC and PTNNT’s management believe that all of PTPI’s claims in these cases are without merit. Furthermore, in conjunction with Newmont’s provision of financing to PTPI in late 2009, PTPI signed a release agreement in which it and its shareholders committed to cease prosecution of the then-pending lawsuits and not to initiate new proceedings.
In August 2010, NIL and NVL USA Limited (“NVL”) commenced an arbitration against PTPI in the Singapore International Arbitration Centre, as provided in relevant agreements, seeking declarations that PTPI has violated the release agreement by failing to dismiss all such claims, that PTPI is in breach of the November 2009 loan facility and related agreements, and that NIL and NVL are entitled to damages arising from PTPI’s and its shareholders’ conduct.
On October 1, 2010, NIL and NVL requested, based upon the release agreement, that the arbitral tribunal issue an interim order requiring PTPI and its shareholders to discontinue the various Indonesian court proceedings and refrain from bringing additional lawsuits. On October 15, 2010, the tribunal issued an order granting NIL and NVL’s request. The order of the tribunal restrains PTPI and its agents from “proceeding with or continuing with or assisting or participating in the prosecution of the Indonesian [s]uits” and from commencing additional proceedings relating to the same subject matter as the Indonesian lawsuits. NIL and NVL are in the process of enforcing the interim award in Indonesian courts but it is not known the extent to which the Indonesian courts will enforce the order or whether PTPI and its shareholders will, in any event, abide by the order.
The Company intends to continue vigorously defending the PTPI lawsuits and pursuing its claims against PTPI in arbitration.
Other Commitments and Contingencies
Tax contingencies are provided for in accordance with ASC income tax guidance (see Note 10).
In a 1993 asset exchange, a wholly-owned subsidiary transferred a coal lease under which the subsidiary had collected advance royalty payments totaling $484. From 1994 to 2018, remaining advance payments under the lease to the transferee total $390. In the event of title failure as stated in the lease, this subsidiary has a primary obligation to refund previously collected payments and has a secondary obligation to refund any of the $390 collected by the transferee, if the transferee fails to meet its refund obligation. The subsidiary has title insurance on the leased coal deposits of $240 covering the secondary obligation. The Company and the subsidiary regard the circumstances entitling the lessee to a refund as remote.

 

41


Table of Contents

NEWMONT MINING CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) (Continued)
(dollars in millions, except per share, per ounce and per pound amounts)
The Company has minimum royalty obligations on one of its producing mines in Nevada for the life of the mine. Amounts paid as a minimum royalty (where production royalties are less than the minimum obligation) in any year are recoverable in future years when the minimum royalty obligation is exceeded. Although the minimum royalty requirement may not be met in a particular year, the Company expects that over the mine life, gold production will be sufficient to meet the minimum royalty requirements. Minimum royalty payments payable are $40 in 2010, $28 in 2011 through 2014 and $278 thereafter.
As part of its ongoing business and operations, the Company and its affiliates are required to provide surety bonds, bank letters of credit and bank guarantees as financial support for various purposes, including environmental reclamation, exploration permitting, workers compensation programs and other general corporate purposes. At September 30, 2010 and December 31, 2009, there were $1,171 and $1,073, respectively, of outstanding letters of credit, surety bonds and bank guarantees. The surety bonds, letters of credit and bank guarantees reflect fair value as a condition of their underlying purpose and are subject to fees competitively determined in the market place. The obligations associated with these instruments are generally related to performance requirements that the Company addresses through its ongoing operations. As the specific requirements are met, the beneficiary of the associated instrument cancels and/or returns the instrument to the issuing entity. Certain of these instruments are associated with operating sites with long-lived assets and will remain outstanding until closure. Generally, bonding requirements associated with environmental regulation are becoming more restrictive. 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 in the above-described proceedings, management does not believe that adverse decisions in any pending or threatened proceeding or that amounts that may be required to be paid by reason thereof will have a material adverse effect on the Company’s financial condition or results of operations.
NOTE 27 SUPPLEMENTARY DATA
Ratio of Earnings to Fixed Charges
The ratio of earnings to fixed charges for the nine months ended September 30, 2010 was 13.3. The ratio of earnings to fixed charges represents income before income tax expense, equity loss of affiliates and noncontrolling interests in subsidiaries, divided by interest expense. Interest expense includes amortization of capitalized interest and the portion of rent expense representative of interest. Interest expense does not include interest on income tax liabilities. The computation of the ratio of earnings to fixed charges can be found in Exhibit 12.1.
NOTE 28 SUBSEQUENT EVENTS
On October 27, 2010, Yanacocha repaid the $96 outstanding balance on its senior notes that had an original maturity date of July 2016. The senior notes were uncollateralized.

