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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
FORM 10-Q
(Mark One)
(X) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended JUNE 30, 1994
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: 1-1153
NEWMONT MINING CORPORATION
------------------------------------------------------
(Exact name of registrant as specified in its charter)
Delaware 13-1806811
- - ------------------------------- -----------------------------------
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
1700 Lincoln Street, Denver, Colorado 80203
- - --------------------------------------- ---------
(Address of principal executive offices) (Zip Code)
303-863-7414
---------------------------------------------------
(Registrant's telephone number, including area code)
- - ---------------------------------------------------------------------
(Former name, address and fiscal year, if changed since last report)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. (X) Yes ( ) No
There were 85,948,906 shares of common stock outstanding on July 29, 1994.
Exhibit index is on page 18.
There are 22 pages included in this report.
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PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
NEWMONT MINING CORPORATION AND SUBSIDIARIES
Statements of Consolidated Income
(In thousands, except per share)
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended
June 30,
----------------------
1994 1993
--------- ---------
<S> <C> <C>
Sales and other income
Sales $ 139,337 $ 156,286
Gain on sale of securities - 29,607
Dividends, interest and other 1,789 3,473
--------- ---------
141,126 189,366
--------- ---------
Costs and expenses
Costs applicable to sales (72,849) (81,683)
Depreciation, depletion and amortization (21,186) (27,778)
Exploration (16,648) (12,162)
General and administrative (12,501) (7,769)
Interest, net of capitalized interest of
$5,531 in 1994 and $1,671 in 1993 (433) (3,588)
Other (28,910) (1,793)
--------- ---------
(152,527) (134,773)
--------- ---------
Equity in income (loss) of affiliated companies 3,641 (1,309)
--------- ---------
Income (loss) before income taxes (7,760) 53,284
Income tax (provision) benefit 26,697 (10,968)
Minority interest in income of Newmont Gold
Company (1,613) (2,779)
--------- ---------
Net income 17,324 39,537
Preferred stock dividends (3,953) (3,909)
--------- ---------
Net income applicable to common shares $ 13,371 $ 35,628
========= =========
Net income per common share $ 0.16 $ 0.42
========= =========
Weighted average number of shares of common
stock and common stock equivalents outstanding 86,127 85,446
Cash dividends declared per common share $ 0.12 $ 0.12
</TABLE>
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NEWMONT MINING CORPORATION AND SUBSIDIARIES
Statements of Consolidated Income
(In thousands, except per share)
(Unaudited)
<TABLE>
<CAPTION>
Six Months Ended
June 30,
---------------------
1994 1993
--------- ---------
<S> <C> <C>
Sales and other income
Sales $ 289,106 $ 292,464
Gain on sale of securities - 29,607
Dividends, interest and other 3,628 10,151
--------- ---------
292,734 332,222
--------- ---------
Costs and expenses
Costs applicable to sales (155,776) (157,086)
Depreciation, depletion and amortization (44,092) (55,956)
Exploration (28,203) (22,140)
General and administrative (21,397) (16,614)
Interest, net of capitalized interest of
$10,281 in 1994 and $3,059 in 1993 (598) (7,488)
Other (30,845) (2,085)
--------- ---------
(280,911) (261,369)
--------- ---------
Equity in income (loss) of affiliated companies 5,101 (1,453)
--------- ---------
Income before income taxes and cumulative effect
of change in accounting principle 16,924 69,400
Income tax (provision) benefit 25,732 (12,347)
Minority interest in income of Newmont Gold Company (3,743) (4,962)
--------- ---------
Income before cumulative effect of change in
accounting principle 38,913 52,091
Cumulative effect of change in accounting
principle - 38,470
--------- ---------
Net income 38,913 90,561
Preferred stock dividends (7,906) (7,960)
--------- ---------
Net income applicable to common shares $ 31,007 $ 82,601
========= =========
Income per share:
Income before cumulative effect of change
in accounting principle $ 0.36 $ 0.52
Cumulative effect of change in accounting
principle - 0.45
--------- ---------
Net income per share $ 0.36 $ 0.97
========= =========
Weighted average number of shares of common stock
and common stock equivalents outstanding 86,125 85,243
Dividends declared per common share $ 0.24 $ 0.24
</TABLE>
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NEWMONT MINING CORPORATION AND SUBSIDIARIES
Consolidated Balance Sheets
(In thousands)
(Unaudited)
<TABLE>
<CAPTION>
June 30, December 31,
1994 1993
---------- ----------
<S> <C> <C>
Assets
Cash and cash equivalents $ 31,045 $ 69,750
Short-term investments 14,315 18,709
Inventories 129,826 122,246
Other 35,455 18,259
---------- ----------
Current assets 210,641 228,964
Property, plant and mine development, net 961,390 794,530
Other 154,592 162,916
---------- ----------
Total assets $1,326,623 $1,186,410
========== ==========
