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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
FOR ANNUAL AND TRANSITION REPORTS
PURSUANT TO SECTIONS 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
(MARK ONE)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
FOR THE FISCAL YEAR ENDED DECEMBER 31, 1998
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)
<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>
TITLE OF EACH CLASS NAME OF EACH EXCHANGE ON WHICH REGISTERED
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<S> <C>
Common Stock, $1.60 par Value New York Stock Exchange
Paris Bourse
Swiss Stock Exchange
Brussels Stock Exchange
Lima Stock Exchange
</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) on March 4, 1999 was approximately $3,081,580,000.
The number of shares of Registrant's common stock outstanding on March 4,
1999 was 167,349,331.
DOCUMENTS INCORPORATED BY REFERENCE
PORTIONS OF REGISTRANT'S ANNUAL REPORT TO STOCKHOLDERS FOR THE YEAR ENDED
DECEMBER 31, 1998 ARE INCORPORATED BY REFERENCE INTO PARTS I, II, III AND IV OF
THIS REPORT AND PORTIONS OF REGISTRANT'S DEFINITIVE PROXY STATEMENT SUBMITTED TO
THE REGISTRANT'S STOCKHOLDERS IN CONNECTION WITH ITS 1999 ANNUAL MEETING TO BE
HELD ON MAY 6, 1999 ARE INCORPORATED BY REFERENCE INTO PART III OF THIS REPORT.
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This document (including information incorporated herein by reference)
contains "forward-looking statements" within the meaning of Section 21E of the
Securities Exchange Act of 1934, which involve a degree of risk and uncertainty
due to various factors affecting Newmont Mining Corporation and its
subsidiaries. For a discussion thereof, see page 15.
PART I
ITEMS 1 AND 2. BUSINESS AND PROPERTIES
INTRODUCTION
Newmont Mining Corporation (the "Corporation") was incorporated in 1921
under the laws of Delaware. It is engaged, directly and through its subsidiaries
and affiliates, in the production of gold, the development of gold properties,
the exploration for gold and the acquisition of gold properties worldwide. It
produces gold from operations in Nevada and California, as well as in Peru,
Indonesia, Mexico and the Central Asian Republic of Uzbekistan. Newmont Mining
Corporation, together with its subsidiaries (unless the context otherwise
requires), is referred to herein as "Newmont."
On May 5, 1997, the Corporation acquired through a merger Santa Fe Pacific
Gold Corporation ("Santa Fe") (the "Santa Fe Merger") in which each outstanding
share of common stock of Santa Fe was converted into the right to receive 0.43
of a share of common stock of the Corporation. As a result, Santa Fe became a
wholly-owned subsidiary of Newmont Gold Company ("NGC"). The Santa Fe Merger
qualified as a tax-free reorganization and was accounted for as a pooling of
interests. All information set forth in this Report with respect to periods
prior to 1997 has been restated to reflect the Santa Fe Merger.
On October 7, 1998, the Corporation acquired the 6.25% minority interest in
the common stock of NGC through a merger in which 1.0125 shares of the
Corporation's common stock was issued in exchange for each share of NGC stock
not then owned by the Corporation. The merger was accounted for at historic
cost, with the exception of the minority interest which was accounted for as a
purchase.
Gold has two main categories of use -- product fabrication and bullion
investment. Fabricated gold has a wide variety of end uses, including jewelry
(the largest fabrication component), electronics, dentistry, industrial and
decorative uses, medals, medallions and official coins. 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.
OVERVIEW
Newmont produces gold primarily through 100% owned operations in Nevada and
California. It also produces gold through a 51.35% owned company in Peru and a
50% owned venture in Uzbekistan. Newmont also has an 80% interest in an
Indonesian company which commenced gold production in March 1996 and a 45%
interest in a second Indonesian company that holds an interest in a large
copper/gold project which is currently in construction and is expected to
commence operations in late 1999. In Mexico, Newmont has a 44% interest in a
project which commenced production in June 1998. Newmont recorded a net loss of
$393.4 million ($2.47 per share) in 1998 and net income of $68.4 million ($0.44
per share) in 1997. Results for 1998 included $424.7 million ($2.67 per share)
for the write-down of assets impaired at a low gold price and $32.9 million
($0.21 per share) for the cumulative effect of an accounting change.
Newmont produced 4.07 million equity ounces of gold in 1998, 3.96 million
equity ounces in 1997 and 3.1 million equity ounces in 1996. In 1998, 72% of
Newmont's equity production of gold related to its U.S. operations and 28% to
its foreign operations. In 1997, 76% of Newmont's equity production of gold
related to its U.S. operations and 24% to its foreign operations. In 1996, 81%
of Newmont's equity production of gold related to its U.S. operations and 19% to
its foreign operations. At December 31, 1998, approximately 37% of Newmont's
consolidated assets related to its foreign operations.
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Newmont had 52.6 million equity ounces of proven and probable gold reserves
at December 31, 1998 and 52.7 million equity ounces of proven and probable gold
reserves at December 31, 1997. Newmont's equity in proven and probable copper
reserves was 4.8 billion pounds at December 31, 1998 and 1997. For information
as to the calculation of reserves see page 11 and for information regarding
risks associated with the estimation of reserves see page 17. In addition to
exploration activities conducted in connection with these projects, Newmont
continues to explore for gold and/or is conducting joint venture activities in
other parts of these countries as well as in other areas of North America, Latin
America, Southeast Asia and Central Asia.
NEVADA
Production
Newmont's Nevada operations include Carlin, located on the geological
feature known as the Carlin Trend which Newmont discovered in 1961, and
operations in the Winnemucca Region which were acquired in the Santa Fe Merger.
The Carlin Trend, located near Carlin, Nevada, is the largest gold district
discovered in North America in this century. The Winnemucca Region includes (i)
the Twin Creeks mine located near Winnemucca, Nevada (ii) the Lone Tree Complex
located near Battle Mountain, Nevada and (iii) a 50% interest in The Rosebud
Mining Company, L.L.C. ("Rosebud") located west of Winnemucca. Production began
in 1965 at Carlin, in 1990 at Twin Creeks, in 1991 at Lone Tree and in 1997 at
Rosebud. See map on page 5.
Gold production in Nevada totaled 2,769,600 ounces in 1998 at a total cash
cost of $209 per ounce, 2,776,500 ounces in 1997 at a total cash cost of $205
per ounce and 2,328,300 ounces in 1996 at a total cash cost of $232 per ounce. A
table presenting Nevada operations mine production data is set forth on page 46
in the 1998 Annual Report to Stockholders which is incorporated herein by
reference.
In 1998, ore was mined from 17 open-pit deposits and four underground
mines. The Post deposit at Carlin is mined by Barrick Goldstrike Mines Inc.
under a joint mining agreement. The parties share the cost of mining the ore
body in proportion to their interests in the contained gold. Production
initially scheduled from 1998 mining activity at the Post deposit was deferred
due to a pit wall failure that occurred in mid-1997. During 1999, mining will
resume in accordance with a revised mine plan. The 50%-owned Rosebud underground
mine is operated by Hecla Mining Company. All ore mined from Rosebud is
transported to Twin Creeks for processing at an agreed upon cost.
Processing Facilities
Oxide ore is amenable to gold extraction through the use of size-reduction
processes, such as crushing and grinding, and the dissolution of the gold in
such ore using conventional cyanidation treatment techniques. Refractory ore
contains minerals which require pre-treatment, such as roasting,
pressure-oxidation, flotation or bio-oxidation, to optimize recovery of gold in
the cyanidation processes. Approximately 73% of Newmont's 1998 year-end proven
and probable gold reserves in Nevada were refractory and the balance were oxide.
Nevada's production is increasingly coming from higher-cost refractory ores from
both deep open pits and underground mines as lower-cost, near-surface oxide ores
are depleted. Refractory ore treatment facilities are expected to generate
approximately 56% of Newmont's Nevada gold production in 1999, compared with 42%
in 1998 and 35% in 1997.
Prior to 1994, processing consisted primarily of either milling or heap
leaching of oxide ores. In 1994, Newmont expanded its facilities at Carlin and
at the Lone Tree Complex to facilitate refractory ore processing. In 1997,
Newmont completed expansion projects at Twin Creeks and Lone Tree for additional
refractory ore treatment facilities. During 1998, Newmont processed higher-grade
oxide ores at seven mills and lower-grade oxide ores at heap-leaching
facilities. Higher-grade refractory ores are processed by a roaster at Carlin,
and by autoclaves in the Winnemucca Region. Lower-grade refractory ores are
processed through a flotation plant at the Lone Tree Complex or by bio-oxidation
and heap-leaching at Carlin. Ores and concentrates are transported to the
facility that maximizes gold recovery, production and cash flow.
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Newmont's refractory ore treatment plant, or roaster, treats high-grade
refractory ores that contain either sulfides or active carbon. A portion of the
concentrates from the Lone Tree Complex flotation plant were processed through
the roaster during the latter half of 1997 and in 1998. For a discussion of the
financing of the roaster, see Note 9 to the financial statements in the 1998
Annual Report to Stockholders at page 29 therein which is incorporated herein by
reference.
Refractory ores at Twin Creeks are processed through the Sage Mill, a twin
autoclave facility that utilizes a patented fine-grinding, pressure-oxidation
process to oxidize ore by the action of heat, pressure and elevated oxygen. The
first autoclave was commissioned in May 1997 and the second in October 1997.
Refractory ores from certain deposits at the Lone Tree Complex and a portion of
the concentrates from the Lone Tree flotation plant are also processed through
the Sage Mill. Since the Santa Fe Merger, certain ores from the Carlin North
Area have been transported to and processed through the Sage Mill. During
scheduled maintenance periods, oxide ore is processed through the Sage Mill,
bypassing the autoclave circuits.
The Lone Tree Complex mill contains a patented partial-oxidation autoclave
circuit that commenced operation in early 1994. Oxide ore has been processed
through the mill, bypassing the autoclave circuit, when the autoclave was
undergoing scheduled maintenance. The Lone Tree Complex mill was shut down in
November 1998; however, it will operate on a scheduled periodic basis during
1999 to process a portion of the Lone Tree Complex's higher grade refractory
ore. A portion of the Lone Tree Complex's higher grade refractory ores are
processed through the autoclave and remaining refractory ores are treated at a
flotation plant commissioned in mid-1997. In the flotation process, sulfide
mineralization, with which gold is associated, is concentrated and separated
from other minerals present in the ore utilizing inert gas. The resulting
concentrates, containing higher percentages of gold in substantially smaller
volumes of material, are processed through either the Lone Tree Complex mill,
the Sage Mill or the Carlin roaster.
During 1997, Newmont completed a large-scale bio-leach demonstration
facility to process lower-grade refractory ores from Carlin's Gold Quarry
deposit. Approximately 7,700 ounces of gold were produced in 1998 and 13,800
ounces of gold were produced in 1997 from this facility. This process utilizes
bacterial oxidation and ammonium thiosulfate leaching applications. An eight
million ton commercial-scale refractory leach pad, originally scheduled for
completion in 1999, has been deferred as part of Newmont's plans to reduce
capital spending during a period of low gold prices.
Gold-bearing activated carbon from Carlin's milling and leaching facilities
is processed on site at a central carbon processing plant and adjacent refinery.
Separate carbon processing facilities are located in North and South Areas at
Twin Creeks with one refinery in the North Area. Lone Tree has two carbon
processing facilities. Material from the Lone Tree carbon processing facilities
is refined at Carlin's refinery.
A table presenting Nevada operations mill and leach production data is set
forth on page 46 in the 1998 Annual Report to Stockholders which is incorporated
herein by reference.
Other Facilities
Analytical laboratories, maintenance facilities and administration offices
are located at Carlin, Twin Creeks and the Lone Tree Complex. Newmont also has
an advanced metallurgical research laboratory in Denver, Colorado.
Electrical power and natural gas for Newmont's Nevada operations are
provided by public utilities. Oxygen for the roaster is provided on a contract
basis from an oxygen plant constructed by the supplier on land leased from
Newmont which is currently the sole customer of the oxygen produced. Oxygen
plants used in conjunction with the autoclaves at Twin Creeks and Lone Tree are
owned by Newmont and are operated and maintained by a third party.
Refining
Newmont has refining agreements with three foreign refiners and one U.S.
refiner to further refine the dore bars it produces in Nevada to 0.995% pure
gold or better, the recognized standard on world markets. Under the terms of the
agreements with these refiners, the dore bars are toll refined and the refined
gold and
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the separately recovered silver are returned to Newmont's account for sale to
third parties. Management believes that there would be no adverse effect on the
Corporation if it lost the services of any of its refiners due to the
availability of alternative refiners, each able to supply all services needed by
Newmont for its Nevada operations.
Exploration
Newmont conducts extensive exploration in Nevada where it owns or otherwise
controls the mineral interests on approximately 1.9 million acres of property.
Exploration efforts at Carlin have been focused on high-grade refractory targets
near existing deposits. In addition, a concerted effort continues to evaluate
the lands acquired in the Santa Fe Merger. This evaluation included geological
mapping, an airborne geophysical survey and re-logging of drill holes in order
to develop target areas around the Twin Creeks, Lone Tree and Rosebud mines.
Mineral Rights
Newmont 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 Carlin mining areas. Such long-term leases extend for
at least the anticipated mine life of those deposits. With respect to Gold
Quarry, Newmont 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% of
such areas has agreed to pay a royalty on production to third party lessors that
is equivalent to 18% of production.
Newmont 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 Winnemucca Region mining areas. The long-term leases
extend for at least the anticipated mine life of those deposits. With respect to
certain smaller deposits in the Winnemucca Region, Newmont is obligated to pay a
royalty on production to third parties that varies from 4% to 7% of production.
On February 3, 1999, Newmont and Barrick Gold Corporation signed an
agreement in principle to exchange approximately 2 million ounces of reserves
and various land rights on the north Carlin Trend that will consolidate each
company's respective land positions in the area. Newmont expects to close the
transaction early in the second quarter of 1999. See also "North American
Operations" in Management's Discussion and Analysis in the 1998 Annual Report to
Stockholders on page 12 therein which is incorporated herein by reference.
For information regarding risks associated with unpatented mining claims,
see page 18.
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[MAP: NEVADA OPERATING PROPERTIES AND PRINCIPAL AREA OF LAND HOLDINGS]
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CALIFORNIA
Newmont has one mine in California, the Mesquite mine, which was acquired
in the Santa Fe Merger. It is located in Imperial County in southern California
and was acquired by Santa Fe in 1993. It has been producing since 1986. Mining
at Mesquite is conducted in two open pits and ore is processed by run-of-mine
heap-leaching. Gold production totaled 154,000 ounces in 1998; 227,900 ounces in
1997 and 191,600 ounces in 1996. Total cash costs per ounce were $176, $213 and
$245 for 1998, 1997 and 1996, respectively. Tables presenting Mesquite mine,
mill and leach production data are set forth on page 46 in the 1998 Annual
Report to Stockholders which is incorporated herein by reference.
Gold-bearing activated carbon from leaching facilities is processed at an
on-site carbon processing plant and refinery. Maintenance facilities and
administration offices are also located at Mesquite. Electric power is supplied
by a local utility.
Mesquite is approaching the end of its mine life. Following a recent land
exchange between the Bureau of Land Management and the State of California,
Newmont gained access to property located just north of an existing pit through
a lease with the State. Newmont began drilling on this property during 1998
which resulted in approximately 60,000 ounces being added to reserves at
December 31, 1998. In 1998, mining rates at Mesquite were reduced to allow
continuation of operations through the period of time required to continue the
development of this property. As a result, the workforce was reduced by
approximately 125 employees in January 1998.
Newmont 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 mining areas of its Mesquite deposits. The long-term
leases extend for at least the anticipated mine life of those deposits. For
information regarding risks associated with unpatented mining claims, see page
18.
PERU
Introduction
Newmont produces gold through Minera Yanacocha S.A. ("Minera Yanacocha") in
Peru. Minera Yanacocha is located approximately 375 miles north of Lima and 28
miles north of the city of Cajamarca. In 1986, Newmont discovered the Yanacocha
gold deposit which has since become the largest gold district in South America.
Minera Yanacocha began production in 1993. Prior to 1997, Newmont owned a 38%
equity interest in Minera Yanacocha. In 1997, Newmont consolidated Minera
Yanacocha in its financial statements following the acquisition of an additional
13.35% interest. The remaining interest is held by Compania de Minas
Buenaventura, S.A. ("Buenaventura") (43.65%) and the International Finance
Corporation (5%). A description of such acquisition is set forth in Note 4 to
the financial statements in the 1998 Annual Report to Stockholders at page 26
therein which is incorporated herein by reference.
Minera Yanacocha has mining rights with respect to a large land position,
which includes eight deposits as well as other prospects. Such mining rights
were acquired through assignments of concessions granted by the Peruvian
government to a related entity. The assignments have a term of 20 years,
beginning in the early 1990s, renewable at the option of Minera Yanacocha for
another 20 years. Newmont acts as manager of Minera Yanacocha.
Production
Four open-pit mines and three leach pads are in operation at Minera
Yanacocha. Production commenced in August 1993 at the Carachugo deposit, in
October 1994 at the Maqui Maqui deposit which is located three miles north of
Carachugo, in January 1996 at the San Jose deposit which is located one mile
southwest of Carachugo, and in December 1997 at the Yanacocha Norte deposit
which is located one mile northwest of Carachugo. In 1998, production was
1,335,800 ounces of gold (685,900 equity ounces) at a total cash cost of $95 per
equity ounce as compared to 1997 production of 1,052,800 ounces of gold (530,900
equity ounces at 51.35%, beginning February 1, 1997) at a total cash cost of $87
per equity ounce and 1996 production of 811,400 ounces of gold (308,300 equity
ounces at 38%) at a total cash cost of $100 per equity ounce. Tables
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presenting Minera Yanacocha mine and leach production data are set forth on page
47 in the 1998 Annual Report to Stockholders which is incorporated herein by
reference.
The ore is not crushed, but transported directly to impermeable leach pads
where the ore is treated with a weak cyanide solution that penetrates the ore
dissolving the gold. The pregnant leach solution is collected and pumped through
two Merrill-Crowe plants (the second of which was placed in service in December
1997) to remove the gold from the solution as a zinc-gold precipitate. After the
gold is processed from the precipitate and smelted into dore, it is transported
from the processing plant by a contractor and toll refined in Switzerland.
Minera Yanacocha's operations are accessible by road. Power for the project is
provided pursuant to a four year renewable contractual agreement with a local
power company. Backup power is provided by diesel generators owned by Minera
Yanacocha.
Exploration
Exploration continues to be conducted at numerous properties owned by
Minera Yanacocha. Approximately $27.8 million was spent by Minera Yanacocha on
exploration and mine geology in 1998.
Exploration work on the Minas Conga joint venture, 40% owned by Newmont,
40% by Cedimin and 20% by Compania Minera Condesa S.A., a subsidiary of
Buenaventura, continued throughout 1998 with an aggressive drilling campaign.
Encouraging porphyry gold-copper mineralization has been identified on two
separate targets. In addition, the joint venture continues to explore the
surrounding area. A second Peruvian joint venture, Minera Coshuro, is 65% owned
by Newmont and 35% by Buenaventura and holds claims on 207,000 acres of
prospective ground along north and south extensions of the volcanic belt hosting
the Minera Yanacocha deposits. In addition, Newmont and Buenaventura are active
in the southern part of Peru. Initial exploration work is underway in these
prospective areas and a number of targets have been outlined.
UZBEKISTAN
Introduction
In Uzbekistan, Newmont has a 50% interest in Zarafshan-Newmont, a joint
venture with the State Committee for Geology and Mineral Resources ("State
Committee") and Navoi Mining and Metallurgical Combine ("Navoi"), each a state
entity of Uzbekistan. The joint venture produces gold by crushing and leaching
ore from existing stockpiles of low-grade oxide ore from the nearby
government-owned Muruntau mine. The gold produced by Zarafshan-Newmont is sold
in international markets for U.S. dollars. Newmont provides technical and
managerial support to Zarafshan-Newmont. The State Committee and Navoi have
guaranteed to Zarafshan-Newmont 242 million tons of ore with an average grade of
0.036 ounces of gold per ton, containing approximately 8.6 million ounces of
gold for the project. At December 31, 1998, approximately 202 million tons of
stockpiled ore and ore in process remained at an average grade of 0.034 ounces
of gold per ton, containing approximately 6.8 million ounces of gold for the
project.
Production
In 1998, total production was 374,600 ounces of gold (187,300 equity
ounces) at a total cash cost of $207 per equity ounce. In 1997, total production
was 430,100 ounces of gold (215,000 equity ounces) at a total cash cost of $201
per equity ounce. In 1996, total production was 326,500 ounces of gold (163,200
equity ounces) at a total cash cost of $224 per equity ounce. A table presenting
Zarafshan-Newmont leach production data is set forth on page 47 in the 1998
Annual Report to Stockholders which is incorporated herein by reference.
Ore from the existing stockpiles is crushed in four stages. The crushed
material is transported to impermeable leach pads where the ore is treated with
a weak cyanide solution that penetrates the ore dissolving the gold. The
pregnant leach solution is collected and pumped through a Merrill-Crowe plant to
remove the gold from the solution as a zinc-gold precipitate. After the gold is
processed from the precipitate and smelted into dore bars it is refined at the
nearby Muruntau gold refinery and then exported. The project has access to air,
rail and road transport. There are no significant logistical difficulties for
transportation of
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refined gold. Power for the project is provided pursuant to a contractual
arrangement with Navoi which acquires such power from a local plant.
Although not contractually obligated to do so, Newmont has made, and may
from time to time make, advances or contributions to Zarafshan-Newmont to cover
debt service requirements and other capital and operating costs.
Exploration
Newmont signed an agreement in September 1996 with the Uzbekistan
government and Mitsui & Co., Ltd. for the development of gold deposits (subject
to satisfaction of certain conditions) in the Angren region of Uzbekistan,
approximately 60 miles south of the city of Tashkent. Newmont has a 40% interest
in the project. Pre-feasibility technical studies and negotiations with the
Uzbekistan government were conducted in 1998 and are continuing in 1999.
INDONESIA
Introduction
Newmont has two projects in Indonesia -- Minahasa which is in operation and
Batu Hijau which is under construction. The Minahasa project is 80% owned by
Newmont and 20% carried interest owned by P.T. Tanjung Serapung, an Indonesian
company. However, because Newmont funded 100% of the construction costs, it is
entitled to 100% of the gold production until it recovers its investment,
including interest. Newmont has a 45% interest in the Batu Hijau project which
it owns through a partnership with an affiliate of Sumitomo Corporation
("Sumitomo"). Sumitomo holds an indirect 35% interest in the Batu Hijau project
through this partnership arrangement and the remaining 20% interest is a carried
interest held by P. T. Pukuafu Indah, an Indonesian company.
In Indonesia, rights are granted to private parties to explore for and to
develop the mineral resources within defined areas through Contracts of Work
entered into with the Indonesian government. In 1986, Newmont entered into
fourth generation Contracts of Work with the Indonesian government covering the
Minahasa and Batu Hijau projects. Under the Contracts of Work, Newmont was
granted the exclusive right to explore the contract area, construct any required
facilities and extract and process the mineralized materials, and sell and
export the minerals produced subject to certain Indonesian government approvals
and payment of royalties to the Indonesian government. Once facilities are
constructed and mining operations commence, the private party has the right to
continue operating the project for 30 years, or longer if approved by the
Indonesian government. Under the Contracts of Work, beginning in the sixth year
after mining operations commence (and continuing through the tenth year) a
portion of each project not already owned by Indonesian nationals must be
offered for sale to the Indonesian government or to Indonesian nationals
(collectively the "Indonesian Parties"), thereby potentially reducing the
non-Indonesian parties ownership in each project to 49% by the end of the tenth
year. The price at which such interest would be offered for sale to the
Indonesian Parties would be the highest of (i) the then current replacement
cost, (ii) the price at which shares of the project company would be accepted
for listing on the Jakarta Stock Exchange or (iii) the fair market value of such
interest as a going concern.
In April 1997, Newmont entered into a Contract of Work granting rights to
Newmont to explore an area located near the Minahasa contract area through a new
company, P. T. Newmont Mongondow Mining ("Mongondow"). Newmont has an 80%
interest and the remaining 20% interest is a carried interest held by P. T.
Lebong Tandai, an Indonesian company. This Contract of Work is a sixth
generation Contract of Work. The major differences between the fourth and sixth
generation Contracts of Work are a reduced income tax rate (from 35% to 30%),
elimination of the requirement that non-Indonesian parties divest part of their
80% interest and changes in the method of royalty calculation.
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Minahasa
Minahasa, a multi-deposit project discovered by Newmont on the island of
Sulawesi, began production in August 1996. It is approximately 1,500 miles
northeast of Jakarta. Minahasa mines and processes ore from the open pit Mesel
deposit and a number of smaller peripheral deposits . These deposits contain
both oxidized and refractory gold mineralization.
Minahasa produced 261,000 ounces of gold in 1998 at a total cash cost of
$127 per ounce as compared to 206,500 ounces of gold in 1997 at a total cash
cost of $156 per ounce. Production in 1996 was 112,700 ounces of gold at a total
cash cost of $222 per ounce. Tables presenting Minahasa mine and mill production
data are set forth on page 47 in the 1998 Annual Report to Stockholders which is
incorporated herein by reference.
The project's facilities include a dry grinding mill, a fluidized bed
roaster facility and a conventional carbon-in-pulp gold recovery plant.
Infrastructure facilities include a deep-water port, electrical power plant,
water supply system and housing for workers. The ore's high mercury content
necessitated installation of a $8 million mercury scrubber in 1997. The Minahasa
project is in close proximity to the coast and does not have any significant
logistical difficulties for transportation of materials, equipment or its
product.
Batu Hijau
Newmont's second project in Indonesia, Batu Hijau, is located on the island
of Sumbawa, approximately 950 miles east of Jakarta. Batu Hijau is a large
porphyry copper/gold deposit discovered by Newmont in 1990. It is located seven
miles from the south coast and nine miles from the west coast of the island and
has access to a natural harbor which is being developed for transportation of
materials, equipment and copper concentrate. Start up is expected to begin in
late 1999.
Newmont owned an 80% interest in Batu Hijau until it entered into a general
partnership arrangement in July 1996 with Sumitomo to develop and operate the
Batu Hijau project. The partnership arrangement was approved by the Indonesian
government and is controlled jointly by Newmont and Sumitomo. As a result of
this ownership structure and certain rights held by Sumitomo, Newmont is
accounting for its investment in Batu Hijau as an equity investment.
Newmont completed a final feasibility study for Batu Hijau in 1996. Based
on the results of that study, and after obtaining the required approvals from
the Indonesian government and entering into the partnership with Sumitomo,
development and construction activities began in 1997. The project is expected
to mine an average of 197 million tons per annum and the ore will be processed
at the concentrator at an average rate of 150 thousand tons per day. Other
facilities included in the project include a port, a coal-fired electrical
generating plant, a townsite for the workforce, and other ancillary facilities.
The total cost of the project is expected to be approximately $1.9 billion
including cost escalations, capitalized interest during construction and working
capital.
Long-term smelter contracts for approximately 70% of the project's average
annual concentrate production have been signed. Production over the 26-year mine
life is expected to average 115,000 tons of copper and 420,000 ounces of gold
per year at an expected average cash cost of about $0.50 per pound of copper,
including gold credits, over the life of the project.
In July 1997, agreements for $1 billion in financing for the Batu Hijau
project were signed. The financing is guaranteed by Newmont and Sumitomo, 56.25%
and 43.75%, respectively, until project completion tests are met, and will be
non-recourse to Newmont and Sumitomo thereafter. Newmont and Sumitomo also
entered into contingent support agreements related to this debt. As of December
31, 1998, $640 million had been used under this facility. See also Note 3 to the
financial statements in the 1998 Annual Report to Stockholders at page 26
therein which is incorporated herein by reference.
Exploration
Exploration work continued through 1998 in areas surrounding Minahasa and
Batu Hijau.
9
<PAGE> 11
MEXICO
In Mexico, Newmont is involved in two projects -- La Herradura, which
commenced production in June 1998, and Mezcala, a 12,000 acre exploration site
in southern Mexico. Newmont has a 44% interest in La Herradura and is earning a
44% interest in Mezcala by investing $15 million over four years of which $14.6
million had been invested through December 31, 1998. The balance of both
projects is held by the Penoles group, a leading Mexican mining company. The
Penoles group will be the operator of Mezcala.
The La Herradura mine is operated by the Penoles group and is located in
northwest Sonora, Mexico. Mining is conducted in two open pits and the ore is
processed by run-of-mine heap-leaching. In 1998, La Herradura produced 29,224
ounces of gold, 12,859 ounces attributable to Newmont at a total cash cost of
$115 per equity ounce. Tables presenting La Herradura mine and leach production
data are set forth on page 46 in the 1998 Annual Report to Stockholders which is
incorporated herein by reference.
EXPLORATION
In 1998, Newmont's total exploration and research expense was $68.4 million
compared with $98.4 million in 1997. These figures exclude capitalized
exploration costs associated with mine development of $12.2 million in 1998 and
$21.3 million in 1997.
Near Fairbanks, Alaska, Newmont continued exploration in 1998 on the True
North property. Under the terms of a joint venture agreement signed with La Teko
Resources, Inc. ("La Teko") in 1995, Newmont has the right to earn a 65%
interest in the property by making cash payments of $6 million to La Teko,
funding $3 million in exploration, and then funding up to $18 million in
additional exploration and development costs. In 1996, Newmont completed its
payment obligations to La Teko, and to date has spent approximately $19.2
million exploring the property of which approximately $17.8 million is
applicable to the earn-in.
Newmont's exploration team has a staff of approximately 195 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.
For information regarding risks associated with exploration and
development, see page 19.
SALES
Newmont'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.
See Note 16 to the financial statements in the 1998 Annual Report to
Stockholders at page 37 therein for information regarding major customers and
export sales which is incorporated herein by reference.
MISCELLANEOUS
Other than operating licenses for mining, processing and refining
facilities built for, or acquired by Newmont, there are no patents, licenses or
franchises material to Newmont's business. In many foreign countries, Newmont
conducts mining or exploration pursuant to concessions granted by or contracts
with the host government. These countries include, among others, Indonesia, Peru
and Mexico. In each case, Newmont believes that such concessions or contracts
are sufficient in extent and duration to justify any proposed investment it
might make based on any such concessions or contracts. In general, such
concessions or contracts are subject to the usual political risks associated
with foreign operations.
Management believes that Newmont's facilities are generally in a state of
good repair. Newmont has a continuous program of capital investment that
includes, as necessary or advisable, the replacement, modernization or expansion
of its equipment and facilities. See "Liquidity and Capital Resources"
discussion in Management's Discussion and Analysis in the 1998 Annual Report to
Stockholders on page 15 therein which is incorporated herein by reference.
10
<PAGE> 12
There were 5,700 persons employed by Newmont worldwide at December 31, 1998
and 6,760 persons employed by Newmont worldwide at December 31, 1997.
PROVEN AND PROBABLE RESERVES
Newmont's equity in proven and probable gold reserves was 52.6 million
ounces at December 31, 1998 and 52.7 million ounces at December 31, 1997. In
addition, Newmont's equity in proven and probable copper reserves was 4.8
billion pounds at December 31, 1998 and 1997.
Proven and probable 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 of proven and
probable gold reserves at December 31, 1998 and 1997 were based on a gold price
of $350 per ounce. Newmont's management believes that if such reserve estimates
were based on a gold price of $325 per ounce using current operating costs and
other current economic assumptions, 1998 year-end proven and probable gold
reserves could decrease by approximately 6%. If such estimates were based on a
gold price of $300 per ounce using current operating costs and other current
economic assumptions, 1998 year-end proven and probable gold reserves could
decrease by approximately 16%. Such potential reduction in reserves would not
have a material impact on Newmont's production rates for the next three years.
After that time, assuming no change in mining plans or Newmont's cost structure,
the impact would be progressively greater. However, if Newmont's gold reserves
were actually calculated at a gold price of $300 per ounce, such calculation
would be based on new mine plans and operating costs to minimize any adverse
impact of any reduction in gold reserves. Newmont's proven and probable gold and
copper reserves represent the total quantity of ore to be extracted from the
deposits or stockpiles allowing for mining efficiencies and ore dilution. Ounces
of gold or pounds of copper in Newmont's proven and probable gold and copper
reserves are prior to any losses during metallurgical treatment. For information
regarding risks associated with Newmont's estimates of its proven and probable
reserves, see page 17.
Newmont's estimate of its proven and probable reserves at December 31, 1998
and 1997 is set forth in the following table.
11
<PAGE> 13
NEWMONT MINING CORPORATION
PROVEN AND PROBABLE RESERVES
<TABLE>
<CAPTION>
DECEMBER 31, 1998 DECEMBER 31, 1997
------------------------------------------ ------------------------------------------
(100%) NEWMONT (100%) NEWMONT
NEWMONT -------------------------------- EQUITY -------------------------------- EQUITY
DEPOSITS WITH PROVEN EQUITY TONNAGE GRADE OUNCES OUNCES TONNAGE GRADE OUNCES OUNCES
AND PROBABLE RESERVES(1)(2) (%) (000 TONS) (OZ/TON) (000) (000) (000 TONS) (OZ/TON) (000) (000)
- --------------------------- ------- ---------- -------- -------- ------- ---------- -------- -------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
GOLD
NORTH AMERICAN
NEVADA
Nevada Open Pit
Carlin North-Post....... 100 9,680 0.180 1,747 1,747 9,680 0.180 1,747 1,747
Carlin North-Genesis
Complex............... 100 20,306 0.033 665 665 21,576 0.033 710 710
Carlin North-Other...... 100 26,382 0.050 1,324 1,324 25,839 0.051 1,323 1,323
Carlin South (includes
Gold
Quarry)............... 100 102,638 0.051 5,261 5,261 135,946 0.048 6,470 6,470
Carlin Rain District.... 100 14,320 0.025 352 352 13,455 0.026 344 344
Twin Creeks............. 100 96,175 0.078 7,484 7,484 109,288 0.075 8,211 8,211
Lone Tree Complex....... 100 54,883 0.059 3,221 3,221 65,120 0.064 4,151 4,151
--------- ----- ------ ------ --------- ----- ------ ------
Total Nevada Open
Pit................. 324,384 0.062 20,054 20,054 380,904 0.060 22,956 22,956
Nevada Underground
Carlin North Area....... 100 2,551 0.641 1,634 1,634 2,889 0.620 1,790 1,790
Deep Post............... 100 2,391 0.813 1,943 1,943 2,430 0.802 1,949 1,949
Goldbug-Barrel.......... 100 2,917 0.391 1,140 1,140 2,917 0.391 1,140 1,140
Carlin North JV (High
Desert)............... 60 7,050 0.425 2,993 1,796 7,050 0.425 2,993 1,796
Carlin Rain District.... 100 374 0.270 101 101 374 0.270 101 101
Rosebud................. 50 484 0.392 190 95 943 0.420 396 198
--------- ----- ------ ------ --------- ----- ------ ------
Total Nevada
Underground......... 15,767 0.507 8,001 6,709 16,603 0.504 8,369 6,974
Stockpiles and
In-Process.............. 100 77,147 0.053 4,115 4,115 71,139 0.053 3,803 3,803
--------- ----- ------ ------ --------- ----- ------ ------
NEVADA TOTALS(3).............. 417,298 0.077 32,170 30,878 468,646 0.075 35,128 33,733
Mesquite, California.......... 100 29,007 0.021 595 595 29,041 0.021 613 613
La Herradura, Mexico(5)....... 44 52,890 0.031 1,638 721 54,408 0.031 1,683 740
--------- ----- ------ ------ --------- ----- ------ ------
TOTAL NORTH AMERICAN.. 446,305 0.073 32,765 31,473 497,687 0.072 35,741 34,346
OVERSEAS
Minera Yanacocha, Peru...... 51
Carachugo................. 51 55,691 0.027 1,491 766 34,018 0.035 1,179 605
Maqui Maqui............... 51 9,789 0.041 400 205 20,632 0.042 875 4 49
San Jose.................. 51 37,367 0.031 1,154 593 47,817 0.028 1,355 696
Yanacocha................. 51 290,028 0.032 9,227 4,738 245,596 0.029 7,167 3,680
La Quinua................. 51 273,061 0.026 7,128 3,660 120,943 0.025 3,002 1,542
Cerro Negro............... 51 23,943 0.027 657 337
In-Process................ 51 12,370 0.045 558 287 7,045 0.043 304 156
--------- ----- ------ ------ --------- ----- ------ ------
Total Yanacocha(4).... 702,249 0.029 20,615 10,586 476,051 0.029 13,882 7,128
Zarafshan-Newmont,
Uzbekistan(6)............. 50 202,381 0.034 6,845 3,422 216,907 0.035 7,510 3,755
Minahasa, Indonesia(7)...... 80 7,207 0.189 1,364 1,091 6,758 0.234 1,583 1,267
--------- ----- ------ ------ --------- ----- ------ ------
TOTAL OVERSEAS........ 964,727 0.032 30,462 15,820 754,124 0.033 24,658 12,890
(EXCLUDING BATU
HIJAU)
Batu Hijau, Indonesia(8)...... 45 1,008,036 0.012 11,849 5,332 1,006,593 0.012 12,096 5,443
------ ------ ------ ------
TOTAL WORLDWIDE-GOLD.. 75,076 52,625 72,495 52,679
====== ====== ====== ======
</TABLE>
<TABLE>
<CAPTION>
COPPER COPPER COPPER COPPER
TONNAGE GRADE (MILLION (MILLION TONNAGE GRADE (MILLION (MILLION
COPPER (000 TONS) (CU%) POUNDS) POUNDS) (000 TONS) (CU%) POUNDS) POUNDS)
- ------ ---------- -------- -------- -------- ---------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Batu Hijau, Indonesia(8).... 45 1,008,036 0.525 10,580 4,761 1,006,593 0.528 10,631 4,784
</TABLE>
12
<PAGE> 14
Numbers may differ slightly from those reported previously as a result of
different deposit groupings yielding different rounding of totals.
- ---------------
(1) The term "reserve" means that part of a mineral deposit which can be
economically and legally extracted or produced at the time of the reserve
determination.
The term "economically," as used in the definition of reserve, implies that
profitable extraction or production has been established or analytically
demonstrated to be viable and justifiable under reasonable investment and
market assumptions.
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 certainty based on applicable laws and
regulations that issuance of 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) Proven and probable reserves in the U.S. were calculated using cut-off
grades as follows: oxide leach material not less than 0.005 ounce per ton;
oxide mill cutoffs varied; refractory leach materials not less than 0.030
ounce per ton at Gold Quarry (which contains 96% of the refractory leach
reserve ounces); refractory mill material not less than 0.043 ounce per ton.
Proven and probable reserves were calculated using different recoveries
depending on each deposit's metallurgical properties and process. The
recoveries utilized in 1998 were as follows: oxide leach recoveries ranged
from 44% to 80% averaging 64%; oxide mill recoveries ranged from 72% to 96%
averaging 86%; refractory leach recoveries at Gold Quarry ranged from 45% to
60%, averaging 56%; refractory mill recoveries ranged from 85% to 93%,
averaging 88%.
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) These reserves are approximately 73% refractory in nature which are not
amenable to the normal cyanidation recovery processes currently used for
oxide material. Such ore must be oxidized before it is subjected to the
normal recovery processes.
(4) Calculated using a cut-off grade not less than 0.011 ounce per ton. Assumed
leach recoveries is 50% to 82%, depending on each deposit's metallurgical
properties. All ore is oxidized.
(5) Calculated using a cut-off grade of 0.01 ounce per ton and a leach recovery
of 61%. All ore is oxidized. Construction began in 1997 and production
commenced in mid-1998.
(6) 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
such designated stockpiles or from other specified sources are guaranteed by
state entities of Uzbekistan. Material is crushed and leached. Ore reserves
calculated using 50% to 65% leach recoveries, depending on material type.
(7) Calculated using a cut-off grade of 0.102 ounce per ton and a mill recovery
of 90% for refractory material. For oxide material a cut-off grade of 0.022
ounce per ton was used and a leach recovery of 62%.
(8) Based on a feasibility study completed in 1996 and updated in 1998.
Production is scheduled to begin in late 1999. Production will be in the
form of copper concentrate. Average recoveries estimated at 93% for copper
and 82% for gold. Cut-off grade and recoveries vary depending on the gold
and copper content.
13
<PAGE> 15
ENVIRONMENTAL MATTERS
General
Newmont's gold mining and processing operations within the U.S. 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, hazardous waste management and mine reclamation. Newmont has
successfully permitted all mine and processing operations and expansion
activities as specified under regulations promulgated by the U.S. and the States
of Nevada and California. Management does not believe that ongoing compliance
with such regulations will have a material adverse effect on its competitive
position. At this time Newmont does not expect any material impact on the future
recurring operating cost of compliance with currently enacted environmental
regulations. Ongoing costs to comply with environmental obligations have not
been significant to Newmont's total operating costs. Since Newmont 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 Newmont. 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
Newmont in terms of increased capital and operating expenditures.
Domestic Operations
It is estimated that with respect to Newmont's Nevada and California
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 $5
million in 1998. It is estimated that Newmont will require approximately $4
million of capital expenditures for environmental compliance in 1999 and
annually thereafter.
Newmont's Nevada and California 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 States of Nevada
and California. Solid waste that is considered "hazardous" is subject to
extensive regulation by the U.S. Environmental Protection Agency (the "EPA") and
the States of Nevada and California 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 States of Nevada and
California. The EPA is developing specific regulations with respect to
"extraction" and "beneficiation" wastes from mining operations under Subtitle D
of RCRA. Newmont is participating in that process. Currently, there is not a
sufficient basis to predict the potential impact of such regulations on Newmont.
Wastes from the "processing" of ores and minerals (including refining wastes) at
Newmont's Nevada and California operations are subject to regulation under
Subtitle C of RCRA. Newmont 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, a
material adverse impact on Newmont's operations.
Newmont's Nevada and California operations are subject to stringent state
permitting regulations for protection of surface and ground water, 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 impoundments
and leaching facilities. Such compliance has not had, and is not expected to
have, a material adverse impact on Newmont's operations.
Mining operations have the potential to produce fugitive dust emissions
which are subject to regulation under the laws of the States of Nevada and
California. 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. Compliance with the federal Clean Air
Act could ultimately increase Newmont's compliance costs for air pollution
permitting and/or control, but the impact on Newmont's mining operations is so
dependent on future regulations and other contingencies that it cannot
reasonably be predicted at this time.
14
<PAGE> 16
Foreign Operations
Newmont's operations outside of the U.S. are also subject to governmental
regulations for the protection of the environment. These regulations have not
had, and are not expected to have, a material adverse impact on Newmont's
operations or its competitive position. Newmont has successfully permitted all
new mine and processing operations as specified under regulations promulgated by
the respective national governments in Peru, Uzbekistan and Indonesia. In
addition, Newmont has mandated that all facilities constructed and operated
outside of the U.S. materially comply with a level of environmental protection
that is equivalent to that for its U.S. operations. Nevertheless, the adoption
of new laws or regulations, or amendments to current laws or regulations,
regarding the operations and activities of mining companies could have a
material adverse impact on Newmont's capital and operating expenditures.
Minera Yanacocha has an advisory role on the Ministry of Energy and Mines
environmental affairs group to provide technical assistance with the development
of achievable environmental strategies for Peru's mining industry.
All Newmont-managed international projects have adopted and implemented
environmental policies and procedures developed by Newmont. Newmont is committed
to educating and training mine operations, exploration and environmental
personnel to meet the highest levels of environmental standards. Newmont
maintains an international environmental compliance program which utilizes state
of the art compliance monitoring protocols and builds and maintains facilities
with high levels of environmental protection and monitoring equipment.
Former Operations
Newmont is involved in matters involving environmental cleanup obligations
arising from past mining activities (not in all cases conducted by Newmont) at
three separate locations. Idarado Mining Company, an 80.1% owned subsidiary of
Newmont, 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 Newmont, is a defendant in lawsuits
brought by the State of Colorado and the U.S. for environmental remediation in
the Leadville, Colorado area. Dawn Mining Company, a 51% owned subsidiary of
Newmont, has filed reclamation 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 these
three sites in 1998. At Idarado, remediation work was completed in 1998. If such
remediation work does not achieve specific performance objectives defined in the
consent decree, the State of Colorado may require Idarado to implement
supplemental activities, also as specified in the consent decree. At December
31, 1998 Newmont had an aggregate $44.9 million accrued for remediation of these
four sites and other sites, a decrease of $7.3 million accrued at the end of
1997, as a result of 1998 expenditures and changes in estimated future
remediation costs, net of expenditures incurred in 1998. See also "Environmental
and Other" discussion in Management's Discussion and Analysis in the 1998 Annual
Report to Stockholders on page 16 therein and Note 18 to the financial
statements in the 1998 Annual Report to Stockholders on page 39 therein which
are incorporated herein by reference.
FORWARD-LOOKING STATEMENTS
Certain statements contained herein (including information incorporated by
reference) are "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.
15
<PAGE> 17
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 future results expressed or implied by such
forward-looking statements. Important factors that could cause actual results to
differ materially from such forward-looking statements ("cautionary statements")
are described below. See also "Safe Harbor Statement" discussion in Management's
Discussion and Analysis in the 1998 Annual Report to Stockholders on page 17
therein which is included herein by reference. Given these uncertainties,
readers are cautioned not to place undue reliance on such 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, or incorporated herein by reference, whether as a result of new
information, future events or otherwise.
RISK FACTORS
Gold and Copper Price Volatility
The cash flows and profitability of Newmont's operations are significantly
affected by changes in the market price of gold. Market gold prices can
fluctuate widely and are affected by numerous factors beyond Newmont'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, gold sales
and loans by central banks, 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
production from mining 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 revenue from gold sales falls for a substantial period below Newmont's
cost of production at its operations, Newmont could determine that it is not
economically feasible to continue commercial production at some or all of its
operations or to continue the development of some or all of its projects.
Newmont's weighted average total cash cost of equity production for its
worldwide operations was $183 per ounce of gold sold in 1998, $187 in 1997 and
$218 in 1996. See also "Gold Price" discussion in Management's Discussion and
Analysis in the 1998 Annual Report to Stockholders on page 10 therein which is
incorporated herein by reference.
16
<PAGE> 18
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 fixing prices for gold per ounce on the London Bullion
Market:
<TABLE>
<CAPTION>
YEAR HIGH LOW AVERAGE
- ---- ---- ---- -------
<S> <C> <C> <C>
1989.................................................... $416 $356 $381
1990.................................................... $424 $346 $383
1991.................................................... $403 $344 $362
1992.................................................... $360 $330 $344
1993.................................................... $406 $326 $360
1994.................................................... $396 $370 $384
1995.................................................... $396 $372 $384
1996.................................................... $415 $367 $388
1997.................................................... $367 $283 $331
1998.................................................... $313 $273 $294
1999 through March 26).................................. $294 $279 $287
</TABLE>
- ---------------
Source of Data: Metals Week and Reuters.
On March 26, 1999, the afternoon fixing price for gold on the London
Bullion Market and the spot market price of gold per ounce on the New York
Commodity Exchange was $279.
The Batu Hijau copper/gold project is expected to commence operations in
late 1999. The cash flow and profitability of this project will be significantly
affected by changes in the market price of copper. Copper prices fluctuate
widely and are affected by numerous factors beyond Newmont's control or ability
to predict, including but not limited to domestic and international economic and
political conditions, industry inventory levels and capacity, global and
regional demand and production, the availability and costs of substitute
materials, speculative activities and inflationary expectations.
Newmont may use commodity instruments to protect the selling price of
certain anticipated gold and copper production. Although the use of such
instruments could protect Newmont against low gold and copper prices, it might
also prevent full participation in subsequent increases in the market prices for
gold and copper with respect to covered production.
Production Estimates
Estimates of future production for particular properties for Newmont as a
whole are derived from annual mining plans prepared by Newmont. Such plans have
been developed based on, among other things, mining experience, reserve
estimates, assumptions regarding ground conditions and physical characteristics
of ores (such as hardness and presence or absence of certain metallurgical
characteristics) and estimated rates and cost of production. Actual production
may vary from estimates for a variety of reasons, including risks and hazards of
the types discussed, actual ore mined varying from estimates of grade and
metallurgical and other characteristics, mining dilution, pitwall failures or
cave-ins, strikes and other actions by labor at unionized locations,
restrictions imposed by government agencies and other factors. Estimates of
production from properties not yet in production or from operations that are to
be expanded are based on similar factors (including, in some instances,
feasibility reports prepared by company personnel and/or outside consultants)
but, as such estimates do not have the benefit of actual experience, there is a
greater likelihood that actual results will vary from the estimates.
Ore Reserve Estimates
The proven and probable reserve figures presented herein are estimates, and
no assurance can be given that the indicated levels of recovery of gold and
copper will be realized. Reserve estimates may require revision based on actual
production experience. Market price fluctuations of gold and copper, as well as
increased production costs or reduced recovery rates, could render Newmont's
proven and probable gold and copper
17
<PAGE> 19
reserves containing relatively lower grades of mineralization uneconomic to
exploit and may ultimately result in a reduction of reserves.
Regulation, Environmental Risks and Unpatented Mining Claims
Mining is subject to potential risks and liabilities associated with
pollution of the environment and the disposal of waste products occurring as a
result of mineral exploration and production. Newmont has been, and may in the
future be, subject to clean-up liability under the Comprehensive Environmental
Response, Compensation and Liability Act of 1980 and comparable state laws which
establish clean-up liability for the release of hazardous substances. Newmont
has interests in certain sites associated with former mining activities for
which clean-up liabilities exist. Although Newmont believes it has made adequate
provisions in its financial statements for clean-up costs, it cannot guarantee
that such provisions will be adequate. In the context of environmental
permitting, including the approval of reclamation plans, Newmont must comply
with existing standards, laws and regulations which may entail greater or lesser
costs and delays depending on the nature of the activity to be permitted and how
such standards, laws and regulations are interpreted or implemented by the
permitting authority. Domestic and foreign mining operations and exploration
activities are subject to extensive laws and regulations governing prospecting,
development, production, exports, taxes, labor standards, occupational health,
waste disposal, protection and remediation of the environment, protection of
endangered and protected species, mine safety, toxic substances and other
matters. It is possible that the costs and delays associated with the compliance
with such standards, laws, regulations and permits could result in Newmont not
proceeding with the development of a project or the operation or further
development of a mine.
Amendments to current laws and regulations governing operations and
activities of mining companies are actively considered from time to time and
could have a material adverse impact on Newmont.
In recent years, the U.S. Congress has considered a number of proposed
amendments to the General Mining Law of 1872, as amended (the "General Mining
Law"), which governs mining claims and related activities on U.S. federal lands.
Although no such legislation has been adopted to date, there can be no
assurances that such legislation will not be adopted in the future. If ever
adopted, such legislation could, among other things, impose royalties on gold
production from currently unpatented mining claims located on U.S. federal
lands. If such legislation is ever adopted, it could reduce the amount of future
exploration and development activity conducted by Newmont on such U.S. federal
lands. In addition, in 1992, a holding fee of $100 per claim was imposed upon
unpatented mining claims located on U.S. 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. As of December
31, 1998, approximately 77.5% of Newmont's proven and probable reserves in the
U.S. are located on private land. The remainder are located on unpatented mining
claims on U.S. federal lands. Of those, 13.6% of Newmont's proven and probable
reserves in the U.S. are located on unpatented mining claims for which Newmont
received first half final entry certificates before the imposition of the
moratorium and is pursuing patenting under the General Mining Law.
Risks of Foreign Investments
Certain of Newmont's activities are located in foreign countries which are
subject to the risks normally associated with conducting business in foreign
countries. Such countries are often less developed or have an emerging economy,
including uncertain political and economic environments, as well as risks of war
and civil disturbances or other risks which may limit or disrupt a project,
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, risk of adverse changes in laws or policies of particular
countries, increases in foreign taxation, delays in obtaining or the inability
to obtain necessary governmental permits, limitations on ownership and on
repatriation of earnings, and foreign exchange controls and currency
devaluations. Although Newmont 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. While political risk insurance
has been obtained to cover portions of Newmont's investments in Peru, Indonesia
and Uzbekistan against certain expropriation, war, civil unrest and political
violence risks, such insurance is limited by its terms to the particular risks
18
<PAGE> 20
specified therein and is subject to certain exclusions. There can 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
and taxation. See also "Foreign Currency" discussion in Management's Discussion
and Analysis in the 1998 Annual Report to Stockholders on page 11 therein which
is incorporated herein by reference.
In certain of the countries other than the U.S. where Newmont has
operations or conducts exploration activities, the mineral rights are owned by
the relevant governments. Such governments have entered into contracts with or
granted concessions that enable Newmont to conduct operations or exploration
activities on such lands. Notwithstanding such arrangements, Newmont's ability
to conduct its operations or exploration activities on such lands is subject to
changes in government policy over which Newmont has no control. If such a change
were to occur that affected the right of Newmont to conduct operations or
exploration activities, it could have a material adverse impact on Newmont.
Speculative Nature of Gold Exploration and Uncertainty of Development Projects
Gold exploration is highly speculative in nature, involves many risks and
frequently is nonproductive. Success in increasing reserves is the result of a
number of factors, including the quality of Newmont's management, its level of
geological and technical expertise, the quality of land available for
exploration and other factors. Once gold mineralization is discovered, it may
take several 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 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. As a result of these uncertainties, no assurance can be given that
Newmont's exploration programs will be successful.
With respect to development projects which have no operations history,
estimates of proven and probable reserves and cash operating costs are, to a
large extent, based upon the interpretation of geologic data obtained from drill
holes and other sampling techniques, and feasibility studies which derive
estimates of cash operating costs based upon anticipated tonnage and grades of
ore to be mined and processed, the configuration of the ore body, expected
recovery rates of the gold from the ore, comparable facility and equipment
operating costs, anticipated climatic conditions and other factors. As a result,
it is possible that actual cash operating costs and economic returns may differ
significantly from those currently estimated. It is not unusual in new mining
operations to experience unexpected problems during the start-up phase. Delays
often can occur in the commencement of production.
Mining Risks and Risk of Nonavailability of Insurance
The business of gold mining is subject to a number of risks and hazards,
including environmental hazards, industrial accidents, labor disputes,
encountering unusual or unexpected geologic formations or other geological or
grade problems, encountering unanticipated ground or water conditions, cave-ins,
pitwall failures, flooding, rock falls, periodic interruptions due to inclement
or hazardous weather conditions or other unfavorable operating conditions and
other acts of God and gold bullion losses. 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.
Newmont maintains insurance against risks that are typical in the operation
of its business and in amounts that it believes to be reasonable. Such
insurance, however, contains exclusions and limitations on coverage. There can
be no assurance that such insurance will continue to be available, will be
available at economically acceptable premiums or will be adequate to cover any
resulting liability.
