Form 10-Q/A for Period Ended March 31, 2004

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D. C. 20549

 


 

Form 10-Q/A

(Amendment No. 1)

 

(Mark One)

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

 

For the Quarterly Period Ended March 31, 2004

 

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

 

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

 


 

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

 

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

 

There were 402,298,433 shares of common stock outstanding on April 26, 2004 (and 40,758,491 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 March 31, 2004 filed on April 30, 2004 (the “Original Filing”). Newmont Mining Corporation has filed this Amendment to correct an error in the Statements of Consolidated Cash Flows as described in Note 25, Restatement of Statements of Consolidated Cash Flows, as well as to make corresponding textual changes in Item 2, Management’s Discussion and Analysis of Results of Operations and Financial Condition and to add related information in Item 4, Controls and Procedures. Other information contained herein has not been updated. Therefore, you should read this Amendment together with other documents that we have filed with the Securities and Exchange Commission subsequent to the filing of the Original Filing. Information in such reports and documents updates and supersedes certain information contained in this Amendment. The filing of this Amendment shall not be deemed an admission that the Original Filing, when made, included any known, untrue statement of material fact or knowingly omitted to state a material fact necessary to make a statement not misleading.

 

2


PART I—FINANCIAL INFORMATION

 

ITEM 1. FINANCIAL STATEMENTS

 

NEWMONT MINING CORPORATION

 

STATEMENTS OF CONSOLIDATED INCOME

 

     Three Months Ended
March 31,


 
     2004

    2003

 
    

(unaudited, in thousands,

except per share)

 

Revenues

                

Sales—gold, net

   $ 934,651     $ 714,556  

Sales—base metals, net

     187,626       19,433  

Royalties

     13,162       14,480  
    


 


       1,135,439       748,469  
    


 


Costs and expenses

                

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

                

Gold

     501,549       399,009  

Base metals

     73,025       15,362  

Depreciation, depletion and amortization

     182,024       130,593  

Exploration, research and development

     36,674       21,472  

General and administrative

     27,158       26,410  

Other

     5,927       22,124  
    


 


       826,357       614,970  
    


 


Other income (expense)

                

Gain on investments, net

     —         85,318  

Gain on derivative instruments, net

     549       55,025  

Loss on extinguishment of debt

     —         (19,530 )

Dividends, interest income, foreign currency exchange and other income

     13,875       30,963  

Interest expense, net of capitalized interest of $2,352 and $1,290, respectively

     (25,502 )     (29,946 )
    


 


       (11,078 )     121,830  
    


 


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

     298,004       255,329  

Income tax expense

     (86,632 )     (62,563 )

Minority interest in income of subsidiaries

     (79,057 )     (37,789 )

Equity loss and impairment of Australian Magnesium Corporation

     —         (11,727 )

Equity income of affiliates

     1,504       8,538  
    


 


Income before cumulative effect of a change in accounting principle

     133,819       151,788  

Cumulative effect of a change in accounting principle, net of tax of $25,382 and $11,188, respectively

     (47,138 )     (34,533 )
    


 


Net income applicable to common shares

   $ 86,681     $ 117,255  
    


 


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

   $ 0.30     $ 0.38  

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

     (0.10 )     (0.09 )
    


 


Net income per common share, basic and diluted

   $ 0.20     $ 0.29  
    


 


Basic weighted average common shares outstanding

     442,535       401,890  
    


 


Diluted weighted average common shares outstanding

     446,638       404,219  
    


 


Cash dividends declared per common share

   $ 0.05     $ 0.04  
    


 


 

The accompanying notes are an integral part of these financial statements.

 

3


NEWMONT MINING CORPORATION

 

CONSOLIDATED BALANCE SHEETS

 

     March 31,
2004


  

December 31,

2003


     (unaudited, in thousands)
ASSETS              

Cash and cash equivalents

   $ 1,548,606    $ 1,314,022

Marketable securities and other short-term investments

     269,241      274,593

Trade receivables

     139,328      20,055

Accounts receivable

     75,654      70,631

Inventories

     282,678      225,719

Stockpiles and ore on leach pads

     248,242      248,625

Deferred stripping costs

     78,745      60,086

Deferred income tax assets

     182,086      73,665

Other current assets

     130,560      100,280
    

  

Current assets

     2,955,140      2,387,676

Property, plant and mine development, net

     3,917,785      2,347,984

Mineral interests and other intangible assets, net

     1,357,843      1,379,101

Investments

     24,422      733,977

Deferred stripping costs

     36,488      30,293

Long-term stockpiles and ore on leach pads

     490,938      305,810

Deferred income tax assets

     766,841      752,408

Other long-term assets

     177,854      95,367

Goodwill

     3,084,686      3,042,557
    

  

Total assets

   $ 12,811,997    $ 11,075,173
    

  

LIABILITIES              

Current portion of long-term debt

   $ 380,874    $ 190,866

Accounts payable

     216,147      163,164

Employee related benefits

     114,649      136,301

Other current liabilities

     477,932      368,689
    

  

Current liabilities

     1,189,602      859,020

Long-term debt

     1,526,879      886,633

Reclamation and remediation liabilities

     405,725      362,283

Deferred revenue from sale of future production

     53,841      53,841

Deferred income tax liabilities

     734,951      633,135

Employee related benefits

     252,114      253,726

Advanced stripping costs

     76,969      —  

Other long-term liabilities

     357,521      295,082
    

  

Total liabilities

     4,597,602      3,343,720
    

  

Commitments and contingencies (Note 22)

             

Minority interest in subsidiaries

     741,750      346,518
    

  

STOCKHOLDERS’ EQUITY              

Preferred stock—$5.00 par value;

             

Authorized—5.0 million shares

             

Issued and outstanding—none

     —        —  

Common stock—$1.60 par value;

             

Authorized—750 million shares at each period end, respectively

             

Issued and outstanding—

             

Common: 402.2 million and 398.7 million shares issued, less 135 thousand and 105 thousand treasury shares, respectively

     643,476      638,046

Exchangeable: 55.9 million shares issued, less 15 million and 12.7 million redeemed shares, respectively

             

Additional paid-in capital

     6,450,650      6,423,278

Accumulated other comprehensive income

     13,201      22,827

Retained earnings

     365,318      300,784
    

  

Total stockholders’ equity

     7,472,645      7,384,935
    

  

Total liabilities and stockholders’ equity

   $ 12,811,997    $ 11,075,173
    

  

 

The accompanying notes are an integral part of these financial statements.

 

4


NEWMONT MINING CORPORATION

 

STATEMENTS OF CONSOLIDATED CASH FLOWS

As Restated. See Note 25

 

     Three Months Ended
March 31,


 
     2004

    2003

 
     (unaudited, in thousands)  

Operating activities:

                

Net income

   $ 86,681     $ 117,255  

Adjustments to reconcile net income to net cash provided by operating activities:

                

Depreciation, depletion and amortization

     182,024       130,593  

Accretion of accumulated reclamation obligations

     6,829       5,744  

Amortization of deferred stripping costs, net

     (15,170 )     (6,362 )

Deferred income taxes

     22,569       (35,400 )

Foreign currency exchange loss (gain)

     463       (24,706 )

Minority interest, net of dividends of $29,190 and zero, respectively

     49,867       37,789  

Equity loss (income) and impairment of affiliates, net of dividends

     (375 )     8,514  

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

     5,123       7,688  

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

     47,138       34,533  

Gain on investments, net

     —         (85,318 )

Gain on derivative instruments, net

     (549 )     (55,025 )

Loss on extinguishment of debt

     —         19,530  

Gain on sale of assets and other

     (10,610 )     (5,623 )

(Increase) decrease in operating assets:

                

Accounts receivable

     (58,624 )     5,855  

Inventories, stockpiles and ore on leach pads

     23,389       (23,480 )

Other assets

     (15,926 )     (1,991 )

Increase (decrease) in operating liabilities:

                

Accounts payable and other accrued liabilities

     174       60,770  

Derivative instruments

     1,244       (17,328 )

Early settlement of derivative instruments classified as cash flow hedges

     —         (32,779 )

Other liabilities

     (181 )     (1,448 )
    


 


Net cash provided by operating activities

     324,066       138,811  
    


 


Investing activities:

                

Additions to property, plant and mine development

     (166,242 )     (82,721 )

Investments in affiliates

     —         (56,224 )

Cash recorded upon consolidation of Batu Hijau

     82,203       —    

Proceeds from the sale of TVX Newmont Americas

     —         170,625  

Early settlement of ineffective derivative instruments

     (290 )     (4,097 )

Proceeds from asset sales and other

     11,114       2,381  
    


 


Net cash (used in) provided by investing activities

     (73,215 )     29,964  
    


 


Financing activities:

                

Repayment of long-term debt

     (22,269 )     (182,787 )

Dividends paid on common

     (22,147 )     (16,089 )

Proceeds from stock issuance

     19,029       934  

Other

     8,504       —    
    


 


Net cash used in financing activities

     (16,883 )     (197,942 )
    


 


Effect of exchange rate changes on cash

     616       7,800  
    


 


Net change in cash and cash equivalents

     234,584       (21,367 )

Cash and cash equivalents at beginning of period

     1,314,022       401,683  
    


 


Cash and cash equivalents at end of period

   $ 1,548,606     $ 380,316  
    


 


Supplemental information:

                

Interest paid, net of amounts capitalized

   $ 20,309     $ 29,557  

Income taxes paid

   $ 48,147     $ 21,560  

 

The accompanying notes are an integral part of these 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 adopting Financial Accounting Standards Board (“FASB”) Interpretation No. 46R (“FIN 46R”), “Consolidation of Variable Interest Entities” (Note 2). 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, 2003.

 

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

 

References to “A$” refer to Australian currency, “CN$” to Canadian currency, “CHF” to Switzerland currency, “IDR” to Indonesian currency and “U.S.$” or “$” to United States currency.

 

Certain amounts for the three months ended March 31, 2003 and at December 31, 2003 have been reclassified to conform to 2004 presentation.