 

42


Table of Contents

ITEM 2.   MANAGEMENT’S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND FINANCIAL CONDITION (dollars in millions, except per share, per ounce and per pound amounts)
The following discussion provides information that management believes is relevant to an assessment and understanding of the consolidated financial condition and results of operations of Newmont Mining Corporation and its subsidiaries (collectively, “Newmont,” the “Company,” “our” and “we”). We use certain non-GAAP financial performance measures in our MD&A. For a detailed description of each of the non-GAAP financial measures used in this MD&A, please see the discussion under “Non-GAAP Financial Performance Measures” beginning on page 59. References to “A$” refer to Australian currency, “C$” to Canadian currency, “IDR” to Indonesian currency, “NZ$” to New Zealand currency and “$” to United States currency.
This item should be read in conjunction with our interim unaudited Condensed Consolidated Financial Statements and the notes thereto included in this quarterly report. Additionally, the following discussion and analysis should be read in conjunction with Management’s Discussion and Analysis of Consolidated Financial Condition and Results of Operations and the consolidated financial statements included in Part II of our Annual Report on Form 10-K for the year ended December 31, 2009.
Overview
Newmont is one of the world’s largest gold producers and is the only gold company included in the S&P 500 Index and Fortune 500, and was the first gold company included in the Dow Jones Sustainability Index-World. We are also engaged in the exploration for and acquisition of gold and gold/copper properties. We have significant assets or operations in the United States, Australia, Peru, Indonesia, Ghana, Canada, New Zealand and Mexico. Our vision is to be the most valued and respected mining company through industry leading performance.
Newmont remains focused on progressing the development of our next generation of mining projects, including Conga in Peru, Akyem in Ghana and Hope Bay in Canada, as well as a series of satellite deposits in Nevada. Roughly 40% of our 2010 capital expenditures will be invested in these projects and the development of our pipeline, funded primarily from Net cash from continuing operations, as we continue to deliver solid leverage to the gold price. 2010 highlights are included in the table below and discussed further in Results of Consolidated Operations.

 

43


Table of Contents

Selected Financial and Operating Results
                                 
    Three Months Ended September 30,     Nine Months Ended September 30,  
    2010     2009     2010     2009  
Sales
  $ 2,597     $ 2,049     $ 6,992     $ 5,187  
Income from continuing operations
  $ 814     $ 645     $ 2,094     $ 1,242  
Net income
  $ 814     $ 645     $ 2,094     $ 1,228  
Net income attributable to Newmont stockholders
  $ 537     $ 388     $ 1,465     $ 739  
 
                               
Per common share, basic :
                               
Income from continuing operations attributable to Newmont stockholders
  $ 1.09     $ 0.79     $ 2.98     $ 1.54  
Net income attributable to Newmont stockholders
  $ 1.09     $ 0.79     $ 2.98     $ 1.52  
 
                               
Adjusted net income (1)
  $ 534     $ 387     $ 1,319     $ 796  
Adjusted net income per share (1)
  $ 1.08     $ 0.79     $ 2.68     $ 1.64  
 
                               
Consolidated gold ounces (thousands)
                               
Produced
    1,689       1,702       4,862       4,720  
Sold (2)
    1,667       1,715       4,794       4,734  
 
                               
Consolidated copper pounds (millions)
                               
Produced
    156       142       463       337  
Sold
    158       141       434       342  
 
                               
Average price received, net:
                               
Gold (per ounce)
  $ 1,221     $ 964     $ 1,176     $ 930  
Copper (per pound)
  $ 3.67     $ 2.80     $ 3.17     $ 2.30  
 
                               
Costs applicable to sales:
                               
Gold (per ounce)
  $ 477     $ 404     $ 483     $ 419  
Copper (per pound)
  $ 0.73     $ 0.50     $ 0.76     $ 0.63  
     
(1)   See “Non-GAAP Financial Measures” on page 59.
 
