<PAGE>
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, 1996
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 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 99,518,786 shares of common stock outstanding on October 25,
1996.
Exhibit index is on page 21.
There are 24 pages included in this report.
<PAGE>
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,
-----------------------
1996 1995
--------- ---------
<S> <C> <C>
Sales and other income
Sales $ 226,038 $ 172,330
Dividends, interest and other 5,565 7,813
--------- ---------
231,603 180,143
--------- ---------
Costs and expenses
Costs applicable to sales 134,182 92,266
Depreciation, depletion and amortization 33,401 27,976
Exploration and research 16,248 18,385
General and administrative 13,125 10,652
Interest, net of capitalized interest
of $463 in 1996 and $3,532 in 1995 12,385 8,691
Other 1,742 784
--------- ---------
211,083 158,754
--------- ---------
Equity in income of affiliated companies 13,009 7,064
--------- ---------
Pretax income 33,529 28,453
Income tax benefit (provision) 5,571 (594)
Minority interest in income of Newmont Gold
Company 3,702 2,567
--------- ---------
Net income 35,398 25,292
Preferred stock dividends - 3,953
--------- ---------
Net income applicable to common shares $ 35,398 $ 21,339
========= =========
Net income per common share $ 0.35 $ 0.25
========= =========
Weighted average number of shares of common
stock and common stock equivalents outstanding 99,791 86,481
Cash dividends declared per common share $ 0.12 $ 0.12
</TABLE>
<PAGE>
NEWMONT MINING CORPORATION AND SUBSIDIARIES
Statements of Consolidated Income
(In thousands, except per share)
(Unaudited)
<TABLE>
<CAPTION>
Nine Months Ended
September 30,
----------------------
1996 1995
--------- ---------
<S> <C> <C>
Sales and other income
Sales $ 561,959 $ 451,849
Dividends, interest and other 18,826 39,737
Gain on disposition of investment - 113,188
--------- ---------
580,785 604,774
--------- ---------
Costs and expenses
Costs applicable to sales 345,679 265,103
Depreciation, depletion and amortization 91,457 76,503
Exploration and research 39,147 40,549
General and administrative 36,937 34,329
Interest, net of capitalized interest
of $4,661 in 1996 and $9,609 in 1995 32,652 26,137
Write-off of exploration property - 18,767
Other 8,795 8,641
--------- ---------
554,667 470,029
--------- ---------
Equity in income of affiliated companies 35,586 20,996
--------- ---------
Pretax income 61,704 155,741
Income tax benefit (provision) 10,755 (35,428)
Minority interest in income of Newmont Gold
Company 6,861 11,668
--------- ---------
Net income 65,598 108,645
Preferred stock dividends - 11,859
--------- ---------
Net income applicable to common shares $ 65,598 $ 96,786
========= =========
Net income per common share $ 0.66 $ 1.12
========= =========
Weighted average number of shares of common
stock and common stock equivalents outstanding 99,260 86,310
Cash dividends declared per common share $ 0.36 $ 0.36
</TABLE>
<PAGE>
NEWMONT MINING CORPORATION AND SUBSIDIARIES
Consolidated Balance Sheets
(In thousands)
(Unaudited)
<TABLE>
<CAPTION>
September 30, December 31,
1996 1995
------------ ------------
<S> <C> <C>
Assets
Cash and cash equivalents $ 187,091 $ 59,142
Short-term investments 12,319 11,820
Accounts receivable 38,814 24,458
Inventories 211,718 173,984
Other 45,817 20,128
---------- ----------
Current assets 495,759 289,532
Property, plant and mine development, net 1,293,311 1,255,278
Investments 90,280 31,658
Other long-term assets 200,269 197,302
---------- ----------
Total assets $2,079,619 $1,773,770
========== ==========
Liabilities
Short-term debt $ 42,554 $ 29,179
Current portion of long-term debt 19,250 4,375
Accounts payable 46,323 38,570
Other accrued liabilities 110,191 122,312
---------- ----------
Current liabilities 218,318 194,436
Long-term debt 585,009 604,259
Reclamation and remediation liabilities 62,344 64,795
Other long-term liabilities 87,059 85,352
---------- ----------
Total liabilities 952,730 948,842
---------- ----------
Minority interest in Newmont Gold Company 106,702 81,981
---------- ----------
Contingencies
Stockholders' Equity
Common stock 159,197 150,738
Capital in excess of par value 568,158 308,566
Retained earnings 292,832 283,643
---------- ----------
Total stockholders' equity 1,020,187 742,947
---------- ----------
Total liabilities and
