<PAGE> 1
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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
(Mark One)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF
THE SECURITIES EXCHANGE ACT OF 1934 [FEE REQUIRED]
FOR THE FISCAL YEAR ENDED DECEMBER 31, 1995
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF
THE SECURITIES EXCHANGE ACT OF 1934 [NO FEE REQUIRED]
FOR THE TRANSITION PERIOD FROM TO
COMMISSION FILE NUMBER 1-1153
NEWMONT MINING CORPORATION
(Exact name of registrant as specified in its charter)
<TABLE>
<S> <C>
DELAWARE 13-1806811
(State or other jurisdiction of (I.R.S. employer
incorporation or organization) identification no.)
1700 LINCOLN STREET
DENVER, COLORADO 80203
(Address of principal executive offices) (Zip Code)
</TABLE>
Registrant's telephone number, including area code (303) 863-7414
Securities registered pursuant to Section 12(b) of the Act:
<TABLE>
<CAPTION>
NAME OF EACH EXCHANGE
TITLE OF EACH CLASS ON WHICH REGISTERED
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<S> <C>
COMMON STOCK, $1.60 PAR VALUE NEW YORK STOCK EXCHANGE
PARIS BOURSE
SWISS STOCK EXCHANGES
(BASEL-GENEVA-ZURICH)
</TABLE>
Securities registered pursuant to Section 12(g) of the Act: NONE
INDICATE BY CHECK MARK WHETHER THE REGISTRANT (1) HAS FILED ALL REPORTS REQUIRED
TO BE FILED BY SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934 DURING
THE PRECEDING 12 MONTHS (OR FOR SUCH SHORTER PERIOD THAT THE REGISTRANT WAS
REQUIRED TO FILE SUCH REPORTS), AND (2) HAS BEEN SUBJECT TO SUCH FILING
REQUIREMENTS FOR THE PAST 90 DAYS. YES X NO .
--- ---
INDICATE BY CHECK MARK IF DISCLOSURE OF DELINQUENT FILERS PURSUANT TO ITEM 405
OF REGULATION S-K IS NOT CONTAINED HEREIN, AND WILL NOT BE CONTAINED, TO THE
BEST OF REGISTRANT'S KNOWLEDGE, IN DEFINITIVE PROXY OR INFORMATION STATEMENTS
INCORPORATED BY REFERENCE IN PART III OF THIS FORM 10-K OR ANY AMENDMENT TO THIS
FORM 10-K. X
---
THE AGGREGATE MARKET VALUE OF THE VOTING STOCK HELD BY NON-AFFILIATES OF THE
REGISTRANT (BASED ON THE CLOSING SALE PRICE OF THE SHARES ON THE NEW YORK STOCK
EXCHANGE) AT MARCH 7, 1996 WAS APPROXIMATELY $5,388,900,000.
THE NUMBER OF SHARES OF REGISTRANT'S COMMON STOCK OUTSTANDING AT MARCH 7, 1996
WAS 99,335,360.
DOCUMENTS INCORPORATED BY REFERENCE
PORTIONS OF REGISTRANT'S DEFINITIVE PROXY STATEMENT TO BE FILED PURSUANT TO
REGULATION 14A PROMULGATED UNDER THE SECURITIES EXCHANGE ACT OF 1934 FOR THE
ANNUAL MEETING OF STOCKHOLDERS TO BE HELD ON MAY 2, 1996 (PART III).
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<PAGE> 2
PART I
ITEMS 1 AND 2. BUSINESS AND PROPERTIES
INTRODUCTION
Newmont Mining Corporation ("Newmont") was incorporated in 1921 under the
laws of Delaware. Its sole asset is ownership of 90.5% of the outstanding stock
of Newmont Gold Company, a Delaware corporation which is engaged, directly and
through its subsidiaries and affiliates, in gold production, exploration for
gold and acquisition of gold properties worldwide. Newmont Gold Company,
together with its subsidiaries (unless the context otherwise requires), is
referred to herein as "NGC." Newmont, together with NGC and NGC's subsidiaries,
are referred to herein as the "Corporation."
Effective January 1, 1994, NGC succeeded to all of the operations and
assets of Newmont, except for the capital stock of NGC retained by Newmont, and
NGC assumed all of Newmont's liabilities. The number of outstanding shares of
Newmont capital stock now equals the number of shares it owns of NGC so that
shareholders of both companies have identical per share interests in the
reserves, production, earnings and dividends of NGC's operations. The income
statements and balance sheets for the two companies are virtually the same with
the only difference being the minority interest in NGC reflected in Newmont's
statements.
Substantially all of the Corporation's consolidated sales and operating
profit in 1995, 1994 and 1993 related to its gold mining activities in the U.S.
Although most of the Corporation's consolidated identifiable assets relate to
domestic activities, 22% of its net identifiable assets as of December 31, 1995
were related to foreign activities, with no single foreign operating entity
representing more than 10% of the Corporation's assets.
NEWMONT GOLD COMPANY
OVERVIEW
NGC produces gold from the Carlin Trend in Nevada. It also produces gold
through a 38% equity owned venture in Peru which commenced gold production in
August 1993 and a 50% owned venture in Uzbekistan which commenced gold
production in September 1995. NGC additionally has an 80% owned venture in
Indonesia, which is scheduled to commence gold production in the first half of
1996 and an 80% interest in a large copper/gold project in Indonesia which is
currently in the feasibility stage. In addition to exploration activities
conducted in connection with the above-referenced operations and projects, NGC
continues to explore for gold and/or is conducting joint venture discussions in
other parts of these countries and in various other countries, including Canada,
Mexico, Ecuador, Chile, Brazil, Argentina, Laos, Myanmar, Philippines, China and
the U.S. NGC had approximately 28.8 million equity ounces of proven and probable
gold ore reserves at December 31, 1995 and produced approximately 1.9 million
equity ounces of gold in 1995.
CARLIN, NEVADA
Production
NGC's North American operations are located on the geological feature known
as the Carlin Trend, near Carlin, Nevada. See map on page 3 herein. The Carlin
Trend is the largest gold district discovered in North America in this century.
At the end of 1995, NGC had 20.9 million ounces of proven and probable gold ore
reserves on the Carlin Trend.
From the Carlin Trend, production was 1,634,500 ounces in 1995 compared
with 1,555,300 ounces in 1994 and 1,674,200 ounces in 1993. Gold production at
NGC's Nevada operations is expected to approximate 1995 production of 1.6
million ounces.
In 1995, ore was mined from seven open-pit deposits (Genesis, Post, Carlin,
Gold Quarry, Tusc, Lantern and North Star) and from four underground mines
(Carlin East, Carlin Main, Deep Star and Rain). The Tusc open-pit mine, a
satellite deposit to NGC's largest mine, Gold Quarry, opened in May 1994 and two
other open-pit mines, Lantern and North Star were opened in 1995. The Carlin
East underground mine, located under the original Carlin pit, and the Rain
underground mine commenced production in late 1994. An additional underground
mine, Carlin Main, also beneath the original Carlin pit, commenced production in
<PAGE> 3
early 1995. Another underground mine, Deep Star, opened in late 1995. The four
underground mines produced 122,500 ounces in 1995.
The Post mine is being mined by Barrick Goldstrike Mines, Inc. ("Barrick")
under a joint mining agreement executed in December 1992 by NGC and Barrick for
the exploitation of the shared Post deposit and other related matters. At the
end of 1995, the lower and deep zones of this ore body contained approximately
4.9 million ounces of proven and probable reserves of gold. The parties share
the cost of mining the ore body in proportion to their interests in the
contained gold. NGC is benefiting from lower costs of mining than would be the
case if it had separately mined its portion of the Post ore body. See Item 7 --
"Management's Discussion and Analysis of Results of Operations and Financial
Condition."
CARLIN TREND MINE PRODUCTION
DRY SHORT TONS (000S)
FOR THE YEARS ENDED DECEMBER 31,
<TABLE>
<CAPTION>
1995 1994 1993
-------------------------------- -------------------------------- --------------------------------
MILL LEACH OVER- MILL LEACH OVER- MILL LEACH OVER-
ORE ORE BURDEN TOTAL ORE ORE BURDEN TOTAL ORE ORE BURDEN TOTAL
------ ------ ------- ------- ------ ------ ------- ------- ------ ------ ------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Open-Pit:
Genesis................. 3,235 15,125 42,727 61,087 3,354 10,591 44,199 58,144 2,336 12,704 50,413 65,453
Carlin/Lantern.......... 25 132 4,524 4,681 86 954 1,853 2,893 64 2,789 3,929 6,782
North Star.............. 11 187 1,936 2,134 -- -- -- -- -- -- -- --
Post.................... 2,084 752 63,024 65,860 404 3,941 43,186 47,531 420 1,066 15,188 16,674
Gold Quarry............. 8,943 32,099 44,639 85,681 9,518 34,885 52,379 96,782 11,005 36,760 56,283 104,048
Tusc.................... 219 2,399 14,743 17,361 100 454 5,654 6,208 -- -- -- --
Rain.................... -- -- -- -- 270 1,230 930 2,430 1,049 2,951 7,758 11,758
------ ------ ------- ------- ------ ------ ------- ------- ------ ------ ------- -------
Total Open-Pit........ 14,517 50,694 171,593 236,804 13,732 52,055 148,201 213,988 14,874 56,270 133,571 204,715
------ ------ ------- ------- ------ ------ ------- ------- ------ ------ ------- -------
Underground:
Carlin.................. 344 -- -- 344 34 7 -- 41 -- -- -- --
Deep Star............... 15 -- -- 15 -- -- -- -- -- -- -- --
Rain.................... 147 -- -- 147 48 3 -- 51 -- -- -- --
------ ------ ------- ------- ------ ------ ------- ------- ------ ------ ------- -------
Total Underground..... 506 -- -- 506 82 10 -- 92 -- -- -- --
------ ------ ------- ------- ------ ------ ------- ------- ------ ------ ------- -------
Grand Total........... 15,023 50,694 171,593 237,310 13,814 52,065 148,201 214,080 14,874 56,270 133,571 204,715
====== ====== ======= ======= ====== ====== ======= ======= ====== ====== ======= =======
</TABLE>
NGC owns in fee or controls through long-term mining leases and unpatented
mining claims all of the minerals and surface area within the boundaries of the
present and projected mining areas of its Carlin Trend deposits. Such long-term
leases extend for at least the anticipated mine life of those deposits. With
respect to Gold Quarry, NGC owns a 10% undivided interest in the minerals in a
majority of the present and projected mining areas, and with respect to the
remaining 90% has agreed to pay a royalty to third party lessors that is
equivalent to 16.2% of production therefrom. NGC's royalty commitments to other
parties with respect to other portions of the Gold Quarry property and certain
of its other properties are much less significant. See Item 7 -- "Management's
Discussion and Analysis of Results of Operations and Financial Condition."
During the past three years, the U.S. Congress considered a number of
proposed amendments to the General Mining Law, as amended (the "General Mining
Law"), which governs mining claims and related activities on federal lands. In
1992, a holding fee of $100 per claim was imposed upon unpatented mining claims
located on federal lands. In October 1994, a moratorium on the processing of new
patent applications was approved. While such moratorium currently remains in
effect, its future is unclear. In addition, a variety of bills have been
introduced in the U.S. Congress to amend further the General Mining Law and, in
1995, Congress passed an amendment to the General Mining Law which provided for
a 5% royalty on minerals taken from U.S. land and required that the patentee pay
the fair market value for surface land required to mine the associated minerals.
This amendment was included in an omnibus budget bill which was vetoed by the
President. Although the ultimate fate of this amendment or other changes to the
General Mining Law are not presently known, approximately 93.5% of NGC's proven
and probable ore reserves in the U.S. are located on private land and,
therefore, are not subject to such amendments.
2
<PAGE> 4
[INSERT NEVADA MAP]
3
<PAGE> 5
Refractory Ore Treatment Plant
In September 1994, NGC completed construction of a refractory ore treatment
plant, known as Mill No. 6, to oxidize refractory ores. Partial operation was
achieved in October 1994, but because of a crack in a weld of a riding ring of
the double rotator mill and a fire in the electrostatic precipitator, final
start-up was delayed until the end of December 1994. Ore processed through the
plant in 1995 yielded approximately 354,400 ounces of gold. This plant is
expected to account for approximately 35% of Carlin's gold production in 1996.
To finance the new facility, the plant was sold and leased backed to NGC
pursuant to a 21 year lease. For a discussion of the financing of the refractory
ore treatment plant, see Note 7 to Item 8 -- "Financial Statements and
Supplementary Data."
The facility enables NGC to oxidize and treat high-grade refractory ores
that contain both sulfides and active carbon. Approximately 65% of NGC's
reserves on the Carlin Trend are refractory and the balance are oxide. Oxide ore
at Carlin is amenable to gold extraction through the use of conventional
size-reduction processes, such as crushing and grinding, and the dissolution of
the gold in such ore using cyanidation treatment techniques common to the
industry. Refractory ore contains minerals which require an additional treatment
process, which is normally not necessary with oxide ore, to optimize the
recovery of gold from conventional cyanidation processes.
Other Mill and Leaching Facilities
NGC has utilized five other mills on the Carlin Trend (two of which are
currently active), in addition to the refractory ore treatment plant. Ore fed to
a mill is subjected to crushing, grinding and cyanide leaching treatment
processes, with gold recovery onto activated carbon. Mill No. 1 was commissioned
in 1965 and treated ore from the Carlin, Genesis and Post mines and was closed
in the Fall of 1994. Mill No. 2 was commissioned in 1985 and located adjacent to
the Gold Quarry open pit mine. Portions of Mill No. 2 were incorporated into the
refractory ore treatment plant in May 1994. Mill No. 3 was commissioned in 1988
and treated material from the Rain mine and was decommissioned in late 1994 when
the Rain mine ore reserves accessible from open-pit mining were depleted. It ran
for two months in 1995 and is scheduled to run for two months in 1996 to process
oxide ore from the Rain underground mine. Mill No. 4 was commissioned in 1989
and is located approximately one mile northeast of the Post deposit. Mill No. 5
was commissioned in 1988 and is located adjacent to the refractory ore treatment
plant.
Processing at the Carlin leaching operations includes crushing ore at
crushing plants, heap leaching ore on leach pads using cyanidation and gold
recovery onto activated carbon through carbon adsorption.
CARLIN TREND MILL AND LEACH PRODUCTION
FOR THE YEARS ENDED DECEMBER 31,
<TABLE>
<CAPTION>
1995 1994 1993
----------------------------------- ----------------------------------- -----------------------------------
DRY GRADE DRY GRADE DRY GRADE
SHORT (OUNCES OUNCES AVERAGE SHORT (OUNCES OUNCES AVERAGE SHORT (OUNCES OUNCES AVERAGE
TONS PER PRODUCED RECOVERY TONS PER PRODUCED RECOVERY TONS PER PRODUCED RECOVERY
(000S) TON) (000S) RATE(%) (000S) TON) (000S) RATE(%) (000S) TON) (000S) RATE(%)
------ ------- -------- -------- ------ ------- -------- -------- ------ ------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Mill No. 1....... -- -- -- -- 188 0.135 24.3 87.7 960 0.094 82.5 85.6
Mill No. 2....... -- -- -- -- 1,034 0.081 85.1 82.7 3,368 0.090 239.2 81.4
Mill No. 3....... 105 0.211 19.9 87.6 859 0.079 59.1 80.9 903 0.101 77.0 85.7
Mill No. 4....... 2,713 0.063 139.6 80.6 2,736 0.129 292.3 80.7 2,692 0.111 252.5 84.9
Mill No. 5....... 6,172 0.091 473.5 82.8 6,264 0.077 396.1 79.5 6,419 0.081 412.3 80.5
Mill No. 6....... 1,383 0.281 354.4 91.0 701 0.081 44.6 85.5 -- -- -- --
------ ------- ------ ------- ------ ----- -------
Total............ 10,373 0.109 987.4 83.4 11,782 0.091 901.5 80.7 14,342 0.091 1,063.5 82.5
====== ====== ======
Leach
Operations..... 44,529 0.023 647.1 --(1) 52,381 0.021 653.8 --(1) 58,945 0.019 610.7 --(1)
====== ------- ====== ------- ====== -------
Total Ounces
Produced....... 1,634.5 1,555.3 1,674.2
======= ======= =======
</TABLE>
- ---------------
(1) Leach recovery from tons placed on leach pads fluctuates from year-to-year
due to ore grade, differing solution application rates and cycle times, as
well as varying quantities of unleached material placed on pads.
4
<PAGE> 6
Bioleaching
As an extension of its current leaching operations, a demonstration project
has confirmed the commercial viability of a patented bioleaching process to
recover gold from low-grade sulfidic refractory materials that previously could
not be treated economically using only conventional cyanidation heap leaching.
In the bioleaching process, high-density cultures of naturally occurring
bacteria are added to low-grade ore as it is placed on leach pads. The bacteria
breaks down the sulfide crystal structure in the ore, allowing the gold
subsequently to be dissolved and recovered through heap leaching processes. In
January 1995, NGC began a $12.5 million three-year demonstration project of the
bioleaching process which resulted in the recovery of approximately 5,200 ounces
of gold in late 1995. It is designed to produce 100,000 ounces of gold over the
three year life of the project. As a result of the development of this
bioleaching process, 4.3 million ounces of low-grade refractory material were
added to the reserve category over the past two years. In 1995, an extension to
the Gold Quarry pit was added to the reserve category which would not be mined
if it was not for bioleaching. This extension contains 3.6 million ounces of
which 2.3 million ounces will be bioleached.
Other Facilities
The gold-bearing activated carbon from NGC's Carlin milling and leaching
plants is processed at a central carbon processing plant and converted into dore
bars at the adjacent refinery.
An analytical laboratory and administration offices are located in the
vicinity of Mill Nos. 5 and 6. NGC also has an advanced metallurgical research
laboratory on leased premises in Salt Lake City, Utah. This lease expires at the
end of 1996. Newmont has commenced construction of a research laboratory in
Englewood, Colorado to replace the Salt Lake City facility. This new facility is
expected to be completed by year-end 1996 at an estimated cost of $13 million.
Electrical power and natural gas for NGC's Nevada operations are provided
by public utilities. Oxygen for the refractory ore treatment plant is provided
by Praxair Inc. from an oxygen plant constructed by it on land leased from NGC
which is the sole consumer of the oxygen produced.
Refining
NGC currently has refining arrangements with three foreign refiners and one
domestic refiner to further refine dore bars produced by NGC to the pure form
recognized as marketable on the world markets. Under the terms of the agreements
with these refiners, the dore bars are toll refined and the precious metals are
returned to NGC's account for sale to third parties. Management believes that
because of the availability of alternative refiners, each able to supply all
services needed by NGC, no adverse effect would result if NGC lost the services
of any of its current refiners.
Exploration
NGC conducts extensive exploration along the Carlin Trend. NGC owns or
otherwise controls the mineral interests on approximately 682 square miles of
property along the Carlin Trend. In 1995, a total of 715 holes totaling 496,606
feet were drilled by NGC on the Carlin Trend in connection with reserve
development and exploration activities. This compares with approximately 775
holes totaling 519,288 feet drilled in 1994. Exploration by underground methods
continues to facilitate the definitive location of deeper deposits of gold ore.
In 1995, approximately $27 million was spent by NGC on reserve development
and exploration on the Carlin Trend. For 1996, reserve development and
exploration expenditures by NGC on the Carlin Trend are expected to be
approximately the same as 1995.
5
<PAGE> 7
PERU
Introduction
The Corporation also produces gold through Minera Yanacocha S.A. in Peru,
which is 38% owned by the Company; 32.3% by Compania de Minas Buenaventura, S.A.
("Buenaventura"), a Peruvian mining company; and 5% by International Finance
Corporation, which provided financing for the project. With respect to the
remaining 24.7% ownership of Yanacocha, see Note 14 -- "Commitments and
Contingencies -- Additional Interest in Minera Yanacocha" in Item
8 -- "Financial Statements and Supplementary Data."
Yanacocha has mining rights with respect to a 63,000 acre land position,
which includes the Carachugo, Maqui Maqui and San Jose deposits and other
prospects, located in northern Peru. The project's mining rights were acquired
through an assignment of a government concession held by a related entity. The
assignment has a term of 20 years, renewable at the option of Yanacocha for
another 20 years. A 100% owned subsidiary of NGC manages the project.
Production
Production commenced in August 1993 at the Carachugo deposit and in October
1994 at the Maqui Maqui deposit, which is located three miles north of the
Carachugo deposit. Contract mining is employed at Yanacocha and power for the
project is provided by diesel generators owned by Yanacocha. During 1994, the
first full year of operation, approximately 304,600 ounces of gold, or 115,700
equity ounces of gold were produced primarily from the Carachugo mine. The two
mines together produced approximately 552,000 ounces in 1995, or 209,800 equity
ounces at a total cash cost of $119 per ounce. In 1996, production is expected
to increase 10% to 15% over 1995 production including production from the San
Jose deposit which Yanacocha began mining at the beginning of 1996.
Yanacocha's operations are accessible by road and are located approximately
375 miles north of Lima and 28 miles north of the city of Cajamarca. Both the
Carachugo and Maqui Maqui deposits are being exploited through open-pit mines.
The San Jose deposit will be accessed through an open-pit mine as well. The ore
is not crushed, but transported directly to two leach pads where the ore is
treated with a cyanide solution. The leach solution is then run through a
processing plant and the gold is extracted utilizing a Merrill-Crowe gold
recovery method. The dore bars produced are transported from the processing
plant by a contractor and refined at refineries in the United Kingdom and
Switzerland.
Total proven and probable reserves for Yanacocha as of December 31, 1995
were approximately 4.9 million ounces (1.9 million equity ounces) compared with
approximately 4.0 million ounces (1.5 million equity ounces) as of December 31,
1994.
MINERA YANACOCHA MINE AND LEACH PRODUCTION (100%)
DRY SHORT TONS (000S)
FOR THE YEARS ENDED DECEMBER 31,
<TABLE>
<CAPTION>
1995 1994 1993
------------------------ ----------------------- ----------------------
LEACH LEACH LEACH
ORE WASTE TOTAL ORE WASTE TOTAL ORE WASTE TOTAL
------ ----- ------- ----- ----- ------- ----- ----- ------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Carachugo............................ 9,238 4,647 13,885 7,157 4,075 11,232 2,706 1,093 3,799
Maqui Maqui.......................... 8,520 2,072 10,592 1,996 372 2,368 -- -- --
------ ----- ------- ----- ----- ------- ----- ----- ------
Total................................ 17,758 6,719 24,477 9,153 4,447 13,600 2,706 1,093 3,799
====== ===== ======= ===== ===== ======= ===== ===== ======
Tons placed on leach pads
(000s dry)......................... 17,758 8,707 2,706
Average grade of ore
(Ounces per ton)................... 0.045 0.054 0.052
Ounces of gold produced.............. 552,000 304,600 81,500
</TABLE>
6
<PAGE> 8
Exploration
Exploration continues to be conducted at numerous prospects owned by
Yanacocha. Approximately $17 million was spent on exploration in 1995 (100%
basis) with approximately 164,000 feet drilled. A $15 million exploration
program (100% basis) is currently underway in 1996 with approximately 164,000
feet of drilling planned.
A second Peruvian joint venture in northern Peru was formed in November
1993 between NGC and Buenaventura. The joint venture, which is 65% owned by NGC,
has staked claims on 423,000 acres of prospective ground along north and south
extensions of the volcanic belt hosting the Yanacocha deposits. In addition, NGC
is active in the southern part of Peru. Initial exploration work is underway in
these prospective areas and a number of targets have been outlined.
[INSERT MINERA YANACOCHA MAP]
7
<PAGE> 9
UZBEKISTAN
In Uzbekistan, NGC has a 50% interest in a joint venture
("Zarafshan-Newmont") with the State Committee for Geology and Navoi Mining and
Metallurgical Combine, each state entities of Uzbekistan, to produce gold by
leaching ore from existing stockpiles of low-grade oxide ore from the
government-owned Muruntau mine. These state entities have guaranteed to
Zarafshan-Newmont 240 million tons of ore with an average grade of 0.036 ounces
of gold per ton, containing approximately 8.6 million ounces of gold. The gold
produced by Zarafshan-Newmont is sold in international markets for U.S. dollars.
A subsidiary of NGC provides technical and managerial support to
Zarafshan-Newmont. Total production which commenced in the second half of 1995
was 37,000 ounces, or 18,500 ounces attributable to NGC, at a total cash cost of
$218 per ounce. In 1996, production is expected to be in excess of 300,000
ounces with 50% attributable to NGC's interest at lower per ounce total cash
costs than in 1995. The project facilities include twenty crushers in four
stages. Crushed material is transported to lined leach pads where the ore is
treated with a cyanide solution. The leach solution is then run through a
processing plant and the gold extracted utilizing a Merrill-Crowe gold recovery
method. The resulting dore is transported to the nearby Muruntau gold refinery
operated by Navoi Mining and Metallurgical Combine where, pursuant to a refining
agreement, the dore is refined for export. The project has access to air, rail
and road transport. There are no significant logistical difficulties for
transportation of refined gold. Power for the project is provided by a
contractual arrangement with Navoi Mining and Metallurgical Combine which
acquires such power from a plant in Navoi, Uzbekistan.
The cost of the project was approximately $230 million, half of which is
attributable to NGC. Zarafshan-Newmont obtained a $105 million project financing
loan from a consortium of banks in 1994 and an additional $30 million in 1995.
See Note 7 to Item 8 -- "Financial Statements and Supplementary Data." NGC
provided to its joint venture partners such partners' share of the equity
capital required for the project in exchange for a portion of the existing
stockpiles and additional funds required to complete the project and supply
working capital.
