<PAGE> 1
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 SEPTEMBER 30, 1995
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
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NEWMONT MINING CORPORATION
(Exact name of registrant as specified in its charter)
Delaware 13-1806811
- ------------------------------- --------------------------------------
(State or other jurisdiction (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 86,226,703 shares of common stock outstanding on October 31,
1995.
Exhibit index is on page 19.
There are 24 pages included in this report.
<PAGE> 2
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
September 30,
-----------------------
1995 1994
--------- ---------
<S> <C> <C>
Sales and other income
Sales $ 172,330 $ 150,063
Dividends, interest and other 7,813 6,772
--------- ---------
180,143 156,835
--------- ---------
Costs and expenses
Costs applicable to sales 92,266 83,001
Depreciation, depletion and amortization 27,976 24,192
Exploration 18,385 19,523
General and administrative 10,652 10,485
Interest, net of capitalized interest
of $3,532 in 1995 and $6,609 in 1994 8,691 307
Other 784 4,250
--------- ---------
158,754 141,758
--------- ---------
Equity in income of affiliated companies 7,064 5,991
--------- ---------
Pretax income 28,453 21,068
Income tax (provision) benefit (594) 1,338
Minority interest in income of Newmont
Gold Company 2,567 1,982
--------- ---------
Net income 25,292 20,424
Preferred stock dividends 3,953 3,953
--------- ---------
Net income applicable to common shares $ 21,339 $ 16,471
========= =========
Net income per common share $ 0.25 $ 0.19
========= =========
Weighted average number of shares of common
stock and common stock equivalents outstanding 86,481 86,190
Cash dividends declared per common share $ 0.12 $ 0.12
</TABLE>
<PAGE> 3
NEWMONT MINING CORPORATION AND SUBSIDIARIES
Statements of Consolidated Income
(In thousands, except per share)
(Unaudited)
<TABLE>
<CAPTION>
Nine Months Ended
September 30,
-----------------------
1995 1994
--------- ---------
<S> <C> <C>
Sales and other income
Sales $ 451,849 $ 439,168
Dividends, interest and other 39,737 10,401
Gain on disposition of investment 113,188 -
--------- ----------
604,774 449,569
--------- ---------
Costs and expenses
Costs applicable to sales 265,103 238,777
Depreciation, depletion and amortization 76,503 68,284
Exploration 40,549 47,726
General and administrative 34,329 31,882
Interest, net of capitalized interest
of $9,609 in 1995 and $16,890 in 1994 26,137 905
Other 27,408 35,095
--------- ---------
470,029 422,669
--------- ---------
Equity in income of affiliated companies 20,996 11,093
--------- ---------
Pretax income 155,741 37,993
Income tax (provision) benefit (35,428) 27,069
Minority interest in income of Newmont
Gold Company 11,668 5,725
--------- ---------
Net income 108,645 59,337
Preferred stock dividends 11,859 11,859
--------- ---------
Net income applicable to common shares $ 96,786 $ 47,478
========= =========
Net income per common share $ 1.12 $ 0.55
========= =========
Weighted average number of shares of common
stock and common stock equivalents outstanding 86,310 86,142
Cash dividends declared per common share $ 0.36 $ 0.36
</TABLE>
<PAGE> 4
NEWMONT MINING CORPORATION AND SUBSIDIARIES
Consolidated Balance Sheets
(In thousands)
(Unaudited)
<TABLE>
<CAPTION>
September 30, December 31,
1995 1994
------------ ------------
<S> <C> <C>
Assets
Cash and cash equivalents $ 111,030 $ 160,637
Short-term investments 12,266 13,438
Accounts receivable 31,568 37,597
Inventories 160,486 130,931
Other 19,716 27,531
---------- ----------
Current assets 335,066 370,134
Property, plant and mine development, net 1,230,313 1,119,286
Other 214,686 167,237
---------- ----------
Total assets $1,780,065 $1,656,657
========== ==========
Liabilities
Short-term debt $ 23,786 $ 15,739
Current portion of long-term debt 4,375 -
Accounts payable 41,540 32,723
Other accrued liabilities 123,843 104,753
---------- ----------
Current liabilities 193,544 153,215
Long-term debt 604,259 593,634
Reclamation and remediation liabilities 64,489 66,760
Other long-term liabilities 85,743 90,097
---------- ----------
Total liabilities 948,035 903,706
---------- ----------
Minority interest in Newmont Gold Company 87,968 79,486
Contingencies
Stockholders' Equity
Preferred stock 14,375 14,375
Common stock 137,963 137,728
Capital in excess of par value 307,423 302,800
Retained earnings 284,301 218,562
---------- ----------
Total stockholders' equity 744,062 673,465
---------- ----------
Total liabilities and
stockholders' equity $1,780,065 $1,656,657
========== ==========
