<PAGE> 1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
FORM 10-Q
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED JUNE 30, 1999
or
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from to
------------------ ------------------
Commission File Number: 1-1153
NEWMONT MINING CORPORATION
--------------------------
(Exact name of registrant as specified in its charter)
Delaware 13-1806811
-------- ----------
(State or other jurisdiction (I.R.S. Employer Identification No.)
incorporation or organization)
1700 Lincoln Street, Denver, Colorado 80203
- ------------------------------------- -----
(Address of principal executive offices) (Zip Code)
303-863-7414
------------
(Registrant's telephone number, including area code)
-------------------------------------------------------------------
(Former name, address and fiscal year, if changed since last report)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. [X] Yes [ ] No
There were 167,525,509 shares of common stock outstanding on August 10, 1999.
<PAGE> 2
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
NEWMONT MINING CORPORATION AND SUBSIDIARIES
Statements of Consolidated Operations
(In thousands, except per share)
(Unaudited)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
JUNE 30,
------------------------
1999 1998
--------- ---------
<S> <C> <C>
Sales and other income
Sales $ 315,755 $ 373,962
Dividends, interest and other 17,251 2,329
--------- ---------
333,006 376,291
Costs and expenses
Costs applicable to sales 198,091 207,635
Depreciation, depletion and amortization 61,166 71,551
Exploration and research 14,428 16,860
General and administrative 12,656 12,287
Interest, net of capitalized interest of $5,208
and $3,047, respectively 17,104 19,644
Other 2,557 2,634
--------- ---------
306,002 330,611
--------- ---------
Pre-tax income before minority interest, equity loss and
cumulative effect of a change in accounting principle 27,004 45,680
Income tax expense (2,093) (6,173)
Minority interest in income of Minera Yanacocha (12,955) (11,078)
Minority interest in income of Newmont Gold Company -- (1,650)
Equity loss of affiliate (4,888) (2,175)
--------- ---------
Net income $ 7,068 $ 24,604
========= =========
Other comprehensive income (loss), net of tax
Unrealized holding loss on investment securities (278) --
--------- ---------
Comprehensive income $ 6,790 $ 24,604
========= =========
Net income per common share, basic and diluted $ 0.04 $ 0.16
========= =========
Basic weighted average shares outstanding 167,417 156,511
Diluted weighted average shares outstanding 167,648 156,511
Cash dividends declared per Newmont Mining Corporation common share $ 0.03 $ 0.03
========= =========
</TABLE>
See Notes to Consolidated Financial Statements
2
<PAGE> 3
NEWMONT MINING CORPORATION AND SUBSIDIARIES
Statements of Consolidated Operations
(In thousands, except per share)
(Unaudited)
<TABLE>
<CAPTION>
SIX MONTHS ENDED
JUNE 30,
------------------------
1999 1998
--------- ---------
<S> <C> <C>
Sales and other income
Sales $ 642,896 $ 752,029
Dividends, interest and other 20,301 13,763
--------- ---------
663,197 765,792
--------- ---------
Costs and expenses
Costs applicable to sales 394,448 417,442
Depreciation, depletion and amortization 119,948 143,650
Exploration and research 25,900 32,990
General and administrative 25,275 26,759
Interest, net of capitalized interest of $9,438
and $5,414 respectively 35,477 40,644
Other 4,321 5,521
--------- ---------
605,369 667,006
--------- ---------
Pre-tax income before minority interest, equity loss and
cumulative effect of a change in accounting principle 57,828 98,786
Income tax expense (7,714) (13,617)
Minority interest in income of Minera Yanacocha (25,122) (23,305)
Minority interest in income of Newmont Gold Company -- (3,678)
Equity loss of affiliate (7,980) (3,308)
--------- ---------
Net income before cumulative effect of change in accounting principle $ 17,012 $ 54,878
Cumulative effect of a change in accounting principle, net -- (32,924)
--------- ---------
Net income $ 17,012 $ 21,954
========= =========
Other comprehensive income, net of tax
Unrealized holding gain on investment securities 5,286 --
--------- ---------
Comprehensive income $ 22,298 $ 21,954
========= =========
Net income before cumulative effect of a change in accounting
principle per common share, basic and diluted $ 0.10 $ 0.35
========= =========
Net income per common share, basic and diluted $ 0.10 $ 0.14
========= =========
Basic weighted average shares outstanding 167,357 156,494
Diluted weighted average shares outstanding 167,473 156,494
Cash dividends declared per Newmont Mining Corporation common share $ 0.06 $ 0.06
========= =========
</TABLE>
See Notes to Consolidated Financial Statements
3
<PAGE> 4
NEWMONT MINING CORPORATION AND SUBSIDIARIES
Consolidated Balance Sheets
(In thousands)
(Unaudited)
<TABLE>
<CAPTION>
JUNE 30, DECEMBER 31,
1999 1998
---------- ------------
<S> <C> <C>
Assets
Cash and cash equivalents $ 81,893 $ 79,086
Short-term investments 11,167 11,802
Accounts receivable 37,098 52,066
Inventories 335,895 280,371
Other current assets 84,017 89,755
---------- ----------
Current assets 550,070 513,080
Property, plant and mine development, net 1,975,912 2,048,707
Investment in Batu Hijau 351,786 277,221
Long-term inventory 117,762 159,674
Other long-term assets 219,431 188,072
---------- ----------
Total assets $3,214,961 $3,186,754
========== ==========
Liabilities
Current portion of long-term debt $ 36,649 $ 47,575
Accounts payable 30,741 37,943
Other accrued liabilities 119,351 126,825
---------- ----------
Current liabilities 186,741 212,343
Long-term debt 1,197,219 1,201,131
Reclamation and remediation liabilities 98,867 94,840
Other long-term liabilities 157,823 146,099
---------- ----------
Total liabilities 1,640,650 1,654,413
---------- ----------
Contingencies (Notes 4 and 9)
Minority interest in Minera Yanacocha 117,929 92,808
---------- ----------
Stockholders' equity
Common stock 267,929 267,544
Additional paid-in capital 1,065,011 1,060,803
Retained earnings 123,442 111,186
---------- ----------
Total stockholders' equity 1,456,382 1,439,533
---------- ----------
Total liabilities and stockholders' equity $3,214,961 $3,186,754
========== ==========
</TABLE>
See Notes to Consolidated Financial Statements
4
<PAGE> 5
NEWMONT MINING CORPORATION AND SUBSIDIARIES
Statements of Consolidated Cash Flows
(In thousands)
(Unaudited)
<TABLE>
<CAPTION>
SIX MONTHS ENDED
JUNE 30,
------------------------
1999 1998
--------- ---------
<S> <C> <C>
Operating activities:
Net income $ 17,012 $ 21,954
Adjustments to reconcile net income to net cash provided
by operating activities:
Depreciation, depletion and amortization 119,948 143,650
Deferred taxes (20,283) (16,081)
Gain on sale of assets, net (15,990) --
Amortization of capitalized mining costs 5,785 31,102
Undistributed earnings of affiliates 7,980 9,406
Minority interest, net of dividends 25,121 9,354
Cumulative effect of change in accounting principle -- 32,924
Other 2,168 2,852
(Increase) decrease in operating assets:
Accounts receivable 11,130 18,393
Inventories 19,287 (12,993)
Other assets (5,650) (13,039)
Increase (decrease) in operating liabilities:
Accounts payable and accrued expenses (13,155) (63,090)
Other liabilities 12,783 6,134
--------- ---------
Net cash provided by operating activities 166,136 170,566
--------- ---------
Investing activities:
Additions to property, plant and mine development (77,278) (115,198)
Advances to joint venture and affiliates (89,347) (54,275)
Proceeds from sale of assets 28,671 --
Acquisition of additional interest in Minera Yanacocha -- (67,484)
Other 96 1,428
--------- ---------
Net cash used in investing activities (137,858) (235,529)
--------- ---------
Financing activities:
Repayments of long-term borrowings (59,846) (168,680)
Proceeds from long-term borrowings 45,000 177,000
Net decrease in short-term borrowings -- (25,771)
Dividends paid on common stock (10,043) (9,389)
Other (582) (295)
--------- ---------
Net cash used in financing activities (25,471) (27,135)
--------- ---------
Net increase (decrease) in cash and cash equivalents 2,807 (92,098)
Cash and cash equivalents at beginning of period 79,086 146,232
--------- ---------
Cash and cash equivalents at end of period $ 81,893 $ 54,134
========= =========
Supplemental information:
Interest paid, net of amounts capitalized of $9,438 and
$5,414, respectively $ 35,566 $ 40,483
Income taxes paid $ 20,374 $ 22,429
</TABLE>
See Notes to Consolidated Financial Statements
5
<PAGE> 6
NEWMONT MINING CORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(Unaudited)
(1) Basis of Preparation of Financial Statements
These unaudited interim consolidated financial statements of Newmont Mining
Corporation ("NMC") and its subsidiaries (collectively, the "Company") have been
prepared in accordance with the rules and regulations of the Securities and
Exchange Commission. Such rules and regulations allow the omission of certain
information and footnote disclosures normally included in financial statements
prepared in accordance with generally accepted accounting principles as long as
the statements are not misleading.
In the opinion of management, all adjustments necessary for a fair
presentation of these interim statements have been included and are of a normal
recurring nature. These interim financial statements should be read in
conjunction with the financial statements of the Company included in its 1998
Annual Report on Form 10-K.
Prior to October 7, 1998, NMC owned approximately 93.75% of Newmont Gold
Company's ("NGC") common stock, through which all of NMC's operations are
conducted. On October 7, 1998, NMC acquired the remaining 6.25% interest in NGC
through the merger of a wholly-owned subsidiary of NMC into NGC.
Certain prior year amounts have been reclassified to conform to the current
year presentation.