Liabilities
Short-term debt $ 15,739 $ 15,739
Accounts payable 20,914 17,937
Accrued income taxes 8,059 2,143
Other accrued liabilities 86,910 74,215
---------- ----------
Current liabilities 131,622 110,034
Long-term debt 314,500 192,000
Reclamation liabilities 71,537 71,093
Other long-term liabilities 72,320 92,040
---------- ----------
Total liabilities 589,979 465,167
---------- ----------
Minority interest in Newmont Gold Company 77,793 91,411
---------- ----------
Contingencies
Stockholders' Equity
Preferred stock 14,375 14,375
Common stock 137,517 137,274
Capital in excess of par value 297,716 293,031
Retained earnings 209,243 185,152
---------- ----------
Total stockholders' equity 658,851 629,832
---------- ----------
Total liabilities and stockholders'
equity $1,326,623 $1,186,410
========== ==========
</TABLE>
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NEWMONT MINING CORPORATION AND SUBSIDIARIES
Statements of Consolidated Cash Flows
(In thousands)
(Unaudited)
<TABLE>
<CAPTION>
Six Months Ended
June 30,
---------------------
1994 1993
--------- ---------
<S> <C> <C>
Operating activities:
Net income $ 38,913 $ 90,561
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation, depletion and amortization 44,092 55,956
Minority interest, net of dividends 1,256 4,962
Undistributed (earnings) losses of affiliates (5,066) 1,453
Deferred taxes (28,284) (53,162)
Debt repayment at less than monetized amount - (12,334)
Gain on sale of affiliate shares - (29,607)
--------- ---------
50,911 57,829
(Increase) decrease in operating assets:
Inventories (4,877) (24,831)
Other assets 22,361 (4,162)
Increase (decrease) in operating liabilities:
Accounts payable and accrued expenses (2,882) (7,857)
Accrued income taxes (9,904) 8,703
Other liabilities 550 5,230
Other operating 74 438
--------- ---------
Net cash provided by operating activities 56,233 35,350
--------- ---------
Investing activities:
Additions to property, plant and mine development (198,225) (102,359)
Proceeds from sale of securities - 66,978
Other 4,580 (9,886)
--------- ---------
Net cash used in investing activities (193,645) (45,267)
--------- ---------
Financing activities:
Proceeds from long-term borrowings 122,500 15,000
Repayments of long-term borrowings - (43,765)
Proceeds from issuance of common stock 4,926 4,958
Dividends paid on common stock (20,813) (20,460)
Dividends paid on preferred stock (7,906) (9,047)
--------- ---------
Net cash provided by (used in) financing
activities 98,707 (53,314)
--------- ---------
Net decrease in cash and cash equivalents (38,705) (63,231)
Cash and cash equivalents at beginning of period 69,750 291,024
--------- ---------
Cash and cash equivalents at end of period $ 31,045 $ 227,793
========= =========
</TABLE>
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NEWMONT MINING CORPORATION AND SUBSIDIARIES
Statements of Consolidated Cash Flows
(In thousands)
(Unaudited)
<TABLE>
<CAPTION>
Six Months Ended
June 30,
---------------------
1994 1993
-------- --------
<S> <C> <C>
Supplemental information:
Interest paid, net of amounts capitalized of
$10,281 in 1994 and $3,059 in 1993 $ (937) $ 7,205
Income taxes paid $ 12,057 $ 19,700
</TABLE>
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NEWMONT MINING CORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(Unaudited)
(1) Basis of Preparation of Financial Statements
These unaudited interim financial statements of Newmont Mining
Corporation and subsidiaries (collectively the "Corporation") have been
prepared in accordance with the rules and regulations of the Securities and
Exchange Commission. Such rules and regulations allow the omission of certain
information and footnote disclosures normally included in financial statements
prepared in accordance with generally accepted accounting principles, so long
as the statements are not misleading.
In the opinion of management, these financial statements reflect all
adjustments which are necessary to a fair statement of the results for the
periods presented. All adjustments were of a normal recurring nature except
for the following: (1) During the quarter and six months ended June 30, 1994,
a charge of $27.1 million related to environmental obligations associated with
former mining activities as discussed in Note 4 herein; (2) during the quarter
and six months ended June 30, 1994, an income tax benefit of $16.2 million
resulting from the resolution of certain tax issues associated with prior
years; and (3) in the six months ended June 30, 1993, a benefit to income of
$38.5 million for the cumulative effect of a change in accounting principle
effective January 1, 1993 for accounting for income taxes as discussed in Item
8, Note 5 of the Corporation's Form 10-K for the year ended December 31, 1993.
These interim financial statements should be read in conjunction with the
annual financial statements of the Corporation included in its 1993 annual
report on Form 10-K.
All share and per share information has been restated to reflect a
1.2481 to 1 share stock split declared March 21, 1994.
Certain prior year amounts have been reclassified to conform with the
current year presentation.
