UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
Form 10-Q/A
(Amendment No. 1)
(Mark One)
x QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the Quarterly Period Ended June 30, 2003
or
¨ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
Commission File Number: 001-31240
NEWMONT MINING CORPORATION
(Exact name of registrant as specified in its charter)
Delaware | 84-1611629 | |
(State or Other Jurisdiction of Incorporation or Organization) |
(I.R.S. Employer Identification No.) | |
1700 Lincoln Street | 80203 | |
Denver, Colorado | (Zip Code) | |
(Address of Principal Executive Offices) |
Registrants telephone number, including area code (303) 863-7414
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. x Yes ¨ No
Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12-b2 of the Exchange Act). x Yes ¨ No
There were 364,076,754 shares of common stock outstanding on July 30, 2003 (and 43,989,956 exchangeable shares).
Explanatory Note
This Amendment No. 1 on Form 10-Q/A (this Amendment) amends the Quarterly Report on Form 10-Q for the quarterly period ended June 30, 2003 filed on August 4, 2003. Newmont Mining Corporation has filed this amendment to provide additional information and to make certain corrections to Note 17, Segment Information, in the Consolidated Financial Statements. Other information contained herein has not been updated. Therefore, you should read this Amendment with other documents that we have filed with the Securities and Exchange Commission. Information in such reports and documents update and supersede certain information contained in this Amendment.
PART IFINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
NEWMONT MINING CORPORATION
STATEMENTS OF CONSOLIDATED OPERATIONS AND COMPREHENSIVE INCOME
Three Months Ended June 30, |
||||||||
2003 |
2002 |
|||||||
(unaudited, in thousands, except per share) |
||||||||
Revenues |
||||||||
Salesgold |
$ | 724,026 | $ | 609,516 | ||||
Salesbase metals, net |
12,735 | 22,935 | ||||||
Royalties |
10,461 | 11,202 | ||||||
747,222 | 643,653 | |||||||
Costs and expenses |
||||||||
Costs applicable to sales (exclusive of depreciation, depletion and amortization shown separately below) |
||||||||
Gold |
423,700 | 383,515 | ||||||
Base metals |
9,973 | 8,674 | ||||||
Depreciation, depletion and amortization |
139,337 | 123,602 | ||||||
Exploration and research |
30,247 | 18,788 | ||||||
General and administrative |
31,292 | 27,652 | ||||||
Write-down of long-lived assets |
1,794 | | ||||||
Other |
2,454 | (1,791 | ) | |||||
638,797 | 560,440 | |||||||
Other income (expense) |
||||||||
Gain on investments, net |
| 47,298 | ||||||
Gain (loss) on gold commodity derivative instruments, net |
16,644 | (9,478 | ) | |||||
Gain on extinguishment of NYOL bonds, net |
94,414 | | ||||||
Gain on extinguishment of NYOL derivatives liability, net |
76,578 | | ||||||
Dividends, interest income, foreign currency exchange and other income |
32,318 | 14,843 | ||||||
Interest expense, net of capitalized interest of $1,758 and $1,223, respectively |
(22,669 | ) | (35,101 | ) | ||||
197,285 | 17,562 | |||||||
Pre-tax income before minority interest, equity (loss) income and impairment of affiliates |
305,710 | 100,775 | ||||||
Income tax expense |
(89,038 | ) | (29,821 | ) | ||||
Minority interest in income of subsidiaries |
(35,807 | ) | (19,284 | ) | ||||
Equity loss and impairment of Australian Magnesium Corporation |
(107,758 | ) | (688 | ) | ||||
Equity income of affiliates |
17,740 | 18,008 | ||||||
Net income |
90,847 | 68,990 | ||||||
Preferred stock dividends |
| (1,869 | ) | |||||
Net income applicable to common shares |
$ | 90,847 | $ | 67,121 | ||||
Net income |
$ | 90,847 | $ | 68,990 | ||||
Other comprehensive income, net of tax |
19,130 | 29,828 | ||||||
Comprehensive income |
$ | 109,977 | $ | 98,818 | ||||
Net income per common share, basic and diluted |
$ | 0.22 | $ | 0.17 | ||||
Basic weighted average common shares outstanding |
405,388 | 397,532 | ||||||
Diluted weighted average common shares outstanding |
408,242 | 399,468 | ||||||
Cash dividends declared per common share |
$ | 0.04 | $ | 0.03 | ||||
See Notes to Consolidated Financial Statements
2
NEWMONT MINING CORPORATION
STATEMENTS OF CONSOLIDATED OPERATIONS AND COMPREHENSIVE INCOME
Six Months Ended June 30, |
||||||||
2003 |
2002 |
|||||||
(unaudited, in thousands, except per share) |
||||||||
Revenues |
||||||||
Salesgold |
$ | 1,438,582 | $ | 1,091,750 | ||||
Salesbase metals, net |
32,168 | 32,305 | ||||||
Royalties |
24,941 | 15,002 | ||||||
1,495,691 | 1,139,057 | |||||||
Costs and expenses |
||||||||
Costs applicable to sales (exclusive of depreciation, depletion and amortization shown separately below) |
||||||||
Gold |
822,709 | 712,050 | ||||||
Base metals |
25,335 | 19,379 | ||||||
Depreciation, depletion and amortization |
269,930 | 225,788 | ||||||
Exploration and research |
51,719 | 30,355 | ||||||
General and administrative |
57,702 | 48,967 | ||||||
Write-down of long-lived assets |
1,794 | | ||||||
Other |
24,473 | (921 | ) | |||||
1,253,662 | 1,035,618 | |||||||
Other income (expense) |
||||||||
Gain on investments, net |
84,337 | 47,298 | ||||||
Gain (loss) on gold commodity derivative instruments, net |
71,669 | (3,147 | ) | |||||
Gain on extinguishment of NYOL bonds, net |
94,414 | | ||||||
Gain on extinguishment of NYOL derivatives liability, net |
76,578 | | ||||||
Loss on extinguishment of debt |
(19,530 | ) | | |||||
Dividends, interest income, foreign currency exchange and other income |
64,157 | 15,258 | ||||||
Interest expense, net of capitalized interest of $3,048 and $2,294, respectively |
(52,615 | ) | (66,238 | ) | ||||
319,010 | (6,829 | ) | ||||||
Pre-tax income before minority interest, equity (loss) income and impairment of affiliates and cumulative effect of a change in accounting principle |
561,039 | 96,610 | ||||||
Income tax expense |
(151,601 | ) | (31,009 | ) | ||||
Minority interest in income of subsidiaries |
(73,596 | ) | (29,834 | ) | ||||
Equity loss and impairment of Australian Magnesium Corporation |
(119,485 | ) | (688 | ) | ||||
Equity income of affiliates |
26,278 | 19,412 | ||||||
Net income before cumulative effect of a change in accounting principle |
242,635 | 54,491 | ||||||
Cumulative effect of a change in accounting principle, net of tax of $11,188 and $(4,147), respectively |
(34,533 | ) | 7,701 | |||||
Net income |
208,102 | 62,192 | ||||||
Preferred stock dividends |
| (3,738 | ) | |||||
Net income applicable to common shares |
$ | 208,102 | $ | 58,454 | ||||
Net income |
$ | 208,102 | $ | 62,192 | ||||
Other comprehensive income, net of tax |
60,159 | 57,706 | ||||||
Comprehensive income |
$ | 268,261 | $ | 119,898 | ||||
Net income per common share before cumulative effect of a change in accounting principle, basic |
$ | 0.60 | $ | 0.15 | ||||
Cumulative effect of a change in accounting principle per common share, basic |
(0.08 | ) | 0.02 | |||||
Net income per common share, basic |
$ | 0.52 | $ | 0.17 | ||||
Net income per common share before cumulative effect of a change in accounting principle, diluted |
$ | 0.60 | $ | 0.15 | ||||
Cumulative effect of a change in accounting principle per common share, diluted |
(0.09 | ) | 0.02 | |||||
Net income per common share, diluted |
$ | 0.51 | $ | 0.17 | ||||
Basic weighted average common shares outstanding |
403,648 | 339,817 | ||||||
Diluted weighted average common shares outstanding |
406,305 | 341,262 | ||||||
Cash dividends declared per common share |
$ | 0.08 | $ | 0.06 | ||||
See Notes to Consolidated Financial Statements
3
NEWMONT MINING CORPORATION
CONSOLIDATED BALANCE SHEETS
June 30, 2003 |
December 31, 2002 |
|||||||
(unaudited, in thousands) | ||||||||
ASSETS | ||||||||
Cash and cash equivalents |
$ | 274,741 | $ | 401,683 | ||||
Marketable securitiesshort-term |
12,030 | 13,188 | ||||||
Accounts receivable |
44,971 | 44,510 | ||||||
Inventories |
170,458 | 169,324 | ||||||
Stockpiles and ore on leach pads |
277,021 | 328,993 | ||||||
Prepaid taxes |
19,318 | 28,335 | ||||||
Deferred stripping costsshort term |
28,660 | 32,085 | ||||||
Deferred income tax assets |
53,482 | 51,451 | ||||||
Newmont Australia infrastructure bonds |
114,287 | | ||||||
Other current assets |
63,365 | 43,687 | ||||||
Current assets |
1,058,333 | 1,113,256 | ||||||
Property, plant and mine development, net |
2,343,102 | 2,287,030 | ||||||
Mineral interests and other intangible assets, net |
1,405,066 | 1,415,348 | ||||||
Investments |
695,059 | 1,206,705 | ||||||
Marketable securitieslong-term |
291,004 | | ||||||
Deferred stripping costslong term |
39,336 | 23,302 | ||||||
Long-term stockpiles and ore on leach pads |
282,537 | 199,761 | ||||||
Deferred income tax assets |
879,324 | 761,428 | ||||||
Other long-term assets |
89,208 | 123,112 | ||||||
Goodwill |
3,068,657 | 3,024,576 | ||||||
Total assets |
$ | 10,151,626 | $ | 10,154,518 | ||||
LIABILITIES | ||||||||
Current portion of long-term debt |
$ | 176,422 | $ | 115,322 | ||||
Accounts payable |
151,042 | 105,277 | ||||||
Deferred income tax liabilities |
9,171 | 28,469 | ||||||
Derivative instruments |
7,914 | 74,999 | ||||||
Employee related benefitsshort-term |
117,196 | 100,936 | ||||||
Other current liabilities |
420,049 | 268,460 | ||||||
Current liabilities |
881,794 | 693,463 | ||||||
Long-term debt |
1,277,166 | 1,701,282 | ||||||
Reclamation and remediation liabilities |
421,970 | 288,536 | ||||||
Deferred revenue from sale of future production |
53,841 | 53,841 | ||||||
Derivative instruments |
17,254 | 388,659 | ||||||
Deferred income tax liabilities |
742,237 | 656,452 | ||||||
Employee related benefitslong-term |
214,697 | 234,103 | ||||||
Other long-term liabilities |
379,677 | 364,376 | ||||||
Total liabilities |
3,988,636 | 4,380,712 | ||||||
Commitments and contingencies (Note 18) |
||||||||
Minority interest in subsidiaries |
362,196 | 354,558 | ||||||
STOCKHOLDERS EQUITY | ||||||||
Preferred stock$5.00 par value; |
||||||||
Authorized5.0 million shares Issued and outstandingnone |
| | ||||||
Common stock$1.60 par value; |
||||||||
Authorized750 million shares at each period end, respectively Issued and outstanding |
||||||||
Common: 362.1 million and 353.2 million shares issued, less 90 thousand and 9 thousand |
579,733 | 565,019 | ||||||
Exchangeable: 55.9 million shares, less 10 million and 7 million redeemed shares, respectively |
||||||||
Additional paid-in capital |
5,153,258 | 5,038,468 | ||||||
Accumulated other comprehensive income (loss) |
(3,867 | ) | (64,026 | ) | ||||
Retained earnings (deficit) |
71,670 | (120,213 | ) | |||||
Total stockholders equity |
5,800,794 | 5,419,248 | ||||||
Total liabilities and stockholders equity |
$ | 10,151,626 | $ | 10,154,518 | ||||
See Notes to Consolidated Financial Statements
4
NEWMONT MINING CORPORATION
STATEMENTS OF CONSOLIDATED CASH FLOWS
Six Months Ended June 30, |
||||||||
2003 |
2002 |
|||||||
(unaudited, in thousands) |
||||||||
Operating activities: |
||||||||
Net income |
$ | 208,102 | $ | 62,192 | ||||
Adjustments to reconcile net income to net cash provided by operating activities: |
||||||||
Depreciation, depletion and amortization |
269,930 | 225,788 | ||||||
Accretion of accumulated reclamation obligations |
11,320 | | ||||||
Amortization of deferred stripping costs, net |
(14,114 | ) | 8,903 | |||||
Deferred income taxes |
8,745 | (10,403 | ) | |||||
Foreign currency exchange (gain) loss |
(34,019 | ) | 10,504 | |||||
Minority interest, net of dividends |
44,406 | 27,134 | ||||||
Equity loss (income) and impairment of affiliates, net of dividends |
99,309 | (14,859 | ) | |||||
Write-downs of inventories, stockpiles and ore on leach pads |
17,941 | 15,897 | ||||||
Cumulative effect of a change in accounting principle, net of tax |
34,533 | (7,701 | ) | |||||
Gain on investments, net |
(84,337 | ) | (47,298 | ) | ||||
Gain on gold commodity derivative instruments, net |
(71,669 | ) | 3,147 | |||||
Gain on extinguishment of NYOL bonds, net |
(94,414 | ) | | |||||
Gain on extinguishment of NYOL derivatives liability, net |
(76,578 | ) | | |||||
Loss on extinguishment of debt |
19,530 | | ||||||
Gain on sale of assets and other |
(11,027 | ) | (9,704 | ) | ||||
(Increase) decrease in operating assets: |
||||||||
Accounts receivable |
8,000 | 14,413 | ||||||
Inventories, stockpiles and ore on leach pads |
(25,574 | ) | (5,441 | ) | ||||
Other assets |
7,332 | 14,881 | ||||||
Increase (decrease) in operating liabilities: |
||||||||
Accounts payable and other accrued liabilities |
54,156 | (46,473 | ) | |||||
Derivative instruments |
(12,935 | ) | | |||||
Early settlement of derivative instruments classified as cash flow hedges |
(120,993 | ) | | |||||
Other liabilities |
(12,698 | ) | (42,896 | ) | ||||
Net cash provided by operating activities |
224,946 | 198,084 | ||||||
Investing activities: |
||||||||
Additions to property, plant and mine development |
(215,301 | ) | (140,810 | ) | ||||
Advances to joint ventures and affiliates, net |
(46,203 | ) | (24,750 | ) | ||||
Proceeds from sale of short-term investments |
1,653 | 406,731 | ||||||
Proceeds from the sale of TVX Newmont Americas |
180,000 | | ||||||
Proceeds from sale of marketable securities of Lihir |
| 84,002 | ||||||
Proceeds from sale of cross currency swaps |
| 50,816 | ||||||
Early settlement of ineffective derivative instruments |
(29,148 | ) | | |||||
Cash consideration for acquisition of Newmont NFM minority interest and other |
(11,195 | ) | | |||||
Cash consideration for the acquisition of Normandy and Franco-Nevada, net of cash received and transaction costs |
| (87,885 | ) | |||||
Proceeds from asset sales and other |
988 | 19,888 | ||||||
Net cash (used) provided by investing activities |
(119,206 | ) | 307,992 | |||||
Financing activities: |
||||||||
Proceeds from long-term debt |
115,000 | 489,131 | ||||||
Repayment of long-term debt |
(322,360 | ) | (911,817 | ) | ||||
Dividends paid on common and preferred stock |
(32,308 | ) | (25,871 | ) | ||||
Proceeds from stock issuance and other |
24,851 | 62,898 | ||||||
Other |
| (691 | ) | |||||
Net cash used in financing activities |
(214,817 | ) | (386,350 | ) | ||||
Effect of exchange rate changes on cash |
(17,865 | ) | 16,248 | |||||
Net change in cash and cash equivalents |
(126,942 | ) | 135,974 | |||||
Cash and cash equivalents at beginning of period |
401,683 | 149,431 | ||||||
Cash and cash equivalents at end of period |
$ | 274,741 | $ | 285,405 | ||||
Supplemental information: |
||||||||
Accrual for NYOL bond extinguishment |
$ | 98,398 | $ | | ||||
Interest paid, net of amounts capitalized of $3,048 and $2,294, respectively |
$ | 67,297 | $ | 61,668 | ||||
Income taxes paid |
$ | 110,467 | $ | 45,700 |
See Notes to Consolidated Financial Statements
5
NEWMONT MINING CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
(1) BASIS OF PREPARATION OF FINANCIAL STATEMENTS
The following interim Consolidated Financial Statements of Newmont Mining Corporation and its subsidiaries (collectively, Newmont or the Company) are unaudited and prepared in accordance with the rules and regulations of the Securities and Exchange Commission for Form 10-Q. Such rules and regulations allow the omission of certain information and footnote disclosures normally included in financial statements prepared in accordance with generally accepted accounting principles as long as the statements are not misleading. In the opinion of management, all adjustments necessary for a fair presentation of these interim statements have been included. These adjustments are of a normal recurring nature, except for the effects of the February 2002 acquisitions. These interim Consolidated Financial Statements should be read in conjunction with the Consolidated Financial Statements of Newmont included in its Annual Report on Form 10-K/A for the year ended December 31, 2002.