(2) Earnings Per Common Share
Basic and diluted earnings per share calculations were based on 167,417,000
and 167,648,000 weighted-average shares, respectively, for the three months
ended June 30, 1999 and on 156,511,000 shares for the three months ended June
30, 1998. Basic and diluted earnings per share calculations were based on
167,357,000 and 167,473,000 weighted-average shares, respectively, for the six
months ended June 30, 1999 and on 156,494,000 for the six months ended June 30,
1998. The weighted average shares used for diluted earnings per share
calculations included the number of additional common shares, if any, that would
have been outstanding if potentially dilutive common shares had been issued
(such as common share equivalents for employee stock options).
(3) Inventories
<TABLE>
<CAPTION>
AT JUNE 30, AT DECEMBER 31,
1999 1998
----------- ---------------
(IN THOUSANDS)
<S> <C> <C>
Current:
Ore and in-process inventories $ 210,393 $138,341
Precious metals 47,145 62,642
Materials and supplies 77,257 78,254
Other 1,100 1,134
--------- --------
$ 335,895 $280,371
========= ========
Non-current:
Ore in stockpiles $ 117,762 $159,674
========= ========
</TABLE>
Ore and in-process inventories at June 30, 1999 reflected a reclassifcation
from non-current ore in stockpiles and deferred mining costs.
(4) Batu Hijau
The Company and Sumitomo Corporation ("Sumitomo") entered into a definitive
partnership agreement to develop and operate the Batu Hijau copper/gold deposit
in Indonesia. Batu Hijau contains proven and probable reserves of 10.6 billion
pounds of copper (4.8 billion equity pounds) and 11.8 million ounces of gold
(5.3 million equity ounces). Start-up is expected in the fourth quarter of 1999,
with a projected mine life in excess of 20 years. The estimated cost for
development of the Batu Hijau mine is expected to be between $1.8 billion and
$1.9 billion.
The Company has an indirect 45% interest in the entity that owns the Batu
Hijau project and Sumitomo has an indirect 35% interest. The remaining 20%
interest is held by an unrelated Indonesian company. Until recouping its
construction investment,
6
<PAGE> 7
including interest, the Company will recognize 56.25% of Batu Hijau's income. As
a result of the ownership structure, the Company accounts for its investment in
Batu Hijau as an equity investment and at June 30, 1999 and December 31, 1998,
such investment was $351.8 million and $277.2 million, respectively. Differences
between 56.25% of the partnership's net assets and the Company's investment
include (1) $220 million for the fair market value adjustment recorded by the
partnership (in conjunction with the Company's initial contribution of its
investment in the entity that owns the project), (2) $26 million for
intercompany charges and (3) $122 million for the fair market value adjustment
recorded by the Company (in conjunction with its acquisition of the minority
interest in NGC). These amounts will be amortized or depreciated upon
commencement of production. The Company's investment also excludes $42 million
for exploration expenses incurred prior to the formation of the partnership.
In conjunction with the Batu Hijau project, the entity owning the project
has entered into a construction contract for approximately $1.0 billion. Project
development is funded by $1.0 billion in third party financings and $0.9 billion
from the Company and Sumitomo. The financings are guaranteed by the Company and
Sumitomo, 56.25% and 43.75%, respectively, until project completion tests are
met (except for political risk, which is born by the lenders), and will be
non-recourse to the Company and Sumitomo thereafter (except for a contingent
obligation to fund an additional $125 million). Repayment of borrowings under
the financings will be over a 13-year period beginning the earlier of six months
after project completion or June 15, 2001, and will bear interest at blended
fixed and floating rates.
Following is summarized financial information for the partnership (in
thousands):
<TABLE>
<CAPTION>
THREE MONTHS ENDED JUNE 30, SIX MONTHS ENDED JUNE 30,
1999 1998 1999 1998
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Revenues $ -- $ 15 $ -- $ 77
Loss before cumulative effect of a change in accounting principle (9,008) (3,163) (15,271) (3,419)
Net loss (9,008) (9,874) (15,271) (15,061)
Dividends received $ -- $ -- $ -- $ --
</TABLE>
<TABLE>
<CAPTION>
AT JUNE 30, AT DECEMBER 31,
1999 1998
----------- ---------------
<S> <C> <C>
Current assets $ 45,915 $ 17,576
Property, plant and mine development, net 1,753,535 1,430,260
Other assets 142,362 104,238
Current liabilities 174,462 153,066
Long-term debt 913,326 640,000
Other liabilities $ 35,734 $ 17,120
</TABLE>
(5) Dividends, Interest and Other Income
In the three and six months ended June 30, 1999, Dividends, interest and
other income included a $13 million gain from the sale of the True North
exploration property in Alaska.
(6) Comprehensive Income
Comprehensive income includes an unrealized holding gain (loss) on common
stock of Argentina Gold Corp., a cost investment considered available for sale
by the Company. Argentina Gold Corp. is an exploration company that was acquired
by another mining company in April 1999.
(7) Accounting Change
The Company adopted Statement of Position 98-5 effective January 1, 1998.
The change resulted in expensing certain costs incurred in the start-up phase of
various projects. The quarter ended June 30, 1998 was restated to reflect the
accounting change. Previously capitalized start-up costs (incurred prior to
January 1, 1998) of $32.9 million ($0.21 per share), net of tax and minority
interest, were reflected as the cumulative effect of the accounting change in
the first quarter of 1998.
(8) Segment Information
In 1998, the Company adopted the Statement of Financial Accounting Standards
("SFAS") No. 131, "Disclosures about Segments of an Enterprise and Related
Information" that established standards for reporting information about
operating segments. The Company predominantly operates in a single industry as a
worldwide corporation engaged in gold production, exploration for gold
7
<PAGE> 8
and acquisition of gold properties. The Company has operations in the United
States, Mexico, Peru, Indonesia and Uzbekistan and its reportable segments are
based on the geographic location of these operations. Earnings from operations
do not include general corporate expenses, interest (except project-specific
interest) or income taxes (except for equity investments).
Financial information relating to the Company's consolidated segments is as
follows (in millions):
<TABLE>
<CAPTION>
THREE MONTHS ENDED JUNE 30, 1999
-------------------------------------------------------------------------------------
NORTH AMERICAN MINERA ZARAFSHAN
OPERATIONS YANACOCHA* MINAHASA NEWMONT OTHER CONSOLIDATED
-------------- ---------- -------- --------- ------- ------------
<S> <C> <C> <C> <C> <C> <C>
Sales $ 175.2 $ 99.3 $ 23.3 $ 18.0 $ -- $ 315.8
Interest income -- 0.9 0.1 -- 1.0 2.0
Interest expense 0.1 2.0 -- 0.6 14.4 17.1
Depreciation and amortization 32.0 19.3 5.7 2.8 1.4 61.2
Pre-tax income (loss) before
minority interest and equity loss 4.9 32.3 9.3 2.9 (22.4) 27.0
Capital expenditures 11.5 19.9 3.2 0.9 4.8 40.3
*Not reduced for minority interest
</TABLE>
<TABLE>
<CAPTION>
THREE MONTHS ENDED JUNE 30, 1998
-------------------------------------------------------------------------------------
NORTH AMERICAN MINERA ZARAFSHAN
OPERATIONS YANACOCHA* MINAHASA NEWMONT OTHER CONSOLIDATED
-------------- ---------- -------- --------- ------- ------------
<S> <C> <C> <C> <C> <C> <C>
Sales $ 249.2 $ 85.1 $ 26.9 $ 12.8 $ -- $ 374.0
Interest income -- 0.6 0.1 -- 1.1 1.8
Interest expense 0.1 2.4 -- 1.4 15.7 19.6
Depreciation and amortization 49.6 13.4 5.0 3.0 0.6 71.6
Pre-tax income (loss) before
minority interest, equity loss and
cumulative effect of a change in
accounting principle 38.1 31.7 11.5 (2.5) (33.2) 45.7
Capital expenditures 28.7 22.8 1.9 0.2 5.6 59.2
</TABLE>
*Not reduced for minority interest
<TABLE>
<CAPTION>
SIX MONTHS ENDED JUNE 30, 1999
--------------------------------------------------------------------------------------
NORTH AMERICAN MINERA ZARAFSHAN
OPERATIONS YANACOCHA* MINAHASA NEWMONT OTHER CONSOLIDATED
-------------- ---------- -------- --------- ------- ------------
<S> <C> <C> <C> <C> <C> <C>
Sales $ 363.7 $ 196.3 $ 49.2 $ 33.7 $ -- $ 642.9
Interest income -- 2.1 0.1 -- 2.6 4.8
Interest expense 0.2 4.3 -- 1.4 29.6 35.5
Depreciation and amortization 65.1 35.0 11.5 5.6 2.7 119.9
Pre-tax income (loss) before
minority interest and equity loss 21.7 68.3 19.9 4.9 (57.0) 57.8
Capital expenditures 28.2 33.8 4.7 1.5 9.1 77.3
</TABLE>
*Not reduced for minority interest
<TABLE>
<CAPTION>
SIX MONTHS ENDED JUNE 30, 1998
---------------------------------------------------------------------------------------
NORTH AMERICAN MINERA ZARAFSHAN
OPERATIONS YANACOCHA* MINAHASA NEWMONT OTHER CONSOLIDATED
-------------- ---------- -------- --------- ------- ------------
<S> <C> <C> <C> <C> <C> <C>
Sales $ 501.5 $ 173.8 $ 49.1 $ 27.6 $ -- $ 752.0
Interest income -- 1.8 0.1 -- 2.3 4.2
Interest expense 0.2 5.1 -- 2.8 32.5 40.6
Depreciation and amortization 97.6 28.1 9.9 5.7 2.4 143.7
Pre-tax income (loss) before
minority interest, equity loss and
cumulative effect of a change in
accounting principle 86.9 67.0 19.1 (0.8) (73.4) 98.8
Cumulative effect of a change in
accounting principle (10.6) -- (1.4) (2.5) (18.4) (32.9)
Capital expenditures 64.5 34.9 5.1 0.6 10.1 115.2
</TABLE>
*Not reduced for minority interest
(9) Contingencies
(a) Environmental Obligations
The Company'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
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<PAGE> 9
Company 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 Company has made, and expects to make in the future,
expenditures to comply with such laws and regulations, but cannot predict the
amount of such future expenditures.
