<PAGE>
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
FORM 10-Q
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED JUNE 30, 2000
or
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from ____________ to _______________
Commission File Number: 1-1153
NEWMONT MINING CORPORATION
--------------------------
(Exact name of registrant as specified in its charter)
Delaware 13-1806811
-------- ----------
(State or other jurisdiction (I.R.S. Employer Identification No.)
incorporation or organization)
1700 Lincoln Street, Denver, Colorado 80203
------------------------------------- -----
(Address of principal executive offices) (Zip Code)
303-863-7414
------------
(Registrant's telephone number, including area code)
--------------------------------------------------------------------
(Former name, address and fiscal year, if changed since last report)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. [X] Yes [ ] No
There were 168,084,603 shares of common stock outstanding on August 7, 2000.
<PAGE>
PART I - FINANCIAL INFORMATION
-------------------------------
ITEM 1. Financial Statements
------------------------------
NEWMONT MINING CORPORATION AND SUBSIDIARIES
Statements of Consolidated Operations
(In thousands, except per share)
(Unaudited)
<TABLE>
<CAPTION>
Three Months
Ended
June 30,
--------------------
2000 1999
-------- --------
Sales and other income
<S> <C> <C>
Sales $355,387 $315,755
Dividends, interest and other 2,794 17,251
-------- --------
358,181 333,006
-------- --------
Costs and expenses
Costs applicable to sales 206,663 198,091
Depreciation and depletion 68,002 61,166
Exploration and research 17,234 14,428
General and administrative 12,898 12,656
Interest, net of capitalized interest of $1,387
and $5,208, respectively 19,683 17,104
Other 3,374 2,557
-------- --------
327,854 306,002
-------- --------
Operating income 30,327 27,004
Unrealized mark-to-market loss on call options (11,305) -
-------- --------
Pre-tax income before minority interest and equity loss 19,022 27,004
Income tax expense (4,427) (2,093)
Minority interest in income of Minera Yanacocha (23,635) (12,955)
Equity loss of affiliate (7,297) (4,888)
-------- --------
Net income (loss) $(16,337) $ 7,068
======== ========
Other comprehensive loss, net of tax
Unrealized holding loss on investment securities (46) (278)
-------- --------
Comprehensive income (loss) $(16,383) $ 6,790
======== ========
Net income (loss) per common share, basic and diluted $ (0.10) $ 0.04
======== ========
Basic weighted average shares outstanding 167,874 167,417
Diluted weighted average shares outstanding 167,874 167,648
Cash dividends declared per common share $ 0.03 $ 0.03
======== ========
</TABLE>
See Notes to Consolidated Financial Statements
2
<PAGE>
NEWMONT MINING CORPORATION AND SUBSIDIARIES
Statements of Consolidated Operations
(In thousands, except per share)
(Unaudited)
<TABLE>
<CAPTION>
Six Months Ended
June 30,
--------------------
2000 1999
-------- --------
Sales and other income
<S> <C> <C>
Sales $713,897 $642,896
Dividends, interest and other 5,533 20,301
-------- --------
719,430 663,197
-------- --------
Costs and expenses
Costs applicable to sales 412,148 394,448
Depreciation and depletion 129,949 119,948
Exploration and research 30,775 25,900
General and administrative 24,887 25,275
Interest, net of capitalized interest of $1,850
and $9,438, respectively 40,588 35,477
Other 4,572 4,321
-------- --------
642,919 605,369
-------- --------
Operating income 76,511 57,828
Unrealized mark-to-market loss on call options (11,069) -
-------- --------
Pre-tax income before minority interest and equity loss 65,442 57,828
Income tax expense (10,955) (7,714)
Minority interest in income of Minera Yanacocha (48,775) (25,122)
Equity loss of affiliate (15,401) (7,980)
-------- --------
Net income (loss) $ (9,689) $ 17,012
======== ========
Other comprehensive income (loss), net of tax
Unrealized holding gain (loss) on investment securities (46) 5,286
-------- --------
Comprehensive income (loss) $ (9,735) $ 22,298
======== ========
Net income (loss) per common share, basic and diluted $ (0.06) $ 0.10
======== ========
Basic weighted average shares outstanding 167,786 167,357
Diluted weighted average shares outstanding 167,786 167,473
Cash dividends declared per common share $ 0.06 $ 0.06
======== ========
</TABLE>
See Notes to Consolidated Financial Statements
3
<PAGE>
NEWMONT MINING CORPORATION AND SUBSIDIARIES
Consolidated Balance Sheets
(In thousands)
(Unaudited)
<TABLE>
<CAPTION>
June 30, December 31,
2000 1999
---------- -----------
Assets
<S> <C> <C>
Cash and cash equivalents $ 52,163 $ 55,314
Short-term investments 5,425 9,414
Accounts receivable 53,257 40,553
Inventories 363,516 322,614
Other current assets 80,112 106,158
---------- -----------
Current assets 554,473 534,053
Property, plant and mine development, net 1,943,982 1,972,348
Investment in Batu Hijau 510,660 438,318
Long-term inventory 146,554 171,206
Deferred income tax assets 216,704 197,456
Other long-term assets 43,621 70,001
---------- -----------
Total assets $3,415,994 $ 3,383,382
========== ===========
Liabilities
Current portion of long-term debt $ 23,681 $ 23,293
Accounts payable 42,380 38,039
Current portion of deferred income tax liabilities 14,760 29,520
Other accrued liabilities 157,866 183,021
---------- -----------
Current liabilities 238,687 273,873
Long-term debt 1,045,557 1,014,193
Reclamation and remediation liabilities 109,853 104,677
Deferred revenue from sale of future production 137,198 137,198
Fair value of written call options 93,503 82,434
Other long-term liabilities 205,577 193,002
---------- -----------
Total liabilities 1,830,375 1,805,377
---------- -----------
Contingencies (Notes 4 and 7)
Minority interest in Minera Yanacocha 145,910 126,357
---------- -----------
Stockholders' equity
Common stock 268,834 268,262
Additional paid-in capital 1,076,443 1,069,146
Retained earnings 94,432 114,240
---------- -----------
Total stockholders' equity 1,439,709 1,451,648
---------- -----------
Total liabilities and stockholders' equity $3,415,994 $ 3,383,382
========== ===========
</TABLE>
See Notes to Consolidated Financial Statements
4
<PAGE>
NEWMONT MINING CORPORATION AND SUBSIDIARIES
Statements of Consolidated Cash Flows
(In thousands)
(Unaudited)
<TABLE>
<CAPTION>
Six Months Ended
June 30,
---------------------
2000 1999
--------- ---------
Operating activities:
<S> <C> <C>
Net income (loss) $ (9,689) $ 17,012
Adjustments to reconcile net income (loss) to cash provided
by operating activities:
Depreciation and depletion 129,949 119,948
Amortization of capitalized mining costs 35,712 5,785
Amortization of put option premiums 13,088 -
Unrealized mark-to-market loss on call options 11,069 -
Deferred taxes (14,107) (20,283)
Minority interest, net of dividends 19,553 25,121
Undistributed earnings of affiliates 15,401 7,980
Other (613) (13,822)
(Increase) decrease in operating assets:
Accounts receivable (4,840) 11,130
Inventories (16,250) 19,287
Other assets (4,461) (5,650)
Increase (decrease) in operating liabilities:
Accounts payable and accrued expenses (587) (13,155)
Other liabilities 15,882 12,783
--------- ---------
Net cash provided by operating activities 190,107 166,136
--------- ---------
Investing activities:
Additions to property, plant and mine development (136,732) (77,278)
Advances to joint venture and affiliates, net (76,436) (89,347)