The Companys Consolidated Financial Statements have been prepared in accordance with accounting principles generally accepted in the United States of America. The preparation of the Companys Consolidated Financial Statements requires the Company to make estimates and assumptions that affect the reported amounts of assets and liabilities and the related disclosure of contingent assets and liabilities at the date of the period. The more significant areas requiring the use of management estimates and assumptions relate to mineral reserves that are the basis for future cash flow estimates and units-of-production depreciation, depletion and amortization calculations; environmental, reclamation and closure obligations; estimates of recoverable gold and other minerals in stockpile and leach pads inventories; asset impairments (including impairments of goodwill, long-lived assets, and investments); write-downs of inventory to net realizable value; post-employment, post-retirement and other employee benefit liabilities; valuation allowances for deferred tax assets; reserves for contingencies and litigation; and the fair value and accounting treatment of financial instruments. The Company bases its estimates on the Companys historical experience and on various other assumptions that are believed to be reasonable under the circumstances. Accordingly, actual results may differ significantly from these estimates under different assumptions or conditions.
References to A$ refer to Australian currency, CDN$ to Canadian currency and $ or US$ to United States currency.
Certain amounts for the three and six months ended June 30, 2002 and at December 31, 2002 have been reclassified to conform to 2003 presentation.
(2) ACQUISITIONS
Newmont NFM Limited Scheme of Arrangement
On April 2, 2003, the shareholders of Normandy NFM Limited (an Australian corporation trading as Newmont NFM on the Australian Stock Exchange or ASX) voted to approve the proposed scheme of arrangement under which Newmont NFM would become a wholly-owned subsidiary of Newmont Australia Limited, a wholly-owned subsidiary of Newmont Mining Corporation, through the acquisition of the remaining minority interest of Newmont NFM. The Federal Court in Sydney, Australia approved the scheme on April 11, 2003 and the scheme became effective on April 14, 2003 after the orders of the Federal Court were filed with the Australian Securities and Investments Commission. Under the terms of the scheme, Newmont NFM shareholders could receive 4.40 ASX listed Newmont Mining Corporation CHESS Depositary Interests (CDIs) for each Newmont NFM share. Each CDI is equivalent to 0.1 Newmont Mining Corporation common shares. As an alternative to receiving Newmont Mining Corporation CDIs, shareholders could sell their Newmont NFM shares back to the company under a concurrent buy-back offer of A$16.50 per Newmont NFM share. On April 29,
6
NEWMONT MINING CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)
2003, Newmont Mining Corporation issued 4,437,506 common shares to CHESS Depository Nominees Pty Ltd, and in turn, 44,375,060 CDIs were issued to former Newmont NFM shareholders. The market value of the issued Newmont Mining Corporation shares was approximately $105 million, based on the average quoted value of the shares of $23.58 two days before and after November 28, 2002, the date the terms of the transaction were announced. The market value of the issued shares, together with the cash consideration paid to those shareholders who elected to accept the buy-back offer of approximately $10 million (including transaction costs), gave rise to a total purchase price of approximately $115 million. The transaction was accounted for as a purchase of minority interest in accordance with Statement of Financial Accounting Standards (SFAS) No. 141 Business Combinations in the second quarter of 2003. Newmont NFM was delisted from the ASX in April 2003. Newmont has performed a preliminary purchase price allocation based on independent appraisals and valuations that gave rise to goodwill of $77.1 million. The final purchase price allocation is not expected to vary significantly from the preliminary allocation.
Normandy and Franco-Nevada
During the first quarter of 2002, Newmont acquired Franco-Nevada Mining Corporation Limited. (Franco-Nevada) and Normandy Mining Limited. (Normandy). The effective date for accounting purposes of the acquisitions was February 15, 2002. For more information on the acquisitions and the related purchase price allocation, see Note 3 to the Consolidated Financial Statements in the Annual Report on Form 10-K for the year ended December 31, 2002.
For information purposes only, the following unaudited pro forma data reflects the consolidated results of operations of Newmont as if the acquisitions of Franco-Nevada and Normandy had taken place on January 1, 2002 (unaudited, in millions, except per share data):
Six Months Ended June 30, 2002 |
||||
Revenues |
$ | 1,368.8 | ||
Net loss applicable to common shares before cumulative effect of a change in accounting principle |
$ | (77.6 | ) | |
Net loss applicable to common shares |
$ | (69.9 | ) | |
Basic and diluted loss per common share before cumulative effect of a change in accounting principle |
$ | (0.20 | ) | |
Basic and diluted loss per common share |
$ | (0.18 | ) | |
Basic and diluted weighted average common shares outstanding |
394.1 |
On a pro forma basis during the six months ended June 30, 2002, the net loss includes mark-to-market losses on derivative instruments totaling $166.9 million, net of tax. The above pro forma amounts do not include the application of hedge accounting prior to the acquisitions to significant portions of the acquired derivative instruments, as hedge accounting documentation was not in place during those periods. The pro forma information is not indicative of the results of operations that would have occurred had the acquisitions been consummated on January 1, 2002. The information is not indicative of the combined companys future results of operations.
7
NEWMONT MINING CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)
Goodwill
Changes in the carrying amount of goodwill allocated to reporting units during 2002 and for the first six months of 2003 are summarized in the following table (unaudited, in millions).
Nevada |
Other North America |
Total North America |
Yanacocha |
Other South |
Total South America |
||||||||||||||||
Balance at January 1, 2002 |
$ | | $ | | $ | | $ | | $ | $ | | ||||||||||
Purchase price allocation for Normandy and Franco-Nevada acquisitions |
40.9 | | 40.9 | | | | |||||||||||||||
Balance at December 31, 2002 |
40.9 | | 40.9 | | | | |||||||||||||||
Reversal of valuation allowances for acquired deferred tax assets |
| | | | | | |||||||||||||||
Balance at March 31, 2003 |
40.9 | | 40.9 | | | | |||||||||||||||
Purchase price allocation for Newmont NFM Scheme of Arrangement |
| | | | | | |||||||||||||||
Reversal of valuation allowances for acquired deferred tax assets |
| | | | | | |||||||||||||||
Balance at June 30, 2003 |
$ | 40.9 | $ | | $ | 40.9 | $ | | $ | | $ | | |||||||||
Pajingo |
Other Australia |
Total Australia |
Zarafshan- Newmont |
Other International Operations |
Total Gold |
||||||||||||||||
Balance at January 1, 2002 |
$ | | $ | | $ | | $ | | $ | | $ | | |||||||||
Purchase price allocation for Normandy and Franco-Nevada acquisitions |
56.9 | 140.8 | 197.7 | | | 238.6 | |||||||||||||||
Balance at December 31, 2002 |
56.9 | 140.8 | 197.7 | | | 238.6 | |||||||||||||||
Reversal of valuation allowances for acquired deferred tax assets |
| (18.5 | ) | (18.5 | ) | | | (18.5 | ) | ||||||||||||
Balance at March 31, 2003 |
56.9 | 122.3 | 179.2 | | | 220.1 | |||||||||||||||
Purchase price allocation for Newmont NFM Scheme of Arrangement |
| 77.1 | 77.1 | | | 77.1 | |||||||||||||||
Reversal of valuation allowances for acquired deferred tax assets |
| (14.5 | ) | (14.5 | ) | | | (14.5 | ) | ||||||||||||
Balance at June 30, 2003 |
$ | 56.9 | $ | 184.9 | $ | 241.8 | $ | | $ | | $ | 282.7 | |||||||||
8
NEWMONT MINING CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)
Base Metals |
Exploration |
Merchant Banking |
Corporate and Other |
Consolidated |
||||||||||||
Balance at January 1, 2002 |
$ | | $ | | $ | | $ | | $ | | ||||||
Purchase price allocation for Normandy and Franco-Nevada acquisitions |
31.5 | 1,129.5 | 1,625.0 | | 3,024.6 | |||||||||||
Balance at December 31, 2002 |
31.5 | 1,129.5 | 1,625.0 | | 3,024.6 | |||||||||||
Reversal of valuation allowances for acquired deferred tax assets |
| | | | (18.5 | ) | ||||||||||
Balance at March 31, 2003 |
31.5 | 1,129.5 | 1,625.0 | | 3,006.1 | |||||||||||
Purchase price allocation for Newmont NFM Scheme of Arrangement |
| | | | 77.1 | |||||||||||
Reversal of valuation allowances for acquired deferred tax assets |
| | | | (14.5 | ) | ||||||||||
Balance at June 30, 2003 |
$ | 31.5 | $ | 1,129.5 | $ | 1,625.0 | $ | | $ | 3,068.7 | ||||||
During the six months ended June 30, 2003, the Company reversed valuation allowances for deferred tax assets related to capital loss carry-forwards in Australia due to capital gains generated by the sale of TVX Newmont Americas, the loss of tax attributes from the extinguishment of Newmont Yandal Operations Pty Ltd (NYOL) bonds (see Note 10 for discussion) and from tax benefits arising from the completion of the Newmont NFM Scheme of Arrangement. The valuation allowances were originally recorded as part of the purchase price allocation for the acquisition of Normandy and were therefore reversed against goodwill.
(3) INVENTORIES
At June 30, 2003 |
At December 31, 2002 | |||||
(unaudited, in thousands) | ||||||
Current: |
||||||
In-process |
$ | 41,782 | $ | 46,435 | ||
Precious metals |
23,923 | 19,467 | ||||
Materials and supplies |
104,753 | 103,310 | ||||
Other |
| 112 | ||||
$ | 170,458 | $ | 169,324 | |||
The Company recorded aggregate write-downs of $5.1 million and $0.8 million for the three months ended June 30, 2003 and 2002, respectively, to reduce the carrying value of inventories to net realizable value. Write-downs in 2003 included $0.8 million at Yanacocha, $0.3 million at Yandal, $0.5 million at Martha and $3.5 million at Golden Grove. Write-downs in 2002 related to $0.8 million at Nevada.