 

(2) CHANGE IN ACCOUNTING POLICY—CONSOLIDATION OF BATU HIJAU

 

In December 2003, the FASB issued FIN 46R, which provides guidance on the identification and reporting for entities over which control is achieved through means other than voting rights. FIN 46R defines such entities as variable interest entities (“VIEs”). Application of this revised interpretation was required in financial statements for companies that have interests in VIEs or potential VIEs commonly referred to as special-purpose entities for periods ending after December 15, 2003. Application for all other types of entities is required in financial statements for periods ending after March 15, 2004.

 

Newmont completed its evaluation of the impact of FIN 46R for VIEs in which the Company has an interest, which were created before December 31, 2003 and that are not considered to be special-purpose entities. Newmont identified the Nusa Tenggara Partnership (“NTP”) and P.T. Newmont Nusa Tenggara (“PTNNT”)

 

6


NEWMONT MINING CORPORATION

 

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—Continued

(Unaudited)

 

(collectively, “Batu Hijau”) as VIEs because of certain capital structures and contractual relationships (primarily the sharing of the expected residual returns with a party that did not have an equity investment at risk that is considered significant to the total expected residual returns, as well as indications of insufficient equity, as defined by FIN 46R). Newmont also determined that it is the primary beneficiary of Batu Hijau. Therefore, as of January 1, 2004, the Company has fully consolidated Batu Hijau in its Consolidated Financial Statements. Previously, the Company accounted for its investment in Batu Hijau using the equity method of accounting, as disclosed in Note 10 in Newmont’s Annual Report on Form 10-K for the year ended December 31, 2003, filed March 15, 2004.

 

7


NEWMONT MINING CORPORATION

 

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—Continued

(Unaudited)

 

The following is summarized financial information reflecting the impact of consolidating Batu Hijau on the Company’s Consolidated Financial Statements as of and for the three months ended March 31, 2004:

 

     Three Months Ended March 31, 2004

 
     Amounts
Before
Consolidation
of Batu Hijau


    Impact of
Consolidating
Batu Hijau


   

Consolidated

Amounts


 
     (unaudited, in thousands)  

Revenues

                        

Sales—gold, net

   $ 899,449     $ 35,202     $ 934,651  

Sales—base metals, net

     15,208       172,418       187,626  

Royalties

     13,162       —         13,162  
    


 


 


       927,819       207,620       1,135,439  
    


 


 


Costs and expenses

                        

Costs applicable to sales—gold

     488,094       13,455       501,549  

Costs applicable to sales—base metals

     8,854       64,171       73,025  

Depreciation, depletion and amortization

     156,491       25,533       182,024  

Other costs and expenses

     68,805       954       69,759  
    


 


 


       722,244       104,113       826,357  
    


 


 


Other income (expense)

                        

Interest expense

     (14,474 )     (11,028 )     (25,502 )

Other income

     14,066       358       14,424  
    


 


 


       (408 )     (10,670 )     (11,078 )
    


 


 


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

     205,167       92,837       298,004  

Income tax expense

     (53,115 )     (33,517 )     (86,632 )

Minority interest in income of subsidiaries

     (53,726 )     (25,331 )     (79,057 )

Equity income (loss) and impairment of affiliates

     35,493       (33,989 )     1,504  
    


 


 


Income before cumulative effect of a change in accounting principle

     133,819       —         133,819  

Cumulative effect of a change in accounting principle, net

     —         (47,138 )     (47,138 )
    


 


 


Net income

   $ 133,819     $ (47,138 )   $ 86,681  
    


 


 


 

8


NEWMONT MINING CORPORATION

 

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—Continued

(Unaudited)

 

     As of March 31, 2004

    

Amounts

Before

Consolidation

of Batu Hijau


  

Impact of

Consolidating

Batu Hijau


   

Consolidated

Amounts


     (unaudited, in thousands)

Current assets

   $ 2,537,876    $ 417,264     $ 2,955,140

Property, plant and mine development, net

     2,378,280      1,539,505       3,917,785

Mineral interests and other intangible assets, net

     1,351,284      6,559       1,357,843

Investments

     756,217      (731,795 )     24,422

Long-term stockpiles and ore on leach pads

     263,336      227,602       490,938

Goodwill

     3,084,686      —         3,084,686

Other assets

     897,575      83,608       981,183
    

  


 

Total assets

   $ 11,269,254    $ 1,542,743     $ 12,811,997
    

  


 

Current portion of long-term debt

   $ 185,393    $ 195,481     $ 380,874

Other current liabilities

     668,369      140,359       808,728

Long-term debt

     873,797      653,082       1,526,879

Long-term deferred income tax liabilities

     633,489      101,462       734,951

Advanced stripping costs

     —        76,969       76,969

Other liabilities

     1,017,369      51,832       1,069,201
    

  


 

Total liabilities

     3,378,417      1,219,185       4,597,602
    

  


 

Minority interest in subsidiaries

     371,054      370,696       741,750
    

  


 

Total stockholders’ equity

     7,519,783      (47,138 )     7,472,645
    

  


 

Total liabilities and stockholders’ equity

   $ 11,269,254    $ 1,542,743     $ 12,811,997
    

  


 

 

Upon consolidation of Batu Hijau, effective January 1, 2004, certain adjustments were recorded to the opening balance sheet of PTNNT and NTP to conform to Newmont’s accounting policies. These adjustments were recorded to change from units-of-production depreciation of processing plant and mining facilities to straight-line depreciation of such facilities and to change from allocating costs to stockpile inventories based on mining costs per ton to allocating costs based on recoverable pounds of copper equivalent contained in the various categories of stockpiles. The impact of these adjustments were charges of $15.1 million and $32.0 million, respectively, and have been recorded in Cumulative effect of a change in accounting principle, net of tax in the Consolidated Statements of Income, net of income tax expense and minority interest.

 

9


NEWMONT MINING CORPORATION

 

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—Continued

(Unaudited)

 

The table below presents the impact of the accounting change for the three-month period ended March 31, 2004 under full consolidation and the pro forma effect for the three-month period ended March 31, 2003 under the equity method of accounting as if the change had been in effect for that period (unaudited, in thousands, except per share data):

 

     Three Months Ended
March 31,


 
     2004

    2003
(pro forma)


 
     (unaudited, in thousands)  

Adjustments to net income:

        

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

                

Gold

   $ 1,333     $ —    

Base metals

     6,507       —    

Depreciation, depletion and amortization

     2,732       —    
    


 


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

     (10,572 )     —    

Income tax benefit

     3,564       —    

Minority interest in income of subsidiaries

     3,066       —    

Equity income of affiliates

     —         (2,005 )
    


 


Income before cumulative effect of a change in accounting principle

   $ (3,942 )   $ (2,005 )
    


 


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

   $ (0.01 )   $ 0.00  
    


 


 

The Company has also reported the results of operations for Batu Hijau in its Consolidated Statements of Income using co-product accounting for gold and copper. In addition, upon consolidation the Company included Batu Hijau’s Cash and cash equivalents of $82.2 million in its Consolidated Balance Sheets at January1, 2004 and in its cash flow from investing activities in the Statement of Consolidated Cash Flows during the three months ended March 31, 2004.

 

The Company and an affiliate of Sumitomo Corporation (“Sumitomo”) are partners with ownership interests of 56.25% and 43.75%, respectively, in NTP, which holds 80% of PTNNT, the owner of the Batu Hijau copper/gold mine in Indonesia. The remaining 20% interest in PTNNT is held by an unrelated Indonesian company, P.T. Pukuafu Indah (“PTPI”). PTNNT obtained rights to conduct mining operations under a Contract of Work with the government of Indonesia. The Batu Hijau mine began production in the fourth quarter of 1999, with a development cost of approximately $1.83 billion. Based on proven and probable reserves as of December 31, 2003, mining will be completed in 2017 and processing of stockpiles will be completed in 2030.

 

To date, PTNNT has recorded cumulative losses. Therefore, during the three months ended March 31, 2004, the Company has recognized the portion of net income attributable to minority interests of 43.75% (representing 43.75% attributable to Sumitomo and 0% attributable to PTPI). NTP loaned PTPI the funds required to purchase its original 20% interest in PTNNT, and under the PTPI loan agreement, PTPI has pledged 70% of its 20% share of future PTNNT dividends to repay its loan to NTP, including interest. As a result of higher metal prices, improved operating and financial results and increased life of mine expectations regarding production, costs and economics, PTNNT is expected to recover all cumulative losses to-date, report positive retained earnings and begin paying dividends during 2004. Once PTNNT’s cumulative losses are recovered, the Company will

 

10


NEWMONT MINING CORPORATION

 

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—Continued

(Unaudited)

 

recognize net income attributable to Sumitomo and PTPI minority interests of 41.125% and 6.0%, respectively, until the PTPI loan is repaid.

 

The Company’s equity investment in PTNNT was $709.7 million at December 31, 2003. As discussed above, effective January 1, 2004, the Company fully consolidated PTNNT and NTP and recognized a liability for the minority interests in PTNNT and NTP attributable to Sumitomo of $370.7 million as of March 31, 2004.

 

For the three months ended March 31, 2004 and 2003, PTNNT recorded gross revenues, before smelting and refining costs, of $197.1 million and $94.3 million for base metals and $40.3 million and $32.4 million for gold, respectively, which were subject to final pricing adjustments. The average price adjustment for base metals was 22.3% and 6.3% for the three months ended March 31, 2004 and 2003, respectively. The average price adjustment for gold was 2.6% and 1.6% for the three months ended March 31, 2004 and 2003, respectively.

 

(3) INVENTORIES

 

     At March 31,
2004


   At December 31,
2003


     (unaudited, in thousands)

Current:

             

In-process

   $ 60,460    $ 64,038

Precious metals

     33,097      52,875

Materials, supplies and other

     189,121      108,806
    

  

     $ 282,678    $ 225,719
    

  

 

The Company recorded aggregate write downs of $5.1 million and $5.8 million for the three months ended March 31, 2004 and 2003, respectively, to reduce the carrying value of inventories to net realizable value. Write-downs in 2004 related to in-process inventories at Tanami and materials and supplies at Batu Hijau. Write-downs in 2003 primarily related to in-process inventories at Golden Grove and precious metals at Minahasa.