Proposed Repeal of Percentage Depletion for Nonfuel Minerals Mined on Certain
Federal Lands
Newmont presently benefits from the percentage depletion allowance
permitted under current U.S. tax law. Subject to limitations, taxpayers may
claim deductions for the depletion of mineral resources. Such deductions may be
based upon the taxpayer's tax cost of the mineral resources ("cost depletion")
or upon a
19
<PAGE> 21
percentage of the gross revenues or net income from sales of the mineral
resources ("percentage depletion"). There are proposals which would repeal the
present percentage depletion provisions for nonfuel minerals, including gold,
extracted from any land where title to the land or the right to extract minerals
from such land was originally obtained pursuant to the provisions of the General
Mining Law. The proposals are stated only in general terms and do not provide
specific details as to their potential operation, including the lands that will
ultimately be affected. It is uncertain whether the repeal of these provisions
will ultimately be adopted. If adopted, however, such repeal could have an
adverse effect on the results of operations of Newmont. The magnitude of such
effect cannot be determined presently, but would be affected by several factors,
including the specific landholdings of Newmont that are actually impacted, the
level of future production from such landholdings and future gold prices.
ITEM 3. LEGAL PROCEEDINGS
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, the Yak Tunnel, and adjacent property, and seek
remedial actions and damages from a number of defendants, including Newmont and
Resurrection Mining Company ("Resurrection") which is a partner with ASARCO
Incorporated 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 CERCLA administrative process. During 1995 and 1996, Resurrection
implemented and completed remedial action at selected locations, and development
of feasibility studies were sent to the EPA for approval in 1997. Remedial
activities were conducted in 1998 and will continue in 1999. The precise nature
of the final remedial activities is subject to EPA and State of Colorado review
and selection and public comment. At this time, the precise remedy and cost have
not been fixed. The proposed settlement also requires Resurrection to reimburse
the EPA and the State of Colorado for their 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 also Note 18 to the financial statements in the 1998 Annual
Report to Stockholders on page 39 therein which is incorporated herein by
reference.
In December 1996, Santa Fe entered into a definitive merger agreement with
Homestake Mining Company ("Homestake") and a subsidiary of Homestake, subsequent
to discussions during November 1996 with both Homestake and the Corporation
regarding potential business combinations. In January 1997, the Corporation
announced a proposal for a business combination with Santa Fe. Santa Fe
commenced discussions with the Corporation in January 1997 and in March 1997,
the merger agreement between Homestake and Santa Fe was terminated and Santa Fe
entered into a merger agreement with the Corporation. In December 1996, six
Santa Fe stockholders filed class action complaints against Santa Fe and Santa
Fe's Board of Directors (collectively, "Defendants"). The complaints alleged,
among other things, that members of the Santa Fe Board of Directors breached
their fiduciary responsibilities to Santa Fe's stockholders by failing to
consider fully the Corporation's proposal to acquire Santa Fe and the Santa Fe
Board of Directors approved the Homestake merger transaction to ensure that
certain of the defendants would retain their positions. Subsequent to the
consummation of the Santa Fe Merger, the plaintiffs dismissed the complaints but
sought to have the Delaware Court of Chancery retain jurisdiction for the
purpose of determining whether plaintiffs' counsel were entitled to an award of
attorneys' fees. On November 30, 1998, plaintiffs voluntarily withdrew their
complaints and the Court ordered the litigation dismissed without prejudice.
20
<PAGE> 22
For a description of the litigation involving Newmont's ownership interest
in Minera Yanacocha, see Note 4 to the financial statements in the 1998 Annual
Report to Stockholders at page 26 therein which is incorporated herein by
reference.
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,
1998.
EXECUTIVE OFFICERS OF THE REGISTRANT
The Corporation's executive officers as of March 4, 1999 were:
<TABLE>
<CAPTION>
NAME AGE OFFICE
---- --- ------
<S> <C> <C>
Ronald C. Cambre...................... 60 Chairman, President and Chief
Executive Officer
Wayne W. Murdy........................ 54 Executive Vice President and Chief
Financial Officer
John A. S. Dow........................ 53 Senior Vice President, Exploration
David H. Francisco.................... 49 Senior Vice President, International
Operations
Lawrence T. Kurlander................. 59 Senior Vice President and Chief
Administrative Officer
W. James Mullin....................... 53 Senior Vice President, North American
Operations
David A. Baker........................ 44 Vice President, Government and
Environmental Affairs
Patricia A. Flanagan.................. 40 Vice President, Treasurer and
Assistant Secretary
Bruce D. Hansen....................... 41 Vice President, Project Development
Joy E. Hansen......................... 53 Vice President and General Counsel
Donald G. Karras...................... 45 Vice President, Taxes
Linda K. Wheeler...................... 45 Vice President and Controller
</TABLE>
There are no family relationships by blood, marriage or adoption among any
of the above executive officers of the Corporation. All executive officers are
elected annually by the Board of Directors of the Corporation 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.
Mr. Cambre was elected Chairman of the Corporation in November 1994
(effective January 1995), President in June 1994 and Chief Executive Officer in
September 1993 (effective November 1993). He served as Vice Chairman of the
Corporation from November 1993 through December 1994.
Mr. Murdy was elected Executive Vice President of the Corporation in July
1996 and designated Chief Financial Officer effective in December 1992. He
served as a Senior Vice President of the Corporation from December 1992 to July
1996.
Mr. Dow was elected Senior Vice President, Exploration of the Corporation
in July 1996. He served as Vice President, Exploration of the Corporation from
April 1992 to July 1996.
Mr. Francisco was elected Senior Vice President, International Operations
of the Corporation in November 1998. He also has served as Senior Vice
President, International Operations of NGC since May 1997. Previously, he served
as Vice President, International Operations of NGC from July 1995 to May 1997.
Prior thereto, 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.
21
<PAGE> 23
Mr. Kurlander was elected Senior Vice President and Chief Administrative
Officer of the Corporation in May 1997. Previously, he served as Senior Vice
President, Administration of the Corporation from March 1994 to May 1997. Prior
thereto, he served as Senior Vice President, Public Affairs and Government
Affairs, of Nabisco International Inc. of RJR Nabisco, Inc., a consumer products
company since 1992.
Mr. Mullin was elected Senior Vice President, North American Operations of
the Corporation in November 1998. He also has served as Senior Vice President,
North American Operations of NGC since 1997. Previously, he served as Vice
President and Regional Director, Nevada Operations of NGC from May 1994 to May
1997, and prior thereto he served as Vice President and General Manager of NGC
from December 1993 to May 1994.
Mr. Baker was elected Vice President, Government and Environmental Affairs
of the Corporation in November 1998. He also has served as Vice President,
Environmental Affairs of NGC since 1991 and Vice President, Governmental Affairs
of NGC since November 1998.
Ms. Flanagan was elected a Vice President of the Corporation in March 1995
and was elected Treasurer in December 1992. She was appointed Assistant
Secretary in June 1992.
Mr. Hansen was elected Vice President, Project Development of the
Corporation in November 1998. He also has served as Vice President, Project
Development of NGC since May 1997. Previously, he served as Senior Vice
President, Corporate Development of Santa Fe from April 1994 to May 1997 and
prior thereto held various senior positions with Santa Fe since 1982.
Ms. Hansen was elected Vice President and General Counsel of the
Corporation in September 1996. She also has served as Vice President and General
Counsel of NGC since July 1996. Previously, she served as Vice President and
Associate General Counsel of NGC from March 1995 to July 1996 and prior to that
she served as Associate General Counsel of NGC.
Mr. Karras has served as Vice President, Taxes of the Corporation since
November 1992.
Ms. Wheeler was elected Vice President of the Corporation in November 1998
and Controller of the Corporation in May 1997. Previously, she served as
Controller of Santa Fe from May 1994 to May 1997, and prior thereto held various
management positions with Santa Fe.
22
<PAGE> 24
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
The Corporation's common stock is listed and principally traded on the New
York Stock Exchange (under the symbol NEM) and is also listed on the Paris
Bourse, the Brussels Stock Exchange, the Swiss Stock Exchange and the Lima Stock
Exchange. The following table sets forth, for the periods indicated, the high
and low sales prices per share of the Corporation's common stock as reported on
the New York Stock Exchange Composite Tape.
<TABLE>
<CAPTION>
1998 1997
--------------- ---------------
HIGH LOW HIGH LOW
------ ------ ------ ------
<S> <C> <C> <C> <C>
First quarter.............................................. $31.63 $23.75 $47.50 $38.25
Second quarter............................................. $34.88 $21.75 $39.88 $33.50
Third quarter.............................................. $25.25 $13.25 $45.88 $35.25
Fourth quarter............................................. $30.31 $16.25 $45.63 $26.56
</TABLE>
On March 4, 1999, there were approximately 26,064 stockholders of record of
the Corporation's common stock. A dividend of $0.03 per share of common stock
outstanding was declared in each quarter of 1998, or a total of $0.12 per share
for such year. In 1997, a dividend of $0.12 per share of common stock
outstanding was declared in the first three quarters and $0.03 per share in the
fourth quarter, or a total of $0.39 per share for such year. The determination
of the amount of future dividends, however, will be made by the Corporation's
Board of Directors from time to time and will depend on the Corporation's future
earnings, capital requirements, financial condition and other relevant factors.
ITEM 6. SELECTED FINANCIAL DATA
<TABLE>
<CAPTION>
1998 1997 1996 1995 1994
-------- -------- -------- -------- --------
(IN MILLIONS, EXCEPT PER SHARE)
<S> <C> <C> <C> <C> <C>
FOR THE YEARS ENDED DECEMBER 31,
Sales...................................... $1,453.9 $1,572.8 $1,105.7 $ 981.6 $ 967.5
Income (loss) before cumulative effect of
change in accounting principle........... $ (360.5) $ 68.4 $ 98.6 $ 147.7 $ 127.4
Net income (loss)(1)....................... $ (393.4) $ 68.4 $ 98.6 $ 147.7 $ 127.4
Income (loss) per common share:
Before cumulative effect of change in
accounting principle.................. $ (2.27) $ 0.44 $ 0.63 $ 0.95 $ 0.80
Net income(1)............................ $ (2.47) $ 0.44 $ 0.63 $ 0.95 $ 0.80
Dividends declared per common share(2)..... $ 0.12 $ 0.39 $ 0.48 $ 0.48 $ 0.48
AT DECEMBER 31,
Total assets............................... $3,186.8 $3,614.0 $3,282.1 $2,710.0 $2,429.0
Long-term debt, including current
portion.................................. $1,248.7 $1,222.7 $1,059.1 $ 808.5 $ 683.6
Stockholders' equity....................... $1,439.5 $1,591.1 $1,562.8 $1,267.3 $1,171.1
</TABLE>
- ---------------
(1) Net loss in 1998 includes the cumulative effect of changing the accounting
method for start-up costs of $32.9 million ($0.21 per share), net of tax.
(2) In the years 1994 through 1996, Newmont declared dividends of $0.48 per
Newmont common share. Santa Fe declared dividends of $0.05 per Santa Fe
common share in 1996 an 1995. Prior to 1995, Santa Fe paid dividends to
another company as its then wholly-owned subsidiary.
23
<PAGE> 25
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
The information set forth under the caption "Management's Discussion and
Analysis" in the 1998 Annual Report to Stockholders on pages 10 through 17
therein is incorporated herein by reference.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
The information set forth under the caption "Market Conditions and Risks"
in Management's Discussion and Analysis in the 1998 Annual Report to
Stockholders on page 10 therein is incorporated herein by reference.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The information set forth in the 1998 Annual Report of Stockholders on
pages 17 through 42, 46 and 47 therein is incorporated herein by reference.
ITEM 9. CHANGES IN DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL
DISCLOSURE
There have been no disagreements with Arthur Andersen LLP, the
Corporation'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 the Corporation's directors will be contained in the
Corporation's definitive Proxy Statement to be filed pursuant to Regulation 14A
promulgated under the Securities Exchange Act of 1934 for the 1999 annual
meeting of stockholders and is incorporated herein by reference. Information
concerning the Corporation's executive officers is set forth under Part I of
this Report.
ITEM 11. EXECUTIVE COMPENSATION
Information concerning this item will be contained in the Corporation's
definitive Proxy Statement to be filed pursuant to Regulation 14A promulgated
under the Securities Exchange Act of 1934 for the 1999 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 the Corporation's
definitive Proxy Statement to be filed pursuant to Regulation 14A promulgated
under the Securities Exchange Act of 1934 for the 1999 annual meeting of
stockholders and is incorporated herein by reference.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Not applicable.
24
<PAGE> 26
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
The financial statements, together with the report thereon of Arthur
Andersen LLP dated January 27, 1999, included as Exhibit 13, are incorporated by
reference in this Form 10-K Annual Report. The report of Price Waterhouse LLP
dated February 1, 1997, except for the fifth paragraph of Note 1, which is as of
March 10, 1997 is included herein as Exhibit 13(a).
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Report of Independent Public Accountants.................... *
Statements of Consolidated Income........................... *
Consolidated Balance Sheets................................. *
Statements of Consolidated Changes in Stockholders'
Equity.................................................... *
Statements of Consolidated Cash Flows....................... *
Notes to Consolidated Financial Statements.................. *
Financial Statements of Nusa Tenggara Partnership,
V.O.F. ................................................... NT-1
</TABLE>
- ---------------
* See Exhibit 13.
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.
3. EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
------- -----------
<C> <S>
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 or 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 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(b)/4(c). -- First Amendment dated November 27, 1990 and Second
Amendment dated December 7, 1990 to the aforementioned
Rights Agreement dated August 30, 1990. Incorporated by
reference to Exhibits 2 and 3, respectively, to
registrant's Form 8 dated December 7, 1990.
4(d). -- 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.
</TABLE>
25
<PAGE> 27
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
------- -----------
<C> <S>
4(e). -- 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.
4(f). -- In reliance upon Item 601(b)(4)(iii) of Regulation S-K,
various instruments defining the rights of holders of
long-term debt of the registrant are not being filed
herewith because the total of securities authorized under
each such instrument does not exceed 10% of the total
assets of registrant. Registrant hereby agrees to furnish
a copy of any such instrument to the Commission upon
request
4(g). -- Pass Through Trust Agreement dated as of July 15, 1994
between Newmont Gold Company and The First National Bank
of Chicago relating to the Pass Through Certificates,
Series 1994-A1. (The front cover of this Exhibit
indicates the material differences between such Exhibit
and the substantially similar (except for price-related
information) Pass-Through Agreement between Newmont Gold
Company and The First National Bank of Chicago relating
to the Pass-Through Certificates, Series 1994-A2.)
Incorporated by reference to Exhibit 4.1 to Newmont Gold
Company's Quarterly Report on form 10-Q for the quarter
ended September 30, 1994.
4(h). -- Lease dated as of September 30, 1994 between Newmont Gold
Company and Shawmut Bank Connecticut, National
Association relating to Trust No. 1 and a 75% undivided
interest in Newmont Gold Company's refractory gold ore
treatment facility. (The front cover of this Exhibit
indicates the material differences between such Exhibit
and the substantially similar (except for price-related
information) entered into on the same date relating to
the remaining 25% undivided interest in the facility.)
Incorporated by reference to Exhibit 4.2 to Newmont Gold
Company's Quarterly Report on Form 10-Q for the quarter
ended September 30, 1994.
4(i). -- Trust Indenture and Security Agreement dated as of July
15, 1994 between Shawmut Bank Connecticut, National
Association and The First National Bank of Chicago
relating to Trust No. 1 and a 75% undivided interest in
Newmont Gold Company's refractory gold ore treatment
facility. (The front cover of this Exhibit indicates the
material differences between such Exhibit and the
substantially similar (except for price-related
information) entered into on the same date relating to
the remaining 25% undivided interest in the facility.)
Incorporated by reference to Exhibit 4.3 to Newmont Gold
Company's Quarterly Report on Form 10-Q for the quarter
ended September 30, 1994.
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). -- 1996 Employees Stock Plan amended and restated effective
as of March 17, 1999.
10(e). -- 1999 Employees Stock Plan
10(f). -- Agreement dated October 15, 1993, effective November 1,
1993, among registrant, Newmont Gold Company 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.
</TABLE>
26
<PAGE> 28
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
------- -----------
<C> <S>
10(g). -- Amendment No. 1, dated June 24, 1997, to Agreement dated
October 15, 1993, effective November 1, 1993 among
registrant, Newmont Gold Company and Ronald C. Cambre.
Incorporated by reference to Exhibit 10 to registrant's
Quarterly Report on Form 10-Q for the quarter ended June
30, 1997.
10(h). -- Letter Agreement dated December 15, 1993, between Newmont
Gold Company and registrant. Incorporated by reference to
Exhibit A to registrant's Proxy Statement dated February
16, 1994.
10(i). -- Tax Sharing Agreement dated as of January 1, 1994 between
registrant and Newmont Gold Company. Incorporated by
reference to Exhibit 10(i) to registrant's Annual Report
on Form 10-K for the year ended December 31, 1994.
10(j). -- Letter Agreement dated May 6, 1993 between Newmont Gold
Company and Wayne W. Murdy. Incorporated by reference to
Exhibit 10 to Newmont Gold Company's Quarterly Report on
Form 10-Q for the quarter ended March 31, 1993.
10(k). -- Agreement dated September 8, 1998 (effective August 6,
1998) between Newmont Gold Company and Lawrence T.
Kurlander. Incorporated by reference to Exhibit 10 to
Newmont Gold Company's Quarterly Report on Form 10-Q for
the quarter ended September 30, 1998.
10(l). -- Newmont Gold Company Annual Incentive Compensation Plan
(amended and restated as of January 1, 1998).
10(m). -- Newmont Gold Company Intermediate Term Incentive
Compensation Plan (amended and restated as of January 1,
1998).
10(n). -- Executive Change of Control Severance Plan dated as of
February 1, 1999.
10(o). -- Directors' Stock Award Plan.
10(p). -- Certificate of Ownership and Merger merging NGC
Acquisition Co. into Newmont Gold Company dated as of
October 6, 1998.
12. -- Statement re Computation of Ratio of Earnings to Fixed
Charges.
13. -- Those portions of registrant's 1998 Annual Report to
Stockholders that are incorporated herein by reference.
13(a). -- Report of Price Waterhouse LLP.
21. -- Subsidiaries of registrant.
23(a). -- Consent of Arthur Andersen LLP.
23(b). -- Consent of PriceWaterhouseCoopers LLP.
24. -- Power of Attorney.
27. -- Financial Data Schedules.
</TABLE>
(b) Reports on Form 8-K:
None.
27
<PAGE> 29
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 31, 1999
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>
* Chairman, President and Chief
- ----------------------------------------------------- Executive Officer and
Ronald C. Cambre Director
* Director
- -----------------------------------------------------
James T. Curry, Jr.
* Director
- -----------------------------------------------------
Joseph P. Flannery
* Director
- -----------------------------------------------------
Thomas A. Holmes
* Director
- -----------------------------------------------------
George B. Munroe
* Director March 31, 1999
- -----------------------------------------------------
Robin A. Plumbridge
* Director
- -----------------------------------------------------
Robert H. Quenon
* Director
- -----------------------------------------------------
Moeen A. Qureshi
* Director
- -----------------------------------------------------
Michael K. Reilly
* Director
- -----------------------------------------------------
Jean Head Sisco
* Director
- -----------------------------------------------------
James V. Taranik
</TABLE>
28
<PAGE> 30
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<C> <S> <C>
* Director
- -----------------------------------------------------
William I. M. Turner, Jr.
* Executive Vice President and
- ----------------------------------------------------- Chief Financial Officer
Wayne W. Murdy (Principal Financial Officer) March 31, 1999
* Vice President and Controller
- ----------------------------------------------------- (Principal Accounting
Linda K. Wheeler Officer)
*By /s/ TIMOTHY J. SCHMITT
-------------------------------------------------
Timothy J. Schmitt as
Attorney-in-fact
</TABLE>
29
<PAGE> 31
NUSA TENGGARA PARTNERSHIP V.O.F.
(A GENERAL PARTNERSHIP IN THE DEVELOPMENT STAGE)
STATEMENTS OF OPERATIONS
(Amounts in thousands of United States dollars)
<TABLE>
<CAPTION>
From
January 1, 1997
Years Ended December 31, through
--------------------------- December 31,
1998 1997 1998
-------- -------- ---------------
<S> <C> <C> <C>
Revenues
Interest income $ 93 $ 540 $ 633
-------- -------- --------
Expenses
Depreciation (120) (95) (215)
Exploration (1,471) (2,233) (3,704)
General and administrative (194) (765) (959)
Other (17,592) (45) (17,637)
-------- -------- --------
Total expenses (19,377) (3,138) (22,515)
-------- -------- --------
Net loss before cumulative effect of a change in accounting
principle (19,284) (2,598) (21,882)
Cumulative effect of a change in accounting principle (50,126) -- (50,126)
-------- -------- --------
Net Loss $(69,410) $ (2,598) $(72,008)
======== ======== ========
</TABLE>
The accompanying notes are an integral part of these financial statements.
NT-1
<PAGE> 32
NUSA TENGGARA PARTNERSHIP V.O.F.
(A GENERAL PARTNERSHIP IN THE DEVELOPMENT STAGE)
BALANCE SHEETS
(Amounts in thousands of United States dollars)
<TABLE>
<CAPTION>
At December 31,
-----------------------
1998 1997
---------- --------
<S> <C> <C>
ASSETS
- -------------------------------------------------------
Current Assets
Cash and cash equivalents $ 5,694 $ 15,682
Accounts receivable from affiliates 159 168
Inventories 8,181 --
Other 3,542 470
---------- --------
Current Assets 17,576 16,320
---------- --------
Non-Current Assets
Property, plant and mine development - net 1,430,260 664,397
Loan receivable from P.T. Pukuafu Indah 17,120 2,200
Debt issuance costs 25,446 24,056
Taxes receivable 61,572 7,494
Deferred partnership organization costs -- 984
Other 100 121
---------- --------
Non-Current Assets 1,534,498 699,252
---------- --------
Total Assets $1,552,074 $715,572
========== ========
LIABILITIES AND PARTNERS' EQUITY
- -------------------------------------------------------
Current Liabilities
Accounts payable and accrued expenses $ 110,045 $105,294
Accounts payable affiliates 37,236 27,224
Taxes payable 5,785 2,157
---------- --------
Current Liabilities 153,066 134,675
Long-term debt 640,000 --
---------- --------
Total Liabilities 793,066 134,675
---------- --------
Commitments and contingencies (Notes 2, 12, 13) -- --
Minority interest in P.T. Newmont Nusa Tenggara 17,120 2,200
---------- --------
Partners' Equity
Capital account - Newmont Indonesia Limited 417,312 325,517
Capital account - Nusa Tenggara Mining Corporation 324,576 253,180
---------- --------
Total Partners' Equity 741,888 578,697
---------- --------
Total Liabilities and Partners' Equity $1,552,074 $715,572
========== ========
</TABLE>
The accompanying notes are an integral part of these financial statements.
NT - 2
<PAGE> 33
NUSA TENGGARA PARTNERSHIP V.O.F.
(A GENERAL PARTNERSHIP IN THE DEVELOPMENT STAGE)
STATEMENTS OF CHANGES IN PARTNERS' EQUITY
(Amounts in thousands of United States dollars)
<TABLE>
<CAPTION>
NIL NTMC
56.25% 43.75% Total
--------- --------- ---------
<S> <C> <C> <C>
Allocation of cumulative losses of PTNNT as of December 31, 1996
as provided for in the partnership agreement $ (23,265) $ (18,095) $ (41,360)
Contributions on initial funding date (see Note 3):
Cash contributions -- 163,960 163,960
Non-cash contributions - agreed value 306,201 -- 306,201
Deferred contributions related to initial funding:
Cash contributions -- 75,333 75,333
Non-cash contributions - agreed value 1,461 -- 1,461
Cash contributions 42,581 33,119 75,700
Net loss for the year (1,461) (1,137) (2,598)
--------- --------- ---------
Balance at December 31, 1997 325,517 253,180 578,697
Cash contributions 130,838 101,763 232,601
Net loss for the year (39,043) (30,367) (69,410)
--------- --------- ---------
Balance at December 31, 1998 $ 417,312 $ 324,576 $ 741,888
========= ========= =========
</TABLE>
The accompanying notes are an integral part of these financial statements.
NT - 3
<PAGE> 34
NUSA TENGGARA PARTNERSHIP V.O.F.
(A GENERAL PARTNERSHIP IN THE DEVELOPMENT STAGE)
STATEMENTS OF CASH FLOWS
(Amounts in thousands of United States dollars)
<TABLE>
<CAPTION>
From
January 1, 1997
Years Ended December 31, through
-------------------------- December 31,
1998 1997 1998
--------- --------- ---------------
<S> <C> <C> <C>
Operating Activities
Net loss $ (69,410) $ (2,598) $ (72,008)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation 120 95 215
Cumulative effect of a change in an accounting principle 50,126 -- 50,126
Decrease in net working capital related to operating activities (1,361) -- (1,361)
--------- --------- -----------
Net cash used in operating activities (20,525) (2,503) (23,028)
--------- --------- -----------
Investing Activities
Additions to property, plant and mine development (845,754) (257,407) (1,103,161)
Loan to P.T. Pukuafu Indah (14,920) -- (14,920)
--------- --------- -----------
Net cash used in investing activities (860,674) (257,407) (1,118,081)
--------- --------- -----------
Financing Activities
Equity contributions from Newmont Indonesia Limited 130,838 42,581 173,419
Equity contributions from Nusa Tenggara Mining Corporation 101,763 272,412 374,175
Proceeds from short-term loan -- 79,765 79,765
Repayments of short-term loan -- (100,000) (100,000)
Proceeds from senior debt 640,000 -- 640,000
Debt issuance costs (1,390) (22,559) (23,949)
--------- --------- -----------
Net cash provided by financing activities 871,211 272,199 1,143,410
--------- --------- -----------
Net increase (decrease) in cash and cash equivalents (9,988) 12,289 2,301
Cash and cash equivalents at beginning of period 15,682 3,393 3,393
--------- --------- -----------
Cash and cash equivalents at end of period $ 5,694 $ 15,682 $ 5,694
========= ========= ===========
</TABLE>
The accompanying notes are an integral part of these financial statements.
NT-4
<PAGE> 35
NUSA TENGGARA PARTNERSHIP V.O.F.
(A GENERAL PARTNERSHIP IN THE DEVELOPMENT STAGE)
NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
1. GENERAL
Nusa Tenggara Partnership ("NTP" or the "Partnership") is a general partnership
organized under the laws of The Netherlands. NTP is 56.25%-owned by Newmont
Indonesia Limited ("NIL"), an indirect subsidiary of Newmont Mining Corporation
("NMC"), both Delaware, U.S.A. corporations, and 43.75%-owned by Nusa Tenggara
Mining Corporation ("NTMC"), a Japanese corporation owned by Sumitomo
Corporation (74.3%), Sumitomo Metal Mining Co., Ltd. (14.3%), Mitsubishi
Materials Corporation (7.1%) and Furukawa Co., Ltd. (4.3%).
NTP was formed to develop and mine the Batu Hijau copper/gold deposit located in
Sumbawa, Nusa Tenggara Barat, Indonesia, through P.T. Newmont Nusa Tenggara
("PTNNT"). Batu Hijau contains proven and probable reserves of 10.6 billion
pounds of copper and 11.8 million ounces of gold and is scheduled to commence
operation in the fourth quarter of 1999, with a projected mine life in excess of
20 years. The estimated cost for the development of the open-pit mine, mill and
infrastructure, including employee housing, a port, electrical generation
facilities, interest during construction and working capital is expected to
approximate US$1.9 billion.
NTP holds an 80% interest in PTNNT, an Indonesian corporation that holds the
Contract of Work ("COW") issued by the Indonesian government, granting PTNNT
sole rights to develop the Batu Hijau project. The remaining 20% interest in
PTNNT is held by P.T. Pukuafu Indah ("PTPI"), an unrelated Indonesian company.
PTPI's interest is a "carried interest" such that at the request of PTPI, NTP
funds PTPI's capital contributions to PTNNT. Contributions made on behalf of
PTPI will be recovered by NTP from 70% of PTPI's share of future dividends from
PTNNT.
NTP was formed in July 1996, but partner funding did not occur until June 1997
and no material Partnership transactions occurred until after such date.
Substantially all Partnership transactions relate to its 80% interest in PTNNT.
Certain NTP and PTNNT actions and transactions, as described in the Partnership
agreement, require unanimous approval of NTP partners.
Copper and gold mining requires the use of specialized facilities and
technology. Future cash flow and profitability of NTP will significantly depend
upon its ability to successfully complete the development and construction of
such facilities and, upon commencement of production, will be significantly
affected by market prices of copper and gold. Such commodity prices fluctuate
widely and are affected by numerous factors beyond NTP's control.
Over the past two years, Indonesia has experienced significant devaluation of
its currency, the Rupiah. This and other factors have also led to political and
social problems in the country. NTP's cost and debt structure is primarily U.S.
dollar-denominated. To the extent that there are fluctuations in the Rupiah, its
devaluation is generally economically neutral or beneficial to NTP since local
salaries and supply contracts will decrease against the U.S. dollar. Excluding
certain tax receivables described in Note 2, NTP's activities have not been
materially affected by the economic, social and political situation in
Indonesia, since its project is in a remote location.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Financial Statements
The financial statements have been prepared on the historical cost basis of
accounting, except as described in Note 3, using generally accepted accounting
principles of the United States ("U.S. GAAP").
NT - 5
<PAGE> 36
Principles of Consolidation
The financial statements reflect the consolidated financial position and the
results of operations of NTP and PTNNT. Because PTPI's interest in PTNNT is a
"carried interest", PTNNT is consolidated on a 100% basis and PTPI's carried
equity contribution is reflected as a minority interest. All significant
intercompany balances and transactions have been eliminated.
Foreign Currency Transactions and Balances
NTP maintains its accounting records in U.S. dollars ("USD" or "US$").
Transactions in other currencies are recorded in USD based on exchange rates
prevailing at the time of such transactions. Monetary assets and liabilities
denominated in other currencies are translated into USD at exchange rates
prevailing at the balance sheet dates, and any resulting gains or losses are
credited or charged to property, plant and mine development.
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. Cash and cash equivalents are primarily invested in money market
accounts.
Inventories
Materials and supplies are stated at the lower of average cost or net realizable
value.
Property, Plant and Mine Development
Expenditures for equipment and plant facilities are capitalized at historical
cost. Depreciation of assets placed in service is computed on the straight-line
method over estimated lives ranging from four to 10 years or the mine life.
The Partnership adopted AICPA Statement of Position 98-5, "Reporting on the
Costs of Start-Up Activities" ("SOP 98-5") effective January 1, 1998. Under this
accounting method, certain costs, such as organization, training and
pre-feasibility expenses, incurred in the start-up phase of the project are
expensed as incurred. (Notes 4 and 5).
The excess of the agreed value of the assets contributed to NTP when it was
initially funded over the historical cost basis was recorded as deferred mineral
rights (Note 3). Such costs will be amortized when production commences over the
estimated mine life of the Batu Hijau mine.
Mineral exploration costs are expensed as incurred. When it has been determined
that a mineral property can be economically developed, the subsequent costs
incurred to develop such property, including costs to further delineate the
orebody and remove overburden to initially expose the orebody for mining, are
capitalized as mine development costs. Mine development costs are amortized
using the unit-of-production method over the life of the orebody.
Interest costs related to developing mining properties and constructing new
facilities are capitalized until operations commence.
Asset Impairment
The Partnership reviews and evaluates its long-lived assets for impairment when
events or changes in circumstances indicate that the related carrying amounts
may not be recoverable. An impairment loss is measured as the amount by which an
asset's carrying value exceeds its fair value. Fair value is generally
determined using estimated future cash flow analysis. An impairment is
NT - 6
<PAGE> 37
considered to exist if total estimated future cash flows on an undiscounted
basis are less than the carrying amount of the asset. An impairment loss is
measured and recorded based on discounted estimated future cash flows. Future
cash flows include estimates of recoverable ounces, metal prices (considering
current and historical prices, price trends and related factors) and production,
capital and reclamation costs. Assumptions underlying future cash flow estimates
are subject to risks and uncertainties. Any differences between significant
assumptions and actual market conditions and/or the Partnership's performance
could have a material effect on the Partnership's financial position and results
of operations. As of December 31, 1998, NTP does not believe that impairment has
occurred.
Debt Issuance Costs
Costs incurred to arrange the third party project financing facility, including
financial advisory fees, legal fees, loan origination and commitment fees,
accounting and tax advisory services, were capitalized as debt issuance costs.
Such costs will be amortized over the life of the loan upon commencement of
commercial production.
Taxes Receivable
Value added taxes ("VAT") are paid on PTNNT's purchases of goods and services.
VAT paid during each year is legally refundable in the following year upon
submission of a refund claim to the government of Indonesia. NTP reports its VAT
receivable as a non-current asset because such taxes have not been received
until one year after refund claim submissions.
VAT payments and refunds are measured in Rupiah and consequently, are subject to
exchange rate fluctuations. VAT receivable balances are adjusted to reflect the
Rupiah/USD exchange rate as of the balance sheet dates.
Mining Costs
Because of diverse grade and waste-to-ore ratios each year over the mine's life,
mining costs incurred are capitalized and will be charged to operations on the
basis of the average life-of-mine-grade and waste-to-ore ratios per equivalent
unit of copper.
Reclamation and Remediation Costs
Estimated future reclamation and remediation costs are based principally on
legal, regulatory and contractual requirements and will be accrued and charged
to operating expense over the expected mine life using the units-of-production
method.
Income Taxes
PTNNT accounts for income taxes using the liability method, recognizing certain
temporary differences between the financial reporting basis of its liabilities
and assets and the related income tax basis of such liabilities and assets. This
method generates a net deferred income tax liability or net deferred income tax
asset as of the end of the year, as measured by the statutory tax rates in
effect as enacted. PTNNT is in the development stage and will not record
benefits for its deferred tax assets until commencement of operations.
Such benefits, resulting from tax loss carryforwards, were approximately US$20
million and US$14 million at December 31, 1998 and 1997, respectively.
Realization of these deferred tax assets is dependent on PTNNT's ability to
generate sufficient income from its operations before expiration of the
eight-year tax loss carryforward period. In addition, income taxes are measured
in Rupiah; consequently, certain tax benefits may be subject to Rupiah/USD
exchange rate fluctuations.
NTP is not subject to income taxes. The taxable income or loss of the
Partnership, which may vary substantially from income or loss reported for
financial reporting purposes, is passed through to NTP partners.
NT - 7
<PAGE> 38
Commodity Instruments
In June 1998, the Financial Accounting Standards Board issued Statements of
Financial Accounting Standards ("SFAS") No. 133, "Accounting for Derivative
Instruments and Hedging Activities," which establishes accounting and reporting
standards for derivative instruments and hedging activity. SFAS No. 133 is
effective for all periods in fiscal years beginning after June 15, 1999 and
requires recognition of derivative instruments, at fair value, on the balance
sheet as either assets or liabilities. Changes in the derivative's fair value
will be recognized currently in earnings unless specific hedge accounting
criteria are met, upon which gains and losses will be recorded in either other
comprehensive income or current earnings, depending on the nature of the
instrument. To date the Partnership has not utilized derivatives and does not
expect a material effect from adopting SFAS No.
133, planned for January 2000.
Comprehensive Income
In the first quarter of 1998, the Partnership adopted SFAS No 130 "Reporting
Comprehensive Income" that established standards for reporting and displaying
comprehensive income and its components in a full set of general purpose
financial statements. In addition to net income, comprehensive income includes
all changes in equity during a period, except those resulting from investments
by and distributions to owners. The Partnership has no material comprehensive
income items.
Use of Estimates
The preparation of financial statements in conformity with generally accepted
accounting principles requires that management 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 amount of revenues and
expenses during the reporting period. Actual amounts could differ from these
estimates.
Reclassifications
Certain amounts in the prior year have been reclassified to conform to the 1998
presentation.
3. INITIAL FUNDING OF THE PARTNERSHIP
The Partnership agreement, executed on July 2, 1996, provided for initial
contributions from its partners. The date of such contributions (referred to as
the "Initial Funding Date") was June 10, 1997. NIL contributed its 80% interest
in PTNNT in exchange for a 56.25% interest in NTP. NIL also contributed rights
to its shareholder loan receivable of US$77.2 million and a PTPI loan receivable
of US$2.2 million. The agreed upon value of NIL's initial contributions was
US$306.2 million. NTMC contributed approximately US$164 million and subsequent
deferred cash contributions, as defined in the agreement, in exchange for a
43.75% interest in NTP.
PTNNT's losses up to the Initial Funding Date of US$41.4 million were allocated
to the capital accounts of NIL and NTMC in proportion to their respective
Partnership interests.
Assets contributed to NTP on the Initial Funding Date were recorded at
historical cost with the excess of the agreed value of NIL's contributions over
such historical cost, US$219.5 million, recorded as deferred mineral rights.
4. PROPERTY, PLANT AND MINE DEVELOPMENT
Property, plant and mine development consisted of the following (in thousands of
US$):
NT - 8
<PAGE> 39
<TABLE>
<CAPTION>
At December 31,
1998 1997
----------- ---------
<S> <C> <C>
Deferred mineral rights $ 219,509 $ 219,509
Machinery and equipment 22,715 858
Mine development 140,006 80,616
Capitalized interest 27,116 180
Construction-in-progress 1,024,245 363,807
----------- ---------
1,433,591 664,970
Accumulated depreciation (3,331) (573)
----------- ---------
Property, plant and mine development - net $ 1,430,260 $ 664,397
=========== =========
</TABLE>
Construction-in-progress primarily consisted of engineering, design and
construction-related costs for development of the Batu Hijau copper/gold
project. As described in Note 2, the Partnership adopted "SOP 98-5" effective
January 1, 1998. This change resulted in expensing certain start-up costs that
totaled US$17.6 million in 1998 (included in other expense). Previously
capitalized start-up costs (incurred prior to January 1, 1998) of US$50.1
million were expensed as the cumulative effect of the accounting change.
5. DEFERRED PARTNERSHIP ORGANIZATION COSTS
As of December 31, 1997, NTP had incurred costs totaling US$984 thousand related
to organizing the partnership. Such costs were primarily for legal and
accounting services. In 1998, these costs were expensed as start-up costs and
included in the cumulative effect of the accounting change.
6. ACCOUNTS PAYABLE AFFILIATES
Accounts payable to affiliates consisted of the following (in thousands of US$)
which are described in Note 12.
<TABLE>
<CAPTION>
At December 31,
1998 1997
------- -------
<S> <C> <C>
Technology and Know-How Agreement royalties - NNHI $18,339 $ 5,416
Technology and Know-How Agreement royalties - Sumitomo 14,264 4,213
Consulting Services Agreement - NISL 1,254 12,525
Consulting Service Agreement - NTMC -- 498
Payroll Agency Agreements - NIIL and NGELP 2,937 2,991
NGC 6 --
NIL -- 1,220
Other 436 361
------- -------
Total $37,236 $27,224
======= =======
</TABLE>
7. MINORITY INTEREST IN PTNNT
As described in Note 1, PTPI owns a 20% carried interest in PTNNT, whose paid-in
capital and deposits for future stock subscriptions totaled US$85.6 million and
US$11.0 million at December 31, 1998 and 1997, respectively. PTPI's share of
such capital, reflected on the balance sheet as Minority interest in PTNNT, was
funded with loans from NIL and NTMC, through NTP, and totaled US$17.1 million
and US$2.2 million at December 31, 1998 and 1997, respectively. These loans are
subject to interest at the six-month Singapore Interbank Offering Rate ("SIBOR")
plus two percent. PTPI agreed to assign 70% of its rights to dividends from
PTNNT to repay such loans, including interest, pursuant to an Acknowledgment of
Indebtedness and Assignment of Dividends agreement with NIL. Interest accrued
NT - 9
<PAGE> 40
under these loans will not be recorded by NTP until commencement of operations
and recoverability of such interest is determined.
On February 25, 1998, PTNNT's shareholders amended its articles of association
to increase its authorized capital by US$172.3 million to US$177.3 million.
Pursuant to Indonesian law, 25% of such capital, or US$44.3 million, had to be
paid by the shareholders before the revised articles of association can be
registered with the Ministry of Mines and Energy and the Ministry of Justice.
Payment occurred on April 13, 1998.
8. TAXES PAYABLE
Taxes payable consisted of the following (in thousands of US$):
<TABLE>
<CAPTION>
At December 31,
1998 1997
------ ------
<S> <C> <C>
Income taxes - withholding taxes from employees and suppliers $1,202 $ 656
Value added tax 4,583 1,501
------ ------
Total $5,785 $2,157
====== ======
</TABLE>
9. LOAN AGREEMENTS
SHAREHOLDER LOAN AGREEMENT
PTNNT entered into a shareholder loan agreement with NIL on April 20, 1993,
wherein PTNNT borrowed funds from NIL to finance its COW activities. The loan,
initially for a maximum of US$50 million and subsequently amended to increase
the maximum borrowing to US$150 million, was contributed by NIL to the
Partnership as part of NIL's initial funding. The loan agreement was amended in
November 1997, to subordinate PTNNT's liabilities under this loan to those under
the project financing facility discussed below, and in early 1999, to reduce the
maximum loan amount to US$77.5 million. The outstanding loan balance at December
1998 was US$77.2 million.
Interest does not accrue on the loan until PTNNT commences commercial mining
operations, as defined by the loan agreement. Interest then accrues at the
180-day SIBOR rate of interest plus three percent. The loan and accrued interest
becomes payable on demand by the Partnership after commencement of operations.
PARTNERSHIP LOAN AGREEMENT
NTP entered into a Partnership loan agreement with PTNNT on June 10, 1997 (the
"Initial Funding Date"), that was amended on October 15, 1997 to subordinate
PTNNT's liabilities under this loan to those under the project financing
facility discussed below.
This agreement provided for borrowings up to US$500 million for the Batu Hijau
project (referred to as "Sponsor Funding"). Such borrowings were payable on
demand and bore interest generally at the 180-day SIBOR interest rate plus three
percent. Any interest that was not paid on designated dates was assessed
interest at the 180-day SIBOR interest rate plus 4%. The weighted average
interest rates on the Sponsor funding during 1998 and 1997 were 8.9% and 8.9%,
respectively, and the interest rate at December 31, 1997 was 8.9%. Sponsor
funding interest and principal payments are Restricted Payments under the
provisions of the project financing facility and no payments can be made prior
to project completion. At December 31, 1997, outstanding Sponsor Funding
principal was US$314.9 million and the related accrued interest was US$9.7
million
The Sponsor Funding was refinanced on July 27, 1998 and replaced with a
Subordinated Loan Agreement. The principle terms and conditions of the
Subordinated Loan Agreement are consistent with the previous agreement and the
NT-10
<PAGE> 41
outstanding principal and interest under the previous agreement were repaid to
NTP with borrowings from the Subordinated Loan Agreement. The weighted average
interest rate on the replacement loan during 1998 was 8.7% and the interest rate
at December 31, 1998 was 8.1%. At December 31, 1998, outstanding Sponsor Funding
principal was US$500.0 million and the related accrued interest was US$17.6
million. Transactions related to Sponsor Funding have been eliminated in the
consolidated financial statements.
10. PROJECT FINANCING FACILITY
On July 30, 1997, PTNNT entered into a US$1.0 billion project financing facility
for the Batu Hijau project. The facility includes commitments from three
export-credit agencies with participation by various commercial banks. The
facility is guaranteed by an NMC subsidiary and Sumitomo Corporation
("Sumitomo"), 56.25% and 43.75%, respectively, until certain project completion
tests are met at which time the facility becomes non-recourse to the NMC
subsidiary and Sumitomo.
As of December 31, 1998, US$640 million was outstanding under this facility. The
fair value cannot practicably be determined due to the lack of available market
information for this type of debt.
The facility will be repaid in semi-annual installments over a 13-year period
beginning with earlier of six months after project completion or June 15, 2001.
Accordingly, unless project completion tests are satisfied more than six months
before June 15, 2001, no repayments will occur in 1999 and 2000, and US$86.7
million will occur in each of 2001, 2002 and 2003. The facility bears interest
at blended fixed and floating rates. Based on interest rates at December 31,
1998, the weighted-average interest rates would be approximately 6.6% and 7.1%
pre-completion and post-completion, respectively. The weighted average interest
rate on the facility during 1998 was 6.2% and the interest rate on December 31,
1998 was 5.5%.
The facility includes a number of covenants, conditions, warranties and
representations that include:
a. Concentrate Sales Agreements - During each year after completion, PTNNT shall
sell not less than 455,000 tonnes of annual copper concentrate production for
export to non-Indonesian buyers for U. S. Dollars, and shall commit not less
than 480,000 tonnes under long-term sales agreements.
b. Limitation on Indebtedness - PTNNT shall not incur any indebtedness, other
than the US$1.0 billion project financing, except for "Permitted Indebtedness",
which includes subordinated debt from NTP, unsecured working capital debt with a
maturity not in excess of one year and not exceeding US$35 million, and other
indebtedness with aggregate principal not to exceed US$5 million at any time.
c. Senior Loans/Sponsor Funding Ratio - The ratio of outstanding funds under the
project financing facility to the aggregate Sponsor Funding shall not exceed 55
to 45.
d. Restricted Payments - Prior to the later of operational completion or the
first scheduled principal repayment date under the project financing facility,
PTNNT is prohibited from making Restricted Payments. Restricted Payments include
dividends or return of capital and payment of principal or interest on
subordinated loans to NTP, its partners or their affiliates. Subsequent to such
restricted period, PTNNT can make Restricted Payments provided certain
conditions and financial ratios are met.
11. SUPPLEMENTAL CASH FLOW INFORMATION
Excluded from the statements of consolidated cash flow was the effect of a
non-cash transaction wherein PTNNT purchased US$6.8 million in inventory, but
deferred payment until the inventory is used. Prior to January 1, 1997, PTNNT
incurred approximately US$20 million of short-term debt, pending Initial
Funding, which was primarily used for plant, property and mine development. This
debt, which totaled US$100 million on the Initial Funding Date, was repaid on
the Initial
NT - 11
<PAGE> 42
Funding Date and such repayment was reflected in the consolidated financial
statements. All interest incurred during 1998 and 1997 was capitalized.
12. OTHER SIGNIFICANT AGREEMENTS
Technology and Know-How Agreements
On July 2, 1996, PTNNT entered into a Technology and Know-How Agreement with
Newmont Nevada Holdings Incorporated ("NNHI"), an indirect subsidiary of NMC,
whereby NNHI agreed to provide proprietary information, technology, know-how and
related intellectual property rights. Under the terms of this agreement, PTNNT
pays NNHI a royalty of 1.6875% of the preceding month's aggregate capital
expenditures determined in accordance with U.S. GAAP, and US$3.9375 per
equivalent ounce of gold produced by PTNNT in such month upon commencement of
production.
A similar Technology and Know-How Agreement was executed with Sumitomo on the
same date, providing a royalty of 1.3125% of aggregate capital expenditures and
US$3.0625 per equivalent ounce of gold produced.
Obligations under these agreements totaled US$25.5 million and US$9.9 million
during 1998 and 1997, respectively. The associated liabilities at December 31,
1998 and 1997 were US$32.6 million and US$9.6 million, respectively and were
included in Accounts payable affiliates (Note 6).
Consulting Services Agreements
In July 1996, PTNNT entered into a Consulting Services Agreement with Newmont
International Services Limited ("NISL"), an indirect subsidiary of NMC, whereby
NISL agreed to provide certain support, advisory and consulting services related
to general project engineering, control and development; procurement advice and
implementation; contract negotiation support; general construction advice and
support; operations management support; tax and legal planning; general and
administrative services; and management and business support services. NISL
provides these services primarily outside of Indonesia. Under the terms of this
agreement, PTNNT reimburses NISL for its actual payroll costs, including related
employee benefits, incurred to provide these services, other out-of-pocket
costs, and an administrative fee. Charges totaled US$4.6 million in 1998 and
US$14.5 million in 1997 and Accounts payable affiliates included US$1.3 million
and US$12.5 million at December 31, 1998 and 1997, respectively (Note 6).
PTNNT has a similar Consulting Services Agreement with NTMC. Pursuant to this
agreement, charges totaled to US$1.2 million in 1998 and US$1.4 million in 1997
and Accounts payable affiliates included US$0.5 million at December 31, 1997
(Note 6).
Payroll Agency Agreements
PTNNT has entered into Payroll Agency Agreements with Newmont Indonesia
Investment Limited ("NIIL") and Newmont Global Employment Limited Partnership
("NGELP"), indirect subsidiaries of NMC, whereby NIIL and NGELP agreed to act as
agents of PTNNT for personnel, payroll and benefits management of non-Indonesian
employees assigned to work for PTNNT in Indonesia. NIIL manages expatriates from
the U.S. and NGELP manages expatriates from countries other than the U.S.
Under the terms of these agreements, PTNNT reimburses these agents for salaries,
related employee benefits and other reasonable expenses and pays a fee of US$20
for each salary payment. Agency payments totaled US$9.0 million in 1998 and
US$3.3 million in 1997 and Accounts payable affiliates included US$2.9 million
and US$3.0 million at December 31, 1998 and 1997, respectively (Note 6).
NT - 12
<PAGE> 43
Batu Hijau Project Engineering and Construction Agreements
PTNNT has entered into an On-Shore Agreement with P.T. Fluor Daniel Indonesia
("FDI") whereby FDI agreed to construct PTNNT's processing facilities and
related infrastructure, and to provide project management, procurement,
engineering and construction management. Such services are performed in
Indonesia and related payments are made in USD on a cost reimbursable basis.
During 1998 and 1997, US$437 million and US$121 million, respectively, were
charged to construction-in-progress for such services and Accounts payable and
accrued expenses included US$72 million and US$6.2 million at December 31, 1998
and 1997, respectively.
PTNNT has entered into an Off-Shore Agreement with Fluor Daniel Engineers and
Constructors, Ltd. ("FDEC") whereby FDEC agreed to perform engineering design
and equipment procurement for PTNNT's processing facilities and related
infrastructure, and to provide project management, procurement, engineering and
construction management. Such services are performed outside Indonesia and
related payments are made in USD on a cost reimbursable basis with an additional
discretionary fee payable as determined by the Partnership. During 1998 and
1997, US$609 million and US$174 million, respectively, were charged to
construction-in-progress for such services and Accounts payable and accrued
expenses included US$37 million and US$41.8 million at December 31, 1998 and
1997, respectively.
13. COMMITMENTS AND CONTINGENCIES
NTP's exploration, development and mining activities are subject to various
Indonesian laws and regulations governing the protection of the environment.
These laws and regulations are continually changing and are generally becoming
more restrictive. NTP conducts its operations so as to protect the public health
and environment and believes its activities are in compliance with all
applicable laws and regulations. NTP has incurred, and in the future expects to
incur, expenditures to comply with such laws and regulations, however, NTP
cannot predict the amount of such future expenditures.
PTNNT has made significant commitments related to the construction and
development of its Batu Hijau copper/gold project. Such commitments are
principally for engineering and construction-related services.
NTP 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 proceeding or that any amounts it may be required to
pay by reason thereof will have a material adverse effect on its financial
condition or results of operations.
NT - 13
<PAGE> 44
Appendix I
The following is a narrative description of the map in image form which
has been included in the paper version of the Form 10-K but has been excluded
from the EDGAR version of the Form 10-K.
Map of Nevada Operating Properties and Principal Area of Land Holdings
-- Page 5 of Form 10-K.
On Page 5 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, Lone Tree Complex, Twin Creeks Mine
and Rosebud Mine discussed on Pages 2 through 4 of the Form 10-K. The
map also includes the registrant's principal area of land holdings in
the gray shaded areas.
<PAGE> 45
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION
----------- -----------
<C> <S>
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 or 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 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(b)/4(c). -- First Amendment dated November 27, 1990 and Second
Amendment dated December 7, 1990 to the aforementioned
Rights Agreement dated August 30, 1990. Incorporated by
reference to Exhibits 2 and 3, respectively, to
registrant's Form 8 dated December 7, 1990.
4(d). -- 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(e). -- 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.
4(f). -- In reliance upon Item 601(b)(4)(iii) of Regulation S-K,
various instruments defining the rights of holders of
long-term debt of the registrant are not being filed
herewith because the total of securities authorized under
each such instrument does not exceed 10% of the total
assets of registrant. Registrant hereby agrees to furnish
a copy of any such instrument to the Commission upon
request.
4(g). -- Pass Through Trust Agreement dated as of July 15, 1994
between Newmont Gold Company and The First National Bank
of Chicago relating to the Pass Through Certificates,
Series 1994-A1. (The front cover of this Exhibit
indicates the material differences between such Exhibit
and the substantially similar (except for price-related
information) Pass-Through Agreement between Newmont Gold
Company and The First National Bank of Chicago relating
to the Pass-Through Certificates, Series 1994-A2.)
Incorporated by reference to Exhibit 4.1 to Newmont Gold
Company's Quarterly Report on form 10-Q for the quarter
ended September 30, 1994.
</TABLE>
<PAGE> 46
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION
----------- -----------
<C> <S>
4(h). -- Lease dated as of September 30, 1994 between Newmont Gold
Company and Shawmut Bank Connecticut, National
Association relating to Trust No. 1 and a 75% undivided
interest in Newmont Gold Company's refractory gold ore
treatment facility. (The front cover of this Exhibit
indicates the material differences between such Exhibit
and the substantially similar (except for price-related
information) entered into on the same date relating to
the remaining 25% undivided interest in the facility.)
Incorporated by reference to Exhibit 4.2 to Newmont Gold
Company's Quarterly Report on Form 10-Q for the quarter
ended September 30, 1994.
4(i). -- Trust Indenture and Security Agreement dated as of July
15, 1994 between Shawmut Bank Connecticut, National
Association and The First National Bank of Chicago
relating to Trust No. 1 and a 75% undivided interest in
Newmont Gold Company's refractory gold ore treatment
facility. (The front cover of this Exhibit indicates the
material differences between such Exhibit and the
substantially similar (except for price-related
information) entered into on the same date relating to
the remaining 25% undivided interest in the facility.)
Incorporated by reference to Exhibit 4.3 to Newmont Gold
Company's Quarterly Report on Form 10-Q for the quarter
ended September 30, 1994.
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). -- 1996 Employees Stock Plan amended and restated effective
as of March 17, 1999.
10(e). -- 1999 Employees Stock Plan.
10(f). -- Agreement dated October 15, 1993, effective November 1,
1993, among registrant, Newmont Gold Company 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(g). -- Amendment No. 1, dated June 24, 1997, to Agreement dated
October 15, 1993, effective November 1, 1993 among
registrant, Newmont Gold Company and Ronald C. Cambre.
Incorporated by reference to Exhibit 10 to registrant's
Quarterly Report on Form 10-Q for the quarter ended June
30, 1997.
10(h). -- Letter Agreement dated December 15, 1993, between Newmont
Gold Company and registrant. Incorporated by reference to
Exhibit A to registrant's Proxy Statement dated February
16, 1994.
10(i). -- Tax Sharing Agreement dated as of January 1, 1994 between
registrant and Newmont Gold Company. Incorporated by
reference to Exhibit 10(i) to registrant's Annual Report
on Form 10-K for the year ended December 31, 1994.
10(j). -- Letter Agreement dated May 6, 1993 between Newmont Gold
Company and Wayne W. Murdy. Incorporated by reference to
Exhibit 10 to Newmont Gold Company's Quarterly Report on
Form 10-Q for the quarter ended March 31, 1993.
</TABLE>
<PAGE> 47
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION
----------- -----------
<C> <S>
10(k). -- Agreement dated September 8, 1998 (effective August 6,
1998) between Newmont Gold Company and Lawrence T.