</TABLE>
<PAGE> 5
NEWMONT MINING CORPORATION AND SUBSIDIARIES
Statements of Consolidated Cash Flows
(In thousands)
(Unaudited)
<TABLE>
<CAPTION>
Nine Months Ended
September 30,
---------------------
1995 1994
--------- ---------
<S> <C> <C>
Operating activities:
Net income $ 108,645 $ 59,337
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation, depletion and amortization 76,503 68,284
Minority interest, net of dividends 7,926 1,996
Undistributed earnings of affiliates (5,019) (11,093)
Deferred taxes 1,850 (28,941)
Gain on investment (113,188) -
Write-off of exploration property 18,767 -
Other 1,128 (2,004)
--------- ---------
96,612 87,579
(Increase) decrease in operating assets:
Accounts receivable 6,047 20,340
Inventories (44,854) 10,822
Other assets 4,520 (10,533)
Increase (decrease) in operating liabilities:
Accounts payable and accrued expenses 44,286 6,218
Accrued income taxes 7,850 (1,820)
Other liabilities (6,625) (7,288)
--------- ---------
Net cash provided by operating activities 107,836 105,318
--------- ---------
Investing activities:
Additions to property, plant and mine development (232,127) (310,951)
Proceeds from sale of investment 116,354 -
Investment in joint venture (19,898) (4,017)
Other (6,805) 12,098
--------- ---------
Net cash used in investing activities (142,476) (302,870)
--------- ---------
Financing activities:
Short-term borrowings 8,047 -
Proceeds from long-term borrowings 15,000 528,634
Repayments of long-term borrowings - (127,000)
Proceeds from issuance of common stock 4,857 8,936
Dividends paid on common stock (31,011) (31,127)
Dividends paid on preferred stock (11,860) (11,859)
--------- ---------
Net cash provided by (used in) financing activities (14,967) 367,584
--------- ---------
Net increase (decrease) in cash and cash equivalents (49,607) 170,032
Cash and cash equivalents at beginning of period 160,637 69,750
--------- ---------
Cash and cash equivalents at end of period $ 111,030 $ 239,782
========= =========
<PAGE> 6
NEWMONT MINING CORPORATION AND SUBSIDIARIES
Statements of Consolidated Cash Flows
(In thousands)
(Unaudited)
</TABLE>
<TABLE>
<CAPTION>
Nine Months Ended
September 30,
---------------------
1995 1994
--------- ---------
<S> <C> <C>
Supplemental information:
Interest paid, net of amounts capitalized of
$9,609 in 1995 and $16,890 in 1994 $ 5,398 $ (4,038)
Income taxes paid $ 14,492 $ 19,157
</TABLE>
<PAGE> 7
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) in the nine months ended September 30, 1995, a write-
down of the carrying value of an exploration property for $18.8 million and an
additional provision for reclamation on such property of $4.5 million as
discussed in Note 4 herein; (2) in the nine months ended September 30, 1994,
a charge of $27.1 million related to environmental obligations associated with
former mining activities, including a valuation allowance for insurance
receivables of $20.0 million and a provision for estimated environmental costs
of $7.1 million; and (3) in the nine months ended September 30, 1994, an income
tax benefit of $16.2 million resulting from the resolution of certain tax
issues associated with prior years. These interim financial statements should
be read in conjunction with the annual financial statements of the Corporation
included in its 1994 Annual Report on Form 10-K.
All of the Corporation's operations are held through Newmont Gold Company
("NGC"), which is approximately 89% owned.
Certain prior year amounts have been reclassified to conform with
the current year presentation.
(2) Inventories
<TABLE>
<CAPTION>
September 30, December 31,
1995 1994
------------- ------------
(In thousands)
<S> <C> <C>
Current:
Ore and in-process $ 89,886 $ 62,196
Precious metals 31,951 34,536
Materials and supplies 36,528 31,533
Other 2,121 2,666
-------- --------
$160,486 $130,931
======== ========
Non-current:
Ore in stockpiles (included
in other assets) $ 55,088 $ 33,051
======== ========
</TABLE>
<PAGE> 8
(3) Sale of Interest in Southern Peru Copper Corporation
On April 5, 1995, NGC sold its 10.7% interest in Southern Peru Copper
Corporation for $116.4 million, which resulted in a pre-tax gain of $113.2
million and an after-tax gain of approximately $72 million, or $0.75 per share.
(4) Write-down of Exploration Property
During the second quarter of 1995, the Corporation determined that it
would no longer pursue exploration or development of its Ivanhoe property,
which was acquired in 1992. Therefore, the entire capitalized value of the
property of $18.8 million was written-off. In addition, the Corporation
increased the reclamation reserve for the property by $4.5 million.