stockholders' equity $2,079,619 $ 73,770
========== ==========
</TABLE>
<PAGE>
NEWMONT MINING CORPORATION AND SUBSIDIARIES
Statements of Consolidated Cash Flows
(In thousands)
(Unaudited)
<TABLE>
<CAPTION>
Nine Months Ended
September 30,
--------------------
1996 1995
--------- ---------
<S> <C> <C>
Operating activities:
Net income $ 65,598 $ 108,645
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation, depletion and amortization 91,457 76,503
Minority interest, net of dividends 3,115 7,926
Undistributed earnings of affiliates (5,362) (5,019)
Deferred taxes 1,430 1,850
Gain on investment - (113,188)
Write-off of exploration property - 18,767
Other - 1,128
--------- ---------
156,238 96,612
(Increase) decrease in operating assets:
Accounts receivable (12,767) 6,047
Inventories (48,074) (44,854)
Other assets (17,635) 4,742
Increase (decrease) in operating liabilities:
Accounts payable and accrued expenses 5,100 44,286
Accrued income taxes (641) 7,850
Other operating 1,378 (6,625)
--------- ---------
Net cash provided by operating activities 83,599 108,058
--------- ---------
Investing activities:
Additions to property, plant and mine
development (186,717) (232,127)
Advances to joint venture (7,944) (19,898)
Proceeds from sale of investment - 116,354
Other (1,179) (6,805)
--------- ---------
Net cash used in investing activities (195,840) (142,476)
--------- ---------
Financing activities:
Proceeds from short-term borrowings 13,375 8,047
Proceeds from long-term borrowings - 15,000
Repayments of long-term borrowings (4,375) -
Proceeds from issuance of common stock 266,980 4,857
Dividends paid on common stock (35,790) (31,011)
Dividends paid on preferred stock - (11,860)
Debt issuance costs - (222)
--------- ---------
</TABLE>
<PAGE>
NEWMONT MINING CORPORATION AND SUBSIDIARIES
Statements of Consolidated Cash Flows
(In thousands)
(Unaudited)
<TABLE>
<CAPTION>
Nine Months Ended
September 30,
--------------------
1996 1995
--------- ---------
<S> <C> <C>
Net cash provided by (used in) financing
activities 240,190 (15,189)
--------- ---------
Net increase in cash and cash equivalents 127,949 (49,607)
Cash and cash equivalents at beginning of period 59,142 160,637
--------- ---------
Cash and cash equivalents at end of period $ 187,091 $ 111,030
========= =========
Supplemental information:
Interest paid, net of amounts capitalized of
$4,661 in 1996 and $9,609 in 1995 $ 41,089 $ 5,398
Income taxes paid $ 2,000 $ 14,492
</TABLE>
<PAGE>
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 ("NMC") and subsidiaries (collectively, the "Corporation") have
been prepared in accordance with the rules and regulations of the United
States 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 for a fair statement of the results for the
periods presented. All adjustments were of a normal recurring nature except
that included in the nine months ended September 30, 1995 are 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.
These interim financial statements should be read in conjunction with the
annual financial statements of the Corporation included in its 1995 Annual
Report on Form 10-K.
All of the Corporation's operations are held through Newmont Gold Company
("NGC"), which is approximately 91% owned by NMC.
Certain prior year amounts have been reclassified to conform with the
current year presentation.
(2) Batu Hijau Transaction
In July 1996, NGC and Sumitomo Corporation ("Sumitomo") entered into a
definitive joint venture agreement to develop and operate the Batu Hijau
copper/gold deposit in Indonesia. Capital costs of the project are expected
to be $1.6 billion. When considering interest during construction, cost
escalations and working capital, total costs will approximate $1.9 billion.
Under the terms of the agreement, after contributions are made by both
parties, NGC will retain a 45% interest in the project and Sumitomo will
have a 35% interest. The remaining 20% is held by an Indonesian company.
NGC will contribute its interest in the project and Sumitomo will
contribute an agreed upon amount of cash, expected to be approximately $245
million. The parties' obligations to make their contributions to the joint
venture are subject to certain conditions including receipt of certain
approvals of the Indonesian government and securing satisfactory project
financing commitments (which is expected to be completed by mid-1997).