 

Inventory write-downs are classified as components of Costs applicable to sales.

 

(4) STOCKPILES AND ORE ON LEACH PADS

 

     At March 31,
2004


   At December 31,
2003


     (unaudited, in thousands)

Current:

             

Stockpiles

   $ 93,852    $ 83,113

Ore on leach pads

     154,390      165,512
    

  

     $ 248,242    $ 248,625
    

  

Long-term:

             

Stockpiles

   $ 378,260    $ 177,524

Ore on leach pads

     112,678      128,286
    

  

     $ 490,938    $ 305,810
    

  

 

11


NEWMONT MINING CORPORATION

 

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—Continued

(Unaudited)

 

(5) MARKETABLE SECURITIES AND OTHER SHORT-TERM INVESTMENTS AND GAIN ON INVESTMENTS, NET

 

Marketable securities and other short-term investments at March 31, 2004 and December 31, 2003 were as follows:

 

     At March 31,
2004


   At December 31,
2003


     (unaudited, in thousands)

Marketable securities

   $ 136,810    $ 144,711

Newmont Australia infrastructure bonds

     129,263      127,674

Other short-term investments

     3,168      2,208
    

  

Total

   $ 269,241    $ 274,593
    

  

 

Gain on investment for the three months ended March 31, 2004 and 2003 was as follows:

 

    

Three Months Ended

March 31,


     2004

   2003

     (unaudited, in thousands)

Gain on exchange of Echo Bay shares for Kinross marketable securities

   $ —      $ 84,337

Gain on sale of other investments

     —        981
    

  

Gain on investments, net

   $ —      $ 85,318
    

  

 

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 Newmont’s 49.9% interest in the TVX Newmont Americas joint venture. Under the terms of the combination and acquisition, Newmont received a 13.8% interest in the restructured Kinross in exchange for its then 45.67% interest in Echo Bay and cash proceeds of $180 million (approximately $9 million was held in escrow until the second quarter of 2003) for its interest in TVX Newmont Americas. Newmont recognized a pre-tax gain of $84.3 million on the transaction in Gain on investments, net in the Statements of Consolidated Income. During the third quarter of 2003, Newmont sold approximately 28 million Kinross shares representing 66% of its investment in Kinross for total cash proceeds of $224.6 million and recorded a net loss of $7.4 million. Newmont classified the remaining balance of its investment in Kinross as a short-term, available-for-sale marketable security at March 31, 2004 and December 31, 2003. At March 31, 2004 and December 31, 2003, the fair value of the Kinross investment was $106.2 million and $115.3 million, respectively. At March 31, 2004, Accumulated other comprehensive income included a loss of $12.6 million related to the change in market value of the investment in Kinross. As the value of Kinross shares have historically been strongly correlated to the price of gold, Newmont considers the unrealized loss to be temporary. Newmont will continue to evaluate the need to recognize a loss for an other-than-temporary decline in the value of the investment.

 

12


NEWMONT MINING CORPORATION

 

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—Continued

(Unaudited)

 

(6) DEFERRED STRIPPING COSTS

 

Movements in the deferred stripping cost balance were as follows:

 

     Three Months Ended
March 31,


 
     2004

    2003

 
     (unaudited, in thousands)  

Opening balance

   $ 90,379     $ 55,387  

Addition due to consolidation of Batu Hijau and cumulative effect of a change in accounting principle (Note 2)

     (67,285 )     —    

Additions

     46,619       40,566  

Amortization

     (31,449 )     (34,204 )
    


 


Closing balance

   $ 38,264     $ 61,749  
    


 


 

The deferred and advanced stripping balances are presented in the balance sheet as follows:

 

     March 31,
2004


  

December 31,

2003


     (unaudited, in thousands)

Assets:

             

Current

   $ 78,745    $ 60,086

Long-term

     36,488      30,293
    

  

       115,233      90,379
    

  

Liabilities:

             

Current

   $ —      $ —  

Long-term

     76,969      —  
    

  

       76,969      —  
    

  

Deferred stripping, net

   $ 38,264    $ 90,379
    

  

 

At the Company’s gold mining operations, deferred stripping costs are charged to Costs applicable to sales as gold is produced and sold using the units of production method based on estimated recoverable ounces of proven and probable gold reserves, using a stripping ratio calculated as the ratio of total tons to be moved to total proven and probable ore reserves, which results in the recognition of the costs of waste removal activities over the life of the mine as gold is produced. The application of the deferred stripping accounting method generally results in an asset on the Consolidated Balance Sheets (Deferred stripping costs), although a liability (Advanced stripping costs) will arise if the actual stripping ratio incurred to date is less than the expected waste-to-ore ratio over the life of the mine. The Advanced stripping costs at March 31, 2004 pertain to Batu Hijau.

 

13


NEWMONT MINING CORPORATION

 

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—Continued

(Unaudited)

 

(7) PROPERTY, PLANT AND MINE DEVELOPMENT

 

          At March 31, 2004

   At December 31, 2003

          (unaudited, in thousands)
    

Depreciable

Life

(in years)


   Cost

  

Accumulated

Depreciation and

Depletion


    Net Book
Value


   Cost

   Accumulated
Depreciation and
Depletion


    Net Book
Value


Land

   —      $ 78,624    $ —       $ 78,624    $ 72,000    $ —       $ 72,000

Buildings and equipment

   1-25      6,330,312      (3,222,899 )     3,107,413      4,207,531      (2,659,685 )     1,547,846

Mine development

   1-25      1,240,719      (783,243 )     457,476      1,242,383      (721,670 )     520,713

Asset retirement cost

   1-25      146,555      (108,390 )     38,165      121,588      (85,295 )     36,293

Construction-in-progress

   —        236,107      —         236,107      171,132      —         171,132
         

  


 

  

  


 

Total

        $ 8,032,317    $ (4,114,532 )   $ 3,917,785    $ 5,814,634    $ (3,466,650 )   $ 2,347,984
         

  


 

  

  


 

Leased assets included above in property, plant and mine development

   3–11    $ 356,576    $ (172,467 )   $ 184,109    $ 354,378    $ (167,183 )   $ 187,195
         

  


 

  

  


 

 

(8) MINERAL INTERESTS AND OTHER INTANGIBLE ASSETS

 

          At March 31, 2004

   At December 31, 2003

          (unaudited, in thousands)
    

Weighted-

average
Amortization
Period
(in years)


   Gross
Carrying
Value


   Accumulated
Amortization


    Net Book
Value


   Gross
Carrying
Value


   Accumulated
Amortization


    Net Book
Value


Mineral Interest:

                                                

Production Stage

                                                

Mineral interests

   10    $ 802,181    $ (384,502 )   $ 417,679    $ 793,813    $ (363,933 )   $ 429,880

Royalties-net smelter returns

   25      215,145      (34,481 )     180,664      215,210      (31,347 )     183,863

Royalties-net profit interest

   11      18,533      (4,055 )     14,478      18,583      (4,018 )     14,565
    
  

  


 

  

  


 

     15      1,035,859      (423,038 )     612,821      1,027,606      (399,298 )     628,308
    
  

  


 

  

  


 

Development stage

                                                

Mineral interests

   18      213,801      —         213,801      213,801      —         213,801

Royalties-net smelter returns

   10      1,598      —         1,598      1,610      —         1,610

Royalties-net profit interest

   10      7,158      (145 )     7,013      7,214      (128 )     7,086
    
  

  


 

  

  


 

     17      222,557      (145 )     222,412      222,625      (128 )     222,497
    
  

  


 

  

  


 

Exploration stage

                                                

Mineral interests

   11      458,765      (19,830 )     438,935      459,660      (17,283 )     442,377

Royalties-net smelter returns

   10      5,131      (804 )     4,327      5,134      (935 )     4,199
    
  

  


 

  

  


 

     11      463,896      (20,634 )     443,262      464,794      (18,218 )     446,576
    
  

  


 

  

  


 

Total mineral interests

   11      1,722,312      (443,817 )     1,278,495      1,715,025      (417,644 )     1,297,381
    
  

  


 

  

  


 

Oil and Gas:

                                                

Producing property

                                                

Royalties-net refining returns

   30      45,877      (11,693 )     34,184      46,235      (10,366 )     35,869

Working interest

   12      22,279      (2,937 )     19,342      22,454      (2,713 )     19,741
    
  

  


 

  

  


 

     24      68,156      (14,630 )     53,526      68,689      (13,079 )     55,610
    
  

  


 

  

  


 

Non-Producing property

                                                

Royalties-net refining returns

   12      5,743      —         5,743      5,788      —         5,788

Working interest

   12      8,629      —         8,629      8,695      —         8,695
    
  

  


 

  

  


 

     12      14,372      —         14,372      14,483      —         14,483
    
  

  


 

  

  


 

Total oil and gas

   12      82,528      (14,630 )     67,898      83,172      (13,079 )     70,093
    
  

  


 

  

  


 

Other

   20      12,279      (829 )     11,450      12,279      (652 )     11,627
    
  

  


 

  

  


 

Total

   14    $ 1,817,119    $ (459,276 )   $ 1,357,843    $ 1,810,476    $ (431,375 )   $ 1,379,101
    
  

  


 

  

  


 

 

14


NEWMONT MINING CORPORATION

 

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—Continued

(Unaudited)

 

The Company’s intangible assets for mineral interests and oil and gas interests are subject to amortization. The aggregate amortization expense for the three months ended March 31, 2004 and 2003, was $27.9 million and $21.5 million, respectively.