Reclamation of the property is expected to take at least three years. In
total, the charges resulted in an after-tax charge of approximately $15.1
million, or $0.16 per share.
(5) Contingencies
Environmental Obligations
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, $62.4 million
and $65.7 million were accrued for such liabilities at September 30, 1995 and
December 31, 1994, respectively. In addition, $18.4 million and $17.0 million
were accrued at September 30, 1995 and December 31, 1994, respectively, for
reclamation costs relating to currently producing mineral properties. These
amounts are included in other current liabilities and reclamation liabilities.
Depending upon the ultimate resolution of the matters related to former mining
activities, 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 September 30, 1995.
A discussion of the environmental obligations and related insurance
receivables associated with former mining activities as of September 30, 1995
follows.
Idarado Mining Company ("Idarado") - 80.1% owned
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 settled natural resources damages
and past and future response costs and provided habitat enhancement work. In
addition, Idarado agreed in the consent decree to undertake specified
remediation work related to its former mining activities in the Telluride/Ouray
area of Colorado. Approximately 75% of the work has been completed. The
Corporation's best estimate of the remaining cost of this work is included in
the accrued liability for environmental matters, as previously discussed. If
the remediation work does not meet certain measurement criteria specified in
the consent decree, the State and the court reserve the right to require
Idarado to perform other remediation work. Idarado and the Corporation have
obtained a $16.3 million letter of credit to secure their obligations under
the consent decree.
<PAGE> 9
Resurrection Mining Company ("Resurrection") - 100% owned
In 1983, the State of Colorado 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 U.S. Environmental Protection Agency
("EPA") in 1986. The EPA is taking the lead role on cleanup issues. The
proceedings sought 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 lawsuits
have named the Corporation, Resurrection, the joint venture and ASARCO as
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.
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 EPA has approved remedial actions for selected components
of Resurrection's portion of the site, which were initiated in the third
quarter of 1995. However, the determination of the final remedy for the site
has not been completed by the EPA. Accordingly, the Corporation cannot yet
determine the full extent or cost of its share of the remedial action which
will be required under Phase II. The government agencies may also seek to
recover for damages to natural resources.
Although the ultimate amount of the Corporation's share of 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 accrued
liability for environmental matters, as previously discussed.
Dawn Mining Company ("Dawn") - 51% owned
Dawn leased a currently inactive open-pit uranium mine on the Spokane
Indian Reservation in the State of Washington. The mine is subject to
regulation by agencies of the U.S. Department of Interior, the Bureau of Indian
Affairs and the Bureau of Land Management, as well as the EPA. Dawn also owns
a nearby uranium millsite facility.
In 1991, Dawn's lease was terminated. As a result, Dawn was required to
file a formal mine reclamation plan. Dawn does not have sufficient funds to
pay for such a reclamation plan or to pay for the closure of its mill. The
Corporation's best estimate for the future costs related to these matters is
included in the accrued liability for environmental matters, as 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
<PAGE> 10
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.
Dawn has received a license for a mill closure plan which could
potentially generate the necessary funds to reclaim the mine and the mill. The
license, however, is currently being challenged by third parties.
Insurance Receivables
Included in accounts receivable at December 31, 1994 was a net $16.7
million from insurance companies 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.
Prior to 1993, three of the insurance companies commenced actions against
the Corporation seeking judgments that they had no liability. In the fall of
1993, the Corporation instituted a comprehensive lawsuit against its carriers.
In the first quarter of 1995, settlement in the insurance litigation was
reached enabling the Corporation to realize the receivable outstanding at
December 31, 1994. Settlement discussions continue with respect to some of the
litigation. The Corporation will continue to vigorously pursue recovery in the
remaining litigation and believes that it is reasonably possible that
additional amounts will be recovered.
Class Action Complaint
In March 1995, a class action complaint was filed against the Corporation
and others in which the plaintiffs allege exposure to certain allegedly
radioactive or otherwise hazardous waste materials produced at a ferroalloy
production plant in Guernsey County, Ohio. This plant was owned until 1987 by
Foote Mineral Company, a former subsidiary of the Corporation. The complaint
sought $500 million of compensatory damages jointly and severally against all
defendants, $63 million in punitive damages against the Corporation, the
recovery of response costs and the establishment of a medical monitoring fund
under CERCLA. Injunctive relief requiring defendants to remove the allegedly
hazardous materials from the property of the plaintiffs was also requested.
In May 1995, the Corporation filed a motion to dismiss the complaint on
the ground that the Ohio federal court lacks personal jurisdiction over the
Corporation. In lieu of responding to the motion, plaintiffs voluntarily
dismissed the complaint as against the Corporation without prejudice in June
1995.