Proceeds from asset sales and other (3,247) 28,767
--------- ---------
Net cash used in investing activities (216,415) (137,858)
--------- ---------
Financing activities:
Proceeds from long-term borrowings 237,000 45,000
Repayments of long-term borrowings (205,257) (59,846)
Dividends paid on common stock (10,074) (10,043)
Other 1,488 (582)
--------- ---------
Net cash provided by (used in) financing activities 23,157 (25,471)
--------- ---------
Net change in cash and cash equivalents (3,151) 2,807
Cash and cash equivalents at beginning of period 55,314 79,086
--------- ---------
Cash and cash equivalents at end of period $ 52,163 $ 81,893
========= =========
Supplemental information:
Interest paid, net of amounts capitalized of $1,850 and
$9,438, respectively $ 38,384 $ 35,566
Income taxes paid $ 44,425 $ 20,374
</TABLE>
See Notes to Consolidated Financial Statements
5
<PAGE>
NEWMONT MINING CORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(Unaudited)
(1) Basis of Preparation of Financial Statements
--------------------------------------------
These unaudited interim consolidated financial statements of Newmont Mining
Corporation ("NMC"), formerly Newmont Gold Company, and its subsidiaries
(collectively, the "Company") have been prepared in accordance with the rules
and regulations of the Securities and Exchange Commission. Such rules and
regulations allow the omission of certain information and footnote disclosures
normally included in financial statements prepared in accordance with generally
accepted accounting principles as long as the statements are not misleading. In
the opinion of management, all adjustments necessary for a fair presentation of
these interim statements have been included and are of a normal recurring
nature. These interim financial statements should be read in conjunction with
the financial statements of the Company included in its 1999 Annual Report on
Form 10-K.
On May 15, 2000, the Company completed a merger in which its parent holding
company, Newmont Mining Corporation, was merged into Newmont Gold Company,
eliminating the holding company structure. The parent holding company's sole
assets were the shares of Newmont Gold Company common stock. In that merger,
the name of Newmont Gold Company was changed to Newmont Mining Corporation.
Certain prior year amounts have been reclassified to conform to the current
year presentation.
(2) Pending Merger
On June 21, 2000, the Company and Battle Mountain Gold Company, a Nevada
corporation, entered into an Agreement and Plan of Merger. Upon consummation of
the merger, Battle Mountain will become a wholly owned subsidiary of NMC subject
to the satisfaction or waiver of the conditions set forth in the merger
agreement. Each share of Battle Mountain common stock issued and outstanding
immediately prior to the effective time of the Merger will be converted into the
right to receive 0.105 of a share of NMC common stock. Under a separate
Canadian statutory arrangement, each outstanding exchangeable share of Battle
Mountain Canada Ltd., a subsidiary of Battle Mountain, will also be converted
into the right to receive 0.105 of a share of NMC common stock. NMC will also
exchange shares of newly issued $3.25 convertible preferred stock, with
substantially identical terms and conditions, for all outstanding shares of
Battle Mountain $3.25 convertible preferred stock. The transaction will be
accounted for as a pooling of interests, and as such, future consolidated
financial statements will include Battle Mountain's financial data as if Battle
Mountain had always been a part of Newmont. The merger is expected to close in
the fall of 2000 subject to regulatory approvals and approval of Battle Mountain
and Battle Mountain Canada shareholders.
6
<PAGE>
The following unaudited pro forma combined financial data is presented for
informational purposes only. They are not necessarily indicative of the results
of operations or of the financial position that would have occurred had the
merger been completed during the periods or as of the date for which the pro
forma data are presented. They are also not necessarily indicative of the
combined company's future results of operations or financial position. In
particular, the Company expects to realize significant operating cost savings as
a result of the merger. No adjustment has been included in the pro forma
combined financial data for these anticipated savings. The Company expects to
incur one-time combined merger expenses of approximately $35 million, of which
$20 million primarily relates to investment advisory and professional fees and
$15 million to employee benefit and severance costs. These expenses will be
charged to income in the period incurred. A provision for $20 million of these
expenses is reflected in the combined balance sheet data. Pro forma per share
amounts for the combined company are based on the exchange ratio of 0.105 of a
share of NMC common stock for each share of Battle Mountain common stock and
each Battle Mountain Canada exchangeable share.
<TABLE>
<CAPTION>
Three Months Six Months Year Ended
Pro Forma Combined Statement of Operations Data Ended June 30, Ended June 30, December 31,
(in millions, except per share amounts) 2000 2000 1999
-------------- -------------- ------------
<S> <C> <C> <C>
Sales $ 414.6 $ 835.6 $ 1,627.1
Net loss applicable to common shares $ (25.5) $ (22.4) $ (102.2)
Net loss per common share, basic and diluted $ (0.13) $ (0.12) $ (0.53)
Weighted average number of common shares and assumed on conversion 192.0 191.9 191.6
</TABLE>
<TABLE>
<CAPTION>
Pro Forma Combined Balance Sheet Data:
(in millions) At June 30, 2000
----------------
<S> <C>
Total assets $ 3,873.9
Total shareholders' equity $ 1,507.5
Book value per common share $ 7.39
</TABLE>
(3) Inventories
-----------
At June 30, At December 31,
2000 1999
----------- ---------------
(In thousands)
Current:
Ore and in-process inventories $ 238,369 $ 190,576
Precious metals 40,949 52,525
Materials and supplies 84,198 78,461
Other - 1,052
----------- ---------------
$ 363,516 $ 322,614
=========== ===============
Non-current:
Ore in stockpiles $ 146,554 $ 171,206
=========== ===============
(4) Batu Hijau
----------
The Company and Sumitomo Corporation ("Sumitomo") are partners in the Nusa
Tengarra Partnership ("NTP") that holds 80% of P.T. Newmont Nusa Tengarra
("PTNNT"), the owner of the Batu Hijau mine in Indonesia. As a result of this
ownership structure, the Company and Sumitomo have an indirect 45% and 35%
interest, respectively, in the Batu Hijau mine. 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 Hijau's
income. The Company accounts for its investment in Batu Hijau as an equity
investment and at June 30, 2000 and December 31, 1999, such investment was
$510.7 million and $438.3 million, respectively. Differences between 56.25% of
the partnership's net assets and the Company's investment include (i) $220
million for the fair market value adjustment recorded by the partnership (in
conjunction with the Company's initial contribution of its investment in PTNNT),
(ii) $24 million for intercompany charges, (iii) $122 million for the fair
market value adjustment recorded by the Company in conjunction with its
acquisition of the minority interest in its subsidiary, and (iv) $140 million
for contributions recorded by the Company that were classified as debt by NTP.
