Amednment No. 1 to Form 10-K dated 12/31/2001

 

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

 

Form 10-K/A

(Amendment No. 1)

 

FOR ANNUAL AND TRANSITION REPORTS

PURSUANT TO SECTIONS 13 OR 15(d) OF THE

SECURITIES EXCHANGE ACT OF 1934

 

(Mark One)

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

 

For the Fiscal Year Ended December 31, 2001

 

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

(State or Other Jurisdiction of
Incorporation or Organization)

  

84-1611629

(I.R.S. Employer
Identification No.)

 

1700 Lincoln Street

Denver, Colorado

(Address of Principal Executive Offices)

  

80203

(Zip Code)

 

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

 

Securities registered pursuant to Section 12(b) of the Act:

 

Title of Each Class

  

Name of Each Exchange on Which Registered

Common Stock, $1.60 par value

  

New York Stock Exchange

$3.25 Convertible Preferred Stock, $5.00 par value*

  

New York Stock Exchange

*   Redeemed in full in May 2002

 

Securities registered pursuant to Section 12(g) of the Act:

None

 

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.    Yes  x    No  ¨

 

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of Registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K.  ¨

 

The aggregate market value of the voting common stock and equivalents held by non-affiliates of the Registrant (based on the closing sale price of the shares of common stock on the New York Stock Exchange) on March 18, 2002, was approximately $9,254,549,905.

 

The number of shares of Registrant’s common stock outstanding on March 18, 2002, was 335,019,544.

 

DOCUMENTS INCORPORATED BY REFERENCE

Portions of Registrant’s definitive Proxy Statement submitted to the Registrant’s stockholders in connection with our 2002 Annual Stockholders Meeting held on May 15, 2002, are incorporated by reference into Part III of this report.

 

This document (including information incorporated herein by reference) contains “forward-looking statements” within the meaning of Section 21E of the Securities Exchange Act of 1934, which involve a degree of risk and uncertainty due to various factors affecting Newmont Mining Corporation and our subsidiaries. For a discussion of some of these factors, see the discussion in Item 1A, Risk Factors, of this report commencing on page 9.

 

Explanatory Note

 

This Amendment No. 1 on Form 10-K/A (this “Amendment”) amends the Annual Report on Form 10-K for the fiscal year ended December 31, 2001, filed on March 27, 2002. The Company has filed this Amendment to give effect to the restatement of the Company’s financial statements for the years ended December 31, 1999, 2000 and 2001 as discussed in Note 23 to the Consolidated Financial Statements. The Company is making adjustments relating to (1) the accounting for a prepaid forward gold sales contract and a forward gold purchase contract entered into in July 1999, (2) the depreciation and deferred stripping calculations to exclude material other than proven and probable reserves, (3) the depreciation of certain mining assets; and, (4) inclusion of depreciation, depletion and amortization (“DD&A”) as a capitalized cost in inventory. The adjustments reflected in this filing are described in more detail elsewhere in this filing. Although we have revised this Amendment to give effect to the adjustments, other information contained herein has not been updated. Therefore, you should read this Amendment together with our Quarterly Reports on Form 10-Q for the quarters ended March 31, June 30 and September 30, 2002 as amended to the date hereof or as subsequently amended, as well as the other documents that we have filed with the Securities and Exchange Commission. Information in such reports and documents update and supersede certain information contained in this Amendment.

 

Arthur Andersen LLP served as Newmont’s independent auditor, and provided a report on the financial statements included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2001, as filed on March 27, 2002. On October 22, 2002, the Company engaged PricewaterhouseCoopers LLP to conduct an audit of the Company’s financial statements for the three years ended December 31, 2001, and the opinions of PricewaterhouseCoopers regarding the financial statements contained in this Annual Report on Form 10-K/A are contained herein.

 

PART I

 

ITEM 1.    BUSINESS

 

Introduction

 

Newmont Mining Corporation’s original predecessor corporation was incorporated in 1921 under the laws of Delaware. On February 13, 2002, at a special meeting of the stockholders of Newmont, stockholders approved adoption of an Agreement and Plan of Merger that provided for a restructuring of Newmont to facilitate the February 2002 acquisitions described below and to create a more flexible corporate structure. Newmont merged with an indirect, wholly-owned subsidiary, which resulted in Newmont becoming a direct wholly-owned subsidiary of a new holding company. The new holding company was renamed Newmont Mining Corporation. There is no impact to the consolidated financial statements of Newmont as a result of this restructuring and former stockholders of Newmont became stockholders of the new holding company. In this report, “Newmont” and “we” refer to Newmont Mining Corporation and/or our affiliates and subsidiaries.

 

On January 10, 2001, Newmont completed a stock-for-stock merger with Battle Mountain Gold Company pursuant to an Agreement and Plan of Merger, dated June 21, 2000(1). During 2001, we integrated the former Battle Mountain operations in Canada and Bolivia, the Phoenix development project in Nevada, and the interest in the Pajingo (Vera/Nancy) joint venture operation in Australia(2). Synergies in excess of an estimated

 

 

(1) The merger was accounted for as a pooling of interests, and as such, the financial and operating data presented in this report includes Battle Mountain as if it has always been a part of Newmont. Consequently, some historical financial and operating data presented in this report may differ from previous reports.
(2) For more information on Pajingo see Item 2, Properties, on page 19.

 

$25 million(3), pre-tax, were achieved during 2001 from consolidation of administrative and exploration staffs, purchasing economies and the introduction of Newmont’s Gold Medal Performance program at Battle Mountain’s operations. The Phoenix project is expected to provide an opportunity for additional synergies in future years from utilization of existing nearby processing facilities.

 

In November 2001, Newmont announced proposed acquisitions of Normandy Mining Limited (“Normandy”), an Australian company, and Franco-Nevada Mining Corporation Limited (“Franco-Nevada”), a Canadian company. On February 16, 2002, Newmont completed the acquisition of Franco-Nevada pursuant to a Plan of Arrangement. On February 20, 2002, Newmont gained control of Normandy through a tender offer for all of the ordinary shares in the capital of Normandy. On February 26, 2002, when Newmont’s tender offer for Normandy expired, Newmont had a relevant interest in more than 96% of Normandy’s outstanding shares. Newmont exercised compulsory acquisition rights under Australian law to acquire all of the shares of Normandy.

 

Franco-Nevada has a portfolio of royalty interests covering producing and non-producing mineral properties located in the United States, Canada, Australia, South Africa, Indonesia and various South American countries. Franco-Nevada also has a portfolio of oil and gas interests in western Canada and various direct and indirect investments in resource properties in Canada, Nevada, Central and South America, Australia, South Africa, Indonesia and the Dominican Republic.

 

Normandy is Australia’s largest gold producer, with over 2 million equity ounces of gold sales annually, and with operations in Australia, the United States, New Zealand, Turkey, Chile, Brazil and Canada. Normandy is also a producer of zinc concentrates and owns interests in companies producing cobalt and magnesium.

 

As a result of the Normandy and Franco-Nevada acquisitions, Newmont has gold reserves of 86 million ounces and an aggregate land position of approximately 94,000 square miles (244,000 square kilometers). We have operations in North America, South America, Australia, New Zealand, Indonesia, Uzbekistan and Turkey. In 2002, we expect to obtain more than 70% of our production from politically and economically stable countries, namely the United States, Canada and Australia. Newmont is also engaged in the production of, and exploration for, copper and zinc.

 

In connection with the acquisition of Normandy and Franco-Nevada, Newmont will issue approximately 194 million Newmont common shares or common share equivalents to former stockholders of Normandy and Franco-Nevada. In addition, pursuant to Newmont’s offer for Normandy, Newmont will make cash payments of approximately $465 million to former stockholders of Normandy ordinary shares. During 2002, we will review opportunities to further rationalize our asset base through the consolidation of separately held and managed assets, asset swaps, and the sale or disposal of lower margin or non-core operations or interests.

 

Unless explicitly provided otherwise in this report, production, revenue and other financial information with respect to 2001 and prior years do not include the operations or revenues of Normandy or Franco-Nevada.

 

For the years ended December 31, 2001 and 2000, prior to the completion of the Normandy and Franco-Nevada transactions, Newmont had revenues of $ 1.67 billion and $1.83 billion, respectively. In 2001, Newmont had a net loss applicable to common shares of $54.1 million, while in 2000, Newmont had a net loss applicable to common shares of $97.2 million.

 

Newmont’s corporate headquarters are in Denver, Colorado, USA.

 

For additional information, see Item 7, Management’s Discussion and Analysis of Consolidated Financial Condition and Results of Operations, commencing on page 39 below.

 

Products

 

Gold

 

Gold Production

 

Including Newmont’s subsidiaries, partnerships and joint ventures prior to the Normandy and Franco-Nevada transactions, Newmont sold 5.47 million equity ounces of gold in 2001 and 5.76 million equity ounces in

 

(3) All references to “dollars” or “$” in this report refer to United States currency unless otherwise specified.

 

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2000. References in this report to “equity ounces” or “equity pounds” mean that portion of gold or base metals, respectively produced, sold, or included in proven and probable reserves, which is attributable to our ownership or economic interest.

 

Approximately 59% of Newmont’s gold production came from North American operations in 2001 and 41% from overseas operations. In 2000, approximately 64% of our gold production came from North American operations and 36% came from overseas operations. In 2001, 44% of overseas production, or 18% of total production, was attributable to Minera Yanacocha in Peru. At December 31, 2001, approximately 47% of our total long-lived assets were related to our overseas operations, with 36% of that total in Indonesia and 53% in Peru.

 

Gold Uses

 

Gold has two main categories of use—product fabrication and bullion investment. Fabricated gold has a variety of end uses, including jewelry, electronics, dentistry, industrial and decorative uses, medals, medallions and official coins. Gold investors buy gold bullion, official coins and high-karat jewelry.

 

Most of Newmont’s revenue comes from the sale of refined gold in the international market. The end product at each of Newmont’s gold operations, however, is doré bars. Because doré is an alloy consisting mostly of gold but also containing silver, copper and other metals, doré bars are sent to refiners to produce bullion that meets the required market standard of 99.95% pure gold. Under the terms of refining agreements, the doré bars are refined for a fee, and Newmont’s share of the refined gold and the separately, recovered silver are credited to Newmont’s account or delivered to buyers, except in the case of the doré produced from Newmont’s operation in Uzbekistan. Doré from that operation is refined locally and physically returned to Newmont for sale in international markets. We do not believe that the loss of service at any of our refiners would have an adverse effect on our business due to the availability of alternative refiners able to supply the necessary services. Additionally, through our recent acquisition of Normandy, Newmont has an interest in an Australian refinery.

 

Gold Supply

 

The worldwide supply of gold consists of a combination of new production from mining and the draw-down of existing stocks of bullion and fabricated gold held by governments, financial institutions, industrial organizations and private individuals. In recent years, mine production has accounted for 60% to 65% of the total annual supply of gold.

 

Gold Price

 

The price of gold is affected by numerous factors that are beyond our control. See Risks Related to the Gold Mining Industry Generally in Item 1A, Risk Factors, commencing on page 9 below.

 

The following table presents the annual high, low and average afternoon fixing prices over the past ten years, expressed in U.S. dollars, for gold per ounce on the London Bullion Market.

 

Year

  

High

   

Low

   

Average

1992

   

$

360

   

$

330

   

$

344

1993

   

$

406

   

$

326

   

$

360

1994

   

$

396

   

$

370

   

$

384

1995

   

$

396

   

$

372

   

$

384

1996

   

$

415

   

$

367

   

$

388

1997

   

$

367

   

$

283

   

$

331

1998

   

$

313

   

$

273

   

$

294

1999

   

$

326

   

$

253

   

$

279

2000

   

$

313

   

$

264

   

$

279

2001

   

$

293

   

$

256

   

$

271

2002 (through March 18)

   

$

304

   

$

278

   

$

289

Source of Data: Metals Week and Reuters.

 

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On March 18, 2002, the afternoon fixing price for gold on the London Bullion Market was $292.05 per ounce and the spot market price of gold on the New York Commodity Exchange was $ 292.70 per ounce.

 

Newmont’s gold sales are generally made at the average price prevailing during the month in which the gold is delivered to the customer plus a “contango,” which is essentially an interest factor, from the beginning of the month until the date of delivery. Revenue from a sale is recognized when gold is delivered from the refiner or other depository to the customer.

 

Copper

 

Copper Production

 

The Batu Hijau mine in Indonesia, in which Newmont holds a 56.25% economic interest (a 45% equity interest), produced copper/gold concentrates containing 657.0 million pounds of copper (370 million equity pounds) and 533,600 ounces of gold (300,200 equity ounces) in 2001. The concentrates, which have the consistency of fine sand, contain about 30% copper and about 0.53 ounce per ton of gold. In addition, the Golden Grove operations in Western Australia, which were acquired in their entirety as a result of the Normandy acquisition, produced concentrates containing 24.3 million pounds of copper for the 12 months ended June 30, 2001.

 

Copper Uses

 

Newmont delivers and sells the concentrates from Batu Hijau to smelters in Japan, Korea, Australia and Europe. The majority of Newmont’s production is sold under long-term contracts, and the balance on the spot market. Refined copper, the final product from the treatment of concentrates, is incorporated into wire and cable products for use in the construction, electric utility, communication and transportation industries. Copper is also used in industrial equipment and machinery, consumer products and a variety of other electrical and electronic applications and is used to make brass. Materials that compete with copper include aluminum, plastics, stainless steel and fiber optics. Refined, or cathode, copper is also an internationally traded commodity.

 

Copper Price

 

The price of copper is quoted on the London Metal Exchange in terms of dollars per metric ton of high grade copper and on the New York Commodity Exchange (Comex) in terms of dollars per pound of high grade copper. Copper prices tend to be more cyclical than gold prices and are more directly affected by the worldwide balance of supply and demand. The volatility of the copper market is illustrated by the following table, which shows the dollar per pound equivalent of the high, low and average price of high grade copper on the London Metal Exchange in each of the last ten years:

 

Year

  

High

   

Low

   

Average

1992

   

$

1.17

   

$

0.95

   

$

1.04

1993

   

$

1.08

   

$

0.72

   

$

0.87

1994

   

$

1.40

   

$

0.78

   

$

1.05

1995

   

$

1.47

   

$

1.23

   

$

1.33

1996

   

$

1.29

   

$

0.83

   

$

1.04

1997

   

$

1.23

   

$

0.77

   

$

1.03

1998

   

$

0.85

   

$

0.65

   

$

0.75

1999

   

$

0.84

   

$

0.61

   

$

0.71

2000

   

$

0.91

   

$

0.73

   

$

0.82

2001

   

$

0.83

   

$

0.60

   

$

0.72

2002 (through March 18)

   

$

0.74

   

$

0.64

   

$

0.70

Source of Data: Metal Bulletin

 

On March 18, 2002, the closing spot price of high grade copper on the London Metal Exchange was equivalent to $0.74 per pound.