Kurlander. Incorporated by reference to Exhibit 10 to
Newmont Gold Company's Quarterly report on Form 10-Q for
the quarter ended September 30, 1998.
10(l) -- Newmont Gold Company Annual Incentive Compensation Plan
(amended and restated as of January 1, 1998).
10(m). -- Newmont Gold Company Intermediate Term Incentive
Compensation Plan (amended and restated as of January 1,
1998).
10(n). -- Executive Change of Control Severance Plan dated as of
February 1, 1999.
10(o). -- Directors' Stock Award Plan.
10(p). -- Certificate of Ownership and Merger merging NGC
Acquisition Co. into Newmont Gold Company dated as of
October 6, 1998.
12. -- Statement re Computation of Ratio of Earnings to Fixed
Charges.
13. -- Those portions of registrant's 1998 Annual Report to
Stockholders that are incorporated herein by reference.
13(a). -- Report of Price Waterhouse LLP.
21. -- Subsidiaries of registrant.
23(a). -- Consent of Arthur Andersen LLP.
23(b). -- Consent of PriceWaterhouseCoopers LLP.
24. -- Power of Attorney.
27. -- Financial Data Schedules.
</TABLE>
<PAGE> 1
EXHBIT 10(d)
NEWMONT MINING CORPORATION
1996 EMPLOYEES STOCK PLAN
(AMENDED AND RESTATED EFFECTIVE AS OF MARCH 17, 1999)
1. Purposes. The purposes of the Newmont Mining Corporation 1996
Employees Stock Plan are:
(a) To further the growth, development and success of the Company
and its Subsidiaries by enabling employees of the Company and its Subsidiaries
to acquire a continuing equity interest in the Company, thereby increasing their
personal interests in such growth, development and success and motivating such
employees to exert their best efforts on behalf of the Company and its
Subsidiaries and to provide incentives for the future performance of services;
and
(b) To maintain the ability of the Company and its Subsidiaries to
attract and retain employees of outstanding ability by offering them an
opportunity to acquire a continuing equity interest in the Company and its
Subsidiaries which will reflect the growth, development and success of the
Company and its Subsidiaries.
(c) Toward these objectives, the Committee may grant Options, Stock
Appreciation Rights, or Other Stock-Based Awards or award Restricted Stock to
such employees or pay such employees' bonuses (if any) or other compensation in
Common Stock or award or grant any combination thereof, all pursuant to the
terms and conditions of the Plan (each, an "Award").
2. Definitions. As used in the Plan, the following capitalized terms
shall have the meanings set forth below:
(a) "ADDITIONAL ANNUAL INCREMENT" - a number of shares of Common
Stock equal to one percent of the number of shares of Common Stock outstanding
on December 31 of the immediately preceding year.
(b) "AGREEMENT" - an option or award agreement evidencing an Award.
(c) "AWARD" - an Option, SAR, Other Stock-Based Award or Restricted
Stock granted or awarded, or bonus or other compensation of an employee paid in
Common Stock, pursuant to the terms and conditions of the Plan.
(d) "AWARD GAIN" - the gain represented by the product of the excess
of the Fair Market Value of the Common Stock on the date of exercise of an
Option or SAR over the exercise price of such Option or SAR multiplied by the
number of shares of Common Stock subject to such Option or SAR, or portion
thereof, exercised, without regard to any subsequent decrease or increase in the
Fair Market Value of the Common Stock.
<PAGE> 2
(e) "AWARD LIMIT" - 500,000 shares of Common Stock (as adjusted in
accordance with Section 15).
(f) "BOARD" - the Board of Directors of the Company.
(g) "CEO" - the Chief Executive Officer of the Company.
(h) "CHANGE OF CONTROL" - the occurrence of any of the following
events:
(i) The acquisition by any individual, entity or group (within
the meaning of Section 13(d)(3) or 14(d)(2) of the Securities Exchange Act of
1934, as amended (the "Exchange Act")) (a "Person") of beneficial ownership
(within the meaning of Rule 13d-3 promulgated under the Exchange Act) of 20% or
more of either (x) the then outstanding shares of common stock of the Company
(the "Outstanding Company Common Stock") or (y) the combined voting power of the
then outstanding voting securities of the Company entitled to vote generally in
the election of directors (the "Outstanding Company Voting Securities");
provided, however, that for purposes of this subsection (i), the following
acquisitions shall not constitute a Change of Control: (A) any acquisition
directly from the Company, (B) any acquisition by the Company, (C) any
acquisition by any employee benefit plan (or related trust) sponsored or
maintained by the Company or any corporation controlled by the Company or (D)
any acquisition by any corporation pursuant to a transaction which complies with
clauses (A), (B) and (C) of paragraph (iii) below; or
(ii) Individuals who, as of the Effective Date, constitute the
Board (the "Incumbent Board") cease for any reason to constitute at least a
majority of the Board; provided, however, that any individual becoming a
director subsequent to the Effective Date whose election, or nomination for
election by the Company's shareholders, was approved by a vote of at least a
majority of the directors then comprising the Incumbent Board shall be
considered as though such individual were a member of the Incumbent Board, but
excluding, for this purpose, any such individual whose initial assumption of
office occurs as a result of an actual or threatened election contest with
respect to the election or removal of directors or other actual or threatened
solicitation of proxies or consents by or on behalf of a Person other than the
Board; or
(iii) Consummation of a reorganization, merger or consolidation
or sale or other disposition of all or substantially all of the assets of the
Company or an acquisition of assets of another corporation (a "Business
Combination"), in each case, unless, following such Business Combination, (A)
all or substantially all of the individuals and entities who were the beneficial
owners, respectively, of the Outstanding Company Common Stock and Outstanding
Company Voting Securities immediately prior to such Business Combination
beneficially own, directly or indirectly, more than 50% of, respectively, the
then outstanding shares of common stock and the combined voting power of the
then outstanding voting securities entitled to vote generally in the election of
directors, as the case may be, of the corporation resulting from such Business
Combination (including, without limitation, a corporation which as a result of
such transaction owns the Company or all or substantially all of the Company's
assets either directly or through one or more subsidiaries) in substantially the
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<PAGE> 3
same proportions as their ownership, immediately prior to such Business
Combination of the Outstanding Company Common Stock and Outstanding Company
Voting Securities, as the case may be, (B) no Person (excluding any corporation
resulting from such Business Combination or any employee benefit plan (or
related trust) of the Company or any corporation resulting from such Business
Combination) beneficially owns, directly or indirectly, 20% or more of,
respectively, the then outstanding shares of common stock of the corporation
resulting from such Business Combination or the combined voting power of the
then outstanding voting securities of such corporation, except to the extent
that such ownership existed prior to the Business Combination and (C) at least a
majority of the members of the board of directors of the corporation resulting
from such Business Combination were members of the Incumbent Board at the time
of the execution of the initial agreement, or of the action of the Board,
providing for such Business Combination; or
(iv) Approval by the shareholders of the Company of a complete
liquidation or dissolution of the Company.
(i) "CODE" - the Internal Revenue Code of 1986, as it may be amended
from time to time, including regulations and rules thereunder and successor
provisions and regulations and rules thereto.
(j) "COMMITTEE" - the Compensation Committee of the Board, or such
other Board committee as may be designated by the Board to administer the Plan.
(k) "COMMON STOCK" - the $1.60 par value common stock of the
Company.
(l) "COMPANY" - Newmont Mining Corporation, a Delaware corporation,
or any successor entity.
(m) "DIVIDEND EQUIVALENTS" - the equivalent value (in cash or Common
Stock) of dividends paid on Common Stock subject to Other Stock-Based Awards
granted under Section 9.
(n) "EXCHANGE ACT" - the Securities Exchange Act of 1934, as it may
be amended from time to time.
(o) "FAIR MARKET VALUE" of a share of Common Stock as of a given
date shall be the average of the high and low sales prices for a share of Common
Stock as reported for New York Stock Exchange issues in The Wall Street Journal
for such date; provided, however, that if there is no sale of shares of Common
Stock reported in The Wall Street Journal on such date, such fair market value
shall be the average between the bid and asked prices for a share of Common
Stock reported in The Wall Street Journal at the close of trading on such date;
provided further, however, that if no such prices are reported for such day, the
most recent day for which such prices are available shall be used. In the event
that the method for determining the fair market value of a share of Common Stock
provided for in the previous sentence shall not be practicable, then such fair
market value shall be determined by such other
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<PAGE> 4
reasonable valuation method as the Committee shall, in its discretion, select
and apply in good faith as of the given date; provided, however, that for
purposes of paragraph (a) of Section 6, such fair market value shall be
determined subject to Section 422(c)(7) of the Code.
(p) "ISO," OR "INCENTIVE STOCK OPTION" - an option to purchase
Common Stock granted to a Participant under the Plan in accordance with the
terms and conditions set forth in Section 6 and which conforms to the applicable
provisions of Section 422 of the Code.
(q) "NOTICE" - written notice actually received by the Company at
its offices on the day of such receipt, if received on or before 1:30 p.m.,
Denver time, on a day when the Company's offices are open for business, or, if
received after such time, such notice shall be deemed received on the next such
day, which notice may be delivered in person to the Company's Payroll Department
or sent by facsimile to the Company, or sent by certified or registered mail or
overnight courier, prepaid, addressed to the Company at 1700 Lincoln Street,
Denver, Colorado 80203, Attention: Payroll Department.
(r) "OPTION" - an option to purchase Common Stock granted to a
Participant under the Plan in accordance with the terms and conditions set forth
in Section 6. Options may be either ISOs or stock options other than ISOs.
(s) "OPTIONEE" - a Participant who has been granted an Option under
the Plan in accordance with the terms and conditions set forth in Section 6.
(t) "OTHER STOCK-BASED AWARDS" - Awards granted to Participants
under the Plan in accordance with the terms and conditions set forth in Section
10.
(u) "PARTICIPANT" - any employee of the Company or its Subsidiaries
selected to participate in the Plan pursuant to Section 3.
(v) "PERFORMANCE CRITERIA" - earnings, increases in production,
reductions in costs of production and reserve replacement.
(w) "PLAN" - this Newmont Mining Corporation 1996 Employees Stock
Plan.
(x) "PREDECESSOR PLANS" - the Company's Amended and Restated 1992
Key Employees Stock Plan and the Company's Amended and Restated 1987 Key
Employees Stock Option Plan.
(y) "RESTRICTED STOCK" - Common Stock awarded under the Plan in
accordance with the terms and conditions set forth in Section 8.
(z) "RESTRICTION PERIOD" - a time period, which may or may not be
based upon the achievement of particular performance goals and/or the
satisfaction of vesting or earnout provisions (which may be dependent on the
continued employment of the recipient)
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<PAGE> 5
applicable to, and established or specified by the Committee at the time of,
each award of Restricted Stock.
(aa) "RULE 16B-3" - Rule 16b-3 under the Exchange Act, as such rule
may be amended from time to time.
(bb) "SAR" - a stock appreciation right granted to a Participant
under the Plan and in accordance with the terms and conditions of Section 7.
(cc) "SEC" shall mean the Securities and Exchange Commission.
(dd) "SUBSIDIARY" shall mean (i) any present or future corporation
which is or would be a "subsidiary corporation" of the Company as the term is
defined in Section 424(f) of the Code and (ii) any unincorporated entity in
which the Company and/or one or more of its "subsidiary corporations" (as
defined in Section 424(f) of the Code) presently or in the future own an
aggregate profits interest of fifty percent (50%) or more, which the Committee
in its discretion determines will be a "Subsidiary" for purposes of the Plan.
3. Administration of the Plan. (a) The Committee shall have exclusive
authority to operate, manage and administer the Plan in accordance with its
terms and conditions. Notwithstanding the foregoing, in its absolute discretion,
the Board may at any time and from time to time exercise any and all rights,
duties and responsibilities of the Committee under the Plan, including, but not
limited to, establishing procedures to be followed by the Committee, but
excluding matters which under Rule 16b-3 or Section 162(m) of the Code are
required to be determined in the discretion of the Committee.
(b) The Committee shall be appointed from time to time by the
Board, and the Committee shall consist of not less than three members of the
Board, each of whom is an "outside director" within the meaning of Section
162(m) of the Code and, to the extent necessary for the Plan and/or Awards
thereunder to satisfy the requirements and conditions of a "nonemployee
director" under Rule 16b-3; provided, however, that if one or more of the
members of the Committee does not qualify as such an "outside director" or a
"non-employee director," at the time any Award is granted, such Award
nevertheless shall be deemed to be properly authorized and issued under the Plan
and shall remain in full force and effect subject to the other terms and
conditions contained in the Plan and the relevant Agreement.
(c) Without limiting the generality of paragraph (a) of this
Section 3, the Committee shall have the exclusive right and discretionary
authority to: (i) interpret the Plan and the Agreements; (ii) determine
eligibility for participation in the Plan and the amount of Awards payable under
the Plan; (iii) select, from time to time, from amongst those eligible, the
employees to whom Awards shall be granted under the Plan, which selection may be
based upon information furnished to the Committee by the Company's management;
(iv) determine whether an Award shall take the form of an ISO, Option other than
an ISO, SAR, Restricted Stock, bonuses or other compensation payable in Common
Stock, Other Stock-Based Award (and, if so, the form thereof) or any combination
thereof, (v) determine the number of shares of Common Stock to be included in
any Award or to which any Award shall otherwise relate and
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<PAGE> 6
the periods for which Awards will be outstanding; (vi) establish, amend, waive
and/or rescind rules and regulations and administrative guidelines for carrying
out the Plan; (vii) to the extent permitted under the Plan and the applicable
Agreement, accelerate the exercisability or the termination of any Restriction
Period with respect to any Award when such acceleration and/or termination would
be in the best interest of the Company; (viii) to the extent permitted under the
Plan and the applicable Agreement, grant waivers of Plan terms, conditions,
restrictions and limitations; (ix) correct any errors, supply any omissions or
reconcile any inconsistencies in the Plan and/or any Agreement or any other
instrument relating to any Award; (x) to the extent permitted by the Plan, amend
or adjust the terms and conditions of any outstanding Award and/or adjust the
number and/or class of shares of Common Stock subject to any outstanding Award;
(xi) in accordance with the Plan, establish and administer any performance goals
in connection with any Awards, including the Performance Criteria to which such
performance goals relate and the applicable measurement periods, and certify
whether, and to what extent, any such performance goals have been met; (xii) at
any time and from time to time after the granting of an Award, specify such
additional terms, conditions and restrictions with respect to any ISO, Option
other than an ISO, SAR, Other Stock-Based Award, Restricted Stock and/or bonuses
or other compensation payable in Common Stock as may be deemed necessary or
appropriate to ensure compliance with any and all applicable laws, including,
but not limited to, (A) terms, restrictions and conditions for compliance with
Federal and state securities laws, (B) methods of withholding or providing for
the payment of required taxes and (C) restrictions regarding a Participant's
ability to exercise Awards under a "cashless exercise" program established by
the Committee; and (xiii) take any and all such other action it deems necessary
or advisable for the proper operation and/or administration of the Plan. The
Committee shall have full discretionary authority in all matters related to the
discharge of its responsibilities and the exercise of its authority under the
Plan. Decisions and actions by the Committee with respect to the Plan and any
Agreement shall be final, conclusive and binding on all persons having or
claiming to have any right or interest in or under the Plan and/or any
Agreement. Awards, including Awards under the same section of the Plan, need not
be uniform as to all grants and recipients thereof.
(d) Each Award shall be evidenced by an Agreement, which shall
be executed by the Company and the Participant to whom such Award has been
granted, unless the Agreement provides otherwise; however, two or more Awards to
a single Participant may be combined in a single Agreement. An Agreement shall
not be a precondition to the granting of an Award; however, no person shall have
any rights under any Award unless and until the Participant to whom the Award
shall have been granted (i) shall have executed and delivered to the Company an
Agreement or other instrument evidencing the Award, unless such Agreement
provides otherwise, and (ii) has otherwise complied with the applicable terms
and conditions of the Award. The Committee shall prescribe the form of all
Agreements, and, subject to the terms and conditions of the Plan, shall
determine the content of all Agreements. Any Agreement may be supplemented or
amended in writing from time to time as approved by the Committee; provided that
the terms and conditions of any such Agreement as supplemented or amended are
not inconsistent with the provisions of the Plan.
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(e) A majority of the members of the entire Committee shall
constitute a quorum and the actions of a majority of the members of the
Committee in attendance at a meeting at which a quorum is present, or actions by
a written instrument signed by all members of the Committee, shall be the
actions of the Committee.
(f) The Committee may, in its discretion, delegate to the CEO,
any Senior Vice President of the Company or the Secretary of the Company the
"administration" of the Plan under this Section 3; provided, however, that no
such delegation by the Committee shall be made if such delegation would not be
permitted under applicable law or with respect to the administration of the Plan
as it affects the CEO or the President or Secretary of the Company or any Senior
Vice President of the Company, and, provided further, however, the Committee may
not delegate its authority to grant awards or correct errors, omissions or
inconsistencies in the Plan. All authority delegated by the Committee under this
paragraph (f) of this Section 3 shall be exercised in accordance with the terms
and conditions of the Plan and any rules, regulations or administrative
guidelines that may from time to time be established by the Committee, and any
delegee of such authority shall periodically report to the Committee concerning
the performance or discharge of the matters delegated to such individual.
4. Shares of Stock Subject to the Plan. (a) The shares of stock
subject to Awards granted under the Plan shall be shares of Common Stock. Such
shares of Common Stock subject to the Plan may be either authorized and unissued
shares (which will not be subject to preemptive rights) or previously issued
shares acquired by the Company or any Subsidiary. The total number of shares of
Common Stock that may be delivered pursuant to any Awards under the Plan is
3,000,000 plus an additional number of shares on January 1 of each calendar year
(beginning with calendar year 1997) during the duration of the Plan equal to the
Additional Annual Increment, of which 600,000 shares of Common Stock plus an
additional amount of shares of Common Stock each calendar year equal to twenty
percent of the Additional Annual Increment with respect to such year may be
awarded as Restricted Stock and no more than 7,500,000 shares of Common Stock
may be awarded in the aggregate with respect to ISOs for the duration of the
Plan. The exercise of a SAR, whether paid in cash or Common Stock, shall be
deemed to be an issuance of Common Stock for purposes of determining the number
of shares delivered under the Plan.
(b) Notwithstanding any of the foregoing limitations set forth
in this Section 4, the numbers of shares of Common Stock specified in this
Section 4 shall be adjusted as provided in Section 15.
(c) Any shares of Common Stock subject to an Option or SAR or
Other Stock-Based Award which for any reason expires or is terminated without
having been fully exercised and any Restricted Stock which is forfeited may
again be granted pursuant to an Award under the Plan, subject to the limitations
of this Section 4; provided, however, that forfeited shares of Common Stock
shall not be available for further Awards if the recipient thereof has realized
any benefits of ownership from such shares.
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5. Eligibility. Employees of the Company and its Subsidiaries (but
excluding members of the Committee as well as non-employee directors) shall be
eligible to become Participants and receive Awards under the Plan.
6. Terms and Conditions of Stock Options. All Options to purchase
Common Stock granted under the Plan shall be either ISOs or Options other than
ISOs. Each Option shall be subject to all the applicable provisions of the Plan,
including the following terms and conditions, and to such other terms and
conditions not inconsistent therewith as the Committee shall determine and which
are set forth in the applicable Agreement.
(a) The option exercise price per share of shares of Common
Stock subject to each Option shall be determined by the Committee and stated in
the Agreement; provided, however, that, subject to paragraph (g)(C) of this
Section 6, such price shall not be less than 100% of the Fair Market Value of a
share of Common Stock at the time that the Option is granted.
(b) Each Option shall be exercisable in whole or in such
installments, at such times and under such conditions as may be determined by
the Committee in its discretion and stated in the Agreement, and, in any event,
over a period of time ending not later than ten years from the date such Option
was granted, subject to paragraph (g)(C) of this Section 6.
(c) An Option shall not be exercisable with respect to a
fractional share of Common Stock or the lesser of fifty shares or the full
number of shares of Common Stock then subject to the Option. No fractional
shares of Common Stock shall be issued upon the exercise of an Option.
(d) Each Option may be exercised by giving Notice to the Company
specifying the number of shares of Common Stock to be purchased, which shall be
accompanied by payment in full including applicable taxes, if any, in accordance
with Section 14. Payment shall be in any manner permitted by applicable law and
prescribed by the Committee, in its discretion, and set forth in the Agreement,
including, in the Committee's discretion, payment in accordance with a "cashless
exercise" program established by the Committee.
(e) No Optionee or other person shall become the beneficial
owner of any shares of Common Stock subject to an Option, nor have any rights to
dividends or other rights of a shareholder with respect to any such shares until
he or she has exercised his or her Option in accordance with the provisions of
the Plan and the applicable Agreement.
(f) An Option may be exercised only if at all times during the
period beginning with the date of the granting of the Option and ending on the
date of such exercise, the Optionee was an employee of either the Company or of
a Subsidiary or of another corporation referred to in Section 421(a)(2) of the
Code. Notwithstanding the above, the Committee may determine in its discretion
that an Option may be exercised following termination of such continuous
employment, whether or not exercisable at such time, to the extent provided in
the applicable Agreement.
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<PAGE> 9
(g) (A) Each Agreement relating to an Option shall state whether
such Option will or will not be treated as an ISO. No ISO shall be granted
unless such Option, when granted, qualifies as an "incentive stock option" under
Section 422 of the Code. Any ISO granted under the Plan shall contain such terms
and conditions, consistent with the Plan, as the Committee may determine to be
necessary to qualify such Option as an "incentive stock option" under Section
422 of the Code. Any ISO granted under the Plan may be modified by the Committee
to disqualify such Option from treatment as an "incentive stock option" under
Section 422 of the Code.
(B) Notwithstanding any intent to grant ISOs, an Option
granted under the Plan will not be considered an ISO to the extent that it,
together with any other "incentive stock options" (within the meaning of Section
422 of the Code, but without regard to subsection (d) of such Section) under the
Plan or any other incentive stock option plans of the Company and any
Subsidiary, are exercisable for the first time by any Optionee during any
calendar year with respect to Common Stock having an aggregate Fair Market Value
in excess of $100,000 (or such other limit as may be required by the Code) as of
the time the Option with respect to such Common Stock is granted. The rule set
forth in the preceding sentence shall be applied by taking Options into account
in the order in which they were granted.
(C) No ISO shall be granted to a Participant who owns
(within the meaning of Section 424(d) of the Code), at the time the Option is
granted, more than 10% of the total combined voting power of all classes of
stock of the Company or a Subsidiary. This restriction does not apply if at the
time such ISO is granted the Option exercise price per share of Common Stock
subject to the Option is at least 110% of the Fair Market Value of a share of
Common Stock on the date such ISO is granted, and the ISO by its terms is not
exercisable after the expiration of five years from such date of grant.
(h) Notwithstanding any other provision contained in the Plan to
the contrary, the maximum number of shares of Common Stock which may be subject
to Options granted under the Plan to any Participant in any twelve-month period
shall not exceed the Award Limit. To the extent required by Section 162(m) of
the Code, shares of Common Stock subject to Options which are cancelled shall
continue to be counted against the Award Limit and if, after the grant of an
Option, the price of shares subject to such Option is reduced and the
transaction is treated as a cancellation of the Option and a grant of a new
Option, both the Option deemed to be canceled and the Option deemed to be
granted shall be counted against the Award Limit.
7. Terms and Conditions of SARs. Any SAR granted by the Committee
under the Plan shall be granted in conjunction with all or part of an Option
granted under the Plan. Each SAR shall be subject to all the applicable
provisions of the Plan, including the following terms and conditions, and to
such other terms and conditions not inconsistent therewith as the Committee
shall determine and which are set forth in the applicable Agreement.
(a) The Committee may grant a SAR with respect to an Option which
is not an ISO, either at the time such Option is granted or at any subsequent
time during the term
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of such Option, or with respect to an ISO, only at the time such ISO is granted.
A SAR shall entitle the grantee thereof to elect, in the manner described below
and as set forth in the applicable Agreement, in lieu of exercising his or her
related Option, for all or a portion of the shares of Common Stock covered by
such Option, to surrender such Option with respect to any or all of such shares
and to receive from the Company a payment, such payment shall have a value equal
to the amount by which (A) the Fair Market Value of a share of Common Stock on
the date of such election, multiplied by the number of shares of Common Stock as
to which the grantee shall have made such election, exceeds (B) the exercise
price stated in such Option multiplied by such number of shares. A SAR shall be
exercisable only to the extent and at the time the related Option is
exercisable. The SAR shall terminate and shall no longer be exercisable upon the
expiration or exercise of the related Option. An Option with respect to which an
Optionee has elected to exercise a SAR, as described above, shall, to the extent
of the shares covered by such exercise, be canceled automatically and
surrendered to the Company. Such Option shall thereafter remain exercisable
according to its terms only with respect to the number of shares of Common Stock
as to which it would otherwise be exercisable, less the number of such shares
with respect to which such SAR has been so exercised.
(b) The Company may, in the discretion of the Committee, as set
forth in the Agreement, make payment on a properly exercised SAR; (i) in cash
equal to the excess of the amount described in clause (A) over the amount
described in clause (B) of paragraph 7(a) above; or (ii) in the nearest whole
number of shares of Common Stock having an aggregate Fair Market Value on the
date of exercise of the SAR which is not greater than the cash amount calculated
in clause 7(b)(i) above; or (iii) in a combination of the manners described in
clauses 7(b)(i) and (ii) above.
(c) An election to exercise SARs shall be deemed to have been
made on the date of Notice of such election to the Company.
(d) Notwithstanding any other provision contained in the Plan to
the contrary, the maximum number of shares of Common Stock for which SARs may be
granted under the Plan to any Participant in any twelve-month period shall not
exceed the Award Limit. To the extent required by Section 162(m) of the Code,
shares of Common Stock subject to SARs which are cancelled continue to be
counted against the Award Limit and if, after the grant of a SAR, the price of
shares subject to such SAR is reduced and the transaction is treated as a
cancellation of the SAR and a grant of a new SAR, both the SAR deemed to be
canceled and the SAR deemed to be granted shall be counted against the Award
Limit.
8. Terms and Conditions of Restricted Stock Awards. All awards of
Restricted Stock under the Plan shall be subject to all the applicable
provisions of the Plan, including the following terms and conditions, and to
such other terms and conditions not inconsistent therewith, as the Committee
shall determine and which are set forth in the applicable Agreement.
(a) Awards of Restricted Stock may be in addition to or in lieu
of any other types of Awards granted under the Plan.
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<PAGE> 11
(b) (i) During the Restriction Period stated in the Agreement,
the recipient shall not be permitted to sell, transfer, pledge, assign, encumber
or otherwise dispose of the shares of Restricted Stock. Any attempt by such
recipient to do so shall constitute the immediate and automatic forfeiture of
such Award.
(ii) An award of Restricted Stock with a Restriction Period
based upon the attainment of particular performance goals established by the
Committee, which performance goals are determined over a measurement period or
periods established by the Committee and relate to one or more Performance
Criteria, as determined by the Committee, in its discretion, is intended to
qualify as "other performance-based compensation," as used in Code Section
162(m)(4)(c). The maximum number of shares of Restricted Stock intended to
qualify as "other performance-based compensation," as used in Code Section
162(m)(4)(C), that may be awarded to a Participant in any twelve-month period
shall not exceed the Award Limit.
(c) Except as otherwise provided in this paragraph (c) of Section
8, shares of Restricted Stock shall be forfeited and revert to the Company upon
termination for any reason of the recipient's employment with the Company or a
Subsidiary and/or the failure to meet any performance goals to the extent set
forth in the Agreement. Notwithstanding the foregoing, upon any such termination
of employment during the Restriction Period, shares of Restricted Stock shall
become free of all or part of the restrictions applicable thereto to the extent
that: the Agreement, as determined by the Committee in its discretion on the
award date, provides for lapse of such restrictions upon such termination of
employment or the Committee in its discretion determines to waive forfeiture of
such shares of Restricted Stock for whatever reason the Committee considers to
be in the interests of the Company; provided, however, to the extent that
subparagraph (b)(ii) of this Section 8 is intended to apply to shares of
Restricted Stock, in no event shall restrictions applicable thereto be subject
to lapse prior to the end of the Restriction Period for any reason other than
the death or disability of the recipient or Change of Control of the Company.
(d) Each recipient of shares of Restricted Stock hereunder may,
but need not, be issued one or more stock certificates in respect of such shares
of Restricted Stock. Any such stock certificates for shares of Restricted Stock
shall be registered in the name of the recipient but shall either be
appropriately legended and returned to the Company by the recipient, together
with a stock power, endorsed in blank by the recipient, or delivered to and held
by the Secretary of the Company.
(e) The recipient of shares of Restricted Stock shall be entitled
to vote shares of Restricted Stock, and shall be entitled to all dividends paid
thereon, except that dividends paid in Common Stock or other property shall be
subject to the same restrictions. To the extent that the Committee so
determines, and sets forth in the Agreement, in the event of any adjustment as
provided in Section 15, any new or additional shares or securities (or any
extraordinary dividends paid in cash) received by a recipient of Restricted
Stock shall be subject to the same terms and conditions as relate to the
original shares of Restricted Stock.
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(f) Restricted Stock shall become free of the foregoing
restrictions upon the expiration of the applicable Restriction Period and the
Company shall, subject to paragraph (c) of Section 15, then deliver Common Stock
certificates evidencing such stock to the Participant.
9. Terms and Conditions of Other Stock-Based Awards. The Committee
may grant to Participants Awards under the Plan that are valued in whole or in
part by reference to, or otherwise based on Common Stock ("Other Stock-Based
Awards"). The provisions of Other Stock-Based Awards need not be the same with
respect to each recipient or each Award. The Committee, in its discretion, may
grant Other Stock-Based Awards as it deems appropriate, including, by way of
example and not in limitation, (i) to take advantage of the compensation
practices or tax laws or accounting rules applicable at the time of grant of
such an Award, even if such practices, laws and/or rules are different from
those in effect on the effective date of the Plan, (ii) to reflect the financial
situation of the Company from time to time or (iii) to conform to and comply
with tax, securities or other law or regulations in jurisdictions outside the
United States. Other Stock-Based Awards shall take such form as the Committee,
in its discretion, from time to time, determines, including, by way of example,
and not in limitation, deferred stock, performance shares, performance units and
convertible debentures. All Other Stock-Based Awards under the Plan shall be
subject to all the applicable provisions of the Plan, including the following
terms and conditions, and to such other terms, conditions, restrictions and/or
limitations, if any, not inconsistent with the Plan, as the Committee shall
determine, in its discretion, and which are set forth in the applicable
Agreement.
(a) Unless the Committee determines otherwise, the recipient of
an Other Stock-Based Award shall be entitled to receive Dividend Equivalents
based on the dividends declared with respect to the number of shares of Common
Stock covered by such Award during the period between the date such Award is
granted and the date such Award is exercised, vests or expires, as determined by
the Committee. Such Dividend Equivalents shall be converted to cash or
additional shares of Common Stock by such formula and at such time and subject
to such limitations as may be determined by the Committee.
(b) An Other Stock-Based Award, and any Common Stock covered by
such Award, may be forfeited to the extent determined by the Committee, in its
discretion, and as provided in the Agreement.
(c) All Other Stock-Based Awards, and any Common Stock covered
thereby, shall be forfeited upon termination of the recipient's employment with
the Company or a Subsidiary. Notwithstanding the foregoing, if any such
recipient's employment is terminated for any reason specified by the Committee
in its discretion and set forth in the Agreement, any or all remaining
limitations, restrictions or requirements imposed pursuant to the Plan or in the
Agreement with respect to such recipient's Other Stock-Based Award shall be
waived provided, however, that, in the case of any Other Stock-Based Award to
which paragraph (d) of this Section 9 applies, no such waiver shall be available
other than in the case of death or disability of the recipient or a change of
control or ownership of the Company. The Committee may, in its discretion,
otherwise modify or accelerate the exercisability or other terms and conditions
of
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<PAGE> 13
any Other Stock-Based Award, to the extent that any such modification or
acceleration is (i) permitted under, and not inconsistent with, the Plan and
(ii) in the best interests of the Company and, provided, that paragraph (d) of
this Section 9 is not applicable to such Other Stock-Based Award.
(d) An Other Stock-Based Award based in whole or in part upon the
attainment of particular performance goals established by the Committee is
intended to qualify as "other performance-based compensation," as used in Code
Section 162(m)(4)(C). Such performance goals shall be determined over a
measurement period or periods established by the Committee and shall relate to
one or more Performance Criteria, as determined by the Committee, in its
discretion. The maximum number of shares of Common Stock that may be awarded to
a Participant subject to an Other Stock-Based Award in any twelve-month period
shall not exceed the Award Limit.
10. Bonuses or Other Compensation Payable in Stock or Options. In
lieu of cash bonuses or other compensation otherwise payable under the Company's
or applicable Subsidiary's compensation practices to employees who are eligible
to participate in the Plan, the Committee, in its discretion, may determine that
such bonuses or other compensation shall be payable in Common Stock or Options,
or in a combination of Stock, Options and/or cash. Such bonuses or other
compensation shall be in consideration of services previously performed and as
an incentive toward future services and shall consist of shares of Common Stock
and/or Options subject to such terms as the Committee may determine in its
discretion.
11. Forfeiture. Except as provided in Section 15 of the Plan,
notwithstanding any other provisions of the Plan to the contrary:
(a) To the extent provided in the Agreement, if a Participant
shall exercise an Option or a SAR, or any portion thereof, and leave the
employment of the Company or a Subsidiary within six months after such exercise
for any reason other than death, permanent disability, retirement under a
retirement plan of the Company and/or a Subsidiary or termination of employment
with the written consent of the Company or such Subsidiary (as applicable), then
any Award Gain realized by such Participant as the result of such exercise shall
be paid by such Participant to the Company; provided, however, that no Award
Gain otherwise payable by a Participant to the Company with respect to the
exercise of an Option pursuant to this paragraph (a) of Section 11 shall be so
payable to the extent that the Fair Market Value of the Common Stock, as of the
date such Participant's employment by the Company or the Subsidiary terminates,
is less than the Option exercise price previously paid by such Participant and
such Participant has not, on or before such date, sold or otherwise disposed of
the Common Stock received upon the exercise of such Option.
(b) To the extent provided in the Agreement, if at any time prior
to the latest to occur of: (x) the termination or exercise of an Option or a SAR
or an Other Stock-Based Award or the expiration of the Restriction Period
applicable to Restricted Stock granted to a Participant, (y) three years after a
Participant leaves employment with the Company or a Subsidiary for any reason
other than death or permanent disability, or (z) three years after a
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<PAGE> 14
Participant exercises an Option or a SAR, or any portion thereof, such
Participant engages directly or indirectly in any manner or capacity in any
activity in competition with the business conducted by the Company or a
Subsidiary (as determined by the Committee in its discretion) or inimical,
contrary or harmful to the interests of the Company or a Subsidiary (as
determined by the Committee in its discretion) then (1) any Option, SAR or Other
Stock-Based Award granted to such Participant shall terminate upon the date on
which such Participant enters into such activity to the extent that such Option,
SAR or Other Stock-Based Award was not previously exercised or terminated in
accordance with the other provisions of the Plan or the Agreement as of such
date, (2) any Award Gain realized by such Participant as the result of an
exercise referred to in clause (z) above shall be paid by such Participant to
the Company, (3) any Restricted Stock awarded to such Participant with respect
to which the Restriction Period has not expired as of such date shall be
forfeited and revert to the Company and (4) any unpaid Dividend Equivalents as
of such date, shall be forfeited and shall not be paid to such Participant.
(c) A Participant shall satisfy any obligation he or she owes to
the Company under the foregoing paragraphs (a) and (b) of this Section 11
promptly after the accrual thereof by payment in cash to the Company; however,
in lieu thereof, the Company may elect to deduct the unpaid amount of any such
obligation owed by such Participant to the Company from any payment of any kind
otherwise due to such Participant, including, but not limited to, wages or other
compensation, fringe benefits or vacation pay.
(d) The Committee may release a Participant from any or all
obligations that he or she owes to the Company pursuant to this Section 11,
and/or waive, in whole or in part, the application of this Section 11 to a
Participant if the Committee determines, in its discretion, that such action is
in the best interests of the Company.
12. Transfer, Leave of Absence. For purposes of the Plan, a transfer
of an employee from the Company to a Subsidiary or an affiliate of the Company,
whether or not incorporated, or vice versa, or from one Subsidiary or affiliate
of the Company to another, and a leave of absence, duly authorized in writing by
the Company or a Subsidiary or affiliate of the Company, shall not be deemed a
termination of employment of the employee.
13. Rights of Employees and Other Persons. (a) No person shall have
any rights or claims under the Plan except in accordance with the provisions of
the Plan and the applicable Agreement.
(b) Nothing contained in the Plan or in any Agreement shall be
deemed to give any employee the right to be retained in the service of the
Company or its Subsidiaries nor restrict in any way the right of the Company or
any Subsidiary to terminate any employee's employment at any time with or
without cause.
(c) The adoption of the Plan shall not be deemed to give any
employee of the Company or any Subsidiary or any other person any right to be
selected as a Participant or to be granted an Award.
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<PAGE> 15
(d) Nothing contained in the Plan or in any Agreement shall be
deemed to give any employee the right to receive any bonus, whether payable in
cash or in Common Stock, or in any combination thereof, from the Company, nor be
construed as limiting in any way the right of the Company to determine, in its
sole discretion, whether or not it shall pay any employee bonuses, and, if so
paid, the amount thereof and the manner of such payment.
14. Tax Withholding Obligations. (a) The Company and/or any
Subsidiary are authorized to take whatever actions are necessary and proper to
satisfy all obligations of Participants for the payment of all Federal, state,
local and foreign taxes in connection with any Awards (including, but not
limited to, actions pursuant to the following paragraphs (b) and (c) of this
Section 14).
(b) If any Participant properly elects, within the period
permitted under Section 83 of the Code after the date on which property subject
to an Award is transferred to such Participant to include in gross income for
Federal income tax purposes an amount equal to the Fair Market Value (on the
date of transfer) of the Common Stock subject to such Award, such Participant
shall pay, or make arrangements satisfactory to the Company, as determined in
the Committee's discretion, to pay to the Company, at the time of such election,
any Federal, state or local taxes required to be withheld with respect to such
Award. If any such Participant shall fail to make such tax payments as are
required, the Company and its Subsidiaries shall, to the extent permitted by
law, have the right to deduct any such taxes from any payment of any kind
otherwise due to such Participant.
(c) Any Participant who does not or cannot make the election
described in paragraph (a) of this Section 14 with respect to an Award shall
(and in no event shall Common Stock be delivered to such Participant with
respect to such Award until), no later than the date as of which the value of
the Award first becomes includible in the gross income of the Participant for
income tax purposes, pay to the Company in cash, or make arrangements
satisfactory to the Company, as determined in the Committee's discretion,
regarding payment to the Company of, any taxes of any kind required by law to be
withheld with respect to the Common Stock or other property subject to such
Award, and the Company and any Subsidiary shall, to the extent permitted by law,
have the right to deduct any such taxes from any payment of any kind otherwise
due to such Participant. Notwithstanding the above, the Committee may, in its
discretion and pursuant to procedures approved by the Committee, permit the
Participant to (i) elect withholding by the Company of Common Stock otherwise
deliverable to such Participant pursuant to such Award (provided, however, that
the amount of any Common Stock so withheld shall not exceed the minimum required
withholding obligation taking into account the Participant's effective tax rate
and all applicable Federal, state, local and foreign taxes) and/or (ii) tender
to the Company Common Stock owned by such Participant (or by such Participant
and his or her spouse jointly) and acquired more than six months prior to such
tender in full or partial satisfaction of such tax obligations.
15. Changes in Capital. (a) Upon changes in the outstanding Common
Stock (or other change in corporate capitalization) by reason of a stock
dividend, stock split, reverse split, subdivision, recapitalization, merger,
consolidation (whether or not the Company is a
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<PAGE> 16
surviving corporation), an extraordinary dividend payable in cash or property,
combination or exchange of shares, separation, reorganization or liquidation,
the aggregate number and class of shares available under the Plan as to which
Awards may be granted, the number and class of shares under (i) each Option and
the option price per share, (ii) each SAR and the exercise price thereof, (iii)
each Other Stock-Based Award and the exercise price (or equivalent, if
applicable) thereof and (iv) each award of Restricted Stock shall, in each case,
be correspondingly adjusted by the Committee. Such adjustments shall be made in
the case of any outstanding Options and/or SARs without change in the total
price applicable to such Options and SARs.
(b) In the event of a Change of Control, except as otherwise
provided in the Agreement specifically with respect to a Change of Control: (1)
all restrictions on Restricted Stock previously awarded to Participants under
the Plan shall be immediately cancelled and the Restriction Periods applicable
thereto shall immediately terminate, without regard to any contrary provisions
contained in the Plan or the applicable Agreements, (2) the time of exercise of
Options, SARs and/or Other Stock-Based Awards which are outstanding shall be
accelerated so that such Awards become immediately exercisable in full without
regard to any limitations of time or amount otherwise contained in the Plan or
the applicable Agreements and, in the event an Optionee terminates employment
for any reason during the one year period following a Change of Control, all
exercisable Options held by such Optionee (or such Optionee's transferee) shall
remain exercisable until the first to occur of the first anniversary of the
Optionee's termination of employment or the expiration of the initial Option
term, or until such later date otherwise provided by the Committee or in the
applicable Agreement, (3) all such Awards shall immediately become fully vested
and nonforfeitable, and (4) any payment owed by, or forfeiture imposed on a
Participant pursuant to Section 11, shall be cancelled or waived. Upon the
occurrence of a Change of Control, the Committee may, in its discretion,
determine (A) that Options, SARs and/or Other Stock-Based Awards shall be
adjusted and make such adjustments by substituting for Common Stock subject to
such Options, SARs and/or Other Stock-Based Awards stock or other securities of
any successor corporation to the Company or that may be issuable by another
corporation that is a party to the transaction if such stock or other securities
are publicly traded, in which event the aggregate exercise price (as applicable)
shall remain the same and the amount of shares or other securities subject to
option or other rights under an Award shall be the amount of shares or other
securities which could have been purchased on the closing date or expiration
date of such transaction with the proceeds which would have been received by the
Participant if the Option, SAR and/or Other Stock-Based Award had been exercised
in full prior to such transaction or expiration date and the Participant
exchanged all of such shares in the transaction, and/or (B) that any outstanding
Options, SARs and/or Other Stock-Based Awards shall, in each case, be converted
into a right to receive in cash, as soon as practicable following the Change of
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<PAGE> 17
Control, an amount equal to the greater of (x) the highest value of the
consideration to be received in connection with such transaction for one share
of Common Stock and (y) the highest market trading price of a share of the
Common Stock reported in The Wall Street Journal during the 30 consecutive
trading days prior to the Change of Control, less, in the case of an Award
prescribing an exercise price, the per share exercise price of such Award,
multiplied by the number of shares of Common Stock subject to such Award. No
Participant shall have any right to prevent the consummation of any transaction
affecting the number of shares available to such Participant. Any actions or
determinations of the Committee under this paragraph (b) of Section 15 need not
be uniform as to all outstanding Awards, nor treat all Participants identically.
Notwithstanding the foregoing adjustments, in no event may any Option be
exercised after ten years from the date it was originally granted and any
changes to ISOs shall, unless the Committee determines otherwise, only be
effective to the extent such adjustments or changes do not cause a
"modification" (within the meaning of Section 424(h)(3) of the Code) of such
ISOs or adversely affect the tax status of such ISOs.
16. Miscellaneous Provisions. (a) The Plan shall be unfunded. The
Company shall not be required to establish any special or separate fund or to
make any other segregation of assets to assure the issuance of shares or the
payment of cash upon exercise or payment of any Award. Proceeds from the sale of
shares of Common Stock pursuant to Options granted under the Plan shall
constitute general funds of the Company. The expenses of the Plan shall be borne
by the Company.
(b) Except as otherwise provided in this paragraph (b) of
Section 16, an Award by its terms shall be personal and may not be sold,
transferred, pledged, assigned, encumbered or otherwise alienated or
hypothecated otherwise than by will or by the laws of descent and distribution
and shall be exercisable during the lifetime of a Participant only by him or
her. The foregoing to the contrary notwithstanding, at the Committee's
discretion, an Agreement may permit the receipt or exercise of a Participant's
Award (or any portion thereof) after his or her death by the beneficiary most
recently named by such Participant in a written designation thereof filed with
the Company, or, in lieu of any such surviving beneficiary, by the legal
representatives of such Participant's estate and/or an Award other than an ISO
to be transferred by a Participant during his or her lifetime to such
Participant's alternate payee pursuant to a qualified domestic relations order,
as defined by the Code or Title I of the Employee Retirement Income Security Act
of 1974, as amended, or the rules and regulations thereunder. In the event any
Award is exercised by the executors, administrators, heirs or distributees of
the estate of a deceased Participant, or such a Participant's beneficiary,
pursuant to the terms and conditions of the Plan and the applicable Agreement,
the Company shall be under no obligation to issue Common Stock thereunder unless
and until the Company is satisfied, as determined in the discretion of the
Committee, that the person or persons exercising such Award are the duly
appointed legal representative of the deceased Participant's estate or the
proper legatees or distributees thereof or the named beneficiary of such
Participant. Further notwithstanding the foregoing to the contrary, at the
Committee's discretion, an Agreement may permit the transfer of an Award other
than an ISO by the recipient thereof, subject to such terms, conditions and
limitations prescribed by the Committee, and the
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<PAGE> 18
applicable transferee of such Award shall be treated under the Plan and the
applicable Agreement as the Participant for purposes of any exercise of such
Award.
(c) It is understood that the Committee may, at any time and
from time to time after the granting of an Award, specify such additional terms,
conditions and restrictions with respect to such Award as may be deemed
necessary or appropriate to ensure compliance with any and all applicable laws,
including, but not limited to, (i) terms, restrictions and conditions for
compliance with Federal and state securities laws, (ii) methods of withholding
or providing for the payment of required taxes and (iii) restrictions regarding
a Participant's ability to exercise Awards under a "cashless exercise" program
established by the Committee.
(d) If at any time the Committee shall determine, in its
discretion, that the listing, registration and/or qualification of shares of
Common Stock upon any national securities exchange or under any state or Federal
law, or the consent or approval of any governmental regulatory body, is
necessary or desirable as a condition of, or in connection with, the sale or
purchase of shares of Common Stock hereunder, no Option, SAR or Other
Stock-Based Award may be exercised or Restricted Stock or bonus or other
compensation payable in Common Stock may be transferred in whole or in part
unless and until such listing, registration, qualification, consent and/or
approval shall have been effected or obtained, or otherwise provided for, free
of any conditions not acceptable to the Committee.
(e) The Committee may require each person receiving Common Stock
in connection with any Award under the Plan to represent and agree with the
Company in writing that such person is acquiring the shares for investment
without a view to the distribution thereof.
(f) By accepting any benefit under the Plan, each Participant
and each person claiming under or through such Participant shall be conclusively
deemed to have indicated their acceptance and ratification of, and consent to,
all of the terms and conditions of the Plan and any action taken under the Plan
by the Committee, the Company or the Board.
(g) Except with respect to "incentive stock options" (as defined
in Section 422 of the Code) granted under the Predecessor Plans and outstanding
on the effective date of the Plan, subject to approval of the Plan by the
Company's shareholders, in accordance with Section 20, the provisions of the
Plan shall apply to and govern existing and subsequent awards under the
Predecessor Plans and, unless otherwise determined by the Committee, existing
and subsequent awards under the Predecessor Plans shall be deemed to be amended
to provide any additional rights applicable to Awards hereunder, subject to the
right of any affected participant in either of the Predecessor Plans to refuse
to consent to such amendment pursuant to the terms and conditions of the
applicable Predecessor Plan and the applicable option or award agreement between
the Company and such participant.
(h) Neither the adoption of the Plan nor anything contained
herein shall affect any other compensation or incentive plans or arrangements of
the Company or any Subsidiary (other than the Predecessor Plans, as provided in
paragraph (g) of this Section 16), or prevent or limit the right of the Company
or any Subsidiary to establish any other forms of
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<PAGE> 19
incentives or compensation for their employees or consultants or directors, or
grant or assume options or other rights otherwise than under the Plan.
(i) The Plan shall be governed by and construed in accordance
with the laws of the State of Delaware, except as superseded by applicable
Federal law.
17. Limits of Liability. (a) Any liability of the Company or a
Subsidiary to any Participant with respect to any Award shall be based solely
upon contractual obligations created by the Plan and the Agreement.
(b) Neither the Company nor a Subsidiary nor any member of the
Committee or the Board, nor any other person participating in any determination
of any question under the Plan, or in the interpretation, administration or
application of the Plan, shall have any liability, in the absence of bad faith,
to any party for any action taken or not taken in connection with the Plan,
except as may expressly be provided by statute.
18. Limitations App1icable to Certain Awards Subject to Section 16
and Code Section 162(m). Unless stated otherwise in the Agreement,
notwithstanding any other provision of the Plan, any Award granted to an
executive or officer of the Company who is then subject to Section 16 of the
Exchange Act, shall be subject to any additional limitations set forth in any
applicable exemptive rule under Section 16 of the Exchange Act (including Rule
16b-3 as it may be amended from time to time) that are requirements for the
application of such exemptive rule, and the Plan shall be deemed amended to the
extent necessary to conform to such limitations. Furthermore, unless stated
otherwise in the Agreement, notwithstanding any other provision of the Plan, any
Award granted to an officer or executive of the Company intended to qualify as
"other performance-based compensation" as described in Section 162(m)(4)(C) of
the Code shall be subject to any additional limitations set forth in Section
162(m) of the Code (including any amendment to Section 162(m) of the Code) or
any regulations or rulings issued thereunder that are requirements for
qualification as "other performance-based compensation" as described in Section
162(m)(4)(C) of the Code, and the Plan shall be deemed amended to the extent
necessary to conform to such requirements.
19. Amendments and Termination. The Board may, at any time and with
or without prior notice, amend, alter, suspend, or terminate the Plan; provided,
however, no amendment, alteration, suspension, or termination shall be made
which would adversely affect an Outstanding Award theretofore granted without
the written consent of the holder of the Award or which, without first obtaining
approval of the stockholders of the Company (where such approval is necessary to
satisfy (i) the then-applicable requirements of Rule 16b-3, (ii) any
requirements under the Code relating to ISOs or for exemption from Section
162(m) of the Code, or (iii) applicable state law), would:
(a) except as is provided in Sections 4(a) and 15, increase the
maximum number of shares of Common Stock which may be sold or awarded under the
Plan;
(b) except as is provided in Section 15, decrease the minimum
option exercise price requirements of Section 6(a);
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<PAGE> 20
(c) change the class of persons eligible to receive Awards under
the Plan; or
(d) extend the duration of the Plan or the period during which
Options may be exercised under Section 6(b).
The Committee may amend the terms of any Award theretofore granted, including
any Agreement, retroactively or prospectively, but no such amendment shall
adversely affect an outstanding Award without the written consent of the holder
of the Award. Notwithstanding the foregoing, the Board may amend the Plan and
the Committee may amend any Award, including any Agreement, either retroactively
or prospectively, and without the consent of the applicable Participant, so as
to preserve or come within any exemptions from liability under Section 16(b) of
the Exchange Act, pursuant to the rules and releases promulgated by the SEC
(including Rule 16b-3) and/or so that any Award granted to an officer or
executive of the Company shall qualify as "other performance-based compensation"
as described in Section 162(m)(4)(C) of the Code.
20. Duration. The Plan shall become effective as of the date on
which it is approved by the holders of a majority of the Company's outstanding
Common Stock which is present and voted at a meeting, which approval must occur
within the period ending twelve months after the date the Plan is adopted by the
Board. The Plan shall terminate upon the earliest to occur of (a) the effective
date of a resolution adopted by the Board terminating the Plan or (b) ten years
from the date the Plan is approved by the Company's shareholders. No Award may
be granted under the Plan after the earliest of (a) and (b) of this Section 20
to occur; however, Awards theretofore granted may extend beyond such date.
No such termination of the Plan shall affect the rights of any
Participant hereunder and all Awards previously granted hereunder shall continue
in force and in operation after the termination of the Plan, except as they may
be otherwise terminated in accordance with the terms of the Plan or the
Agreement.
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<PAGE> 1
EXHIBIT 10(e)
NEWMONT MINING CORPORATION
1999 EMPLOYEES STOCK PLAN
1. Purposes. The purposes of the Newmont Mining Corporation 1999
Employees Stock Plan are:
(a) To further the growth, development and success of the Company
and its Subsidiaries by enabling employees of the Company and its Subsidiaries
to acquire a continuing equity interest in the Company, thereby increasing their
personal interests in such growth, development and success and motivating such
employees to exert their best efforts on behalf of the Company and its
Subsidiaries and to provide incentives for the future performance of services;
and
(b) To maintain the ability of the Company and its Subsidiaries
to attract and retain employees of outstanding ability by offering them an
opportunity to acquire a continuing equity interest in the Company and its
Subsidiaries which will reflect the growth, development and success of the
Company and its Subsidiaries.
(c) Toward these objectives, the Committee may grant Options,
Stock Appreciation Rights, or Other Stock-Based Awards or award Restricted Stock
to such employees or pay such employees' bonuses (if any) or other compensation
in Common Stock or award or grant any combination thereof, all pursuant to the
terms and conditions of the Plan (each, an "Award").
2. Definitions. As used in the Plan, the following capitalized terms
shall have the meanings set forth below:
(a) "AGREEMENT" - an option or award agreement evidencing an
Award.
(b) "AWARD" - an Option, SAR, Other Stock-Based Award or
Restricted Stock granted or awarded, or bonus or other compensation of an
employee paid in Common Stock, pursuant to the terms and conditions of the Plan.
(c) "AWARD GAIN" - the gain represented by the product of the
excess of the Fair Market Value of the Common Stock on the date of exercise of
an Option or SAR over the exercise price of such Option or SAR multiplied by the
number of shares of Common Stock subject to such Option or SAR, or portion
thereof, exercised, without regard to any subsequent decrease or increase in the
Fair Market Value of the Common Stock.
(d) "BOARD" - the Board of Directors of the Company.
(e) "CEO" - the Chief Executive Officer of the Company.