[INSERT ZARAFSHAN-NEWMONT MAP]
8
<PAGE> 10
INDONESIA
NGC has two projects in Indonesia, Minahasa and Batu Hijau, both of which
are 80% owned by NGC. The remaining 20% of each project is owned by P.T. Tanjung
Serapung and P.T. Pukuafu Indah, respectively. Both projects hold mineral rights
pursuant to Contracts of Work with the Republic of Indonesia. Such contracts
provide for an eight-year term for exploration and feasibility analysis and a
30-year term for mining.
The more advanced of these projects is Minahasa, a multi-deposit project on
the island of Sulawesi. It is approximately 1,500 miles northeast of Jakarta.
The Minahasa project will mine and process ore from three hydrothermal
deposits -- Mesel, Leons and Nibong -- which at the end of 1995 contained
approximately 2.1 million ounces of proven and probable reserves (in which NGC
has an equity interest of approximately 1.7 million ounces). These deposits
contain both oxidized and refractory gold mineralization.
Site preparation at the Minahasa project began in November 1994 and
pre-production mining was initiated in April 1995. The project facilities
include a dry grinding mill, a fluidized bed roaster facility and a conventional
carbon-in-pulp gold recovery plant. Infrastructure improvements such as a
deep-water port, electrical power plant, water supply system and a village for
workers are also being constructed. Production is scheduled to commence in the
first half of 1996 and approach 100,000 ounces (100% basis) in 1996. Total
capital costs are estimated at $135 million. Production over the 13-year mine
life is expected to average 140,000 ounces (100% basis) per year at a cash cost
of $210 per ounce. The Minahasa project is in close proximity to the coast and
does not present any significant logistical difficulties for transportation of
materials and equipment.
The second project, Batu Hijau, is located on the island of Sumbawa, 950
miles east of Jakarta. It is a large porphyry copper/gold deposit that was
discovered in 1990. Batu Hijau is located 10 miles from the island's coast and
has access to natural harbors which can be developed for transportation of
materials, equipment and concentrate product. By year-end, a total of 113 holes
had been drilled in this deposit to an average depth of 330 feet. In 1995, a
comprehensive feasibility study refined cost and production alternatives. In
addition, discussions were conducted with potential partners who could bring
financing and copper expertise to this project. Total capital costs are
estimated at $1.5 billion. Batu Hijau is considered to have significant
potential, although there can be no assurance that such potential could or will
be realized. During the third quarter of 1995 NGC recognized that given the
size, complexity and nature of this large porphyry copper/gold project and the
cost of developing the project it would require more time to complete final
feasibility studies beyond the December 1, 1995 date provided for in the
Contract of Work. Accordingly, in October 1995, NGC requested from the
government of Indonesia an extension of the feasibility studies period. In late
December 1995, NGC was advised by the Indonesian government that it needed more
time to review its request for an extension and that the time period provided
for feasibility studies in the Contract of Work was suspended pending the
Indonesian government's decision. On March 15, 1996, the Indonesian government
granted an extension of the feasibility studies period to June 1, 1996.
9
<PAGE> 11
Exploration work continued through 1995 in areas surrounding the Minahasa
and Batu Hijau projects. Such work will continue in 1996 as part of NGC's
ongoing exploration program in Indonesia.
[INSERT BATU HIJAU MAP]
10
<PAGE> 12
EXPLORATION
NGC conducts its worldwide exploration activities through various
affiliates. One of these affiliates was responsible for the discovery in 1961 of
the Carlin Trend in Nevada and one discovered the existence of gold at the
Yanacocha deposit in Peru in the 1980s. In 1995, exploration and research
expense was $57.3 million compared with $69.2 million in 1994. These figures
exclude capitalized exploration costs associated with mine development of $9.4
million in 1995 and $5.1 million in 1994. NGC's 1996 exploration budget is
approximately at the same level as 1995.
In addition to the exploratory projects specifically discussed above, NGC
is in the preliminary stages of exploration in other areas of the U.S. and other
parts of the world. During 1995, on-the-ground evaluations were conducted in
approximately 25 countries and acquisition opportunities were monitored in
others.
In Mexico, NGC is involved in two projects -- La Herradura, a 45,000 acre
site just south of the U.S. border in northern Mexico is undergoing
prefeasibility studies and Mezcala, a 12,000 acre exploration site in southern
Mexico. NGC has a 44% interest in La Herradura and is earning a 44% interest in
Mezcala by investing $8.5 million over the next four years. The balance of both
projects is held by Minas Penoles, S.A. de C.V., a leading Mexican mining
company that would be the operator.
Near Fairbanks, Alaska, NGC began exploration on the True North property.
Under the terms of a joint venture agreement signed with La Teko Resources, Inc.
("La Teko") on June 9, 1995, NGC can earn a 65% interest in the property by (i)
making cash payments totaling $6 million to La Teko, (ii) expending $3 million
in exploration expenditures by December 31, 1996 and (iii) expending up to $18
million to bring the property into production. Drilling in 1995 confirmed an
average grade of 0.06 ounces per ton. Almost all of this deposit is near the
surface. NGC will intensify its efforts at True North in 1996. Work is focused
on extending a broader zone of mineralization from the 7.2 million tons already
identified.
Exploration continued in Canada where NGC has completed a drilling program
with its co-venturer, Westmin Resources Limited, on several targets at the
Fairchild Lake project in the Yukon Territory. NGC has earned a 51% interest in
the project by expending C$3.5 million in exploration over the last two years
and can earn up to a 65% interest by expending an additional C$7 million on the
property.
In Asia, NGC has a 93% interest in a joint venture for exploration in Laos.
The joint venture agreement covers approximately 2,500 square miles of land. NGC
continues to pursue exploration in other areas of the Asia/Pacific region,
including opportunities in the Philippines and China.
In the U.S., exploration continues at various locations. During the year,
NGC wrote off its investments in two exploration properties acquired in 1992,
Ivanhoe, located north of Carlin and Grassy Mountain in eastern Oregon. While
localized high-grade zones were identified at Ivanhoe, most of the
mineralization was low grade and did not meet development criteria. Similarly,
after analyzing the Grassy Mountain deposit, NGC concluded it was not
economically feasible for it to mine the property. In 1996, exploration will
continue in several states, including Alaska, Idaho, Montana, Nevada and Oregon.
Gold exploration is highly speculative in nature, involves many risks and
frequently is nonproductive. There can be no assurance that NGC's gold
exploration efforts will be successful. Once gold mineralization is discovered,
it may take a number of years from the initial phases of drilling until
production is possible, during which time the economic feasibility of production
may change. Substantial expenditures are required to establish proven and
probable ore reserves through drilling, to determine metallurgical processes to
extract the metals from the ore and, in the case of new properties, to construct
mining and processing facilities. No assurance can be given that NGC's
exploration programs will result in the expansion or replacement of current
production with new proven and probable ore reserves.
NGC's exploration team has a staff of approximately 200 geologists,
geochemists and geophysicists. State-of-the-art technology, including airborne
geophysical data acquisition systems, satellite location devices and
field-portable imaging systems, also aids in the location of prospective
targets.
11
<PAGE> 13
MARKETING
NGC's gold sales generally are made at the monthly average market price
prevailing during the month in which the gold is delivered plus a "contango",
which is essentially an interest factor, from the beginning of the month until
the date of delivery. Since the end of 1993 the Corporation has not engaged in
any hedging transactions on current production and none of NGC's 1995 production
was hedged. However, 125,000 ounces per year of the first five years of
production of NGC's Minahasa project in Indonesia beginning in 1996 has been
sold forward at an average price of $454 per ounce with a 40% participation in
prices above that level. See Note 12 to Item 8 -- "Financial Statements and
Supplementary Data" for information regarding major customers and export sales.
GENERAL
The business of gold mining is generally subject to a number of risks and
hazards, including environmental hazards, industrial accidents, labor disputes,
encountering unusual or unexpected geologic formations, cave-ins, flooding, rock
falls, periodic interruptions due to inclement or hazardous weather conditions,
other acts of God and fluctuations in the market prices of gold. Such risks
could result in damage to, or destruction of, mineral properties or producing
facilities, personal injury or death, environmental damage, delays in mining,
monetary losses and possible legal liability. NGC maintains insurance against
risks that are typical in the operation of its business and in amounts which NGC
believes to be reasonable, but no assurance can be given that such insurance
will continue to be available, will be available at economically acceptable
premiums or will be adequate to cover any resulting liability.
NGC's projects in Indonesia, Peru and Uzbekistan are subject to the risks
normally associated with conducting business in foreign countries, including
labor disputes and uncertain political and economic environments, as well as
risks of war and civil disturbances or other risks which may limit or disrupt
the projects, restrict the movement of funds or result in the deprivation of
contract rights or the taking of property by nationalization or expropriation
without fair compensation, foreign taxation, limitations on ownership and on
repatriation of earnings, and foreign exchange controls and currency
fluctuations. Although NGC is not currently experiencing any significant
problems in foreign countries arising from such risks, there can be no assurance
that such problems will not arise in the future. Political risk insurance from
the Overseas Private Investment Corporation ("OPIC") and/or the Multilateral
Investment Guarantee Agency has been obtained to cover a portion of NGC's
investments in Peru and Uzbekistan against certain expropriation, war, civil
unrest and political violence risks. Newmont is applying to OPIC for similar
political risk insurance covering its Minahasa investment in Indonesia.
Political risk insurance is limited by its terms to the particular risks
specified therein and is subject to certain exclusions. There can therefore be
no assurance that claims would be paid under such insurance in connection with a
particular event in a foreign country. Foreign investments may also be adversely
affected by laws and policies of the U.S. affecting foreign trade, investment
insurance and taxation.
The successful application of bioleach technology, on which NGC holds
patents in the U.S. and in many foreign countries, has resulted in significant
increases in proven and probable reserves of NGC. There are no other patents,
licenses or franchises material to NGC's business. In many foreign countries,
NGC conducts mining or exploration pursuant to concessions granted by the host
government. These countries include, among others, Indonesia, Laos and Peru. In
each case, NGC believes that such concessions are sufficient in extent and
duration to justify any proposed investment it might make based on any such
concessions. Such concessions are subject to the usual political risks
associated with foreign operations generally.
Capital expenditures incurred by NGC for continuing operations were
approximately $309 million, $402 million and $235 million in 1995, 1994 and
1993, respectively. NGC has an established program for the maintenance and
repair of its equipment and facilities. Management believes that NGC's
facilities are generally in a state of good repair. NGC has a continuous program
of capital investment that includes, as necessary or advisable, the replacement,
modernization or expansion of its equipment and facilities. For a discussion of
anticipated future capital expenditures, see Item 7 -- "Management's Discussion
and Analysis of Results of Operations and Financial Condition."
12
<PAGE> 14
There were 4,100 persons employed by NGC worldwide at December 31, 1995 and
2,835 persons employed by NGC worldwide at December 31, 1994. Newmont has no
employees.
GOLD MARKET
Gold has two main categories of use -- product fabrication and bullion
investment. Fabricated gold has a wide variety of end uses. Purchasers of
official coins and high-karat jewelry frequently are motivated by investment
considerations, so that net private bullion purchases alone do not necessarily
represent the total investment activity in gold.
The profitability of NGC's current operations is significantly affected by
changes in the market price of gold. Market gold prices can fluctuate widely and
are affected by numerous factors beyond NGC's control, including industrial and
jewelry demand, expectations with respect to the rate of inflation, the strength
of the U.S. dollar (the currency in which the price of gold is generally quoted)
and of other currencies, interest rates, central bank sales, forward sales by
producers, global or regional political or economic events, and production and
cost levels in major gold-producing regions such as South Africa. In addition,
the price of gold sometimes is subject to rapid short-term changes because of
speculative activities. The current demand for and supply of gold affect gold
prices, but not necessarily in the same manner as current supply and demand
affect the prices of other commodities. The supply of gold consists of a
combination of new mine production and existing stocks of bullion and fabricated
gold held by governments, public and private financial institutions, industrial
organizations and private individuals. As the amounts produced in any single
year constitute a very small portion of the total potential supply of gold,
normal variations in current production do not necessarily have a significant
impact on the supply of gold or on its price. If NGC's revenue from gold sales
falls for a substantial period below its cost of production at any or all of its
operations, NGC could determine that it is not economically feasible to continue
commercial production at any or all of its operations or to continue the
development of some or all of its projects. NGC's consolidated weighted average
total cash cost of equity production for its Nevada, Peruvian and Uzbekistan
operations was $210 per ounce of gold sold in 1995, $202 in 1994 and $197 in
1993.
The gold market generally is characterized by volatile prices. The
volatility of gold prices is illustrated in the following table of annual high,
low and average afternoon gold fixing prices of gold per ounce on the London
Bullion Market:
<TABLE>
<CAPTION>
YEAR HIGH LOW AVERAGE
---- ---- ---- -------
<S> <C> <C> <C>
1986........................................................ $438 $326 $ 368
1987........................................................ 500 390 446
1988........................................................ 484 395 437
1989........................................................ 416 356 381
1990........................................................ 424 346 383
1991........................................................ 403 344 362
1992........................................................ 360 330 344
1993........................................................ 406 326 360
1994........................................................ 395 378 384
1995........................................................ 396 372 384
1996 (through March 7)...................................... 415 389 395
</TABLE>
- ---------------
Source of Data: Metals Week
On March 7, 1996, the afternoon fixing for gold on the London Bullion
Market was $394 per ounce and the spot market price of gold on the New York
Commodity Exchange was $395 per ounce. Gold prices on both the London Bullion
Market and the New York Commodity Exchange are regularly published in most major
financial publications and many nationally recognized newspapers.
13
<PAGE> 15
PROVEN AND PROBABLE ORE RESERVES
NGC's equity in proven and probable ore reserves was approximately
28,782,000 ounces and 26,106,000 ounces of gold at December 31, 1995 and
December 31, 1994, respectively.
NGC's estimate of its proven and probable ore reserves at December 31, 1995
and 1994 is set forth in the table below. The proven and probable ore reserves
were determined by the use of mapping, drilling, sampling, assaying and
evaluation methods generally applied in the mining industry. Calculations with
respect to the estimates as of December 31, 1995 and 1994, are based on a gold
price of $400 per ounce. NGC's management believes that if its reserve estimates
were to be based on gold prices as low as $300 per ounce with current operating
costs, 1995 year-end reserves would decrease by approximately 15%. Conversely,
if NGC's reserve estimates were to be based on a gold price of $500 per ounce
with current operating costs, 1995 year-end reserves would increase by
approximately 9%. These reserves represent the total quantity of ore to be
extracted from the deposits or stockpiles allowing for mining efficiencies and
ore dilution. Contained ounces are prior to any losses during metallurgical
treatment.
<TABLE>
<CAPTION>
DECEMBER 31, 1995 DECEMBER 31, 1994
----------------------------------------- -----------------------------------------
NGC DRY SHORT GRADE CONTAINED EQUITY DRY SHORT GRADE CONTAINED EQUITY
DEPOSITS WITH PROVEN PERCENT TONS (OUNCES OUNCES OUNCES TONS (OUNCES OUNCES OUNCES
AND PROBABLE RESERVES(1) EQUITY (000S) PER TON) (000S) (000S) (000S) PER TON) (000S) (000S)
------------------------ ------- --------- -------- --------- ------ --------- -------- --------- ------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Carlin, Nevada
Open Pit
Gold Quarry/Mac/Tusc......... 100% 209,670 0.045 9,519 9,519 162,222 0.045 7,286 7,286
Carlin/Pete/Lantern.......... 100% 14,818 0.031 456 456 14,466 0.031 446 446
Genesis/North Star........... 100% 41,349 0.029 1,194 1,194 53,229 0.028 1,516 1,516
Post/Goldbug................. 100% 25,622 0.191 4,890 4,890 27,957 0.184 5,147 5,147
Capstone/Bootstrap/Tara...... 100% 19,851 0.046 915 915 28,041 0.040 1,127 1,127
Rain/Emigrant Springs........ 100% 4,864 0.035 169 169 4,864 0.035 169 169
------- ------ ------ ------- ------ ------
Total Open Pit................. 316,174 0.054 17,143 17,143 290,779 0.054 15,691 15,691
------- ------ ------ ------- ------ ------
Underground
Carlin....................... 100% 936 0.429 402 402 647 0.371 240 240
Deep Star.................... 100% 847 0.930 788 788 849 0.929 789 789
Rain......................... 100% 148 0.203 30 30 118 0.254 30 30
------- ------ ------ ------- ------ ------
Total Underground.............. 1,931 0.632 1,220 1,220 1,614 0.656 1,059 1,059
Stockpiles and in process.... 100% 47,730 0.053 2,521 2,521 37,558 0.048 1,793 1,793
------- ------ ------ ------- ------ ------
Total Carlin(2)(3)............. 365,835 0.057 20,884 20,884 329,951 0.056 18,543 18,543
------- ------ ------ ------- ------ ------
Minera Yanacocha, Peru
Carachugo.................... 38% 35,459 0.025 896 340 45,264 0.027 1,209 460
Maqui Maqui.................. 38% 47,652 0.047 2,238 850 56,612 0.047 2,680 1,018
San Jose..................... 38% 52,160 0.032 1,690 642
Stockpiles and in process.... 38% 1,800 0.048 87 33 1,846 0.044 81 31
------- ------ ------ ------- ------ ------
Total Yanacocha(4)............. 137,071 0.036 4,911 1,865 103,722 0.038 3,970 1,509
------- ------ ------ ------- ------ ------
Zarafshan-Newmont,
Uzbekistan(5).................. 50% 241,794 0.036 8,632 4,316 242,508 0.036 8,674 4,337
------- ------ ------ ------- ------ ------
Minahasa, Indonesia
Mesel/Leons/Nibong........... 80% 9,668 0.207 2,006 1,605 9,668 0.207 2,006 1,605
Other........................ 80% 858 0.164 141 112 858 0.164 141 112
------- ------ ------ ------- ------ ------
Total Minahasa(6).............. 10,526 0.204 2,147 1,717 10,526 0.204 2,147 1,717
------- ------ ------ ------- ------ ------
Total.......................... 755,226 0.048 36,574 28,782 686,707 0.049 33,334 26,106
======= ====== ====== ======= ====== ======
</TABLE>
- ---------------
(1) The term "reserve" means that part of a mineral deposit which can be
economically and legally extracted or produced under reasonable assumptions
at the time of the reserve determination.
The term "economically," as used in the definition of reserve, implies that
profitable extraction or production under defined investment assumptions has
been established or analytically demonstrated. The assumptions made must be
reasonable, including assumptions concerning the prices and costs that will
prevail during the life of the project.
14
<PAGE> 16
The term "legally," as used in the definition of reserve, does not imply
that all permits needed for mining and processing have been obtained or
that other legal issues have been completely resolved. However, for a
reserve to exist, there should be a reasonable basis to believe that
issuance of these permits or resolution of legal issues can be accomplished
in a timely manner.
The term "proven reserves" means reserves for which (a) quantity is
computed from dimensions revealed in outcrops, trenches, workings or drill
holes; (b) grade and/or quality are computed from the result of detailed
sampling and (c) the sites for inspection, sampling and measurements are
spaced so closely and the geologic character is sufficiently defined that
size, shape, depth and mineral content of reserves are well established.
The term "probable reserves" means reserves for which quantity and grade
are computed from information similar to that used for proven reserves but
the sites for sampling are farther apart or are otherwise less adequately
spaced. The degree of assurance, although lower than that for proven
reserves, is high enough to assume continuity between points of
observation.
(2) Calculated using cutoff grades for 1995 and 1994 as follows: oxide leach
material not less than 0.006 ounce per ton; refractory leach material (for
the Gold Quarry, Mac and Tusc deposits only) not less than 0.03 ounce per
ton; refractory mill material not less than 0.07 ounce per ton; oxide mill
material varies. Ore reserves were calculated using different recoveries
depending on each deposit's metallurgical properties and process. The
average oxide mill recoveries utilized were as follows (1994 values in
parenthesis): Mill No. 3 -- 85% (85%); Mill No. 4 -- 83% (81%); Mill No.
5 -- 82% (85%). The average refractory mill recoveries utilized were: Mill
No. 6 -- 88% (88%). The average leach recoveries utilized for oxide material
were as follows: North Area Leach Facility -- 63% (64%); South Area Leach
Facility -- 61% (69%); Rain Area Leach Facility -- 55% (56%). The following
average leach recovery was utilized for refractory bioleach material in the
Gold Quarry, Mac and Tusc deposits: 55% (60%) (engineered estimates).
The term "cut-off grade" means the lowest grade of mineralized rock that
can be included in the reserve in a given deposit. Cut-off grades vary
between deposits depending upon prevailing economic conditions, mineability
of the deposit, amenability of the ore to gold extraction, and milling or
leaching facilities available.
(3) Approximately 65% of these reserves are refractory in nature. Refractory ore
is not amenable to the normal cyanidation recovery processes currently used
by NGC. Such ore must be oxidized before it is subjected to the normal
recovery processes. Refractory reserves of mill-grade material contain at
least 0.07 ounces per ton. Refractory reserves of leach-grade material (Gold
Quarry, Mac and Tusc deposits only) contain at least 0.03 ounces per ton.
(4) Calculated by NGC using a cutoff grade not less than 0.010 ounces per ton.
Assumed leach recovery is 60% to 83%, depending on each deposit's
metallurgical properties. All of the ore is oxidized.
(5) Material available to Zarafshan-Newmont for processing from designated
stockpiles or from other specified sources. All ore is oxidized. Tonnage and
gold content of material available to Zarafshan-Newmont for processing from
the designated stockpiles or from other specified sources are guaranteed by
state entities of Uzbekistan. Material will be crushed and leached. The
feasibility study prepared by Zarafshan-Newmont used a 50% to 65% leach
recovery rate, depending on material type.
(6) Calculated by NGC using a cutoff grade of 0.058 ounces per ton and mill
recovery rates of 80% to 89% depending on material type. Substantially all
of the ore is refractory.
ENVIRONMENTAL MATTERS
GENERAL
NGC's U.S. gold mining and processing operations are subject to extensive
federal, state and local governmental regulations for the protection of the
environment, including those relating to the protection of air and water quality
and mine reclamation, and for the promotion of mine and occupational safety.
Management does not believe that compliance with such regulations will have a
material adverse effect on its competitive position. At this time NGC does not
expect any material impact on future recurring operating costs of compliance
with currently enacted environmental regulations. Ongoing costs to comply with
environmental obligations have not been significant to NGC's total costs of
operations. Since NGC is not able to pass on any net increases in costs to its
customers, any such increases could have an adverse effect on future
profitability of NGC. Amendments to current laws and regulations governing
operations and activities of mining companies or the stringent implementation
thereof could have a material adverse impact on NGC in terms of increased
capital and operating expenditures.
CURRENT OPERATIONS
It is estimated that with respect to NGC's U.S. operations, compliance with
federal, state and local regulations relating to the discharge of material into
the environment, or otherwise relating to the protection of the environment,
required capital expenditures of approximately $15 million in 1995. It is
estimated that NGC will require approximately $20 million of capital
expenditures for environmental compliance in 1996 and annually thereafter.
NGC's operations outside of the U.S. are also subject to governmental
regulations for the protection of the environment. Management believes that
these regulations have not had, and will not have, a materially adverse effect
on NGC's operations or its competitive position. The adoption of new laws or
regulations, or
15
<PAGE> 17
amendments to current laws or regulations, regarding the operations and
activities of mining companies could have a material adverse impact on NGC's
capital and operating expenditures. It is estimated that compliance with
regulations for the protection of the environment required capital expenditures
of approximately $3 million in 1995 in connection with the Minahasa project in
Indonesia.
NEVADA OPERATIONS
NGC's Nevada gold mining and processing operations generate solid waste
which is subject to regulation under the federal Resource Conservation and
Recovery Act ("RCRA") and similar laws of the State of Nevada. Solid waste that
is considered "hazardous" is subject to extensive regulation by the U.S.
Environmental Protection Agency (the "EPA") and the State of Nevada under
Subtitle C of RCRA, while non-hazardous solid waste is governed by a less
stringent program under Subtitle D of RCRA and solid waste management
regulations of the State of Nevada.
In 1986, the EPA determined that the regulation of "extraction" and
"beneficiation" wastes from mining operations under Subtitle C of RCRA was not
warranted and these wastes have been exempted from RCRA pursuant to the Bevill
Amendment. However, the EPA began to develop specific regulations for such
wastes under Subtitle D. NGC is participating in that process. Currently, there
is not a sufficient basis to predict the potential impact of such regulations on
NGC.
Wastes from the "processing" of ores and minerals (including refining
wastes) at NGC's Nevada operations is subject to regulation under Subtitle C of
RCRA. NGC recycles substantially all of the potentially hazardous secondary
materials generated during refining operations in compliance with Subtitle C.
Such compliance has not had, and is not expected to have, any material impact on
NGC's operations.
NGC's Nevada operations are subject to stringent state permitting
regulations for protection of surface and groundwater, as well as wildlife.
These regulations may require additional capital and operating expenditures for
expansion of current operations and development of new projects and may increase
closure and reclamation costs for pits, tailing impoundment and leaching
facilities.
Mining operations have the potential to produce fugitive dust emissions
which are subject to regulation under the laws of the State of Nevada. The EPA's
current regulations under the federal Clean Air Act exclude fugitive dust from
surface mines in determining whether new or expanded sources need permits for
construction under the regulations for prevention of significant deterioration
of air quality. The 1990 amendments to the Federal Clean Air Act could
ultimately increase NGC's compliance costs for air pollution permitting and/or
control, but the impact on NGC's mining operations is so dependent on future
regulations and other contingencies that it cannot reasonably be predicted at
this time.