 

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Zinc

 

Newmont produces zinc, lead and copper concentrates at our Golden Grove operations in Western Australia. Golden Grove produced 182,700 tonnes of zinc concentrates containing 82,400 tonnes of payable zinc during the period July 1, 2000 to June 30, 2001. Golden Grove markets its zinc concentrates under “evergreen” contracts to major zinc smelters in Japan and Korea. The majority of zinc concentrates are sold under long-term contract arrangements. Pricing terms are negotiated annually.

 

Hedging Activities

 

Newmont has a “no hedging” philosophy and generally sells its production at spot market prices. Nevertheless, Newmont monitors the market on an ongoing basis and may periodically elect to enter into selective hedging transactions, if required to achieve our strategic objectives. The hedging policy authorized by Newmont’s board of directors limits total hedging activity to 16 million ounces.

 

Newmont sales of gold under forward sales contracts represented 1%, 3%, and 6% of Newmont’s total equity sales in 2001, 2000, and 1999, respectively. Newmont, prior to the acquisitions of Normandy and Franco-Nevada, utilized forward sales contracts for a portion of the gold production from the Minahasa mine in Indonesia and from the Nevada and Canadian operations. No costs were incurred in connection with forward sales contracts and there were no margin requirements related to these contracts. In December 2001, Newmont entered into offsetting positions to effectively close out combination matched put and call options and flat forward sales contracts associated with Canadian operations. In September 2001, Newmont entered into transactions closing out certain written call options covering 2.35 million ounces of gold. These options were replaced with a series of sales contracts requiring physical delivery of the same quantity of gold from 2005 to 2011. Under the terms of the sales contracts, Newmont will realize the lower of the spot price on the delivery date or the stated capped price ranging from $350 per ounce in 2005 to $392 per ounce in 2011.

 

At December 31, 2001, the following offsetting commodity instruments were outstanding for Newmont and subsidiaries owned by Newmont on that day:

 

    

Ounces

   

Fair Value

         

(in millions)

Combination, matched put and call options, expiring 2002-2004

   

193,067

   

$

  3.2 

Offsetting combination, matched put and call options, expiring 2002-2004

   

193,067

   

$

 (3.2)

Flat forward sales contracts, 2002-2004

   

64,067

   

$

  2.0 

Forward purchase contracts, 2002-2004

   

64,067

   

$

 (2.0)

 

For more information see Market Conditions and Risks in Item 7, Management’s Discussion and Analysis of Consolidated Financial Condition and Results of Operations, commencing on page 39 below.

 

Prior to Newmont’s acquisition of Normandy, Normandy’s policy was to hedge a minimum of 60% of recoverable reserves. Recoverable reserves were generally between 80% and 95% of total reserves. Normandy did not enter into contracts that required margin calls and has no outstanding long-dated sold call options. Normandy utilized forward sales contracts with fixed and floating gold lease rates. Newmont intends to opportunistically unwind or deliver into Normandy’s hedge contracts over time.

 

At December 31, 2001, the Normandy hedge position consisted of derivative contracts covering approximately 8.6 million ounces of gold at an average price of $283 per ounce. At that time, the Normandy hedge position included forward sales, purchased put, and convertible put contracts covering 5.8, 1.3, and 1.5 million ounces at net contract prices of $286, $267, and $283, respectively. At December 31, 2001, the mark-to-market value of the combined Normandy hedge position (which includes subsidiaries) represented an approximate liability of $239 million. All prices and values noted above were converted to US dollars at the December 31, 2001, closing exchange rate of A$1.9543/US$1.00.

 

5

 

The following table shows the approximate sensitivities of the US$ mark-to-market value of the Normandy gold hedge position to changes in certain market variables as of December 31, 2001 (assuming all other market variables remain unchanged):

 

Market Variables

  

Change in Variable

   

Change In

Mark-to-Market Value (Millions)

A$ Interest Rates

  

+/-1.0%

   

-/+$6.6

US$/A$ Exchange Rates

  

+/-US$0.01

   

+/-$58.0

Gold Lease Rates

  

+/-1.0%

   

+/-$2.9

US$ Interest Rates

  

+/-1.0%

   

-/+$1.3

US$ Gold Price/oz.

  

+/-$1.00

   

-/+$11.6

 

 

Royalty Business

 

Newmont is in the process of forming a new business unit to build upon the royalty and merchant banking business of Franco-Nevada. As part of our ongoing exploration program (which is described in the Exploration section on page 6 below), we identify properties or exploration targets that have good potential but appear incompatible with our core objectives, and seek to sell those properties to other operators in return for a royalty. Newmont is in the process of identifying properties where we do not intend to conduct active exploration in the foreseeable future. Newmont will attempt to assemble land packages from among these lands and sell these packages to other operators, possibly in return for a royalty. In some cases these lands may be prospective for minerals other than gold. Through this process Newmont intends to continue to benefit from any discoveries made by other operators on lands in which we have a royalty.

 

Exploration

 

Newmont and its subsidiaries, prior to the acquisitions of Normandy and Franco-Nevada, spent $55.5 million in 2001 and $77.4 million in 2000 for exploration and research. Exploration work is regularly conducted in areas surrounding our existing mines for the purpose of locating additional deposits and determining mine geology. Our exploration staff employs state-of-the-art technology, including airborne geophysical data acquisition systems, satellite location devices and field-portable imaging systems to aid in the location of prospective targets.

 

Gold exploration is highly speculative in nature, involves many risks and frequently is unproductive. No assurances can be given that any of our new or ongoing exploration programs will result in new mineral producing operations. Once mineralization is discovered, it may take many years from the initial phases of drilling until production is possible, during which time the economic feasibility of production may change.

 

For more information, see Item 2, Properties, commencing on page 14 below.

 

Segment Information, Export Sales, Etc.

 

Note 21 to our consolidated financial statements beginning on page 95 of this report includes information for each of the last three years relating to our business segments and certain financial information, our domestic and export sales, and our customers.

 

Licenses and Concessions

 

Other than operating licenses for its mining and processing facilities, there are no third party patents, licenses or franchises material to Newmont’s business. In many foreign countries, however, we conduct our mining and exploration activities pursuant to concessions granted by, or under contract with, the host

 

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government. These countries include, among others, Australia, Bolivia, Indonesia, Peru, Mexico and Turkey. The concessions and contracts are subject to the political risks associated with foreign operations. For a more detailed description of our Indonesian Contracts of Work, see Item 2, Properties on pages 20-21 below.

 

Condition Of Physical Assets; Insurance and Foreign Investment Risks

 

Our business is capital intensive, requiring ongoing capital investment for the replacement, modernization or expansion of equipment and facilities. For more information, see Liquidity and Capital Resources in Item 7, Management’s Discussion and Analysis of Consolidated Financial Condition and Results of Operations, on pages 55-58 below.

 

We maintain insurance against property loss and business interruption and insure against risks that are typical in the operation of business in amounts that we believe to be reasonable. Such insurance, however, contains exclusions and limitations on coverage, particularly with respect to liability for environmental impairment.

 

Some concern always exists with respect to investments in less developed countries and countries with emerging economies where civil unrest, nationalist movements, political violence or economic crises are possible. These countries may also pose heightened risks of expropriation of assets, increased taxation and a unilateral modification of concessions and contracts. We have obtained political risk insurance through May 2002, to cover portions of our investment in Indonesia against the risk of expropriation, war, civil unrest and political violence. This insurance is limited to particular risks and is subject to certain exclusions. There can be no assurance that claims would be paid under such insurance in connection with a particular event.

 

Environmental Matters

 

United States Operations

 

Newmont’s United States mining and exploration activities are subject to various federal and state laws and regulations governing the protection of the environment, including the Clean Air Act; the Clean Water Act; the Emergency Planning and Community Right-to-Know Act; the Endangered Species Act; the Federal Land Policy and Management Act; the National Environmental Policy Act; the Resource Conservation and Recovery Act; and related state laws. These laws and regulations are continually changing and are generally becoming more restrictive. We conduct our operations so as to protect the public health and environment and believe our operations are in compliance with all applicable laws and regulations. Each currently operating Newmont mine has a reclamation plan in place that meets all currently enacted legal and regulatory requirements. We have made, and expect to make in the future, expenditures to comply with such laws and regulations, but cannot predict the amount of such future expenditures. Estimated future reclamation costs are based principally on legal and regulatory requirements. At December 31, 2001, $128.4 million was accrued for reclamation costs relating to currently producing mineral properties owned by Newmont on that day.

 

Reclamation and Remediation of Inactive Sites within the United States

 

Newmont is involved in several matters concerning environmental obligations associated with former U.S. mining activities. Generally, these matters concern developing and implementing remediation plans at the various sites involved. We believe that the related environmental obligations associated with these sites are similar in nature with respect to the development of remediation plans, their risk profile and the compliance required to meet general environmental standards. Based upon our best estimate of our liability for these matters, $57.3 million was accrued for such obligations associated with properties owned by Newmont or our subsidiaries on or before December 31, 2001. These amounts are included in Other accrued liabilities and Reclamation and remediation liabilities. Depending upon the ultimate resolution of these matters, we believe that it is reasonably possible that the liability for these matters could be as much as 50% greater or 30% lower than the amount accrued at December 31, 2001. The amounts accrued for these matters are reviewed periodically based upon facts

 

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and circumstances available at the time. Changes in estimates are charged to costs and expenses in the period estimates are revised.

 

For a discussion on the most significant reclamation and remediation activity, see the discussion in Item 3, Legal Proceedings, commencing on page 34 below, Environmental in Item 7, Management’s Discussion and Analysis of Consolidated Financial Condition and Results of Operations commencing on page 59 below, and Note 22 of Item 7, commencing on page 98 below.

 

Operations Outside the United States

 

Newmont’s interests outside the United States are also subject to governmental regulations for the protection of the environment. These regulations have not had, and are not expected to have, a material adverse impact on Newmont’s operations or our competitive position. All of the international projects we manage adopt and implement environmental policies and procedures developed by us.

 

Employees

 

There were 10,600 people employed by Newmont and our affiliates worldwide at December 31, 2001, and 10,800 people employed by Newmont and our affiliates worldwide at December 31, 2000. At December 31, 2001, Franco-Nevada employed 25 people and Normandy employed 2,900 people.

 

Forward-Looking Statements

 

Certain statements contained in this report (including information incorporated by reference) are “forward-looking statements” within the meaning of Section 21E of the Securities Exchange Act of 1934, as amended, and are intended to be covered by the safe harbor provided for under this section. Our forward-looking statements include, without limitation:

 

  Ÿ   estimates of future mineral production for specific operations and on a consolidated basis;

 

  Ÿ   estimates of future production costs and other expenses, for specific operations and on a consolidated basis;

 

  Ÿ   estimates of future capital expenditures and other cash needs for specific operations and on a consolidated basis and expectations as to the funding thereof;

 

  Ÿ   statements as to the projected development of certain ore deposits, including estimates of development and other capital costs, financing plans for these deposits, and expected production commencement dates;

 

  Ÿ   estimates of future costs and other liabilities for certain environmental matters;

 

  Ÿ   estimates of reserves; and

 

  Ÿ   projected synergies and costs associated with acquisitions and related matters.

 

Where we express an expectation or belief as to future events or results, such expectation or belief is expressed in good faith and believed to have a reasonable basis. However, our forward-looking statements are subject to risks, uncertainties, and other factors, which could cause actual results to differ materially from future results expressed, projected, or implied by those forward-looking statements. These factors include, but are not limited to, the price of gold and copper; currency exchange rates; geological and metallurgical assumptions; operating performance of equipment, processes and facilities; labor relations; timing of receipt of necessary governmental permits or approvals; domestic and foreign laws or regulations, particularly relating to the environment and mining; domestic and international economic and political conditions; the ability of Newmont to obtain or maintain necessary financing; and other risks and hazards associated with mining operations. More detailed information regarding these factors is included in Item 1, Business, Item 1A, Risk Factors, and

 

8

elsewhere throughout this report, as well as other filings with the Securities and Exchange Commission. Given these uncertainties, readers are cautioned not to place undue reliance on our forward-looking statements.

 

All subsequent written and oral forward-looking statements attributable to Newmont or to persons acting on our behalf are expressly qualified in their entirety by the cautionary statements. Subject to the Explanatory Note on page 1, forward looking statements contained in this report speak only as of the date of this report. Newmont does not undertake any obligation to release publicly any revisions to these forward-looking statements, to reflect events or circumstances after the date of the document, or to reflect the occurrence of unanticipated events, except as may be required under applicable securities laws.

 

ITEM 1A.    RISK FACTORS

 

Every investor or potential investor in Newmont should carefully consider the following risks, which have been separated into two groups:

 

  Ÿ   risks related to the gold mining industry generally; and

 

  Ÿ   risks related to Newmont’s operations.

 

Risks Related to the Gold Mining Industry Generally

 

A Substantial or Extended Decline in Gold Prices Would Have a Material Adverse Effect on Newmont

 

Newmont’s business is extremely dependent on the price of gold, which is affected by numerous factors beyond Newmont’s control. Factors tending to put downward pressure on the price of gold include:

 

  Ÿ   sales or leasing of gold by governments and central banks;

 

  Ÿ   a low rate of inflation and a strong U.S. dollar;

 

  Ÿ   global and regional recession or reduced economic activity;

 

  Ÿ   speculative trading;

 

  Ÿ   decreased demand for gold for industrial uses, use in jewelry, and investment;

 

  Ÿ   high supply of gold from production, disinvestment, scrap and hedging;

 

  Ÿ   sales by gold producers in forward transactions and other hedging transactions;

 

  Ÿ   devaluing local currencies (relative to gold priced in US Dollars) leading to lower production costs and higher production in certain major gold-producing regions.

 

Any drop in the price of gold adversely impacts our revenues, profits and cash flows, particularly in light of our “no hedging” philosophy. Newmont has recorded asset writedowns in recent years as a result of a sustained period of low gold prices. Newmont may experience additional asset impairment as a result of continuing low gold prices.

 

In addition, sustained low gold prices can:

 

  Ÿ   reduce revenues further by production cutbacks due to cessation of the mining of deposits or portions of deposits that have become uneconomic at the then-prevailing gold price;

 

  Ÿ   halt or delay the development of new projects;

 

  Ÿ   reduce funds available for exploration, with the result that depleted reserves are not replaced; and

 

  Ÿ   reduce existing reserves, by removing ores from reserves that cannot be economically mined or treated at prevailing prices.

 

Also see the discussion in Item 1, Gold Price, commencing on page 3 above.

 

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Gold Producers Need to Continually Obtain Additional Reserves for Gold Production

 

Gold producers must continually replace gold reserves depleted by production. Depleted reserves must be replaced by expanding known orebodies or by locating new deposits in order for gold producers to maintain production levels over the long term. Success in exploration for gold is uncertain. As a result, reserves may decline as gold is produced without adequate replacement.