Estimated future reclamation and remediation costs are based principally
on legal and regulatory requirements. At June 30, 1999 and December 31, 1998,
$62.4 million and $56.0 million, respectively, were accrued for reclamation and
remediation costs relating to currently producing mineral properties.
Certain appeals have been filed with the Department of Interior Board of
Land Appeals in conjunction with the Twin Creeks Environmental Impact Statement.
These appeals seek to impose mitigation and other conditions on the mine
operations. The Company has intervened and does not believe that such appeals
have merit. An unfavorable outcome of such appeals, however, could result in
additional conditions on operations that may have a material adverse effect on
the Company's financial position or results of operations.
In addition, the Company is involved in several matters concerning
environmental obligations associated with former mining activities. Generally,
these matters concern developing and implementing remediation plans at the
various sites involved. The Company believes that the related environmental
obligations associated with these sites are similar in nature with respect to
the development of remediation plans, their risk profile and the compliance
required to meet general environmental standards. Based upon the Company's best
estimate of its liability for these matters, $43.9 million and $44.9 million
were accrued for such obligations at June 30, 1999 and December 31, 1998,
respectively. These amounts are included in Other accrued liabilities and
Reclamation and remediation liabilities. Depending upon the ultimate resolution
of these matters, the Company believes that it is reasonably possible that the
liability for these matters could be as much as 70% greater or 15% lower than
the amount accrued at June 30, 1999. The amounts accrued for these matters are
reviewed periodically based upon facts and circumstances available at the time.
Changes in estimates are charged to Costs and expenses, Other in the period
estimates are revised.
Details about certain of the more significant sites involved are
discussed below.
Idarado Mining Company ("Idarado") - 80.1% owned
In July 1992, the Company and Idarado signed a consent decree with the
State of Colorado ("State") that was agreed to by the U.S. District Court of
Colorado to settle a lawsuit brought by the State under the Comprehensive
Environmental Response, Compensation and Liability Act ("CERCLA"), generally
referred to as the "Superfund Act." Idarado settled natural resources damages
and past and future response costs and provided habitat enhancement work. In
addition, Idarado agreed in the consent decree to undertake specified
remediation work at its former mining site in the Telluride/Ouray area of
Colorado. Remediation work at this property is substantially complete. If the
remediation does not achieve specific performance objectives defined in the
consent decree, the State may require Idarado to implement supplemental
activities at the site, also as defined in the consent decree. Idarado and the
Company have obtained a $5.2 million letter of credit to secure their potential
obligations under the consent decree.
Resurrection Mining Company ("Resurrection") -- 100% owned
The Company, Resurrection and other defendants have been named in
lawsuits filed by the State of Colorado, under the Superfund Act in 1983 and
subsequently consolidated with a lawsuit filed by the U.S. Environmental
Protection Agency ("EPA") in 1986. These proceedings seek to compel the
defendants to remediate the impacts of pre-existing, historic mining activities
near Leadville, Colorado that date back to the mid-1800's, which the government
agencies claim are causing substantial environmental problems in the area.
In 1988 and 1989, the EPA issued administrative orders with respect to
one area on the site and the defendants have collectively implemented those
orders by constructing a water treatment plant, which was placed in operation in
early 1992. Remaining remedial work for this area primarily consists of
environmental monitoring and maintenance activities.
The parties have entered into a consent decree with respect to the
remaining areas that apportions liabilities and responsibilities for the site
among the various parties. The EPA has approved remedial actions for selected
components of Resurrection's portion of the site, which were initiated in 1995.
However, the EPA has not yet selected the final remedy for the site.
Accordingly, the Company cannot yet determine the full extent or cost of its
share of the remedial action that will be required. The government agencies may
also seek to recover for damages to natural resources.
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<PAGE> 10
Dawn Mining Company LLC ("Dawn") -- 51% owned
Dawn leased a currently inactive open-pit uranium mine on the Spokane
Indian Reservation in the State of Washington. The mine is subject to regulation
by agencies of the U.S. Department of Interior, the Bureau of Indian Affairs and
the Bureau of Land Management, as well as the EPA. Dawn also owns a nearby
uranium millsite facility.
In 1991, Dawn's lease was terminated. As a result, Dawn was required to
file a formal mine closure and reclamation plan. The Department of Interior has
commenced an Environmental Impact Study to analyze Dawn's proposed plan and to
consider alternate closure and reclamation plans for the mine. Dawn cannot
predict at this time what type of mine reclamation plan may be selected by the
Department of Interior. Dawn does not have sufficient funds to pay for the
reclamation plan it proposed, for any alternate plan, or for the closure of its
mill.
The Department of Interior previously notified Dawn that when the lease
was terminated, it would seek to hold Dawn and the Company (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. Other government agencies also might
attempt to hold the Company liable for future reclamation or remediation work at
the mine or millsite. In early 1999, the EPA proposed that the mine be included
on the National Priorities List under CERCLA. If asserted, the Company will
vigorously contest any such claims as to its liability. The Company cannot
reasonably predict the likelihood or outcome of any future action against Dawn
or the Company arising from this matter.
Dawn has received a license for a mill closure plan that could generate
funds to close and reclaim both the mine and the mill. The license is being
challenged by third parties.
(b) Additional Interest in Minera Yanacocha
The Company has an interest in Minera Yanacocha, a gold mining
operation located in Peru, that began production in 1993. Prior to 1997, that
interest was 38% and was accounted for on an equity basis. Beginning in 1997,
Minera Yanacocha was consolidated into the Company's financial statements
following the acquisition of an additional 13.35% interest. The acquisition was
disputed and, in June 1998, the Peruvian Supreme Court resolved the dispute in
favor of the Company as described below.
In November 1993, the French government announced its intention to
privatize the mining assets of Bureau de Recherches Geologiques et Minieres, the
geological and mining bureau of the French government ("BRGM") and in September
1994, BRGM announced its intention to transfer its 24.7% interest in Minera
Yanacocha to a third party. The Company and Compania de Minas Buenaventura, S.A.
("Buenaventura"), then 38.0% and 32.3% owners of Minera Yanacocha, respectively,
filed suit in Peru to seek enforcement of their preemptive rights with respect
to the proposed BRGM transfer. In September 1996, the trial court ruled in favor
of the Company and Buenaventura and held that the preemptive rights were
triggered in November 1993, and that the value of the 24.7% interest was $109.3
million. In June 1998, the Peruvian Supreme Court issued a resolution upholding
the decision.
In spite of the final decision of the Peruvian Supreme Court, in
October 1998, BRGM, through its subsidiary Compagnie Miniere International Or
S.A. ("Mine Or"), filed with the International Centre for Settlement of
Investment Disputes a request for arbitration against the Republic of Peru. The
request alleges that the decision of the Peruvian courts wrongfully deprived
Mine Or of its shares in Minera Yanacocha (which Mine Or values at approximately
$560 million) and seeks restitution and damages from the Republic of Peru.
While the Company is not a party to the arbitration, it believes that
Mine Or's claims are unfounded. It is unclear at this time what effect, if any,
the arbitration might have on the Company.
(c) Forward Sale Contracts
On July 23, 1999, the Company entered into a prepaid forward sale
contract for approximately 483,333 ounces of gold, with initial net proceeds
of $137.2 million, for delivery in June 2005, 2006 and 2007. Additional
proceeds will be determined at each delivery date based on the excess of the
then existing market price (not to exceed $380 per ounce) over $300 per
ounce. The prepaid forward sale contract also includes annual delivery
requirements of approximately 35,900 ounces beginning June 2000 through June
2007. Newmont has entered into forward purchase contracts at prices ranging
from $263 to $351 per ounce to coincide with these annual deliveries.
Initial proceeds from the prepaid forward sale of $137.2 million will be
recorded as deferred revenue from the sale of future production and will be
recognized in income when the related gold is delivered.
10
<PAGE> 11
In 1996, the Company entered into a forward sales contract that
continues through December 2000 for 125,000 ounces of gold per year, from
its Minahasa property in Indonesia, at an average price of $454 an ounce.
(10) Condensed Consolidating Financial Statements
The following condensed consolidating financial statements of Newmont Mining
Corporation should be read in conjunction with the consolidated financial
statements and the notes thereto included in its Annual Report on Form 10-K for
the year ended December 31, 1998.
<TABLE>
<CAPTION>
Newmont Newmont Newmont
Consolidating Statement of Operations Mining Gold Other Elimi- Mining Corp.
(In millions) Corp. Company Subsidiaries nations Consolidated
-------- ------- ------------ ------- ------------
<S> <C> <C> <C> <C> <C>
Three Months Ended June 30, 1999
Sales and other income
Sales $ -- $ 93.5 $222.3 $ -- $315.8
Dividends, interest and other - intercompany -- 4.4 -- (4.4) --
Dividends, interest and other -- 5.1 12.1 -- 17.2
------ ------ ------ ------ ------
-- 103.0 234.4 (4.4) 333.0
------ ------ ------ ------ ------
Costs and expenses
Costs applicable to sales -- 71.4 126.7 -- 198.1
Depreciation, depletion and amortization -- 18.6 42.6 -- 61.2
Exploration and research -- 4.8 9.6 -- 14.4
General and administrative -- 12.4 0.2 -- 12.6
Interest expense - intercompany -- -- 4.4 (4.4) 0.0
Interest, net of capitalized interest -- 10.5 6.6 -- 17.1
Other -- 3.9 (1.3) -- 2.6
------ ------ ------ ------ ------
-- 121.6 188.8 (4.4) 306.0
------ ------ ------ ------ ------
Pre-tax income (loss) before minority interest
and equity loss -- (18.6) 45.6 -- 27.0
Income tax (expense) benefit -- 6.5 (8.5) -- (2.0)
Minority interest in income of Minera Yanacocha -- -- (13.0) -- (13.0)
Equity in income of subsidiaries 7.1 19.2 -- (26.3) 0.0
Equity in loss of affiliate -- -- (4.9) -- (4.9)
------ ------ ------ ------ ------
Net income $ 7.1 $ 7.1 $ 19.2 $(26.3) $ 7.1
====== ====== ====== ====== ======
</TABLE>
11
<PAGE> 12
<TABLE>
<CAPTION>
Newmont Newmont Newmont
Consolidating Statement of Operations Mining Gold Other Elimi- Mining Corp.