Until these conditions are satisfied, Sumitomo has agreed to fund up to $130
million of project costs through non-interest bearing loans. Effective July
1996, NGC has accounted for this project as an equity investment. At
September 30, 1996 NGC's investment was $47.6 million.
Excluded from the statements of consolidated cash flows are the effects
of non-cash transactions. The following reflects the adjustments made to
NGC's balance sheet subsequent to June 30, 1996 for the Batu Hijau
transaction discussed above (in thousands):
<PAGE>
<TABLE>
<CAPTION>
Increase (decrease)
-------------------
<S> <C>
Assets
Other current assets $ (849)
Property, plant and mine development, net (43,936)
Investments 48,210
Other long-term assets (3,607)
---------
Total assets $ (182)
=========
Liabilities
Accounts payable $ (182)
---------
Total liabilities $ (182)
</TABLE>
=========
(3) Inventories
<TABLE>
<CAPTION>
September 30, December 31,
1996 1995
------------- ------------
(In thousands)
<S> <C> <C>
Current:
Ore and in-process $111,985 $101,684
Precious metals 43,125 29,691
Materials and supplies 54,730 40,651
Other 1,878 1,958
-------- --------
$211,718 $173,984
======== ========
Non-current:
Ore in stockpiles (included
in other assets) $ 65,228 $ 53,167
======== ========
</TABLE>
(4) Investment in Minera Yanacocha
Included in investments is NGC's 38% equity investment in Minera
Yanacocha, S.A. ("Minera Yanacocha"), a Peruvian entity. Summarized
financial information of Minera Yanacocha is as follows:
<PAGE>
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
September 30, September 30,
------------------ ------------------
1996 1995 1996 1995
-------- -------- -------- --------
(In thousands)
<S> <C> <C> <C> <C>
Sales $ 84,239 $ 55,097 $238,915 $152,402
Costs applicable to sales
and depreciation, depletion
and amortization $ 28,324 $ 20,591 $ 85,469 $ 56,417
Exploration $ 4,731 $ 4,429 $ 13,226 $ 9,818
Other, including Peruvian
income tax provision $ 16,006 $ 9,522 $ 44,212 $ 28,101
Net income $ 35,178 $ 20,555 $ 96,008 $ 58,066
</TABLE>
<TABLE>
<CAPTION>
At September 30, At December 31,
1996 1995
---------------- ---------------
(In thousands)
<S> <C> <C>
Current assets $ 68,434 $ 71,705
Non-current assets 98,008 88,114
-------- --------
Total assets $166,442 $159,819
======== ========
Current liabilities $ 50,391 $ 49,977
Non-current liabilities 36,530 48,335
-------- --------
Total liabilities $ 86,921 $ 98,312
======== ========
Total equity $ 79,521 $ 61,507
======== ========
</TABLE>
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 to another entity. NGC and Compania de Minas Buenaventura, S.A.
("Buenaventura"), 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 proposed 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 elected to exercise their preemptive rights to acquire their
proportionate share of the 24.7% interest. In accordance with the court
ruling, Minera Yanacocha canceled the BRGM shares and issued shares
representing interests in Minera Yanacocha of 13.35% to NGC and 11.35% to
Buenaventura. NGC deposited $48.6 million for its additional interest,
together with the additional shares, 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 set off against the deposit, and
accordingly, these amounts have been netted. The trial hearing in the case
<PAGE>
occurred in July 1996 and a ruling was issued in September 1996. The ruling
provided that NGC and Buenaventura have the right to acquire the 24.7%
interest for a purchase price of $109.3 million, $59.1 million attributable
to the 13.35% interest of NGC. As established by such ruling, the
preemptive rights were triggered in November 1993 and thus the valuation of
the shares held in escrow were calculated as of such date. The BRGM has
filed an appeal challenging the court's determination that the preemptive
rights were triggered and the date and amount of the valuation. As a result
of the ruling, and subject to final decision of the Peruvian appellate
courts, NGC owns 51.35% of Minera Yanacocha. This additional 13.35%
interest will not be reflected in NGC's financial statements until a final
decision is made by the Peruvian appellate courts on the pending appeals.
Dividends that NGC has received related to the 13.35% interest amounted to
$18.6 million at September 30, 1996 and are included in other accrued
liabilities. NGC intends to fund the purchase of the additional interest
with its available cash or borrowings under credit facilities.