 

Estimates of Proven and Probable Reserves are Uncertain

 

Estimates of proven and probable reserves are subject to considerable uncertainty. Such estimates are, to a large extent, based on interpretations of geologic data obtained from drill holes and other sampling techniques. Gold producers use feasibility studies to derive estimates of cash operating costs based upon anticipated tonnage and grades of ore to be mined and processed, the predicted configuration of the ore body, expected recovery rates of metals from the ore, comparable facility, equipment, and operating costs, and other factors. Actual cash operating costs and economic returns on projects may differ significantly from original estimates. Further, it may take many years from the initial phase of drilling before production is possible and, during that time, the economic feasibility of exploiting a discovery may change.

 

Increased Costs Could Affect Profitability

 

The cash cost of production at any particular mining location is frequently subject to great variation from one year to the next due to a number of factors, such as changing waste-to-ore ratios, ore grade and metallurgy. In the past, a cash cost swing of 10% at any one location has not been a significant factor in Newmont’s profitability. However, this may not always be the case.

 

Mining Accidents or Other Adverse Events at a Mining Location Could Reduce Our Production Levels

 

At any of Newmont’s operations, production may fall below historic or estimated levels as a result of mining accidents such as a pit wall failure in an open pit mine, or cave-ins or flooding at underground mines. In addition, production may be unexpectedly reduced at a location if, during the course of mining, unfavorable ground conditions or seismic activity are encountered; ore grades are lower than expected; the physical or metallurgical characteristics of the ore are less amenable to mining or treatment than expected; or our equipment, processes or facilities fail to operate properly or as expected.

 

The Use of Hedging Instruments May Prevent Gains Being Realized from Subsequent Price Increases

 

Consistent with Newmont’s position as a largely unhedged producer, Newmont does not intend to enter into new material gold hedging positions and intends to decrease its hedge position over time. Over time, our intention is to opportunistically deliver into our existing hedge contracts, and we will seek to unwind our hedge position when economically attractive. Nonetheless, Newmont currently has a gold hedging position. If the gold price rises above the price at which future production has been committed under these hedge instruments, Newmont will have an opportunity loss. However, if the gold price falls below that committed price, Newmont’s revenues will be protected to the extent of such committed production.

 

Currency Fluctuations May Affect the Costs that Newmont Incurs

 

Currency fluctuations may affect the costs that we incur at our operations. Gold is sold throughout the world based principally on the U.S. dollar price, but a portion of Newmont’s operating expenses are incurred in local currencies. The appreciation of non-U.S. dollar currencies against the U.S. dollar can increase the costs of gold production in U.S. dollar terms at mines located outside the United States, making such mines less profitable. The currencies which primarily impact the Company’s results of operations are the Canadian and Australian dollars.

 

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During 2001, the Canadian and Australian dollars weakened by an average 4% and 9%, respectively, against the U.S. dollar. This reduced U.S. dollar reported operating costs in Canada and Australia by approximately $2.8 million and $1.4 million, respectively. The impact of fluctuations in these two currencies will increase with the acquisitions of Normandy and Franco-Nevada.

 

Gold Mining Companies are Subject to Extensive Environmental Laws and Regulations

 

Newmont’s exploration, production, and processing operations are extensively regulated under various U.S. federal, state, and local, and overseas laws relating to the protection of air and water quality, hazardous waste management and mine reclamation. Delays in receiving or failure to receive required government permits and approvals may adversely impact our operations. Newmont has also incurred current liabilities and may have potential future liability for environmental costs. Further, the regulatory environment for Newmont’s operations could change in ways that would substantially increase Newmont’s liability or the costs of compliance and that could have a material adverse effect on Newmont’s operations or financial position. For a more detailed discussion of potential environmental liabilities, see the discussion in Environmental Matters in Item 1, Business, commencing on page 7 above, and in Item 3, Legal Proceedings, commencing on page 34 below.

 

Risks Related To Newmont Operations

 

Our Operations Outside North America and Australia are Subject to the Risks of Doing Business Abroad

 

Exploration, development and production activities outside of North America and Australia are potentially subject to political and economic risks, including:

 

  Ÿ   cancellation or renegotiation of contracts;

 

  Ÿ   disadvantages of competing against companies from countries that are not subject to U.S. laws and regulations, including the Foreign Corrupt Practices Act;

 

  Ÿ   changes in foreign laws or regulations;

 

  Ÿ   changes in tax laws;

 

  Ÿ   royalty and tax increases or claims by governmental entities, including retroactive claims;

 

  Ÿ   expropriation or nationalization of property;

 

  Ÿ   currency fluctuations (particularly in countries with high inflation);

 

  Ÿ   foreign exchange controls;

 

  Ÿ   restrictions on the ability of local operating companies to sell gold offshore for U.S. dollars, and on the ability of such companies to hold U.S. dollars or other foreign currencies in offshore bank accounts;

 

  Ÿ   import and export regulations, including restrictions on the export of gold;

 

  Ÿ   restrictions on the ability to pay dividends offshore;

 

  Ÿ   environmental controls;

 

  Ÿ   risks of loss due to civil strife, acts of war, guerrilla activities, insurrection and terrorism; and

 

  Ÿ   other risks arising out of foreign sovereignty over the areas in which our operations are conducted.

 

Consequently, Newmont’s exploration, development, and production activities outside of North America and Australia may be substantially affected by factors beyond Newmont’s control, any of which could materially adversely affect Newmont’s financial position or results of operations. Furthermore, in the event of a dispute arising from such activities, Newmont may be subject to the exclusive jurisdiction of courts outside North America or Australia or may not be successful in subjecting persons to the jurisdiction of the courts in North America or Australia, which could adversely affect the outcome of a dispute.

 

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Newmont has substantial investments in Indonesia, a nation that since 1997 has undergone financial crises and devaluation of its currency, outbreaks of political and religious violence, changes in national leadership, and the secession of East Timor, one of its former provinces. Despite democratic elections in 1999, a change in government occurred in late July 2001, and civil unrest, independence movements, and tensions between the civilian government and the military continue. These problems heighten the risk of abrupt changes in the national policy toward foreign investors, which in turn could result in unilateral modification of concessions or contracts, increased taxation, or expropriation of assets.

 

In Peru, elections for a new president and Congress were held in April 2001, with run-off elections for the presidency held in June 2001. During the last two years, Minera Yanacocha, of which Newmont owns a 51.35% interest, has been the target of numerous local political protests, including ones that blocked the road between the Yanacocha mine complex and the city of Cajamarca. Newmont cannot predict whether these incidents will continue, nor can we predict the new government’s continuing positions on foreign investment, mining concessions, land tenure, environmental regulation, or taxation.

 

Remediation Costs for Federal Superfund Law Liabilities May Exceed the Provisions We Have Made

 

Newmont has conducted extensive remediation work at two inactive sites in the United States as a result of liability under the U.S. Superfund law. At one of these two sites, remediation requirements have not been finally determined, and the ultimate cost cannot be estimated with certainty. At a third site in the U.S., an inactive uranium mine and mill formerly operated by a subsidiary of Newmont, final remediation has not begun due to the failure to date of federal agencies to agree on a remediation plan. We dispute our liability for remediation costs at this site. The environmental standards that may ultimately be imposed at this site remain uncertain and there is a risk that the costs of remediation may exceed the provision Newmont’s subsidiary has made for such remediation by a material amount.

 

Whenever a previously unrecognized remediation claim becomes known or a previously estimated cost is increased, that amount of additional cost is expensed and this can materially reduce net income in that period.

 

We May Face Risks Related To Our Investment In Australian Magnesium Corporation (“AMC”)

 

AMC is an Australian company based in Queensland whose primary project is the development of its A$1.5 billion Stanwell magnesium project. As a result of its acquisition of Normandy, Newmont is a substantial holder of AMC securities with a 22.8% voting interest in AMC. Newmont also has significant future obligations to AMC including an obligation to contribute A$100 million (approximately $51 million) in equity by January 31, 2003, which was satisfied in the first quarter of 2003. See additional discussion below.

 

Additionally, AMC announced on November 29, 2001, that Normandy, which subsequently has become a subsidiary of Newmont, agreed to continue as guarantor of AMC’s foreign exchange hedging position and of AMC’s A$71 million (approximately $36 million) corporate facility with ANZ Banking Group Limited. If AMC is unable to perform its obligations under these arrangements, there is a risk that Newmont’s subsidiary, as guarantor, may incur liabilities under these arrangements.

 

On January 3, 2003 Newmont contributed an additional A$100 million ($US 55.9 million) to AMC pursuant to its obligation under the original investment in return for approximately 167 million additional shares, increasing our ownership percentage to 40.9%. However, due to the conversion by a third-party shareholder of preferred shares to voting common shares, our interest was decreased to 27.8%. In addition, subsequent to year end the A$90 million (approximately $49 million) contingent equity commitment outlined in Note 7 was negotiated into an A$75 million (approximately $41 million) contingent convertible debt and equity facility.

 

Additionally, there are a number of significant risks related to investments in AMC, including:

 

  Ÿ   risks related to the project, which has no operating history;

 

  Ÿ   AMC’s substantial dependence on the project;

 

  Ÿ   risks related to the magnesium market;

 

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  Ÿ   financial risks specific to AMC’s business and operations; and

 

  Ÿ   AMC’s reliance upon Newmont for financial and operational support.

 

For additional information on AMC, see the discussion in Item 2, Investment Interests, Australian Magnesium Corporation.

 

Our Level Of Indebtedness May Affect Our Business

 

As a result of our recent acquisitions, our level of indebtedness has increased, although indebtedness is a smaller percentage of our total capitalization. From December 31, 2001 to March 31, 2002, the Company’s debt increased from $1.4 billion to $2.3 billion. The level of indebtedness could have important consequences for our operations, including:

 

  Ÿ   Newmont may need to use a large portion of the money Newmont earns to repay principal and pay interest on our debt, which will reduce the amount of money available to finance our operations and other business activities;

 

  Ÿ   Newmont’s debt level may make us vulnerable to economic downturns and adverse developments in Newmont’s businesses and markets; and

 

  Ÿ   Newmont’s debt level may limit our ability to pursue other business opportunities, borrow money for operations or capital in the future or implement our business strategy.

 

Newmont expects to obtain the funds to pay our expenses and to pay principal and interest on our debt by utilizing cash flow, refinancing existing debt and asset sales. Newmont’s ability to meet these requirements will depend on our future financial performance, which will be affected by financial, business, economic and other factors. Newmont will not be able to control many of these factors, such as economic conditions in the markets in which Newmont operates. Newmont cannot be certain that our future cash flow will be sufficient to allow us to pay principal and interest on our debt and meet our other obligations. If cash flow is insufficient, we may be required to refinance all or part of our existing debt, sell assets or borrow more money. We cannot be sure that we will be able to do so on commercially reasonable terms, if at all.

 

Occurrence of Events for which We are not Insured may Affect Our Cash Flows and Overall Profitability

 

We maintain insurance to protect ourselves against certain risks related to our operations. This insurance is maintained in amounts that we believe to be reasonable depending upon the circumstances surrounding each identified risk. However, Newmont may elect not to have insurance for certain risks because of the high premiums associated with insuring those risks or for various other reasons, including the fact that insurance may not be available for certain matters. Occurrence of events for which Newmont is not insured may affect its cash flows and overall profitability.

 

Uncertainties Exist in Integrating the Business Operations of all of Our Recently Acquired Subsidiaries

 

We intend, to the extent possible, to integrate our operations with those of our recently acquired subsidiaries. Our goal in integrating these operations is to increase earnings and achieve cost savings by taking advantage of the synergies of consolidation and enhanced growth opportunities. We may encounter substantial difficulties integrating these operations, resulting in a delay or the failure to achieve the anticipated synergies and, therefore, the expected increases in earnings. Moreover, the integration process may cause us to incur substantial unanticipated costs as a result of, among other things:

 

  Ÿ   the loss of key employees;

 

  Ÿ   the possible inconsistencies in standards, controls, procedures and policies, business cultures and compensation structures among the subsidiaries; and the need to implement, integrate and harmonize various business-specific operating procedures and systems, as well as company-wide financial, accounting, information, and other systems; and

 

  Ÿ   the diversion of management’s attention from day-to-day business as a result of the need to deal with integration issues.

 

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For these reasons, Newmont may not complete successfully the necessary integration or realize some or all of the anticipated benefits of the integration. Actual cost savings and synergies may be lower than Newmont currently expects and may take a longer time to achieve than Newmont currently anticipates.

 

Our Business Depends on Good Relations with Our Employees

 

Newmont may experience difficulties in integrating labor policies, practices, and strategies with our recently acquired subsidiaries. In addition, problems with or changes affecting employees of one subsidiary may affect relations with employees of other subsidiaries. The process of integrating our recently acquired subsidiaries increases the risk of labor disputes, work stoppages, or other disruptions in production that could adversely affect us. Furthermore, at December 31, 2001, approximately 34 percent of Newmont’s employees (including Franco-Nevada’s and Normandy’s employees) are subject to collective bargaining or similar labor agreements.

 

Our Earnings also Could be Affected by the Prices for Other Commodities

 

The revenues and earnings of Newmont also could be affected, to a lesser extent than by the price of gold, by the prices of other commodities such as copper and zinc. The prices of these commodities are affected by numerous factors beyond Newmont’s control. For more information see Item 1, Copper and Zinc, commencing on page 4 above, and Item 2, Properties, commencing on page 14 below.

 

Title to Some of Our Properties May Be Defective or Challenged

 

Although we have conducted title reviews of our properties, title review does not necessarily preclude third parties from challenging our title. While Newmont believes that it has satisfactory title to its properties, some risk exists that some titles, particularly titles to undeveloped properties, may be defective or subject to challenge. In addition, certain of our Australian properties could be subject to native title or traditional landowner claims. For information regarding native title or traditional landowner claims, see the discussion under Mineral Rights and Native Title under Item 2, Properties.

 

ITEM 2.    PROPERTIES

 

Introduction:    Gold Processing Methods

 

Gold is extracted from naturally-oxidized ores by either heap leaching or milling, depending on the amount of gold contained in the ore and the amenability of the gold ore to treatment. Gold contained in ores that are not naturally oxidized can be directly milled if the gold is amenable to cyanidization, generally known as free milling ores. Ores that will not leach efficiently, known as refractory ores, require more costly and complex processing techniques than oxide or free milling ore. Higher-grade refractory ores are processed through either roasters or autoclaves. Roasters heat finely ground ore with air and oxygen to a high temperature and burn off the carbon and oxidize the sulfide minerals that encase the gold and prevent efficient leaching. Autoclaves use heat, oxygen and pressure to remove sulfide minerals from the ore.

 

Some gold bearing sulfide ores may be processed through a flotation plant or by bio-milling. In flotation, ore is finely ground, turned into slurry, then placed in a tank known as a flotation cell. Chemicals are added to the slurry causing the gold-containing sulfides to float in air bubbles to the top of the tank, where they can be separated from waste particles that sink to the bottom. The sulfides are removed from the cell and formed into a concentrate that can then be processed in an autoclave or roaster to fully recover the gold. Bio-milling incorporates patented technology that involves inoculation of suitable crushed ore on a leach pad with naturally occurring bacteria strains that oxidize the sulfides encasing the gold over a period of time. The ore is then processed through an oxide mill.