(2) Transaction with Newmont Gold Company
Effective January 1, 1994, Newmont Gold Company ("NGC"), the principal
operating subsidiary of the Corporation, acquired essentially all the
Corporation's non-NGC assets and assumed essentially all of the Corporation's
non-NGC liabilities in a tax-free transaction. As part of the transaction, the
Corporation transferred 8,649,899 shares of NGC stock to NGC, reducing the
Corporation's interest in NGC to 89.2% from 90.1%. The result of the
transaction is that the common shareholders of both entities have interests in
the same assets and liabilities. Furthermore, the Corporation declared a
1.2481 shares to 1 share stock split on March 21, 1994 which will result in
future per share earnings of the two entities being comparable.
The transfer of assets, NGC common stock and liabilities to NGC was
recorded at historical cost as the transaction was between entities under
common control. As a result of the transaction, consolidated retained earnings
increased approximately $14 million and the minority interest in NGC decreased
by a like amount due to net liabilities with a historical cost of approximately
$202 million being transferred to NGC, offset partially by the Corporation's
decrease in ownership of NGC.
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(3) Inventories
Inventories consist of the following:
<TABLE>
<CAPTION>
June 30, December 31,
1994 1993
------------ ------------
(In thousands)
<S> <C> <C>
Current:
Ore and in-process $ 64,070 $ 55,874
Precious metals 36,815 38,090
Materials and supplies 26,567 25,907
Other 2,374 2,375
-------- --------
$129,826 $122,246
-------- --------
Non-current:
Ore in stockpiles (included
in other assets) $ 37,503 $ 40,206
-------- --------
</TABLE>
(4) Contingencies
The Corporation is involved in several matters concerning
environmental obligations primarily associated with former mining activities.
Based upon the Corporation's best estimate of its liability for these matters,
$66.3 million was accrued at June 30, 1994, excluding $18.1 million also
accrued for reclamation costs relating to currently producing mineral
properties. The amounts are included in reclamation liabilities and other
current liabilities. The $66.3 million at June 30, 1994 includes a charge of
$7.1 million taken in the second quarter of 1994 as a result of the Corporation
revising its estimate of the costs associated with these matters. Depending
upon the ultimate resolution of these matters, the Corporation believes that it
is reasonably possible that the liability for these matters could be as much as
65% greater or 15% lower than the amount accrued at June 30, 1994.
The Corporation has recorded net long-term receivables from insurance
companies of approximately $17 million at June 30, 1994 for both a portion of
the costs previously expended and for estimated future costs associated with
environmental obligations covered by insurance policies associated with former
mining activities. This amount is substantially less than what the Corporation
has or will claim from the insurance carriers. All of the claims are contested
by the insurance carriers. The Corporation has had and continues to have
discussions with the insurance carriers regarding its claims. Certain of the
insurance carriers have commenced declaratory judgment actions seeking to avoid
coverage and the Corporation has commenced litigation seeking coverage from
certain other carriers. As a result of the Corporation's counsels' recent
review of the actions and the fact that settlement discussions with the
insurance carriers have not progressed as quickly as had previously been
expected, the Corporation provided a valuation allowance of $20 million in the
second quarter of 1994. Although the Corporation cannot predict the outcome of
the legal actions or assure receipt of the amounts recorded, the Corporation
will continue to vigorously pursue recovery under the insurance policies and
believes that it is reasonably possible that the ultimate amounts recovered
will exceed the net receivable recorded as of June 30, 1994. The net
receivable recorded at June 30, 1994 represents the probable amount the
Corporation expects to receive based upon its evaluation of the discussions
with the insurance companies, its discussions with in-house and outside counsel
regarding the merits of the
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various claims made and defenses raised, its interpretation of the insurance
policies and its factual investigation of the issues.
The following is a discussion of the environmental obligations
associated with former mining activities as of June 30, 1994.
Idarado Mining Company ("Idarado") - 80.1% owned by NGC
In July 1992, the Corporation and Idarado signed a consent decree with
the State of Colorado ("State") which was agreed to by the U.S. District Court
of Colorado to settle a lawsuit brought by the State under the Comprehensive
Environmental Response, Compensation, and Liability Act ("CERCLA"), generally
referred to as the "Superfund Act." Idarado paid $5.35 million pursuant to
this consent decree in August 1992 to settle natural resources damages, past
and future response costs and to provide habitat enhancement work. In
addition, Idarado agreed in the consent decree to undertake specified
reclamation and remediation work related to its former mining activities in the
Telluride/Ouray area of Colorado. The Corporation's best estimate of the cost
of this work is included in the gross liability, as previously discussed. If
the reclamation and remediation work does not meet certain measurement criteria
specified in the consent decree, the State and court reserve the right to
require Idarado to perform other reclamation and remediation work. Idarado and
the Corporation have obtained a $16.3 million letter of credit to secure their
obligations under the consent decree.