(5) Common Stock Issue
In January 1996, NMC issued 4.65 million shares of common stock for
$51.87 per share under an existing shelf registration statement filed with
the Securities and Exchange Commission. Proceeds of the issue netted $241.3
million which were used to purchase an equal number of shares of common
stock of NGC directly from NGC.
(6) Contingencies
Environmental Obligations
Estimated future reclamation and mine closure costs are based principally
on legal and regulatory requirements. Such costs are accrued and charged
over the expected operating lives of the Corporation's mines using a unit-
of-production method. At September 30, 1996 and December 31, 1995, $20.3
million and $19.0 million, respectively, were accrued for reclamation costs
relating to currently producing mineral properties.
In addition, the Corporation is involved in several matters concerning
environmental obligations associated with former mining activities. Based
upon the Corporation's best estimate of its liability for these matters,
$52.0 million and $55.8 million were accrued for such liabilities at
September 30, 1996 and December 31, 1995, respectively. These amounts are
included in other current liabilities and reclamation liabilities.
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 100% greater or 5% lower than the amount accrued at
September 30, 1996.
A discussion of the environmental obligations associated with former
mining activities as of September 30, 1996 follows.
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
<PAGE>
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. The Corporation's best
estimate of the remaining cost of this work is included in the accrued
liability for environmental matters, as previously discussed. The
Corporation expects to complete the remediation work at this property by the
end of 1997. If the 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 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 filed a lawsuit under the Superfund Act
which involves a Resurrection Mining Company and Asarco Incorporated
("Asarco") joint venture mining operation near Leadville, Colorado. This
action was subsequently consolidated with a lawsuit filed by the U.S.
Environmental Protection Agency ("EPA") in 1986, with the EPA taking the
lead role. The proceedings seek to compel the defendants to remediate the
impacts of pre-existing, historic mining activities that date back to the
late 1800's which the government agencies claim are causing substantial
environmental problems in the area. The lawsuits have named the
Corporation, Resurrection, the joint venture and Asarco as defendants in the
proceedings. The EPA is also proceeding against other companies with
interests in the area.
The EPA divided the remedial work into two phases. Phase I addresses the
Yak Tunnel, a drainage and access tunnel owned by the joint venture. 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 Corproation 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 environmental monitoring and
operating and 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 1995. However, the EPA has not yet selected the final remedy for the
site. 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 actual amount of Resurrection's and the Corporation's share
of such costs for Phase I and Phase II cannot be presently determined, the
Company's best estimate of its potential exposure for these costs is
included in the accrued liability for environmental matters, as previously
discussed.
<PAGE>
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. 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. The Department of Interior has
commenced an Environmental Impact Study to analyze Dawn's proposed plan and
to consider alternate reclamation plans for the mine. Dawn cannot predict
at this time what type of mine reclamation plan may be selected by the
Department of Interior. Dawn does not have sufficient funds to pay for the
reclamation plan it proposed, for any alternate plan, or 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 comply with the lease and applicable regulations. If asserted, the
Corporation will 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.
<PAGE>
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 ("NMC") and its subsidiaries (collectively, the
"Corporation") for the quarters and nine month periods ended September 30,
1996 and 1995 and changes in its financial condition from December 31, 1995
to September 30, 1996. NMC's principal subsidiary is Newmont Gold Company
("NGC"), which is approximately 91% owned by NMC, and which holds all of the
operating assets of the Corporation. This discussion should be read in
conjunction with the Management's Discussion and Analysis included in the
Company's 1995 Annual Report on Form 10-K.
RESULTS OF OPERATIONS
The Corporation earned $35.4 million, or $0.35 per share, and $65.6
million, or $0.66 per share, in the quarter and nine months ended September
30, 1996, respectively, compared with $25.3 million, or $0.25 per share, in
the respective 1995 quarter, and $57.5 million, or $0.53 per share, before
considering certain NGC gains and charges in the nine-month 1995 period.