 

Free milled ores and some oxide ores are processed through mills where the ore is ground into a fine powder and mixed with water in slurry, which then passes through a cyanide leaching circuit where gold is extracted and collected on carbon followed by extraction from the carbon and electrowinning. Other ores are processed using

 

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heap leaching. The ore is crushed and stacked on impermeable pads, where weak cyanide solution is applied to the top surface of the heaps to dissolve the gold. The gold-bearing solution is collected and pumped to facilities to remove the gold by collection on carbon or zinc precipitation directly from leach solutions.

 

Production Properties

 

Set forth below is a description of the properties of Newmont and its subsidiaries, including the properties of Normandy and Franco-Nevada.

 

North America

 

Nevada

 

Production

 

Newmont has been mining gold in Nevada since 1965. Newmont’s Nevada operations include Carlin, located west of Elko on the geological feature known as the Carlin Trend, and the Winnemucca Region, located 80 miles (129 kilometers) to the west of Carlin. The Carlin Trend is the largest gold district discovered in North America in the last 50 years. The Winnemucca Region includes the Twin Creeks mine located near Winnemucca,

the Lone Tree Complex located near Battle Mountain, and the Battle Mountain Complex, near Battle Mountain, where there are no currently active mining operations but where studies are ongoing with respect to the feasibility of developing a large gold/copper deposit, known as Phoenix. Following Newmont’s acquisition of Normandy, our Nevada operations also include the Midas mine.

 

In 2001, ore was mined from nine open-pit deposits and five underground mines, including the Midas mine. Although the Deep Post open pit was mined out at the end of 2000, production from stockpiled ore continued into 2001. Production from the Deep Post underground mine, which is accessed through a decline near the bottom of the pit, commenced in March 2001.

 

Gold sales from Newmont’s Nevada operations (excluding the Midas mine, which was acquired by Newmont in the Normandy acquisition) totaled approximately 2.7 million equity ounces at a cash cost of $222 per ounce for 2001. The Midas mine sold 138,900 ounces of gold in 2001. Total cash costs per ounce produced were $135.(5)

 

Underground production will continue to grow at Carlin, as preliminary underground mine development is expected to begin in 2002 at Leeville. Additionally, for the first time, underground mining will occur from the Gold Quarry open pit mine, where development of a small deposit, Chukar, began in January 2002, with production expected in November 2002.

 

Processing Facilities

 

Newmont’s operations in Nevada have a number of different ore types and processing techniques. Newmont has developed a linear programming model to determine the best mix of ore types for each processing facility in order to obtain the maximum ounces of gold at the lowest cost from the ores. Approximately 74.6% of Newmont’s 2001 year-end proven and probable gold reserves in Nevada (excluding the Midas mine) were refractory and the balance were oxide. Nevada’s production has increasingly come from higher-cost refractory ores from both deep open pits and underground mines, as near-surface oxide ores have been depleted. Refractory ore treatment facilities are expected to generate approximately 76% of Nevada’s gold production (excluding the Midas mine) in 2002, compared with 65% in 2001, and 68% in 2000.

 

Higher-grade oxide ores are processed at one oxide mill at Carlin, two at Twin Creeks and one at Lone Tree. Newmont is considering whether to continue operating the Midas mill, or close it and process the Midas ore at one of the oxide mills at Twin Creeks. Lower-grade oxide ores are processed using heap leaching. Higher-grade refractory ores are processed through either a roaster at Carlin or through autoclaves at Twin Creeks or Lone Tree. Lower grade sulfide ores are processed through a flotation plant at Lone Tree or at Carlin by bio-milling.

(5) Midas was acquired by Normandy effective April 1, 2001, prior to which it was owned and operated by Franco-Nevada.

 

 

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Gold-bearing activated carbon from Carlin’s milling and leaching facilities is processed on site at a central carbon processing plant and adjacent smelting facilities. Separate carbon processing facilities are located in the North and South Areas at Twin Creeks with one smelter in the North Area. Lone Tree has two carbon processing facilities. Material from the Lone Tree carbon processing facilities is smelted at Carlin.

 

Other Facilities

 

Analytical laboratories, maintenance facilities and administrative offices are located at Carlin, Twin Creeks and the Lone Tree Complex. Newmont also has an advanced metallurgical research laboratory in Denver, Colorado.

 

Mineral Rights

 

Newmont owns, or controls through long-term mining leases and unpatented mining claims, all of the minerals and surface area within the boundaries of the present Carlin and Winnemucca Region mining operations. The long-term leases extend for at least the anticipated mine life of those deposits. With respect to a significant portion of the Gold Quarry mine at Carlin, Newmont owns a 10% undivided interest in the mineral rights and leases the remaining 90%, on which Newmont pays a royalty equivalent to 18% of the mineral production. The remainder of the Gold Quarry mineral rights are wholly-owned or controlled by Newmont, in some cases subject to additional royalties. With respect to certain smaller deposits in the Winnemucca Region, Newmont is obligated to pay royalties on production to third parties that vary from 3% to 5% of production.

 

Exploration

 

Exploration near existing mines was highlighted by underground drilling in the Deep Post/Deep Star corridor. Follow-up drilling will test for additional extensions and other targets in that region.

 

California

 

Newmont has one mine in Southern California, Mesquite. Mining operations at Mesquite ceased in the second quarter of 2001, with the depletion of the main ore body. Production from residual heap leaching resulted in sales of 92,600 ounces of gold at a total cash cost of $205 per ounce in 2001. Mesquite operations are transitioning to temporary shut-down and reclamation, and declining amounts of gold will be recovered from the inventory of ores on the heap leach pads. The permitting process for an expansion at Mesquite is continuing, but such expansion is dependent on higher gold prices.

 

Canada

 

Newmont’s Canadian operations include two underground mines. The Golden Giant mine (100% owned), is located approximately 25 miles (40 kilometers) east of Marathon in Ontario, Canada and has been in production since 1985. The Holloway mine is located approximately 35 miles (56 kilometers) east of Matheson in Ontario, and about 400 miles (644 kilometers) northeast of Golden Giant. The Holloway mine is owned by a joint venture in which Newmont has an 84.65% interest. The remaining 15.35% interest is held by Teddy Bear Valley Mines.

 

The Golden Giant and Holloway mines together sold 373,100 equity ounces of gold in 2001 at a total cash cost of $192 per ounce.

 

Also see the TVX Normandy description on page 21 below for information on other Newmont property interests in Canada.

 

Mexico

 

Newmont has a 44% interest in La Herradura, which is located in northwest Sonora, Mexico, and operated by the Peñoles group, Mexico’s largest silver producer. The mine is an open pit operation with a two-stage crushing circuit and heap-leach recovery. Mine sales were 124,300 ounces of gold (54,700 equity ounces) in 2001. Total cash costs were $173 per ounce.

 

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South America

 

Peru

 

The properties of Minera Yanacocha S.R.L. are located approximately 375 miles (604 kilometers) north of Lima and 28 miles (45 kilometers) north of the city of Cajamarca. Since the discovery of gold ores in 1986, the area has become the largest gold district in South America. Minera Yanacocha began production in 1993. Newmont holds a 51.35% interest in Minera Yanacocha. The remaining interest is held by Compañia de Minas Buenaventura, S.A.A. (43.65%) and the International Finance Corporation (5%).

 

Minera Yanacocha has mining rights with respect to a large land position that includes multiple deposits as well as other prospects. Minera Yanacocha’s mining rights were acquired through assignments of concessions granted by the Peruvian government to a related entity. The assignments have a term of 20 years, beginning in the early 1990s, renewable at the option of Minera Yanacocha for another 20 years. In October 2000, Newmont and Buenaventura unitized their land holdings in northern Peru, folding them into Minera Yanacocha. The unitization increased Minera Yanacocha’s land position from 100 to 535 square miles.

 

Five open-pit mines, four leach pads, and two processing plants are in operation at Yanacocha. Gold sales for 2001 totaled 1.91 million ounces (983,100 equity ounces) at a total cash cost of $115 per ounce. Production from the La Quinua deposit commenced in the fourth quarter of 2001. By 2003, production from La Quinua is expected to reach one million ounces per year at an average total cash cost of approximately $125 per ounce.

 

Exploration at Minera Yanacocha is focused on further definition of covered oxide deposits and deeper copper/gold sulfide systems. Additional oxide mineralization was found during 2001 at Corimayo, on the western edge of La Quinua.

 

Bolivia

 

The Kori Kollo open pit mine is on the high plain in northwestern Bolivia near Oruro, on government mining concessions issued to a Bolivian corporation, Empresa Minera Inti Raymi S.A., of which Newmont has a 88% interest. The remaining 12% is owned by Zeland Mines, S.A.   Inti Raymi owns and operates the mine. In 2001, the mine sold 312,300 ounces (274,800 equity ounces) of gold, while total cash costs declined 21% from 2000 to $158 per ounce.

 

Brazil and Chile

 

Newmont also has interests in two operating mines in Brazil and one in Chile. See the TVX Normandy discussion on page 21 below for more details.

 

Australia

 

General

 

Prior to our acquisition of Normandy, we owned a 50% interest in the Pajingo (Vera/Nancy) Mine discussed below. The remaining 50% interest in Pajingo (Vera/Nancy), and all other Australian properties described in this report, were acquired as part of our acquisition of Normandy.

 

Mineral Rights and Native Title

 

In Australia, mineral exploration and mining titles are granted by the individual states or territories. Mineral titles may also be subject to native title legislation. Native title describes the rights of Aboriginal people in land and water according to their traditional laws and customs. In 1992, the High Court of Australia held that Aboriginal people who have maintained a continuing connection with their land according to their traditions and customs may hold native title. Since the High Court's decision, Australia has passed legislation providing for the

 

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protection of native title and established procedures for Aboriginal people to claim these rights. The fact that native title is claimed with respect to an area, however, does not necessarily mean that native title exists, and disputes may be resolved by the Federal Court of Australia.

 

Generally, under native title legislation, all mining titles granted before January 1, 1994 are valid. Titles granted between January 1, 1994 and December 23, 1996, however, are subject to invalidation if they were not obtained in compliance with applicable legislative procedures. Titles granted or renewed after December 23, 1996 and all new titles are also subject to legislative processes that generally give native title claimants the “right to negotiate” with the title applicant for compensation and other conditions. Native title holders do not have a veto over the granting of mining titles, but if agreement cannot be reached, the matter will be referred to arbitration for decision.

 

Newmont does not expect that native title claims will have a material adverse effect on any of its operations in Australia. Generally, native title is only an issue for Newmont with respect to obtaining new mineral titles or moving from one form of title to another, for example, from an exploration title to a mining title. In these cases, the requirements for negotiation and the possibility of a requirement to pay compensation may result in delay and increased costs for mining in the affected areas.

 

Kalgoorlie

 

The Kalgoorlie operations comprise the Fimiston open pit (commonly referred to as the Super Pit) and Mt. Charlotte underground mine at Kalgoorlie-Boulder, 373 miles (600 kilometers) east of Perth. The mines are managed and run by Kalgoorlie Consolidated Gold Mines Pty Ltd for the joint venture owners, Newmont and Barrick, each of which holds 50%.

 

The Super Pit is Australia’s largest gold mine, in terms of both gold production and total annual mining volumes. Mt. Charlotte is a large underground gold mine. In 2001, 768,700 ounces of gold (384,400 Normandy ounces) were sold at the combined Kalgoorlie operations. Total cash costs of production were $203 per ounce. The Mt. Charlotte operation closed in December 2001.

 

Boddington

 

Boddington, a large-scale open pit mining operation, is located 81 miles (130 kilometers) southeast of Perth in Western Australia. Boddington is operated by Worsley Alumina Pty Ltd on behalf of the joint venture owners, Newmont (44.4%), AngloGold Limited (33.3%) and Newcrest Mining Limited (22.2%). Mining operations ceased in November 2001, and facilities are being placed on care and maintenance, as the facilities may be used for a proposed expansion project pending the restructuring of current management arrangements as a prerequisite to any development. In 2001, 234,000 ounces of gold (104,000 Normandy ounces) were sold. Total cash costs of production were $195 per ounce.

 

Yandal

 

Newmont owns a 100% interest in Yandal, which consists of the Bronzewing, Jundee and Wiluna mines situated approximately 435 miles (700 kilometers) northeast of Perth in the Yandal Goldfields in Western Australia. The three operations collectively sold 835,500 ounces of gold in 2001. Normandy estimated that the average cash costs of production were $160 per ounce.

 

Tanami

 

The Tanami operations comprise The Granites treatment plant and associated mining operations, which are located in the Northern Territory approximately 342 miles (550 kilometers) northwest of Alice Springs, adjacent to the Tanami highway, and the Dead Bullock Soak mining operations, approximately 25 miles (40 kilometers) west of The Granites. The Tanami operations are owned by Normandy NFM Limited, a publicly listed, 87.45% owned subsidiary of Newmont.

 

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The operation is predominantly focused on the Callie underground mine at Dead Bullock Ridge with mill feed supplemented by production from the Dead Bullock Ridge open pit and the Bunkers and Quorn pits at The Granites. Ore from all of these operations is processed through The Granites plant. The Tanami operations also include the Groundrush deposit, at which mining commenced in mid-September 2001. Ore from Groundrush is processed through the Tanami plant rather than The Granites plant.

 

In 2001, the Tanami operations sold 506,000 ounces of gold (442,500 Normandy ounces). Total cash costs of production were $144 per ounce.

 

Pajingo (Vera/Nancy)

 

The Pajingo gold mine is an underground mine located approximately 93 miles (150 kilometers) southwest of Townsville, Queensland and 45 miles (72 kilometers) south of the local township of Charters Towers. Prior to the Normandy acquisition, Newmont owned a 50% interest in Pajingo. Following the Normandy acquisition, Newmont owns 100% of Pajingo. In 2001, Pajingo sold 252,000 ounces of gold (126,000 equity ounces). Total cash costs of production were $105 per ounce.

 

In respect to the Pajingo mine, royalties are paid to the Queensland government at 4.0%-5.9% of revenues depending on the gold price. Royalties are also paid to traditional land owners consisting of 0.2% of revenues and a fixed payment upon exploration success.

 

Mt. Leyshon

 

The Mt. Leyshon open pit gold mine, near Charters Towers, Queensland, is owned by Leyshon Resources Ltd, which is a publicly listed company, of which Newmont owns 13.7%.

 

Mining ceased at Mt. Leyshon in February 2001. The operation is currently producing gold by treating existing low-grade stockpiles. Treatment of stockpiles is expected to be completed in early 2002, with operations expected to be closed by mid-2002.

 

A comprehensive mine closure and rehabilitation plan covering remaining operations, closure, rehabilitation, decommissioning, and post-closure monitoring has been implemented. As part of a restructuring of Leyshon Resources Ltd, Newmont will assume responsibility for mine closure and rehabilitation costs, as well as ongoing environmental obligations.