Resurrection Mining Company ("Resurrection") - 100% owned by NGC
In 1983, the State of Colorado ("State") filed a lawsuit under the
Superfund Act which involves a joint venture mining operation near Leadville,
Colorado in which Resurrection is a joint venturer. This action was
subsequently consolidated with a lawsuit filed by the United States
Environmental Protection Agency ("EPA") in 1986. The EPA is taking the lead
role on cleanup issues and the matters are now proceeding principally through
the administrative processes of CERCLA, rather than through the court action.
The proceedings seek to compel the defendants to remediate the impacts of
pre-existing mining activities which the government agencies claim are causing
substantial environmental problems in the area. The mining operations of the
joint venture are operated by ASARCO, the other joint venturer. The
governments have made the Corporation, Resurrection, the joint venture and
ASARCO defendants in the proceedings. They are also proceeding against other
companies with interests in the area.
The EPA divided the remedial work into two phases. Phase I addresses
a drainage and access tunnel owned by the joint venture - the Yak Tunnel.
Phase II addresses the remainder of the site.
In 1988 and 1989, the EPA issued administrative orders with respect to
Phase I work for the Yak Tunnel. The joint venture, ASARCO, Resurrection and
the Corporation have collectively implemented those orders by constructing a
water treatment plant which was placed in operation in early 1992. The joint
venture is in negotiations regarding remaining remedial work for Phase I, which
primarily consists of monitoring and environmental maintenance activities.
In October 1993, Resurrection paid $4.4 million for its share of past
response costs through January 1991 for the United States and through January
1992 for the State.
The EPA has not yet completed work to define a remedy for Phase II and
thus has not published a current estimate of the costs of such remedial
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action. Accordingly, the Corporation cannot yet determine the full extent or
cost of remedial action which will be required under Phase II. Moreover, in
addition to costs of remedial action, the government agencies will seek to
recover past and future response costs to be incurred at the site and may seek
to recover for damages to natural resources. The parties have entered into a
consent decree with respect to Phase II which apportions liabilities and
responsibilities for the site among the various parties. The consent decree
has been lodged with the court but has not yet been entered by the court. The
consent decree will not be final and binding until entered by the court.
Although the ultimate amount of total costs and Resurrection's and the
Corporation's exposure for such costs for Phase I and Phase II cannot be
presently determined, the Corporation's best estimate of its potential exposure
for these costs is included in the gross liability for these matters,
previously discussed.
Dawn Mining Company ("Dawn") - 51% owned by NGC
Dawn leased a currently inactive open-pit uranium mine on the Spokane
Indian Reservation in the State of Washington ("State"). The mine is subject
to regulation by agencies of the United States Department of Interior, the
Bureau of Indian Affairs and the Bureau of Land Management, as well as the EPA.
Dawn also owns a nearby uranium millsite facility.
In 1991, Dawn's lease was formally terminated. As a result, Dawn was
required to file a formal reclamation plan. Dawn does not have sufficient
funds to pay for such a reclamation plan or to pay for the closure of its mill.
Dawn proposed to the State a mill closure plan which could potentially generate
the necessary funds to reclaim the mine and the mill. The State notified Dawn
that the proposed plan was not the State's preferred alternative and was not
consistent with certain policy considerations of the State. Dawn has submitted
a revised mill closure plan to address the State's concerns. The State has not
yet acted on the revised proposed plan. The Corporation's best estimate for
the future costs related to these matters is included in the gross liability
for environmental matters, previously discussed.
The Department of Interior previously notified Dawn that when the
lease was terminated, it would seek to hold Dawn and the Corporation (as Dawn's
then 51% owner) liable for any costs incurred as a result of Dawn's failure to
comply with the lease and applicable regulations. The Corporation would
vigorously contest any such claims. The Corporation cannot reasonably predict
the likelihood or outcome of any future action against Dawn or the Corporation
arising from this matter.
(5) Supplementary Data
The ratio of earnings to fixed charges for the six months ended June
30, 1994 was 1.2. The ratio of earnings to combined fixed charges and
preferred stock dividends for the six months ended June 30, 1994 was less than
1.0:1 due to the $27.1 million of non-cash charges related to environmental
obligations discussed in Note 4. The amount of the coverage deficiency was
$5.8 million.
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Item 2. Management's Discussion and Analysis of Results of Operations and
Financial Condition
As discussed in Note 2 of Item 1, effective January 1, 1994, Newmont
Gold Company ("NGC"), the principal producing operating subsidiary of Newmont
Mining Corporation ("NMC"), acquired essentially all of the NMC corporate
assets (except for approximately 86 million shares of common stock of NGC held
by NMC) and assumed essentially all of the NMC corporate liabilities which it
did not already own or have an interest. In that the transaction occurred
within NMC's consolidated group, it had minimal impact on consolidated results
of operations, liquidity and capital resources. NMC's consolidated group is
referred to hereafter as the "Corporation".