FORMER OPERATIONS
The Corporation is involved in matters involving environmental cleanup
obligations arising from past mining activities (not in all cases conducted by
the Corporation) at four separate locations within the U.S. Idarado Mining
Company, an 80.1% owned subsidiary of NGC, agreed by consent decree in 1992 with
the state of Colorado to undertake specific remediation work in the
Telluride/Ouray area of Colorado. Resurrection Mining Company, 100% owned by
NGC, is a defendant in lawsuits brought by the state of Colorado and the U.S.,
respectively, for environmental remediation in the Leadville, Colorado area.
Dawn Mining Company, a 51% owned subsidiary of NGC, has filed remedial proposals
for an inactive uranium mine formerly leased from the Spokane Indian Tribe in
Washington State and a former mill site located near Ford, Washington.
Remediation activities were conducted at all sites in 1995 and, at Idarado 80%
of the remediation was completed. The fourth site is for reclamation of an
inactive site mined by the former owners on the Ivanhoe exploration property in
Nevada. At December 31, 1995 the Corporation had an aggregate $55.8 million
accrued for remediation of these inactive sites, a reduction from $65.7 million
accrued at the end of 1994. See Note 14 to Item 8 -- "Financial Statements and
Supplementary Data, Item 3" -- "Legal Proceedings" and see Item 7 -- "Management
Discussion and Analysis of Results of Operations and Financial Conditions."
16
<PAGE> 18
ITEM 3. LEGAL PROCEEDINGS
During 1995, an agency of the State of Nevada Department of Taxation filed
an assessment claiming sales taxes due relating to the sale-leaseback of NGC's
refractory ore treatment plant. This assessment, including interest, totals
approximately $30 million. The Corporation filed a Petition for Redetermination
and a hearing was held by the agency that issued the assessment in October 1995.
The hearing officer reaffirmed the agency's determination. The Corporation
intends to appeal this determination to the State Tax Commission, which is
independent from the agency. If unsuccessful, the Corporation will vigorously
contest the determination to higher levels and believes that it will ultimately
prevail based upon the opinion of its counsel.
In December 1983, the State of Colorado filed a lawsuit in the U.S.
District Court for the District of Colorado under the Comprehensive
Environmental Response Compensation and Liability Act of 1980 ("CERCLA"), 42
U.S.C. 9601 et seq., seeking clean-up and damages for alleged injury to natural
resources due to releases of hazardous substances into the environment. This
case, State of Colorado v. ASARCO, Inc., et al. (Civil Action No. 83-C-2388),
was consolidated with another action, United States of America v. Apache Energy
& Minerals, et al. (Civil Action No. 86-C-1676), which was filed in August 1986.
Both cases involve allegations of environmental impairment in the vicinity of
Leadville, Colorado, including the area of the operations and property of the
Res-ASARCO Joint Venture which owns the Black Cloud Mine, the Yak Tunnel, and
adjacent property, and seek remedial actions and damages from a number of
defendants, including Newmont and NGC's wholly owned subsidiary, Resurrection
Mining Company ("Resurrection"), which is a partner with ASARCO in the
Res-ASARCO Joint Venture. In August 1994, the Court entered a Partial Consent
Decree between and among the U.S., Newmont, Resurrection and certain defendants.
The Partial Consent Decree obligates Resurrection to pay for and perform the
cleanup of sources of contamination in various areas, pursuant to the Superfund
administrative process. During 1995, Resurrection implemented and completed
remedial action at selected locations. Additional remedial activities are
planned for 1996. The precise nature of the remaining remedial activities is
subject to further investigation and study, EPA selection in accordance with the
National Contingency Plan and public comment. At this time, the precise remedy
and cost have not been fixed. The proposed settlement also requires Resurrection
to reimburse the governments for their past response costs. Further,
Resurrection's cleanup and reimbursement obligations are subject to certain
sharing percentages with at least one other defendant. The Partial Consent
Decree does not resolve certain other potential liabilities, including liability
for any natural resource damage and any groundwater or surface water
contamination. See Note 14 to Item 8 -- "Financial Statements and Supplementary
Data."
In September 1995, Southern Peru Copper Corporation ("SPCC"), previously
10% owned by NGC, was served with a lawsuit, which was filed in the state court
of Nueces County, Texas, naming as defendants SPCC, its present and former
stockholders including NGC, and certain other defendants. The lawsuit seeks
unspecified compensatory and punitive damages for alleged personal injuries to
approximately 700 persons resident in Peru and property damages arising from
alleged releases into the environment from SPCC operations in Peru. In September
1995, the action was removed from Texas state court to the U.S. District Court
for the Southern District of Texas, Corpus Christi Division. In October 1995,
SPCC and other defendants filed a motion to dismiss the action on a number of
grounds, including that it would be unreasonable for a United States court to
exercise extraterritorial jurisdiction, lack of personal jurisdiction and forum
non conveniens. In January 1996 the Court entered an order dismissing the
complaint on the grounds that under U.S. and international law the subject
matter of the lawsuit should be adjudicated before Peruvian courts. On February
15, 1996, plaintiffs filed a notice of appeal from the order of the U.S.
District Court dismissing the complaint and from an earlier order of that Court
denying plaintiffs' motion to remand the case to the Texas state court.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No matters were submitted to a vote of security holders, through the
solicitation of proxies or otherwise during the quarter ended December 31, 1995.
17
<PAGE> 19
ITEM 4A. EXECUTIVE OFFICERS OF THE REGISTRANT
Newmont's executive officers as of March 7, 1996 were:
<TABLE>
<CAPTION>
NAME AGE OFFICE
- ---- --- ------
<S> <C> <C>
Ronald C. Cambre 57 Chairman, President and Chief Executive Officer
Graham M. Clark, Jr. 50 Senior Vice President and General Counsel
Lawrence T. Kurlander 56 Senior Vice President, Administration
Wayne W. Murdy 51 Senior Vice President and Chief Financial Officer
David A. Baker(1) 41 Vice President, Environmental Affairs
Steven A. Conte(1) 53 Vice President, Human Resources
Marcel F. DeGuire(1) 46 Vice President, Project Development and Regional
Director, Commonwealth of Independent States
Mary E. Donnelly(1) 44 Vice President, Government Relations
John A. S. Dow(1) 50 Vice President and Regional Director, Indonesia and
Southeast Asia
W. Durand Eppler(1) 42 Vice President, Business Development and Planning
Gary E. Farmar 41 Vice President and Controller
Patricia A. Flanagan 37 Vice President, Treasurer and Assistant Secretary
David H. Francisco(1) 46 Vice President, International Operations
Eric Hamer(1) 53 Vice President, North American Operations
Joy E. Hansen(1) 50 Vice President and Associate General Counsel
Donald G. Karras 42 Vice President, Taxes
Leendert G. Krol(1) 56 Vice President, Exploration
Michael G. Moran(1) 54 Vice President, Engineering Services
Jack H. Morris(1) 56 Vice President, Corporate Relations
W. James Mullin(1) 50 Vice President and Regional Director, Nevada
Operations
Jean-Michel Rendu(1) 52 Vice President, Technical Services
Timothy J. Schmitt 53 Vice President, Secretary and Assistant General
Counsel
</TABLE>
- ---------------
(1) Elected officer of NGC only.
There are no family relationships by blood, marriage or adoption among any
of the above executive officers of Newmont. All executive officers are elected
annually by the Boards of Directors of Newmont and NGC, as the case may be, to
serve for one year or until their respective successors are elected and qualify.
There is no arrangement or understanding between any of the above executive
officers and any other person pursuant to which he or she was selected as an
officer. Each executive officer of Newmont also serves as an executive officer
of NGC.
Mr. Cambre was elected Chairman of Newmont on November 16, 1994 (effective
January 1, 1995), President on June 1, 1994 and Chief Executive Officer on
September 23, 1993 (effective November 1, 1993). He served as Vice Chairman of
Newmont from November 1, 1993 through December 31, 1994. Previously, he served
as Vice President and Senior Technical Advisor to the office of the Chairman of
Freeport-McMoRan Inc., a natural resources company, from June 1988 to September
1993. He is also Chairman, President and Chief Executive Officer of NGC.
Mr. Clark was elected a Senior Vice President of Newmont on September 11,
1991. He was designated General Counsel on October 26, 1988 (effective May 1,
1989) and elected a Vice President on December 17, 1986. He is also Senior Vice
President and General Counsel of NGC.
18
<PAGE> 20
Mr. Kurlander was elected Senior Vice President, Administration, of Newmont
on March 16, 1994 (effective April 1, 1994). Previously, he served as Senior
Vice President, Public Affairs and Government Affairs, for Nabisco International
Inc. of RJR Nabisco, Inc., a consumer products company, since 1992. Prior to
that he managed worldwide communications, state government affairs and worldwide
security functions for American Express Company, a financial services company.
He is also Senior Vice President, Administration of NGC.
Mr. Murdy was elected a Senior Vice President and Chief Financial Officer
of Newmont on December 16, 1992 (effective December 31, 1992). Previously, he
served as Senior Vice President and Chief Financial Officer of Apache
Corporation, an oil and gas exploration and production company, since May 1991.
Prior to that he had been Vice President and Chief Financial Officer of Apache
Corporation. He is also Senior Vice President and Chief Financial Officer of
NGC.
Mr. Baker was elected Vice President, Environmental Affairs, of NGC on
April 24, 1991 (effective March 11, 1991). Previously, he held various senior
environmental positions with Newmont and NGC for more than five years.
Mr. Conte was elected Vice President, Human Resources, of NGC on April 3,
1995. Previously, he served as Vice President, Human Resources of Echo Bay Mines
Ltd., a natural resources company, since January 1988.
Mr. DeGuire was elected a Vice President of NGC on May 18, 1994. He was
designated Vice President, Project Development and Regional Director,
Commonwealth of Independent States, in 1995. Previously, he served as Vice
President, Project Development and Metallurgical Research, since May 18, 1994.
Prior to that he held various senior metallurgical research and environmental
positions with Newmont and NGC for more than five years.
Ms. Donnelly was elected Vice President, Government Relations of NGC on
June 12, 1990. Previously, she held various senior government relations
positions with Newmont and NGC for more than five years.
Mr. Dow was elected a Vice President of NGC on May 18, 1994 and
subsequently was designated Regional Director, Indonesia and Southeast Asia.
Previously, he held various senior exploration positions with NGC and its
subsidiaries for more than five years.
Mr. Eppler was elected Vice President, Business Development and Planning,
of NGC on May 17, 1995. Previously, he served as Managing Director of Chemical
Securities, Inc., an affiliate of Chemical Bank, for more than five years.
Mr. Farmar was elected a Vice President of Newmont on December 16, 1992 and
Controller on October 30, 1991. He had served as Assistant Controller from
January 28, 1989 through October 29, 1991. He is also Vice President and
Controller of NGC.
Ms. Flanagan was elected a Vice President of Newmont on March 15, 1995 and
elected Treasurer on December 16, 1992. Previously, she served as an Assistant
Treasurer. She was appointed Assistant Secretary on June 24, 1992. She is also
Vice President, Treasurer and Assistant Secretary of NGC.
Mr. Francisco was elected Vice President, International Operations, of NGC
on July 19, 1995 (effective July 10, 1995). Previously, he served as Executive
Vice President and General Manager of P.T. Freeport Indonesia Co., a natural
resources company, from August 1992 to May 1995 and as Senior Vice President and
Chief Administrative Officer from May 1991 to August 1992.
Mr. Hamer was designated Vice President, North American Operations, of NGC
on July 12, 1995. Previously, he served as Vice President, Indonesian Projects,
since January 1, 1994 and as Vice President, Project Development from January 1,
1993 through December 31, 1993. He also served as Vice President and General
Manager from October 30, 1991 to December 31, 1992 and as Vice President and
Resident Manager from March 11, 1991 to October 29, 1991 and as Vice President,
Operations from October 31, 1988 to March 10, 1991.
19
<PAGE> 21
Ms. Hansen was elected Vice President and Associate General Counsel of NGC
on March 15, 1995. Previously, she served as Associate General Counsel since
March 1992. Previously, she was a partner in the law firm of Holland & Hart
specializing in natural resources law.
Mr. Karras has served as Vice President, Taxes, of Newmont since November
9, 1992. Previously, he served as Director of Taxes of Kennecott Corporation, a
natural resources company, for four years. He is also Vice President, Taxes of
NGC.
Mr. Krol has served as Vice President, Exploration of NGC since September
14, 1994. Previously, he served as Director of Foreign Exploration since May
1992. Prior to that he served as Director of Metallurgical Services since 1990.
Mr. Moran was elected Vice President, Engineering Services, of NGC on
December 15, 1993 (effective January 17, 1994). Previously, he was employed by
BHP Minerals International Inc., a natural resources company, for more than five
years where he was responsible for the development and management of major
construction projects.
Mr. Morris was elected Vice President, Corporate Relations, of NGC on March
16, 1994 (effective April 1, 1994). Previously, he served as Director of
Investor Relations and Corporate Communications for Inland Steel Industries, a
steel producer, from 1990 to 1993.
Mr. Mullin was designated Vice President and Regional Director, Nevada
Operations, of NGC on May 14, 1994. Previously, he served as Vice President and
General Manager from December 15, 1993 to May 13, 1994. He also served as Acting
General Manager from January 1, 1993 to December 14, 1993. Prior to that he held
various senior operating positions with NGC.
Mr. Rendu was designated Vice President, Technical Services, of NGC, on
January 19, 1995. Previously, he served as Vice President, Information Systems
of NGC since November 26, 1991 and Vice President, Mine Engineering of NGC since
March 11, 1991.
Mr. Schmitt was elected a Vice President of Newmont on December 17, 1986
and was elected Secretary on May 25, 1988. He was designated Assistant General
Counsel on October 30, 1991. He served as Controller from March 31, 1983 through
October 29, 1991. He is also Vice President, Secretary and Assistant General
Counsel of NGC.
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
Newmont's common stock is traded on the New York Stock Exchange (under the
symbol "NEM"). The following table sets forth, for the periods indicated, the
high and low sales prices per share of Newmont's common stock as reported on the
New York Stock Exchange Composite Transactions Tape, as adjusted for an April
1994 1.2481-for-1 stock split.
<TABLE>
<CAPTION>
1995 1994
----------------- -----------------
HIGH LOW HIGH LOW
------ ------ ------ ------
<S> <C> <C> <C> <C>
First quarter................................... $43.88 $33.13 $48.07 $40.67
Second quarter.................................. $45.25 $38.25 $45.67 $37.63
Third quarter................................... $46.25 $41.13 $46.75 $38.25
Fourth quarter.................................. $46.00 $36.63 $45.50 $33.88
</TABLE>
On March 7, 1996, there were 5,463 stockholders of record of Newmont's
common stock.
A dividend of $0.12 per share of common stock outstanding was declared in
each quarter of 1995 and 1994, or a total of $0.48 per share in each such year.
The determination of the amount of future dividends,
20
<PAGE> 22
however, will be made by Newmont's Board of Directors from time to time and will
depend on Newmont's future earnings, capital requirements, financial condition
and other relevant factors.
ITEM 6. SELECTED FINANCIAL DATA
<TABLE>
<CAPTION>
1995 1994 1993 1992 1991
---------- ---------- ---------- ---------- --------
(IN THOUSANDS, EXCEPT PER SHARE)
<S> <C> <C> <C> <C> <C>
FOR THE YEARS ENDED DECEMBER 31,
Sales................................. $ 636,219 $ 597,370 $ 628,809 $ 605,897 $616,818
========== ========== ========== ========== ========
Income before cumulative effects of
changes in accounting principles.... $ 112,634 $ 76,121 $ 94,669 $ 90,621 $ 94,278
Cumulative effects of changes in
accounting principles after tax..... -- -- 38,470 (11,572) --
---------- ---------- ---------- ---------- --------
Net income............................ $ 112,634 $ 76,121 $ 133,139 $ 79,049 $ 94,278
========== ========== ========== ========== ========
Income per common share:
Before cumulative effects of changes
in accounting principles......... $ 1.17 $ 0.70 $ 0.92 $ 1.04 $ 1.11
Cumulative effects of changes in
accounting principles............ -- -- 0.45 (0.14) --
---------- ---------- ---------- ---------- --------
Net income.......................... $ 1.17 $ 0.70 $ 1.37 $ 0.90 $ 1.11
========== ========== ========== ========== ========
Dividends declared per common share... $ 0.48 $ 0.48 $ 0.48 $ 0.48 $ 0.48
========== ========== ========== ========== ========
AT DECEMBER 31,
Total assets.......................... $1,773,770 $1,656,657 $1,186,410 $1,236,304 $841,049
Long-term debt, including current
portion............................. $ 608,634 $ 593,634 $ 192,000 $ 265,689 $224,395
Stockholders' equity.................. $ 742,947 $ 673,465 $ 629,832 $528,565(1) $201,448
</TABLE>
- ---------------
(1) Includes the effect of the issuance of 2.875 million shares of $5.50
convertible preferred stock.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND
FINANCIAL CONDITION
The following discussion and analysis provides information which management
believes is relevant to an assessment and understanding of Newmont Mining
Corporation ("NMC") and its subsidiaries' (collectively, the "Corporation")
consolidated results of operations and financial condition. The discussion
should be read in conjunction with the consolidated financial statements and
notes thereto. NMC's principal subsidiary is Newmont Gold Company ("NGC"), which
is approximately 90% owned by NMC, and which holds all of the operating assets
of the Corporation. As a result, all per share amounts take into consideration
the minority interest in NGC.
SUMMARY
The Corporation earned $112.6 million ($1.17 per share), $76.1 million
($0.70 per share) and $94.7 million ($0.92 per share) in 1995, 1994 and 1993,
respectively, before the cumulative effect of a change in accounting principle.
Results for 1995 reflect a gain on the sale of an investment and the write-off
of two exploration properties. NGC sold its 10.7% interest in Southern Peru
Copper Corporation ("SPCC") for $116.4 million, resulting in a pre-tax gain of
$113.2 million, or $72 million after-tax ($0.74 per share). The write-off of the
Grassy Mountain and Ivanhoe exploration properties resulted in a pre-tax charge
of $57.1 million, or $37.1 million after-tax ($0.38 per share). During 1993, the
Corporation sold its remaining interest in Newcrest Mining Limited for $67
million, recognizing a pre-tax gain of $29.6 million, or an after-tax gain of
$19.3 million ($0.22 per share). In 1993, the Corporation adopted Statement of
Financial Accounting Standards No. 109, "Accounting for Income Taxes," which
resulted in a cumulative benefit from a change in
21
<PAGE> 23
accounting principle of $38.5 million ($0.45 per share). Further information
about this change in accounting for income taxes can be found in Note 6 to Item
8 -- "Financial Statements and Supplementary Data."
When excluding the above items, the Corporation earned $70.3 million ($0.81
per share), $76.1 million ($0.70 per share) and $75.4 million ($0.70 per share)
in 1995, 1994 and 1993, respectively. This resulted from NGC's total equity
production of 1,862,800 ounces, 1,671,000 ounces and 1,705,200 ounces in 1995,
1994 and 1993, respectively, at a weighted average total cash cost of production
per ounce for the same years of $210, $202 and $197, respectively.
RESULTS OF OPERATIONS
NGC's consolidated sales revenue resulted from gold production (which
excludes Minera Yanacocha's equity production) which was 1,653,000 ounces,
1,555,300 ounces and 1,674,200 ounces in 1995, 1994 and 1993, respectively. The
profitability of the Corporation's operations is significantly affected by the
market price of gold. Gold prices can fluctuate widely and are affected by
numerous factors beyond the Corporation's control. The average annual gold price
per ounce received was $385, $384 and $376 in 1995, 1994 and 1993, respectively.
In 1993, the Corporation hedged a portion of its production through the payment
of a gold loan which resulted in realizing a higher price than the average open
market price for the year of $361 per ounce. No production was hedged in 1995
and 1994. However, the Corporation has entered into hedging transactions that
begin in January 1996 and continue through December 2000 for production from its
Minahasa property, located in Indonesia. These transactions consist of forward
sales of 125,000 ounces per year at an average price of $454 an ounce, plus 40%
of the amount by which the market price exceeds the forward sales price.
The effects of the changes in the average annual gold price received and
NGC's annual consolidated production levels on sales revenues between years are
reflected in the following table (in thousands):
<TABLE>
<CAPTION>
1995 VS. 1994 1994 VS. 1993
------------- -------------
<S> <C> <C>
Increase (decrease) in sales revenues due to:
Gold price............................................... $ 1,339 $ 13,203
Production............................................... 37,510 (44,642)
------- ---------
Total............................................ $38,849 $ (31,439)
======= =========
</TABLE>
NGC's North American operations are located on the geological feature known
as the Carlin Trend, hereafter, referred to as the "Carlin operations." NGC's
Carlin gold production was 1,634,500 ounces, 1,555,300 ounces and 1,674,200
ounces in 1995, 1994 and 1993, respectively. The first full year of operation of
the refractory ore treatment plant, in conjunction with high grade underground
ore, were responsible for the increase in gold production at Carlin between 1995
and 1994. Gold production during 1994 declined from 1993 due to the shutdown of
three mills, the largest of which was closed to accommodate the start-up of the
refractory ore treatment plant. This plant, which initially began operations in
mid-1994, operated at reduced rates in 1994 and 1995 due primarily to a crack in
a weld of a riding ring of the double rotator mill in August 1994 and a fire in
an electrostatic precipitator in November 1994. The plant operated at steadily
increasing rates during 1995 and further increases are expected in 1996 as
modifications have increased throughput. Approximately $12 million in capital
expenditures is estimated to be incurred in 1996 for modifications to the plant.
This plant is expected to account for approximately 35% of Carlin's gold
production in 1996.
In 1996 and future years, Carlin's ore production will continue to shift
from open-pit oxide ore to refractory ore coming from both open-pits and
underground operations. Carlin production in 1996 is expected to be similar to
1995's and then increase in 1997 with the mining of higher grade ores from the
Post deposit.
In September 1995, Zarafshan-Newmont, a 50%-50% joint venture between a NGC
subsidiary and two Uzbekistan governmental entities, poured its first gold.
Zarafshan-Newmont produces gold by crushing and leaching low grade oxide ore
obtained from existing stockpiles from the Muruntau mine in Uzbekistan. Total
production for 1995 was 37,000 ounces, or 18,500 ounces attributable to NGC's
interest, at total cash costs of $218 per ounce of gold produced. Although
problems have been experienced in starting up the leach facility, the
Corporation believes it has identified the necessary modifications for the
facility to reach designed
22
<PAGE> 24
capacity. Such modifications may require Zarafshan-Newmont to invest up to $15
million in additional capital ($7.5 million to NGC's interest) in 1996. In 1996,
production is expected to be in excess of 300,000 ounces with 50% attributable
to NGC's interest, at lower per ounce total cash costs. In following years,
somewhat higher levels of gold production are anticipated.
Gold production will be further augmented in mid-1996 by production from
the 80% owned Minahasa project. Construction of the project commenced in the
third quarter of 1994 and is expected to cost approximately $135 million.
Production is expected to approach 100,000 ounces in 1996 with total cash costs
anticipated to be approximately $210 per ounce. NGC has an 80% interest in this
project, but since it funded 100% of the construction costs, it will be entitled
to 100% of the gold production until its investment has been recovered.
NGC also has a 38% interest in Minera Yanacocha S.A. ("Minera Yanacocha"),
a Peruvian entity, which is managed by a NGC subsidiary. NGC has exercised its
preemptive right to increase its interest in Minera Yanacocha to 51.35%, as
discussed in Note 14 to Item 8 -- "Financial Statements and Supplementary Data,"
however, this is still subject to final determination by the Peruvian courts.
Therefore, the Corporation has continued to account for its 38% interest as an
equity investment. In 1995, Minera Yanacocha produced 552,000 ounces, or 209,800
equity ounces, at total cash costs of $119 per ounce. In 1994, production
totalled 304,600 ounces, or 115,700 equity ounces, at total cash costs of $135
per ounce. Production commenced in August 1993 and 81,500 ounces, or 31,000
equity ounces, were produced in 1993 at total cash costs of $149 per ounce. The
increase in gold production in 1995 was primarily attributable to a second mine
coming into production in late 1994. Production is expected to increase 10% to
15% in 1996 due to increased ore production with the addition of a third mine
and a higher ore grade, and a similar increase is expected in 1997. Total cash
costs are expected to slightly increase in 1996 and 1997.
NGC's total equity gold production is expected to increase 10% to 15%
annually over the next two years.
Costs applicable to sales were $370.6 million, $326.4 million and $333.5
million in 1995, 1994 and 1993, respectively. Of the 1995 amount, $4.1 million
of the costs relate to NGC's share of costs attributable to Zarafshan-Newmont.
All other costs applicable to sales for the last three years were attributable
to the Carlin operations. The Carlin operation's costs applicable to sales on a
per ounce of gold sold basis were as follows for the last three years:
<TABLE>
<CAPTION>
1995 1994 1993
---- ---- ----
<S> <C> <C> <C>
Cash operating costs.......................................... $189 $178 $165
Royalties..................................................... 31 25 29
Other cash costs.............................................. 3 5 4
---- ---- ----
Total cash costs.................................... 223 208 198
Other......................................................... 1 2 1
---- ---- ----
Total costs applicable to sales..................... $224 $210 $199
==== ==== ====
</TABLE>
Cash operating costs consist principally of charges for mining ore and
waste associated with current period gold production and processing ore through
milling and leaching facilities. Total Carlin site cash operating costs
increased to $308.4 million in 1995, from $277.3 million in 1994 and $276.7
million in 1993. The increased aggregate and per ounce cash operating costs in
1995 compared to 1994 relate primarily to increased milling costs associated
with the operation of the refractory ore treatment plant and to underground
mining costs. Total cash operating costs increased slightly in 1994, compared to
1993, despite lower gold production, resulting in the increase in per ounce
costs. This cost increase resulted from higher milling and leaching costs
incurred during 1994, as the refractory ore treatment plant began operations and
as the processing plants treated ore that was mined from deeper areas of the
open-pit mines, which is more difficult to process. However, these cost
increases were substantially offset by lower mining costs which resulted from a
decrease in tons mined attributable to gold produced. Per ounce cash operating
costs for the Carlin operations are expected to increase slightly in 1996 due to
increased gold production from the refractory ore treatment plant and increased
ore from underground mining, with decreased gold production from low-cost oxide
leach
23
<PAGE> 25
operations. Per ounce cash operating costs are expected to decrease in 1997 when
the production of higher grade ore from the Post deposit enters the production
stream.