The Company recorded aggregate write-downs of $10.9 million and $2.3 million for the six months ended June 30, 2003 and 2002, respectively, to reduce the carrying value of inventories to net realizable value. Write-downs in 2003 include $0.8 million at Yanacocha, $1.0 million at Yandal, $1.3 million at Minahasa, $1.0 million at Martha and $6.8 million at Golden Grove. Write-downs in 2002 primarily related to $2.0 million at Nevada.
Inventory write-downs are classified as components of Costs applicable to sales.
9
NEWMONT MINING CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)
(4) STOCKPILES AND ORE ON LEACH PADS
At June 30, 2003 |
At December 31, 2002 | |||||
(unaudited, in thousands) | ||||||
Current: |
||||||
Stockpiles |
$ | 92,129 | $ | 104,997 | ||
Ore on leach pads |
184,892 | 223,996 | ||||
$ | 277,021 | $ | 328,993 | |||
Long-term: |
||||||
Stockpiles |
$ | 164,830 | $ | 136,116 | ||
Ore on leach pads |
117,707 | 63,645 | ||||
$ | 282,537 | $ | 199,761 | |||
Write-downs of inventories included in Costs applicable to sales totaled $5.1 million and $6.8 million for the three months ended June 30, 2003 and 2002, respectively, to reduce the carrying value of stockpiles to net realizable value. The 2003 stockpile write-downs included $1.4 million at Yandal, $2.1 million at Tanami, $1.0 million at Kalgoorlie, and $0.6 million at Martha. The 2002 stockpile write-downs primarily related to $6.6 million at Nevada.
Write-downs of inventories included in Costs applicable to sales totaled $6.8 million and $13.6 million for the six months ended June 30, 2003 and 2002, respectively, to reduce the carrying value of stockpiles to net realizable value. The Company also recorded a write-down in Nevada of $0.2 million for the six months ended June 30, 2003 to reduce the carrying value of ore on leach pads to net realizable value. Stockpile write-downs in 2003 include $0.8 million in Nevada, $1.4 million at Yandal, $2.1 million at Tanami, $1.0 million at Kalgoorlie and $1.5 million at Martha. $13.3 million of the stockpile write-downs in 2002 related to Nevada.
Stockpile and ore on leach pads write-downs are classified as components of Costs applicable to sales.
(5) GAIN ON INVESTMENTS, NET
Gain on investment for the three and six months ended June 30, 2003 and 2002 was as follows:
Three months ended June 30, |
Six months ended June 30, | |||||||||||
2003 |
2002 |
2003 |
2002 | |||||||||
(unaudited, in thousands) | ||||||||||||
Gain on exchange of Echo Bay shares for Kinross marketable securities |
$ | | $ | | $ | 84,337 | $ | | ||||
Gain on sale of marketable securities of Lihir Gold |
| 47,298 | | 47,298 | ||||||||
Total |
$ | | $ | 47,298 | $ | 84,337 | $ | 47,298 | ||||
Kinross Gold Corporation
On January 31, 2003, Kinross Gold Corporation (Kinross), Echo Bay Mines Ltd. (Echo Bay) and TVX Gold Inc. (TVX Gold) were combined, and TVX Gold acquired Newmonts 49.9% interest in the TVX Newmont Americas joint venture. Under the terms of the combination and acquisition, Newmont received a 13.8% interest in the restructured Kinross in exchange for its then 45.67% interest in Echo Bay and $180 million for its interest in TVX Newmont Americas. Cash proceeds of $170.6 million were received immediately after the
10
NEWMONT MINING CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)
close of the transaction. The remaining $9.4 million, originally held in escrow, were received subsequent to the end of the first quarter. Newmont recognized a pre-tax gain of $84.3 million on the transaction in Gain on investments, net in the Statement of Consolidated Operations.
Newmont classifies its investment in Kinross as a long-term, available-for-sale marketable security. At June 30, 2003, the fair value of the Kinross investment was $291 million. During the three months ended March 31, 2003, a loss of $45.3 million, net of tax, was recorded in Other comprehensive income, net of tax for the change in market value of the investment. During the second quarter of 2003, a loss of $3.2 million, net of tax, was recorded in Other comprehensive income, net of tax for the change in market value of the investment. Newmont will continue to monitor the market value of its investment in Kinross Gold Corporation. In the event that the decline in the market value of the Kinross shares continues in future periods, the Company will evaluate the need to recognize a loss for an other-than-temporary decline in the value of the investment.
Gain on Sale of Marketable Securities of Lihir Gold
At March 31, 2002, the Company held a 9.74% interest in Lihir Gold, which was accounted for as an investment in marketable securities. During the three months ended March 31, 2002, unrealized holding gains of $11.0 million were recorded in Other comprehensive income, net of tax to reflect the market value increase during the period. On April 12, 2002, Newmont sold its equity holding in Lihir Gold through a block trade to Macquarie Equity Capital Markets Limited in Australia for approximately $84 million, resulting in the recognition of a pre-tax gain of approximately $47.3 million in Gain on investments, net in the Statement of Consolidated Operations.
Sales of Debt Securities
As part of the Franco-Nevada acquisition in February 2002, the Company acquired significant investments in marketable debt securities. These debt securities are classified as available-for-sale and recorded at their fair values of $402.6 million under purchase accounting. All such securities were sold immediately after the Franco-Nevada acquisition for net proceeds of $402.9 million, resulting in the recognition of a pre-tax gain of $0.3 million, which is included in Dividends, interest income, foreign currency exchange, and other income for the six months ended June 30, 2002.
(6) DEFERRED STRIPPING COSTS
Movements in the deferred stripping cost balance were as follows:
Six months ended June 30, 2003 |
Year ended December 31, 2002 |
|||||||
(unaudited, in thousands) | ||||||||
Opening balance |
$ | 55,387 | $ | 91,631 | ||||
Additions |
84,238 | 65,371 | ||||||
Amortization |
(71,629 | ) | (101,615 | ) | ||||
Closing balance |
$ | 67,996 | $ | 55,387 | ||||
11
NEWMONT MINING CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)
(7) PROPERTY, PLANT AND MINE DEVELOPMENT
At June 30, 2003 |
At December 31, 2002 | |||||||||||||||||||
Cost |
Accumulated Depreciation and Depletion |
Net Book Value |
Cost |
Accumulated Depreciation and Depletion |
Net Book Value | |||||||||||||||
(unaudited, in thousands) | ||||||||||||||||||||
Land |
$ | 76,743 | $ | | $ | 76,743 | $ | 71,521 | $ | | $ | 71,521 | ||||||||
Buildings and equipment |
4,156,356 | (2,583,915 | ) | 1,572,441 | 4,093,028 | (2,371,017 | ) | 1,722,011 | ||||||||||||
Mine development |
1,158,455 | (670,688 | ) | 487,767 | 1,005,166 | (580,594 | ) | 424,572 | ||||||||||||
Asset retirement cost |
131,649 | (69,332 | ) | 62,317 | | | | |||||||||||||
Construction-in-progress |
143,834 | | 143,834 | 68,926 | | 68,926 | ||||||||||||||
Total |
$ | 5,667,037 | $ | (3,323,935 | ) | $ | 2,343,102 | $ | 5,238,641 | $ | (2,951,611 | ) | $ | 2,287,030 | ||||||
Leased assets included above in property, plant and mine development |
$ | 351,498 | $ | (153,600 | ) | $ | 197,898 | $ | 361,889 | $ | (146,884 | ) | $ | 215,005 | ||||||
12
NEWMONT MINING CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)
(8) MINERAL INTERESTS AND OTHER INTANGIBLE ASSETS
At June 30, 2003 |
At December 31, 2002 | |||||||||||||||||||
Carrying Value |
Accumulated Amortization |
Net Book Value |
Carrying Value |
Accumulated Amortization |
Net Book Value | |||||||||||||||
(unaudited, in thousands) | ||||||||||||||||||||
Mineral Interests: |
||||||||||||||||||||
Production stage |
||||||||||||||||||||
Mineral interests |
$ | 801,518 | $ | (373,726 | ) | $ | 427,792 | $ | 712,098 | $ | (325,822 | ) | $ | 386,276 | ||||||
Royaltiesnet smelter returns |
223,684 | (19,387 | ) | 204,297 | 222,614 | (12,751 | ) | 209,863 | ||||||||||||
Royaltiesnet profit interest |
18,290 | (3,639 | ) | 14,651 | 17,340 | (3,231 | ) | 14,109 | ||||||||||||
1,043,492 | (396,752 | ) | 646,740 | 952,052 | (341,804 | ) | 610,248 | |||||||||||||
Development stage |
||||||||||||||||||||
Mineral interests |
123,955 | | 123,955 | 92,757 | | 92,757 | ||||||||||||||
Royaltiesnet smelter returns |
1,542 | | 1,542 | 1,321 | | 1,321 | ||||||||||||||
Royaltiesnet profit interest |
6,911 | (90 | ) | 6,821 | 5,921 | (50 | ) | 5,871 | ||||||||||||
132,408 | (90 | ) | 132,318 | 99,999 | (50 | ) | 99,949 | |||||||||||||
Exploration stage |
||||||||||||||||||||
Mineral interests |
548,433 | (10,813 | ) | 537,620 | 632,284 | (8,449 | ) | 623,835 | ||||||||||||
Royalties-net smelter returns |
5,815 | (351 | ) | 5,464 | 5,700 | (314 | ) | 5,386 | ||||||||||||
554,248 | (11,164 | ) | 543,084 | 637,984 | (8,763 | ) | 629,221 | |||||||||||||
Total mineral interests |
1,730,148 | (408,006 | ) | 1,322,142 | 1,690,035 | (350,617 | ) | 1,339,418 | ||||||||||||
Oil and gas: |
||||||||||||||||||||
Producing property |
||||||||||||||||||||
Royaltiesnet refining returns |
44,293 | (7,142 | ) | 37,151 | 37,964 | (3,842 | ) | 34,122 | ||||||||||||
Working interest |
21,510 | (2,174 | ) | 19,336 | 18,430 | (1,400 | ) | 17,030 | ||||||||||||
65,803 | (9,316 | ) | 56,487 | 56,394 | (5,242 | ) | 51,152 | |||||||||||||
Non-producing property |
||||||||||||||||||||
Royaltiesnet refining returns |
5,545 | | 5,545 | 4,751 | | 4,751 | ||||||||||||||
Working interest |
8,280 | | 8,280 | 7,090 | | 7,090 | ||||||||||||||
13,825 | | 13,825 | 11,841 | | 11,841 | |||||||||||||||
Total oil and gas |
79,628 | (9,316 | ) | 70,312 | 68,235 | (5,242 | ) | 62,993 | ||||||||||||
Other |
12,937 | (325 | ) | 12,612 | 12,937 | | 12,937 | |||||||||||||
Total |
$ | 1,822,713 | $ | (417,647 | ) | $ | 1,405,066 | $ | 1,771,207 | $ | (355,859 | ) | $ | 1,415,348 | ||||||
The Companys intangible assets for mineral interests and oil and gas interests are subject to amortization. The aggregate amortization expense for the three months ended June 30, 2003 and 2002 was $39.6 million and $39.0 million, respectively. The aggregate amortization expense for the six-month periods ended June 30, 2003 and 2002 was $61.1 million and $54.4 million, respectively.
13
NEWMONT MINING CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)
(9) INVESTMENTS AND EQUITY INCOME OF AFFILIATES
Investments:
At June 30, 2003 |
At December 31, 2002 | |||||
(unaudited, in thousands) | ||||||
Investments in affiliates: |
||||||
Batu Hijau |
$ | 684,905 | $ | 660,928 | ||
TVX Newmont Americas |
| 183,028 | ||||
Echo Bay Mines |
| 210,643 | ||||
Australian Magnesium Corporation |
| 44,244 | ||||
AGR Matthey Joint Venture |
10,154 | 11,213 | ||||
$ | 695,059 | $ | 1,110,056 | |||
Other: |
||||||
Newmont Australia infrastructure bondslong-term |
| 96,649 | ||||
$ | 695,059 | $ | 1,206,705 | |||
Other: |
||||||
Newmont Australia infrastructure bondsshort-term |
$ | 114,287 | | |||
Equity Loss and Impairment of Australian Magnesium Corporation
Three months ended June 30, |
Six months ended June 30, |
|||||||||||||||
2003 |
2002 |
2003 |
2002 |
|||||||||||||
(unaudited, in thousands) | ||||||||||||||||
Australian Magnesium Corporation |
$ | (107,758 | ) | $ | (688 | ) | $ | (119,485 | ) | $ | (688 | ) |
Equity Income of Affiliates:
Three months ended June 30, |
Six months ended June 30, | |||||||||||||
2003 |
2002 |
2003 |
2002 | |||||||||||
(unaudited, in thousands) | ||||||||||||||
Batu Hijau |
$ | 18,397 | $ | 13,533 | $ | 25,750 | $ | 14,937 | ||||||
TVX Newmont Americas |
| 3,892 | 810 | 3,892 | ||||||||||
AGR Matthey Joint Venture |
(657 | ) | 583 | (282 | ) | 583 | ||||||||
Total |
$ | 17,740 | $ | 18,008 | $ | 26,278 | $ | 19,412 | ||||||
Investment in Batu Hijau
The Company and an affiliate of Sumitomo Corporation (Sumitomo) are partners with economic interests of 56.25% and 43.75%, respectively, in the Nusa Tenggara Partnership (NTP), which holds 80% of P.T. Newmont Nusa Tenggara (PTNNT), the owner of the Batu Hijau copper/gold mine in Indonesia. Due to the significant participating rights provided to Sumitomo under the terms of the NTP partnership agreement, the Company uses the equity method to account for its investment in NTP. The Company and Sumitomo have an indirect 45% and 35% interest, respectively, in PTNNT. The remaining 20% interest is held by an unrelated Indonesian company. Because the Company and Sumitomo have carried the investment of the 20% owner, the
14
NEWMONT MINING CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)
Company and Sumitomo recognize 56.25% and 43.75% of PTNNTs net income (loss), respectively, until recouping the bulk of the construction investment, including interest. Under the Contract of Work, a portion of PTNNT not already owned by Indonesian nationals must be offered for sale to the Indonesian government or to Indonesian nationals, beginning in the sixth year after mining operations commenced. The effect of this provision could potentially reduce the Company and Sumitomos ownership to 49% by the end of the tenth year after mining operations commenced.