Certain of these amounts are amortized or depreciated on a unit-of-production
basis. The Company's investment also excludes $42 million for exploration
expenses incurred prior to the formation of NTP. The difference between 56.25%
of NTP's net income and Equity loss of affiliate result from the elimination of
intercompany interest and management fees.
Production at Batu Hijau began in the fourth quarter of 1999. Project
development was funded by $1.0 billion from third party loans and $0.83 billion
from the Company and Sumitomo. The loans are guaranteed by the Company and
Sumitomo, 56.25% and 43.75%, respectively, until project completion tests are
met (except for political risk, which is born by the lenders), and will be non-
7
<PAGE>
recourse to the Company and Sumitomo thereafter (except for a contingent
obligation to fund its pro rata share of an additional $125 million). Project
completion tests are expected to be met during 2000. Repayment of the loans of
$43.5 million semi-annually will be over a 13-year period beginning the earlier
of six months after project completion or June 15, 2001, and will bear interest
at blended fixed and floating rates.
Following is summarized financial information for NTP (in thousands):
<TABLE>
<CAPTION>
THREE MONTHS ENDED JUNE 30, SIX MONTHS ENDED JUNE 30,
2000 1999 2000 1999
------------ ------------- ------------ -----------
<S> <C> <C> <C> <C>
Revenues $ 85,168 $ - $ 173,163 $ -
Net loss $ (22,926) $ (9,008) $ (50,348) $ (15,271)
Dividends received $ - $ - $ - $ -
<CAPTION>
AT JUNE 30, AT DECEMBER 31,
2000 1999
---------- ---------------
<S> <C> <C>
Current assets $ 166,373 $ 137,542
Property, plant and mine development, net $2,007,087 $ 1,956,515
Other assets $ 196,744 $ 190,059
Current liabilities $ 151,337 $ 207,645
Long-term debt $1,000,000 $ 1,000,000
Debt and related interest to affiliates $ 259,561 $ 195,476
Other liabilities $ 1,049 $ 132
Minority interest in PTNNT $ 56,745 $ 35,455
</TABLE>
(5) Comprehensive Income
--------------------
Comprehensive income in 1999 included an unrealized holding gain on
equity securities in another mining company that was sold early in the third
quarter of 1999.
(6) Segment Information
-------------------
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 North America, Peru (Minera
Yanacocha), Indonesia (Minahasa) and Uzbekistan (Zarafshan-Newmont) and its
reportable segments are based on the geographic location of these operations.
Earnings from operations do not include general corporate expenses, interest
(except project-specific interest) or income taxes (except for equity
investments).
Financial information relating to the Company's consolidated segments is as
follows (in millions):
<TABLE>
<CAPTION>
THREE MONTHS ENDED JUNE 30, 2000
-------------------------------------------------------------------------------------
NORTH AMERICAN MINERA ZARAFSHAN
OPERATIONS YANACOCHA* MINAHASA NEWMONT OTHER CONSOLIDATED
-------------- ---------- -------- --------- ------- ------------
<S> <C> <C> <C> <C> <C> <C>
Sales $ 196.7 $ 116.3 $ 26.1 $ 16.3 $ - $ 355.4
Interest income $ - $ 1.5 $ 0.1 $ - $ 0.6 $ 2.2
Interest expense $ 0.1 $ 1.1 $ - $ 0.5 $ 18.0 $ 19.7
Depreciation and amortization $ 40.2 $ 17.0 $ 5.9 $ 2.8 $ 2.1 $ 68.0
Pre-tax income (loss) before
minority interest and equity loss $ 1.7 $ 58.6 $ 7.1 $ 5.7 $ (54.1) $ 19.0
Capital expenditures $ 25.0 $ 55.1 $ 1.5 $ 1.3 $ 6.4 $ 89.3
*Not reduced for minority interest
<CAPTION>
THREE MONTHS ENDED JUNE 30, 1999
-------------------------------------------------------------------------------------
NORTH AMERICAN MINERA ZARAFSHAN
OPERATIONS YANACOCHA* MINAHASA NEWMONT OTHER CONSOLIDATED
-------------- ---------- -------- --------- ------- ------------
<S> <C> <C> <C> <C> <C> <C>
Sales $ 175.2 $ 99.3 $ 23.3 $ 18.0 $ - $ 315.8
Interest income $ - $ 0.9 $ 0.1 $ - $ 1.0 $ 2.0
Interest expense $ 0.1 $ 2.0 $ - $ 0.6 $ 14.4 $ 17.1
Depreciation and amortization $ 32.0 $ 19.3 $ 5.7 $ 2.8 $ 1.4 $ 61.2
Pre-tax income (loss) before
minority interest and equity loss $ 4.9 $ 32.3 $ 9.3 $ 2.9 $ (22.4) $ 27.0
Capital expenditures $ 11.5 $ 19.9 $ 3.2 $ 0.9 $ 4.8 $ 40.3
</TABLE>
*Not reduced for minority interest
8
<PAGE>
<TABLE>
<CAPTION>
SIX MONTHS ENDED JUNE 30, 2000
----------------------------------------------------------------------------------------
NORTH AMERICAN MINERA ZARAFSHAN
OPERATIONS YANACOCHA* MINAHASA NEWMONT OTHER CONSOLIDATED
-------------- ---------- -------- --------- ------- ------------
<S> <C> <C> <C> <C> <C> <C>
Sales $ 379.1 $ 240.3 $ 60.1 $ 34.4 $ - $ 713.9
Interest income $ - $ 2.5 $ 0.1 $ - $ 1.4 $ 4.0
Interest expense $ 0.2 $ 3.3 $ - $ 1.0 $ 36.1 $ 40.6
Depreciation and amortization $ 75.3 $ 33.3 $ 11.7 $ 5.7 $ 3.9 $ 129.9
Pre-tax income (loss) before
minority interest and equity loss $ 0.2 $ 121.8 $ 23.1 $ 12.8 $ (92.5) $ 65.4
Capital expenditures $ 40.5 $ 84.7 $ 2.3 $ 2.3 $ 6.9 $ 136.7
*Not reduced for minority interest
<CAPTION>
SIX MONTHS ENDED JUNE 30, 1999
----------------------------------------------------------------------------------------
NORTH AMERICAN MINERA ZARAFSHAN
OPERATIONS YANACOCHA* MINAHASA NEWMONT OTHER CONSOLIDATED
-------------- ---------- -------- --------- ------- ------------
<S> <C> <C> <C> <C> <C> <C>
Sales $ 363.7 $ 196.3 $ 49.2 $ 33.7 $ - $ 642.9
Interest income $ - $ 2.1 $ 0.1 $ - $ 2.6 $ 4.8
Interest expense $ 0.2 $ 4.3 $ - $ 1.4 $ 29.6 $ 35.5
Depreciation and amortization $ 65.1 $ 35.0 $ 11.5 $ 5.6 $ 2.7 $ 119.9
Pre-tax income (loss) before
minority interest and equity loss $ 21.7 $ 68.3 $ 19.9 $ 4.9 $ (57.0) $ 57.8
Capital expenditures $ 28.2 $ 33.8 $ 4.7 $ 1.5 $ 9.1 $ 77.3
</TABLE>
*Not reduced for minority interest
The Company operates the Batu Hijau mine in Indonesia that is accounted for
as an equity investment. Financial information relating to Batu Hijau was as
follows (in millions):
<TABLE>
<CAPTION>
Three Months Ended June 30, Six Months Ended June 30,
--------------------------- -------------------------
2000 1999 2000 1999
----------- ------------ ---------- -----------
<S> <C> <C> <C> <C>
Sales $ 85.0 $ - $ 172.9 $ -
Interest expense $ 24.5 $ - $ 56.1 $ -
Depreciation and amortization $ 19.3 $ - $ 36.9 $ -
Net loss $ (25.3) $ (8.2) $ (60.3) $ (13.7)
Capital expenditures $ 16.7 $ 158.2 $ 69.3 $ 345.8
Total assets, at June 30 $ 2,174.7 $ 1,747.4 $ 2,174.7 $ 1,747.4
</TABLE>
Equity loss of affiliated company was $7.3 million in the second quarter of