Additional Interest in Minera Yanacocha
In September 1994, an affiliate of Bureau de Recherches Geologiques et
Minieres, the geological and mining bureau of the French government ("BRGM"),
announced its intention to transfer its 24.7% interest in Minera Yanacocha,
S.A. to another entity. NGC and Compania de Minas Buenaventura, S.A.
("Buenaventura"), then 38.0% and 32.3% owners of Minera Yanacocha,
respectively, filed suit in Peru to seek enforcement of a provision in the
bylaws of Minera Yanacocha, giving shareholders preemptive rights on the sale
or transfer of any shareholder's interest. In February 1995, an appellate
court in Peru issued a preliminary ruling in favor of NGC and Buenaventura,
both of whom then elected to exercise their preemptive rights to acquire their
<PAGE> 11
proportionate share of the 24.7% interest. In accordance with the court ruling
Minera Yanacocha cancelled the BRGM shares and issued shares representing
13.35% to NGC and 11.33% to Buenaventura. NGC deposited $48.6 million with a
Peruvian bank pending the final resolution of the case. NGC borrowed the $48.6
million from the same Peruvian bank with the right of setoff against the
deposit. Part of the final resolution of the case, if resolved in NGC's favor,
will determine how much NGC must pay for the additional interest, which may be
more or less than the amount deposited. NGC intends to fund the purchase of
the additional interest with its available cash or borrowings under credit
facilities. As a result of the preliminary ruling of the court and NGC's
exercise of its preemptive right, NGC presently owns 51.35% of Minera
Yanacocha. This additional interest will not be reflected in the financial
statements until a final determination is made by the Peruvian courts.
(6) Supplementary Data
The ratio of earnings to fixed charges and ratio of earnings to combined
fixed charges and preferred stock dividends for the nine months ended September
30, 1995 was 4.9 and 3.4, respectively. The Corporation guarantees certain
third party debt which had total interest obligations of $1.0 million for the
nine months ended September 30, 1995. The Corporation has not been required
to pay any interest on these obligations in the past, nor does it expect to
have to pay any amounts with respect to such debt in the future. Therefore,
such amounts have not been included in the ratio of earnings to fixed charges
or the ratio of earnings to combined fixed charges and preferred stock
dividends.
<PAGE> 12
Item 2. Management's Discussion and Analysis of Results of Operations and
Financial Condition
The following discussion summarizes the results of operations of Newmont
Mining Corporation ("Newmont") and its subsidiaries (collectively, the
"Corporation") for the quarters and nine month periods ended September 30, 1995
and 1994 and the changes in its financial condition from December 31, 1994 to
September 30, 1995. All the Corporation's operations are held through Newmont
Gold Company ("NGC"), which is approximately 89% owned. This discussion should
be read in conjunction with the Management's Discussion and Analysis included
in the Corporation's 1994 Annual Report on Form 10-K.
RESULTS OF OPERATIONS
The Corporation earned $25.3 million ($0.25 per share) and $108.6 million
($1.12 per share) in the quarter and nine months ended September 30, 1995,
respectively, compared with $20.4 million ($0.19 per share) and $59.3 million
($0.55 per share) in the respective 1994 periods. The nine months ended
September 30, 1995 includes a gain of $113.2 million, or $72.0 million after-
tax ($0.75 per share), on the sale of NGC's interest in Southern Peru Copper
Corporation ("SPCC") (see Note 3 in Item 1), as well as a charge of $23.3
million, or $15.1 million after-tax ($0.16 per share), for the write-off and
reclamation accrual associated with the Ivanhoe exploration property (see Note
4 in Item 1). The nine months ended September 30, 1994 includes a tax benefit
of $16.2 million ($0.17 per share) resulting from the resolution of certain tax
issues associated with prior years and a charge of $27.1 million, or $17.6
million after-tax ($0.18 per share), for environmental obligations associated
with former mining activities.
During the third quarter of 1995, consolidated gold sales were 449,800
ounces at an average price of $383 per ounce. This compares with 388,100
ounces sold at an average price of $387 per ounce in the third quarter of 1994.
During the first nine months of 1995, consolidated gold sales were 1,177,400
ounces at an average price of $384 per ounce, compared to 1,142,800 ounces at
an average price of $384 per ounce in the first nine months of 1994. The
61,700 ounce increase in production in the 1995 third quarter over the 1994
third quarter increased sales by $23.9 million, while the $4 decrease in the
realized price per ounce decreased sales revenue by $1.6 million. For the
nine-month comparison, with the average price realization the same, the $12.7
million increase in 1995 over 1994 sales was attributable to the increased
production.
Production for the 1994 periods and almost all the production for the 1995
periods was attributable to the Carlin, Nevada operations. The increase in
production between both periods was primarily due to the combination of
increased tonnage of high-grade ore from underground mines and increased
utilization of the refractory ore treatment plant. Production from Carlin is
expected to be approximately 1.6 million ounces for the year.