(2)   2010 results include 16 thousand incremental start-up ounces. 2009 results include nil and 1 thousand incremental start-up ounces for the three and nine months ended, respectively.
Consolidated Financial Results
Net income attributable to Newmont stockholders for the third quarter of 2010 was $537 ($1.09 per share) compared to $388 ($0.79 per share) for the third quarter of 2009. Results for the third quarter of 2010 compared to the third quarter of 2009 were impacted by higher realized gold and copper prices combined with higher copper sales volume, partially offset by increased costs applicable to sales, amortization and income taxes. Net income attributable to Newmont stockholders for the first nine months of 2010 was $1,465 ($2.98 per share) compared to $739 ($1.52 per share) for the first nine months of 2009. Results for the first nine months of 2010 compared to the first nine months of 2009 were impacted by higher realized gold and copper prices, higher sales volumes, a $127 tax benefit related to the conversion of non-U.S. entities for income tax purposes in the first quarter of 2010, a $42 gain from the sale of non-core assets in 2010 and $67 of Boddington acquisition expenses in 2009, partially offset by increased costs applicable to sales, amortization and income taxes.

 

44


Table of Contents

Sales — gold, net for the third quarter of 2010 increased 22% compared to the third quarter of 2009 due to higher realized prices, slightly offset by decreased sales volume and an increase in treatment and refining charges. Sales - gold, net for the first nine months of 2010 increased 28% compared to the first nine months of 2009 due to higher realized prices and increased sales volume, slightly offset by an increase in treatment and refining charges. The following analysis summarizes the change in consolidated gold sales revenue:
                                 
    Three Months Ended September 30,     Nine Months Ended September 30,  
    2010     2009     2010     2009  
Consolidated gold sales:
                               
Gross before provisional pricing
  $ 2,028     $ 1,655     $ 5,632     $ 4,415  
Provisional pricing mark-to-market gain
    5       5       27       6  
 
                       
Gross after provisional pricing
    2,033       1,660       5,659       4,421  
Less: Treatment and refining charges
    (17 )     (7 )     (40 )     (20 )
 
                       
Net
  $ 2,016     $ 1,653     $ 5,619     $ 4,401  
 
                       
 
                               
Consolidated gold ounces sold (thousands):
                               
Gross
    1,667       1,715       4,794       4,734  
Less: Incremental start-up sales
    (16 )           (16 )     (1 )
 
                       
Net
    1,651       1,715       4,778       4,733  
 
                       
 
                               
Average realized gold price (per ounce):
                               
Gross before provisional pricing
  $ 1,229     $ 965     $ 1,179     $ 933  
Provisional pricing mark-to-market gain
    3       3       6       1  
 
                       
Gross after provisional pricing
    1,232       968       1,185       934  
 
Less: Treatment and refining charges
    (11 )     (4 )     (9 )     (4 )
 
                       
Net
  $ 1,221     $ 964     $ 1,176     $ 930  
 
                       
The change in consolidated gold sales is due to:
                 
    Three Months Ended     Nine Months Ended  
    September 30,     September 30,  
    2010 vs. 2009     2010 vs. 2009  
Change in consolidated ounces sold
  $ (62 )   $ 42  
Change in average realized gold price
    435       1,196  
Change in treatment and refining charges
    (10 )     (20 )
 
           
 
  $ 363     $ 1,218  
 
           

 

45


Table of Contents

Sales — copper, net for the third quarter of 2010 increased 47% compared to the third quarter of 2009 due to higher realized prices and increased sales volume. Sales - copper, net for the first nine months of 2010 increased 75% compared to the first nine months of 2009 due to higher realized prices and increased sales volume. The following analysis summarizes the change in consolidated copper sales revenue:
                                 
    Three Months Ended September 30,     Nine Months Ended September 30,  
    2010     2009     2010     2009  
Consolidated copper sales:
                               
Gross before provisional pricing
  $ 539     $ 386     $ 1,433     $ 763  
Provisional pricing mark-to-market gain
    78       48       30       112  
 