The Companys equity investment in PTNNT was $684.9 million and $660.9 million at June 30, 2003 and December 31, 2002, respectively, based on accounting principles generally accepted in the United States. At June 30, 2003, differences between 56.25% of PTNNTs net assets of $266.5 million and Newmonts investment included (i) $45.2 million for Newmonts contribution prior to the formation of NTP; (ii) $106.9 million for the fair market value adjustment recorded by Newmont in conjunction with the purchase of a subsidiary minority interest, net of amortization; (iii) $395.6 million for the contributions and interest income recorded by Newmont classified as debt and interest expense by PTNNT; (iv) negative $120.6 million for contributions to PTNNT, through NTP, by Sumitomo disproportionate to its equity interest, net of amounts recorded; (v) negative $76.9 million for stockholders equity of the carried interest partner; (vi) $38.6 million for other intercompany charges; (vii) $30.9 million for capitalized interest; and, (viii) negative $1.3 million for other adjustments recorded by Newmont. At December 31, 2002, differences between 56.25% of PTNNTs net assets of $257.6 million and Newmonts investment included (i) $45.2 million for Newmonts contribution prior to the formation of NTP; (ii) $109.1 million for the fair market value adjustment recorded by Newmont in conjunction with the purchase of a subsidiary minority interest, net of amortization; (iii) $391.2 million for the contributions and interest income recorded by Newmont classified as debt and interest expense by PTNNT; (iv) negative $122.6 million for contributions in PTNNT, through NTP, by Sumitomo disproportionate to its equity interest, net of amounts recorded; (v) negative $76.9 million for stockholders equity of the carried interest partner; (vi) $33.3 million for other intercompany charges; (vii) $30.9 million for capitalized interest; and, (viii) negative $6.9 million for other adjustments recorded by Newmont. Certain of these amounts are amortized or depreciated on a units-of-production basis based on proven and probable reserves. Below is a description of Newmonts equity income (loss) in PTNNT, where the net income (loss) reflects the elimination of interest between PTNNT and NTP.
Newmonts equity income in PTNNT for the six months ended June 30, 2003 was $25.8 million versus $14.9 million for the same period in 2002. Newmonts equity income for the six months ended June 30, 2003 was based on 56.25% of PTNNTs net income of $16.0 million, adjusted for the elimination of $3.6 million of inter-company interest, $4.2 million of inter-company management fees, the cumulative effect of reclamation and remediation liabilities of $8.0 million and other adjustments of $1.0 million. For the comparable 2002 period, Newmonts equity income was based on 56.25% of PTNNTs net income of $7.4 million, adjusted for the elimination of $3.6 million of inter-company interest, $5.1 million of inter-company management fees, and other adjustments of $2.0 million.
On May 9, 2002, PTNNT completed a restructuring of its $1.0 billion project financing facility (Senior Debt) that provides PTNNT the ability to defer up to $173.5 million in principal payments scheduled for 2002 and 2003. The restructuring was expected to provide a better match between the expected cash flows of the project and the maturities of the debt. Any deferred principal amounts were to be repaid between 2004 and 2010. Under this restructuring, Batu Hijau is not permitted to pay dividends or make other restricted payments to Newmont or Sumitomo as long as any amount of deferred principal is outstanding; however, there is no restriction on prepaying any of the deferred principal amounts. Amounts outstanding under the project financing were $783.2 million at June 30, 2003 and $913.3 million in December 31, 2002. The amount of deferred principal at June 30, 2003 was $43.3 million and at December 31, 2002 was $173.4 million. During the quarter ended June 30, 2003, PTNNT repaid $130.1 million of this facility all of which represented repayments
15
NEWMONT MINING CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)
of the deferred principal. Newmont and its partner provide a contingent support line of credit to PTNNT. During the first half of 2003 and 2002, Newmont funded zero and $24.8 million, respectively under this contingent support facility as its pro-rata share of capital expenditures. Additional support from Newmont and its partner available under this facility amounts to $115.0 million, of which Newmonts pro-rata share is $64.7 million.
The following is NTP summarized financial information based on accounting principles generally accepted in the United States. The results of operations and assets and liabilities are not reflected in the Companys Consolidated Financial Statements. As described earlier, the Company accounts for NTP as an equity investment.
Three months ended June 30, |
Six months ended June 30, | |||||||||||
2003 |
2002 |
2003 |
2002 | |||||||||
(unaudited, in thousands) | ||||||||||||
Revenues, net of smelting and refining costs |
$ | 102,718 | $ | 94,083 | $ | 177,591 | $ | 165,988 | ||||
Revenues from by-product sales credited to production costs |
$ | 58,336 | $ | 37,342 | $ | 91,947 | $ | 59,475 | ||||
Gross profit |
$ | 40,271 | $ | 13,384 | $ | 50,426 | $ | 9,058 | ||||
Net income before cumulative effect of a change in accounting principle |
$ | 25,528 | $ | 13,181 | $ | 31,488 | $ | 8,751 | ||||
Net income |
$ | 25,528 | $ | 13,181 | $ | 17,270 | $ | 8,751 |
In the six-month period ended June 30, 2003, NTP recorded a charge of $14.2 million to reflect the cumulative effect of the adoption of Statement of Financial Accounting Standards (SFAS) No. 143 Accounting for Asset Retirement Obligations.
At June 30, 2003 |
At December 31, 2002 | |||||
(unaudited, in thousands) | ||||||
Current assets |
$ | 254,748 | $ | 313,110 | ||
Property, plant and mine development, net |
$ | 1,672,313 | $ | 1,658,912 | ||
Mineral interests |
$ | 183,319 | $ | 188,294 | ||
Other assets |
$ | 291,795 | $ | 282,133 | ||
Debt and related interest to partners and affiliates |
$ | 261,640 | $ | 259,793 | ||
Other current liabilities |
$ | 187,975 | $ | 103,117 | ||
Long-term debtthird parties (including current portion) |
$ | 805,677 | $ | 935,771 | ||
Other liabilities |
$ | 149,420 | $ | 163,346 |
For the six months ended June 30, 2003 and 2002, PTNNT recorded gross revenues, before smelting and refining costs, of $220 million and $212 million, respectively, which were subject to final pricing adjustments. The average price adjustment for copper was 2.38% and 5.2% for the six months ended June 30, 2003 and 2002, respectively. The average price adjustment for gold was 0.9% and 4.4% for the six months ended June 30, 2003 and 2002, respectively. At June 30, 2003, PTNNT had copper derivatives embedded in outstanding shipment contracts of 74.9 million pounds of copper recorded at an average price of $0.74 per pound. A one-cent movement in the average price used for these derivatives will have an approximate $0.5 million impact on PTNNTs 2003 net income.
By-product commodities, gold and silver, represented 57% and 40% of sales, net of smelting and refining charges, and reduced production costs by 79% and 57% for the three-month periods ended June 30, 2003 and 2002, respectively, and 52% and 36% of sales, net of smelting and refining charges, and reduced production costs by 71% and 49% for the six-month periods ended June 30, 2003 and 2002, respectively.
PTNNT entered into a series of copper hedging transactions in March 2002. At March 31, 2002, 23,400 metric tons of copper were hedged. These contracts were settled during the second quarter of 2002. These
16
NEWMONT MINING CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)
contracts allowed PTNNT to realize an average price of $1,619 per metric ton (approximately $0.73 per pound). In second quarter 2003, PTNNT entered into copper forward sales contracts covering 5,000 metric tonnes per month for each of August and September 2003 at a weighted average fixed price between $1,665 and $1,725 per metric tonne. Each contract is settled by cash on a monthly basis. These contracts had a positive fair value as at June 30, 2003 of US$0.4 million (US$0.3 million net of tax).
In 2001, PTNNT entered into two diesel hedging contracts for 360,000 barrels each at a fixed price of $27.39 per barrel and $27.98 per barrel, respectively. Each of these contracts cover purchases of 15,000 barrels monthly and expire in August and September of 2003, respectively. Each contract is settled monthly. In December 2002, PTNNT entered into an additional hedge contract for 60,000 barrels over the following 12 months at a fixed price of $27.50 per barrel. These contracts have all been designated as cash flow hedges and the fair value at June 30, 2003 and December 31, 2002 was $0.2 million and $0.6 million, respectively. At June 30, 2003, 140,000 barrels are outstanding for these contracts.
TVX Newmont Americas and Echo Bay Mines Ltd.
Newmont had a 49.9% interest and an equity investment of $183.0 million in TVX Newmont Americas joint venture at December 31, 2002. On January 31, 2003, Newmont sold its interest in TVX Newmont Americas for $180 million.
On January 31, 2003, Kinross, Echo Bay and TVX Gold were combined. Under the terms of the combination and acquisition, Newmont received a 13.8% interest in the restructured Kinross in exchange for its then 45.67% interest in Echo Bay. Newmont recorded a pre-tax gain on the transactions of $83.4 million (See Note 5).
Australian Magnesium Corporation (AMC)
At December 31, 2002, Newmonts interest in AMC comprised a 22.8% equity and voting interest and a loan receivable in the amount of A$38 million (approximately $20.1 million) including interest capitalized since December 31, 2002. In addition, Newmont subsidiaries had obligations to contribute to AMC A$100 million in equity by January 31, 2003 and a further A$90 million in equity (reduced to A$75 million through a funding agreement reached in January 2003, though a condition required to bring the agreement into effect was not satisfied), contingent upon the Stanwell Magnesium Project not achieving certain specified production and operating criteria by December 2006. On January 3, 2003, Newmont purchased an additional 167 million shares at A$0.60 per share for a total of A$100 million (approximately $56.2 million) increasing its ownership to 40.9%, thereby satisfying its January 2003 equity contribution obligation. However, due to additional equity contributions by other shareholders on January 31, 2003, Newmonts interest was decreased to 27.8%. As a result of this equity dilution in its interest in AMC, Newmont recorded an increase of $7.0 million to Additional paid-in-capital.
AMCs primary asset is the Stanwell Magnesium Project (the Project), a proprietary chemical and dehydration process for producing anhydrous magnesium chloride as feed for an electrolytic cell to produce molten magnesium metal and magnesium alloys. The original funding arrangements for the Project amounted to approximately A$1.5 billion (approximately $1 billion), including contingencies and cost overrun reserves. Preliminary indications by AMC are that the project may now require A$150 million to A$200 million (approximately $100 million to $134 million) of funds in addition to the existing funding arrangements and potentially some form of third-party project financing support.
On April 17, 2003, AMC announced that it was unlikely that it would reach agreement with its independent engineering firm for a fixed price contract for the development of the Project. Following this announcement,
17
NEWMONT MINING CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)
AMCs share price declined substantially and was A$0.24 per share on May 8, 2003. As a result, Newmont wrote down the carrying value of its investment at March 31, 2003 to the quoted market price of the AMC shares at that date of $A0.43 per share and recorded a loss for an other-than-temporary decline in market value of $11 million.
On June 5, 2003, AMC requested suspension of its securities on the ASX. Subsequently, on June 12, 2003 AMC announced a restructuring agreement with the projects major creditors including Newmont (the Agreement). The Agreement was designed to give AMC time to assess the Project development options and to search for either a corporate or project partner. Work on the Project has essentially ceased and the site is in a care and maintenance status. It is not known if or when the Project or any other magnesium project will be developed by AMC. In addition, as part of the Agreement, AMC (i) will settle outstanding obligations to its outside creditors from existing cash reserves, (ii) has cancelled the senior debt facilities associated with the Project and the associated foreign exchange and interest rate hedging contracts and (iii) has agreed to release Newmont from the above-mentioned A$90 million (approximately $60.1 million) contingent funding commitment. Newmont has agreed to forgive its A$38 million (approximately $24.8 million) loan receivable and provide support in the form of an A$10 million (approximately $6.6 million) contingent, subordinated credit facility and to maintain the existing guarantee in relation to the QMC finance facilities described below.
As a result of the agreement, Newmont recorded an additional write-down in the second quarter of $107.8 million reducing the carrying value of its investment in AMC to zero. The write-down is attributable to the following: (i) $72.7 million representing the book value of its investment at June 30, 2003, (ii) $24.8 million for the loan receivable from AMC, (iii) $10 million charge to settle Newmonts guarantee of the Ford contract (see discussion below), (iv) $6.6 million relating to the contingent credit facility, and (v) $1.1 million for various other items offset by a $7.4 million income tax benefit.