In addition to the cash operating costs expensed, the Corporation is
capitalizing a portion of mining costs associated with tons mined from deposits
having diverse grade and waste-to-ore ratios over a mine's life. Total
capitalized mining costs were $57.4 million, $33.2 million and $23.6 million in
1995, 1994 and 1993, respectively. The most significant costs relate to the Post
deposit. This deposit is being mined under the 1992 joint mining agreement
between NGC and Barrick Goldstrike Mines, Inc. ("Barrick"). Under the agreement,
Barrick, which has a separate and distinct interest in the same ore body, mines
the deposit and charges NGC on a basis that will result in both companies
ultimately bearing the same cost per contained ounce of gold mined. Since a
significant portion of NGC's contained ounces in this deep deposit are not
expected to be mined for at least another year, such mining costs are being
capitalized and will be matched against the revenue from the ounces when they
are produced. These capitalized costs increased in 1995 due to elevated mining
rates for this deposit. Also in 1995, the Corporation capitalized costs for
other deposits on the Carlin Trend and in Indonesia that have diverse grade and
waste-to-ore ratios. Such capitalized mining costs are expected to increase in
1996 over the 1995 amount.
Royalty costs, which depend largely on the amount of royalty ore processed,
were $51.6 million, $38.7 million, and $47.6 million in 1995, 1994 and 1993,
respectively. Royalty costs are expected to decrease in 1996 due to processing
less royalty burdened ore.
On a consolidated basis, the Corporation's costs applicable to sales per
ounce should remain fairly constant in 1996 with expected lower cost production
from Zarafshan-Newmont and Minahasa offsetting higher cost Carlin production.
DD&A was $106.8 million, $91.1 million and $110 million in 1995, 1994 and
1993, respectively. The increase in 1995 over 1994 is primarily due to new
facilities and equipment at the Carlin operations, including the refractory ore
treatment plant. The decrease in 1994 compared to 1993 is primarily due to lower
depreciation attributable to three Carlin mills which were shut down in 1994.
With increased assets placed in service at the Carlin operations, a full year of
Zarafshan-Newmont operations and the startup of Minahasa operations, DD&A is
expected to increase in 1996.
Exploration and research expenses were $57.3 million, $69.2 million and
$52.7 million in 1995, 1994 and 1993, respectively. The decrease in exploration
and research expenses in 1995 compared to the 1994 amount was due to the
Corporation's planned decrease in exploration spending and increased focus on
resource development, for which costs are capitalized. The increase in
exploration and research expenses in 1994 over the 1993 amount reflects an
increase in exploration efforts primarily in Indonesia and South America. NGC
intends to replace and increase its reserve base primarily through exploration.
At December 31, 1995, NGC's proven and probable gold reserves were 28.8 million
equity ounces, compared to 26.1 million equity ounces at December 31, 1994.
Exploration and research expenses in 1996 are expected to remain at the 1995
level.
During the first quarter of 1995, studies on NGC's 80% owned Batu Hijau
project in Indonesia confirmed that this large porphyry copper/gold deposit
could be economically developed. Therefore, beginning in 1995, development costs
were capitalized. Cash expenditures totaled $27.7 million for the year. In 1994
and 1993, $16.8 million and $7.2 million, respectively, of exploration and
research expenses were incurred for this project. Capital costs for this project
are expected to be approximately $1.5 billion, and the Corporation has studies
underway to review how best to maximize its shareholder value from the project.
Investment options for this project include the possibility of a joint venture
partner.
General and administrative expense ("G&A") was $46 million in 1995,
compared to $41.9 million in 1994 and $35.8 million in 1993. The increases in
G&A are primarily related to higher staff levels attributable to the increased
international focus of the Corporation's operations. The Corporation provides
extensive management oversight and technical expertise to its overseas
operations. A nominal increase in G&A expense is expected in 1996 over 1995.
Interest expense before capitalized interest was $48 million, $29.5 million
and $20.9 million in 1995, 1994 and 1993, respectively. The increases in 1995
and 1994 are associated with higher debt balances, primarily due
24
<PAGE> 26
to the sale-leaseback financing of the refractory ore treatment plant which was
completed in September 1994. Only a slight increase in interest expense over the
1995 amount is expected in 1996 as debt balances should remain fairly constant.
Of the interest expense amounts, $11.6 million, $19.7 million and $8.5 million
were capitalized in 1995, 1994 and 1993, respectively. The higher amount of
capitalized interest in 1994 compared to 1995 and 1993 is the result of major
construction projects at the Carlin operations, primarily the refractory ore
treatment plant. Capitalized interest in 1995 consists of interest capitalized
in respect to the Zarafshan-Newmont, Minahasa and Batu Hijau projects and
continued construction at the Carlin operations. Capitalized interest is
expected to decrease in 1996, compared to the 1995 amount, due to the completion
of the Zarafshan-Newmont project in 1995 and the Minahasa project by mid-1996.
Other expense totalled $61.5 million, $42.7 million and $14.2 million in
1995, 1994 and 1993, respectively. Included in the 1995 amount is the write-off
of two exploration properties. In 1995, an evaluation of the Ivanhoe exploration
property in Nevada was completed and determined that most of the mineralization
was low grade and did not meet the Corporation's criteria for development. A
charge of $23.3 million was taken for the write-off and estimated costs to
reclaim areas disturbed by previous mining and exploration activity on the
property.
At December 31, 1994, the Corporation concluded that the geological model
being used for the Grassy Mountain property in Oregon was inadequate to support
mine development, resulting in 996,000 ounces of proven and probable reserves
being reclassified as mineralized material not in reserves. After completion of
a thorough evaluation of the deposit in 1995, the Corporation concluded that the
deposit did not meet its criteria for development and a charge of $33.8 million
was taken for the write-off.
Other expense also reflects charges of $3 million, $36.1 million and $6
million in 1995, 1994 and 1993, respectively, related to environmental
obligations associated with former mining activities discussed in Note 14 to
Item 8 -- "Financial Statements and Supplementary Data." Included in the 1994
amount is a valuation allowance of $20 million that was made against receivables
from insurance companies for recoveries related to such environmental
obligations. The Corporation recorded the valuation allowance after discussions
with its new lead counsel regarding its review of the litigation with the
insurance companies and due to the absence of expected settlement discussions.
After recording the valuation allowance there remained a net receivable balance
from insurance companies of approximately $17 million at December 31, 1994.
Settlement in certain of the insurance litigation was reached in 1995 enabling
the Corporation to realize the receivable. Settlement discussions continue with
respect to additional insurance litigation. The Corporation intends to
vigorously pursue its claims with respect to the remaining litigation and
believes that it is reasonably possible that additional amounts will be
recovered although no such amounts are accrued.
Since the actual cash payments for the environmental obligations associated
with the Corporation's former mining activities are expected to occur over a
number of years, such cash requirements are not expected to have a significant
negative impact on the Corporation's liquidity. The Corporation made payments of
$20 million, $14.5 million and $12.6 million in 1995, 1994 and 1993,
respectively, with respect to these environmental obligations and expects to pay
approximately $10 million of such costs in 1996. For these liabilities,
including the liabilities associated with the Ivanhoe property, $56.1 million
was accrued at December 31, 1995. Because of the uncertain nature of these
liabilities, the Corporation estimates that it is reasonably possible that the
ultimate liability may be as much as 50% greater or 15% lower than the amount
accrued at December 31, 1995. Absent concurrent insurance recoveries, on-going
cash expenditures will be funded out of operating cash flows and/or borrowings.
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.
Other expenses in 1993 also include $3.5 million of costs for the
transaction with NGC discussed in Note 2 to Item 8 -- "Financial Statements and
Supplementary Data."
Dividends, interest and other income was $42.2 million, $22.3 million and
$20 million for 1995, 1994 and 1993, respectively. The 1995 and 1994 amounts
include $28.3 million and $9.2 million, respectively, for business interruption
insurance recorded for the problems associated with the refractory ore treatment
plant, as previously discussed. The remaining variance in amounts between years
is due primarily to variances in
25
<PAGE> 27
interest income. Interest income was higher in the 1995 and 1993 periods than
the 1994 period due to higher cash balances throughout 1995 and 1993 than in
1994.
In 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 tax
benefit of $20 million related to the charges associated with the Ivanhoe and
Grassy Mountain properties. In 1994, the Corporation recognized an income tax
benefit of $16.2 million resulting from the resolution of certain tax issues
associated with prior years, as well as a tax benefit of $12.6 million
recognized in connection with the charge relating to environmental obligations.
In 1993, a $10.3 million tax charge was recognized for the gain on the sale of
Newcrest Mining Limited. Tax benefits from percentage depletion were realized in
all three years. At December 31, 1995, the Corporation had $59.6 million of net
deferred tax assets. Although it can give no assurances, the Corporation
estimates projected future operations and tax planning strategies will result in
the utilization of these net deferred tax assets.
General inflation over the past three years has not had a material effect
on the Corporation's cost of doing business and is not expected to have a
material effect in the foreseeable future. Changes in the price received for
gold will impact the Corporation's revenue stream, as previously discussed.
LIQUIDITY AND CAPITAL RESOURCES
During 1995, the Corporation's cash outlays included $309.3 million in
capital expenditures, $30.5 million to fund the partners' share of the costs at
Zarafshan-Newmont and $53.7 million in dividends. Of the capital expenditures,
approximately $163.1 million was spent on projects at the Carlin operations.
These Carlin costs were primarily associated with capitalized mining costs, the
refractory ore treatment plant, underground development, development exploration
and leach pad construction. In addition, $76.7 million was spent by the
Corporation on mine site development for the Minahasa project, $30.3 million on
the Zarafshan-Newmont project and $27.7 million on the Batu Hijau project. These
expenditures were funded by cash on hand at December 31, 1994 of $160.6 million,
cash flow from operating activities of $152.2 million and cash received on the
sale of NGC's investment in SPCC of $116.4 million. The cash flow from operating
activities reflects taxes associated with the SPCC sale and the Ivanhoe property
write-off of $16.1 million. In addition, $13.4 million was borrowed under
short-term credit facilities and Zarafshan-Newmont obtained an additional $30
million of project financing, $15 million of which was attributable to NGC.
Approximately $300 million is expected to be spent on capital projects in
1996. Carlin Trend expenditures of approximately $200 million will be for
capitalized mining costs, mine equipment, underground development, tailings dams
and modifications relating to the refractory ore treatment plant. Capital funds
of approximately $20 million, $15 million and $40 million will also be required
for the Batu Hijau, Zarafshan-Newmont and Minahasa projects, respectively.
In January 1996, NMC issued 4.65 million shares of common stock for $51.87
per share under an existing shelf registration statement with the Securities and
Exchange Commission. Proceeds of the issue netted $241.3 million and were used
to purchase an equal number of shares of common stock of NGC. This transaction
increased NMC's ownership of NGC to 90.5%.
Cash on hand at December 31, 1995 of $59.1 million, proceeds of $241.3
million from the equity offering, operating cash flow, and short-term borrowings
will be used to fund the Corporation's capital expenditures and other cash
requirements in 1996. In June 1994, NGC filed a shelf registration statement
with the Securities and Exchange Commission covering the issuance of up to $150
million in non-convertible debt securities. The Corporation also has a $400
million unused revolving credit facility with a consortium of banks. There are
no present plans to issue any such securities or use the revolving credit
facility.
Scheduled minimum long-term debt repayments are $4.4 million in 1996. The
Corporation expects to fund maturities of its debt through operating cash flow
and/or by refinancing the debt as it becomes due.
In December 1995, NMC called for redemption all of its 2.875 million shares
of convertible preferred stock. At the option of the shareholders, substantially
all of the convertible preferred stock was converted prior to the redemption
date into shares of common stock, at a conversion price of $36.395 per share of
common
26
<PAGE> 28
stock (equivalent to a conversion rate of 2.7476 shares of common stock for each
whole share of convertible preferred stock). In connection with the transaction,
NGC called for redemption its shares of convertible preferred stock, all of
which were owned by NMC. NMC converted shares of the NGC convertible preferred
stock in an amount equal to the conversion of NMC convertible preferred stock by
the holders thereof, increasing its ownership in NGC to 90.1%. Costs associated
with the transaction totalled $4.4 million.
As discussed in Note 14 to Item 8 -- "Financial Statements and
Supplementary Data," 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.
Of the Corporation's $309.3 million in capital expenditures in 1995, it is
estimated that approximately $18 million was required to comply with
environmental regulations. The Corporation estimates that approximately $20
million will be spent for capital expenditures to comply with environmental
regulations annually beginning in 1996. The ongoing costs to comply with
environmental regulations are not a significant portion of the Corporation's
cash operating costs.
The Corporation provides for future reclamation and mine closure costs on a
unit-of-production basis. The annual accrual for costs associated with current
operations has not been significant. The Corporation reviews the adequacy of its
reclamation and closure reserves in light of current laws and regulations and
makes provisions as necessary. In addition, periodic internal environmental
audits are conducted to evaluate environmental compliance. Cash flow from the
Corporation's operations and salvage values are expected to provide funding for
reclamation and closure costs. The Corporation believes that its current
operations are in compliance with applicable laws and regulations designed to
protect the public health and environment.
Current and non-current inventories (non-current inventories are included
in other assets) increased from December 31, 1994 to December 31, 1995 by $43.1
and $20.1 million, respectively. These increases were primarily due to a $43.2
million increase in ore and in-process inventories at Carlin, principally the
result of the stockpiling of mill and leach refractory ore primarily for
processing at the refractory ore treatment plant and the bio-leach facility. The
remainder of the increases are primarily related to Zarafshan-Newmont with the
commencement of operations and with the Corporation acquiring ore stockpiles
from its partners in 1995 to allow them to fund their capital contributions to
the venture.
In 1995, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 121, "Accounting for the Impairment of
Long-Lived Assets and for Long-Lived Assets to Be Disposed Of." The Corporation
adopted this standard for the 1995 fiscal year with no impact on the
Corporation's financial position or results of operations. Also in 1995, the
Financial Accounting Standards Board issued Statement of Financial Accounting
Standards No. 123, "Accounting for Stock-Based Compensation." The Corporation
intends to adopt this standard for the 1996 fiscal year by continuing to account
for such compensation under the Accounting Principles Board Opinion No. 25,
"Accounting for Stock Issued to Employees" and disclosing the pro forma effect
on net income and earnings per share had the new accounting standard been
applied.
27
<PAGE> 29
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To Newmont Mining Corporation:
We have audited the accompanying consolidated balance sheets of Newmont
Mining Corporation (a Delaware corporation) and subsidiaries as of December 31,
1995 and 1994, and the related statements of consolidated income, changes in
stockholders' equity and cash flows for each of the three years in the period
ended December 31, 1995. These financial statements are the responsibility of
the Corporation's management. Our responsibility is to express an opinion on
these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of Newmont Mining Corporation
and subsidiaries as of December 31, 1995 and 1994, and the results of their
operations and their cash flows for each of the three years in the period ended
December 31, 1995 in conformity with generally accepted accounting principles.
As discussed in Note 6 to the consolidated financial statements, effective
January 1, 1993, the Corporation changed its method of accounting for income
taxes.
ARTHUR ANDERSEN LLP
Denver, Colorado,
January 23, 1996.
28
<PAGE> 30
NEWMONT MINING CORPORATION AND SUBSIDIARIES
STATEMENTS OF CONSOLIDATED INCOME
(IN THOUSANDS, EXCEPT PER SHARE)
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
----------------------------------
1995 1994 1993
-------- -------- --------
<S> <C> <C> <C>
Sales and other income
Sales.................................................. $636,219 $597,370 $628,809
Dividends, interest and other.......................... 42,157 22,316 19,976
Gain on disposition of investments..................... 113,188 -- 29,607
-------- -------- --------
791,564 619,686 678,392
-------- -------- --------
Costs and expenses
Costs applicable to sales.............................. 370,617 326,385 333,541
Depreciation, depletion and amortization............... 106,835 91,115 110,000
Exploration and research............................... 57,291 69,151 52,694
General and administrative............................. 45,953 41,892 35,849
Interest, net of amounts capitalized................... 36,415 9,823 12,393
Other.................................................. 61,484 42,655 14,230
-------- -------- --------
678,595 581,021 558,707
-------- -------- --------
Equity in income of affiliated companies................. 28,895 15,395 5,001
-------- -------- --------
Pre-tax income before cumulative effect of change in
accounting principle................................... 141,864 54,060 124,686
Income tax (provision) benefit........................... (16,992) 29,334 (18,565)
Minority interest in income of Newmont Gold Company...... (12,238) (7,273) (11,452)
-------- -------- --------
Income before cumulative effect of change in accounting
principle.............................................. 112,634 76,121 94,669
Cumulative effect of change in accounting principle...... -- -- 38,470
-------- -------- --------
Net income............................................... 112,634 76,121 133,139
Preferred stock dividends................................ 11,157 15,813 15,910
-------- -------- --------
Net income applicable to common shares................... $101,477 $ 60,308 $117,229
======== ======== ========
Income per common share:
Before cumulative effect of change in accounting
principle........................................... $ 1.17 $ 0.70 $ 0.92
Cumulative effect of change in accounting principle.... -- -- 0.45
-------- -------- --------
Net income............................................. $ 1.17 $ 0.70 $ 1.37
======== ======== ========
Average shares outstanding............................. 87,006 86,147 85,462
======== ======== ========
</TABLE>
The accompanying notes are an integral part of these statements.
29
<PAGE> 31
NEWMONT MINING CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS, EXCEPT PER SHARE)
<TABLE>
<CAPTION>
AT DECEMBER 31,
-------------------------
1995 1994
---------- ----------
<S> <C> <C>
ASSETS
Cash and cash equivalents........................................... $ 59,142 $ 160,637
Short-term investments.............................................. 11,820 13,438
Accounts receivable................................................. 24,458 37,597
Inventories......................................................... 173,984 130,931
Other current assets................................................ 20,128 27,531
---------- ----------
Current assets................................................. 289,532 370,134
Property, plant and mine development, net........................... 1,255,278 1,119,286
Other long-term assets.............................................. 228,960 167,237
---------- ----------
Total assets.............................................. $1,773,770 $1,656,657
========== ==========
LIABILITIES
Short-term debt..................................................... $ 29,179 $ 15,739
Current portion of long-term debt................................... 4,375 --
Accounts payable.................................................... 38,570 32,723
Other accrued liabilities........................................... 122,312 104,753
---------- ----------
Current liabilities............................................ 194,436 153,215
Long-term debt...................................................... 604,259 593,634
Reclamation and remediation liabilities............................. 64,795 66,760
Other long-term liabilities......................................... 85,352 90,097
---------- ----------
Total liabilities......................................... 948,842 903,706
---------- ----------
Minority interest in Newmont Gold Company........................... 81,981 79,486
---------- ----------
Commitments and contingencies
STOCKHOLDERS' EQUITY
Preferred stock -- $5.00 par value; 5,000 shares authorized; 2,875
shares issued in 1994, of $5.50 convertible (aggregate liquidation
preference $287,500).............................................. -- 14,375
Common stock -- $1.60 par value; 120,000 shares authorized; 94,802
and 86,804 issued, less 591 and 724 treasury shares,
respectively...................................................... 150,738 137,728
Capital in excess of par value...................................... 308,566 302,800
Retained earnings................................................... 283,643 218,562
---------- ----------
Total stockholders' equity................................ 742,947 673,465
---------- ----------
Total liabilities and stockholders' equity................ $1,773,770 $1,656,657
========== ==========
</TABLE>
The accompanying notes are an integral part of these statements.
30
<PAGE> 32
NEWMONT MINING CORPORATION AND SUBSIDIARIES
STATEMENTS OF CONSOLIDATED CHANGES
IN STOCKHOLDERS' EQUITY
(IN THOUSANDS, EXCEPT PER SHARE)
<TABLE>
<CAPTION>
PREFERRED STOCK COMMON STOCK CAPITAL IN
----------------- ----------------- EXCESS OF RETAINED
SHARES AMOUNT SHARES AMOUNT PAR VALUE EARNINGS
------ -------- ------ -------- ---------- --------
<S> <C> <C> <C> <C> <C> <C>
Balance at December 31, 1992...... 2,875 $ 14,375 68,149 $109,038 $ 295,163 $109,989
Stock options exercised......... -- -- 350 560 14,913 --
Common stock issued from
treasury, primarily for stock
options exercised............ -- -- 242 388 10,243 --
Net income...................... -- -- -- -- -- 133,139
Common stock dividends -- $0.48
per share.................... -- -- -- -- -- (41,019)
Preferred stock
dividends -- $5.50 per
share........................ -- -- -- -- -- (15,910)
Minimum pension liability
adjustment................... -- -- -- -- -- (1,047)
1.2481 shares to 1 share stock
split declared March 21,
1994......................... -- -- 17,055 27,288 (27,288) --
------ -------- ------ -------- --------- --------
Balance at December 31, 1993...... 2,875 14,375 85,796 137,274 293,031 185,152
Transaction with NGC (Note 2)... -- -- -- -- -- 14,069
Stock options exercised......... -- -- 106 169 3,065 (131)
Common stock issued from
treasury, primarily for stock
options exercised............ -- -- 178 285 6,704 (219)
Net income...................... -- -- -- -- -- 76,121
Common stock dividends -- $0.48
per share.................... -- -- -- -- -- (41,452)
Preferred stock
dividends -- $5.50 per
share........................ -- -- -- -- -- (15,813)
Minimum pension liability
adjustment................... -- -- -- -- -- 835
------ -------- ------ -------- --------- --------
Balance at December 31, 1994...... 2,875 14,375 86,080 137,728 302,800 218,562
Stock options exercised......... -- -- 99 159 3,434 (119)
Common stock issued from
treasury, primarily for stock
options exercised............ -- -- 133 213 4,692 (161)
Preferred stock redemption and
conversion, net of costs..... (2,875) (14,375) 7,899 12,638 (2,360) 5,260
Net income...................... -- -- -- -- -- 112,634
Common stock dividends -- $0.48
per share.................... -- -- -- -- -- (41,823)
Preferred stock
dividends -- $3.88 per
share........................ -- -- -- -- -- (11,157)
Minimum pension liability
adjustment................... -- -- -- -- -- 447
------ -------- ------ -------- --------- --------
Balance at December 31, 1995...... -- $ -- 94,211 $150,738 $ 308,566 $283,643
====== ======== ====== ======== ========= ========
</TABLE>
The accompanying notes are an integral part of these statements.
31
<PAGE> 33
NEWMONT MINING CORPORATION AND SUBSIDIARIES
STATEMENTS OF CONSOLIDATED CASH FLOWS
(IN THOUSANDS)
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
-------------------------------------
1995 1994 1993
--------- --------- ---------
<S> <C> <C> <C>
Operating activities
Net income............................................ $ 112,634 $ 76,121 $ 133,139
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation, depletion and amortization........... 106,835 91,115 110,000
Undistributed earnings of affiliates............... (3,603) (14,553) (4,928)
Minority interest, net of dividends................ 7,253 1,318 11,229
Deferred taxes..................................... (16,300) (28,052) (65,774)
Gain on sale of investments........................ (113,188) -- (29,607)
Write-off of exploration properties................ 52,591 -- --
Debt repayment at less than monetized amount....... -- -- (23,508)
Other.............................................. 1,128 (1,950) (1,925)
--------- --------- ---------
147,350 123,999 128,626
(Increase) decrease in operating assets:
Accounts receivable.............................. 13,815 9,970 (809)
Inventories...................................... (55,669) (13,336) (46,062)
Other assets..................................... 8,816 1,609 3,958
Increase (decrease) in operating liabilities:
Accounts payable and accrued expenses............ 43,552 24,868 (7,592)
Other liabilities................................ (5,683) (3,378) (19,571)
--------- --------- ---------
Net cash provided by operating activities............... 152,181 143,732 58,550
--------- --------- ---------
Investing activities
Additions to property, plant and mine development..... (309,269) (402,030) (235,314)
Proceeds from sale of investments..................... 116,357 -- 66,978
Investment in joint venture........................... (30,543) (14,675) (23,196)
Other................................................. (8,345) 15,533 15,019
--------- --------- ---------
Net cash used in investing activities................... (231,800) (401,172) (176,513)
--------- --------- ---------
Financing activities
Short-term borrowings................................. 13,440 -- 4,798
Proceeds from long-term borrowings.................... 15,000 528,634 15,000
Repayments of long-term borrowings.................... -- (127,000) (88,689)
Proceeds from issuance of common stock................ 8,034 10,599 26,104
Dividends paid on common stock........................ (41,823) (41,452) (41,019)
Dividends paid on preferred stock..................... (11,860) (15,813) (16,954)
Preferred stock redemption and conversion costs....... (4,442) -- --
Debt issuance costs................................... (225) (6,641) (2,551)
--------- --------- ---------
Net cash provided by (used in) financing activities..... (21,876) 348,327 (103,311)
--------- --------- ---------
Net increase (decrease) in cash and cash equivalents.... (101,495) 90,887 (221,274)
Cash and cash equivalents at beginning of year.......... 160,637 69,750 291,024
--------- --------- ---------
Cash and cash equivalents at end of year................ $ 59,142 $ 160,637 $ 69,750
========= ========= =========
</TABLE>
See Note 13 for supplemental cash flow information.