                       
Gross after provisional pricing
    617       434       1,463       875  
Less: Treatment and refining charges
    (36 )     (38 )     (90 )     (89 )
 
                       
Net
  $ 581     $ 396     $ 1,373     $ 786  
 
                       
 
                               
Consolidated copper pounds sold (millions)
    158       141       434       342  
 
                               
Average realized copper price (per pound):
                               
Gross before provisional pricing
  $ 3.41     $ 2.73     $ 3.31     $ 2.23  
Provisional pricing mark-to-market gain
    0.49       0.34       0.07       0.33  
 
                       
Gross after provisional pricing
    3.90       3.07       3.38       2.56  
Less: Treatment and refining charges
    (0.23 )     (0.27 )     (0.21 )     (0.26 )
 
                       
Net
  $ 3.67     $ 2.80     $ 3.17     $ 2.30  
 
                       
The change in consolidated copper sales is due to:
                 
    Three Months Ended     Nine Months Ended  
    September 30,     September 30,  
    2010 vs. 2009     2010 vs. 2009  
Change in consolidated pounds sold
  $ 51     $ 234  
Change in average realized copper price
    132       354  
Change in treatment and refining charges
    2       (1 )
 
           
 
  $ 185     $ 587  
 
           

 

46


Table of Contents

The following is a summary of consolidated gold and copper sales, net:
                                 
    Three Months Ended September 30,     Nine Months Ended September 30,  
    2010     2009     2010     2009  
Gold
                               
North America:
                               
Nevada
  $ 568     $ 481     $ 1,540     $ 1,321  
La Herradura
    52       23       149       75  
 
                       
 
    620       504       1,689       1,396  
 
                       
South America:
                               
Yanacocha
    436       535       1,321       1,451  
 
                               
Asia Pacific:
                               
Boddington
    181             582        
Batu Hijau
    260       201       595       358  
Jundee
    109       103       320       293  
Kalgoorlie
    125       91       343       223  
Tanami
    87       61       220       220  
Waihi
    30       27       90       78  
 
                       
 
    792       483       2,150       1,172  
 
                       
Africa:
                               
Ahafo
    168       131       459       382  
 
                       
 
                               
 
    2,016       1,653       5,619       4,401  
 
                       
Copper
                               
Asia Pacific:
                               
Batu Hijau
    543       396       1,256       786  
Boddington
    38             117        
 
                       
 
    581       396       1,373       786  
 
                       
 
  $ 2,597     $ 2,049     $ 6,992     $ 5,187  
 
                       
Costs applicable to sales increased in the third quarter of 2010 compared to the third quarter of 2009 and increased in the first nine months of 2010 compared to the first nine months of 2009, as detailed in the table below. The increase in Costs applicable to sales for gold is due to the addition of Boddington production as of November 2009, higher production at Batu Hijau and La Herradura and higher waste mining costs. The increase in Costs applicable to sales for copper is due to the addition of Boddington production and higher production and waste mining costs at Batu Hijau. For a complete discussion regarding variations in operations, see Results of Consolidated Operations below.
Amortization increased in the third quarter of 2010 compared to the third quarter of 2009 and increased in the first nine months of 2010 compared to the first nine months of 2009, as detailed in the table below. The increase in Amortization is due to the commencement of commercial production at Boddington in November 2009, higher production at Batu Hijau and La Herradura and higher capitalized mine development in Nevada. We now expect 2010 Amortization to be approximately $925 to $950 (previous guidance was $970 to $1,000).

 

47


Table of Contents

The following is a summary of Costs applicable to sales and Amortization:
                                                                 
    Costs Applicable                     Costs Applicable        
    to Sales     Amortization     to Sales     Amortization  
    Three Months Ended     Three Months Ended     Nine Months Ended     Nine Months Ended  
    September 30,     September 30,     September 30,     September 30,  
    2010     2009     2010     2009     2010     2009     2010     2009  
Gold
                                                               
North America:
                                                               
Nevada
  $ 267     $ 273     $ 68     $ 69     $ 776     $ 764     $ 194     $ 183  
La Herradura
    20       8       5       2       52       30       13       7  
 
                                               
 