In conjunction with the transaction with NGC, NMC declared a 1.2481 to
1 share stock split to equate NMC's outstanding shares to the shares it holds
in NGC. All share and per share information has been restated for the stock
split. The following discussion summarizes the Corporation's results of
operations for the quarters and six month periods ended June 30, 1994 and 1993
and changes in financial condition from December 31, 1993 to June 30, 1994, as
well as the impacts of the transaction with NMC. This discussion should be
read in conjunction with the Management's Discussion and Analysis included in
the Corporation's 1993 annual report on Form 10-K.
RESULTS OF OPERATIONS
The Corporation earned $17.3 million, or $0.16 per share, and $38.9
million, or $0.36 per share, in the quarter and six months ended June 30, 1994,
respectively, compared with $39.5 million, or $0.42 per share, and $90.6
million, or $0.97 per share, in the respective 1993 periods. The 1994 periods
include a tax benefit of $16.2 million resulting from the resolution of certain
tax issues associated with prior years and $27.1 million of charges ($17.6
million after-tax) associated with environmental obligations discussed in Note
4 of Item 1, which together net to a charge of $0.01 per share on an after-tax
basis after considering NGC's minority interest. The 1993 periods included a
gain of $29.6 million, or $19.3 million and $0.22 per share after-tax, on the
sale of an investment in Newcrest Mining Limited, a former subsidiary of NMC.
In addition, the six months ended June 30, 1993 included a benefit of $38.5
million, or $0.45 per share, for the cumulative effect of a change in
accounting principle for income taxes. Earnings for the 1994 periods were
impacted by anticipated lower gold production.
Sales revenue decreased $17.0 million, or 11%, for the second quarter
of 1994 compared to the same quarter of 1993 and decreased $3.4 million, or 1%,
for the first six months of 1994 compared to 1993. The following table shows
the impact of price and quantity variances between the periods on sales
revenues (in millions):
<TABLE>
<CAPTION>
1994 Compared to 1993
----------------------
Second First Six
Quarter Months
--------- ---------
<S> <C> <C>
Changes in sales revenues
due to change in:
Average sales price $ 2.0 $ 15.5
Quantity sold (19.0) (18.9)
------ ------
Total decrease $(17.0) $ (3.4)
====== ======
</TABLE>
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The following table reflects the gold ounces sold and average price
for the respective periods:
<TABLE>
<CAPTION>
Second Quarter Six Months
Ended June 30, Ended June 30,
----------------- --------------
1994 1993 1994 1993
----- ----- ----- -----
<S> <C> <C> <C> <C>
Ounces sold (in thousands) 365.0 415.4 754.7 806.7
Average price
per ounce $382 $376 $383 $362
</TABLE>
Production decreased in the 1994 periods as the Corporation began its
transition to ready itself to process large quantities of refractory ore at its
Carlin operations. In May 1994, the Corporation shut down its Mill No. 2 at
Carlin to facilitate the incorporation of parts of this mill into the
Corporation's new refractory ore treatment plant which will process high-grade
refractory ore. This plant is expected to become operational by the end of the
third quarter of 1994. The Corporation expects its total annual production to
be 1.6 million ounces in 1994.
The decrease in 1994 production attributable to sales revenues is
partially offset by the Corporation's equity interest in Minera Yanacocha S.A.
("Yanacocha"), a 38% owned Peruvian corporation which commenced production in
August 1993. Yanacocha sold 69,200 ounces, or 26,300 ounces to the
Corporation's interest, and 114,800 ounces, or 43,600 ounces to the
Corporation's interest, in the second quarter and first six months of 1994,
respectively. These ounces were produced at an average operating cost,
excluding depreciation, depletion and amortization, of $126 per ounce and $135
per ounce in the second quarter and first six months of 1994, respectively.
The Corporation's equity income in the 1994 periods is a result of this
investment.
In 1993, the Corporation realized gold prices above average market
prices due to a hedging program. No production in 1994 has been hedged.
As a result of lower production, the Corporation's costs applicable to
sales decreased in the aggregate in the 1994 periods, but increased on a per
ounce of gold sold basis in the 1994 periods from the 1993 periods. The
following table summarizes the significant components of these costs per ounce
of gold sold:
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
June 30, June 30,
------------------ ----------------
1994 1993 1994 1993
---- ---- ---- ----
<S> <C> <C> <C> <C>
Production costs $172 $162 $177 $160
Royalties 21 28 23 29
Other 6 7 6 6
---- ---- ---- ----
$199 $197 $206 $195
==== ==== ==== ====
</TABLE>
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In the aggregate, production costs decreased approximately $4.1
million for the second quarter of 1994 compared to the second quarter of 1993.