 

Golden Grove

 

Newmont owns 100% of the Golden Grove operation in Western Australia, approximately 217 miles (350 kilometers) north of Perth. The principal product is zinc concentrate. A high precious metal lead concentrate and low precious metal copper concentrate are also produced. Golden Grove has two underground mines at the Scuddles and Gossan Hill deposits, with a combined mining rate of 1.2 million tonnes per year. Golden Grove produced 182,700 tonnes of zinc concentrates containing 82,400 tonnes of payable zinc during the period July 1, 2000 to June 30, 2001. It also produced concentrates containing 24.3 million pounds of copper during the same period.

 

New Zealand

 

Newmont acquired an interest in the Martha gold mine as part of the Normandy acquisition. This mine is located within the town of Waihi, located approximately 68 miles (110 kilometers) southeast of Auckland, New Zealand. It is a joint venture between Newmont and Otter Gold Mines Limited. Newmont receives a management fee of 2% of gross revenues from Otter. The long-term future for the Martha operation is based on the recently discovered Favona vein.

 

19

 

Normandy Mining Limited (now known as Newmont Australia Limited), a 100% owned subsidiary of Newmont, owns a 67.06% interest in the Martha Mine. Otter Gold Mines Limited, an 89.9% owned subsidiary of Newmont, owns the remaining 32.94% interest in the Martha Mine. As a result, Newmont now has an approximate 92% interest in the Martha mine.

 

The operation sold 109,300 ounces of gold (78,900 Normandy ounces) in 2001. Total cash costs of production were $172 per ounce.

 

The Martha mine does not currently pay royalties. Under new royalty arrangements, the Martha mine will be required to pay a royalty on new discoveries such as Favona. The royalty rate is the greater of 1% of gross revenues from silver and gold sales or 5% of accounting profit.

 

Indonesia

 

Newmont has two operating properties in Indonesia, Minahasa, a gold operation, and Batu Hijau, a producer of copper/gold concentrates. Newmont owns 80% of Minahasa. The remaining 20% interest is a carried interest held by P.T. Tanjung Serapung, an unrelated Indonesian company. Newmont has a 45% equity interest in Batu Hijau through a partnership with an affiliate of Sumitomo Corporation, which holds a 35% interest. The remaining 20% is a carried interest held by P.T. Pukuafu Indah, an Indonesian company. We account for our investment in Batu Hijau as an equity investment due to each partner’s significant participating rights in the business. Newmont is entitled to 56.25% of production until Newmont recovers the bulk of its investment, including interest.

 

Newmont’s first project in Indonesia, Minahasa, on the island of Sulawesi, approximately 1,500 miles (2,414 kilometers) northeast of Jakarta, was a Newmont discovery and consisted of a multi-deposit operation. Production began in 1996 and mining was completed in October 2001. It is expected, however, that processing of stockpiled ore from this mine will continue through 2003. In 2001, Minahasa sold 341,500 equity ounces at a total cash cost of $142 per ounce.

 

Newmont’s second project in Indonesia, Batu Hijau, is located on the island of Sumbawa, approximately 950 miles (1,529 kilometers) east of Jakarta. Batu Hijau is a large porphyry copper/gold deposit, which Newmont discovered in 1990. The mine contains reserves of 9.7 billion pounds of copper (5.5 billion equity pounds) and 11 million ounces of gold (6.1 million equity ounces). Development and construction activities began in 1997 and start-up took place in late 1999. In 2001, copper production increased 26% to 657 million pounds (370 million equity pounds), while gold production increased 65% to 524,600 ounces (295,100 equity ounces). Total cash costs in 2001 declined 37% to $0.37 per pound of copper after gold credits.

 

In Indonesia, rights are granted to foreign investors to explore for and to develop mineral resources within defined areas through Contracts of Work entered into with the Indonesian government. In 1986, Newmont entered into separate Contracts of Work with the government covering Minahasa and Batu Hijau, under which Newmont was granted the exclusive right to explore in the contract area, construct any required facilities, extract and process the mineralized materials, and sell and export the minerals produced, subject to certain requirements including Indonesian government approvals and payment of royalties to the government. Under the Contracts of Work, Newmont has the right to continue operating the projects for 30 years from operational start-up, or longer if approved by the Indonesian government.

 

Under Newmont’s Contracts of Work, beginning in the sixth year after mining operations commenced (and continuing through the tenth year), a portion of each project not already owned by Indonesian nationals must be offered for sale to the Indonesian government or to Indonesian nationals, thereby potentially reducing Newmont’s (and, in the case of Batu Hijau, Newmont’s and Sumitomo’s) ownership in each project to 49% by the end of the tenth year. The price at which such interest would be offered for sale to the Indonesian parties

 

20

would be the highest of the then-current replacement cost, the price at which shares of the project company would be accepted for listing on the Jakarta Stock Exchange, or the fair market value of such interest in the project company as a going concern.

 

In April 1997, Newmont entered into a third Indonesian Contract of Work granting rights to explore an area located on Sulawesi near the Minahasa mine. Newmont owned 80% of this project, and P.T. Lebong Tandai, an Indonesian company, held the remaining 20%, as a carried interest. After several years of exploration, which resulted in the identification of mineralized areas but no resources sufficient to support a large-scale gold mining operation, Newmont solicited third party interest in this Contract of Work. As a result, in January 2002, we sold all of our interest in this Contract of Work to Avocet Mining Plc., a company based in London, which operates the Penjom gold mine in Malaysia. In addition to cash consideration, Avocet has agreed to pay Newmont the equivalent of a 4% NSR royalty on the first 500,000 ounces of gold produced from this Contract of Work area, if any gold is produced.

 

Uzbekistan

 

Newmont has a 50% interest in Zarafshan-Newmont. Ownership of the remaining 50% interest is divided between the State Committee for Geology and Mineral Resources and Navoi Mining and Metallurgical Combine, each a state entity of Uzbekistan. The joint venture produces gold by crushing and leaching ore from existing stockpiles of low-grade oxide ore from the nearby government-owned Muruntau mine. The gold produced by Zarafshan-Newmont is sold in international markets for U.S. dollars. Newmont provides technical and managerial support to Zarafshan-Newmont.

 

The State Committee and Navoi furnish ore to Zarafshan-Newmont under an ore supply agreement. In late 2000, the ore supply agreement was amended to modify the required grades and pricing structure of the ore supply agreement covering 220 million metric tons of ore. At signing of the amendment, 68.8 million metric tons had already been delivered. Of the remaining 151.2 million metric tons, 48.7 million metric tons, are to be delivered regardless of the gold price, with the price of the ore being dependent on the grade of ore delivered. For the remaining ore (102.5 million metric tons) the grade of ore that the State Committee and Navoi are obligated to provide is dependent on the forecasted gold price as determined by the board of directors of Zarafshan-Newmont, and the price is dependent on the average gold price during the period the ore is processed. Thus, at higher gold prices, the State Committee and Navoi may deliver lower grade ore, but receive a higher price. For 2001, the project sold 444,000 ounces of gold (222,000 equity ounces) at a total cash cost of $136 per ounce.

 

Turkey

 

The Ovacik gold mine is located on the western Aegean coast of Turkey and was acquired by Newmont through the acquisition of Normandy. Newmont owns 100% of the mine. The first gold was produced in June 2001. In 2001, Ovacik sold 48,200 ounces of gold. Total cash costs of production were $153 per ounce. The mine is the subject of lawsuits which could result in its closure.

 

Africa

 

The Ity gold mine is located in Cote d’Ivoire, West Africa. Normandy, prior to being acquired by Newmont, accepted an offer for the sale of its interest in the Ity gold mine. The sale was finalized on March 7, 2002, for $10.8 million paid at closing and an NSR royalty.

 

TVX Normandy

 

TVX Normandy was formed in June 1999 as a strategic alliance between Normandy and TVX Gold. TVX Normandy is 49.9% owned by Normandy and 50.1% owned by TVX Gold. TVX Normandy sold 857,500 ounces (192,400 Normandy ounces) in 2001. Total cash costs of production were $154 per ounce. On January 31, 2003, Newmont sold its 49.9% interest in TVX Newmont Americas (a joint venture between the Company and TVX Gold Inc., acquired as part of the Normandy acquisition) to TVX for $180 million in cash and recognized no significant gain or loss on the transaction. Also on January 31, 2002, the combination of Kinross Gold Corporation (“Kinross”), TVX Gold Inc. (“TVX”) and Echo Bay was announced whereby shareholders of Echo Bay and TVX became common shareholders of Kinross.

 

21

 

The principal assets of TVX Normandy are interests in the following operating gold mines in South America and Canada:

 

  Ÿ   Paracatu (51% Rio Tinto Limited; 49% economic interest TVX Normandy)

 

Rio Tinto is the operator of the mine, which is located in Brazil, 149 miles (240 kilometers) southeast of Brasilia. In 2001, Paracatu sold 191,400 ounces of gold. Total cash costs of production were $193 per ounce.

 

  Ÿ   Crixas (50% AngloGold; 50% economic interest TVX Normandy)

 

AngloGold is the operator of the mine, which is located in Brazil, 218 miles (350 kilometers) northwest of Brasilia. In 2001, Crixas sold 203,500 ounces of gold. Total cash costs of production were $109 per ounce.

 

  Ÿ   La Coipa (50% Placer Dome; 50% TVX Normandy)

 

Placer Dome is the operator of the mine, which is located in Northern Chile. In 2001, La Coipa’s gold equivalent sold was 124,800 ounces. Total cash costs of production were $88 per ounce.

 

  Ÿ   Musselwhite (68.1% Placer Dome; 31.9% TVX Normandy)

 

Placer Dome is the operator of the mine, which is located 311 miles (500 kilometers) north of Thunder Bay in northwestern Ontario, Canada. In 2001, Musselwhite sold 229,600 ounces of gold. Total cash costs of production were $189 per ounce.

 

  Ÿ   New Britannia (50% High River Gold; 50% TVX Normandy)

 

TVX Normandy is the operator of the mine, which is located in Snow Lake, Canada, 436 miles (700 kilometers) north of Winnipeg in central Manitoba. In 2001, New Britannia sold 108,200 ounces of gold. Total cash costs of production were $188 per ounce.

 

22

 

Newmont Mining Corporation Operating Statistics

Reflects only operations owned by Newmont Mining Corporation on December 31, 2001

 

North American Operations

 

   

Nevada(2)

    

Canada

    

Other

  

Year ended
December 31,

  

2001

    

2000

    

1999

    

2001

    

2000

    

1999

    

2001

  

2000

  

1999

  

Tons Mined (000 dry short tons):

                                                                    

Open-Pit

  

 

139,000

 

  

 

200,228

 

  

 

221,110

 

  

 

n/a

 

  

 

n/a

 

  

 

n/a

 

  

 

19,030

  

 

36,465

  

 

33,167

 

Underground

  

 

1,123

 

  

 

943

 

  

 

919

 

  

 

1,607

 

  

 

1,762

 

  

 

1,738

 

  

 

n/a

  

 

n/a

  

 

n/a

 

Tons Milled/Processed (000):

                                                                    

Oxide

  

 

5,395

 

  

 

5,739

 

  

 

6,757

 

  

 

1,605

 

  

 

1,720

 

  

 

1,727

 

  

 

n/a

  

 

n/a

  

 

n/a

 

Refractory

  

 

8,844

 

  

 

8,548

 

  

 

8,001

 

  

 

n/a

 

  

 

n/a

 

  

 

n/a

 

  

 

n/a

  

 

n/a

  

 

n/a

 

Leach

  

 

24,448

 

  

 

25,490

 

  

 

28,022

 

  

 

n/a

 

  

 

n/a

 

  

 

n/a

 

  

 

7,861

  

 

16,078

  

 

16,541

 

Average Ore Grade:

                                                                    

Oxide

  

 

0.108

 

  

 

0.086

 

  

 

0.116

 

  

 

0.236

 

  

 

0.259

 

  

 

0.284

 

  

 

n/a

  

 

n/a

  

 

n/a

 

Refractory

  

 

0.218

 

  

 

0.276

 

  

 

0.191

 

  

 

n/a

 

  

 

n/a

 

  

 

n/a

 

  

 

n/a

  

 

n/a

  

 

n/a

 

Leach

  

 

0.033

 

  

 

0.036

 

  

 

0.031

 

  

 

n/a

 

  

 

n/a

 

  

 

n/a

 

  

 

0.028

  

 

0.018

  

 

0.018

 

Average Mill Recovery Rate:

                                                                    

Oxide

  

 

70.5

%

  

 

81.0

%

  

 

77.4

%

  

 

95.2

%

  

 

95.6

%

  

 

94.4

%

  

 

n/a

  

 

n/a

  

 

n/a

 

Refractory

  

 

88.9

%

  

 

90.4

%

  

 

87.6

%

  

 

n/a

 

  

 

n/a

 

  

 

n/a

 

  

 

n/a

  

 

n/a

  

 

n/a

 

Equity Ounces Produced (000):

                                                                    

Oxide

  

 

433.2

 

  

 

400.2

 

  

 

556.8

 

  

 

348.7

 

  

 

426.9

 

  

 

447.2

 

  

 

n/a

  

 

n/a

  

 

n/a

 

Refractory

  

 

1,749.3

 

  

 

2,072.6

 

  

 

1,337.6

 

  

 

n/a

 

  

 

n/a

 

  

 

n/a

 

  

 

n/a

  

 

n/a

  

 

n/a

 

Leach

  

 

514.4

 

  

 

571.2

 

  

 

604.3

 

  

 

n/a

 

  

 

n/a

 

  

 

n/a

 

  

 

147.3

  

 

180.9

  

 

204.8

 

   
 
 
 
 
 
 
 
 

Total

  

 

2,696.9

 

  

 

3,044.0

 

  

 

2,498.7

 

  

 

348.7

 

  

 

426.9

 

  

 

447.2

 

  

 

147.3

  

 

180.9

  

 

204.8

 

   
 
 
 
 
 
 
 
 

Equity Ounces Sold (000)

  

 

2,703.2

 

  

 

3,047.9

 

  

 

2,498.7

 

  

 

373.1

 

  

 

490.0

 

  

 

448.7

 

  

 

147.3

  

 

180.8

  

 

204.8

 

 
   

Nevada

    

Canada

    

Total N. America

  
   

2001

    

2000

    

1999

    

2001

    

2000

    

1999

    

2001

  

2000

  

1999

  

Production Costs Per Ounce:

                                                                    

Direct mining and production costs

  

$

207

 

  

$

192

 

  

$

212

 

  

$

187

 

  

$

155

 

  

$

151

 

  

$

204

  

$

188

  

$

198

 

Deferred stripping and other costs

  

 

11

 

  

 

7

 

  

 

(5

)

  

 

1

 

  

 

—

 

  

 

—

 

  

 

9

  

 

4

  

 

(2

)

   
 
 
 
 
 
 
 