The nine-month period of 1995 included a gain of $113.2 million, or $64.6
million after minority interest and income taxes ($0.75 per share), on the
sale of the NGC's interest in Southern Peru Copper Corporation and a charge
of $23.3 million, or $13.5 million after minority interest and income taxes
($0.16 per share), for the write-off and reclamation accrual associated with
the Ivanhoe exploration property. This resulted in total net income of
$98.6 million, or $1.12 per share in the first nine months of 1995. NGC's
total equity production rose to 663,700 ounces in the third quarter of 1996
from 504,300 ounces in the third quarter of 1995 at a weighted average cash
cost of production per ounce of $212 in the 1996 quarter compared to $193 in
the 1995 quarter. During the first nine months of 1996, NGC's total equity
production rose to 1,666,200 ounces from 1,328,000 ounces in the first nine
months of 1995 at a weighted average cash cost of production per ounce of
$220 in 1996 compared to $210 in 1995. NGC expects its total equity gold
production to approximate 2.2 million ounces in 1996.
During the third quarter of 1996, consolidated gold sales (which exclude
NGC's equity interest in Minera Yanacocha's production) were 580,300 ounces
at an average price of $390 per ounce, compared to 449,800 ounces at an
average price of $383 per ounce in the third quarter of 1995. During the
first nine months of 1996, consolidated gold sales were 1,428,200 ounces at
an average price of $393 per ounce compared to 1,177,400 ounces at an
average price of $384 per ounce in the first nine months of 1995.
The 130,500 ounce increase in sales during the third quarter of 1996
compared to the third quarter of 1995 resulted in a $50.0 million increase
in sales revenue, while the $7 increase in the average per ounce gold price
over the same period resulted in a $3.7 million increase. The 250,800 ounce
increase in sales during the first nine months of 1996 compared to the same
period of 1995 resulted in a $96.3 million increase in sales revenue, while
the $9 increase in the average per ounce gold price over the same period
resulted in a $13.8 million increase.
The higher sales in the 1996 periods are partially due to NGC's 50% share
of production of the Zarafshan-Newmont Joint Venture ("Zarafshan-Newmont")
of 45,200 and 113,100 ounces during the third quarter and first nine months
of 1996, respectively. Zarafshan-Newmont commenced operations in the third
quarter of 1995 with 3,100 ounces attributable to NGC's share. The Carlin
<PAGE>
operation also showed an increase in production of 39,200 ounces and 70,400
ounces for the third quarter and first nine months of 1996, respectively,
resulting in total production of 485,900 ounces and 1,244,700 ounces,
respectively. The increased production at Carlin is primarily due to the
mining of high grade underground ore and increased throughput at the
refractory ore treatment plant. Additionally, the Minahasa operation in
Indonesia produced 49,200 ounces in the third quarter and 76,100 ounces
since production commenced in early 1996. Of these ounces, 5,700 were
produced before commercial operations commenced, and the revenue from these
ounces was credited against the capitalized costs of the project. All of
Minahasa's 1996 production has been sold at $454 per ounce as a result of
Minahasa having entered into forward sales contracts in 1994.
NGC's equity income from its 38% interest in Minera Yanacocha S.A.
increased to $13.4 million in the third quarter of 1996 from $7.8 million in
the third quarter of 1995 and to $36.5 million in the first nine months of
1996 from $22.1 million in the first nine months of 1995. Minera Yanacocha
produced 219,400 ounces, or 83,400 ounces attributable to NGC's interest, in
the third quarter of 1996 compared to 143,400 ounces, or 54,500 ounces
attributable to NGC's interest, in the third quarter of 1995. Total cash
costs were $99 per ounce in the third quarter of 1996 compared to $120 per
ounce in the third quarter of 1995. Minera Yanacocha produced 611,300
ounces, or 232,300 ounces attributable to NGC's interest, in the first nine
months of 1996 compared to 396,400 ounces, or 150,600 ounces attributable to
NGC's interest, in the first nine months of 1995. Total cash costs were
$107 per ounce in the first nine months of 1996 compared to $115 per ounce
in the first nine months of 1995. The increases in production are primarily
due to a third mine coming into production in early 1996, and the processing
of higher grade ore in 1996 compared to 1995.