(In millions) Corp. Company Subsidiaries nations Consolidated
-------- ------- ------------ ------- ------------
<S> <C> <C> <C> <C> <C>
Three Months Ended June 30, 1998
Sales and other income
Sales $ -- $ 131.7 $ 242.3 $ -- $ 374.0
Dividends, interest and other - intercompany -- 6.1 -- (6.1) --
Dividends, interest and other -- 0.3 2.3 (0.3) 2.3
------ ------- ------- ------- ------
-- 138.1 244.6 (6.4) 376.3
------ ------- ------- ------- ------
Costs and expenses
Costs applicable to sales -- 94.0 113.9 (0.3) 207.6
Depreciation, depletion and amortization -- 23.5 48.1 -- 71.6
Exploration and research -- 4.3 12.6 -- 16.9
General and administrative -- 11.7 0.6 -- 12.3
Interest expense - intercompany -- -- 6.1 (6.1) --
Interest, net of capitalized interest -- 11.0 8.6 -- 19.6
Other -- (0.8) 3.4 -- 2.6
------ ------- ------- ------- ------
-- 143.7 193.3 (6.4) 330.6
------ ------- ------- ------- ------
Pre-tax income (loss) before minority interest
and equity loss -- (5.6) 51.3 -- 45.7
Income tax benefit (expense) -- 2.0 (8.1) -- (6.1)
Minority interest in income of Minera Yanacocha -- -- (11.1) -- (11.1)
Minority interest in income of Newmont Gold Company (1.7) -- -- -- (1.7)
Equity in income of subsidiaries 26.3 29.9 -- (56.2) 0.0
Equity in loss of affiliate -- -- (2.2) -- (2.2)
------ ------- ------- ------- ------
Net income $ 24.6 $ 26.3 $ 29.9 $ (56.2) $ 24.6
====== ======= ======= ======= ======
Six Months Ended June 30, 1999
Sales and other income
Sales $ -- $ 206.7 $ 436.2 $ -- $642.9
Dividends, interest and other - intercompany -- 9.0 -- (9.0) --
Dividends, interest and other -- 5.9 14.4 -- 20.3
------ ------- ------- ------- ------
-- 221.6 450.6 (9.0) 663.2
------ ------- ------- ------- ------
Costs and expenses
Costs applicable to sales -- 140.5 253.9 -- 394.4
Depreciation, depletion and amortization -- 37.7 82.3 -- 120.0
Exploration and research -- 9.0 16.9 -- 25.9
General and administrative -- 24.7 0.6 -- 25.3
Interest expense - intercompany -- -- 9.0 (9.0) 0.0
Interest, net of capitalized interest -- 21.7 13.8 -- 35.5
Other -- 4.0 0.3 -- 4.3
------ ------- ------- ------- ------
-- 237.6 376.8 (9.0) 605.4
------ ------- ------- ------- ------
Pre-tax income before minority interest
and equity loss -- (16.0) 73.8 -- 57.8
Income tax (expense) benefit -- 5.4 (13.1) -- (7.7)
Minority interest in income of Minera Yanacocha -- -- (25.1) -- (25.1)
Equity in income of subsidiaries 17.0 27.6 -- (44.6) 0.0
Equity in loss of affiliate -- -- (8.0) -- (8.0)
------ ------- ------- ------- ------
Net income $ 17.0 $ 17.0 $ 27.6 $ (44.6) $ 17.0
====== ======= ======= ======= ======
</TABLE>
12
<PAGE> 13
<TABLE>
<CAPTION>
Newmont Newmont Newmont
Consolidating Statement of Operations Mining Gold Other Elimi- Mining Corp.
(In millions) Corp. Company Subsidiaries nations Consolidated
-------- ------- ------------ ------- ------------
<S> <C> <C> <C> <C> <C>
Six Months Ended June 30, 1998
Sales and other income
Sales $ -- $ 252.7 $ 499.3 $ -- $752.0
Dividends, interest and other - intercompany -- 12.2 -- (12.2) --
Dividends, interest and other -- 9.1 5.3 (0.6) 13.8
------ ------- ------- ------- ------
-- 274.0 504.6 (12.8) 765.8
------ ------- ------- ------- ------
Costs and expenses
Costs applicable to sales -- 188.6 229.4 (0.6) 417.4
Depreciation, depletion and amortization -- 45.6 98 -- 143.6
Exploration and research -- 7.7 25.3 -- 33.0
General and administrative -- 25.2 1.6 -- 26.8
Interest expense - intercompany -- -- 12.2 (12.2) 0.0
Interest, net of capitalized interest -- 22.7 17.9 -- 40.6
Other -- (0.2) 5.8 -- 5.6
------ ------- ------- ------- ------
-- 289.6 390.2 (12.8) 667.0
------ ------- ------- ------- ------
Pre-tax income (loss) before minority interest, equity loss
and cumulative effect of a change in accounting principle -- (15.6) 114.4 -- 98.8
Income tax benefit (expense) -- 5.4 (19.0) -- (13.6)
Minority interest in income of Minera Yanacocha -- -- (23.3) -- (23.3)
Minority interest in income of Newmont Gold Company (3.7) -- -- -- (3.7)
Equity in loss of subsidiaries 23.5 32.9 -- (56.4) 0.0
Equity in loss of affiliate -- -- (3.3) -- (3.3)
------ ------- ------- ------- ------
Net income before cumulative effect of a
change in accounting principle 19.8 22.7 68.8 (56.4) 54.9
Cumulative effect of a change in accounting principle 2.2 0.8 (35.9) -- (32.9)
------ ------- ------- ------- ------
Net income $ 22.0 $ 23.5 $ 32.9 $ (56.4) $ 22.0
====== ======= ======= ======= ======
</TABLE>
13
<PAGE> 14
<TABLE>
<CAPTION>
Newmont Newmont Newmont
Consolidating Balance Sheets Mining Gold Other Elimi- Mining Corp.
(In millions) Corp. Company Subsidiaries nations Consolidated
-------- ------- ------------ ------- ------------
<S> <C> <C> <C> <C> <C>
At June 30, 1999
Cash and cash equivalents $ -- $ 3.7 $ 78.2 $ -- $ 81.9
Short-term investments -- -- 11.2 11.2
Accounts receivable 4.5 377.8 36.7 (381.9) 37.1
Inventories -- 141.1 194.8 -- 335.9
Other current assets -- 18.2 65.8 -- 84.0
-------- -------- -------- --------- --------
Current assets 4.5 540.8 386.7 (381.9) 550.1
-------- -------- -------- --------- --------
Property, plant and mine development, net 823.3 1,152.6 1,975.9
Investment in subsidiaries 1,451.9 2,706.2 -- (4,158.1) --
Investment in Batu Hijau -- -- 351.8 351.8
Long-term inventory -- 111.1 6.7 117.8
Other long-term assets -- 147.4 1,859.7 (1,787.7) 219.4
-------- -------- -------- --------- --------
Total assets $1,456.4 $4,328.8 $3,757.5 $(6,327.7) $3,215.0
======== ======== ======== ========= ========
Liabilities
Current portion of long-term debt $ -- $ 17.9 $ 18.8 $ -- $ 36.7
Accounts payable -- 13.7 394.4 (377.4) 30.7
Other accrued liabilities -- 38.3 81.1 119.4
-------- -------- -------- --------- --------
Current liabilities -- 69.9 494.3 (377.4) 186.8
-------- -------- -------- --------- --------
Long-term debt -- 908.5 288.7 1,197.2
Reclamation and remediation liabilities -- 27.3 71.6 98.9
Other long-term liabilities -- 1,871.2 78.8 (1,792.2) 157.8
-------- -------- -------- --------- --------
Total liabilities -- 2,876.9 933.4 (2,169.6) 1,640.7
-------- -------- -------- --------- --------
Minority interest -- -- 117.9 -- 117.9
-------- -------- -------- --------- --------
Stockholders' Equity
Common stock 267.9 -- 56.8 (56.8) 267.9
Additional paid-in capital 1,065.0 592.1 2,229.0 (2,821.1) 1,065.0
Retained earnings 123.5 859.8 420.4 (1,280.2) 123.5
-------- -------- -------- --------- --------
Total stockholders' equity 1,456.4 1,451.9 $2,706.2 (4,158.1) 1,456.4
-------- -------- -------- --------- --------
Total liabilities and stockholders' equity $1,456.4 $4,328.8 $3,757.5 $(6,327.7) $3,215.0
======== ======== ======== ========= ========
</TABLE>
14
<PAGE> 15
<TABLE>
<CAPTION>
Newmont Newmont Newmont
Consolidating Balance Sheets Mining Gold Other Elimi- Mining Corp.