2000 (based on 56.25% of Batu Hijau's income and elimination of $4.7 million and
$1.8 million of intercompany interest and management fees, respectively, and
amortization adjustments of $0.4 million) and $4.9 million in the comparable
1999 period (based on 56.25% of the Batu Hijau loss and elimination of $0.3
million intercompany interest). Equity loss of affiliated company was $15.4
million in the first half of 2000 (based on 56.25% of Batu Hijau's income and
elimination of $11.4 million and $5.9 million of intercompany interest and
management fees, respectively, and amortization adjustments of $1.2 million) and
$8.0 million in the comparable 1999 period (based on 56.25% of the Batu Hijau
loss and elimination of $0.3 million intercompany interest).
9
<PAGE>
(7) Contingencies
-------------
(a) Reclamation Obligations
The Company's mining and exploration activities are subject to various
federal and state laws and regulations governing the protection of the
environment.
These laws and regulations are continually changing and are generally
becoming more restrictive. The Company conducts its operations so as to protect
the public health and environment and believes its operations are in compliance
with all applicable laws and regulations. The Company has made, and expects to
make in the future, expenditures to comply with such laws and regulations, but
cannot predict the amount of such future expenditures.
Estimated future reclamation and remediation costs are based principally on
legal and regulatory requirements. At June 30, 2000 and December 31, 1999, $73.0
million and $66.9 million, respectively, were accrued for reclamation and
remediation costs relating to currently producing mineral properties.
Certain appeals have been filed by third parties with the Department of
Interior Board of Land Appeals in conjunction with the Twin Creeks Environmental
Impact Statement. These appeals seek to impose mitigation and other conditions
on the mine operations. The Company has intervened and does not believe that
such appeals have merit. An unfavorable outcome of such appeals, however, could
result in additional conditions on operations that may have a material adverse
effect on the Company's financial position or results of operations.
In addition, the Company is involved in several matters concerning
environmental obligations associated with former mining activities. Generally,
these matters concern developing and implementing remediation plans at the
various sites involved. The Company believes that the related environmental
obligations associated with these sites are similar in nature with respect to
the development of remediation plans, their risk profile and the compliance
required to meet general environmental standards. Based upon the Company's best
estimate of its liability for these matters, $42.7 million and $43.6 million
were accrued for such obligations at June 30, 2000 and December 31, 1999,
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 20% lower than
the amount accrued at December 31, 1999. The amounts accrued for these matters
are reviewed periodically based upon facts and circumstances available at the
time. Changes in estimates are charged to Costs and expenses, Other in the
period estimates are revised.
Details about certain of the more significant sites involved are discussed
below.
Idarado Mining Company ("Idarado")-80.1% owned
----------------------------------------------
In July 1992, the Company and Idarado signed a consent decree with the
State of Colorado ("State") that was agreed to by the U.S. District Court of
Colorado to settle a lawsuit brought by the State under the Comprehensive
Environmental Response, Compensation and Liability Act ("CERCLA"), generally
referred to as the "Superfund Act." Idarado settled natural resources damages
and past and future response costs and provided habitat enhancement work. In
addition, Idarado agreed in the consent decree to undertake specified
remediation work at its former mining site in the Telluride/Ouray area of
Colorado. Remediation work at this property is substantially complete. If the
remediation does not achieve specific performance objectives defined in the
consent decree, the State may require Idarado to implement supplemental
activities at the site, also as defined in the consent decree. Idarado and the
Company have obtained a $5.2 million reclamation bond to secure their potential
obligations under the consent decree.
Resurrection Mining Company ("Resurrection")-100% owned
-------------------------------------------------------
The Company, Resurrection and other defendants have been named in lawsuits
filed by the State of Colorado, under the Superfund Act in 1983 and subsequently
consolidated with a lawsuit filed by the U.S. Environmental Protection Agency
("EPA") in 1986. These proceedings seek to compel the defendants to remediate
the impacts of pre-existing, historic mining activities near Leadville, Colorado
that date back to the mid-1800's, which the government agencies claim are
causing substantial environmental problems in the area.
In 1988 and 1989, the EPA issued administrative orders with respect to one
area on the site and the defendants have collectively implemented those orders
by constructing a water treatment plant, which was placed in operation in early
1992. Remaining remedial work for this area primarily consists of environmental
monitoring and maintenance activities.
10
<PAGE>
The parties have entered into a consent decree with respect to the
remaining areas that apportions liabilities and responsibilities for the site
among the various parties. The EPA has approved remedial actions for selected
components of Resurrection's portion of the site, which were initiated in 1995.
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. In March 1999, the parties entered
into a Memorandum of Understanding ("MOU") to facilitate the settlement of
natural resources damages claims under CERCLA for the upper Arkansas River
Basin. The MOU provides a structure for evaluation of damages and possible
restoration activities that may be required if it is concluded such damages have
occurred.
Dawn Mining Company LLC ("Dawn")-51% owned
------------------------------------------
Dawn leased an open-pit uranium mine, currently inactive, 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 that is subject to federal and state regulation.