The decrease is due primarily to lower costs associated with mining and milling
as a result of lower tons mined and milled. In the aggregate, production costs
increased approximately $5.5 million for the six months ended June 30, 1994
compared to the same period of 1993. The increase is primarily the result of a
larger increase in ore inventory in the 1993 period relative to 1994 ($14.8
million) and a greater reduction of in-process inventory in the 1994 period
relative to 1993 ($2.1 million). These increases were partially offset by
lower mining and milling costs as a result of lower tons mined and milled. The
increased per ounce production costs are a result of processing higher cost
ores in the 1994 periods due to higher waste-to-ore ratios and slightly lower
grades.
For the 1994 second quarter and six month period, royalty costs on an
aggregate basis were $7.7 million and $17.2 million, respectively. This
compares to royalty costs in the 1993 second quarter and six month period of
$11.5 million and $23.6 million, respectively. Royalty costs on an aggregate
and per ounce basis were lower in the 1994 periods than the same periods in 1993
due to less royalty-burdened ore being treated in the 1994 periods.
Depreciation, depletion and amortization decreased $6.6 million and
$11.9 million in the 1994 second quarter and first six months, respectively,
when compared to the same periods of 1993. Approximately $2.7 million of the
decrease between quarters and $3.5 million of the decrease between the six
month periods is the result of facilities that became either fully depreciated
or placed on standby status and thus no comparable depreciation was taken in
1994 periods. Another $3.1 million and $4.6 million of the decrease in the
1994 quarter and six month period, respectively, was due to a change in
estimated useful lives of certain depreciable assets effective July 1, 1993.
In addition, $1.9 million of the decrease in the six month 1994 period is the
result of lower estimated future dewatering costs.
Exploration expense in the 1994 periods is up over the comparable 1993
periods as had been anticipated due to increased international exploration
activity.
Compared to the 1993 amounts, general and administrative expense
increased by $4.7 million and $4.8 million in the second quarter and first six
months of 1994, respectively, primarily due to the Corporation's expanding
international activities.
Net interest expense decreased during the second quarter and first six
months of 1994 due to almost all interest costs for such periods being
capitalized as a result of major construction projects at the Carlin
operations, primarily the refractory ore treatment plant. The refractory ore
treatment plant is expected to be operational by the end of the third quarter
of 1994.
Other expense increased $27.1 million and $28.8 million for the second
quarter and first six months periods of 1994, respectively, over the same
periods of 1993. In the 1994 second quarter, as discussed in Note 4 of Item 1,
a valuation allowance of $20.0 million was made against long-term receivables
from insurance companies for recoveries related to environmental obligations
associated with former mining activities and a provision of $7.1
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million was made for additional estimated environmental related costs
associated with the same former mining activities. The Corporation recorded
the valuation allowance after discussions with counsel reviewing the litigation
with the insurance companies and due to the cases not progressing as quickly as
previously expected. Nevertheless, the Corporation intends to vigorously
pursue its claims against the insurance companies and believes it is reasonably
possible that it will ultimately recover more than the approximate net $17
million receivable recorded at June 30, 1994, although there can be no
assurance that this amount will be recovered. Due to the expectation that the
actual cash payments for the environmental obligations will occur over a number
of years and the Corporation cannot predict when it will receive insurance
recoveries, the charge for the valuation allowance as well as additional
environmental obligations are not expected to have any significant negative
impact on the Corporation's liquidity. The Corporation continuously monitors
and reviews its environmental obligations, and although the Corporation
believes that it has adequately accrued for such costs, as additional facts
become known, additional provisions may be required.
In Oregon, a petition drive has placed an initiative on the ballot for
the fall election which would require the back-filling of open pit gold mines.
The Corporation's Grassy Mountain project is in Oregon and is expected to be an
open pit mine. If the initiative is passed, it would be uneconomic to use an
open pit to mine the current reserves.
During the second quarter of 1994, the Corporation recognized a $16.2
million income tax benefit as a result of the resolution of certain tax issues
associated with prior years. This, combined with a deferred tax benefit of
approximately $9.5 million associated with the previously mentioned $27.1
million total charge associated with environmental obligations, resulted in the
tax benefit for the second quarter and first six months of 1994. In addition,
the benefits of percentage depletion result in a low effective tax rate for the
year.
LIQUIDITY AND CAPITAL RESOURCES
During the first six months of 1994, the Corporation's capital
expenditures were $198.2 million and cash flow from operating activities was
$56.2 million. Other significant sources of cash during the period were $75.0
million of borrowings under the Corporation's revolving credit facility and
$47.5 million of project financing debt related to construction of the
Uzbekistan leaching project. Of the capital expenditures, $100.9 million was
spent on the refractory ore treatment facility and $30.7 million was spent on
the Uzbekistan project. In addition, the Corporation capitalized $16.9 million
of mining costs associated with the Post deposit in Nevada. Due to the diverse
waste-to-ore ratios of the deposit, costs are capitalized to the extent they do
not relate to current production.