    287       281       73       71       828       794       207       190  
South America:
                                                               
Yanacocha
    149       163       42       43       442       488       119       128  
Asia Pacific:
                                                               
Boddington
    91             25             284             81        
Batu Hijau
    47       37       12       10       123       88       34       23  
Jundee
    34       33       7       12       104       103       25       33  
Kalgoorlie
    55       60       5       5       158       151       12       11  
Tanami
    49       45       11       10       139       146       32       32  
Waihi
    19       14       3       5       53       38       13       18  
 
                                               
 
    295       189       63       42       861       526       197       117  
Africa:
                                                               
Ahafo
    57       61       22       17       176       175       58       51  
 
                                               
 
    788       694       200       173       2,307       1,983       581       486  
 
                                                               
Copper
                                                               
Asia Pacific:
                                                               
Batu Hijau
    96       71       26       18       261       217       72       55  
Boddington
    19             5             68             18        
 
                                               
 
    115       71       31       18       329       217       90       55  
 
                                                               
Other
                                                               
Hope Bay
                4       3                   10       9  
Asia Pacific
                1       1                   2       2  
Corporate and other
                6       4                   14       14  
 
                                               
 
                11       8                   26       25  
 
                                               
 
  $ 903     $ 765     $ 242     $ 199     $ 2,636     $ 2,200     $ 697     $ 566  
 
                                               
Exploration expense increased $12 in the third quarter of 2010 compared to the third quarter of 2009 due to additional near mine expenditures in all regions, with the largest increase at Leeville/Turf in Nevada. Exploration expense increased $16 in the first nine months of 2010 compared to the first nine months of 2009 due to additional near mine expenditures in all regions. We continue to expect Exploration expense to be approximately $220 to $245 in 2010.
Advanced projects, research and development expense increased $19 in the third quarter of 2010 compared to the third quarter of 2009 and $49 in the first nine months of 2010 compared to the first nine months of 2009 due to additional expenditures for Hope Bay in Canada, Yanacocha sulfides, Chaquicocha underground and Grande Basin in South America, Subika underground at Ahafo and technical and project services, partially offset by a reduction of expenditures for Boddington as it achieved commercial production in November 2009.

 

48


Table of Contents

The following is a summary of Advanced projects, research and development:
                                 
    Three Months Ended September 30,     Nine Months Ended September 30,  
    2010     2009     2010     2009  
Major projects:
                               
Hope Bay
  $ 13     $ 2     $ 48     $ 18  
Subika underground
    4             6       1  
Conga
    2       1       5       2  
Akyem
          2       4       5  
Boddington
          11             24  
Other projects:
                               
Technical and project services
    12       6       35       18  
Corporate
    4       3       25       10  
South America growth
    7       1       11       5  
Nevada growth
    2       1       8       13  
Other
    2             7       4  
 
                       
 