Newmont had guaranteed a $30 million obligation payable by AMC to Ford Motor Company (Ford) in the event the Project did not meet certain specified production and operating criteria by November 2005. AMC indemnified Newmont for this obligation, but this indemnity was unsecured. As of June 30, 2003, Newmont and Ford agreed to settle the liability in relation to the guarantee for $10 million in exchange for a release of the guarantee. Newmont has agreed not to seek recovery of this amount from AMC.
Subsequent to June 30, 2003, Newmonts ownership interest in AMC was further diluted to 26.9% (See Note 21, Subsequent Events).
Newmont is also the guarantor of an A$71 million (approximately $47 million) amortizing loan facility of AMCs subsidiary, QMC Finance Pty Ltd (QMC), of which A$67.5 million (approximately $45.0 million) was outstanding as of June 30, 2003. The QMC loan facility, which is secured by the assets of the Queensland Magnesia Project, expires in November 2006.
QMC is also a party to hedging contracts, which have been guaranteed by Newmont. The contracts include a series of foreign exchange forward contracts and bought put options, the last of which expire in June 2006. As of June 30, 2003, the fair value of these contracts was a positive A$5.5 million (approximately $3.7 million).
The guarantees under the QMC loan facility and hedging contracts could be called in the event of a default by QMC. Newmonts liability under QMC loan facility guarantee is limited to the total amount of outstanding borrowings under the facility at the time the guarantee is called. Newmonts maximum potential liability under its guarantee of the QMC hedging contracts, however, would depend on the market value of the hedging contracts at the time the guarantee is called upon. The principal lender and counterparty under the QMC loan and hedging facilities also have a fixed and floating charge over certain assets of AMC. In the event the guarantees are called, Newmont would have a right of subrogation to the lender under Australian law.
18
NEWMONT MINING CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)
The Company is currently evaluating the impact of adoption of FIN 46, Consolidation of Variable Interest Entities on its investment in AMC and related entities, including QMC.
AGR Matthey Joint Venture
Newmont holds a 40% interest in a joint venture with the West Australian Mint and Johnson Matthey (Australia) Ltd. known as AGR Matthey Joint Venture (AGR). Newmont has no guarantees related to this investment. At June 30, 2003 and December 31, 2002, the difference between Newmonts investment in AGR of $10.2 million ($11.2 million at December 31, 2002) and its share of AGRs net assets consisted of a $2.4 million reduction in long-lived assets recorded by Newmont.
Newmont Australia Infrastructure Bonds
In June 1996, NP Finance Limited and GPS Finance Limited, wholly owned subsidiaries of Newmont Australia Limited (formerly Normandy), issued A$111.9 million (approximately $63.2 million) and A$21.9 million (approximately $12.4 million), respectively, of 7.906%, fifteen-year bonds at a premium to fund certain gas pipeline and power station projects. The bonds were issued at a premium due to unique tax-related benefits available to the bondholders and the issuer under Australian tax regulations. Interest is accrued and capitalized semi-annually in arrears in June and December of each year. Concurrently, with the issue of the Infrastructure Bonds described above, GMK Investments Pty Ltd (GMKI), a wholly owned subsidiary of Newmont Australia Limited (formerly Normandy), entered into an offsetting transaction, making payments to Deutsche Bank Aktiengesellschaft (DBA) equal to the face value of the bonds in return for DBA agreeing to purchase the bonds from each holder of the bonds in June 2004 and to sell those bonds to GMKI for a nominal amount at that time. The receivable from DBA also accrues interest receivable at 7.906% and such interest is capitalized semi-annually in arrears in June and December of each year. Because the arrangement does not technically qualify as a defeasance of debt, the receivable is presented in Investments at December 31, 2002. As of June 30, 2003, Newmont reclassified this investment as a current asset and the corresponding debt liability to Current portion of long-term debt (see Note 11, Long-Term Debt) since, as stated above, DBA is obligated to repurchase these bonds from each holder in June 2004. The repurchase of these bonds will effectively retire the outstanding liability and satisfy the receivable.
(10) EXTINGUISHMENT OF NYOL OBLIGATIONS
On May 29, 2003, Newmont made an offer through its wholly owned subsidiary, Yandal Bond Company Limited (YBCL) to acquire all of the outstanding 8 7/8% Senior Notes due in April 2008 of its wholly owned Australian subsidiary, NYOL. On May 28, 2003, YBCL made a separate offer to acquire all of NYOLs gold hedge contracts from the counterparties. The offer to acquire the Senior Notes was at a price of $500 per $1,000 of principal amount. The offer to acquire the gold hedge contracts was at $0.50 per $1.00 of the net mark-to-market hedge liability as of May 22, 2003. As of June 30, 2003, YBCL had received binding tenders for the Senior Notes totaling $196.8 million, representing 83% of the total $237.2 million outstanding principal amount. Six of the total of seven counterparties to the gold hedge contracts, representing 94% of the gold ounces in the NYOL hedge book and 76% of the mark-to-market May 22, 2003 hedge liability, had assigned their hedge contracts to YBCL as of June 30, 2003. The transactions gave rise to a Gain on extinguishment of NYOL bonds, net of $94.4 million, net of transaction costs, and a Gain on extinguishment of NYOL derivatives liability, net of $76.6 million, net of transaction costs. The cash payments of $98.4 million to settle the extinguishment of the bonds were accrued in Other current liabilities at June 30, 2003 and were made subsequent to that date. YBCL subsequently received additional binding tenders for a portion of the remaining outstanding Senior Notes and extended the offer deadline (see Note 21, Subsequent Events).
19
NEWMONT MINING CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)
(11) LONG-TERM DEBT
June 30, 2003 |
December 31, 2002 |
|||||||
(unaudited, in thousands) | ||||||||
Sale-leaseback of refractory ore treatment plant |
$ | 298,944 | $ | 307,880 | ||||
8 3/8% debentures, net of discount |
182,696 | 204,658 | ||||||
8 5/8% notes, due May 2011, net of discount |
222,234 | 274,339 | ||||||
Newmont Australia 7 5/8% notes, net of premium |
121,027 | 152,690 | ||||||
Newmont Australia 7 1/2% notes, net of premium |
91,400 | 101,850 | ||||||
NYOL 8 7/8% notes |
40,435 | 237,220 | ||||||
6% convertible subordinated debentures |
99,980 | 99,980 | ||||||
Medium-term notes |
17,000 | 32,000 | ||||||
Newmont Australia infrastructure bonds |
116,933 | 99,680 | ||||||
Prepaid forward sales obligation |
145,000 | 145,000 | ||||||
Revolving credit facility |
19,000 | | ||||||
Interest rate swaps |
(8,086 | ) | (6,684 | ) | ||||
Project financing, capital leases and other |
107,025 | 167,991 | ||||||
1,453,588 | 1,816,604 | |||||||
Current maturities |
(176,422 | ) | (115,322 | ) | ||||
$ | 1,277,166 | $ | 1,701,282 | |||||
Scheduled minimum long-term debt repayments are $23.6 million for the remainder of 2003, $177.4 million in 2004, $437.0 million in 2005, $109.8 million in 2006, $74.8 million in 2007 and $631.0 million thereafter.
During the six months ended June 30, 2003, the Company repurchased $23.0 million of 8 3/8% debentures, $52.4 million of 8 5/8% notes due in May 2011, $30.9 million of Newmont Australia 7 5/8% notes and $10.0 million of Newmont Australia 7 1/2% notes for total cash consideration of $135.8 million. As a result of these debt repurchases, the Company recognized a Loss on extinguishment of debt of $19.5 million.
In March 2002, Newmont, through an indirect, wholly-owned subsidiary, YBCL, made an offer to repurchase any and all of the outstanding 8 7/8% Senior Notes due 2008 of NYOL. As of the offer date, $300 million principal amount of notes was outstanding. The transaction resulted in redemption of $62.8 million of the outstanding notes at 101% of the principal amount of the notes, plus accrued and unpaid interest as of the repurchase date.
On May 27, 2003, Newmont Mining Corporation initiated an offer through YBCL to acquire all of the outstanding 8 7/8% Senior Notes due April 2008 issued by NYOL (see Note 10, Extinguishment of NYOL Obligations). At June 30, 2003, YBCL had acquired $196.8 million through this offer.
Newmont has extended its offer to acquire the remaining NYOL 8 7/8% Senior Notes and acquired amounts subsequent to June 30, 2003. NYOL also entered into Voluntary Administration (VA, a form of insolvency proceeding in Australia) subsequent to June 30, 2003 (see Note 21, Subsequent Events).
(12) RECLAMATION AND REMEDIATION
The Companys mining and exploration activities are subject to various federal and state laws and regulations governing the protection of the environment. These laws and regulations are continually changing
20
NEWMONT MINING CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)
and are generally becoming more restrictive. The Company conducts its operations so as to protect the public health and environment and believes its operations are in compliance with all applicable laws and regulations. The Company has made, and expects to make in the future, expenditures to comply with such laws and regulations, but cannot predict the amount of such future expenditures. Estimated future reclamation costs are based principally on legal and regulatory requirements.
Effective January 1, 2003, the Company adopted SFAS No. 143 Accounting for Asset Retirement Obligations. As a result, Reclamation and remediation liabilities increased by $120.7 million for the fair value of the estimated asset retirement obligations, Other accrued liabilities increased by $2.3 million for worker participation bonuses in Peru (bonuses required by law at Minera Yanacocha based on net income), Deferred income tax assets increased by $6.9 million, Property, plant and mine development, net increased by $69.1 million, Minority interest in subsidiaries decreased by $16.2 million and a $34.5 million loss was recorded for the Cumulative effect of a change in accounting principle, net of tax. At June 30, 2003 and December 31, 2002, $379.8 million and $254.1 million, respectively, were accrued for reclamation obligations relating to currently or recently producing mineral properties.
In addition, the Company is involved in several matters concerning environmental obligations associated with former, primarily historic, mining activities. Generally, these matters concern developing and implementing remediation plans at the various sites involved. At June 30, 2003 and December 31, 2002, respectively, $62.5 million and $48.1 million were accrued for such obligations These amounts are also included in Reclamation and remediation liabilities.
The following is a reconciliation of the total liability for asset retirement obligations (unaudited, in thousands):
Balance December 31, 2002 |
$ | 302,229 | ||
Impact of adoption of SFAS No. 143 |
120,707 | |||
Additions to liabilities |
21,460 | |||
Liabilities settled |
(13,396 | ) | ||
Accretion expense |
11,320 | |||
Revisions |
| |||
Balance June 30, 2003 |
$ | 442,320 | ||
The current portions of Reclamation and remediation liabilities of $20.3 million and $13.7 million at June 30, 2003 and December 31, 2002, respectively, are included in Other accrued liabilities.
On a pro forma basis, the liabilities for asset retirement obligations would have been $420.0 million and $422.9 million at January 1, 2002 and December 31, 2002, respectively, if SFAS No. 143 had been applied at the beginning of 2002.
There were no assets that were legally restricted for purposes of settling asset retirement obligations at June 30, 2003.
21
NEWMONT MINING CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)
The table below presents the impact of the accounting change for the three- and six-month periods ended June 30, 2003 and the pro forma effect for the three- and six-month periods ended June 30, 2002 as if the change had been in effect for that period (unaudited, in thousands, except per share data):
Three months ended June 30, |
Six months ended June 30, |
|||||||||||||||
2003 |
2002 |
2003 |
2002 |
|||||||||||||
(pro forma) | (pro forma) | |||||||||||||||
Increase/(decrease) to net income |
||||||||||||||||
Costs applicable to sales (exclusive of depreciation, depletion and amortization shown separately below) |
||||||||||||||||
Gold |
$ | 4,815 | $ | 1,752 | $ | 10,112 | $ | 1,905 | ||||||||
Base metals |
89 | | 179 | | ||||||||||||
Depreciation, depletion, and amortization |
(3,420 | ) | (3,307 | ) | (6,833 | ) | (6,614 | ) | ||||||||
Income tax (expense) benefit |
(519 | ) | 544 | (1,210 | ) | 1,648 | ||||||||||
Minority interest |
(995 | ) | 577 | (1,953 | ) | 1,204 | ||||||||||
Equity loss of affiliate |
(319 | ) | (201 | ) | (799 | ) | (541 | ) | ||||||||
Net loss before cumulative effect of a change in accounting principle |
$ | (349 | ) | $ | (635 | ) | $ | (504 | ) | $ | (2,398 | ) | ||||
Net loss before cumulative effect of a change in accounting principle per common share, basic and diluted |
$ | 0.00 | $ | 0.00 | $ | 0.00 | $ | (0.01 | ) | |||||||
The table below presents pro forma net income and earnings per share before cumulative effect of a change in accounting principle for the three- and six-month periods ended June 30, 2002 as if the Company had adopted the SFAS No. 143 as of January 1, 2002 (unaudited, in thousands, except per share data):
Three months ended June 30, 2002 |
Six months ended June 30, 2002 |
||||||||||||||
Net income applicable to common shares |
Income per share |
Net income applicable to common shares |
Income per share |
||||||||||||
As reported |
$ | 67,121 | 0.17 | $ | 50,753 | $ | 0.15 | ||||||||
Change in accounting method SFAS No. 143 |
(635 | ) | | (2,398 | ) | (0.01 | ) | ||||||||
Pro forma |
$ | 66,486 | $ | 0.17 | $ | 48,355 | $ | 0.14 | |||||||
(13) SALES CONTRACTS, COMMODITY AND DERIVATIVE INSTRUMENTS
Newmont has a no hedging philosophy and generally sells its gold production at market prices. Newmont has, on a limited basis, entered into derivative contracts to protect the selling price for certain anticipated gold production and to manage risks associated with sales contracts, commodities, interest rates and foreign currency. In addition, at the time of Normandys acquisition, three of its affiliates had a substantial derivative instrument position. These three affiliates are now known as Newmont Gold Treasury Pty Ltd., Newmont NFM and NYOL. Newmont is not required to place collateral with respect to its commodity instruments and there are no margin calls associated with such contracts. A number of NYOLs hedging positions pertaining to one counterparty are governed by agreements that confer on the relevant counterparties a right to terminate the position prior to its agreed scheduled maturity date. Such a termination would result in an immediate cash settlement of that contract based on the contracts market value on the date of termination. Exercise of termination rights may result in a cash settlement obligation to NYOL hedge counterparties in excess of funds available to NYOL. NYOL obligations, however, are non-recourse to Newmont and its other subsidiaries.