As stated in the Management's Discussion and Analysis in the
Corporation's 1993 annual report on Form 10-K, available cash balances and cash
flow from operating activities will not be sufficient to cover an expected $400
million in capital expenditures in 1994. The Corporation has a $400 million
revolving credit facility, of which $75 million was outstanding at June 30,
1994. The Corporation also expects to enter into a sale-leaseback transaction
to finance the Carlin refractory ore treatment facility. The Corporation
expects to raise approximately $340 million from this transaction and use a
portion of the proceeds to pay down outstanding balances under its revolving
credit facility. This transaction is expected to be consummated in the second
half of 1994 and will be reflected as a financing transaction for financial
statement purposes. The Corporation believes that this financing, in
conjunction with its other sources of
<PAGE> 15
PAGE 15
funding described above, provides adequate liquidity to finance the
Corporation's capital investment programs. However, the Corporation
continuously monitors capital markets and may utilize alternative sources of
funds available to it. The Corporation expects to fund maturities of its debt
through operating cash flow or by refinancing the debt as it becomes due,
or both.
For the first six months of 1994, the Corporation paid common stock
dividends of $0.24 per share, or $20.8 million. In addition, the Corporation
paid $7.9 million of preferred stock dividends.
The decrease in minority interest in subsidiaries is a result of the
transaction with NGC. In that approximately $202 million of net liabilities
were assumed by NGC, this decreased the minority interest by approximately $21
million. This decrease was partially offset by the minority interest in NGC
increasing from 9.9% to 10.8%. The net decrease was offset by a like increase
to retained earnings.
<PAGE> 16
PAGE 16
PART II - OTHER INFORMATION
Item 4. Submission of Matters to a Vote of Security Holders
Registrant's annual meeting of stockholders was held on May 12, 1994.
All nine directors nominated to serve as directors of Registrant were
elected. The vote was as follows:
<TABLE>
<CAPTION>
Broker
Nominee For Withheld Abstentions Non-Votes
- - -------------------- ---------- -------- ----------- ---------
<S> <C> <C> <C> <C>
R. I. J. Agnew 57,615,809 367,759 0 0
J. P. Bolduc 57,771,126 212,442 0 0
R. C. Cambre 57,851,721 131,847 0 0
J. P. Flannery 57,846,614 136,954 0 0
T. A. Holmes 57,848,209 135,359 0 0
G. R. Parker 57,849,827 133,741 0 0
T. P. Philip 57,846,727 136,841 0 0
R. A. Plumbridge 57,604,303 379,265 0 0
W. I. M. Turner, Jr. 57,849,007 134,561 0 0
</TABLE>
The stockholders defeated a proposal that the Registrant report on the
CERES principles for corporate environmental accountability. The vote was as
follows:
For 10,101,442
Against 37,321,624
Abstentions 2,307,586
Broker non-votes 8,252,916
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits:
11 - Statement re Computation of Per Share Earnings.
12.1 - Statement re Computation of Ratio of Earnings to Fixed Charges.
12.2 - Statement re Computation of Ratios of Earnings to Combined Fixed
Charges and Preferred Stock Dividends.
(b) Reports on Form 8-K:
No reports were filed on Form 8-K during the quarter ended June 30,
1994.
<PAGE> 17
PAGE 17
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
NEWMONT MINING CORPORATION
(Registrant)
Date: August 12, 1994 /s/ Wayne W. Murdy
Wayne W. Murdy
Senior Vice President and
Chief Financial Officer
(Principal Financial Officer)
/s/ Gary E. Farmar
Gary E. Farmar
Vice President and Controller
(Principal Accounting Officer)
<PAGE> 18
PAGE 18
EXHIBIT INDEX
Page
-----
Exhibit 11 - Statement re Computation of Per Share Earnings 19-20
Exhibit 12.1 - Statement re Computation of Ratios of Earnings 21
to Fixed Charges
Exhibit 12.2 - Statement re Computation of Ratios of Earnings 22
to Combined Fixed Charges and Preferred Stock
Dividends
<PAGE> 1
PAGE 19
EXHIBIT 11
Page 1 of 2
NEWMONT MINING CORPORATION AND SUBSIDIARIES
COMPUTATION OF PER SHARE EARNINGS
(In thousands, except per share)
PRIMARY EARNINGS PER SHARE CALCULATIONS
<TABLE>
<CAPTION>
Three Months Six Months
Ended June 30, Ended June 30,
----------------- ----------------
1994 1993 1994 1993
-------- ------- ------- -------
<S> <C> <C> <C> <C>
INCOME DATA:
Income before cumulative
effect of change in
accounting principle $17,324 $39,537 $38,913 $52,091
Preferred stock dividends (3,953) (3,909) (7,906) (7,960)