  $ 46     $ 27     $ 149     $ 100  
 
                       
We continue to expect Advanced projects, research and development expenses to be approximately $230 to $250 in 2010.
General and administrative expenses increased by $6 in the third quarter of 2010 compared to the third quarter of 2009 due to higher compensation, benefit and consulting costs. General and administrative expenses increased by $15 in the first nine months of 2010 compared to the first nine months of 2009 due to higher compensation and benefit costs. We expect 2010 General and administrative expenses to be approximately $180 to $190.
Other expense, net decreased by $15 in the third quarter of 2010 compared to the third quarter of 2009 due to lower costs at the Western Australia power plant. Other expense, net decreased by $50 in the first nine months of 2010 compared to the first nine months of 2009 due to Boddington acquisition costs and higher Western Australia power plant costs in 2009, partially offset by higher community development costs at Batu Hijau in 2010.
Other income, net decreased by $20 in the third quarter of 2010 compared to the third quarter of 2009 due to a weaker US$ and foreign currency translation losses (primarily Australia), partially offset by an increase in Canadian Oil Sands Trust income and income from Amoma incremental start-up production at Ahafo. Other income, net increased by $54 in the first nine months of 2010 compared to the first nine months of 2009 due to the sale of non-core assets and an increase in Canadian Oil Sands Trust income, partially offset by foreign currency translation losses.
Interest expense, net increased by $56 in the third quarter of 2010 compared to the third quarter of 2009 and increased by $145 in the first nine months of 2010 compared to the first nine months of 2009 due to interest related to the 2019 and 2039 senior notes issued during September 2009 and lower capitalized interest. Capitalized interest decreased by $39 in the third quarter of 2010 compared to the third quarter of 2009 and decreased by $74 in the first nine months of 2010 compared to the first nine months of 2009 due to achieving commercial production at Boddington in November 2009. We expect 2010 Interest expense, net to be approximately $270 to $290.
Income tax expense during the third quarter of 2010 was $348 resulting in an effective tax rate of 29.9%. Income tax expense during the third quarter of 2009 was $253 for an effective tax rate of 28.0%. The increase in the effective tax rate from 2009 to 2010 resulted from the change in the jurisdictional blend of our taxable income and the effect it has on the overall rate impact from percentage depletion and non-recurring discrete items in the prior quarter. Income tax expense during the first nine months of 2010 was $756 resulting in an effective tax rate of 26.5%. Income tax expense during the first nine months of 2009 was $494 for an effective tax rate of 28.2%. The decrease in the effective tax rate from 2009 to 2010 resulted from a tax benefit of $127 being recorded in the first quarter of 2010 from the conversion of non-US tax-paying entities to entities currently subject to U.S. income tax resulting in an increase in net deferred tax assets, partially offset by the change in the jurisdictional blend of the our taxable income and the effect it has on the overall rate impact from percentage depletion. The effective tax rates in the third quarter of 2010 and 2009 are different from the United States statutory rate of 35% primarily due to the above mentioned tax benefit in 2010, U.S. percentage depletion and the effect of different income tax rates in countries where earnings are indefinitely reinvested. For a complete discussion of the factors that influence our effective tax rate, see Management’s Discussion and Analysis of Consolidated Financial Condition and Results of Operations in Newmont’s Annual Report on Form 10-K for the year ended December 31, 2009 filed February 25, 2010. We expect the 2010 full year tax rate to be approximately 26% to 28%, assuming an average gold price of $1,100 per ounce.

 

49


Table of Contents

Net income attributable to noncontrolling interests increased to $277 in the third quarter of 2010 compared to $257 in the third quarter of 2009 as a result of increased earnings at Batu Hijau, partially offset by lower earnings at Yanacocha. Net income attributable to noncontrolling interests increased to $629 in the first nine months of 2010 compared to $489 in the first nine months of 2009 as a result of increased earnings at Batu Hijau, partially offset by lower earnings at Yanacocha.
The Income (loss) from discontinued operations of $(14) in 2009 related to the sale of the Kori Kollo operation in Bolivia in July 2009.
Results of Consolidated Operations
                                                 
    Gold Ounces or              
    Copper Pounds Produced     Costs Applicable to Sales(1)     Amortization  
    2010     2009     2010     2009     2010     2009  
Three Months Ended September 30,
                                               
Gold   (in thousands)   ($ per ounce)   ($ per ounce)
North America
    495       510     $ 565     $ 532     $ 144     $ 136  
South America(2)
    355       543       420       294       118       78  
Asia Pacific(2)
    683       504       451       380       96       82  
Africa
    156       145       422       446       160       130  
 
                                   
Total/Weighted-Average
    1,689       1,702     $ 477     $ 404     $ 121     $ 101  
 
                                   
Equity(3)(4)
    1,408       1,326                                  
 
                                           
 
                                               
Copper   (in millions)   ($ per pound)   ($ per pound)
Asia Pacific(2)
    156       142     $ 0.73     $ 0.50     $ 0.20     $ 0.12  
Equity
    83       64                                  
                                                 
    Gold Ounces or              
    Copper Pounds Produced     Costs Applicable to Sales(1)     Amortization  
    2010     2009     2010     2009     2010     2009  
Nine Months Ended September 30,
                                               
Gold   (in thousands)   ($ per ounce)   ($ per ounce)
North America
    1,431       1,500     $ 579     $ 524     $ 145     $ 126  
South America(2)
    1,131       1,559       392       313       106       82  
Asia Pacific(2)
    1,892       1,252       469       422       107       93  
Africa
    408       409       456       424       151       125  
 
                                   
Total/Weighted-Average
    4,862       4,720     $ 483     $ 419     $ 122     $ 103  
 
                                   
Equity(3)(4)
    4,038       3,781                                  
 
                                           
 
                                               
Copper   (in millions)   ($ per pound)   ($ per pound)
Asia Pacific(2)
    463       337     $ 0.76     $ 0.63     $ 0.21     $ 0.16  
Equity
    253       152                                  
     
(1)   Excludes Amortization and Reclamation and remediation.
 