 

(9) INVESTMENTS AND EQUITY INCOME OF AFFILIATES

 

     At
March 31,
2004


   At
December 31,
2003


     (unaudited, in thousands)

Investments in affiliates:

             

Batu Hijau

   $ —      $ 709,749

European Gold Refineries

     12,628      11,907

AGR Matthey Joint Venture

     11,794      12,321
    

  

     $ 24,422    $ 733,977
    

  

 

Equity Loss and Impairment of Australian Magnesium Corporation

 

During the three months ended March 31, 2003, the Company recorded a loss of $11.7 million related to its investment in Australian Magnesium Corporation for an other-than-temporary decline in value of the investment of approximately $11.0 million and its proportionate share of AMC’s first quarter losses of $0.7 million.

 

     Three Months Ended
March 31,


     2004

   2003

     (unaudited, in thousands)

Equity income of affiliates:

             

Batu Hijau

   $ —      $ 7,353

TVX Newmont Americas and other

     —        810

European Gold Refineries

     903      —  

AGR Matthey Joint Venture

     601      375
    

  

     $ 1,504    $ 8,538
    

  

 

Investment in Batu Hijau

 

Effective January 1, 2004, Newmont consolidated Batu Hijau (see Note 2). For the three months ended March 31, 2003 and at December 31, 2003, the Company accounted for its investment in Batu Hijau under the equity method of accounting.

 

Newmont’s 2003 first quarter equity income in PTNNT of $7.4 million was based on 56.25% of PTNNT’s net loss of $8.9 million, adjusted for the elimination of $1.8 million of inter-company interest, $1.7 million of inter-company management fees, the cumulative effect of reclamation and remediation liabilities of $8.0 million and other adjustments of $0.9 million.

 

15


NEWMONT MINING CORPORATION

 

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—Continued

(Unaudited)

 

The summarized results of operations of NTP for the three months ended March 31, 2003 using the co-product accounting method for gold and base metals are as follows (unaudited, in thousands):

 

Copper revenues, net of smelting and refining costs

   $ 80,014  

Gold revenues, net of smelting and refining costs

   $ 27,230  

Gross profit

   $ 10,155  

Net income before cumulative effect of a change in accounting principle

   $ 5,960  

Net income

   $ (8,258 )

 

The summarized assets and liabilities of NTP as of December 31, 2003 are as follows (unaudited, in thousands):

 

Current assets

   $ 324,958

Property, plant and mine development, net

   $ 1,585,124

Mineral interest, net

   $ 176,349

Other assets

   $ 372,070

Debt and related interest to partners and affiliates

   $ 258,182

Other current liabilities

   $ 206,132

Debt—third parties (including current portion)

   $ 739,812

Other liabilities

   $ 176,649

 

Australian Magnesium Corporation (“AMC”)

 

As of January 1, 2003, Newmont held a 22.8% interest in Australian Magnesium Corporation (“AMC”). On January 3, 2003, Newmont contributed A$100 million (approximately $56.2 million) in equity to AMC that increased its ownership to 40.9%. During the first quarter of 2003, Newmont’s interest decreased to 27.8% as a result of AMC stock issuances to shareholders other than Newmont. As a result of this equity dilution of its interest in AMC, Newmont recorded an increase of $7.0 million to Additional paid-in capital. Newmont’s ownership decreased to 26.7% as a result of AMC stock issuances to shareholders other than Newmont during the remainder of 2003. During 2003, Newmont also recorded write downs of its investment in AMC as follows: (i) during the first quarter of 2003, a loss for an other-than-temporary decline in market value of $11.0 million as a result of certain announcements made by AMC and $0.7 million for its share of AMC’s first quarter 2003 losses and (ii) during the second quarter of 2003, a loss of $107.8 million that reduced the carrying value of its investment in AMC to zero. During the fourth quarter of 2003, Newmont sold its entire interest in AMC for a nominal amount to Deutsche Bank AG and to Magtrust Pty Ltd, a company owned and controlled by the directors of AMC. Magtrust purchased approximately a 19.9% interest in AMC, with Deutsche Bank purchasing approximately 6.8% of AMC. As part of the sale agreement with Deutsche Bank, if Deutsche Bank sells its interest in AMC to a third party in the future, it must pay Newmont 90% of the sales proceeds. During the first quarter of 2004, Deutsche Bank sold approximately 50 million shares of AMC, which resulted in A$2.3 million (approximately $1.8 million) in proceeds payable to Newmont, which was recorded in Dividends, interest income, foreign currency exchange and other income.

 

Newmont is the guarantor of a A$71.0 million (approximately $53.5 million) amortizing loan facility of an AMC subsidiary, QMC Finance Pty Ltd (“QMC”), of which A$63.0 million (approximately $47.5 million) was outstanding as of March 31, 2004. The QMC loan facility, which is collateralized by the assets of AMC subsidiaries, which assets are used in the Queensland Magnesium joint venture, expires in November 2006. During the fourth quarter of 2003, Newmont recorded a $30.0 million charge in Loss on guarantee of QMC debt

 

16


NEWMONT MINING CORPORATION

 

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—Continued

(Unaudited)

 

and established a corresponding reserve in Other current liabilities, for the expected loss associated with its guarantee of QMC’s debt. QMC is also a party to hedging contracts that 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 March 31, 2004, the fair value of these contracts was positive A$5.9 million (approximately $4.5 million). QMC is considered to be a special-purpose entity that is a variable interest entity. Further, Newmont’s guarantee of the QMC loan facility qualifies as a variable interest in QMC. However, Newmont has not consolidated QMC, as Newmont is not the primary beneficiary of QMC, as defined by FIN 46R.

 

For more information regarding AMC, refer to Notes 2 and 10 to the Consolidated Financial Statements in Newmont’s Annual Report on Form 10-K for the year ended December 31, 2003, filed March 15, 2004.

 

(10) Goodwill

 

Changes in the carrying amount of goodwill allocated to reporting units during 2003 and for the three months ended March 31, 2004 are summarized in the following table (unaudited, in millions).

 

     Nevada

   Other
North
America


   Total
North
America


   Yanacocha

   Other
South
America


   Total
South
America


Balance at January 1, 2003

   $ 40.9    $ —      $ 40.9    $ —      $ —      $ —  

Purchase price allocation for Newmont NFM Scheme of Arrangement

     —        —        —        —        —        —  

Reversal of valuation allowances for acquired deferred tax assets

     —        —        —        —        —        —  

Change in estimate of pre-acquisition tax contingency and other

     —        —        —        —        —        —  
    

  

  

  

  

  

Balance at December 31, 2003

     40.9      —        40.9      —        —        —  

Change in estimate of pre-acquisition tax contingency

     —        —        —        —        —        —  
    

  

  

  

  

  

Balance at March 31, 2004

   $ 40.9    $ —      $ 40.9    $ —      $ —      $ —  
    

  

  

  

  

  

 

     Pajingo

   Other
Australia


    Total
Australia


    Zarafshan-
Newmont


   Other
International
Operations


   Total
Gold


 

Balance at January 1, 2003

   $ 56.9    $ 140.8     $ 197.7     $ —      $ —      $ 238.6  

Purchase price allocation for Newmont NFM Scheme of Arrangement

     —        45.8       45.8       —        47.5      93.3  

Reversal of valuation allowances for acquired deferred tax assets

     —        (43.8 )     (43.8 )     —        —        (43.8 )

Change in estimate of pre-acquisition tax contingency and other

     —        —         —         —        —        —    
    

  


 


 

  

  


Balance at December 31, 2003

     56.9      142.8       199.7       —        47.5      288.1  

Change in estimate of pre-acquisition tax contingency

     —        —         —         —        —        —    
    

  


 


 

  

  


Balance at March 31, 2004

   $ 56.9    $ 142.8     $ 199.7     $ —      $ 47.5    $ 288.1  
    

  


 


 

  

  


 

17


NEWMONT MINING CORPORATION

 

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—Continued

(Unaudited)

 

     Batu
Hijau


   Other
Base
Metals


   Total
Base
Metals


   Exploration

   Merchant
Banking


    Corporate
and Other


   Consolidated

 

Balance at January 1, 2003

   $ —      $ —      $ 31.5    $ 1,129.5    $ 1,625.0     $ —      $ 3,024.6  

Purchase price allocation for Newmont NFM Scheme of Arrangement

     —        —        —        —        —         —        93.3  

Reversal of valuation allowances for acquired deferred tax assets

     —        —        —        —        —         —        (43.8 )

Change in estimate of pre-acquisition tax contingency and other

     —        —        —        —        (31.5 )     —        (31.5 )
    

  

  

  

  


 

  


Balance at December 31, 2003

     —        —        31.5      1,129.5      1,593.5       —        3,042.6  

Change in estimate of pre-acquisition tax contingency

     —        —        —        —        42.1       —        42.1  
    

  

  

  

  


 

  


Balance at March 31, 2004

   $ —      $ —      $ 31.5    $ 1,129.5    $ 1,635.6     $ —      $ 3,084.7  
    

  

  

  

  


 

  


 

During the three months ended March 31, 2004, the Company revised its estimate for probable loss relating to a pre-acquisition accrual that was originally recorded as part of the purchase price allocation for the acquisitions of Normandy Mining Limited and Franco-Nevada Mining Corporation Limited.

 

(11) OTHER CURRENT LIABILITIES

 

     At
March 31,
2004


   At
December 31,
2003


     (unaudited, in thousands)

Interest

   $ 48,720    $ 32,345

Taxes other than income and mining

     14,967      10,861

Reclamation and remediation

     61,423      57,350

Utilities

     7,381      8,360

Income and mining taxes

     144,923      116,520

Royalties

     20,501      25,701

Guarantee of QMC debt

     30,000      30,000

Deferred income tax liabilities

     21,014      18,182

Derivative instruments

     8,838      6,074

Other

     120,165      63,296
    

  

     $ 477,932    $ 368,689
    

  

 

18


NEWMONT MINING CORPORATION

 

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—Continued

(Unaudited)

 

(12) LONG-TERM DEBT

 

     At
March 31,
2004


    At
December 31,
2003


 
     (unaudited, in thousands)  

Sale-leaseback of refractory ore treatment plant

   $ 286,757     $ 296,979  

8 3/8% debentures, net of discount

     52,789       52,877  

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

     230,716       228,091  

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

     120,784       120,881  

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

     19,675       19,708  

Medium-term notes

     17,000       17,000  

Newmont Australia infrastructure bonds

     131,315       130,228  

Prepaid forward sales obligation

     145,000       145,000  

Interest rate swaps

     (10,869 )     (7,716 )

PTNNT project financing facility

     739,812       —    

PTNNT Sumitomo loan

     108,750       —    

Project financing, capital leases and other

     66,024       74,451  
    


 


       1,907,753       1,077,499  

Current maturities

     (380,874 )     (190,866 )
    


 


     $ 1,526,879     $ 886,633  
    


 


 

Scheduled minimum long-term debt repayments as of March 31, 2004 are $365.7 million for the remainder of 2004, $232.4 million in 2005, $173.3 million in 2006, $161.9 million in 2007, $234.2 million in 2008 and $740.3 million thereafter.