In 1991, Dawn's lease was terminated. As a result, Dawn was required to
file a formal mine closure and reclamation plan. The Department of Interior has
commenced an Environmental Impact Study to analyze Dawn's proposed plan and to
consider alternate closure and reclamation plans for the mine. Dawn cannot
predict at this time what type of mine reclamation plan may be selected by the
Department of Interior. Dawn does not have sufficient funds to pay for the
reclamation plan it proposed, for any alternate plan, or for the closure of its
mill.
The Department of Interior previously notified Dawn that when the lease was
terminated, it would seek to hold Dawn and the Company (as Dawn's 51% owner)
liable for any costs incurred as a result of Dawn's failure to comply with the
lease and applicable regulations. Other government agencies have asserted that
the Company is liable for future reclamation or remediation work at the mine or
millsite. In mid-2000, the mine was included on the National Priorities List
under CERCLA. The Company will vigorously contest any claims as to its
liability. The Company cannot reasonably predict the likelihood or outcome of
any future action against Dawn or the Company arising from this matter.
In late 1999, Dawn initiated state approval for a revised mill closure plan
that, if implemented, would expedite the reclamation process at the mill. The
State of Washington has approved this revised plan, subject to concurrence from
the U.S. Department of Energy. The currently approved clean fill plan for the
mill is secured by a $19.9 million bond that is 50% secured by a letter of
credit and is guaranteed by the Company.
(b) Additional Interest in Minera Yanacocha
The Company has an interest in Minera Yanacocha, a gold mining operation
located in Peru, that began production in 1993. Prior to 1997, that interest was
38% and was accounted for on an equity basis. Beginning in 1997, Minera
Yanacocha was consolidated into the Company's financial statements following the
acquisition of an additional 13.35% interest. The acquisition was disputed and,
in June 1998, the Peruvian Supreme Court resolved the dispute in favor of the
Company as described below.
In November 1993, the French government announced its intention to
privatize the mining assets of Bureau de Recherches Geologiques et Minieres, the
geological and mining bureau of the French government ("BRGM") and in September
1994, BRGM announced its intention to transfer its 24.7% interest in Minera
Yanacocha to a third party. The Company and Compania de Minas Buenaventura, S.A.
("Buenaventura"), then 38.0% and 32.3% owners of Minera Yanacocha, respectively,
filed suit in Peru to seek enforcement of their preemptive rights with respect
to the proposed BRGM transfer. In September 1996, the trial court ruled in favor
of the Company and Buenaventura and held that the preemptive rights were
triggered in November 1993, and that the value of the 24.7% interest was $109.3
million. In June 1998, the Peruvian Supreme Court issued a resolution upholding
the decision.
In spite of the final decision of the Peruvian Supreme Court, in October
1998, BRGM, through its subsidiary Compagnie Miniere International Or S.A.
("Mine Or"), filed with the International Centre for Settlement of Investment
Disputes a request for arbitration against the Republic of Peru. The request
alleges that the decision of the Peruvian courts wrongfully deprived Mine Or of
its shares in Minera Yanacocha (which Mine Or values at approximately $560
million) and seeks restitution and damages from the Republic of Peru.
While the Company is not a party to the arbitration, it believes that Mine
Or's claims are unfounded. It is unclear at this time what effect, if any, the
arbitration might have on the Company. The Company continues to monitor this
and related arbitration and remains open to consider alternatives which could
bring these issues to conclusion.
11
<PAGE>
(c) Other
On June 2, 2000, a transport contractor of Minera Yanacocha spilled
approximately three gallons (330 pounds) of mercury near the town of Chorapampa,
Peru located 53 miles southwest of the mine. Mercury is a byproduct of gold
mining and was sold to a Lima firm for use in medical instrumentation and
industrial applications. Minera Yanacocha officials were notified the following
morning by the contractor and immediately began cleanup efforts and notification
of local residents of the potential hazard. Mining, health and environmental
authorities from the Peruvian government were also notified. The ministry of
health brought in staff to assist with diagnosis and treatment of those with
potential symptoms from mercury exposure. A comprehensive health and
environmental remediation program was initiated by Minera Yanacocha. Those who
were exposed have been medically treated. Health monitoring and environmental
cleanup continue. Estimated costs for health and remediation efforts of $2.4
million were recorded in the second quarter of 2000. The Company cannot
reasonably predict the likelihood of any additional expenditures related to this
matter.
The Company has forward sales contracts to deliver 62,500 ounces of gold
through December 2000, from its Minahasa property in Indonesia, at an average
price of $454 an ounce. At June 30, 2000 the fair value of these contracts was
$9.7 million.
In July 1999, the Company entered into a prepaid forward sale contract for
approximately 483,333 ounces of gold, with initial proceeds of $137.2 million,
for delivery in June 2005, 2006 and 2007. Such proceeds were recorded as
deferred revenue and will be recognized in income when the related gold is
delivered. Additional proceeds will be determined at each delivery date based
on the excess of the then existing market price (not to exceed $380 per ounce)
over $300 per ounce. The prepaid forward sale contract also included semi-
annual delivery requirements of approximately 17,950 ounces beginning June 2000
through June 2007. The Company entered into forward purchase contracts at
prices increasing from $263 per ounce in 2000 to $354 per ounce in 2007 to
coincide with these delivery commitments.
In late July and early August 1999, the Company purchased put option
contracts for 2.85 million ounces of gold, with a strike price of $270 per
ounce. This purchase was paid for by selling call options contracts for 2.35
million ounces at the strike prices noted below. Call options in 2004 and 2005
terminate if the market price is $240 per ounce or lower at any time prior to
expiration. The call option contracts are marked to market at each reporting
date and on June 30, 2000 had a fair value of $93.5 million. As of June 30,
2000, the following contracts were outstanding:
<TABLE>
<CAPTION>
Purchased Put Options Sold Call Options
------------------------------------------------------------------------------------------------------------------------------------
Ounces Price Ounces Price
------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
2000 383,333 $ 270 - -
------------------------------------------------------------------------------------------------------------------------------------
2004 - - 250,000 $ 350
------------------------------------------------------------------------------------------------------------------------------------
2005 - - 250,000 $ 350
------------------------------------------------------------------------------------------------------------------------------------
2009 - - 1,000,000 $ 386
------------------------------------------------------------------------------------------------------------------------------------
2009 - - 850,000 $ 385
------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
(8) Supplementary Data
------------------
The ratio of earnings to fixed charges for the six months ended June 30,
2000 was 2.2. The Company guarantees certain third party debt; however, it has
not been and does not expect to be required to pay any amounts associated with
such debt. Therefore, related interest on such debt has not been included in the
ratio of earnings to fixed charges.
ITEM 2. Management's Discussion and Analysis of Results of Operations and
-------------------------------------------------------------------------
Financial Condition
-------------------
The following provides information that management believes is relevant to
an assessment and understanding of the consolidated results of operations and
financial condition of Newmont Mining Corporation ("NMC") and its subsidiaries
(collectively, "Newmont"). The discussion should be read in conjunction with
Management's Discussion and Analysis included in Newmont's Annual Report on Form
10-K.