(In millions) Corp. Company Subsidiaries nations Consolidated
-------- ------- ------------ ------- ------------
<S> <C> <C> <C> <C> <C>
At December 31, 1998
Cash and cash equivalents $ -- $ 21.6 $ 57.5 $ -- $ 79.1
Short-term investments -- -- 11.8 -- 11.8
Accounts receivable -- 445.6 30.0 (423.6) 52.0
Inventories -- 122.1 158.3 -- 280.4
Other current assets -- 33.0 56.8 -- 89.8
-------- -------- -------- --------- --------
Current assets -- 622.3 314.4 (423.6) 513.1
-------- -------- -------- --------- --------
Property, plant and mine development, net 856.5 1,192.2 2,048.7
Investment in subsidiaries 1,444.6 2,817.9 -- (4,262.5) --
Investment in Batu Hijau -- -- 277.2 -- 277.2
Long-term inventory -- 143.3 16.4 -- 159.7
Other long-term assets -- 119.5 2,094.8 (2,026.3) 188.0
-------- -------- -------- --------- --------
Total assets $1,444.6 $4,559.5 $3,895.0 $(6,712.4) $3,186.7
======== ======== ======== ========= ========
Liabilities
Current portion of long-term debt $ -- $ 17.8 $ 29.8 $ -- $ 47.6
Accounts payable 5.1 17.2 439.2 (423.6) 37.9
Other accrued liabilities -- 57.2 69.6 -- 126.8
-------- -------- -------- --------- --------
Current liabilities $ 5.1 92.2 538.6 (423.6) 212.3
-------- -------- -------- --------- --------
Long-term debt -- 902.5 298.6 -- 1,201.1
Reclamation and remediation liabilities -- 26.3 68.5 -- 94.8
Other long-term liabilities -- 2,093.9 78.6 (2,026.3) 146.2
-------- -------- -------- --------- --------
Total liabilities 5.1 $3,114.9 984.3 (2,449.9) 1,654.4
-------- -------- -------- --------- --------
Minority interest -- -- 92.8 -- 92.8
-------- -------- -------- --------- --------
Stockholders' Equity
Common stock 267.5 56.5 (56.5) 267.5
Additional paid-in capital 1,060.8 592.1 2,154.3 (2,746.4) 1,060.8
Retained earnings 111.2 852.5 607.1 (1,459.6) 111.2
-------- -------- -------- --------- --------
Total stockholders' equity 1,439.5 1,444.6 2,817.9 (4,262.5) 1,439.5
-------- -------- -------- --------- --------
Total liabilities and stockholders' equity $1,444.6 $4,559.5 $3,895.0 $(6,712.4) $3,186.7
======== ======== ======== ========= ========
</TABLE>
<TABLE>
<CAPTION>
Newmont Newmont Newmont
Statement of Consolidating Cash Flows Mining Gold Other Elimi- Mining Corp.
(In millions) Corp. Company Subsidiaries nations Consolidated
-------- ------- ------------ ------- ------------
<S> <C> <C> <C> <C> <C>
Six Months Ended June 30, 1999
Operating activities
Net income $ 17.0 $ 17.0 $ 27.6 $ (44.6) $ 17.0
Adjustments to reconcile net income to net --
cash provided by operating activities (2.0) (16.7) 113.9 29.5 124.7
Change in working capital (5.0) 0.1 29.3 -- 24.4
-------- -------- -------- --------- --------
Net cash provided by (used for) operating activities 10.0 0.4 170.8 (15.1) 166.1
-------- -------- -------- --------- --------
Investing activities
Additions to property, plant and mine development -- (9.1) (68.2) -- (77.3)
Investments in affiliates and Other -- -- (60.5) -- (60.5)
-------- -------- -------- --------- --------
Net cash used for investing activities -- (9.1) (128.7) -- (137.8)
-------- -------- -------- --------- --------
Financing activities
Net borrowings (repayments) -- 6.0 (20.9) -- (14.9)
Dividends paid (10.0) (15.1) -- 15.1 (10.0)
Other -- -- (0.6) -- (0.6)
-------- -------- -------- --------- --------
Net cash provided by (used for) financing activities (10.0) (9.1) (21.5) 15.1 (25.5)
-------- -------- -------- --------- --------
Net change in cash and cash equivalents 0.0 (17.8) 20.6 -- 2.8
Cash and cash equivalents at beginning of period -- 21.5 57.6 -- 79.1
-------- -------- -------- --------- --------
Cash and cash equivalents at end of period $ -- $ 3.7 $ 78.2 $ -- $ 81.9
======== ======== ======== ========= ========
</TABLE>
15
<PAGE> 16
<TABLE>
<CAPTION>
Newmont Newmont Newmont
Statement of Consolidating Cash Flows Mining Gold Other Elimi- Mining Corp.
(In millions) Corp. Company Subsidiaries nations Consolidated
-------- ------- ------------ ------- ------------
<S> <C> <C> <C> <C> <C>
Six Months Ended June 30, 1998
Operating activities
Net income $ 22.0 $ 23.5 $ 32.9 $ (56.4) $ 22.0
Adjustments to reconcile net income to net
cash provided by operating activities (12.6) 26.4 152.4 47.0 213.2
Change in working capital -- (103.9) 39.3 -- (64.6)
-------- -------- -------- --------- --------
Net cash provided by (used for) operating activities 9.4 (54.0) 224.6 (9.4) 170.6
-------- -------- -------- --------- --------
Investing activities
Additions to property, plant and mine development -- (41.7) (73.5) -- (115.2)
Investments in affiliates and Other -- -- (120.3) -- (120.3)
-------- -------- -------- --------- --------
Net cash used for investing activities -- (41.7) (193.8) -- (235.5)
-------- -------- -------- --------- --------
Financing activities
Net borrowings (repayments) -- 27.0 (44.5) -- (17.5)
Dividends paid (9.4) (9.4) -- 9.4 (9.4)
Other -- -- (0.3) -- (0.3)
-------- -------- -------- --------- --------
Net cash provided by (used for) financing activities (9.4) 17.6 (44.8) 9.4 (27.2)
-------- -------- -------- --------- --------
Net decrease in cash and cash equivalents 0.0 (78.1) (14.0) 0.0 (92.1)
Cash and cash equivalents at beginning of period -- 85.1 61.1 -- 146.2
-------- -------- -------- --------- --------
Cash and cash equivalents at end of period $ -- $ 7.0 $ 47.1 $ -- $ 54.1
======== ======== ======== ========= ========
</TABLE>
(11) Supplementary Data
The ratio of earnings to fixed charges for the six months ended June 30,
1999 was 1.9. The Company guarantees certain third party debt; however, it has
not been and does not expect to be required to pay any amounts associated with
such debt. Therefore, related interest on such debt has not been included in the
ratio of earnings to fixed charges.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND
FINANCIAL CONDITION
The following provides information that management believes is relevant to
an assessment and understanding of the consolidated results of operations and
financial condition of Newmont Mining Corporation ("NMC") and its subsidiaries
(collectively, "Newmont"). The discussion should be read in conjunction with
Management's Discussion and Analysis included in Newmont's Annual Report on Form
10-K.
On October 7, 1998, NMC acquired the minority interest of Newmont Gold
Company ("NGC") and NGC became 100%-owned by NMC.
SUMMARY
Newmont earned $7.1 million ($0.04 per share) and $24.6 million ($0.16 per
share) in the second quarter of 1999 and 1998, respectively, and $17.0 million
($0.10 per share) and $22.0 million ($0.14 per share) for the first six months
of 1999 and 1998, respectively. Earnings in the 1999 second quarter and six
months included an $8.4 million ($0.05 per share) after-tax gain on the sale of
the True North Alaska exploration property. Included in the 1998 six-month
period was an after-tax charge of $32.9 million ($0.21 per share) for the
cumulative effect of a change in accounting principle for start-up costs.
Start-up costs for the Batu Hijau copper/gold project in Indonesia, reflected in
Equity loss of affiliate, were $4.9 million ($0.03 per share) and $2.2 million
($0.01 per share) in the second quarter of 1999 and 1998, respectively, and $8.0
million ($0.05 per share) and $3.3 million ($0.02 per share) in the first half
of 1999 and 1998, respectively.
Year-to-date earnings in 1999 reflected average realized gold prices of $287
per equity ounce, $35 below those in the 1998 period when approximately 27% of
production was sold under commodity instruments at above-market prices. The
average realized market price per ounce for the first half of 1999 and 1998 was
$281 and $297, respectively. Equity gold production totaled 1,908,600 ounces and
2,070,500 ounces in the first half of 1999 and 1998, respectively.
16
<PAGE> 17
MARKET CONDITIONS AND RISKS
COMMODITY PRICES
Changes in the market price of gold significantly affect Newmont's
profitability and cash flow. Gold prices can fluctuate widely and are affected
by numerous factors, such as demand, forward selling by producers, central bank
sales, purchases and lending, investor sentiment and production levels. During
1998, a decline in gold prices occurred concurrently with a strong U.S. dollar,
weakened economies in major global regions such as Asia and Russia, central bank
selling and lending and general uncertainties surrounding future actions of
central banks, especially those in the European Monetary Union. The gold price
fell to a 20-year low of $273 in August 1998 and recovered only modestly before
dropping to around $255 per ounce in July 1999 following a central bank gold
sale.
Changes in the market price of copper will also affect Newmont's
profitability from its Batu Hijau project in Indonesia that is expected to
commence operations in the fourth quarter of 1999.
Newmont sells most of its gold production at market prices; therefore,
revenue, earnings and cash flow are highly leveraged to the gold price. In the
past, Newmont has entered into forward sales contracts to protect the selling
price for certain anticipated gold production. In early August, Newmont
purchased put option contracts for 2.85 million ounces of gold, with a strike
price of $270 per ounce, over a 24-month period beginning August 1999 through
July 2001. This purchase was paid for by selling call option contracts for
250,000 ounces per year in 2004 and 2005, with a strike price of $350 per ounce,
and for 1.0 million and 850,000 ounces in 2008 and 2009, respectively, at an
average strike price of $386 per ounce. Total ounces under call option contracts
is approximately 4.5% of proven and probable reserves at December 31, 1998.
Deferral accounting will be applied to put option contracts such that gains and
losses will be recognized in income as the designated production is delivered or
sold. Call option contracts do not qualify for deferral accounting and will thus
be marked to market at each balance sheet date. Gains and losses on call option
contracts will be recognized in other income. Newmont will continue to evaluate
transactions that mitigate downside price exposure while preserving the ability
to participate in rising commodity price markets for its gold and copper
production.
While gold prices remain at historically low levels, Newmont continues to
pursue operating alternatives that maximize cash flow. During 1998, Newmont
reduced costs, decreased its workforce, reviewed life-of-mine plans and
processing options for optimization and flexibility, and deferred discretionary
spending. This effort continues in 1999 and Newmont expects to fund capital
expenditures and dividends from operating cash flow without incurring additional
debt, excluding project financing for the development of the Batu Hijau project.