Late in the third quarter of 1995, the Zarafshan-Newmont Joint Venture
("Zarafshan-Newmont") realized its first production of 6,200 ounces, or 3,100
ounces attributable to NGC's interest. This venture is expected to produce in
excess of 400,000 ounces, or 200,000 ounces attributable to NGC's interest,
annually beginning in 1996.
The Corporation's equity income from NGC's 38% interest in Minera
Yanacocha S.A. ("Minera Yanacocha") increased to $8.3 million in the 1995 third
quarter from $5.9 million in the 1994 third quarter, and to $23.4 million in
the 1995 first nine months from $12.4 million in the 1994 first nine months.
<PAGE> 13
Minera Yanacocha produced 143,400 ounces, or 54,500 ounces attributable to
NGC's interest, in the 1995 third quarter up from 89,700 ounces, or 34,100
ounces attributable to NGC's interest, in the 1994 third quarter. Operating
costs at Minera Yanacocha, excluding depreciation, depletion and amortization
("DD&A"), were $122 per ounce in the 1995 third quarter compared to $131 per
ounce in the 1994 third quarter. Minera Yanacocha produced 396,400 ounces, or
150,600 ounces attributable to NGC's interest, in the first nine months of 1995
compared to 204,500 ounces, or 77,700 ounces attributable to NGC's interest,
in the first nine months of 1994. Operating costs at Minera Yanacocha,
excluding DD&A, were $117 per ounce for the first nine months of 1995 compared
to $133 per ounce in the 1994 first nine months. The increases in production
were primarily attributable to a second mine coming into production in late
1994.
Including Minera Yanacocha, NGC's total quarterly equity gold production
increased to 504,300 ounces for the third quarter of 1995 from 422,200 ounces
in the 1994 third quarter.
Costs applicable to sales increased $9.3 million and $26.3 million in the
1995 third quarter and the 1995 first nine months, respectively, compared to
the 1994 periods. Of these amounts, $0.7 million relates to NGC's share of
costs attributable to Zarafshan-Newmont. Based on ounces of gold sold from
Carlin, costs applicable to sales declined $8 per ounce in the 1995 third
quarter compared with the 1994 third quarter and rose $17 per ounce in the 1995
first nine months compared with the same period in 1994. The following table
summarizes the significant components of these costs per ounce of gold sold:
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
September 30, September 30,
-------------------- -------------------
1995 1994 1995 1994
---- ---- ---- ----
<S> <C> <C> <C> <C>
Production costs $172 $183 $188 $179
Royalties 30 25 32 24
Other 3 5 5 5
---- ---- ---- ----
$205 $213 $225 $208
==== ==== ==== ====
</TABLE>
Of the increase in the aggregate amounts, $6.1 million and $16.6 million
relate to higher Carlin production costs in 1995 for the third quarter and
first nine months, respectively. These higher costs in both periods relate
primarily to increased milling costs associated with the operation of the
refractory ore treatment plant.
The decrease in per ounce production costs in the third quarter of 1995
compared with the third quarter of 1994 was the result of increased production
in the period due to the combination of increased tonnage of high-grade ore
from underground mines and increased utilization of the refractory ore
treatment plant. The increase in per ounce production costs in the first nine
months of 1995 compared with the first nine months of 1994 was the result of
the higher milling costs associated with the operation of the refractory ore
treatment plant. Per ounce production costs are expected to increase in the
fourth quarter as compared to the third quarter as Carlin processes a
<PAGE> 14
relatively greater proportion of higher cost ores and Zarafshan-Newmont
continues in its start-up phase.
Royalty costs on an aggregate basis were $3.4 million and $10.4 million
higher in the third quarter and the first nine months of 1995 compared with the
third quarter and the first nine months of 1994, respectively. The increase
in royalty costs on an aggregate and per ounce basis was due to the production
of a higher proportion of royalty-burdened ore in 1995 compared to 1994.
In addition to expensed production costs, the Corporation capitalized
$15.6 million and $38.4 million for mining costs during the 1995 third quarter
and first nine months, respectively. These costs are associated with deposits
having diverse waste-to-ore ratios, where such ratios are quite high early in
the mine's life. Capitalized costs in the 1994 third quarter and first nine
months were $10.8 million and $28.5 million, respectively.
DD&A increased $3.8 million and $8.2 million in the 1995 third quarter and
first nine months, respectively, compared to the same periods in 1994 primarily
due to new facilities and equipment at Carlin, including the refractory ore
treatment plant.