(f) "CHANGE OF CONTROL" - the occurrence of any of the following
events:
<PAGE> 2
(i) The acquisition by any individual, entity or group
(within the meaning of Section 13(d)(3) or 14(d)(2) of the Securities Exchange
Act of 1934, as amended (the "Exchange Act")) (a "Person") of beneficial
ownership (within the meaning of Rule 13d-3 promulgated under the Exchange Act)
of 20% or more of either (x) the then outstanding shares of common stock of the
Company (the "Outstanding Company Common Stock") or (y) the combined voting
power of the then outstanding voting securities of the Company entitled to vote
generally in the election of directors (the "Outstanding Company Voting
Securities"); provided, however, that for purposes of this subsection (i), the
following acquisitions shall not constitute a Change of Control: (A) any
acquisition directly from the Company, (B) any acquisition by the Company, (C)
any acquisition by any employee benefit plan (or related trust) sponsored or
maintained by the Company or any corporation controlled by the Company or (D)
any acquisition by any corporation pursuant to a transaction which complies with
clauses (A), (B) and (C) of paragraph (iii) below; or
(ii) Individuals who, as of the Effective Date, constitute
the Board (the "Incumbent Board") cease for any reason to constitute at least a
majority of the Board; provided, however, that any individual becoming a
director subsequent to the Effective Date whose election, or nomination for
election by the Company's shareholders, was approved by a vote of at least a
majority of the directors then comprising the Incumbent Board shall be
considered as though such individual were a member of the Incumbent Board, but
excluding, for this purpose, any such individual whose initial assumption of
office occurs as a result of an actual or threatened election contest with
respect to the election or removal of directors or other actual or threatened
solicitation of proxies or consents by or on behalf of a Person other than the
Board; or
(iii) Consummation of a reorganization, merger or
consolidation or sale or other disposition of all or substantially all of the
assets of the Company or an acquisition of assets of another corporation (a
"Business Combination"), in each case, unless, following such Business
Combination, (A) all or substantially all of the individuals and entities who
were the beneficial owners, respectively, of the Outstanding Company Common
Stock and Outstanding Company Voting Securities immediately prior to such
Business Combination beneficially own, directly or indirectly, more than 50% of,
respectively, the then outstanding shares of common stock and the combined
voting power of the then outstanding voting securities entitled to vote
generally in the election of directors, as the case may be, of the corporation
resulting from such Business Combination (including, without limitation, a
corporation which as a result of such transaction owns the Company or all or
substantially all of the Company's assets either directly or through one or more
subsidiaries) in substantially the same proportions as their ownership,
immediately prior to such Business Combination of the Outstanding Company Common
Stock and Outstanding Company Voting Securities, as the case may be, (B) no
Person (excluding any corporation resulting from such Business Combination or
any employee benefit plan (or related trust) of the Company or such corporation
resulting from such Business Combination) beneficially owns, directly or
indirectly, 20% or more of, respectively, the then outstanding shares of common
stock of the corporation resulting from such Business Combination or the
combined voting power of the then outstanding voting securities of such
corporation, except to the extent that such ownership
<PAGE> 3
existed prior to the Business Combination and (C) at least a majority of the
members of the board of directors of the corporation resulting from such
Business Combination were members of the Incumbent Board at the time of the
execution of the initial agreement, or of the action of the Board, providing for
such Business Combination; or
(iv) Approval by the shareholders of the Company of a
complete liquidation or dissolution of the Company.
(g) "CODE" - the Internal Revenue Code of 1986, as it may be
amended from time to time, including regulations and rules thereunder and
successor provisions and regulations and rules thereto.
(h) "COMMITTEE" - the Compensation Committee of the Board, or
such other Board committee as may be designated by the Board to administer the
Plan.
(i) "COMMON STOCK" - the $1.60 par value common stock of the
Company.
(j) "COMPANY" - Newmont Mining Corporation, a Delaware
corporation, or any successor entity.
(k) "DIVIDEND EQUIVALENTS" - the equivalent value (in cash or
Common Stock) of dividends paid on Common Stock subject to Other Stock-Based
Awards granted under Section 9.
(l) "EXCHANGE ACT" - the Securities Exchange Act of 1934, as it
may be amended from time to time.
(m) "FAIR MARKET VALUE" of a share of Common Stock as of a given
date shall be the average of the high and low sales prices for a share of Common
Stock as reported for New York Stock Exchange issues in The Wall Street Journal
for such date; provided, however, that if there is no sale of shares of Common
Stock reported in The Wall Street Journal on such date, such fair market value
shall be the average between the bid and asked prices for a share of Common
Stock reported in The Wall Street Journal at the close of trading on such date;
provided further, however, that if no such prices are reported for such day, the
most recent day for which such prices are available shall be used. In the event
that the method for determining the fair market value of a share of Common Stock
provided for in the previous sentence shall not be practicable, then such fair
market value shall be determined by such other reasonable valuation method as
the Committee shall, in its discretion, select and apply in good faith as of the
given date; provided, however, that for purposes of paragraph (a) of Section 6,
such fair market value shall be determined subject to Section 422(c)(7) of the
Code.
(n) "ISO," OR "INCENTIVE STOCK OPTION" - an option which conforms
to the applicable provisions of Section 422 of the Code.
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<PAGE> 4
(o) "NOTICE" - written notice actually received by the Company at
its offices on the day of such receipt, if received on or before 1:30 p.m.,
Denver time, on a day when the Company's offices are open for business, or, if
received after such time, such notice shall be deemed received on the next such
day, which notice may be delivered in person to the Company's Payroll Department
or sent by facsimile to the Company, or sent by certified or registered mail or
overnight courier, prepaid, addressed to the Company at 1700 Lincoln Street,
Denver, Colorado 80203, Attention: Payroll Department.
(p) "OPTION" - an option to purchase Common Stock granted to a
Participant under the Plan in accordance with the terms and conditions set forth
in Section 6. Options shall be stock options that are not ISOs.
(q) "OPTIONEE" - a Participant who has been granted an Option
under the Plan in accordance with the terms and conditions set forth in Section
6.
(r) "OTHER STOCK-BASED AWARDS" - Awards granted to Participants
under the Plan in accordance with the terms and conditions set forth in Section
10.
(s) "PARTICIPANT" - any employee of the Company or its
Subsidiaries selected to participate in the Plan pursuant to Section 3.
(t) "PERFORMANCE CRITERIA" - earnings, increases in production,
reductions in costs of production and reserve replacement.
(u) "PLAN" - this Newmont Mining Corporation 1999 Employees Stock
Plan.
(v) "RESTRICTED STOCK" - Common Stock awarded under the Plan in
accordance with the terms and conditions set forth in Section 8.
(w) "RESTRICTION PERIOD" - a time period, which may or may not be
based upon the achievement of particular performance goals and/or the
satisfaction of vesting or earnout provisions (which may be dependent on the
continued employment of the recipient) applicable to, and established or
specified by the Committee at the time of, each award of Restricted Stock.
(x) "RULE 16B-3" - Rule 16b-3 under the Exchange Act, as such
rule may be amended from time to time.
(y) "SAR" - a stock appreciation right granted to a Participant
under the Plan and in accordance with the terms and conditions of Section 7.
(z) "SEC" shall mean the Securities and Exchange Commission.
(aa) "SUBSIDIARY" shall mean (i) any present or future
corporation which is or would be a "subsidiary corporation" of the Company as
the term is defined in Section 424(f) of the Code and (ii) any unincorporated
entity in which the Company and/or one or more of its
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<PAGE> 5
"subsidiary corporations" (as defined in Section 424(f) of the Code) presently
or in the future own an aggregate profits interest of fifty percent (50%) or
more, which the Committee in its discretion determines will be a "Subsidiary"
for purposes of the Plan.
3. Administration of the Plan. (a) The Committee shall have
exclusive authority to operate, manage and administer the Plan in accordance
with its terms and conditions. Notwithstanding the foregoing, in its absolute
discretion, the Board may at any time and from time to time exercise any and all
rights, duties and responsibilities of the Committee under the Plan, including,
but not limited to, establishing procedures to be followed by the Committee, but
excluding matters which under Rule 16b-3 or Section 162(m) of the Code are
required to be determined in the discretion of the Committee.
(b) The Committee shall be appointed from time to time by the
Board, and the Committee shall consist of not less than three members of the
Board, each of whom is, to the extent necessary for the Plan and/or Awards
thereunder to satisfy the requirements and conditions of Rule 16b-3, a
"nonemployee director" under Rule 16b-3; provided, however, that if one or more
of the members of the Committee does not qualify as such a "non-employee
director," at the time any Award is granted, such Award nevertheless shall be
deemed to be properly authorized and issued under the Plan and shall remain in
full force and effect subject to the other terms and conditions contained in the
Plan and the relevant Agreement.
(c) Without limiting the generality of paragraph (a) of this
Section 3, the Committee shall have the exclusive right and discretionary
authority to: (i) interpret the Plan and the Agreements; (ii) determine
eligibility for participation in the Plan and the amount of Awards payable under
the Plan; (iii) select, from time to time, from amongst those eligible, the
employees to whom Awards shall be granted under the Plan, which selection may be
based upon information furnished to the Committee by the Company's management;
(iv) determine whether an Award shall take the form of an Option, SAR,
Restricted Stock, bonuses or other compensation payable in Common Stock, Other
Stock-Based Award (and, if so, the form thereof) or any combination thereof, (v)
determine the number of shares of Common Stock to be included in any Award or to
which any Award shall otherwise relate and the periods for which Awards will be
outstanding; (vi) establish, amend, waive and/or rescind rules and regulations
and administrative guidelines for carrying out the Plan; (vii) to the extent
permitted under the Plan and the applicable Agreement, accelerate the
exercisability or the termination of any Restriction Period with respect to any
Award when such acceleration and/or termination would be in the best interest of
the Company; (viii) to the extent permitted under the Plan and the applicable
Agreement, grant waivers of Plan terms, conditions, restrictions and
limitations; (ix) correct any errors, supply any omissions or reconcile any
inconsistencies in the Plan and/or any Agreement or any other instrument
relating to any Award; (x) to the extent permitted by the Plan, amend or adjust
the terms and conditions of any outstanding Award and/or adjust the number
and/or class of shares of Common Stock subject to any outstanding Award; (xi) in
accordance with the Plan, establish and administer any performance goals in
connection with any Awards, including the Performance Criteria to which such
performance goals relate and the applicable measurement periods, and certify
whether, and to what extent, any such performance goals have been met; (xii) at
any time and from time to time after the granting of an Award,
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<PAGE> 6
specify such additional terms, conditions and restrictions with respect to any
ISO, Option other than an ISO, SAR, Other Stock-Based Award, Restricted Stock
and/or bonuses or other compensation payable in Common Stock as may be deemed
necessary or appropriate to ensure compliance with any and all applicable laws,
including, but not limited to, (A) terms, restrictions and conditions for
compliance with Federal and state securities laws, (B) methods of withholding or
providing for the payment of required taxes and (C) restrictions regarding a
Participant's ability to exercise Awards under a "cashless exercise" program
established by the Committee; and (xiii) take any and all such other action it
deems necessary or advisable for the proper operation and/or administration of
the Plan. The Committee shall have full discretionary authority in all matters
related to the discharge of its responsibilities and the exercise of its
authority under the Plan. Decisions and actions by the Committee with respect to
the Plan and any Agreement shall be final, conclusive and binding on all persons
having or claiming to have any right or interest in or under the Plan and/or any
Agreement. Awards, including Awards under the same section of the Plan, need not
be uniform as to all grants and recipients thereof.
(d) Each Award shall be evidenced by an Agreement, which shall be
executed by the Company and the Participant to whom such Award has been granted,
unless the Agreement provides otherwise; however, two or more Awards to a single
Participant may be combined in a single Agreement. An Agreement shall not be a
precondition to the granting of an Award; however, no person shall have any
rights under any Award unless and until the Participant to whom the Award shall
have been granted (i) shall have executed and delivered to the Company an
Agreement or other instrument evidencing the Award, unless such Agreement
provides otherwise, and (ii) has otherwise complied with the applicable terms
and conditions of the Award. The Committee shall prescribe the form of all
Agreements, and, subject to the terms and conditions of the Plan, shall
determine the content of all Agreements. Any Agreement may be supplemented or
amended in writing from time to time as approved by the Committee; provided that
the terms and conditions of any such Agreement as supplemented or amended are
not inconsistent with the provisions of the Plan.
(e) A majority of the members of the entire Committee shall
constitute a quorum and the actions of a majority of the members of the
Committee in attendance at a meeting at which a quorum is present, or actions by
a written instrument signed by all members of the Committee, shall be the
actions of the Committee.
(f) The Committee may, in its discretion, delegate to the CEO,
any Senior Vice President of the Company or the Secretary of the Company the
"administration" of the Plan under this Section 3; provided, however, that no
such delegation by the Committee shall be made if such delegation would not be
permitted under applicable law or with respect to the administration of the Plan
as it affects the CEO or the President or Secretary of the Company or any Senior
Vice President of the Company, and, provided further, however, the Committee may
not delegate its authority to grant awards or correct errors, omissions or
inconsistencies in the Plan. All authority delegated by the Committee under this
paragraph (f) of this Section 3 shall be exercised in accordance with the terms
and conditions of the Plan and any rules, regulations or administrative
guidelines that may from time to time be established by the Committee, and
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<PAGE> 7
any delegee of such authority shall periodically report to the Committee
concerning the performance or discharge of the matters delegated to such
individual.
4. Shares of Stock Subject to the Plan. (a) The shares of stock
subject to Awards granted under the Plan shall be shares of Common Stock. Such
shares of Common Stock subject to the Plan may be either authorized and unissued
shares (which will not be subject to preemptive rights) or previously issued
shares acquired by the Company or any Subsidiary. The total number of shares of
Common Stock that may be delivered pursuant to any Awards under the Plan is
6,000,000.
(b) Notwithstanding any of the foregoing limitations set forth in
this Section 4, the number of shares of Common Stock specified in this Section 4
shall be adjusted as provided in Section 15.
(c) Any shares of Common Stock subject to an Option or SAR or
Other Stock-Based Award which for any reason expires or is terminated without
having been fully exercised and any Restricted Stock which is forfeited may
again be granted pursuant to an Award under the Plan, subject to the limitations
of this Section 4. If the Option exercise price of any Option is satisfied by
delivering shares of Common Stock to the Company (by either actual delivery or
attestation), only the number of shares of Common Stock delivered or attested to
shall be deemed delivered for purposes of determining the maximum number of
shares available for delivery under the Plan. To the extent any shares of Common
Stock subject to an Award are not delivered to a Participant because such shares
are used to satisfy an applicable tax-withholding obligation, such shares shall
not be deemed to have been delivered for purposes of determining the maximum
number of shares of Common Stock available for delivery under the Plan.
5. Eligibility. Employees of the Company and its Subsidiaries (but
excluding non-employee directors) shall be eligible to become Participants and
receive Awards under the Plan.
6. Terms and Conditions of Stock Options. All Options to purchase
Common Stock granted under the Plan shall be Options other than ISOs. Each
Option shall be subject to all the applicable provisions of the Plan, including
the following terms and conditions, and to such other terms and conditions not
inconsistent therewith as the Committee shall determine and which are set forth
in the applicable Agreement.
(a) The option exercise price per share of shares of Common Stock
subject to each Option shall be determined by the Committee and stated in the
Agreement; provided, however, that such price shall not be less than 100% of the
Fair Market Value of a share of Common Stock at the time that the Option is
granted.
(b) Each Option shall be exercisable in whole or in such
installments, at such times and under such conditions as may be determined by
the Committee in its discretion and stated in the Agreement, and, in any event,
over a period of time ending not later than ten years from the date such Option
was granted.
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<PAGE> 8
(c) An Option shall not be exercisable with respect to a
fractional share of Common Stock or the lesser of fifty shares or the full
number of shares of Common Stock then subject to the Option. No fractional
shares of Common Stock shall be issued upon the exercise of an Option.
(d) Each Option may be exercised by giving Notice to the Company
specifying the number of shares of Common Stock to be purchased, which shall be
accompanied by payment in full including applicable taxes, if any, in accordance
with Section 14. Payment shall be in any manner permitted by applicable law and
prescribed by the Committee, in its discretion, and set forth in the Agreement,
including, in the Committee's discretion, payment in accordance with a "cashless
exercise" program established by the Committee.
(e) No Optionee or other person shall become the beneficial owner
of any shares of Common Stock subject to an Option, nor have any rights to
dividends or other rights of a shareholder with respect to any such shares until
he or she has exercised his or her Option in accordance with the provisions of
the Plan and the applicable Agreement.
(f) An Option may be exercised only if at all times during the
period beginning with the date of the granting of the Option and ending on the
date of such exercise, the Optionee was an employee of either the Company or of
a Subsidiary or of another corporation referred to in Section 421(a)(2) of the
Code. Notwithstanding the above, the Committee may determine in its discretion
that an Option may be exercised following termination of such continuous
employment, whether or not exercisable at such time, to the extent provided in
the applicable Agreement.
(g) Each Agreement relating to an Option shall state that such
Option will not be treated as an ISO.
7. Terms and Conditions of SARs. Any SAR granted by the Committee
under the Plan shall be granted in conjunction with all or part of an Option
granted under the Plan. Each SAR shall be subject to all the applicable
provisions of the Plan, including the following terms and conditions, and to
such other terms and conditions not inconsistent therewith as the Committee
shall determine and which are set forth in the applicable Agreement.
(a) The Committee may grant a SAR with respect to an Option at
the time such Option is granted or at any subsequent time during the term of
such Option. A SAR shall entitle the grantee thereof to elect, in the manner
described below and as set forth in the applicable Agreement, in lieu of
exercising his or her related Option, for all or a portion of the shares of
Common Stock covered by such Option, to surrender such Option with respect to
any or all of such shares and to receive from the Company a payment, such
payment shall have a value equal to the amount by which (A) the Fair Market
Value of a share of Common Stock on the date of such election, multiplied by the
number of shares of Common Stock as to which the grantee shall have made such
election, exceeds (B) the exercise price stated in such Option multiplied by
such number of shares. A SAR shall be exercisable only to the extent and at the
time the related Option is exercisable. The SAR shall terminate and shall no
longer be
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<PAGE> 9
exercisable upon the expiration or exercise of the related Option. An Option
with respect to which an Optionee has elected to exercise a SAR, as described
above, shall, to the extent of the shares covered by such exercise, be canceled
automatically and surrendered to the Company. Such Option shall thereafter
remain exercisable according to its terms only with respect to the number of
shares of Common Stock as to which it would otherwise be exercisable, less the
number of such shares with respect to which such SAR has been so exercised.
(b) The Company may, in the discretion of the Committee, as set
forth in the Agreement, make payment on a properly exercised SAR; (i) in cash
equal to the excess of the amount described in clause (A) over the amount
described in clause (B) of paragraph 7(a) above; or (ii) in the nearest whole
number of shares of Common Stock having an aggregate Fair Market Value on the
date of exercise of the SAR which is not greater than the cash amount calculated
in clause 7(b)(i) above; or (iii) in a combination of the manners described in
clauses 7(b)(i) and (ii) above.
(c) An election to exercise SARs shall be deemed to have been
made on the date of Notice of such election to the Company.
8. Terms and Conditions of Restricted Stock Awards. All awards of
Restricted Stock under the Plan shall be subject to all the applicable
provisions of the Plan, including the following terms and conditions, and to
such other terms and conditions not inconsistent therewith, as the Committee
shall determine and which are set forth in the applicable Agreement.
(a) Awards of Restricted Stock may be in addition to or in lieu
of any other types of Awards granted under the Plan.
(b) During the Restriction Period stated in the Agreement, the
recipient shall not be permitted to sell, transfer, pledge, assign, encumber or
otherwise dispose of the shares of Restricted Stock. Any attempt by such
recipient to do so shall constitute the immediate and automatic forfeiture of
such Award.
(c) Except as otherwise provided in this paragraph (c) of Section
8, shares of Restricted Stock shall be forfeited and revert to the Company upon
termination for any reason of the recipient's employment with the Company or a
Subsidiary and/or the failure to meet any performance goals to the extent set
forth in the Agreement. Notwithstanding the foregoing, upon any such termination
of employment during the Restriction Period, shares of Restricted Stock shall
become free of all or part of the restrictions applicable thereto to the extent
that: the Agreement, as determined by the Committee in its discretion on the
award date, provides for lapse of such restrictions upon such termination of
employment or the Committee in its discretion determines to waive forfeiture of
such shares of Restricted Stock for whatever reason the Committee considers to
be in the interests of the Company.
(d) Each recipient of shares of Restricted Stock hereunder may,
but need not, be issued one or more stock certificates in respect of such shares
of Restricted Stock. Any such stock certificates for shares of Restricted Stock
shall be registered in the name of the
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<PAGE> 10
recipient but shall either be appropriately legended and returned to the Company
by the recipient, together with a stock power, endorsed in blank by the
recipient, or delivered to and held by the Secretary of the Company.
(e) The recipient of shares of Restricted Stock shall be entitled
to vote shares of Restricted Stock, and shall be entitled to all dividends paid
thereon, except that dividends paid in Common Stock or other property shall be
subject to the same restrictions. To the extent that the Committee so
determines, and sets forth in the Agreement, in the event of any adjustment as
provided in Section 15, any new or additional shares or securities received by a
recipient of Restricted Stock (or any extraordinary dividends paid in cash)
shall be subject to the same terms and conditions as relate to the original
shares of Restricted Stock.
(f) Restricted Stock shall become free of the foregoing
restrictions upon the expiration of the applicable Restriction Period and the
Company shall, subject to paragraph (c) of Section 15, then deliver Common Stock
certificates evidencing such stock to the Participant.
9. Terms and Conditions of Other Stock-Based Awards. The Committee
may grant to Participants Awards under the Plan that are valued in whole or in
part by reference to, or otherwise based on Common Stock ("Other Stock-Based
Awards"). The provisions of Other Stock-Based Awards need not be the same with
respect to each recipient or each Award. The Committee, in its discretion, may
grant Other Stock-Based Awards as it deems appropriate, including, by way of
example and not in limitation, (i) to take advantage of the compensation
practices or tax laws or accounting rules applicable at the time of grant of
such an Award, even if such practices, laws and/or rules are different from
those in effect on the effective date of the Plan, (ii) to reflect the financial
situation of the Company from time to time or (iii) to conform to and comply
with tax, securities or other law or regulations in jurisdictions outside the
United States. Other Stock-Based Awards shall take such form as the Committee,
in its discretion, from time to time, determines, including, by way of example,
and not in limitation, deferred stock, performance shares, performance units and
convertible debentures. All Other Stock-Based Awards under the Plan shall be
subject to all the applicable provisions of the Plan, including the following
terms and conditions, and to such other terms, conditions, restrictions and/or
limitations, if any, not inconsistent with the Plan, as the Committee shall
determine, in its discretion, and which are set forth in the applicable
Agreement.
(a) Unless the Committee determines otherwise, the recipient of
an Other Stock-Based Award shall be entitled to receive Dividend Equivalents
based on the dividends declared with respect to the number of shares of Common
Stock covered by such Award during the period between the date such Award is
granted and the date such Award is exercised, vests or expires, as determined by
the Committee. Such Dividend Equivalents shall be converted to cash or
additional shares of Common Stock by such formula and at such time and subject
to such limitations as may be determined by the Committee.
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<PAGE> 11
(b) An Other Stock-Based Award, and any Common Stock covered by
such Award, may be forfeited to the extent determined by the Committee, in its
discretion, and as provided in the Agreement.
(c) All Other Stock-Based Awards, and any Common Stock covered
thereby, shall be forfeited upon termination of the recipient's employment with
the Company or a Subsidiary. Notwithstanding the foregoing, if any such
recipient's employment is terminated for any reason specified by the Committee
in its discretion and set forth in the Agreement, any or all remaining
limitations, restrictions or requirements imposed pursuant to the Plan or in the
Agreement with respect to such recipient's Other Stock-Based Award shall be
waived. The Committee may, in its discretion, otherwise modify or accelerate the
exercisability or other terms and conditions of any Other Stock-Based Award, to
the extent that any such modification or acceleration is (i) permitted under,
and not inconsistent with, the Plan and (ii) in the best interests of the
Company.
10. Bonuses or Other Compensation Payable in Stock or Options. In
lieu of cash bonuses or other compensation otherwise payable under the Company's
or applicable Subsidiary's compensation practices to employees who are eligible
to participate in the Plan, the Committee, in its discretion, may determine that
such bonuses or other compensation shall be payable in Common Stock or Options,
or in a combination of Stock, Options and/or cash. Such bonuses or other
compensation shall be in consideration of services previously performed and as
an incentive toward future services and shall consist of shares of Common Stock
and/or Options subject to such terms as the Committee may determine in its
discretion.
11. Forfeiture. Except as provided in Section 15 of the Plan,
notwithstanding any other provisions of the Plan to the contrary:
(a) To the extent provided in the Agreement, if a Participant
shall exercise an Option or a SAR, or any portion thereof, and leave the
employment of the Company or a Subsidiary within six months after such exercise
for any reason other than death, permanent disability, retirement under a
retirement plan of the Company and/or a Subsidiary or termination of employment
with the written consent of the Company or such Subsidiary (as applicable), then
any Award Gain realized by such Participant as the result of such exercise shall
be paid by such Participant to the Company; provided, however, that no Award
Gain otherwise payable by a Participant to the Company with respect to the
exercise of an Option pursuant to this paragraph (a) of Section 11 shall be so
payable to the extent that the Fair Market Value of the Common Stock, as of the
date such Participant's employment by the Company or the Subsidiary terminates,
is less than the Option exercise price previously paid by such Participant and
such Participant has not, on or before such date, sold or otherwise disposed of
the Common Stock received upon the exercise of such Option.
(b) To the extent provided in the Agreement, if at any time
prior to the latest to occur of: (x) the termination or exercise of an Option or
a SAR or an Other Stock-Based Award or the expiration of the Restriction Period
applicable to Restricted Stock granted to a Participant, (y) three years after a
Participant leaves employment with the Company or a
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<PAGE> 12
Subsidiary for any reason other than death or permanent disability, or (z) three
years after a Participant exercises an Option or a SAR, or any portion thereof,
such Participant engages directly or indirectly in any manner or capacity in any
activity in competition with the business conducted by the Company or a
Subsidiary (as determined by the Committee in its discretion) or inimical,
contrary or harmful to the interests of the Company or a Subsidiary (as
determined by the Committee in its discretion) then (1) any Option, SAR or Other
Stock-Based Award granted to such Participant shall terminate upon the date on
which such Participant enters into such activity to the extent that such Option,
SAR or Other Stock-Based Award was not previously exercised or terminated in
accordance with the other provisions of the Plan or the Agreement as of such
date, (2) any Award Gain realized by such Participant as the result of an
exercise referred to in clause (z) above shall be paid by such Participant to
the Company, (3) any Restricted Stock awarded to such Participant with respect
to which the Restriction Period has not expired as of such date shall be
forfeited and revert to the Company and (4) any unpaid Dividend Equivalents as
of such date, shall be forfeited and shall not be paid to such Participant.
(c) A Participant shall satisfy any obligation he or she owes to
the Company under the foregoing paragraphs (a) and (b) of this Section 11
promptly after the accrual thereof by payment in cash to the Company; however,
in lieu thereof, the Company may elect to deduct the unpaid amount of any such
obligation owed by such Participant to the Company from any payment of any kind
otherwise due to such Participant, including, but not limited to, wages or other
compensation, fringe benefits or vacation pay.
(d) The Committee may release a Participant from any or all
obligations that he or she owes to the Company pursuant to this Section 11,
and/or waive, in whole or in part, the application of this Section 11 to a
Participant if the Committee determines, in its discretion, that such action is
in the best interests of the Company.
12. Transfer, Leave of Absence. For purposes of the Plan, a transfer
of an employee from the Company to a Subsidiary or an affiliate of the Company,
whether or not incorporated, or vice versa, or from one Subsidiary or affiliate
of the Company to another, and a leave of absence, duly authorized in writing by
the Company or a Subsidiary or affiliate of the Company, shall not be deemed a
termination of employment of the employee.
13. Rights of Employees and Other Persons. (a) No person shall have
any rights or claims under the Plan except in accordance with the provisions of
the Plan and the applicable Agreement.
(b) Nothing contained in the Plan or in any Agreement shall be
deemed to give any employee the right to be retained in the service of the
Company or its Subsidiaries nor restrict in any way the right of the Company or
any Subsidiary to terminate any employee's employment at any time with or
without cause.
(c) The adoption of the Plan shall not be deemed to give any
employee of the Company or any Subsidiary or any other person any right to be
selected as a Participant or to be granted an Award.
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<PAGE> 13
(d) Nothing contained in the Plan or in any Agreement shall be
deemed to give any employee the right to receive any bonus, whether payable in
cash or in Common Stock, or in any combination thereof, from the Company, nor be
construed as limiting in any way the right of the Company to determine, in its
sole discretion, whether or not it shall pay any employee bonuses, and, if so
paid, the amount thereof and the manner of such payment.
14. Tax Withholding Obligations. (a) The Company and/or any
Subsidiary are authorized to take whatever actions are necessary and proper to
satisfy all obligations of Participants for the payment of all Federal, state,
local and foreign taxes in connection with any Awards (including, but not
limited to, actions pursuant to the following paragraphs (b) and (c) of this
Section 14).
(b) If any Participant properly elects, within the period
permitted under Section 83 of the Code after the date on which property subject
to an Award is transferred to such Participant to include in gross income for
Federal income tax purposes an amount equal to the Fair Market Value (on the
date of transfer) of the Common Stock subject to such Award, such Participant
shall pay, or make arrangements satisfactory to the Company, as determined in
the Committee's discretion, to pay to the Company, at the time of such election,
any Federal, state or local taxes required to be withheld with respect to such
Award. If any such Participant shall fail to make such tax payments as are
required, the Company and its Subsidiaries shall, to the extent permitted by
law, have the right to deduct any such taxes from any payment of any kind
otherwise due to such Participant.
(c) Any Participant who does not or cannot make the election
described in paragraph (a) of this Section 14 with respect to an Award shall
(and in no event shall Common Stock be delivered to such Participant with
respect to such Award until), no later than the date as of which the value of
the Award first becomes includible in the gross income of the Participant for
income tax purposes, pay to the Company in cash, or make arrangements
satisfactory to the Company, as determined in the Committee's discretion,
regarding payment to the Company of, any taxes of any kind required by law to be
withheld with respect to the Common Stock or other property subject to such
Award, and the Company and any Subsidiary shall, to the extent permitted by law,
have the right to deduct any such taxes from any payment of any kind otherwise
due to such Participant. Notwithstanding the above, the Committee may, in its
discretion and pursuant to procedures approved by the Committee, permit the
Participant to (i) elect withholding by the Company of Common Stock otherwise
deliverable to such Participant pursuant to such Award (provided, however, that
the amount of any Common Stock so withheld shall not exceed the minimum required
withholding obligation taking into account the Participant's effective tax rate
and all applicable Federal, state, local and foreign taxes) and/or (ii) tender
to the Company Common Stock owned by such Participant (or by such Participant
and his or her spouse jointly) and acquired more than six months prior to such
tender in full or partial satisfaction of such tax obligations.
15. Changes in Capital. (a) Upon changes in the outstanding Common
Stock (or other change in corporate capitalization) by reason of a stock
dividend, stock split, reverse split, subdivision, recapitalization, merger,
consolidation (whether or not the Company is a
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<PAGE> 14
surviving corporation), an extraordinary dividend or distribution payable in
cash or property, combination or exchange of shares, separation, reorganization
or liquidation, the aggregate number and class of shares available under the
Plan as to which Awards may be granted, the number and class of shares under (i)
each Option and the option price per share, (ii) each SAR and the exercise price
thereof, (iii) each Other Stock-Based Award and the exercise price (or
equivalent, if applicable) thereof and (iv) each award of Restricted Stock
shall, in each case, be correspondingly adjusted by the Committee. Such
adjustments shall be made in the case of any outstanding Options and/or SARs
without change in the total price applicable to such Options and SARs.
(b) In the event of a Change of Control, except as otherwise
provided in the Agreement specifically with respect to a Change of Control: (1)
all restrictions on Restricted Stock previously awarded to Participants under
the Plan shall be immediately cancelled and the Restriction Periods applicable
thereto shall immediately terminate, without regard to any contrary provisions
contained in the Plan or the applicable Agreements, (2) the time of exercise of
Options, SARs and/or Other Stock-Based Awards which are outstanding shall be
accelerated so that such Awards become immediately exercisable in full without
regard to any limitations of time or amount otherwise contained in the Plan or
the applicable Agreements and, in the event an Optionee terminates employment
for any reason during the one year period following a Change of Control, all
exercisable Options held by such Optionee (or such Optionee's transferee) shall
remain exercisable until the first to occur of the first anniversary of the
Optionee's termination of employment or the expiration of the initial Option
term, or until such later date otherwise provided by the Committee or in the
applicable Agreement, (3) all such Awards shall immediately become fully vested
and nonforfeitable, and (4) any payment owed by, or forfeiture imposed on a
Participant pursuant to Section 11, shall be cancelled or waived. Upon the
occurrence of a Change of Control, the Committee may, in its discretion,
determine (A) that Options, SARs and/or Other Stock-Based Awards shall be
adjusted and make such adjustments by substituting for Common Stock subject to
such Options, SARs and/or Other Stock-Based Awards stock or other securities of
any successor corporation to the Company or that may be issuable by another
corporation that is a party to the transaction if such stock or other securities
are publicly traded, in which event the aggregate exercise price (as applicable)
shall remain the same and the amount of shares or other securities subject to
option or other rights under an Award shall be the amount of shares or other
securities which could have been purchased on the closing date or expiration
date of such transaction with the proceeds which would have been received by the
Participant if the Option, SAR and/or Other Stock-Based Award had been exercised
in full prior to such transaction or expiration date and the Participant
exchanged all of such shares in the transaction, and/or (B) that any outstanding
Options, SARs and/or Other Stock-Based Awards shall, in each case, be converted
into a right to receive in cash, as soon as practicable following the Change of
Control, an amount equal to the greater of (x) the highest value of the
consideration to be
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<PAGE> 15
received in connection with such transaction for one share of Common Stock and
(y) the highest market trading price of a share of the Common Stock reported in
The Wall Street Journal during the 30 consecutive trading days prior to the
Change of Control, less, in the case of an Award prescribing an exercise price,
the per share exercise price of such Award, multiplied by the number of shares
of Common Stock subject to such Award. No Participant shall have any right to
prevent the consummation of any transaction affecting the number of shares
available to such Participant. Any actions or determinations of the Committee
under this paragraph (b) of Section 15 need not be uniform as to all outstanding
Awards, nor treat all Participants identically. Notwithstanding the foregoing
adjustments, in no event may any Option be exercised after ten years from the
date it was originally granted.
16. Miscellaneous Provisions. (a) The Plan shall be unfunded. The
Company shall not be required to establish any special or separate fund or to
make any other segregation of assets to assure the issuance of shares or the
payment of cash upon exercise or payment of any Award. Proceeds from the sale of
shares of Common Stock pursuant to Options granted under the Plan shall
constitute general funds of the Company. The expenses of the Plan shall be borne
by the Company.
(b) Except as otherwise provided in this paragraph (b) of
Section 16, an Award by its terms shall be personal and may not be sold,
transferred, pledged, assigned, encumbered or otherwise alienated or
hypothecated otherwise than by will or by the laws of descent and distribution
and shall be exercisable during the lifetime of a Participant only by him or
her. The foregoing to the contrary notwithstanding, at the Committee's
discretion, an Agreement may permit the receipt or exercise of a Participant's
Award (or any portion thereof) after his or her death by the beneficiary most
recently named by such Participant in a written designation thereof filed with
the Company, or, in lieu of any such surviving beneficiary, by the legal
representatives of such Participant's estate and/or an Award to be transferred
by a Participant during his or her lifetime to such Participant's alternate
payee pursuant to a qualified domestic relations order, as defined by the Code
or Title I of the Employee Retirement Income Security Act of 1974, as amended,
or the rules and regulations thereunder. In the event any Award is exercised by
the executors, administrators, heirs or distributees of the estate of a deceased
Participant, or such a Participant's beneficiary, pursuant to the terms and
conditions of the Plan and the applicable Agreement, the Company shall be under
no obligation to issue Common Stock thereunder unless and until the Company is
satisfied, as determined in the discretion of the Committee, that the person or
persons exercising such Award are the duly appointed legal representative of the
deceased Participant's estate or the proper legatees or distributees thereof or
the named beneficiary of such Participant. Further notwithstanding the foregoing
to the contrary, at the Committee's discretion, an Agreement may permit the
transfer of an Award by the recipient thereof, subject to such terms, conditions
and limitations prescribed by the Committee, and the applicable transferee of
such Award shall be treated under the Plan and the applicable Agreement as the
Participant for purposes of any exercise of such Award.
(c) It is understood that the Committee may, at any time and
from time to time after the granting of an Award, specify such additional terms,
conditions and restrictions
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<PAGE> 16
with respect to such Award as may be deemed necessary or appropriate to ensure
compliance with any and all applicable laws, including, but not limited to, (i)
terms, restrictions and conditions for compliance with Federal and state
securities laws, (ii) methods of withholding or providing for the payment of
required taxes and (iii) restrictions regarding a Participant's ability to
exercise Awards under a "cashless exercise" program established by the
Committee.
(d) If at any time the Committee shall determine, in its
discretion, that the listing, registration and/or qualification of shares of
Common Stock upon any national securities exchange or under any state or Federal
law, or the consent or approval of any governmental regulatory body, is
necessary or desirable as a condition of, or in connection with, the sale or
purchase of shares of Common Stock hereunder, no Option, SAR or Other
Stock-Based Award may be exercised or Restricted Stock or bonus or other
compensation payable in Common Stock may be transferred in whole or in part
unless and until such listing, registration, qualification, consent and/or
approval shall have been effected or obtained, or otherwise provided for, free
of any conditions not acceptable to the Committee.
(e) The Committee may require each person receiving Common Stock
in connection with any Award under the Plan to represent and agree with the
Company in writing that such person is acquiring the shares for investment
without a view to the distribution thereof.
(f) By accepting any benefit under the Plan, each Participant
and each person claiming under or through such Participant shall be conclusively
deemed to have indicated their acceptance and ratification of, and consent to,
all of the terms and conditions of the Plan and any action taken under the Plan
by the Committee, the Company or the Board.
(g) Neither the adoption of the Plan nor anything contained
herein shall affect any other compensation or incentive plans or arrangements of
the Company or any Subsidiary, or prevent or limit the right of the Company or
any Subsidiary to establish any other forms of incentives or compensation for
their employees or consultants or directors, or grant or assume options or other
rights otherwise than under the Plan.
(h) The Plan shall be governed by and construed in accordance
with the laws of the State of Delaware, except as superseded by applicable
Federal law.
17. Limits of Liability. (a) Any liability of the Company or a
Subsidiary to any Participant with respect to any Award shall be based solely
upon contractual obligations created by the Plan and the Agreement.
(b) Neither the Company nor a Subsidiary nor any member of the
Committee or the Board, nor any other person participating in any determination
of any question under the Plan, or in the interpretation, administration or
application of the Plan, shall have any liability, in the absence of bad faith,
to any party for any action taken or not taken in connection with the Plan,
except as may expressly be provided by statute.
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<PAGE> 17
18. Limitations App1icable to Certain Awards Subject to Section 16.
Unless stated otherwise in the Agreement, notwithstanding any other provision of
the Plan, any Award granted to an executive or officer of the Company who is
then subject to Section 16 of the Exchange Act, shall be subject to any
additional limitations set forth in any applicable exemptive rule under Section
16 of the Exchange Act (including Rule 16b-3 as it may be amended from time to
time) that are requirements for the application of such exemptive rule, and the
Plan shall be deemed amended to the extent necessary to conform to such
limitations.
19. Amendments and Termination. The Board may, at any time and with
or without prior notice, amend, alter, suspend, or terminate the Plan; provided,
however, no amendment, alteration, suspension, or termination shall be made
which would adversely affect an outstanding Award theretofore granted without
the written consent of the holder of the Award. The Committee may amend the
terms of any Award theretofore granted, including any Agreement, retroactively
or prospectively, but no such amendment shall adversely affect an outstanding
Award without the written consent of the holder of the Award. Notwithstanding
the foregoing, the Board may amend the Plan and the Committee may amend any
Award, including any Agreement, either retroactively or prospectively, and
without the consent of the applicable Participant, so as to preserve or come
within any exemptions from liability under Section 16(b) of the Exchange Act,
pursuant to the rules and releases promulgated by the SEC (including Rule
16b-3).
20. Duration. The Plan shall become effective as of the date on
which it is adopted by the Board. The Plan shall terminate upon the earliest to
occur of (a) the effective date of a resolution adopted by the Board terminating
the Plan or (b) ten years from the date the Plan is adopted by the Board. No
Award may be granted under the Plan after the earliest of (a) and (b) of this
Section 20 to occur; however, Awards theretofore granted may extend beyond such
date.
No such termination of the Plan shall affect the rights of any
Participant hereunder and all Awards previously granted hereunder shall continue
in force and in operation after the termination of the Plan, except as they may
be otherwise terminated in accordance with the terms of the Plan or the
Agreement.
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<PAGE> 1
EXHIBIT 10(l)
===============================================================================
NEWMONT GOLD COMPANY
ANNUAL INCENTIVE COMPENSATION PLAN
(AMENDED AND RESTATED GENERALLY EFFECTIVE AS OF JANUARY 1, 1998)
===============================================================================
<PAGE> 2
NEWMONT GOLD COMPANY
ANNUAL INCENTIVE COMPENSATION PLAN
(AMENDED AND RESTATED GENERALLY EFFECTIVE AS OF JANUARY 1, 1998)
The Board of Directors of Newmont Gold Company, a Delaware corporation
(the "Company"), hereby amends and restates the Newmont Gold Company Annual
Incentive Compensation Plan (the "Plan"), generally effective as of January 1,
1998 (the "Effective Date"). The provisions of the Plan as in effect prior to
January 1, 1998 shall continue to govern the payment of amounts pursuant to the
provisions of such Plan with respect to Plan Years prior to 1998 and the
provisions of this Plan document, as it may be amended from time to time, shall
govern all payments and other matters with respect to the Plan for the 1998 Plan
Year, including but not limited to payments with respect to 1998 that are made
subsequent to December 31,1998, and subsequent Plan Years.
PURPOSE
The purpose of the Plan is to provide to employees of the Company and
its Affiliated Entities (defined herein) that participate in the Plan a more
direct interest in the success of the operations of the Company by rewarding
their successful efforts to maximize production, minimize production costs,
expand reserves, and develop new capital projects in an optimal manner.
Employees of the Company and participating Affiliated Entities will be rewarded
in accordance with the terms and conditions described below.
ARTICLE I
DEFINITIONS
1.1 "Actual Defined Cost Per Ounce" means, with respect to a particular
Unit, the cost of producing an ounce of gold during the Plan Year, as calculated
by the Company and approved by the Compensation Committee.
1.2 "Actual Production" means, with respect to a particular Unit, the
number of ounces of gold produced during the Plan Year, as calculated by the
Company and approved by the Compensation Committee.
1.3 "Affiliated Entity(ies)" means any corporation or other entity, now
or hereafter formed, that is or shall become affiliated with the Company, either
directly or indirectly, through stock ownership, control or otherwise, as
determined by the Company, including but not limited to Newmont Mining
Corporation, a Delaware corporation ("NMC").
1.4 "Area of Primary Responsibility" means the Unit to which an
Employee has been assigned by the Company for purposes of calculating the
Employee's Unit Performance Bonus.
1
<PAGE> 3
1.5 "Board" means the Board of Directors of the Company.
1.6 "Bonus Eligible Earnings" means the total base salary earnings of
the Employee during the calendar year. If an Employee is absent from work
because of a work-related injury, the Employee's "Bonus Eligible Earnings" will
be determined by his actual gross W-2 base earnings during the Plan Year. In the
case of a Terminated Eligible Employee who is Disabled, "Bonus Eligible
Earnings" will be determined by his actual gross W-2 base earnings, including
short-term disability pay received during the Plan Year, but excluding pay from
any other source. If an Employee dies during the Plan Year, the "Bonus Eligible
Earnings" for such Terminated Eligible Employee will be determined by his actual
gross W-2 base earnings. If an Employee is on active military duty during a Plan
Year, the "Bonus Eligible Earnings" will be determined by his actual gross W-2
base earnings during the Plan Year, exclusive of any military pay. If an
Employee does not receive a W-2, his "Bonus Eligible Earnings" shall be
determined on the basis of his actual gross base earnings for the Plan Year, or
portion thereof, as shown on the payroll records of the Company or the
Participating Employer. In all cases, an Employee's "Bonus Eligible Earnings"
shall be computed before reduction for pre-tax contributions to an employee
benefit plan of the Company pursuant to Section 401(k) or Section 125 of the
Code. In the event of a Change of Control the Bonus Eligible Earnings of each
Eligible Employee shall be equal to such Employee's base salary, on an
annualized basis, as of the date immediately preceding the Change of Control
and, in the case of a Terminated Eligible Employee, such Employee's base salary
for the Plan Year through the date of termination of employment. Notwithstanding
the foregoing, the "Bonus Eligible Earnings" of an Employee whose compensation
is subject to the deduction limitation of Section 162(m) of the Code with
respect to a Plan Year shall not exceed the annualized base salary of the
Employee as in effect on the first day of such Plan Year.
1.7 "Change of Control" means:
(a) The acquisition by any individual, entity or group (within
the meaning of Section 13(d)(3) or 14(d)(2) of the Securities Exchange Act of
1934, as amended (the "Exchange Act")) (a "Person") of beneficial ownership
(within the meaning of Rule 13d-3 promulgated under the Exchange Act) of 20% or
more of either (i) the then outstanding shares of common stock of NMC (the
"Outstanding NMC Common Stock") or (ii) the combined voting power of the then
outstanding voting securities of NMC entitled to vote generally in the election
of directors (the "Outstanding NMC Voting Securities"); provided, however, that
for purposes of this subsection (a), the following acquisitions shall not
constitute a Change of Control: (i) any acquisition directly from NMC, (ii) any
acquisition by NMC, (iii) any acquisition by any employee benefit plan (or
related trust) sponsored or maintained by NMC or any corporation controlled by
NMC or (iv) any acquisition pursuant to a transaction which complies with
clauses (i), (ii) and (iii) of subsection (c) of this Section; or
(b) Individuals who, as of the date hereof, constitute the
Board of Directors of NMC (the "Incumbent Board") cease for any reason to
constitute at least a majority of the Board of Directors of NMC; provided,
however, that any individual becoming a director subsequent to the date hereof
whose election, or nomination for election by NMC's shareholders, was approved
by a vote of at least a majority of the directors then comprising the Incumbent
Board shall be considered as though such individual were a member of the
Incumbent Board, but excluding, for this purpose,
2
<PAGE> 4
any such individual whose initial assumption of office occurs as a result of an
actual or threatened election contest with respect to the election or removal of
directors or other actual or threatened solicitation of proxies or consents by
or on behalf of a Person other than the Board of Directors of NMC; or
(c) Consummation by NMC of a reorganization, merger or
consolidation or sale or other disposition of all or substantially all of the
assets of NMC or the acquisition of assets of another entity (a "Business
Combination"), in each case, unless, following such Business Combination, (i)
all or substantially all of the individuals and entities who were the beneficial
owners, respectively, of the Outstanding NMC Common Stock and Outstanding NMC
Voting Securities immediately prior to such Business Combination beneficially
own, directly or indirectly, more than 50% of, respectively, the then
outstanding shares of common stock and the combined voting power of the then
outstanding voting securities entitled to vote generally in the election of
directors, as the case may be, of the corporation resulting from such Business
Combination (including, without limitation, a corporation which as a result of
such transaction owns NMC or all or substantially all of NMC's assets either
directly or through one or more subsidiaries) in substantially the same
proportions as their ownership immediately prior to such Business Combination of
the Outstanding NMC Common Stock and Outstanding NMC Voting Securities, as the
case may be, (ii) no Person (excluding any employee benefit plan (or related
trust) of NMC or such corporation resulting from such Business Combination)
beneficially owns, directly or indirectly, 20% or more of, respectively, the
then outstanding shares of common stock of the corporation resulting from such
Business Combination or the combined voting power of the then outstanding voting
securities of such corporation except to the extent that such ownership existed
prior to the Business Combination and (iii) at least a majority of the members
of the board of directors of the corporation resulting from such Business
Combination were members of the Incumbent Board at the time of the execution of
the initial agreement, or of the action of the Board, providing for such
Business Combination; or
(d) Approval by the shareholders of NMC of a complete liquidation
or dissolution of NMC.
1.8 "Code" means the Internal Revenue Code of 1986, as amended from
time to time.
1.9 "Company" means Newmont Gold Company, and where the context
requires, any Affiliated Entity that has become a Participating Employer.
1.10 "Compensation Committee" means the Board and the Compensation
Committee of the Board of Directors of NMC.
1.11 "Consolidated Unit" means those Employees whose Area of Primary
Responsibility is the corporate office of the Company, and those Employees
assigned to non-operational projects.
1.12 "Disability" means a condition such that the Employee has
terminated employment with the Company and/or all Participating Employers with a
qualifying disability and has immediately begun receiving benefits from a
long-term disability plan of the Company or a Participating Employer.
3
<PAGE> 5
1.13 "Earnings Per Share" means the earnings per share, before
extraordinary items (determined in accordance with the provisions of Accounting
Principles Board Opinion Number 30), of NMC, for the relevant Plan Year, as
determined by the Company and approved by the Compensation Committee. The
Earnings Per Share taken into account under the Plan for any Plan Year shall be
capped at $1.00 per share.
1.14 "Earnings Per Share Factor" means the Earnings Per Share for such
Plan Year (but not in excess of $1.00) expressed as a decimal.
1.15 "Employee" means a full-time, salaried employee of the Company
and/or a Participating Employer, excluding temporary or leased employees. For
purposes of this Plan, an employee is any individual who provides services to
the Company as a common law employee and whose remuneration is subject to the
withholding of federal income tax pursuant to Section 3401 of the Code. An
Employee shall not include any individual (i) who provides services to the
Company and/or a Participating Employer under an agreement, contract, or any
other arrangement pursuant to which the individual is initially classified as an
independent contractor by the Company and/or a Participating Employer, or (ii)
whose remuneration for services has not been treated initially as subject to the
withholding of federal income tax pursuant to Section 3401 of the Code even if
the individual is subsequently reclassified as a common law employee as a result
of a final decree of a court of competent jurisdiction or the settlement of an
administrative or judicial proceeding.
1.16 "Exploration Team" means those Employees whose Area of Primary
Responsibility is associated with the generation of reserves and who are
designated by the Company as members of such a Team.
1.17 "Key Objectives" means the key results expected by the end of the
review period for an Employee, as established and administered through the
Company's performance management system.
1.18 "Minahasa Raya Unit" means those Employees whose Area of Primary
Responsibility is the Company's Minahasa Raya operations.
1.19 "Minera Yanacocha Unit" means those Employees whose Area of
Primary Responsibility is the Company's Minera Yanacocha operations.
1.20 "North American Unit" means those Employees whose Area of Primary
Responsibility is the Company's North American operations.
1.21 "Participating Employer" means the Company and any Affiliated
Entity that the Company determines shall participate in the Plan.
1.22 "Pay Grade" means those jobs sharing a common salary range, as
designated by the Company. If the Pay Grade of an Employee changes during a Plan
Year, the bonus payable to such Employee shall be calculated on a pro rata basis
in accordance with the provisions of Section 6.3.
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<PAGE> 6
Notwithstanding the foregoing, for purposes of this Plan the Pay Grade of an
Employee whose compensation is subject to the deduction limitation of Section
162(m) of the Code with respect to a Plan Year shall be the Pay Grade applicable
to such Employee as of the first day of such Plan Year, or such lesser Pay Grade
as may be assigned to the Employee during such Plan Year.
1.23 "Performance Distribution Guidelines" means the percent of all
salaried Employees classified in each of the Company's designated performance
categories as assigned by the Company.
1.24 "Performance Rating Category" means one of the following
categories used to classify the performance of Employees and Teams in accordance
with the Company's performance management system: "Exceptional," "Exceeds
Expectations," "Meets Expectations," and "Needs Development."
1.25 "Personal Performance Bonus" means the bonus payable to an
Employee based on the individual performance of such Employee, as set forth in
Section 4.2.
1.26 "Personal Performance Percentage" means the percentage determined
by the Company that shall apply to each Employee in accordance with Table II in
Section 4.1.
1.27 "Plan Year" means the calendar year.
1.28 "Position(s)" means the defined job(s) held by an Employee during
the Plan Year.
1.29 "Retirement" means termination of employment with the Company
and/or all Participating Employers by an Employee who immediately begins to
receive benefits from a defined benefit plan of the Company or a Participating
Employer.
1.30 "Severance" means the termination of employment with the Company
and/or all Participating Employers because of an event entitling the Employee to
benefits under the terms of the Company's Severance Pay Plan if the Employee
immediately begins receiving benefits under the terms of the Severance Pay Plan.
1.31 "Targeted Defined Cost Per Ounce" means the targeted cash cost of
production of gold per ounce for the Plan Year, as established by the
Compensation Committee.
1.32 "Targeted Production" means the targeted amount of gold to be
produced for the Plan Year, as established by the Compensation Committee.
1.33 "Team" means the designated group of Employees to which an
Employee is assigned for purposes of Article V. Each Employee shall be assigned
to a Team within 30 days of the date the Employee becomes eligible for
participation in the Plan.
1.34 "Team Performance Bonus" means the bonus payable to an Employee
designated as a member of an Exploration Team, or any other Team designated by
the Compensation Committee,
5
<PAGE> 7
based on the performance of the Team of which the Employee is a member, as set
forth in Section 5.2.
1.35 "Team Performance Percentage" means the percentage to be applied
to determine the Team Performance Bonus in accordance with the provisions of
Article V, which percentage shall be determined by the appropriate officer of
the Company pursuant to Section 5.1.
1.36 "Terminated Eligible Employee" means an Employee who terminates
employment with the Company and/or a Participating Employer during the Plan Year
on account of death, Retirement, Disability, or Severance. The Company's Vice
President of Human Resources may, in his sole discretion, also designate in
writing other Employees who terminate employment during the Plan Year under
other circumstances as "Terminated Eligible Employees".
1.37 "Unit" means the unit of Employees to which an Employee is
assigned for purposes of Article III. Each Employee shall be assigned to a Unit
within 30 days of the date the Employee becomes eligible for participation in
the Plan.
1.38 "Unit Performance Bonus" means, with respect to each Unit, the
bonus payable to an Employee based on the performance of such Employee's Unit,
as set forth in Section 3.1.
1.39 "Unit Performance Percentage" means the percentage used to
calculate an Employee's Unit Performance Bonus, as set forth in Section 3.1.
1.40 "Uzbekistan Unit" means those Employees whose Area of Primary
Responsibility is the Company's Zarafshan-Newmont operations in Uzbekistan.
ARTICLE II
ELIGIBILITY
All Employees of the Company and/or a Participating Employer are
potentially eligible to receive a bonus payment under the Plan, provided (i)
they are on the payroll of the Company and/or a Participating Employer as of the
last day of the Plan Year, or (ii) they are a Terminated Eligible Employee with
respect to such Plan Year. Employees who are on short-term disability under the
Company's short-term disability policy or not working because of a work-related
injury as of the last day of the Plan Year shall be eligible to receive a bonus
under clause (i). Notwithstanding the foregoing provisions of this Article II,
the Compensation Committee may, prior to the end of any Plan Year, exclude from
eligibility for participation under this Plan with respect to such Plan Year any
Employee or Employees, as the Compensation Committee may determine in its sole
discretion.