Primarily as a result of the production increases, costs applicable to
sales increased $41.9 million and $80.6 million in the third quarter and
first nine months of 1996, respectively, when compared to the same periods
in 1995. Of these amounts, $21.5 million and $41.6 million relate to Carlin
operations for the third quarter and nine months of 1996, respectively. In
addition, $20.4 million and $39.2 million relate to NGC's share of costs
attributable to Zarafshan-Newmont and Minahasa during the third quarter and
first nine months of 1996, respectively. On a per ounce of gold sold basis,
costs applicable to sales were higher in the 1996 periods compared to the
1995 periods. The following tables summarize the significant components of
these costs per ounce of gold sold:
<PAGE>
<TABLE>
<CAPTION>
Three Months Ended September 30,
---------------------------------------------
Zarafshan- Consol-
Carlin Newmont Minahasa idated
----------- ---------- -------- ----------
1996 1995 1996 1995 1996 1996 1995
---- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C>
Cash operating costs $212 $172 $242 $217 $200 $214 $173
Royalties 17 30 0 0 8 15 29
Other cash costs 2 2 0 0 0 1 2
---- ---- ---- ---- ---- ---- ----
Total cash costs 231 204 242 217 208 230 204
Other 2 1 1 1 2 1 1
---- ---- ---- ---- ---- ---- ----
Total costs
applicable to
sales $233 $205 $243 $218 $210 $231 $205
==== ==== ==== ==== ==== ==== ====
</TABLE>
<TABLE>
<CAPTION>
Nine Months Ended September 30,
---------------------------------------------
Zarafshan- Consol-
Carlin Newmont Minahasa idated
----------- ---------- -------- ----------
1996 1995 1996 1995 1996 1996 1995
---- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C>
Cash operating costs $222 $188 $222 $217 $199 $221 $188
Royalties 21 32 0 0 8 19 32
Other cash costs 1 4 0 0 0 0 4
---- ---- ---- ---- ---- ---- ----
Total cash costs 244 224 222 217 207 240 224
Other 2 1 1 1 2 2 1
---- ---- ---- ---- ---- ---- ----
Total costs
applicable to
sales $246 $225 $223 $218 $209 $242 $225
==== ==== ==== ==== ==== ==== ====
</TABLE>
The increase in Carlin production costs on a per-ounce-of-gold-sold basis
in the third quarter and first nine months of 1996 was the result of higher
costs related to underground mining and the refractory ore treatment plant
as well as increased waste-to-ore ratios. The increase in production costs
at Zarafshan-Newmont in the third quarter of 1996 was primarily the result
of a reduction in the estimated gold recovery rate for this leach operation.
Consolidated per ounce production costs are expected to continue to run
higher than 1995 amounts for the balance of the year.
For the third quarter and first nine months of 1996, royalty costs on an
aggregate basis were $8.8 million and $27.1 million, respectively. This
compares to royalty costs in the third quarter and first nine months of 1995
<PAGE>
of $13.2 million and $37.4 million, respectively. The decrease in royalty
costs on a per ounce basis is due to the lower production of royalty-
burdened ore at Carlin, as previously discussed, and this is expected to
continue the rest of the year.
In addition to expensed production costs, the Corporation capitalized
$16.1 million and $57.9 million of mining costs during the third quarter and
first nine months of 1996, respectively. These costs were associated with
deposits having diverse grade and waste-to-ore ratios, the largest being the
Post deposit at Carlin. Capitalized costs in the third quarter and first
nine months of 1995 were $5.7 million and $28.5 million, respectively. The
current year increases are attributable to more tons being mined at deposits
with these characteristics in the 1996 periods compared to the 1995 periods.
Depreciation, depletion and amortization increased $5.4 million and $15.0
million in the third quarter and first nine months of 1996, respectively,
compared to the same periods in 1995. The increase is primarily due to
depreciation related to the facilities at Zarafshan-Newmont and Minahasa.
The difference in exploration and research expense between the 1996 and
1995 periods is not considered significant and the amount of such expense
for 1996 is expected to be at approximately the level incurred in 1995.
General and administrative expenses increased $2.5 million and $2.6
million in the third quarter and first nine months of 1996, respectively,
compared to the same periods in 1995. The increase is primarily due to
higher legal costs associated with environmental and other corporate matters
and higher insurance costs for political risk coverage associated with the
foreign operations.
Net interest expense increased $3.7 million and $6.6 million in the third
quarter and first nine months of 1996, respectively, compared with the same
respective periods in 1995. Total interest expense was not significantly
different between the periods. Capitalized interest decreased as a result
of the 1995 third quarter start-up of the Zarafshan-Newmont operation,
which, for the nine month period, was partially offset by an increase in
capitalized interest related to development of the Minahasa project which
did not commence operations until April 1996.
Interest income for the third quarter and first nine months of 1996 is
$2.2 million and $9.0 million, respectively, compared to $2.0 million and
$7.1 million for the respective 1995 periods. This increase is due to
higher cash balances in the 1996 periods. Additionally, dividends, interest
and other income in the third quarter and first nine months of 1995 includes
$5.3 million and $28.3 million, respectively, for business interruption
insurance recorded for the start-up problems with the refractory ore
treatment plant. The first nine months of 1996 also includes $3.1 million
of such insurance.