 

Cash operating costs

  

 

218

 

  

 

199

 

  

 

207

 

  

 

188

 

  

 

155

 

  

 

151

 

  

 

213

  

 

192

  

 

196

 

Royalties and production taxes

  

 

4

 

  

 

4

 

  

 

4

 

  

 

4

 

  

 

5

 

  

 

5

 

  

 

4

  

 

5

  

 

5

 

   
 
 
 
 
 
 
 
 

Total cash costs

  

$

222

 

  

$

203

 

  

$

211

 

  

$

192

 

  

$

160

 

  

$

156

 

  

$

217

  

$

197

  

$

201

 

Reclamation and mine closure costs

  

 

4

 

  

 

3

 

  

 

3

 

  

 

6

 

  

 

5

 

  

 

4

 

  

 

5

  

 

3

  

 

2

 

   
 
 
 
 
 
 
 
 

Total costs applicable to sales

  

 

226

 

  

 

206

 

  

 

214

 

  

 

198

 

  

 

165

 

  

 

160

 

  

 

222

  

 

200

  

 

203

 

Depreciation, depletion and amortization(1)

  

 

43

 

  

 

41

 

  

 

53

 

  

 

67

 

  

 

75

 

  

 

77

 

  

 

47

  

 

47

  

 

56

 

   
 
 
 
 
 
 
 
 

Total production costs

  

$

269

 

  

$

247

 

  

$

267

 

  

$

265

 

  

$

240

 

  

$

237

 

  

$

269

  

$

247

  

$

259

 

   
 
 
 
 
 
 
 
 

 

23

 

Overseas Operations

 

   

Yanacocha, Peru(1)

    

Kori Kollo, Bolivia

    

Zarafshan-Newmont Uzbekistan

Year ended December 31,

  

2001

    

2000

    

1999

    

2001

    

2000

    

1999

    

2001

  

2000

  

1999

Tons Mined (000 dry short tons)

  

 

155,707

 

  

 

131,916

 

  

 

105,920

 

  

 

18,444

 

  

 

18,616

 

  

 

19,345

 

  

 

n/a

  

 

n/a

  

 

n/a

Tons Milled/Processed (000):

                                                                  

Leach

  

 

84,738

 

  

 

83,024

 

  

 

61,367

 

  

 

3,853

 

  

 

n/a

 

  

 

n/a

 

  

 

15,354

  

 

15,540

  

 

14,996

Mill

  

 

n/a

 

  

 

n/a

 

  

 

n/a

 

  

 

7,582

 

  

 

7,753

 

  

 

7,613

 

  

 

n/a

  

 

n/a

  

 

n/a

Average Ore Grade

  

 

0.030

 

  

 

0.031

 

  

 

0.037

 

  

 

0.046

 

  

 

0.055

 

  

 

0.057

 

  

 

0.044

  

 

0.046

  

 

0.056

Average Mill Recovery Rate

  

 

n/a

 

  

 

n/a

 

  

 

n/a

 

  

 

61.8

%

  

 

62.4

%

  

 

63.8

%

  

 

n/a

  

 

n/a

  

 

n/a

Ounces Produced
(000)

  

 

1,902.5

 

  

 

1,795.4

 

  

 

1,665.8

 

  

 

305.6

 

  

 

273.9

 

  

 

291.4

 

  

 

433.5

  

 

498.8

  

 

543.0

Equity Ounces Produced (000)

  

 

976.9

 

  

 

921.9

 

  

 

850.3

 

  

 

269.0

 

  

 

241.0

 

  

 

256.4

 

  

 

216.7

  

 

249.4

  

 

271.5

Equity Ounces Sold (000)

  

 

983.1

 

  

 

901.2

 

  

 

850.3

 

  

 

274.8

 

  

 

247.7

 

  

 

256.1

 

  

 

222.0

  

 

251.4

  

 

271.5

 
 
   

Yanacocha, Peru(1)

    

Kori Kollo, Bolivia

    

Zarafshan-Newmont Uzbekistan

   

2001

    

2000

    

1999

    

2001

    

2000

    

1999

    

2001

  

2000

  

1999

Production Costs Per Ounce:

                                                                  

Direct mining
and production costs

  

$

113

 

  

$

85

 

  

$

100

 

  

$

163

 

  

$

200

 

  

$

190

 

  

$

133

  

$

126

  

$

159

Deferred stripping and other costs

  

 

(1

)

  

 

(2

)

  

 

(1

)

  

 

(5

)

  

 

—

 

  

 

—

 

  

 

3

  

 

3

  

 

2

   
 
 
 
 
 
 
 
 

Cash operating
costs

  

 

112

 

  

 

83

 

  

 

99

 

  

 

158

 

  

 

200

 

  

 

190

 

  

 

136

  

 

129

  

 

161

Royalties and production taxes

  

 

3

 

  

 

4

 

  

 

4

 

  

 

—

 

  

 

—

 

  

 

—

 

  

 

—

  

 

—

  

 

—

   
 
 
 
 
 
 
 
 

Total cash costs

  

$

115

 

  

$

87

 

  

$

103

 

  

$

158

 

  

$

200

 

  

$

190

 

  

$

136

  

$

129

  

$

161

Reclamation and mine closure
costs

  

 

3

 

  

 

3

 

  

 

3

 

  

 

5

 

  

 

15

 

  

 

14

 

  

 

1

  

 

1

  

 

1

   
 
 
 
 
 
 
 
 

Total costs applicable to
sales

  

 

118

 

  

 

90

 

  

 

106

 

  

 

163

 

  

 

215

 

  

 

204

 

  

 

137

  

 

130

  

 

162

Depreciation, depletion and amortization(1)

  

 

48

 

  

 

45

 

  

 

43

 

  

 

62

 

  

 

85

 

  

 

89

 

  

 

54

  

 

56

  

 

56

   
 
 
 
 
 
 
 
 

Total production costs

  

$

166

 

  

$

135

 

  

$

149

 

  

$

225

 

  

$

300

 

  

$

293

 

  

$

191

  

$

186

  

$

218

   
 
 
 
 
 
 
 
 

 

24

Newmont Mining Corporation Operating Statistics

 

    

Minahasa, Indonesia

    

Vera/Nancy, Australia

    

Batu Hijau, Indonesia

Year ended December 31,

   

2001

     

2000

     

1999

     

2001

     

2000

     

1999

    

2001

    

2000

    

1999

Tons Mined (000 dry short tons)

   

 

5,586

 

   

 

6,766

 

   

 

8,449

 

   

 

736

 

   

 

650

 

   

 

404

 

  

 

183,991

 

  

 

156,223

 

  

 

87,903

Tons Milled/Processed (000):

                                                                            

Leach

   

 

1,572

 

   

 

1,732

 

   

 

448

 

   

 

n/a

 

   

 

n/a

 

   

 

n/a

 

  

 

n/a

 

  

 

n/a

 

  

 

n/a

Mill

   

 

716

 

   

 

753

 

   

 

754

 

   

 

722

 

   

 

681

 

   

 

361

 

  

 

48,358

 

  

 

42,131

 

  

 

—

Average Ore Grade

   

 

0.176

 

   

 

0.193

 

   

 

0.334

 

   

 

0.351

 

   

 

0.350

 

   

 

0.387

 

  

 

0.013

 

  

 

0.010

 

  

 

—

Average Mill Recovery Rate

   

 

91.4

%

   

 

92.4

%

   

 

92.5

%

   

 

96.9

%

   

 

96.8

%

   

 

95.2

%

  

 

80.3

%

  

 

77.4

%

  

 

—

Ounces Produced (000)

   

 

326.0

 

   

 

364.3

 

   

 

343.9

 

   

 

247.6

 

   

 

231.3

 

   

 

133.9

 

  

 

533.6

 

  

 

320.1

 

  

 

11.3

Equity Ounces Produced (000)

   

 

323.7

 

   

 

364.3

 

   

 

343.9

 

   

 

123.8

 

   

 

115.7

 

   

 

67.0

 

  

 

300.2

 

  

 

180.1

 

  

 

6.3

Equity Ounces Sold
(000)

   

 

341.5

 

   

 

354.2

 

   

 

343.9

 

   

 

126.0

 

   

 

112.1

 

   

 

65.9

 

  

 

295.1

 

  

 

178.4

 

  

 

6.3

 
    

Minahasa, Indonesia

    

Vera/Nancy, Australia

    

Total International(1)

    

2001

     

2000

     

1999

     

2001

     

2000

     

1999

    

2001

    

2000

    

1999

Production Costs Per Ounce:

                                                                            

Direct mining and production costs

   

$

125

 

   

$

111

 

   

$

97

 

   

$

97

 

   

$

93

 

   

$

120

 

  

$

123

 

  

$

112

 

  

$

122

Deferred stripping and other costs

   

 

14

 

   

 

19

 

   

 

3

 

   

 

1

 

   

 

—

 

   

 

—

 

  

 

2

 

  

 

3

 

  

 

—

    
  
  
  
  
  
 
 
 

Cash operating costs

   

 

139

 

   

 

130

 

   

 

100

 

   

 

98

 

   

 

93

 

   

 

120

 

  

 

125

 

  

 

115

 

  

 

122

Royalties and production taxes

   

 

3

 

   

 

3

 

   

 

3

 

   

 

7

 

   

 

6

 

   

 

4

 

  

 

3

 

  

 

2

 

  

 

3

    
  
  
  
  
  
 
 
 

Total cash costs

   

$

142

 

   

$

133

 

   

$

103

 

   

$

105

 

   

$

99

 

   

$

124

 

  

$

128

 

  

$

117

 

  

$

125

Reclamation and mine closure costs

   

 

3

 

   

 

2

 

   

 

2

 

   

 

1

 

   

 

1

 

   

 

2

 

  

 

3

 

  

 

5

 

  

 

4

    
  
  
  
  
  
 
 
 

Total costs applicable to sales

   

 

145

 

   

 

135

 

   

 

105

 

   

 

106

 

   

 

100

 

   

 

126

 

  

 

131

 

  

 

122

 

  

 

129

Depreciation, depletion and amortization(1)

   

 

66

 

   

 

75

 

   

 

57

 

   

 

34

 

   

 

38

 

   

 

42

 

  

 

52

 

  

 

56

 

  

 

54

    
  
  
  
  
  
 
 
 

Total production costs

   

$

211

 

   

$

210

 

   

$

162

 

   

$

140

 

   

$

138

 

   

$

168

 

  

$

183

 

  

$

178

 

  

$

183

    
  
  
  
  
  
 
 
 
(1)   As restated. See Note 23 to the Company’s Consolidated Financial Statements.
(2)   Restated to include only ore processed. Previously reported mill tons processed included concentrates, an intermediate product derived from processing mined ore.

 

For all periods presented, total cash costs include charges for mining ore and waste associated with current period gold production, processing ore through milling and leaching facilities, by-product credits, production taxes, royalties and other cash costs. Certain gold mines produce silver as a by-product. Proceeds from the sale of by-products are reflected as credits to total cash costs. All of the charges and applicable credits are included in Costs applicable to sales. Charges for reclamation are also included in Costs applicable to sales, but are not included in total cash costs. Reclamation charges are included in total production costs, together with total cash costs and Depreciation, depletion and amortization. A reconciliation of total cash costs to Costs applicable to sales is provided below, in total and by segment. Total production costs provide an indication of earnings-before-interest expense-and-taxes for Newmont’s share of gold mining properties, when taking into account the average realized price received for gold sold, as this measure combines Costs applicable to sales plus Depreciation, depletion and amortization, net of minority interest.

 

25

 

This measure is intended to provide investors with information about cash generating capacities of these mining operations. Newmont management uses this measure for the same purpose and for monitoring the performance of its gold mining operations. This information differs from earnings determined in accordance with GAAP and should not be considered in isolation or as a substitute for measures of performance determined in accordance with GAAP. This measure was developed in conjunction with gold mining companies associated with the Gold Institute in an effort to provide a level of comparibility; however, Newmont’s measure may not be comparable to similarly titled measures of other companies.

 

Reconciliation of Costs applicable to sales (“CAS”) to total cash costs per ounce (unaudited):

 

For the Year Ended
December 31, 2001

   

Nevada

    

Golden Giant

     

Holloway

     

Total Canada (1)

     

Mesquite

       

La

Herradura

     

Total

North America

         

(in millions, except for equity ounces sold and equity cash cost per ounce sold)

  

Costs applicable to sales per financial statements

   

$

610.9

 

  

$

54.8

 

   

$

19.1

 

   

$

73.9

 

   

$

20.4

 

     

$

9.6

 

   

$

714.8

 

         

Minority interest in Minera Yanacocha

   

 

—

 

  

 

—

 

   

 

—

 

   

 

—

 

   

 

—

 

     

 

—

 

   

 

—

 

         

Minority interest in
Kori Kollo

   

 

—

 

  

 

—

 

   

 

—

 

   

 

—

 

   

 

—

 

     

 

—

 

   

 

—

 

         

Reclamation accrual

   

 

(10.3

)

  

 

(1.7

)

   

 

(0.4

)

   

 

(2.1

)

   

 

(1.5

)

     

 

(0.2

)

   

 

(14.1

)

         

Other

   

 

—

 

  

 

—

 

   

 

—

 

   

 

—

 

   

 

—

 

     

 

—

 

   

 

—

 

         
    
 
  
  
  
    
  
        

Total cash cost for per ounce calculation

   

$

600.6

 

  

$

53.1

 

   

$

18.7

 

   

$

71.8

 

   

$

18.9

 

     

$

9.4

 

   

$

700.7

 

         

Equity ounces sold (000)

   

 

2,703.2

 

  

 

283.7

 

   

 

89.4

 

   

 

373.1

 

   

 

92.6

 

     

 

54.7

 

   

 

3,223.6

 

         

Equity cash cost per
ounce sold

   

$

222

 

  

$

187

 

   

$

209

 

   

$

192

 

   

$

205

 

     

$

173

 

   

$

217

 

         

For the Year Ended
December 31, 2001

   

Yanacocha (3)

    

Kori Kollo

     

Zarafshan-

Newmont,

Uzbekistan

     

Minahasa, Indonesia

     

Pajingo

       

Total International (2)(3)

     

Corporate And Other

     

Consolidated(3)

  

(in millions, except for equity ounces sold and equity cash cost per ounce sold)

  

Costs applicable to sales per financial statements

   

$

233.9

 

  

$

50.8

 

   

$

30.4

 

   

$

49.7

 

   

$

13.4

 

     

$

378.2

 

   

$

(0.2

)

   

$

1,092.8

 

Minority interest in Minera Yanacocha

   

 

(117.6

)

  

 

—

 

   

 

—

 

   

 

—

 

   

 

—

 

     

 

(117.6

)

   

 

—

 

   

 

(117.6

)

Minority interest in
Kori Kollo

   

 

—

 

  

 

(6.1

)

   

 

—

 

   

 

—

 

   

 

—

 

     

 

(6.1

)

   

 

—

 

   

 

(6.1

)