6
<PAGE> 8
ARTICLE III
UNIT PERFORMANCE BONUS
3.1 Determination of Unit Performance Bonus. For each Plan Year, the
Unit Performance Percentage for each Unit will be determined on the last day of
the Plan Year pursuant to the following formula:
1 + (Actual Production - Targeted Production)
-----------------------------------------
(Targeted Production)
x 1 + (Targeted Defined Cost Per Ounce - Actual Defined Cost Per Ounce)
-----------------------------------------------------------------
(Targeted Defined Cost Per Ounce)
= Unit Performance Percentage
If the Unit Performance Percentage of a Unit is greater than 100%, the Unit
Performance Percentage is converted to a Percent of Target as set forth in the
following Schedule. If the Unit Performance Percentage of a Unit is greater than
100%, a Unit Performance Bonus will be payable, with such Unit Performance Bonus
determined by (w) multiplying the Employee's Bonus Eligible Earnings by (x) the
applicable Target Unit Performance Level for the Employee's Pay Grade set forth
in the applicable Table in Section 3.2 below, and by (y) the applicable
percentage derived from the following Schedule and by (z) the Earnings Per Share
Factor.
If the Unit Performance Percentage of a Unit is equal to or less than 100%, a
Unit Performance Bonus will be payable, with such Unit Performance Bonus
determined by (x) multiplying the Employee's Bonus Eligible Earnings by (y) the
applicable Target Unit Performance Level for the Employee's Pay Grade set forth
in the applicable table in Section 3.2 below and by (z) the Earnings Per Share
Factor.
SCHEDULE
<TABLE>
<CAPTION>
UNIT PERFORMANCE UNIT PERFORMANCE BONUS
PERCENTAGE AS A PERCENT OF TARGET
- ---------------- ----------------------
<S> <C>
100 (Target) 100%
105 125%
110 150%
115 175%
120 or more 200%
</TABLE>
If the Unit Performance Percentage of a Unit falls between the various Unit
Performance Percentages set forth in the foregoing Schedule, then the Unit
Performance Bonus as a Percent of Target percentages set forth in the foregoing
Schedule shall be interpolated so that such percentage bears the same
relationship to the Unit Performance Bonus as a Percent of Target percentages
for the two closest Unit Performance Percentages. The Compensation Committee
may, in its sole discretion,
7
<PAGE> 9
adjust the Unit Performance Percentage of any Unit or otherwise increase the
Unit Performance Bonus otherwise payable in order to reflect changed
circumstances or such other matters as the Compensation Committee deems
appropriate, provided that no such change shall result in any increase in the
amount of the Unit Performance Bonus payable to an Employee whose compensation
is subject to the limitation on the deductibility of compensation pursuant to
Section 162(m) of the Code. The maximum Unit Performance Bonus that may be paid
with respect to any Plan Year to an Employee whose compensation is subject to
the deduction limitation of Section 162(m) of the Code shall be $3 million.
Prior to the payment of any Unit Performance Bonus to an Employee whose
compensation is subject to the limitation imposed by Section 162(m) of the Code,
the Compensation Committee shall certify in writing that the applicable Unit
Performance Percentage has been attained and shall take any other action
required in order to qualify for the exemption from the deduction limitation
provided by Section 162(m) of the Code.
3.2 Determination of Target Unit Performance Level. An Employee's
Target Unit Performance Level is determined by the Employee's Pay Grade pursuant
to the following Table I (Table IA for Employees designated as members of an
Exploration Team or other Team):
TABLE I
Non-Team
<TABLE>
<CAPTION>
PAY TARGET UNIT
GRADE PERFORMANCE LEVEL
----- -----------------
<S> <C>
203 67%
202 45%
200-201 37%
113-114 29%
111-112 20%
110 17%
109 14%
107-108 15%
105-106 10%
104 5%
103 4%
11-102 5%
</TABLE>
8
<PAGE> 10
TABLE IA
Team
<TABLE>
<CAPTION>
PAY TARGET UNIT
GRADE PERFORMANCE LEVEL
----- -----------------
<S> <C>
113-203 N/A
111-112 7.500%
110 6.500%
109 5.250%
107-108 6.000%
105-106 4.125%
104 2.500%
103 2.000%
11-102 2.500%
</TABLE>
3.3 Terminated Eligible Employees. Terminated Eligible Employees shall
be eligible to receive a Unit Performance Bonus based upon the actual year end
Earnings Per Share Factor and the Unit Performance Percentage for the applicable
Unit calculated through the end of the calendar quarter during which the
Employee's termination of employment with the Company and/or all Participating
Employers occurred.
ARTICLE IV
PERSONAL PERFORMANCE BONUS
4.1 Personal Performance Level. At the end of the Plan Year, each
Employee's supervisor will evaluate the Employee and rate the Employee's
Personal Performance Level. The Personal Performance Bonus for the Company's
Chief Executive Officer shall be determined by the Compensation Committee. In
accordance with the Company's performance management system, the supervisor will
rate the degree to which the Employee met the Key Objectives that were
established for the Employee during the Plan Year. Each Employee will be rated
by the Employee's supervisor in one of the Company's Performance Rating
Categories. In conjunction with these ratings, the Company will assign a
Personal Performance Percentage for the Employee from within the applicable
ranges set forth in the following Table II. The distribution of Personal
Performance Ratings and Personal Performance Percentages will be reviewed
annually by an executive review committee for internal equity and consistency.
9
<PAGE> 11
TABLE II
<TABLE>
<CAPTION>
PERSONAL PERFORMANCE PERCENTAGES
(PERCENTAGE OF TARGET
PERFORMANCE RATING CATEGORY PERFORMANCE BONUS PAYABLE)
--------------------------- --------------------------------
<S> <C>
Exceptional 151%-200%
Exceeds Expectations 101%-150%
Meets Expectations 26%-100%
Needs Development 0% - 25%
</TABLE>
4.2 Determination of Personal Performance Bonus. Subject to Section
4.3, an Employee's Personal Performance Bonus is calculated by multiplying (x)
the Employee's Bonus Eligible Earnings by (y) the Personal Performance
Percentage determined pursuant to Section 4.1 and (z) multiplying that product
by the applicable Target Personal Performance Level, as set forth in the
following Table III (Table IIIA for Employees designated as members of an
Exploration Team or other Team):
TABLE III
Non-Team
<TABLE>
<CAPTION>
PAY TARGET PERSONAL
GRADE PERFORMANCE LEVEL
----- -----------------
<S> <C>
203 33.00%
202 23.00%
200-201 19.00%
113-114 15.00%
111-112 10.00%
110 9.00%
109 8.50%
107-108 9.00%
105-106 6.50%
104 4.00%
103 2.00%
11-102 N/A
</TABLE>
10
<PAGE> 12
TABLE IIIA
Team
<TABLE>
<CAPTION>
PAY TARGET PERSONAL
GRADE PERFORMANCE LEVEL
----- -----------------
<S> <C>
113-203 N/A
111-112 7.500%
110 6.500%
109 5.250%
107-108 6.000%
105-106 4.125%
104 2.000%
103 2.000%
11-102 N/A
</TABLE>
4.3 Proration of Certain Bonuses. Notwithstanding any other provision
in this ARTICLE IV, except as approved by the Compensation Committee prior to
the payment of Personal Performance Bonuses, or subsequently thereto by
ratification, the amount of the Personal Performance Bonuses payable to all
Employees of the Company and all Participating Employers in Pay Grades 103 - 202
may not exceed the amount that would be payable to all such Employees if each of
their Personal Performance Percentages were determined to be 100%.
4.4 Terminated Eligible Employees. Terminated Eligible Employees shall
be eligible to receive a Personal Performance Bonus based upon an assumed
Personal Performance Percentage of 100%.
4.5 Ineligible Employees. Employees with a Pay Grade 102 and below and
Employees whose Personal Performance Percentage (determined pursuant to Section
4.1) is less than 25% shall not be eligible to receive a Personal Performance
Bonus.
ARTICLE V
TEAM PERFORMANCE BONUS
5.1 Team Performance Level. This ARTICLE V shall be applicable only to
Employees designated as members of an Exploration Team, or other Team. At the
end of the Plan Year, the Vice Presidents responsible for each Team will make an
assessment of the performance of their respective Teams. The overall Team
Performance Ratings for each Company officer responsible for one or more Teams
will be determined by the appropriate Senior Vice President or the Chief
Executive Officer of the Company. In accordance with the Company's performance
management system, such Company officer will rate the degree to which the Team
met the Key Objectives that were established for the Team during the Plan Year.
Each Team will be rated in one of the Company's Performance Rating Categories.
In conjunction with these ratings, each such Company officer will assign a Team
Performance Percentage for their respective Teams in accordance with Table II in
Section 4.1. If the Team Performance Level of a Team is less than 25%, the
Employees
11
<PAGE> 13
assigned to the Team will not receive a Team Performance Bonus. The percentages
shown in the "Target Performance Level" category specified in the Table set
forth below in Section 5.2 shall be multiplied by the Team's Team Performance
Percentage to determine the applicable percentage for calculating the Team
Performance Bonus of the Employees from each Team.
5.2 Determination of Team Performance Bonus. Subject to Section 5.4, an
Employee's Team Performance Bonus is calculated by multiplying (x) the
Employee's Bonus Eligible Earnings by (y) the Team Performance Percentage
determined pursuant to Section 5.1 and (z) multiplying that product by the
applicable Target Team Performance Level, as set forth in the following Table
IV:
TABLE IV
<TABLE>
<CAPTION>
PAY TARGET TEAM
GRADE PERFORMANCE LEVEL
----- -----------------
<S> <C>
113-203 N/A
111-112 15.000%
110 13.000%
109 10.500%
107-108 12.000%
105-106 8.250%
104 4.500%
103 2.000%
11-102 2.500%
</TABLE>
5.3 Terminated Eligible Employees. Terminated Eligible Employees shall
be eligible to receive a Team Performance Bonus based upon the year-end Earnings
Per Share Factor, and the actual Team Performance Percentage for the applicable
Team calculated through the end of the month during which the Employee's
termination of employment with the Company and/or all Participating Employers
occurred.
5.4 Proration of Certain Team Performance Bonuses. Notwithstanding any
other provision in this Article V, except as approved by the Compensation
Committee prior to the payment of Team Performance Bonuses, or subsequently
thereto by ratification, the amount of Team Performance Bonuses payable to all
Employees of the Company and all Participating Employers in Pay Grades 112 and
below shall not exceed the amount that would be payable to all such Employees if
the Team Performance Percentages applicable to all such Employees were
determined to be 100%.
ARTICLE VI
PAYMENT OF BONUS
6.1 Stockholder Approval Requirement. Notwithstanding any other
provision herein, no portion of the Unit Performance Bonus shall be paid to an
Employee whose compensation is subject to the deduction limitation of Section
162(m) of the Code to the extent that such payment would be
12
<PAGE> 14
non-deductible under such provision unless and until the stockholders of the
Company have approved this Plan and the material terms of the performance goals
established under this Plan with respect to Unit Performance Bonuses in
conformity with the requirements of Section 162(m) of the Code and the
regulations thereunder.
6.2 Deferral of Certain Payments. Notwithstanding the foregoing
provisions of this Article VI, if an Employee would receive compensation with
respect to any Plan Year, including a Unit Performance Bonus under this Plan,
that would exceed the compensation deduction limitation of Section 162(m) of the
Code and therefore be non-deductible for federal income tax purposes, the amount
of the Employee's Unit Performance Bonus for such Plan Year may be reduced by
the Compensation Committee to the extent necessary to avoid such limitation and
any such reduction shall be paid to the Employee in a subsequent year in
accordance with the provisions of this Section. In the event of any such
deferral, the amount deferred, together with interest credited as set forth
below, shall be paid to the Employee in the first calendar year during which the
deduction of such amounts shall not be subject to the limitation of Section
162(m) of the Code. The amount of the Unit Performance Bonus deferred shall be
credited to a special deferred compensation account in the name of the Employee
and such account shall be credited with interest at a rate equal to the rate of
interest announced publicly by The Chase Manhattan Bank (National Association)
from time to time as its "prime rate", with the interest rate hereunder adjusted
at such time as such "prime rate" is adjusted, from the period beginning upon
the date on which such amount otherwise would have been paid under the
provisions of this Plan through the last day of the month immediately preceding
the date of payment. Notwithstanding the foregoing, in the event of a Change of
Control, all amounts deferred in accordance with the provisions of this Section,
together with interest credited with respect to such deferred amounts, shall be
paid to the appropriate Employees as soon as practicable following the date of
the Change of Control. Determinations with respect to the deferral of Unit
Performance Bonuses hereunder shall be made by the Compensation Committee in its
sole discretion.
6.3 Pay Grade. The bonus payable to an eligible Employee who was in
more than one Pay Grade during the Plan Year shall be calculated on a pro-rata
basis in accordance with the amount of time spent by such Employee in each Pay
Grade during the Plan Year. Notwithstanding the foregoing, for purposes of
determining the Unit Performance Bonus payable to an Employee whose compensation
is subject to the deduction limitation of Section 162(m) of the Code with
respect to a Plan Year, the Pay Grade of such Employee shall not be increased
during such Plan Year if any portion of such Employee's compensation would be
non-deductible under such provision.
6.4 Multiple Teams. The bonus payable to an eligible Employee who was
in more than one Team during the Plan Year shall be calculated on a pro-rata
basis in accordance with the amount of time spent by such Employee in each Team
during the Plan Year.
6.5 Multiple Units. The bonus payable to an eligible Employee who was
in more than one Unit during the Plan Year shall be calculated on a pro-rata
basis in accordance with the amount of time spent by such Employee in each Unit
during the Plan Year. Notwithstanding the foregoing, the Unit Performance Bonus
payable to an Employee whose compensation is subject to the deduction limitation
of Section 162(m) of the Code with respect to a Plan Year and who is in more
than one
13
<PAGE> 15
Unit during the Plan Year shall not be greater than the Unit Performance Bonus
that would have been payable to such Employee if the Employee had remained in
the Unit to which the Employee was assigned on the first day of the Plan Year if
any portion of the compensation payable to such Employee would be non-deductible
under such provision.
6.6 Time and Method of Payment. The aggregate of any and all bonuses
payable under the Plan shall be payable to each eligible Employee and Terminated
Eligible Employee in cash as soon as practicable following the close of the Plan
Year.
6.7 Withholding Taxes. All bonuses payable hereunder shall be subject
to the withholding of such amounts as the Company may determine is required to
be withheld pursuant to any applicable federal, state or local law or
regulation.
ARTICLE VII
CHANGE OF CONTROL
7.1 In General. In the event of a Change of Control, each eligible
Employee (including Terminated Eligible Employees who terminate employment
during the Plan Year in which the Change of Control occurs) shall become
entitled to the payment of a Unit Performance Bonus, a Personal Performance
Bonus and a Team Performance Bonus in accordance with the provisions of this
Article.
7.2 Calculation of Bonuses. Upon a Change of Control, each eligible
Employee, together with each Terminated Eligible Employee, shall become entitled
to the payment of (i) a Unit Performance Bonus calculated on the basis of a Unit
Performance Percentage equal to the greater of the actual Unit Performance
Percentage attained for the Plan Year or the applicable Target Unit Performance
Percentage for such Plan Year and an Earnings Per Share Factor of one, (ii) a
Personal Performance Bonus calculated on the basis of a Personal Performance
Percentage equal to the greater of the actual Personal Performance Percentage
for the Plan Year or the applicable Target Personal Performance Percentage for
such Plan Year, and (iii) each such Employee and Terminated Eligible Employee
who is a member of an Exploration Team, or other Team, shall be entitled to the
payment of a Team Performance Bonus based upon the greater of the actual Team
Performance Percentage for such Plan Year or the applicable Target Team
Performance Percentage for such Plan Year. If a Change of Control occurs prior
to the time that the Compensation Committee has established the Target Unit
Performance Percentage, Target Personal Performance Percentage, or Target Team
Performance Percentage for the Plan Year, such percentages shall be based upon
the corresponding percentages for the immediately preceding Plan Year.
7.3 Payment of Bonuses. The bonuses payable in accordance with the
provisions of this Article VII shall be calculated and paid as soon as
practicable following the date of the Change of Control, but in no event later
than the sixtieth day after the date of the Change of Control. Such payments
shall be subject to the withholding of such amounts as the Company may determine
is required to be withheld pursuant to any applicable federal, state or local
law or regulation. Upon the
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completion of such payments, Eligible Employees and Terminated Eligible
Employees shall have no further right to the payment of any bonus hereunder
(other than any bonus payable hereunder with respect to a previous Plan Year
that has not yet been paid) and this Plan shall terminate.
ARTICLE VIII
GENERAL PROVISIONS
8.1 Administration. The Plan will be administered by the Compensation
Committee or its delegees. The Compensation Committee shall interpret the
provisions of the Plan in its full and absolute discretion. The determinations
of the Compensation Committee with respect to the Plan shall be conclusive. All
expenses of the Company in administering the Plan shall be borne by the Company.
8.2 Plan Unfunded. The Plan shall be unfunded and no trust or other
funding mechanism shall be established for the Plan. All benefits to be paid
pursuant to the Plan shall be paid by the Company from its general assets and an
Employee (or his heir or devisee) shall not have any greater rights than a
general, unsecured creditor against the Company for any benefit hereunder.
8.3 Participation in Plan by Affiliates. Any Affiliated Entity shall
become a party to this Plan and become a Participating Employer upon designation
by the Company as a Participating Employer.
8.4 Amount Payable Upon Death of Employee. If an Employee who is
entitled to payment hereunder dies before receiving full payment of the amount
due, such amount shall be paid as soon as practicable after the close of the
Plan Year, in a cash lump sum, to the beneficiary or beneficiaries designated by
the Employee to receive life insurance proceeds under the Company's life
insurance plan. In the absence of an effective beneficiary designation under
said plan, any amount payable hereunder following the death of an Employee shall
be paid to the Employee's estate.
8.5 Right of Offset. To the extent permitted by applicable law, the
Company may, in its sole discretion, apply any bonus payments otherwise due and
payable under this Plan against any Employee loans outstanding to the Company or
other debts of the Employee to the Company.
8.6 Amendments, Termination, Etc. The Board, upon the recommendation of
the Compensation Committee, may at any time amend, modify, suspend or terminate
the Plan.
8.7 Payments Due Minors or Incapacitated Persons. If any person
entitled to a payment under the Plan is a minor, or if the Compensation
Committee determines that any such person is incapacitated by reason of physical
or mental disability, whether or not legally adjudicated as an incompetent, the
Compensation Committee shall have the power to cause the payment becoming due to
such person to be made to another for his benefit, without responsibility of the
Compensation Committee, the Company, or any other person or entity to see to the
application of such payment.
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Payments made pursuant to such power shall operate as a complete discharge of
the Compensation Committee, the Plan and the Company.
8.8 Section Headings. The Section headings are included herein only for
convenience, and they shall have no effect on the interpretation of the Plan.
8.9 Severability. If any article, section, subsection or specific
provision is found to be illegal or invalid for any reason, such illegality or
invalidity shall not affect the remaining provisions of the Plan, and the Plan
shall be construed and enforced as if such illegal and invalid provision had
never been set forth in the Plan.
8.10 No Right to Employment. The establishment of this Plan shall not
be deemed to confer upon any person any legal right to be employed by, or to be
retained in the employ of, the Company or any Affiliated Entity, or to give any
Employee or any person any right to receive any payment whatsoever, except as
provided under this Plan. All Employees shall remain subject to discharge from
employment to the same extent as if this Plan had never been adopted.
8.11 Transferability. Any bonus payable hereunder is personal to the
Employee and may not be sold, exchanged, transferred, pledged, assigned or
otherwise disposed of except by will or by the laws of descent and distribution.
8.12 Successors. This Plan shall be binding upon and inure to the
benefit of the Company, the Participating Employers and the Employees and their
respective heirs, representatives and successors.
8.13 Governing Law. The Plan and all agreements hereunder shall be
construed in accordance with and governed by the laws of the State of Colorado,
unless superseded by federal law.
Adopted as of January 1, 1998.
NEWMONT GOLD COMPANY
By: /s/ TIMOTHY J. SCHMITT
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EXHIBIT 10(m)
===============================================================================
NEWMONT GOLD COMPANY
INTERMEDIATE TERM INCENTIVE COMPENSATION PLAN
(AMENDED AND RESTATED GENERALLY EFFECTIVE AS OF JANUARY 1, 1998)
===============================================================================
<PAGE> 2
NEWMONT GOLD COMPANY
INTERMEDIATE TERM INCENTIVE COMPENSATION PLAN
(AS AMENDED AND RESTATED GENERALLY EFFECTIVE AS OF JANUARY 1, 1998)
The board of directors of Newmont Gold Company, a Delaware Corporation
(the "Company" or "NGC"), established the Newmont Gold Company Intermediate Term
Incentive Compensation Plan (the "Plan"), effective January 1, 1997 (the
"Effective Date"). The Plan is hereby amended and restated in its entirety,
generally effective as of January 1, 1998, as set forth below.
PURPOSE
The purpose of the Plan is to provide to selected key employees of the
Company and its Affiliated Entities (defined herein) that participate in the
Plan a more direct interest in the success of the operations of the Company by
rewarding their successful efforts to maximize production, minimize production
costs, expand reserves and develop new capital projects in an optimal manner.
Employees of the Company and participating Affiliated Entities will be rewarded
in accordance with the terms and conditions described below.
ARTICLE I
DEFINITIONS
1.1 "Affiliated Entity(ies)" means any corporation or other entity, now
or hereafter formed, that is or shall become affiliated with the Company, either
directly or indirectly, through stock ownership, control or otherwise, as
determined by the Company, including but not limited to Newmont Mining
Corporation ("NMC").
1.2 "Board" means the Board of Directors of the Company.
1.3 "Bonus Eligible Earnings" means the total base salary earnings of
the Employee during the calendar year. If an Employee is absent from work
because of a work-related injury, the Employee's "Bonus Eligible Earnings" will
be determined by his actual gross W-2 base earnings during the Plan Year. In the
case of a Terminated Eligible Employee who is Disabled, "Bonus Eligible
Earnings" will be determined by his actual gross W-2 base earnings, including
short-term disability pay received during the Plan Year, but excluding pay from
any other source. If an Employee dies during the Plan Year, the "Bonus Eligible
Earnings" for such Terminated Eligible Employee will be determined by his actual
gross W-2 base earnings. If an Employee is on active military duty during a Plan
Year, the "Bonus Eligible Earnings" will be determined by his actual gross W-2
base earnings during the Plan Year, exclusive of any military pay. If an
Employee does not receive a W-2, his "Bonus Eligible Earnings" shall be
determined on the basis of his actual gross base earnings for the Plan Year, or
portion thereof, as shown on the payroll records of the Company or the
Participating Employer. In all cases, an Employee's "Bonus Eligible Earnings"
shall be computed before reduction for pre-tax contributions to an employee
benefit plan of the Company
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pursuant to Section 401(k) or Section 125 of the Code. In the event of a Change
of Control, each Participant's "Bonus Eligible Earnings" for purposes of
computing the applicable ITIP Bonus in accordance with the provisions of Section
3.3 shall be equal to each such Participant's base salary, on an annualized
basis, as of the date immediately preceding the Change of Control, or, in the
case of a Participant who terminates employment prior to the date of the Change
of Control, such Participant's base salary for the Plan Year through the date of
termination of employment. Notwithstanding the foregoing, the "Bonus Eligible
Earnings" of an Employee whose compensation is subject to the deduction
limitation of Section 162(m) of the Code with respect to a Plan Year shall not
exceed the annualized base salary of the Employee as in effect on the first day
of such Plan Year.
1.4 "Change of Control" means:
(a) The acquisition by any individual, entity or group (within
the meaning of Section 13(d)(3) or 14(d)(2) of the Securities Exchange Act of
1934, as amended (the "Exchange Act")) (a "Person") of beneficial ownership
(within the meaning of Rule 13d-3 promulgated under the Exchange Act) of 20% or
more of either (i) the then outstanding shares of common stock of NMC (the
"Outstanding NMC Common Stock") or (ii) the combined voting power of the then
outstanding voting securities of NMC entitled to vote generally in the election
of directors (the "Outstanding NMC Voting Securities"); provided, however, that
for purposes of this subsection (a), the following acquisitions shall not
constitute a Change of Control: (i) any acquisition directly from NMC, (ii) any
acquisition by NMC, (iii) any acquisition by any employee benefit plan (or
related trust) sponsored or maintained by NMC or any corporation controlled by
NMC or (iv) any acquisition pursuant to a transaction which complies with
clauses (i), (ii) and (iii) of subsection (c) of this Section; or
(b) Individuals who, as of the date hereof, constitute the
Board of Directors of NMC (the "Incumbent Board") cease for any reason to
constitute at least a majority of the Board of Directors of NMC; provided,
however, that any individual becoming a director subsequent to the date hereof
whose election, or nomination for election by NMC's shareholders, was approved
by a vote of at least a majority of the directors then comprising the Incumbent
Board shall be considered as though such individual were a member of the
Incumbent Board, but excluding, for this purpose, any such individual whose
initial assumption of office occurs as a result of an actual or threatened
election contest with respect to the election or removal of directors or other
actual or threatened solicitation of proxies or consents by or on behalf of a
Person other than the Board of Directors of NMC; or
(c) Consummation by NMC of a reorganization, merger or
consolidation or sale or other disposition of all or substantially all of the
assets of NMC or the acquisition of assets of another entity (a "Business
Combination"), in each case, unless, following such Business Combination, (i)
all or substantially all of the individuals and entities who were the beneficial
owners, respectively, of the Outstanding NMC Common Stock and Outstanding NMC
Voting Securities immediately prior to such Business Combination beneficially
own, directly or indirectly, more than 50% of, respectively, the then
outstanding shares of common stock and the combined voting power of the then
outstanding voting securities entitled to vote generally in the election of
directors, as the case may be, of the corporation resulting from such Business
Combination (including, without limitation, a corporation which as a result of
such transaction owns NMC or all
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or substantially all of NMC's assets either directly or through one or more
subsidiaries) in substantially the same proportions as their ownership
immediately prior to such Business Combination of the Outstanding NMC Common
Stock and Outstanding NMC Voting Securities, as the case may be, (ii) no Person
(excluding any employee benefit plan (or related trust) of NMC or such
corporation resulting from such Business Combination) beneficially owns,
directly or indirectly, 20% or more of, respectively, the then outstanding
shares of common stock of the corporation resulting from such Business
Combination or the combined voting power of the then outstanding voting
securities of such corporation except to the extent that such ownership existed
prior to the Business Combination and (iii) at least a majority of the members
of the board of directors of the corporation resulting from such Business
Combination were members of the Incumbent Board at the time of the execution of
the initial agreement, or of the action of the Board, providing for such
Business Combination; or
(d) Approval by the shareholders of NMC of a complete liquidation
or dissolution of NMC.
1.5 "Code" means the Internal Revenue Code of 1986, as amended from
time to time.
1.6 "Common Stock" means the $1.60 par value common stock of Newmont
Mining Corporation.
1.7 "Company" means NGC, and where the context requires, any Affiliated
Entity that has become a Participating Employer.
1.8 "Compensation Committee" means the Board and the Compensation
Committee of the Board of Directors of NMC, as applicable.
1.9 "Disability" means a condition such that the Employee has
terminated employment with the Company and/or all Participating Employers with a
qualifying disability and has immediately begun receiving benefits from a
long-term disability plan of the Company or a Participating Employer.
1.10 "Earnings Factor" means the Performance Factor determined with
respect to NMC's Earnings Per Share for the relevant Performance Period.
1.11 "Earnings Per Share" means the earnings per share, before
extraordinary items (determined in accordance with the provisions of Accounting
Principles Board Opinion Number 30), of NMC, for the relevant Performance
Period, as determined by the Company.
1.12 "Employee" means a full time, salaried employee of the Company
and/or a Participating Employer, excluding temporary or leased employees. For
purposes of this Plan, an employee is any individual who provides services to
the Company as a common law employee and whose remuneration is subject to the
withholding of federal income tax pursuant to Section 3401 of the Code. An
Employee shall not include any individual (i) who provides services to the
Company and/or a Participating Employer under an agreement, contract, or any
other arrangement pursuant to which the individual is initially classified as an
independent contractor by the Company and/or
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a Participating Employer, or (ii) whose remuneration for services has not been
treated initially as subject to the withholding of federal income tax pursuant
to Section 3401 of the Code even if the individual is subsequently reclassified
as a common law employee as a result of a final decree of a court of competent
jurisdiction or the settlement of an administrative or judicial proceeding.
1.13 "Fair Market Value" means, with respect to a share of Common Stock
as of a given date, the average of the high and low sales prices for a share of
Common Stock as reported for New York Stock Exchange issues in The Wall Street
Journal for such date; provided, however, that if there is no sale of shares of
Common Stock reported in The Wall Street Journal on such date, such fair market
value shall be the average between the bid and asked prices for a share of
common stock reported in The Wall Street Journal at the close of trading on such
date; provided further, however, that if no such prices are reported for such
day, the most recent day for which such prices are available shall be used. In
the event that the method for determining the fair market value of a share of
Common Stock provided for in the previous sentence shall not be practicable,
then such fair market value shall be determined by such other reasonable
valuation method as the Compensation Committee shall, in its discretion, select
and apply in good faith as of the given date.
1.14 "ITIP Bonus" means the bonus payable to a Participant under this
Plan with respect to a Performance Period (or portion thereof as provided in
Section 3.2), which shall be determined by multiplying the Participant's Bonus
Eligible Earnings for the last Plan Year of such Performance Period (or portion
thereof) by the product of the following: 70% times (Targeted Payout Percentage
times Management Effectiveness Factor) plus 30% times (Targeted Payout
Percentage times Earnings Factor).
1.15 "Management Effectiveness Factor" means, with respect to any
Performance Period, the average of the Production Factor, the Total Cost Factor
and the Total Reserves Factor for such Performance Period.
1.16 "Measure of Performance" means Production Equity Ounces, Total
Cost Per Equity Ounce, Total Reserves Equity Ounces and Earnings Per Share, as
the case may be.
1.17 "NMC" means Newmont Mining Corporation, a Delaware corporation.
1.18 "Participant" means an Employee who has satisfied the eligibility
requirements of Article II and who is, or may become, entitled to an ITIP Bonus
under the provisions of this Plan.
1.19 "Participating Employer" means the Company and any Affiliated
Entity that the Company determines shall participate in the Plan.
1.20 "Pay Grade" means those jobs sharing a common salary range, as
designated by the Company. If the Pay Grade of a Participant changes during the
Performance Period, the Targeted Payout Percentage applicable to such
Participant shall be prorated in accordance with the provisions of Section 1.29.
Notwithstanding the foregoing, for purposes of this Plan the Pay Grade of an
Employee whose compensation is subject to the deduction limitation of Section
162(m) of the Code with respect to a Plan Year shall be the Pay Grade applicable
to such Employee as of the first day
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of the applicable Performance Period, or such lesser Pay Grade as may be
assigned to the Employee during such Performance Period.
1.21 "Performance Categories" means the following categories used to
determine the Performance Factors: "Outstanding," "Excellent," "Target,"
"Threshold" and "Unacceptable". The Compensation Committee shall approve the
level of performance for each Performance Category and for each Measure of
Performance with respect to each Performance Period. The approval of the level
of performance for each Performance Category and for each Measure of Performance
with respect to each Performance Period shall be conducted so as to comply with
the requirements for exemption from the limitations of Section 162(m) of the
Code. The Compensation Committee shall retain the discretion to change the
required levels of performance, and the underlying measurements of performance,
in order to reflect the acquisition or disposition of assets, or for other
reasons as determined by the Compensation Committee in its sole discretion,
provided, however, that any such change shall be in conformity with generally
accepted accounting principles and provided further that no such change shall
result in any increase in the amount of ITIP Bonus payable to a Participant
hereunder whose compensation is subject to the deduction limitation of Section
162(m) of the Code and all such changes shall be consistent with the
requirements for exemption under Section 162(m) of the Code.
1.22 "Performance Factor" means the Production Factor, the Total Cost
Factor, the Total Reserves Factor or the Earnings Factor, as the case may be,
for the relevant Performance Period. The Performance Factor for each of the
foregoing Factors shall be determined based upon where each such Measure of
Performance falls with respect to the level of performance approved by the
Compensation Committee for each Performance Category. The Performance Factor for
the Outstanding Performance Category shall be three, the Performance Factor for
the Excellent Performance Category shall be two, the Performance Factor for the
Target Performance Category shall be one, the Performance Factor for the
Threshold Performance Category shall be zero, and the Performance Factor for the
Unacceptable Performance Category shall be minus one. The Performance Factor for
each Measure of Performance will be determined by interpolation, with rounding
to the nearest 0.01, where the Measure of Performance falls between the
specified Performance Categories for such Performance Period. If the Performance
Factor with respect to any Measure of Performance falls below the Threshold
Performance Category, a negative Performance Factor for that Measure of
Performance will apply for the relevant Performance Period and such negative
Performance Factor must be offset by other positive Performance Factors in order
for there to be an ITIP Bonus. The Compensation Committee shall certify in
writing, prior to the payment of any ITIP Bonus, that the Performance Factors
used for the calculation of the ITIP Bonus have been attained and take any other
action required in order to qualify for the exemption from the provisions of
Section 162(m) of the Code.
1.23 "Performance Period" means the period of Plan Year(s) over which
the Measures of Performance shall be calculated for purposes of determining the
amount of an ITIP Bonus. The initial Performance Period shall be the calendar
year 1997, the second Performance Period shall be the period from January 1,
1997 through December 31, 1998, and the next Performance Period shall be the
period from January 1, 1997 through December 31, 1999. Performance Periods
beginning on January 1, 1998 and future years shall be composed of three Plan
Years.
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1.24 "Plan Year" means the calendar year.
1.25 "Position(s)" means the defined job(s) held by an Employee during
the Plan Year.
1.26 "Production Equity Ounces" means the total equity ounces produced
by the Company in the relevant Performance Period, as calculated by the Company
and approved by the Compensation Committee.
1.27 "Production Factor" means the Performance Factor attributable to
Production Equity Ounces with respect to the relevant Performance Period.
1.28 "Retirement" means termination of employment with the Company
and/or all Participating Employers by an Employee who immediately begins to
receive benefits from a defined benefit pension plan of the Company or a
Participating Employer.
1.29 "Targeted Payout Percentage" means the percentage of a
Participant's Bonus Eligible Earnings taken into account when calculating the
ITIP Bonus with respect to a Performance Period. The Targeted Payout Percentage
for the Payout Period beginning January 1, 1997 and ending December 31, 1997,
the Performance Period beginning January 1, 1997 and ending December 31, 1998
and the Performance Period beginning January 1, 1997 and ending December 31,
1999 shall be determined in accordance with the provisions of Schedule A
attached hereto and hereby made a part hereof. Targeted Payout Percentages for
subsequent Performance Periods shall be established by the Compensation
Committee and attached as additional Schedules to this Plan. If the Pay Grade of
a Participant changes during a Performance Period, the Targeted Payout
Percentage applicable to such Participant shall be prorated based upon the
number of days spent in each Pay Grade during the Performance Period, provided,
however, that for purposes of this Plan, the Pay Grade of an Employee whose
compensation is subject to the deduction limitation of Section 162(m) of the
Code with respect to a Plan Year shall be the Pay Grade applicable to such
Employee as of the first day of the applicable Performance Period, or such
lesser Pay Grade as may be assigned to the Employee during such Performance
Period.
1.30 "Total Cost Factor" means the Performance Factor determined with
respect to the Company's Total Cost Per Equity Ounce for the relevant
Performance Period.
1.31 "Total Cost Per Equity Ounce" means the Company's total cost of
producing an ounce of gold during the relevant Performance Period, which shall
be determined by dividing the total cost of producing an ounce of gold during
such Performance Period by the total Production Equity Ounces for such
Performance Period. The Total Cost Per Equity Ounce shall be calculated by the
Company and approved by the Compensation Committee.
1.32 "Total Reserves Equity Ounces" means the Company's total equity
ounces of gold in proven and probable gold reserves at the end of the relevant
Performance Period as calculated by the Company and approved by the Compensation
Committee.
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1.33 "Total Reserves Factor" means the Performance Factor determined
with respect to the Total Reserves Equity Ounces for the relevant Performance
Period.
ARTICLE II
ELIGIBILITY
All Employees of the Company and/or a Participating Employer in Pay
Grades 109 and above are eligible to receive an ITIP Bonus under the Plan,
provided (i) they are on the payroll of the Company and/or a Participating
Employer as of the last day of the relevant Performance Period or (ii) they have
terminated employment with the Company and/or a Participating Employer during
the Performance Period and the Vice President of Human Resources of the Company,
acting in his sole discretion, has approved in writing their eligibility to
receive an ITIP Bonus. Employees who are on short-term disability under the
Company's short-term disability policy or not working because of a work-related
injury as of the last day of the Plan Year shall be eligible to receive a bonus
under clause (i). Notwithstanding the foregoing provisions of this Article II,
the Compensation Committee may, prior to the end of any Performance Period,
exclude from eligibility for participation under this Plan with respect to such
Performance Period any Employee or Employees, as the Compensation Committee may
determine in its sole discretion.
ARTICLE III
PAYMENT OF ITIP BONUS
3.1 Determination of ITIP Bonus. As soon as reasonably practicable
after the end of each Performance Period, when all of the necessary information
with respect to the Performance Factors for such Performance Period have been
determined, the Compensation Committee shall certify in writing the extent to
which the Measures of Performance satisfy the Performance Categories, the
Performance Factors achieved with respect to such Performance Period, and any
other material terms of this Plan that apply to the payment of the ITIP Bonus.
Following such certification, payment of the ITIP Bonus shall be made to the
eligible Participants in accordance with the provisions of this Article III as
soon as reasonably practicable.
3.2 Termination of Employment During Performance Period. If a
Participant terminates employment during a Performance Period and the Vice
President of Human Resources of the Company has determined in writing that such
Participant should receive an ITIP Bonus with respect to such Performance
Period, the Participant shall be entitled to a prorated ITIP Bonus calculated by
using the Performance Factors applicable to the Plan Year during which the
Participant terminated employment, calculated at the end of such Plan Year, and
multiplied by the employee's Bonus Eligible Earnings for such Plan Year. If a
Participant terminates employment before the completion of one full Plan Year
during a Performance Period no ITIP Bonus shall be paid. Payment shall be made
to a terminated Participant with respect to a Performance Period at the same
time that
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payments with respect to such Performance Period are made to Participants in
accordance with the provisions of Section 3.1.
3.3 Change of Control. In the event of a Change of Control, each
Participant (including any Participant who has terminated employment with the
Company and/or a Participating Employer during the relevant Performance Period
and who has been designated in writing by the Vice President of Human Resources
of the Company as eligible to receive an ITIP Bonus) shall become entitled to
the payment of an ITIP Bonus based upon the applicable Targeted Payout
Percentage for the Performance Period during which such Change of Control occurs
and calculated based upon a Performance Category for each Performance Factor
equal to the greater of the actual Performance Category attained with respect to
such Performance Factor or the Target Performance Category. If a Change of
Control occurs prior to January 1, 2000, the Targeted Payout Percentages set
forth on Schedule A under the column headed 1997-1999 shall be applied to
determine the amount of the ITIP Bonus payable in accordance with the provisions
of this Section. If a Change of Control occurs prior to the time that the
Compensation Committee has established the Targeted Payout Percentages or the
levels of performance for the Performance Categories and Measures of Performance
for a Performance Period, the levels of performance and Targeted Payout
Percentages shall be based upon the immediately preceding Performance Period.
Notwithstanding the provisions of Section 3.5, in the event of a Change of
Control, the ITIP Bonus payable pursuant to this Section 3.3 shall be paid
entirely in cash. Payment of the ITIP Bonus under the foregoing circumstances
shall be made as soon as practicable following the date of the Change of
Control. Upon the completion of such payments, the Participants shall have no
further right to the payment of any ITIP Bonus hereunder (other than an ITIP
Bonus previously earned but not yet paid) and this Plan shall terminate.
3.4 Limitation on ITIP Bonus. The maximum ITIP Bonus payable to any
Participant under this Plan with respect to a Performance Period shall not
exceed 300% of the amount of such Bonus payable to the Participant if all
Performance Factors were at the Target Performance Category level, based upon
the Bonus Eligible Earnings of such Participant for the last Plan Year in the
Performance Period. Notwithstanding the foregoing, the largest ITIP Bonus
payable to any Participant under this Plan with respect to any Performance
Period shall not exceed $3 million.
3.5 Form of Payment. The amount of ITIP Bonuses payable under this Plan
shall be paid 50% in cash and 50% in shares of Common Stock (payable in whole
shares only with excess amounts paid in cash), which shall be subject to the
restrictions set forth in Section 3.7 below. The number of shares of Common
Stock to be issued in payment of an ITIP Bonus shall be determined based upon
the Fair Market Value of the Common Stock on the date that the Compensation
Committee meets and certifies the satisfaction of the material terms of this
Plan with respect to the payment of the ITIP Bonus in accordance with the
provisions of Section 3.1. Notwithstanding the foregoing, (i) the Compensation
Committee may, in its sole discretion, cause all or any portion of any ITIP
Bonus otherwise payable in shares of Common Stock to be paid in cash, and (ii)
if a Participant terminates employment before payment of an ITIP Bonus and if
all of the Participant's shares of Common Stock granted pursuant to this Plan
are non-forfeitable and are transferrable, in accordance with the provisions of
Section 3.7, the Participant's ITIP Bonus may be paid in cash if approved by the
Vice President of Human Resources of the Company.
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3.6 Withholding Taxes. All bonuses payable hereunder shall be subject
to the withholding of such amounts as the Company may determine is required to
be withheld pursuant to any applicable federal, state or local law or
regulation. The Compensation Committee may, in its sole discretion, permit any
Participant to satisfy the applicable withholding by causing the Company to
withhold the appropriate number of shares of Common Stock from the ITIP Bonus
otherwise payable and to make the requisite withholding payments on behalf of
the Participant.
3.7 Restrictions on Common Stock. (a) Shares of Common Stock issued as
payment of a portion of an ITIP Bonus hereunder shall be restricted and subject
to forfeiture as follows: If a Participant terminates employment prior to the
first anniversary of the date on which such shares of Common Stock were granted
to the Participant (as determined by the Compensation Committee) (the "Grant
Date"), all such shares of Common Stock shall be forfeited. If a Participant
terminates employment more than one year after the Grant Date, but prior to the
second anniversary of the Grant Date, the Participant shall forfeit 50% of the
shares of Common Stock awarded as a part of such ITIP Bonus. If a Participant
terminates employment on or after the second anniversary of the Grant Date, the
shares of Common Stock shall not be subject to forfeiture. Notwithstanding the
foregoing, if a Participant terminates employment on account of death,
Disability, Retirement, Change of Control, or other termination approved by the
Vice President of Human Resources of the Company in writing, none of the shares
of Common Stock granted to the Participant pursuant to this Plan shall be
subject to forfeiture.
(b) Shares of Common Stock issued hereunder as a part of an
ITIP Bonus shall not be subject to transfer by the Participant for a period of
five years from the Grant Date on which such shares of Common Stock were issued,
provided, however, that such Common Stock shall be transferable (i) if approved
in writing by the Vice President of Human Resources of the Company in the event
of the Death, Disability, Retirement of the Participant, or other termination of
employment, (ii) in the event of a Change of Control, or (iii) to family trusts
or similar vehicles for personal estate planning purposes as approved by the
Vice President of Human Resources of the Company in writing.
(c) The Compensation Committee shall cause a legend to be
placed on the Common Stock certificates issued pursuant to this Plan referring
to the restrictions provided by this Section and, in addition, may in its sole
discretion require one or more of the following methods of enforcing the
restrictions: (i) requiring the Participant to keep the stock certificates, duly
endorsed, in the custody of the Company while the restrictions remain in effect;
or (ii) requiring that the stock certificates, duly endorsed, be held in the
custody of a third party while the restrictions remain in effect.
(d) Shares of Common Stock issued under this Plan may be
issued pursuant to the provisions of the Newmont Mining Corporation 1996
Employees Stock Plan, or otherwise, as determined in the sole discretion of the
Compensation Committee.
(e) The Compensation Committee may, in its sole discretion,
require the Participant to agree not to make an election pursuant to Section
83(b) of the Code as a condition for the receipt of Common Stock hereunder.
9
<PAGE> 11
3.8 Stockholder Approval Requirement. Notwithstanding the foregoing
provisions of this Article III, no ITIP Bonus shall be paid under this Plan to a
Participant to the extent that such payment would be non-deductible under the
provisions of Section 162(m) of the Code unless and until the stockholders of
the Company have approved this Plan and the material terms of the performance
goals established under this Plan in conformity with the requirements of Section
162(m) of the Code and the Regulations thereunder.
3.9 Deferral of Certain Payments. Notwithstanding the foregoing
provisions of this Article III, if a Participant would receive compensation with
respect to any Plan Year, including ITIP Bonuses under this Plan, that would
exceed the $1 million compensation deduction limitation of Section 162(m) of the
Code and therefore be non-deductible for federal income tax purposes, the amount
of the Participant's ITIP Bonus for such Plan Year may be reduced by the
Compensation Committee to the extent necessary to avoid such limitation and any
such reduction shall be paid to the Participant in a subsequent year in
accordance with the provisions of this Section. In the event of any such
deferral, the amount deferred, which shall consist of the cash portion of the
ITIP Bonus and the number of shares of Common Stock that would have otherwise
been issuable to the Participant, together with interest and dividends credited
as set forth below, shall be paid to the Participant in the first calendar year
during which the deduction of such amounts shall not be subject to the
limitations of Section 162(m) of the Code. The amount of the cash portion of the
ITIP Bonus deferred shall be credited to a special deferred compensation account
in the name of the Participant and such account shall be credited with interest
at a rate equal to the rate of interest announced publicly by The Chase
Manhattan Bank (National Association) from time to time as its "prime rate",
with the interest rate hereunder adjusted at such time as such "prime rate" is
adjusted, from the period beginning upon the date on which such amount otherwise
would have been paid under the provisions of this Plan through the last day of
the month immediately preceding the date of payment. Any dividends paid with
respect to the shares of Common Stock that are deferred in accordance with the
provisions of this Section 3.9 shall be credited to the special deferred
compensation account as of the date such dividends would otherwise have been
paid and such amounts shall be credited with interest as above provided.
Notwithstanding the foregoing, in the event of a Change of Control, all amounts
deferred in accordance with the provisions of this Section, together with
interest and dividends credited with respect to such deferred amounts, shall be
paid to the appropriate Participants as soon as practicable following the date
of the Change of Control. Determinations with respect to the deferral of ITIP
Bonuses hereunder shall be made by the Compensation Committee in its sole
discretion.
ARTICLE IV
GENERAL PROVISIONS
4.1 Administration. The Plan will be administered by the Compensation
Committee or its delegees. The Compensation Committee shall interpret the
provisions of the Plan in its full and absolute discretion. The determinations
of the Compensation Committee with respect to the Plan shall be conclusive. All
expenses of the Company in administering the Plan shall be borne by the Company.
10
<PAGE> 12
4.2 Plan Unfunded. The Plan shall be unfunded and no trust or other
funding mechanism shall be established for the Plan. All benefits to be paid
pursuant to the Plan shall be paid by the Company from its general assets and an
Employee (or his heir or devisee) shall not have any greater rights than a
general, unsecured creditor against the Company for any benefit hereunder.
4.3 Participation in Plan by Affiliates. Any Affiliated Entity shall
become a party to this Plan and become a Participating Employer upon designation
by the Company as a Participating Employer.
4.4 Amount Payable Upon Death of Employee. If a Participant who is
entitled to payment hereunder dies before receiving full payment of the amount
due, such amount shall be paid, in a cash lump sum, to the beneficiary or
beneficiaries designated by the Participant to receive life insurance proceeds
under the Company's life insurance plan. In the absence of an effective
beneficiary designation under said plan, any amount payable hereunder following
the death of a Participant shall be paid to the Participant's estate.
4.5 Right of Offset. To the extent permitted by applicable law, the
Company may, in its sole discretion, apply any bonus payments otherwise due and
payable under this Plan against any Participant loans outstanding to the Company
or other debts of the Participant to the Company.
4.6 Amendments, Termination, Etc. The Board, upon the recommendation of
the Compensation Committee, may at any time amend, modify, suspend or terminate
the Plan.
4.7 Payments Due Minors or Incapacitated Persons. If any person
entitled to a payment under the Plan is a minor, or if the Compensation
Committee determines that any such person is incapacitated by reason of physical
or mental disability, whether or not legally adjudicated as an incompetent, the
Compensation Committee shall have the power to cause the payment becoming due to
such person to be made to another for his benefit, without responsibility of the
Compensation Committee, the Company, or any other person or entity to see to the
application of such payment. Payments made pursuant to such power shall operate
as a complete discharge of the Compensation Committee, the Plan and the Company.
4.8 Section Headings. The Section headings are included herein only for
convenience, and they shall have no effect on the interpretation of the Plan.
4.9 Severability. If any article, section, subsection or specific
provision is found to be illegal or invalid for any reason, such illegality or
invalidity shall not affect the remaining provisions of the Plan, and the Plan
shall be construed and enforced as if such illegal and invalid provision had
never been set forth in the Plan.
4.10 No Right to Employment. The establishment of this Plan shall not
be deemed to confer upon any person any legal right to be employed by, or to be
retained in the employ of, the Company or any Affiliated Entity, or to give any
Employee or any person any right to receive any payment whatsoever, except as
provided under this Plan. All Employees shall remain subject to discharge from
employment to the same extent as if this Plan had never been adopted.
11
<PAGE> 13
4.11 Transferability. Any ITIP Bonus payable hereunder is personal to
the Participant and may not be sold, exchanged, transferred, pledged, assigned
or otherwise disposed of except by will or by the laws of descent and
distribution.
4.12 Successors. This Plan shall be binding upon and inure to the
benefit of the Company, the Participating Employers and the Participants and
their respective heirs, representatives and successors.
4.13 Governing Law. The Plan and all agreements hereunder shall be
construed in accordance with and governed by the laws of the State of Colorado,
unless superseded by federal law.
Adopted as of January 1, 1998.
NEWMONT GOLD COMPANY
By: /s/ TIMOTHY J. SCHMITT
----------------------------
12
<PAGE> 14
SCHEDULE A
TARGETED PAYOUT PERCENTAGES
<TABLE>
<CAPTION>
Pay Grade 1997 1997-1998 1997-1999
--------- ---- --------- ---------
<S> <C> <C> <C>
203 N/A N/A N/A
202 28% 56% 85%
200-201 25% 50% 75%
113-114 17% 34% 50%
111-112 13% 26% 40%
110 10% 20% 30%
109 7% 14% 20%
</TABLE>
13
<PAGE> 1
EXHIBIT 10(n)
NEWMONT MINING CORPORATION
EXECUTIVE CHANGE OF CONTROL SEVERANCE PLAN
INTRODUCTION
The Board of Directors of Newmont Mining Corporation
recognizes that, as is the case with many publicly held corporations, there
exists the possibility of a Change of Control of the Company. This possibility
and the uncertainty it creates may result in the loss or distraction of
executives of the Company and its Subsidiaries to the detriment of the Company
and its shareholders.
The Board considers the avoidance of such loss and distraction
to be essential to protecting and enhancing the best interests of the Company
and its shareholders. The Board also believes that when a Change of Control is
perceived as imminent, or is occurring, the Board should be able to receive and
rely on disinterested service from executives regarding the best interests of
the Company and its shareholders without concern that executives might be
distracted or concerned by the personal uncertainties and risks created by the
perception of an imminent or occurring Change of Control.
In addition, the Board believes that it is consistent with the
Company's employment practices and policies of the Company and its Subsidiaries
and in the best interests of the Company and its shareholders to treat fairly
its executives whose employment terminates in connection with or following a
Change of Control.
Accordingly, the Board has determined that appropriate steps
should be taken to assure the Company and its Subsidiaries of the continued
employment and attention and dedication to duty of its executives and to seek to
ensure the availability of their continued service, notwithstanding the
possibility, threat or occurrence of a Change of Control.
Therefore, in order to fulfill the above purposes, the
following plan has been developed and is hereby adopted.
ARTICLE I
ESTABLISHMENT OF PLAN
As of the Effective Date, the Company hereby establishes a
separation compensation plan known as the Newmont Mining Corporation Executive
Change of Control Severance Plan, as set forth in this document.
ARTICLE II
DEFINITIONS
As used herein the following words and phrases shall have the
following respective meanings unless the context clearly indicates otherwise.
<PAGE> 2
(a) Affiliate. Any entity which controls, is controlled by or
is under common control with the Company.
(b) Annual Bonus. The aggregate annual bonus that a
Participant is eligible to earn pursuant to the Annual Incentive Compensation
Plan and Intermediate Term Incentive Compensation Plan of the Company or any
Affiliate, or any successor or replacement plans.
(c) Annual Bonus Amount. The highest amount a Participant
received as an annual bonus in any of the last three full fiscal years prior to
the Change of Control.
(d) Annual Salary. The Participant's regular annual base
salary immediately prior to his or her termination of employment, including
compensation converted to other benefits under a flexible pay arrangement
maintained by the Company or any Affiliate or deferred pursuant to a written
plan or agreement with the Company or any Affiliate, but excluding overtime pay,
allowances, premium pay, compensation paid or payable under any bonus or
incentive plan of the Company or any Affiliate or any similar payment.
(e) Board. The Board of Directors of Newmont Mining
Corporation.
(f) Cause. With respect to any Participant: (i) the willful
and continued failure of the Participant to perform substantially the
Participant's duties with the Company or one of its Affiliates (other than any
such failure resulting from incapacity due to physical or mental illness), after
a written demand for substantial performance is delivered to the Participant by
the Board or the Chief Executive Officer of the Company which specifically
identifies the manner in which the Board or Chief Executive Officer believes
that the Participant has not substantially performed the Participant's duties,
or (ii) the willful engaging by the Participant in illegal conduct or gross
misconduct which is materially and demonstrably injurious to the Company or any
Affiliate. For purposes of this definition, no act or failure to act on the part
of the Participant shall be considered "willful" unless it is done, or omitted
to be done, by the Participant in bad faith or without reasonable belief that
the Participant's action or omission was in the best interests of the Company or
any Affiliate. Any act or failure to act based upon authority given pursuant to
a resolution duly adopted by the Board or upon the instructions of the Chief
Executive Officer or a senior officer of the Company or any Affiliate or based
upon the advice of counsel for the Company shall be conclusively presumed to be
done, or omitted to be done, by the Participant in good faith and in the best
interests of the Company.