FOREIGN CURRENCY
In addition to the U.S., Newmont has operations in Peru, Uzbekistan and
Indonesia. Gold produced at these operations is sold in the international
markets for U.S. dollars. The cost and debt structures at these operations are
also primarily U.S. dollar denominated. To the extent that there are
fluctuations in local currency exchange rates against the U.S. dollar, the
devaluation of a local currency is generally economically neutral or beneficial
to the operation since local salaries and supply contracts will decrease against
the U.S. dollar revenue stream.
During 1997 and 1998, Indonesia experienced a significant devaluation of its
currency, the rupiah, with significant recovery during the second quarter of
1999. With improved economic conditions and national parliamentary elections in
June 1999, the accompanying social and political unrest have substantially
subsided. While uncertainty surrounding the Indonesian situation continues,
Newmont's Minahasa operation and Batu Hijau project, located in remote areas,
remain largely unaffected. The functional currency for Newmont's Indonesian
projects is the U.S. dollar; however, certain receivables, primarily refunds of
Value Added Tax, are rupiah-denominated. During the six months ended June 30,
1999 and 1998, $1.2 million and $2.9 million, respectively, was charged to Costs
applicable to sales to reflect the devaluation of these receivables.
17
<PAGE> 18
RESULTS OF OPERATIONS
PRODUCTION
Production and per ounce cash costs are summarized below:
<TABLE>
<CAPTION>
THREE MONTHS ENDED SIX MONTHS ENDED
JUNE 30, JUNE 30,
--------------------- ---------------------
1999 1998 1999 1998
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Equity production ozs. (000):
Nevada operations 585.4 734.8 1,192.1 1,462.8
Mesquite 39.9 38.4 81.7 80.4
La Herradura 8.9 -- 15.6 --
Minera Yanacocha 186.7 147.8 360.7 302.3
Zarafshan-Newmont 66.9 42.8 121.8 92.7
Minahasa 64.5 73.9 136.7 132.3
-------- -------- -------- --------
Total 952.3 1,037.7 1,908.6 2,070.5
======== ======== ======== ========
Total cash costs per equity ounce:
Nevada operations $ 214 $ 199 $ 212 $ 202
Mesquite 165 192 153 195
La Herradura 182 -- 188 --
Minera Yanacocha 111 109 113 106
Zarafshan-Newmont 172 258 177 216
Minahasa 124 108 127 119
Weighted average $ 183 $ 182 $ 182 $ 183
</TABLE>
Total cash costs include charges for mining ore and waste associated with
current period gold production, processing ore through milling and leaching
facilities, production taxes, royalties and other cash costs.
NORTH AMERICAN OPERATIONS
Newmont's Nevada operations are along the Carlin Trend near Elko and in the
Winnemucca Region, where the Twin Creeks and the Lone Tree Complex mines are
located.
Production in the second quarter and first six months of 1999 decreased 20%
and 18%, respectively, from the comparable 1998 period with planned reduced
mining rates, lower-grade ores due to mine sequencing and processing oxide ores
with moderate refractory content that yield lower recovery. These factors also
contributed to increased total cash costs per ounce.
In early 1999, Newmont and Barrick Gold Corporation agreed to exchange
approximately two million ounces of reserves and various land rights on the
north Carlin Trend. This exchange, which was finalized on May 3, 1999, created
operational and exploration synergies for both companies by consolidating their
respective land positions. Among other things, this exchange has accelerated
Newmont's access to the high-grade Deep Post deposit and will reduce development
costs. Nevada production in 1999 is expected to be somewhat less than the 2.8
million ounces in 1998 with total cash costs per ounce comparable to the $209
realized in 1998. Increased production for the second half of 1999 is expected
to be predominantly from the availability of Deep Post ore in the fourth
quarter.
Production at the Mesquite mine, a heap-leach operation in southern
California, was consistent with the prior year quarter and first six months, but
total cash costs per ounce were $27 and $42 lower, respectively, reflecting
lower waste-to-ore mining rates. Production in 1999 is expected to total 180,000
ounces with total cash costs per ounce comparable to the $176 in 1998.
La Herradura, a 44%-owned joint venture in Mexico, commenced production in
mid-1998 and produced 15,600 equity ounces in the first six months of 1999 at a
total cash cost of $188 per ounce.
OVERSEAS OPERATIONS
Production at Minera Yanacocha in Peru increased 26% to 363,700 ounces
(186,700 equity ounces) in the second quarter of 1999 and 19% to 702,400 ounces
(360,700 equity ounces) in the first half of 1999 from the comparable 1998
periods. Higher production reflected an increase in ore tons mined and more than
offset lower ore grades year-to-date. Total cash costs per ounce increased
slightly to $111 and $113 for the quarter and six month periods, respectively.
Estimated gold production for 1999 is expected to exceed 1,640,000 ounces
(842,000 equity ounces) with somewhat higher total cash costs per ounce than the
$95 in 1998.
In the second quarter and first six months of 1999, production from
Zarafshan-Newmont, a 50%-owned joint venture in the Central
18
<PAGE> 19
Asian Republic of Uzbekistan, increased 56% and 31%, respectively, from the
comparable 1998 periods. Increased production primarily resulted from improved
recoveries of gold from leach ore. Year-to-date 1999 total cash costs per ounce
of $177 were $39 below those in the same 1998 period with increased production.
Also, 1998 total cash costs per ounce included an adjustment to reflect lower
recovery rates. Production in 1999 is expected to exceed 200,000 equity ounces
with total cash costs significantly below the $207 per ounce in 1998.
In Indonesia, production from Newmont's 80%-owned Minahasa property was 13%
lower in the second quarter of 1999, compared with the same 1998 quarter, but 4%
higher in the six months ended June 30, 1999 with increased recovery rates.
Total cash costs per ounce were somewhat higher in 1999 primarily from higher
waste-to-ore ratios. Production is expected to reach approximately 300,000
ounces in 1999 with higher ore grades during the second half of the year. Total
cash costs are expected to be below the $127 per ounce in 1998.
FINANCIAL RESULTS
Consolidated sales include 100% of Minera Yanacocha production and Newmont
equity production elsewhere. The decrease in consolidated sales revenue in the
1999 periods from comparable 1998 periods resulted from the decline in average
realized gold prices received and lower production as shown in the following
table:
<TABLE>
<CAPTION>
THREE MONTHS ENDED SIX MONTHS ENDED
JUNE 30, JUNE 30,
--------------------- ---------------------
1999 1998 1999 1998
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Consolidated sales (in millions) $ 315.8 $ 374.0 $ 642.9 $ 752.0
Consolidated production ozs. (000) 1,129.2 1,177.8 2,250.3 2,356.8
Average price realized per consolidated ounce $ 281 $ 318 $ 287 $ 319
Average spot price received per ounce $ 275 $ 299 $ 281 $ 297
</TABLE>
<TABLE>
<CAPTION>
THREE MONTHS ENDED SIX MONTHS ENDED
JUNE 30, JUNE 30,
1999 VS. 1998 1999 VS. 1998
--------------- ---------------
<S> <C> <C>
Decrease in consolidated sales due to (in millions):
Consolidated production $ (21.1) $ (42.8)
Average gold price received (37.1) (66.3)
------- -------
Total $ (58.2) $(109.1)
======= =======
</TABLE>
Costs applicable to sales include total cash costs and provisions for
estimated final reclamation expenses related to consolidated production. The
decrease in costs applicable to sales was primarily attributable to lower
production in Nevada.
<TABLE>
<CAPTION>
THREE MONTHS ENDED SIX MONTHS ENDED
JUNE 30, JUNE 30,
------------------ -----------------
1999 1998 1999 1998
------ ------ ------ ------
<S> <C> <C> <C> <C>
Costs applicable to sales (in millions)
Nevada operations $126.7 $148.1 $254.8 $298.4
Mesquite 6.6 7.6 12.5 16.1
La Herradura 1.5 -- 2.9 --
Minera Yanacocha 43.6 32.8 84.8 66.7
Zarafshan-Newmont 11.6 11.0 21.7 20.1
Minahasa 8.1 8.1 17.7 16.1
------ ------ ------ ------
Total $198.1 $207.6 $394.4 $417.4
====== ====== ====== ======
</TABLE>
Depreciation, depletion and amortization decreased 15% and 16% in the 1999
quarter and first six months compared with the 1998 periods primarily as a
result of a December 1998 reduction in the carrying value of certain Nevada and
Mesquite Property, plant and mine development.
<TABLE>
<CAPTION>
THREE MONTHS ENDED SIX MONTHS ENDED
JUNE 30, JUNE 30,
------------------ -----------------
1999 1998 1999 1998
------ ------ ------ ------
<S> <C> <C> <C> <C>
Depreciation, depletion and amortization (in millions):
Nevada operations $ 29.8 $ 44.7 $ 60.7 $ 87.9
Mesquite 1.7 4.9 3.5 9.7
La Herradura 0.5 -- 0.9 --
Minera Yanacocha 19.3 13.4 35.0 28.1
Zarafshan-Newmont 2.8 3.0 5.6 5.7
Minahasa 5.7 5.0 11.5 9.9
Other 1.4 0.6 2.7 2.4
------ ------ ------ ------
Total $ 61.2 $ 71.6 $119.9 $143.7
====== ====== ====== ======
</TABLE>
19
<PAGE> 20
Exploration and research expenses decreased $2.4 million and $7.1 million in
the second quarter and first six months of 1999, respectively, compared with the
same periods in 1998 as a result of cash conservation efforts during the low
gold price environment.
Interest, net of capitalized interest was $35.5 million for the six months
ended June 30, 1999 and $40.6 million for the same period in 1998. The 1999
decrease reflected a higher proportion of capitalized interest associated with
Newmont's investment in Batu Hijau. Dividends, interest and other income
included a $13 million gain in 1999 on the sale of the True North Alaska
exploration property and $8.3 million in the six months ended June 30, 1998 from
business interruption insurance in Nevada.
Equity loss of affiliate of $8.0 million and $3.3 million for the six months
ended June 30, 1999 and 1998, respectively, related to start-up costs at Batu
Hijau that must be expensed pursuant to an accounting change adopted in 1998.
Comprehensive income included, for the six months ended June 30, 1999, an
unrealized holding gain of $5.3 million on an investment in Argentina Gold
Company, an exploration company that was acquired by another mining company in
April 1999.