(2)   Consolidated gold ounces or copper pounds produced includes noncontrolling interests’ share at Yanacocha and Batu Hijau.
 
(3)   Includes our equity share of Yanacocha and Batu Hijau gold ounces produced and, for the three and nine months ended in 2010, respectively, 5 thousand ounces from non-consolidated equity interests.
 
(4)   2009 results include 2 thousand and 32 thousand ounces from discontinued operations for the three and nine months ended, respectively.

 

50


Table of Contents

Third quarter 2010 compared to 2009
Consolidated gold production decreased slightly as lower production in South America and North America was largely offset by higher production in Asia Pacific (primarily the start-up of Boddington) and Africa. Consolidated copper production increased 10% due to the start-up of Boddington in the second half of 2009.
Costs applicable to sales per consolidated gold ounce sold increased 18% due to higher waste mining and royalty costs, a stronger Australian dollar, the addition of higher cost production at Boddington and lower production in South America, partially offset by higher production in Africa. Costs applicable to sales per consolidated copper pound sold increased 46% due to higher waste mining costs at Batu Hijau and the addition of higher cost production from Boddington.
Amortization per consolidated gold ounce sold increased 20% due to the start-up of Boddington in the second half of 2009, lower production in South America and equipment additions in Africa.
First nine months 2010 compared to 2009
Consolidated gold production increased 3% due to higher production in Asia Pacific (primarily the start-up of Boddington), partially offset by lower production in South America and North America. Consolidated copper production increased 37% due to higher production at Batu Hijau combined with the start-up of Boddington in the second half of 2009.
Costs applicable to sales per consolidated gold ounce sold increased 15% due to higher waste mining and royalty costs, a stronger Australian dollar, the addition of higher cost production at Boddington and lower production in South America. Costs applicable to sales per consolidated copper pound sold increased 21% due to higher waste mining costs at Batu Hijau and the addition of higher cost production from Boddington.
Amortization per consolidated gold ounce sold increased 18% due to the start-up of Boddington in the second half of 2009, lower production in South America and North America and equipment additions in Africa.
Our 2010 guidance for consolidated gold production has narrowed to approximately 6.3 to 6.5 million ounces (from previous guidance of 6.3 to 6.8 million ounces) at a higher range of Costs applicable to sales per ounce of approximately $485 to $500 (from previous guidance of $460 to $480 per ounce). Our 2010 guidance for consolidated copper production has decreased to approximately 565 to 605 million pounds (from previous guidance of 610 to 670 million pounds) at unchanged guidance for Costs applicable to sales per pound of approximately $0.85 to $0.95.
North America Operations
                                                 
    Gold Ounces Produced     Costs Applicable to Sales(1)     Amortization  
    2010     2009     2010     2009     2010     2009  
Three Months Ended September 30,
  (in thousands)   ($ per ounce)   ($ per ounce)
Nevada
    453       486     $ 575     $ 541     $ 146     $ 137  
La Herradura (44% owned)
    42       24       464       352       115       98  
 
                                   
Total/Weighted-Average
    495       510     $ 565     $ 532     $ 144     $ 136  
 
                                   
                                                 
    Gold Ounces Produced     Costs Applicable to Sales(1)     Amortization  
    2010     2009     2010     2009     2010     2009  
Nine Months Ended September 30,
  (in thousands)   ($ per ounce)   ($ per ounce)
Nevada
    1,306       1,421     $ 595     $ 532     $ 149     $ 127  
La Herradura (44% owned)
    125       79       415       381       106       93  
 
                                   
Total/Weighted-Average
    1,431       1,500     $ 579     $ 524     $ 145     $ 126  
 
                                   
     
(1)   Excludes Amortization and Reclamation and remediation.
Third quarter 2010 compared to 2009
Nevada, USA. Gold production decreased 7% due to lower leach tons placed at Twin Creeks and Carlin, lower Gold Quarry ore feed to Mill 5 due to the slope failure which occurred in late 2009 and the completion of underground mining at Deep Post in 2009, partially offset by increased underground mining at Leeville. Costs applicable to sales per ounce increased 6% due to lower production, partially offset by higher silver and copper by-product credits. Amortization per ounce increased 7% due to lower production.