(g) Change of Control The occurrence of any of the following
events:
(i) The acquisition by any individual, entity or group
(within the meaning of Section 13(d)(3) or 14(d)(2) of the Securities Exchange
Act of 1934, as amended (the "Exchange Act")) (a "Person") of beneficial
ownership (within the meaning of Rule 13d-3 promulgated under the Exchange Act)
of 20% or more of either (x) the then outstanding shares of common stock of the
Company (the "Outstanding Company Common Stock") or (y) the
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<PAGE> 3
combined voting power of the then outstanding voting securities of the Company
entitled to vote generally in the election of directors (the "Outstanding
Company Voting Securities"); provided, however, that for purposes of this
subsection (i), the following acquisitions shall not constitute a Change of
Control: (A) any acquisition directly from the Company, (B) any acquisition by
the Company, (C) any acquisition by any employee benefit plan (or related trust)
sponsored or maintained by the Company or any corporation controlled by the
Company or (D) any acquisition by any corporation pursuant to a transaction
which complies with clauses (A), (B) and (C) of paragraph (iii) below; or
(ii) Individuals who, as of the Effective Date,
constitute the Board (the "Incumbent Board") cease for any reason to constitute
at least a majority of the Board; provided, however, that any individual
becoming a director subsequent to the Effective Date whose election, or
nomination for election by the Company's shareholders, was approved by a vote of
at least a majority of the directors then comprising the Incumbent Board shall
be considered as though such individual were a member of the Incumbent Board,
but excluding, for this purpose, any such individual whose initial assumption of
office occurs as a result of an actual or threatened election contest with
respect to the election or removal of directors or other actual or threatened
solicitation of proxies or consents by or on behalf of a Person other than the
Board; or
(iii) Consummation of a reorganization, merger or
consolidation or sale or other disposition of all or substantially all of the
assets of the Company or an acquisition of assets of another corporation (a
"Business Combination"), in each case, unless, following such Business
Combination, (A) all or substantially all of the individuals and entities who
were the beneficial owners, respectively, of the Outstanding Company Common
Stock and Outstanding Company Voting Securities immediately prior to such
Business Combination beneficially own, directly or indirectly, more than 50% of,
respectively, the then outstanding shares of common stock and the combined
voting power of the then outstanding voting securities entitled to vote
generally in the election of directors, as the case may be, of the corporation
resulting from such Business Combination (including, without limitation, a
corporation which as a result of such transaction owns the Company or all or
substantially all of the Company's assets either directly or through one or more
subsidiaries) in substantially the same proportions as their ownership,
immediately prior to such Business Combination of the Outstanding Company Common
Stock and Outstanding Company Voting Securities, as the case may be, (B) no
Person (excluding any corporation resulting from such Business Combination or
any employee benefit plan (or related trust) beneficially owns, directly or
indirectly, 20% or more of, respectively, the then outstanding shares of common
stock of the corporation resulting from such Business Combination or the
combined voting power of the then outstanding voting securities of such
corporation, except to the extent that such ownership existed prior to the
Business Combination and (C) at least a majority of the members of the board of
directors of the corporation resulting from such Business Combination were
members of the Incumbent Board at the time of the execution of the initial
agreement, or of the action of the Board, providing for such Business
Combination; or
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<PAGE> 4
(iv) Approval by the shareholders of the Company of a
complete liquidation or dissolution of the Company.
(h) Code. The Internal Revenue Code of 1986, as amended from
time to time.
(i) Committee. The Compensation Committee of the Board.
(j) Company. Newmont Mining Corporation and any successor
thereto.
(k) Date of Termination. The date on which a Participant
ceases to be an Employee of the Company and its Affiliates.
(l) Disability. A condition such that the Employee has
terminated employment with the Company and/or all participating Employers with a
qualifying disability and has immediately began receiving benefits from a
long-term disability plan of the Company or any participating Employer.
(m) Effective Date. February 1, 1999.
(n) Employee. Any full-time, regular-benefit, non-bargaining
employee of an Employer.
(o) Employer. The Company or any Subsidiary which participates
in the Plan pursuant to Article V hereof or, under the circumstances set forth
in the second sentence of Section 3.1 hereof, any Subsidiary or Affiliate
described in such sentence.
(p) ERISA. The Employee Retirement Income Security Act of
1974, as amended from time to time.
(q) Good Reason. With respect to any Participant, without such
Participant's written consent, (i) the assignment to the Participant of any
duties inconsistent in any respect with the Participant's position (including
status, offices, titles and reporting requirements), authority, duties or
responsibilities immediately before the Change of Control, or any other action
by the Company which results in a significant diminution in such position,
authority, duties or responsibilities, excluding for this purpose an isolated,
insubstantial and inadvertent action not taken in bad faith and which is
remedied by the Company or the Employer promptly after receipt of notice thereof
given by the Participant; (ii) any reduction in the Participant's Annual Salary,
or annual target bonus opportunity, or any material reduction in other
compensation or employee benefits, as in effect during the 120-day period
immediately preceding the Change of Control (or as such amounts may be increased
from time to time), other than as a result of an isolated and inadvertent action
not taken in bad faith and which is remedied by the Company promptly after
receipt of notice thereof given by the Participant; (iii) the Company or the
Employer requiring the Participant to relocate his or her principal place of
-4-
<PAGE> 5
business to a location which is more than 35 miles from his or her previous
principal place of business; (iv) any purported termination of the Plan
otherwise than as expressly permitted by the Plan; or (v) any failure by the
Company to comply with and satisfy Article V of the Plan. For purposes of the
Plan, any good faith determination of "Good Reason" made by the Participant
shall be conclusive.
(r) Participant. An individual who is designated as such
pursuant to Section 3.1.
(s) Plan. The Newmont Mining Corporation Executive Change of
Control Severance Plan.
(t) Separation Benefits. The benefits described in Section 4.2
that are provided to qualifying Participants under the Plan.
(u) Subsidiary. Any corporation in which the Company, directly
or indirectly, holds a majority of the voting power of such corporation's
outstanding shares of capital stock.
(v) Target Annual Bonus. The annual bonus that the Participant
would have received for the year in which his or her Date of Termination occurs,
if the target goals had been achieved.
ARTICLE III
ELIGIBILITY
3.1 Participation. Each of the individuals named on Schedule 1
hereto shall be a Participant in the Plan. Schedule 1 may be amended by the
Chief Executive Officer of the Company from time to time to add individuals as
Participants. If a Participant's employment is transferred from an Employer to a
Subsidiary or Affiliate of the Company which is not a participating Employer
under the Plan, the provisions of the Plan will continue to apply to such
Participant while employed by such Subsidiary or Affiliate.
3.2 Duration of Participation. A Participant shall only cease
to be a Participant in the Plan as a result of an amendment or termination of
the Plan complying with Article VII of the Plan, or when he ceases to be an
Employee of any Employer, unless, at the time he ceases to be an Employee, such
Participant is entitled to payment of a Separation Benefit as provided in the
Plan or there has been an event or occurrence constituting Good Reason that
would enable the Participant to terminate his employment and receive a
Separation Benefit. A Participant entitled to payment of a Separation Benefit or
any other amounts under the Plan shall remain a Participant in the Plan until
the full amount of the Separation Benefit and any other amounts payable under
the Plan have been paid to the Participant.
-5-
<PAGE> 6
ARTICLE IV
SEPARATION BENEFITS
4.1 Terminations of Employment Which Give Rise to Separation
Benefits Under This Plan. A Participant shall be entitled to Separation Benefits
as set forth in Section 4.2 below if, at any time following a Change of Control
and prior to the third anniversary of the Change of Control, the Participant's
Employment is terminated (i) by the Company for any reason other than Cause,
death, or Disability or (ii) by the Participant within 120 days after the
Participant has knowledge of the occurrence of Good Reason.
4.2 Separation Benefits.
(a) If a Participant's employment is terminated in
circumstances entitling such participant to Separation Benefits pursuant to
Section 4.1, the Company shall provide to such Participant, within ten days
following the Date of Termination, a lump sum cash payment as set forth in
subsection (b) below, and shall provide to the Participant the continued
benefits as set forth in subsection (c) below and the outplacement services set
forth in subsection (d) below. For purposes of determining the benefits set
forth in subsections (b) and (c), if the termination of the Participant's
employment is for Good Reason based upon a reduction of the Participant's Annual
Salary, opportunity to earn annual bonuses, or other compensation or employee
benefits, such reduction shall be ignored.
(b) The cash lump sum referred to in Section 4.2(a) shall be
the aggregate of the following amounts:
(i) the sum of (A) the Participant's Annual Salary through
the Date of Termination, (B) the product of (1) the Participant's
Target Annual Bonus and (2) a fraction, the numerator of which is
the number of days in the such year through the Date of
Termination, and the denominator of which is 365, and (C) any
compensation previously deferred by the Participant (together with
any accrued interest or earnings thereon) and any accrued vacation
pay, in each case to the extent not theretofore paid and in full
satisfaction of the rights of the Participant thereto;
(ii) an amount equal to the product of (A) two, times (B)
the sum of (1) the Participant's Annual Salary, (2) the higher of
the Participant's Annual Bonus Amount or the annual bonus paid or
payable, including any bonus or portion thereof which has been
earned but deferred (and annualized for any fiscal year consisting
of less than 12 full months or during which the Participant was
employed for less than 12 full months), for the most recently
completed fiscal year prior to the Participant's Date of
Termination, and (3) the highest employer matching contribution
made to the 401(k) Plan of the Company or any Affiliate, or any
successor or replacement plans, on behalf of the Participant,
during the last three full fiscal years prior to the Change of
Control; and
-6-
<PAGE> 7
(iii) an amount (calculated consistent with the example
set forth on Exhibit A to this Plan) equal to the excess (without
present value discount, as a result of receiving such amount prior
to the end of the three-year period following the Date of
Termination) of (a) the actuarial equivalent of the benefit under
the qualified defined benefit retirement plan of the Company or
any Affiliate in which the Participant participates immediately
prior to the Change of Control, or under any such plan with more
favorable benefits in which the Participant participates
following the Change of Control (the "Retirement Plan"), and any
excess or supplemental retirement plan, program or arrangement of
the Company or any Affiliate in which the Participant
participates immediately prior to the Change of Control or under
any such plans, programs or arrangements with more favorable
benefits in which the Participant participates following the
Change of Control (together, the "SERP") which the Participant
would receive if the Participant's employment continued for three
years after the Date of Termination, assuming for this purpose
that (i) the Participant is fully vested in all benefits to be
calculated under this clause (a), and (ii) the Participant is
treated as having attained three additional years of age under
the Retirement Plan or the SERP, including for purposes of
reducing any otherwise applicable actuarial reduction, but not
for purposes of reducing the number of years of the Participant's
life expectancy, over (b) the actuarial equivalent of the
Participant's actual benefit (paid or payable), if any, under the
Retirement Plan and the SERP as of the Date of Termination. The
actuarial assumptions used for determining actuarial equivalence
in this Section 4.2(b)(iii) shall be no less favorable to the
Participant, than the most favorable of those in effect under the
Company's Retirement Plan and SERP, as the case may be,
immediately prior to the Change of Control or on the Date of
Termination.
(c) During the three-year period following the Participant's
Date of Termination, the Participant and his or her family shall be provided
with medical, dental, disability and life insurance benefits as if the
Participant's employment had not been terminated; provided, that such benefits
and the cost to the Participant shall be no less favorable than under the
programs in which the Participant participated during the 120-day period
immediately prior to the Change of Control); provided, however, that if the
Participant becomes reemployed with another employer and is eligible to receive
medical or other welfare benefits under another employer-provided plan, the
medical and other welfare benefits described herein shall be secondary to those
provided under such other plan during such applicable period of eligibility. For
purposes of determining eligibility (but not the time of commencement of
benefits) of the Participant for retiree medical, dental and life insurance
benefits under the Company's plans, practices, programs and policies, the
Participant shall be considered to have remained employed during the two-year
period following the Date of Termination and to have retired on the last day of
such period. To the extent any benefits described in this Section 4.2(c) cannot
be provided pursuant to the appropriate plan or program maintained for
Employees, the Company shall provide such benefits outside such plan or program
at no additional cost (including without limitation tax cost) to the
Participant.
(d) The Company shall, at its sole expense as incurred,
provide the Participant with outplacement services the scope and provider of
which shall be consistent with the Company's practices during the one-year
period immediately preceding the Change of Control.
-7-
<PAGE> 8
4.3 Other Benefits Payable. To the extent not theretofore paid
or provided, the Company shall timely pay or provide (or cause to be paid or
provided) to a Participant entitled to the Separation Benefits, any other
amounts or benefits required to be paid or provided to the Participant or which
the Participant is eligible to receive under any plan, program, policy or
practice or contract or agreement of the Company and its Affiliates, but
excluding any severance pay or pay in lieu of notice required to be paid to such
Participant under applicable law or any other severance pay plan or policy of
the Company or any Employer.
4.4 Certain Additional Payments by the Company.
(a) Anything in this Plan to the contrary notwithstanding and
except as set forth below, in the event it shall be determined that any payment
or distribution by the Company or its affiliates to or for the benefit of a
Participant (whether paid or payable or distributed or distributable pursuant to
the terms of this Plan or otherwise, but determined without regard to any
additional payments required under this Section 4.4(a)) (a "Payment") would be
subject to the excise tax imposed by Section 4999 of the Code or any interest or
penalties are incurred by the Participant with respect to such excise tax (such
excise tax, together with any such interest and penalties, are hereinafter
collectively referred to as the "Excise Tax"), then the Participant shall be
entitled to receive an additional payment (a "Gross-Up Payment") in an amount
such that after payment by the Participant of all taxes (including any interest
or penalties imposed with respect to such taxes), including, without limitation,
any income taxes (and any interest and penalties imposed with respect thereto)
and Excise Tax imposed upon the Gross-Up Payment, the Participant retains an
amount of the Gross-Up Payment equal to the Excise Tax imposed upon the
Payments. Notwithstanding the foregoing provisions of this Section 4.4(a), if it
shall be determined that the Participant is entitled to a Gross-Up Payment, but
that the Payments do not exceed 110% of the greatest amount (the "Safe Harbor
Amount") that could be paid to the Participant such that the receipt of Payments
would not give rise to any Excise Tax, then no Gross-Up Payment shall be made to
the Participant and the amounts payable under this Plan shall be reduced so that
the Payments, in the aggregate, are reduced to the Safe Harbor Amount. The
reduction of the amounts payable hereunder, if applicable, shall be made by
first reducing the payments under Section 4.2(b)(ii), unless an alternative
method of reduction is elected by the Participant. For purposes of reducing the
Payments to the Safe Harbor Amount, only amounts payable under this Plan (and no
other Payments) shall be reduced. If the reduction of the amount payable under
this Plan would not result in a reduction of the Payments to the Safe Harbor
Amount, no amounts payable under this Plan shall be reduced pursuant to this
Section 4.4(a).
(b) Subject to the provisions of Section 4.4(c), all
determinations required to be made under this Section 4.4, including whether and
when a Gross-Up Payment is required and the amount of such Gross-Up Payment and
the assumptions to be utilized in arriving at such determination, shall be made
by Arthur Andersen LLP (the "Accounting Firm") which shall provide detailed
supporting calculations both to the Company and the Participant within 15
business days of the receipt of notice from the Participant that there has been
a Payment, or such earlier time as is requested by the Company. In the event
that the Accounting Firm is serving as
-8-
<PAGE> 9
accountant or auditor for the individual, entity or group effecting the Change
of Control, the Participant shall appoint another nationally recognized
accounting firm to make the determinations required hereunder (which accounting
firm shall then be referred to as the Accounting Firm hereunder). All fees and
expenses of the Accounting Firm shall be borne solely by the Company. Any
Gross-Up Payment, as determined pursuant to this Section 4.4, shall be paid by
the Company to the Participant within five days of the receipt of the Accounting
Firm's determination. Any determination by the Accounting Firm shall be binding
upon the Company and the Participant. As a result of the uncertainty in the
application of Section 4999 of the Code at the time of the initial determination
by the Accounting Firm hereunder, it is possible that Gross-Up Payments which
will not have been made by the Company should have been made ("Underpayment"),
consistent with the calculations required to be made hereunder. In the event
that the Company exhausts its remedies pursuant to Section 4.4(c) and the
Participant thereafter is required to make a payment of any Excise Tax, the
Accounting Firm shall determine the amount of the Underpayment that has occurred
and any such Underpayment shall be promptly paid by the Company to or for the
benefit of the Participant.
(c) The Participant shall notify the Company in writing of any
claim by the Internal Revenue Service that, if successful, would require the
payment by the Company of the Gross-Up Payment. Such notification shall be given
as soon as practicable but no later than ten business days after the Participant
is informed in writing of such claim and shall apprise the Company of the nature
of such claim and the date on which such claim is requested to be paid. The
Participant shall not pay such claim prior to the expiration of the 30-day
period following the date on which it gives such notice to the Company (or such
shorter period ending on the date that any payment of taxes with respect to such
claim is due). If the Company notifies the Participant in writing prior to the
expiration of such period that it desires to contest such claim, the Participant
shall:
(i) give the Company any information reasonably requested
by the Company relating to such claim,
(ii) take such action in connection with contesting such
claim as the Company shall reasonably request in writing from time to time,
including, without limitation, accepting legal representation with respect to
such claim by an attorney reasonably selected by the Company,
(iii) cooperate with the Company in good faith in order
effectively to contest such claim, and
(iv) permit the Company to participate in any proceedings
relating to such claim;
provided, however, that the Company shall bear and pay directly all costs and
expenses (including additional interest and penalties) incurred in connection
with such contest and shall
-9-
<PAGE> 10
indemnify and hold the Participant harmless, on an after-tax basis, for any
Excise Tax or income tax (including interest and penalties with respect thereto)
imposed as a result of such representation and payment of costs and expenses.
Without limitation on the foregoing provisions of this Section 4.4(c), the
Company shall control all proceedings taken in connection with such contest and,
at its sole option, may pursue or forgo any and all administrative appeals,
proceedings, hearings and conferences with the taxing authority in respect of
such claim and may, at its sole option, either direct the Participant to pay the
tax claimed and sue for a refund or contest the claim in any permissible manner,
and the Participant agrees to prosecute such contest to a determination before
any administrative tribunal, in a court of initial jurisdiction and in one or
more appellate courts, as the Company shall determine; provided, however, that
if the Company directs the Participant to pay such claim and sue for a refund,
the Company shall advance the amount of such payment to the Participant, on an
interest-free basis and shall indemnify and hold the Participant harmless, on an
after-tax basis, from any Excise Tax or income tax (including interest or
penalties with respect thereto) imposed with respect to such advance or with
respect to any imputed income with respect to such advance; and further provided
that any extension of the statute of limitations relating to payment of taxes
for the taxable year of the Participant with respect to which such contested
amount is claimed to be due is limited solely to such contested amount.
Furthermore, the Company's control of the contest shall be limited to issues
with respect to which a Gross-Up Payment would be payable hereunder and the
Participant shall be entitled to settle or contest, as the case may be, any
other issue raised by the Internal Revenue Service or any other taxing
authority.
(d) If, after the receipt by the Participant of an amount
advanced by the Company pursuant to Section 4.4(c), the Participant becomes
entitled to receive any refund with respect to such claim, the Participant shall
(subject to the Company's complying with the requirements of Section 4.4(c))
promptly pay to the Company the amount of such refund (together with any
interest paid or credited thereon after taxes applicable thereto). If, after the
receipt by the Participant of an amount advanced by the Company pursuant to
Section 4.4(c), a determination is made that the Participant shall not be
entitled to any refund with respect to such claim and the Company does not
notify the Participant in writing of its intent to contest such denial of refund
prior to the expiration of 30 days after such determination, then such advance
shall be forgiven and shall not be required to be repaid and the amount of such
advance shall offset, to the extent thereof, the amount of Gross-Up Payment
required to be paid.
ARTICLE V
PARTICIPATING EMPLOYERS
Any Subsidiary of the Company may become a participating
Employer in the Plan following approval by the Company. The provisions of the
Plan shall be fully applicable to the Employees of any such Subsidiary who are
Participants pursuant to Section 3.1.
-10-
<PAGE> 11
ARTICLE VI
SUCCESSOR TO COMPANY
This Plan shall bind any successor of the Company, its assets
or its businesses (whether direct or indirect, by purchase, merger,
consolidation or otherwise), in the same manner and to the same extent that the
Company would be obligated under this Plan if no succession had taken place.
In the case of any transaction in which a successor would not
by the foregoing provision or by operation of law be bound by this Plan, the
Company shall require such successor expressly and unconditionally to assume and
agree to perform the Company's obligations under this Plan, in the same manner
and to the same extent that the Company would be required to perform if no such
succession had taken place. The term "Company," as used in this Plan, shall mean
the Company as hereinbefore defined and any successor or assignee to the
business or assets which by reason hereof becomes bound by this Plan.
ARTICLE VII
DURATION, AMENDMENT AND TERMINATION
7.1 Duration. If a Change of Control has not occurred, this
Plan shall expire five years from the Effective Date, unless extended for an
additional period or periods by resolution adopted by the Board. If a Change of
Control occurs while this Plan is in effect, this Plan shall continue in full
force and effect for at least three years following such Change of Control, and
shall not terminate or expire until after all Participants who become entitled
to any payments hereunder shall have received such payments in full.
7.2 Amendment or Termination. The Board may amend or terminate
this Plan; provided, that this Plan may not be terminated or amended in a manner
adverse to Participants (including modifying the eligibility of Employees to
participate in the Plan) prior to the fifth anniversary of the Effective Date or
during the three-year period following a Change of Control.
7.3 Procedure for Extension, Amendment or Termination. Any
extension, amendment or termination of this Plan by the Board in accordance with
the foregoing shall be made by action of the Board in accordance with the
Company's charter and by-laws and applicable law.
ARTICLE VIII
MISCELLANEOUS
8.1 Full Settlement. The Company's obligation to make the
payments provided for under this Plan and otherwise to perform its obligations
hereunder shall not be affected by any set-off, counterclaim, recoupment,
defense or other claim, right or action which the Company may have against a
Participant or others. In no event shall a Participant be
-11-
<PAGE> 12
obligated to seek other employment or take any other action by way of mitigation
of the amounts payable to the Participant under any of the provisions of this
Plan and such amounts shall not be reduced whether or not the Participant
obtains other employment. The Company agrees to pay as incurred, to the full
extent permitted by law, all legal fees and expenses which a Participant may
reasonably incur as a result of any contest (regardless of the outcome thereof)
by the Company, the Participant or others of the validity or enforceability of,
or liability under, any provision of this Plan or any guarantee of performance
thereof (including as a result of any contest by the Participant about the
amount of any payment pursuant to this Plan), plus in each case interest on any
delayed payment at the applicable Federal rate provided for in Section
7872(f)(2)(A) of the Code.
8.2 Employment Status. This Plan does not constitute a
contract of employment or impose on the Participant or the Participant's
Employer any obligation for the Participant to remain an Employee or change the
status of the Participant's employment or the policies of the Company and its
affiliates regarding termination of employment.
8.3 Confidential Information. Each Participant shall hold in a
fiduciary capacity for the benefit of the Company all secret or confidential
information, knowledge or data relating to the Company or any of its affiliated
companies, and their respective businesses, which shall have been obtained by
the Participant during the Participant's employment by the Company or any of its
affiliated companies and which shall not be or become public knowledge (other
than by acts by the Participant or representatives of the Participant in
violation of this Plan). After termination of a Participant's employment with
the Company, the Participant shall not, without the prior written consent of the
Company or as may otherwise be required by law or legal process, communicate or
divulge any such information, knowledge or data to anyone other than the Company
and those designated by it. In no event shall an asserted violation of the
provisions of this Section 8.3 constitute a basis for deferring or withholding
any amounts otherwise payable under this Plan.
8.4 Named Fiduciary; Administration. The Company is the named
fiduciary of the Plan, and shall administer the Plan, acting through the Plan
Administration Committee.
8.5 Claim Procedure. If an Employee or former Employee makes a
written request alleging a right to receive benefits under this Plan or alleging
a right to receive an adjustment in benefits being paid under the Plan, the
Company shall treat it as a claim for benefit. All claims for benefit under the
Plan shall be sent to the Plan Claims Review Committee of the Company and must
be received within 30 days after termination of employment. If the Company
determines that any individual who has claimed a right to receive benefits, or
different benefits, under the Plan is not entitled to receive all or any part of
the benefits claimed, it will inform the claimant in writing of its
determination and the reasons therefor in terms calculated to be understood by
the claimant. The notice will be sent within 60 days of the claim. The notice
shall make specific reference to the pertinent Plan provisions on which the
denial is based, and describe any additional material or information is
necessary. Such notice shall, in addition,
-12-
<PAGE> 13
inform the claimant what procedure the claimant should follow to take advantage
of the review procedures set forth below in the event the claimant desires to
contest the denial of the claim. The claimant may within 90 days thereafter
submit in writing to the Company a notice that the claimant contests the denial
of his or her claim by the Company and desires a further review. The Plan
Appeals Committee of the Company shall within 60 days thereafter review the
claim and authorize the claimant to appear personally and review pertinent
documents and submit issues and comments relating to the claim to the persons
responsible for making the determination on behalf of the Company. The Company
will render its final decision with specific reasons therefor in writing and
will transmit it to the claimant within 60 days of the written request for
review. If the Company fails to respond to a claim filed in accordance with the
foregoing within 60 days, the Company shall be deemed to have denied the claim.
This Section 8.5 shall not serve to prohibit any Participant from bringing an
action in a court of competent jurisdiction to enforce his or her rights under
the Plan after satisfaction of the foregoing procedures.
8.6 Unfunded Plan Status. This Plan is intended to be an
unfunded plan maintained primarily for the purpose of providing deferred
compensation for a select group of management or highly compensated employees,
within the meaning of Section 401 of ERISA. All payments pursuant to the Plan
shall be made from the general funds of the Company and no special or separate
fund shall be established or other segregation of assets made to assure payment.
No Participant or other person shall have under any circumstances any interest
in any particular property or assets of the Company as a result of participating
in the Plan. Notwithstanding the foregoing, the Company may (but shall not be
obligated to) create one or more grantor trusts, the assets of which are subject
to the claims of the Company's creditors, to assist it in accumulating funds to
pay its obligations under the Plan.
8.7 Validity and Severability. The invalidity or
unenforceability of any provision of the Plan shall not affect the validity or
enforceability of any other provision of the Plan, which shall remain in full
force and effect, and any prohibition or unenforceability in any jurisdiction
shall not invalidate or render unenforceable such provision in any other
jurisdiction.
8.8 Governing Law. The validity, interpretation, construction
and performance of the Plan shall in all respects be governed by the laws of
Colorado, without reference to principles of conflict of law, except to the
extent pre-empted by Federal law.
-13-
<PAGE> 14
Schedule 1
to Section 3.1
NEWMONT MINING CORPORATION
EXECUTIVE CHANGE OF CONTROL SEVERANCE PLAN
Participants
(as of February 1, 1999)
Timothy Acton Paul Lahti
David A. Baker Guy L. Lansdown
Britt D. Banks Brian Levet
D. Scott Barr Thomas P. Mahoney
John Brownlie James Miller
Robert Bush Jack H. Morris
Odin Christensen Richard Ness
Steven A. Conte James Osterkamp
Thomas Conway Richard Perry
Anthony Cost Jean Rendu
Tom Enos Scott Santti
W. Durand Eppler Timothy J. Schmitt
Gary Farmar Lee Shumway
Alan Fitzpatrick Gary Simmons
Patricia Flanagan Craig Smith
Bruce D. Hansen Ali Soltani
Joy E. Hansen Douglas Sparks
William Hart Trent Tempel
Gary Hevelone Michael Thomsen
Don Hullinger James Voorhees
Jeffrey Huspeni Linda K. Wheeler
Donald G. Karras Mark Wood
Leendert Krol
Leland Krugerud
Ihor Kunasz
<PAGE> 15
EXHIBIT A
NEWMONT MINING CORPORATION
EXECUTIVE CHANGE OF CONTROL SEVERANCE PLAN
<TABLE>
<CAPTION>
"Enhanced" "Actual"
Pension Pension
Benefit Benefit
------------ ------------
<S> <C> <C>
1. Final average earnings
(pensionable earnings) $ 350,000 $ 350,000(1)
2. Times 1.75% x .0175 x .0175
------------ ------------
6,125 6,125
3. Social Security offset(2) -0- -0-
4. Net benefit unit 6,125 6,125
5. Times years of
credited service x 15 x 12(3)
------------ ------------
91,875 73,500
6. Early commencement
of pension adjustment(4)
Age 58 55
Factor x 84% x 72%
------------ ------------
7. Early commencement
benefit 77,175 52,920
8. Times life expectancy x 25.658 yrs. x 25.658 yrs.
------------ ------------
9. Lump sum benefit $ 1,980,156 $ 1,357,821
============ ============
10. Benefit payable pursuant
to Section 4.2(b)(iii): $ 1,980,156
( 1,357,821)
-----------
$ 622,335
===========
</TABLE>
- --------
(1) Assumes a separation benefit pursuant to Section 4.2(b)(ii) of $500,000
(excluding any amount attributable to Section 4.2(b)(ii)(3)). Such
amount is includible pursuant to Section 1.25(b)(i) of Newmont Gold
Company's Pension Plan. Divide by "5" for impact on final average
earnings.
(2) Ignored for purposes of this example.
(3) Includes two additional years of deemed service pursuant to Section
1.26(d) of Newmont Gold Company's Pension Plan.
(4) For purposes of this example only, Section 3.7 of Newmont Gold
Company's Pension Plan is ignored.
<PAGE> 1
EXHIBIT 10(o)
NEWMONT MINING CORPORATION
DIRECTORS' STOCK AWARD PLAN
AMENDED AND RESTATED AS OF NOVEMBER 18, 1998
1. PURPOSE. The Directors' Stock Award Plan ("Plan") is intended to (a)
attract and retain highly qualified individuals to serve as directors of Newmont
Mining Corporation (the "Company"), (b) increase non-employee directors' stock
ownership in the Company and (c) align non-employee directors' financial
interests more closely with those of the stockholders of the Company.
2. PARTICIPANTS. Participants in the Plan shall consist of directors of
the Company who are not employees of the Company or any of the Company's
subsidiaries. The term "subsidiary" means a corporation more than 50% of the
voting stock of which is owned directly or indirectly by the Company.
3. (a) SHARE AWARDS. On the date of the Annual Meeting of Stockholders
of the Company (the "Annual Meeting") in each year, commencing in 1999, each
non-employee director of the Company who is elected or re-elected at such Annual
Meeting shall receive, for service as a director of the Company previously
rendered and to be rendered during the year in which such Annual Meeting is
held, shares of Common Stock of the Company (the "Common Stock") in the
Determined Amount. If a person who is not an employee of the Company is elected
a director of the Company in any year after the Annual Meeting held in such
year, then such person shall receive on the effective date of such person's
election as a director of the Company, for service as a director of the Company
to be rendered during the relevant year, shares of Common Stock in the
Determined Amount. The term "Determined Amount" shall mean an amount (rounded
down to the nearest whole share) equal to (a) $25,000 divided by (b) the Fair
Market Value on the applicable Determination Date. The term "Fair Market Value"
of a share of Common Stock as of a given date shall be the average of the high
and low sales prices for a share of Common Stock as reported for New York Stock
Exchange issues in The Wall Street Journal for such date; provided, however,
that if there is no sale of shares of Common Stock reported in The Wall Street
Journal for such date, such fair market value shall be the average between the
bid and asked prices for a share of Common Stock reported in The Wall Street
Journal at the close of trading on such date; provided further, however, that if
no such prices are reported for such day, the most recent day for which such
prices are available shall be used. In the event that the method for determining
the fair market value of a share of Common Stock provided for in the previous
sentence shall not be practicable, then such fair market value shall be
determined by such other reasonable valuation method as the Company shall, in
its reasonable discretion, select and apply in good faith as of the given date.
The term "Determination Date" shall mean (a) in the case of a person who is
elected a director of the Company at an Annual Meeting, the day immediately
preceding the day of such Annual Meeting and (b) in the case of a person who is
elected a director of the Company in any year after the Annual Meeting, the day
immediately preceding the effective date of such person's election as a director
of the Company.
<PAGE> 2
(b) A director may forego any award under the Plan for any year by
giving irrevocable written notice to such effect to the Secretary of the Company
on or before December 31 of the preceding year or, in the case of awards to be
made to a person on the effective date of such person's election as a director
of the Company, on or prior to such effective date. A director shall not be
required to make any payment for any shares of Common Stock issued under the
Plan. Subject to Section 6, a director participant in the Plan shall have full
beneficial ownership of, and rights and privileges of a shareholder as to
awarded shares, including the right to vote and the right to receive dividends.
4. ADJUSTMENTS. If the outstanding Common Stock shall at any time be
changed or exchanged by exchanges of shares, recapitalization, merger,
consolidation or other corporate reorganization in which the Company is the
surviving corporation, the class of shares thereafter to be issued under the
Plan shall be appropriately and equitably adjusted.
5. SHARES ISSUED UNDER PLAN. Common Stock issued under the Plan shall
be newly issued shares.
6. TRANSFER RESTRICTIONS. The shares of Common Stock received by a
participant pursuant to the Plan may not be sold, transferred, pledged, assigned
or otherwise encumbered or disposed of by such participant until the earliest of
(a) the expiration of five years after the date of the receipt of such shares by
such participant, (b) the date such participant ceases to be a director of the
Company by reason of death or disability, or (c) the later of (x) the date such
participant ceases to be a director of the Company for any reason other than
death or disability or (y) the expiration of six months after the date of the
receipt of such shares by such participant; provided, however, a participant (i)
may sell, transfer or assign shares of Common Stock received by such participant
pursuant to the Plan to members of his or her immediate family (as defined
below) sharing the same household ("Immediate Family Members"), or a trust,
partnership, limited liability company, corporation (including a personal
holding company) or similar vehicle established solely for the benefit of, or
the partners, members or shareholders of which are solely, the participant
and/or any such Immediate Family Members (an "Eligible Transferee") or (ii) may
direct the Company, by written notice delivered to the Secretary of the Company
prior to the date of issuance of any shares of Common Stock that such
participant is entitled to receive pursuant to the Plan, to issue such shares in
the name of, and to deliver such shares to, an Eligible Transferee of such
participant, provided that, in the case of clause (i) or (ii), the foregoing
restrictions on transfer shall apply to such Eligible Transferee. The term
"immediate family" shall mean any child, stepchild, grandchild, parent,
stepparent, grandparent, spouse, sibling, mother-in-law, father-in-law,
son-in-law, daughter-in-law, brother-in-law or sister-in-law, and shall include
adoptive relationships. Upon receiving an award of shares of Common Stock
pursuant to the Plan, a participant may be required to represent in writing that
such shares are being acquired for such participant's account for investment and
not with a view to, or for sale in connection with, the distribution of any part
thereof. In addition, the shares of Common Stock received by a participant
pursuant to the Plan may not be sold, transferred, pledged, assigned or
otherwise encumbered or disposed of except pursuant to an available exemption
from the registration requirements of the Securities Act of 1933, as amended.
-2-
<PAGE> 3
Certificates for shares delivered under the Plan may include any legend which
the Company deems appropriate to reflect any or all of the foregoing
restrictions on transfers.
7. GOVERNMENT AND OTHER REGULATIONS. The obligation of the Company to
deliver shares of Common Stock under the Plan shall be subject to all applicable
laws, rules and regulations and such approvals by any governmental agencies or
regulatory authorities as may be required or be deemed necessary or appropriate
by counsel for the Company.
8. NO RIGHT TO CONTINUE AS DIRECTOR. Nothing contained in the Plan
shall be deemed to confer upon any person any right to continue as a director of
or to be associated in any other way with the Company.
9. GOVERNING LAW; AMENDMENTS. The Plan shall be construed in accordance
with the law of the State of Delaware and may be amended or terminated at any
time by action of the Board of Directors of the Company.
-3-
<PAGE> 1
EXHIBIT 10(p)
CERTIFICATE OF OWNERSHIP AND MERGER
MERGING
NGC ACQUISITION CO.
INTO
NEWMONT GOLD COMPANY
* * * * *
NGC Acquisition Co. ("Acquisition Co."), a corporation organized and
existing under the laws of Delaware, DOES HEREBY CERTIFY:
FIRST: That Acquisition Co. was incorporated on the twenty-first day of
September, 1998, pursuant to the General Corporation Law of the State of
Delaware (the "DGCL").
SECOND: That Acquisition Co. owns 93.75% of the outstanding shares of
common stock, par value $0.01 per share of Newmont Gold Company ("NGC"), a
corporation incorporated on the twenty-sixth day of March, 1965, pursuant to the
DGCL and that no other class of capital stock is currently issued and
outstanding.
THIRD: That Acquisition Co., by the following resolutions of its Board
of Directors, duly adopted by unanimous written consent, filed with the minutes
of the Board on the 6th day of October, 1998, determined to and did merge itself
into NGC:
RESOLVED, that Acquisition Co. merge itself into Newmont Gold Company,
a Delaware corporation ("NGC"), and NGC shall assume all of Acquisition
Co.'s obligations (the "Merger"); and it is further
RESOLVED, that NGC shall be the surviving corporation (the "Surviving
Corporation") of the Merger; and it is further
RESOLVED, that the Certificate of Incorporation of NGC as heretofore
amended and as in effect on the date of the Merger shall continue in
full force and effect as the Certificate of Incorporation of the
Surviving Corporation; provided, however, that pursuant to the Merger,
Article FOURTH of the NGC Restated Certificate of Incorporation be
amended
<PAGE> 2
by deleting the current Article FOURTH in its entirety and inserting in
lieu thereof the text set forth on Exhibit A attached hereto; and it is
further
RESOLVED, that on the effective date of the Merger each share of NGC
common stock, par value $0.01 per share ("Common Stock") (other than
shares of Common Stock in NGC's treasury and shares of Common Stock
held by Acquisition Co., which in each case will be cancelled and other
than shares of Common Stock held by stockholders who elect to perfect
their appraisal rights pursuant to the Delaware General Corporation
Law) will be converted into the right to receive 1.025 shares of common
stock, par value $1.60 per share, of Newmont Mining Corporation, a
Delaware corporation, together with related share purchase rights; and
it is further
RESOLVED, that the By-Laws of NGC as they exist on the effective date
of the Merger shall be and remain the By-Laws of the Surviving
Corporation until the same shall be altered, amended or repealed as
therein provided; and it is further
RESOLVED, that each of the officers of NGC as they exist on the
effective date of the Merger shall be and remain officers of the
Surviving Corporation until the next annual meeting of the Surviving
Corporation and/or until his or her respective successor shall have
been duly elected and qualified; and it is further
RESOLVED, that the directors of Acquisition Co. shall be the directors
of the Surviving Corporation on the effective date of the Merger, each
such director holding the same directorship for the term elected and
until his respective successor is duly elected or appointed and
qualified; and it is further
RESOLVED, that upon the merger becoming effective, all property,
rights, privileges, franchises, patents, trademarks, licenses,
registrations and other assets of every kind and description of
Acquisition Co. shall be transferred to, vested in and devolve upon the
Surviving Corporation without further act or deed, and all property,
rights and every other interest of Acquisition Co. shall be as
effectively the property of the Surviving Corporation as they were of
Acquisition Co. and that, from time to time as and when requested by
the Surviving Corporation or by its successors or assigns, Acquisition
Co. shall execute and deliver or cause to be executed and delivered all
such deeds and instruments and to take or cause to be taken such
further or other action as the Surviving Corporation may deem necessary
or desirable in order to vest in and confirm to the Surviving
Corporation title to and possession of any property of Acquisition Co.
acquired or to be acquired by reason of or as a result of the Merger,
and the proper officers and directors of the Surviving Corporation are
fully authorized in the name of Acquisition Co. or otherwise to take
any and all such action; and it is further
RESOLVED, that the Merger shall become effective at 5:00 p.m. on
October 7, 1998; and
RESOLVED, that the Vice President and Secretary of Acquisition Co. be,
and he is, hereby directed to make and execute such documentation as
may be necessary to
-2-
<PAGE> 3
effectuate the Merger, including a Certificate of Ownership and Merger
in the form attached hereto as Annex I (the "Delaware Merger
Certificate"), and to cause the Delaware Merger Certificate to be filed
with the Secretary of State of Delaware and to do all acts and things
whatsoever, whether within or without the State of Delaware, which may
be in any way necessary or proper to effect the Merger; and it is
further
RESOLVED, that each officer of Acquisition Co. be, and each is,
authorized, in the name and on behalf of Acquisition Co., to take all
such other actions, including executing and delivering such agreements,
documents, certificates, instruments and filings as may be necessary or
appropriate (such necessity or appropriateness to be conclusively
evidenced by the execution and delivery thereof), to effectuate or
carry out the purposes and intent of the foregoing resolutions and for
the performance of Acquisition Co.'s obligations under the Delaware
Merger Certificate and otherwise to consummate the transactions
contemplated by the Delaware Merger Certificate; and it is further
RESOLVED, that all actions and deeds heretofore taken by any officer of
Acquisition Co. in connection with the transactions contemplated by the
Delaware Merger Certificate or any of the other transactions
contemplated by these resolutions are hereby approved, ratified and
confirmed in all respects.
FOURTH: That the Merger was approved by the written consent of the sole
stockholder of Acquisition Co. on October 6, 1998.
FIFTH: Anything herein or elsewhere to the contrary notwithstanding,
this merger may be amended or terminated and abandoned by the Board of Directors
of Acquisition Co. at any time prior to the effective time and date of the
Merger.
-3-
<PAGE> 4
IN WITNESS WHEREOF, Acquisition Co. has caused this Certificate to be
signed by Timothy J. Schmitt, its Vice President and Secretary, as of the 6th
day of October, 1998.
By /s/ TIMOTHY J. SCHMITT
-------------------------------------
Name: Timothy J. Schmitt
Title: Vice President and Secretary
-4-
<PAGE> 5
EXHIBIT A
"FOURTH: The total number of shares of all classes of stock
which the Company shall have authority to issue is One
Thousand (1,000) shares of which all shall be Common Stock of
the par value of One Cent ($0.01) per share."
<PAGE> 1
EXHIBIT 12
COMPUTATION OF RATIO OF EARNINGS TO COMBINED FIXED CHARGES
(AMOUNTS IN THOUSANDS EXCEPT RATIOS)
(UNAUDITED)
<TABLE>
<CAPTION>
Year Ended December 31,
---------------------------------------------------------------------------
1998 1997 1996 1995 1994
------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
Earnings:
Income (loss) before income taxes
and cumulative effect of changes
in accounting principles $ (541,335) $ 60,477 $ 82,652 $ 177,666 $ 115,755
Adjustments:
Net interest expense (1) 78,823 77,067 58,619 47,099 18,588
Amortization of capitalized
interest 4,434 3,221 2,359 2,594 2,299
Portion of rental expense
representative of interest 3,373 2,714 3,428 2,834 1,581
Minority interest of majority-
owned subsidiaries that have
fixed charges 70,286 71,438 6,584 9,864 8,298
Undistributed income of
less-than-50%-owned entities -- -- (18,359) (7,027) (15,549)
------------ ------------ ------------ ------------ ------------
$ (384,419) $ 214,917 $ 135,283 $ 233,030 $ 130,972
============ ============ ============ ============ ============
Fixed Charges
Net interest expense (1) $ 78,823 $ 77,067 $ 58,619 $ 47,099 $ 18,588
Capitalized interest 13,720 15,604 16,571 14,043 19,982
Portion of rental expense
representative of interest 3,373 2,714 3,428 2,834 1,581
------------ ------------ ------------ ------------ ------------
$ 95,916 $ 95,385 $ 78,618 $ 63,976 $ 40,151
============ ============ ============ ============ ============
Ratio of Earnings to Fixed Charges (4.0) 2.3 1.7 3.6 3.3
============ ============ ============ ============ ============
</TABLE>
(1) Includes interest expense of majority-owned subsidiaries and amortization
of debt issuance costs.
<PAGE> 1
EXHIBIT 13
NEWMONT MINING CORPORATION
MANAGEMENTS DISCUSSION AND ANALYSIS
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 the
consolidated financial statements and accompanying notes (Notes).
As described in Note 1, (i) on October 7, 1998, NMC acquired the minority
interest of Newmont Gold Company (NGC) and NGC became 100%-owned by NMC, (ii) in
May 1997, NMC acquired Santa Fe Pacific Gold Corporation (Santa Fe) and (iii) in
February 1997, Newmonts interest in Minera Yanacocha increased to 51.35%.
Newmonts consolidated financial statements included Minera Yanacocha beginning
in 1997 (previously accounted for on an equity basis) and were restated for
periods prior to 1997 to reflect the Santa Fe merger as a pooling of interests.
SUMMARY
Newmont recorded a net loss of $393.4 million ($2.47 per share) in 1998 compared
with net income of $68.4 million ($0.44 per share) in 1997. Results for 1998
included, after tax and minority interest:
o $424.7 million ($2.67 per share) for the write-down of assets impaired at a
low gold price,
o $32.9 million ($0.21 per share) for the cumulative effect of an accounting
change for start-up costs and
o $5.0 million ($0.03 per share) for the current-year effect of this
accounting change.
In 1997, net income, after tax and minority interest, included $112.3
million ($0.72 per share) for expenses and write-offs associated with the Santa
Fe merger and $14.4 million ($0.09 per share) from a gain on closing certain
Santa Fe option contracts.
Excluding these items, Newmont earned $69.2 million ($0.44 per share) in
1998 and $166.3 million ($1.07 per share) in 1997, compared with earnings of
$98.6 million ($0.63 per share) in 1996. Gold sales revenue declined $118.9
million in 1998 to $1.45 billion, but was $348.2 million higher than in 1996.
The past two years have been characterized by rising production and an
extensive effort by Newmont to reduce costs, optimize operations and defer
discretionary spending in order to maximize cash flow in response to declining
gold prices. The gold price fell to a 20-year low of $273 an ounce in August
1998 and since has recovered only modestly. As a largely unhedged company,
Newmonts realized gold price closely tracks the spot price for the commodity.
Newmonts average realized gold price was $310, $354 and $395 per equity ounce in
1998, 1997 and 1996, respectively.
Since 1996, total cash costs of production were pared $35 ($4 in 1998) to
$183 an ounce. Exploration and research expense was reduced $13 to $17 an ounce
(an $8 reduction in 1998) and General and administrative expense was cut $9 to
$12 an ounce (a $5 reduction in 1998). As a result, cash flow from operating
activities increased to $373.5 million in 1998 from $283.8 million in 1997 and
$207.6 million in 1996.
Total equity gold production in 1998 increased to 4.07 million ounces from
3.10 million ounces in 1996. Of the nearly one million ounce increase since
1996, approximately 55% came from overseas operations, primarily in Peru and
Indonesia, while North American operations accounted for 45%. Over the next two
years, total equity production is expected to be between 3.8 million and 4.0
million ounces at a total cash cost per ounce of under $190.
Gold reserves at December 31, 1998 totaled 52.6 million equity ounces,
essentially unchanged from December 31, 1997. Reserve calculations for both
years were based on a long-term price of $350 per ounce. Using long-term gold
prices of $325 and $300 per ounce could lower reserves approximately 6% and 16%,
respectively.
MARKET CONDITIONS AND RISKS
GOLD PRICE AND ASSET IMPAIRMENT
Changes in the market price of gold significantly affect Newmonts
profitability. 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. The decline in
the gold price has 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. These and other factors
could continue to adversely affect market gold prices.
Revenue, earnings and cash flow are highly leveraged to the gold price.
Based on estimates of 1999 production and expenses, a $10 per ounce change in
the gold price would result in an increase or decrease of approximately $38
million in cash flow from operations and approximately $28 million (about $0.16
per share) in net income.
10
<PAGE> 2
NEWMONT MINING CORPORATION
MANAGEMENTS DISCUSSION AND ANALYSIS
Newmont generally sells its production at market prices, but has entered
into a forward sales contract for 125,000 ounces per year from its Minahasa mine
in Indonesia at an average price of $454 per ounce through December 2000.
Additionally, through September 1998 approximately 614,000 ounces from former
Santa Fe mines were sold under spot deferred forward contracts at an average
price of $423 per ounce. In 1997, Newmont entered into forward purchase
contracts at an average price of $331 per ounce, offsetting the remaining Santa
Fe spot deferred contracts. The net gain from these contracts was recognized in
sales revenue as the related gold was delivered in 1997 and 1998.
As a result of the prolonged period of low gold prices, Newmont reviewed
its long-lived assets during the fourth quarter of 1998 to determine whether
their carrying values were recoverable from projected future cash flows. As
discussed in Note 14, a $424.7 million after-tax write-down resulted with
respect to Newmonts U.S. operations, primarily former Santa Fe properties in
Nevada. Assumptions underlying projected future cash flows are subject to risks
and uncertainties. Any differences between significant assumptions and actual
market conditions and/or Newmonts performance could have a material effect on
Newmonts financial position and results of operations.
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 and reviewed life-of-mine plans and
processing options for optimization and flexibility. Further cost reduction
measures are planned for 1999 such that 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
copper/gold project in Indonesia.
FOREIGN CURRENCY
In addition to the U.S., Newmont operates mines 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
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.
Over the past two years, Indonesia has experienced a significant
devaluation of its currency, the rupiah. The functional currency for Newmonts
Indonesian projects is the U.S. dollar; however, certain receivables, primarily
refunds of Value Added Tax, are rupiah-denominated. During 1998 and 1997, $0.9
million and $3.3 million, respectively, were expensed for devaluation of these
receivables. Newmonts Minahasa operation and Batu Hijau project are in remote
locations and have been largely unaffected by social problems caused by the
economic and political situation in Indonesia.
INTEREST RATES
At December 31, 1998, Newmonts long-term debt of $1,248.7 million included
$415.4 million of variable-rate debt with an average interest rate of 6.08%, and
fixed-rate debt of $833.3 million, with an average interest rate of 7.48% and an
estimated fair value of $840.7 million. Newmonts public debt has received
investment-grade ratings from both Moodys Investors Service and Standard & Poors
Ratings Services.
RESULTS OF OPERATIONS
PRODUCTION
Increased capacities at Minera Yanacocha in Peru and at Minahasa in Indonesia,
as well as expanded refractory ore processing facilities in Nevada, have led to
growing production in recent years. This, coupled with cost-reduction efforts
and processing higher-grade ore with improved recovery rates, has generally
lowered cash costs per equity ounce.
<TABLE>
<CAPTION>
Equity Production Ozs. (000) Total Cash Cost Per Equity Oz.
-------------------------------------------------------------------
1998 1997 1996 1998 1997 1996
------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C>
Nevada operations 2,769.6 2,776.5 2,328.3 $ 209 $ 205 $ 232
Mesquite, California 154.0 227.9 191.6 176 213 245
La Herradura, Mexico 12.9 -- -- 115 -- --
Minera Yanacocha, Peru* 685.9 530.9 308.3 95 87 100
Zarafshan-Newmont, Uzbekistan 187.3 215.0 163.2 207 201 224
Minahasa, Indonesia 261.0 206.5 112.7 127 156 222
------- ------- ------- ------- ------- -------
Total/Weighted average 4,070.7 3,956.8 3,104.1 $ 183 $ 187 $ 218
======= ======= ======= ======= ======= =======
</TABLE>
*51.35% beginning February 1997, 38% in 1996
11
<PAGE> 3
NEWMONT MINING CORPORATION
MANAGEMENTS DISCUSSION AND ANALYSIS
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
Newmonts Nevada operations (along the Carlin Trend near Elko and in the
Winnemucca Region, where Twin Creeks and the Lone Tree Complex are located)
include production from 17 open-pit and four underground mines. Oxide ores are
processed by milling or heap leaching, depending upon ore grade. The Carlin
roaster and Winnemucca Region autoclaves process higher-grade refractory ores.
The Lone Tree flotation plant and Carlin demonstration bio-oxidation facility
process lower-grade refractory ores.
Nevada production of 2.77 million ounces in 1998 was essentially unchanged
from 1997, but up substantially from 1996. Positively affecting this trend was
the start-up of operations at (a) the Twin Creeks autoclaves in the second half
of 1997, (b) the Lone Tree flotation plant in March 1997 and (c) the 50%-owned
Rosebud mine in February 1997. Higher ore grades and recovery rates and,
following the Santa Fe merger, the transfer of selected ore types to the optimal
process facility also enhanced production and lowered costs in 1997 and 1998.
However, declining availability of oxide ores and a decision to reduce mining
levels in the second half of 1998, were partially offsetting factors. Refractory
ore treatment facilities generated 42% of Nevadas production in 1998, increasing
from 35% and 30% in 1997 and 1996, respectively. Cash costs per ounce, which
declined with the rise in production in 1997, increased slightly in 1998 as cost
reduction efforts nearly offset higher costs associated with refractory ore
processing.
During 1998, mining was reduced 26% to 274 million tons with cutbacks at
high-cost pits and mines with high waste-to-ore ratios, and processing was
optimized to maximize cash flow. The Nevada workforce was pared by 950
employees. Cost reduction efforts will continue in 1999, as mining rates are
expected to drop another 25% and certain processing facilities will operate on a
periodic basis. Gold from refractory ores will comprise approximately 56% of
Nevadas 1999 production. While production will be curtailed by approximately
15%, total cash costs per ounce are expected to increase only slightly.
In early 1999, Newmont and Barrick Gold Corporation signed an agreement in
principle to exchange approximately two million ounces of reserves and various
land rights on the north Carlin Trend. This exchange will create operational and
exploration synergies for both companies by consolidating their respective land
positions. The transaction is expected to close by the end of the first quarter
of 1999. Among other benefits, the exchange will accelerate Newmonts access to
the high-grade Deep Post deposit and reduce future development costs.
Production at the Mesquite mine, a heap-leach operation in southern
California, decreased 32% to 154,000 ounces in 1998 as mining rates and the
workforce were reduced to improve cash flow and facilitate an orderly phase-out
of operations. Mesquite is reaching the end of its economic life; however,
results of development drilling on a recently-acquired adjacent property led to
gold reserve additions in 1998 and may extend the mine life. Total cash costs
per ounce declined 17% from 1997. Production is expected to increase to about
180,000 ounces in 1999, with somewhat higher ore tons and grades. Total cash
costs per ounce will increase slightly.
In the third quarter of 1998, production commenced at La Herradura, a
44%-owned joint venture with Minera Peoles, S.A. de C.V., the operator of the
heap-leach operation located in Sonora, Mexico. During 1998, production totaled
29,200 ounces (12,900 equity ounces) at a total cash cost of $115 per equity
ounce. Production for 1999 is expected to approximate 90,000 ounces (40,000
equity ounces).
OVERSEAS OPERATIONS
Minera Yanacocha in Peru achieved record production of 1.34 million ounces
(685,900 equity ounces) in 1998, 27% higher than the prior year with the
completion of an additional mine and facilities in late 1997 and improved
recovery rates. Newmonts equity share of 1997 production was 72% higher than in
1996, primarily reflecting Newmonts increased ownership. Production in 1999 is
expected to reach 1.45 million ounces (745,000 equity ounces). Total cash costs
are comparatively low at Minera Yanacocha because of low waste-to-ore ratios and
porous ore that yields high gold recovery without crushing prior to heap
leaching. After declining with rising production in 1997, total cash costs rose
slightly in 1998 to $95 an ounce because of longer haul distances. Higher
waste-to-ore ratios and lower ore grades will cause a minimal increase in costs
in 1999.
As described in Note 4, Newmont acquired an additional 13.35% interest in
Minera Yanacocha in 1997. The acquisition was contested, but resolved in
Newmonts favor in 1998 with a decision of the Peruvian Supreme Court. In spite
of this final decision, a former partner filed a request for arbitration against
the Republic of Peru, alleging that it had been deprived
12
<PAGE> 4
NEWMONT MINING CORPORATION
MANAGEMENTS DISCUSSION AND ANALYSIS
of its shares in Minera Yanacocha. While Newmont is not a party to the
arbitration and believes that the claims are unfounded, it is unclear what
effect, if any, the arbitration might have on the company.
The Zarafshan-Newmont Joint Venture, in the Central Asian Republic of
Uzbekistan, is a 50/50 joint venture between Newmont and two Uzbekistan
governmental entities. Zarafshan-Newmont produces gold by crushing and heap
leaching low-grade oxide ore from existing stockpiles at the government-owned
Muruntau mine. After reaching design capacity of 430,000 ounces (215,000 equity
ounces) in 1997, lower recovery rates in 1998 caused a drop in production to
374,600 ounces (187,300 equity ounces). However, cash costs per ounce increased
only nominally. Recovery rates improved in December 1998 following operational
and metallurgical changes, and 1999 production is expected to increase to
400,000 ounces (200,000 equity ounces) with an approximate 5% reduction in cash
costs per equity ounce.