Dividends, interest and other income in the 1995 third quarter and first
nine months includes $5.0 million and $28.3 million, respectively, for business
interruption insurance recorded for the start-up problems of the refractory ore
treatment plant, including an electrostatic precipitator fire and a crack in
a weld of a riding ring of the double rotator mill in 1994. These amounts
compare with $2.0 million recorded in the third quarter and first nine months
of 1994. In April 1995, NGC sold its 10.7% interest in SPCC for $116.4
million, which resulted in a pre-tax gain of $113.2 million, as previously
discussed.
Exploration expense in the third quarter and first nine months of 1995
decreased $1.1 million and $7.2 million, respectively, compared to the same
periods of 1994. This decline was in accordance with the Corporation's plans
to decrease exploration spending in 1995 as it focuses on resource development.
During the first quarter of 1995, studies on the Batu Hijau project in
Indonesia confirmed that this large porphyry copper/gold deposit can be
economically developed. Therefore, development costs are being capitalized and
totaled $8.1 million and $17.5 million in the third quarter and first nine
months of 1995, respectively. Capital costs for this project could approach
$1.5 billion, and the Corporation has studies underway to review how best to
maximize its shareholder value from such project. Such investment options
include the possibility of a joint venture partner for the project.
Although virtually flat between the 1995 and 1994 third quarters, general
and administrative expenses have increased in the 1995 nine month period
compared to the 1994 same period due to the increased international focus of
the Corporation's operations.
Net interest expense increased $8.4 million and $25.2 million in the 1995
third quarter and first nine month periods, respectively, compared with the
same periods in 1994. Interest expense increased from $6.9 million in the 1994
third quarter to $12.2 million in the 1995 third quarter and from $17.8 million
in the 1994 first nine months to $35.7 million in the 1995 first nine months.
These increases were primarily due to interest expense associated with the
sale-leaseback transaction of the refractory ore treatment plant completed in
September 1994. With the completion of the refractory ore treatment plant in
1994 and, consequently, the decrease in capital expenditures eligible for
<PAGE> 15
interest capitalization, capitalized interest in the 1995 third quarter was
$3.5 million compared to $6.6 million in the 1994 third quarter and $9.6
million in the 1995 first nine months compared to $16.9 million in the 1994
first nine months.
Other expense included the write-off and additional reclamation for the
Ivanhoe exploration property in the first nine months of 1995 and charges
related to environmental obligations in the first nine months of 1994, as
previously discussed. In the second quarter of 1995, the Corporation wrote-off
its investment in the Ivanhoe property which was acquired in 1992 and added to
its reclamation reserve to reclaim areas disturbed by previous mining and
exploration activity on the property, resulting in a pre-tax charge of $23.3
million. This charge was determined to be necessary after evaluation of the
property identified most of the mineralization to be low grade and, therefore,
not meeting the Corporation's criteria for development. Charges for
environmental obligations made in the 1994 second quarter include a valuation
allowance of $20.0 million 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 million made for additional
estimated environmental related costs associated with the same former mining
activities.
In December 1994, the Corporation concluded that the geological model used
by the previous owner of the Grassy Mountain property in Oregon was inadequate
to support mine development. Pending completion of additional evaluations,
996,000 ounces of previously classified proven and probable reserves were then
no longer classified as reserves as of December 31, 1994. In 1995, the
Corporation has continued to evaluate the deposit to determine its economic
potential. Based on results to date, the deposit has not met the Corporation's
criteria for development. The final results of such evaluations are expected
to be completed in the fourth quarter of 1995. If the final results conclude
that the deposit does not meet such criteria, the Corporation will write-down
or write-off its $33.7 million investment in this property.
During the second quarter of 1995, the Corporation recognized $41.2
million of taxes related to the sale of NGC's investment in SPCC. This charge
was partially offset by a deferred tax benefit of approximately $8.1 million
related to the $23.3 million charge associated with the Ivanhoe property. In
the second quarter of 1994, as previously discussed, 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 a $27.1 million charge for
environmental obligations, resulted in the tax benefit for the first nine
months of 1994. Both years' effective tax rates also benefitted from
percentage depletion being a high proportion of the estimated annual pre-tax
financial income.
LIQUIDITY AND CAPITAL RESOURCES
During the first nine months of 1995, the Corporation's cash outlays
included $232.1 million of capital expenditures, $19.9 million to carry the
partners' share of the costs in Zarafshan-Newmont and $42.9 million in
dividends. Of the capital expenditures, approximately $115.7 million was spent
on projects at the Carlin operations. These Carlin costs were primarily
associated with capitalized mining costs, leach pad construction, the
refractory ore treatment plant and underground development. In addition, $61.1
million was spent on mine site development for the Minahasa project, $27.7
million on the Zarafshan-Newmont project and $17.5 million on the Batu Hijau
project. These expenditures were funded by cash flow from operating activities
<PAGE> 16
of $107.8 million and from $116.4 million received on the sale of NGC's
investment in SPCC. The cash flow from operating activities includes a
reduction of approximately $18 million for taxes associated with the SPCC sale.