In April 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, as previously discussed.
In the second quarter of 1995, a charge of $18.8 million was taken for
the write-off of the Ivanhoe exploration property in Nevada after an
evaluation of the property determined it was not suitable for development.
In addition, a charge of $4.5 million, which is included in other expense,
was taken for the estimated costs to remediate areas disturbed by previous
mining and exploration activity on the property.
<PAGE>
Both years' effective tax rates benefit from, and are very sensitive to,
the estimated amount of annual percentage depletion since it represents a
significant portion of pre-tax financial income. In addition, during the
first nine months of 1995, the Corporation recognized $41.2 million of taxes
related to the sale of its investment in Southern Peru Copper Corporation.
This charge was offset by a deferred tax benefit of approximately $8.1
million related to the previously mentioned $23.3 million charge associated
with the Ivanhoe property.
LIQUIDITY AND CAPITAL RESOURCES
During the first nine months of 1996 the Corporation generated $83.6
million of cash flow from operating activities, received $267.0 million of
proceeds from the issuance of common stock, including $241.3 million from
the stock offering as discussed in Note 5 of Item 1, and borrowed $13.4
million under short-term credit facilities. A portion of these proceeds was
used to fund $186.7 million of capital expenditures. Of this amount,
approximately $125.2 million was spent on projects at the Carlin operations
including capitalized mining costs, mine equipment, underground development
and improvements to the refractory ore treatment plant. In addition, $24.0
million was spent for mine site development at the Minahasa operation, $15.1
million was spent for development plans at the Batu Hijau project through
June 30, 1996 and $12.3 million was spent on construction of a new technical
facility in Denver.
Although cash requirements during 1996 are expected to exceed operating
cash flow, the proceeds received from the common stock sale, as previously
discussed, are expected to result in more than an adequate amount of funds
to cover the Corporation's cash requirements for the year.
Accounts receivable increased $14.3 million during the first nine months
of 1996 primarily due to an increase in current estimated federal income
taxes receivable.
The increase in current inventories during the first nine months of 1996
is primarily attributable to the start-up of operations at Zarafshan-Newmont
and Minahasa.
Other current assets increased $25.7 million during the first nine months
of 1996. The increase is primarily the result of advances to Zarafshan-
Newmont of $17.7 million, $10.2 million of which was advanced in prior years
and was reclassified from long-term assets in 1996.
The $58.6 million increase in investments during the first nine months of
1996 results primarily from $47.6 million for the investment in Batu Hijau.
As discussed in Note 2, in July 1996, NGC and Sumitomo Corporation
("Sumitomo") entered into an agreement to develop and operate the Batu Hijau
project in Indonesia. The estimated cost for development of the open pit
mine, mill, and infrastructure including employee housing, a port,
electrical generation facilities, interest during construction, cost
escalations and working capital is expected to approximate $1.9 billion.
Batu Hijau contains a mineable resource of 11.7 billion pounds of copper and
13.4 million ounces of gold. Production is expected to begin around the
turn of the century, with a projected mine life in excess of 20 years.
Under the joint venture agreement between Sumitomo and NGC, NGC will, at
the outset, contribute to the joint venture its interest in the project.
Sumitomo will contribute, at the outset, approximately $168 million and in
<PAGE>
the months immediately following the date of the initial contributions, an
estimated additional $77 million. The parties' obligations to make their
initial contributions to the joint venture are subject to certain
conditions, including receipt of certain approvals of the Indonesian
government and securing satisfactory project financing commitments (which is
expected to be completed by mid-1997). Until these conditions are
satisfied, Sumitomo has agreed to fund up to $130 million of project costs
through non-interest bearing loans. As a result of the contemplated
ownership structure, NGC is accounting for its investment in Batu Hijau as
an equity investment effective July 1996. NGC's investment at September 30,
1996 was $47.6 million.
Sumitomo will provide or arrange for up to 60% of the total debt package
that is arranged for the project up to $800 million. NGC expects to fund
its share of project costs through operating cash flow and/or third party
financing sources as required. Depending on financing arrangements, it is
possible that NGC will have no cash requirements for the project until 1998.
<PAGE>
PART II - OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits:
11 - Statement re Computation of Per Share Earnings.