Pending Merger. As described in Note (2), on June 21, 2000, NMC and Battle
Mountain Gold Company entered into an Agreement and Plan of Merger. Upon
consummation of the merger, Battle Mountain will become a wholly owned
subsidiary of NMC subject to the satisfaction or waiver of the conditions set
forth in the merger agreement. Each share of Battle Mountain common stock and
each Battle Mountain Canada Ltd. exchangeable share will be converted into the
right to receive 0.105 of a share of NMC common
12
<PAGE>
stock. NMC will also exchange shares of a new $3.25 convertible preferred stock
for all outstanding shares of Battle Mountain $3.25 convertible preferred stock.
The transaction will be accounted for as a pooling of interests and is expected
to close in the fall of 2000 subject to regulatory approvals and approval of
Battle Mountain and Battle Mountain Canada shareholders.
SUMMARY
Newmont reported a net loss of $16.3 million ($0.10 per share) and $9.7
million ($0.06 per share) in the second quarter and first half of 2000,
respectively, compared with net income of $7.1 million ($0.04 per share) and
$17.0 million ($0.10 per share) in the same 1999 periods, respectively. The
second quarter of 2000 included $7.3 million ($0.04 per share), net of tax, for
a non-cash unrealized mark-to-market loss on call option contracts, $4.3 million
($0.03 per share), net of tax, for non-cash amortization of put option premiums
and $7.3 million ($0.04 per share) for start-up losses at the Batu Hijau
copper/gold mine in Indonesia (reflected in Equity loss of affiliate). The
first six months of 2000 included $7.2 million ($0.04 per share), net of tax,
for the mark-to-market loss, $8.5 million ($0.05 per share), net of tax, for
non-cash amortization of put option premiums and $15.4 million ($0.09 per share)
for Batu Hijau start-up losses. The second quarter and first half of 1999
included Batu Hijau start-up losses of $4.9 million ($0.03 per share) and $8.0
million ($0.05 per share), net of tax, respectively.
Total equity gold production was 1,088,300 ounces and 2,156,300 ounces in
the second quarter and first half of 2000, respectively, compared with 952,300
ounces and 1,908,600 ounces in the same 1999 periods, respectively. Total cash
costs per equity ounce declined to $174 and $175 for the 2000 second quarter and
first half, respectively, from $183 and $182 for the same 1999 periods and total
production costs declined $8 and $6 per equity ounce, respectively. Average
realized gold prices of $283 and $285 per equity ounce in the second quarter and
first half of 2000, respectively, compared to $281 and $287 in the prior year
periods. Non-cash amortization of put option premiums was included in gold price
realizations.
MARKET CONDITIONS AND RISKS
METAL PRICE
Changes in the market price of gold significantly effect Newmont's
profitability and cash flow. Gold prices can fluctuate widely and are affected
by numerous factors, such as demand; forward selling by producers; central bank
sales, purchases and lending; investor sentiment and global mine production
levels. The gold price fell to a 20-year low of $253 in July 1999 and since has
recovered to a $270 to $280 per-ounce-range. Changes in the market price of
copper also affect Newmont's profitability and cash flow from its Batu Hijau
mine in Indonesia.
Newmont generally sells its production at market prices, but has forward
sales contracts for 62,500 ounces for the remainder of 2000 from its Minahasa
mine in Indonesia at an average price of $454 per ounce. Following the July 1999
decline in gold spot market prices, Newmont entered into two put and call option
contracts to provide a measure of price protection. As described in Note 7 (c),
the purchase of near-term put option contracts at a strike price of $270 per
ounce was paid for by selling call option contracts for 2.35 million ounces,
with strike prices between $350 and $392 per ounce, expiring in 2004 through
2009. The call options are marked to market at each quarter-end and the
resulting gains or losses may fluctuate significantly, primarily depending upon
gold spot market prices and volatility.
FOREIGN CURRENCY
In addition to the U.S., Newmont conducts operations in Peru, Uzbekistan
and Indonesia. Gold produced at these operations is sold in the international
markets for U.S. dollars. The cost and debt structures at these operations are
also primarily U.S. dollar denominated. To the extent that there are
fluctuations in local currency exchange rates against the U.S. dollar, the
devaluation of a local currency is generally economically neutral or beneficial
to the operation since local salaries and supply contracts will decrease against
the U.S. dollar revenue stream.
The functional currency for Newmont's Indonesian projects is the U.S.
dollar; however, certain receivables, primarily refunds of Value Added Tax, are
rupiah-denominated. During the six months ended June 30, 2000 and 1999, $1.5
million and $1.2 million, respectively, was charged to Costs applicable to sales
to reflect the devaluation of these receivables.
13
<PAGE>
RESULTS OF OPERATIONS
PRODUCTION
<TABLE>
<CAPTION>
THREE MONTHS ENDED SIX MONTHS ENDED
JUNE 30, JUNE 30,
------------------ ------------------
2000 1999 2000 1999
-------- -------- -------- --------
Equity production ozs. (000):
<S> <C> <C> <C> <C>
Nevada operations 672.3 585.4 1,281.7 1,192.1
Mesquite 31.5 39.9 62.3 81.7
La Herradura 13.5 8.9 23.8 15.6
Minera Yanacocha 209.2 186.7 431.8 360.7
Zarafshan-Newmont 57.7 66.9 121.0 121.8
Minahasa 73.3 64.5 172.9 136.7
Batu Hijau 30.8 - 62.8 -
-------- -------- -------- --------
Total 1,088.3 952.3 2,156.3 1,908.6
======== ======== ======== ========
Total cash costs per equity ounce:
Nevada operations $ 205 $ 214 $ 213 $ 212
Mesquite 193 165 199 153
La Herradura 142 182 146 188
Minera Yanacocha 87 111 88 113
Zarafshan-Newmont 127 172 122 177
Minahasa 178 124 144 127
Weighted average $ 174 $ 183 $ 175 $ 182
</TABLE>
Total cash costs include charges for mining ore and waste associated with
current period gold production, processing ore through milling and leaching
facilities, production taxes, royalties and other cash costs. Batu Hijau costs
are reported per pound of copper, with gold revenue as a by-product credit.
NORTH AMERICAN OPERATIONS
Newmont's Nevada operations are along the Carlin Trend near Elko and in the
Winnemucca Region, where the Twin Creeks and the Lone Tree Complex mines are
located.
Production in the second quarter and first six months of 2000 increased 15%
to 672,300 ounces and 8% to 1,281,700 ounces, respectively, from the comparable
1999 periods. Total cash costs for the first six months were comparable to those
in the same 1999 period as the mix of refractory to oxide ores increased to 61%
from 48%. Nevada production in 2000 is expected total approximately 2.9 million
ounces with total cash costs under $208 per ounce.