22
NEWMONT MINING CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)
Gold Commodity Contracts
The tables below are expressed in thousands of ounces of gold, and prices for contracts denominated in A$ have been translated to US$ at the exchange rate at June 30, 2003 of US$0.67 per A$1.
On May 28, 2003, YBCL offered to acquire all of the gold hedge obligations owed by NYOL from the counterparties (see Note 10, Extinguishment of NYOL Obligations). The offer included two alternatives: the counterparties could elect to receive $0.50 for each dollar of net mark-to-market liability under their individual hedge contracts, as calculated by YBCL as of May 22, 2003; or, in lieu of cash, the counterparties could elect to assign all such contracts with NYOL to YBCL and enter into new hedging contracts with Newmont, such that Newmont would assume obligations equivalent to an undivided 40% of NYOLs existing hedge obligations with such counterparty.
At the close of the offer YBCL had acceptances from six of the seven gold hedge book counterparties. All of the six counterparties elected to receive $0.50 for each dollar of net mark-to-market liability, as calculated by YBCL as of May 22, 2003. This resulted in a total cash payment from YBCL to the counterparties of approximately $77 million. A gain of $76.6 million was recorded in Gain on extinguishment of NYOL derivatives liability, net due to the extinguishment of the hedge book liability for the six NYOL hedge counterparties who accepted the offer.
NYOL was placed into VA on July 3, 2003 and deconsolidated from the Newmont group as of that date (see Note 21, Subsequent Events). Accordingly, the Company has reclassified to earnings as of June 30, 2003, $542,000 of Accumulated other comprehensive income (OCI) related to hedged forecasted sales designated against NYOLs production scheduled to occur during the period ending September 30, 2003 (the period through which NYOL is expected to remain in VA). No similar reclassification has been made with respect to the amounts in OCI associated with sales expected to occur after September 30, 2003, as the Company believes that it is reasonably possible that those forecasted transactions will occur since the Company expects to regain control of NYOL or its assets by October 1, 2003. Accordingly, the balance deferred in OCI as of June 30, 2003 (a gain of approximately $43.8 million, net of taxes) relating to hedge contracts designated against forecasted sales of NYOLs production beyond September 30, 2003, will continue to be deferred in OCI. The Company will continue to assess the probability of its regaining control of NYOL and making any necessary adjustments to the balance of OCI in future periods, if required.
For the three months ended June 30, 2003 and 2002, gains of $8.1 million and $1.4 million, respectively, were included in income in Gain (loss) on gold commodity derivative instruments, net for the ineffective portion of derivative instruments designated as cash flow hedges, and a gain of $8.5 million and a loss of $10.8 million, respectively, for the change in fair value of gold commodity contracts that do not qualify as hedges. For the half year ended June 30, 2003 and 2002, gains of $31.0 million and $5.9 million, respectively, were included in income in Gain (loss) on gold commodity derivative instruments, net for the ineffective portion of derivative instruments designated as cash flow hedges, and a gain of $40.6 million and a loss of $9.0 million, respectively, for the change in fair value of gold commodity contracts that do not qualify as hedges. The amount anticipated to be reclassified from Accumulated other comprehensive income (loss), to income for derivative instruments during the next 12 months is a gain of approximately $18.7 million. The maximum period over which hedged forecasted transactions are expected to occur is five years.
23
NEWMONT MINING CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)
Gold Forward Sales Contracts
Newmont had no gold forward sales contracts outstanding at June 30, 2003 (unaudited), although positions existed at December 31, 2002. The fair values of these contracts at December 31, 2002 were as follows:
Gold Forward Contracts |
||||
(A$ denominated) | US $ (000) | |||
Fixed Forwards |
$ | (138,095 | ) | |
Floating Rate Forwards |
(37,401 | ) | ||
Synthetic Forwards |
(34,222 | ) | ||
Total: |
$ | (209,718 | ) | |
Gold Put Option Contracts
Newmont had the following gold put option contracts at June 30, 2003 (unaudited):
Expected Maturity Date or Transaction Date |
Fair Value |
||||||||||||||||||||||||||||
Put Option Contracts: |
2003 |
2004 |
2005 |
2006 |
2007 |
Thereafter |
Total/ Average |
June 30, 2003 |
December 31, 2002 |
||||||||||||||||||||
US$ (000) | |||||||||||||||||||||||||||||
US$ Denominated Fixed Purchased Puts: |
|||||||||||||||||||||||||||||
Ounces |
105 | 203 | 205 | 100 | 20 | | 633 | $ | (7,591 | ) | $ | (6,773 | ) | ||||||||||||||||
Average price |
$ | 292 | $ | 292 | $ | 292 | $ | 338 | $ | 397 | $ | | $ | 303 | |||||||||||||||
A$ Denominated Fixed Purchased Puts: |
|||||||||||||||||||||||||||||
Ounces |
| | | | | | | $ | | $ | (3,690 | ) | |||||||||||||||||
Average price |
| | | | | | | | | ||||||||||||||||||||
A$ Denominated Floating Forward Purchased Puts: |
|||||||||||||||||||||||||||||
Ounces |
| | | | | | | $ | | $ | (12,140 | ) | |||||||||||||||||
Average price |
| | | | | | | | |||||||||||||||||||||
Total: |
|||||||||||||||||||||||||||||
Ounces |
105 | 203 | 205 | 100 | 20 | | 633 | $ | (7,591 | ) | $ | (22,603 | ) | ||||||||||||||||
Average price |
$ | 292 | $ | 292 | $ | 292 | $ | 338 | $ | 397 | $ | | $ | 303 |
Note: Through December 31, 2002, the floating forward purchased put option contracts were accounted for as cash flow hedges as they were statistically proven to qualify as highly effective cash flow hedges through that date. However, due to changes in market conditions during the first quarter of 2003, these contracts were no longer considered highly effective cash flow hedges. The effect of this change was gains of $5.3 million and $10.7 million that were recorded in Gain (loss) on gold commodity derivative instruments, net in income during the three and six months ended June 30, 2003, respectively.
24
NEWMONT MINING CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)
Convertible Put Options and Other Instruments
Newmont had the following gold convertible put option contracts and other instruments outstanding at June 30, 2003 (unaudited):
Expected Maturity Date or Transaction Date |
Fair Value |
||||||||||||||||||||||||||||
Convertible Put Options and Other Instruments |
2003 |
2004 |
2005 |
2006 |
2007 |
Thereafter |
Total/ Average |
June 30, 2003 |
December 31, 2002 |
||||||||||||||||||||
(A$ denominated) | US$ (000) | ||||||||||||||||||||||||||||
Floating Convertible Put Options: |
|||||||||||||||||||||||||||||
Ounces |
| | | | | | | $ | | $ | (102,952 | ) | |||||||||||||||||
Average price |
| | | | | | | | |||||||||||||||||||||
Knock-out/knock-in Contracts: |
|||||||||||||||||||||||||||||
Ounces |
| | | | | | | $ | | $ | (6,794 | ) | |||||||||||||||||
Average price |
| | | | | | | | |||||||||||||||||||||
Indexed Forward Contracts: |
|||||||||||||||||||||||||||||
Ounces |
| | 33 | 65 | 65 | 32 | 195 | $ | (4,937 | ) | $ | (15,740 | ) | ||||||||||||||||
Average price |
$ | | $ | | $ | 361 | $ | 361 | $ | 361 | $ | 361 | $ | 361 | |||||||||||||||
Total: |
|||||||||||||||||||||||||||||
Ounces |
| | 33 | 65 | 65 | 32 | 195 | $ | (4,937 | ) | $ | (125,486 | ) | ||||||||||||||||
Average price |
$ | | $ | | $ | 361 | $ | 361 | $ | 361 | $ | 361 | $ | 361 |
Sold Convertible Put Options
Newmont had no sold convertible put option contracts outstanding at June 30, 2003, although a position did exist at December 31, 2002. The fair value of the position at December 31, 2002 was positive $14.3 million.
Sold Put Options
Newmont had no sold put option contracts outstanding at June 30, 2003 or December 31, 2002. A sold put position was created during the first quarter of 2003 and was closed out as part of the YBCL transaction during the second quarter (see Note 10, Extinguishment of NYOL Obligations ).
Price-Capped Sales Contracts
Newmont had the following price-capped forward sales contracts outstanding at June 30, 2003 (unaudited):
Expected Maturity Date or Transaction Date |
Fair Value | ||||||||||||||||||||||||
Price-capped Contracts: |
2003 |
2004 |
2005 |
2006 |
2007 |
Thereafter |
Total/ Average |
June 30, 2003 |
December 31, 2002 | ||||||||||||||||
(US$ Denominated) | US$ (000) | ||||||||||||||||||||||||
Ounces |
| | 500 | | | 1,850 | 2,350 | N/A | N/A | ||||||||||||||||
Average price |
$ | | $ | | $ | 350 | $ | | $ | | $ | 384 | $ | 377 |
Note: The fair value of the price-capped sales contracts of $53.9 million was recorded as deferred revenue in September 2001 and will be included in sales revenue as delivery occurs in 2005 through 2011. The forward sales contracts are accounted for as normal sales contracts under SFAS No. 133 Accounting for Derivative Instruments and Hedging Activities.
25
NEWMONT MINING CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)
US$/Gold Swap Contracts
Newmont Australia entered into a US$/gold swap contract whereby principal payments on US$ bonds are swapped into gold-denominated payments of 600,000 ounces in 2008. Newmont Australia also receives US$ fixed interest payments and pays gold lease rates, which are indexed to market rates. This instrument was marked to market at each period end, with the change reflected in income up until the contract was closed out during the YBCL buy back transaction (see Note 10, Extinguishment NYOL Obligations). However, the indexed portion of the transaction was held with the one counterparty who did not take up the offer. As such this portion of the transaction continues to be marked-to-market at each period end, with the change reflected in income. As at June 30, 2003 and December 31, 2002 the instrument had a negative fair value of $6.2 million and $47.8 million, respectively.
Other Sales Contracts, Commodity and Derivative Instruments
Foreign Currency Contracts
Newmont acquired certain currency swap contracts in the Normandy transaction intended to hedge the currency risk on repayment of US$-denominated debt. These contracts were closed out during the quarter ended June 30, 2002 for net proceeds of $50.8 million. The contracts were accounted for on a mark-to-market basis until closed out, resulting in a loss of $10.9 million for the three months ended March 31, 2002.
Newmont also acquired currency swap contracts to receive A$ and pay US$ designated as hedges of A$ denominated debt. The A$-denominated debt was repaid during the quarter ended June 30, 2002 and the contracts are currently undesignated. The contracts are accounted for on a mark-to-market basis. At June 30, 2003 and December 31, 2002 they had a negative fair value of $2.7 million and $21.9 million, respectively.
Interest Rate Swap Contracts
During the last half of 2001, Newmont entered into contracts to hedge the interest rate risk exposure on a portion of its $275 million 8.625% notes and its $200 million 8.375% debentures. Newmont receives fixed-rate interest payments at 8.625% and 8.375% and pays floating-rate interest amounts based on periodic LIBOR settings plus a spread, ranging from 2.60% to 4.25%. The notional principal amount of these transactions (representing the amount of principal tied to floating interest rate exposure) was $200 million at both June 30, 2003 and December 31, 2002. Half of these contracts expire in July 2005 and half expire in May 2011. For the quarters ended June 30, 2003 and June 30, 2002, these transactions resulted in a reduction in interest expense of $1.9 million and $1.4 million, respectively, and $3.6 million ad $2.9 million for the first halves of 2003 and 2002, respectively. These transactions have been designated as fair value hedges and had a fair value of $21.1 million and $13.8 million at June 30, 2003 and December 31, 2002, respectively.