The accompanying notes are an integral part of these statements.
32
<PAGE> 34
NEWMONT MINING CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
PRINCIPLES OF CONSOLIDATION
The consolidated financial statements include the accounts of Newmont
Mining Corporation's ("NMC") more-than-50% owned subsidiaries (collectively, the
"Corporation"). The Corporation also includes its pro-rata share of assets,
liabilities and operations for joint ventures in which it has an interest. All
significant intercompany balances and transactions have been eliminated. The
Corporation's principal subsidiary is Newmont Gold Company ("NGC"), which was
approximately 90% owned at December 31, 1995, and which holds all of the
operating assets of the Corporation. The functional currency for all
subsidiaries is the U.S. dollar.
NATURE OF OPERATIONS
The Corporation is a worldwide company engaged in gold production,
exploration for gold and acquisition of gold properties. Substantially all of
the Corporation's consolidated sales and operating profit in 1995, 1994 and 1993
related to its gold mining activities in the U.S. Although most of the
Corporation's consolidated identifiable assets relate to domestic activities,
22% of its net identifiable assets as of December 31, 1995 were related to
foreign activities, with no single foreign operating entity representing more
than 10%. A property in Uzbekistan commenced production in 1995 and the
Corporation has an equity interest in a property in Peru that went into
production in 1993. The Corporation carries political risk insurance on its
investments in both countries. A property in Indonesia is expected to begin
production in 1996. The Corporation also conducts exploration for gold deposits
worldwide.
Gold mining requires the use of specialized facilities and technology. The
Corporation relies heavily on such facilities to maintain production levels.
Also, the profitability of the Corporation's current operations is significantly
affected by the market price of gold. Market gold prices can fluctuate widely
and are affected by numerous factors beyond the Corporation's control.
CASH AND CASH EQUIVALENTS
Cash and cash equivalents consist of all cash balances and highly liquid
investments with an original maturity of three months or less. Because of the
short maturity of these investments, the carrying amounts approximate their fair
value. Excess cash balances are primarily invested in U.S. Treasury bills, with
lesser amounts invested in high-quality commercial paper and time deposits.
INVESTMENTS
Short-term investments are carried at cost, which approximates market, and
include Eurodollar government and corporate obligations rated AA or higher. At
December 31, 1995 and 1994, $7.9 million and $6.9 million, respectively, of such
investments secured letters of credit.
Investments in companies in which NGC's ownership is 20% to 50% are
accounted for by the equity method of accounting. Included in other long-term
assets is NGC's 38% equity investment in Minera Yanacocha S. A. Summarized
financial information of Minera Yanacocha S. A. is as follows (in thousands):
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
---------------------------
1995 1994 1993
------ ------ -----
<S> <C> <C> <C>
Sales..................................................... $212.5 $116.6 $30.4
Gross profit.............................................. $130.1 $ 67.6 $15.9
Income before cumulative effect of a change in accounting
principle............................................... $ 80.8 $ 41.2 $ 3.8
Net income................................................ $ 80.8 $ 41.2 $ 6.3
</TABLE>
33
<PAGE> 35
NEWMONT MINING CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
<TABLE>
<CAPTION>
AT DECEMBER 31,
-----------------
1995 1994
------ ------
<S> <C> <C>
Current assets..................................................... $ 71.7 $ 53.7
Noncurrent assets.................................................. 88.1 69.2
------ ------
Total assets............................................. $159.8 $122.9
====== ======
Current liabilities................................................ $ 50.0 $ 22.3
Noncurrent liabilities............................................. 48.3 58.9
------ ------
Total liabilities........................................ $ 98.3 $ 81.2
====== ======
</TABLE>
Investments in companies owned less than 20% by NGC are recorded at the
lower of cost or net realizable value. Income from such investments is recorded
when dividends are paid.
INVENTORIES
Ore and in-process inventories and materials and supplies are stated at the
lower of average cost or net realizable value. Precious metals are stated at
market value.
Non-current inventories are stated at the lower of average cost or net
realizable value and represent ore-in-stockpiles from which no material is
expected to be processed for more than one year after the balance sheet date.
PROPERTY, PLANT AND MINE DEVELOPMENT
Expenditures for new facilities or expenditures which extend the useful
lives of existing facilities are capitalized and depreciated using the
straight-line method at rates sufficient to depreciate such costs over the
estimated productive lives of such facilities. Productive lives of such
facilities range from 2 to 21 years.
Mineral exploration costs are expensed as incurred. When it has been
determined that a mineral property can be economically developed, the costs
incurred to develop such property, including costs to further delineate the ore
body and remove overburden to initially expose the ore body, are capitalized.
Such costs, and estimated future development costs, are amortized using a
unit-of-production method over the estimated life of the ore body. On-going
development expenditures to maintain production are generally charged to
operations as incurred.
Significant payments related to the acquisition of exploration interests
are capitalized. If a mineable ore body is discovered, such costs are amortized
using a unit-of-production method. If no mineable ore body is discovered, such
costs are expensed in the period in which it is determined the property has no
future economic value.
Interest expense allocable to the cost of developing mining properties and
to constructing new facilities is capitalized until operations commence.
Gains or losses from normal sales or retirements of assets are included in
other income or expense.
In 1995, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 121, "Accounting for the Impairment of
Long-Lived Assets and for Long-Lived Assets to Be Disposed Of." The Corporation
adopted this standard for the 1995 fiscal year with no impact on the
Corporation's financial position or results of operations.
REVENUE RECOGNITION
Gold sales are recognized when dore bars are produced.
34
<PAGE> 36
NEWMONT MINING CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
MINING COSTS
In general, mining costs are charged to operations as incurred. However,
certain of the Corporation's deposits have diverse grade and waste-to-ore ratios
over the mine's life. Mining costs for these deposits, to the extent they do not
relate to current gold production, are capitalized and then charged to
operations when the applicable gold is produced.
RECLAMATION AND MINE CLOSURE COSTS
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.
INCOME TAXES
Effective January 1, 1993, the Corporation adopted Statement of Financial
Accounting Standards No. 109, "Accounting for Income Taxes" ("SFAS 109"). Under
the liability method of SFAS 109, the Corporation recognizes certain temporary
differences between the financial reporting basis of the Corporation's
liabilities and assets and the related income tax basis for such liabilities and
assets. This generates a net deferred income tax liability or net deferred
income tax asset for the Corporation as of the end of the year, as measured by
the statutory tax rates in effect as enacted. The Corporation derives its
deferred income tax charge or benefit by recording the change in the net
deferred income tax liability or net deferred income tax asset balance for the
year.
The Corporation's deferred income tax assets include certain future tax
benefits such as net operating losses or tax credit carryforwards. The
Corporation must record a valuation allowance against any portion of those
deferred income tax assets which it believes it will more likely than not fail
to realize.
GOLD HEDGING ACTIVITIES
The Corporation may enter into gold loans, options contracts and forward
sales contracts to hedge the effect of price changes on the gold it produces.
Gains and losses realized on such instruments, as well as any cost or revenue
associated therewith, are recognized in sales when the related gold production
is delivered.
EARNINGS PER COMMON SHARE
The treasury stock method is used in computing earnings per common and
common equivalent share. Earnings per common and common equivalent share are
based on the sum of the weighted average number of common shares outstanding
during each period and the assumed exercise of stock options having exercise
prices less than the average market prices of the common stock. The convertible
preferred shares outstanding until conversion, as discussed in Note 8, were not
common stock equivalents as they were anti-dilutive.
USE OF ESTIMATES
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions. These estimates and assumptions affect the reported amounts of
assets and liabilities and disclosure of contingent assets and liabilities at
the date of the financial statements, as well as the reported amounts of
revenues and expenses during the reporting period. Actual amounts could differ
from those estimates.
RECLASSIFICATIONS
Certain amounts in prior years have been reclassified to conform to the
1995 presentation.
35
<PAGE> 37
NEWMONT MINING CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(2) TRANSACTION WITH NEWMONT GOLD COMPANY
Effective January 1, 1994, NGC acquired essentially all of the
Corporation's non-NGC assets and assumed essentially all of the Corporation's
non-NGC liabilities. As part of the transaction, NMC transferred 8,649,899
shares of NGC stock to NGC. The result of the transaction is that the common
shareholders of both entities have interests in the same assets and liabilities.
Furthermore, NMC declared a 1.2481 shares to 1 share stock split on March 21,
1994 which resulted in the two entities having identical per share earnings.
The transfer of assets, NGC common stock and liabilities to NGC was
recorded at historical cost since 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. This resulted because net liabilities, with a historical cost
of approximately $203 million, were transferred to NGC, offset partially by
NMC's decrease in ownership of NGC resulting from the transfer of NGC shares to
NGC.
(3) INVENTORIES
<TABLE>
<CAPTION>
AT DECEMBER 31,
-----------------------
1995 1994
-------- --------
<S> <C> <C>
(IN THOUSANDS)
Current:
Ore and in-process inventories.......................... $101,684 $ 62,196
Precious metals......................................... 29,691 34,536
Materials and supplies.................................. 40,651 31,533
Other................................................... 1,958 2,666
-------- --------
$173,984 $130,931
======== ========
Non-current:
Ore-in-stockpiles (included in other assets)............ $ 53,167 $ 33,051
======== ========
</TABLE>
(4) PROPERTY, PLANT AND MINE DEVELOPMENT
<TABLE>
<CAPTION>
AT DECEMBER 31,
-------------------------
1995 1994
---------- ----------
(IN THOUSANDS)
<S> <C> <C>
Land and mining claims...................................... $ 56,846 $ 70,884
Buildings and equipment..................................... 1,387,586 1,212,738
Mine development............................................ 247,196 231,468
Construction-in-progress.................................... 137,436 145,608
---------- ----------
1,829,064 1,660,698
Accumulated depreciation, depletion and amortization........ (695,501) (603,350)
Capitalized mining costs.................................... 121,715 61,938
---------- ----------
$1,255,278 $1,119,286
========== ==========
</TABLE>
36
<PAGE> 38
NEWMONT MINING CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(5) OTHER ACCRUED LIABILITIES
<TABLE>
<CAPTION>
AT DECEMBER 31,
-----------------------
1995 1994
-------- --------
(IN THOUSANDS)
<S> <C> <C>
Interest..................................................... $ 33,696 $ 5,119
Plant and equipment.......................................... 17,926 35,511
Payroll and related benefits................................. 18,443 17,099
Reclamation and remediation.................................. 10,000 15,900
Other........................................................ 42,247 31,124
-------- --------
$122,312 $104,753
======== ========
</TABLE>
(6) INCOME TAXES
SFAS 109 requires that, effective January 1, 1993, the Corporation account
for income taxes under the liability method rather than the deferred method
required previously under Accounting Principles Board Opinion No. 11. The
cumulative effect of this change in accounting for income taxes increased the
Corporation's 1993 earnings $38.5 million, or $0.45 per share, attributable to
fiscal years prior to 1993.
Worldwide components of the Corporation's deferred income tax liabilities
and assets are as follows (in thousands):
<TABLE>
<CAPTION>
AT DECEMBER 31,
---------------------
1995 1994
-------- --------
<S> <C> <C>
Deferred tax liabilities:
Accelerated tax depreciation................................. $(52,381) $(45,165)
Capitalized interest......................................... (8,158) (9,892)
Mine development costs....................................... (3,644) (8,444)
Depletion of the cost of land and mining claims.............. (2,872) (3,589)
Other........................................................ (923) (722)
-------- --------
Deferred tax liabilities............................. (67,978) (67,812)
-------- --------
Deferred tax assets:
Investments in subsidiaries and affiliates not consolidated
for tax purposes.......................................... 49,846 47,603
Exploration costs............................................ 37,155 19,956
Alternative minimum tax credit carryforward.................. 9,031 19,616
Reclamation costs............................................ 13,789 11,353
Retiree benefit costs........................................ 9,933 8,857
Deferred gain on interest rate hedges........................ 3,240 3,798
Relocation/reorganization costs.............................. 2,610 3,407
Capitalized inventory costs.................................. 10,622 3,270
Other........................................................ 1,152 2,147
-------- --------
Deferred tax assets.................................. 137,378 120,007
-------- --------
Valuation allowance for deferred tax assets.................. (9,800) (8,857)
-------- --------
Net deferred tax assets...................................... $ 59,600 $ 43,338
======== ========
</TABLE>
Based upon estimates of future operations and tax planning strategies, the
Corporation, more likely than not, will utilize $127.6 million of the $137.4
million of deferred income tax assets at December 31, 1995. This
37
<PAGE> 39
NEWMONT MINING CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
estimate reflects a valuation allowance of $9.8 million, which is an increase of
$0.9 million from December 31, 1994's valuation allowance.
The Corporation, however, gives no assurance that it will generate
sufficient taxable income to fully realize the $127.6 million of deferred income
tax assets at December 31, 1995. The Corporation's future levels of taxable
income will depend, in part, upon gold prices, general economic conditions and
other factors beyond the Corporation's control.
The Corporation's pre-tax financial statement income (loss) before minority
interest in NGC and the cumulative effect of a change in accounting principle
consists of (in thousands):
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
----------------------------------
1995 1994 1993
-------- -------- --------
<S> <C> <C> <C>
Domestic........................................... $136,387 $ 68,880 $111,656
Foreign............................................ 5,477 (14,820) 13,030
-------- -------- --------
$141,864 $ 54,060 $124,686
======== ======== ========
</TABLE>
The Corporation's provision (benefit) for income taxes before the
cumulative effect of a change in accounting principle consists of (in
thousands):
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
----------------------------------
1995 1994 1993
-------- -------- --------
<S> <C> <C> <C>
Current:
Domestic......................................... $ 30,815 $ 3,660 $ 43,084
Foreign.......................................... 2,477 586 1,369
-------- -------- --------
33,292 4,246 44,453
-------- -------- --------
Deferred:
Domestic......................................... (16,300) (33,580) (26,200)
Foreign.......................................... -- -- --
Adjustment in net deferred tax liabilities
for change in tax rates....................... -- -- 312
-------- -------- --------
(16,300) (33,580) (25,888)
-------- -------- --------
$ 16,992 $(29,334) $ 18,565
======== ======== ========
</TABLE>
38
<PAGE> 40
NEWMONT MINING CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
The Revenue Reconciliation Act of 1993 raised the U.S. federal corporate
income tax rate from 34% to 35%, retroactive to January 1, 1993. The
Corporation's resulting provisions (benefits) for income taxes before the
cumulative effect of a change in accounting principle differ from the amounts
computed by applying the U.S. corporate income tax statutory rate for the
following reasons (in thousands):
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
----------------------------------
1995 1994 1993
-------- -------- --------
<S> <C> <C> <C>
U.S. corporate income tax at statutory rate........ $ 49,652 $ 18,921 $ 43,521
Percentage depletion............................... (26,999) (27,437) (26,191)
Resolution of tax issues associated with prior
years............................................ -- (16,250) --
Foreign tax credits................................ (8,658) (4,421) --
Foreign losses..................................... 1,715 -- --
State taxes........................................ 1,300 500 --
Undistributed loss of subsidiary................... -- -- 754
Non-taxable portion of dividends received from
domestic corporations............................ (700) (564) (474)
Other.............................................. 682 (83) 955
-------- -------- --------
$ 16,992 $(29,334) $ 18,565
======== ======== ========
</TABLE>
The Corporation's other long-term liabilities included $24.5 million and
$23.7 million of income taxes payable at December 31, 1995 and 1994,
respectively.
(7) DEBT
LONG-TERM DEBT
Long-term debt consists of (in thousands):
<TABLE>
<CAPTION>
AT DECEMBER 31,
---------------------
1995 1994
-------- --------
<S> <C> <C>
Sale-leaseback of refractory ore treatment plant............... $349,134 $349,134
8 5/8% notes................................................... 150,000 150,000
Medium-term notes.............................................. 42,000 42,000
Project financing.............................................. 67,500 52,500
-------- --------
608,634 593,634
Current maturities............................................. (4,375) --
-------- --------
$604,259 $593,634
======== ========
</TABLE>
Scheduled minimum long-term debt repayments are $4.4 million in 1996, $30.5
million in 1997, $33.2 million in 1998, $23.1 million in 1999 and $8.4 million
in 2000. Actual payments may be greater due to actual operating cash flows
realized. The Corporation is in compliance with all covenants associated with
its debt.
Sale-Leaseback of the Refractory Ore Treatment Plant
In September 1994, NGC entered into a sale and leaseback agreement for its
refractory ore treatment plant located in Carlin, Nevada for $349.1 million. The
transaction has been accounted for as debt for financial statement purposes,
with the cost of the refractory ore treatment plant recognized as an asset and
depreciated. The lease is for 21 years and the aggregate future minimum lease
payments, which include interest, as of December 31, 1995 and 1994 were $667.9
million. These payments begin in January 1996 and are $29.7 million annually
through 2000. Principal payments are included in these amounts beginning in
1998. The lease
39
<PAGE> 41
NEWMONT MINING CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
has purchase options during and at the end of the lease at predetermined prices.
The interest rate on this sale-leaseback transaction is 6.36%. Because of the
uniqueness of this transaction, the Corporation determined that it is not
practicable to estimate the fair value of this debt.
In connection with this transaction, the Corporation entered into certain
interest rate contracts to hedge the interest cost of the financing. These
contracts were settled for a gain of $11 million which is being recognized as a
reduction of interest expense over the term of the lease. As a result of this
gain, the effective interest rate on this sale and leaseback transaction is
6.15%.
8 5/8% Notes
In April 1992, the Corporation issued unsecured notes with a principal
amount of $150 million due April 1, 2002 bearing an annual interest rate of
8 5/8%. Interest is payable semi-annually in April and October and the notes are
not redeemable prior to maturity. Using interest rates prevailing on similar
instruments at December 31, 1995 and 1994, this debt was estimated to have a
fair value of $169.5 million and $151.5 million, respectively.
Medium-Term Notes
Beginning in May 1992, the Corporation began issuing notes under a $150
million medium-term notes program that has since expired. Notes totalling $42
million, with a weighted average interest rate of 7.7%, maturing on various
dates ranging from mid-1999 to late 2004, were outstanding as of December 31,
1995 and 1994. Interest is payable semi-annually in March and September and the
notes are not redeemable prior to maturity. Using the interest rates prevailing
on similar instruments at December 31, 1995 and 1994, this debt was estimated to
have a fair value of $44.9 million and $40.4 million, respectively.
Project Financing Facility
NGC, through a wholly-owned subsidiary, is a 50% participant in
Zarafshan-Newmont Joint Venture in the Republic of Uzbekistan. The other 50%
participants are two entities of the Uzbekistan government.
Zarafshan-Newmont obtained a $105 million project financing loan from a
consortium of banks in 1994 and an additional $30 million in 1995. The loan is
payable out of the proceeds of the project, beginning July 1996, in semi-annual
installments over three years. The average interest rate on the loan is
approximately 2.3 percentage points over the three-month London Interbank
Offered Rate prior to October 1996 and approximately 3.9 percentage points over
the three-month London Interbank Offered Rate after that date. The carrying
amount of the loan is assumed to approximate its fair value. The weighted
average interest rates for 1995 and 1994 were 8.4% and 6.9%, respectively, and
the interest rates at December 31, 1995 and 1994 were 8.2% and 7.8%,
respectively.
The Corporation has guaranteed one-half of the payment of any amounts due
under such loan until the requirements of project completion tests have been
satisfied, at which time the loan will become non-recourse debt. Such completion
tests must be satisfied no later than October 1997. The Corporation has obtained
political risk insurance coverage for its investment and its loan guarantee.
Unissued Non-Convertible Debt Securities
In June 1994, NGC filed a shelf registration statement with the Securities
and Exchange Commission covering the issuance of up to $150 million in
non-convertible debt securities. At December 31, 1995 and December 31, 1994, no
securities related to this filing had been issued.
40
<PAGE> 42
NEWMONT MINING CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Revolving Credit Facility
The Corporation has a $400 million revolving credit facility with a
consortium of banks that expires in April 1998. No amounts were outstanding
under the facility as of December 31, 1995 and 1994. Interest rates are variable
and adjust subject to changes in the Corporation's long-term debt ratings and to
usage of the facility in terms of borrowings as a percentage of commitments.
Currently, the Corporation's interest rate is the lenders' base rate plus 0.25%.
The Corporation has the option to fix the rate for up to six months. There is an
annual facility fee which will also adjust subject to the Corporation's debt
ratings. This fee is currently 0.15% of the lenders' total commitment.
The credit agreement contains covenants that limit consolidated
indebtedness, as defined, to 67% of total capitalization; require minimum net
worth, as defined, of $275 million and $250 million in 1995 and 1994,
respectively, which then increases $25 million annually through 1997; and
require an interest coverage ratio, as defined, of not less than 2.5 to 1.
SHORT-TERM DEBT
All short-term debt at December 31, 1995 and 1994 consisted of bank debt.
The Corporation had unsecured demand bank lines of credit aggregating $39
million and $16 million at December 31, 1995 and 1994, respectively, of which
$29.2 million and $15.7 million were outstanding at the same respective periods.
These facilities bear interest at customary short-term rates for borrowers with
similar credit ratings. The carrying value of this debt is assumed to
approximate its fair value. The weighted average interest rates for 1995 and
1994 were 8.8% and 6.5%, respectively, and the interest rates at December 31,
1995 and 1994 were 8.5%.
CAPITALIZED INTEREST
Capitalized interest was $11.6 million, $19.7 million and $8.5 million in
1995, 1994 and 1993, respectively.
(8) STOCKHOLDERS' EQUITY
PREFERRED STOCK
NMC called all of its 2.875 million shares of $5.00 par value convertible
preferred stock for redemption on December 14, 1995 at a redemption price of
$105.21 per share. Each share of convertible preferred stock was convertible at
the option of the shareholder into shares of common stock at the conversion
price of $36.395 per share of common stock (equivalent to a conversion rate of
2.7476 shares of common stock for each whole share of convertible preferred
stock). Substantially all of the convertible preferred stock was converted prior
to the redemption date. A total of 7.9 million common shares were issued in the
redemption.
The $5.50 annual dividend per share of convertible preferred stock was
cumulative from the original issue date and was payable quarterly.
COMMON STOCK RIGHTS
Equal Value Rights
In September 1987, the Board of Directors declared a dividend distribution
of one equal value right ("EVR") on each share of common stock outstanding on
October 5, 1987. Each share issued subsequent to such date automatically
receives an EVR. The EVRs, which are non-voting, expire in September 1997 unless
redeemed earlier by NMC, and separate from the common shares effective with the
public announcement (the "Control Date") that a person or group has acquired
more than 50% of the common stock. Until an EVR is exercised, the holder thereof
has no rights as a stockholder of NMC. Until the Control Date, the EVRs will
41
<PAGE> 43
NEWMONT MINING CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
be evidenced by NMC's common stock and will be transferred with and only with
such certificates. In the event of a subsequent merger or other specified
transaction by NMC, each EVR would entitle the holder, under certain
circumstances, to receive from NMC an amount in cash equal to the amount by
which the highest price per share paid by such acquirer within 91 days prior to
and including the Control Date exceeds the fair market value of the
consideration paid for each share of NMC's common stock in connection with the
merger or other transaction. At any time prior to the Control Date, NMC may (but
only with the concurrence of continuing directors) redeem the EVRs at a price of
$0.02 per EVR.
Preferred Share Purchase Rights
In August 1990, the Board of Directors declared a dividend distribution of
one preferred share purchase right ("PSPR") on each share of common stock
outstanding on September 11, 1990. Each share issued subsequent to September 11,
1990 and prior to the "Distribution Date" referred to below (and in certain
limited circumstances thereafter) will be issued with a PSPR. Each PSPR entitles
the holder to purchase from NMC one five-hundredth of a share of participating
preferred stock of NMC for $150, subject to adjustment. Prior to the
Distribution Date, the PSPRs are not exercisable, will be evidenced by NMC's
common stock certificates and will be transferred with and only with such
certificates. The PSPRs expire in September 2000 unless earlier redeemed. Until
a PSPR is exercised, the holder thereof has no rights as a stockholder of NMC.
The Distribution Date, which is the date on which the PSPRs separate from
the common stock and become exercisable, is the earlier of (i) ten days after
the public announcement that a person or group (other than NMC's present
shareholder groups subject to a standstill agreement dated as of December 7,
1990, as amended and certain related entities and their transferees, but only to
the extent of their current share ownership) (an "Acquiring Person") has
acquired 15% or more of the common stock (the date of such first public
announcement being the "Stock Acquisition Date"), or (ii) ten business days
after the commencement of a tender or exchange offer that would result in a
person or group owning 15% or more of the common stock. If after the
Distribution Date a person shall become an Acquiring Person (other than pursuant
to certain offers approved by the Board of Directors) each holder of a PSPR
(other than the Acquiring Person and, in certain circumstances, transferees of
the Acquiring Person) will have the right to receive, upon exercise, common
stock (or, in certain circumstances, cash, property or other securities of NMC)
having a value equal to two times the purchase price of the PSPR. In addition,
if after a Stock Acquisition Date NMC is not the surviving entity in certain
business combinations, or 50% or more of NMC's assets or earning power is sold
or transferred, each holder of a PSPR shall have the right to receive, upon
exercise, common stock of the acquiring company having a value equal to two
times the purchase price of the PSPR. Prior to the earlier of a Stock
Acquisition Date or the expiration date of the PSPR, NMC, in certain
circumstances with the approval of continuing directors, may redeem the PSPRs at
a price of $0.01 per PSPR.