LIQUIDITY AND CAPITAL RESOURCES
During the first half of 1999, cash flow from operations ($166.1 million)
and proceeds from asset sales ($28.7 million) funded capital expenditures ($77.3
million), net advances to joint ventures and affiliates ($89.3 million), net
debt repayments ($13.8 million) and dividends ($10.0 million). Newmont expects
that operating cash flows for the 1999 year will fund capital expenditures,
advances to affiliates and dividends, assuming gold price realizations
comparable to those year-to-date 1999.
INVESTING ACTIVITIES AND CAPITAL EXPENDITURES
Capital expenditures were as follows:
<TABLE>
<CAPTION>
SIX MONTHS ENDED
JUNE 30,
-------------------
1999 1998
------ ------
<S> <C> <C>
Capital expenditures (in millions):
North American operations $ 28.2 $ 59.7
Overseas operations 40.0 45.4
Other projects and capitalized interest 9.1 10.1
------ ------
Total $ 77.3 $115.2
====== ======
</TABLE>
Expenditures for U.S. operations during the first half of 1999 primarily
related to activities in Nevada for capitalized mining costs ($16.9 million) and
deferred mine development ($3.1 million). Overseas capital expenditures were
primarily for Minera Yanacocha ($33.8 million). Capital expenditures in the 1998
period were primarily for Nevada and Minera Yanacocha leach pad expansion
projects and Nevada capitalized mining.
Batu Hijau
Newmont has a 45% interest in the Batu Hijau project in Indonesia, accounted
for on an equity basis. At June 30, 1999 and December 31, 1998, Newmont's
investment was $351.8 million and $277.2 million, respectively. Funding of $89.0
million in the first half of 1999 is included in Advances to joint venture and
affiliates. The project is 95% complete and remains on schedule for a fourth
quarter start-up.
Batu Hijau contains proven and probable reserves of 10.6 billion pounds of
copper (4.8 billion equity pounds) and 11.8 million ounces of gold (5.3 million
equity ounces). The projected mine life is in excess of 20 years. The cost for
development of the open-pit mine, mill and infrastructure including employee
housing, a port, electrical generation facilities, interest during construction,
cost escalation and working capital is expected to be between $1.8 billion and
$1.9 billion.
Financing facilities for $1.0 billion are guaranteed by Newmont and its
partner, Sumitomo Corporation ("Sumitomo"), 56.25% and 46.75%, respectively,
until project completion tests are met, and will be non-recourse thereafter
(except for a $125 million contingent support facility that Newmont and Sumitomo
will provide). Debt repayments will begin the earlier of six months after
project completion or June 15, 2001. At June 30, 1999, $840 million was
outstanding under this facility.
20
<PAGE> 21
FINANCING ACTIVITIES
During the first half of 1999, Newmont increased net borrowings under its
$1.0 billion revolving credit facility $16.0 million, with $401.0 million
outstanding at June 30, 1999 and repaid $20.8 million of project financings for
Zarafshan-Newmont and Minera Yanacocha and $10 million of medium term notes.
In July 1999, long-term debt was reduced $135 million with initial proceeds
from a prepaid forward sale contract described in Note 8 (c). The forward sale
includes delivery of approximately 483,333 ounces in June 2005, 2006 and 2007
and annual deliveries of 35,900 ounces beginning June 2000 through June 2007.
OTHER
On October 7, 1998, NMC acquired the 6.25% minority interest of NGC by
merging an NMC subsidiary into NGC and issuing 10.7 million shares of NMC common
stock to NGC minority interest stockholders.
Cash used for accounts payable and accrued expenses of $63.1 million for the
first half of 1998 primarily related to the payment of interest, severance and
other benefit-related accruals.
YEAR 2000 READINESS DISCLOSURE
Newmont has undertaken a comprehensive "Year 2000 Readiness Program"
("Program") to address the ability of its hardware, software and control systems
to correctly identify two-digit references to specific years, beginning with the
year 2000. The Program consists of five phases (assessment, analysis,
remediation, testing and certification) for four work streams (automated
processes, process control systems, personal computers and third-party
suppliers). A third party audit of the Program was completed in 1998 with
favorable findings.
Each location has substantially completed all phases of each work stream in
all material respects. The estimated cost of the Program is expected to be
approximately $3 million, of which $1.9 million had been spent as of June 30,
1999. Remaining costs include implementing contingency plans and testing and
certification of new vendors, products and process control components. Newmont
does not separately track its internal costs incurred for the Program; however,
such costs are principally the related payroll costs for its information systems
group.
Although Newmont believes that the Program will adequately address year 2000
issues and prevent significant business disruptions, there can be no assurances
that compliance-related failures will not occur. Such compliance-related
failures, including those of material third-party suppliers (such as suppliers
of power, oxygen, chemicals and refining), could result in temporary delays in
Newmont's ability to generate cash from its operations. Newmont has contacted
all of its material third-party suppliers to assess their year 2000 readiness
and contingency plans have been developed and are continually reviewed and
refined to mitigate any such temporary delays. However, if such delays occur,
they are not reasonably likely to have a material adverse effect on Newmont's
financial condition or results of operations.
SAFE HARBOR STATEMENT
The foregoing discussion and analysis, as well as certain information
contained elsewhere in this Quarterly Report, contain "forward-looking
statements" within the meaning of Section 21E of the Securities Exchange Act of
1934, as amended, and are intended to be covered by the safe harbor created
thereby. Such forward-looking statements include, without limitation, (i)
estimates of future gold production for specific operations and on a
consolidated basis, (ii) estimates of future production costs, exploration
expenditures and other expenses for specific operations and on a consolidated
basis, (iii) estimates of future capital expenditures and other cash needs for
specific operations and on a consolidated basis and expectations as to the
funding thereof, (iv) statements as to the projected development of certain ore
deposits, including estimates of development and other capital costs, financing
plans with respect thereto and expected production commencement dates, (v)
estimates of future costs and other liabilities for certain environmental
matters and (vi) estimates of reserves.
Where Newmont expresses an expectation or belief as to future events or
results, such expectation or belief is expressed in good faith and believed to
have a reasonable basis. However, such forward-looking statements are subject to
risks, uncertainties and other factors, which could cause actual results to
differ materially from such forward-looking statements. Important factors that
could cause actual results to differ materially from such forward-looking
statements ("cautionary statements") are disclosed under "Risk Factors"
21
<PAGE> 22
in the Newmont Annual Report on Form 10-K for the year ended December 31, 1998,
as well as other filings with the Securities and Exchange Commission. Many of
these factors are beyond Newmont's ability to control or predict. Readers are
cautioned not to put undue reliance on forward-looking statements.
All subsequent written and oral forward-looking statements attributable to
Newmont or to persons acting on its behalf are expressly qualified in their
entirety by the cautionary statements. Newmont disclaims any intent or
obligation to update publicly any forward-looking statements set forth in this
Report, whether as a result of new information, future events or otherwise.
PART II - OTHER INFORMATION
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
Registrant's annual meeting of stockholders was held on May 6, 1999.
All eleven directors nominated to serve as directors of Registrant were
elected. The vote was as follows:
<TABLE>
<CAPTION>
Broker
Nominee For Withheld Abstentions Non-Votes
------- --- --------- ----------- ---------
<S> <C> <C> <C> <C>
R. C. Cambre 139,422,538 1,016,350 0 0
J. T. Curry, Jr. 139,431,470 1,007,418 0 0
J. P. Flannery 139,389,454 1,049,434 0 0
L. I. Higdon, Jr. 139,420,181 1,018,707 0 0
R. J. Miller 138,951,478 1,487,410 0 0
R. A. Plumbridge 139,427,206 1,011,682 0 0
R. H. Quenon 139,404,176 1,034,712 0 0
M. A. Qureshi 139,407,128 1,031,760 0 0
M. K. Reilly 139,450,018 988,870 0 0
J. V. Taranik 139,423,457 1,015,431 0 0
W.I.M. Turner, Jr. 139,405,404 1,033,484 0 0
</TABLE>
The stockholders approved Registrant's Annual Incentive Compensation Plan.
The vote was as follows:
For: 95,547,886
Against: 7,703,395
Abstentions: 1,551,236
Broker non-votes: 35,636,371
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) The exhibits to this report are listed in the Exhibit Index on Page 24
hereof.
(b) Reports filed on Form 8-K during the quarter ended June 30, 1999
None
22
<PAGE> 23
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
NEWMONT MINING CORPORATION
(Registrant)
Date: August 13, 1999 /s/ BRUCE D. HANSEN
-------------------
Bruce D. Hansen
Senior Vice President and
Chief Financial Officer
(Principal Financial Officer)
Date: August 13, 1999 /s/ LINDA K. WHEELER
--------------------
Linda K. Wheeler
Vice President and Controller
(Principal Accounting Officer)
23
<PAGE> 24
Newmont Mining Corporation
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- ------- ---------------
<S> <C>
12 - Statement re Computation of Ratio of Earnings to Fixed Charges.
27 - Financial Data Schedule.
99 - Consulting Agreement between Newmont International Services Limited and
Robert J. Miller dated April 1, 1999.
</TABLE>
24
<PAGE> 1
EXHIBIT 12
NEWMONT MINING CORPORATION AND SUBSIDIARIES
COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES
(Amounts in thousands except ratio)
(Unaudited)
<TABLE>
<CAPTION>
Six Months Ended
June 30, 1999
-----------------
<S> <C>
Earnings:
Income before income taxes $ 32,706
Adjustments:
Net interest expense (1) 35,477
Amortization of capitalized interest 2,350
Portion of rental expense representative of interest 866
Undistributed loss of affiliate (7,980)
Minority interest 25,122
--------
$ 88,541
========
Fixed Charges:
Net interest expense (1) $ 35,477
Capitalized interest 9,438
Portion of rental expense representative of interest 866
--------
$ 45,781
========
Ratio of earnings to fixed charges 1.9
========
</TABLE>
(1) Includes interest expense of majority-owned subsidiaries and amortization
of debt issuance costs.