26
NEWMONT MINING CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)
(14) STATEMENT OF COMPREHENSIVE INCOME
Three Months Ended June 30, |
Six Months Ended June 30, |
|||||||||||||||
2003 |
2002 |
2003 |
2002 |
|||||||||||||
(unaudited, in thousands) | ||||||||||||||||
Net income |
$ | 90,847 | $ | 68,990 | $ | 208,102 | $ | 62,192 | ||||||||
Other comprehensive income, net of tax: |
||||||||||||||||
Sale of marketable securities of Lihir, net of tax $17,053 and $10,732, respectively |
| (29,036 | ) | | (18,273 | ) | ||||||||||
Unrealized (loss) gain on marketable equity securities, net of tax of $678, $(1,071), $12,655 and $(1,163), respectively |
(3,307 | ) | 2,499 | (49,068 | ) | 2,714 | ||||||||||
Foreign currency translation adjustments |
26,146 | 17,288 | 32,109 | 18,125 | ||||||||||||
Changes in fair value of cash flow hedge instruments, net of tax of $1,589, $(16,747), $(20,441) and $(23,631), respectively |
(3,709 | ) | 39,077 | 72,546 | 55,140 | |||||||||||
Exchange of Echo Bay shares for Kinross shares |
| | 4,572 | | ||||||||||||
Total other comprehensive income, net of tax |
19,130 | 29,828 | 60,159 | 57,706 | ||||||||||||
Comprehensive income |
$ | 109,977 | $ | 98,818 | $ | 268,261 | $ | 119,898 | ||||||||
(15) DIVIDENDS, INTEREST INCOME, FOREIGN CURRENCY EXCHANGE AND OTHER INCOME
Three Months Ended June 30, |
Six Months Ended June 30, |
|||||||||||||
2003 |
2002 |
2003 |
2002 |
|||||||||||
(unaudited, in thousands) | ||||||||||||||
Interest income |
$ | 2,815 | $ | 5,102 | $ | 5,020 | $ | 7,898 | ||||||
Foreign currency exchange gains (losses) |
27,178 | 6,144 | 51,884 | (1,482 | ) | |||||||||
Gain on sale of exploration properties |
189 | 4,649 | 1,462 | 6,402 | ||||||||||
Other |
2,136 | (1,052 | ) | 5,791 | 2,440 | |||||||||
Total |
$ | 32,318 | $ | 14,843 | $ | 64,157 | $ | 15,258 | ||||||
(16) ACCOUNTING CHANGES
Depreciation, Depletion and Amortization
During the third quarter of 2002, Newmont changed its accounting policy, retroactive to January 1, 2002, with respect to depreciation, depletion and amortization (DD&A) of Property, plant and mine development to exclude future estimated development costs expected to be incurred for certain underground operations. Previously, the Company had included these costs and associated reserves in its DD&A calculations at certain of its underground mining operations. In addition, the Company further revised its policy such that costs incurred to access specific ore blocks or areas that only provide benefit over the life of that area are depreciated, depleted or amortized over the reserves associated with the specific ore area. These changes were made to better match DD&A with the associated ounces of gold sold and to remove the inherent uncertainty in estimating future development costs in arriving at DD&A rates. The cumulative effect of this change in accounting principle through December 31, 2001 increased net income during the six months ended June 30, 2003 by $7.7 million, net of tax of $4.1 million, and earnings per common share, basic and diluted, by $0.02 per share.
27
NEWMONT MINING CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)
Reclamation and Remediation
In August 2001, the Financial Accounting Standards Board (FASB) issued SFAS No. 143, which established uniform methodology for accounting for estimated reclamation and abandonment costs. The statement was adopted as required on January 1, 2003. See Note 12, Reclamation and Remediation, for complete disclosure of the impact of adopting SFAS 143.
(17) SEGMENT INFORMATION
Financial information relating to Newmonts segments is as follows:
Three Months Ended June 30, 2003
(Unaudited, in millions)
North America |
South America |
Australia |
||||||||||||||||||||||||||||||
Nevada |
Other North America |
Total North America |
Yanacocha |
Other South America |
Total South |
Pajingo |
Other Australia |
Total Australia |
||||||||||||||||||||||||
Sales, net |
$ | 185.6 | $ | 35.7 | $ | 221.3 | $ | 231.7 | $ | 19.2 | $ | 250.9 | $ | 32.7 | $ | 160.3 | $ | 193.0 | ||||||||||||||
Gain on investments, net |
$ | | $ | | $ | | $ | | $ | | $ | | $ | | $ | | $ | | ||||||||||||||
Gain on extinguishment of debt and other obligations, net |
$ | | $ | | $ | | $ | | $ | | $ | | $ | | $ | | $ | | ||||||||||||||
Royalties |
$ | | $ | | $ | | $ | | $ | | $ | | $ | | $ | | $ | | ||||||||||||||
Interest income |
$ | | $ | | $ | | $ | 0.1 | $ | | $ | 0.1 | $ | | $ | 2.3 | $ | 2.3 | ||||||||||||||
Interest expense |
$ | 0.1 | $ | | $ | 0.1 | $ | 1.0 | $ | 0.1 | $ | 1.1 | $ | | $ | 5.4 | $ | 5.4 | ||||||||||||||
Exploration and research expense |
$ | 5.5 | $ | | $ | 5.5 | $ | 3.7 | $ | 0.1 | $ | 3.8 | $ | 1.2 | $ | 2.1 | $ | 3.3 | ||||||||||||||
Depreciation, depletion and amortization |
$ | 34.7 | $ | 8.0 | $ | 42.7 | $ | 40.4 | $ | 1.8 | $ | 42.2 | $ | 6.9 | $ | 20.5 | $ | 27.4 | ||||||||||||||
Pre-tax income (loss) before minority interest, equity income (loss) and cumulative effect |
$ | 6.3 | $ | 2.4 | $ | 8.7 | $ | 101.0 | $ | 5.3 | $ | 106.3 | $ | 12.0 | $ | 6.0 | $ | 18.0 | ||||||||||||||
Equity loss and impairment of Australian Magnesium Corporation |
$ | | $ | | $ | | $ | | $ | | $ | | $ | | $ | | $ | | ||||||||||||||
Equity income (loss) of affiliates |
$ | | $ | | $ | | $ | | $ | | $ | | $ | | $ | (0.7 | ) | $ | (0.7 | ) | ||||||||||||
Cumulative effect of a change in accounting principal, net of tax |
$ | | $ | | $ | | $ | | $ | | $ | | $ | | $ | | $ | | ||||||||||||||
Amortization of deferred stripping, net |
$ | (5.4 | ) | $ | (0.2 | ) | $ | (5.6 | ) | $ | | $ | | $ | | $ | | $ | 0.1 | $ | 0.1 | |||||||||||
Write-down of long-lived assets |
$ | | $ | | $ | | $ | 1.2 | $ | | $ | 1.2 | $ | | $ | 0.6 | $ | 0.6 | ||||||||||||||
Capital expenditures |
$ | 29.6 | $ | 1.8 | $ | 31.4 | $ | 60.6 | $ | 0.1 | $ | 60.7 | $ | 4.8 | $ | 14.1 | $ | 18.9 | ||||||||||||||
Deferred stripping costs |
$ | 49.4 | $ | 6.6 | $ | 56.0 | $ | | $ | | $ | | $ | | $ | 9.2 | $ | 9.2 | ||||||||||||||
Total assets |
$ | 1,539.2 | $ | 142.0 | $ | 1,681.2 | $ | 1,208.0 | $ | 27.5 | $ | 1,235.5 | $ | 178.4 | $ | 1,591.1 | $ | 1,769.5 |
28
NEWMONT MINING CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)
Three Months Ended June 30, 2003
(Unaudited, in millions)
Zarafshan- Newmont, Uzbekistan |
Other International Operations |
Total Gold |
Base Metals |
Exploration |
Merchant Banking |
Corporate and Other |
Consolidated |
|||||||||||||||||||||||
Sales, net |
$ | 21.4 | $ | 37.4 | $ | 724.0 | $ | 12.8 | $ | | $ | | $ | | $ | 736.8 | ||||||||||||||
Gain on investments, net |
$ | | $ | | $ | | $ | | $ | | $ | | $ | | $ | | ||||||||||||||
Gain on extinguishment of debt and other obligations, net |
$ | | $ | | $ | | $ | | $ | | $ | 171.0 | $ | | $ | 171.0 | ||||||||||||||
Royalties |
$ | | $ | | $ | | $ | | $ | | $ | 10.4 | $ | | $ | 10.4 | ||||||||||||||
Interest income |
$ | | $ | | $ | 2.4 | $ | | $ | | $ | | $ | 0.4 | $ | 2.8 | ||||||||||||||
Interest expense |
$ | 0.2 | $ | | $ | 6.8 | $ | | $ | | $ | | $ | 15.9 | $ | 22.7 | ||||||||||||||
Exploration and research expense |
$ | | $ | 2.1 | $ | 14.7 | $ | 1.0 | $ | 8.3 | $ | | $ | 6.2 | $ | 30.2 | ||||||||||||||
Depreciation, depletion and amortization |
$ | 2.9 | $ | 8.1 | $ | 123.3 | $ | 6.7 | $ | 0.9 | $ | 5.6 | $ | 2.8 | $ | 139.3 | ||||||||||||||
Pre-tax income (loss) before minority interest, equity income (loss) and cumulative effect |
$ | 9.0 | $ | 4.8 | $ | 146.8 | $ | (5.1 | ) | $ | (9.7 | ) | $ | 175.1 | $ | (1.4 | ) | $ | 305.7 | |||||||||||
Equity loss and impairment of Australian Magnesium Corporation |
$ | $ | $ | $ | $ | $ | $ | (107.8 | ) | $ | (107.8 | ) | ||||||||||||||||||
Equity income (loss) of affiliates |
$ | | $ | | $ | (0.7 | ) | $ | | $ | | $ | | $ | 18.4 | $ | 17.7 | |||||||||||||
Cumulative effect of a change in accounting principal, net of tax |
$ | | $ | | $ | | $ | | $ | | $ | | $ | | $ | | ||||||||||||||
Amortization of deferred stripping, net |
$ | | $ | (2.2 | ) | $ | (7.7 | ) | $ | | $ | | $ | | $ | | $ | (7.7 | ) | |||||||||||
Write-down of long-lived assets |
$ | | $ | | $ | 1.8 | $ | | $ | | $ | | $ | | $ | 1.8 | ||||||||||||||
Capital expenditures |
$ | 0.2 | $ | 6.1 | $ | 117.3 | $ | 3.6 | $ | 8.9 | $ | | $ | 4.2 | $ | 134.0 | ||||||||||||||
Deferred stripping costs |
$ | | $ | 2.8 | $ | 68.0 | $ | | $ | | $ | | $ | | $ | 68.0 | ||||||||||||||
Total assets |
$ | 101.7 | $ | 189.9 | $ | 4,983.1 | $ | 244.2 | $ | 1,217.4 | $ | 2,279.6 | $ | 1,427.3 | $ | 10,151.6 |
Newmont has made corrections for certain misclassifications resulting from clerical errors that existed in the disclosure of Pre-tax income (loss) before minority interest, equity income (loss) and cumulative effect by segment for the three months ended June 30, 2003; the corrections resulted in an increase of $2.3 million in the Other Australia segment and a decrease of $2.3 million in the Corporate and Other category.
29
NEWMONT MINING CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)
Three Months Ended June 30, 2002
(Unaudited, in millions)
North America |
South America |
Australia | |||||||||||||||||||||||||||
Nevada |
Other North America |
Total North America |
Yanacocha |
Other South America |
Total South |
Pajingo |
Other Australia |
Total Australia | |||||||||||||||||||||
Sales, net |
$ | 186.6 | $ | 40.9 | $ | 227.5 | $ | 149.0 | $ | 23.5 | $ | 172.5 | $ | 23.1 | $ | 129.7 | $ | 152.8 | |||||||||||
Gain on investments, net |
$ | | $ | | $ | | $ | | $ | | $ | | $ | | $ | | $ | | |||||||||||
Royalties |
$ | | $ | | $ | | $ | | $ | | $ | | $ | | $ | | $ | | |||||||||||
Interest income |
$ | | $ | | $ | | $ | 0.1 | $ | | $ | 0.1 | $ | 0.2 | $ | 4.0 | $ | 4.2 | |||||||||||
Interest expense |
$ | | $ | | $ | | $ | 2.5 | $ | 0.1 | $ | 2.6 | $ | | $ | 10.0 | $ | 10.0 | |||||||||||
Exploration and research expense |
$ | 3.9 | $ | | $ | 3.9 | $ | 2.5 | $ | 0.2 | $ | 2.7 | $ | 0.4 | $ | 2.5 | $ | 2.9 | |||||||||||
Depreciation, depletion and amortization |
$ | 25.2 | $ | 9.1 | $ | 34.3 | $ | 26.2 | $ | 3.8 | $ | 30.0 | $ | 6.4 | $ | 23.3 | $ | 29.7 | |||||||||||
Pre-tax income (loss) before minority interest, equity income (loss) and cumulative effect |
$ | (0.1 | ) | $ | 7.7 | $ | 7.6 | $ | 47.7 | $ | 8.2 | $ | 55.9 | $ | 10.1 | $ | 7.5 | $ | 17.6 | ||||||||||
Equity income (loss) of affiliates |
$ | | $ | | $ | | $ | | $ | | $ | | $ | | $ | 3.1 | $ | 3.1 | |||||||||||
Amortization of deferred stripping, net |
$ | 3.2 | $ | (0.3 | ) | $ | 2.9 | $ | | $ | | $ | | $ | | $ | | $ | | ||||||||||
Write-down of long-lived assets |
$ | 7.4 | $ | | $ | 7.4 | $ | | $ | | $ | | $ | | $ | 0.1 | $ | 0.1 | |||||||||||
Capital expenditures |
$ | 12.0 | $ | 3.7 | $ | 15.7 | $ | 43.3 | $ | 0.4 | $ | 43.7 | $ | 3.6 | $ | 16.3 | $ | 19.9 | |||||||||||
Deferred stripping costs |
$ | 76.6 | $ | 6.1 | $ | 82.7 | $ | | $ | | $ | | $ | | $ | | $ | | |||||||||||
Total assets |
$ | 1,895.7 | $ | 175.8 | $ | 2,071.5 | $ | 1,089.6 | $ | 41.4 | $ | 1,131.0 | $ | 209.8 | $ | 2,121.9 | $ | 2,331.7 |
Zarafshan- Newmont, Uzbekistan |
Other International Operations |
Total Gold |
Base Metals |
Exploration |
Merchant Banking |
Corporate and Other |
Consolidated | |||||||||||||||||||
Sales, net |
$ | 22.2 | $ | 34.6 | $ | 609.6 | $ | 22.9 | $ | | $ | | $ | | $ | 632.5 | ||||||||||
Gain on investments, net |
$ | | $ | | $ | | $ | | $ | | $ | 47.3 | $ | | $ | 47.3 | ||||||||||
Royalties |
$ | | $ | | $ | | $ | | $ | | $ | 11.2 | $ | | $ | 11.2 | ||||||||||
Interest income |
$ | | $ | | $ | 4.3 | $ | | $ | | $ | 0.3 | $ | 0.5 | $ | 5.1 | ||||||||||
Interest expense |
$ | 0.2 | $ | | $ | 12.8 | $ | | $ | | $ | | $ | 22.3 | $ | 35.1 | ||||||||||
Exploration and research expense |
$ | | $ | 0.6 | $ | 10.1 | $ | 1.1 | $ | 4.0 | $ | | $ | 3.6 | $ | 18.8 | ||||||||||
Depreciation, depletion and amortization |
$ | 3.1 | $ | 10.6 | $ | 107.7 | $ | 6.7 | $ | 2.0 | $ | 6.0 | $ | 1.2 | $ | 123.6 | ||||||||||
Pre-tax income (loss) before minority interest, equity income (loss) and cumulative effect |
$ | 9.1 | $ | 6.6 | $ | 96.8 | $ | 7.8 | $ | (5.9 | ) | $ | 52.2 | $ | (50.1 | ) | $ | 100.8 | ||||||||
Equity income (loss) of affiliates |
$ | | $ | | $ | 3.1 | $ | | $ | | $ | 1.2 | $ | 13.0 | $ | 17.3 | ||||||||||
Amortization of deferred stripping, net |
$ | | $ | | $ | 2.9 | $ | | $ | | $ | | $ | | $ | 2.9 | ||||||||||
Write-down of long-lived assets |
$ | | $ | | $ | 7.5 | $ | 0.1 | $ | | $ | | $ | | $ | 7.6 | ||||||||||
Capital expenditures |
$ | 0.8 | $ | 5.1 | $ | 85.2 | $ | 2.5 | $ | 0.0 | $ | 0.6 | $ | 0.7 | $ | 89.0 | ||||||||||
Deferred stripping costs |
$ | | $ | | $ | 82.7 | $ | | $ | | $ | | $ | | $ | 82.7 | ||||||||||
Total assets |
$ | 105.1 | $ | 530.1 | $ | 6,169.4 | $ | 488.9 | $ | 226.6 | $ | 2,073.9 | $ | 878.7 | $ | 9,837.5 |
Newmont has made corrections for certain misclassifications resulting from clerical errors that existed in the disclosure of Pre-tax income (loss) before minority interest, equity income (loss) and cumulative effect by segment for the three months ended June 30, 2002; the corrections resulted in a decrease of $47.3 million in the Corporate and Other category and an increase of $47.3 million in the Merchant Banking segment.