------- ------- ------- -------
Income before cumulative
effect of change in
accounting principle
applicable to common shares 13,371 35,628 31,007 44,131
Cumulative effect of change
in accounting principle - - - 38,470
------- ------- ------- -------
Net income applicable to
common shares $13,371 $35,628 $31,007 $82,601
======= ======= ======= =======
COMMON AND COMMON EQUIVALENT SHARES:
Weighted average common
shares 85,932 85,155 85,889 85,114
Equivalent common shares
from stock options 195 291 236 129
------- ------- ------- -------
Common and common equivalent
shares 86,127 85,446 86,125 85,243
======= ======= ======= =======
EARNINGS PER COMMON SHARE:
Income before cumulative
effect of change in
accounting principle $ 0.16 $ 0.42 $ 0.36 $ 0.52
Cumulative effect of change
in accounting principle - - - 0.45
------- ------- ------- -------
Net income per common and
common equivalent shares $ 0.16 $ 0.42 $ 0.36 $ 0.97
======= ======= ======= =======
</TABLE>
<PAGE> 2
PAGE 20
EXHIBIT 11
Page 2 of 2
NEWMONT MINING CORPORATION AND SUBSIDIARIES
COMPUTATION OF PER SHARE EARNINGS
(In thousands, except per share)
FULLY DILUTED EARNINGS PER SHARE CALCULATIONS
<TABLE>
<CAPTION>
Three Months Six Months
Ended June 30, Ended June 30,
---------------- ----------------
1994 1993 1994 1993
------- ------- ------- -------
<S> <C> <C> <C> <C>
INCOME DATA:
Income before cumulative
effect of change in
accounting principle $17,324 $39,537 $38,913 $52,091
Cumulative effect of change
in accounting principle - - - 38,470
------- ------- ------- -------
Net income applicable to
common shares $17,324 $39,537 $38,913 $90,561
======= ======= ======= =======
COMMON AND COMMON EQUIVALENT SHARES:
Weighted average common shares 85,932 85,155 85,889 85,114
Equivalent common shares from
stock options 195 423 236 422
Equivalent common shares from
conversion of preferred stock 7,899 7,899 7,899 7,899
------- ------- ------- -------
Common and common equivalent
shares 94,026 93,477 94,024 93,435
======= ======= ======= =======
EARNINGS PER COMMON SHARE:
Income before cumulative
effect of change in
accounting principle $ 0.18 $ 0.42 $ 0.41 $ 0.56
Cumulative effect of change
in accounting principle - - - 0.41
------- ------- ------- -------
Net income per common and
common equivalent shares $ 0.18 $ 0.42 $ 0.41 $ 0.97
======= ======= ======= =======
</TABLE>
<PAGE> 1
PAGE 21
EXHIBIT 12.1
NEWMONT MINING CORPORATION AND SUBSIDIARIES
COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES
(In thousands, except ratios)
(Unaudited)
<TABLE>
<CAPTION>
Six Months
Ended
June 30, 1994
-------------
<S> <C>
Earnings:
Income before income taxes $ 16,924
Adjustments:
Net interest expense (1) 598
Amortization of capitalized
interest 572
Portion of rental expense
representative of interest 385
Undistributed income of less
than 50% owned entities (5,066)
--------
$ 13,413
========
Fixed Charges:
Net interest expense (1) $ 598
Capitalized interest 10,281
Portion of rental expense
representative of interest 385
--------
$ 11,264
========
Ratio of earnings to fixed charges 1.2
========
</TABLE>
(1) Includes interest expense of majority-owned subsidiaries and amortization
of debt issuance costs.
<PAGE> 1
PAGE 22
EXHIBIT 12.2
NEWMONT MINING CORPORATION AND SUBSIDIARIES
COMPUTATION OF RATIO OF EARNINGS TO COMBINED
FIXED CHARGES AND PREFERRED STOCK DIVIDENDS
(In thousands, except ratios)
(Unaudited)
<TABLE>
<CAPTION>
Six Months
Ended
June 30, 1994
-------------
<S> <C>
Earnings:
Income before income taxes $ 16,924
Adjustments:
Net interest expense (1) 598
Amortization of capitalized
interest 572
Portion of rental expense
representative of interest 385
Undistributed income of less
than 50% owned entities (5,066)
-------
$13,413
=======
Fixed Charges:
Net interest expense (1) 598
Preferred stock dividends (2) 7,906
Capitalized interest 10,281
Portion of rental expense
representative of interest 385
-------
$19,170
=======
Ratio of earnings to combined fixed
charges and preferred stock dividends (3) 0.7
=======
</TABLE>
(1) Includes interest expense of majority-owned subsidiaries and amortization
of debt issuance costs.
(2) Reflects actual preferred stock dividends without an adjustment for
pretax earnings which would be required to cover such dividend
requirements due to a tax benefit recognized in the period.
(3) The ratio is less than 1.0:1 due to the $27.1 million of non-cash charges
related to environmental obligations discussed in Note 4 of Item 1. The
amount of the coverage deficiency is $5.8 million.