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-END> JUN-30-1999
<CASH> 81,893
<SECURITIES> 11,167
<RECEIVABLES> 37,098
<ALLOWANCES> 0
<INVENTORY> 335,895
<CURRENT-ASSETS> 550,070
<PP&E> 3,638,856
<DEPRECIATION> 1,662,945
<TOTAL-ASSETS> 3,214,961
<CURRENT-LIABILITIES> 186,741
<BONDS> 1,197,219
0
0
<COMMON> 267,929
<OTHER-SE> 1,188,453
<TOTAL-LIABILITY-AND-EQUITY> 3,214,961
<SALES> 642,896
<TOTAL-REVENUES> 663,197
<CGS> 394,448
<TOTAL-COSTS> 514,396
<OTHER-EXPENSES> 55,496
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 35,477
<INCOME-PRETAX> 57,828
<INCOME-TAX> 7,714
<INCOME-CONTINUING> 17,012
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 17,012
<EPS-BASIC> 0.10
<EPS-DILUTED> 0.10
</TABLE>
<PAGE> 1
EXHIBIT 99
CONSULTING AGREEMENT
THIS AGREEMENT is made and entered into as of this 1st day of April,
1999, by and between Newmont International Services Limited (hereinafter
"NEWMONT"), a Delaware corporation and wholly owned subsidiary of Newmont Gold
Company, and Robert J. Miller, former Governor of the State of Nevada
(hereinafter "CONSULTANT").
In consideration of the mutual promises and conditions contained in
this AGREEMENT, and other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties agree as follows:
1. TERM
This AGREEMENT shall be effective from April 1, 1999 to December 31,
1999 (the "Term"), unless terminated earlier under Paragraph 6. This
Agreement shall automatically terminate at the end of the Term unless
extended by a written agreement between the parties.
2. STATEMENT OF SERVICES
A. During the Term of this AGREEMENT, CONSULTANT shall perform
the work described in Exhibit A hereto (the ?Services?).
B. In performance of the Services, CONSULTANT shall use his best
efforts and exercise a high degree of care, skill, and
judgment as would be expected for professional consultants of
his skill, knowledge and education engaged in the performance
of services of this nature.
C. In his performance of the Services, CONSULTANT shall comply
with all applicable federal and state laws, rules and
regulations, including, but not limited to, those addressing
the preservation of health, safety and the environment.
CONSULTANT shall be solely responsible for and assume full
responsibility for the assessment, collection and payment of
all taxes assessed against him in connection with the Services
to be performed hereunder. CONSULTANT shall be solely
responsible for and assume full responsibility for his actions
and omissions, and CONSULTANT shall indemnify and hold NEWMONT
harmless from and against any and all claims arising as a
result of his failure to comply with the requirements of this
Paragraph 2.C.
D. This AGREEMENT does not preclude CONSULTANT from undertaking
work of this general nature for others; provided, however,
that without NEWMONT's written consent, CONSULTANT shall not
perform work for others where such work is reasonably likely
to result in a conflict of interest between NEWMONT and such
third party.
3. COMPENSATION FOR SERVICES
As compensation for the performance of Services hereunder, CONSULTANT
shall be compensated as and in accordance with the terms set forth in
Exhibit A hereto.
<PAGE> 2
4. NONDISCLOSURE/NON-USE
CONSULTANT shall not disclose to third parties or use for purposes
other than performing hereunder, without the written consent of
NEWMONT, any information that relates to the technical, legal, or
business affairs or activities of NEWMONT or its subsidiaries or
affiliates obtained by CONSULTANT in connection with the performance of
Services under this AGREEMENT, unless said information:
(i) is, or shall have been, in the possession of CONSULTANT and
not subject to a confidentiality obligation prior to
CONSULTANT?s acquisition thereof in connection with Services
performed hereunder;
(ii) through no act or omission of CONSULTANT becomes published or
otherwise available to the public under circumstances such
that the public may utilize the same without any direct or
indirect obligation to NEWMONT or its subsidiaries or
affiliates;
(iii) is acquired by CONSULTANT from any third party rightfully in
possession of the same and having no direct or indirect
confidentiality obligation to NEWMONT or its subsidiaries or
affiliates with respect to the same.
This Paragraph 4 shall survive the expiration or termination of this AGREEMENT.
5. STATUS OF CONSULTANT
CONSULTANT shall perform the Services as an independent contractor in
accordance with his own methods, the terms of this AGREEMENT, and
applicable laws, rules and regulations. CONSULTANT shall have complete
charge of his personnel (if any) engaged in the performance of the
Services. No one employed or subcontracted by CONSULTANT shall be
deemed for any purpose to be an employee, agent, servant, or
representative of NEWMONT and shall not have authority to enter into
agreements on behalf of NEWMONT or otherwise bind NEWMONT in any
manner. Neither CONSULTANT nor any of his employees or subcontractors
(if any) shall be eligible for any retirement plan, insurance program,
or any other employee benefits provided to employees of NEWMONT.
Consultant is not entitled to workers' compensation benefits and is
obligated to pay all applicable income tax on monies earned pursuant to
this agreement. It is not the intent of the parties to create, nor
shall this AGREEMENT be construed as creating, a partnership, joint
venture, employment relationship, agency relationship or association,
or to render the parties liable as partners, co-venturers, or
principals.
6. TERMINATION
NEWMONT may terminate the Services being performed under this AGREEMENT
by giving thirty days prior written notice of termination to
CONSULTANT. Upon receipt of such notice from NEWMONT, CONSULTANT shall
stop all work on the date specified in the notice; and NEWMONT shall
pay CONSULTANT for the Services performed up to the date of
termination. NEWMONT shall not be liable to pay any bonus, damage, or
other claim for profits asserted by CONSULTANT.
-2-
<PAGE> 3
7. ASSIGNMENT
This AGREEMENT is for CONSULTANT's unique services and may not be
assigned by CONSULTANT without NEWMONT's written consent, which may be
withheld in NEWMONT's sole discretion. NEWMONT, in its sole discretion,
may assign this contract to an affiliate.
8. ENTIRE AGREEMENT
This AGREEMENT, including its Exhibits, if any, constitutes the
complete and entire agreement and understanding between the parties
with respect to the subject matter hereof and supersedes, merges, and
voids all negotiations, prior discussions, and prior agreements and
understandings, either written or oral, relating to the subject matter
hereof. This AGREEMENT may not be altered or amended except by a
written document executed by a duly authorized representative of each
party.
9. GOVERNING LAW
This AGREEMENT shall be governed by and interpreted in accordance with
the laws of the State of Colorado, excepting Colorado law pertaining to
choice of law or conflicts of law. The parties hereby submit to the
jurisdiction of the state and federal courts in the state of Colorado
and agree that the state and federal courts in the state of Colorado
shall be the exclusive forum for the resolution of any disputes related
to, arising out of, or arising under this AGREEMENT, whether based in
tort, contract, or other legal theory.
10. NOTICES
All notices and other required communications hereunder shall be in
writing, addressed as follows:
Newmont International Services Limited
1700 Lincoln Street
Denver, CO 80203
Attention: Legal Department
Facsimile Number: (303) 837-6007
Robert J. Miller
Jones, Vargas
3773 Howard Hughes Parkway
3rd Floor South
Las Vegas, Nevada 89109
Facsimile Number: (702) 737-7706
Notices shall be given (a) by personal delivery to the other party, (b)
by facsimile or other electronic communication, or (c) by registered or
certified mail, return receipt requested. All notices shall be
effective and deemed delivered (i) if by personal delivery, on the date
of delivery if during business hours, otherwise the next business day,
(ii) if by facsimile or other electronic communication, on the date it
is received if received during business hours, otherwise the next
business day and (iii) if solely by mail, three business days after
deposit in the mail. A party may change its address, including
increasing the number of addressees, by notice to the other party.
-3-
<PAGE> 4
11. SEVERABILITY
If any provision of this AGREEMENT is invalid or unenforceable, such
provision shall be fully severable from this AGREEMENT and the other
provisions hereof shall remain in full force and effect and shall be
liberally construed to carry out the provisions and intent hereof.
The parties hereto have duly executed this Agreement as of the day and
year first above written.
NEWMONT INTERNATIONAL SERVICES LIMITED
By: /s/ Lawrence T. Kurlander
--------------------------
Name: Lawrence T. Kurlander
Title: Chairman
ROBERT J. MILLER
/s/ Robert J. Miller
--------------------
-4-
<PAGE> 5
EXHIBIT A TO CONSULTING AGREEMENT
A. SERVICES. CONSULTANT shall advise representatives of NEWMONT on federal
governmental affairs issues relating to NEWMONT's interests and mining
operations (and those of its affiliates) within the United States of
America. As part of the Services, CONSULTANT shall consult with members
of Congress, various governmental agencies and the Administration as
requested by Newmont from time to time.
B. COMPENSATION. For Services performed in accordance with the AGREEMENT,
CONSULTANT shall be compensated as follows:
NEWMONT shall pay CONSULTANT a fee of Ten Thousand Dollars
(U.S.$10,000.00) per month during the Term for his performance of the
Services, unless the Agreement is earlier terminated in which case the
amount shall be reduced in accordance with Section 6 of the Agreement.
The monthly consulting fee shall be paid in arrears within five days
after the end of each month.
NEWMONT shall also reimburse CONSULTANT for all routine costs and
expenses he incurs in the performance of the SERVICES, provided that
such costs and expenses are routine and are incurred in the ordinary
course of CONSULTANT'S performance under this AGREEMENT. CONSULTANT
will not incur extraordinary costs and expenses without prior written
approval of NEWMONT. For purposes of this AGREEMENT, extraordinary
costs and expenses include retention of experts, consultants, or other
persons to promote the interests of NEWMONT, the acquisition of
studies, reports, or other information to promote the interests of
NEWMONT, and other items that are not generally considered routine by
consultants and attorneys performing services for clients. CONSULTANT
shall invoice NEWMONT for such amounts, and all nondisputed amounts
shall be paid within thirty (30) days of receipt of the invoice.
-5-