 

In July 1997, PTNNT entered into a $1.0 billion project financing facility, which is non-recourse to Newmont. The scheduled repayments of this debt are in semi-annual installments of $43.4 million through November 2010 and $22.1 million from May 2011 through November 2013. Approximately $739.8 million was outstanding under this facility at March 31, 2004 and December 31, 2003, respectively. The interest rate is based on blended fixed and floating rates, and at current market rates, the weighted average interest rate approximates the London InterBank Offering Rate (“LIBOR”) plus 3.45%.

 

Prior to 2001, PTNNT entered into two separate shareholder subordinated loan agreements (“Sponsor Loans”) with Newmont Indonesia Limited (“NIL”), a wholly-owned subsidiary of Newmont, and Nusa Tenggara Mining Corporation (“NTMC”), with substantially the same terms. Total principal outstanding under these Sponsor Loans was approximately $248.6 million as of March 31, 2004 and December 31, 2003, respectively. Of this amount, 43.75% or approximately $108.8 million is due to NTMC, an unrelated third-party, and is non-recourse to Newmont, with the remainder payable to a subsidiary consolidated by Newmont. Borrowings under the Sponsor Loans are guaranteed by NTP and are payable on demand, subject to the project financing facility subordination terms. Through December 31, 2003, the interest rate was based on the annual Singapore InterBank Offering Rate (“SIBOR”) and the interest rate on any unpaid interest was based on the annual SIBOR rate plus 1%. Effective January 1, 2004, PTNNT entered into Amendments 1 and 2 to the shareholder subordinated loan agreements with NIL and NTMC and under the terms of the Amendments, annual interest rates are based on SIBOR rate plus 3% for principal and SIBOR rate plus 4% for any unpaid accrued interest.

 

As of March 31, 2004 and December 31, 2003, PTNNT was in compliance with the project financing facility debt covenants, which include restrictions and limitations on other indebtedness, and also restricts

 

19


NEWMONT MINING CORPORATION

 

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—Continued

(Unaudited)

 

payments from PTNNT. PTNNT is not able to incur any other indebtedness, other than the project financing facility debt, except for “Permitted Indebtedness”, which includes subordinated debt from NTP or the Sponsor Loans, unsecured working capital debt with maturity not in excess of one year and not exceeding $35.0 million, and other indebtedness with aggregate principal not to exceed $5.0 million at any one time. “Restricted Payments” include dividends or returns of capital and payment of principal and interest on subordinated loans to NTP, its partners or their affiliates. Restricted Payments can be made provided certain conditions, financial covenants and financial ratios are met, which are as follows: project financing facility reserve fully funded for next payment; no event of default; funding for 30 days operating costs in collateral accounts; and no event of political force majeure. There were no Restricted Payments made for the three months ended March 31, 2004. As of March 31, 2004, the balance of the project financing facility reserve account was $61.1 million, which is considered restricted cash and is included in Other long-term assets.

 

NIL and NTMC also provide a contingent support line of credit to PTNNT. As of March 31, 2004 and December 31, 2003, the available additional contingent support from NIL and NTMC was $65.0 million, of which Newmont’s pro-rata share was $36.6 million at March 31, 2004 and December 31, 2003. No funding was required in 2003 or for the three months ended March 31, 2004.

 

PTNNT also has a $35 million working capital loan agreement with Newmont and Sumitomo Corporation Capital Asia Pty Ltd., which is available through July 14, 2005. The loan is available for one-, two-, or three-month periods at the option of PTNNT. The interest rate is based on the three-month SIBOR plus 2% (interest on any principal not paid by the due date would be based on the three-month SIBOR plus 4%). There were no amounts outstanding under this facility at March 31, 2004 or December 31, 2003.

 

(13) RECLAMATION AND REMEDIATION (ASSET RETIREMENT OBLIGATIONS)

 

At March 31, 2004 and December 31, 2003, $410.3 million and $361.0 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 March 31, 2004 and December 31, 2003, $56.9 million and $58.6 million, respectively, 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):

 

     At March 31,
2004


    At March 31,
2003


 

Balance at beginning of period

   $ 419,633     $ 302,229  

Addition due to the consolidation of Batu Hijau (see Note 2)

     47,492       —    

Impact of adoption of SFAS No. 143

     —         120,707  

Additions and changes in estimates

     212       20,533  

Liabilities settled

     (7,018 )     (6,478 )

Accretion expense

     6,829       5,744  
    


 


Balance at end of period

   $ 467,148     $ 442,735  
    


 


 

The current portions of Reclamation and remediation liabilities of $61.4 million and $57.4 million at March 31, 2004 and December 31, 2003, respectively, are included in Other current liabilities.

 

20


NEWMONT MINING CORPORATION

 

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—Continued

(Unaudited)

 

(14) SALES CONTRACTS, COMMODITY AND DERIVATIVE INSTRUMENTS

 

Newmont has an unhedged philosophy with respect to gold, 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 the Normandy Mining Limited (“Normandy”) acquisition, three of Normandy’s affiliates had a substantial derivative instrument position. Newmont is not required to place collateral with respect to its commodity instruments and there are no margin calls associated with such contracts.

 

For the three months ended March 31, 2004 and 2003, gains of $0.6 million and $22.9 million, respectively, were included in income in Gain on derivative instruments, net for the ineffective portion of derivative instruments designated as cash flow hedges, and gains of $0 million and $32.1 million, respectively, for the change in fair value of derivative instruments that do not qualify as hedges. The amount anticipated to be reclassified from Accumulated other comprehensive income to income for derivative instruments during the next 12 months is a gain of approximately $8.2 million. The maximum period over which hedged forecasted transactions are expected to occur is 7.7 years.

 

Gold Put Option Contracts

 

Newmont had the following fixed purchased gold put option contracts at March 31, 2004 (unaudited):

 

     Expected Maturity Date or Transaction Date

   Fair Value

 

Fixed Purchased Put Option
Contracts:


   2004

   2005

   2006

   2007

   2008

   Thereafter

   Total/
Average


   March 31,
2004


    December 31,
2003


 
(U.S.$ Denominated)                                       U.S.$ (000)  

Ounces (000)

     150      205      100      20      —        —        475    $ (11,966 )   $ (11,758 )

Average price

   $ 292    $ 292    $ 338    $ 397    $ —      $ —      $ 306                 

Note: Fixed purchased put option contracts provide the right, but not the obligation, to sell a specified number of ounces at a specified strike price and are accounted for as cash flow hedges.

 

Price-Capped Sales Contracts

 

In September 2001, Newmont entered into transactions that closed out certain call options. The options were replaced with a series of forward sales contracts requiring physical delivery of the same quantity of gold over slightly extended future periods. Under the terms of the contracts, Newmont will realize the lower of the spot price on the delivery date or the capped price ranging from $350 per ounce in 2005 to $392 per ounce in 2011. The fair value of the forward sales contracts of $53.8 million was recorded as Deferred revenue from sale of future production 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 133.

 

Newmont had the following price-capped forward sales contracts outstanding at March 31, 2004 (unaudited):

 

     Expected Maturity Date or Transaction Date

Price-Capped Contracts:


   2004

   2005

   2006

   2007

   2008

   Thereafter

   Total/
Average


(U.S.$ Denominated)                                   

Ounces (000)

     —        500      —        —        1,000      850      2,350

Average price

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

 

21


NEWMONT MINING CORPORATION

 

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—Continued

(Unaudited)

 

Silver Commodity Contracts

 

Newmont had the following silver fixed forward contracts outstanding at March 31, 2004 (unaudited):

 

    Expected Maturity Date or Transaction Date

  Fair Value

 

Silver Forward Contracts:


  2004

  2005

  2006

  2007

  2008

  Thereafter

  Total/
Average


  March 31,
2004


    December 31,
2003


 
(U.S.$ Denominated)                               U.S.$ (000)  

Ounces (000)

    1,200     1,200     50     —       —       —       2,450   $ (4,872 )   $ (1,000 )

Average price

  $ 5.79   $ 6.01   $ 6.50   $ —     $ —     $ —     $ 5.91                

 

Copper Commodity Contracts

 

PTNNT had no copper commodity contracts outstanding as of March 31, 2004, although a position existed at December 31, 2003. The fair value of those contracts was negative $5.0 million at December 31, 2003.

 

Diesel Commodity Contracts

 

PTNNT had the following diesel forward purchase contracts outstanding at March 31, 2004 (unaudited):

 

    Expected Maturity Date or Transaction Date

      Fair Value

 

Diesel Forward Purchase Contracts:


  2004

  2005

  2006

  2007

  2008

  Thereafter

  Total/
Average


  March 31,
2004


  December 31,
2003


 
(U.S.$ Denominated)                               U.S.$ (000)  

Barrels (000)

    80     50     —       —       —       —       130   $ 911   $ (637 )

Average price

  $ 27.90   $ 27.28   $ —     $ —     $ —     $ —     $ 27.66              

 

Indonesia Rupiah Contracts

 

PTNNT had the following Indonesia Rupiah forward purchase contracts outstanding at March 31, 2004 (unaudited):

 

    Expected Maturity Date or Transaction Date

      Fair Value

U.S.$/IDR Forward Purchase Contracts:


  2004

  2005

  2006

  2007

  2008

  Thereafter

  Total/
Average


 

March 31,

2004


 

December 31,

2003


(U.S.$ Denominated)                               U.S.$ (000)

U.S.$ hedged (millions)

  44   12   —     —     —     —     56   $ 137   $ —  

Average hedge rate (IDR/USD)

  8,847   8,960   —     —     —     —     8,871            

Note: Prices for IDR forward purchase contracts have been translated at the exchange rate at March 31, 2004 of IDR 8,621 per $1.