In Indonesia, production began in 1996 at the Minahasa property, where
Newmont has an 80% interest, but receives 100% of the gold production until
recouping the bulk of its investment, including interest. Production of 261,000
ounces at a total cash cost of $127 per ounce in 1998 reflected a significant
increase in processed ore grades following the addition of a mercury scrubber in
late 1997. The devaluation of the rupiah and reduced mining rates also
contributed to lower operating costs. Production in 1999 will increase to
approximately 300,000 ounces with the commencement of heap-leach operations for
low-grade oxide ore. No material change in cash costs is anticipated.
FINANCIAL RESULTS
Consolidated sales include 100% of Minera Yanacocha production, except in 1996,
and Newmonts equity production elsewhere. Variances in sales revenue are
illustrated in the following table:
<TABLE>
<CAPTION>
1998 1997 1996
---------- ---------- ----------
<S> <C> <C> <C>
Consolidated sales
(in millions) $ 1,453.9 $ 1,572.8 $ 1,105.7
Consolidated production
ozs. (000) 4,720.6 4,478.7 2,790.1
Average price received
per ounce $ 308 $ 351 $ 396
Average market price
per ounce $ 294 $ 331 $ 388
========== ========== ==========
</TABLE>
<TABLE>
<CAPTION>
1998 vs. 1997 1997 vs. 1996
------------- -------------
<S> <C> <C>
Increase (decrease) in consolidated
sales due to (in millions):
Consolidated production* $ 72.7 $ 251.1
Average gold price received (191.6) (128.3)
Consolidation of
Minera Yanacocha N/A 344.3
------------ ------------
Total $ (118.9) $ 467.1
============ ============
</TABLE>
*Excluding Minera Yanacocha in 1996
Realized gold prices higher than average market gold prices resulted from
sales under commodity hedging instruments of 18% of equity production in 1998
and 30% in each of 1997 and 1996.
Dividends, interest and other for 1998, 1997 and 1996 included $8.3
million, $6.5 million and $3.1 million, respectively, for recoveries from
business interruption insurance related to processing facilities in Nevada. 1997
also included gains from closing certain put and call option contracts ($23.7
million) and from a property disposition ($5.1 million). Interest income
declined to $7.8 million in 1998 from $14.6 million in 1997 reflecting lower
interest rates and cash balances.
13
<PAGE> 5
NEWMONT MINING CORPORATION
MANAGEMENTS DISCUSSION AND ANALYSIS
Costs applicable to sales include total cash costs and provisions for
estimated final reclamation expenses related to consolidated production. The
increase in Costs applicable to sales in 1998 from 1997 primarily related to
higher production levels at Minera Yanacocha, partially offset by cost-reduction
efforts at all locations.
<TABLE>
<CAPTION>
1998 1997 1996
--------- --------- ---------
<S> <C> <C> <C>
Costs applicable to sales
(in millions):
Nevada operations $ 586.2 $ 565.8 $ 544.1
Mesquite 27.9 49.4 47.5
La Herradura 1.5 -- --
Minera Yanacocha 136.5 98.9 --
Zarafshan-Newmont 39.0 43.8 36.9
Minahasa 33.8 32.6 23.8
--------- --------- ---------
Total $ 824.9 $ 790.5 $ 652.3
========= ========= =========
</TABLE>
Certain mining costs associated with deposits that have diverse grade and
waste-to-ore ratios over the mine life are capitalized. In 1998, 1997 and 1996,
such costs were capitalized for certain deposits at the Nevada operations ($29.5
million, $66.5 million and $130.4 million, respectively) and at Minahasa ($3.6
million, $8.4 million and $6.1 million, respectively). These costs are charged
to operating expenses as the related gold is sold. Reduced mining rates led to
lower capitalized mining costs in 1998. Capitalized mining costs also declined
in 1997 with lower mining rates following a pit wall failure at Nevadas Post
deposit. Capitalized mining costs are expected to increase approximately 15% in
1999 as mining at the Post deposit resumes.
Depreciation, depletion and amortization (DD&A) increased 9% in 1998 and
30% in 1997 from each prior year. The addition of mine and leach facilities as
well as higher production at Minera Yanacocha caused the 1998 increase, while
the consolidation of Minera Yanacocha, completion of Nevadas mine and mill
expansion projects and a full year of Minahasa operations accounted for the 1997
increase.
<TABLE>
<CAPTION>
1998 1997 1996
--------- --------- ---------
<S> <C> <C> <C>
Depreciation, depletion and amortization
(in millions):
Nevada operations $ 172.6 $ 168.9 $ 157.2
Mesquite 19.1 23.5 27.2
La Herradura 0.6 -- --
Minera Yanacocha 59.6 41.7 --
Zarafshan-Newmont 11.3 11.9 10.8
Minahasa 20.1 18.3 8.7
Other 5.8 1.5 0.2
--------- --------- ---------
Total $ 289.1 $ 265.8 $ 204.1
========= ========= =========
</TABLE>
In 1999, an approximate $50 million reduction in DD&A will result
primarily from the 1998 asset write-down.
Because of the decline in gold prices, Newmont reduced 1998 Exploration
and research and General and administrative expenses 31% and 25%, respectively,
from 1997. In 1999, these combined expenses are targeted to be approximately $15
million to $20 million lower than in 1998.
Interest expense, net of amounts capitalized was $78.8 million, $77.1
million and $58.6 million in 1998, 1997 and 1996, respectively. The 1997
increase from 1996 reflected higher debt balances following the consolidation of
Minera Yanacochas $100 million financing obtained during 1997 and credit
facility borrowings for expansion projects. Net interest expense for 1999 is
expected to be comparable to 1998.
Write-down of assets totaled $614.9 million ($424.7 million net of tax) in
1998 and related to Property, plant and mine development ($528 million),
Inventories ($80 million) and Other long-term assets ($7 million). Nevada
operations, primarily at Santa Fe properties, accounted for $587.6 million,
certain Santa Fe exploration properties, $13.4 million and other investments,
$13.9 million (including $7.2 million at the Mesquite mine in California). In
1997, Nevada stockpile inventories were written-down $9.5 million.
Merger and related expenses in 1997 of $162.7 million ($112.3 million net
of tax and minority interest) consisted of $135.4 million for transaction costs
and $27.3 million for write-offs associated with the Santa Fe merger.
Other expenses included $10.0 million and $8.7 million for severance costs
associated with workforce reductions in 1997 and 1996, respectively, and $4.8
million, $5.0 million and $6.6 million in 1998, 1997 and 1996, respectively, for
environmental obligations associated with former mining activities.
In 1998, the $180.9 million income tax benefit was primarily attributable
to the asset write-down. The 1997 tax benefit ($7.9 million) reflected the
consolidation of Minera Yanacocha, synergies from the Santa Fe merger and
refunds from settling prior-year tax audits. The 1996 benefit ($15.9 million)
included foreign tax credits associated with Minera Yanacocha and benefits from
resolving prior-year tax issues.
14
<PAGE> 6
NEWMONT MINING CORPORATION
MANAGEMENTS DISCUSSION AND ANALYSIS
Effective January 1, 1998, Newmont adopted the American Institute of
Certified Public Accountants Statement of Position 98-5 requiring that certain
start-up costs be expensed rather than capitalized. As discussed in Note 17,
such costs incurred and capitalized prior to January 1, 1998 were expensed. The
cumulative effect of the accounting change was $32.9 million, net of tax and
minority interest, and included approximately $18 million for the Batu Hijau
project and $11 million for Nevada operations. During 1998, substantially all
start-up costs were related to Batu Hijau (reflected in Equity loss of
affiliated companies).
LIQUIDITY AND CAPITAL RESOURCES
During 1998, cash flow from operating activities of $373.5 million and
draw-downs of existing cash balances of $67.1 million funded capital
expenditures ($216.0 million), net advances to joint ventures and affiliates
($131.0 million), payment for the acquisition of an additional interest in
Minera Yanacocha ($75.9 million) and dividends ($19.1 million). Newmont plans to
use cash on hand at December 31, 1998 of $79.1 million and operating cash flow
to fund 1999 capital expenditures, advances to affiliates and dividends.
Consolidated debt reduction is also planned in 1999, assuming comparable or
higher gold price realizations.
INVESTING ACTIVITIES AND CAPITAL EXPENDITURES
BATU HIJAU
As discussed in Note 3, Newmont has a 45% interest in the Batu Hijau project in
Indonesia. At December 31, 1998 and 1997, Newmonts investment in Batu Hijau was
$277.2 million and $76.9 million, respectively. The project was 72% complete at
year-end 1998 and is on schedule for start-up in the fourth quarter of 1999.
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 approximate $1.9 billion.
During 1998, Newmont advanced project funding of $130.8 million (reflected
in Advances to joint ventures and affiliates) and expects to fund approximately
$150 million in 1999. Financing facilities for $1.0 billion are guaranteed by
Newmont and its partner, Sumitomo Corporation(Sumitomo), 56.25% and 43.75%,
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). The lenders carry all political risk coverage on
their investment from inception of the project. Debt repayments will begin the
earlier of six months after project completion or June 15, 2001. The financing
facilities provided $640 million in 1998, with the remaining balance to be drawn
in 1999.
Capital Expenditures
As part of Newmonts strategic focus on maximizing cash flow, coupled with the
completion in 1997 of several Nevada expansion projects, 1998 capital
expenditures were reduced $199.1 million from 1997.
<TABLE>
<CAPTION>
1998 1997 1996
--------- --------- ---------
<S> <C> <C> <C>
Capital expenditures (in millions):
Nevada operations $ 95.6 $ 231.0 $ 450.8
Minera Yanacocha 82.5 113.7 --
Minahasa 6.4 24.2 27.4
Mesquite 6.7 18.8 3.6
Zarafshan-Newmont 0.9 5.6 7.3
La Herradura 9.7 -- --
Batu Hijau -- -- 15.1
Other projects and
capitalized interest 14.2 21.8 43.6
--------- --------- ---------
Total $ 216.0 $ 415.1 $ 547.8
========= ========= =========
</TABLE>
During 1998, capital expenditures in Nevada included capitalized mining
costs ($29.5 million), refractory leach pads ($22.0 million), process equipment
($14.6 million) and other ongoing capital requirements. Minera Yanacochas
expenditures included $47.8 million for mine/facility expansion and $16.4
million for development drilling.
In 1997, Nevadas expenditures for completion of the Winnemucca Region Sage
Mill and other processing equipment totaled $90.3 million, capitalized mining
costs, $66.5 million, mining and de-watering equipment, $22.9 million, deferred
mine development, $22.5 million and refractory leach pads, $10.9 million. At
Minera Yanacocha expenditures included mine and facility expansion ($78.4
million) and development drilling ($14.0 million). In 1996, capital expenditures
included $296.8 million in the Winnemucca Region, primarily for expansion
projects and $130.4 million for capitalized mining costs.
15
<PAGE> 7
NEWMONT MINING CORPORATION
MANAGEMENTS DISCUSSION AND ANALYSIS
Capital spending in 1999 is expected to be approximately $175 million,
including $75 million at Minera Yanacocha (primarily for leach pad expansion and
mine geology work at the La Quinua deposit); $55 million in Nevada (primarily
for capitalized mining costs); $23 million in capitalized interest (primarily
for Batu Hijau); $12 million at Minahasa (including $6 million for construction
of leach facilities); and $5 million at Zarafshan-Newmont.
FINANCING ACTIVITIES
Newmont has a $1.0 billion revolving credit facility with a consortium of banks
that expires in June 2002. At December 31, 1998, $385 million was outstanding
under this facility. The interest rate is variable and was 5.8% at December 31,
1998. Of the $615 million available under this facility, an estimated $515
million could be utilized, if necessary, given current loan covenant compliance
requirements; however, Newmont does not anticipate additional borrowing under
this facility.
Scheduled minimum long-term debt repayments are $47.6 million in 1999.
Newmont expects to fund maturities of its debt through operating cash flow
and/or by refinancing the debt as it becomes due.
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. The merger was accounted for at historic
cost, with the exception of the minority interest, which was accounted for using
purchase accounting. The excess purchase price over NMCs carrying value of its
minority interest (approximately $207 million) was allocated to assets and
liabilities of NGC (primarily to Investment in Batu Hijau and to Minera
Yanacocha Property, plant and mine development) and stockholders equity
increased $259 million.
Cash used for accounts payable and accrued expenses of $51.9 million in
1998 included payments for interest, severance and other benefit-related
accruals.
ENVIRONMENTAL
Included in 1998 capital expenditures was approximately $5 million required to
comply with environmental regulations. Expenditures of $4 million are
anticipated in 1999. Ongoing costs to comply with environmental regulations have
not been a significant component of Newmonts cash operating costs. Estimated
future reclamation and remediation costs relating to currently producing mines
are accrued over each mine life and at December 31, 1998, $56.0 million had been
accrued.
Newmont spent $10.9 million, $13.0 million and $14.8 million in 1998, 1997
and 1996, respectively, for environmental obligations related to former mining
sites discussed in Note 18, and expects to spend approximately $9 million in
1999. At December 31, 1998, $44.9 million was accrued for total estimated future
costs associated with such obligations. During 1997, approximately $10 million,
net of related expenses, was received pursuant to settlements with several
insurance companies for remediation expenses at certain former mining sites.
These proceeds were applied against the charges for changes in estimated future
costs. Because of the uncertain nature of these liabilities, Newmont estimates
that it is reasonably possible that the ultimate liability may be as much as 70%
greater or 15% lower than the amount accrued at December 31, 1998. Environmental
obligations are continuously monitored and reviewed and, although Newmont
believes that its reserves are adequate, as additional facts become known
further provisions may be required.
YEAR 2000 READINESS DISCLOSURE
Newmont has undertaken a comprehensive Year 2000 Readiness Program (Program) to
address its year 2000 issues, which generally refer to the ability of hardware,
software and control systems to correctly identify two-digit references to
specific years, beginning with the year 2000. The Program, conducted by
a cross-functional employee group and outside consultants, consists of four work
streams at each geographic location, including automated processes, process
control systems (including embedded technology such as microprocessors),
personal computers and third-party material suppliers and contractors. Within
each work stream there are five phases consisting of assessment; analysis;
remediation (including development of contingency plans); testing; and
certification. A third party audit of the Program was completed in 1998 with
favorable findings and Newmont has incorporated resulting recommendations that
further strengthen its Program. Year 2000 readiness for all material systems is
on schedule for mid-1999 completion.
Each location has completed the assessment and analysis phases of each
work stream. As of the end of January 1999, the remediation phase was
approximately 70% complete and the testing and certification phases were
approximately 50% and 40% complete, respectively. Based on results from the
assessment and analysis phases, the estimated cost of the Program is expected to
total approximately $5 million, of which $1.6 million had been spent as of
January 31, 1999. Newmont does not separately track its internal costs
16
<PAGE> 8
NEWMONT MINING CORPORATION
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
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 Newmonts ability to generate cash from its operations.
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 Newmonts financial
condition or results of operations.
SAFE HARBOR STATEMENT
The foregoing discussion and analysis, as well as certain information contained
elsewhere in this Annual Report, contain forward-looking statements within the
meaning of Section 21E of the Securities Exchange Act of 1934, as amended. These
statements concerning future operations or events are subject to important
risks, uncertainties and other factors that could cause actual results to differ
materially. Forward-looking statements involve certain factors that are subject
to change including, but not limited to, the price of gold and copper; interest
and currency exchange rates; geological and metallurgical assumptions; operating
performance of equipment, processes and facilities; labor relations; timing of
receipt of necessary governmental permits or approvals; weather and other acts
of God; domestic and foreign laws or regulations, particularly relating to the
environment and mining; domestic and international economic and political
conditions; the ability of joint venture partners to meet their obligations; the
ability of Newmont to obtain or maintain necessary financing; and other risks
and hazards associated with mining operations. More detailed information
regarding Newmont, its operations and factors that could materially affect its
financial position and results of operations are included in NMCs Annual Report
on Form 10-K as well as other filings with the Securities and Exchange
Commission. Many of these factors are beyond Newmonts ability to control or
predict. Readers are cautioned not to put undue reliance on forward-looking
statements. Newmont disclaims any intent or obligation to update publicly any
forward-looking statements set forth herein, whether as a result of new
information, future events or otherwise.
To Newmont Mining Corporation:
We have audited the accompanying consolidated balance sheets of Newmont Mining
Corporation (a Delaware corporation) and subsidiaries (the Company) as of
December 31, 1998 and 1997, and the related consolidated statements of
operations, changes in stockholders equity and cash flows for each of the three
years in the period ended December 31, 1998. 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 did not audit the
financial statements of Santa Fe Pacific Gold Corporation in 1996, a company
merged into the Company during 1997 in a transaction accounted for as a pooling
of interests, as discussed in Note 1. Such statements are included in the
consolidated financial statements of the Company and reflect 30 percent of total
consolidated revenues in 1996, after restatement to reflect certain adjustments
as set forth in Note 1. The financial statements of Santa Fe Pacific Gold
Corporation prior to those adjustments were audited by other auditors whose
report has been furnished to us and our opinion, insofar as it relates to
amounts included for Santa Fe Pacific Gold Corporation, is based solely on the
report of the other auditors.
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 and the report of other auditors provide a reasonable
basis for our opinion.
In our opinion, based on our audits and the report of other auditors, 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, 1998 and 1997, and the results of their operations and their cash
flows for each of the three years in the period ended December 31, 1998, in
conformity with generally accepted accounting principles.
As explained in Notes 2 and 17 to the consolidated financial statements,
effective January 1, 1998, the Company changed its method of accounting for
start-up costs.
/s/ ARTHUR ANDERSEN LLP
ARTHUR ANDERSEN LLP
Denver, Colorado,
January 27, 1999.
17
<PAGE> 9
NEWMONT MINING CORPORATION
STATEMENTS OF CONSOLIDATED OPERATIONS
<TABLE>
<CAPTION>
Years Ended December 31,
(In thousands, except per share) 1998 1997 1996
----------- ----------- -----------
<S> <C> <C> <C>
Sales and other income
Sales $ 1,453,856 $ 1,572,757 $ 1,105,666
Dividends, interest and other 21,057 55,235 29,460
----------- ----------- -----------
1,474,913 1,627,992 1,135,126
----------- ----------- -----------
Costs and expenses
Costs applicable to sales 824,858 790,545 652,305
Depreciation, depletion and amortization 289,067 265,765 204,081
Exploration and research 68,373 98,420 92,863
General and administrative 49,724 66,380 65,671
Interest, net of amounts capitalized 78,823 77,067 58,619
Write-down of assets 614,893 9,500 --
Merger and related expenses -- 162,674 --
Other 11,060 25,726 22,521
----------- ----------- -----------
1,936,798 1,496,077 1,096,060
----------- ----------- -----------
Pre-tax income (loss) before minority interest, equity
income (loss) and cumulative effect of a change in
accounting principle (461,885) 131,915 39,066
Income tax benefit 180,876 7,900 15,949
Minority interest in Minera Yanacocha (66,193) (66,882) --
Minority interest in Newmont Gold Company (4,093) (4,556) (6,584)
Equity income (loss) of affiliated companies (9,164) -- 50,170
----------- ----------- -----------
Net income (loss) before cumulative effect of a change
in accounting principle (360,459) 68,377 98,601
Cumulative effect of a change in accounting principle, net (32,924) -- --
----------- ----------- -----------
Net income (loss) and comprehensive income (loss) $ (393,383) $ 68,377 $ 98,601
=========== =========== ===========
Net income (loss) before cumulative effect of a change
in accounting principle per common share,
basic and diluted $ (2.27) $ 0.44 $ 0.63
=========== =========== ===========
Net income (loss) per common share, basic and diluted $ (2.47) $ 0.44 $ 0.63
=========== =========== ===========
Basic weighted average shares outstanding 159,010 156,243 155,573
=========== =========== ===========
</TABLE>
The accompanying notes are an integral part of these statements.
18
<PAGE> 10
NEWMONT MINING CORPORATION
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
At December 31,
(In thousands, except shares and per share) 1998 1997
---------- ----------
<S> <C> <C>
ASSETS
Cash and cash equivalents $ 79,086 $ 146,232
Short-term investments 11,802 12,790
Accounts receivable 52,066 52,410
Inventories 280,371 339,549
Other current assets 89,755 90,389
---------- ----------
Current assets 513,080 641,370
Property, plant and mine development, net 2,048,707 2,598,809
Investment in Batu Hijau 277,221 76,861
Long-term inventory 159,674 174,445
Other long-term assets 188,072 122,497
---------- ----------
Total assets $3,186,754 $3,613,982
========== ==========
LIABILITIES
Short-term debt $ -- 25,771
Current portion of long-term debt 47,575 43,301
Accounts payable 37,943 83,101
Other accrued liabilities 126,825 242,358
---------- ----------
Current liabilities 212,343 394,531
Long-term debt 1,201,131 1,179,410
Reclamation and remediation liabilities 94,840 88,651
Other long-term liabilities 146,099 192,033
---------- ----------
Total liabilities 1,654,413 1,854,625
---------- ----------
Commitments and contingencies (See Notes 3, 4 and 18)
Minority interest in Minera Yanacocha 92,808 62,253
Minority interest in Newmont Gold Company -- 106,017
---------- ----------
STOCKHOLDERS EQUITY
Common stock$1.60 par value; 250 million shares authorized;
167.5 million and 156.8 million shares issued, less 309 thousand
and 307 thousand treasury shares, respectively 267,544 250,350
Additional paid-in capital 1,060,803 817,040
Retained earnings 111,186 523,697
---------- ----------
Total stockholders equity 1,439,533 1,591,087
---------- ----------
Total liabilities and stockholders equity $3,186,754 $3,613,982
========== ==========
</TABLE>
The accompanying notes are an integral part of these statements.
19
<PAGE> 11
NEWMONT MINING CORPORATION
STATEMENTS OF CONSOLIDATED CHANGES
IN STOCKHOLDERS EQUITY
<TABLE>
<CAPTION>
Common Stock Additional
--------------------------- Paid-In Retained
(In thousands) Shares Amount Capital Earnings
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Balance at December 31, 1995 150,713 $ 241,141 $ 546,253 $ 479,895
Common stock issuance 4,651 7,442 233,814 (13,765)
Shares issued under stock compensation plans 666 1,065 23,579 (1,190)
Net income -- -- -- 98,601
Common stock dividends -- -- -- (54,305)
Other -- -- (315) 537
----------- ----------- ----------- -----------
Balance at December 31, 1996 156,030 249,648 803,331 509,773(1)
Shares issued under stock compensation plans 439 702 13,382 87
Net income -- -- -- 68,377
Common stock dividends -- -- -- (54,540)
Other -- -- 327 --
----------- ----------- ----------- -----------
Balance at December 31, 1997 156,469 250,350 817,040 523,697(1)
Common stock issued for acquisition of
minority interest of Newmont Gold Company 10,694 17,111 242,225 --
Shares issued under stock compensation plans 52 83 1,538 --
Net loss -- -- -- (393,383)
Common stock dividends -- -- -- (19,105)
Other -- -- -- (23)
----------- ----------- ----------- -----------
Balance at December 31, 1998 167,215 $ 267,544 $ 1,060,803 $ 111,186(1)
=========== =========== =========== ===========
</TABLE>
(1) Includes accumulated other comprehensive income for adjustments to minimum
pension liabilities of $2,274, $2,191 and $2,168 as of December 31, 1998,
1997 and 1996, respectively.
The accompanying notes are an integral part of these statements.
20
<PAGE> 12
NEWMONT MINING CORPORATION
STATEMENTS OF CONSOLIDATED CASH FLOWS
<TABLE>
<CAPTION>
Years Ended December 31,
(In thousands) 1998 1997 1996
--------- --------- ---------
<S> <C> <C> <C>
Operating Activities
Net income (loss) $(393,383) $ 68,377 $ 98,601
Adjustments to reconcile net income (loss) to net cash
provided by operating activities:
Depreciation, depletion and amortization 289,067 265,765 204,081
Amortization of capitalized mining costs 52,634 55,254 --
Write-down of assets 614,893 9,500 --
Deferred tax benefit (221,020) (48,800) (16,607)
Cumulative effect of change in accounting principle 32,924 -- --
Undistributed earnings (losses) of affiliates 9,164 -- (18,359)
Minority interest, net of dividends 33,647 7,735 1,589
Merger related asset write-offs -- 27,288 --
Other 3,379 8,374 3,585
(Increase) decrease in operating assets:
Accounts receivable 17,341 (12,188) (4,245)
Inventories (7,821) (149,296) (63,233)
Other assets (5,193) 8,414 (13,125)
Increase (decrease) in operating liabilities:
Accounts payable and other accrued liabilities (51,894) 41,983 11,891
Other liabilities (225) 1,375 3,430
--------- --------- ---------
Net cash provided by operating activities 373,513 283,781 207,608
--------- --------- ---------
Investing Activities
Additions to property, plant and mine development (216,025) (415,082) (547,757)
Acquisition of additional interest in Minera Yanacocha (75,868) -- --
Advances to joint ventures and affiliates (131,029) (67,119) (3,684)
Repayments from joint ventures and affiliates -- 16,356 --
Cash effect of consolidating Minera Yanacocha -- 40,705 --
Other 2,099 48 (2,335)
--------- --------- ---------
Net cash used in investing activities (420,823) (425,092) (553,776)
--------- --------- ---------
Financing Activities
Proceeds from short-term debt -- 7,630 16,802
Repayments of short-term debt (25,771) (27,840) --
Proceeds from long-term debt 135,000 828,000 255,000
Repayments of long-term debt (109,017) (702,541) (4,375)
Proceeds from issuance of common stock 256 12,580 265,449
Dividends paid on common stock (19,105) (54,540) (54,305)
Other (1,199) (2,799) (344)
--------- --------- ---------
Net cash (used in) provided by financing activities (19,836) 60,490 478,227
--------- --------- ---------
Net change in cash and cash equivalents (67,146) (80,821) 132,059
Cash and cash equivalents at beginning of year 146,232 227,053 94,994
--------- --------- ---------
Cash and cash equivalents at end of year $ 79,086 $ 146,232 $ 227,053
========= ========= =========
</TABLE>
The accompanying notes are an integral part of these statements.
21
<PAGE> 13
NEWMONT MINING CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1 THE COMPANY
Newmont Mining Corporation and its subsidiaries (collectively, NMC or the
Company) is a worldwide company engaged in gold production, exploration for gold
and acquisition of gold properties. The Company also has an interest in a
copper/gold mine that is currently under construction.
NGC MERGER
Prior to October 7, 1998, NMC owned 93.75% of the common stock of Newmont Gold
Company (NGC), through which all of NMCs 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. Each outstanding share of NGC, other
than the shares held by the Company, which were canceled, were converted into
1.025 shares of NMC.
The merger was accounted for at historic cost, with the exception of the
minority interest, which was accounted for as a purchase. The purchase price was
based on the value of the shares of NMC common stock issued to NGC stockholders
pursuant to the merger, which totaled approximately 10.7 million shares valued
at $24.25 per share. The excess purchase price over the carrying value of such
minority interest (including transaction costs of $1.0 million and related
deferred taxes of $53.6 million) was $206.9 million and was allocated to NGCs
assets and liabilities based on their respective fair market values ($122.0
million to Investment in Batu Hijau and $84.9 million to Property, plant and
mine development, primarily for Minera Yanacocha). The Company's stockholders
equity increased $259.3 million as a result of this transaction.
The following unaudited pro forma information reflects the consolidated
results of operations of the Company as if the acquisition had taken place on
January 1, 1997. The pro forma results have been prepared for comparative
purposes only and are not indicative of the results of operations that would
have actually occurred had the merger been consummated on the date indicated.
The pro forma information includes adjustments for the additional depreciation,
depletion and amortization resulting from the allocation of the excess purchase
price, elimination of the minority shareholders interest in NGC, and the related
income tax effects (in thousands, except per share).
<TABLE>
<CAPTION>
For the Years Ended December 31,
1998 1997
------------- -------------
<S> <C> <C>
Sales $ 1,453,856 $ 1,572,757
Net income (loss) $ (404,010) $ 63,248
Net income (loss) per share,
basic and diluted $ (2.42) $ 0.38
----------- -----------
</TABLE>
SANTA FE MERGER
On May 5, 1997, NMC completed a merger with Santa Fe Pacific Gold Corporation
(Santa Fe), a U.S. gold mining company, under which each outstanding share of
Santa Fe common stock was exchanged for 0.43 of a share of NMC common stock. The
outstanding shares of common stock of Santa Fe were converted into approximately
56.5 million shares of NMC common stock, reflected as outstanding for all
periods presented. NMC also reserved approximately 566,000 shares of its common
stock for issuance in connection with outstanding Santa Fe stock options that
were assumed by NMC in the merger. The merger qualified as a tax-free
reorganization and was accounted for as a pooling of interests. The consolidated
financial statements have been restated for periods prior to the merger to
include the operations of Santa Fe, adjusted to conform with NMCs accounting
policies and presentations.
Merger expenses of $162.7 million ($112.3 million net of tax and minority
interest) consisted of $135.4 million of transaction costs and $27.3 million in
asset write-downs. The more significant transaction costs included a $65.2
million fee paid to terminate an existing definitive merger agreement between
Santa Fe and another company, investment advisory fees of $20.5 million,
employee benefit and severance costs of $18.0 million and professional fees of
$18.4 million. The asset write-offs, related to certain Santa Fe assets that did
not meet the Company's valuation criteria, included a write-down of the Elkhorn,
Montana exploration project and the write-off of duplicative facilities,
equipment and information system costs.
22
<PAGE> 14
NEWMONT MINING CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
The following table provides a reconciliation of sales and net income
reported by NMC to the consolidated amounts presented (in thousands).
<TABLE>
<CAPTION>
For the Years Ended December 31,
1997 1996
----------- -----------
<S> <C> <C>
Sales
Pre-merger
NMC $ 357,316 $ 768,455
Santa Fe 130,540 337,211
Post-merger 1,084,901 --
Merger adjustments -- --
----------- -----------
Consolidated $ 1,572,757 $ 1,105,666
=========== ===========
Net income
Pre-merger
NMC $ 31,608 $ 85,076
Santa Fe 31,702 21,068
Post-merger 110,441 --
Merger adjustments (105,374) (7,543)
----------- -----------
Consolidated $ 68,377 $ 98,601
=========== ===========
</TABLE>
Merger adjustments reflect conforming accounting policy changes,
transaction fees, other one-time expenses associated with the merger and the tax
effect of such adjustments. Accounting policy changes were primarily related to
the accounting treatment for capitalized mining costs. Santa Fe included certain
depreciation, depletion and amortization charges in capitalized mining costs. To
the extent Santa Fe capitalized such charges as mining costs or as inventory,
restatement adjustments have been made to reflect these charges against earnings
in the appropriate period. In addition, ore and in-process inventories were not
maintained on the same basis as NMC, which resulted in certain balance sheet
reclassifications.
OPERATIONS
The Company's sales result from operations in the United States, Mexico, Peru,
Uzbekistan and Indonesia. Operations commenced in Indonesia in March 1996 and in
Mexico in July 1998. The Company had an equity interest in a mining operation in
Peru that was consolidated beginning in 1997 as a result of the acquisition of
an additional interest described in Note 4.
Gold mining requires the use of specialized facilities and technology. The
Company relies heavily on such facilities to maintain its production levels.
Also, the cash flow and profitability of the Company's current operations are
significantly affected by the market price of gold. Gold prices can fluctuate
widely and are affected by numerous factors beyond the Company's control.
NOTE 2 -SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
PRINCIPLES OF CONSOLIDATION
The consolidated financial statements include the accounts of Newmont
Mining Corporation and its more-than-50%-owned subsidiaries. The Company also
includes its pro-rata share of assets, liabilities and operations for
unincorporated joint ventures in which it has an interest. All significant
intercompany balances and transactions have been eliminated. The functional
currency for all subsidiaries is the U.S. dollar.
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. Cash and cash equivalents are primarily invested in United States
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, 1998 and 1997, $8.5 million of such investments secured letters of
credit.
Investments in incorporated entities in which the Company's ownership is
greater than 20% and less than 50% are accounted for by the equity method and
are included in long-term assets. Income or loss from such investments is
included in Equity income (loss) of affiliated companies.
23
<PAGE> 15
NEWMONT MINING CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
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.
PROPERTY, PLANT AND MINE DEVELOPMENT
Expenditures for new facilities or expenditures that 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 range from 2 to 21 years.
The Company adopted AICPA Statement of Position 98-5, Reporting on the
Costs of Start-Up Activities (SOP 98-5) effective January 1, 1998. Under this
accounting method, certain costs, such as organization, training and
pre-feasibility expenses, incurred in the start-up phase of a project are
expensed as incurred (See Note 17).
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 the
unit-of-production method over the estimated life of the ore body. Ongoing
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 the 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.
ASSET IMPAIRMENT
The Company reviews and evaluates its long-lived assets for impairment when
events or changes in circumstances indicate that the related carrying amounts
may not be recoverable. An impairment loss is measured as the amount by which
asset carrying value exceeds fair value. Fair value is generally determined
using estimated future cash flow analysis. An impairment is considered to exist
if total estimated future cash flows on an undiscounted basis are less than the
carrying amount of the asset. An impairment loss is measured and recorded based
on discounted estimated future cash flows. Future cash flows include estimates
of recoverable ounces, gold prices (considering current and historical prices,
price trends and related factors) and production, capital and reclamation costs.
Assumptions underlying future cash flow estimates are subject to risks and
uncertainties. Any differences between significant assumptions and actual market
conditions and/or the Company's performance could have a material effect on the
Company's financial position and results of operations (See Note 14).
REVENUE RECOGNITION
Gold sales are recognized when gold is produced.
MINING COSTS
In general, mining costs are charged to operations as incurred. However, certain
of the Company's deposits have diverse grade and waste-to-ore ratios over the
mines 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 REMEDIATION COSTS
Estimated future reclamation and remediation costs are based principally on
legal and regulatory requirements. Such costs related to active mines are
accrued and charged over the expected operating lives of the mines using the
unit-of-production method. Future reclamation and remediation costs for inactive
mines are accrued based on managements best estimate at the end of each period
of the undiscounted costs expected to be incurred at a site. Such cost estimates
include, where applicable, ongoing care, maintenance and monitoring costs.
Changes in estimates are reflected in earnings in the period an estimate is
revised.
INCOME TAXES
The Company accounts for income taxes using the liability method, recognizing
certain temporary differences between the financial reporting basis of the
Company's liabilities and assets and the related income tax basis for such
liabilities and assets. This method generates a net deferred income tax
liability or net deferred income tax asset for the Company as of the end of the
year, as measured by the statutory tax rates in effect as enacted. The Company
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.
24
<PAGE> 16
NEWMONT MINING CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
The Company's deferred income tax assets include certain future tax
benefits. The Company records a valuation allowance against any portion of those
deferred income tax assets that it believes will, more likely than not, fail to
be realized.
COMMODITY INSTRUMENTS
On a limited basis, the Company has entered into forward sales contracts to
protect the selling price for certain anticipated gold production. The Company
does not acquire, hold or issue commodity instruments for trading or speculative
purposes.
Forward sales contracts enable the Company to deliver to a counterparty a
specified number of ounces of gold at a specified price and date. Gains and
losses realized on these contracts, as well as any cost or revenue associated
therewith, are recognized in sales when the related gold is delivered.
In June 1998, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards (SFAS) No. 133, Accounting for Derivative
Instruments and Hedging Activities, which establishes accounting and reporting
standards for derivative instruments and hedging activity. SFAS No. 133 is
effective for all periods in fiscal years beginning after June 15, 1999. SFAS
No. 133 requires recognition of all derivative instruments on the balance sheet
as either assets or liabilities and measurement at fair value. Changes in the
derivatives fair value will be recognized currently in earnings unless specific
hedge accounting criteria are met. Gains and losses on derivative hedging
instruments must be recorded in either other comprehensive income or current
earnings, depending on the nature of the instrument. The Company is currently
assessing the effect of adopting SFAS No. 133 on its financial statements and
plans to adopt the statement on January 1, 2000.
EARNINGS PER COMMON SHARE
Earnings or loss per share are presented for basic and diluted net income or
loss and, if applicable, for net income or loss before the cumulative effect of
a change in accounting principle. Basic earnings per share is computed by
dividing net income (the numerator)
by the weighted-average number of common shares (the denominator) for the
period. The computation of diluted earnings per share includes the same
numerator, but the denominator is increased to include the number of additional
common shares that would have been outstanding if potentially dilutive common
shares had been issued (such as the common share equivalents for employee stock
options). The denominator is based on the following weighted-average number of
common shares (in thousands):
<TABLE>
<CAPTION>
1998 1997 1996
------- ------- -------
<S> <C> <C> <C>
Basic 159,010 156,243 155,573
Diluted 159,010 156,347 155,905
------- ------- -------
</TABLE>
COMPREHENSIVE INCOME
In the first quarter of 1998, the Company adopted SFAS No. 130 Reporting
Comprehensive Income that established standards for reporting and displaying
comprehensive income and its components in a full set of general purpose
financial statements. In addition to net income, comprehensive income includes
all changes in equity during a period, except those resulting from investments
by and distributions to owners. The Company has no material comprehensive income
items.
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 1998
presentation.
25
<PAGE> 17
NEWMONT MINING CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 3 BATU HIJAU
In July 1996, 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 open pit mine, mill, and infrastructure
including employee housing, a port, electrical generation facilities, interest
during construction, cost escalations and working capital is expected to
approximate $1.9 billion.
Under the terms of the agreement with Sumitomo, the Company contributed
its interest in the company that owns the project to the partnership and
Sumitomo contributed an agreed upon amount of cash. The Company retained an
indirect 45% interest in the company that owns the project and Sumitomo has an
indirect 35% interest. The remaining 20% interest is held by an unrelated
Indonesian company. Until recouping its construction investment, including
interest, the Company recognizes 56.25% of Batu Hijaus income.
As a result of the ownership structure, effective July 1996, the Company
accounted for its investment in Batu Hijau as an equity investment. At December
31, 1998 and 1997 such investment was $277.2 million and $76.9 million,
respectively. Differences between 56.25% of the partnerships net assets and the
Company's investment include $220 million for the fair market value adjustment
recorded by the partnership in conjunction with the Company's initial
contribution, $26 million for intercompany charges and $122 million for the fair
market value adjustment recorded by the Company in conjunction with the NGC
minority interest acquisition. These amounts will be amortized or depreciated
upon commencement of production. The Company's investment also reflects $42
million for exploration expenditures incurred prior to the formation of the
partnership.
In connection with the Batu Hijau project, the entity owning the project
has entered into a construction contract for approximately $1.0 billion.
Financing agreements were signed in July 1997 for $1.0 billion in funds for the
project and the Company and Sumitomo are funding $0.9 billion. The financing is
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 thereafter (except with
respect to a $125 million contingent support facility that the Company and
Sumitomo will provide). Repayment of borrowings under the financing 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. Based
on current market rates at December 31, 1998, the average interest rates would
be approximately 5.7% and 6.8% pre-completion and post-completion, respectively.
Following is summarized financial information for the partnership (in
thousands):
<TABLE>
<CAPTION>
Years Ended December 31,
1998 1997 1996
----------- ----------- -----------
<S> <C> <C> <C>
Revenues $ 93 $ 540 $ --
Loss before cumulative
effect of a change in
accounting principle (19,284) (2,598) --
Net loss (69,410) (2,598) --
Dividends received $ -- $ -- $ --
----------- ----------- -----------
</TABLE>
<TABLE>
<CAPTION>
At December 31,
1998 1997
----------- -----------
<S> <C> <C>
Current assets $ 17,576 $ 16,320
Property, plant and mine
development, net 1,430,260 664,397
Other assets 104,238 34,855
Current liabilities 153,066 134,675
Long-term debt 640,000 --
Other liabilities 17,120 2,200
----------- -----------
</TABLE>
NOTE 4 ADDITIONAL INTEREST IN MINERA YANACOCHA
The Company has an interest in Minera Yanacocha, a gold mining operation located
in Peru. Prior to 1997, that interest was 38.0% 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
(BRGM), the geological and mining bureau of the French government. In September
1994, BRGM announced its intention to transfer its 24.7% interest in Minera
Yanacocha to a third party. The
26
<PAGE> 18
NEWMONT MINING CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Company and Compaia 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 February 1997, the Superior Court upheld the decision of the trial
court. As a result, the Company reflected the increase in its ownership from
38.0% to 51.35% as of February 1997.
In June 1998, the Peruvian Supreme Court issued a resolution upholding the
Superior Court decision and resolving the litigation in favor of the Company and
Buenaventura.
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, the Company believes
that Mine Ors claims are unfounded. It is unclear at this time what effect, if
any, the arbitration might have on the Company.
See Note 16 for summarized 1996 Minera Yanacocha financial information.
NOTE 5 INVENTORIES
<TABLE>
<CAPTION>
At December 31,
(In thousands) 1998 1997
---------- ----------
<S> <C> <C>
Current:
Ore and in-process inventories $ 138,341 $ 172,589
Precious metals 62,642 82,594
Materials and supplies 78,254 82,819
Other 1,134 1,547
---------- ----------
$ 280,371 $ 339,549
========== ==========
Ore-in-stockpiles (included in
Long-term
inventory) $ 159,674 $ 174,445
========== ==========
</TABLE>
As described in Note 14, the Company wrote down certain assets at December
31, 1998, reducing ore and in-process inventories approximately $67 million and
materials and supplies approximately $13 million.
NOTE 6 PROPERTY, PLANT AND MINE DEVELOPMENT
<TABLE>
<CAPTION>
At December 31,
(In thousands) 1998 1997
----------- -----------
<S> <C> <C>
Land and mining claims $ 292,410 $ 362,049
Buildings and equipment 2,442,554 2,536,810
Mine development 584,325 537,819
Construction-in-progress 60,018 154,974
----------- -----------
3,379,307 3,591,652
Accumulated depreciation,
depletion and amortization (1,584,585) (1,343,885)
Capitalized mining costs 253,985 351,042
----------- -----------
$ 2,048,707 $ 2,598,809
=========== ===========
</TABLE>
As described in Note 14, the Company wrote down certain assets at December
31, 1998, reducing Property, plant and mine development approximately $528
million.
NOTE 7 OTHER ACCRUED LIABILITIES
<TABLE>
<CAPTION>
At December 31,
(In thousands) 1998 1997
-------- --------
<S> <C> <C>
Payroll and related benefits $ 44,242 $ 53,349
Interest 26,000 28,081
Royalties 6,264 5,671
Reclamation and remediation 6,073 9,157
Severance benefits 2,908 10,000
Purchase price payable (see Note 4) -- 59,100
Other 41,338 77,000
-------- --------
$126,825 $242,358
======== ========
</TABLE>
27
<PAGE> 19
NEWMONT MINING CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 8 INCOME TAXES
The Company's income tax benefit consisted of (in thousands):
<TABLE>
<CAPTION>
Years Ended December 31,
1998 1997 1996
--------- -------- --------
<S> <C> <C> <C>
Current:
Domestic $ -- $ 13,700 $ 3,347
Foreign (40,144) (54,600) (4,005)
--------- -------- --------
(40,144) (40,900) (658)
--------- -------- --------
Deferred:
Domestic 234,509 57,822 18,232
Foreign (13,489) (9,022) (1,625)
--------- -------- --------
221,020 48,800 16,607
--------- -------- --------
$ 180,876 $ 7,900 $ 15,949
========= ======== ========
</TABLE>
The Company's income tax benefit differed from the amounts computed by
applying the United States corporate income tax statutory rate for the following
reasons (in thousands):
<TABLE>
<CAPTION>
Years Ended December 31,
1998 1997 1996
--------- --------- ---------
<S> <C> <C> <C>
U.S. corporate income tax
at statutory rate $ 161,660 $ (46,170) $ (13,673)
Percentage depletion 29,793 39,155 32,620
Valuation allowance on
deferred tax assets (26,448) (1,400) (3,970)
Resolution of tax issues
associated with prior years -- 12,885 6,000
Foreign tax credits 8,905 4,377 --
Foreign losses (earnings) 8,553 1,377 (4,842)
Other (1,587) (2,324) (186)
--------- --------- ---------
$ 180,876 $ 7,900 $ 15,949
========= ========= =========
</TABLE>
The Company's Pre-tax income (loss) before minority interest, equity
income (loss) and cumulative effect of a change in accounting principle
consisted of (in thousands):
<TABLE>
<CAPTION>
Years Ended December 31,
1998 1997 1996
--------- --------- ---------
<S> <C> <C> <C>
Domestic $(670,383) $ (60,989) $ 42,677
Foreign 208,498 192,904 (3,611)
--------- --------- ---------
$(461,885) $ 131,915 $ 39,066
========= ========= =========
</TABLE>
Components of the Company's consolidated deferred income tax liabilities
and assets are as follows (in thousands):
<TABLE>
<CAPTION>
At December 31,
1998 1997
--------- ---------
<S> <C> <C>
Deferred tax liabilities:
Depletion of the cost of land
and mining claims $ (91,589) $ (64,599)
Net undistributed earnings
from subsidiaries (56,033) (16,913)
Capitalized mining costs (65,348) (83,049)
Capitalized interest (17,228) (13,046)
Accelerated tax depreciation -- (65,261)
Mine development costs -- (35,137)
Other (1,151) (1,260)
--------- ---------
Deferred tax liabilities $(231,349) $(279,265)
--------- ---------
Deferred tax assets:
Exploration costs 101,981 99,652
Depreciation 81,623 --
Alternative minimum tax credit
carry forward 52,983 46,684
Capitalized inventory costs 34,863 4,915
Foreign tax credit carry forward 12,701 --
Remediation and reclamation costs 24,633 40,875
Mine development costs 22,399 --
Net operating loss carry forwards 16,046 27,670
Retiree benefit costs 15,504 19,621
Sale/leaseback transaction, net 6,878 10,029
Deferred gain on interest rate hedges 2,386 2,426
Relocation/reorganization costs 1,285 1,876
Other 7,463 7,480
--------- ---------
380,745 261,228
Valuation allowance for
deferred tax assets (41,800) (15,400)
--------- ---------
Net deferred tax assets 338,945 245,828
--------- ---------
Net deferred tax assets (liabilities) $ 107,596 $ (33,437)
========= =========
</TABLE>
Primarily based on estimates of future sources of taxable income, the
Company believes that it, more likely than not, will utilize $338.9 million of
the $380.7 million of deferred income tax assets at December 31, 1998. This
estimate reflects a valuation allowance of $41.8 million.
28
<PAGE> 20
NEWMONT MINING CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 9 DEBT
LONG-TERM DEBT
Long-term debt consists of (in thousands):
<TABLE>
<CAPTION>
At December 31,
1998 1997
----------- -----------
<S> <C> <C>
Sale-leaseback of refractory
ore treatment plant $ 343,339 $ 349,134
Credit facility 385,000 316,000
838% debentures, net 199,889 199,866
858% notes 150,000 150,000
Medium-term notes 42,000 42,000
Project financing 128,478 165,711
----------- -----------
1,248,706 1,222,711
Current maturities (47,575) (43,301)
----------- -----------
$ 1,201,131 $ 1,179,410
=========== ===========
</TABLE>
Scheduled minimum long-term debt repayments are $47.6 million in 1999,
$26.1 million in 2000, $25.9 million in 2001, $564.8 million in 2002, $39.3
million in 2003 and $545.0 million thereafter. The Company may accelerate credit
facility repayments, depending on available operating cash flow.
SALE-LEASEBACK OF THE REFRACTORY ORE
TREATMENT PLANT
In September 1994, the Company entered into a sale and leaseback agreement for
its refractory ore treatment plant located in Carlin, Nevada. The transaction
was accounted for as debt and the cost of the refractory ore treatment plant was
recorded as a depreciable asset. The lease term is 21 years and aggregate future
minimum lease payments, which include interest, as of December 31, 1998 and 1997
were $578.8 million and $608.5 million, respectively. Payments began in January
1996 and are $29.7 million annually in 1999 through 2004. The lease includes
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 this asset is
specialized, it is not practicable to estimate the fair value of this debt.
In connection with this transaction, the Company entered into certain interest
rate hedging contracts that were settled for a gain of $11 million, which is
recognized as a reduction of interest expense over the term of the lease.
Including this gain, the effective interest rate on the transaction is 6.15%.
<PAGE> 21
NEWMONT MINING CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
CREDIT FACILITIES
On June 11, 1997, the Company entered into a $1.0 billion revolving credit
facility with a consortium of banks, replacing separate credit facilities held
by NGC and Santa Fe. As of December 31, 1998, $385 million was outstanding under
the credit facility, which expires in June 2002. Interest rates are variable,
can be fixed for up to six months at the option of the Company and are subject
to adjustment if changes in the Company's long-term debt ratings occur. As of
and for the year ended December 31, 1998, the interest rate was 5.8%. An annual
facility fee, currently 0.1%, is required based on the lenders total commitment.
The fair value of amounts outstanding under the credit facility at December 31,
1998 approximated the related carrying amount.
The credit facility contains certain covenants, including limitations on
aggregate consolidated indebtedness (including guarantees) to 60% of total
capitalization, requirements for $1.0 billion of minimum consolidated tangible
net worth and limitations on incurrence of liens, fundamental business changes
and transactions with affiliates.
8 3/8% DEBENTURES
Unsecured debentures in an aggregate principal amount of $200 million maturing
July 1, 2005 bearing an annual interest rate of 8.375% were outstanding at
December 31, 1998 and 1997. The debentures were issued by Santa Fe and
subsequent to the merger are guaranteed by NGC. The debentures were priced at
99.928% to yield 8.386% and are not redeemable prior to maturity. The costs
related to the issuance of the debentures were capitalized and are amortized to
interest expense over the term of the debentures. Using prevailing interest
rates on similar instruments, the fair value of these debentures was
approximately $204.9 million and $213.3 million at December 31, 1998 and 1997,
respectively.
8 5/8% NOTES
Unsecured notes with a principal amount of $150 million due April 1, 2002
bearing an annual interest rate of 8.625% were outstanding at December 31, 1998
and 1997. 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, 1998 and 1997, the estimated fair value of this debt
was $154.4 million and $159.6 million, respectively.
29
<PAGE> 22
NEWMONT MINING CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MEDIUM-TERM NOTES
Unsecured notes totaling $42 million were outstanding as of December 31, 1998
and 1997, with a weighted average fixed interest rate of 7.75% and maturing on
various dates ranging from mid-1999 to late 2004. Interest is payable
semi-annually in March and September and the notes are not redeemable prior to
maturity. Using interest rates prevailing on similar instruments at December 31,
1998 and 1997, the estimated fair value of these notes was $42.2 million and
$43.2 million, respectively.
PROJECT FINANCINGS
Minera Yanacocha
Minera Yanacocha issued debt through the sale of $100 million 8.4% 1997 Series A
Trust Certificates (Certificates) to various institutional investors. At
December 31, 1998 and 1997, $94 million and $98 million was outstanding under
the financing. Interest on the Certificates is fixed at 8.4% and repayments are
required quarterly through 2004. The fair value of the Certificates was $91.8
million at December 31, 1998, and approximated the related carrying amount at
December 31, 1997.
Minera Yanacocha also had $9.9 million and $23.8 million outstanding under
loans with the International Finance Corporation (IFC) and with Deutsche
Investitions und Entwicklungsgesellschaft mbH (DEG) at December 31, 1998 and
1997, respectively. The IFC and DEG loans mature in 2000, and interest rates on
a portion of the loans are variable, ranging from 2.88% to 3.25% over LIBOR. A
portion of the IFC loan is subject to an interest rate premium (not to exceed
2.5%) when the average realized gold price exceeds $370 per ounce. Interest
rates on a portion of the DEG loan are fixed at 9.3%. Weighted average interest
rates on the IFC and DEG loans were 9.1% as of and for the years ended December
31, 1998 and 1997, and the fair value of the fixed-rate portion of such loans
approximated carrying value.
All Minera Yanacocha debt (non-recourse to its shareholders) is secured by
certain restricted funds and substantially all of Minera Yanacochas property,
plant and equipment.
Zarafshan-Newmont
The Company, through a wholly-owned subsidiary, is a 50% participant in the
Zarafshan-Newmont Joint Venture in the Republic of Uzbekistan. The other 50%
participants are two Uzbekistan government entities.
As of December 31, 1998, Zarafshan-Newmont had $49.3 million outstanding
under a project financing loan secured by the assets of the project. The loan is
to be repaid in semi-annual installments until 2001. The average interest rate
is between 3.9 and 4.25 percentage points over the three-month LIBOR. The
weighted average interest rates for 1998 and 1997 were 9.5% and 9.6%,
respectively, and the interest rates at December 31, 1998 and 1997 were 9.2% and
9.7%, respectively. The carrying amount of the loan is estimated to approximate
its fair market value.
Until defined completion tests have been satisfied, the Company has
guaranteed payment of certain amounts due under the loan, which totaled $23.8
million at December 31, 1998, and the Uzbek partners have guaranteed payment of
the balance. After satisfaction of the completion tests, the loan becomes
non-recourse to Zarafshan-Newmont partners. The lenders have agreed to extend
the completion test date to April 2000.
SHORT-TERM DEBT
The Company's short-term debt at December 31, 1997 consisted of bank debt with a
weighted average interest rate of approximately 7% that was repaid in 1998.
CAPITALIZED INTEREST
Capitalized interest was $13.7 million, $15.6 million and $16.6 million in 1998,
1997 and 1996, respectively.
30
<PAGE> 23
NEWMONT MINING CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 10 STOCKHOLDERS EQUITY
COMMON STOCK OFFERINGS
As discussed in Note 1, NMC issued 10.7 million shares of common stock in
conjunction with the acquisition of NGCs minority interest on October 7, 1998.
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 $241.3 million were used to fund the Company's
operations.
DIVIDENDS
The Company paid dividends of $0.12 per common share in 1998, $0.39 per share in
1997 and $0.48 per share in 1996. Santa Fe paid dividends of $0.05 per Santa Fe
common share in 1996.
PREFERRED SHARE PURCHASE RIGHTS
Each share of NMCs common stock carries one Preferred Share Purchase Right
(PSPR) that expires in September 2000 unless earlier redeemed. Each PSPR
entitles the holder to purchase from NMC one five- hundredth of a share of NMC
participating preferred stock for $150 (subject to adjustment). Until exercised,
holders of PSPRs have no stockholder rights. The PSPRs become exercisable only
if a defined acquiring person has acquired 15% or more of NMC common stock or
has begun a tender or exchange offer that would result in such person owning 15%
or more of NMC common stock. If such events occur, PSPR holders will have a
right to receive, upon exercise, NMC common stock (or in certain circumstances
common stock of the acquiring company) having a value equal to two times the
purchase price of the PSPR. NMC may redeem the PSPRs for $0.01 each prior to an
announcement that a defined acquiring person exists.