27 - Financial Data Schedule
(b) Reports on Form 8-K:
No reports were filed on Form 8-K during the quarter ended September 30,
1996.
<PAGE>
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: November 5, 1996 /s/ WAYNE W. MURDY
--------------------------------
Wayne W. Murdy
Executive Vice President and
Chief Financial Officer
(Principal Financial Officer)
Date: November 5, 1996 /s/ GARY E. FARMAR
--------------------------------
Gary E. Farmar
Vice President and Controller
(Principal Accounting Officer)
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT INDEX
-------------
Page
----
<S> <C>
Exhibit 11 - Statement re Computation of Per Share Earnings 22-23
Exhibit 27 - Financial Data Schedule 24
</TABLE>
<PAGE>
EXHIBIT 11
Page 1 of 2
NEWMONT MINING CORPORATION AND SUBSIDIARIES
COMPUTATION OF PER SHARE EARNINGS
(In thousands, except per share)
<TABLE>
<CAPTION>
PRIMARY EARNINGS PER SHARE CALCULATIONS
Three Months Ended Nine Months Ended
September 30, September 30,
------------------ -----------------
1996 1995 1996 1995
-------- -------- ------- -------
<S> <C> <C> <C> <C>
INCOME DATA:
Net income $ 35,398 $ 25,292 $ 65,598 $108,645
Preferred stock dividends - (3,953) - (11,859)
-------- -------- -------- --------
Net income applicable to
common shares $ 35,398 $ 21,339 $ 65,598 $ 96,786
======== ======== ======== ========
COMMON AND COMMON EQUIVALENT SHARES:
Weighted average common shares 99,497 86,204 98,900 86,139
Equivalent common shares from
stock options 294 277 360 171
-------- -------- -------- --------
Common and common equivalent
shares 99,791 86,481 99,260 86,310
======== ======== ======== ========
EARNINGS PER COMMON SHARE:
Net income per common and common
equivalent shares $ 0.35 $ 0.25 $ 0.66 $ 1.12
========= ======== ======== ========
</TABLE>
<PAGE>
EXHIBIT 11
Page 2 of 2
NEWMONT MINING CORPORATION AND SUBSIDIARIES
COMPUTATION OF PER SHARE EARNINGS
(In thousands, except per share)
<TABLE>
<CAPTION>
FULLY DILUTED EARNINGS PER SHARE CALCULATIONS
Three Months Ended Nine Months Ended
September 30, September 30,
------------------ ------------------
1996 1995 1996 1995
-------- -------- -------- --------
<C> <C> <C> <C> <C>
INCOME DATA:
Net income applicable to
common shares $ 35,398 $ 25,292 $ 65,598 $108,139
======== ======== ======== ========
COMMON AND COMMON EQUIVALENT SHARES:
Weighted average common shares 99,497 86,204 98,900 86,139
Equivalent common shares from
stock options 294 277 360 216
Equivalent common shares from
conversion of preferred stock - 7,899 - 7,899
-------- -------- -------- --------
Common and common equivalent
shares 99,791 94,380 99,260 94,254
======== ======== ======== ========
EARNINGS PER COMMON SHARE:
Net income per common and common
equivalent shares $ 0.35 $ 0.27 $ 0.66 $ 1.15
======== ======== ======== ========
</TABLE>
<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-31-1995
<PERIOD-END> SEP-30-1996
<CASH> 187,091
<SECURITIES> 12,319
<RECEIVABLES> 38,814
<ALLOWANCES> 0
<INVENTORY> 211,718
<CURRENT-ASSETS> 495,759
<PP&E> 2,021,528
<DEPRECIATION> 728,217
<TOTAL-ASSETS> 2,079,619
<CURRENT-LIABILITIES> 218,318
<BONDS> 585,009
0
0
<COMMON> 159,197
<OTHER-SE> 860,990
<TOTAL-LIABILITY-AND-EQUITY> 2,079,619
<SALES> 561,959
<TOTAL-REVENUES> 580,785
<CGS> 345,679
<TOTAL-COSTS> 437,136
<OTHER-EXPENSES> 84,879
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 32,652
<INCOME-PRETAX> 61,704
<INCOME-TAX> 10,755
<INCOME-CONTINUING> 65,598
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 65,598
<EPS-PRIMARY> 0.66
<EPS-DILUTED> 0.66
</TABLE>