 

Foreign Currency Contracts

 

Newmont has currency swap contracts outstanding to receive A$ and pay U.S.$. The contracts, which are currently undesignated, are accounted for on a mark-to-market basis with the change recorded in earnings.

 

22


NEWMONT MINING CORPORATION

 

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—Continued

(Unaudited)

 

At March 31, 2004, Newmont had the following A$/U.S.$ foreign currency contracts outstanding (unaudited):

 

    Expected Maturity Date or Transaction Date

      Fair Value

A$/U.S.$ Currency Exchange Contracts:


  2004

  2005

  2006

  2007

  2008

  Thereafter

  Total/
Average


  March 31,
2004


  December 31,
2003


                                U.S.$ (000)

U.S.$ (millions)

  $ 42   $ 31   $ —     $ —     $ —     $ —     $ 73   $ 9,040   $ 7,669

Average price (U.S.$ per A$1)

  $ 0.645   $ 0.682   $ —     $ —     $ —     $ —     $ 0.660            

Note: Prices for contracts denominated in A$ have been translated at the exchange rate at March 31, 2004 of $0.76 per A$1.

 

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. Under these contracts, 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 March 31, 2004 and December 31, 2003. Half of these contracts expire in July 2005 and half expire in May 2011. For the three months ended March 31, 2004 and 2003, these transactions resulted in a reduction in interest expense of $1.1 million and $1.7 million, respectively. The fair value of the ineffective portions accounted for as derivative assets was $5.3 million at March 31, 2004 and December 31, 2003 and the fair value of the effective portions accounted for as fair value hedges were $10.9 million and $7.7 million at March 31, 2004 and December 31, 2003, respectively. Effective April 1, 2004, the Company re-designated $150 million of these contracts as new fair value hedges against portions of the 8.625% notes and the 8.375% debentures, which will reduce the ineffective portion of these contracts going forward.

 

(15) STATEMENTS OF COMPREHENSIVE INCOME

 

     Three Months Ended
March 31,


 
     2004

    2003

 
     (unaudited, in thousands)  

Comprehensive income:

                

Net income

   $ 86,681     $ 117,255  

Other comprehensive (loss) income, net of tax:

                

Unrealized loss on marketable equity securities, net of tax of $884 and $14,995, respectively

     (5,016 )     (39,841 )

Foreign currency translation adjustments

     (1,513 )     5,963  

Changes in fair value of cash flow hedge instruments, net of tax of $3,738 and $(32,103), respectively

     (3,097 )     74,907  
    


 


Total other comprehensive (loss) income, net of tax

     (9,626 )     41,029  
    


 


Comprehensive income

   $ 77,055     $ 158,284  
    


 


 

23


NEWMONT MINING CORPORATION

 

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—Continued

(Unaudited)

 

     At March 31,
2004


    At December 31,
2003


 
     (unaudited, in thousands)  

Accumulated other comprehensive income:

                

Unrealized (loss) gain on marketable equity securities, net of tax of $1,022 and $138, respectively

   $ (4,549 )   $ 467  

Minimum pension liability adjustments, net of tax of $16,291 for each period

     (30,274 )     (30,274 )

Foreign currency translation adjustments

     (1,360 )     153  

Changes in fair value of cash flow hedge instruments, net of tax of $(17,537) and $(21,275), respectively

     49,384       52,481  
    


 


Accumulated other comprehensive income

   $ 13,201     $ 22,827  
    


 


 

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

 

     Three Months Ended
March 31,


     2004

    2003

     (unaudited, in thousands)

Interest income

   $ 4,186     $ 2,205

Foreign currency exchange (losses) gains

     (463 )     24,706

Gain on sale of property, plant, equipment and other assets

     8,852       1,273

Other

     1,300       2,779
    


 

Total

   $ 13,875     $ 30,963
    


 

 

(17) EARNINGS PER SHARE

 

The difference between the basic weighted-average common shares outstanding and the diluted weighted-average common shares outstanding at March 31, 2004 and 2003 is due to the assumed conversion of employee stock options. Employee stock options with exercise prices greater than the average market price were excluded from the March 31, 2004 and 2003 diluted weighted-average common shares because the effect would have been anti-dilutive. Employee stock options are potentially outstanding for up to ten years.

 

(18) SEGMENT INFORMATION

 

Newmont made certain reclassifications in its segment presentation at and for the three months ended March 31, 2003 to conform to changes in presentation reflected in internal management reporting at and for the three months ended March 31, 2004.

 

The primary reclassifications for the three months ended March 31, 2003 are as follows: (i) the amortization to Sales, net of Accumulated other comprehensive income related to closed out derivative positions that were previously classified as cash flow hedges has been reclassified from Other Australia to Corporate and Other; (ii) interest expense not specifically related to project financing has been reclassified from Other Australia to Corporate and Other; (iii) research and development expense was reclassified from various segments to Corporate and Other; and (iv) exploration expense related to certain advanced development sites was reclassified from various segments to Other International Operations. The Company also made other insignificant reclassifications between segments for the three months ended March 31, 2003 to conform to 2004 presentation.

 

24


NEWMONT MINING CORPORATION

 

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—Continued

(Unaudited)

 

The effects of all reclassifications for the three months ended March 31, 2003 on Pre-tax income (loss) before minority interest, equity income (loss), impairment of affiliates and cumulative effect were increases of $0.1 million, $0.1 million, $2.8 million, $1.4 million and $17.9 million for Nevada, Yanacocha, Other Australia, Exploration and Merchant Banking, respectively, and decreases of $0.3 million, $3.6 million and $18.4 million for Other North America, Other International Operations and Corporate and Other, respectively.

 

Newmont also made certain reclassifications in Total assets by segment at March 31, 2003. The primary reclassifications were as follows: (i) deferred income tax assets were reclassified from all segments to Corporate and Other; (ii) the investment in AGR was reclassified from Other Australia to Merchant Banking; (iii) the investment in AMC was reclassified from Other Australia to Merchant Banking: (iv) all marketable securities were reclassified from Other Australia to Merchant Banking; and (v) the assets of certain development sites were reclassified from various segments to Other International Operations. The Company also made other insignificant reclassifications in Total assets at March 31, 2003 to conform to 2004 presentation. The effects of all reclassifications on Total assets at March 31, 2003 were increases of $0.1 million, $0.1 million, $115.3 million, $18.8 million and $300.7 million for Other North America, Other South America, Other International, Exploration and Corporate and Other, respectively, and decreases of $2.5 million, $15.9 million, $406.0 million, $5.1 million and $5.5 million for Nevada, Yanacocha, Other Australia, Pajingo and Merchant Banking, respectively.

 

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

 

Three Months Ended March 31, 2004

(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

   $ 270.2     $ 36.5    $ 306.7     $ 326.4    $ 3.4     $ 329.8    $ 31.0    $ 183.6     $ 214.6  

Royalties

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

Interest income

   $ —       $ —      $ —       $ 0.3    $ —       $ 0.3    $ 0.1    $ 0.4     $ 0.5  

Interest expense

   $ —       $ —      $ —       $ 0.3    $ —       $ 0.3    $ —      $ ––       $ ––    

Exploration, research and development

   $ 2.3     $ —      $ 2.3     $ 1.0    $ 0.6     $ 1.6    $ 1.0    $ 1.0     $ 2.0  

Depreciation, depletion and amortization

   $ 35.1     $ 6.3    $ 41.4     $ 54.3    $ 1.1     $ 55.4    $ 9.1    $ 27.1     $ 36.2  

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

   $ 41.4     $ 8.6    $ 50.0     $ 157.9    $ (1.3 )   $ 156.6    $ 6.4    $ 32.4     $ 38.8  

Equity income of affiliates

   $ —       $ —      $ —       $ —      $ —       $ —      $ —      $ ––       $ ––    

Amortization of deferred stripping, net

   $ (20.2 )   $ —      $ (20.2 )   $ —      $ —       $ —      $ —      $ (1.1 )   $ (1.1 )

Cumulative effect of a change in accounting principle

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

Capital expenditures (as restated – see Note 25)

   $ 28.4     $ 1.9    $ 30.3     $ 45.0    $ 0.2     $ 45.2    $ 3.3    $ 34.2     $ 37.5  

Deferred stripping costs

   $ 82.5     $ 6.7    $ 89.2     $ —      $ —       $ —      $ —      $ 14.2     $ 14.2  

Total assets

   $ 1,489.5     $ 94.1    $ 1,583.6     $ 1,263.7    $ 17.3     $ 1,281.0    $ 121.9    $ 1,084.1     $ 1,206.0  

 

25


NEWMONT MINING CORPORATION

 

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—Continued

(Unaudited)

 

     Zarafshan-
Newmont,
Uzbekistan


   Other
International
Operations


    Batu
Hijau


    Golden
Grove


    Exploration

    Merchant
Banking


   Corporate
and Other


    Consolidated

 

Sales, net

   $ 22.8    $ 23.1     $ 207.6     $ 15.2     $ —       $ —      $ 2.5     $ 1,122.3  