NOTE 11 STOCK OPTIONS
EMPLOYEE STOCK OPTIONS
Under the Company's stock option plans, options to purchase shares of stock have
been granted to key employees generally at the fair market value of such shares
on the date of grant. The options under these plans generally vest over a
two-year period (except for certain options granted to key employees, which vest
over a four-year period) and are exercisable over a period not exceeding ten
years. At December 31, 1998, 1,859,851 shares were available for future grants
under the Company's plans. In conjunction with the merger with Santa Fe, 566,000
shares were authorized for issuance in connection with outstanding Santa Fe
stock options that were assumed by NMC.
In 1994, 1993 and 1992, certain key executives were granted options that,
although the exercise price was generally equal to the fair market value on the
date of grant, cannot be exercised when otherwise vested unless the market price
of NMCs 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, 1998, 503,354 of
these options were outstanding.
31
<PAGE> 24
NEWMONT MINING CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
The following table summarizes annual total stock option activity for each
of the three years in the period ended December 31:
<TABLE>
<CAPTION>
1998 1997 1996
----------------------- ----------------------- -----------------------
Weighted Weighted Weighted
Average Average Average
Number Exercise Number Exercise Number Exercise
of Shares Price of Shares Price of Shares Price
--------- ----------- --------- ----------- --------- -----------
<S> <C> <C> <C> <C> <C> <C>
Outstanding at beginning of year 4,068,828 $ 41 3,063,087 $ 43 2,719,682 $ 38
Granted 2,257,583 $ 26 1,602,802 $ 35 1,216,916 $ 49
Exercised (8,502) $ 30 (439,363) $ 31 (666,164) $ 37
Forfeited (364,941) $ 37 (157,698) $ 47 (207,347) $ 38
-------- ----------- --------- ----------- --------- -----------
Outstanding at end of year 5,952,968 $ 35 4,068,828 $ 41 3,063,087 $ 43
Options exercisable at year end 2,644,156 $ 44 1,944,027 $ 43 1,320,799 $ 40
========= =========== ========= =========== ========= ===========
Weighted average fair value of
options granted during the year $ 18.34 $ 14.31 $ 18.46
</TABLE>
The following table summarizes information about stock options outstanding
at December 31, 1998 with exercise prices equal to the fair market value on the
date of grant and no restrictions on exercisability after vesting:
<TABLE>
<CAPTION>
Options Outstanding Options Exercisable
--------------------------------------- -------------------
Weighted Weighted Weighted
Average Average Average
Range of Number Remaining Exercise Number Exercise
Exercise Prices Outstanding Contractual Life Price Exercisable Price
- --------------- ----------- ---------------- -------- ----------- -----
<S> <C> <C> <C> <C> <C>
$21 to $29 2,250,682 9.4 years $ 26 83,333 $ 29
$30 to $35 734,054 8.2 years $ 32 386,977 $ 32
$37 to $44 1,662,317 7.3 years $ 39 1,104,571 $ 39
$45 to $59 802,561 7.3 years $ 54 802,561 $ 54
--------- ------- --------- ------
$21 to $59 5,449,614 8.3 years $ 36 2,377,442 $ 43
</TABLE>
Information about all other stock options outstanding at December 31, 1998
is summarized below:
<TABLE>
<CAPTION>
Options Outstanding Options Exercisable
---------------------------------------- ------------------------
Weighted Weighted Weighted
Range of Average Average Average
Exercise Number Remaining Exercise Number Exercise
Type of Option Prices Outstanding Contractual Life Price Exercisable Price
- -------------- --------- ------------ ---------------- ------- ----------- ---------
<S> <C> <C> <C> <C> <C> <C>
Options with exercise prices in excess of the
fair market value on the date of the grant $40 to $56 266,714 4.5 years $ 50 266,714 $ 50
Options that cannot be exercised until the
market price exceeds a fixed amount above
the exercise price $30 to $41 236,640 4.8 years $ 37 -- $ --
</TABLE>
32
<PAGE> 25
The Company applies APB Opinion No. 25 and related interpretations in
accounting for stock options. Accordingly, no compensation cost has been
recognized for its stock options. Had compensation cost for the options been
determined based on fair value at grant dates in 1998, 1997 and 1996, as
prescribed by SFAS No. 123, the Company's net income and earnings per share
would have been the pro forma amounts indicated below:
<TABLE>
<CAPTION>
Years Ended December 31,
1998 1997 1996
----------- ----------- -----------
<S> <C> <C> <C>
Net income (loss) (000)
As reported $ (393,383) $ 68,377 $ 98,601
Pro forma $ (406,484) $ 57,540 $ 93,057
Net income (loss) per
share, basic and diluted
As reported $ (2.47) $ 0.44 $ 0.63
Pro forma $ (2.56) $ 0.37 $ 0.60
----------- ----------- -----------
</TABLE>
For purposes of determining the pro forma amounts, the fair value of each
option grant was estimated on the date of the grant using the Black-Scholes
option-pricing model with the following assumptions for 1998, 1997 and 1996,
respectively: weighted average risk-free interest rates of 4.5%, 5.8% and 6.1%;
dividend yield of 0.5% for 1998 and 1% for the other periods; expected lives of
six years for 1998 and five years for the other periods; and volatility of 85%,
40% and 35%, respectively.
Compensation costs included in the pro forma amounts reflect only fair
values of options granted after January 1, 1995. These amounts may not be
indicative of actual results had the Company used fair-value-based accounting
for stock options.
OTHER STOCK-BASED COMPENSATION
In 1997, the Company adopted an intermediate term incentive plan (ITIP) under
which restricted stock may be granted to certain key employees. These shares are
granted upon achievement of certain financial and operating thresholds at fair
market value on the grant date. ITIP stock grants are subject to certain
restrictions related to ownership and transferability that currently lapse two
years from the date of the grant. In 1998, 31,705 shares of restricted stock
were issued under ITIP, of which 28,052 shares remain outstanding at December
31, 1998. Also in 1998, the Company awarded 10,643 shares of restricted stock to
certain key executives. Compensation expense recorded for these grants was $1.2
million and $0.8 million in 1998 and 1997, respectively.
NOTE 12 EMPLOYEE PENSION AND OTHER BENEFIT PLANS
For the year ended December 31, 1998, the Company adopted SFAS No. 132,
Employers Disclosure about Pensions and Other Postretirement Benefits. SFAS No.
132 revises employers pension and other postretirement benefit plan disclosures
but does not change measurement or recognition associated with these plans. It
standardizes disclosure requirements for pensions and other postretirement
benefits to the extent practicable.
PENSION PLANS
The Company's pension plans include: (1) three qualified non-contributory
defined benefit plans (for salaried employees and substantially all domestic
hourly employees); (2) two non-qualified supplemental plans (for salaried
employees whose benefits under the qualified plan are limited by federal
legislation); and (3) a non-qualified cash balance international plan (for
select employees who are not eligible to participate in the U.S.-based plans
because of citizenship). The vesting period for each plan is five years of
service. The plans benefit formulas are based on an employees years of credited
service and either (1) such employees last five years average pay (salaried
plan), (2) a percentage of annual pay (international plan) or (3) a flat dollar
amount adjusted by a service-weighted multiplier (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.
OTHER BENEFIT PLANS
The Company provides defined medical benefits to qualified retirees (and to
their eligible dependents) who were salaried employees and defined life
insurance benefits to qualified retirees who were salaried employees. In
general, participants become eligible for these benefits upon retirement
directly from the Company if they are at least 55 years old and the combination
of their age and years of service with the Company equals 75 or more. Beginning
in 1998, these plans included former Santa Fe employees who were previously
covered under separate contributory medical and noncontributory life insurance
plans.
Defined medical benefits cover most of the reasonable and customary
charges for hospital, surgical,
33
<PAGE> 26
NEWMONT MINING CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
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 following tables provide a reconciliation of changes in the plans
benefit obligations and assets fair values over the two-year period ended
December 31, 1998, and a statement of the funded status as of December 31 of
both years (in thousands):
<TABLE>
<CAPTION>
Pension Benefits Other Benefits
1998 1997 1998 1997
--------- --------- --------- ---------
<S> <C> <C> <C> <C>
Change in Benefit Obligation:
Benefit obligation at beginning of year $ 118,099 $ 96,465 $ 42,898 $ 31,013
Service cost-benefits earned during the year 7,023 6,529 3,604 2,908
Interest cost 8,122 7,435 2,961 2,317
Amendments -- 5 -- 4,998
Actuarial (gain)/loss 4,775 12,827 1,785 2,692
Curtailment -- (1,867) -- --
Special benefits -- 899 -- --
Benefits paid (4,609) (4,194) (1,205) (1,030)
--------- --------- --------- ---------
Benefit obligation at end of year $ 133,410 $ 118,099 $ 50,043 $ 42,898
========= ========= ========= =========
Change in Fair Value of Assets:
Fair value of assets at beginning of year $ 108,585 $ 97,784 $ -- $ --
Adjustment to fair value of assets 287 (1,657) -- --
Actual return on plan assets 8,064 15,409 -- --
Employer contributions 2,173 1,243 1,205 1,030
Benefits paid (4,609) (4,194) (1,205) (1,030)
--------- --------- --------- ---------
Fair value of assets at end of year $ 114,500 $ 108,585 $ -- $ --
========= ========= ========= =========
Funded status $ (18,910) $ (9,514) $ (50,043) $ (42,898)
Unrecognized prior service cost 1,565 1,679 3,246 3,476
Unrecognized net loss (gain) 10,573 5,340 (1,936) (2,706)
Unrecognized net obligation (asset) 288 203 -- --
--------- --------- --------- ---------
Accrued cost $ (6,484) $ (2,292) $ (48,733) $ (42,128)
========= ========= ========= =========
</TABLE>
In connection with the Santa Fe merger, the Company's projected pension
benefit obligation increased $0.9 million for special pension benefits to
certain key executives and decreased $1.9 million for curtailment resulting from
the reduction in workforce. At December 31 of both years, the Company's hourly
pension plan was the only qualified pension plan with an accumulated benefit
obligation (ABO) in excess of plan assets. This plans ABO was $13.7 million and
$11.5 million at December 31, 1998 and 1997, respectively, while the fair value
of plan assets was $11.3 million and $10.0 million as of the same dates. Assets
in qualified plans consist of stocks, bonds and cash.
The Company's non-qualified pension plans and postretirement benefit plans
have ABOs in excess of plan assets. The ABO was $4.4 million and $3.9 million
for supplemental pension plans and $50.0 million and $42.9 million for
postretirement benefit plans, at December 31, 1998 and 1997, respectively. The
Company maintains trusts to fund these benefits.
The trust maintained to fund the supplemental pension plan also funds
death benefits for officers of the Company. This trust is funded at the
discretion of the Company and had a balance, which approximated market value, of
$1.5 million at December 31, 1998 and $1.7 million at December 31, 1997. The
trust used to fund postretirement benefits, which can also be used to pay other
employee benefits, had assets with a market value of $0.7 million and $1.3
million at December 31, 1998 and 1997, respectively.
34
<PAGE> 27
NEWMONT MINING CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
The following table provides amounts recognized in the consolidated balance
sheets as of December 31 (in thousands):
<TABLE>
<CAPTION>
Pension Benefits Other Benefits
1998 1997 1998 1997
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
Amounts recognized in the consolidated balance sheets:
(Accrued) benefit cost $ (13,374) $ (9,189) $ (48,733) $ (42,128)
Intangible asset 3,427 3,151 -- --
Accumulated other comprehensive income 3,463 3,746 -- --
---------- ---------- ---------- ----------
Net amount recognized $ (6,484) $ (2,292) $ (48,733) $ (42,128)
========== ========== ========== ==========
</TABLE>
In accordance with the provisions of SFAS No. 87, an adjustment was
required to reflect a minimum liability for the supplemental pension plan in
1998, 1997 and 1996. As a result of such adjustment, an intangible asset was
recorded and (to the extent the minimum liability adjustment exceeded the
unrecognized net transition liability) stockholders equity was reduced $2.3
million, $2.2 million and $2.2 million (net of related deferred income tax
benefits) at December 31, 1998, 1997 and 1996, respectively. The following table
provides components of net periodic pension benefit cost for the indicated
fiscal years (in thousands):
<TABLE>
<CAPTION>
Pension Benefits Other Benefits
---------------------------------------------------------
1998 1997 1996 1998 1997 1996
------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C>
Components of net periodic pension benefit cost:
Service cost $ 7,023 $ 6,529 $ 5,590 $ 3,604 $ 2,908 $ 2,845
Interest cost 8,122 7,435 6,342 2,961 2,317 2,017
Expected return on plan assets (9,093) (7,895) (7,195) -- -- --
Amortization of prior service cost 119 119 31 232 -- --
Amortization of loss/(gain) 280 297 424 (12) (302) (299)
Amortization of net obligation (asset) (86) (86) (85) -- (235) (119)
------- ------- ------- ------- ------- -------
Total net periodic pension benefit cost $ 6,365 $ 6,399 $ 5,107 $ 6,785 $ 4,688 $ 4,444
======= ======= ======= ======= ======= =======
</TABLE>
For the pension plans, prior-service costs are amortized on a
straight-line basis over the average remaining service period of active
participants. Gains and losses in excess of 10% of the greater of the benefit
obligation and the market-related value of assets are amortized over the average
remaining service period of active participants. Postretirement benefits other
than pensions are accrued during an employees service to the Company.
Assumptions used in measuring the Company's benefit obligation were as
follows:
<TABLE>
<CAPTION>
Pension Other
Benefits Benefits
-------------------------------------
1998 1997 1998 1997
---- ---- ---- ----
<S> <C> <C> <C> <C>
Weighted-average assumptions
as of December 31:
Discount rate 6.75% 7.00% 6.75% 7.00%
Expected return on
plan assets 9.00% 9.00% N/A N/A
Rate of compensation
increase 4.00% 4.00% 4.00% 4.00%
---- ---- ---- ----
</TABLE>
The assumed health care cost trend rates to measure the expected cost of
benefits at December 31, 1998 start at a 6% annual increase for coverage before
age 65 and a 5% annual increase for coverage after age 64. The assumed health
care cost trend rates to measure the expected cost of benefits at December 31,
1997 start at a 7% annual increase for coverage before age 65 and a 6% annual
increase for coverage after age 64. These rates were assumed to decrease one
percentage point each year until a 5% annual rate of increase was reached and
assumed thereafter.
Assumed health care cost trend rates have a significant effect on amounts
reported for the health care plans. A 1% change in assumed health care cost
trend rates would have the following effects (in thousands):
<TABLE>
<CAPTION>
1% 1%
Increase Decrease
-------- -------
<S> <C> <C>
Effect on total of service and interest
cost components of net periodic
postretirement health care benefit cost $ 1,150 $ (950)
Effect on the health care component
of the accumulated postretirement
benefit obligation $ 7,300 $(6,000)
</TABLE>
35
<PAGE> 28
NEWMONT MINING CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
SAVINGS PLANS
The Company has two qualified defined contribution savings plans, one that
covers salaried employees and another that covers substantially all hourly
employees. In addition, the Company has a non-qualified supplemental savings
plan for salaried employees whose benefits under the qualified plan are limited
by federal regulations. Prior to 1998, the Company also had a qualified defined
contribution savings plan that covered salaried employees of Santa Fe. At
January 1, 1998 this plan was combined with NMCs salaried plan.
When an employee meets eligibility requirements, the Company matches 100%
of employee contributions of up to 6% and 4% of base salary for the salaried and
hourly plans, respectively. Employees covered by the Santa Fe plan received
matching contributions up to 4% of base salary and eligible hourly employees
also received an employer contribution equal to 2% of before-tax eligible
compensation.
The Company's matching contributions under these plans were $8.7 million,
$8.9 million and $8.2 million in 1998, 1997 and 1996, respectively.
NOTE 13 DIVIDENDS, INTEREST AND OTHER
Included in Dividends, interest and other were $8.3 million, $6.5 million and
$3.1 million in 1998, 1997 and 1996, respectively, for recoveries from
business interruption insurance. Also included in 1997 was a gain of $23.7
million related to closing Santa Fe put and call option contracts.
NOTE 14 WRITE-DOWN OF ASSETS
As a result of a prolonged period of low gold prices, the Company adjusted the
carrying value of certain long-lived assets to their estimated fair values
resulting in an impairment loss of $614.9 million ($424.7 million net of tax).
The write-down included $587.6 million for Nevada operations (primarily at
former Santa Fe properties), $13.4 million for certain Santa Fe exploration
properties and $13.9 million for other investments (including $7.2 million at
the Mesquite mine). The write-down related to Property, plant and mine
development ($528 million), ore-in-stockpiles inventory ($67 million), materials
and supplies inventory ($13 million) and Other long-term assets ($7 million).
NOTE 15 SUPPLEMENTAL CASH FLOW INFORMATION
Net cash provided by operating activities includes the following cash payments
(in thousands):
<TABLE>
<CAPTION>
Year Ended December 31,
1998 1997 1996
-------- -------- --------
<S> <C> <C> <C>
Income taxes, net of refunds $ 52,695 $ 46,671 $ (9,708)
Interest, net of amounts
capitalized $ 80,903 $ 76,711 $ 55,644
-------- -------- --------
</TABLE>
As described in Note 1, in October 1998, NMC acquired the remaining 6.25%
interest in NGC. This transaction (accounted for under the purchase method of
accounting) resulted in non-cash increases to: stockholders equity ($259
million), Investment in Batu Hijau ($122 million), Property, plant and mine
development ($85 million), deferred income tax liability ($54 million); and a
non-cash decrease to minority interest ($107 million).
The following reflects non-cash adjustments recorded on January 1, 1997
for the Minera Yanacocha transaction described in Note 4 (in thousands):
<TABLE>
<S> <C>
Assets
Inventories $ 15,661
Other current assets 28,848
----------
Current assets 44,509
Property, plant and mine development, net 106,308
Other long-term assets 1,887
----------
Total assets $ 152,704
==========
Liabilities
Current portion of long-term debt $ 14,256
Other current liabilities 31,190
----------
Current liabilities 45,446
Long-term debt 24,244
Other long-term liabilities 15,520
----------
Total liabilities $ 85,210
==========
</TABLE>
In connection with the Minera Yanacocha acquisition described above, the
Company recorded $59.8 million in Property, plant and mine development
representing the excess of the cost to purchase the additional interest over the
net book value of such interest.
36
<PAGE> 29
NEWMONT MINING CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
As described in Note 3, in July 1996, the Company began accounting for its
45% interest in Batu Hijau as an equity investment. Related non-cash adjustments
were as follows (in thousands):
<TABLE>
<CAPTION>
Increase (decrease)
------------------
<S> <C>
Assets
Other current assets $ (849)
Property, plant and mine development, net (43,936)
Investment in Batu Hijau (3,607)
Liabilities
Accounts payable 182
----------
Total $ (48,210)
==========
</TABLE>
In 1998 and 1996 the Company retired mostly fully depreciated property,
plant and mine development with an original cost of $50 million and $77 million,
respectively, which is not reflected in the statements of consolidated cash
flows.
In 1997 and 1996, the Company recognized income tax benefits of $12.9
million and $6.0 million, respectively, resulting from the resolution of certain
tax issues associated with prior years.
NOTE 16 SEGMENT AND RELATED INFORMATION
In 1998, the Company adopted SFAS No. 131, Disclosures about Segments of an
Enterprise and Related Information that established standards for reporting
information about operating segments. SFAS No. 131 also established standards
for related disclosures about products and services, geographic areas and major
customers. Information for 1997 and 1996 has been restated to conform to this
standard.
The Company predominantly operates in a single industry as a worldwide
corporation engaged in gold production, exploration for gold 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>
YEAR ENDED DECEMBER 31, 1998
---------------------------------------------------------------------------------------
North American Minera Zarafshan
Operations Yanacocha* Minahasa Newmont Other Consolidated
-------------- ---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
Sales $ 909.7 $ 392.5 $ 96.6 $ 55.1 $ -- $ 1,453.9
Interest income -- 3.2 0.2 -- 4.4 7.8
Interest expense 0.4 9.0 -- 5.1 64.3 78.8
Depreciation and amortization 192.3 59.6 20.1 11.3 5.8 289.1
Pre-tax income (loss) before minority
interest, equity income (loss) and
cumulative effect of a change in
accounting principle (511.2) 177.1 41.2 (0.5) (168.5) (461.9)
Cumulative effect of a change in
accounting principle (10.6) -- (1.5) (2.5) (18.3) (32.9)
Significant non-cash items:
Amortization of capitalized mining 48.4 -- 4.2 -- -- 52.6
Write-down of assets 594.8 -- -- -- 20.1 614.9
Capital expenditures 112.0 82.5 6.4 0.9 14.2 216.0
Total assets at December 31, 1998 $ 1,811.8 $ 500.2 $ 147.2 $ 122.3 $ 605.3 $ 3,186.8
---------- ---------- ---------- ---------- ---------- ----------
</TABLE>
*Not reduced for minority interest
<TABLE>
<CAPTION>
Year Ended December 31, 1997
----------------------------------------------------------------------------------------
North American Minera Zarafshan
Operations Yanacocha* Minahasa Newmont Other Consolidated
------------ ------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
Sales $ 1,075.2 $ 344.3 $ 83.1 $ 70.2 $ -- $ 1,572.8
Interest income -- 4.2 0.1 -- 10.3 14.6
Interest expense 0.3 6.2 -- 6.9 63.7 77.1
Depreciation and amortization 192.4 41.7 18.3 11.9 1.5 265.8
Pre-tax income (loss) before minority
interest, equity income (loss) and
cumulative effect of a change in
accounting principle 223.5 190.1 25.5 8.7 (315.9) 131.9
Amortization of capitalized mining 55.3 -- -- -- -- 55.3
Capital expenditures 249.8 113.7 24.2 5.6 21.8 415.1
Total assets at December 31, 1997 $ 1,605.5 $ 350.6 $ 179.5 $ 137.1 $ 1,341.3 $ 3,614.0
------------ ------------ ------------ ------------ ------------ ------------
</TABLE>
*Not reduced for minority interest
37
<PAGE> 30
NEWMONT MINING CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
Year Ended December 31, 1996
---------------------------------------------------------------------------------
North American Zarafshan
Operations Minahasa Newmont Other Consolidated
------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
Sales $ 995.1 $ 48.0 $ 62.6 $ -- $ 1,105.7
Interest income -- -- 1.4 7.4 8.8
Interest expense -- -- 7.5 51.1 58.6
Depreciation and amortization 184.4 8.7 10.8 0.2 204.1
Pre-tax income (loss) before minority
interest, equity income (loss) and
cumulative effect of a change in
accounting principle 218.2 11.4 15.3 (205.8) 39.1
Capital expenditures $ 454.4 $ 27.4 $ 7.3 $ 58.7 $ 547.8
------------ ------------ ------------ ------------ ------------
</TABLE>
Financial information relating to the Company's equity investments was as
follows (in millions):
<TABLE>
<CAPTION>
1996
1998 1997 ------------------------------
Batu Batu Batu Minera
Hijau Hijau Hijau Yanacocha
---------- ---------- ---------- ------------
<S> <C> <C> <C> <C>
For the years ended December 31:
Sales $ -- $ -- $ -- $ 313.9
Interest income -- -- -- 2.3
Interest expense -- -- -- 3.7
Depreciation and amortization 0.1 0.1 -- 24.6
Net income (loss) before cumulative effect of a change
in accounting principle (26.8) (2.4) (1.6) 132.0**
Cumulative effect of a change in accounting principle (49.3) -- -- --
Capital expenditures 873.6 257.7 78.3 45.1
At December 31,
Total Assets $ 1,351.4 $ 502.5 N/A N/A
--------- --------- --------- ---------
</TABLE>
** Excludes intercompany charges. Reported net income was $124.7 million.
Equity income (loss) of affiliated companies was $(9.2) million in 1998
(based on 56.25% of the Batu Hijau loss, after elimination of approximately ~$11
million of intercompany interest) and $50.2 million in 1996 (based on 38% of
Minera Yanacocha earnings). Equity losses for Batu Hijau for 1997 and 1996 were
included in Exploration expense. In 1996, the Company received $29.6 million in
dividends related to its interest in Minera Yanacocha.
Revenues from export and domestic sales were as follows (in millions):
<TABLE>
<CAPTION>
For the Years Ended December 31,
----------------------------------------------
1998 1997 1996
------------ ------------ ------------
<S> <C> <C> <C>
Europe $ 1,382.0 $ 1,498.0 $ 749.4
United States 7.2 6.0 341.3
Other 64.7 68.8 15.0
------------ ------------ ------------
$ 1,453.9 $ 1,572.8 $ 1,105.7
============ ============ ============
</TABLE>
Long-lived assets in the United States and other countries are as follows
(in millions): As of December 31:
<TABLE>
<CAPTION>
1998 1997
------------ ------------
<S> <C> <C>
United States $ 1,849.7 $ 2,205.6
Indonesia 394.1 269.0
Other 429.9 498.0
------------ ------------
$ 2,673.7 $ 2,972.6
============ ============
</TABLE>
The Company is not economically dependent on a limited number of customers
for the sale of its product because gold can be sold through numerous commodity
market traders worldwide. In 1998, sales to two customers totaled $869 million
and $239 million or 61% and 17% of total sales, respectively. In 1997, sales to
one customer totaled $897 million or 57% of total sales. In 1996, sales to one
customer accounted for $213 million or 19% of total sales.
NOTE 17 ACCOUNTING CHANGE
As described in Note 1, the Company adopted SOP 98-5 effective January 1, 1998.
The change resulted in expensing certain costs incurred in the start-up phase
of a project. The quarters ended March 31, June 30, and September 30, 1998 were
restated to reflect the accounting change, which totaled $5.0 million (net of
tax and minority interest) for the year (see Note 19). Previously capitalized
start-up costs (incurred prior to January 1, 1998) of $32.9 million (net of tax
and minority interest) were reflected as the cumulative effect of the accounting
change and included approximately $18 million for Batu Hijau and $11 million for
Nevada operations.
38
<PAGE> 31
NEWMONT MINING CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 18 COMMITMENTS AND CONTINGENCIES
ENVIRONMENTAL OBLIGATIONS
The Company(1)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 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. The
Company cannot predict such future expenditures.
Estimated future reclamation and remediation costs are based principally on
legal and regulatory requirements. At December 31, 1998 and 1997, $56.0 million
and $45.6 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
and the Lone Tree Mine Plan of Operations. 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(1)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(1)s
best estimate of its liability for these matters, $44.9 million and $52.2
million were accrued for such obligations at December 31, 1998 and 1997,
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 December 31, 1998. The amounts accrued for these matters
are reviewed periodically based upon facts and circumstances available at the
time. In 1998, 1997 and 1996, charges related to environmental obligations
associated with former mining activities of $4.8 million, $15.0 million and $6.6
million, respectively, were included in Other expenses. In 1997, the Company
received $10 million, net of related expenses for the settlement of litigation
against certain insurance carriers related to recovery of costs for certain of
its remediation activities. These net proceeds were applied against charges
taken for changes in estimated future remediation costs.
Details about certain of the more significant sites involved are discussed
below.
IDARADO MINING COMPANY ((3)IDARADO(2))--80.1%-OWNED
In July 1992, the Company and Idarado signed a consent decree with the State of
Colorado ((3)State(2)) 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 ((3)CERCLA(2)), generally referred to
as the (3)Superfund Act.(2) 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 was substantially complete by the end of 1997. 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 $9.6 million letter of credit to secure their potential
obligations under the consent decree.
RESURRECTION MINING COMPANY ((3)RESURRECTION(2))--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
((3)EPA(2)) 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-1800s, which government agencies
claim are causing substantial environmental problems in the area.
39
<PAGE> 32
NEWMONT MINING CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
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. The parties are in negotiations regarding remaining remedial work for this
area, which primarily consists of environmental monitoring and operating and
maintenance activities.
The parties have entered into a consent decree with respect to the
remaining area that apportions liabilities and responsibilities for the site
among the various parties. The EPA has approved remedial actions for selected
components of Resurrection(1)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.
DAWN MINING COMPANY ((3)DAWN(2))--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(1)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(1)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(1)s then 51%
owner) liable for any costs incurred as a result of Dawn(1)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. 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.
GUARANTEE OF THIRD PARTY INDEBTEDNESS
The Company guaranteed a former subsidiary(1)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 Company will be required
to remain liable on this guarantee as long as the bonds remain outstanding;
however, the Company has not been required to pay any of these amounts, nor does
it expect to have to pay any in the future.
COMMODITY INSTRUMENTS
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 at an average price of $454 an ounce.
OTHER COMMITMENTS AND CONTINGENCIES
Under a 1992 agreement, Barrick Goldstrike Mines Inc. ((3)Barrick(2)), is mining
the Post deposit which is located on both companies(1) property and with respect
to which both companies share mining costs and de-watering costs. The Company
paid $33.0 million and $63.8 million for its share of such costs in 1997 and
1996, respectively. No payments were made in 1998, but payments of approximately
$18 million are expected during 1999.
40
<PAGE> 33
NEWMONT MINING CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
In a 1993 asset exchange, a wholly-owned subsidiary of Santa Fe transferred
a coal lease under which the subsidiary had collected advance royalty payments
totaling $484 million. Remaining payments under the lease to the transferee
total $390 million from 1994 to 2018. In the event of title failure as stated in
the lease, this subsidiary has a primary obligation to refund previously
collected payments and has a secondary obligation to refund any of the $390
million collected by the transferee, if the transferee fails to meet its refund
obligation. The subsidiary has no direct liability to the lessor and has title
insurance on the leased coal deposits of $240 million covering the secondary
obligation. The Company and the subsidiary regard the circumstances entitling
the lessor to a refund as remote. The Company has agreed to maintain the
subsidiary(1)s net worth at $108 million until July 1, 2005.
The Company has minimum royalty obligations on one of its producing mines
for the life of the mine. Amounts paid as a minimum royalty (where production
royalties are less than the minimum obligation) in any year are recoverable in
future years when the minimum royalty obligation is exceeded. Although the
minimum royalty requirement may not be met in a particular year, the Company
expects that over the mine life, gold production will be sufficient to meet the
minimum royalty requirements.
At December 31, 1998, there were $76.3 million of outstanding letters of
credit and surety bonds primarily for bonding reclamation plans and electric
supply and reinsurance agreements. The Company has provided investment
collateral for $8.5 million of these letters of credit. The remaining $67.8
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 marketplace.
The Company 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 proceeding or that 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.
STOCK MARKET INFORMATION (UNAUDITED)
Newmonts common stock is listed and principally traded on the New York Stock
Exchange (under the symbol NEM) and is also listed on the Paris Bourse, the
Brussels Stock Exchange, the Swiss Stock Exchange and the Lima Stock Exchange.
The following table sets forth, for the periods indicated, the high and low
sales prices per share of Newmonts common stock as reported on the New York
Stock Exchange Composite Tape.
<TABLE>
<CAPTION>
1998 1997
--------------------- ---------------------
High Low High Low
-------- -------- -------- --------
<S> <C> <C> <C> <C>
First quarter $ 31.63 $ 23.75 $ 47.50 $ 38.25
Second quarter $ 34.88 $ 21.75 $ 39.88 $ 33.50
Third quarter $ 25.25 $ 13.25 $ 45.88 $ 35.25
Fourth quarter $ 30.31 $ 16.25 $ 45.63 $ 26.56
</TABLE>
On March 4, 1999, there were approximately 26,064 stockholders of record
of Newmonts common stock. A dividend of $0.03 per share of common stock
outstanding was declared in each quarter of 1998, or a total of $0.12 per share
for such year. In 1997, a dividend of $0.12 per share of common stock
outstanding was declared in the first three quarters and $0.03 per share in the
fourth quarter, or a total of $0.39 per share for such year. The determination
of the amount of future dividends, however, will be made by Newmonts Board of
Directors from time to time and will depend on Newmonts future earnings, capital
requirements, financial condition and other relevant factors.
41
<PAGE> 34
NEWMONT MINING CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 19 UNAUDITED SUPPLEMENTARY DATA
QUARTERLY DATA
The following is a summary of selected quarterly financial information (in
millions except per share amounts):
<TABLE>
<CAPTION>
1998
---------------------------------------------------------------------------
Three Months Ended
----------------------------------------------------------- Year Ended
March 31, June 30, September 30, December 31, December 31,
------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
Sales $ 378.1 $ 374.0 $ 349.8 $ 352.0 $ 1,453.9
Gross profit(1) $ 96.2 $ 94.8 $ 70.4 $ 78.5 $ 339.9
Net income (loss) before cumulative effect
of change in accounting principle(2)(3) $ 30.2 $ 24.6 $ 6.1 $ (421.4) $ (360.5)
Net income (loss) $ (2.7) $ 24.6 $ 6.1 $ (421.4) $ (393.4)
Net income (loss) before cumulative effect of
a change in accounting principle per
common share, basic and diluted $ 0.19 $ 0.16 $ 0.04 $ (2.53) $ (2.27)
Net income (loss) per common share,
basic and diluted $ (0.02) $ 0.16 $ 0.04 $ (2.53) $ (2.47)
Basic weighted average shares outstanding 156.5 156.5 156.5 166.5 159.0
Dividends declared per NMC common share $ 0.03 $ 0.03 $ 0.03 $ 0.03 $ 0.12
Closing price of NMC common stock $ 30.5625 $ 23.625 $ 24.25 $ 18.25 $ 18.25
------------ ------------ ------------ ------------ ------------
</TABLE>
<TABLE>
<CAPTION>
1997
-------------------------------------------------------------------------
Three Months Ended
--------------------------------------------------------- Year Ended
March 31, June 30, September 30, December 31, December 31,
------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
Sales $ 355.0 $ 421.8 $ 383.8 $ 412.2 $ 1,572.8
Gross profit(1) $ 110.5 $ 143.9 $ 132.2 $ 129.9 $ 516.5
Net income (loss)(4) $ 51.2 $ (64.6) $ 43.1 $ 38.6 $ 68.4
Net income (loss) per common share, basic and diluted $ 0.32 $ (0.41) $ 0.28 $ 0.25 $ 0.44
Basic weighted average shares outstanding 156.1 156.1 156.3 156.5 156.2
Dividends declared per NMC common share $ 0.12 $ 0.12 $ 0.12 $ 0.03 $ 0.39
Closing price of NMC common stock $ 38.75 $ 39.00 $ 44.94 $ 29.375 $ 29.375
------------ ------------ ------------ ------------ ------------
</TABLE>
(1) Sales less costs applicable to sales and depreciation, depletion and
amortization.
(2) In the quarter ended December 31, 1998, the Company adopted SOP 98-5
related to start-up costs, as described in Note 17. The accounting
principle was applied retroactively to January 1, 1998, and 1998 quarterly
information was restated to reflect a) $32.9 million for the cumulative
effect of the change and $0.5 million additional expense, net of tax, in
the quarter ended March 31, and b) $1.1 million and $0.8 million additional
expense, net of tax, in the quarters ended June 30 and September 30,
respectively. The effect of these changes on previously reported
information was as follows:
<TABLE>
<CAPTION>
March 31, June 30, September 30,
----------------------- ----------------------- -----------------------
Originally Originally Originally
Reported Restated Reported Restated Reported Restated
---------- ---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
Gross profit $ 95.4 $ 96.2 $ 94.1 $ 94.8 $ 69.7 $ 70.4
Net income before cumulative effect of a
change in accounting principle $ 30.8 $ 30.3 $ 25.7 $ 24.6 $ 6.9 $ 6.1
Net income (loss) $ 30.8 $ (2.7) $ 25.7 $ 24.6 $ 6.9 $ 6.1
Net income before cumulative effect of a
change in accounting principle
per common share, basic and diluted $ 0.20 $ 0.19 $ 0.16 $ 0.16 $ 0.04 $ 0.04
Net income (loss) per common share, basic and diluted $ 0.20 $ (0.02) $ 0.16 $ 0.16 $ 0.04 $ 0.04
---------- ---------- ---------- ---------- ---------- ----------
</TABLE>
(3) Included an after-tax charge of $2.6 million for expenses related to the
adoption of SOP 98-5 and an after-tax impairment charge of $424.7 million
in the quarter ended December 31.
(4) Included an after-tax gain of $14.4 million from the close-out of put and
call option contracts in the quarter ended March 31 and an after-tax charge
of $109.2 million and $3.1 million for expenses and write-offs associated
with the Santa Fe merger (see Note 1) in the quarters ended June 30 and
December 31, respectively.
RATIO OF EARNINGS TO FIXED CHARGES
The ratio of earnings to fixed charges was (4.0), 2.3, 1.7, 3.6, and 3.3 for the
years ended December 31, 1998, 1997, 1996, 1995, and 1994, respectively.
Earnings in 1998 were inadequate to cover fixed charges, with a deficiency of
$480 million. 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.
42
<PAGE> 35
NEWMONT MINING CORPORATION
OPERATING STATISTICS
FOR THE YEAR ENDED DECEMBER 31,
NORTH AMERICAN MINE PRODUCTION
(Dry Short Tons 000)
<TABLE>
<CAPTION>
1998 1997
------------------------------------------------------- --------------------------------------------------
Average Mill Leach Average Mill Leach
Grade* Ore Ore Waste Total Grade* Ore Ore Waste Total
------- ------- ------- ------- ------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
NEVADA
Open-Pit Mines
Carlin Trend:
Carlin South 5,973 17,075 25,598 48,646 7,649 27,544 41,312 76,505
Carlin North-Post 40 6 11,925 11,971 4,721 7 47,914 52,642
Carlin North-
Genesis Complex 428 7,441 14,924 22,793 612 10,381 26,331 37,324
Carlin North-Other 695 4,872 19,699 25,266 1,860 3,668 20,843 26,371
Twin Creeks 4,703 7,591 97,882 110,176 4,418 11,191 99,942 115,551
Lone Tree Complex 2,641 3,616 47,822 54,079 2,874 7,104 50,267 60,245
------- ------- ------- ------- ------- ------- ------- ------- ------- -------
Total Open-Pit 0.053 14,480 40,601 217,850 272,931 0.047 22,134 59,895 286,609 368,638
------- ------- ------- ------- ------- ------- ------- ------- ------- -------
Nevada Underground
Carlin North 591 0 0 591 683 0 0 683
Carlin Rain 26 4 0 30 145 29 0 174
Rosebud (50%) 168 0 0 168 113 0 0 113
------- ------- ------- ------- ------- ------- ------- ------- ------- -------
Total Underground 0.625 785 4 0 789 0.517 941 29 0 970
------- ------- ------- ------- ------- ------- ------- ------- ------- -------
TOTAL NEVADA 0.062 15,265 40,605 217,850 273,720 0.052 23,075 59,924 286,609 369,608
CALIFORNIA
Mesquite 0.016 0 11,537 13,457 24,994 0.016 0 16,463 29,142 45,605
------- ------- ------- ------- ------- ------- ------- ------- ------- -------
MEXICO
La Herradura 0.022 0 1,647 4,238 5,885 --
------- ------- ------- ------- ------- ------- ------- ------- ------- -------
TOTAL NORTH AMERICAN 0.053 15,265 53,789 235,545 304,599 0.045 23,075 76,387 315,751 415,213
======= ======= ======= ======= ======= ======= ======= ======= ======= =======
<CAPTION>
1996
-------------------------------------------------------
Average Mill Leach
Grade* Ore Ore Waste Total
------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C>
NEVADA
Open-Pit Mines
Carlin Trend:
Carlin South 8,407 30,891 57,805 97,103
Carlin North-Post 1,037 136 78,180 79,353
Carlin North-
Genesis Complex 1,753 12,493 43,822 58,068
Carlin North-Other 661 1,289 4,969 6,919
Twin Creeks 3,136 18,238 106,845 128,219
Lone Tree Complex 1,910 4,736 41,645 48,291
------- ------- ------- ------- -------
Total Open-Pit 0.037 16,904 67,783 333,266 417,953
------- ------- ------- ------- -------
Nevada Underground
Carlin North 546 0 0 546
Carlin Rain 160 6 0 166
Rosebud (50%) 0 0 0 0
------- ------- ------- ------- -------
Total Underground 0.471 706 6 0 712
------- ------- ------- ------- -------
TOTAL NEVADA 0.040 17,610 67,789 333,266 418,665
CALIFORNIA
Mesquite 0.023 0 15,528 25,891 41,419
------- ------- ------- ------- -------
MEXICO
La Herradura
------- ------- ------- ------- -------
TOTAL NORTH AMERICAN 0.038 17,610 83,317 359,157 460,084
======= ======= ======= ======= =======
</TABLE>
NORTH AMERICAN MILL AND LEACH PRODUCTION
(Dry Short Tons 000)
<TABLE>
<CAPTION>
1998 1997
------------------------------------------------- ------------------------------------------------
Ounces Ounces
Dry Tons Average Recovery Produced Dry Tons Average Recovery Produced
(000) Grade* Rate (%) (000s) (000) Grade* Rate (%) (000s)
----------- ----------- ----------- ----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
NEVADA
Oxide Mills:
Carlin Trend
Mill No. 3 121 0.195 84.2 20.5 0 0.000 0.0 0.0
Mill No. 4 804 0.139 78.5 93.6 2,104 0.125 76.6 207.7
Mill No. 5 5,515 0.117 85.9 577.7 6,170 0.087 81.5 443.7
Twin Creeks 1,542 0.155 93.2 175.6 3,633 0.096 86.2 286.4
Lone Tree Complex 432 0.140 87.9 56.4 680 0.138 83.0 71.0
----------- ----------- ----------- ----------- ----------- ----------- ----------- -----------
Total Oxide Mills 8,414 0.129 86.8 923.8 12,587 0.099 81.9 1,008.8
----------- ----------- ----------- ----------- ----------- ----------- ----------- -----------
Refractory Mills:
Carlin Roaster 2,325 0.226 89.5 477.7 2,330 0.336 87.3 700.9
Twin Creeks Autoclaves 2,722 0.240 89.1 581.0 763 0.206 89.5 144.0
Lone Tree Autoclave 2,251 0.101 86.5 110.6 1,382 0.106 85.8 114.2
----------- ----------- ----------- ----------- ----------- ----------- ----------- -----------
Total Refractory Mills 7,298 0.193 88.8 1,169.3 4,475 0.242 87.4 959.1
----------- ----------- ----------- ----------- ----------- ----------- ----------- -----------
Total Mills 15,712 0.158 88.0 2,093.1 17,062 0.137 83.3 1,967.9
----------- ----------- ----------- ----------- ----------- ----------- ----------- -----------
Leach Production:
Carlin-Oxide 24,354 0.027 N/A 398.3 34,820 0.022 N/A 465.3
Carlin-Refractory 0 0.000 N/A 7.7 363 0.075 N/A 13.8
Twin Creeks-Oxide 7,660 0.024 N/A 179.7 11,187 0.018 N/A 202.0
Lone Tree-Oxide 3,608 0.340 N/A 90.8 6,926 0.026 N/A 127.5
----------- ----------- ----------- ----------- ----------- ----------- ----------- -----------
Total Leach 35,622 0.028 676.5 53,296 0.022 808.6
----------- ----------- ----------- ----------- ----------- ----------- ----------- -----------
TOTAL NEVADA PRODUCTION 51,334 0.068 2,769.6 70,358 0.050 2,776.5
CALIFORNIA
Mesquite-Leach 11,537 0.016 N/A 154.0 16,463 0.016 N/A 227.9
----------- ----------- ----------- ----------- ----------- ----------- ----------- -----------
MEXICO
La Herradura-Leach 1,647 0.022 N/A 12.9 -- --
----------- ----------- ----------- ----------- ----------- ----------- ----------- -----------
TOTAL NORTH AMERICAN PRODUCTION 64,518 0.057 2,936.5 86,821 0.040
=========== =========== =========== =========== =========== =========== =========== ===========
<CAPTION>
1996
--------------------------------------------------------
Ounces
Dry Tons Average Recovery Produced
(000) Grade* Rate (%) (000s)
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
NEVADA
Oxide Mills:
Carlin Trend
Mill No. 3 242 0.186 68.2 39.6
Mill No. 4 2,741 0.071 75.6 152.7
Mill No. 5 5,904 0.084 77.8 400.8
Twin Creeks 2,768 0.085 83.7 160.7
Lone Tree Complex 241 0.133 86.0 27.6
----------- ----------- ----------- -----------
Total Oxide Mills 11,896 0.084 79.1 781.4
----------- ----------- ----------- -----------
Refractory Mills:
Carlin Roaster 2,364 0.256 84.8 540.0
Twin Creeks Autoclaves 0 0.000 0.0 0.0
Lone Tree Autoclave 841 0.165 90.9 127.7
----------- ----------- ----------- -----------
Total Refractory Mills 3,205 0.232 86.0 667.7
----------- ----------- ----------- -----------
Total Mills 15,101 0.115 80.6 1,449.1
----------- ----------- ----------- -----------
Leach Production:
Carlin-Oxide 38,658 0.022 N/A 547.3
Carlin-Refractory 352 0.107 N/A 19.7
Twin Creeks-Oxide 18,238 0.022 N/A 261.3
Lone Tree-Oxide 4,716 0.025 N/A 50.9
----------- ----------- ----------- -----------
Total Leach 61,964 0.023 879.2
----------- ----------- ----------- -----------
TOTAL NEVADA PRODUCTION 77,065 0.041 2,328.3
CALIFORNIA
Mesquite-Leach 15,527 0.023 N/A 191.6
----------- ----------- ----------- -----------
MEXICO
La Herradura-Leach -- --
----------- ----------- ----------- -----------
TOTAL NORTH AMERICAN PRODUCTION 92,592 0.035 2,519.9
=========== =========== =========== ===========
</TABLE>
*Ounce per ton.
45
<PAGE> 36
NEWMONT MINING CORPORATION
OPERATING STATISTICS
FOR THE YEAR ENDED DECEMBER 31,
OVERSEAS MINE PRODUCTION
(Dry Short Tons 000)
<TABLE>
<CAPTION>
1998 1997
--------------------------------------------------- ---------------------------------------------------
Average Mill Leach Average Mill Leach
Grade* Ore Ore Waste Total Grade* Ore Ore Waste Total
------- ------- ------- ------- ------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
BATU HIJAU -- -- 42,267 42,267 -- -- -- --
MINAHASA 0.269 1,271 76 6,907 8,254 0.231 1,269 0 10,032 11,301
YANACOCHA
Carachugo N/A 13,174 10,606 23,780 0 10,658 7,509 18,167
Maqui Maqui N/A 12,572 6,843 19,415 0 14,909 7,379 22,288
Yanacocha N/A 11,642 6,692 18,334 0 601 831 1,432
San Jose N/A 4,980 3,405 8,385 0 3,239 1,484 4,723
------- ------- ------- ------- ------- ------- ------- ------- ------- -------
TOTAL YANACOCHA 0.045 42,368 27,546 69,914 0.043 0 29,407 17,203 46,610
------- ------- ------- ------- ------- ------- ------- ------- ------- -------
TOTAL OVERSEAS 0.052 1,271 42,444 76,720 120,435 0.051 1,269 29,407 27,235 57,911
======= ======= ======= ======= ======= ======= ======= ======= ======= =======
<CAPTION>
1996
---------------------------------------------------
Average Mill Leach
Grade* Ore Ore Waste Total
------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C>
BATU HIJAU -- -- -- --
MINAHASA 0.258 1,048 0 9,062 10,110
YANACOCHA
Carachugo 0 2,491 1,380 3,871
Maqui Maqui 0 15,218 4,291 19,509
Yanacocha 0 0 0 0
San Jose 0 6,026 1,145 7,171
------- ------- ------- ------- -------
TOTAL YANACOCHA 0.046 0 23,735 6,816 30,551
------- ------- ------- ------- -------
TOTAL OVERSEAS 0.055 1,048 23,735 15,878 40,661
======= ======= ======= ======= =======
</TABLE>
OVERSEAS MILL AND LEACH PRODUCTION
<TABLE>
<CAPTION>
1998
---------------------------------------------------------------------------------
Ounces Equity
Dry Tons Average Recovery Produced Ounces
(000) Grade* Rate (%) (000s) (000s)
------------- ------------- ------------- ------------- -------------
<S> <C> <C> <C> <C> <C>
MINAHASA
Mill 780 0.383 89.3 261.0 261.0
YANACOCHA
Leach 42,368 0.045 N/A 1,335.8 685.9
ZARAFSHAN-NEWMONT
Leach 14,851 0.051 N/A 374.6 187.3
------------- ------------- ------------- ------------- -------------
TOTAL OVERSEAS
PRODUCTION 58,000 0.051 1,971.4 1,134.2
============= ============= ============= ============= =============
TOTAL NORTH
AMERICAN
PRODUCTION 2,936.5 2,936.5
============= ============= ============= ============= =============
TOTAL
PRODUCTION 4,907.9 4,070.7
============= ============= ============= ============= =============
<CAPTION>
1997
---------------------------------------------------------------------------------
Ounces Equity
Dry Tons Average Recovery Produced Ounces
(000) Grade* Rate (%) (000s) (000s)
------------- ------------- ------------- ------------- -------------
<S> <C> <C> <C> <C> <C>
MINAHASA
Mill 794 0.289 91.4 206.5 206.5
YANACOCHA
Leach 29,407 0.043 N/A 1,052.8 530.9
ZARAFSHAN-NEWMONT
Leach 14,618 0.050 N/A 430.1 215.0
------------- ------------- ------------- ------------- -------------
TOTAL OVERSEAS
PRODUCTION 44,819 0.049 1,689.4 952.4
============= ============= ============= ============= =============
TOTAL NORTH
AMERICAN
PRODUCTION 3,004.4 3,004.4
============= ============= ============= ============= =============
TOTAL
PRODUCTION 4,693.8 3,956.8
============= ============= ============= ============= =============
<CAPTION>
1996
-----------------------------------------------------------------------------------
Ounces Equity
Dry Tons Average Recovery Produced Ounces
(000) Grade* Rate (%) (000s) (000s)
------------- ------------- ------------- ------------- -------------
<S> <C> <C> <C> <C> <C>
MINAHASA
Mill 454 0.279 90.3 112.7** 112.7**
YANACOCHA
Leach 23,735 0.046 N/A 811.4 308.3
ZARAFSHAN-NEWMONT
Leach 12,737 0.053 N/A 326.5 163.2
------------- ------------- ------------- ------------- -------------
TOTAL OVERSEAS
PRODUCTION 36,926 0.052 1,250.6 584.2
============= ============= ============= ============= =============
TOTAL NORTH
AMERICAN
PRODUCTION 2,519.9 2,519.5
============= ============= ============= ============= =============
TOTAL
PRODUCTION 3,770.5 3,104.1
============= ============= ============= ============= =============
</TABLE>
*Ounce per ton.
**Includes 5,700 ounces produced before commercial operations commenced.
47
<PAGE> 1
EXHIBIT 13(a)
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors and Shareholders of Santa Fe Pacific Gold Corporation
In our opinion, the consolidated statements of operations, of cash flows
and of shareholders' equity of Santa Fe Pacific Gold Corporation (not presented
separately herein) present fairly, in all material respects, the results of
operations and cash flows of Santa Fe Pacific Gold Corporation and its
subsidiaries for the year ended December 31, 1996, in conformity with generally
accepted accounting principles. 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 audit. We conducted our audit
of these statements in accordance with generally accepted auditing standards
which 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, assessing the accounting principles
used and significant estimates made by management, and evaluating the overall
financial statement presentation. We believe that our audit provides a
reasonable basis for the opinion expressed above.
PRICE WATERHOUSE LLP
Phoenix, Arizona
February 1, 1997, except for the fifth paragraph of Note 1,
which is as of March 10, 1997
<PAGE> 1
EXHIBIT 21
SUBSIDIARIES OF NEWMONT MINING CORPORATION
<TABLE>
<CAPTION>
Name Ownership Place of Incorporation
- ---- --------- ----------------------
<S> <C> <C>
Newmont Gold Company 100% Delaware
Santa Fe Pacific Gold Corporation 100% Delaware
Hospah Coal Company 100% Delaware
Minera Yanacocha, S.A. 51.35% Peru
PT Newmont Minahasa Raya 80% Indonesia
PT Newmont Nusa Tenggara 45% Indonesia
</TABLE>
<PAGE> 1
Exhibit 23(a)
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the incorporation of our
report included in this 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, S-8 Registration Statement
No. 33-62469, S-8 Registration Statement No. 333-04161, S-4 Registration
Statement No. 333-19335, Post Effective Amendment No. 1 on Form S-8 to Form S-4
No. 333-19335-01, S-3 Registration Statement No. 333-59141, S-8 Registration
Statement No. 333-64795, S-8 Registration Statement No. 333-69147 and S-8
Registration Statement No. 333-69145.
ARTHUR ANDERSEN LLP
Denver, Colorado,
March 30, 1999.
<PAGE> 1
EXHIBIT 23(b)
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the incorporation by reference in the Prospectus
constituting part of the Registration Statements on Form S-3 (Nos. 33-54249
and 33-59141), and Form S-4 (No. 333-19335), and the Registration Statements
on Form S-8 (Nos. 33-49872; 33-53267; 33-62469; 333-04161; 333-64795; 333-69147;
333-69145; and 333-19335-01) of Newmont Mining Corporation of our report dated
February 1, 1997, except for the fifth paragraph of Note 1, which is as of
march 10, 1997, pertaining to the consolidated financial statements of Santa
Fe Pacific Gold Corporation and Subsidiaries appearing in Newmont Mining
Corporation's Annual Report on Form 10-K for the year ended December 31, 1998.
It should be noted, however, that such financial statements are not included
in such Annual Report on Form 10-K.
PricewaterhouseCoopers LLP
Phoenix, Arizona
March 30, 1999
<PAGE> 1
EXHIBIT 24
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 Mining Corporation 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 Mining Corporation) to the Annual Report on
form 10-K of Newmont Mining Corporation for the fiscal year ended December 31,
1998 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 17th day of March, 1999.
<TABLE>
<CAPTION>
SIGNATURES TITLE
---------- -----
<S> <C>
/s/ RONALD C. CAMBRE Chairman, President and Chief
----------------------------- Executive Officer and Director
Ronald C. Cambre (Principal Executive Officer)
/s/ JAMES T. CURRY, JR. Director
----------------------------
James T. Curry, Jr.
/s/ JOSEPH P. FLANNERY Director
----------------------------
Joseph P. Flannery
/s/ THOMAS A. HOLMES Director
----------------------------
Thomas A. Holmes
/s/ GEORGE B. MUNROE Director
----------------------------
George B. Munroe
/s/ ROBIN A. PLUMBRIDGE Director
----------------------------
Robin A. Plumbridge
/s/ ROBERT H. QUENON Director
----------------------------
Robert H. Quenon
</TABLE>
<PAGE> 2
<TABLE>
<CAPTION>
SIGNATURES TITLE
---------- -----
<S> <C>
/s/ MOEEN A. QURESHI Director
-----------------------------
Moeen A. Qureshi
/s/ MICHAEL K. REILLY Director
-----------------------------
Michael K. Reilly
/s/ JEAN HEAD SISCO Director
-----------------------------
Jean Head Sisco
/s/ JAMES V. TARANIK Director
-----------------------------
James V. Taranik
/s/ WILLIAM I. M. TURNER, JR. Director
-----------------------------
William I. M. Turner, Jr.
/s/ WAYNE W. MURDY Executive Vice President and Chief
----------------------------- Financial Officer (Principal
Wayne W. Murdy Financial Officer)
/s/ LINDA K. WHEELER Vice President and Controller
----------------------------- (Principal Accounting Officer)
Linda K. Wheeler
</TABLE>
-2-
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