Reclamation accrual

   

 

(2.9

)

  

 

(1.4

)

   

 

(0.2

)

   

 

(1.0

)

   

 

(0.2

)

     

 

(5.7

)

   

 

—

 

   

 

(19.8

)

Other

   

 

—

 

  

 

—

 

   

 

—

 

   

 

—

 

   

 

—

 

     

 

—

 

   

 

0.2

 

   

 

0.2

 

    
 
  
  
  
    
  
  

Total cash cost for per ounce calculation

   

$

113.4

 

  

$

43.3

 

   

$

30.2

 

   

$

48.7

 

   

$

13.2

 

     

$

248.8

 

   

$

—

 

   

$

949.5

 

Equity ounces sold (000)

   

 

983.1

 

  

 

274.8

 

   

 

222.0

 

   

 

341.5

 

   

 

126.0

 

     

 

1,947.4

 

   

 

n/a

 

   

 

5,171.0

 

Equity cash cost per
ounce sold

   

$

115

 

  

$

158

 

   

$

136

 

   

$

142

 

   

$

105

 

     

$

128

 

   

$

—

 

   

$

184

 

For the Year Ended
December 31, 2000

   

Nevada

    

Golden Giant

     

Holloway

     

Total Canada (1)

     

Mesquite

       

La

Herradura

     

Total North America

         

(in millions, except for equity ounces sold and equity cash cost per ounce sold)

  

Costs applicable to sales per financial statements

   

$

625.6

 

  

$

61.8

 

   

$

19.4

 

   

$

81.2

 

   

$

29.4

 

     

$

6.8

 

   

$

743.0

 

         

Minority interest in Minera Yanacocha

   

 

—

 

  

 

—

 

   

 

—

 

   

 

—

 

   

 

—

 

     

 

—

 

   

 

—

 

         

Minority interest in
Kori Kollo

   

 

—

 

  

 

—

 

   

 

—

 

   

 

—

 

   

 

—

 

     

 

—

 

   

 

—

 

         

Reclamation accrual

   

 

(7.6

)

  

 

(2.5

)

   

 

(0.3

)

   

 

(2.8

)

   

 

(0.5

)

     

 

(0.2

)

   

 

(11.1

)

         

Other

   

 

(0.1

)

  

 

—

 

   

 

—

 

   

 

—

 

   

 

—

 

     

 

—

 

   

 

(0.1

)

         
    
 
  
  
  
    
  
        

Total cash cost for per ounce calculation

   

$

617.9

 

  

$

59.3

 

   

$

19.1

 

   

$

78.4

 

   

$

28.9

 

     

$

6.6

 

   

$

731.8

 

         

Equity ounces sold (000)

   

 

3,047.9

 

  

 

406.6

 

   

 

83.4

 

   

 

490.0

 

   

 

130.3

 

     

 

50.5

 

   

 

3,718.7

 

         

Equity cash cost per
ounce sold

   

$

203

 

  

$

146

 

   

$

229

 

   

$

160

 

   

$

221

 

     

$

131

 

   

$

197

 

         

 

26

For the Year Ended
December 31, 2000

   

Yanacocha (3)

    

Kori Kollo

     

Zarafshan-

Newmont, Uzbekistan

     

Minahasa, Indonesia

     

Pajingo

       

Total International (2)(3)

     

Corporate And Other

     

Consolidated(3)

  

(in millions, except for equity ounces sold and equity cash cost per ounce sold)

  

Costs applicable to sales per financial statements

   

$

165.4

 

  

$

67.1

 

   

$

32.8

 

   

$

47.6

 

   

$

11.6

 

     

$

324.5

 

   

$

(1.6

)

   

$

1,065.9

 

Minority interest in Minera Yanacocha

   

 

(84.7

)

  

 

—

 

   

 

—

 

   

 

—

 

   

 

—

 

     

 

(84.7

)

   

 

—

 

   

 

(84.7

)

Minority interest in
Kori Kollo

   

 

—

 

  

 

(7.2

)

   

 

—

 

   

 

—

 

   

 

—

 

     

 

(7.2

)

   

 

—

 

   

 

(7.2

)

Reclamation accrual

   

 

(2.7

)

  

 

(3.8

)

   

 

(0.3

)

   

 

(0.7

)

   

 

(0.1

)

     

 

(7.6

)

   

 

—

 

   

 

(18.7

)

Other

   

 

0.5

 

  

 

(6.6

)

   

 

—

 

   

 

—

 

   

 

(0.4

)

     

 

(6.5

)

   

 

1.6

 

   

 

(5.0

)

    
 
  
  
  
    
  
  

Total cash cost for per ounce calculation

   

$

78.5

 

  

$

49.5

 

   

$

32.5

 

   

$

46.9

 

   

$

11.1

 

     

$

218.5

 

   

$

—

 

   

$

950.3

 

Equity ounces sold (000)

   

 

901.2

 

  

 

247.7

 

   

 

251.4

 

   

 

354.2

 

   

 

112.1

 

     

 

1,866.6

 

   

 

n/a

 

   

 

5,585.3

 

Equity cash cost per
ounce sold

   

$

87

 

  

$

200

 

   

$

129

 

   

$

133

 

   

$

99

 

     

$

117

 

   

$

—

 

   

$

170

 

For the Year Ended December 31, 1999

   

Nevada

    

Golden Giant

     

Holloway

     

Total Canada (1)

     

Mesquite

       

La Herradura

     

Total North America

         

(in millions, except for equity ounces sold and equity cash cost per ounce sold)

  

Costs applicable to sales per financial statements

   

$

534.1

 

  

$

55.3

 

   

$

19.6

 

   

$

74.9

 

   

$

27.5

 

     

$

6.4

 

   

$

642.9

 

         

Minority interest in Minera Yanacocha

   

 

—

 

  

 

—

 

   

 

—

 

   

 

—

 

   

 

—

 

     

 

—

 

   

 

—

 

         

Minority interest in
Kori Kollo

   

 

—

 

  

 

—

 

   

 

—

 

   

 

—

 

   

 

—

 

     

 

—

 

   

 

—

 

         

Reclamation accrual

   

 

(5.7

)

  

 

(1.7

)

   

 

(0.2

)

   

 

(1.9

)

   

 

—

 

     

 

(0.1

)

   

 

(7.7

)

         

Other

   

 

—

 

  

 

(2.2

)

   

 

(1.3

)

   

 

(3.5

)

   

 

—

 

     

 

—

 

   

 

(3.5

)

         
    
 
  
  
  
    
  
        

Total cash cost for per ounce calculation

   

$

528.4

 

  

$

51.4

 

   

$

18.1

 

   

$

69.5

 

   

$

27.5

 

     

$

6.3

 

   

$

631.7

 

         

Equity ounces sold (000)

   

 

2,498.7

 

  

 

356.0

 

   

 

92.7

 

   

 

448.7

 

   

 

164.6

 

     

 

40.2

 

   

 

3,152.2

 

         

Equity cash cost per
ounce sold

   

$

211

 

  

$

144

 

   

$

198

 

   

$

156

 

   

$

167

 

     

$

159

 

   

$

201

 

         

For the Year Ended December 31, 1999

   

Yanacocha (3)

    

Kori Kollo

     

Zarafshan-

Newmont, Uzbekistan

     

Minahasa, Indonesia

     

Pajingo

       

Total International (2)(3)

     

Corporate And Other

     

Consolidated(3)

  

(in millions, except for equity ounces sold and equity cash cost per ounce sold)

  

Costs applicable to sales per financial statements

   

$

184.6

 

  

$

68.1

 

   

$

44.1

 

   

$

36.1

 

   

$

8.4

 

     

$

341.3

 

   

$

(2.1

)

   

$

982.1

 

Minority interest in Minera Yanacocha

   

 

(92.8

)

  

 

—

 

   

 

—

 

   

 

—

 

   

 

—

 

     

 

(92.8

)

   

 

—

 

   

 

(92.8

)

Minority interest in
Kori Kollo

   

 

—

 

  

 

(7.1

)

   

 

—

 

   

 

—

 

   

 

—

 

     

 

(7.1

)

   

 

—

 

   

 

(7.1

)

Reclamation accrual

   

 

(2.5

)

  

 

(3.8

)

   

 

(0.3

)

   

 

(0.7

)

   

 

(0.1

)

     

 

(7.4

)

   

 

—

 

   

 

(15.1

)

Other

   

 

(1.6

)

  

 

(8.6

)

   

 

—

 

   

 

—

 

   

 

—

 

     

 

(10.2

)

   

 

2.1

 

   

 

(11.6

)

    
 
  
  
  
    
  
  

Total cash cost for per ounce calculation

   

$

87.7

 

  

$

48.6

 

   

$

43.8

 

   

$

35.4

 

   

$

8.3

 

     

$

223.8

 

   

$

—

 

   

$

855.5

 

Equity ounces sold (000)

   

 

850.3

 

  

 

256.1

 

   

 

271.5

 

   

 

343.9

 

   

 

65.9

 

     

 

1,787.7

 

   

 

n/a

 

   

 

4,939.9

 

Equity cash cost per
ounce sold

   

$

103

 

  

$

190

 

   

$

161

 

   

$

103

 

   

$

124

 

     

$

125

 

   

$

—

 

   

$

173

 

(1)   Total Canada includes Golden Giant and Holloway.
(2)   Total International includes Yanacocha, Kori Kollo, Zarafshan-Newmont, Minahasa and Pajingo.
(3)   As restated. See Note 23 to the Company’s Consolidated Financial Statements.

 

27

 

Batu Hijau Copper Production

Twelve months ended Dec. 31,

   

2001

     

2000

     

1999

  

Dry tons processed (000)

   

48,358

 

   

42,131

 

   

5,727

 

Average copper grade

   

0.75

%

   

0.72

%

   

0.75

%

Average recovery rate

   

89.2

%

   

87.5

%

   

60.9

%

Copper pounds produced (000)

   

656,954

 

   

520,781

 

   

48,837

 

Equity copper pounds produced (000)

   

369,537

 

   

292,939

 

   

27,471

 

Equity copper pounds sold (000)

   

359,955

 

   

294,182

 

   

10,220

 

 

Batu Hijau Costs

          

Co-Product Method

  

Twelve months ended Dec. 31, 2001

   

By-Product Method

     

Copper

     

Gold

     

Total

  

Revenue

   

$

251,601

 

   

$

251,601

 

   

$

78,198

 

   

$

329,799

 

Cash production costs(1)

   

 

214,417

 

   

 

163,577

 

   

 

50,840

 

   

 

214,417

 

By-product credits

   

 

(81,709

)

   

 

(2,679

)

   

 

(832

)

   

 

(3,511

)

    
  
  
  

Total Cash Costs

   

 

132,708

 

   

 

160,898

 

   

 

50,008

 

   

 

210,906

 

Noncash costs(1)

   

 

61,385

 

   

 

46,830

 

   

 

14,555

 

   

 

61,385

 

    
  
  
  

Total Production Costs

   

$

194,093

 

   

$

207,728

 

   

$

64,563

 

   

$

272,291

 

    
  
  
  

Pounds of copper sold (000)

   

 

359,955

 

                           

Ounces of gold sold (000)

   

 

295.1

 

                           
 
 

Reported cash cost per lb./oz.

   

$

0.37

 

   

$

0.45

 

   

$

170

 

         

Reported noncash cost per lb./oz.(1)

   

 

0.17

 

   

 

0.13

 

   

 

49

 

         
    
  
  
        

Total costs per lb./oz.

   

$

0.54

 

   

$

0.58

 

   

$

219

 

         
    
  
  
        

(1)    As restated. See Note 16 in the Nusa Tenggara Partnership V.O.F. financial statements.

 

Royalty Properties

 

The following is a description of Newmont’s principal royalty interests, all of which were acquired as a result of the Franco-Nevada acquisition. Newmont’s royalty interests are generally in the form of a net smelter return (“NSR”) royalty that provides for the payment either in cash or physical metal (“in kind”) of a specified percentage of production, less certain specified transportation and refining costs. In some cases, Newmont owns a net profit interest (“NPI”) pursuant to which Newmont is entitled to a specified percentage of the net profits, as defined in each case, from a particular mining operation. The majority of NSR royalty revenue and NPI revenue can be received in kind at the option of Newmont.

 

North America

 

Nevada

 

Goldstrike

 

Newmont holds various NSR and NPI royalties at the Goldstrike Properties (Betze-Post and Meikle mines) located in the Carlin Trend gold mining area of northern Nevada. The Betze-Post and Meikle mines are owned and operated by a subsidiary of Barrick Gold Corporation.

 

The Betze-Post mine is a conventional open pit operation. The Betze-Post property consists of various claim blocks and Newmont’s royalty interest in each claim block is different, ranging from 0% to 4% for the NSRs and 0% to 6% for the NPIs.

 

28

 

The Meikle mine is an underground operation comprising the Meikle, Rodeo, and Griffin deposits, located one mile north of the Betze-Post mine, which shares the Goldstrike processing facilities with the Betze-Post mine. Newmont holds a 4% NSR and a 5% NPI over 1,280 acres of the claims that cover the Meikle, Rodeo, and Griffin deposits.

 

Newmont is not obligated to fund any portion of the cost associated with the Betze-Post mine or the Meikle mine.

 

Barrick’s mining sequence from various claim areas will cause fluctuations in Newmont’s royalty receipts. The NSR royalties are based upon gross production from the mine, reduced only by the ancillary costs of smelter charges and transportation costs of about $2 per ounce. The determinants of the revenue received from the NSRs covering the Betze-Post Mine are the number of ounces of gold produced, the spot price of gold, and the cost of shipping and smelting. The Betze-Post Goldstrike NPI began paying in October 1993, the month that the cumulative net profit from the Betze-Post and Goldstrike claims exceeded capital invested in those claims. Net profits are calculated as proceeds less costs. Proceeds equal the number of ounces of gold produced from the Betze-Post and Goldstrike claims and the Meikle mine, multiplied by the spot price of gold on the date gold is credited to Barrick’s account at the refinery. Costs include operating and capital costs as incurred.

 

Montana

 

Stillwater

 

Newmont holds a 5% net smelter return royalty on a portion of the Stillwater mine and all of the East Boulder mine located near Nye, Montana. The Stillwater mine and East Boulder mine projects are owned and operated by Stillwater Mining Company. Stillwater produces palladium, platinum, and associated metals (platinum group metals or PGMs) from a geological formation known as the J-M Reef. Stillwater is the only significant producer of PGMs outside of South Africa and Russia. The J-M Reef is an extensive mineralized zone containing PGMs, which has been traced over a strike length of approximately 28 miles.

 

Newmont’s royalty covers more than 80% of the combined reserves and mineralized material of the deposit, but does not cover a portion of the deposit at the Stillwater mine. The majority of production to date has been from the Stillwater mine. For that reason, the percentage of ore mined from the royalty lands has been lower than the 80% reserve percentage. For the years 1995 through 2000, the average annual percentage of total production from the royalty lands was 52.45%. The percentage of future production from the royalty lands will vary from year to year.