Royalties

   $ —      $ —       $ —       $ —       $ —       $ 13.2    $ —       $ 13.2  

Interest income

   $ —      $ 0.1     $ 0.4     $ —       $ —       $ —      $ 2.9     $ 4.2  

Interest expense

   $ 0.2    $ —       $ 11.0     $ —       $ —       $ —      $ 14.0     $ 25.5  

Exploration, research and development

   $ —      $ 6.9     $ —       $ 1.6     $ 12.9     $ 1.6    $ 7.8     $ 36.7  

Depreciation, depletion and amortization

   $ 2.7    $ 7.3     $ 25.4     $ 5.4     $ 0.8     $ 5.5    $ 1.9     $ 182.0  

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

   $ 11.6    $ (7.7 )   $ 93.9     $ (0.9 )   $ (13.7 )   $ 6.3    $ (36.9 )   $ 298.0  

Equity income of affiliates

   $ —      $ —       $ —       $ —       $ —       $ 0.6    $ 0.9     $ 1.5  

Amortization of deferred stripping, net

   $ —      $ (3.6 )   $ 9.7     $ —       $ —       $ —      $ —       $ (15.2 )

Cumulative effect of a change in accounting principle

   $ —      $ —       $ (83.8 )   $ —       $ —       $ —      $ 36.7     $ (47.1 )

Capital expenditures (as restated – see Note 25)

   $ 3.4    $ 11.4     $ 20.2     $ 7.8     $ 0.1     $ 2.2    $ 8.2     $ 166.3  

Deferred stripping costs

   $ —      $ 11.8     $ (77.0 )   $ —       $ —       $ —      $ —       $ 38.2  

Total assets

   $ 99.5    $ 228.3     $ 2,217.5     $ 273.3     $ 1,149.4     $ 2,057.1    $ 2,716.3     $ 12,812.0  

 

Three Months Ended March 31, 2003

(Unaudited, in millions)

 

     North America

    South America

    Australia

 
     Nevada

    Other
North
America


    Total
North
America


    Yanacocha

    Other
South
America


   

Total

South
America


    Pajingo

   Other
Australia


    Total
Australia


 

Sales, net

   $ 221.1     $ 40.0     $ 261.1     $ 229.5     $ 20.7     $ 250.2     $ 25.8    $ 122.8     $ 148.6  

Royalties

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

Gain on investments, net

   $ —       $ —       $ —       $ ––       $ —       $ —       $ —      $ —       $ —    

Loss on extinguishment of debt

   $ —       $ —       $ —       $ ––       $ —       $ —       $ —      $ ––       $ —    

Interest income

   $ —       $ —       $ —       $ 0.4     $ —       $ 0.4     $ —      $ 1.3     $ 1.3  

Interest expense

   $ —       $ —       $ —       $ 1.4     $ —       $ 1.4     $ —      $ —       $ —    

Exploration, research and development

   $ 3.2     $ —       $ 3.2     $ 1.9     $ —       $ 1.9     $ 0.3    $ 1.1     $ 1.4  

Depreciation, depletion and amortization

   $ 31.6     $ 10.2     $ 41.8     $ 35.5     $ 2.1     $ 37.6     $ 5.6    $ 21.4     $ 27.0  

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

   $ 37.5     $ 2.7     $ 40.2     $ 104.2     $ 5.7     $ 109.9     $ 11.1    $ (0.7 )   $ 10.4  

Equity loss and impairment of Australian Magnesium Corporation

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

Equity income of affiliates

   $ —       $ —       $ —       $ —       $ —       $ —       $ —      $ 1.2     $ 1.2  

Amortization of deferred stripping, net

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

Cumulative effect of a change in accounting principle

   $ (14.4 )   $ (3.4 )   $ (17.8 )   $ (32.4 )   $ (0.2 )   $ (32.6 )   $ 0.8    $ (3.6 )   $ (2.8 )

Capital expenditures (as restated – see Note 25)

   $ 22.2     $ 0.4     $ 22.6     $ 35.3     $ 0.5     $ 35.8     $ 1.7    $ 9.1     $ 10.8  

Deferred stripping costs

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

Total assets

   $ 1,486.3     $ 138.7     $ 1,625.0     $ 1,187.5     $ 29.7     $ 1,217.2     $ 175.4    $ 1,172.2     $ 1,347.6  

 

26


NEWMONT MINING CORPORATION

 

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—Continued

(Unaudited)

 

     Zarafshan-
Newmont,
Uzbekistan


    Other
International
Operations


    Total
Gold


    Base
Metals


    Exploration

    Merchant
Banking


    Corporate
and Other


    Consolidated

 

Sales, net

   $ 21.2     $ 31.5     $ 712.6     $ 19.4     $ —       $ —       $ 2.0     $ 734.0  

Royalties

   $ —       $ —       $ —       $ —       $ —       $ 14.5     $ —       $ 14.5  

Gain on investments, net

   $ —       $ —       $ —       $ —       $ —       $ 85.3     $ —       $ 85.3  

Loss on extinguishment of debt

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

Interest income

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

Interest expense

   $ 0.2     $ —       $ 1.6     $ —       $ —       $ —       $ 28.3     $ 29.9  

Exploration, research and development

   $ —       $ 4.9     $ 11.4     $ 0.7     $ 5.9     $ 1.0     $ 2.5     $ 21.5  

Depreciation, depletion and amortization

   $ 2.6     $ 7.7     $ 116.7     $ 7.1     $ 0.8     $ 4.7     $ 1.3     $ 130.6  

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

   $ 9.8     $ (1.4 )   $ 168.9     $ (3.8 )   $ (6.7 )   $ 91.4     $ 5.5     $ 255.3  

Equity loss and impairment of Australian Magnesium Corporation

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

Equity income of affiliates

   $ —       $ —       $ 1.2     $ —       $ —       $ —       $ 7.3     $ 8.5  

Amortization of deferred stripping, net

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

Cumulative effect of a change in accounting principle

   $ (1.3 )   $ (3.2 )   $ (57.7 )   $ (0.2 )   $ —       $ —       $ 23.4     $ (34.5 )

Capital expenditures (as restated – see Note 25)

   $ 0.5     $ 7.1     $ 76.8     $ 2.0     $ 0.2     $ —       $ 3.7     $ 82.7  

Deferred stripping costs

   $ —       $ 0.5     $ 61.8     $ —       $ —       $ —       $ —       $ 61.8  

Total assets

   $ 104.7     $ 288.7     $ 4,583.2     $ 245.3     $ 1,295.5     $ 2,256.7     $ 1,787.9     $ 10,168.6  

 

(19) PRO FORMA STOCK OPTION COMPENSATION EXPENSE

 

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

 

     Three Months Ended
March 31,


 
         2004    

        2003    

 

Net income applicable to common shares

                

As reported

   $ 86.7     $ 117.3  

SFAS 123 expense

     (2.3 )     (2.8 )
    


 


Pro forma

   $ 84.4     $ 114.5  
    


 


Net income per common share, basic and diluted

                

As reported

   $ 0.20     $ 0.29  

SFAS 123 expense

     (0.01 )     (0.01 )
    


 


Pro forma

   $ 0.19     $ 0.28  
    


 


 

27


NEWMONT MINING CORPORATION

 

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—Continued

(Unaudited)

 

(20) EMPLOYEE PENSION AND OTHER BENEFIT PLANS

 

The following table provides components of net periodic pension benefit cost for the indicated periods (unaudited, in thousands):

 

     Pension Benefits

    Other Benefits

 
     For the Three Months Ended March 31,

 
     2004

    2003

    2004

    2003

 

Components of net periodic pension benefit cost:

                                

Service cost

   $ 2,786     $ 2,347     $ 911     $ 745  

Interest cost

     4,415       4,130       1,058       938  

Expected return on plan assets

     (3,384 )     (3,016 )     —         —    

Amortization of prior service cost

     196       211       (140 )     (108 )

Amortization of loss (gain)

     1,094       571       (14 )     (199 )

Amortization of net asset

     (1 )     (1 )     —         —    
    


 


 


 


Total net periodic pension benefit cost

   $ 5,106     $ 4,242     $ 1,815     $ 1,376  
    


 


 


 


 

For the pension plans, prior service costs are amortized on a straight-line basis over the average remaining service period of active participants. Gains and losses in excess of 10% of the greater of the benefit obligation or the market-related value of assets are amortized over the average remaining service period of active participants. Pension and postretirement benefits are accrued during an employee’s service to the Company.

 

28


NEWMONT MINING CORPORATION

 

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—Continued

(Unaudited)

 

(21) CONDENSED CONSOLIDATING FINANCIAL STATEMENTS

 

     Three Months Ended March 31, 2004

 

Consolidating Statement of Operations


   Newmont
Mining
Corporation


    Newmont
USA


    Other
Subsidiaries


    Eliminations

    Newmont
Mining
Corporation
Consolidated


 
     (unaudited, in millions)  

Revenues

                                        

Sales—gold, net

   $ —       $ 721.5     $ 213.2     $ —       $ 934.7  

Sales—base metals, net

     —         172.4       15.2       —         187.6  

Royalties

     —         0.2       12.9       —         13.1  
    


 


 


 


 


       —         894.1       241.3       —         1,135.4  
    


 


 


 


 


Costs and expenses

                                        

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

                                        

Gold

     —         366.1       138.6       (3.2 )     501.5  

Base metals

     —         64.1       8.9       —         73.0  

Depreciation, depletion and amortization

     —         133.6       48.4       —         182.0  

Exploration, research and development

     —         21.3       15.4       —         36.7  

General and administrative

     —         20.7       3.4       3.1       27.2  

Other

     —         3.2       2.8       —         6.0  
    


 


 


 


 


       —         609.0       217.5       (0.1 )     826.4  
    


 


 


 


 


Other income (expense)

                                        

Gain (loss) on derivative instruments, net

     —         1.2       (0.7 )     —         0.5  

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

     23.1       (11.6 )     —         (11.5 )     —    

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

     (0.2 )     14.9       (0.7 )     —         14.0  

Interest expense—intercompany

     23.4       —         (34.9 )     11.5       —    

Interest expense, net of capitalized interest

     (0.5 )     (22.8 )     (2.2 )     —         (25.5 )
    


 


 


 


 


       45.8       (18.3 )     (38.5 )     —         (11.0 )
    


 