Production at the Mesquite mine, a heap-leach operation in southern
California, decreased 21% to 31,500 ounces and 24% to 62,300 ounces,
respectively, from the prior year quarter and first half with higher total cash
costs per ounce. Higher costs resulted from higher waste-to-ore ratios and the
commencement of third-party royalties in the third quarter of 1999. Production
in 2000 is expected to exceed 130,000 ounces with total cash costs below $190
per ounce.
La Herradura, a 44%-owned non-operated joint venture in Mexico, produced
23,800 equity ounces in the first half of 2000 at a total cash cost of $146 per
ounce.
OVERSEAS OPERATIONS
Production at Minera Yanacocha in Peru increased 12% to 209,200 equity
ounces and 20% to 431,800 equity ounces in the second quarter and first half of
2000, respectively, from the same periods of 1999. Higher production reflected
an increase in ore tons mined that more than offset decreased average ore
grades. Total cash costs declined to $87 per ounce from $111 per ounce in the
first half of 1999 with higher production and productivity and assumption of
owner mining. Estimated gold production for 2000 is expected to reach
approximately 1,000,000 equity ounces at a total cash cost below $90 per ounce.
In the first half of 2000, production from Zarafshan-Newmont, a 50%-owned
joint venture in the Central Asian Republic of Uzbekistan, was comparable to
that in the same 1999 period. Total cash costs per ounce of $122 in the first
half of 2000 were significantly below those in the same 1999 period when
estimated recovery rates were lower. Production in 2000 is expected to exceed
220,000 equity ounces with total cash costs below $140 per ounce.
14
<PAGE>
In Indonesia, at Newmont's 80%-owned Minahasa property, production
increased 26% in the first half of 2000 over the comparable 1999 period with
higher mill ore grades and recovery rates and with the commencement of leach
operations in the third quarter of 1999. Total cash costs were $144 per ounce
for the first six months of 2000. Production is expected to exceed 360,000
ounces in 2000 with total cash costs below $135 per ounce.
The Batu Hijau mine in Indonesia, which commenced production in the fourth
quarter of 1999, produced 67.2 million and 127.7 million equity pounds of copper
and 30,800 and 62,800 equity ounces of gold during the second quarter and first
half of 2000, respectively. Copper sales totaled 59.0 million equity pounds and
120.9 million equity pounds for the 2000 periods presented. Total cash costs
were $0.60 and $0.62 per pound, after gold sales credits, for the second quarter
and first half of 2000. Copper production in 2000 is expected to reach 300
million equity pounds at a cash cost of $0.55 per pound, with gold production at
approximately 175,000 equity ounces.
FINANCIAL RESULTS
Consolidated sales include 100% of Minera Yanacocha production and Newmont
equity production elsewhere, but exclude Batu Hijau, which is accounted for as
an equity investment. The increase in consolidated sales revenue in the second
quarter and first half of 2000 from the comparable 1999 periods primarily
resulted from higher production as shown in the following table:
<TABLE>
<CAPTION>
THREE MONTHS ENDED SIX MONTHS ENDED
JUNE 30, JUNE 30,
------------------ ------------------
2000 1999 2000 1999
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Consolidated sales (in millions) $ 355.4 $ 315.8 $ 713.9 $ 642.9
Consolidated production ozs. (000) 1,255.7 1,129.2 2,502.6 2,250.3
Average price realized per consolidated ounce $ 283 $ 281 $ 285 $ 287
Average spot price received per ounce $ 284 $ 275 $ 286 $ 281
</TABLE>
<TABLE>
<CAPTION>
THREE MONTHS ENDED SIX MONTHS ENDED
JUNE 30, JUNE 30,
2000 VS. 1999 2000 VS. 1999
------------------ ------------------
Increase in consolidated sales due to (in millions):
<S> <C> <C>
Consolidated production $ 35.6 $ 73.6
Average gold price received 4.0 (2.6)
------------------ ------------------
Total $ 39.6 $ 71.0
================== ==================
</TABLE>
Costs applicable to sales include total cash costs and provisions for
estimated final reclamation expenses related to consolidated production.
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
June 30, June 30,
------------------ ------------------
2000 1999 2000 1999
-------- -------- -------- --------
Costs applicable to sales (in millions)
North American operations:
<S> <C> <C> <C> <C>
Nevada $ 139.6 $ 126.7 $ 276.5 $ 254.8
Mesquite 6.1 6.6 12.4 12.5
La Herradura 2.0 1.5 3.5 2.9
Minera Yanacocha 37.7 43.6 78.0 84.8
Zarafshan-Newmont 7.5 11.6 15.1 21.7
Minahasa 13.8 8.1 26.6 17.7
-------- -------- -------- --------
Total $ 206.7 $ 198.1 $ 412.1 $ 394.4
======== ======== ======== ========
</TABLE>
15
<PAGE>
Depreciation and depletion
<TABLE>
<CAPTION>
Three Months Ended Three Months Ended
June 30, June 30,
------------------ ------------------
2000 1999 2000 1999
-------- -------- -------- --------
Depreciation and depletion (in millions):
North American operations:
<S> <C> <C> <C> <C>
Nevada operations $ 36.7 $ 29.8 $ 68.5 $ 60.7
Mesquite 2.7 1.7 5.4 3.5
La Herradura 0.8 0.5 1.4 0.9
Minera Yanacocha 14.6 19.3 28.5 35.0
Zarafshan-Newmont 2.9 2.8 5.7 5.6
Minahasa 6.1 5.7 12.1 11.5
Other 4.2 1.4 8.3 2.7
-------- -------- -------- --------
Total $ 68.0 $ 61.2 $ 129.9 $ 119.9
======== ======== ======== ========
</TABLE>
Interest expense, net of capitalized interest was $19.7 million and $40.6
million for the second quarter and first half of 2000, respectively, and $17.1
million and $35.5 million for the same periods in 1999, respectively. The 2000
increase reflected a lower proportion of capitalized interest associated with
the Newmont's investment in Batu Hijau.
Income tax expense in the first half of 2000 and 1999 was $11.0 million at
an effective rate of 16.7% and $7.7 million at an effective rate of 13.3%,
respectively. The effective tax rate in the 2000 period primarily reflected
reduced percentage depletion benefits than in the comparable 1999 period.
Equity in loss of affiliate of $15.4 million and $8.0 million for the first
half of 2000 and 1999, respectively, related to start-up losses at Batu Hijau.
LIQUIDITY AND CAPITAL RESOURCES
During the first half of 2000, cash flow from operations ($190.1 million)
and net borrowings ($31.7 million) funded capital expenditures ($136.7 million),
net advances to joint ventures and affiliates ($76.4 million) and dividends
($10.1 million). Newmont expects that operating cash flows for the 2000 year
will fund capital expenditures, advances to affiliates, dividends and
consolidated debt reduction, assuming gold price realizations comparable to
those in the first half of 2000.