Each one five-hundredth share of preferred stock is designed to have
similar rights to one share of common stock. The preferred shares have a
preferential quarterly dividend that is 500 times the dividends on the common
stock, but in no event less than one dollar. The liquidation preference per
preferred share is the greater of $500 (plus accrued dividends to the date of
distribution) or an amount equal to 500 times the aggregate amount of dividends
to be distributed per share to holders of NMC's common stock. In the event of a
business combination in which shares of NMC's common stock are exchanged, each
preferred share will be entitled to receive 500 times the amount and type of
consideration received per share of common stock. Each preferred share will have
500 votes and vote together with the common stock. The preferred shares are not
redeemable.
42
<PAGE> 44
NEWMONT MINING CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(9) EMPLOYEE BENEFIT PLANS
STOCK OPTION PLANS
Under the Corporation's stock option plans, options to purchase shares of
NMC are granted to key employees at the fair market value of such shares on the
date of grant. The options under these plans vest over a two year period and are
exercisable over a period not exceeding ten years. At December 31, 1995, 590,903
shares were available for future grants under the Corporation's stock option
plans.
In 1994, 1993 and 1992 certain key executives were granted options that,
although the exercise price is generally equal to the fair market value on the
date of grant, cannot be exercised when otherwise vested unless the market price
of NMC's common stock is a defined amount above the option exercise price. In
addition, the same executives were granted options in 1994, 1993 and 1992 having
exercise prices in excess of the fair market value on the date of grant.
Generally, these key executive options vest over a period of one to five years
and are exercisable over a ten year period. At December 31, 1995, 808,094 of
these options were outstanding.
The following table summarizes annual stock option activity for the three
years ended December 31, 1995:
<TABLE>
<CAPTION>
1995 1994 1993
------------------------- ------------------------- -------------------------
NUMBER OPTION PRICE NUMBER OPTION PRICE NUMBER OPTION PRICE
OF SHARES PER SHARE OF SHARES PER SHARE OF SHARES PER SHARE
--------- ------------- --------- ------------- --------- -------------
<S> <C> <C> <C> <C> <C> <C>
Outstanding at beginning of
year......................... 2,177,546 $27.20-$56.09 2,055,087 $27.20-$56.09 2,418,991 $27.20-$56.09
Granted........................ 534,035 $39.94-$44.94 476,703 $39.50-$56.09 634,192 $37.56-$56.09
Exercised...................... (232,109) $27.50-$40.07 (276,894) $27.20-$38.97 (758,533) $27.20-$40.06
Canceled....................... (128,885) $32.36-$45.83 (77,350) $27.20-$45.83 (239,563) $27.20-$56.09
--------- --------- ---------
Outstanding at end of year..... 2,350,587 $27.20-$56.09 2,177,546 $27.20-$56.09 2,055,087 $27.20-$56.09
========= ========= =========
</TABLE>
At December 31, 1995, 1,287,688 options were exercisable.
In 1995, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 123, "Accounting for Stock-Based
Compensation." The Corporation intends to adopt this standard for the 1996
fiscal year by continuing to account for such compensation consistent with the
Accounting Principles Board Opinion No. 25, "Accounting for Stock Issued to
Employees" and disclosing the pro forma effect on net income and earnings per
share had the new accounting standard been applied.
PENSION BENEFITS
The Corporation has two qualified non-contributory defined benefit pension
plans, one which covers salaried employees and the other which covers
substantially all hourly employees. In addition, the Corporation has a
non-qualified supplemental pension plan for salaried employees whose benefits
under the qualified plan are limited by federal legislation. The vesting period
is five years of service for each plan. The plans' benefit formulas are based on
an employee's years of credited service and either such employee's last five
years average pay (salaried plan) or a flat dollar amount (hourly plan).
Pension costs are determined annually by independent actuaries and pension
contributions to the qualified plans are made based on funding standards
established under the Employee Retirement Income Security Act of 1974 ("ERISA").
The Corporation maintains a trust for the purpose of funding the supplemental
pension plan as well as death benefits for officers of the Corporation. This
trust is funded at the discretion of the Corporation and had a balance, which
approximated market value, of $2 million and $1.9 million at December 31, 1995
and 1994, respectively. Although the trust's assets can be used to pay benefits
for the supplemental pension plan, they cannot be used in determining the net
pension liability for the supplemental pension plan. The qualified plans' assets
consist of stocks, bonds and cash.
43
<PAGE> 45
NEWMONT MINING CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
The components of pension expense for these three plans, in the aggregate,
consist of (in thousands):
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
-------------------------------
1995 1994 1993
------- ------- -------
<S> <C> <C> <C>
Service cost.......................................... $ 2,651 $ 3,070 $ 2,854
Interest cost on projected benefit obligation......... 4,755 4,633 5,076
Return on assets...................................... (5,938) (5,370) (4,993)
Net amortization and deferral......................... 176 211 254
------- ------- -------
Pension expense....................................... $ 1,644 $ 2,544 $ 3,191
======= ======= =======
</TABLE>
The following tables set forth the funded status of the Corporation's
pension plans and the amounts recognized in the Corporation's consolidated
balance sheets at December 31, 1995 and 1994, respectively (in thousands):
<TABLE>
<CAPTION>
AT DECEMBER 31, 1995
---------------------------------
SALARY HOURLY
PENSION PENSION SUPPLEMENTAL
PLAN PLAN PENSION PLAN
-------- ------- ------------
<S> <C> <C> <C>
Actuarial present value of benefit obligations:
Accumulated benefit obligation
Vested benefits.................................. $(56,420) $(6,637) $ (430)
Non-vested benefits.............................. (2,102) (1,381) (20)
-------- ------- --------
(58,522) (8,018) (450)
Effect of future salary increases................... (7,631) -- (43)
-------- ------- --------
Projected benefit obligation.......................... (66,153) (8,018) (493)
Plan assets at fair value............................. 68,331 6,918 --
-------- ------- --------
Plan assets greater (less) than projected benefit
obligation.......................................... 2,178 (1,100) (493)
Unrecognized prior service cost....................... (548) 130 567
Unrecognized net loss................................. 2,752 871 3,549
Unrecognized net transition (asset) liability......... (2,215) (72) 2,327
Adjustment required to recognize minimum liability.... -- -- (6,400)
-------- ------- --------
Net pension asset (liability)......................... $ 2,167 $ (171) $ (450)
======== ======= ========
</TABLE>
44
<PAGE> 46
NEWMONT MINING CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
<TABLE>
<CAPTION>
AT DECEMBER 31, 1994
---------------------------------
SALARY HOURLY
PENSION PENSION SUPPLEMENTAL
PLAN PLAN PENSION PLAN
-------- ------- ------------
<S> <C> <C> <C>
Actuarial present value of benefit obligations:
Accumulated benefit obligation
Vested benefits.................................. $(46,831) $(4,094) $ (945)
Non-vested benefits.............................. (1,650) (1,167) (26)
-------- ------- --------
(48,481) (5,261) (971)
Effect of future salary increases................... (3,399) -- (10)
-------- ------- --------
Projected benefit obligation.......................... (51,880) (5,261) (981)
Plan assets at fair value............................. 60,221 5,044 --
-------- ------- --------
Plan assets greater (less) than projected benefit
obligation.......................................... 8,341 (217) (981)
Unrecognized prior service cost....................... (590) 141 610
Unrecognized net (gain) loss.......................... (2,558) (419) 4,285
Unrecognized net transition (asset) liability......... (2,680) (78) 2,715
Adjustment required to recognize minimum liability.... -- -- (7,600)
-------- ------- --------
Net pension asset (liability)......................... $ 2,513 $ (573) $ (971)
======== ======= ========
</TABLE>
In accordance with the provisions of Statement of Financial Accounting
Standards No. 87, an adjustment was required to reflect a minimum liability for
the supplemental pension plan in 1995, 1994 and 1993. Such adjustment resulted
in recording an intangible asset and, to the extent the minimum liability
adjustment exceeded the unrecognized net transition liability, a reduction of $2
million, $2.5 million and $3.7 million in stockholders' equity, which is net of
related deferred income tax benefits, for 1995, 1994 and 1993, respectively.
In measuring the projected benefit obligation for the plans, the following
actuarial assumptions were used:
<TABLE>
<CAPTION>
AT DECEMBER 31,
---------------
1995 1994
---- ----
<S> <C> <C>
Weighted average discount rate....................................... 7.0% 8.5%
Rate of increase in future compensation (applicable only to salaried
plans)............................................................. 4.0% 4.0%
</TABLE>
The weighted average expected long-term rate of return on plan assets was
assumed to be 9% for 1995 and 8.25% for 1994 and 1993.
RETIREE BENEFITS OTHER THAN PENSIONS
The Corporation provides defined medical benefits to qualified retirees who
were salaried employees and to their eligible dependents, and it provides
defined life insurance benefits to qualified retirees who were salaried
employees. In general, participants become eligible for these benefits upon
retirement directly from the Corporation if they are at least 55 years old and
the combination of their age and years of service with the Corporation equals 75
or more.
The defined medical benefits cover most of the reasonable and customary
charges for hospital, surgical, diagnostic and physician services and
prescription drugs. Life insurance benefits are based on a percentage of final
base annual salary and decline over time after retirement commences.
The Corporation accounts for these postretirement benefits other than
pensions under Statement of Financial Accounting Standards No. 106, "Employers'
Accounting for Postretirement Benefits Other Than
45
<PAGE> 47
NEWMONT MINING CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Pensions" ("SFAS 106"). The statement requires that postretirement benefits
other than pensions be accrued during an employee's service to the Corporation.
The components of expense for postretirement benefits other than pensions
for 1995, 1994 and 1993 are shown in the table below (in thousands):
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
----------------------------
1995 1994 1993
------ ------ ------
<S> <C> <C> <C>
Service cost............................................. $1,570 $1,846 $1,575
Interest cost............................................ 1,904 1,642 1,602
Amortization of net gain................................. (80) -- --
------ ------ ------
Expense for postretirement benefits other than
pensions............................................... $3,394 $3,488 $3,177
====== ====== ======
</TABLE>
The following table sets forth the components of the liability for the
Corporation's plans for postretirement benefits other than pensions recognized
in its balance sheet (in thousands):
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER
31,
---------------------
1995 1994
------- -------
<S> <C> <C>
Actuarial present value of accumulated benefit obligation
("APBO"):
Retirees and eligible dependents............................. $12,510 $10,296
Other fully eligible plan participants....................... 1,974 1,556
Other active plan participants............................... 13,076 9,659
------- -------
Total APBO........................................... 27,560 21,511
Unrecognized net gain........................................ 820 4,072
------- -------
Accrued liability for postretirement benefits other than
pensions..................................................... $28,380 $25,583
======= =======
</TABLE>
At December 31, 1995 and 1994, $2.6 million and $3 million of assets,
respectively, with market values of approximately the same amounts, were
designated in a trust to pay postretirement benefits other than pensions. Since
these assets could be used to pay other employee benefits, they cannot be used
for the postretirement benefit calculations. The Corporation has no formal
policy for funding postretirement benefit obligations.
Weighted average discount rates of 7% and 8.5% were used in calculating the
APBO at December 31, 1995 and 1994, respectively. The assumed health care cost
trend rates to measure the expected cost of benefits at December 31, 1995 start
at a 9% annual increase for coverage before the age of 65 and an 8% annual
increase for coverage after the age of 64. These rates were assumed to decrease
one percentage point each year until a 5% annual rate of increase was reached,
at which point a 5% annual rate of increase was assumed thereafter. The assumed
health care cost trend rates to measure the expected cost of benefits at
December 31, 1994 start at a 10% annual increase for coverage before the age of
65 and a 9% annual increase for coverage after the age of 64. These rates were
assumed to decrease one percentage point each year until a 6% annual rate of
increase was reached, at which point a 6% annual rate of increase was assumed
thereafter. The effect of a one percentage point annual increase in the assumed
cost trend rates would increase the aggregate of service and interest costs by
approximately 23% in 1995 and the APBO at December 31, 1995 by approximately
19%. The effect of a one percentage point annual increase in the assumed cost
trend rates would increase the aggregate of service and interest costs in 1994
and the APBO at December 31, 1994 by approximately 22%.
SAVINGS PLAN
The Corporation has two qualified defined contribution savings plans, one
which covers salaried employees and the other which covers substantially all
hourly employees. In addition, the Corporation has a
46
<PAGE> 48
NEWMONT MINING CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
non-qualified supplemental savings plan for salaried employees whose benefits
under the qualified plan are limited by federal regulations.
Upon the employee meeting eligibility requirements, the Corporation matches
100% of employee contributions of up to 6% and 4% of base salary for the
salaried and hourly plans, respectively.
The Corporation's matching contributions to such plans were $3.7 million,
$3.3 million and $2.4 million in 1995, 1994 and 1993, respectively.
(10) OTHER EXPENSES
In 1995, an evaluation of the Ivanhoe exploration property in Nevada was
completed and determined that most of the mineralization was low grade and, did
not meet the Corporation's criteria for development. A charge of $23.3 million
was taken for the write-off and estimated costs to reclaim areas disturbed by
previous mining and exploration activity on the property.
At December 31, 1994, the Corporation concluded that the geological model
being used for the Grassy Mountain property in Oregon was inadequate to support
mine development, resulting in 996,000 ounces of proven and probable reserves
being reclassified as mineralized material not in reserves. After completion of
a thorough evaluation of the deposit in 1995, the Corporation concluded that the
deposit did not meet its criteria for development and a charge of $33.8 million
was taken for the write-off.
The Corporation is involved in several matters concerning environmental
obligations primarily associated with former mining activities, as discussed in
Note 14. Included in other expenses for the years ended December 31, 1995, 1994
and 1993 are provisions of $3 million, $36.1 million and $6 million,
respectively, related to these matters.
In December 1993, the Corporation announced that effective January 1, 1994,
NGC would acquire all of the Corporation's non-NGC assets and liabilities. See
Note 2 for additional information about this transaction. Costs related to the
transaction of $0.6 million and $3.5 million were expensed in 1994 and 1993,
respectively. Also during 1994, the Corporation incurred $4.1 million of costs
associated with defeating a referendum placed on an Oregon ballot which would
have effectively prevented open pit mining.
(11) GAIN ON SALE OF INVESTMENTS
In May 1995, NGC sold its 10.7% interest in Southern Peru Copper
Corporation for $116.4 million, which resulted in a gain of $113.2 million.
In May 1993, the Corporation sold its 14% interest in Newcrest Mining
Limited for $67 million and recognized a gain of $29.6 million.
(12) MAJOR CUSTOMERS AND EXPORT SALES
The Corporation is not economically dependent on a limited number of
customers for the sale of its product because gold commodity markets are
well-established worldwide. During 1995, four customers accounted for $109
million, $85.7 million, $82.2 million and $73.1 million of total sales, each of
which represented more than 10% of total sales and together accounted for 55% of
the annual sales. In 1994, sales to three such major customers accounted for
$125.2 million, $99.6 million and $88.5 million, or 52% of total sales. In 1993,
sales to three such major customers accounted for $104.9 million, $97.3 million
and $78.3 million, or 44% of total sales.
Export sales were $636.2 million, $497.2 million and $269.3 million in
1995, 1994 and 1993, respectively.
47
<PAGE> 49
NEWMONT MINING CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(13) SUPPLEMENTAL CASH FLOW INFORMATION
Net cash provided by operating activities includes the following cash
payments (in thousands):
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-------------------------------
1995 1994 1993
------- ------- -------
<S> <C> <C> <C>
Income taxes, net of refunds.......................... $18,992 $21,375 $62,873
Interest, net of amounts capitalized.................. $12,197 $ 6,975 $ 9,731
</TABLE>
Excluded from the statements of consolidated cash flows are the effects of
certain non-cash transactions. In 1995, as discussed in Note 8, NMC called for
redemption all of its 2.875 million shares of convertible preferred stock.
Substantially all of the convertible preferred stock was converted into common
stock of NMC. This transaction resulted in a non-cash decrease to preferred
stock offset by a non-cash increase to common stock and capital in excess of par
value. Also, retained earnings increased $5.3 million due to the increased
ownership in NGC.
In 1994, the Corporation recognized an income tax benefit of $16.2 million
resulting from the resolution of certain tax issues associated with prior years.
(14) COMMITMENTS AND CONTINGENCIES
ENVIRONMENTAL OBLIGATIONS
The Corporation's mining and exploration activities are subject to various
federal and state laws and regulations governing the protection of the
environment. These laws and regulations are continually changing and are
generally becoming more restrictive. The Corporation conducts its operations so
as to protect the public health and environment and believes its operations are
in compliance with all applicable laws and regulations. The Corporation has
made, and expects to make in the future, expenditures to comply with such laws
and regulations. The Corporation cannot predict such future expenditures.
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, $55.8 million
and $65.7 million were accrued for such liabilities at December 31, 1995 and
1994, respectively. 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 50%
greater or 15% lower than the amount accrued at December 31, 1995. In addition,
$19 million and $16.9 million were accrued at December 31, 1995 and 1994,
respectively, for reclamation costs relating to currently producing mineral
properties. These amounts are included in other current liabilities and
reclamation liabilities. The $55.8 million at December 31, 1995 includes charges
of $4.5 million taken in 1995 related to the Ivanhoe exploration property
discussed in Note 10.
A discussion of the environmental obligations and related insurance
receivables associated with former mining activities as of December 31, 1995
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 which was agreed to by the U.S. District Court of Colorado to
settle a lawsuit brought by the State of Colorado 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 80% 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
48
<PAGE> 50
NEWMONT MINING CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
work does not meet certain measurement criteria specified in the consent decree,
the State of Colorado and the court reserve the right to require Idarado to
perform other remediation work. Idarado and the Corporation obtained a $16.3
million letter of credit to secure their obligations under terms of 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 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 Incorporated, the other joint venturer. 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
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 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. 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 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.
49
<PAGE> 51
NEWMONT MINING CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
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.
Based on the views of prior lead counsel, the Corporation had believed that
significant progress in certain settlement discussions would have been achieved
by mid-summer 1994, but that expectation was not realized. The absence of such
anticipated progress in settlement discussions, as well as the Corporation's
discussions with new lead counsel for the insurance recovery actions regarding
its review of such actions, caused the Corporation in the second quarter of 1994
to provide a $20 million valuation allowance on its insurance receivables
resulting in the net balance outstanding at December 31, 1994.
In the first quarter of 1995, settlement in certain of the insurance
litigation was reached enabling the Corporation to realize the receivable
outstanding at December 31, 1994. Settlement discussions continue with respect
to additional insurance litigation. The Corporation intends to vigorously pursue
its claims with respect to the remaining litigation and believes that it is
reasonably possible that additional amounts will be recovered although no such
amounts are accrued.
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% 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 proportionate share of the
24.7% interest. In accordance with the court ruling, Minera Yanacocha cancelled
the BRGM shares and issued shares representing interest in Minera Yanacocha of
13.35% to NGC and 11.35% to Buenaventura. NGC deposited $48.6 million, 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 setoff against the deposit, and accordingly, these amounts have been
netted. The final hearing is presently scheduled to take place in April 1996.
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 currently owns 51.35% of Minera Yanacocha.
The additional interest of 13.35% will not be reflected in the financial
statements until a final determination is made by the Peruvian courts.
STATE OF NEVADA SALES TAX CLAIM
During 1995, an agency of the State of Nevada Department of Taxation filed
an assessment claiming sales taxes due relating to the sale-leaseback of the
refractory ore treatment plant. This assessment, including interest, totals
approximately $30 million. The Corporation filed a Petition for Redetermination
and a hearing
50
<PAGE> 52
NEWMONT MINING CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
was held by the agency that issued the assessment in October 1995. The hearing
officer reaffirmed the agency's determination. The Corporation intends to appeal
this determination to the State Tax Commission, which is independent from the
agency. If unsuccessful, the Corporation will vigorously contest the
determination to higher levels and believes that it will ultimately prevail
based upon the opinion of its counsel.
GUARANTEE OF THIRD PARTY INDEBTEDNESS
The Corporation guaranteed a former subsidiary's $35.7 million Pollution
Control Revenue Bonds, due 2009. The former subsidiary is BHP Copper Inc.,
formerly known as Magma Copper Company. It is expected that the Corporation will
be required to remain liable on this guarantee as long as the bonds remain
outstanding.
GOLD PRICE HEDGING CONTRACTS
In 1994, the Corporation entered into hedging transactions that begin in
January 1996 and continue through December 2000 for production from its Minahasa
property, located in Indonesia. These transactions consist of forward sales of
125,000 ounces of gold per year at an average price of $454 an ounce, plus 40%
of the amount by which the market price exceeds the forward sales price. No
production had been hedged in 1995 or 1994.
OTHER COMMITMENTS AND CONTINGENCIES
In December 1992, NGC finalized an agreement with Barrick Goldstrike Mines,
Inc. ("Barrick") which provides for Barrick to mine NGC's Post deposit which
extends beyond NGC's property boundaries onto Barrick's property. NGC and
Barrick share the costs so that each ounce of gold mined bears the same mining
cost. NGC is obligated to pay Barrick for such costs as Barrick mines the
deposit. In addition, NGC is obligated to share dewatering costs which are
associated with the deposit. NGC incurred $62.5 million, $39 million and $26.6
million of such mining and dewatering costs in 1995, 1994 and 1993,
respectively, and expects to incur approximately $100 million in 1996.
The Corporation has minimum royalty obligations on one of its producing
mines of 55,000 ounces of gold in 1996 and no more than 40,000 ounces of gold
per year thereafter, for the life of the mine. The amount to be paid to meet the
royalty obligations is based upon a defined average market gold price. Any
amounts paid due to the minimum royalty obligation not being met in any year are
recoverable in future years when the minimum royalty obligation is exceeded. The
Corporation expects the mine's gold production will meet the minimum royalty
requirements.
At December 31, 1995, there were $97.7 million of outstanding letters of
credit that were primarily for bonding reclamation plans and electric supply and
reinsurance agreements. The Corporation has provided investment collateral for
$7.9 million of these letters of credit. The remaining $89.8 million represents
unsecured letters of credit. The letters of credit reflect fair value as a
condition of their underlying purpose and are subject to fees competitively
determined in the market place.
The Corporation's Batu Hijau project in Indonesia is currently in the
feasibility stage. The mineral rights for the Batu Hijau project are held
pursuant to a Contract of Work between the Republic of Indonesia and an 80%
subsidiary of NGC. During the third quarter of 1995 the Corporation recognized
that, given the size, complexity and nature of this large porphyry copper/gold
project and the cost of developing the project, it would require more time to
complete final feasibility studies beyond the December 1, 1995 date provided for
in the Contract of Work. Accordingly, in October 1995, the Corporation requested
from the government of Indonesia an extension of the feasibility studies period.
In late December 1995, the Corporation was advised by the Indonesian government
that it needed more time to review the Corporation's request for an extension
and that the time period provided for feasibility studies in the Contract of
Work was suspended pending the
51
<PAGE> 53
NEWMONT MINING CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Indonesian government's decision. Management believes that the Indonesian
government's actions will not affect the development plans and, therefore,
feasibility study activities continue on the project.
The Corporation is from time to time involved in various legal proceedings
of a character normally incident to its business. It does not believe that
adverse decisions in any pending or threatened proceedings or any amounts which
it may be required to pay by reason thereof will have a material adverse effect
on its financial condition or results of operations.
(15) SUBSEQUENT EVENT
In January 1996, NMC issued 4.65 million shares of common stock for $51.87
per share under an existing shelf registration statement with the Securities and
Exchange Commission. Proceeds of the issue netted $241.3 million and were used
to purchase an equal number of shares of common stock of NGC. This transaction
increased NMC's ownership of NGC to 90.5%.
(16) UNAUDITED SUPPLEMENTARY DATA
QUARTERLY DATA
The following is a summary of selected quarterly financial information
(amounts in millions except per share amounts and all per share amounts take
into consideration the minority interest in NGC):
<TABLE>
<CAPTION>
1995
------------------------------------------------------------------
THREE MONTHS ENDED
--------------------------------------------------- YEAR ENDED
MARCH 31, JUNE 30, SEPTEMBER 30, DECEMBER 31, DECEMBER 31,
--------- -------- ------------- ------------ ------------
<S> <C> <C> <C> <C> <C>
Sales.................................... $ 134.5 $ 145.1 $ 172.3 $ 184.4 $ 636.2
Gross profit(1).......................... $ 26.6 $ 31.6 $ 52.1 $ 48.6 $ 158.8
Net income............................... $ 15.6 $ 67.8(2) $ 25.3 $ 4.0 (3) $ 112.6(2,3)
Preferred stock dividends................ $ 4.0 $ 4.0 $ 4.0 $ (0.7)(4) $ 11.2(4)
Net income applicable to common stock.... $ 11.6 $ 63.8(2) $ 21.3 $ 4.7 (3) $ 101.5(2,3)
Net income per common share.............. $ 0.14 $ 0.74(2) $ 0.25 $ 0.05 (3) $ 1.17(2,3)
Weighted average shares outstanding...... 86.1 86.3 86.5 89.3 (4) 87.0(4)
Dividends declared per common share...... $ 0.12 $ 0.12 $ 0.12 $ 0.12 $ 0.48
Closing price of common stock............ $ 42.75 $ 41.875 $ 42.50 $ 45.375 $ 45.375
</TABLE>
<TABLE>
<CAPTION>
1994
------------------------------------------------------------------
THREE MONTHS ENDED
--------------------------------------------------- YEAR ENDED
MARCH 31, JUNE 30, SEPTEMBER 30, DECEMBER 31, DECEMBER 31,
--------- -------- ------------- ------------ ------------
<S> <C> <C> <C> <C> <C>
Sales................................... $ 149.8 $139.3 $ 150.1 $158.2 $597.4
Gross profit(1)......................... $ 43.9 $ 45.3 $ 42.9 $ 47.8 $179.9
Net income.............................. $ 21.6 $ 17.3(5) $ 20.4 $ 16.7 $ 76.1
Preferred stock dividends............... $ 4.0 $ 4.0 $ 3.9 $ 4.0 $ 15.8
Net income applicable to common stock... $ 17.6 $ 13.4(5) $ 16.5 $ 12.7 $ 60.3
Net income per common share............. $ 0.20 $ 0.16(5) $ 0.19 $ 0.15 $ 0.70
Weighted average shares outstanding..... 86.1 86.1 86.2 86.2 86.1
Dividends declared per common share..... $ 0.12 $ 0.12 $ 0.12 $ 0.12 $ 0.48
Closing price of common stock........... $ 46.00 $39.75 $ 45.00 $36.00 $36.00
</TABLE>
- ---------------
(1) Sales less costs applicable to sales and depreciation, depletion and
amortization.