 

The royalty encompasses all of the reserves at the East Boulder mine, which is being developed approximately thirteen miles to the west of the Stillwater mine. Once the East Boulder mine is producing, the percentage of total production from the royalty lands will increase. Ultimately, the cumulative rate is expected to equal the percentage of reserves covered by the royalty. On November 8, 2001, Stillwater announced that in light of sharply lower prices for palladium and platinum, it was modifying mine plans for both the Stillwater and East Boulder mines.

 

Canada

 

Oil and Gas Interests

 

Newmont’s oil and gas portfolio contains 1.8 million gross acres of producing and non-producing lands located in western Canada and the Canadian Arctic. The average royalty on these lands is 6%.

 

Investment Interests

 

Echo Bay Mines Limited

 

Normandy owned approximately $72.4 million principal amount of the 11% capital securities due April 2027 of Echo Bay Mines Limited. Echo Bay is a gold company, which produced 667,000 ounces in 2001 from four mines in the United States and Canada.

 

29

 

At September 30, 2001, the principal plus accrued interest on the Echo Bay capital securities owned by Normandy amounted to $115.3 million. In 2002, Newmont converted all its Echo Bay capital securities into Echo Bay common stock and agreed to support the proposed combination of Kinross Gold Corporation, TVX Gold Inc. and Echo Bay. On January 31, 2003 the combination of Kinross Gold Corporation (“Kinross”), TVX Gold Inc. (“TVX”) and Echo Bay was announced. Shareholders of Echo Bay and TVX became common shareholders of Kinross based on the exchange ratios of 0.1733 and 2.1667, respectively. The combination of the three companies was effective February 3, 2003 and includes the exchange of Newmont’s 45.67% interest in Echo Bay for an approximate interest of 13.8% in the new Kinross. Newmont expects to record a gain of approximately $90 million on the sale of Echo Bay. See Note 24 to the Consolidated Financial Statements.

 

Australian Magnesium Corporation

 

Newmont has a 22.8% voting interest in Australian Magnesium Corporation (“AMC”), which raised equity to support the development of a project involving a proprietary chemical and dehydration process for producing anhydrous magnesium chloride as feed for an electrolytic cell to produce molten magnesium metal and magnesium alloys. Newmont had an obligation to contribute to AMC A$100 million (approximately $51 million) in equity by January 31, 2003, which was satisfied in the first quarter of 2003. See additional discussion below. In addition, Newmont provided an A$90 million (approximately $46 million) contingency equity commitment in the event the project does not achieve certain specified production and operating criteria by December 2006, which commitment is being renegotiated so as to require that Newmont provide for an A$75 million (approximately $38 million) convertible debt and equity facility. Newmont has also guaranteed a $30 million obligation payable by AMC to Ford Motor Company in the event the project does not meet certain specified production and operating criteria by November 2005. Newmont expects to meet any funding obligations from operating cash flow.

 

Newmont is guarantor of the $A71 million (approximately $36 million) corporate facility of AMC’s subsidiary, QMC Finance Pty Limited (“QMC”). QMC is a party to a series of foreign exchange contracts. All obligations related to these contracts have been guaranteed by Newmont Australia and certain of its wholly-owned subsidiaries. These contracts are designed to convert the receipt of Euro dollars and US$ revenue from the sale of magnesium into A$ cash flows to cover A$ operating costs and the servicing of A$ denominated debt. The contracts include foreign exchange forward contracts and bought put options. As of December 31, 2001, the fair value of the contracts was a negative US$10.4 million.

        We may face risks related to our investment in AMC. See the discussion in Item 1A, Risk Factors and the discussion in Item 7, Management’s Discussion and Analysis of Consolidated Financial Condition and Results of Operations, Australian Magnesium Corporation (AMC).

 

On January 3, 2003 Newmont contributed an additional A$100 million ($US 55.9 million) to AMC pursuant to its obligation under the original investment in return for approximately 167 million additional shares, increasing our ownership percentage to 40.9%. However, due to the conversion by a third-party shareholder of preferred shares to voting common shares, our interest was decreased to 27.8%. In addition, subsequent to year end the A$90 million (approximately $49 million) contingent equity commitment was negotiated into an A$75 million (approximately $41 million) contingent convertible debt and equity facility.

 

Lihir Gold

 

Newmont owns 111.3 million shares of Lihir Gold, representing a 9.74% interest and reflected in marketable securities of Lihir as a cost investment available for sale. Lihir Gold operates a gold mine in Papua New Guinea. During the second quarter of 2002, Newmont sold its investment in Lihir Gold for $84 million and recognized a pre-tax gain of $47 million on the transaction.

 

Recent Dispositions

 

Prior to its acquisition by Newmont, Franco-Nevada disposed of its interests in Aber Diamond Corporation and in warrants of Inco Limited, realizing proceeds of approximately $112 million.

 

30

 

Proven and Probable Reserves

 

Newmont has a significant reserve base, having steadily increased its economic reserves over the past decade through a combination of exploration success, acquisitions, and lower production costs. In light of this, the company reduced its exploration expenditures in 2001 and directed its drilling program toward targets with a longer time horizon than the normal year-end reserve calculation.

 

As a result, Newmont ended 2001 with equity reserves of 59.6 million ounces of gold and 6 billion pounds of copper, representing declines of 10% and 2%, respectively, from year-end 2000. Depletion of 6.7 million ounces from production reflected an overall recovery rate of nearly 80%. As in 2000, reserves were calculated at a gold price of $300 per ounce. Newmont’s 2001 reserves would decline 6.9% to 55.5 million ounces if calculated at a $275 per ounce gold price, while an increase in the gold price to $325 per ounce would increase reserves by 5% to 62.6 million ounces.

 

At year-end, Newmont’s North American gold reserves were 31.4 million equity ounces (including 29.0 million ounces in Nevada) compared with 35.2 million equity ounces (32.3 million ounces in Nevada) in 2000.

 

Overseas, year-end gold reserves of 28.2 million ounces compared with 31.1 million ounces a year earlier. In Peru, reserves at Minera Yanacocha decreased 6.5% to 34.2 million ounces (17.6 million equity ounces).

 

At Batu Hijau, gold reserves decreased 800,000 ounces to 10.9 million ounces (6.1 million equity ounces). Copper reserves declined slightly to 9.75 billion pounds (5.5 billion equity pounds).

 

Under the Company’s current mining plans, all reserves will be depleted during the terms of the Company’s existing mining licenses or concessions or, where applicable, any assured renewal or extension periods for the licenses or concessions.

 

With the acquisition in 2002 of Normandy Mining Limited, Newmont has worldwide equity gold reserves of 86.0 million ounces (based on Normandy’s reported reserves as of June 30, 2001). Not included in reserves are Franco-Nevada’s royalty interests, equivalent to 2 million ounces of gold, or Franco-Nevada’s expected 49.5% interest in Echo Bay (equivalent to 1.9 million ounces). Franco-Nevada’s acquisition of an equity interest in Echo Bay is subject to the approval of Echo Bay stockholders and is conditional on regulatory approvals. For more information see Item 2, Properties, on page 29 above.

 

Proven and probable reserves are based on extensive drilling, sampling, mine modeling and metallurgical testing from which economic feasibility has been determined. The price sensitivity of reserves depends upon several factors including grade, waste-to-ore ratio, and ore type. The reserves are estimated based on information available at the time the reserves are calculated. Recovery rates vary depending on the metallurgical properties of each deposit and the production process used. The reserve tables list the average recovery rate for each deposit, which takes into account the several different processing methods scheduled to be used. The cutoff grade, or lowest grade of mineralized material considered economic to process, varies with material type, metallurgical recoveries, and operating costs.

 

The proven and probable reserves figures presented herein are estimates, and no assurance can be given that the indicated levels of recovery of gold and copper will be realized. Ounces of gold or pounds of copper in the proven and probable reserves are prior to any losses during metallurgical treatment. Reserve estimates may require revision based on actual production experience. Market price fluctuations of gold, and copper, as well as increased production costs or reduced recovery rates, could render proven and probable reserves containing relatively lower grades of mineralization uneconomic to exploit and might result in a reduction of reserves.

 

Reserves are published once each year and will be recalculated as of December 31, 2002, for the entire company, taking into account depletion as well as any additions to reserves based on results of exploration and development work performed during 2002.

 

31

 

Newmont Mining Corporation

Gold Proven and Probable Reserves(1)—U.S. Units—$300/oz

Reflects only Gold Proven and Probable Reserves owned by Newmont Mining Corporation on  December 31, 2001

 

   

Newmont Share (%)

    

December 31, 2001

    

December 31, 2000

     

(100%)

  

Newmont share

     

Metallurgical Recovery

    

(100%)

  

Newmont Share

     

Tonnage(2)

  

Grade

   

Ounces(3)

  

Ounces

       

Tonnage(2)

  

Grade

   

Ounces(3)

  

Ounces

Deposits/Districts

    

(000 tons)

  

(oz/ton)

   

(000)

  

(000)

       

(000 tons)

  

(oz/ton)

   

(000)

  

(000)

North America

                                                 

Nevada(4)

                                                 

Nevada Open Pit

                                                 

Carlin North

  

100.00

%

  

32,612

  

0.044

   

1,428

  

1,428

     

70

%

  

33,856

  

0.041

   

1,402

  

1,402

Carlin South

  

100.00

%

  

61,335

  

0.062

   

3,829

  

3,829

     

65

%

  

75,168

  

0.059

   

4,426

  

4,426

Carlin Rain District

  

100.00

%

  

13,455

  

0.026

   

344

  

344

     

61

%

  

13,455

  

0.026

   

344

  

344

Twin Creeks

  

100.00

%

  

57,443

  

0.089

   

5,088

  

5,088

     

86

%

  

75,199

  

0.086

   

6,436

  

6,436

Lone Tree Complex

  

100.00

%

  

29,247

  

0.065

   

1,893

  

1,893

     

75

%

  

40,847

  

0.060

   

2,464

  

2,464

Phoenix(5)

  

100.00

%

  

174,177

  

0.034

   

5,991

  

5,991

     

82

%

  

174,177

  

0.034

   

5,991

  

5,991

         
      
 
          
      
 

Total Nevada Open Pit

        

368,269

  

0.050

   

18,573

  

18,573

           

412,702

  

0.051

   

21,063

  

21,063

         
      
 
          
      
 

Nevada Underground

                                                 

Chukar Footwall

  

100.00

%

  

278

  

0.49

   

138

  

138

     

90

%

                 

Carlin North Area (incl. Deep Post)

  

100.00

%

  

10,854

  

0.56

   

6,097

  

6,097

     

93

%

  

11,324

  

0.58

   

6,597

  

6,597

Carlin Rain District

  

100.00

%

  

21

  

0.24

   

5

  

5

     

83

%

  

308

  

0.27

   

82

  

82

         
      
 
          
      
 

Total Nevada Underground

        

11,153

  

0.56

   

6,240

  

6,240

           

11,632

  

0.57

   

6,679

  

6,679

         
      
 
          
      
 

Stockpiles and In-Process

  

100.00

%

  

75,378

  

0.055

   

4,143

  

4,143

     

76

%

  

92,502

  

0.049

   

4,518

  

4,518

         
      
 
          
      
 

Total Nevada(6)

        

454,800

  

0.064

   

28,956

  

28,956

           

516,836

  

0.062

   

32,260

  

32,260

         
      
 
          
      
 

Other North America

                                                 

Mesquite, California(7)

  

100.00

%

  

8,424

  

0.014

   

118

  

118

     

61

%

  

13,689

  

0.019

   

263

  

263

Golden Giant, Ontario(8)

  

100.00

%

  

3,560

  

0.29

   

1,042

  

1,042

     

96

%

  

4,779

  

0.29

   

1,369

  

1,369

Holloway, Ontario(9)

  

89.35

%

  

3,775

  

0.19

   

718

  

641

     

94

%

  

4,389

  

0.20

   

858

  

758

La Herradura, Mexico(10)

  

44.00

%

  

47,326

  

0.030

   

1,423

  

626

     

71

%

  

49,754

  

0.026

   

1,306

  

575

         
      
 
          
      
 

Total Other North America

        

63,085

  

0.052

   

3,301

  

2,427

           

72,611

  

0.052

   

3,796

  

2,965

         
      
 
          
      
 

Total North America

        

517,885

  

0.062

   

32,257

  

31,383

           

589,447

  

0.061

   

36,056

  

35,225

         
      
 
          
      
 

South America

                                                 

Minera Yanacocha, Peru

                                                 

Carachugo/Chaquicocha

  

51.35

%

  

76,987

  

0.039

   

2,993

  

1,537

     

69

%

  

141,460

  

0.033

   

4,732

  

2,430

Maqui Maqui

  

51.35

%

                            

7,589

  

0.025

   

192

  

98

San Jose

  

51.35

%

  

6,484

  

0.021

   

139

  

71

     

75

%

  

23,388

  

0.019

   

453

  

233

Cerro Yanacocha

  

51.35

%

  

486,001

  

0.027

   

13,045

  

6,699

     

72

%

  

534,946

  

0.026

   

14,058

  

7,219

La Quinua (and El Tapado)

  

51.35

%

  

456,766

  

0.027

   

12,533

  

6,436

     

73

%

  

455,522

  

0.026

   

12,039

  

6,182

Cerro Negro(5)

  

51.35

%

  

19,494

  

0.032

   

631

  

324

     

77

%

  

23,976

  

0.028

   

682

  

350

Cerro Quilish(5)

  

51.35

%

  

137,736

  

0.027

   

3,700

  

1,900

     

76

%

  

118,888

  

0.027

   

3,251

  

1,669

In Process

  

51.35

%

  

34,621

  

0.033

   

1,132

  

581

     

79

%

  

29,749

  

0.039

   

1,146

  

588

         
      
 
          
      
 

Total Minera Yanacocha(11)

        

1,218,089

  

0.028

   

34,173

  

17,548

           

1,335,518

  

0.027

   

36,553

  

18,769

         
      
 
          
      
 

Kori Kollo, Bolivia(12)

  

88.00

%

  

21,745

  

0.032

   

698

  

614

     

63

%

  

30,348

  

0.038

   

1,148

  

1,010

         
      
 
          
      
 

Total South America

        

1,239,834

  

0.028

   

34,871

  

18,162

           

1,365,866

  

0.028

   

37,701

  

19,779

         
      
 
          
      
 

Australia

                                                 

Pajingo (Vera Nancy)(13)

  

50.00

%

  

2,304

  

0.39

   

907

  

453

     

97

%

  

2,126

  

0.45

   

959

  

480

         
      
 
          
      
 

Total Australia

        

2,304

  

0.39

   

907

  

453

           

2,126

  

0.45

   

959

  

480

         
      
 
          
      
 

Asia

                                                 

Zarafshan-Newmont, Uzbekistan(14)

  

50.00

%

  

154,934

  

0.042

   

6,523

  

3,261

     

55

%

  

169,468

  

0.042