INVESTING ACTIVITIES AND CAPITAL EXPENDITURES
Capital expenditures were as follows:
Six Months Ended
June 30,
-----------------
2000 1999
-------- -------
Capital expenditures (in millions):
North American operations $ 40.5 $ 28.2
Overseas operations 89.3 40.0
Other projects and capitalized interest 6.9 9.1
-------- -------
Total $ 136.7 $ 77.3
======== =======
Expenditures for U.S. operations during the first half of 2000 primarily
related to activities in Nevada for mine development ($12.8 million),
capitalized mining costs ($10.8 million) and underground equipment ($4.1
million). Overseas capital expenditures were primarily at Minera Yanacocha
($84.7 million) for development of the La Quinua project and other ongoing
expansion work. Capital expenditures in the 1999 period were primarily for
Nevada and Minera Yanacocha leach pad expansion projects and Nevada capitalized
mining.
Batu Hijau
At June 30, 2000 and December 31, 1999, Newmont's investment was $510.7
million and $438.3 million, respectively. Funding of $91.8 million in the first
half of 2000 was included in Advances to joint ventures and affiliates for
ongoing capital expenditures and working capital requirements during the
production ramp-up period.
Construction of the mine, completed in the fourth quarter of 1999, was
funded through third party project loans of $1.0 billion and partner
contributions of $0.83 billion. The loans are guaranteed by Newmont and its
partner, Sumitomo Corporation ("Sumitomo"), 56.25% and 46.75%, respectively,
until project completion tests are met, and will be non-recourse thereafter
(except for a $125 million
16
<PAGE>
contingent support facility that Newmont and Sumitomo will provide on a pro rata
basis). Newmont expects that project completion tests will be met during 2000.
The lenders carry all political risk on their investment. Debt repayments of
$43.5 million semi-annually will begin the earlier of six months after project
completion or June 15, 2001.
FINANCING ACTIVITIES
During the first half of 2000, net borrowings of $40 million were made
under the $1.0 billion credit facility, with $250.0 million outstanding at June
30, 2000, and repayments of $8.2 million occurred under project financings for
Minera Yanacocha.
DEVELOPMENTS IN INDONESIA
Newmont operates the Minahasa mine on the island of Sulawesi and the Batu
Hijau mine on the island of Sumbawa. Both are in remote locations and have been
largely unaffected by civil unrest coinciding with the recent period of
political and social change in Indonesia. Both mines operate under Contracts of
Work issued by the central government. Indonesia's new government has publicly
expressed its intention to uphold existing Contracts of Work. At Minahasa, a
small group of protestors blocked the access road to the mine from June 26
through July 2, shutting down production for one week until the protest
peacefully ended. Protestors were led by former landowners seeking additional
compensation for property sold to Minahasa over six years ago. Minahasa had
previously reviewed the compensation process and determined that procedures were
proper. Compensation amounts had been set by the Indonesian government.
SAFE HARBOR STATEMENT
The foregoing discussion and analysis, as well as certain information
contained elsewhere in this Quarterly Report, contain "forward-looking
statements" within the meaning of Section 21E of the Securities Exchange Act of
1934, as amended, and are intended to be covered by the safe harbor created
thereby. Such forward-looking statements include, without limitation, (i)
estimates of future gold production for specific operations and on a
consolidated basis, (ii) estimates of future production costs 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) estimates of
future costs and other liabilities for certain environmental and related health
matters and (v) estimates of reserves.
Where Newmont expresses an expectation or belief as to future events or
results, such expectation or belief is expressed in good faith and believed to
have a reasonable basis. However, such forward-looking statements are subject to
risks, uncertainties and other factors, which could cause actual results to
differ materially from such forward-looking statements. Important factors that
could cause actual results to differ materially from such forward-looking
statements ("cautionary statements") are disclosed under "Risk Factors" in the
Newmont Annual Report on Form 10-K for the year ended December 31, 1999, as well
as other filings with the Securities and Exchange Commission. Many of these
factors are beyond Newmont's ability to control or predict. Readers are
cautioned not to put undue reliance on forward-looking statements.
All subsequent written and oral forward-looking statements attributable to
Newmont or to persons acting on its behalf are expressly qualified in their
entirety by the cautionary statements. Newmont disclaims any intent or
obligation to update publicly any forward-looking statements set forth in this
Report, whether as a result of new information, future events or otherwise.
17
<PAGE>
PART II - OTHER INFORMATION
----------------------------
ITEM 4. Submission Of Matters To A Vote Of Security Holders
------------------------------------------------------------
None.
ITEM 6. Exhibits and Reports on Form 8-K
-------------------------------------------
(a) The exhibits to this report are listed in the Exhibit Index on Page 20
hereof.
(b) Reports filed on Form 8-K during the quarter ended June 30, 2000:
A report was filed on Form 8-K, Item 5 on June 30, 2000, including the
press release dated June 21, 2000, announcing a merger agreement with
Battle Mountain Gold Company.
A report was filed on Form 8-K, Item 5 on May 16, 2000, describing the
merger of the registrant holding company, Newmont Mining Corporation,
into its wholly owned subsidiary Newmont Gold Company, whereby Newmont
Gold became the surviving company and changed its name to Newmont
Mining Corporation.
18
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
NEWMONT MINING CORPORATION
(Registrant)
Date: August 9, 2000 /s/ BRUCE D. HANSEN
-----------------------------
Bruce D. Hansen
Senior Vice President and
Chief Financial Officer
(Principal Financial Officer)
Date: August 9, 2000 /s/ LINDA K. WHEELER
-----------------------------
Linda K. Wheeler
Vice President and Controller
(Principal Accounting Officer)
19
<PAGE>
Newmont Mining Corporation
EXHIBIT INDEX
Exhibit
Number Description
-------- ----------------------------------------------------------------
2.1 Agreement and Plan of Merger, dated as of June 21, 2000, by and
among Newmont Mining Corporation, Bounty Merger Corp. and Battle
Mountain Gold Company, filed as Exhibit 2.1 to Form 8-K filed by
Battle Mountain Gold Company on June 23, 2000.
2.2 Arrangement Agreement, dated as of June 21, 2000, by and among
Newmont Mining Corporation, Bounty Merger Corp., Battle Mountain
Gold Company and Battle Mountain Canada Ltd., filed as Exhibit
2.2 to Form 8-K filed by Battle Mountain Gold Company on June 23,
2000.
3(i) Newmont Mining Corporation Restated Certificate of Incorporation
3(ii) Newmont Mining Corporation Bylaws
10.1 The Support/Voting Agreement, dated June 21, 2000, among Noranda,
Inc., Newmont Mining Corporation and Battle Mountain Company,
filed as Exhibit 10.1 to Form 8-K filed by Battle Mountain Gold
Company on June 23, 2000.
12 - Statement re Computation of Ratio of Earnings to Fixed Charges.
27 - Financial Data Schedule.
20