(2) Includes an after-tax gain of $72 million, or $0.75 per share for the
quarter and $0.74 per share for the year, from the sale of NGC's interest in
Southern Peru Copper Corporation and an after-tax charge of $15.1 million,
or $0.16 per share, for the write-off of the investment and additional
reclamation provision of the Ivanhoe exploration property (see Notes 10 and
11).
52
<PAGE> 54
NEWMONT MINING CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(3) Includes an after-tax charge of $22 million, or $0.22 per share, for the
quarter and $0.23 per share for the year, for the write-off of the
investment in the Grassy Mountain property (see Note 10).
(4) Substantially all of the convertible preferred stock was converted into
common stock in December 1995 (see Note 8).
(5) Includes a $17.6 million after-tax charge related to environmental
obligations associated with former mining activities and an income tax
benefit of $16.2 million resulting from the resolution of certain tax issues
associated with prior years, with a net effect charge of $0.01 per share.
RATIO OF EARNINGS TO FIXED CHARGES
The ratio of earnings to fixed charges was 3.6, 1.7, 6.3, 6.5 and 10.3 for
the years ended December 31, 1995, 1994, 1993, 1992 and 1991, respectively. The
Corporation guarantees certain third party debt which had total interest
obligations of $1.4 million, $1 million, $0.8 million, $3.3 million and $4
million for the years ended December 31, 1995, 1994, 1993, 1992 and 1991,
respectively. The Corporation has not been required to pay any of these amounts,
nor does it expect to have to pay any amounts; therefore, such amounts have not
been included in the ratio of earnings to fixed charges.
53
<PAGE> 55
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
There have been no disagreements with Arthur Andersen LLP, Newmont's
independent public accountants, regarding any matter of accounting principles or
practices or financial statement disclosure.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
Information concerning Newmont's directors will be contained in Newmont's
definitive Proxy Statement to be filed pursuant to Regulation 14A promulgated
under the Securities Exchange Act of 1934 for the 1996 annual meeting of
stockholders and is incorporated herein by reference. Information concerning
Newmont's executive officers is set forth under Part I of this report.
ITEM 11. EXECUTIVE COMPENSATION
Information concerning this item will be contained in Newmont's definitive
Proxy Statement to be filed pursuant to Regulation 14A promulgated under the
Securities Exchange Act of 1934 for the 1996 annual meeting of stockholders and
is incorporated herein by reference.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
Information concerning this item will be contained in Newmont's definitive
Proxy Statement to be filed pursuant to Regulation 14A promulgated under the
Securities Exchange Act of 1934 for the 1996 annual meeting of stockholders and
is incorporated herein by reference.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Information concerning this item will be contained in Newmont's definitive
Proxy Statement to be filed pursuant to Regulation 14A promulgated under the
Securities Exchange Act of 1934 for the 1996 annual meeting of stockholders and
is incorporated herein by reference.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
(a) The following documents are filed as a part of this report:
1. Financial Statements
<TABLE>
<CAPTION>
10-K
PAGE
----
<S> <C>
Report of Independent Public Accountants............................ 28
Statements of Consolidated Income................................... 29
Consolidated Balance Sheets......................................... 30
Statements of Consolidated Changes in Stockholders' Equity.......... 31
Statements of Consolidated Cash Flows............................... 32
Notes to Consolidated Financial Statements.......................... 33
Consolidated Financial Statements of Minera Yanacocha S.A........... MY-1
</TABLE>
2. Financial Statement Schedules
All schedules have been omitted since they are either not required,
are not applicable, or the required information is shown in the financial
statements or related notes.
54
<PAGE> 56
3. Exhibits
<TABLE>
<S> <C>
3(a). Restated Certificate of Incorporation dated as of July 13, 1987. Incorporated by
reference to Exhibit 3 to registrant's Annual Report on Form 10-K for the year ended
December 31, 1987.
3(b). By-Laws as amended through November 1, 1993 and adopted November 1, 1993.
Incorporated by reference to Exhibit 3(b) to registrant's Annual Report on Form 10-K
for the year ended December 31, 1993.
3(c). Certificate of Designations, Preferences and Rights of $5.50 Convertible Preferred
Stock, $5 par value, dated November 13, 1992. Incorporated by reference to Exhibit
(3)c to registrant's Annual Report on Form 10-K for the year ended December 31,
1992.
4(a). Rights Agreement dated as of September 23, 1987 between registrant and Manufacturers
Hanover Trust Company as Equal Value Agent relating to the Equal Value Rights.
Incorporated by reference to Exhibit 1 to registrant's Registration Statement on
Form 8-A dated September 25, 1987.
4(b). First Amendment dated as of October 1, 1987 amending the Rights Agreement dated as
of September 23, 1987 between registrant and Manufacturers Hanover Trust Company, as
Rights Agent. Incorporated by reference to Exhibit (4)b to registrant's Annual
Report on Form 10-K for the year ended December 31, 1990.
4(c). Second Amendment dated as of May 1, 1989 amending the Rights Agreement dated as of
September 23, 1987 between registrant and Manufacturers Hanover Trust Company, as
Rights Agent. Incorporated by reference to Exhibit 1 to registrant's Form 8 dated
June 7, 1989.
4(d). Rights Agreement dated August 30, 1990 between registrant and Manufacturers Hanover
Trust Company, as Rights Agent. Incorporated by reference to Exhibit 1 to
registrant's Registration Statement on Form 8-A dated August 31, 1990.
4(e) First Amendment dated November 27, 1990 and Second Amendment dated December 7, 1990
and to the aforementioned Rights Agreement dated August 30, 1990. Incorporated by
4(f). reference to Exhibits 2 and 3, respectively, to registrant's Form 8 dated December
7, 1990.
4(g). Third Amendment dated February 26, 1992 to the aforementioned Rights Agreement dated
August 30, 1990. Incorporated by reference to Exhibit 4 to registrant's Form 8 dated
March 17, 1992.
4(h). Indenture dated March 23, 1992 between registrant and Bank of Montreal Trust
Company. Incorporated by reference to Exhibit 4 to registrant's Quarterly Report on
Form 10-Q for the quarter ended June 30, 1992.
10(a). 1982 Key Employees Stock Option Plan. Incorporated by reference to Exhibit to
registrant's Registration Statement on Form S-8 (No. 33-10141).
10(b). 1987 Key Employees Stock Option Plan as amended as of October 25, 1993. Incorporated
by reference to Exhibit 10(e) to registrant's Annual Report on Form 10-K for year
ended December 31, 1993.
10(c). 1992 Key Employees Stock Plan as amended as of October 25, 1993. Incorporated by
reference to Exhibit 10(p) to registrant's Annual Report on Form 10-K for the year
ended December 31, 1993.
10(d). Agreement dated as of December 7, 1990 among registrant, SP Gold Holdings Inc.,
Holdgold, Inc., Hornwood Investments N.V., James M. Goldsmith, Jacob Rothschild, St.
James Place Capital, plc and RIT Capital Partners plc. Incorporated by reference to
Exhibit (28)(i) to registrant's Current Report on Form 8-K dated December 7, 1990.
10(e). Amendment dated May 10, 1993 to the Agreement dated as of December 7, 1990 among
registrant, SP Gold Holdings Inc., Holdgold Inc., Hornwood Investments N.V., James
M. Goldsmith, Jacob Rothschild, St. James Place Capital, plc and RIT Capital
Partners plc. Incorporated by reference to Exhibit 28(b) to registrant's
Registration Statement on Form S-3 (File No. 33-65274).
</TABLE>
55
<PAGE> 57
<TABLE>
<S> <C>
10(f). Agreement dated as of May 10, 1993 among registrant, George Soros, Soros Fund
Management, Stanley F. Druckenmiller, Duquesne Capital Management, Inc., Quantum
Fund N.V., Quasar International Partners C.V. and Quota Fund N.V. Incorporated by
reference to Exhibit 28(c) to registrant's Registration Statement on Form S-3 (File
No. 33-65274).
10(g). Agreement dated October 15, 1993, effective November 1, 1993, among registrant, NGC
and Ronald C. Cambre. Incorporated by reference to Exhibit 10 to registrant's
Quarterly Report on Form 10-Q for the quarter ended September 30, 1993.
10(h). Letter Agreement dated December 15, 1993, between NGC and registrant. Incorporated
by reference to Exhibit A to NGC's Proxy Statement dated February 16, 1994.
10(i). Tax Sharing Agreement dated as of January 1, 1994 between registrant and NGC.
Incorporated by reference to Exhibit 10(i) to registrant's Annual Report on Form
10-K for the year ended December 31, 1994.
11. Statement re Computation of Per Share Earnings.
12. Statement re Computation of Ratio of Earnings to Fixed Charges.
21. Subsidiaries of registrant. Incorporated by reference to Exhibit 21 to registrant's
Annual Report on Form 10-K for the year ended December 31, 1993.
23. Consent of Independent Public Accountants.
24. Power of Attorney.
27. Financial Data Schedules.
</TABLE>
(b) Reports on Form 8-K
No reports on Form 8-K were filed by the registrant during the quarter ended
December 31, 1995.
56
<PAGE> 58
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Shareholders and Board of Directors of
Minera Yanacocha S. A.:
We have audited the accompanying balance sheets of Minera Yanacocha S. A.
(a Peruvian Corporation, the "Company") as of December 31, 1995 and 1994, and
the related statements of income, changes in shareholders' equity and cash flows
for each of the three years in the period ended December 31, 1995. These
financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with auditing standards generally
accepted in Peru which are substantially equivalent to those applied in the
United States of America. Those standards require that we plan and perform the
audit to obtain reasonable assurance about whether the financial statements are
free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements. An
audit also includes assessing the accounting principles used and significant
estimates made by the Company's management, as well as evaluating the overall
financial statements presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of Minera Yanacocha S. A. as of
December 31, 1995 and 1994, and the results of its operations and its cash flows
for each of the three years in the period ended December 31, 1995 in conformity
with generally accepted accounting principles followed in the United States of
America.
Countersigned by:
/s/ Marco Antonio Zaldivar
--------------------------------------
Marco Antonio Zaldivar
C.P.C. Register No. 12477
Lima, Peru
January 23, 1996.
MY-1
<PAGE> 59
MINERA YANACOCHA S. A.
BALANCE SHEETS
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
<TABLE>
<CAPTION>
AT DECEMBER 31,
---------------------
1995 1994
-------- --------
<S> <C> <C>
ASSETS
Current Assets
Cash and cash equivalents............................................ $ 29,721 $ 22,306
Restricted funds..................................................... 8,647 2,500
Trade accounts receivable............................................ 15,699 8,571
Inventories.......................................................... 13,084 15,647
Prepaid taxes and expenses........................................... 4,553 4,657
-------- --------
Total current assets.............................................. 71,704 53,681
Property, plant, equipment and mine development, net................... 85,844 66,325
Other assets........................................................... 2,270 2,851
-------- --------
Total assets................................................. $159,818 $122,857
======== ========
LIABILITIES
Current Liabilities
Taxes and profit sharing payable..................................... $ 25,170 $ 11,263
Trade accounts payable............................................... 6,544 2,726
Other accrued liabilities............................................ 5,120 4,548
Current portion of long-term debt.................................... 13,142 3,781
-------- --------
Total current liabilities......................................... 49,976 22,318
Long-term debt......................................................... 38,799 51,534
Deferred income tax liability.......................................... 7,660 6,539
Reclamation liability.................................................. 1,876 772
-------- --------
Total liabilities................................................. 98,311 81,163
-------- --------
SHAREHOLDERS' EQUITY
Capital stock -- S/1.00 par value; 4,600,104 shares authorized and
issued............................................................... 2,116 2,116
Additional paid-in capital............................................. 226 226
Legal reserve.......................................................... 470 470
Retained earnings...................................................... 58,695 38,882
-------- --------
Total shareholders' equity........................................ 61,507 41,694
-------- --------
Total liabilities and shareholders' equity................... $159,818 $122,857
======== ========
</TABLE>
The accompanying notes are an integral part of these statements.
MY-2
<PAGE> 60
MINERA YANACOCHA S. A.
STATEMENTS OF INCOME
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
----------------------------------
1995 1994 1993
-------- -------- --------
<S> <C> <C> <C>
Sales and other income
Sales.................................................... $212,520 $116,607 $ 30,357
Interest and other....................................... 2,426 663 132
-------- -------- --------
214,946 117,270 30,489
-------- -------- --------
Cost and expenses
Costs applicable to sales................................ (66,679) (42,195) (12,127)
Exploration costs........................................ (11,391) (4,051) (6,276)
Depreciation and amortization............................ (15,725) (6,820) (2,302)
Interest, net of amounts capitalized and other........... (5,705) (5,024) (4,217)
-------- -------- --------
(99,500) (58,090) (24,922)
-------- -------- --------
Pretax income before cumulative effect of change in
accounting principle..................................... 115,446 59,180 5,567
Income tax................................................. (34,633) (17,949) (1,723)
-------- -------- --------
Income before cumulative effect of a change in
accounting principle..................................... 80,813 41,231 3,844
Cumulative effect of a change in accounting principle...... -- -- 2,425
-------- -------- --------
Net income................................................. $ 80,813 $ 41,231 $ 6,269
======== ======== ========
Income per common share
Before cumulative effect of a change in accounting
principle............................................. $ 17.57 $ 8.96 $ 0.84
Cumulative effect of a change in accounting principle.... -- -- 0.52
-------- -------- --------
Net income per common share.............................. $ 17.57 $ 8.96 $ 1.36
======== ======== ========
</TABLE>
The accompanying notes are an integral part of these statements.
MY-3
<PAGE> 61
MINERA YANACOCHA S. A.
STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY
(IN THOUSANDS, EXCEPT SHARE DATA)
<TABLE>
<CAPTION>
NUMBER ADDITIONAL RETAINED TOTAL
OF COMMON CAPITAL PAID-IN EARNINGS SHAREHOLDERS' LEGAL
SHARES STOCK CAPITAL (DEFICIT) EQUITY RESERVE
--------- ------- ---------- -------- ------------- --------
<S> <C> <C> <C> <C> <C> <C>
Balance at December 31, 1992......... 10,100 $ 10 $ -- $ -- $ (8,148) $ (8,138)
Common stock issued................ 4,590,004 2,106 226 -- -- 2,332
Net income......................... -- -- -- -- 6,269 6,269
--------- ------- ---- ---- -------- --------
Balance at December 31, 1993......... 4,600,104 2,116 226 -- (1,879) 463
Net income......................... -- -- -- -- 41,231 41,231
Appropriation of legal reserve..... -- -- -- 470 (470) --
--------- ------- ---- ---- -------- --------
Balance at December 31, 1994......... 4,600,104 2,116 226 470 38,882 41,694
Net income......................... -- -- -- -- 80,813 80,813
Cash dividends..................... -- -- -- -- (61,000) (61,000)
--------- ------- ---- ---- -------- --------
Balance at December 31, 1995......... 4,600,104 $ 2,116 $226 $470 $ 58,695 $ 61,507
========= ======= ==== ==== ======== ========
</TABLE>
The accompanying notes are an integral part of these statements.
MY-4
<PAGE> 62
MINERA YANACOCHA S. A.
STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
----------------------------------
1995 1994 1993
-------- -------- --------
<S> <C> <C> <C>
OPERATING ACTIVITIES
Net income............................................... $ 80,813 $ 41,231 $ 6,269
Adjustments to reconcile net income to net cash provided
by operating activities:
Deferred income tax................................... 1,121 7,242 (702)
Depreciation and amortization......................... 15,725 6,820 2,302
Other................................................. 431 -- --
-------- -------- --------
98,090 55,293 7,869
(Increase) decrease in operating assets:
Trade accounts receivable............................. (7,128) (3,174) (5,397)
Inventories........................................... 2,563 (11,229) (4,418)
Prepaid taxes and expenses and other assets........... 685 (380) (7,598)
Increase (decrease) in operating liabilities:
Accounts payable and accrued liabilities.............. 18,297 12,669 3,341
Reclamation liability................................. 1,104 609 163
-------- -------- --------
Net cash provided by (used in) operating activities...... 113,611 53,788 (6,040)
-------- -------- --------
INVESTING ACTIVITIES
Additions to property, plant, equipment and mine
development........................................... (35,244) (40,973) (27,761)
-------- -------- --------
Net cash used in investing activities.................... (35,244) (40,973) (27,761)
-------- -------- --------
FINANCING ACTIVITIES
Proceeds from long-term borrowings....................... -- 24,079 31,235
Repayments of long-term borrowings....................... (3,805) -- --
Repayments of advances to shareholders................... -- (20,478) (26,000)
Restricted funds......................................... (6,147) (1,400) (1,100)
Advances from shareholders............................... -- -- 33,833
Proceeds from issuance of common stock................... -- -- 2,332
Cash dividends........................................... (61,000) -- --
-------- -------- --------
Net cash provided by (used in) financing activities........ (70,952) 2,201 40,300
-------- -------- --------
Net increase in cash and cash equivalents.................. 7,415 15,016 6,499
Cash and cash equivalents at beginning of year............. 22,306 7,290 791
-------- -------- --------
Cash and cash equivalents at end of year................... $ 29,721 $ 22,306 $ 7,290
======== ======== ========
</TABLE>
The accompanying notes are an integral part of these statements of cash flows.
MY-5
<PAGE> 63
MINERA YANACOCHA S. A.
NOTES TO THE FINANCIAL STATEMENTS
1. BUSINESS ACTIVITY
Minera Yanacocha S. A. ("Yanacocha") was established on January 14, 1992
and started production activities in August, 1993. Yanacocha is engaged in
exploration and exploitation of gold under the mining concessions owned by
S.M.R.L. Chaupiloma Dos de Cajamarca ("Chaupiloma").
In accordance with a mining lease amended effective January 1, 1994,
Yanacocha pays Chaupiloma a 3 percent royalty on the monthly production at
current prices, after deducting refinery and transport costs. The royalty
agreement expires in the year 2012. Prior to 1994, the royalty was calculated at
2 percent.
During 1995, Yanacocha's operation consisted of two open pit mines, the
Carachugo and Maqui Maqui mines located in the Cajamarca district of Peru, from
which gold-bearing ores were delivered to separate leach pads for gold recovery
using conventional heap leaching cyanidation followed by Merrill-Crowe zinc
precipitation and smelting to provide a final dore product. The dore was then
shipped offsite for further refining before being sold in the world gold
markets.
2. BASIS OF PRESENTATION
Up to December 31, 1994 the Peruvian statutory accounting records were kept
in Peruvian nuevos soles. Effective January 1, 1995, Yanacocha began maintaining
its accounting records in U.S. Dollars, its functional currency, as prescribed
in the tax stability agreements signed with the Peruvian Government, explained
in Note 8. The accompanying financial statements were prepared in accordance
with U.S. generally accepted accounting principles ("U.S. GAAP") and are stated
in thousands of U.S. Dollars.
3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The following accounting policies were used in preparing the accompanying
U.S. GAAP financial statements:
Cash and cash equivalents
Cash and cash equivalents consist of cash balances and highly liquid
investments with a maturity of three months or less, carried at cost, which
approximates market value.
Inventories
Precious metals are stated at market value. Ore in process is determined
using the first-in, first-out method and is stated at the lower of cost or net
realizable value. Materials, supplies and spare parts inventories are stated at
average cost.
Property, plant and equipment
Property, plant and equipment is stated at cost. Depreciation is computed
using the straight-line method with the rates indicated in Note 6. Maintenance
and minor renewals are charged to expenses as incurred. Significant repairs and
modifications which extend the useful life of the existing facilities are
capitalized and depreciated.
Exploration and mine development costs
Mineral exploration costs are expensed as incurred. When it has been
determined that a mineral property can be economically developed, the costs
incurred to develop such property, including the costs to further delineate the
ore body and remove overburden to initially expose the ore body, are
capitalized. Such costs are amortized using a units-of-production method over
the estimated life of the ore body. Until 1994 these costs were amortized using
the straight-line method with an annual rate of 20 percent. The cumulative
effect of the
MY-6
<PAGE> 64
MINERA YANACOCHA S. A.
NOTES TO THE FINANCIAL STATEMENTS -- (CONTINUED)
change is immaterial. On-going mine development expenditures to maintain
production are generally charged to operations as incurred.
Interest capitalization
Interest expense allocable to the costs of constructing new facilities is
capitalized until operations commence. Capitalized interest is expensed over the
depreciable lives of the assets to which it relates.
Reclamation and mine closure costs
Estimated future reclamation and mine closure costs are based principally
on legal and regulatory requirements and are accrued and charged to the
statements of income on a units-of-production basis.
Debt issuance costs
Debt issuance costs are deferred and amortized over the term of the related
debt.
Revenue recognition
Gold sales are recognized in income when dore bars are produced based on
prevailing market prices.
Income tax
Effective January 1, 1993, Yanacocha adopted Statement of Financial
Accounting Standards No.109, "Accounting for Income Taxes" ("SFAS 109"). Under
the liability method of SFAS 109, Yanacocha recognizes certain temporary
differences between the financial reporting basis of Yanacocha's liabilities and
assets and the related tax basis of such liabilities and assets.
4. FOREIGN CURRENCY TRANSACTIONS
Monetary assets and liabilities of Yanacocha are principally denominated in
U.S. Dollars, its functional currency. No significant assets or liabilities are
denominated in Peruvian currency.
A loan from Deutsche Investitions-und Entwicklungsgesellschaft MBH-DEG
("DEG") denoted as the Carachugo loan is denominated in Deutsch Marks. As of
December 31, 1995 and 1994 the total amount outstanding was DM 8.1 million
(US$5,641) and DM 9.0 million (US$5,815), respectively (see Note 9).
5. INVENTORIES
<TABLE>
<CAPTION>
AT DECEMBER 31,
---------------------
1995 1994
------- -------
(IN THOUSANDS)
<S> <C> <C>
Precious metals........................................ $ 4,332 $10,693
Ore in process......................................... 5,373 2,956
Materials, supplies and spare parts.................... 3,379 1,998
------- -------
$13,084 $15,647
======= =======
</TABLE>
MY-7
<PAGE> 65
MINERA YANACOCHA S. A.
NOTES TO THE FINANCIAL STATEMENTS -- (CONTINUED)
6. PROPERTY, PLANT, EQUIPMENT AND MINE DEVELOPMENT
<TABLE>
<CAPTION>
AT DECEMBER 31,
DEPRECIATION OR --------------------
AMORTIZATION RATES 1995 1994
------------------- -------- -------
(IN THOUSANDS)
<S> <C> <C> <C>
Land....................................... -- $ 933 $ 236
Buildings and equipment.................... 10% and 20% 99,240 69,781
Mine development........................... Units-of production 7,379 2,113
Construction-in-progress................... -- 3,136 3,316
-------- -------
110,688 75,446
Accumulated depreciation and
amortization............................. (24,844) (9,121)
-------- -------
$ 85,844 $66,325
======== =======
</TABLE>
Certain fixed assets of Yanacocha guarantee loans from the International
Finance Corporation ("IFC") and DEG (see Note 9).
7. TAXES AND PROFIT SHARING PAYABLE
<TABLE>
<CAPTION>
AT DECEMBER 31,
-------------------
1995 1994
------- -------
(IN THOUSANDS)
<S> <C> <C>
Income tax....................................................... $19,575 $ 8,287
Profit sharing................................................... 5,595 2,080
Value added tax.................................................. -- 311
Other............................................................ -- 585
------- -------
$25,170 $11,263
======= =======
</TABLE>
8. INCOME TAX
As explained in Note 3, effective January 1, 1993, income tax is accounted
for under the provisions of SFAS 109. The cumulative effect of this change in
accounting for income tax was to increase Yanacocha's 1993 earnings US$2.4
million or US$0.52 per share.
Under SFAS 109, Yanacocha accounts for deferred income tax liabilities and
deferred income tax assets when temporary differences arise between the
financial and the income tax reporting of its liabilities and assets. The
measurement of the deferred income tax liabilities and assets is based upon the
Peruvian tax rates and tax law provisions as enacted.
Yanacocha's provision for income tax before the cumulative effect of a
change in accounting principle consist of:
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
-------------------------------------
1995 1994 1993
------- -------------- ------
(IN THOUSANDS)
<S> <C> <C> <C>
Current............................................ $33,512 $ 10,707 $2,425
Deferred........................................... 1,121 7,242 (702)
------- -------- ------
Total.................................... $34,633 $ 17,949 $1,723
======= ======== ======
</TABLE>
MY-8
<PAGE> 66
MINERA YANACOCHA S. A.