In addition, $8.0 million was borrowed under short-term credit facilities and
Zarafshan-Newmont obtained an additional $30.0 million of project financing,
$15.0 million of which was attributable to the Corporation.
Cash requirements for the remainder of 1995 are expected to continue to
exceed operating cash flow. The $111.0 million of cash and cash equivalents
at September 30, 1995, as well as funds available under credit facilities, will
adequately cover any short-fall in operating cash flow for the remainder of the
year.
As discussed in Note 5, NGC exercised its preemptive right to acquire an
additional interest in Minera Yanacocha, subject to a final determination by
the Peruvian courts. If successful, NGC intends to fund this purchase with
available cash or borrowings under credit facilities.
The increase in both current ($29.5 million) and long-term inventories
($22.0 million) in the first nine months of 1995 was primarily due to a $32.4
million increase in ore inventories at Carlin, principally the result of the
stockpiling of mill and leach refractory ore. The remainder of the increase
is primarily related to Zarafshan-Newmont, as it commenced operations and the
Corporation acquired ore stockpiles from its partners to allow them to fund
their capital contributions to the venture. In addition to long-term
inventories, other long-term assets increased between December 31, 1994 and
September 30, 1995 due to a $7.2 million increase in NGC's equity investment
in Minera Yanacocha, the result of that company's earnings exceeding its
dividends, and additional investments in and advances to Zarafshan-Newmont.
Other current accrued liabilities increased between December 31, 1994 and
September 30, 1995 by $19.1 million. This increase was primarily attributable
to higher accrued interest of $24.7 million and higher accrued income taxes of
$7.9 million, both due to timing of payments. These higher accruals were
partially offset by lower accrued liabilities related to property, plant and
equipment.
<PAGE> 17
PART II - OTHER INFORMATION
Item 1. Legal Proceedings
In March 1995, a class action complaint was filed against Newmont Mining
Corporation ("the Corporation") and others in which the plaintiffs allege
exposure to certain allegedly radioactive or otherwise hazardous waste
materials produced at a ferroalloy production plant in Guernsey County, Ohio.
This plant was owned until 1987 by Foote Mineral Company, a former subsidiary
of the Corporation. The complaint sought $500 million of compensatory damages
jointly and severally against all defendants, $63 million in punitive damages
against the Corporation, the recovery of response costs and the establishment
of a medical monitoring fund under the Comprehensive Environmental Response,
Compensation and Liability Act. Injunctive relief requiring defendants to
remove the allegedly hazardous materials from the property of the plaintiffs
was also requested.
In May 1995, the Corporation filed a motion to dismiss the complaint on
the ground that the Ohio federal court lacks personal jurisdiction over the
Corporation. In lieu of responding to the motion, plaintiffs voluntarily
dismissed the complaint as against the Corporation without prejudice in June
1995.
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 Ratio of Earnings to Combined
Fixed Charges and Preferred Stock Dividends
27 - Financial Data Schedule
(b) Reports on Form 8-K:
No reports were filed on Form 8-K during the quarter ended September 30,
1995.
<PAGE> 18
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: October 31, 1995 /s/ WAYNE W. MURDY
--------------------------------
Wayne W. Murdy
Senior Vice President and
Chief Financial Officer
(Principal Financial Officer)
Date: October 31, 1995 /s/ GARY E. FARMAR
--------------------------------
Gary E. Farmar
Vice President and Controller
(Principal Accounting Officer)
<PAGE> 19
EXHIBIT INDEX
<TABLE>
<CAPTION>
Page
----
<S> <C>
Exhibit 11 - Statement re Computation of Per Share Earnings 20-21
Exhibit 12.1 - Statement re Computation of Ratio of Earnings 22
to Fixed Charges
Exhibit 12.2 - Statement re Computation of Ratio of Earnings 23
to Combined Fixed Charges and Preferred Stock
Dividends
Exhibit 27 - Financial Data Schedule 24
</TABLE>
<PAGE> 1
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 Ended Nine Months Ended
September 30, September 30,
---------------------- ----------------------
1995 1994 1995 1994
--------- --------- --------- ---------
<S> <C> <C> <C> <C>
INCOME DATA:
Net income $ 25,292 $ 20,424 $ 108,645 $ 59,337
Preferred stock dividends (3,953) (3,953) (11,859) (11,859)
--------- -------- --------- ---------
Net income applicable to
common shares $ 21,339 $ 16,471 $ 96,786 $ 47,478
========= ======== ========= ========
COMMON AND COMMON EQUIVALENT SHARES:
Weighted average common shares 86,204 85,971 86,139 85,916
Equivalent common shares from
stock options 277 219 171 226
--------- -------- -------- --------
Common and common equivalent shares 86,481 86,190 86,310 86,142
========= ======== ======== ========
EARNINGS PER COMMON SHARE:
Net income per common and common
equivalent shares $ 0.25 $ 0.19 $ 1.12 $ 0.55
========= ======== ======== ========
</TABLE>
<PAGE> 2
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 Ended Nine Months Ended
September 30, September 30,
---------------------- ----------------------
1995 1994 1995 1994
--------- --------- --------- ---------
<S> <C> <C> <C> <C>
INCOME DATA:
Net income applicable to
common shares $ 25,292 $ 20,424 $ 108,645 $ 59,337
========= ========= ========= =========
COMMON AND COMMON EQUIVALENT SHARES:
Weighted average common shares 86,204 85,971 86,139 85,916
Equivalent common shares from
stock options 277 311 216 301
Equivalent common shares from
conversion of preferred stock 7,899 7,899 7,899 7,899
--------- --------- --------- ---------
Common and common equivalent shares 94,380 94,181 94,254 94,116
========= ========= ========= =========
EARNINGS PER COMMON SHARE:
Net income per common and common
equivalent shares $ 0.27 $ 0.22 $ 1.15 $ 0.63
========= ========= ========= =========
</TABLE>
<PAGE> 1
EXHIBIT 12.1
NEWMONT MINING CORPORATION AND SUBSIDIARIES
COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES
(Amounts in thousands except ratios)
(Unaudited)
<TABLE>
<CAPTION>
Nine Months Ended
September 30, 1995
-------------------
<S> <C>
Earnings:
Income before income taxes $ 144,073
Adjustments:
Net interest expense (1) 26,137
Amortization of capitalized interest 1,730
Portion of rental expense representative
of interest 1,066
Minority interest of majority-owned subsidiaries
that have fixed charges 11,668
Undistributed income of less than 50%
owned entities (5,019)
---------
$ 179,655
=========
Fixed Charges:
Net interest expense (1) $ 26,137
Capitalized interest 9,609
Portion of rental expense representative
of interest 1,066
---------
$ 36,812
=========
Ratio of earnings to fixed charges 4.9
=========
</TABLE>
(1) Includes interest expense of majority-owned subsidiaries and
amortization of debt issuance costs.
<PAGE> 1
EXHIBIT 12.2
NEWMONT MINING CORPORATION AND SUBSIDIARIES
COMPUTATION OF RATIO OF EARNINGS TO COMBINED FIXED CHARGES
AND PREFERRED STOCK DIVIDENDS
(Amounts in thousands except ratios)
(Unaudited)
<TABLE>
<CAPTION>
Nine Months Ended
September 30, 1995
-------------------
<S> <C>
Earnings:
Income before income taxes $ 144,073
Adjustments:
Net interest expense (1) 26,137
Amortization of capitalized interest 1,730
Portion of rental expense representative
of interest 1,066
Minority interest of majority-owned subsidiaries
that have fixed charges 11,668
Undistributed income of less than 50%
owned entities (5,019)
---------
$ 179,655
=========
Fixed Charges:
Net interest expense (1) $ 26,137
Preferred stock dividends (2) 15,727
Capitalized interest 9,609
Portion of rental expense representative
of interest 1,066
---------
$ 52,539
=========
Ratio of earnings to combined fixed charges and
preferred stock dividends 3.4
=========
</TABLE>
(1) Includes interest expense of majority-owned subsidiaries and
amortization of debt issuance costs.
(2) Increased to represent pre-tax earnings which would be required to
cover such dividend requirements.
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
ART. 5 FOR 3RD QUARTER 10Q
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1994
<PERIOD-END> SEP-30-1995
<CASH> 111,030
<SECURITIES> 12,266
<RECEIVABLES> 31,568
<ALLOWANCES> 0
<INVENTORY> 160,486
<CURRENT-ASSETS> 335,066
<PP&E> 1,900,717
<DEPRECIATION> 670,404
<TOTAL-ASSETS> 1,780,065
<CURRENT-LIABILITIES> 193,544
<BONDS> 604,259
<COMMON> 445,386
0
14,375
<OTHER-SE> 284,301
<TOTAL-LIABILITY-AND-EQUITY> 1,780,065
<SALES> 451,849
<TOTAL-REVENUES> 604,774
<CGS> 265,103
<TOTAL-COSTS> 341,606
<OTHER-EXPENSES> 102,286
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 26,137
<INCOME-PRETAX> 144,073
<INCOME-TAX> 35,428
<INCOME-CONTINUING> 108,645
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 108,645
<EPS-PRIMARY> 1.12
<EPS-DILUTED> 1.15
</TABLE>