30
NEWMONT MINING CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)
Six Months Ended June 30, 2003
(Unaudited, in millions)
North America |
South America |
Australia |
|||||||||||||||||||||||||||||||||
Nevada |
Other North America |
Total North America |
Yanacocha |
Other South America |
Total South America |
Pajingo |
Other Australia |
Total Australia |
|||||||||||||||||||||||||||
Sales, net |
$ | 406.6 | $ | 76.0 | $ | 482.6 | $ | 461.2 | $ | 39.9 | $ | 501.1 | $ | 58.5 | $ | 284.9 | $ | 343.4 | |||||||||||||||||
Gain on investments, net |
$ | | $ | | $ | | $ | | $ | | $ | | $ | | $ | | $ | | |||||||||||||||||
Gain on extinguishment of debt and other obligations, net |
$ | | $ | | $ | | $ | | $ | | $ | | | $ | | $ | | ||||||||||||||||||
Royalties |
$ | | $ | | $ | | $ | | $ | | $ | | $ | | $ | | $ | | |||||||||||||||||
Interest income |
$ | | $ | | $ | | $ | 0.5 | $ | | $ | 0.5 | $ | | $ | 3.6 | $ | 3.6 | |||||||||||||||||
Interest expense |
$ | 0.1 | $ | | $ | 0.1 | $ | 2.4 | $ | 0.1 | $ | 2.5 | $ | | $ | 14.3 | $ | 14.3 | |||||||||||||||||
Exploration and research expense |
$ | 8.8 | $ | | $ | 8.8 | $ | 5.6 | $ | 0.1 | $ | 5.7 | $ | 1.5 | $ | 3.5 | $ | 5.0 | |||||||||||||||||
Depreciation, depletion and amortization |
$ | 66.3 | $ | 18.2 | $ | 84.5 | $ | 75.9 | $ | 3.9 | $ | 79.8 | $ | 12.5 | $ | 40.3 | $ | 52.8 | |||||||||||||||||
Pre-tax income (loss) before minority interest, equity income and cumulative effect of a change in accounting principle |
$ | 43.7 | $ | 5.4 | $ | 49.1 | $ | 205.1 | $ | 11.0 | $ | 216.1 | $ | 23.1 | $ | 2.5 | $ | 25.6 | |||||||||||||||||
Equity loss and impairment of Australian Magnesium Corporation |
$ | | $ | | $ | | $ | | $ | | $ | | $ | | $ | | $ | | |||||||||||||||||
Equity income of affiliates |
$ | | $ | | $ | | $ | | $ | | $ | | $ | | $ | 0.5 | $ | 0.5 | |||||||||||||||||
Cumulative effect of a change in accounting principal, net of tax |
$ | (14.4 | ) | $ | (3.4 | ) | $ | (17.8 | ) | $ | (32.4 | ) | $ | (0.2 | ) | $ | (32.6 | ) | $ | 0.8 | $ | (1.1 | ) | $ | (0.3 | ) | |||||||||
Amortization of deferred stripping, net |
$ | (12.0 | ) | $ | (0.3 | ) | $ | (12.3 | ) | $ | | $ | | $ | | $ | | $ | (0.9 | ) | $ | (0.9 | ) | ||||||||||||
Write-down of long-lived assets |
$ | | $ | | $ | | $ | 1.2 | $ | | $ | 1.2 | $ | | $ | 0.6 | $ | 0.6 | |||||||||||||||||
Capital expenditures |
$ | 50.0 | $ | 2.2 | $ | 52.2 | $ | 96.0 | $ | 0.6 | $ | 96.6 | $ | 6.4 | $ | 24.2 | $ | 30.6 | |||||||||||||||||
Deferred stripping costs |
$ | 49.4 | $ | 6.6 | $ | 56.0 | $ | | $ | | $ | | $ | | $ | 9.2 | $ | 9.2 | |||||||||||||||||
Total assets |
$ | 1,539.2 | $ | 142.0 | $ | 1,681.2 | $ | 1,208.0 | $ | 27.5 | $ | 1,235.5 | $ | 178.4 | $ | 1,591.1 | $ | 1,769.5 |
Zarafshan- Newmont, Uzbekistan |
Other International Operations |
Total Gold |
Base Metals |
Exploration |
Merchant Banking |
Corporate and Other |
Consolidated |
||||||||||||||||||||||||
Sales, net |
$ | 42.6 | $ | 68.9 | $ | 1,438.6 | $ | 32.2 | $ | | $ | | $ | | $ | 1,470.8 | |||||||||||||||
Gain on investments, net |
$ | | $ | | $ | | $ | | $ | | $ | 84.3 | $ | | $ | 84.3 | |||||||||||||||
Gain on extinguishment of debt and other obligations, net |
$ | | $ | | $ | | $ | | $ | | $ | 151.5 | $ | | $ | 151.5 | |||||||||||||||
Royalties |
$ | | $ | | $ | | $ | | $ | | $ | 24.9 | $ | | $ | 24.9 | |||||||||||||||
Interest income |
$ | | $ | | $ | 4.1 | $ | | $ | | $ | 0.1 | $ | 0.8 | $ | 5.0 | |||||||||||||||
Interest expense |
$ | 0.4 | $ | | $ | 17.3 | $ | | $ | | $ | | $ | 35.3 | $ | 52.6 | |||||||||||||||
Exploration and research expense |
$ | | $ | 3.9 | $ | 23.4 | $ | 1.7 | $ | 15.7 | $ | | $ | 10.9 | $ | 51.7 | |||||||||||||||
Depreciation, depletion and amortization |
$ | 5.5 | $ | 15.3 | $ | 237.9 | $ | 13.8 | $ | 1.7 | $ | 10.3 | $ | 6.2 | $ | 269.9 | |||||||||||||||
Pre-tax income (loss) before minority interest, equity income and cumulative effect of a change in accounting principle |
$ | 18.8 | $ | 7.0 | $ | 316.6 | $ | (8.9 | ) | $ | (17.8 | ) | $ | 248.6 | $ | 22.5 | $ | 561.0 | |||||||||||||
Equity loss and impairment of Australian Magnesium Corporation |
$ | | $ | | $ | | $ | | $ | | $ | | $ | (119.5 | ) | $ | (119.5 | ) | |||||||||||||
Equity income of affiliates |
$ | | $ | | $ | 0.5 | $ | | $ | | $ | | $ | 25.8 | $ | 26.3 | |||||||||||||||
Cumulative effect of a change in accounting principal, net of tax |
$ | (1.3 | ) | $ | (3.2 | ) | $ | (55.2 | ) | $ | (0.2 | ) | $ | | $ | | $ | 20.9 | $ | (34.5 | ) | ||||||||||
Amortization of deferred stripping, net |
$ | | $ | (0.9 | ) | $ | (14.1 | ) | $ | | $ | | $ | | $ | | $ | (14.1 | ) | ||||||||||||
Write-down of long-lived assets |
$ | | $ | | $ | 1.8 | $ | | $ | | $ | | $ | | $ | 1.8 | |||||||||||||||
Capital expenditures |
$ | 0.7 | $ | 12.4 | $ | 192.5 | $ | 5.8 | $ | 9.0 | $ | | $ | 8.0 | $ | 215.3 | |||||||||||||||
Deferred stripping costs |
$ | | $ | 2.8 | $ | 68.0 | $ | | $ | | $ | | $ | | $ | 68.0 | |||||||||||||||
Total assets |
$ | 101.7 | $ | 189.9 | $ | 4,983.1 | $ | 244.2 | $ | 1,217.4 | $ | 2,279.6 | $ | 1,427.3 | $ | 10,151.6 |
Newmont has made corrections for certain misclassifications resulting from clerical errors that existed in the disclosure of Pre-tax income (loss) before minority interest, equity income (loss) and cumulative effect by segment for the six months ended June 30, 2003; the corrections resulted in increases of $7.6 million and $9.9 million for the Nevada and Other Australia segments, respectively, and a decrease of $17.5 million in the Corporate and Other category.
31
NEWMONT MINING CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)
Six Months Ended June 30, 2002
(Unaudited, in millions)
North America |
South America |
Australia |
||||||||||||||||||||||||||||||
Nevada |
Other North America |
Total North America |
Yanacocha |
Other South America |
Total South America |
Pajingo |
Other Australia |
Total Australia |
||||||||||||||||||||||||
Sales, net |
$ | 362.9 | $ | 76.5 | $ | 439.4 | $ | 289.2 | $ | 43.4 | $ | 332.6 | $ | 39.9 | $ | 185.9 | $ | 225.8 | ||||||||||||||
Gain on investments, net |
$ | | $ | | $ | | $ | | $ | | $ | | $ | | $ | | $ | | ||||||||||||||
Royalties |
$ | | $ | | $ | | $ | | $ | | $ | | $ | | $ | | $ | | ||||||||||||||
Interest income |
$ | | $ | | $ | | $ | 0.2 | $ | | $ | 0.2 | $ | 0.4 | $ | 5.4 | $ | 5.8 | ||||||||||||||
Interest expense |
$ | 0.1 | $ | | $ | 0.1 | $ | 5.4 | $ | 0.2 | $ | 5.6 | $ | 0.2 | $ | 15.9 | $ | 16.1 | ||||||||||||||
Exploration and research expense |
$ | 6.3 | $ | | $ | 6.3 | $ | 4.3 | $ | 0.6 | $ | 4.9 | $ | 0.6 | $ | 3.1 | $ | 3.7 | ||||||||||||||
Depreciation, depletion and amortization |
$ | 52.0 | $ | 17.7 | $ | 69.7 | $ | 61.2 | $ | 6.9 | $ | 68.1 | $ | 9.9 | $ | 35.3 | $ | 45.2 | ||||||||||||||
Pre-tax income (loss) before minority interest, equity income and cumulative effect of a change in accounting principle |
$ | (9.0 | ) | $ | 10.1 | $ | 1.1 | $ | 75.4 | $ | 13.1 | $ | 88.5 | $ | 17.9 | $ | (3.8 | ) | $ | 14.1 | ||||||||||||
Equity income (loss) of affiliates |
$ | | $ | | $ | | $ | | $ | | $ | | $ | | $ | 3.1 | $ | 3.1 | ||||||||||||||
Cumulative effect of a change in accounting principal, net of tax |
$ | 0.9 | $ | 7.2 | $ | 8.1 | $ | | $ | | $ | | $ | (0.4 | ) | $ | | $ | (0.4 | ) | ||||||||||||
Amortization of deferred stripping, net |
$ | 9.5 | $ | (0.6 | ) | $ | 8.9 | $ | | $ | | $ |