 

51


Table of Contents

La Herradura, Mexico. Gold production increased 75% due to the commencement of production from the Soledad and Dipolos pits in January 2010. Costs applicable to sales per ounce increased 32% due to higher mining costs associated with waste removal from the two new pits. Amortization per ounce increased 17% due to the use of additional mining equipment and new leach pads.
First nine months 2010 compared to 2009
Nevada, USA. Gold production decreased 8% due to lower leach tons placed at Twin Creeks and Carlin, lower Gold Quarry ore feed to Mill 5 due to the slope failure which occurred in late 2009 and the completion of underground mining at Deep Post in 2009, partially offset by increased underground mining at Leeville. Mill throughput was also impacted by harder ore at Phoenix. Costs applicable to sales per ounce increased 12% due to lower production. Amortization per ounce increased 17% due to lower production and higher capitalized mine development.
La Herradura, Mexico. Gold production increased 58% due to the commencement of production from the Soledad and Dipolos pits in January 2010. Costs applicable to sales per ounce increased 9% due to higher mining costs associated with waste removal from the two new pits, partially offset by higher production. Amortization per ounce increased 14% due to the use of additional mining equipment and new leach pads.
We now expect gold production in North America of approximately 1.8 to 1.9 million ounces (previous guidance was 1.7 to 1.9 million ounces) at Costs applicable to sales per ounce of approximately $575 to $595 in 2010 (previous guidance was $575 to $615 per ounce).
South America Operations
                                                 
    Gold Ounces Produced     Costs Applicable to Sales(1)     Amortization  
    2010     2009     2010     2009     2010     2009  
Three Months Ended September 30,
  (in thousands)   ($ per ounce)   ($ per ounce)
Yanacocha (2)
    355       543     $ 420     $ 294     $ 118     $ 78  
Equity(3)
    187       280                                  
                                                 
    Gold Ounces Produced     Costs Applicable to Sales(1)     Amortization  
    2010     2009     2010     2009     2010     2009  
Nine Months Ended September 30,
  (in thousands)   ($ per ounce)   ($ per ounce)
Yanacocha (2)
    1,131       1,559     $ 392     $ 313     $ 106     $ 82  
Equity(3)
    585       801                                  
     
(1)   Excludes Amortization and Reclamation and remediation.
 
(2)   Consolidated gold production includes noncontrolling interests’ share.
 
(3)   Gold production attributable to Newmont after noncontrolling interests (51.35% of Yanacocha gold ounces produced and 5 thousand ounces from our 46.94% non-consolidated equity interest in La Zanja).
Third quarter 2010 compared to 2009
Yanacocha, Peru. Gold production decreased 35% due to mine sequencing resulting in lower leach tons placed, transitional ore stockpiling at La Quinua and lower mill grade and recovery. Costs applicable to sales per ounce increased 43% due to lower production, higher waste mining and higher diesel and royalty costs, partially offset by higher silver by-product credits. Amortization per ounce increased 51% due to lower production.
First nine months 2010 compared to 2009
Yanacocha, Peru. Gold production decreased 27% due to mine sequencing resulting in lower leach tons placed, transitional ore stockpiling and lower mill grade and recovery. Costs applicable to sales per ounce increased 25% due to lower production and higher waste mining and diesel costs, partially offset by higher silver by-product credits. Amortization per ounce increased 29% due to lower production.
We now expect consolidated gold production in South America of approximately 1.48 to 1.5 million ounces (previous guidance was 1.5 to 1.6 million ounces) at Costs applicable to sales per ounce of approximately $400 to $420 in 2010 (previous guidance was $360 to $400 per ounce).

 

52


Table of Contents

Asia Pacific Operations
                                             <