 


 


 


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

     45.8       266.8       (14.7 )     0.1       298.0  

Income tax expense

     (16.1 )     (64.5 )     (6.0 )     —         (86.6 )

Minority interest in (income) loss of subsidiaries

     —         (80.1 )     0.2       0.8       (79.1 )

Equity income of affiliates

     57.0       —         16.8       (72.3 )     1.5  
    


 


 


 


 


Income before cumulative effect of a change in accounting principle

     86.7       122.2       (3.7 )     (71.4 )     133.8  

Cumulative effect of a change in accounting principle, net

     —         (47.1 )     —         —         (47.1 )
    


 


 


 


 


Net income applicable to common shares

   $ 86.7     $ 75.1     $ (3.7 )   $ (71.4 )   $ 86.7  
    


 


 


 


 


 

29


NEWMONT MINING CORPORATION

 

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—Continued

(Unaudited)

 

    Three Months Ended March 31, 2003

 

Consolidating Statement of Operations


  Newmont
Mining
Corporation


    Newmont
USA


    Other
Subsidiaries


    Eliminations

    Newmont
Mining
Corporation
Consolidated


 
    (unaudited, in millions)  

Revenues

                                       

Sales—gold

  $ —       $ 557.7     $ 156.9     $ —       $ 714.6  

Sales—base metals, net

    —         —         19.4       —         19.4  

Royalties

    —         —         15.0       (0.5 )     14.5  
   


 


 


 


 


      —         557.7       191.3       (0.5 )     748.5  
   


 


 


 


 


Costs and expenses

                                       

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

                                       

Gold

    —         292.0       107.6       (0.6 )     399.0  

Base metals

    —         —         15.4       —         15.4  

Depreciation, depletion and amortization

    —         87.5       43.1       —         130.6  

Exploration, research and development

    —         10.8       10.7       —         21.5  

General and administrative

    —         19.9       6.4       0.1       26.4  

Other

    —         24.6       5.1       (7.6 )     22.1  
   


 


 


 


 


      —         434.8       188.3       (8.1 )     615.0  
   


 


 


 


 


Other income (expense)

                                       

Gain on investments, net

    —         —         92.9       (7.6 )     85.3  

Gain on derivative instruments, net

    —         —         55.0       —         55.0  

Loss on extinguishment of debt

    —         (14.3 )     (5.2 )     —         (19.5 )

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

    5.0       4.2       3.8       (13.0 )     —    

Dividends, interest income, foreign currency exchange and other income

    24.9       2.8       3.3       —         31.0  

Interest expense—intercompany

    (2.2 )     (3.4 )     (7.4 )     13.0       —    

Interest expense, net of capitalized interest

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


 


 


 


 


      27.2       (31.3 )     133.6       (7.6 )     121.9  
   


 


 


 


 


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

    27.2       91.6       136.6       —         255.4  

Income tax expense

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

Minority interest in (income) loss of subsidiaries

    —         (39.0 )     (3.6 )     4.8       (37.8 )

Equity loss and impairment of Australian Magnesium Corporation

    —         —         (11.7 )     —         (11.7 )

Equity income of affiliates

    99.6       7.4       15.9       (114.4 )     8.5  
   


 


 


 


 


Income before cumulative effect of a change in accounting principle

    117.3       39.1       105.0       (109.6 )     151.8  

Cumulative effect of a change in accounting principle, net

    —         (31.5 )     (3.0 )     —         (34.5 )
   


 


 


 


 


Net income applicable to common shares

  $ 117.3     $ 7.6     $ 102.0     $ (109.6 )   $ 117.3  
   


 


 


 


 


 

30


NEWMONT MINING CORPORATION

 

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—Continued

(Unaudited)

 

    At March 31, 2004

Consolidating Balance Sheets


  Newmont
Mining
Corporation


  Newmont
USA


    Other
Subsidiaries


  Eliminations

    Newmont
Mining
Corporation
Consolidated


    (unaudited, in millions)

Assets

                                 

Cash and cash equivalents

  $ —     $ 1,448.3     $ 100.3   $ —       $ 1,548.6

Marketable securities and other short-term investments

    —       4.0       265.2     —         269.2

Trade receivables

    —       127.6       11.7     —         139.3

Accounts receivable

    1,873.9     638.9       345.5     (2,782.6 )     75.7

Inventories

    —       209.6       73.1     —         282.7

Stockpiles and ore on leach pads

    —       203.7       44.5     —         248.2

Deferred stripping costs

    —       55.0       23.7     —         78.7

Deferred income tax assets

    —       160.2       21.9     —         182.1

Other current assets

    0.6     71.0       59.0     —         130.6
   

 


 

 


 

Current assets

    1,874.5     2,918.3       944.9     (2,782.6 )     2,955.1

Property, plant and mine development, net

    —       3,455.6       462.2     —         3,917.8

Mineral interests and other intangible assets, net

    —       237.5       1,120.3     —         1,357.8

Investments

    —       —         24.4     —         24.4

Investments in subsidiaries

    4,244.5     —         3,495.3     (7,739.8 )     —  

Deferred stripping costs

    —       34.2       2.3     —         36.5

Long-term stockpiles and ore on leach pads

    —       467.6       23.3     —         490.9

Deferred income tax assets

    6.8     494.8       265.2     —         766.8

Other long-term assets

    1,027.7     683.6       89.4     (1,622.7 )     178.0

Goodwill

    —       93.7       2,991.0     —         3,084.7
   

 


 

 


 

Total assets

  $ 7,153.5   $ 8,385.3     $ 9,418.3   $ (12,145.1 )   $ 12,812.0
   

 


 

 


 

Liabilities

                                 

Current portion of long-term debt

  $ —     $ 248.5     $ 132.4   $ —       $ 380.9

Accounts payable

    165.9     2,024.7       807.3     (2,781.8 )     216.1

Employee related benefits

    —       88.5       26.2     —         114.7

Other current liabilities

    43.3     303.5       103.0     28.1       477.9
   

 


 

 


 

Current liabilities

    209.2     2,665.2       1,068.9     (2,753.7 )     1,189.6

Long-term debt

    —       1,384.5       142.4     —         1,526.9

Reclamation and remediation liabilities

    —       279.6       126.1     —         405.7

Deferred revenue from sale of future production

    —       53.8       —       —         53.8

Deferred income tax liabilities

    43.0     219.5       447.1     25.4       735.0

Employee related benefits

    —       231.6       20.5     —         252.1

Advanced stripping costs

    —       77.0       —       —         77.0

Other long-term liabilities

    203.6     131.9       1,838.5     (1,816.5 )     357.5
   

 


 

 


 

Total liabilities

    455.8     5,043.1       3,643.5     (4,544.8 )     4,597.6
   

 


 

 


 

Minority interest in subsidiaries

    —       773.3       307.4     (338.9 )     741.8
   

 


 

 


 

Stockholders’ equity

                                 

Preferred stock

    —       —         60.7     (60.7 )     —  

Common stock

    643.5     —         —       —         643.5

Additional paid-in capital

    5,675.9     2,209.7       4,687.1     (6,122.1 )     6,450.6

Accumulated other comprehensive income (loss)

    13.2     (46.6 )     13.1     33.5       13.2

Retained earnings

    365.1     405.8       706.5     (1,112.1 )     365.3
   

 


 

 


 

Total stockholders’ equity

    6,697.7     2,568.9       5,467.4     (7,261.4 )     7,472.6
   

 


 

 


 

Total liabilities and stockholders’ equity

  $ 7,153.5   $ 8,385.3     $ 9,418.3   $ (12,145.1 )   $ 12,812.0
   

 


 

 


 

 

31


NEWMONT MINING CORPORATION

 

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—Continued

(Unaudited)

 

     At December 31, 2003

Consolidating Balance Sheets


   Newmont
Mining
Corporation


    Newmont
USA


    Other
Subsidiaries


    Eliminations

    Newmont
Mining
Corporation
Consolidated


     (unaudited, in millions)

Assets

                                      

Cash and cash equivalents

   $ —       $ 1,211.2     $ 102.8     $ —       $ 1,314.0

Marketable securities and other short-term investments

     —         3.1       271.5       —         274.6

Trade receivables

     —         6.4       13.7       —         20.1

Accounts receivable

     1,791.0       328.4       310.6       (2,359.4 )     70.6

Inventories

     —         156.0       69.7       —         225.7

Stockpiles and ore on leach pads

     —         210.8       37.8       —         248.6

Deferred stripping costs

     —         41.0       19.1       —         60.1

Deferred income tax assets

     —         50.6       23.1       —         73.7

Other current assets

     (122.9 )     53.0       (81.0 )     251.2       100.3
    


 


 


 


 

Current assets

     1,668.1       2,060.5       767.3       (2,108.2 )     2,387.7

Property, plant and mine development, net

     —         1,909.4       438.6       —         2,348.0

Mineral interests and other intangible assets, net

     —         237.0       1,142.1       —         1,379.1

Investments

     —         709.7       892.8       (868.5 )     734.0

Investments in subsidiaries

     4,154.1       —         2,608.7       (6,762.8 )     —  

Deferred stripping costs

     —         28.0       2.3       —         30.3

Long-term stockpiles and ore on leach pads

     —         284.3       21.5       —         305.8

Deferred income tax assets

     6.8       482.2       263.4       —         752.4

Other long-term assets

     1,313.6       586.9       221.1       (2,026.3 )     95.3

Goodwill

     —         93.7       2,948.9       —         3,042.6
    


 


 


 


 

Total assets

   $ 7,142.6     $ 6,391.7     $ 9,306.7     $ (11,765.8 )   $ 11,075.2
    


 


 


 


 

Liabilities

                                      

Current portion of long-term debt

   $ —       $ 59.9     $ 131.0     $ —       $ 190.9

Accounts payable

     129.5       1,643.0       756.4       (2,365.7 )     163.2

Employee related benefits

     —         107.7       28.6       —         136.3

Other current liabilities

     27.2       226.9       115.8       (1.3 )     368.6