NOTES TO THE FINANCIAL STATEMENTS -- (CONTINUED)
The components of Yanacocha's deferred income tax liabilities are as
follows:
<TABLE>
<CAPTION>
AT DECEMBER 31,
-----------------
1995 1994
------ ------
(IN THOUSANDS)
<S> <C> <C>
Mine development costs deducted for tax in excess of book
amortization..................................................... $7,289 $5,483
Debt issuance costs deducted for tax in excess of book
amortization..................................................... 544 686
Interest deducted for tax and capitalized as fixed assets for book
purposes......................................................... 269 429
Start-up costs deducted for tax and capitalized for book
purposes......................................................... 121 173
Reclamation liability not deducted in tax return................... (563) (232)
------ ------
$7,660 $6,539
====== ======
</TABLE>
The income tax returns of 1992 through 1994, prepared in Peruvian nuevos
soles, and the income tax return for 1995, prepared in U. S. Dollars, are
pending review by the tax authorities. Additional taxes and surcharges from
future tax assessments, if any, would be charged to expense in the years in
which they are settled.
Under current regulations, effective January 1994, the equity tax has been
eliminated; however, Yanacocha calculates the equity tax on the Carachugo's net
equity in accordance with the tax stabilization agreement explained in the next
paragraph.
In May 1994 Yanacocha signed two tax stabilization agreements with the
Peruvian Government which guarantee Yanacocha the use of tax rulings of the tax
regimes in force at December 31, 1992 for Carachugo and at December 31, 1994 for
Maqui Maqui for 15 years from the dates that the agreements become effective.
Under such agreements Yanacocha is permitted to keep its accounting records in
U. S. Dollars.
Effective January 1, 1995 Yanacocha adopted the Carachugo tax stabilization
agreement. Yanacocha expects to meet the investment criteria for Maqui Maqui
during 1996 and to adopt the tax stabilization provisions of that agreement for
Maqui Maqui thereafter.
9. LONG-TERM DEBT
Long-term debt consists of loans from the IFC and DEG, to finance the
Carachugo and Maqui Maqui projects. The maturities due pursuant to the financing
arrangement as of December 31, 1995, are as follows (in thousands):
<TABLE>
<CAPTION>
DEG
IFC --------------------
------------------------------------------ CARACHUGO MAQUI
A LOAN B LOAN C LOAN D LOAN LOAN LOAN TOTAL
------- ------- ------- ------ --------- ------ -------
<S> <C> <C> <C> <C> <C> <C> <C>
Current portion...... $ 2,400 $ 4,000 $ 2,860 $1,428 $ 1,254 $1,200 $13,142
------- ------- ------- ------ ------- ------ -------
Non-current
1997............... 2,400 4,000 2,860 1,428 1,254 2,400 14,342
1998............... 2,400 4,000 2,860 1,428 1,254 2,400 14,342
1999............... 2,400 -- 1,420 716 1,252 2,500 8,288
2000............... 1,200 -- -- -- 627 -- 1,827
------- ------- ------- ------ ------- ------ -------
8,400 8,000 7,140 3,572 4,387 7,300 38,799
------- ------- ------- ------ ------- ------ -------
Total debt........... $10,800 $12,000 $10,000 $5,000 $ 5,641 $8,500 $51,941
======= ======= ======= ====== ======= ====== =======
</TABLE>
The Carachugo loan is denominated in Deutsch Marks and translated to US$ at
the balance sheet date.
Interest on the IFC "A loan" (8.275% and 8.4375% at December 31, 1995 and
1994) is calculated at 2 7/8% over the London Interbank Offering Rate ("LIBOR")
plus a rate (not to exceed 2 1/2%) based on the amount the average price of gold
per ounce is above US$370. When the prior six month average gold price is
MY-9
<PAGE> 67
MINERA YANACOCHA S. A.
NOTES TO THE FINANCIAL STATEMENTS -- (CONTINUED)
between US$370 and US$410 an ounce the interest rate is 2 7/8% over LIBOR plus
1/8% for each US$10 the gold price is over US$370 per ounce. When the six month
average gold price is between US$410 and US$490 per ounce the interest rate is
3 3/8% over LIBOR plus 1/4% for each US$10 the gold price is over US$410 per
ounce. The "B loan" interest rate for any interest period (8.525% and 8.5625% at
December 31, 1995 and 1994) is an annual rate equal to 3 1/8% over the LIBOR.
The "C loan" and "D loan" interest rates for any interest period (8.65% and
8.6875% at December 31, 1995 and 1994) is an annual rate equal to 3 1/4% over
LIBOR. Interest on the Carachugo DEG loan is calculated at the fixed annual rate
of 9.3% while interest on the Maqui Maqui DEG loan is calculated at LIBOR plus
3 1/2% (8.9% and 8.9375% at December 31, 1995 and 1994). The weighted average
interest rates on these obligations was 9.4% and 8.4% during 1995 and 1994,
respectively. Interest rates prevailing on similar debt at the balance sheet
dates were essentially the same as the interest rates on these debts. Therefore,
the fair value of the debt approximates the reported value.
The following assets secure the loans disbursed by the IFC and DEG:
<TABLE>
<CAPTION>
MAXIMUM
GUARANTEE LEVEL
---------------
(IN THOUSANDS)
<S> <C>
First mortgages over certain rustic lands and over facilities,
constructions, machinery and equipment owned by Yanacocha............. $ 47,000
First mortgage over mining rights owned by Chaupiloma................... 50,000
Restricted funds in Barclays Bank PLC................................... 8,647
First mining pledge over vehicles and equipment owned by Yanacocha...... 861
--------
$106,508
========
</TABLE>
The loan agreements contain certain covenants which limit indebtedness and
payment of dividends to shareholders. In addition, Yanacocha must maintain
certain financial ratios as provided in the loan agreements. At December 31,
1995 and 1994 Yanacocha is in compliance with the convenants.
The IFC loan requires Yanacocha to maintain an escrow account representing
the next interest and principal installments due. The amounts totaling US$8,647
and US$2,500 as of December 31, 1995 and 1994, respectively, reflects the March
15, 1996 and 1995 interest and principal payments and, accordingly have been
reported as restricted funds on the balance sheets.
10. SHAREHOLDERS' EQUITY
The capital stock is represented by 4,600,104 common shares with a par
value of one Peruvian nuevo sol each, fully subscribed and paid. This amount
includes 2,592,159 shares owned by non-Peruvian investors.
Under current Peruvian regulations, there is no restriction on remittance
of dividends or repatriation of foreign investment, except for a creation of a
legal reserve discussed in the next paragraph. Furthermore, under current
Peruvian regulations, dividend distribution is tax free beginning January 1,
1994. However, dividends paid to a Yanacocha's non-domiciled shareholder who had
executed an Investment Agreement with the Peruvian Government is still subject
to a 10 percent dividend withholding tax on dividends paid on capital stock
issued pursuant to that agreement.
According to the Peruvian General Law on Corporations, when net income
exceeds 7 percent of capital stock in the financial statements prepared
following Peruvian GAAP, Yanacocha must create a reserve (the legal reserve) of
at least 20 percent of its capital stock by annual appropriations of at least 10
percent of net income. The legal reserve must be used only to offset losses, and
can not be distributed as dividends, except in case of the closing of a business
activity. As of December 31, 1995 and 1994 Yanacocha has fulfilled this
requirement.
MY-10
<PAGE> 68
MINERA YANACOCHA S. A.
NOTES TO THE FINANCIAL STATEMENTS -- (CONTINUED)
11. RELATED PARTY TRANSACTIONS
In years prior to 1994, Yanacocha obtained loans from its shareholders
amounting to US$46,478 to finance the construction of facilities. These loans
and the related accrued interest were repaid in full in 1993 and 1994. Interest
on the loans was calculated at an annual rate of 10 percent and amounted to
US$1,838 in 1994 and US$4,888 in 1993.
Management, exploration, mine development, engineering and employment
services are provided pursuant to contracts with affiliated companies. The
corresponding charges amounted to US$4,617 in 1995, US$3,065 in 1994 and
US$1,859 in 1993, and the outstanding account payable amounts to US$1,313 and
US$510 at December 31, 1995 and 1994, respectively.
12. SUPPLEMENTAL CASH FLOW INFORMATION
Net cash provided by operating activities includes the following cash
payments:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-----------------------------
1995 1994 1993
------- ------ ------
(IN THOUSANDS)
<S> <C> <C> <C>
Income tax.............................................. $22,113 $2,377 $ 685
Interest, net of amounts capitalized.................... $ 4,740 $4,665 $4,085
</TABLE>
13. ENVIRONMENT AND NATURAL RESOURCES CODE
Yanacocha's mining and exploration activities are subject to Legislative
Decree 613 published on September 8, 1990 which is regulated by Supreme Decrees
N(o)016-93-EM and N(o)059-93-EM dated April 28 and December 10, 1993,
respectively. These legal rules govern the protection of the environment.
Yanacocha conducts its operations so as to protect the public health and
environment and believes it operates in compliance with all applicable legal
rulings. Yanacocha accrues for its expected future reclamation and closure
liabilities on a units-of-production basis and such liability amounted to
US$1,876 and US$772 at December 31, 1995 and 1994, respectively.
MY-11
<PAGE> 69
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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
By /s/ TIMOTHY J. SCHMITT
------------------------------------
Timothy J. Schmitt
Vice President, Secretary and
Assistant General Counsel
March 29, 1996
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the date indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<C> <S> <C>
* Director
- ---------------------------------------------
J. P. Bolduc
* Chairman, President and
- --------------------------------------------- Chief Executive Officer
Ronald C. Cambre and Director
* Director
- ---------------------------------------------
Joseph P. Flannery
* Director
- ---------------------------------------------
Leo I. Higdon, Jr.
* Director March 29, 1996
- ---------------------------------------------
Thomas A. Holmes
* Director
- ---------------------------------------------
Robin A. Plumbridge
* Director
- ---------------------------------------------
Moeen A. Qureshi
* Director
- ---------------------------------------------
Michael K. Reilly
* Director
- ---------------------------------------------
William I. M. Turner, Jr.
* Senior Vice President and
- --------------------------------------------- Chief Financial Officer
Wayne W. Murdy (Principal Financial
Officer)
* Vice President and
- --------------------------------------------- Controller (Principal
Gary E. Farmar Accounting Officer)
*By /s/ TIMOTHY J. SCHMITT
- ---------------------------------------------
Timothy J. Schmitt
as Attorney-in-fact
</TABLE>
<PAGE> 70
Appendix I
The following is a narrative description of certain maps in image form
which have been included in the paper version of the Form 10-K but which have
been excluded from the EDGAR version of the Form 10-K.
1. Map of location of the Carlin Trend Operations in Nevada --
Page 3 of the Form 10-K.
On Page 3 of the Form 10-K, the registrant has
included a map of Nevada with an enlargement of the
geographical location of its operations on the Carlin Trend
discussed on Pages 1 through 5 of the Form 10-K. The
map also includes a chart indicating the location of various
deposits with proven and probable reserves.
2. Map of location of the Yanacocha Project in Peru -- Page 7
of the Form 10-K.
On Page 7 of the form 10-K, the registrant has
included a map of the country of Peru showing the geographical
location of the Yanacocha project discussed on Page 6 and
7 of the Form 10-K. The map also includes a notation that
Minera Yanacocha S.A., the Peruvian corporation which owns the
Yanacocha project, is 38% owned by the registrant.
3. Map of location of the Zarafshan-Newmont Project in Uzbekistan
-- Page 8 of the Form 10-K.
On Page 8 of the Form 10-K, the registrant has
included a map of the Republic of Uzbekistan showing the
geographical location of the Zarafshan- Newmont project
discussed on Page 8 of the form 10-K. The map also
includes notation that the Zarafshan-Newmont joint venture,
which owns the project, is 50% owned by the registrant.
4. Map of locations of the Minahasa Project and the Batu Hijau
Project in Indonesia -- Page 10 of the Form 10-K.
On Page 10 of the Form 10-K, the registrant has
included a map of the Republic of Indonesia showing the
geographical location of the Minahasa project and the Batu
Hijau project, each of which is discussed on Pages 9 and 10
of the Form 10-K. The map also includes a notation that each
of the Indonesian companies that own the Minahasa project and
the Batu Hijau project is 80% owned by the registrant
<PAGE> 71
Index to Exhibits
Exhibit Description
- ------- -----------
3(a). Restated Certificate of Incorporation dated as of July 13, 1987.
Incorporated by reference to Exhibit 3 to registrant's Annual
Report on Form 10-K for the year ended December 31, 1987.
3(b). By-Laws as amended through November 1, 1993 and adopted November 1,
1993. Incorporated by reference to Exhibit 3(b) to registrant's
Annual Report on Form 10-K for the year ended December 31, 1993.
3(c). Certificate of Designations, Preferences and Rights of $5.50
Convertible Preferred Stock, $5 par value, dated November 13, 1992.
Incorporated by reference to Exhibit (3)c to registrant's Annual
Report on Form 10-K for the year ended December 31, 1992.
4(a). Rights Agreement dated as of September 23, 1987 between registrant
and Manufacturers Hanover Trust Company as Equal Value Agent
relating to the Equal Value Rights. Incorporated by reference to
Exhibit 1 to registrant's Registration Statement on Form 8-A dated
September 25, 1987.
4(b). First Amendment dated as of October 1, 1987 amending the Rights
Agreement dated as of September 23, 1987 between registrant and
Manufacturers Hanover Trust Company, as Rights Agent. Incorporated
by reference to Exhibit (4)b to registrant's Annual Report on Form
10-K for the year ended December 31, 1990.
4(c). Second Amendment dated as of May 1, 1989 amending the Rights
Agreement dated as of September 23, 1987 between registrant and
Manufacturers Hanover Trust Company, as Rights Agent. Incorporated
by reference to Exhibit 1 to registrant's Form 8 dated June 7,
1989.
4(d). Rights Agreement dated August 30, 1990 between registrant and
Manufacturers Hanover Trust Company, as Rights Agent. Incorporated
by reference to Exhibit 1 to registrant's Registration Statement on
Form 8-A dated August 31, 1990.
4(e). First Amendment dated November 27, 1990 and Second Amendment dated
and December 7, 1990 to the aforementioned Rights Agreement dated
4(f). August 30, 1990. Incorporated by reference to Exhibits 2 and 3,
respectively, to registrant's Form 8 dated December 7, 1990.
4(g). Third Amendment dated February 26, 1992 to the aforementioned
Rights Agreement dated August 30, 1990. Incorporated by reference
to Exhibit 4 to registrant's Form 8 dated March 17, 1992.
<PAGE> 72
4(h). Indenture dated March 23, 1992 between registrant and Bank of
Montreal Trust Company. Incorporated by reference to Exhibit 4 to
registrant's Quarterly Report on Form 10-Q for the quarter ended
June 30, 1992.
10(a). 1982 Key Employees Stock Option Plan. Incorporated by reference to
Exhibit to registrant's Registration Statement on Form S-8 (No.
33-10141).
10(b). 1987 Key Employees Stock Option Plan as amended as of October 25,
1993. Incorporated by reference to Exhibit 10(e) to registrant's
Annual Report on Form 10-K for year ended December 31, 1993.
10(c). 1992 Key Employees Stock Plan as amended as of October 25, 1993.
Incorporated by reference to Exhibit 10(p) to registrant's Annual
Report on Form 10-K for the year ended December 31, 1993.
10(d). Agreement dated as of December 7, 1990 among registrant, SP Gold
Holdings Inc., Holdgold, Inc., Hornwood Investments N.V., James M.
Goldsmith, Jacob Rothschild, St. James Place Capital, plc and RIT
Capital Partners plc. Incorporated by reference to Exhibit (28)(i)
to registrant's Current Report on Form 8-K dated December 7, 1990.
10(e). Amendment dated May 10, 1993 to the Agreement dated as of December
7, 1990 among registrant, SP Gold Holdings Inc., Holdgold Inc.,
Hornwood Investments N.V., James M. Goldsmith, Jacob Rothschild,
St. James Place Capital, plc and RIT Capital Partners plc.
Incorporated by reference to Exhibit 28(b) to registrant's
Registration Statement on Form S-3 (File No. 33-65274).
10(f). Agreement dated as of May 10, 1993 among registrant, George Soros,
Soros Fund Management, Stanley F. Druckenmiller, Duquesne Capital
Management, Inc., Quantum Fund N.V., Quasar International Partners
C.V. and Quota Fund N.V. Incorporated by reference to Exhibit
28(c) to registrant's Registration Statement on Form S-3 (File No.
33-65274).
10(g). Agreement dated October 15, 1993, effective November 1, 1993, among
registrant, NGC and Ronald C. Cambre. Incorporated by reference
to Exhibit 10 to registrant's Quarterly Report on Form 10-Q for the
quarter ended September 30, 1993.
10(h). Letter Agreement dated December 15, 1993, between NGC and
registrant. Incorporated by reference to Exhibit A to NGC's Proxy
Statement dated February 16, 1994.
10(i). Tax Sharing Agreement dated as of January 1, 1994 between
registrant and NGC. Incorporated by reference to Exhibit 10(i) to
registrant's Annual Report on Form 10- K for the year ended
December 31, 1994.
11. Statement re Computation of Per Share Earnings.
<PAGE> 73
12. Statement re Computation of Ratio of Earnings to Fixed Charges.
21. Subsidiaries of registrant. Incorporated by reference to Exhibit
21 to registrant's Annual Report on Form 10-K for the year ended
December 31, 1993.
23. Consent of Independent Public Accountants.
24. Power of Attorney.
27. Financial Data Schedules.
(b) Reports on Form 8-K
No reports on Form 8-K were filed by the registrant during the quarter
ended December 31, 1995.
<PAGE> 1
Exhibit 11
NEWMONT MINING CORPORATION AND SUBSIDIARIES
COMPUTATION OF PER SHARE EARNINGS
(In thousands, except per share)
<TABLE>
<CAPTION>
PRIMARY EARNINGS PER SHARE CALCULATION
Years Ended December 31,
--------------------------------
1995 1994 1993
-------- -------- --------
<S> <C> <C> <C>
INCOME DATA:
Income before cumulative
effect of change in
accounting principle $112,634 $ 76,121 $ 94,669
Preferred stock dividends (11,157) (15,813) (15,910)
-------- -------- --------
Income before cumulative
effect of change in
accounting principle
applicable to common
shares 101,477 60,308 78,759
Cumulative effect of
change in accounting
principle - - 38,470
-------- -------- --------
Net income applicable to
common shares $101,477 $ 60,308 $117,229
======== ======== ========
COMMON AND COMMON EQUIVALENT SHARES:
Weighted average common
shares 86,876 85,948 85,286
Equivalent common shares
from stock options 130 199 176
-------- -------- --------
Common and common
equivalent shares 87,006 86,147 85,462
======== ======== ========
EARNINGS PER COMMON SHARE:
Income before cumulative
effect of change in
accounting principle $ 1.17 $ 0.70 $ 0.92
Cumulative effect of
change in accounting
principle - - 0.45
-------- -------- --------
Net income per common and
common equivalent
shares $ 1.17 $ 0.70 $ 1.37
======== ======== ========
</TABLE>
Page 1 of 2
<PAGE> 2
Exhibit 11
NEWMONT MINING CORPORATION AND SUBSIDIARIES
COMPUTATION OF PER SHARE EARNINGS
(In thousands, except per share)
<TABLE>
<CAPTION>
FULLY DILUTED EARNINGS PER SHARE CALCULATION
- --------------------------------------------
Years Ended December 31,
--------------------------------
1995 1994 1993
-------- -------- --------
<S> <C> <C> <C>
INCOME DATA:
Income before cumulative
effect of change in
accounting principle $112,634 $ 76,121 $ 94,669
Cumulative effect of
change in accounting
principle - - 38,470
-------- -------- --------
Net income applicable to
common shares $112,634 $ 76,121 $133,139
======== ======== ========
COMMON AND COMMON EQUIVALENT SHARES:
Weighted average common
shares 86,876 85,948 85,286
Equivalent common shares
from stock options 267 199 352
Equivalent common shares
from conversion of
preferred stock 5,583 7,899 7,899
-------- -------- --------
Common and common
equivalent shares 92,726 94,046 93,537
======== ======== ========
EARNINGS PER COMMON SHARE:
Income before cumulative
effect of change in
accounting principle $ 1.21 $ 0.81 $ 1.01
Cumulative effect of
change in accounting
principle - - 0.41
-------- -------- --------
Net income per common
and common equivalent
shares $ 1.21 $ 0.81 $ 1.42
======== ======== ========
</TABLE>
Page 2 of 2
<PAGE> 1
Exhibit 12
Newmont Mining Corporation and Subsidiaries
COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES
(Amounts in thousands except ratios)
(Unaudited)
<TABLE>
<CAPTION>
Year Ended December 31,
----------------------------------------------------------------
1995 1994 1993 1992 1991
-------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
Earnings:
Income before income taxes and
cumulative effect of changes
in accounting principles $129,625 $ 46,787 $113,234 $ 93,399 $122,218
Adjustments:
Net interest expense (1) 36,415 9,823 12,393 14,555 13,021
Amortization of capitalized
interest 2,305 1,928 1,814 1,410 1,668
Portion of rental expense
representative of interest 1,604 825 800 1,088 1,572
Minority interest of majority-
owned subsidiaries that have
fixed charges 12,239 7,273 11,113 7,580 12,455
Undistributed income of less-
than-50%-owned entities (3,603) (16,089) (3,526) - -
-------- -------- -------- -------- --------
$178,585 $ 50,547 $135,828 $118,032 $150,934
======== ======== ======== ======== ========
Fixed Charges:
Net interest expense (1) $ 36,415 $ 9,823 $ 12,393 $ 14,555 $ 13,021
Capitalized interest 11,558 19,618 8,480 2,405 -
Portion of rental expense
representative of interest 1,604 825 800 1,088 1,572
-------- -------- -------- -------- --------
$ 49,577 $ 30,266 $ 21,673 $ 18,048 $ 14,593
======== ======== ======== ======== ========
Ratio of Earnings to Fixed Charges 3.6 1.7 6.3 6.5 10.3
=== === === === ====
</TABLE>
(1) Includes interest expense of majority-owned subsidiaries and amortization of
debt issuance costs.
Page 1 of 1
<PAGE> 1
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the incorporation of
our report included in this 1995 Form 10-K into Newmont Mining Corporation's
previously filed S-8 Registration Statement No. 33-49872, S-8 Registration
Statement No. 33-53267, S-3 Registration Statement No. 33-54249 and S-8
Registration Statement No. 33-62469.
/s/ ARTHUR ANDERSEN LLP
ARTHUR ANDERSEN LLP
Denver, Colorado
March 21, 1996.
<PAGE> 1
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that each person whose
signature appears below constitutes and appoints Timothy J. Schmitt his true and
lawful attorney-in-fact and agent, with full power of substitution and
revocation, in his name and on his behalf, to do any and all acts and things and
to execute any and all instruments which he may deem necessary or advisable to
enable Newmont Gold Company to comply with the Securities Exchange Act of 1934,
as amended (the "Act"), and any rules, regulations or requirements of the
Securities and Exchange Commission in respect thereof, including power and
authority to sign his name in any and all capacities (including his capacity as
a Director and/or Officer of Newmont Gold Company) to the Annual Report on Form
10-K of Newmont Gold Company for the fiscal year ended December 31, 1995 and the
undersigned hereby ratifies and confirms all that said attorney-in-fact and
agent shall lawfully do or cause to be done by virtue hereof.
IN WITNESS WHEREOF, the undersigned have subscribed these
presents as of the 20th day of March, 1996.
Signature Title
- --------- -----
/s/ J. P. Bolduc
- ----------------------
J. P. Bolduc Director
/s/ Ronald C. Cambre
- ----------------------
Ronald C. Cambre Chairman, President and Chief
Executive Officer and Director
(Principal Executive Officer)
/s/ Joseph P. Flannery
- ----------------------
Joseph P. Flannery Director
/s/ Leo I. Higdon, Jr.
- ----------------------
Leo I. Higdon, Jr. Director
/s/ Thomas A. Holmes
- ----------------------
Thomas A. Holmes Director
<PAGE> 2
/s/ Robin A. Plumbridge
- -----------------------------
Robin A. Plumbridge Director
/s/ Moeen A. Qureshi
- -----------------------------
Moeen A. Qureshi Director
/s/ Michael K. Reilly
- -----------------------------
Michael K. Reilly Director
/s/ William I. M. Turner, Jr.
- -----------------------------
William I. M. Turner, Jr. Director
/s/ Wayne W. Murdy
- ----------------------------- Senior Vice President
Wayne W. Murdy and Chief Financial Officer
(Principal Financial Officer)
/s/ Gary E. Farmar
- ----------------------------- Vice President and Controller
Gary E. Farmar (Principal Accounting
Officer)
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
Art. 5 FDS for 1995 10-K
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> DEC-31-1995
<CASH> 59142
<SECURITIES> 11820
<RECEIVABLES> 24458
<ALLOWANCES> 0
<INVENTORY> 173984
<CURRENT-ASSETS> 289532
<PP&E> 1950779
<DEPRECIATION> 695501
<TOTAL-ASSETS> 1773770
<CURRENT-LIABILITIES> 194436
<BONDS> 604259
0
0
<COMMON> 459304
<OTHER-SE> 283643
<TOTAL-LIABILITY-AND-EQUITY> 1773770
<SALES> 636219
<TOTAL-REVENUES> 791564
<CGS> 370617
<TOTAL-COSTS> 477452
<OTHER-EXPENSES> 164728
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 36415
<INCOME-PRETAX> 141864
<INCOME-TAX> 16992
<INCOME-CONTINUING> 112634
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 112634
<EPS-PRIMARY> 1.17
<EPS-DILUTED> 1.21
</TABLE>
